Hello, everyone, and welcome to today's Spectris conference call. My name is Seb, and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, you can do so by pressing star one on your telephone keypad. If you would like to withdraw your question, please press star two. I'll now hand the floor over to Andrew Heath, CEO, to begin. Please go ahead when you're ready. Thank you, and good morning, everyone, and welcome to this morning's conference call. With me is Derek Harding, our CFO. This morning, we released two announcements, the first covering changes to our board and the executive committee, and the second, providing an update on current trading and outlook for the full year. Before getting to trading, I don't want to miss the opportunity to emphasize the importance of the organizational announcement. As you have seen, we announced that Derek will be taking up a new role as president of our enlarged Spectris Scientific division, which now encompasses our Malvern Panalytical, PMS, and Servomex businesses. I have to say, I'm very much looking forward to continuing my strong partnership with Derek. Derek will bring his usual energy and ambition to this new role and will be pivotal in realizing the full potential of our scientific division as a whole. Derek will continue in his role as CFO until the first September of this year and will remain on the board. Mark Fleiner, who is the current president of the division, has decided that it is time for him to leave the group after five years, where he has overseen and led significant growth. I am hugely grateful to Mark for the instrumental role that he has played in the creation and growth of the division. He is a great colleague, and I wish him all the very best for the future. I'm also delighted that Angela Noon has agreed to join the company as our new CFO. Angela will be a great addition to the team, bringing significant financial and commercial experience from the industrial and technology sectors. I'm greatly looking forward to working closely with both Angela and Derek to continue to deliver on our strategic growth ambitions. Separately, we are updating the market today on current trading and the outlook for the full year. So firstly, let me address an issue we've experienced with the new ERP system. As you know, the system was successfully implemented in Malvern Panalytical. I am very pleased with the implementation and the overall performance of the system. However, there is a specific issue which has led to a delay in the transition and processing of some existing customer orders from the previous system into the new one, notably at our X-ray facility in Almelo, in the Netherlands. As a result, we anticipate GBP 15 million worth of sales and GBP 10 million of operating profit will move into the second half. Although I stress that this will not impact the full year as we work through the outstanding orders and as operations return to normal. Our teams are working to get through the backlog as quickly as we can. The overall plan for the ERP rollout remains on track, and everything we are seeing gives us confidence in achieving the benefits, which, if you remember, will contribute to an additional 150 basis points of margin improvement as we fully implement the system across the group. Secondly, let me turn to comment on what we are seeing on trading. Additionally, in Malvern Panalytical, the combination of weaker demand in China, a significant reduction in battery development that's associated with a slowdown in sales of electric vehicles, and the continued subdued trading in pharmaceuticals, is expected to reduce sales by a further GBP 50 million and operating profit by GBP 10 million in H1. And we expect this trend to continue into the second half. Now, we hope to see a recovery in pharma markets, and while we are seeing growing demand in biologics, this has not been sufficient to offset continued weakness in conventional drug development. The reduction in batteries was a sharper deterioration in the quarter, and we now expect this to last through the second half. There is undoubtedly a lot of disruption in the EV market currently, with growth slowing, some players exiting, and all this is having an impact on short-term customer behaviors. However, the structural growth in this market is not in doubt, but clearly, there is more volatility in the short term. The general softness in China is an exacerbation of what we saw in Q1, rather than the improvement we are expecting from the injection of new stimulus. Consequently, we have not seen the anticipated recovery in sectors such as academia and building materials, in addition to the overall weakness in pharma and battery development that is also being seen in China. But to be clear, trading across our other businesses is in line with our expectations. As a result of the performance of Malvern Panalytical in the first half and our revised expectations for the second half, we now expect to deliver adjusted operating profit for the group at or marginally below the bottom end of the range of consensus public expectations. We remain focused on managing the business against the backdrop of continued macroeconomic uncertainty. While softness in some markets is outside our control, we have several levers that we are deploying to manage the business tightly and reduce costs. We'll provide a full update with our half-year results at the end of July, but for now, Derek and I are happy to answer your questions. Thank you. If you'd like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two. Our first question today comes from Lushanthan Mahendrarajah from J.P. Morgan. Please go ahead. Good morning, guys. Thanks for taking my questions. The first one's just more broadly on the EV market. I guess, just because there's a lot of disruption going on, just to get an idea of