TIDMOXIG
RNS Number : 7729S
Oxford Instruments PLC
12 November 2013
Tuesday 12 November 2013
Oxford Instruments plc
Announcement of Half Year Results for 2013/2014
Oxford Instruments plc, a leading provider of high technology
tools and systems for industry and research, today announces its
Half Year Results for the six months to 30 September 2013.
Highlights:
-- First half orders of GBP168.0 million (2012: GBP169.8 million)
-- First half revenue of GBP166.3 million (2012: GBP170.8 million)
-- Marked improvement in trading conditions in the second quarter
-- Adjusted gross margin of 45.0% (2012: 44.6%)
-- Adjusted profit before tax* of GBP20.6 million (2012: GBP22.5 million)
-- Reported EPS up 16.0% at 23.2 pence (2012: 20.0 pence)
-- Adjusted EPS down 13.3% at 28.6 pence (2012: 33.0 pence)
-- Focused R&D and strong new product pipeline will underpin organic growth
-- Acquisition of RMG Technology Limited
-- Discussions with Andor Technology plc
-- Interim dividend increased by 10.2% to 3.36p per share (2012: 3.05p)
*Adjusted numbers are stated to give a better understanding of
the underlying business. Details of adjusting items can be found in
Note 2.
Jonathan Flint, Chief Executive of Oxford Instruments plc,
said:
"The second quarter has shown a significant strengthening in
both orders and revenues. This improvement in trading, supported by
the strength of new product introductions and our actions to
enhance operating efficiencies, should enable us to deliver an
improved performance in the second half. Looking forward, the
application of both our existing and new techniques to the Nano-Bio
field offers us the opportunity for further sustained profitable
growth".
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Jonathan Flint, Chief Executive
Kevin Boyd, Group Finance Director
MHP Communications Tel: 020 3128 8100
Rachel Hirst
Rory King
Half Year Statement
Introduction
This statement addresses Oxford Instruments' financial and
operational performance for the half year to 30 September 2013. It
also includes commentary on the planned strategic direction for the
Oxford Instruments Group, beyond the end of the current mid-term
plan which is due to be completed at the end of this financial
year, in March 2014.
Half Year Overview
The Group saw a marked improvement in trading conditions as the
first half of the year progressed. As previously reported, the year
started with slow trading during April and May, followed by a
better performance in June. This strengthening in demand has
continued with a sustained recovery during the second quarter of
our financial year. Second quarter revenue was above the same
period in the prior year, offsetting the fall seen in the first
quarter. Orders reflected a similar pattern. The Group saw an
increase in orders year-on-year during quarter two, offsetting the
decline seen during the first quarter. The book to bill ratio
improved with total orders for the first half year steady at
GBP168.0 million (2012: GBP169.8 million).
Total revenue in the first half was GBP166.3 million (2012:
GBP170.8 million). Excluding the effects of the ITER wire and
Austin Scientific GTAT contracts which were largely completed in
the prior year, we saw underlying growth. As a result of the
reduced revenues, adjusted operating profit fell GBP1.6 million to
GBP22.0 million giving an adjusted operating margin of 13.2% (2012:
13.8%). Operating margins improved in the Industrial Products and
Service sectors but fell in Nanotechnology Tools due to reduced
revenues into the High Brightness LED market and the addition of
lower margins from the Asylum Research acquisition. We believe that
the HBLED market will recover in the next 12 months and margins in
Asylum Research will improve as sales volumes grow.
At the time of our AGM Statement in September our order rate was
ahead of the previous year in Asia and Europe but behind in North
America. At the end of the half year, run rates are still ahead in
Asia and Europe and much improved in North America.
We continue to invest in our customer focused R&D programme
with sustained momentum in new product introductions. Our strong
brand and technological leadership underpinned our success in
maintaining pricing and continued to strengthen our competitive
position. We acted quickly to address the softness in the first
quarter by focusing on operational cost control while protecting
R&D programmes.
As announced today, we are in discussions with the Board of
Andor Technology plc (Andor) in relation to an offer to acquire
Andor for 500 pence per share in cash (c. GBP166 million) funded
from debt and current cash. This is covered in more detail in the
strategy section below.
We also announce today the acquisition of RMG Technology (RMG),
completed on 8 November 2013. RMG is a small UK business, formed in
2000, which brings a unique laser technology to our Industrial
Analysis business. This is covered in the Industrial Products
review below. This acquisition will not have a material impact on
performance in the current year.
