spectris plc annual report and accounts 2005
improving performance for our customers
spectris cover web  11406  108 am  page a our technologies
spectris enhances productivity for customers through precision
instrumentation and controls we have a wide range of core
technologies many of which are proprietary based on
standard platforms working closely with customers we apply
our expertise and technology in the following areas
in situ measurement measurement of thickness moisture
consistency diameter composition and weight applications include
pulp paper and film wire cable and pipe food
particle characterisation instrumentation for accurate
characterisation of particles fibre and material properties
applications include pharmaceutical research pulp and paper paints
polymers and cement
contamination detection monitoring instrumentation to detect
microcontamination in cleanrooms applications in semiconductor
electronics and pharmaceuticals manufacturing equipment to detect
contaminants such as bone metal or glass in fresh or processed food
xray analysis analytical instrumentation and software for
determining the chemical composition and crystallographic structure
of a range of materials applications include research and
development in biotechnology nanotechnology pharmaceuticals
metals and minerals and industrial process control
uv curing systems for curing photosensitive inks coatings and
adhesives applications include printing and packaging cd and dvd
production electronics and automotive industries
sound  vibration analysis and monitoring instrumentation and
software to measure monitor and analyse noise and vibration
applications include automotive aerospace telecommunications
household appliances environmental noise hydroelectric and wind
turbine monitoring
electronic control scanners counters meters displays load cells and
digital measurement systems applications in process measurement
and control product tracking and quality control
our customers
our businesses are all leaders in their specialised markets and
work with multinational bluechip customers in a wide range
of industries the chart below shows the breakdown of our
2005 sales by end user industry
our companies
the way we are organised offers the best structure to deliver
against our strategy our businesses are all wellknown and
respected brands in the markets they serve they operate
autonomously within a framework of group management 
and control
electronic controls
arcom embedded processors telemetry products and 
industrial controls
hbm digital measurement systems load cells and transducers
microscan high speed industrial barcode scanning and decoding
equipment
red lion controls operator interfaces signal conditioners
temperature controllers counters rate indicators and panel meters
inline instrumentation
beta lasermike noncontact laserbased dimensional gauging and
ultrasonic measurement systems
brüel  kjær vibro machine condition monitoring systems and
maintenance services
btg group sensors instrumentation coating and creping technology
for the pulp and paper industry
ircon infrared noncontact temperature measuring and thermal 
imaging instruments
spectrum inspection systems contamination detectors and
checkweighers
ndc infrared engineering isotopic and infrared sensors for inline
measurement and control of moisture composition and web variables
servomex transducers analysers and systems for gas analysis
process technology
brüel  kjær sound  vibration transducers sound level meters
and analysers for sound and vibration measurement
fusion uv systems ultraviolet light processing technology for curing
photosensitive inks coatings and adhesives
malvern instruments instrumentation for the accurate
characterisation of particle and material properties
panalytical xray analytical equipment for industrial and scientific
applications
particle measuring systems microcontamination monitoring
systems for ultraclean environments and manufacturing processes
our locations
our companies have offices around the world helping customers
to meet global challenges wherever they are based we have
increased our presence in the rapidly growing markets of china
eastern europe latin america and india in order to work more
closely with our customers
spectris is a leading supplier of precision instrumentation and controls our products help
customers to improve product quality and performance increase productivity and yield
and reduce downtime
finished product 
industries
semiconductor  
telecoms
electronics
food  drink
transport
other industries 
2005 sales by end user industry
research  development
energy  primary 
industries
pulp  paper
energy  utilities
metals minerals  
mining
converting  
processing industries
web print  packaging
machine manufacturing
pharmaceuticals  
chemicals
north america
china
japan
europe
rest of asia pacific
rest of world
2005 sales by destination
spectris cover web  11406  108 am  page b spectris plc annual report and accounts 2005   1
 explanatory notes for reading the 2005 
annual report and accounts
1 the results for the year ended 31 december 2005
represent the group’s first preliminary financial
statements prepared in accordance with its accounting
policies under international financial reporting
standards ifrs the 2004 comparative results have
been restated
2 spectris uses adjusted figures as key performance
measures adjusted figures are stated before
amortisation of acquisitionrelated intangible assets
goodwill charges profits or losses on termination or
disposal of businesses or major fixed assets unrealised
changes in the fair value of financial instruments
related tax effects and other tax items which do not
form part of the underlying tax rate the differences
between the adjusted and unadjusted measures are
reconciled in note 3
3 the narrative that follows is based on the adjusted
measures of operating profit profit before tax and
earnings per share
see explanatory notes
2005 2004 change
sales £m 6559 6141 7
adjusted operating profit £m 735 646 14
adjusted profit before tax £m 605 505 20
profit before tax £m 508 359 42
adjusted earnings per share pence 362 316 15
basic earnings per share pence 288 195 48
dividend pence 158 145 9
contents
1 financial highlights
2 improving performance for our customers
8 chairman’s statement
9 chairman’s and chief executive’s review
11 financial review
16 board of directors
18 directors’ report
23 directors’ remuneration report
30 corporate responsibility
32 independent auditors’ report
33 consolidated income statement 
33 consolidated statement of 
recognised income and expense
34 consolidated balance sheet
35 consolidated cash flow statement
36 notes to the accounts
70 company balance sheet
71 notes to the company’s accounts
77 shareholder information
financial highlights
•
increased sales and operating profit in all three sectors
•
operating margins increased from 105 to 112
•
107 cash conversion of operating profit
•
significant reduction in net debt from £1589 million 
to £1199 million
figures for 2004 and 2005 are in accordance with ifrs
previous years are in accordance with uk gaap 
turnover
£m
operating
profit £m
earnings per
share pence
dividend per 
share pence
01 02 03 04 05 01 02 03 04 05 01 02 03 04 05 01  02  03  04 05
5431
4901
5680
6141
6559
607
507
598
646
735
338
281
321
316
362
1225
1275
1335
145
158
spectris 0117  3406  856 pm  page 1 2 spectris plc annual report and accounts 2005
improving performance for our customers
helping our customers to improve
product quality and performance
increase productivity and yield and
reduce downtime and waste
sca hygiene products’ mill in mannheim germany
is the largest tissue mill in europe with a production
capacity of more than 260000 tonnes of tissue per
year changing to using btg’s slowwearing ceramic
duroblade® instead of conventional steel blades has
reduced the number of blade changes on the tissue
machines thus decreasing the amount of downtime
and lost production an increase in blade lifetime from
an average of 22 hours per blade to over 40 hours has
resulted in a significant increase in tonnes of tissue
produced per year a further benefit from the ceramic
blades is more consistent tissue quality
paper mill
downtime reduced
german company schuler’s coining presses produce around
80 of the world’s coins prior to the introduction of the euro
in 2002 the presses had to work at full speed with the help
of hbm’s measurement technology which accurately monitors
the force used in minting schuler were able to guarantee the
output and performance of their machines and their european
clients were able to fulfil ambitious targets for supplying the
new coins on time schuler’s latest generation of minting
machines are equipped with hbm’s instrumentation and
customised software these new presses operate at speeds
around 20 higher than the previous machines resulting
in an additional 150 coins produced per minute
coin production
increased by 20
spectris 0117  5406  1115 am  page 2 spectris plc annual report and accounts 2005   3
hoben industrial minerals based in england are specialists in processing
hard minerals to fine powders following installation of a malvern inline
particle size analyser product consistency and mill control has been improved
and the manpower required to run the unit substantially reduced the silica
sand processing mill now operates around the clock and throughput has
increased by 60 in addition hoben’s ability to produce a more closely
specified product consistently has helped its customers to access new markets
mineral processing
throughput up 60
spectris 0117  3406  856 pm  page 3 4 spectris plc annual report and accounts 2005
the way that its cars sound and feel is a key product differentiator for automotive
manufacturer sea t  part of the v olkswagen group at its research and development
facility near barcelona spain sound and vibration characteristics such as interior
noise from the engine along with functions such as the electric windows wipers and
sunroof are analysed and recorded a new model cannot be released for production
until it fully conforms to its specified noise parameters using brüel  kjær’s sound
analysis equipment the total measurement time has been reduced from four hours
per car to one hour  a saving of 75 per cent
noise testing times cut by 75
improving performance for our customers
swedish company lkab is one of the world’s leading producers of iron 
ore products for the steel industry new products are developed using their
own experimental blast furnace the objective is to develop new pellets with
better properties which will help to reduce hot metal costs at their customers’
blast furnaces using a panalytical xrf spectrometer to perform analyses of
iron and slag has resulted in a dramatic reduction in the time spent waiting
for the results enabling more precise monitoring and control of the process 
in the experimental blast furnace
iron ore analysis times reduced 
spectris 0117  3406  856 pm  page 4 pressing the oil from rape seed results in a proteinrich cake which
is used as an animal feed supplement the oil being used for a
variety of consumer products using ndc infrared engineering’s
online near infrared analyser to monitor the moisture content of
the rape seed enabled danish producer scanola to maintain the
maximum permissible amount of moisture in the cake resulting
in an additional 1800 tonnes of cake being produced each year
a second ndc online analyser measuring the oil content has
enabled an additional 1 of oil to be extracted from the seed
resulting in an extra 800 tonnes of oil per year more accurate
measurement of oil and moisture through continuous online
monitoring rather than intermittent laboratory sample testing
has generated additional production for scanola worth around
€600000 per year at current prices
helping our customers to address
environmental issues by reducing raw
material and energy consumption and
measuring pollutants and emissions
continuous oil and 
moisture measurement
increases production
spectris 0117  5406  1108 am  page 5 starkey laboratories is the world’s leading manufacturer of
custom hearing instruments each highly specialised instrument
comprises a mass of miniature electronic circuitry encased in
plastic and is individually constructed however manufacturing
productivity was restricted as the glues used to bond the speaker
component to the silicone tube which delivers the amplified sound
into the ear required overnight curing following the installation
of a fusion uv curing unit this process now takes just one minute
an additional benefit is that solventbased glues have been replaced
with more environmentallyfriendly silicone adhesives
hearing aid curing process
reduced to 1 minute
with replacement costs exceeding 1 million
preventing damage to optical equipment is a critical
issue for semiconductor manufacturers using
instrumentation from particle measuring systems to
monitor and detect airborne contamination during
the photolithography process which creates the
multiple layers of circuit patterns on the chip a major
north american semiconductor manufacturer was
able to detect and identify a gas contaminant
alternative technology would have been unable to
detect this event in real time thus the company was
able to prevent damage to the equipment and avoid
the cost of production lost during the downtime
semiconductor 
equipment damage
prevented
improving performance for our customers
helping our customers to improve 
their design and development processes
speeding up time to market
spectris 0117  5406  1114 am  page 6 spectris plc annual report and accounts 2005   7
the port of long beach in california is the secondbusiest port in
the us with its milelong pier t terminal capable of handling more
than two million cargo containers per year t o meet growing
demand stateoftheart surveillance and intrusion detection systems
are installed theseinclude intelligent cameras which capture truck
drivers’ vehicle information at the 29lane gates microscan’s bar code
scanners then scan their id cards on entry and the bar codes on the
paperwork on exit and document the time and date the driver exited
the facility in addition to increasing the security of the facility the
gate and access control systems have also increased cargo throughput
by reducing gate waiting times and overall driver turn times which
has measurably lowered the operating cost per move
cargo throughput increased
spectris 0117  3406  856 pm  page 7 8 spectris plc annual report and accounts 2005
chairman’s statement
“the company achieved good progress in 2005 with sales
operating profit and margins all ahead actions to restrain
overheads restore profitability in underperforming
businesses improve margins and generate cash were all
positive levels of demand in the first two months of the
year provide encouragement that the company will show
further good progress in 2006 ”
overview
as indicated in the trading update in january sales in 2005
increased by 7 with all three sectors reporting growth over
the previous year and orders in excess of sales profits earnings
per share and cash conversion also moved ahead strongly
growth in asia in particular continued to be vigorous
actions taken to improve margins involving overhead
containment reflected in an unchanged year end headcount
and the elimination of some lower margin sales began to show
benefits operating margins improved from 105 to 112
sales increased by 7 to £6559 million 2004
£6141 million operating profit increased by 14 to 
£735 million 2004 £646 million

 earnings per share
increased from 316p to 362p on a tax rate of 27 2004 24
the effects of changes in exchange rates were negligible
cash conversion was excellent with 107 of operating profit
converted into cash as actions to generate cash on a more
consistent basis took effect net debt at the year end was 
£1199 million compared with £1589 million twelve months
earlier interest costs were £126 million giving an annualised
interest cover of 58 times
the board proposes to pay a final dividend of 112p which
combined with the interim dividend gives a total of 158p
2004 145p an increase of 9 the dividend will be paid on
23 june 2006 to shareholders on the register at 2 june 2006
board changes
i am pleased to welcome john o’higgins who joined the
board in january 2006 as chief executive john was previously
with honeywell inc the us aerospace and technology products
multinational latterly as president of honeywell automation
and control solutions based in shanghai john’s educational
qualifications track record within the instrumentation and
controls industry and business experience equip him well to
lead the company and drive its development i am also pleased
to welcome john warren who joins the board from 7 march as
a nonexecutive director nonexecutive directors martin lamb
and professor leo murray will be standing down at the agm
and i should like to thank them for their guidance and
contribution to the development of the company in recent years
john poulter
chairman
unless otherwise stated all profit and earnings figures referred to are adjusted 
measures see explanatory note on page 1
spectris 0117  3406  856 pm  page 8 spectris plc annual report and accounts 2005   9
the following paragraphs describe the operational performance
of the group’s business segments
sector performance
electronic controls achieved sales growth of 3 from 
£1397 million in 2004 to £1435 million with profit up 6
from £172 million to £182 million operating margins
improved from 123 to 127 microscan launched two new
bar code readers during the year which made a positive
contribution to a good growth performance red lion controls
enjoyed particular success with humanmachine interface
products increasing sales in the us by more than 40 compared
with the prior year at hbm sales in the second half were
attenuated both by a lack of large projects and the elimination
of some low margin business largely for chinese customers
however profitability improved a conditional agreement for
the disposal of arcom was signed in february 2006 for a total
consideration of us26 million this business is being divested
as it is not core to spectris’ strategy and will have greater
opportunities as part of a specialist embedded computer
technology company
inline instrumentation achieved sales growth of 2 from
£1984 million to £2023 million with profit growing by 11
from £206 million to £229 million operating margins
improved from 104 to 113 sales of btg’s duroblade
product recovered in the second half with the ending of the
lockout at paper mills in finland however delayed capital
spending by paper manufacturers in the light of increases in
energy and transport costs caused sales at the instrumentation
side of btg’s business to be subdued servomex reported
record sales and operating profits with strong demand in the
second half for gas analysis systems on the back of increased
spending by companies in the hydrocarbon industries
operating profits were up at brüel  kjær vibro on
relatively flat sales due primarily to an improved product mix
electronic controls
sales
£m
profit
£m
04
1397
1435
05 04 05
172
182
04
1984
2023
05 04 05
206
229
sales
£m
profit
£m
inline instrumentation
04
2760
 3101
05 04 05
268
324
sales
£m
profit
£m
process technology
“our priority going forward is to continue to pursue the
strategy of managing cost pricing and overheads tightly
actions such as transferring component sourcing
manufacturing and assembly to lowercost regions
productivity and process improvements and a maintained
focus on cash generation reinforce our ability to deliver
improved profitability and operating margins ”
chairman’s and chief executive’s review 
spectris 0117  5406  426 pm  page 9 outlook
levels of demand in the first two months of the year provide
encouragement that the company will show further good
progress in 2006 spectris has a strong business portfolio with
marketleading brands and good technology positions exposure
to a number of attractive enduser industries and high calibre
people continued focus on the emerging markets of asia
pacific eastern europe and latin america together with
growing emphasis by customers on the value of aftersales
service present good opportunities for the company several 
of our operations are well positioned to take advantage of
increasing investment in petrochemical mining and metals
industries as a consequence of high oil and commodity demand
our priority going forward is to continue to pursue the
strategy of managing cost pricing and overheads tightly
actions such as transferring component sourcing
manufacturing and assembly to lowercost regions
productivity and process improvements and a maintained
focus on cash generation reinforce our ability to deliver
improved profitability and operating margins in addition we
will continue to drive organic sales growth and to strengthen
our portfolio of businesses by considering external
opportunities for growth where appropriate
john poulter john o’higgins
chairman chief executive
10 spectris plc annual report and accounts 2005
chairman’s and chief executive’s review continued
the company is expected to benefit as oil refiners invest in
new capacity with increased demand for safety and condition
monitoring systems at ircon trading margins and profits
moved ahead ndc made good progress particularly with the
sales of sensors for measuring equipment with strong growth
in asia although the chinese plastics market suffered from
the high oil price and overcapacity greater penetration of
other industries such as nonwovens compensated beta
lasermike made good progress with its restructuring and
returned to trading profitability in the year the restructuring
at loma and cintex returned the business to profitability in
the second half as management focused on product margins
and the benefits of the move to a manufacturing unit in the
czech republic were realised the company has been renamed
spectrum inspection systems
process technology achieved sales growth of 12 from 
£2760 million to £3101 million with profit growing by 21
from £268 million to £324 million operating margins
improved from 97 to 104 in a year in which
semiconductor equipment investment was flat particle
measuring systems did well primarily due to market share
gains in the flat panel display optical display and
pharmaceutical industries continued investment by the
automotive and electronics industries in japan benefited
fusion uv systems particularly in flat panel displays where
demand for uvcoated functionalised film products is strong
with asia expected to satisfy around 90 of world demand
malvern produced a good performance both from the
laboratory business where nanomaterial and biotechnology
research markets are attractive and in the process business
globally malvern’s newlyopened applications laboratory in
china underpinned a strong asian performance
sales at brüel  kjær sound  vibration increased
the company won strategic environmental contracts in china
for both beijing city and airport giving brüel  kjær a strong
position in the growing chinese environmental noise
management market underlying profits increased but were
impacted by a oneoff cost for centralising backoffice
functions panalytical enjoyed doubledigit growth in both
sales and operating profit with particular success in asia
the european directives on restricting hazardous substances
and waste electrical and electronic equipment have already
been beneficial the measurement of traces of heavy metals 
in foods and asbestos in waste presents good opportunities
panalytical also entered into an agreement with lafarge
making it the preferred supplier of xray analysis systems for
the entire cement division comprising 150 plants worldwide
spectris 0117  3406  856 pm  page 10 spectris plc annual report and accounts 2005   11
financial review
introduction
during 2005 spectris adopted international financial
reporting standards ifrs in common with other
companies that are listed in the european union this has
required a restatement of the 2004 results reported previously
under uk gaap  in certain respects ifrs has introduced
more complexity to spectris’ financial statements through the
use of fair value accounting rules the section headed
‘adoption of ifrs’ below describes the principal impact on
spectris from adopting ifrs
spectris uses adjusted figures as key performance measures
in addition to those reported under ifrs adjusted figures are
stated before amortisation of acquisitionrelated intangible
assets goodwill charges profits or losses on the termination
or disposal of businesses or major fixed assets unrealised
changes in the fair value of financial instruments related tax
effects and other tax items which do not form part of the
underlying tax rate unless otherwise stated all profit and
earnings figures referred to below are adjusted measures
operating performance
2005 2004
turnover £m 6559 6141
operating profit £m 735 646
operating margin  112 105
sales increased by 7 overall driven largely by increased
demand from customers in asia
adjusted operating profit rose by 14 overall with the
operating margin improving from 105 to 112 aside
from the impact of sales growth operating profits benefited
from the constraint exercised on overheads and the return to
profitability of the beta lasermike and spectrum businesses
interest costs including ias 19 pension charges reduced
from £141 million to £130 million reflecting both the
consistent reduction in the level of net debt during the year
and more efficient use of surplus cash balances after taking
account of lower interest costs adjusted profits before tax
increased by 20 from £505 million to £605 million
bolton acquisitions and currency movements had a
broadly neutral overall effect on the profits for the year
operating profits after including goodwill charges of
£74 million 2004 £122 million and acquisitionrelated
intangible asset amortisation of £12 million 2004
£12 million increased by 27 from £512 million to
£649 million
unadjusted profits before tax increased by 42 from 
£359 million to £508 million in addition to goodwill
charges and acquisitionrelated intangible asset amortisation
charges the 2005 result includes a £17 million profit on the
disposal of the group’s remaining interest in the luxtron
business this result also includes unrealised losses of £28
million on the group’s crosscurrency interest rate swaps and
average rate options as a consequence of the adoption of ias
39 with effect from 1 january 2005 these items are explained
in more detail in the ‘adoption of ifrs’ section below
acquisitions and disposals
during the year one small bolton acquisition was made for
which the total consideration including acquisition expenses
and debt acquired was £25 million
in february 2006 spectris entered into an option
agreement to sell the arcom business to eurotech spa
since the year end eurotech has paid us2 million to
spectris in consideration for the option which gives eurotech
60 days to acquire arcom on a cash and debtfree basis
should the acquisition complete the total consideration will
be us26 million including the us2 million option payment
already received as a consequence of this agreement the
arcom business’ assets and liabilities are presented separately
in the group balance sheet as ‘held for sale’ 
t axation
the effective tax rate on profits was 269 2004 244
the effective tax rate continues to be below the weighted
average statutory tax rate of 328 2004 326 as a
consequence of the utilisation of unrecognised tax losses in
germany taxefficient financing and prior year tax credits
as anticipated the increase in the tax rate in 2005 was due to
spectris 0117  3406  856 pm  page 11 12 spectris plc annual report and accounts 2005
financial review continued
a reduction in the effect of tax planning and brought forward
loss utilisation the underlying tax charge is expected to
increase further towards the weighted average statutory tax
rate over the next few years
earnings per share
adjusted earnings per share increased by 15 from 316p to
362p this increase is lower than the growth in profit before
tax due to a higher effective tax rate
basic earnings per share increased by 48 from 195p to
288p the differences between the two measures are shown in
the table below
2005 2004
pence pence
basic earnings per share 288 195
goodwill charges and acquisitionrelated
intangible asset amortisation 70 111
loss on termination of businesses – 10
income from disposal of luxtron 14 –
unrealised changes in fair value of
financial instruments 23 –
tax effect of the above and other tax items that 
do not form part of the underlying tax rate 05 –
adjusted earnings per share 362 316
the weighted average number of shares outstanding during
the year increased from 1209 million to 1221 million this
increase arose principally as a result of the disposal of a
proportion of the own shares held by the spectris employee
benefit trust for cash proceeds of £107 million
cash flow
2005 2004
operating cash flow £m £m
adjusted operating profit 735 646
add back depreciation 126 134
working capital movementother 45 137
net cash flow from operating activities
before capex 906 643
capex 122 156
operating cash flow 784 487
cash conversion 107 75
nonoperating cash flow
tax paid 158 77
interest paid 127 139
dividends paid 181 163
acquisitions 30 105
shares issued 13 07
sale of own shares by employee benefit trust 107 –
financial income 18 01
finance leases 05 –
exchangeother 31 34
total nonoperating cash flow 394 442
operating cash flow 784 487
movement in net debt 390 45
cash conversion of operating profit to operating cash was
107 2004 75 the improvement in cash conversion was
chiefly due to a turnaround of £182 million in the working
capital movements which improved from a cash outflow in
2004 of £137 million to a cash inflow of £45 million in 2005
inventory turns improved from 29 times at december 2004
to 33 times at the end of 2005 debtor days outstanding
increased very slightly rising from 59 days at december 2004
to 60 days at the end of 2005 over the same period trade
working capital expressed as a percentage of sales remained
constant at 16
capital expenditure reduced during the year and equated to
19 of sales and at £122 million was 97 of depreciation
the level of tax paid in 2005 was higher than in 2004 due
primarily to the acceleration of payments on account in
germany and an increase in the current tax on profits
overall net debt fell by £390 million interest cost