how... What was 2023 like versus, I guess, more normalized levels? Because obviously, there seemed to be quite a strong ramp up last year, and then obviously some of that seems to be unwinding. So just to get an idea of how strong that was last year would be quite helpful for you guys. And then, I guess, in terms of the sort of what are you assuming for recovery in the second half? Obviously, I guess the downgrade implies H2 numbers need to come down a bit, sort of X, the sort of transition of the ERP stuff. I guess, are you sort of suggesting that sort of pharma and EV and China aren't really gonna sort of pick up in the second half? Is that your new sort of base case assumption? Thank you. Yeah, that's, thanks for your question. So firstly, regarding the EV market, I mean, last year we saw exceptional growth. I mean, we were seeing 20, 30%+ order growth on demand for our plasma analyzers and X-ray equipment, in particular, the normal partners who are looking at battery material development. And as you're well aware, you know, a lot of the manufacturers, a lot of the auto OEM are investing hugely, not just in EV, but in different battery developments. But that also stretches across other sectors as well. So, you know, this is against an extremely tough comp. As we came into the year, Q1 was down. We knew that against last year, but, you know, we always anticipated Q1 to be down. It was a very tough comp, but we have seen quite a sort of sharp pullback over the last few months. So, you know, on EV batteries, it's a very tough comp. But as I said, we fully expect this market to have very strong structural growth drivers for many years ahead. The world is driving to electrification, we know, and batteries will be a part of it. So, you know, we still remain very focused and excited on that sector of the market. It's just unfortunately getting this short-term volatility. And so regarding the second half numbers, yes, I mean, basically what we've announced today in terms of, you know, China not picking up as we expected, continued sort of being subdued. But, you know, and that's, you know, the stimulus money that I mentioned, that was announced during the year, we were expecting, as we saw last year, that sort of really start to impact opportunities in academia and grow demand in things like building materials. We've just not seen that come through this year. And then that's obviously compounded in China by the fact that sort of, you know, pharma overall and battery development, which China is a big part of all that overall, you know, is down as well. And as you rightly point out, you know, we, we said in our statement, you know, we expect that trend to continue into the second half. And as such, as we look forward to the full year, that's why we've revised our guidance. Okay, brilliant. Thank you very much. Our next question comes from Mark Davies Jones at Stifel. Please go ahead. Thanks, morning, Andrew. A couple of sort of related questions, really. Firstly, can you give us a bit more color about what's happened on the ERP? Because I thought we were kind of there on the Malvern Pan business. So why is it we had this surprise kind of after the event? You suggest it's fairly specific to one facility. Can you give us a bit more color about what's actually gone wrong, or what's been delayed anyway? And then on the guidance, can you give us a sort of updated view on first half, second half split? It still looks like you've got an awful lot to do, so are there more cost levers that you can pull to offset that weaker revenue outlook? Because obviously, these are higher margin businesses that are quite a lot softer than anticipated. So, what's the other part of the bridge to the full year outlook? Yeah. So okay, let me take the first part of your question on the ERP. Mark, I mean, whenever you implement a system of the size and complexity that we have done, I mean, we've implemented SAP S/4HANA, you know, right across our global plants. So that's across all the sites across the world. And you know, given the nature of change, it's appropriate to do, you know, a sort of full scale rollout. It has gone very well. The system works. You know, we are buying components, we're receiving them, we're putting them into the stores. We're issuing to the shop floor, we're assembling, manufacturing, we're testing, we're shipping, we're invoicing, receiving payments. All that is flowing very well in the new system. There are sort of two specific, sort of challenges. One, which is the natural one, is that whenever you go into an ERP implementation, you effectively end up with a sort of blackout period where you have to sort of transition from one system to another. So you end up with some manual processing of orders and issuing kits to the shop floor, et cetera. And then you have to, you know, once you put the new system in, you then put what you did manually during that two weeks, you have to put in the system. That always takes a bit of time, and we're pretty much through that now. Well, sort of recovered by the, you know, the half year. But what we had fully anticipated was, particularly on sort of, the configuration of where we have sort of more highly configurable products, which is particularly our X-ray products, the complication of moving from the old system to the new system was, in reality, bigger. So that as we started to issue the kits to the shop floor, it wasn't as efficient, and that's impacted production capacity and throughput. And then that just takes time to catch back up. What we've—you know, what we're seeing is clearly we're not going to catch that up before the half year. But the teams are working diligently, and we fully anticipate to sort of get all that recovered through Q3. So it's purely a timing issue. And in terms of guidance, as Andrew said, we obviously—you