Overview
Test and Measurement supplies test, measurement and analysis equipment and software for product design optimisation and manufacturing control, principally to the aerospace, automotive and consumer electronics industries. For customers in the automotive and aerospace industries, our products and applications help them to design and test new products whilst reducing time to market. In consumer electronics, our equipment and software enable customers to refine the performance and accuracy of their products. Further applications are in the environmental monitoring market, where the desire for higher standards of community comfort drives increasing demand. The operating companies in this segment are Brüel & Kjær Sound & Vibration and HBM.

Market drivers
Product testing and quality control are the principal drivers of demand in the test and measurement sector. Prototype testing is a costly, but unavoidable, stage in the development of many consumer durable products. R&D engineers must ensure not only that consumer requirements are met within shorter development cycle times, but also compliance with ever-increasing environmental, safety and efficiency targets. In addition to product development, increasing regulation on noise levels (for example the EU directives on noise regulation for airports, cities and workplaces) is also driving demand for our test and measurement applications.

Segment performance
Sales in Test and Measurement increased by 5% (organic decline of 22% at constant currencies) to £267.1 million, with the recent acquisitions contributing £42.0 million in sales. The decline in the automotive industry was the principal driver behind the decrease in organic revenue. As a result of the lower sales and the fact that a significant portion of the restructuring and post-acquisition integration activities were incurred in this segment (£9.7 million), as sales channels and facilities were consolidated, operating profit was down by 95% to £1.4 million. Operating margins were 0.5% compared with 11.7% in the prior year period. Around half of the decline in operating margins relates to the dramatic reduction in volume, with the majority of the remainder attributable to the cost of the restructuring and post-acquisition integration activities referred to above.

Demand from the automotive industry declined during 2009, as customers cancelled or delayed spending on research and development projects. Nevertheless, activity was more resilient from automotive manufacturers in emerging markets, for example India and China, and from companies developing hybrid vehicles. Both the LAN-XI hardware platform and the new PULSE Reflex noise analysis post-processing software generated significant interest among automotive and aerospace customers alike, with a number of orders received for the combined system. Following the success of HBM's QuantumX system, launched with BMW in 2008, this system has now attracted significant interest from other vehicle manufacturers and also from customers involved in railway infrastructure services as well as the marine, aerospace and electrical test markets. Demand also continued to grow for Brüel & Kjær’s Noise Vibration Harshness Simulator, with orders from Ford and Nissan. Ford is the first vehicle manufacturer in North America to use the simulator for vehicle design optimisation and considers it to be a key technology which helps the company to keep its innovative edge in vehicle development.

In the aerospace industry, the LDS vibration test systems business saw good demand for satellite applications. These powerful shakers are designed for the most demanding vibration testing and are built for testing large payloads such as satellites and aerospace assemblies with masses of several tonnes.

Demand for our environmental noise monitoring services, which include the recently-acquired Lochard airport noise monitoring systems, was robust, with a number of orders secured from airports around the world. In July, Los Angeles World Airports launched a new online flight tracking and aircraft noise monitoring system using Lochard’s WebTrak software, which allows them to manage better relations with their neighbouring communities. In November, Brüel & Kjær extended the airport noise monitoring concept to urban noise applications with the release of a newly-developed system, Sentinel, aimed at businesses which need to conform to local community noise directives.

Outlook
2009 was a year of consolidation and integration of the acquisitions in this segment. With the restructuring now substantially complete, we will see the benefits of this during 2010. Although we remain cautious about the prospects for the automotive industry, we do expect to see some recovery in spending on research and development in this market. The market for urban and airport noise monitoring is expected to continue to grow.