Business Plan of the Spectris 1 Business plan of the Spectris Executive summary The main aim of this report

is to analyze the business plan for Spectris in connection to its proposed strategic plan. In this report, a statement of the recommended strategy will be given as well as a financial forecast. The financial forecast of balance sheet, cash flow and loss and profit account items will be given based on both the current strategy and on the proposed strategy. Several models which Spectris have put in place to ensure the success of its strategic plan like the Capital assets pricing model (CAPM) and the Return on Investments (ROI) will be discussed in this report and their critiques. Corporate governance and agency theory relating to Spectris will be discussed and how they can influence the proposed strategy. This report will then be presented to the board of Spectris Company. Company overview Spectris Company was founded in 1915 by Sir Richard Fairey as Fairey Aviation Company Ltd. The company was initially recognizes for the manufacture of seaplanes where it achieved its renown in the 1930s and 1940s for its aircrafts. The company was listed in the Stock Exchange in the year 1988 and in the 1990s the company highly concentrated on the construction of its electronic sector which enabled it to acquire a large number of companies. Spectris which is a specialist in electronic controls and technology based instrumentation changed its name in May 2001 from Fairey Group. The change in its name marked the transformation of the business from UK engineering and aviation provider of innovative

Business Plan of the Spectris 2 technology for the improvement of customers performance worldwide. Spectris therefore develops and markets instrumentation for enhancing productivity and controls. The company employs about 6,000 people around the globe and it had total sales of 902 million in the year 2010. The company is listed in the London Stock Exchange and it is a member of techMark which is the Londons Stock Exchanges index for all technology companies and the FTSE4Good index which is for the socially responsible companies. Being a market leader, Spectris maintains it market leadership through investment programme in the research and development of new products and their applications. Spectris has a market capitalization of 1,717.09 million. Spectris operates in around 29 countries with 160 offices globally. The company is highly committed towards creating business growth by adding value to its customers while ensuring that it does not miss its environmental impact. The company operates in four units which include test and measurement, in-line instrumentation, material analysis and industrial controls. Spectris has over the last 11 years been operating in a 13 market niche group making to be the leading process technology and electronic control company. The company obtains a competitive advantage form its strong and well managed brands as well as its multinational customer base in blue chip. Strategic development/plan As part of its strategic plan, Spectris aims at delivering shareholder value over the long term through the supply of productivity which will enhance solutions for its customers. The company also aims at expanding through acquisition of businesses. To achieve this, the

Business Plan of the Spectris 3 company has decided to use the capital assets pricing model (CAPM), return on investment (ROI) and the dividend strategy. Capital assets pricing model (CAPM) is a model which is used to describe the relationship which exists between expected return and risk and it is used to price risky securities. In this model, investors should be compensated in the time value of money and risk. This model will be used by Spectris to implement its strategic plan which involves the deliverance of shareholder value. Return on investment (ROI) is used to evaluate the efficiency of an investment. In this model, the benefit or returns obtained from investment will be divided by the cost incurred in the investment and then expressed as a percentage. In this case, Spectris is planning to have a positive ROI in its investments. By doing this, Spectris will be aiming at delivering shareholder value by ensuring that the shareholders are compensated effectively. To implement its strategic plan, Spectris will use both the capital assets pricing model (CAPM ) and the return on investment (ROI) as the models of evaluating efficiency so as the compensate its shareholders effectively hence meeting its strategic plan of delivering value to its shareholders. Strategic recommendation I would recommend Spectris to use the dividend strategy over the life cycle of its business. Investors of Spectris will use the dividend strategy to maximize the amount of cash income obtained from their portfolio. Dividend strategy defines how much should be paid out to investors instead of being retained for future expansion. The dividend strategy will enable investors to re-invest the dividend payment into buying of more shares of the company stock and hence ensuring that the investors or shareholders receive increasing amount of income.

Business Plan of the Spectris 4 This strategy will help Spectris to achieve its proposed strategic plan of delivering shareholder value. This recommended strategy will have a huge impact on the market value of the business. That is, it will lead to an increase in the market value of Spectris due to the increase share price resulting to the increase in dividend yield which is as a result of the dividend strategy. This means that the adoption of dividend strategy will lead to high levels of share prices like indicated in the profit and loss account items under the proposed strategy. Increase in share price is a clear indication of a high demand of the shares in the market and these results to an increase the market value of the company. Increase in share prices due to increase in demand will lead to high income for the company and this also means that the shareholders will be compensated well for their investments. Financial forecast The financial forecast of Spectris will include the forecast on profit and loss, balance sheet and cash flow items. Profit and loss account items- Based on the proposed strategy Item 2011 m Operating profit Revenue Profit before tax Profit after tax Basic earnings per share 130.8 1000.8 123.98 100.4 85.4p 2012 m 142.6 1021.67 132.45 101.5 87.2p