excluding the financing charge arising from ias 19 was
covered by operating profits 58 times 2004 47 times
providing headroom over the banking covenants which
require a minimum of 3 times cover
financing and treasury
the group finances its operations from both retained
earnings and thirdparty borrowings the majority of which
are currently at fixed rates of interest
during 2004 no significant new loan borrowings were
taken out and the majority of thirdparty borrowings
continue to be comprised of us dollar private placement
loans which have been partly swapped into euros to provide 
a hedge against eurodenominated net assets in the group’s
balance sheet
30 of debt is due to mature within one year 2004 0
29 of debt is due to mature in between one and five years
2004 27 and the remaining 41 in more than five years
2004 73 during july 2006 the 100 million 1996 private
placement loan notes will become due for repayment new
committed facilities have already been negotiated which
together with the free cash flow generated by the group will
provide sufficient funds to repay these loans
currency
the group has both translational and transactional currency
exposures translational exposures arise on the consolidation
of overseas company results into sterling transactional
exposures arise where the currency of sale or purchase
invoices differs from the functional currency in which each
company prepares its local accounts the transactional
exposures include situations where foreign currency
denominated trade debtor trade creditor and cash balances
are held
t o demonstrate the currency exposures faced by the 
group the chart opposite shows the differences between 
the group’s consolidated revenues and costs for each of the
major currencies
spectris 0117  5406  0851  page 12 spectris plc annual report and accounts 2005   13
the largest transactional exposures are to the us dollar and
to a lesser extent the japanese yen the largest translational
exposures are to the us dollar and euro and also the danish
krone which has tended to track the euro quite closely the
table below shows the average exchange rates during 2004 and
2005 which are quite similar and there was therefore a modest
currency effect on the results when compared yearonyear
the key exchange rates were as follows
2004 2005 2005
average average yearend rate
us 183 182 172
euro 147 146 145
yen 197 200 203
in the past the group’s currency exposures have been
hedged using zero cost average rate options the group’s us
dollar euro and japanese yen exposures were hedged in 2004
through zero cost average rate options which in aggregate
generated net gains of £32 million in 2005 whilst the group
had zero cost average rate options in place no gain or loss
arose going forward the group does not intend to use zero
cost average rate options to hedge currency exposures and no
options were outstanding as at 31 december 2005
translational currency exposures are not hedged forward
exchange contracts are used to hedge forecast sale transactions
where there is reasonable certainty of an exposure
defined benefit pension schemes
operating profit includes a defined benefit pension scheme
current service charge of £07 million 2004 £08 million
the net pension liability in the balance sheet before taking
account of the related deferred tax asset has increased to
£226 million 2004 £207 million largely as a consequence 
of a reduced discount rate during 2005 the group increased
its cash contributions into the defined benefit pension
schemes to £32 million 2004 £15 million
adoption of ifrs
in most respects there was a minimal impact on spectris
from the adoption of ifrs however ifrs has introduced
more complexity into the group’s financial statements
particularly the requirement to fair value derivative financial
instruments following the adoption of accounting standard
ias 39 with effect from 1 january 2005 the detailed
transitional reconciliations from the group’s reported uk
gaap results in 2004 to the restated ifrs results for 2004 are
presented in note 36 of the financial statements however the
most significant adjustments arising on adoption of ifrs
are summarised below
presentational matters
ifrs has different presentation and disclosure requirements
to uk gaap and has involved significant changes to the
presentation of the financial statements wherever possible
the group has attempted to present the financial statements in
a consistent manner with those presented in the past the
changes in accounting rules have meant that the group’s
adjusted measures of profits and earnings have been changed
and the new measures are described in the introduction to
the financial review
deferred tax
the single largest adjustment arising on the transition to
ifrs relates to deferred tax deferred tax accounting under
uk gaap is based on the concept of ‘timing’ differences
which focuses on the differences in timing between when
profits are recognised for accounting and tax purposes
in contrast ifrs has a concept of ‘temporary’ differences
which is more balance sheet focused comparing the carrying
value of assets and liabilities for both tax and accounting
purposes goodwill arising on the acquisition of the group’s
us businesses which was previously written off to reserves is
deductible for tax purposes under uk gaap  the current tax
deduction obtained each year gave rise to a deferred tax
liability because it was perceived that there was a timing
difference which could reverse for example on disposal of a
business under ifrs the tax balance carried forward at each
balance sheet date instead gives rise to a deferred tax asset
since the accounting asset has been written off to reserves and
is not recognised on the balance sheet whilst a tax asset exists
by virtue of the ability to claim future deductions
at 31 december 2004 the deferred tax liability under 
uk gaap was £176 million under ifrs this liability has
been eliminated and replaced with a deferred tax asset of
£110 million a combined adjustment of £286 million
there was an impact of £02 million on the tax charge in the
income statement in 2004 from this change
goodwill
there are a number of differences in the way goodwill is
treated between ifrs and uk gaap
1 under uk gaap  goodwill was amortised over its estimated
useful life under ifrs goodwill is not amortised but is
  dollareuro categories include tracking currencies
  costs include interest
  euro  £ yen other
total sales £6559m
total costs £5954m
pbt £605m
sales
costs  
265
194
240
235
62
99
49
23
40
44
spectris 0117  3406  856 pm  page 13 14 spectris plc annual report and accounts 2005
financial review continued
instead subject to an annual impairment test as a
consequence of this goodwill amortisation included in 
the 2004 uk gaap accounts of £130 million has been
reversed
2 under uk gaap  no distinction was made between the
various components of any intangible asset arising on
acquisitions where the price paid exceeds the fair market
value of the tangible assets and liabilities acquired under
uk gaap all such intangibles were disclosed as goodwill
and amortised over an appropriate economic life ifrs
requires separate identification of these intangibles and
amortisation where appropriate with any residue being
classified as goodwill as a consequence £58 million of the
goodwill reported at 31 december 2004 under uk gaap
has been reclassified under ifrs as intangible assets and
amortisation of £12 million was charged on these assets 
in 2004
3 where an acquisition occurs and the conditions for
recognition of a deferred tax asset are not met at that time
but are met at a later date ifrs requires that an equal and
opposite adjustment to goodwill is made in 2004 under
uk gaap  the group recognised a deferred tax asset of
£122 million relating to an earlier acquisition and as a
consequence under ifrs an additional goodwill charge 
of £122 million has been made in 2004
dividends
under uk gaap  dividends payable to shareholders were
recognised in the profit and loss account in the period to
which they related on this basis the 2004 uk gaap accounts
included an accrual for the final dividend approved at the
annual general meeting in may 2005
ifrs requires that dividends are not recognised until they
are declared as a consequence the net assets reported by the
group on a uk gaap basis at 31 december 2004 have been
increased on adoption of ifrs by £124 million to reverse the
accrual for the final dividend declared in 2005 in respect of
the year ended 31 december 2004
other adjustments impacting the transition to ifrs in the 2004
comparative period
there were three other types of adjustment made to the 2004
comparative results in the transition to ifrs which had a less
significant impact than those items already described above
1 share options – a charge to the profit and loss account is
recognised under ifrs where previously no such charge
existed under uk gaap  the charge applies to options
issued after november 2002 this requirement resulted 
in a charge to the income statement in the year ended 
31 december 2004 of £04 million however there is no
overall impact on the balance sheet since there is also a
corresponding adjustment to equity through reserves
2 revenue recognition – ifrs is similar to uk gaap but
contains specific additional guidance on accounting for
contracts that include installation elements following a
review of existing policies this gives rise to some subtle
differences in the timing of accounting for certain
transactions this led to a reduction in profits before tax 
of £02 million in the income statement for the year ended 
31 december 2004 the net deferral of revenue and
associated costs in the balance sheet at 31 december 2004
was £23 million
3 holiday pay – ifrs requires shortterm accumulating
benefits such as holiday and sick pay entitlements to be
accrued over the period in which the entitlement is earned
there was no impact on the income statement in 2004 but 
an additional liability of £11 million was recognised in the
balance sheet as at 31 december 2004
adoption of ias 39 from 1 january 2005 derivatives and
hedge accounting
as permitted by the ifrs transitional accounting rules the
group elected to adopt ias 39 with effect from 1 january 2005
and consequently the comparative period for 2004 has not
been restated to comply with ias 39 ias 39 has impacted on
the group in 2005 in three main areas
1 average rate options – the group has historically used
average rate options to provide a hedge against the group’s
currency exposures under uk gaap  the value of the
options was recognised in the profit and loss account in a
way that matched the gains or losses arising with the period
the options were intended to hedge ifrs requires that the
fair value of such derivative financial instruments is
recognised on the balance sheet at all times since the
options did not meet ias 39’s strict hedge accounting
criteria all changes in the fair value were recognised in the
income statement as at 1 january 2005 the fair value of the
average rate options was £17 million reducing to a value of
£nil at 31 december 2005 this gives rise to a charge in the
income statement in 2005 of £17 million this charge is
excluded from the group’s adjusted measure of profits and
earnings since it is an unrealised loss
2 crosscurrency interest rate swaps – the group uses cross
currency interest rate swaps to convert some of its fixed
interest us dollar private placement loan note borrowings
into fixed interest eurodenominated borrowings this is
done so as to provide a natural hedge of the group’s
european investments under uk gaap  the combined
instruments were accounted for as if they were a single
financial instrument whilst ifrs requires that the
instruments are recognised in the balance sheet separately
and the swaps are required to be carried at their fair value
the fair value of the crosscurrency swaps can effectively
be split into two components a currency portion that
converts a us dollar borrowing obligation into one
denominated in euros and an interest portion that changes
a stream of us dollar fixed interest payments into euro
fixed interest payments under uk gaap  the currency
spectris 0117  3406  856 pm  page 14 spectris plc annual report and accounts 2005   15
portion of the swaps was included within the carrying value
of the group’s borrowings in the balance sheet however
the interest portion of the swap was not previously
recognised in the group balance sheet aside from the
change to the way these financial instruments are presented
in the balance sheet the move to ifrs has required the
interest portion of the swap to be carried in the group
balance sheet for the first time since it is considered to be
ineffective in any hedging relationship all changes in the
fair value of the interest portion of the swap are recognised
in the income statement at 1 january 2005 the fair value
of the interest portion of the swap was a liability of
£76 million increasing to a liability of £87 million at 
31 december 2005 this gives rise to a charge in the income
statement of £11 million in 2005
over time as the group continues to make the fixed 
interest payments due under the swap arrangement the
value of the interest portion of the swap will decrease to nil
on this basis changes in its value are considered to be
unrealised gains or losses and so are excluded from the
group’s adjusted measures of profits and earnings
3 forward currency contracts – the group uses forward
exchange contracts to hedge highly probable forecast future
cash flows under uk gaap  the value of these contracts
was recognised at the time when the sale transactions to
which they related were recognised under ifrs the fair
value of the forward exchange contracts is required to be
recognised on the balance sheet at all times provided the
hedges are considered to remain fully effective the change
in the fair value of the forward exchange contracts is
recognised in a hedging reserve until the point in time
when the sale transactions occur at this point the fair
value of the contracts is recognised in the income
statement
this change from uk gaap to ifrs has not had any 
impact on the income statement in 2005 but there is an
impact on the group balance sheet the fair value of the
forward exchange contracts at 1 january 2005 of an asset 
of £08 million was recognised in the group balance sheet
reducing to a liability of £06 million at 31 december 2005
£13 million of this movement was recognised in the 
hedging reserve and £01 million of the movement has 
been recognised in the income statement in 2005
steve hare 
group finance director
spectris 0117  3406  856 pm  page 15 16 spectris plc annual report and accounts 2005
board of directors
john poulter
chairman
john poulter joined spectris in 1988 and 
was chief executive from 1992 until he
became nonexecutive chairman in 2001
his earlier career was with btr plc and
cambridge instruments he has been a 
nonexecutive director of a number of 
public companies including rac plc and
kidde plc he is currently a nonexecutive
director of smaller companies value trust
plc and several private companies age 63
chairman of the nomination committee
andrew given 
nonexecutive director
andrew given was appointed to the board
in 2001 from 1990 to 2002 he was with
logica plc initially as group finance director
and latterly as deputy chief executive prior
to that he held senior financial positions
with plessey company plc and with
northern telecom limited mainly in north
america he is a nonexecutive director of
vt group plc and spirent plc age 58
chairman of the audit committee and
senior independent director
professor leo murray 
nonexecutive director
professor murray was appointed to the
board in 2003 he is a graduate of glasgow
university and was for 17 years director of
the cranfield school of management
before joining cranfield he had a successful
international business career including
management positions with bp  courtaulds
at kearney management consultants and
rothmans international he is a director of
east of england international limited and
the macintyre charitable trust and a board
member of and consultant to a number of
organisations age 62
steve hare 
group finance director
steve hare a bachelor of commerce and
chartered accountant joined spectris in
2004 previously a cofounder of
consultancy hba partners he was before
that chief financial officer and a board
member of marconi plc where he was
instrumental in achieving agreement for 
the successful financial restructuring
package prior to joining marconi steve 
was group finance director at gpt limited
a joint venture between gec and siemens
age 44
john o’higgins 
chief executive
john joined spectris in january 2006 
his previous career was with honeywell inc
where he was latterly president of 
honeywell automation and control 
solutions based in shanghai prior to this 
he was based in brussels in a series of senior
roles in the automation and industrial 
divisions of the company before joining
honeywell he was with daimler benz john
has an engineering degree from university
college dublin a master’s degree in control
engineering from purdue in indiana and an
mba from insead age 42
martin lamb 
nonexecutive director
martin lamb was appointed to the
board in 1999 an engineer he has
considerable business and technical
experience both in the uk and north
america much of his career has been
spent with imi plc where 
he is chief executive age 46
spectris 0117  4406  336 pm  page 16 spectris plc annual report and accounts 2005   17
john warren 
nonexecutive director
john warren was appointed to the board
in march 2006 from 2000 to 2005 he was
group finance director at wh smith plc
prior to that he was with united biscuits
plc for 19 years latterly as group finance
director he has been a nonexecutive
director of rexam plc and rac plc and is
currently a nonexecutive director of the
rank group plc arla foods uk plc bovis
homes group plc and will be appointed a
nonexecutive director of bpp holdings plc
from may 2006 age 52
anthony reading mbe 
nonexecutive director
anthony reading was appointed to the board
in 2004 he was a director of tomkins plc
and chairman of tomkins corporation usa
for 11 years until he retired at the end of
2003 prior to that he held senior positions
with a number of international companies
including group chief executive of the
manufacturing and engineering division 
of btr plc he is a nonexecutive director 
of the laird group plc george wimpey plc
and e2v technologies plc age 62
chairman of the remuneration committee
jim webster
business group director
jim webster a metallurgy graduate
joined spectris in 1993 he is responsible
for the operational supervision of a
number of the group’s trading
companies he was previously general
manager of the european wire and
cable division of raychem corporation
he is a nonexecutive director of
raymarine plc age 55
stephen harris
business group director
stephen harris joined spectris in 2003 
he is responsible for the operational
supervision of a number of the group’s
trading companies prior to joining 
spectris he was executive director at 
powell duffryn responsible for a number 
of subsidiaries and before that held 
several positions within apv in north
america he has a degree in engineering
from cambridge and an mba from the
university of chicago age 47
roger stephens
head of commercial and 
company secretary
roger stephens is an economics graduate
and chartered company secretary prior 
to joining spectris in 1997 he worked 
in engineering project management
specialising in commercial negotiations 
and claims resolution and then as director 
of administration in a commercial law firm
age 45
spectris 0117  3406  857 pm  page 17 18 spectris plc annual report and accounts 2005
directors’ report
the directors present their report and accounts for the year
ended 31 december 2005
principal activities
spectris is engaged in the development and marketing of
precision instrumentation and controls for 2005 reporting
purposes the businesses were grouped into three sectors
electronic controls inline instrumentation and process
technology further details of the trading companies can
be found in the chairman’s and chief executive’s review 
page 9 developments in the group’s business activities
are discussed in the chairman’s and chief executive’s review
page 9 and financial review page 11
acquisitions
during the year a small bolton acquisition was made for
which the consideration was £25 million including expenses
disposals
in february 2006 the company entered into an option agreement
to sell the arcom business to eurotech spa eurotech paid
us2 million in consideration for the option should the
acquisition complete the total consideration including the 
us2 million already received will be us26 million
during the year the company sold its remaining equity interest
in luxtron corporation for £17 million net of legal expenses
share capital
the issued share capital at the year end consisted of
124624405 5p ordinary shares
at the 2006 annual general meeting resolutions will be
proposed for the renewal of the authorities granted to the
directors to allot shares to allot shares on a non preemptive
basis for cash and to purchase the company’s own shares
either to be cancelled or to be held in treasury all within
specified limits
at 7 march 2006 interests notified to the company in
accordance with part vi of the companies act 1985 comprised
aegon asset management 
5234182 shares 420 material interest
standard life investments
4940303 shares 396 material interest
liberty wanger asset management lp
4120000 shares 331 material interest
legal  general investment management limited
4088072 shares 328 material interest
prudential plc
3989203 shares 320 material interest
dividends
results for the group are set out in the consolidated income
statement on page 33 and in the supporting notes a final
dividend of 112p per ordinary share is proposed for the
year to 31 december 2005 2004 1025p with the interim
dividend this makes a total for the year of 158p 2004 145p
the final dividend will be paid on 23 june 2006 to
shareholders on the register on 2 june 2006
the terms of the spectris plc employee benefit trust
provide that dividends payable on shares held within the
trust are waived to 001p
research and development
expenditure committed to research and development
is focused on new product development applications
engineering and process integration costs are expensed as
incurred except where the expenditure meets certain strict
criteria for capitalisation in the year to 31 december 2005
amounts expensed totalled £449 million 2004 £434 million
and no expenditure met the criteria for capitalisation 
2004 £nil
fixed assets
whilst the market values of some properties differ from
book values the directors believe that the differences are
not material
payment of suppliers
the group’s policy on payment of suppliers is to ensure that
terms of payment accord with contractual and legal
obligations the company had £01 million of trade creditors
at the year end 2004 £nil
directors
the directors of the company are named on pages 16 and 17
john o’higgins and john warren were appointed to the
board on 10 january 2006 and 7 march 2006 respectively
hans nilsson resigned from the board on 25 may 2005
martin lamb and leo murray will retire from the board
following the 2006 agm
john o’higgins and john warren having been appointed
since the 2005 agm retire from the board under the terms of
the articles of association and being eligible offer themselves
for election all other directors of the company were either
appointed or reappointed at the 2004 or 2005 agms
therefore in accordance with article 106 of the company’s
articles of association approved at the 2005 agm no
director is required to submit themselves for reelection at
the 2006 agm
the directors’ total remuneration for the year and their
interests in the shares of the company and its subsidiaries
at 31 december 2005 are disclosed in the directors’
remuneration report on pages 26 to 29
spectris 1822  3406  950 pm  page 18 spectris plc annual report and accounts 2005   19
auditors
separate resolutions to reappoint kpmg audit plc as
auditors and to authorise the directors to agree their
remuneration will be proposed at the annual general meeting
annual general meeting
the notice of annual general meeting to be held at the
company’s offices on wednesday 17 may 2006 at 1130 am
is contained in a separate letter from the chairman
accompanying this report
corporate governance
combined code statement of compliance
spectris plc is subject to the combined code on corporate
governance “the combined code” that is appended to the
listing rules of the uk listing authority the combined
code sets out principles and provisions relating to the good
governance of companies
corporate governance has been and remains the
responsibility of the whole board this statement describes
how the company applied the principles and complied with
the provisions of the combined code during 2005
the board considers that it was throughout the year and
continues to be in full compliance with the provisions set out
in section 1 of the combined code save that
• a majority of the members of the nomination committee
are not independent nonexecutive directors as required
by provision a41 the committee consists of the
chairman the senior independent director and the
chief executive and the board considers this to be the
most appropriate composition for the sensitive issues
addressed by the committee
• until 31 may 2005 the audit committee did not consist
exclusively of independent nonexecutive directors as
required by provision c31 the chairman john poulter
has since resigned from the audit committee whose
composition is now in compliance
board composition and procedures
the board meets formally around nine times each year to
consider developments in relation to the company’s strategy
and longterm objectives and to review trading results and
operational and business issues in particular it deals with
those matters reserved to it for decision including the
acquisition and disposal of businesses major capital
expenditure the appointment and where necessary removal
of directors and board and senior management succession
planning usually two meetings each year are held at
operating locations and encompass a detailed review of the
relevant business operational decisions are delegated by the
board to senior management at trading company level over
which the business group directors exercise supervision
all directors receive detailed progress reports one week prior
to each board meeting
the board currently comprises the chairman four
executive directors and five nonexecutive directors
the board considers all its nonexecutive directors 
andrew given martin lamb leo murray anthony reading
and john warren to be independent in normal
circumstances the positions of chairman and chief executive
and that of senior independent director are held by separate
individuals and the board has adopted written profiles for
each of these the nonexecutive directors have all had senior
experience in other organisations and offer independent
judgement on board matters the chairman’s other
significant interests are as a nonexecutive director of smaller
companies value trust plc and certain private companies
the board believes that the chairman’s obligations to the
company are unaffected by these directorships
there are procedures for individual board members to
receive induction and training as appropriate and to solicit
independent professional advice at the group’s expense where
specific expertise is required in the course of exercising their
duties all directors have access to the company secretary who
is responsible for ensuring compliance with appropriate
statutes and regulations
all directors are subject to reelection by shareholders
at the first agm after their appointment and thereafter at
intervals of no more than three years
the board delegates specific responsibilities to board
committees notably the nomination remuneration and audit
committees the terms of reference of these committees are
published on the company’s website and the following
additional documents are available to shareholders on
application to the company secretary
• schedule of matters reserved for decision by the board
• responsibilities of the chairman the chief executive and
the nonexecutive directors
• relations with shareholders
• performance evaluation
• procedure for taking independent professional advice
spectris 1822  3406  950 pm  page 19 20 spectris plc annual report and accounts 2005
board and committee meeting attendance 2005
remuneration audit nomination
board committeecommittee committee
total meetings during year 13 9 3 1
j w poulter chairman 13 na 2 1
a f given
senior independent director 11 8 3 1
m j lamb 11 8 3 na
l g murray 10 9 3 na
a j reading 12 9 3 na
s hare 12 na na na
s c harris 13 na na na
j c webster 13 na na na
h d nilsson 6 na na na
h d nilsson held office for part of the year only and attended all of the
board meetings he was eligible to attend mr poulter attended all of the
audit committee meetings he was eligible to attend before stepping
down from that committee following the 2005 agm
board appointments and performance evaluation
the nomination committee consists of the chairman the
senior independent director and the chief executive and is
chaired by the chairman save in the event of discussions
relating to his succession when the senior independent
director would take the chair
following a decision of the board that the appointment of
a new director is appropriate the duty of the committee is to
present for board consideration suitably qualified candidates
in making such recommendations the committee evaluates the
balance of skills knowledge and experience on the board and
develops a description of the role and required capabilities
candidates are then identified for interview external search
consultants being engaged as part of this process the
committee also makes recommendations to the board
regarding the reelection andor reappointment of any
director similar selection processes would apply for the
appointment of a successor chairman
the nomination committee meets as the need arises its
terms of reference can be found on the company’s website
the operation of the board and its committees is evaluated
by the board as a whole annually the executive directors’ and