For the half year just ended, the Directors are proposing an
interim dividend of 3.36 pence per share (2012: 3.05 pence), a
10.2% increase payable on 7 April 2014 to shareholders who are on
the register on 7 March 2014.
Strategy
In June 2011, we defined a medium term strategic objective for
the Group in which we sought to achieve a revenue compound annual
growth rate of 14% per year and a net return on sales of 14% by the
end of the 2014 financial year. This is known as the 14 Cubed
Plan.
The strong performance of the Group over the first two years of
the plan, driven by our technological advantage and exposure to
growing markets and geographies, meant that we hit the 14% return
on sales target a year early in March 2013. The revenue growth rate
in the first two years averaged 15.6%, in excess of the 14%
required. In the first half of the current year, growth was a
compound 13.7% over the same period in 2011, our base year.
With this strong foundation in place, now is the time to look
forward to the next stage of the Group's strategic evolution. We
believe the current trend towards convergence of the sciences
provides a unique opportunity for Oxford Instruments to access a
new set of customers who want to work at the atomic and molecular
level. Areas like genomics and DNA modelling hold enormous
potential for researchers worldwide. The mechanisms of protein
folding and enzyme replication, for example, are amenable to
research using tools at the nano scale. Initially, our
technological focus will be on analysis, observing biological
mechanisms in their natural state. Whilst many of our existing
analytical techniques can be used in life sciences, there is a
difference. Biological samples are often best studied in their
natural, liquid environments, rather than in vacuum environments,
as is generally the case in the analysis of inorganic samples. We
call the analysis and manipulation of organic molecules the
Nano-Bio arena.
We intend to build on our world renowned reputation in the
physical sciences with a complementary capability using related
techniques to become a leading provider of tools in the Nano-Bio
area. The acquisition of Asylum Research in 2012 gave us the
capability to produce atomic force microscopes that are used in
both the physical and life sciences markets.
We are looking at acquisitions that share routes to market with
Oxford Instruments and offer opportunities for growth in the
Nano-Bio market. As announced this morning, one avenue we are
exploring is through the potential acquisition of Andor, a UK based
high-technology company specialising in the manufacture of high-end
scientific cameras, microscope systems and analytical software for
the material and life science industries. Andor's technology would
extend our capability into the optical domain, which is the primary
technology used for analysing biological samples at the nano
scale.
Nanotechnology applied to both life sciences and elsewhere will
continue to offer long term structural growth. Our strategy will
continue to focus on delivering organic growth derived from our
existing nanotechnology capabilities in materials science,
augmented with a new range of techniques in the Nano-Bio field. We
are committed to driving further margin improvement by building on
our market leading position and continuing to focus on efficiency
and operational excellence. We will continue our investment in
research and product development with a particular emphasis on the
rapidly growing emerging markets. We will also continue to target
acquisitions that further strengthen our position in our chosen
markets.
Half Year Operational Review
Nanotechnology Tools Sector
2013 2012
GBPm GBPm
----------------- ----
Revenue 77.1 80.9
Operating profit 7.4 10.3
----------------- ---- ----
The Nanotechnology Tools sector produces our highest technology
products. It serves research and industrial customers in both the
public and private sectors and represents 46% of Group revenue. The
sector comprises three businesses: NanoAnalysis, which includes
Omniprobe and Asylum Research, Plasma Technology and Omicron
NanoScience.
Overall revenue fell by 4% in the half. However, in line with
the overall Group trend, performance in the second quarter was much
improved with growth of 10% over the same period last year.
Operating margins reduced from 12.7% to 9.6% primarily as a result
of the decline in the HBLED market noted above and the inclusion of
the Asylum Research acquisition. This is performing exactly on plan
and we should see increasing margins from this business in
future.
Our NanoAnalysis business produces leading-edge tools that
enable materials characterisation and sample manipulation at the
nanometre scale. Its products include detectors used on electron
microscopes and ion-beam systems in academic institutions and
industrial applications including semiconductors, renewable energy,
mining, metallurgy and forensics. Sales of our new material
characterisation system, comprising our latest generation
nanoanalysis detector hardware and multi-tasking AZtec(R) software,
have been strong. A new software product was introduced for the
characterisation and analysis of photovoltaic cells. AZtec
LayerProbe(TM) is used by customers in the energy market to
determine the correct thickness of solar cells to obtain maximum
efficiency and reduce costs at the same time. Asylum Research,
acquired in December 2012, gives us entry to the Nano-Bio market.