know, we knew that 2024 was going to be a tougher year relative to 2023. We entered the year with the cost base set with that in mind, and we would have difficult comps there through the year. Obviously, the news this morning and just what we've seen in China and the battery market that Andrew talked about earlier, and our expectations of that into the second half, does bring down the revenue and bring down the sort of gross margin contribution. We will, as always, be looking at, you know, our response to that and try to make sure that we are focused on the costs and focused on opportunities to offset as much as that's possible. But, inevitably, as you say, with the higher price margin business, you're not going to be able to offset all of it. So that's why we've seen the net number come off, in the guidance this morning. Sure. It's still gonna be a very heavy second half waiting, though, even by your standards, isn't it, on the, on the guidance you're giving us now? Well, I'm not sure that it'll be very heavy. I mean, you have to kind of look at the ERP movement in one part, because as we're saying, there's a shift of around GBP 10 million of profit that would have been recognized in H1 normally. So if you like, H1 will be slightly understated by that ten million, and then H2 will pick it up. So that might skew the math slightly, but if you kind of correct for that, the shape is not out of whack with the historical shapes that we've posted in terms of H1, H2 profit. Okay. Thanks very much. The next question is from Jonathan Hurn at Barclays. Please go ahead. Hey, guys, good morning. Just a couple of questions, please. Firstly, could you just kind of remind us where we are in terms of ERP in Dynamics? You know, how far that's been rolled out? You know, obviously, you've had issues in scientific. Is there lessons to be learned in terms of rolling out the ERP in Dynamics, so maybe we can avoid a repeat of what we've just seen? Hey, Jonathan, yeah, it's Derek. Look, so Dynamics is slightly different in the way in which it's being rolled out. It'll be a phased rollout because their underlying systems are more of a patchwork than Malvern was. So that de-risks the rollout on Dynamics anyway, by definition, because it phases. And that will start to happen over the course of the second half and then into next year. And I think it's important to note a couple of facts. The system is in at Malvern Pan, and it's working across the globe, with the exception of this small challenge that we had in Almelo, point one. And all the new orders that are coming in post that, that period, and the whole process we associated with it are flowing through. So we're not in a situation where the system is not working. This is, this is entirely a transition issue, and it's a transition issue that's taking slightly longer than we, than we hoped. So, you know, we went live right at the start of the quarter in the hope that we would get through this. We, we always knew there would be a transition issue. We always knew it takes time. These things, you don't just flip the switch and they're on, you have to transition. It's just taking a little bit longer than we hoped, which is what pushes it out of Q2 into the second half. As always, you know, there are lessons learned on a daily basis across the whole piece, and we'll take those into the next phase of the rollout. Okay, that's very clear. And then the second question, just for you, Derek. Obviously, you take over Spectris Scientific. I mean, a little bit surprising, but okay, you've obviously looked at the business or the division for a long time. You're going to take over. What are you going to do differently? I mean, what are your views there? What do you think you can change for the better? Is there sort of a plan you have going into that new role? Yeah, it's a great question. I mean, look, they're fantastic businesses. So I think when you look at the quality of our scientific division, Malvern Panalytical, PMS, Servomex, they're all fantastic businesses. You know, if we look, we gave you a pro forma number for last year, and it's over GBP 800 million of revenue in that division, and profit margin is over 20%. So it's a very strong group of businesses. They have strong independent identities, and we'll continue to support those strong independent identities. But as we brought them together, as we've completed the portfolio rationalization, there's an opportunity here to build a platform for further growth. There will be, you know, for example, the rollout of ERP. It's a great example where we are working in multiple places today, that we can take that knowledge and that experience and roll it into PMS, roll it into Servomex, create a single ERP for the division. As we look at M&A, having the scale of the businesses together gives us the opportunity to consider acquisitions that can bolt on and develop and improve. So it's an evolution rather than a revolution. We're not in a situation where we have something that's broken, far from it. But as we look forward and think about how we're going to grow that, that division and that business as a whole, there'll be opportunities for the businesses to work closer together, and opportunities for us to look at different areas that complement those businesses through the M&A and organically. So it's a, you know, it's an iteration, it's the next stage of the journey. There's absolutely nothing wrong with them today, but there's opportunity to continue improving them over the future. Great. If I could just maybe just squeeze one in. Obviously, we have, you know, obviously, operationally, there's things going on. There's, like you say, there's cost-cutting actions that need to go through, but obviously, the focus is on that. Does that in any way affect how you look at the balance sheet right now and what