company secretary’s performances are appraised annually
against objectives established for the prior year the
contributions of the chairman and nonexecutive directors
are reviewed in advance of the conclusion of their initial 
threeyear term by the senior independent director and
the chairman respectively prior to their being proposed to
shareholders for reelection additionally the chairman holds
periodic meetings with the nonexecutive directors only and
led by the senior independent director the nonexecutives
meet at least annually without the chairman present
an external moderator assisted the board during 2005 in
the evaluation of its operation and performance
shareholder relations
spectris conducts regular dialogue with institutional
shareholders and divulges such information as is permitted
within the guidelines of the listing rules the content of
presentations made after results announcements may be
accessed by individual investors on the group website
wwwspectriscom
all shareholders are invited to participate in the annual
general meeting where the chairman the chief executive
and the chairmen of the audit remuneration and nomination
committees are available to answer questions the results of
proxy votes are declared at the annual general meeting after
each resolution has been dealt with on a show of hands
the board is kept informed of the views of major
shareholders through periodic reports from the chief
executive the company’s broker merrill lynch and the
company’s shareholder relations adviser makinson cowell
the chairman and nonexecutive directors have the
opportunity to attend the biannual analyst presentations
shareholders representing in excess of 3 of the company’s
issued share capital receive a standing invitation to meet
with the chairman the senior independent director or new
nonexecutive directors such meetings would supplement
if necessary but not replace the regular meetings with the
chief executive and group finance director
audit committee
the audit committee comprises the nonexecutive directors
and is chaired by andrew given andrew given and john
warren both have recent and relevant financial experience
as the former group finance directors of logica plc and
wh smith plc respectively the committee meets at least
three times each year to consider the effectiveness of the
group’s internal controls policies and procedures the process
of internal audit and the outcome of the external audit its
meetings are normally attended by the chairman the chief
executive the group finance director the company secretary
and the external auditor the committee regularly confers with
the auditor without the attendance of executive directors its
terms of reference can be found on the company’s website
the committee is responsible for making recommendations
to the board in relation to the appointment of the external
auditor and then for approving the external auditor’s
remuneration terms of engagement and scope of work
the committee has also adopted procedures governing
and restricting the appointment of the external auditor for
nonaudit services the following services are precluded
• bookkeeping or other services related to the accounting
records or financial statements of spectris plc
• financial information systems design and implementation
• appraisal or valuation services fairness opinions or
contribution in kind reports
• actuarial services
directors’ report continued
spectris 1822  3406  950 pm  page 20 spectris plc annual report and accounts 2005   21
• internal audit outsourcing services
• management functions or human resources
• broker or dealer investment adviser or investment
banking services
• legal services and expert services unrelated to the audit
a cumulative annual cap of £200000 is established for all
other nonaudit services save for acquisition due diligence
and taxation services above which all engagements are
subject to prior approval by the audit committee
the group employs an internal control and risk manager
who performs internal control reviews across the group
according to a work programme agreed by the committee
the group internal control and risk manager is assisted in this
by an internal auditor and by other group finance personnel
the nature and scope of the group’s internal control review
resources is reviewed by the audit committee annually the
audit committee receives reports twice a year on the results
of internal control reviews the group internal control and
risk manager has direct access to the chairman of the audit
committee and may meet with him in the absence of
executive management
internal controls 
the board is ultimately responsible for the group’s system of
internal controls and for reviewing its effectiveness however
such a system is designed to manage rather than eliminate
risk of failure to meet business objectives and can provide
only reasonable and not absolute assurance against material
misstatement or loss
following publication of the updated guidance for directors
on internal control “internal control guidance for directors
on the combined code” the board confirms that there is an
ongoing process for identifying evaluating and managing any
significant risks faced by the group that this has been in place
for the year under review and up to the date of approval of
the annual report and accounts that this process has been
reviewed by the board during the year and that the group
accords with the guidance the board affirms the importance
it attaches to the continuous review and application of the
guidance the regular and systematic assessment of the risks
facing the group and the value of embedding risk management
and internal control systems within its business processes
to that end an experienced internal auditor was appointed
during the year to assist the group internal control and risk
manager and further such strengthening of the internal audit
function is under consideration
the processes which the board and the audit committee
have applied in reviewing the effectiveness of the group’s
system of internal controls are summarised as follows
• risk assessment and evaluation for each business unit takes
place as an integral part of the annual strategic planning
cycle having identified the principal risks to achievement
of their strategic business objectives each business unit is
required to document the management and mitigating
actions in place and proposed
• the principal risks identified during the annual strategic
planning cycle and the effectiveness of the management
and mitigating actions in place are reviewed regularly by the
executive directors and twice yearly by the audit committee
• additionally the executive directors consider those risks to
the group’s strategic objectives which are not addressed
within the business units and develop appropriate
approaches to managing and mitigating these risks
• annual financial plans for each business unit significant
capital investments or contractual commitments and major
acquisitions or divestments are all subject to review and
approval by the board
• there is a group accounting and policies manual which
sets out the minimum standards and procedures to be
applied in relation to those risk areas which are regarded
as significant in a group context
• a process of self assessment of compliance with the manual
and reporting thereon has been established providing for 
a documented trail of accountability from business unit
presidents and finance directors to the audit committee
the necessary actions are taken by the audit committee to
remedy any failings or weaknesses identified by its review
of the internal control system
• the executive directors report to the board on changes
in the business and external environment which present
significant risks the group finance director provides the
board with monthly financial information which includes
key performance and risk indicators regular reports on
significant legal issues and insurance matters are received
from the company secretary
going concern
having reviewed the group’s plans and available financial
facilities the board has a reasonable expectation that the
group has adequate resources to continue in operational
existence for the foreseeable future for this reason it
continues to adopt the going concern basis in preparing
the group’s accounts
spectris 1822  3406  951 pm  page 21 22 spectris plc annual report and accounts 2005
directors’ report continued
statement of directors’ responsibilities in respect of the
annual report and the financial statements
the directors are responsible for preparing the annual report
and the group and parent company financial statements in
accordance with applicable law and regulations
company law requires the directors to prepare group and
parent company financial statements for each financial year
under that law the directors are required to prepare the
group financial statements in accordance with international
financial reporting standards ifrs as adopted by the eu
and have elected to prepare the parent company financial
statements in accordance with uk accounting standards
the group financial statements are required by law and
ifrs as adopted by the eu to present fairly the financial
position and performance of the group the companies act
1985 provides in relation to such financial statements that
references in the relevant part of that act to financial
statements giving a true and fair view are references to
their achieving a fair presentation
the parent company financial statements are required
by law to give a true and fair view of the state of affairs of
the parent company
in preparing each of the group and parent company
financial statements the directors are required to
• select suitable accounting policies and then apply
them consistently
• make judgements and estimates that are reasonable
and prudent
• for the group financial statements state whether they have
been prepared in accordance with ifrs as adopted by the eu
• for the parent company financial statements state whether
applicable uk accounting standards have been followed
subject to any material departures disclosed and explained
in the parent company financial statements
the directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time
the financial position of the parent company and enable
them to ensure that its financial statements comply with the
companies act 1985 they have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect fraud and
other irregularities
under applicable law and regulations the directors are
also responsible for preparing a directors’ report directors’
remuneration report and corporate governance statement
that comply with that law and those regulations
the directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website legislation in the uk governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions
by order of the board
roger stephens
secretary
7 march 2006
spectris 1822  3406  951 pm  page 22 spectris plc annual report and accounts 2005   23
directors’ remuneration report
the directors present their remuneration report for the year
ended 31 december 2005
remuneration committee
the remuneration committee is responsible for
recommending to the board the broad policy for the
remuneration of the chairman the chief executive
the executive directors and the company secretary the
remuneration of nonexecutive directors is a matter
reserved to the chairman and executive directors
within the terms of the agreed policy the committee
determines
• the total individual remuneration package including
where appropriate bonuses and sharebased incentives
• the targets for any performancerelated incentives
• the scope of any pension arrangements
• contractual terms of engagement and any payments
to be made on termination and
• the policy for authorising claims for expenses from
the chairman or chief executive
the committee also monitors the level and structure of
remuneration for business unit presidents or managing
directors and the head of corporate development
the remuneration committee consists of the nonexecutive
directors who are all independent these being at the date
of this report anthony reading chairman andrew given
martin lamb leo murray and john warren martin lamb
served as chairman throughout 2005 john poulter chairman
of the board is in attendance at most meetings save during
discussions relating to his own remuneration the chief
executive may also on occasions be in attendance by
invitation and the committee takes into consideration
his recommendations regarding the remuneration of his
executive colleagues the chief executive is not involved
in discussions concerning his own remuneration
the committee has appointed new bridge street
consultants llp to advise on various aspects of the
chairman’s and executive directors’ remuneration including
the establishment of the proposed new performance share
plan for the company’s senior management this firm did not
provide any other services to the company during the year
the terms of reference of the remuneration committee
can be found on the company’s website and are available
on request
remuneration policy
the board in considering the recommendations of the
remuneration committee complied throughout the year
with the provisions of the combined code including the
principles for performancerelated remuneration set out in
schedule a the policy objective is to ensure that the high
calibre managers required at board level are fairly and
competitively remunerated and incentivised in a manner
consistent with the group’s strategic objectives
the remuneration committee also regularly reviews the
relative importance of fixed and variable pay and considers
the current balance to be appropriate
salaries
base salaries are established by reference to surveys of the
terms offered by comparable uk quoted companies the
starting point for comparative surveys is the scope of the
position and associated performance of the chairman each
executive director and the company secretary excluding
his own position and performance the chief executive is
responsible for the definition of the scope of positions and
assessment of performance of each executive director for
approval by the remuneration committee salaries are set at
competitive levels typically based around the market median
although the remuneration committee reserves the flexibility
to respond to individual circumstances market ranges are
reviewed on a regular basis
bonuses
to align remuneration with shareholders’ interests a
significant proportion of executive directors’ potential total
remuneration is related to corporate performance and it is
intended that this balance should continue bonuses of up
to 75 of base salary are achievable dependent upon the
attainment of demanding normalised earnings per share
profit before tax or similar targets set in relation to carefully
considered business plans in a typical year bonus payments
will commence only at a level which shows an acceptable
degree of progress yearonyear and a 50 of salary payment
is set at an achievable but stretching target maximum bonus
would only become payable for an exceptional level of
performance such bonuses are not pensionable and the
executive directors have undertaken that any bonus payment
in excess of 50 of salary will after deduction of tax be used
for the purchase of shares in the company until the required
once times salary shareholding is achieved
mr o’higgins’ bonus entitlements for 2006 include a
guaranteed 25 element this was negotiated as part of the
terms of his joining and there will be no guaranteed element
in subsequent years
455 bonuses were earned in respect of 2005 performance
sharebased incentives
it is intended that each executive director should subject
to personal circumstances build through the vesting of
performance share awards the exercise of option grants
and the achievement of bonus levels above 50 a retained
shareholding in spectris plc greater than once times salary
in value within a fiveyear period from appointment
the remuneration committee keeps under constant review
the company’s sharebased incentive arrangements and takes
advice on market practice previously the company has made
grants of share options under the 1996 executive share option
plan and the 1999 executive share option scheme the tenyear
life of the 1996 plan will expire at the 2006 agm following
spectris 2329  3406  908 pm  page 23 24 spectris plc annual report and accounts 2005
directors’ remuneration report continued
a process of consultation with major shareholders the
committee has decided that the replacement scheme should
be in the form of a performance share plan the board is
therefore seeking approval at the 2006 agm for a
performance share plan for senior management to be known
as the spectris performance share plan the “plan” the full
details of which are set out in the chairman’s letter
accompanying the notice of agm
the committee is of the view that offering senior
management the opportunity to be awarded shares in the
company is an important part of motivating and rewarding
key employees so that they may participate in the future
growth in value of the company the plan is intended to
support this objective and to facilitate the retention of senior
management over the longer term
in summary under the plan annual awards of shares will
be made which will vest at the end of a threeyear period
subject to continued employment and the satisfaction of
performance conditions
the maximum award of performance shares that may be
made to any participant in any financial year will be limited
to shares with a market value equal to 125 of the
participant’s salary although initial awards will be over shares
worth a multiple of salary determined by reference to a base
award of 67 of salary which may then be flexed up or down
depending on corporate and personal performance
it is proposed that the performance condition at least
in respect of initial awards granted up to the normal level
ie awards over shares worth 67 of salary will be structured
so that 50 of awards will be subject to an earnings per share
“eps” target and 50 will be subject to a total shareholder
return “tsr” target the performance criteria are
summarised in the table below
company  of award that vests expressed as 
eps performance a percentage of onehalf of the total 
number of shares subject to an award
consumer prices index ”cpi” 100
 10 compound 
per annum cpa
between cpi  5 and 10 prorata straight line between
cpa 25 and 100
cpi  5 cpa 25
less than cpi  5 cpa 0
company tsr performance  of award that vests expressed as 
relative to the ftse 250 a percentage of onehalf of the total
excluding investment trusts number of shares subject to an award
upper quartile of above 100
between upper quartile prorata straight line 
and median between 25 and 100
median 25
below median 0
if awards in excess of 100 of salary are granted then
the percentage of an award that will vest for threshold
performance will be limited to 25 of a participant’s base
salary rather than 25 of the number of shares subject to
an award with prorata straight line vesting from this lower
point up to 100 of award
if the plan is approved it is the intention of the committee
that all further sharebased incentives granted to senior
managers or executive directors would be made under the
plan and that no further grants would be made under the
remaining 1999 executive share option scheme no option
grants have been made during the year to date nor are any
grants envisaged executive directors may however continue
to participate in the savingsrelated option scheme which is
applicable to all uk employees
mr poulter retains share option grants received during his
previous service as an executive director but has not received
grants since being appointed chairman in 2001 and would
not receive awards under the proposed plan
exercise of share options which were granted under the
1996 executive share plan or the 1999 executive share option
scheme remain subject to prior achievement of performance
conditions requiring compound growth in earnings per
share before exceptional items and amortisation of goodwill
“eps” over three financial years to be significantly ahead
of the increase in the retail prices index “rpi” eps growth
was selected as the appropriate precondition to exercise
in order to ensure that share option gains would only be
received if the company’s performance for shareholders had
been enhanced eps figures to be used will be those published
in the audited accounts for each financial year during the
period of transition to international financial reporting
standards the remuneration committee will ensure that
eps figures continue also to be calculated on a uk gaap
basis to enable the base and final eps figures for prior grants
to be calculated on a consistent basis grants of options made
in 2005 will be calculated under ifrs
benefits
company car and health insurance benefits are subject
to income tax and none of these benefits is pensionable
the executive directors have defined contribution pension
arrangements to which the company contributes at a rate
of 25 of salary
contractual terms
all executive directors have rolling contracts subject to
12 months’ notice mr o’higgins’ contract provides for an
initial notice period of 18 months reducing to 12 months
over the first six months of employment
the committee has determined that contracts of
employment should going forward contain a contractual
best endeavours obligation to seek alternative employment in
the event of serving of notice of termination by the company
and that full mitigation reflective of any earnings from a new
position should apply so as to reduce the payments otherwise
due from the company during the notice period additionally
in these circumstances it is the current intention that bonus
entitlements should be calculated to the date of notice of
termination only and that a phased payment provision
subject to reduction as explained above and equivalent to
165 times monthly salary should apply in lieu of all
spectris 2329  3406  908 pm  page 24 spectris plc annual report and accounts 2005   25
remuneration and benefits otherwise payable during
the notice period and in full and final settlement of all
employmentrelated claims mr o’higgins’ contract
of employment reflects these terms
the contracts for all other executive directors only provide
for a predetermined compensation payment in lieu of notice
equivalent to total notice period remuneration – salary
bonus and benefits in the event of termination within
12 months of a change in control of the group termination
payments in other circumstances would be a matter for
negotiation and remain at the discretion of the committee
subject to mitigation andor reduction for accelerated payment
the chairman john poulter is retained on a contract of
employment subject to six months’ notice and terminating
at the 2007 agm
external appointments
executive directors may retain any payments received in
respect of external nonexecutive appointments such
appointments are limited to one per director at any time
and are subject to the approval of the board
remuneration below board level
remuneration for presidents of the group’s trading
companies is set at competitive levels to reflect the size
complexity and geographic locations of these businesses base
salaries for presidents of the group’s european operations fall
within a range between €140000 and €240000 base salaries
for presidents of the group’s us operations fall within a range
between 160000 and 260000 additionally the group’s
presidents participate in profitrelated bonus arrangements
yielding up to 75 of base salary dependent upon
performance over both the current and subsequent
financial years
nonexecutive directors
nonexecutive directors’ fees are agreed by the chairman
and executive directors by reference to market practice
there is no participation in bonus share option or pension
arrangements and there will be no participation in the
proposed performance share plan all nonexecutive
directors’ conditions of appointment provide for a sixmonth
period of notice within an initial term of three years from
election by shareholders at the director’s first agm the
appointment may be renewed by mutual agreement for
a further threeyear period
total shareholder return
the following graph indicates the value by the end of 2005
of £100 invested in spectris plc 5p ordinary shares on
31 december 2000 compared with the value of £100 invested
in the ftse mid250 index excluding investment trusts
over the same period the graph was selected as the most
appropriate comparison measure because the company is
a constituent member of the ftse mid250 index and the
members of the ftse mid250 excluding investment trusts
form the comparator group for the purposes of the tsr
performance test under the proposed performance share plan
ftse mid250 
spectris source datastream
excluding investment trusts
spectris 2329  3406  908 pm  page 25 26 spectris plc annual report and accounts 2005
directors’ remuneration report continued
contracts
details of the directors’ contracts are as follows
date of expiry notice length of service at
contract date period 7 march 2006
executive directors
j e o’higgins 1106 3229 12 months 2 months
s hare 181104 15421 12 months 1 year 4 months
s c harris 2603 15519 12 months 2 years 9 months
j c webster 27398 21610 12 months 12 years 5 months
h d nilsson 23401 26506 12 months 8 years 3 months
nonexecutive directors
a f given 5601 14508 6 months 4 years 9 months
m j lamb 12999 17506 6 months 6 years 6 months
l g murray 81202 17506 6 months 3 years 2 months
j w poulter 17202 16507 6 months 17 years 10 months
a j reading 10304 16507 6 months 2 years
j warren 7306 13509 6 months –
save for mr o’higgins’ contract the executive directors’ contracts provide for a predetermined compensation payment in lieu of notice equivalent
to total notice period remuneration – salary bonus and benefits in the event of termination within 12 months of a change in control of the group 
mr o’higgins’ contract contains a liquidated damages provision equivalent to 165 times monthly salary in lieu of all remuneration and benefits
otherwise payable during the notice period in full and final settlement of all employmentrelated claims the contract also provides for an initial
period of 18 months reducing to 12 months over the first six months of employment
directors’ remuneration and interests
the auditors are required to report on the information contained in the following sections a to d
a emoluments of directors excluding pension contributions £’000
salary and benefits taxable termination 2005 2004
or fees bonus in kind expenses payments total total
executive directors
s hare 250 114 1 21 – 386 51
s c harris 220 100 18 – – 338 242
j c webster 220 100 15 – – 335 238
p v boughton ––––– – 205
h d nilsson 142 – 1 6 – 149 377
j g zacharias ––––– – 163
nonexecutive directors
a f given 35 – – – – 35 35
m j lamb 35 – – – – 35 35
l g murray 30–––– 30 30
j w poulter 215 – 1 – – 216 101
a j reading 30–––– 30 24
1177 314 36 27 – 1554 1501
mr o’higgins and mr warren were appointed to the board after the year end mr o’higgins is entitled to an annual salary of £350000 and 
mr warren to annual fees of £35000
mr poulter’s remuneration as chairman of £100000 pa was supplemented by an additional £115000 reflecting the responsibilities assumed 
by mr poulter during the period in which he was acting chief executive
benefits in kind include company cars private fuel and medical expenses insurance taxable expenses relate to an accommodation allowance paid 
to mr hare during his first six months of employment and allowances paid in lieu of company cars and private fuel
spectris 2329  3406  908 pm  page 26 spectris plc annual report and accounts 2005   27
the company has entered into a termination agreement incorporating a contractual duty to mitigate loss with former director mr nilsson
terminating his service agreement on 12 months’ notice effective from 25 may 2005 the table above shows only mr nilsson’s emoluments paid
to the date of his resignation from the board under the provisions of this termination agreement which was concluded in accordance with
independent legal advice mr nilsson will continue to receive his salary and benefits during the subsequent notice period or to such earlier date
as may be agreed the “termination date” mr nilsson’s 2005 bonus payment is to be based on the percentage authorised by the company’s
remuneration committee as payable to members of the company’s executive committee for the 2005 financial year mr nilsson will receive a fixed
bonus payment for 2006 based on his 2005 bonus payment percentage but prorated to reflect the proportion of the 2006 financial year during
which he remains in the employ of the company up to the termination date £12000 will be paid post the termination date in consideration of
mr nilsson’s compliance with certain posttermination restrictions in the event of his securing new employment during the notice period payments
will cease and the company will pay to mr nilsson 50 of the aggregate value of his salary contractual benefits and fixed bonus payment which
would otherwise have been paid in the period from the termination date to the end of the notice period the arrangements described will incur
a maximum cost of £614000 plus £89000 pension contribution from the date of resignation all of which was accrued in 2005 all unexercised
share options will lapse at the termination date at the date of notice of termination mr nilsson had served as a director of the company for in
excess of 7 years
b directors’ pensions 
company contributions to defined contribution plans
2005 2004
£’000 £’000
s hare 47 –
s c harris 55 51
j c webster 55 51
p v boughton – 30
h d nilsson 35 83
j g zacharias – 27
the company contributes at the rate of 25 of salary mr o’higgins is not eligible to join the spectris defined contribution pension plan 
until 1 april 2006
c directors’ total remuneration
2005 2004
£’000 £’000
aggregate emoluments 1554 1501
company pension contributions to defined contribution schemes 192 242
gains made on exercise of share options 54 33
1800 1776
spectris 2329  3406  908 pm  page 27 28 spectris plc annual report and accounts 2005
directors’ remuneration report continued
d directors’ interests in options to purchase ordinary shares
options share price options 
held exercise at date of held date