It continues to contribute to the growth of the business through
access to new microscopy technologies that operate in ambient
conditions independently from electron microscopes. Successful
marketing of its atomic force microscopes in Asia has resulted in
improved orders from demanding markets such as Japan.
Our Plasma Technology business produces equipment for
nanofabrication. This business has seen a general slowdown in its
markets primarily due to softness in the HBLED sector. However, we
maintain a strong technological position in this market and we are
well placed to benefit when demand picks up, underpinned by our
pipeline of innovative new products. Increased interest in two
dimensional materials such as graphene, molybdenum disulphide and
boron nitride is driving increased interest in our plasma
technology solutions and has led us to develop a centre of
excellence to exploit worldwide investment in this nascent
area.
Our Omicron NanoScience business is the market and technology
leader for analytical measurement techniques in high vacuum, low
temperature and high magnetic fields, supplying the fundamental and
applied research communities. Its technologies are used in a broad
range of application-specific solutions in advanced materials,
advanced computing, sustainable energy, life science and security.
This business is made up of the former NanoScience and Omicron
Nanotechnology businesses. We have experienced difficult trading
conditions in some markets with sequestration in the USA having had
a significant effect. Demand has shown some tentative recovery in
the last two months. Sales of the next generation dilution
refrigerator for quantum processing applications, TritonULT, have
grown 50% year on year in the first half. Deliveries began of our
largest ever nanofabrication system to Jülich University in
Germany. This multi-technique system includes an Atomic Layer
Deposition system from Plasma Technology, a cross business
collaboration model we are developing within the Nanotechnology
Tools sector.
Industrial Products Sector
2013 2012
GBPm GBPm
----------------- ----
Revenue 58.0 61.5
Operating profit 8.1 7.5
----------------- ---- ----
Our Industrial Products sector supplies analytical systems for
quality control, environmental and compliance testing and
components for industry and research. It represents 35% of Group
revenue. The businesses which make up this sector are grouped into
Industrial Analysis and Industrial Components. The Industrial
Analysis business comprises X-ray Fluorescence, Optical Emission
Spectroscopy and Magnetic Resonance. Industrial Components
comprises Superconducting Wire, Austin Scientific and X-Ray
Technology.
Revenue in the first half was 6% down on the prior year.
Excluding the two major contracts discussed above, revenue grew by
5%. Operating profits grew by 8% and operating margins increased to
14.0% (2012: 12.2%) due to a better product mix and good cost
control.
Our Industrial Analysis business supplies high quality
instruments for materials identification, quality assurance,
elemental analysis, thickness gauging and quality control
applications. Our customers span global industries including
metals, steel, recycling, agriculture, automotive, textiles,
petrochemicals and construction. The decline in steel markets that
we saw last year has reversed, particularly in China, and sales of
our portable and hand-held analysers have been strong. We have
launched the world's first portable optical emission spectrometer.
PMI-MASTER Smart enables the analysis of metals in inaccessible
environments such as high platforms and towers in chemical and oil
plants. A new magnetic resonance analyser Pulsar(TM) was introduced
earlier this year for rapid, low cost analysis of the fatty acid
composition of food samples. In an exclusive collaboration with the
UK Institute of Food Research, we have developed improved methods
of testing meat in the food chain and are able to differentiate
between beef, lamb, pork and horsemeat, providing new tools to
tackle the problems of food fraud and contamination.
The acquisition of RMG Technology, which we have announced
today, will strengthen our ability to offer customers in the
recycling industry an unprecedented choice of analytical
techniques, tailored to their specific requirements. RMG's
innovative Laser Induced Breakdown Spectrography (LIBS) will
provide differentiation in a growing sector and is complementary to
our existing X-ray Fluorescence and Optical Emission technologies,
allowing us to expand and develop our share of the world recycling
market in the medium term.
In Industrial Components, increasing demand for next generation,
higher magnetic field MRI scanners continues to drive growth in our
Superconducting Wire business. We have installed new capital
equipment which will improve the efficiency of our wire production
facility. Our Austin Scientific business has won an order from a
major semiconductor equipment manufacturer, mitigating the impact
of challenging US market conditions. Both our Superconducting Wire
and Austin businesses have faced tough comparators with last year
following the successful completion of major contracts, as
previously reported. Our X-Ray Technology business has performed
well, particularly in sales to China.