Business Plan of the Spectris 5 Profit and loss account items -Based on the current strategy Item 2011 m Operating profit Revenue Profit before tax Profit after tax Basic earnings per share 110.8 908.8 103.98 90.4 79.4p 2012 m 114.6 980.67 112.45 97.5 82.2p

Balance sheet items- Based on the proposed strategy Item 2011 m Fixed assets Current assets Equity shareholders funds 300.5 450 497.7 2012 m 350.8 506.8 500.9

Balance sheet items- Based on the current strategy Item 2011 m Fixed assets Current assets Equity shareholders funds 298.5 425 478.7 2012 m 300.8 450.8 498.9

Cash flow items- Based on the proposed strategy Item 2011 m 2012 m

Business Plan of the Spectris 6 Operating profit before Changes in working capital and provisions 170.6 Net cash flow from operating activities Net cash flow used in investing activities 160.5 (80.3) 176.7 169.09 (79.98) 78.54

Cash and cash equivalents at end of the year 70.8 Cash Flow items-Based on the current strategy Item 2011 m Operating profit before Changes in working capital and provisions 156.6 Net cash flow from operating activities Net cash flow used in investing activities 159.5 (78.3)

2012 m

168.7 164.09 (79.98) 72.54

Cash and cash equivalents at end of the year 68.8 Corporate governance

Corporate governance defines the system in which organizations are controlled and directed. Transparency, responsibility, honesty, independence, integrity, accountability, fairness, reputation and judgment are the principles or the building blocks of corporate governance. Agency theory is concerned with the stewardship of responsibility for a company between the directors, stakeholders, third parties and owners. Agency theory defines the relationship between company directors, shareholders and other stakeholders. For instance, the directors are given the power to control a company by the shareholders who a re the owner of the company. Agency theory is the main model of corporate governance.

Business Plan of the Spectris 7 Spectris is subject to the Combined Code on Corporate Governance which is responsible for setting principles and provisions which are related to the good governance of companies. The responsibility over corporate governance is the responsibility of the board of Spectris. This is done to ensure that the proposed strategy of delivering shareholder value comes to pass. As a result, in 2009, majority of the members of the nomination committee were not independent non-executive directors as required by provision A.4.1. A meeting held in 2009 resolved that the nomination committee compliant with the Combined Code by expanding its membership to include all non-executive directors, so that a majority of the nomination committees members from that date are independent non-executive directors. The corporate governance arrangements by Spectris are necessary to ensure the success of the proposed strategy as it will enable the company to deliver values to shareholders. It is also part of the companys strategic plan to ensure that the relationship between the shareholders and the company is enhanced. Providing value to its shareholders is an all round thing which will be aimed at ensuring that the company relationship with shareholders and stakeholders is enhanced. To ensure that the strategic plan comes to pass, Spectris is working day and night towards promoting and enhancing the relationship between the shareholders and the company at large.

Recommendations dealing with the financing and corporate governance

Business Plan of the Spectris 8 Intellectual capital is the sum of what everyone in a company knows and which gives the company a competitive advantage. I would recommend Spectris to posses an intellectual capital as it will enable it to succeed. That is, a company which is based on knowledge will always give rise to new businesses, new professionals and new workers. I would therefore advise the company to adopt a strategy which will help them to identify the intellectual capital. Spectris should also enhance its internal control system which will ensure the corporate governance principles are followed to the latter and also to ensure that the financial movements are monitored. That is, by having an internal control system, the company will be in a better position of forecasting sales and other business aspects which affect the success of the business. All the proposed measures towards achieving the set strategy will be clearly defined in the internal control system and the system will ensure that all the measures are followed to the latter. Critical review of the models used Capital assets pricing model (CAPM) Capital assets pricing model assumes that the trading of shares is costless and that investments are priced to all fall on the capital market line. This is not so since many investments involve high transaction costs. As a result, using this model to ensure the success of the proposed strategy may not be helpful. This is because high costs of trading may lead to high prices for investments which may be unaffordable to the investors making the company unable to deliver value to its shareholders.

Business Plan of the Spectris 9 Return on Investment (ROI) Return on Investment is used in performance evaluation. This model may not be useful to Spectris since majority of the managers may not know how to increase ROI to be consistent with the strategy of the company. Also, some managers may take action to increase the ROI in the short run which then becomes harmful in the long run. Therefore, to ensure that shareholders receive value for their investments, Spectris should not only depend on ROI. Also, a manager may reject a profitable investment because he has based it on the return on investments. Conclusion It is important for any company to set up a business plan as well to devise a strategic plan after which it should lay down all the mechanisms required for the success of the plan. It is estimated that there will be a noticeable growth rate on Spectris after the implementation of the proposed strategy as compared to the growth during the current strategy. The measures to be used in achieving the proposed strategy should be clearly evaluated to determine whether their delimitations exceed their strengths.

References Business Ideas http://www.mybusinesstricks.com/2012/10/business-ideas-2013.html,