you're going to do there? Does that potentially, if you are going to go get an M&A, does that push that further out? Does it sort of cause a little bit of a pause in terms of sort of activities that are going on? Yeah, Jonathan, M&A remains a key part of our strategy. I mean, clearly, you know, we look at trading and market environments and other factors whenever we're looking to do M&A, but you know, we remain committed to you know, our strategy. As ever, we are actively pursuing a number of opportunities today, but- we think will be exciting additions to the group that would absolutely, you know, be strong strategic fits, highly accretive, and would, you know, absolutely speak to our compound growth story. So, you know, we remain focused on that. Okay. Thanks, Matt. It's very clear. Thank you. Our next question comes from Bruno Gjani at Exane BNP Paribas. Please go ahead. Thanks for taking the question. Just coming back to battery, I was just wondering how big it was in 2023 in terms of sales, or percentage of group sales, or percentage of material sales? That'll be helpful to get a context of just the overall absolute size of the business. Well, I mean, it's sort of, it's sort of, it's in the single digits range, you know, from a group perspective, slightly high single digits from a sort of Malvern Panalytical perspective. So, you know, as I said earlier, sort of the part that Malvern Panalytical last year that was growing really strongly. And, you know, we coming off a tough comp. Yeah. Just in terms of geographical exposure of that battery business, what percentage is China, Asia? Is it above 50%, 60, 70, or kind of just, just some color there? Well, it's more, I would say it is more, you know, there is proportionally more activity in China relative to other regions. But, you know, we are, you know, we are selling heavily into, you know, European manufacturers and developers, so it's North America as well. But, you know, this sort of goes, you know, goes across the whole supply chain. You know, so we look at everything from, you know, the sort of fine chemistry that's going into the development of the batteries through to, you know, looking at the structural integrity and of things like the, you know, interconnect layer, the anodes, the cathodes- Mm-hmm. all the way through, you know, the full batteries. So there is, you know, there's quite a complex and significant supply chain supporting battery development at the moment. Mm-hmm. Clearly, a lot of the end user demands in China, so, you know, it's not, you know, it ripples from China elsewhere into the world as well. Got it. And in terms of the quiet, the sharp pullback that you noted, in the quarter in Q2, where would you say demand is today relative to a more normal year? So I don't know, maybe call it 2022. Are we back to 2022 levels of demand? Are we sharply below those levels today? Yeah, just any color here. Well, I say batteries, because it's been such a rapidly developing sort of piece of the market for the last four or five years. So, I mean, you know, I think, you know, we sold a lot of equipment into factory development last year. And I think, you know, given, you know, the volatility and some of the uncertainty in the short term, you know, people just held back within, you know, making further investments and just leveraging the equipment they've got, I would say. Mm-hmm. The best way to describe it. Okay, got it. And if we put battery to the side, or, and I guess if we're thinking about overall group orders or demand, the delta in batteries, is that enough to... What does that mean for orders sequentially, essentially? Was it enough to mean that orders deteriorated in Q2, or, were there offsets in the group to mean that, orders are likely stable Q2 over Q1, or maybe they're slightly up? Just some color in terms of how you're seeing order development. Yeah. So look, we'll give you much more color of the half year. This is, this is just an intermediate day today. Um, yeah. You know, as we said at the Q1 trading updates, you know, we provided guidance then, you know, we're very much dependent on the rate of order intake that we were gonna see through Q2 into the early summer. And what we're signaling today is that clearly that, you know, that has not been as strong in these areas as we anticipated. It particularly focused in Malvern Panalytical, and, you know, given the earlier points around, you know, the high gross margins in the business, and therefore, you know, the negative operating leverage, you know, you get from a pullback in demand and sales in the short term, it's something that, you know, we had anticipated when we did the Q1 trading update. But as we said then, it was very much dependent on what was the order demand we'd see over the coming months, and we're seeing today, obviously, that's a bit weaker. Importantly, you know, for the rest of the group, you know, the other, the rest of our businesses are performing in line with our expectations, as we also said. Mm-hmm. Mm-hmm. I got it, got it. Just finally on China stimulus, have these stimulus plans been funded? Are funds flowing to your customers? It's just that some peers rather, sorry, are talking about a Q3 or Q4 moment when, when these funds start to flow to customers. All our customers today are in a planning phase. So I'm just wondering if it's customers are in a wait and see mode today, making plans for those stimulus measures, and so therefore that's having or distorting demand today for you guys. So just any color around those factors, I guess? Yeah. So I think, you know, we, you know, if you compare sort of 2023 to this year, and with the stimulus money, we saw a pretty immediate impact last year. We're not seeing that, you know, that immediacy this year. So there's clearly more caution in China, and there's also a lot