Service Sector
2013 2012
GBPm GBPm
----------------- ----
Revenue 32.3 29.3
Operating profit 6.5 5.8
----------------- ---- ----
Our Service business comprises our service, support, training,
refurbishment, consumables and accessories elements of our business
and represents 19% of Group revenue. It consists of the
refurbishment, servicing and sale of CT and MRI medical scanners in
North America and Asia, and the service elements of the
Nanotechnology Tools and Industrial Products sectors.
Revenue grew by 10% and profits by 12%. Operating profit margins
remained strong at 20.1% (2012: 19.8%).
The aftermarket revenues associated with our two manufacturing
sectors are split into three main revenue streams: service
contracts (customers purchase unlimited support for a fixed
period); billable service (customers are billed for time and
materials); and the sale of spare parts and consumables. Service
orders and sales were ahead of last year across all revenue
streams, particularly for service contracts and spares. We continue
to invest in the development of our service capability
internationally, especially in emerging and fast growing
markets.
The CT and MR Service business continues to win long term
service contracts helped by new opportunities in the US veterinary
market.
Financial Review
Comparative figures have been restated as required by IAS 19
(revised). Details of this restatement can be found in note 1 to
the accounts.
After a slow start in the first two months of the year, order
intake picked up and ended the half year at GBP168.0 million (2012:
GBP169.8 million) with the order book for future deliveries
standing at GBP123.0 million.
Revenue in the half year fell by 2.6% to GBP166.3 million.
Acquisitions contributed GBP7.3 million in the period. Foreign
currency exchange rate movements increased sales by GBP1.8 million
resulting in a constant currency organic decline in revenue of
8.0%.
Improved mix, favourable foreign exchange rates and acquisitions
helped raise the adjusted gross margin from 44.6% to 45.0%. In
response to the downturn in revenue there was an increased focus on
costs. As a result, constant currency operating expenses, excluding
acquisitions, fell by GBP5.2 million.
Adjusted operating profit reduced by GBP1.6 million to GBP22.0
million, giving an adjusted operating profit margin of 13.2% (2012:
13.8%). Net bank interest reduced by GBP0.1 million to a charge of
GBP0.2 million. Net interest on the pension fund increased GBP0.4
million to GBP1.2 million due to the increased pension deficit at
the end of March 2013. As a result, adjusted profit before tax fell
GBP1.9 million to GBP20.6 million.
The ability to utilise brought forward tax losses in the UK has
kept the adjusted tax rate relatively low at 21% (2012: 18%) which
leads to adjusted basic earnings per share (EPS) of 28.6 pence
(2012: 33.0 pence). Reported EPS was 23.2 pence (2012: 20.0 pence).
The difference is due to the items detailed in note 2, primarily
mark to market movements of derivative financial instruments,
acquisition costs, amortisation of acquired intangible assets and
the utilisation of a large deferred tax asset the recognition of
which was excluded from adjusted earnings in 2011.
Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) in the period were GBP26.1 million (2012:
GBP28.0 million). As expected working capital expanded in the
period but remains controlled at 11% of the previous 12 months'
sales. Capital expenditure reduced to GBP2.4 million from GBP4.2
million. The prior year had been abnormally high due to investment
in our superconducting wire facility.
At the half year end, net cash was GBP32.2 million (2012:
GBP37.1 million). Cash outflow in the period was GBP7.0 million
(2012: GBP2.0 million inflow). The Group has a committed GBP50
million revolving credit facility with a club of banks, extendable
to GBP70 million by mutual consent, which expires in December 2014.
In March 2013, the Group agreed a GBP25 million 7 year fixed
interest facility with the European Investment Bank. This facility
was drawn down in August 2013.
As calculated under IAS19, the defined benefit pension deficit
has reduced by GBP5.3 million to GBP42.6 million since 31 March
2013. Since then assets have fallen by 2.7% to GBP192.6 million
while liabilities have reduced by 4.4% to GBP235.2 million due
mainly to the increase in corporate bond yields used to discount
liabilities.
Dividends
In 2011 the Group moved to a progressive dividend policy,
whereby we would seek to raise dividends as adjusted earnings per
share increase, although not necessarily by the same proportion,
depending on the Directors' perceived need for cash to expand the
business both organically and through acquisition. For the half
year just ended, the Directors are proposing an interim dividend of
3.36 pence per share (2012: 3.05 pence), payable on 7 April 2014 to
shareholders who are on the register on 7 March 2014.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
are set out above. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in
the above Financial Review section.