date granted 1 jan 05 granted price p exercised exercise p lapsed 31 dec 05 exercisable expiry date
j w poulter jun 1996 41037 6618261 41037 jun 1999 jun 2006
mar 1997 25648 5385256 25648 mar 2000 mar 2007
mar 1998 15389 5507095 15389 mar 2001 mar 2008
mar 1999 20518 3216533 20518 mar 2002 mar 2009
mar 2000 48715 5131832 48715 mar 2003 mar 2010
mar 2001 30550 49850 30550 mar 2004 mar 2011
181857 181857
h d nilsson mar 1998 30572 5507095 30572 mar 2001 mar 2008
mar 1999 15389 3216533 15389 mar 2002 mar 2009
mar 2000 33125 5131832 33125 mar 2003 mar 2010
mar 2001 21385 49850 21385 mar 2004 mar 2011
mar 2003 100000 279 100000 mar 2006 mar 2013
sep 2003 64000 4685 64000 sep 2006 sep 2013
mar 2004 66000 462 66000 mar 2007 mar 2014
oct 2004 50000 40625 50000 oct 2007 oct 2014
saye oct 2003 1969 4685 1969 dec 2006 jun 2007
382440 382440
s hare sep 2005 115000 589 115000 sep 2008 sep 2015
115000 115000
s c harris sep 2003 40000 4685 40000 sep 2006 sep 2013
mar 2004 40000 462 40000 mar 2007 mar 2014
oct 2004 35000 40625 35000 oct 2007 oct 2014
sep 2005 85000 589 85000 sep 2008 sep 2015
115000 85000 200000
j c webster sep 1995 20518 5253671 20518 5861757 sep 1998 sep 2005
jun 1996 20518 6618261 20518 jun 1999 jun 2006
mar 1997 15389 5385256 15389 mar 2000 mar 2007
mar 1998 10259 5507095 10259 mar 2001 mar 2008
mar 1999 15389 3216533 15389 593244 mar 2002 mar 2009
mar 2000 30202 5131832 30202 mar 2003 mar 2010
mar 2001 18839 49850 18839 mar 2004 mar 2011
mar 2003 65000 279 65000 mar 2006 mar 2013
sep 2003 44000 4685 44000 sep 2006 sep 2013
mar 2004 40000 462 40000 mar 2007 mar 2014
oct 2004 35000 40625 35000 oct 2007 oct 2014
sep 2005 85000 589 85000 sep 2008 sep 2015
saye oct 2003 1969 4685 1969 dec 2006 jun 2007
317083 85000 35907 366176 
shares other than those marked saye relate to executive share option grants entitlement to exercise grants under the unapproved 1996 executive
share option plan is conditional upon a performance criterion requiring compound growth in normalised earnings per share “eps” over three years
up to 5 per annum in excess of the increase in the retail prices index refer to the directors’ remuneration report on page 24 for further
explanation no consideration was paid by any recipient in relation to the grant of an option and there were no changes to the conditions
on which any option was granted during the year
j c webster exercised 20518 options under the approved 1988 executive share option scheme during the year he sold sufficient shares to pay
the exercise and dealing costs retaining the balance of 2065 shares the gain on exercise was £12476 j c webster also exercised 15389 options
under the unapproved 1996 executive share plan during the year he sold sufficient shares to pay the exercise and dealing costs and income tax
due on exercise retaining the balance of 4187 shares the gain on exercise was £41795
spectris 2329  3406  908 pm  page 28 spectris plc annual report and accounts 2005   29
e directors’ interests
the following directors or their families had beneficial interests in the ordinary shares of the company
shareholdings
2005 2005
31 dec 1 jan
or date of or date of
resignation appointment
j w poulter 142687 142687
a f given 5000 5000
s hare ––
s c harris ––
m j lamb 6000 6000
l g murray ––
a j reading 10000 10000
j c webster 86249 79997
h d nilsson 70210 70210
there were no changes to the above interests between the year end and the date of this report mr warren held 3000 shares
at the date of his appointment mr o’higgins does not hold any shares in the company
no director had during the year or at the end of the year any material interest in any contract of significance to the 
group’s business
at 31 december 2005 the middle market closing share price on the london stock exchange was 6335p the highest share
price in the year was 644p and the lowest was 389p at 31 december 2005 each of the executive directors was deemed to have
a nonbeneficial interest in 1133395 2004 3212330 ordinary shares held by the trustees of the spectris plc employee
benefit trust of which the directors are among the class of discretionary beneficiaries
by order of the board
roger stephens
secretary
7 march 2006
spectris 2329  3406  908 pm  page 29 30 spectris plc report and accounts 2005
corporate responsibility
spectris is committed to creating business growth whilst
ensuring that impact on the environment is minimised and
that all activities are conducted safely by welltrained and
qualified employees
spectris comprises a number of subsidiary companies which
operate around the world the companies’ products are used
to monitor and control processes in many industries helping
customers to improve efficiency and minimise their impact
on the environment by reducing raw material consumption
waste or energy use in turn spectris companies themselves
actively seek to minimise their impact on the environment by
designing products which are more energyefficient and avoid
the use of harmful substances
policy setting and monitoring
overall responsibility for developing corporate policies on
social ethical and environmental matters and for reviewing
their effectiveness lies with the spectris board the individual
operating units are then responsible for ensuring the policy is
communicated and applied within their particular business
taking account of local legislation and regulation all policies
and procedures are reviewed periodically and any updates
are communicated to the operating companies
spectris policies and procedures are communicated to all
business units via the spectris group manual as an integral
part of the company’s risk management and corporate
governance processes the presidents and finance directors of
the operating companies are required to certify on an annual
basis compliance with the company’s policies and procedures
and report on where appropriate all noncompliance events
the process for identifying evaluating and managing any
significant risks including those arising from social ethical
and environmental matters forms part of the group’s system
of internal controls and is regularly reviewed by the group
internal control and risk manager additionally the executive
directors report to the board on any changes in the business
and external environment which present significant risk
whilst regular reports on legal exposure and insurance
matters are received from the company secretary
ftse4good index
spectris has been a member of the ftse4good uk index
since its establishment in july 2001 the ftse4good uk
index measures and benchmarks the performance of
companies that meet globally recognised corporate
responsibility standards with particular emphasis on the
environment and human rights
the following report explains the company’s commitment
to social ethical and environmental issues the policies are
described fully on the company’s website at
httpwwwspectriscomaboutuscorporatephp
environment health and safety ehs
the chief executive has overall responsibility for
environment health and safety matters senior executives in
each of the business units are responsible for implementing
the policy at local level
environment
spectris addresses environmental concerns by providing
customers with products which enable them to minimise
their impact on the environment by reducing raw material
and energy consumption eliminating waste and minimising
harmful emissions products are also designed to help
customers to meet new legislation for example instrumentation
providing the ability to measure low levels of materials such
as lead and cadmium to meet the new european directive
on the restriction of hazardous substances other examples
of the use of spectris products having a direct beneficial
contribution to reducing environmental impact are shown on
the company’s website
spectris products do not require capitalintensive
manufacturing processes and hence their manufacture
generally has a low overall environmental impact
nevertheless spectris is committed to adopting
environmentally responsible policies in its internal
operations wherever its companies operate each
operating company is required to comply with all
relevant environmental laws and minimise raw material
usage energy and waste disposal
the design processes for spectris products take into account
the operational lifetime of every product and endoflife
removal or disposal consideration is given to the recyclability
of materials energy consumption and environmentfriendly
production packaging and shipping during 2005 spectris
companies and their suppliers worked to ensure the provision
of products which comply with the new european regulations
on the restriction of hazardous substances rohs and waste
electrical and electronic equipment weee where
appropriate these directives apply particularly in the
manufacture of printed circuit boards an activity largely
carried out by thirdparty suppliers to spectris where
leadfree solder is now being used
internal initiatives are in place at many spectris sites to
reduce energy usage and minimise wastage these include
recycling of waste paper cardboard plastic cups aluminium
cans and mobile phones reducing energy consumption
through the use of timers and sensors to control hot water air
conditioning and lighting reducing water consumption and
reuse of packaging and filling materials spectris complies
with the uk producer responsibility obligations packaging
waste regulations which set targets for the recovery and
recycling of packaging waste
spectris 3031  3406  951 pm  page 30 spectris plc report and accounts 2005   31
environmental management systems
operating companies representing over onethird of spectris
business by turnover are certified to iso14001
during the year no significant environmental incidents
were recorded investigative studies into contaminated land
at almelo in the netherlands resulting from activities prior 
to ownership by panalytical have now been completed and
a final report has been submitted to the dutch authorities
for review and approval prior to any remediation activities
health and safety 
spectris is committed to providing a working environment
at all of its sites which is safe and without risk to health each
operating company is responsible for ensuring the health
and safety of its employees and also that of subcontractors
and suppliers
audits of health and safety policies and procedures are
undertaken at all major locations by external assessors acting
on behalf of the group’s insurers on a periodic basis
during the year no significant health and safety incidents
were recorded
human rights employment and ethics
spectris operates mainly in europe and the us but with
a growing presence in asia although different social and
employment conditions exist in different locations spectris
places high priority on compliance with legislative and ethical
requirements within all jurisdictions in which business is
conducted particularly with respect to employment practices
labour rights and equal opportunities the head of
commercial has overall responsibility for human rights
employment and ethics policies but responsibility for
implementation is delegated to individual business units
with operational policies tailored to suit local needs
human rights 
spectris believes in the fundamental rights of people in
all parts of the world and is committed to adopting
internationally recognised human rights standards wherever
it operates the company’s human rights policy is consistent
with the principles of human rights as set out in the
international labour organization’s core conventions and
includes policies on nondiscrimination harassment pay
and forced labour
the group monitors compliance with the policy through
various processes including confirmation in writing by each
business unit annually and consolidated equal employment
opportunities commission returns which are produced in
the us
ethics
all employees are expected to behave with integrity and
honesty and demonstrate appropriate business behaviour
the ethics policy prohibits bribery and similar facilitation
payments donations to political parties or similar
organisations are also prohibited
spectris operates a confidential “whistleblowing” policy via
which employees may report to the business’s management
team or any board member any concerns they may have over
unethical business practices or conduct dangers to health and
safety or breach of company policies any such disclosures are
appropriately investigated in addition spectris is committed
to protecting the career and reputation of employees who
report wrongdoing in accordance with established procedures
as long as their disclosures are delivered in good faith and seek
to safeguard the best interests of the group
training and development
spectris recognises the value that its employees create for
the business and its commitment to training and personal
development together with remuneration policies which
are designed to reward achievement emphasises the
importance of retaining staff throughout the group local
policies based on overall group guidelines are set by
individual managements according to the needs of their
business and local conditions
employee communications
the company has a policy of encouraging its operating
companies to provide information to their employees on a
regular basis this information includes matters relating to
their company’s performance its prospects in the markets it
serves and the future outlook for its business in addition the
group distributes a periodic electronic newsletter perspectives
which keeps employees abreast of group progress and is also
available to shareholders at wwwspectriscom financial
participation in the group is encouraged through the savings
related share option scheme available to all uk employees
the group’s executive share option schemes and the proposed
performance share plan
community involvement
spectris operating companies worldwide support local
charities and participate in a range of community activities
and educational initiatives charitable donations in 2005
totalled £73300 of which £5500 were in the uk 2004
£35000 of which £8000 in uk examples of community
activities are described on our website
spectris 3031  3406  951 pm  page 31 32 spectris plc annual report and accounts 2005
independent auditors’ report 
to the members of spectris plc 
we have audited the group and parent company financial statements
the “financial statements” of spectris plc for the year ended
31 december 2005 which comprise the group income statement
the group and parent company balance sheets the group cash flow
statement the group statement of recognised income and expense
and the related notes these financial statements have been prepared
under the accounting policies set out therein we have also audited
the information in the directors’ remuneration report that is described
as having been audited
this report is made solely to the company’s members as a body in
accordance with section 235 of the companies act 1985 our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose to the fullest extent permitted by law
we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body for our audit work
for this report or for the opinions we have formed 
respective responsibilities of directors and auditors
the directors’ responsibilities for preparing the annual report and the
group financial statements in accordance with applicable law and
international financial reporting standards ifrs as adopted by the eu
and for preparing the parent company financial statements and the
directors’ remuneration report in accordance with applicable law and
uk accounting standards uk generally accepted accounting practice
are set out in the statement of directors’ responsibilities on pages 21
and 22 
our responsibility is to audit the financial statements and the part of
the directors’ remuneration report to be audited in accordance with
relevant legal and regulatory requirements and international standards
on auditing uk and ireland 
we report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements and the
part of the directors’ remuneration report to be audited have been
properly prepared in accordance with the companies act 1985 and
whether in addition the group financial statements have been properly
prepared in accordance with article 4 of the ias regulation we also
report to you if in our opinion the directors’ report is not consistent
with the financial statements if the company has not kept proper
accounting records if we have not received all the information and
explanations we require for our audit or if information specified by
law regarding directors’ remuneration and other transactions is
not disclosed 
we review whether the corporate governance statement reflects
the company’s compliance with the nine provisions of the 2003 frc
combined code specified for our review by the listing rules of the
financial services authority and we report if it does not we are not
required to consider whether the board’s statements on internal
control cover all risks and controls or form an opinion on the
effectiveness of the group’s corporate governance procedures 
or its risk and control procedures 
we read other information contained in the annual report and
consider whether it is consistent with the audited financial statements
we consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial
statements our responsibilities do not extend to any other information 
basis of audit opinion 
we conducted our audit in accordance with international standards
on auditing uk and ireland issued by the auditing practices board
an audit includes examination on a test basis of evidence relevant to
the amounts and disclosures in the financial statements and the part of
the directors’ remuneration report to be audited it also includes an
assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements and of whether
the accounting policies are appropriate to the group’s and company’s
circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the
financial statements and the part of the directors’ remuneration report
to be audited are free from material misstatement whether caused by
fraud or other irregularity or error in forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements and the part of the directors’ remuneration report
to be audited 
opinion 
in our opinion 
• the group financial statements give a true and fair view in
accordance with ifrs as adopted by the eu of the state of the
group’s affairs as at 31 december 2005 and of its profit for the
year then ended 
• the group financial statements have been properly prepared in
accordance with the companies act 1985 and article 4 of the
ias regulation 
• the parent company financial statements give a true and fair view in
accordance with uk generally accepted accounting practice of the
state of the parent company’s affairs as at 31 december 2005 and 
• the parent company financial statements and the part of the
directors’ remuneration report to be audited have been properly
prepared in accordance with the companies act 1985 
kpmg audit plc
chartered accountants
registered auditor
london
7 march 2006
spectris 3276  4406  849 am  page 32 spectris plc annual report and accounts 2005   33
consolidated income statement
for the year ended 31 december 2005
2005 2004
notes £m £m
continuing operations
revenue 6 6559 6141
cost of sales 2786 2625
gross profit 3773 3516
indirect production and engineering expenses 628 578
sales and marketing expenses 1735 1682
administrative expenses 761 744
operating profit 7 649 512
loss on termination of businesses – 12
financial income 10 66 40
finance costs 10 207 181
profit before tax 508 359
taxation – uk 11 05 95
taxation – overseas 11 151 28
profit after tax for the year from continuing operations attributable to equity shareholders 352 236
basic earnings per share 13 288p 195p
diluted earnings per share 13 288p 195p
interim dividends paid and final dividends proposed for the year per share 12 158p 145p
dividends paid during the year per share 12 1485p 1355p
spectris uses adjusted figures as key performance measures in addition to those reported under ifrs adjusted figures are stated before amortisation
of acquisitionrelated intangible assets goodwill charges profits or losses on termination or disposal of businesses or major fixed assets unrealised
changes in the fair value of financial instruments related tax effects and other tax items which do not form part of the underlying tax rate
reconciliations showing how the adjusted performance measures are derived from those reported under ifrs are set out in note 3
consolidated statement of recognised income and expense
2005 2004
notes £m £m
net loss on effective portion of changes in fair value of forward exchange contracts 21 13 –
deferred tax on changes in fair value of forward exchange contracts 04 –
net gain on changes in fair value of effective portion of net investment hedge 19 –
actuarial loss arising on pension schemes 9 41 34
current and deferred tax on actuarial loss on pension schemes 13 11
foreign exchange difference on translation of overseas operations – 09
current tax on foreign exchange differences 04 –
net income recognised in equity in respect of year 52 32
profit for the year 352 236
total recognised income and expense for the year attributable to equity shareholders 300 204
change in accounting policy adoption of ias 39 financial instruments
recognition and measurement as at 1 january 2005
hedging reserve
fair value of forward exchange contracts 21 08 –
deferred tax on forward exchange contracts 02 –
retained earnings
fair value of crosscurrency interest rate swaps 21 76 –
fair value of average rate options 21 17 –
deferred tax on the above 18 –
35 –
265 204
spectris 3276  3406  918 pm  page 33 34 spectris plc annual report and accounts 2005
consolidated balance sheet
as at 31 december 2005
2005 2004
notes £m £m
assets
noncurrent assets
goodwill 14 2095 2190
other intangible assets 15 41 52
property plant and equipment 16 928 937
deferred tax asset 25 446 402
3510 3581
current assets
inventories 17 882 940
taxation recoverable 09 19
trade and other receivables 18 1504 1458
cash and cash equivalents 19 771 344
assets held for sale 5 59 –
3225 2761
total assets 6735 6342
liabilities
current liabilities
shortterm borrowings 20 594 03
derivative financial instruments 21 06 –
trade and other payables 23 1324 1345
current tax liabilities 324 341
provisions 24 123 70
liabilities held for sale 5 37 –
2408 1759
net current assets 817 1002
noncurrent liabilities
medium and longterm borrowings 20 1216 1930
derivative financial instruments 21 247 –
other payables 23 67 54
retirement benefit obligations 9 226 207
provisions 24 06 25
deferred tax liability 25 10 19
1772 2235
total liabilities 4180 3994
net assets 2555 2348
equity 
issued share capital 26 62 62
share premium 27 2291 2278
retained earnings 27 201 17
translation reserve 27 28 09
hedging reserve 27 05 –
merger reserve 27 31 31
capital redemption reserve 27 03 03
equity shareholders’ funds 2555 2348
total equity and liabilities 6735 6342
the financial statements on pages 33 to 69 were approved by the board of directors on 7 march 2006 and were signed on its behalf by
steve hare
director
spectris 3276  3406  918 pm  page 34 spectris plc annual report and accounts 2005   35
consolidated cash flow statement
for the year ended 31 december 2005
2005 2004
notes £m £m
cash flows from operating activities
profit after tax 352 236
adjustments for
tax 11 156 123
loss on termination of businesses – 12
finance costs 10 207 181
financial income 10 66 40
depreciation 126 134
amortisation of intangible assets 13 13
goodwill impairment charge 74 –
goodwill reduction 36 – 122
loss on sale of property plant and equipment 03 04
equity settled sharebased payment expense 28 03 04
operating profit before changes in working capital and provisions 868 789
increase in trade and other receivables 45 150
decreaseincrease in inventories 62 93
increase in trade and other payables 28 121
decrease in provisions and employee benefits 07 24
corporation tax paid 158 77
net cash from operating activities 748 566
cash flows from investing activities
purchase of property plant and equipment 123 165
proceeds from sale of property plant and equipment 01 07
purchase of intangible assets – 22
acquisition of subsidiary net of cash acquired 30 23 83
interest received 11 04
dividend income 01 01
other financial income 17 –
net cash flows used in investing activities 116 258
cash flows from financing activities
interest paid 138 143
dividends paid to equity holders of the parent 181 163
proceeds from issue of share capital 13 07
sale of own shares by employee benefit trust 107 02
repayment of borrowings 02 11
new borrowings – 23
net cash flows fromused in financing activities 201 285
net increase in cash and cash equivalents 431 23
cash and cash equivalents at beginning of year 341 317
effect of foreign exchange rate changes 11 01
cash and cash equivalents at end of year 761 341
2005 2004
reconciliation of changes in cash and cash equivalents to movements in net debt as defined in note 20 notes £m £m
net increase in cash and cash equivalents 431 23
net decreaseincrease in loans 02 12
increase in finance lease liabilities 05 –
borrowings acquired on acquisitions 30 07 –
effect of foreign exchange rate changes 31 34
movement in net debt 390 45
net debt at start of year 20 1589 1634
net debt at end of year 20 1199 1589
spectris 3276  3406  918 pm  page 35 36 spectris plc annual report and accounts 2005
notes to the accounts
1 accounting policies
general information
spectris plc is a limited company incorporated and domiciled in the
united kingdom under the companies act 1985 whose shares are
publicly traded on the london stock exchange 
these financial statements are presented in pounds sterling foreign
operations are included in accordance with the policies set out below 
statement of compliance and basis of preparation
the group financial statements have been prepared and approved by the
directors in accordance with international financial reporting standards
as adopted by the eu ifrs the company has elected to prepare its
parent company financial statements in accordance with uk gaap these
are presented on pages 70 to 76 reconciliations required by ifrs 1 first
time adoption of ifrs are included in note 36 to these accounts
the financial statements are prepared rounded to the nearest
hundred thousand on the historical cost basis except that the derivative
financial instruments are stated at fair value and noncurrent assets and
disposal groups held for sale are stated at the lower of carrying amount
and fair value less costs to sell
the preparation of financial statements in conformity with ifrs
requires management to make judgements estimates and assumptions
that affect the application of policies and reported amounts of assets
and liabilities income and expenses the estimates and associated
assumptions are continually evaluated and are based on historical
experience and various other factors that are believed to be reasonable
under the circumstances actual results may differ from these estimates
the estimates and assumptions that have a significant effect on the
carrying amount of assets and liabilities are noted within specific
accounting policies below revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods
the accounting policies set out below have been applied consistently
to all periods presented in these financial statements except where the
policy is indicated as relating to the implementation of ias 32 or ias 39
which were adopted from 1 january 2005 or to the implementation
of ifrs 5 noncurrent assets held for sale and discontinued
operations which was also adopted from 1 january 2005 the
accounting policies have been applied consistently by group entities
basis of consolidation
the group financial statements include the results of the company and
all of its subsidiary undertakings a subsidiary is an entity controlled by
the group control is the power to govern the financial and operating
policies of the entity so as to obtain benefits from its activities the
financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases
intragroup balances and any unrealised gains and losses or income
and expenses arising from intragroup transactions are eliminated in
preparing the consolidated financial statements
the assets and liabilities of foreign operations including goodwill and fair
value adjustments arising on consolidation are translated into sterling at
exchange rates ruling at the balance sheet date the revenues and expenses
of foreign operations are translated into sterling at average annual
exchange rates foreign exchange differences arising on retranslation are
recognised directly in a separate translation reserve within equity
foreign currency transactions
transactions in foreign currencies are translated at the foreign exchange
rate ruling at the date of the transaction monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
translated at the exchange rate ruling at that date with any exchange
differences arising on retranslation being recognised in the income
statement nonmonetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction
derivative financial instruments may be purchased to hedge the
group’s exposure to changes in foreign exchange rates the accounting
policies applied in these circumstances are described under the heading
‘derivative financial instruments and hedge accounting’ below
interestbearing borrowings
interestbearing borrowings are recognised initially at fair value
less attributable transaction costs subsequent to initial recognition
interestbearing borrowings are stated at amortised cost with any
difference between cost and redemption value being recognised
in the income statement over the period of the borrowings on an
effective interest basis
derivative financial instruments and hedge accounting
the group uses derivative financial instruments to hedge its exposure
to foreign exchange and interest rate risks arising from operating and
financing activities in accordance with its treasury policy it does not hold
or use derivative financial instruments for trading or speculative purposes
following the transition to ifrs and in accordance with the
transitional provisions set out in ifrs 1 the group adopted ias 32
financial instruments disclosure and presentation and ias 39 financial
instruments measurement and recognition with effect from 1 january