of chatter in China about, you know, how much stimulus money is actually going in and, you know, into the overall economy, and is that just generating capacity but not demand? So, you know, there's a bit, you know, the supply is increasing, the demand isn't. So, you know, I think, you know, customers are being a bit more cautious. We may see, you know, some uptick from that coming through in the second half, but I think it's a bit too early to call. Understood. Thank you very much. The next question is from Rory Smith at UBS. Please go ahead. Excuse me. Good morning, it's Rory at UBS. I just wanted to ask on China, which particular market segments you're expecting to pick up that haven't? On EV batteries, do you expect the slowdown in EV sales to impact the automotive exposure in Dynamics? And why do you think conventional drug discovery in pharma is not where you thought it would be, vis-à-vis recovery in biologics and more consumable success? Okay. Quite a bit in there, Rory. So, I mean, I think the first part, your, your, your point on China, I think we've answered the question pretty much. I mean, I mean, so, so, you know, EVs is clearly the pullback on batteries. We talked about that. You know, we were expecting from the stimulus money, as I said, sort of academia and particularly building materials to pick up in China. That, that hasn't happened. We've, you know, we've, we've seen a, a decline, on both, but on academia, I mean, it was against an incredibly tough comp again last year. And then on sort of pharma more generally, you know, I mean, really, we said at the full year and we confirmed this, the key trading update that we, you know, expected pharma to start coming back in the second half. And what we're seeing is, you know, yes, biologics, biopharma is picking up. We're seeing that both in terms of the drug discovery and development phase, that impacts more on Panalytical to a positive. We are seeing it very positively in PMS, in our Particle Measuring Systems business, where we provide the aseptic monitoring solutions for clean rooms for life science applications. So there's definitely, you know, strong demand coming through there, which is an increase in capacity in clean room manufacturing, really to support the development of biologics, but also, you know, a lot of new drugs coming through, like weight loss drugs. You know, that is driving demand on the, on the sort of manufacturing operation side of things. But we just, you know, we're still not seeing, you know, the upswing, come through in sort of more conventional drug discovery and development, which we always anticipated more of a H2 weighting. But, you know, equally with today, we're still not seeing the signs, you know, really any meaningful signs of that picking up. Whether we will in the second half, I think is, you know, in a bit of a wait and see mode. And then your question on Dynamics, I think you were—if I understood you correctly, you were sort of just trying to correlate, you know, was there an impact on EVs battery developments into Dynamics? The answer is yes. I mean, you know, the amount of physical test demand and sales going into sort of EV battery developers has come off in the first half of the year. Sort of, you know, you know, clearly, coincidentally, and synchronized what we're seeing on more on the financial side. But we are actually up on automotive orders for the year, even despite a strong year last year, and that's because we have been very successful in our simulation software, virtual test business, which is growing very strongly and orders intake is well up this year. which I think, you know, just points to everything that we showed you in Udine in June last year around what we're doing in that space, just how excited customers are about the prospects of using our solutions to reduce time to market, reduce the time it takes to develop, you know, go from the sort of digital twin to the full scale on their own vehicle, reduce that sort of prototyping phase. And we can, you know, half the time and reduce the cost by at least 20% through use of our tools, and we're seeing continued adoption across the auto OEMs, across the tire manufacturers, but now increasingly into some of the sub-tier developers as well, in terms of, as they think about developing subsystems and hardware-in-the-loop applications. You know, we're very pleased and excited about the opportunities in that space. That's helping to more than offset the sort of weakness we're seeing on the sort of battery EV side and Dynamics at the moment. Great. Thank you. And if I could just squeeze in one final one. Thinking about that GBP 15 million sales impact in the first half for Malvern Panalytical, I don't suppose you'd be willing to apportion that out across the areas that you flagged? No, I think, I mean, I think we're getting into far too much sort of granularity and detail doing that. I think, you know, it's the amalgam of the factors that we talked about earlier. Understood. Thank you. Okay, at this time, we have no further questions in the queue. All right, well, thank you very much for joining this morning. As I said, you know, we're excited about the organization changes that we're making today. It's unfortunate we have a trading update that coincides with this, but that's just, you know, purely coincidence and the timing of the two things happening together. But clearly we see lots of opportunities for the scientific division as a whole going forward, and I'm delighted that Derek's accepted my offer to the board's offer to lead the division going forward from here. And in terms of trading, you know, we'll provide further color at our half year results at the end of July. So thanks very much for joining, and we'll speak then. Thank you. This concludes today's conference call. You may now disconnect.