The diverse nature of the Group combined with its current
financial strength provides a solid foundation for a sustainable
business. The Directors have reviewed the Group's forecasts and
considered a number of potential scenarios relating to changes in
trading performance. The Directors believe that the Group will be
able to operate within its existing debt facility which expires in
December 2014. This review also considered hedging arrangements in
place. As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully.
This Half Year Report has been prepared on a going concern
basis, based on the Directors' opinion, after making reasonable
enquiries, that the Group has adequate resources to continue in
operational existence for the foreseeable future.
Principal Risks
The principal risks in the business are considered in the
Principal Risks and Uncertainties section of this Half Year
Report.
People
Our business relies on the expertise and commitment of our
people. When the market slowed during the first quarter of the year
we relied more than ever on the continued dedication of our staff,
operating to the highest standards of professionalism and skill. I
would like to thank them for their valuable contribution during the
half year.
Outlook
Following the weaker trading conditions seen in the first two
months of the year, the remainder of the period has shown a
significant strengthening in both orders and revenues. This
improvement in trading, supported by the strength of new product
introductions and our actions to enhance operating efficiencies,
should enable us to deliver an improved performance in the second
half. Looking forward, the application of both our existing and new
techniques to the Nano-Bio field offers us the opportunity for
further sustained profitable growth.
Jonathan Flint
Chief Executive
12 November 2013
Condensed Consolidated Statement of Income
Half year ended 30 September 2013 - unaudited
Half Year to 30 Sept Half Year to 30 Sept
2013 2012
As restated*
Before Adjusting Total Before Adjusting Total
adjusting items** GBPm adjusting items** GBPm
items** GBPm items** GBPm
GBPm GBPm
Notes
---------------------------------- ----------- ---------- ------- ----------- ---------- -------
Revenue 3 166.3 - 166.3 170.8 - 170.8
Cost of sales (91.4) - (91.4) (94.6) (0.2) (94.8)
------------------------------ ----------- ---------- ------- ----------- ---------- -------
Gross profit 74.9 - 74.9 76.2 (0.2) 76.0
Research and development 4 (12.0) - (12.0) (12.1) - (12.1)
Selling and marketing (26.9) - (26.9) (25.1) - (25.1)
Administration and shared
services (14.2) (5.9) (20.1) (16.5) (6.0) (22.5)
Foreign exchange gain 0.2 - 0.2 1.1 - 1.1
------------------------------ ----------- ---------- ------- ----------- ---------- -------
Operating profit 22.0 (5.9) 16.1 23.6 (6.2) 17.4
Other financial income 0.2 3.5 3.7 0.2 - 0.2
------------------------------ -----------
Financial income 0.2 3.5 3.7 0.2 - 0.2
Interest charge on net
defined benefit pension (1.2) - (1.2) (0.8) - (0.8)
liabilities
Other financial expenditure (0.4) (0.5) (0.9) (0.5) - (0.5)
Financial expenditure (1.6) (0.5) (2.1) (1.3) - (1.3)
Profit before income
tax 3 20.6 (2.9) 17.7 22.5 (6.2) 16.3
Income tax (expense)/credit 6 (4.4) (0.1) (4.5) (4.0) (1.1) (5.1)
------------------------------ ----------- ---------- ------- ----------- ---------- -------
Profit for the period
attributable to equity
shareholders of the parent 16.2 (3.0) 13.2 18.5 (7.3) 11.2
------------------------------ ----------- ---------- ------- ----------- ---------- -------
pence pence pence pence
------------------------------ ----------- ---------- ------- ----------- ---------- -------
Earnings per share
Basic earnings per share 7 28.6 23.2 33.0 20.0
Diluted earnings per
share 7 28.3 23.1 32.5 19.7
Dividends per share
Dividends paid 8 3.05 2.77
Dividends proposed 8 3.36 3.05
------------------------------ ----------- ---------- ------- ----------- ---------- -------
* See Note 1 of this Half Year Report for details of restatement
and re-presentation of comparative information.
** Adjusting numbers are stated to give a better understanding
of the underlying business performance. Details of adjusting items
can be found in note 2 of this Half Year Report.
