In-line Instrumentation provides process analytical measurement, asset monitoring and on-line controls for both primary processing and the converting industries. Our products and applications provide precision measurement in challenging operating environments, ensuring process quality, asset uptime, safety, and improved yield. The operating companies in this segment are Beta LaserMike, Brüel & Kjær Vibro, BTG Group, Fusion UV Systems, NDC Infrared Engineering and Servomex.

The growing requirement to improve process manufacturing productivity and drive down costs in an increasingly competitive global environment has led to greater demand for process instrumentation. End user markets are facilities with critical plant assets such as paper mills and converting plants where downtime and lost production are costly. Environmental issues are also key drivers for process instrumentation in these industries. The oil and gas industry continues to focus on enhancing productivity and is seeing growing demand from the industrialising economies. Increasing power costs have led energy-intensive industries such as pulp and paper to install new instrumentation as they seek production efficiencies. Investment in infrastructure is also driving demand for process control solutions worldwide. The growth in demand for renewable resources, for example alternative energy sources such as hydro-electric and wind power, as well as the need to meet regulations on reducing emissions, has led to an increase in demand for process control solutions. Safety is also a priority in these industries, where it is a requirement to monitor gas emissions and other harmful substances in order to comply with increased health and safety regulation.

Sales in In-line Instrumentation increased by 17% (5% at constant currencies) to £233.3 million. Operating profit increased by 23% to £42.7 million and operating margins increased by 1pp to 18.3%. The favourable effects of foreign exchange rates and R&D expenditure growing at a slower rate than sales contributed to the increase in operating margins.

The high price of oil in the first half of 2008 led to rapid development of natural gas production and transportation and process efficiencies in existing plants, resulting in good growth for Servomex in this sector, particularly in the Americas. The company also saw strong growth in the industrial gas business and in June signed a global supply agreement with Air Liquide to supply industrial gas analysers to their operations worldwide. The aftermarket business is also showing good growth as customers look to outsource their service and maintenance work. In November, Servomex opened a new technical centre in Crowborough, England, merging the production, management and R&D facilities under one roof for the first time. In the last quarter, the company launched two new gas analysers: the SERVOTOUGH-Oxy and SERVOPRO-MultiExact, which set new industry benchmarks in flexible, accurate and reliable gas measurement. Brüel & Kjær Vibro continued to see good demand for its condition monitoring products for oil and gas installations and for remote monitoring systems for wind turbines.

In the pulp and paper industry, although some capacity was taken out of the industry over the summer, the falling price of energy in the second half of the year helped paper manufacturers to improve margins, however temporary shutdowns were implemented at many mills at the end of the year to reduce inventories. Certain grades of paper have remained unaffected, with the market for tissue products growing in all regions of the world. This benefited BTG who saw increased demand for high performance creping blades as a replacement for traditional steel blades. In addition, the company secured an order to supply its new blades to a major tissue manufacturer for production of a new product. During the year BTG launched a number of new products which help to reduce pulp and papermaking costs, including a drainage rate transmitter which provides improved control during refining of the pulp and reduces energy consumption.

Customer investment in alternative energy sources continued to create demand for products from NDC and Fusion. NDC received orders for the on-line measurement of proprietary coatings used in solar panel production and Fusion also saw increasing demand for its UV curing equipment from the solar energy market. Fusion's equipment is used for the curing of adhesives, layers and coatings on a variety of solar energy-generating platforms.

Demand from the converting industry was strong in the first half of the year but orders slowed towards the end of the year as the difficult economic environment became evident. At NDC, speciality markets such as lithium ion battery production continue to generate good demand. The company introduced a new on-line web measurement and control system, the Pro.Net TDI, which features a 'Total Distributed Intelligence' architecture, breaking down complex gauging tasks to their simplest components. The system uses operator interfaces supplied by another Spectris operating company, Red Lion Controls. Red Lion's operator interfaces are also being used on NDC's newly-launched 710e series of ethernet-enabled on-line gauging systems for process control. These systems measure critical parameters such as coat weight and moisture in the converting and papermaking industries, as well as moisture, fat and protein for a wide range of applications in the food industry. Beta LaserMike saw good sales of its products to the metals industry, which is now the company's second largest market, after cable, with increasing sales into new applications rather than cold mill operations. The company also launched the LaserSpeed 4000 gauge which provides non-contact length and speed measurement in non-metals applications such as plastics and film.

Demand for optical fibre continued to grow, driven by oceanic undersea cables and for fibre-to-the-home applications, particularly in the Asia Pacific region. This has resulted in fibre producers recommissioning 'mothballed' production equipment and/or adding new equipment to increase volumes and production speeds. This has benefited Beta LaserMike, who supply a variety of process control systems to address the different stages in the manufacture and quality control of optical fibre, and Fusion, whose equipment is used to cure the barrier coatings that are required to protect the glass fibre prior to its incorporation into the transmission cables.

Customer investment in the energy market is expected to continue, despite the falling oil price. The focus on alternative energy sources continues, in particular the use of wind turbines, where Spectris has a growing presence in both development of new materials for the turbine structures and in remote monitoring of power generation. The outlook for the pulp and paper market remains uncertain in the short term, although demand for tissue is expected to continue to grow. The converting industry is slowing in some areas, particularly in China, but speciality markets in converting and high technology, especially lithium ion battery production, are still doing well in this region.