2005 the paragraphs relating to cash flow hedge accounting net
investment hedge accounting and other derivative financial instruments
which follow therefore explain both the previous uk gaap accounting
policy applied in the comparative period ended 31 december 2004 and
those new policies applied during the year ended 31 december 2005
the financial impact of these changes of accounting policy is set
out in note 21
cash flow hedge accounting
derivative financial instruments may be transacted to hedge the
variability in cash flows of a recognised asset or liability or of highly
probable forecast transactions caused by changes in exchange rates
in the comparative period ended 31 december 2004 the value
of such instruments is not recognised until the point at which the
transactions being hedged occurred at the point the hedged
transaction occurs the asset or liability is recorded using the rate
of exchange under the related derivative financial instrument
from adoption of ias 39 as at 1 january 2005 derivative financial
instruments are carried in the balance sheet at fair value where a
derivative financial instrument is designated in a cash flow hedge
relationship with a highly probable forecast transaction the
effective part of any gain or loss arising is recognised directly in equity
the ineffective part of any gain or loss is recognised in the income
statement when the forecast transaction subsequently occurs and
results in the recognition of a financial asset or liability that impacts
on the income statement the associated cumulative gain or loss is
removed from equity and presented within the income statement
when the forecast transaction subsequently occurs and results in the
recognition of a nonfinancial asset or liability the associated cumulative
gain or loss is removed from equity and included within the initial cost
spectris 3276  3406  918 pm  page 36 spectris plc annual report and accounts 2005   37
of the nonfinancial asset or liability if a derivative financial instrument
is not formally designated in a cash flow hedge relationship any change
in fair value is recognised in the income statement
net investment hedge accounting
the group uses us and eurodenominated borrowings as a hedge
against the translation exposure on the group’s net investment in
overseas companies in both 2004 and 2005 where the hedge is fully
effective at hedging the variability in the net assets of such companies
caused by changes in exchange rates the changes in value of the
borrowings are recognised in equity the ineffective part of any change
in value caused by changes in exchange rates is recognised in the
income statement
the group takes advantage of crosscurrency swaps for some of its
usdenominated private placement borrowings the swaps have the
effect of converting fixed rate us borrowings into ‘synthetic’ fixed
rate eurodenominated borrowings the portion of the swap that locks
interest payments at a fixed euro interest rate changes as us variable
interest rates euro variable interest rates and foreign currency
exchange rates change under ias 39’s rules such changes in value
are considered to be ineffective as a net investment hedge in the
comparative period ended 31 december 2004 the fair value attributed
to the portion of the swap that locks euro interest payments at fixed
rates was not recognised from adoption of ias 39 as at 1 january
2005 this value is recognised in the balance sheet with any changes
in value being recognised in the income statement
other derivative financial instruments
certain other derivative financial instruments are transacted to provide
a hedge against the group’s overall exposure to changes in foreign
currency exchange rates
in the comparative period ended 31 december 2004 the value of
these instruments is not recognised in the balance sheet or income
statement until the accounting period they were intended to cover
as a hedge from adoption of ias 39 as at 1 january 2005 these
instruments do not meet ias 39’s hedge accounting criteria and
consequently these instruments are carried at fair value with any
gain or loss being recognised in the income statement
business combinations and goodwill
all business combinations are accounted for by applying the purchase
method goodwill represents the excess of the fair value of the
purchase consideration for the interests in subsidiary undertakings
over the fair value to the group of the net assets and any contingent
liabilities acquired in respect of acquisitions prior to 1 january 2004
goodwill is included on the basis of its deemed cost which represents
the amount recorded previously under uk gaap prior to 1 january
1998 goodwill was written off to reserves in the year of acquisition 
goodwill arising on acquisitions is stated at cost less any accumulated
impairment losses from 1 january 2004 goodwill is allocated on
acquisition to cashgenerating units that are anticipated to benefit from
the combination and is no longer amortised but is tested annually for
impairment impairment is determined by assessing the recoverable amount
of the cashgenerating unit to which the goodwill relates this estimate of
recoverable amount is performed at each balance sheet date  
the estimate of recoverable amount requires significant judgement
and is based on a number of factors such as the nearterm business
outlook for the cash generating unit including both its operating profit
and operating cash flow performance where the recoverable amount
of the cash generating unit is less than the carrying amount an
impairment loss is recognised where goodwill forms part of a cash
generating unit and part of the operation within that unit is disposed
of the goodwill associated with the operation disposed of is included in
the carrying amount of the operation when determining the gain or loss
on disposal goodwill disposed of in this circumstance is measured on
the basis of the relative values of the operation disposed of and the
portion of the cashgenerating unit retained
noncurrent assets held for sale
following the adoption of ifrs 5 noncurrent assets held for sale and
discontinued operations from 1 january 2005 noncurrent assets and
disposal groups classified as held for sale are measured at the lower
of carrying amount and fair value less costs to sell
noncurrent assets and disposal groups are classified as held for sale
if their carrying amount will be recovered through a sale transaction
rather than through continuing use this condition is regarded as met
only when the sale is highly probable and the asset or disposal group
is available for immediate sale in its present condition management
must be committed to the sale and an active programme to locate a
buyer and complete the sale must have been initiated ordinarily the
sale should be expected to qualify for recognition as a completed sale
within one year from the date of the classification as held for sale
segmental analysis
a segment is a distinguishable component of the group that is engaged
in providing products or services business segment or in providing
products or services within a particular economic environment
geographical segment which is subject to risks and rewards that are
different from those of other segments
segmental information is based on two segment formats the primary
format represents the group’s business segments whereas the secondary
format reflects the geographical segments
segment result represents operating profits including intangible asset
amortisation and goodwill charges and includes an allocation of head
office expenses segment result excludes tax and financing items
segment assets comprise goodwill other intangible assets property
plant and equipment inventories trade and other receivables and assets
held for sale segment liabilities comprise trade and other payables
provisions held for sale liabilities and other payables unallocated items
represent corporate and deferred taxation balances defined benefit
scheme liabilities and all components of net debt
intangible assets
selffunded research and development costs are charged to the income
statement in the year in which they are incurred unless development
expenditure meets certain strict criteria for capitalisation these criteria
include demonstration of the technical feasibility of completing a new
intangible asset that will be available for sale and that the asset will
generate probable future economic benefits where expenditure meets
the criteria development costs are capitalised and amortised over their
useful economic lives
other intangible assets that are acquired by the group are stated at
cost less accumulated amortisation and impairment losses subsequent
expenditure on capitalised intangible assets is expensed as incurred
amortisation of intangible assets is charged to administrative
expenses in the income statement on a straightline basis over the
estimated useful lives of intangible assets the estimated useful lives
are as follows
patents and trademarks  up to 5 years
other intangible assets up to 3 years
spectris 3276  3406  918 pm  page 37 38 spectris plc annual report and accounts 2005
notes to the accounts continued
property plant and equipment
property plant and equipment is stated at cost less accumulated
depreciation and any provision for impairments in value the group
recognises in the carrying amount of property plant and equipment the
subsequent costs of replacing part of such items when there are future
economic benefits all other costs are recognised in the income
statement as an expense as they are incurred
depreciation is provided on a straightline basis to write off the cost
less the estimated residual value of property plant and equipment over
its estimated useful life the depreciation charge is revised where useful
lives are different to previously estimated or where technically obsolete
assets are required to be written down where parts of an item of plant
and equipment have separate lives they are accounted for and
depreciated as separate items land is not depreciated estimated useful
lives are as follows
freehold and long leasehold property 20 to 40 years
short leasehold property over the period of the lease
plant machinery and other equipment 5 to 20 years
motor vehicles 4 years
tooling computer hardware and software 3 to 5 years
impairment of tangible and intangible assets excluding goodwill
the carrying amount of the group’s assets is reviewed at each balance
sheet date to determine whether there is any indication of impairment
if any such indication exists the asset’s recoverable amount is estimated
where the asset does not generate cash flows that are independent
from other assets the group estimates the recoverable amount of the
cashgenerating unit to which the asset belongs an intangible asset
with an indefinite useful life is tested for impairment annually and
whenever there is an indication that the asset may be impaired
recoverable amount is the higher of fair value less costs to sell and
value in use in assessing value in use the estimated future cash flows
are discounted to their present value using a pretax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows
have not been adjusted
if the recoverable amount of an asset or cashgenerating unit is
estimated to be less than its carrying amount the carrying amount is
reduced to its recoverable amount an impairment loss is recognised
as an operating expense immediately
where an impairment loss subsequently reverses the carrying amount
of the asset is increased to the revised estimate of its recoverable
amount but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment
loss been recognised for the asset in prior years a reversal of an
impairment loss is recognised as income immediately
trade and other receivables
trade and other receivables are stated at their amortised cost as reduced
by appropriate allowances for estimated irrecoverable amounts
inventories
inventories and work in progress are carried at the lower of cost and
net realisable value cost represents direct costs incurred and where
appropriate a proportion of attributable overheads inventory is
accounted for on a firstin firstout basis provision is made for slow
moving and obsolete items based on an assessment of technological
and market developments and on an analysis of historic and
projected usage
cash and cash equivalents
cash and cash equivalents comprises cash balances and call deposits
bank overdrafts that are repayable on demand and form an integral
part of the group’s cash management are included as a component
of cash equivalents for the purposes of the statement of cash flows
trade and other payables
trade and other payables are stated at amortised cost
provisions
a provision is recognised in the balance sheet when the group has a
present legal or constructive obligation as a result of a past event and
it is probable that an outflow of economic benefits will be required to
settle the obligation in respect of warranties a provision is recognised
when the underlying products or services are sold provisions are
recognised at an amount equal to the best estimate of the expenditure
required to settle the group’s liability obligations arising from
restructuring plans are recognised when detailed formal plans have
been established and when there is a valid expectation that such a
plan will be carried out
postretirement benefits
the group has applied the amendments in ias 19 revised 2004 from
the date of transition to ifrs 1 january 2004 the group operates both
defined benefit schemes based on final pensionable pay and defined
contribution schemes
the group operates pension schemes providing benefits based on
final pensionable pay the assets of the schemes are held separately
from those of the group the group’s net obligation in respect of
defined benefit pension plans is calculated separately for each plan by
estimating the amount of future benefit that employees have earned
in return for their service in the current and prior periods that benefit
is discounted to determine its present value and the fair value of any
plan assets is deducted the discount rate is determined by reference
to market yields at the balance sheet date on high quality corporate
bonds that have maturity dates approximating to the terms of the
group’s obligations
the calculation is performed by a qualified actuary using the
projected unit method actuarial gains and losses are recognised in full
in the period in which they arise in the statement of recognised income
and expense
when the benefits of a plan are improved the portion of the
increased benefit relating to past service by employees is recognised as
an expense in the income statement on a straightline basis over the
average period until the benefits become vested to the extent that the
benefits vest immediately the expense is recognised immediately in the
income statement 
for defined contribution schemes the assets are held separately from
those of the group in independently administered funds payments to
defined contribution schemes are charged to the income statement as
they fall due 
sharebased payments
the fair value of employee share option grants is calculated at grant
date the resulting cost is charged to the income statement over the
vesting period of the plans the value of the charge is adjusted to reflect
expected and actual levels of options that vest except where forfeiture
is only due to share prices not achieving the threshold for vesting 
spectris 3276  3406  918 pm  page 38 spectris plc annual report and accounts 2005   39
revenues
revenues comprise sales to outside customers after discounts and
excluding value added tax
revenue from the sale of goods is recognised in the income
statement when the significant risk and rewards of ownership of the
goods have been transferred to the customer for contracts which
involve a significant element of installation or testing of equipment
revenue is recognised at the point of customer acceptance revenue
from services rendered is recognised in the income statement in
proportion to the measurement of the stage of completion of services
rendered as at the balance sheet date rental income is recognised
in the income statement on a straightline basis over the term of
the agreement revenue is not recognised if there are significant
uncertainties regarding recovery of the consideration due
interest payable
interest payable comprises the interest payable on borrowings calculated
using the effective interest method 
interest receivable and payable is recognised in the income statement
as it accrues using the effective interest method dividend income is
recognised in the income statement when the right to receive payment
is established
leasing
leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the
lessee all other leases are classified as operating leases
assets held under finance leases are recognised as assets of the group
at their fair value or if lower at the present value of the minimum
lease payments each determined at the inception of the lease
the corresponding liability to the lessor is included in the balance sheet
as a finance lease obligation lease payments are apportioned between
finance charges and reduction of the lease obligation so as to achieve
a constant rate of interest on the remaining balance of the liability
finance charges are charged directly against income
rentals payable under operating leases are charged to income on a
straightline basis over the term of the relevant lease benefits received
and receivable as an incentive to enter into an operating lease are also
spread on a straightline basis over the lease term
taxation
tax on the profit or loss for the year comprises both current and
deferred tax tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity in which
case it is recognised in equity
current tax is the expected tax payable on the taxable income for
the year using tax rates enacted or substantively enacted at the balance
sheet date and any adjustments to tax payable in respect of previous years
deferred tax is provided using the balance sheet liability method
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes a deferred tax asset is recognised only to
the extent that it is probable that future taxable profits will be available
against which the asset can be utilised
additional income taxes that arise from the distribution of intragroup
dividends are recognised at the same time as the liability to pay the
related dividend
ifrs transitional arrangements
when preparing the group’s ifrs balance sheet at 1 january 2004
the date of transition the following optional exemptions provided by
ifrs 1 firsttime adoption of international financial reporting standards
from full retrospective application of ifrs accounting policies have
been adopted
• business combinations – the provisions of ifrs 3 have been
applied from 1 january 2004 the net carrying value of goodwill
at 31 december 2003 under the previous accounting policies has
been deemed to be the cost at 1 january 2004
• financial instruments – the provisions of ias 32 and ias 39 have
not been applied to the comparative period to 31 december 2004
which for these purposes has been prepared on the basis of
previous uk gaap accounting policies as described above
• cumulative translation differences arising on consolidation of
subsidiaries – ias 21 requires such differences to be held in a separate
reserve rather than included in the profit and loss reserve under uk
gaap this reserve has been deemed to be nil on 1 january 2004
• sharebased payments – ifrs 2 has not been applied to share options
granted prior to 7 november 2002 nor to any options that vested
prior to 1 january 2005 and
• employee benefits – the group has elected to recognise all cumulative
actuarial gains and losses in relation to employee benefit schemes at
the date of transition 
the group’s transitional balance sheet and other reconciliations required
by ifrs 1 firsttime adoption of international financial reporting
standards together with a description of the significant adjustments
applied are included in note 36 to these financial statements
spectris 3276  3406  918 pm  page 39 40 spectris plc annual report and accounts 2005
notes to the accounts continued
2 financial risk management
the group’s multinational operations and debt financing expose it to
a variety of financial risks in the course of its business the group is
exposed to foreign currency risk interest rate risk funding risk and
credit risk financial risk management is an integral part of the way the
group is managed financial risk management policies are set by the
board of directors these policies are implemented by a central treasury
department that has formal procedures to manage foreign exchange
risk interest rate risk and funding risk including where appropriate the
use of derivative financial instruments the group has clearly defined
authority and approval limits
in accordance with its treasury policy the group does not hold or use
derivative financial instruments for trading or speculative purposes such
instruments are only used to manage the risks arising from operating or
financial assets or liabilities or highly probable future transactions
a foreign currency risk
foreign currency risk arises both where sale or purchase transactions
are undertaken in foreign currencies transactional exposures and
where the results of overseas companies are consolidated into the
group’s reporting currency of £sterling translational exposures the
group has operations around the world which record their results in a
variety of different local functional currencies in countries where the
group does not have operations it invariably has some customers or
suppliers that transact in a foreign currency the group is therefore
exposed to the changes in foreign currency exchange rates between a
number of different currencies but the group’s primary exposures relate
to the us euro and £sterling and to a lesser extent the japanese yen
where appropriate the group manages its foreign currency exposures
using derivative financial instruments
historically the group has used zero cost average rate options
to manage to a greater or lesser extent both transactional and
translational foreign currency exposures the last such derivative
financial instrument expired on 31 december 2005 and the group
has no current intention of using average rate options as a hedging
instrument in future
the group manages its transactional exposures to foreign currency
risks through the use of forward exchange contracts forward exchange
contracts are typically used to hedge highly probable forecast sale
transactions which can be forecast to occur from anything between
1 and 18 months into the future
the group’s translational exposures to foreign currency risks can relate
both to the income statement and net assets of overseas subsidiaries
following the expiry of the last zero cost average rate option on
31 december 2005 the group’s policy is not to hedge the translational
exposure that arises on consolidation of the income statements of
overseas subsidiaries the group finances overseas company investments
partly through the use of foreign currency borrowings in order to
provide a natural hedge of foreign currency risk arising on translation
of the group’s net investment
b interest rate risk
interest rate risk comprises both the interest rate price risk that results
from borrowing at fixed rates of interest and also the interest cash flow
risk that results from borrowing at variable rates where appropriate
interest rate swaps are used to manage the group’s interest rate profile
at this time the majority of the group’s borrowings attract fixed rates
of interest payments and therefore the group’s principal interest rate risk
is a price risk
c funding risk
funding risk represents the risk that the group encounters difficulties in
raising finance in order to meet its financial obligations as they fall due
the group manages this risk by maintaining adequate committed lines
of funding from high quality lenders
during july 2006 the 100m 1996 private placement loans will
become due for repayment new committed facilities have already been
negotiated which together with the free cash flow generated by the
group will provide sufficient funds to repay these loans and ensure
that the group’s funding risks remain at an acceptable level
d credit risk
credit risk arises because a counterparty may fail to perform its
obligations the group is exposed to credit risk on financial assets
such as cash balances derivative financial instruments trade and
other receivables
the group’s credit risk is primarily attributable to its trade receivables
the amounts recognised in the balance sheet are net of appropriate
allowances for doubtful receivables estimated by the group’s
management based on prior experience and their assessment of the
current economic environment trade receivables are subject to credit
limits and control and approval procedures in the operating companies
due to its large geographic base and number of customers the
group is not exposed to material concentrations of credit risk on its
trade receivables
credit risk associated with cash balances and derivative financial
instruments is managed by transacting with financial institutions with
high quality credit ratings accordingly the group’s associated credit risk
is limited the group has no significant concentration of credit risk
the group’s maximum exposure to credit risk is represented by the
carrying amount of each financial asset including derivative financial
instruments in the group balance sheet
spectris 3276  3406  918 pm  page 40 spectris plc annual report and accounts 2005   41
3 adjusted performance measures
spectris uses adjusted figures as key performance measures in addition to those reported under ifrs adjusted figures are stated before amortisation
of acquisitionrelated intangible assets goodwill charges profits or losses on termination or disposal of businesses or major fixed assets unrealised
changes in the fair value of financial instruments related tax effects and other tax items which do not form part of the underlying tax rate 
see note 11
the adjusted performance measures are derived from the reported figures under ifrs as follows
2005 2004
adjusted operating profit notes £m £m
operating profit as reported under ifrs 649 512
amortisation of acquisitionrelated intangible assets 15 12 12
goodwill impairment charge 14 74 –
goodwill reduction 14 – 122
adjusted operating profit 735 646
electronic inline process 2005
controls instrumentation technology total
adjusted operating profit by segment £m £m £m £m
segment result under ifrs 4 182 155 312 649
amortisation of acquisitionrelated intangible assets – – 12 12
goodwill impairment charge – 74 – 74
adjusted operating profit 182 229 324 735
electronic inline process 2004
controls instrumentation technology total
adjusted operating profit by segment £m £m £m £m
segment result under ifrs 4 172 206 134 512
amortisation of acquisitionrelated intangible assets – – 12 12
goodwill reduction – – 122 122
adjusted operating profit 172 206 268 646
2005 2004
adjusted profit before tax notes £m £m
profit before tax as reported under ifrs 508 359
amortisation of acquisitionrelated intangible assets 15 12 12
goodwill impairment charges 14 74 –
goodwill reduction 14 – 122
loss on termination of businesses – 12
unrealised change in fair value of crosscurrency interest rate swaps 10 11 –
unrealised change in fair value of average rate options 10 17 –
other financial income 10 17 –
adjusted profit before tax 605 505
2005 2004
operating cash flow £m £m
net cash from operating activities under ifrs 748 566
corporation tax paid 158 77
purchase of property plant and equipment 123 165
proceeds from sale of property plant and equipment 01 07
sale of own shares by employee benefit trust – 02
operating cash flow for management purposes 784 487
spectris 3276  3406  918 pm  page 41 42 spectris plc annual report and accounts 2005
notes to the accounts continued
3 adjusted performance measures continued
2005 2004
adjusted earnings per share note £m £m
profit after tax as reported under ifrs 352 236
adjusted for
amortisation of acquisitionrelated intangible assets 15 12 12
goodwill impairment charge 14 74 –
goodwill reduction 14 – 122
loss on termination of businesses – 12
unrealised change in fair value of crosscurrency interest rate swaps 10 11 –
unrealised change in fair value of average rate options 10 17 –
other financial income 10 17 –
tax effect of the above 11 15 02
other tax items not forming part of the underlying tax rate 11 08 02
adjusted earnings 442 382
weighted average number of shares outstanding millions 13 1221 1209
adjusted earnings per share pence 362p 316p
adjusted diluted earnings per share
adjusted earnings as above 442 382
diluted weighted average number of shares outstanding millions 13 1224 1211
adjusted diluted earnings per share pence 361p 315p
4 segmental information
the group’s primary reporting format is business segments and its secondary format is geographical segments the companies within each business
segment together with the significant products made by each are detailed within the additional information section of this annual report see the
inside front cover
external 
segment revenue intersegment revenue customer revenue segment result
1111111111111 111111111111 111111111111 111111111111
2005 2004 2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m £m £m
electronic controls 1436 1399 01 02 1435 1397 182 172
inline instrumentation 2028 1990 05 06 2023 1984 155 206
process technology 3116 2774 15 14 3101 2760 312 134
eliminate intersegment sales 21 22 21 22 – – – –
total continuing operations 6559 6141 – – 6559 6141 649 512
loss on termination of businesses – 12
financial income 66 40
finance costs 207 181
profit before tax 508 359
tax 156 123
profit after tax 352 236
intersegment pricing is done on an arm’s length basis segments are presented on the basis of actual intersegment charges made loss on
termination of businesses of £12m in 2004 relates to the electronic controls sector £06m and corporate activities £06m
segment assets segment liabilities
1111111111111 1111111111111
2005 2004 2005 2004
£m £m £m £m
electronic controls 1147 1158 289 267
inline instrumentation 1503 1587 351 346
process technology 2857 2832 916 881
total segment assets and liabilities 5507 5577 1556 1494
cash and borrowings 771 344 1810 1933
derivative financial instruments – – 247 –