Condensed Consolidated Statement of Income
Half year ended 30 September 2013 - unaudited
Year to 31 March 2013
As restated*
Before adjusting Adjusting Total
items** items** GBPm
GBPm GBPm
Notes
------------------------------------ ------ ----------------- ---------- --------
Revenue 3 350.8 - 350.8
Cost of sales (194.0) (0.5) (194.5)
------------------------------------ ------ ----------------- ---------- --------
Gross profit 156.8 (0.5) 156.3
Research and development 4 (24.3) - (24.3)
Selling and marketing (51.1) - (51.1)
Administration and shared services (35.3) (15.9) (51.2)
Foreign exchange gain 3.2 - 3.2
------------------------------------ ------ ----------------- ---------- --------
Operating profit 49.3 (16.4) 32.9
------------------------------------
Other financial income 0.3 - 0.3
------------------------------------
Financial income 0.3 - 0.3
Interest charge on net defined (1.7) - (1.7)
benefit pension liabilities
Other financial expenditure (0.9) (2.2) (3.1)
--------
Financial expenditure (2.6) (2.2) (4.8)
Profit before income tax 47.0 (18.6) 28.4
Income tax (expense)/credit 6 (9.7) 2.3 (7.4)
------------------------------------ ------ ----------------- ---------- --------
Profit for the period attributable
to equity shareholders of the
parent 37.3 (16.3) 21.0
------------------------------------ ------ ----------------- ---------- --------
pence pence
------------------------------------ ------ ----------------- ---------- --------
Earnings per share
Basic earnings per share 7 66.5 37.4
Diluted earnings per share 7 65.7 37.0
Dividends per share
Dividends paid 8 10.0
Dividends proposed 8 11.2
------------------------------------ ------ ----------------- ---------- --------
* See note 1 of this Half Year Report for details of restatement
of comparative information
**Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in note 2 of this Half Year Report.
Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2013 - unaudited
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
As restated* As restated*
GBPm GBPm GBPm
--------------------------------------------- ---------- -------------- --------------
Profit for the period 13.2 11.2 21.0
Other comprehensive (expense)/income:
Items that may be reclassified subsequently
to profit or loss
Foreign exchange translation differences (5.5) (2.6) 3.4
Gain on effective portion of changes
in fair value of cash flow hedges,
net of amounts recycled 0.1 - -
Tax on items that may be reclassified
to profit or loss - - -
Items that will not be reclassified
subsequently to profit or loss
Remeasurement gain/(loss) in respect
of post retirement benefits 3.6 (7.1) (15.7)
Tax on items that will not be reclassified
to profit or loss (2.2) 1.5 3.5
--------------------------------------------- ---------- -------------- --------------
Total other comprehensive expense (4.0) (8.2) (8.8)
Total comprehensive income for the
period attributable to equity shareholders
of the parent 9.2 3.0 12.2
--------------------------------------------- ---------- -------------- --------------
* See note 1 of this Half Year Report for details of restatement
of comparative information
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2013 - unaudited
Foreign
Share exchange
Share premium Other translation Retained
capital account reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- --------- ------------ --------- ------
Balance at 1 April 2013 2.8 60.6 0.1 4.0 70.2 137.7
Total comprehensive income/(expense)
attributable to equity
shareholders of the parent
- Profit for the period - - - - 13.2 13.2
- Other comprehensive
income - - 0.1 (5.5) 1.4 (4.0)
----------------------------------------- -------- --------- ------------ --------- ------
- - 0.1 (5.5) 14.6 9.2
Transactions recorded
directly in equity:
- Credit in respect of
employee service costs
settled by award of share
options - - - - 0.8 0.8
- Tax charge in respect
of share options - - - - (0.7) (0.7)
- Proceeds from shares
issued - 0.1 - - - 0.1
- Dividends paid and accrued - - - - (6.4) (6.4)
----------------------------------------- -------- --------- ------------ --------- ------
Total contributions by
and distributions to equity
shareholders - 0.1 - - (6.3) (6.2)
----------------------------------------- -------- --------- ------------ --------- ------
Balance at 30 September
2013 2.8 60.7 0.2 (1.5) 78.5 140.7
----------------------------------------- -------- -------- --------- ------------ --------- ------
Total
Foreign
Share exchange Retained
Share Premium Other translation earnings