net pension liability – – 226 207
taxation including amounts disclosed within assets and liabilities held for sale 457 421 341 360
consolidated total assets and liabilities 6735 6342 4180 3994
spectris 3276  3406  918 pm  page 42 spectris plc annual report and accounts 2005   43
4 segmental information continued
additions to depreciation and
noncurrent assets amortisation impairment charges
1111111111111 1111111111111 1111111111111
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
electronic controls 49 30 39 39 – –
inline instrumentation 40 81 38 39 74 –
process technology 42 129 62 69 – –
131 240 139 147 74 –
geographical segments
the group’s business operations are each located in several geographical locations and sell on to external customers in all parts of the world 
the following is an analysis of revenue by geographical destination
2005 2004
£m £m
uk 414 394
continental europe 2401 2421
north america 1696 1573
japan 540 462
china 456 403
rest of asia pacific 704 591
rest of the world 348 297
6559 6141
the following is an analysis of the carrying amount of segment assets and additions to property plant and equipment and intangible assets
analysed by the geographical area in which the assets are located
carrying amount of additions to
segment assets noncurrent assets
1111111111111 1111111111111
2005 2004 2005 2004
£m £m £m £m
uk 670 755 16 55
continental europe 3594 3702 84 98
north america 798 741 11 47
japan 195 179 03 31
china 107 84 15 06
rest of asia pacific 122 109 01 02
rest of the world 21 07 01 01
5507 5577 131 240
5 assets and liabilities held for sale
during the ordinary course of the group‘s strategic reviews a decision was taken to dispose of the arcom business which is included in the
electronic controls segment in february 2006 spectris entered into an option agreement to sell the arcom business to eurotech spa since the
year end eurotech has paid us2m to spectris in consideration for the option which gives eurotech 60 days to acquire arcom on a cash and debt
free basis should the acquisition complete the total consideration will be us26m including the us2m option payment already received as at
31 december 2005 the assets and liabilities of the arcom business are presented in the group accounts as held for sale and are stated at the lower
of their carrying amount and fair value less costs to sell there was no gain or loss arising as a result of the classification as held for sale
2005
assets held for sale £m
property plant and equipment 01
deferred tax assets 02
inventory 22
trade and other receivables 34
59
liabilities held for sale
trade and other payables 29
current tax liabilities 07
provisions 01
37
spectris 3276  3406  918 pm  page 43 44 spectris plc annual report and accounts 2005
notes to the accounts continued
6 revenue
an analysis of the group’s revenue is as follows
2005 2004
£m £m
sale of goods 6006 5680
services rendered 553 461
revenue 6559 6141
7 operating profit
operating profit has been arrived at after charging
2005 2004
£m £m
net foreign exchange losses 04 17
research and development expenditure 449 434
depreciation of property plant and equipment 126 134
amortisation of intangible fixed assets 13 13
goodwill impairment charge 74 –
loss on sale of property plant and equipment 03 04
auditors’ remuneration
audit services including worldwide auditrelated services 09 08
other assurance services 02 01
tax advisory 05 05
16 14
amounts payable to kpmg audit plc and their associates by the company and its uk subsidiary undertakings in respect of audit services and 
nonaudit services were £03m 2004 £03m and £02m 2004 £01m respectively
8 employee costs
2005 2004
employee costs including directors’ remuneration £m £m
wages and salaries 1907 1847
social security costs 294 280
defined benefit pension plans current service cost see note 9 07 08
defined contribution pension plans see note 9 69 63
sharebased payment expense 03 04
2280 2202
directors’ remuneration
shortterm benefits 16 15
postemployment benefits 02 02
sharebased payment expense 03 04
21 21
further details of directors’ remuneration and share options are given in the directors’ remuneration report on pages 23 to 29
2005 2004
average number of employees number number
production and engineering 3206 3199
sales and marketing 2247 2211
administrative 492 486
5945 5896
spectris 3276  3406  918 pm  page 44 spectris plc annual report and accounts 2005   45
9 retirement benefit schemes
spectris plc operates funded defined benefit ‘final salary’ and defined contribution pension plans for the group’s qualifying employees in the uk
in addition six overseas subsidiaries provide defined benefit plans other uk and overseas subsidiaries have their own defined contribution plans
invested in independent funds and the group operates a defined contribution plan in the usa for its us subsidiaries 
defined contribution plans
the total cost to spectris plc of the defined contribution plans for the year ended 31 december 2005 was £69m 2004 £63m there were no
outstanding or prepaid contributions to these plans as at 31 december 2005 or at 31 december 2004
defined benefit plans
the last full actuarial valuations were carried out as at the following dates
plan name date of last full actuarial valuation
spectris pension plan 31 december 2002
servomex pension and assurance scheme 30 june 2002
brüel  kjær vibro gmbh 31 december 2005
hottinger baldwin messtechnik gmbh 31 december 2005
spectris gmbh sensoren und systeme 31 december 2005
btg mütek gmbh 31 december 2005
brüel  kjær gmbh 31 december 2005
panalytical gmbh 31 december 2005
the valuations were updated to 31 december 2005 for ias 19 purposes by qualified independent actuaries
the total contributions made to the defined benefit plans in the year ended 31 december 2005 were £32m 2004 £15m contributions for 2006
are expected to be as follows
plan name expected 2006 contributions £m
spectris pension plan 25
servomex pension and assurance scheme –
brüel  kjær vibro gmbh –
hottinger baldwin messtechnik gmbh 02
spectris gmbh sensoren und systeme 01
btg mütek gmbh –
brüel  kjær gmbh –
panalytical gmbh –
the above contribution rates are subject to review at future valuations and periodical certifications of the schedule of contributions
the assets and liabilities of the servomex pension and assurance scheme were transferred to the spectris pension plan on 31 december 2005 and
this is reflected in the above contribution rates
the spectris pension plan is a closed scheme and hence under the projected unit method used to calculate the service cost under ias 19 the
current service cost will increase when expressed as a percentage of pensionable pay as the members of the plan approach retirement
the major assumptions used by the actuary to value the liabilities of the defined benefit plans were
2005 2004
uk plans  pa  pa
discount rate 480 530
salary increases 440 440
pension increases in payment 290 for lpi 290 for lpi
pension increases in deferment 290 290
inflation assumption 290 290
 lpi is limited price indexation
mortality rate assumptions
pensioner life expectancy assumed in the 31 december 2005 update is based on the following tables
current pensioners pxa92 mortality tables projected to calendar year 2005
future pensioners pxa92 mortality tables projected to calendar year 2020
samples of the ages which pensioners are assumed to live to are as follows male female
pensioner aged 65 in 2005 837 866
pensioner aged 65 in 2020 850 879
spectris 3276  3406  918 pm  page 45 46 spectris plc annual report and accounts 2005
notes to the accounts continued
9 retirement benefit schemes continued
2005 2004
german plans  pa  pa
discount rate 425 475
salary increases 250 250
pension increases in payment 150 175
pension increases in deferment – –
inflation assumption 250 250
mortality rate assumptions
pensioner life expectancy assumed in the 31 december 2005 update is based on the following tables
current pensioners and future pensioners dr k heubeck pension tables 2005 g
samples of the ages which pensioners are assumed to live to are as follows male female
pensioner aged 60 in 2005 820 867
pensioner aged 60 in 2020 843 888
different rates of pension increases apply to some members of the spectris pension plan and the servomex pension and assurance scheme
the liabilities have been valued at the appropriate rates
uk plans german plans total
1111111111111 1111111111111 1111111111111
2005 2004 2005 2004 2005 2004
amounts recognised in the income statement £m £m £m £m £m £m
current service cost 07 07 – 01 07 08
interest cost 39 37 03 03 42 40
expected return on scheme assets 37 36 01 01 38 37
09 08 02 03 11 11
the current service cost is recognised in administrative expenses in the income statement the interest cost and expected return on scheme assets
are both recognised in finance costs in the income statement actuarial losses are recognised in the statement of recognised income and expense
during the year insurance premiums for deathinservice benefits were paid amounting to £03m 2004 £02m
the actual return on scheme assets was £99m 2004 £48m
uk plans german plans total
1111111111111 1111111111111 1111111111111 amounts recognised in the statement of 
2005 2004 2005 2004 2005 2004
recognised income and expense £m £m £m £m £m £m
actuarial gains and losses recognised in the current period 39 30 02 04 41 34
cumulative actuarial gains and losses 315 276 12 10 327 286
uk plans german plans total
1111111111111 1111111111111 1111111111111
2005 2004 2005 2004 2005 2004
amounts recognised in the balance sheet £m £m £m £m £m £m
present value of defined benefit obligations 857 740 61 61 918 801
fair value of scheme assets 681 583 11 11 692 594
net deficit in scheme 176 157 50 50 226 207
uk plans german plans total
1111111111111 1111111111111 1111111111111
2005 2004 2005 2004 2005 2004
reconciliation of movement in net deficit £m £m £m £m £m £m
at 1 january 157 131 50 46 207 177
expected return on plan assets 37 36 01 01 38 37
contributions from sponsoring company 29 12 03 03 32 15
current service cost 07 07 – 01 07 08
interest cost 39 37 03 03 42 40
total actuarial losses 39 30 02 04 41 34
exchange difference – – 01 – 01 –
at 31 december 176 157 50 50 226 207
spectris 3276  3406  918 pm  page 46 spectris plc annual report and accounts 2005   47
9 retirement benefit schemes continued
uk plans german plans total
1111111111111 1111111111111 1111111111111 analysis of movement in the present value of 
2005 2004 2005 2004 2005 2004
the defined benefit obligation £m £m £m £m £m £m
at 1 january 740 684 61 57 801 741
current service cost 07 07 – 01 07 08
interest cost 39 37 03 03 42 40
actuarial losses 100 41 02 04 102 45
exchange difference – – 01 – 01 –
contributions from scheme members 03 03 – – 03 03
benefits paid 32 32 04 04 36 36
at 31 december 857 740 61 61 918 801
uk plans german plans total
1111111111111 1111111111111 1111111111111
2005 2004 2005 2004 2005 2004
analysis of defined benefit obligation £m £m £m £m £m £m
present value of unfunded defined benefit obligation – – 47 48 47 48
present value of funded defined benefit obligation 857 740 14 13 871 753
uk plans german plans total
1111111111111 1111111111111 1111111111111
2005 2004 2005 2004 2005 2004
reconciliation of movement in fair value of plan assets £m £m £m £m £m £m
at 1 january 583 553 11 11 594 564
expected return on plan assets 37 36 01 01 38 37
actuarial gains 61 11 – – 61 11
contributions from sponsoring company 29 12 03 03 32 15
contributions from scheme members 03 03 – – 03 03
benefits paid 32 32 04 04 36 36
at 31 december 681 583 11 11 692 594
analysis of the scheme assets and expected rate of return
expected return fair value of assets
1111111111111 1111111111111
2005 2004 2005 2004
uk plans   £m £m
equity instruments 78 80 312 264
debt instruments 45 50 352 313
other assets 45 45 17 06
60 64 681 583
expected return fair value of assets
1111111111111 1111111111111
2005 2004 2005 2004
german plans   £m £m
insurance policies 425 475 11 11
the overall expected return on assets is calculated as the weighted average of the expected return on each individual asset class the expected
return on equities is the sum of inflation dividend yield and economic growth less investment expenses the return on gilts and bonds is the
current market yield on longterm gilts and bonds the expected return on other assets is the current interest rate set by the bank of england
2005 2004 2003 2002 2001
history of experience adjustments £m £m £m £m £m
present value of defined benefit obligations 918 801 741 680 622
fair value of scheme assets 692 594 564 546 630
surplusdeficit in the scheme 226 207 177 134 08
experience adjustment on scheme liabilities 2005 2004 2003 2002 2001
amount £m 102 45 72 41 49
percentage of scheme liabilities  111 56 97 60 79
experience adjustment on scheme assets 2005 2004 2003 2002 2001
amount £m 61 11 27 107 108
percentage of scheme assets  88 19 48 196 171
spectris 3276  3406  918 pm  page 47 48 spectris plc annual report and accounts 2005
notes to the accounts continued
10 finance costs and financial income
2005 2004
financial income £m £m
bank interest receivable 10 02
dividend income 01 01
expected return on pension scheme assets 38 37 
other financial income 17 –
66 40
other financial income represents a gain made on disposal of the group’s remaining interest in luxtron corporation in 2002 the group disposed
of 801 of its interest in luxtron corporation in exchange for us6m 5 preference shares and continued to hold its 199 equity interest
the group’s preference shares and equity interest were deemed to be impaired and have since been carried in the group balance sheet at a nil
value during 2005 £04m of preference shares were redeemed and the group has disposed of its remaining interest in luxtron for a further
£13m generating a gain on disposal of £17m this gain is presented as financial income in the income statement in addition the group has
received dividend income amounting to £01m 2004 £01m
2005 2004
finance costs £m £m
interest payable on bank loans and overdrafts 09 15
interest payable on other loans 128 126
total interest payable  137 141
unrealised change in fair value of crosscurrency interest rate swaps 11 –
unrealised change in fair value of average rate options 17 –
interest cost on pension scheme liabilities 42 40
207 181
interest costs of £126m 2004 £138m for the purposes of the calculation of interest cover comprise of bank interest receivable of £10m 2004
£02m dividend income of £01m 2004 £01m and interest payable on bank and other loans and overdrafts of £137m 2004 £141m
11 taxation
2005 2004
111111111111111111111 111111111111111111111
uk overseas total uk overseas total
£m £m £m £m £m £m
current tax charge 35 164 199 98 107 205
adjustments in respect of current tax of prior years 13 18 31 03 06 09
deferred tax – origination and reversal of temporary differences 17 05 12 – 73 73
05 151 156 95 28 123
the standard rate of corporation tax for the year based on the weighted average of tax rates applied to the group’s profits is 328 2004 326
the tax charge for the year is lower 2004 higher than the standard rate of corporation tax for the reasons set out in the following reconciliation
2005 2004
£m £m
profit before taxation 508 359
corporation tax at standard rate of 328 2004 326 167 117
nontaxable income and gains 27 31
nondeductible expenditure 28 68
movements on unrecognised deferred tax assets 30 01
other current year items 06 01
tax charge on dividends received from eubased subsidiaries 28 98
taxation on other dividend flows 36 09
revision of recognition of opening deferred tax assets 25 96
other adjustments to prior year current and deferred tax charges 15 40
total taxation 156 123
a tax liability of £28m 2004 £98m has been recognised on dividends received in the uk from eubased subsidiaries on the basis of current uk
tax legislation the legality of the uk rules is currently being challenged and the group litigation order test case has been referred to the european
court of justice in view of the uncertainties regarding the final outcome of the court proceedings and taking into account current uk tax law
a liability has been recognised in the event that current uk law is overturned no tax will be due
taxation on other dividend flows of £36m 2004 £09m is mitigated by movements on unrecognised deferred tax assets of £14m 2004 £09m
and current year uk tax losses of £19m 2004 £nil the remaining £03m 2004 £nil relates to withholding tax payments
spectris 3276  3406  918 pm  page 48 spectris plc annual report and accounts 2005   49
11 taxation continued
the following tax chargescredits relate to items of income and expense that are excluded from the group’s adjusted performance measures
2005 2004
tax on items of income and expense that are excluded from the group’s adjusted profits before tax £m £m
tax credit on unrealised change in fair value of crosscurrency interest rate swaps 03 –
tax credit on unrealised change in fair value of average rate options 05 –
tax credit on amortisation of intangible assets and goodwill impairment charge 12 02
tax charge on other financial income 05 –
total tax credit 15 02
2005 2004
other tax items not forming part of the underlying tax rate £m £m
material transfers from unrecognised tax assets 25 96
material changes in deferred tax rates 05 –
tax charge on dividends received from eubased subsidiaries 28 98
total charge 08 02
the effective adjusted tax rate for the period was 269 2004 244 as set out in the reconciliation below
2005 2004
reconciliation of total tax charge on ifrs basis to adjusted tax charge £m £m
total tax charge on ifrs basis 156 123
tax credit on items of income and expense that are excluded from the group’s adjusted profits before tax 15 02
other tax items not forming part of the underlying tax rate 08 02
adjusted tax charge 163 123
adjusted profits before tax 605 505
adjusted effective tax rate 269 244
12 dividends
2005 2004
amounts recognised and paid as distributions to equity holders in the year £m £m
final dividend for the year ended 31 december 2004 of 1025p 2003 93p per share 124 112
interim dividend for the year ended 31 december 2005 of 46p 2004 425p per share 57 51
181 163
amounts arising in respect of the year
interim dividend for the year ended 31 december 2005 of 46p 2004 425p 57 51
proposed final dividend for the year ended 31 december 2005 of 112p 2004 1025p per share 138 124
195 175
the proposed final dividend is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these
financial statements 
13 earnings per share
basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity shareholders of the parent by the
weighted average number of ordinary shares outstanding during the year
diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the year but adjusted for the effects of dilutive options the key features of share option contracts are
described in note 28 to these accounts
basic earnings per share 2005 2004
profit after tax £m 352 236
weighted average number of shares outstanding millions 1221 1209
basic earnings per share pence 288 195
spectris 3276  3406  918 pm  page 49 50 spectris plc annual report and accounts 2005
notes to the accounts continued
13 earnings per share continued
diluted earnings per share 2005 2004
profit after tax per income statement £m 352 236
basic weighted average number of shares outstanding millions 1221 1209
weighted average number of dilutive 5p ordinary shares under option millions 15 07
weighted average number of 5p ordinary shares that would have been issued at 
average market value from proceeds of dilutive share options millions 12 05
diluted weighted average number of shares outstanding millions 1224 1211
diluted earnings per share pence 288 195
14 goodwill
cost £m
at 1 january 2004 2595
recognised on acquisitions 40
reduction in goodwill associated with recognition of deferred tax assets 122
exchange differences 07
at 31 december 2004 2520
recognised on acquisitions 18
disposals 05
exchange differences 46
at 31 december 2005 2487
accumulated amortisation and impairment losses
at 1 january 2004 331
exchange differences 01
at 31 december 2004 330
impairment charge 74
disposals 05
exchange differences 07
at 31 december 2005 392
carrying amount
at 31 december 2005 2095
at 31 december 2004 2190
at 1 january 2004 2264
from 1 january 2004 goodwill is no longer amortised and is annually tested for impairment the reduction in goodwill reflects the corresponding
adjustment to goodwill for the recognition of danish deferred tax assets following an acquisition prior to 1 january 2004
during the year the carrying value of the group’s goodwill has been reviewed and an impairment charge of £74m 2004 £nil has been recognised
in order to write down the goodwill to its estimated recoverable amount this goodwill is attributable to the inline instrumentation segment
spectris 3276  3406  918 pm  page 50 spectris plc annual report and accounts 2005   51
15 other intangible assets
customer
patents and related
trademarks intangibles total
cost £m £m £m
at 1 january 2004 34 – 34
additions 22 – 22
recognised on acquisitions 13 24 37
at 31 december 2004 69 24 93
exchange differences 02 – 02
at 31 december 2005 71 24 95
accumulated amortisation and impairment losses
at 1 january 2004 28 – 28
charge for the year 07 06 13
at 31 december 2004 35 06 41
charge for the year 08 05 13
at 31 december 2005 43 11 54
carrying amount
at 31 december 2005 28 13 41
at 31 december 2004 34 18 52
at 1 january 2004 06 – 06
of the total amortisation charge of £13m 2004 £13m the amount attributable to the amortisation of acquisitionrelated intangible assets was 
£12m 2004 £12m
spectris 3276  3406  918 pm  page 51 52 spectris plc annual report and accounts 2005
notes to the accounts continued
16 property plant and equipment
freehold leasehold plant 
property property equipment total
cost £m £m £m £m
at 1 january 2004 680 50 1270 2000
additions 20 06 139 165
acquired on acquisition of subsidiary undertakings 04 – 12 16
disposals 04 – 72 76
transfers 02 11 28 19
exchange differences 09 03 08 20
at 31 december 2004 689 64 1313 2066
additions 12 04 107 123
acquired on acquisition of subsidiary undertakings 04 – 04 08
disposals – – 31 31
assets reclassified as held for sale – – 10 10
transfers 10 04 24 10
exchange differences 09 04 07 02
at 31 december 2005 706 76 1366 2148
accumulated depreciation and impairment
at 1 january 2004 141 36 899 1076
acquired on acquisition of subsidiary undertakings – – 09 09
charge for the year 19 06 109 134
disposals – – 65 65
transfers 09 – 20 11
exchange differences – 03 11 14
at 31 december 2004 169 39 921 1129
charge for the year 19 07 100 126
disposals – – 27 27
depreciation on assets reclassified as held for sale – – 09 09
transfers 05 01 02 06
exchange differences 03 03 07 07
at 31 december 2005 180 50 990 1220
carrying amount
at 31 december 2005 526 26 376 928
at 31 december 2004 520 25 392 937
at 1 january 2004 539 14 371 924
the amount recognised in the carrying amount of items of plant and equipment in the course of its construction was £20m 2004 £16m 
the carrying amount of the group’s plant and equipment includes an amount of £04m 2004 £07m in respect of assets held under finance leases
the group has pledged land and buildings having a carrying amount of approximately £29m 2004 £29m to secure bank loans granted to the group
spectris 3276  3406  918 pm  page 52 spectris plc annual report and accounts 2005   53
17 inventories
2005 2004
£m £m
raw materials 330 366
work in progress 136 191
finished goods 416 383
882 940
inventory is stated after impairments of £41m 2004 £21m and reversals of previous impairments of £02m 2004 £06m impairments and
reversals of impairments are included within operating profit
inventory with a carrying value of £01m 2004 £01m was pledged as security for liabilities
18 trade and other receivables
2005 2004
£m £m
trade receivables 1334 1262
prepayments and accrued income 108 153
other receivables 62 43
1504 1458
trade receivables are noninterest bearing standard credit terms provided to customers differ according to business and country and are typically
between 30 and 60 days included within the above are amounts receivable in more than one year of £02m 2004 £01m trade receivables and
other receivables include impairments of £03m 2004 £14m and reversals of impairments of £07m 2004 £nil impairments and reversals of
impairments are included within operating profit
the fair value of nonderivative financial assets approximates to book value due to the shortterm maturities associated with these items 
19 cash and cash equivalents
cash at bank and in hand is placed on deposit according to the immediate cash requirements of the group during the year amounts placed on
deposit earned interest at an effective rate of 45 deposits are usually made on an overnight basis amounts not on deposit earned interest at
nominal rates there is no cash held by the group that is not available for use by the group
2005 2004
analysis of balances of cash and cash equivalents £m £m
cash balances 771 344
bank overdrafts 10 03
cash and cash equivalents in the statement of cash flows 761 341
spectris 3276  3406  918 pm  page 53 54 spectris plc annual report and accounts 2005
notes to the accounts continued
20 borrowings
earlier of repricing 2005 2004
current effective interest rate date or maturity date £m £m
bank loans – secured see below see below 01 –
bank overdrafts 470 on demand 10 03
unsecured loan notes – 1996 100m see below 15 july 2006 580 –
finance lease liabilities 468 see below 03 –
594 03
earlier of repricing 2005 2004
noncurrent effective interest rate date or maturity date £m £m
bank loans – secured see below see below 31 28
finance lease liabilities 468 see below 02 –
33 28
unsecured loan notes – 1996 100m see below 15 july 2006 – 520
unsecured loan notes – 2000 75m see below 13 september 2010 433 567
unsecured loan notes – 2003 100m see below 15 october 2013 578 638
unsecured loan notes – 2003 €25m see below 15 october 2013 172 177
total unsecured loan notes 1183 1902
total noncurrent borrowings 1216 1930
at 31 december 2005 the group had available £435m 2004 £731m of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met
secured bank loan
bank loans are secured by fixed charges over property at three of the group’s subsidiaries of these £17m is denominated in chinese renminbi 
and is repayable by instalments until december 2012 with a fixed interest rate of 75 £08m is denominated in us dollars and is repayable 
by instalments until december 2014 with a variable interest rate of libor plus a small margin and £07m is denominated in euros and is repayable 
by instalments until december 2012 with a variable interest rate of libor plus a small margin
unsecured loan notes
in 1996 the group issued us100m of loan notes repayable on 15 july 2006 at par the loan notes bear interest at an average rate of 772
which is fixed until redemption in 1996 the group entered into treasury locks to underwrite the interest rate at which the loan notes were issued
this produced net proceeds of us14m these proceeds are amortised over the period of the loan notes in the income statement after taking
these proceeds into account the average net rate of interest on the loan notes is 75
in september 2000 the group issued us75m of loan notes repayable on 13 september 2010 at par the interest rate on these notes is 823
on issue the group entered into crosscurrency interest rate swap arrangements which have the effect of converting the us borrowings into fixed
interest eurodenominated debt the combined effect of the borrowing and swap arrangement results in euro debt of €804m with a fixed interest
rate of 689 the interest rate is fixed until redemption of the loan notes
in october 2003 the group issued €25m of loan notes repayable on 15 october 2013 the interest rate on these notes is 556 and remains
fixed until redemption
in october 2003 the group issued us100m of loan notes repayable on 15 october 2013 the interest rate on these notes is 608 on issue
the group entered into crosscurrency interest rate swap arrangements which have the effect of converting the us borrowings into fixed interest
eurodenominated debt the combined effect of the borrowing and swap arrangement results in euro debt of €905m with a fixed interest rate of
564 the interest rate remains fixed until redemption
interest is paid sixmonthly in arrears on all loan notes 
under ifrs in the case of both the september 2000 and october 2003 us borrowing arrangements the value of the underlying us borrowing
is presented in this borrowings note and the value of the related crosscurrency interest rate swaps is presented separately within derivative financial
instruments in note 21 for management purposes the value attributed to the portion of the swap arrangements that converts us borrowings into
euro borrowings is viewed as part of the group’s net debt as analysed below
spectris 3276  3406  918 pm  page 54 spectris plc annual report and accounts 2005   55
20 borrowings continued
2005 2004
analysis of net debt £m £m
bank overdrafts 10 03
bank loans – secured 32 28
unsecured loan notes 1763 1902
crosscurrency interest rate swaps – currency portion see note 21 160 –
finance lease liabilities 05 –
total borrowings 1970 1933
cash balances see note 19 771 344
net debt 1199 1589
2005 2004
maturity profile of borrowings £m £m
due within one year 597 03
due between one and two years 04 522
due between two and five years 562 02
due in more than five years 807 1406
total borrowings 1970 1933
2005 2004
111111111111111111111 111111111111111111111
minimum minimum
lease lease
payments interest principal payments interest principal
finance lease liabilities £m £m £m £m £m £m
less than one year 03 – 03 –––
between one and five years 02 – 02 –––
more than five years ––– –––
05 – 05 –––
21 derivative financial instruments
2005 2004
£m £m
forward exchange contracts 06 –
crosscurrency interest rate swaps 247 –
253 –
included in current liabilities 06 –
included in noncurrent liabilities 247 –
253 –
change in accounting policy
following the transition to ifrs the group adopted ias 32 financial instruments disclosure and presentation and ias 39 financial instruments
measurement and recognition from 1 january 2005 in accordance with the transitional provisions of ifrs 1 first time adoption of ifrs the group
has applied the exemption permitting the group not to adopt the standards in the comparative period ended 31 december 2004 and therefore
these standards have been applied prospectively from 1 january 2005 from a presentational perspective the 2004 comparatives are stated in
accordance with the uk gaap standard frs 13 derivatives and other financial instruments the nature of the changes arising from the changes in
accounting policy are described further below
forward exchange contracts
the group utilises forward exchange contracts to hedge the potential variability in cash flow arising from highly probable forecast sale transactions
due to changes in foreign currency exchange rates
until 31 december 2004 under uk gaap  the value of these instruments was not recognised until the hedged transactions took place following
adoption of ias 39 as at 1 january 2005 these contracts are recorded at each balance sheet date at their fair value on the balance sheet assuming
the hedge is effective any change in the fair value of the forward exchange contracts is recognised in the hedging reserve in equity until the point
at which the hedged transaction occurs at which time any amount recognised in the hedging reserve is recycled through the income statement
any ineffectiveness in the hedging relationship is recognised in the income statement immediately as at 1 january 2005 following the change
in accounting policy described an asset of £08m was recognised in the balance sheet with a corresponding entry in the hedging reserve
spectris 3276  3406  918 pm  page 55 56 spectris plc annual report and accounts 2005
notes to the accounts continued
21 derivative financial instruments continued
the fair value of forward exchange contracts outstanding as at 31 december 2005 is a liability of £06m of which £05m has been debited to the
hedging reserve and £01m debited to the income statement these contracts mature over periods not exceeding 12 months a summary of the
movements in the hedging reserve during the year is presented below
2005
analysis of movements in hedging reserve £m
at 1 january 2005 08
amounts recognised in equity during the year 05
amounts removed from equity and included in income statement during the year 08
at 31 december 2005 05
the fair value of forward exchange contracts is determined using discounted cash flow techniques based on readily available market data
crosscurrency interest rate swaps
as described in note 20 the group has taken out crosscurrency interest rate swaps to effectively convert fixed interest us borrowings into fixed
interest euro borrowings these ‘synthetic’ euro borrowings act as a natural hedge of the net assets of the group’s european businesses
the value of the group’s crosscurrency interest rate swaps can effectively be split into two components a portion that is attributable to converting
a usdenominated borrowing liability into a eurodenominated borrowing liability the currency portion – the value of this portion changes as
currency exchange rates change and a portion that is attributable to converting fixed rate us interest payments into fixed rate euro interest
payments the interest portion – the value of this portion of the swap changes as us variable interest rates euro variable interest rates and foreign
currency exchange rates change
until 31 december 2004 under uk gaap  the combined instruments were accounted for as if they were straightforward fixed interest euro
borrowings and were designated as a hedge of the group’s net investment in its european businesses the effect of this accounting policy was that
the currency portion of the swaps was effectively recognised within the carrying value of borrowings on the balance sheet and the interest portion
of the swap was not recognised on the balance sheet any exchange gain or loss on retranslation of the borrowings was recognised in equity 
the fair value of the entire crosscurrency swap was disclosed in the accounts
from adoption of ias 32 and ias 39 the underlying us borrowings are required to be presented separately in the balance sheet from the cross
currency interest rate swaps in addition the fair value of the crosscurrency interest rate swaps is required to be recognised in full on the balance
sheet following adoption of ias 39 as at 1 january 2005 the previous uk gaap carrying value of the affected 2000 and 2003 unsecured loan
note borrowings underlying us borrowings and currency portion of the swap of £1205m was replaced with the underlying us borrowings of
£906m and total liability value of the crosscurrency interest rate swap of £375m the net effect of this change was to reduce net assets by
£76m with a corresponding entry in reserves
at 31 december 2005 the fair value of the crosscurrency interest rate swap is a liability of £247m the reduction in value is primarily attributable
to the strengthening of the us during the year the table below shows the movements on the total value of the crosscurrency interest rate swap
during the year and also how it is attributed to its currency and interest portions
currency interest total
portion portion value
fair value of crosscurrency interest rate swap £m £m £m
at 1 january 2005 299 76 375
change in fair value recognised in reserves 139 – 139
change in fair value recognised in income statement – 11 11
at 31 december 2005 160 87 247
the combination of the underlying us borrowings and crosscurrency interest rate swap has been designated as a net investment hedge of the
group’s net investment in its european businesses however the interest portion of the swap is ineffective in this hedging relationship accordingly
the change in value of the currency portion of the swap is recognised together with the change in value of the underlying us borrowings in
reserves and the change in value of the interest portion of the swap is recognised in the income statement within financing costs
the fair value of crosscurrency interest rate swaps is determined using discounted cash flow techniques based on readily available market data
the key terms of the crosscurrency interest rate swaps are set out below the principal borrowing amounts match exactly with the related
unsecured loan note borrowings as described in note 20
principal amount date taken out maturity date € swap rate  swap rate
75m 13 september 2000 13 september 2010 689 823
100m 15 october 2003 15 october 2013 564 608
spectris 3276  3406  918 pm  page 56 spectris plc annual report and accounts 2005   57
21 derivative financial instruments continued
average rate options
historically the group has used zero cost average rate options to manage to a greater or lesser extent both transactional and translational foreign
currency exposures
until 31 december 2004 under uk gaap  the value of these instruments was recognised in the period they were intended to cover as a hedge
following adoption of ias 39 from 1 january 2005 the fair value of these instruments is required to be recognised on the balance sheet since
these instruments do not meet ias 39’s hedge accounting criteria any change in the fair value of the instruments is recognised in the income
statement as at 1 january 2005 following the change in accounting policy described an asset of £17m was recognised on the balance sheet
with a corresponding entry in reserves
at 31 december 2005 all outstanding instruments expired with a nil value the change in fair value during the year ended 31 december 2005
of £17m has been recognised in the income statement within financing costs
fair value and book values of derivative financial instruments
book fair book fair
value value value value
31 december 31 december 1 january 1 january
2005 2005 2005 2005
fair value of derivative financial instruments £m £m £m £m
forward exchange contracts 06 06 08 08
crosscurrency interest rate swaps 247 247 375 375
average rate options –– 17 17
253 253 350 350
22 nonderivative financial instruments
this note provides additional information on the group’s nonderivative financial assets and liabilities in addition to that set out in notes 18 trade
and other receivables 20 borrowings and 23 trade and other payables 
fair book fair book
value value value value
2005 2005 2004 2004
fair value of nonderivative financial assets and liabilities £m £m £m £m
cash deposits 771 771 344 344
floating rate borrowings 25 25 10 11
fixed rate borrowings 2079 1940 2017 1922
finance lease liabilities 05 05 ––
1338 1199 1683 1589
interest rate exposure of financial assets and liabilities by currency
financial assets financial liabilities 2005
111111111111111111111 111111111111111111111
net financial
noninterest assets
floating rate bearing total fixed rate floating rate total liabilities
£m £m £m £m £m £m £m
sterling 309 20 329––– 329
euro 167 25 192 1343 07 1350 1158
us dollar 29 13 42 580 08 588 546
japanese yen 07 32 39––– 39
other 154 15 169 22 10 32 137
666 105 771 1945 25 1970 1199
financial assets financial liabilities 2004
111111111111111111111 111111111111111111111
net financial
noninterest assets
floating rate bearing total fixed rate floating rate total liabilities
£m £m £m £m £m £m £m
sterling 06 01 07 – 03 03 04
euro 241 55 296 1402 – 1402 1106
us dollar 01 11 12 520 08 528 516
japanese yen 03 13 16––– 16
other 01 12 13––– 13
252 92 344 1922 11 1933 1589
spectris 3276  3406  918 pm  page 57 58 spectris plc annual report and accounts 2005
notes to the accounts continued
currency exposure of monetary assets and liabilities
the following summary shows the net unhedged assets and liabilities of group companies at 31 december 2005 that are not denominated in their
functional currency and therefore give rise to exchange gains and losses which are recognised in the income statement
net currency monetary assetsliabilities 2005
1111111111111111111111111111111111111
sterling euro us dollar yen other total
functional currency of group operations £m £m £m £m £m £m
sterling – 22 26 – 38 86
euro 06 – 02 06 07 21
us dollar 05 25 – 08 08 46
japanese yen – – 07 – 03 10
danish krone 07 64 16 11 09 67
swiss franc 03 23 01 – 02 29
swedish krona – 02 – – 10 12
other 06 05 18 – 19 38
27 131 56 03 72 289
net currency monetary assetsliabilities 2004
1111111111111111111111111111111111111
sterling euro us dollar yen other total
functional currency of group operations £m £m £m £m £m £m
sterling – 23 16 13 71 123
euro 66 – 03 01 02 72
us dollar 01 11 – – 97 109
japanese yen – – 05 – 03 08
danish krone 04 72 70 14 19 179
swiss franc 02 43 02 – 05 52
swedish krona 02 06 01 – 05 14
other 20 13 15 – 44 92
95 168 102 28 240 633
23 trade and other payables
2005 2004
current £m £m
trade payables 527 581
other creditors 126 138
accruals and deferred income 671 626
1324 1345
noncurrent
other creditors 67 54
the fair value of nonderivative financial liabilities approximates to book value due to the shortterm maturities associated with these items
spectris 3276  3406  918 pm  page 58 spectris plc annual report and accounts 2005   59
24 provisions
product 
reorganisation warranty other total
£m £m £m £m
at 1 january 2005 – 81 14 95
transfer fromto creditors – 25 48 23
additional provision in the year 26 26 19 71
utilised during the year 14 22 19 55
released during the year – 02 03 05
transferred to liability held for resale – 01 – 01
exchange adjustments – 02 01 01
at 31 december 2005 12 59 58 129
included in current liabilities 12 58 53 123
included in noncurrent liabilities – 01 05 06
12 59 58 129
reorganisation provisions relate to committed restructuring plans in place within the business and represent the directors’ best estimate of the cost
to complete the restructuring product warranty provisions reflect commitments made to customers on the sale of goods in the ordinary course
of business and included within the group’s standard terms and conditions warranty commitments typically apply for a 12month period with the
occasional extension up to 36 months the provision represents the directors’ best estimate of the group’s liability based on past experience other
provisions represent the directors’ best estimate of settling various potential claims against the group arising in the ordinary course of business
the timing of utilisation of these provisions is uncertain pending the outcome of ongoing negotiations
25 deferred tax
deferred tax is calculated in full on temporary differences under the liability method using the current corporate tax rate in the relevant local
jurisdiction
the movement on the deferred tax account is shown below
2005 2004
£m £m
at 1 january 383 306
impact of adoption of ias 39 financial instruments recognition and measurement as at 1 january 2005 16 –
exchange adjustments 17 16
acquisition of subsidiary undertaking – 12
transfer from current taxation – 02
deferred tax on changes in fair value of forward exchange contracts recognised in equity 04 –
deferred tax on actuarial loss on pension schemes recognised in equity 06 10
credited to income statement in the year see note 11 12 73
at 31 december 438 383
comprising
deferred tax liabilities 10 19
deferred tax assets including £73m attributable to the pension scheme deficit 2004 £67m 446 402
deferred tax asset held for sale 02 –
438 383
spectris 3276  3406  918 pm  page 59 60 spectris plc annual report and accounts 2005
notes to the accounts continued
25 deferred tax continued
deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where it is
probable that these assets will be recovered tax losses do not expire
no deferred tax liabilities have been provided in respect of the unremitted earnings of nonuk subsidiaries the amount of such unremitted earnings
is estimated to be a retained profit of £353m 2004 £351m
deferred tax assets estimated at £42m 2004 £107m have not been recognised due to the degree of uncertainty over both the amount and
utilisation of the underlying tax losses and deductions in certain jurisdictions there is no associated expiry date with the unrecognised deferred
tax assets in respect of tax losses
the movements in deferred tax assets and liabilities during the period are shown below deferred tax assets and liabilities are only offset where
there is a legally enforceable right of offset and there is an intention to settle the balances net
unrealised profit
accelerated accruals  on intercompany pension goodwill  2005
tax depreciation provisions tax losses transactions fund intangibles other total
net deferred tax assets £m £m £m £m £m £m £m £m
at 31 december 2004 58 76 11 27 67 145 01 383
impact of adoption of ias 39 as at 1 january 2005 – – – – – – 16 16
exchange adjustments – 09 – – – 08 – 17
deferred tax on changes in fair value of forward 
exchange contracts recognised in equity – – – – – – 04 04
deferred tax on actuarial loss on pension 
schemes recognised in equity – – – – 06 – – 06
chargedcredited to income statement 31 27 27 01 – 16 04 12
at 31 december 2005 27 112 38 28 73 137 23 438
unrealised profit
accelerated accruals  on intercompany pension goodwill  2004
tax depreciation provisions tax losses transactions fund intangibles other total
net deferred tax assets £m £m £m £m £m £m £m £m
at 31 december 2003 02 61 37 26 57 137 10 306
exchange adjustments – 04 02 – – 10 – 16
acquisition of subsidiary undertaking 01 11 – –––– 12
transferred from current taxation – 02 – –––– 02
deferred tax on actuarial loss on pension schemes 
recognised in equity – – – – 10 – – 10
chargedcredited to income statement 59 10 24 01 – 18 09 73
at 31 december 2004 58 76 11 27 67 145 01 383
26 share capital and reserves
2005 2004
1 1111111111111 1111111111111
number of number of
shares m £m shares m £m
authorised
ordinary shares of 5p each 2100 105 2100 105
issued and fully paid
at 1 january 1243 62 1241 62
issued for cash on exercise of share options 03 – 02 –
at 31 december 1246 62 1243 62
the group has one class of ordinary voting shares which carry no right to fixed income
during the year 03 million 2004 02 million ordinary shares were issued upon exercise under share option schemes giving rise to net proceeds
of £13m 2004 £07m see note 28 for a summary of potential issues of ordinary shares under existing share option schemes
spectris 3276  3406  918 pm  page 60 spectris plc annual report and accounts 2005   61
26 share capital and reserves continued
other reserves
movements in reserves are set out in the reconciliation of movement in capital and reserves in note 27 the retained earnings reserve includes
own shares held by the employee benefit trust see note 29 the nature and purpose of other reserves forming part of equity are as follows
translation reserve
the foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign
subsidiaries including gains or losses arising on net investment hedges
hedging reserve
this reserve records the fair value of forward exchange contracts where they are designated in effective cash flow hedge relationships
merger reserve
this reserve arose on the acquisition of servomex limited in 1999 a purchase satisfied substantially by the issue of share capital and therefore
eligible for merger relief under the provisions of section 131 of the companies act 1985
capital redemption reserve
this reserve records the historical repurchase of the group’s own shares
27 reconciliation of movement in capital and reserves
for the year ended 31 december 2005
capital
share share retained translation hedging merger redemption total
capital premium earnings reserve reserve reserve reserve equity
£m £m £m £m £m £m £m £m
equity at 31 december 2003 under uk gaap 62 2271 473 – – 31 03 1894
adjustment on adoption of ifrs – – 401––––401
at 1 january 2004 62 2271 72 – – 31 03 2295
gains and losses – year ended 31 december 2004
total recognised income and expense – – 213 09 – – – 204
total gains and losses 62 2271 141 09 – 31 03 2499
distributions to and transactions with shareholders
equity dividends paid – – 163 –––– 163
sharebased payments – – 04–––– 04
sale of own shares by employee benefit trust – – 01–––– 01
exercise of equity share options – 07 – – – – – 07
equity at 31 december 2004 62 2278 17 09 – 31 03 2348
change in accounting policy adoption of ias 39 
financial instruments recognition and measurement – – 43 – 08 – – 35
equity at 1 january 2005 62 2278 60 09 08 31 03 2313
gains and losses – year ended 31 december 2005
total recognised income and expense – – 332 19 13 – – 300
total gains and losses 62 2278 272 28 05 31 03 2613
distributions to and transactions with shareholders
equity dividends paid – – 181 –––– 181
sharebased payments – – 03–––– 03
sale of own shares by employee benefit trust – – 107––––107
exercise of equity share options – 13 – – – – – 13
equity at 31 december 2005 62 2291 201 28 05 31 03 2555
spectris 3276  3406  918 pm  page 61 62 spectris plc annual report and accounts 2005
notes to the accounts continued
28 sharebased payments
the executive share option scheme and save as you earn share option schemes were set up in order to provide executives and selected employees
with options to purchase ordinary shares in the company under the executive share option scheme exercise prices are determined according to the
midmarket closing share price prevailing on the day before the date of grant share options granted under the executive share option scheme are
also subject to performance criteria being the fulfilment of earnings growth targets options vest after a period of three years and have a maximum
term of ten years 
under the save as you earn scheme equity shares are issued following a vesting period of three years options may be exercised during a sixmonth
period following the vesting date and exercise prices are determined according to the midmarket closing share price prevailing on the day before
the date of grant there are no performance criteria associated with options granted under the save as you earn scheme
share options outstanding at the end of the period
2005 2004
111111111111111111111111111
exercise price exercise period number number
saye – year of grant £ thousands thousands
1999 396 2005 – 39
2001 358 2005 – 17
2002 343 2006 4 65
2003 469 2007 54 60
2004 408 2008 108 123
2005 589 2009 36 –
202 304
2005 2004
111111111111111111111111111
exercise price exercise period number number
executive share option scheme – year of grant £ thousands thousands
1995 379 – 586 1998 – 2005 – 85
1996 597 – 777 1999 – 2006 78 147
1997 538 – 660 2000 – 2007 151 196
1998 239 – 551 2001 – 2008 204 311
1999 322 – 396 2002 – 2009 104 186
2000 513 – 525 2003 – 2010 525 724
2001 358 – 499 2004 – 2011 756 889
2003 469 2006 – 2013 443 649
2004 406 – 462 2007 – 2014 374 453
2005 589 2008 – 2015 396 –
3031 3640
movements in the year
2005 2004
111111111111111111111 111111111111111111111
weighted weighted
average average
exercise value of exercise value of
number price shares number price shares
saye thousands £ £m thousands £ £m
at 1 january 304 402 12 389 380 15
granted 36 589 02 124 408 05
exercised 94 355 03 153 338 05
lapsed 44 400 02 56 440 02
at 31 december 202 447 09 304 402 12
exercisable at 31 december 202 447 09 304 402 12
spectris 3276  3406  918 pm  page 62 spectris plc annual report and accounts 2005   63
28 sharebased payments continued
2005 2004
111111111111111111111 111111111111111111111
weighted weighted
average average
exercise value of exercise value of
number price shares number price shares
executive share option scheme thousands £ £m thousands £ £m
at 1 january 3640 434 158 4634 420 195
granted 395 589 23 453 406 18
exercised 475 434 21 124 313 04
lapsed 529 489 26 1323 387 51
at 31 december 3031 445 135 3640 434 158
exercisable at 31 december 3031 445 135 3640 434 158
sharebased payment expense
share options are valued using a stochastic option pricing model with support from an independent remuneration consultant no performance
conditions were included in the calculation of fair value for options granted in 2005 and 2004 the fair value per option granted and the
assumptions used in the calculation are as follows
executive share
saye option scheme
11111111111 11111111111
2005 2004 2005 2004
weighted average share price pence 553 408 588 416
weighted average exercise price pence 589 408 589 436
expected volatility 311 311 366 385
expected life 325 yrs 325 yrs 60 yrs 60 yrs
riskfree rate 42 47 41 46
expected dividends expressed as a yield 27 33 25 31
fair value per option 196 232 319 289
the expected volatility is based on historical volatility over the last 6 years the expected life is the average expected period to exercise the riskfree
rate of return is the yield on zerocoupon uk government bonds of a term consistent with the assumed option life 
the group recognised total expenses of £03m related to equity settled sharebased payment transactions in 2005 2004 £04m 
29 own shares held by employee benefit trust
the own shares reserve forms part of retained earnings and represents the cost of shares in spectris plc purchased in the market and held by the
spectris plc employee benefit trust ‘ebt’ to satisfy options under the group’s share option schemes see note 28
2005 2004
£m £m
balance at 1 january 142 150
acquired in the period – –
disposed of on exercise of options 92 01
other movement – 07
at 31 december 50 142
the ebt holds ordinary 5p shares in spectris plc for the purpose of satisfying obligations under the 1996 executive share option plan for the benefit
of the group’s employees the ebt held 11 million shares at 31 december 2005 2004 32 million at a cost of £50m 2004 £142m the market
value of the ebt’s shares at 31 december 2005 was £72m 2004 £123m
the purchase of the shares on the open market is funded by loans directly from spectris plc dividend income in excess of 001p per share on the
shares held by the ebt has been waived by the trust and is therefore not included in the group’s income statement interest and administration costs
of the ebt are charged to the profit and loss account of the company for the year
spectris 3276  3406  918 pm  page 63 64 spectris plc annual report and accounts 2005
notes to the accounts continued
30 acquisitions
the following table provides an analysis of the assets and liabilities acquired and the related fair value adjustments 
fair value
book value adjustments fair value
net assets acquired £m £m £m
tangible fixed assets 08 – 08
inventories 01 – 01
trade and other payables 03 01 02
borrowings 07 – 07
net assets acquired –
goodwill 18
cash paid including directly attributable costs 18
prior year acquisitions
deferred consideration in relation to lumitron acquisition 03
deferred consideration in relation to mtt acquisition 02
05
net cash outflow relating to acquisitions 23
it is not possible to state what group revenue and profit would have been had the acquisition been undertaken on the first day of the financial year
31 contingent liabilities
group companies have given indemnities to the royal bank of scotland in respect of guarantees negotiations and foreign exchange facilities
of which £46m 2004 £49m was outstanding at 31 december 2005
the group has in the ordinary course of business provided indemnities to jp morgan chase na in respect of outstanding letters of credit of which
£13m 2004 £09m was outstanding at 31 december 2005
the group has in the ordinary course of business provided indemnities to abn amro bank nv in respect of outstanding trade finance facilities
of which £62m 2004 £51m was outstanding at 31 december 2005
group companies have in the normal course of business provided bonds and guarantees through local banking arrangements amounting to
£45m 2004 £46m
spectris plc has issued guarantees in respect of certain of its subsidiary companies’ operations in the normal course of business
32 operating lease arrangements 
2005 2004
1111111111111 1111111111111
property other property other
total commitments under noncancellable operating leases £m £m £m £m
within one year 33 19 26 14
in the second to fifth years 113 50 98 42
after five years 186 01 179 –
332 70 303 56
group companies are party to a number of operating leases mainly for plant and machinery including motor vehicles and property rentals
the arrangements do not impose any significant restrictions on the group
during the year £87m 2004 £68m was recognised in the income statement in respect of operating lease rental payments total future minimum
sublease rentals receivable in respect of subleases are £09m 2004 £02m
33 capital commitments
at 31 december 2005 the group had entered into contractual commitments for the acquisition of property plant and equipment amounting to
£06m 2004 £22m for which provision has not been made
34 related party transactions
details of directors’ remuneration being the key management personnel are summarised in note 8 and shown in detail in the directors’
remuneration report on page 26 there were no other related party transactions requiring disclosure
spectris 3276  3406  918 pm  page 64 spectris plc annual report and accounts 2005   65
35 subsidiary undertakings
the following are the group’s principal subsidiary undertakings they operate mainly in the countries of incorporation all the subsidiaries other
than intermediate holding companies are involved in the manufacture and sale of inline instrumentation electronic controls and process
technology systems
spectris plc holds 100 of the ordinary share capital of the subsidiaries incorporated in the uk subsidiaries incorporated overseas are 100 owned
through intermediate holding companies
country of
incorporation
arcom control systems limited uk
malvern instruments limited uk
servomex group limited uk
spectrum inspection systems limited previously loma systems limited uk
spectris china limited china
brüel  kjær sound  vibration measurement as denmark
brüel  kjær vibro as denmark
hottinger baldwin messtechnik gmbh germany
spectris company limited japan japan
btg eclépens sa switzerland
panalytical bv the netherlands
beta lasermike inc usa
fusion uv systems inc usa
ircon inc usa
microscan systems inc usa
ndc infrared engineering inc usa
particle measuring systems inc usa
red lion controls inc usa
spectris inc usa
spectris 3276  3406  918 pm  page 65 66 spectris plc annual report and accounts 2005
notes to the accounts continued
36 explanation of transition to ifrs
this is the first year the group has presented its financial statements under ifrs the following disclosures are required in the year of transition
the last financial statements under uk gaap were for the year ended 31 december 2004 and the date of transition to ifrs was therefore 
1 january 2004
transition
adjustments
uk gaap restated ifrs
reconciliation of equity at 1 january 2004 note £m £m £m
noncurrent assets
goodwill 2264 – 2264
other intangible assets 06 – 06
property plant and equipment 924 – 924
financial assets 06 – 06
deferred tax asset a 125 202 327
3325 202 3527
current assets
inventories b 838 02 836
taxation recoverable 92 – 92
trade and other receivables b 1326 02 1328
cash and cash equivalents 317 – 317
2573 – 2573
total assets 5898 202 6100
current liabilities
shortterm borrowing 08 – 08
trade and other payables b c d 1312 80 1232
current tax liabilities 291 – 291
provisions 114 – 114
1725 80 1645
net current assets 848 80 928
noncurrent liabilities
medium and longterm borrowings 1943 – 1943
other payables 19 – 19
retirement benefit obligations a 120 57 177
provisions a 197 176 21
2279 119 2160
total liabilities 4004 199 3805
net assets 1894 401 2295
equity
issued capital 62 – 62
share premium account 2271 – 2271
retained earnings and other reserves 439 401 38
equity shareholders’ funds 1894 401 2295
total equity and liabilities 5898 202 6100
spectris 3276  3406  918 pm  page 66 spectris plc annual report and accounts 2005   67
36 explanation of transition to ifrs continued
transition
adjustments
uk gaap restated ifrs
reconciliation of equity at 31 december 2004 note £m £m £m
noncurrent assets
goodwill a e 2235 45 2190
other intangible assets e 06 46 52
property plant and equipment 937 – 937
deferred tax asset a 214 188 402
3392 189 3581
current assets
inventories b 943 03 940
taxation recoverable a 165 146 19
trade and other receivables b 1457 01 1458
cash and cash equivalents 344 – 344
2909 148 2761
total assets 6301 41 6342
current liabilities
shortterm borrowing 03 – 03
trade and other payables b c d h 1480 135 1345
current tax liabilities a 487 146 341
provisions g 95 25 70
2065 306 1759
net current assets 844 158 1002
noncurrent liabilities
medium and longterm borrowings 1930 – 1930
other payables h 11 43 54
retirement benefit obligations a 140 67 207
provisions a g 195 151 44
2276 41 2235
total liabilities 4341 347 3994
net assets 1960 388 2348
equity
issued capital 62 – 62
share premium account 2278 – 2278
retained earnings and other reserves 380 388 08