capital Account reserves reserve as restated*
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- ---------- ------------- -------------- ------
Balance at 1 April 2012 2.8 60.2 0.1 0.6 63.4 127.1
Total comprehensive income/(expense)
attributable to equity
shareholders of the parent
- Profit for the period - - - - 11.2 11.2
- Other comprehensive
income - - - (2.6) (5.6) (8.2)
-------------------------------------- --------- ---------- ------------- -------------- ------
- - - (2.6) 5.6 3.0
Transactions recorded
directly in equity:
- Credit in respect of
employee service costs
settled by award of share
options - - - - 0.6 0.6
- Tax credit in respect
of share options - - - - 1.3 1.3
- Proceeds from shares
issued - 0.1 - - - 0.1
- Dividends paid and accrued - - - - (5.6) (5.6)
-------------------------------------- --------- ---------- ------------- -------------- ------
Total contributions by
and distributions to equity
shareholders - 0.1 - - (3.7) (3.6)
-------------------------------------- --------- ---------- ------------- -------------- ------
Balance at 30 September
2012 2.8 60.3 0.1 (2.0) 65.3 126.5
-------------------------------------- --------- --------- ---------- ------------- -------------- ------
* See note 1 of this Half Year Report for details of restatement
of comparative information
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2013 - unaudited continued
Foreign
Share exchange Retained
Share Premium Other translation earnings
capital Account reserves reserve as restated* Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- ---------- ------------- -------------- ------
Balance at 1 April 2012 2.8 60.2 0.1 0.6 63.4 127.1
Total comprehensive income/(expense)
attributable to equity
shareholders of the parent
- Profit for the period - - - - 21.0 21.0
- Other comprehensive
income - - - 3.4 (12.2) (8.8)
-------------------------------------- --------- ---------- ------------- -------------- ------
- - - 3.4 8.8 12.2
Transactions recorded
directly in equity:
- Credit in respect of
employee service costs
settled by award of share
options 1.4 1.4
- Tax credit in respect
of share options - - - - 2.2 2.2
- Proceeds from shares
issued - 0.4 - - - 0.4
- Dividends paid - - - - (5.6) (5.6)
-------------------------------------- --------- ---------- ------------- -------------- ------
Total contributions by
and distributions to equity
shareholders - 0.4 - - (2.0) (1.6)
-------------------------------------- --------- ---------- ------------- -------------- ------
Balance at 31 March 2013 2.8 60.6 0.1 4.0 70.2 137.7
-------------------------------------- --------- --------- ---------- ------------- -------------- ------
* See note 1 of this Half Year Report for details of restatement
of comparative information
Condensed Consolidated Statement of Financial Position
As at 30 September 2013 - unaudited
As at As at As at
30 Sept 30 Sept 31 March
2013 2012 2013
GBPm GBPm GBPm
Assets
Non-current assets
Property, plant and equipment 32.1 29.9 32.9
Intangible assets 84.1 70.8 91.9
Deferred tax assets 19.3 21.0 25.0
135.5 121.7 149.8
Current assets
Inventories 61.0 60.9 58.1
Trade and other receivables 70.3 64.2 71.8
Current income tax recoverable 0.1 1.0 0.4
Derivative financial instruments 4.2 2.2 2.2
Cash and cash equivalents 56.9 37.9 39.2
192.5 166.2 171.7
Total assets 328.0 287.9 321.5
--------------------------------------- -------- -------- ---------
Equity
Capital and reserves attributable
to the Company's equity shareholders
Share capital 2.8 2.8 2.8
Share premium 60.7 60.3 60.6
Other reserves 0.2 0.1 0.1
Translation reserve (1.5) (2.0) 4.0
Retained earnings 78.5 65.3 70.2
140.7 126.5 137.7
Liabilities
Non-current liabilities
Bank loans 24.7 0.7 -
Other payables 11.4 3.8 11.1
Retirement benefit obligations 42.6 40.9 47.9
Deferred tax liabilities 5.1 7.2 6.2
--------------------------------------- -------- -------- ---------
83.8 52.6 65.2
Current liabilities
Bank loans - 0.1 -
Trade and other payables 84.3 91.4 101.4
Current income tax payables 4.4 3.5 4.3
Accrued dividend 4.6 4.0 -
Derivative financial instruments 0.4 0.4 2.6
Provisions 9.8 9.4 10.3
--------------------------------------- -------- -------- ---------
103.5 108.8 118.6
Total liabilities 187.3 161.4 183.8
Total liabilities and equity 328.0 287.9 321.5
--------------------------------------- -------- -------- ---------
Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2013 - unaudited
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
as restated* as restated*
GBPm GBPm GBPm