equity shareholders’ funds 1960 388 2348
total equity and liabilities 6301 41 6342
transition
adjustments
uk gaap restated ifrs
reconciliation of profit for 2004 note £m £m £m
revenue b 6142 01 6141
cost of sales b 2624 01 2625
gross profit 3518 02 3516
operating costs a e f 2996 08 3004
operating profit 522 10 512
loss on sale or termination of business 12 – 12
profit before interest and tax 510 10 500
financial income c 03 37 40
finance costs c 144 37 181
profit before taxation 369 10 359
taxation a 122 01 123
profit after tax attributable to equity shareholders 247 11 236
basic earnings per share pence 204p 09p 195p
dilutive earnings per share pence 204p 09p 195p
spectris 3276  3406  918 pm  page 67 68 spectris plc annual report and accounts 2005
36 explanation of transition to ifrs continued
notes to the ifrs transition reconciliations
a deferred and current taxes
deferred tax on us goodwill – goodwill from the acquisition of
us businesses previously written off to reserves under uk gaap
is deductible for us tax purposes under ias 12 this gives rise to
a deferred tax asset under uk gaap the current tax deduction
obtained each year gave rise to a deferred tax liability
at 31 december 2004 the deferred tax liability attributable to
us goodwill under uk gaap was £176m 1 january 2004 £176m
under ifrs this has been eliminated and replaced with a deferred tax
asset of £110m 1 january 2004 £135m a combined adjustment
of £286m 1 january 2004 £311m
the impact on the income statement in the year ended 31 december
2004 was an increase in the taxation charge of £02m the remaining
movement of £23m between 1 january 2005 and 31 december 2005
represents foreign exchange movements on the asset and this is
recorded in reserves
goodwill reduction – when a deferred tax asset is recognised following
a business acquisition ias 12 requires that goodwill arising on the
acquisition be reduced by a corresponding amount with the reduction
in goodwill charged to the income statement under uk gaap  the
group recognised a deferred tax asset of £122m at 31 december 2004
1 january 2004 £nil relating to tax losses brought forward from a
prior acquisition that took place in 2000 the corresponding
adjustment to goodwill a reduction in carrying value of £122m
at 31 december 2004 1 january 2004 £nil has been made under
ifrs and is included in operating costs in the income statement
deferred tax asset on pension scheme deficit – under ifrs the
deferred tax asset arising on the defined benefit pension scheme deficit
must not be included within the pension scheme deficit as previously
was the case under uk gaap  accordingly a deferred tax asset
of £67m 1 january 2004 £57m has been reclassified from retirement
benefit scheme obligations to deferred tax assets in the balance sheet
there was no impact on the income statement
current tax – the 2004 current tax debtor and creditor have been
restated to better reflect the 2005 current tax debtor and creditor
the debtors and creditors of companies forming local tax groupings
have now been netted off to give a net debtor or creditor for the
relevant jurisdiction the reclassification at 31 december 2004 was
a decrease in tax recoverable and a corresponding increase in current
tax payable of £146m
other tax adjustments – the nontax ifrs adjustments outlined below
have been tax effected as at 31 december 2004 the impact on the
balance sheet at 31 december 2004 was an increase in net assets of
£11m 1 january 2004 £10m the impact on the tax charge in the
income statement in the year ended 31 december 2004 was a credit
of £01m
b revenue recognition
ias 18 revenue is similar to the uk gaap treatment for revenue
recognition in many respects although it contains specific additional
guidance such as on accounting for contracts that include installation
elements following a review of existing policies this gives rise to some
subtle differences in the timing of accounting for certain transactions
the net deferral of revenue and associated costs in the balance sheet
at 31 december 2004 was £23m 1 january 2004 £21m of this 
deferral £03m 1 january 2004 £02m reduces inventory £01m
1 january 2004 £02m increases trade and other receivables and
£21m 1 january 2004 £21m is included within other payables in the
income statement at 31 december 2004 this movement was recognised
as a reduction in turnover of £01m and an increase in costs of £01m
c employee benefits
pensions – spectris adopted the uk gaap standard frs 17 retirement
benefits in 2001 and therefore the adoption of ias 19 pensions and
other postretirement benefits does not result in significant adjustments
for the accounting for pensions the group will continue to recognise
immediately any variations in the scheme deficit or surplus in full in a
statement of recognised income and expense outside of the income
statement as permitted by ias 19
ias 1 presentation of financial statements requires that items of income
and expense are not presented on a net basis in the income statement
where no legal right of setoff exists as a result of this the finance costs
associated with the retirement benefit scheme have been restated on
a gross basis on the face of the income statement this has the effect
of increasing financial income at 31 december 2004 by £37m and
increasing financial costs by £37m there is no overall impact on the
result for the year to 31 december 2004
holiday pay – ias 19 requires shortterm accumulating benefits such as
holiday pay entitlement and sick pay to be accrued over the period in
which the entitlement is earned the additional liability in the balance
sheet at 31 december 2004 is £11m 1 january 2004 £11m there was
no impact on the income statement for the year to 31 december 2004
d dividends
ias 10 events after the balance sheet date requires that dividends
declared after the balance sheet date should not be recognised as a
liability at that balance sheet date as the liability does not represent a
present obligation as defined by ias 37 provisions contingent liabilities
and contingent assets under ifrs dividends are shown as a deduction
from reserves therefore the income statement no longer shows the
deduction of dividends the balance sheet adjustment at 31 december
2004 was a reduction in liabilities of £124m 1 january 2004 £112m 
e intangible assets
ias 38 intangible assets requires that goodwill is not amortised instead it
is subject to an annual impairment review as the group has elected not
to apply ifrs 3 business combinations retrospectively to acquisitions prior
to 1 january 2004 the uk gaap goodwill balance at 31 december 2003
£2264m has been included in the transitional ifrs balance sheet and is
no longer amortised the goodwill amortisation in the year to
31 december 2004 of £130m under uk gaap has been reversed
resulting in a reduction in operating costs of £130m the related
exchange adjustment associated with the reversal of amortisation
increased goodwill by a further £05m 1 january 2004 £nil
the group made four bolton acquisitions of businesses during 2004
these acquisitions included the purchase of finitelived intangible
assets not previously recognised under uk gaap under ifrs these
intangible assets are reclassified out of goodwill and amortised over
their useful economic lives the reclassified intangible assets are being
amortised over various periods not exceeding five years depending
on their nature the corresponding amortisation charge for the year
to 31 december 2004 was £12m included within operating costs
the balance sheet reclassification of goodwill to intangibles arising
from 2004 acquisitions as at 31 december 2004 was £58m
notes to the accounts continued
spectris 3276  3406  918 pm  page 68 spectris plc annual report and accounts 2005   69
f sharebased payments
ifrs 2 sharebased payments requires that an expense for share options
granted be recognised in the financial statements based on their fair
value at the date of grant this expense is recognised over the vesting
period of the options the charge to the income statement for the year
to 31 december 2004 was £04m included within operating costs as
this transaction is settled in equity there is a net nil effect on the
balance sheet
g provisions
under ias 1 presentation of financial statements the group is required
to present balance sheet amounts according to whether the item is
current or noncurrent under uk gaap  provisions were not split
between amounts due in less than one year and amounts due in more
than one year accordingly the £95m of provisions under uk gaap
at 31 december 2004 have been reclassified so that £70m is classified
as a current liability and £25m is classified as a noncurrent liability
h trade and other payables
a reclassification of £43m from current liabilities to noncurrent
liabilities has been made at 31 december 2004 to better reflect the
nature of certain amounts there is no impact on the income statement
explanation of material movements to the cash flow
statement for 2004
there is no overall impact on the movement in cash and cash
equivalents at 31 december 2004 within the cash flow statement
there are reclassifications between captions for the employee benefit
trust and corporation tax movements of £02m in the employee
benefit trust were previously categorised within capital expenditure
under ifrs they are now included within financing corporation tax
paid of £77m is reclassified from its own subheading under uk gaap
to within ‘cash flows from operating activities’ under ifrs 
spectris 3276  3406  918 pm  page 69 70 spectris plc annual report and accounts 2005
company balance sheet
2005 2004
restated
notes £m £m
fixed assets
tangible fixed assets 39 01 01
fixed asset investments 40 3312 2856
3313 2857
current assets
debtors 41 3940 4189
cash at bank 327 –
4267 4189
creditors due within one year
shortterm borrowing 42 580 04
other creditors 42 2432 2160
3012 2164
net current assets 1255 2025
total assets less current liabilities 4568 4882
creditors due after more than one year
medium and longterm borrowing 43 1183 1902
derivative financial instruments 44 247 –
1430 1902
provisions for liabilities and charges 45 09 11
net assets 3129 2969
capital and reserves
called up share capital 46 62 62
share premium account 47 2291 2278
merger reserve 47 31 31
capital redemption reserve 47 03 03
special reserve 47 341 341
profit and loss account 47 401 254
equity shareholders’ funds 3129 2969
restated for the adoption of frs 21 events after the balance sheet date as described in note 37 the adoption of frs 26 financial instruments
measurement has not been applied retrospectively and therefore does not result in a restatement of 2004 comparatives
the financial statements on pages 70 to 76 were approved by the board of directors on 7 march 2006 and were signed on its behalf by
steve hare
director
spectris 3276  3406  918 pm  page 70 spectris plc annual report and accounts 2005   71
notes to the company’s accounts
37 accounting policies
the separate financial statements of the company are presented as
required by the companies act 1985 as permitted by that act the
separate financial statements have been prepared in accordance with
applicable accounting standards in the united kingdom in accordance
with the exemption provided by section 230 of the companies act
1985 the company has not presented its own profit and loss account
basis of accounting
the accounts are prepared on the historical cost basis except that
derivative financial instruments are stated at fair value as described in
the change in accounting policy paragraph below the accounts reflect
the adoption of frs 20 sharebased payments frs 21 events after the
balance sheet date frs 23 the effects of changes in foreign exchange
rates frs 25 financial instruments disclosure and presentation frs 26
financial instruments recognition and measurement and frs 28
corresponding amounts as described further below
changes in accounting policy
sharebased payments
the company has adopted frs 20 sharebased payments from
1 january 2005 there was no impact on the balance sheet at 
1 january 2005
the fair value of employee share option grants is calculated at grant
date the resulting cost is charged to the profit and loss account over the
vesting period of the plans the value of the charge is adjusted to reflect
expected and actual levels of options that vest except where forfeiture is
only due to share prices not achieving the threshold for vesting
events after the balance sheet date
the company has adopted frs 21 events after the balance sheet date
from 1 january 2005 this means that dividends are now recognised
in the period when they are declared the balance sheet adjustment
at 31 december 2004 was a reduction in liabilities of £124m
31 december 2003 £112m
the effects of changes in foreign exchange rates
the company has adopted frs 23 the effects of changes in foreign
exchange rates from 1 january 2005 there was no impact on the
financial statements
corresponding amounts
the company has adopted frs 28 corresponding amounts from
1 january 2005 this standard contains provisions regarding the content
of comparative information and accordingly the only changes to the
financial statements arising from this standard are the provision of prior
year information where this has not been required
derivative financial instruments
the company uses derivative financial instruments to hedge the
group’s exposure to foreign exchange and interest rate risks arising
from operating and financing activities in accordance with its treasury
policy it does not hold or use derivative financial instruments for
trading or speculative purposes
following the adoption of frs 26 financial instruments
measurement the company has changed its accounting policies in
respect of derivative financial instruments with effect from 1 january
2005 in accordance with frs 26 the comparative results for the year
ended 31 december 2004 have not been restated
crosscurrency interest rate swaps
the company takes advantage of crosscurrency interest rate swaps for
some of its us denominated private placement borrowings the swaps
have the effect of converting fixed rate us borrowings into fixed rate
eurodenominated borrowings 
until 31 december 2004 under uk gaap  the combined instruments
were accounted for as if they were straightforward fixed interest euro
borrowings the effect of this accounting policy was that the currency
portion of the swaps was effectively recognised within the carrying
value of borrowings on the balance sheet and the interest portion of
the swap was not recognised on the balance sheet any exchange gain
or loss on retranslation of the borrowings was recognised in the profit
and loss account the fair value of the entire crosscurrency swap was
disclosed in the accounts
from adoption of frs 26 the underlying us borrowings are required
to be presented separately in the balance sheet from the crosscurrency
interest rate swaps in addition the fair value of the crosscurrency
interest rate swap is required to be recognised in full on the balance
sheet all changes in value are recognised in the profit and loss account
the financial impact of this change in accounting policy is identical
to that set out in note 21 of the group’s consolidated financial
statements prepared under ifrs except that the company does not
seek to hedge account for any changes in fair value of the financial
instruments and consequently all changes in fair value are recognised
in the company’s profit and loss account
average rate options
average rate options are transacted to provide a hedge against the
group’s overall exposure to changes in foreign currency exchange rates
in the comparative period ended 31 december 2004 the value of
these instruments is not recognised in the balance sheet or profit and
loss account until the accounting period the instruments were intended
to cover as a hedge from adoption of frs 26 as at 1 january 2005
these instruments are carried at fair value on the balance sheet with any
gain or loss being recognised in the profit and loss account
foreign currencies
transactions in foreign currencies are translated at the foreign exchange
rate ruling at the date of the transaction monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
translated at the exchange rate ruling at that date with any exchange
differences arising on retranslation being recognised in the profit and
loss account nonmonetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction
tangible fixed assets and depreciation
tangible fixed assets are stated at historic cost depreciation is calculated
to write off the difference between the cost or valuation of fixed assets
and their residual value over their estimated useful lives on a straight
line basis at the following rates per annum
leasehold improvements 5 years
office equipment 3 years
spectris 3276  3406  918 pm  page 71 72 spectris plc annual report and accounts 2005
notes to the company’s accounts continued
37 accounting policies continued
fixed asset investments
investments in subsidiaries are stated at cost less where appropriate
provisions for impairment
trade and other receivables
trade and other receivables are stated at their cost as reduced by
appropriate allowances for estimated irrecoverable amounts
trade and other payables
trade and other payables are stated at cost
taxation
the charge for taxation is based on the profit for the year and takes
into account taxation deferred because of timing differences between
the treatment of certain items for taxation and accounting purposes
deferred tax is recognised without discounting in respect of all timing
differences between the treatment of certain items for taxation and
accounting purposes which have arisen but not reversed by the balance
sheet date except as otherwise required by frs 19
leasing
annual payments under operating leases are charged to the profit and
loss account on an accruals basis
postretirement benefits
the company participates in group operated defined contribution and
defined benefit pension schemes the assets of the schemes are held
separately from those of the company in independently administered
funds the company is unable to identify its share of the group defined
benefit scheme’s underlying assets and liabilities and therefore accounts
for it as a defined contribution scheme the amounts charged against
profits represent contributions payable to the schemes in respect of
the accounting period
cash flow statement
the company has not presented a separate cash flow statement in
accordance with the exemption provided by frs 1 revised as its
cash flows are included within the cash flows of the group as set
out elsewhere in this annual report
spectris 3276  3406  918 pm  page 72 spectris plc annual report and accounts 2005   73
38 employee costs
2005 2004
employee costs including directors’ remuneration £m £m
wages and salaries 35 29
social security costs 07 04
defined benefit pension plans 05 03
defined contribution pension plans 04 04
sharebased payment expense 03 04
54 44
further details of directors‘ remuneration and share options are given in note 8 to the group financial statements and in the directors’ remuneration
report on pages 26 to 29
2005 2004
number number
average number of employees 27 26
39 tangible fixed assets
leasehold office
improvements equipment total
cost £m £m £m
at 1 january 2005 03 06 09
additions – 01 01
at 31 december 2005 03 07 10
depreciation
at 1 january 2005 03 05 08
charge for the year – 01 01
at 31 december 2005 03 06 09
net book value
at 1 january 2005 and 31 december 2005 – 01 01
40 fixed asset investments
investments
in subsidiary
undertakings
cost £m
at 1 january 2005 2870
additions 588
disposals 88
at 31 december 2005 3370
provision for impairment
at 1 january 2005 14
charge for the year 58
disposals 14
at 31 december 2005 58
net book value
at 31 december 2005 3312
at 1 january 2005 2856
spectris 3276  3406  918 pm  page 73 74 spectris plc annual report and accounts 2005
41 debtors
2005 2004
amounts falling due within one year £m £m
amounts owed by group undertakings 3867 4164
other debtors 08 –
prepayments and accrued income 02 02
corporation tax 34 23
deferred tax asset 29 –
3940 4189
the deferred tax asset is attributable to accelerated capital allowances of £03m 2004 £nil and other shortterm timing differences of £26m 2004 £nil
42 creditors due within one year
2005 2004
£m £m
shortterm borrowing
unsecured loan notes 580 –
bank loans and overdraft – 04
580 04
trade creditors 01 –
amounts owed to group undertakings 2359 2114
other taxation and social security 02 –
accruals and deferred income 70 46
2432 2160
total 3012 2164
further details regarding the company‘s borrowings are set out in note 20 of the consolidated financial statements
43 creditors due after more than one year
2005 2004
£m £m
medium and longterm borrowing
unsecured loan notes 1183 1902
further details regarding the company’s borrowings are set out in note 20 of the consolidated financial statements
44 derivative financial instruments
2005 2004
£m £m
crosscurrency interest rate swaps 247 –
further details regarding the company’s crosscurrency interest rate swaps are set out in note 21 of the consolidated financial statements
45 provisions for liabilities and charges
£m
at 1 january 2005 11
transfer to creditors 02
at 31 december 2005 09
provisions represent the directors’ best estimate of settling various potential claims against the company arising in the ordinary course of business
notes to the company’s accounts continued
spectris 3276  3406  918 pm  page 74 spectris plc annual report and accounts 2005   75
46 share capital
2005 2004
11111111111111 1111111111111
number of number of
shares m £m shares m £m
authorised
ordinary shares of 5p each 2100 105 2100 105
issued and fully paid
at 1 january 1243 62 1241 62
issued for cash on exercise of share options 03 – 02 –
at 31 december 1246 62 1243 62
share options have been granted to subscribe for ordinary shares of spectris plc the adoption of frs 20 sharebased payments in the current year
has had the effect of recognising an expense in the profit and loss account for sharebased payments there is no overall impact on equity in the
restated prior year balance sheet full details of share options currently in issue including those issued during the year together with information
regarding the basis of calculation of the sharebased payment expense is contained in note 28 to the consolidated financial statements
the company recognised total expenses of £03m related to equity settled sharebased payment transactions in 2005 2004 £04m
47 reserves
share capital profit and
premium merger redemption special loss account total
account reserve reserve reserve restated restated
£m £m £m £m £m £m
at 1 january 2004 2271 31 03 341 129 2775
profit for the year –––– 287 287
dividends paid –––– 163 163
sharebased payment expense –––– 04 04
premium on issues of shares 07–––– 07
sale of own shares by employee benefit trust –––– 01 01
other –––– 04 04
at 31 december 2004 2278 31 03 341 254 2907
adoption of frs 26 financial instruments measurement –––– 41 41
at 1 january 2005 2278 31 03 341 213 2866
profit for the year –––– 259 259
dividends paid –––– 181 181
sharebased payment expense –––– 03 03
premium on issues of shares 13–––– 13
sale of own shares by employee benefit trust –––– 107 107
at 31 december 2005 2291 31 03 341 401 3067
further details of the employee benefit trust are set out in note 29 of the consolidated financial statements
the purpose of the merger reserve and capital redemption reserve is detailed in note 26 of the consolidated financial statements the special
reserve was created historically following the cancellation of an amount of share premium for the purpose of writing off goodwill the special
reserve is not distributable
spectris 3276  3406  918 pm  page 75 76 spectris plc annual report and accounts 2005
48 reconciliation of movement in equity shareholders’ funds
2005 2004
restated
£m £m
adjustment on adoption of frs 26 financial instruments measurement 41 –
profit for the year 259 287
dividends paid in the year 181 163
sharebased payment expense 03 04
issue of new share capital 13 07
sale of own shares by employee benefit trust 107 01
other – 04
net increase in equity shareholders’ funds 160 132
opening equity shareholders’ funds as adjusted by £112m and £124m 
at 1 january 2004 and 31 december 2004 respectively following adoption 
of frs 21 events after the balance sheet date 2969 2837
closing equity shareholders’ funds 3129 2969
49 pensions
certain of the company’s employees participate in the spectris pension plan a uk multiemployer defined benefit scheme further details of
the group’s scheme are contained in note 9 to the consolidated financial statements the company is unable to identify its share of the plan’s
underlying assets and liabilities and therefore accounts for the scheme as a defined contribution scheme in accordance with the schedule of
contributions in place for the spectris pension plan for the financial year ending 31 december 2005 employer contributions of 11 pa of
pensionable salaries plus £480000 pa were due the actuary certified in 2005 that this level of contributions was adequate for the purposes
of the minimum funding requirement contributions paid in that year to the spectris pension plan were £05m 2004 £05m and to defined
contribution plans were £03m 2004 £04m
50 related party disclosures
the company has taken advantage of the exemption under frs 8 related party disclosures not to disclose related party transactions
between subsidiaries
there are no material transactions with directors and other related parties of the company except those relating to remuneration and share
dealing disclosed in the remuneration report enclosed within this annual report
51 commitments
land and buildings
1111111111
2005 2004
annual commitments for operating leases expiring £m £m
after five years 02 02
at the balance sheet date the company had no capital commitments for which provision has not been made 2004 £nil
52 contingent liabilities
the company has provided crossguarantees in respect of the group indemnities to the royal bank of scotland relating to guarantees
negotiations and foreign exchange facilities of which £46m 2004 £49m was outstanding at 31 december 2005
the company has provided crossguarantees in respect of the indemnities provided by the group in the ordinary course of business 
to jp morgan chase na relating to outstanding letters of credit of which £13m 2004 £09m was outstanding at 31 december 2005
the company has provided crossguarantees in respect of the indemnities provided by the group in the ordinary course of business to abn
amro bank nv relating to outstanding trade finance facilities of which £62m 2004 £51m was outstanding at 31 december 2005
spectris plc has issued guarantees in respect of certain of its subsidiary companies’ operations in the normal course of business
notes to the company’s accounts continued
spectris 3276  3406  918 pm  page 76 financial calendar
annual general meeting 17 may 2006
record date for 2005 final dividend 2 june 2006
2005 final dividend payable 23 june 2006
2006 interim results 5 september 2006
2006 preliminary results february 2007
company secretary
r j stephens fcis
registered office
spectris plc
station road
egham
surrey
tw20 9np
england
tel 44 01784 470470
email headofficespectriscom
company registered in england no 2025003
auditors
kpmg audit plc
bankers
royal bank of scotland plc
solicitors
ashurst 
brokers
merrill lynch
corporate finance advisers
merrill lynch
shareholder relations advisers
makinson cowell
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© spectris plc 2006
spectris plc annual report and accounts 2005   77
spectris cover web  11406  108 am  page c


Summary:
 8 spectris plc annual report and accounts 2005
chairman’s statement
“the company achieved good progress in 2005 with sales
operating profit and margins all ahead actions to restrain
overheads restore profitability in underperforming
businesses improve margins and generate cash were all
positive levels of demand in the first two months of the
year provide encouragement that the company will show
further good progress in 2006 ”
overview
as indicated in the trading update in january sales in 2005
increased by 7 with all three sectors reporting growth over
the previous year and orders in excess of sales profits earnings
per share and cash conversion also moved ahead strongly
growth in asia in particular continued to be vigorous
actions taken to improve margins involving overhead
containment reflected in an unchanged year end headcount
and the elimination of some lower margin sales began to show
benefits operating margins improved from 105 to 112
sales increased by 7 to £6559 million 2004
£6141 million operating profit increased by 14 to 
£735 million 2004 £646 million

 earnings per share
increased from 316p to 362p on a tax rate of 27 2004 24
the effects of changes in exchange rates were negligible
cash conversion was excellent with 107 of operating profit
converted into cash as actions to generate cash on a more
consistent basis took effect net debt at the year end was 
£1199 million compared with £1589 million twelve months
earlier interest costs were £126 million giving an annualised
interest cover of 58 times
the board proposes to pay a final dividend of 112p which
combined with the interim dividend gives a total of 158p
2004 145p an increase of 9 the dividend will be paid on
23 june 2006 to shareholders on the register at 2 june 2006
board changes
i am pleased to welcome john o’higgins who joined the
board in january 2006 as chief executive john was previously
with honeywell inc the us aerospace and technology products
multinational latterly as president of honeywell automation
and control solutions based in shanghai john’s educational
qualifications track record within the instrumentation and
controls industry and business experience equip him well to
lead the company and drive its development i am also pleased
to welcome john warren who joins the board from 7 march as
a nonexecutive director nonexecutive directors martin lamb
and professor leo murray will be standing down at the agm
and i should like to thank them for their guidance and
contribution to the development of the company in recent years
john poulter
chairman
unless otherwise stated all profit and earnings figures referred to are adjusted 
measures see explanatory note on page 1
spectris 0117  3406  856 pm  page 8