-------------------------------------------- ---------- ------------- -------------
Profit for the period 13.2 11.2 21.0
Adjustments for:
Income tax expense 4.5 5.1 7.4
Net financial (income)/expense (1.6) 1.1 4.5
Reversal of acquisition related fair
value adjustments - 0.2 0.5
Acquisition related costs 0.8 0.6 2.1
Amortisation of acquired intangibles 5.1 5.4 13.8
Depreciation of property, plant and
equipment 2.3 2.3 4.6
Amortisation and impairment of capitalised
development costs 1.8 2.1 3.9
-------------------------------------------- ---------- ------------- -------------
Adjusted earnings before interest,
tax, depreciation and amortisation 26.1 28.0 57.8
Loss on disposal of plant, property
and equipment 0.2 - 0.2
Cost of equity settled employee share
schemes 0.8 0.6 1.4
Acquisition related costs paid (0.1) - (1.2)
Cash payments to the pension scheme
more than the charge to operating
profit (2.4) (2.2) (4.9)
-------------------------------------------- ---------- ------------- -------------
Operating cash flows before movements
in working capital 24.6 26.4 53.3
(Increase)/decrease in inventories (5.0) (2.2) 4.7
Increase in receivables (1.2) (4.7) (9.4)
(Decrease)/increase in payables and
provisions (10.3) (4.6) 2.8
(Decrease)/increase in customer deposits (4.3) 0.4 (1.0)
Cash generated by operations 3.8 15.3 50.4
Interest paid (0.3) (0.5) (0.5)
Income taxes paid (3.0) (5.8) (8.4)
-------------------------------------------- ---------- ------------- -------------
Net cash from operating activities 0.5 9.0 41.5
-------------------------------------------- ---------- ------------- -------------
Cash flows from investing activities
Proceeds from sale of product line
and subsidiary - 1.0 1.0
Interest received - 0.2 -
Acquisition of subsidiaries, net
of cash acquired (0.3) (0.2) (20.1)
Acquisition of property, plant and
equipment (2.4) (4.2) (8.6)
Capitalised development expenditure (2.4) (1.8) (4.6)
-------------------------------------------- ---------- ------------- -------------
Net cash used in investing activities (5.1) (5.0) (32.3)
-------------------------------------------- ---------- ------------- -------------
Cash flows from financing activities
Proceeds from issue of share capital 0.1 0.1 0.4
Increase in borrowings 24.7 0.8 -
Dividends paid (1.7) (1.6) (5.6)
-------------------------------------------- ---------- ------------- -------------
Net cash from/(used in) financing
activities 23.1 (0.7) (5.2)
-------------------------------------------- ---------- ------------- -------------
Net increase in cash and cash equivalents 18.5 3.3 4.0
Cash and cash equivalents at beginning
of the period 39.2 35.1 35.1
Effect of exchange rate fluctuations
on cash held (0.8) (0.5) 0.1
-------------------------------------------- ---------- ------------- -------------
Cash and cash equivalents at end
of the period 56.9 37.9 39.2
-------------------------------------------- ---------- ------------- -------------
Reconciliation of changes in cash and cash equivalents to movement
in net cash
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ---------
Increase in cash and cash equivalents 18.5 3.3 4.0
Effect of foreign exchange rate changes
on cash and cash equivalents (0.8) (0.5) 0.1
----------------------------------------- ---------- ---------- ---------
17.7 2.8 4.1
Cash inflow from increase in debt (24.7) (0.8) -
Movement in net cash in the period (7.0) 2.0 4.1
Net cash at start of the period 39.2 35.1 35.1
----------------------------------------- ---------- ---------- ---------
Net cash at the end of the period 32.2 37.1 39.2
----------------------------------------- ---------- ---------- ---------
* See note 1 of this Half Year Report for details of restatement
of comparative information
Notes on the Half Year Financial Statements
Half year ended 30 September 2013 - unaudited
1 BASIS OF PREparATION OF ACCOUNTS
Reporting entity
Oxford Instruments plc (the Company) is a company incorporated
in England and Wales. The condensed consolidated half year
financial statements consolidate the results of the Company and its
subsidiaries (together referred to as the Group). They have been
prepared and approved by the Directors in accordance with
International Financial Reporting Standard (IFRS) IAS 34 Interim
Financial Reporting as adopted by the EU. They do not include all
of the information required for full annual financial statements,
and should be read in conjunction with the consolidated financial
statements of the Group for the year ended 31 March 2013.
The financial information contained herein is unaudited and does
not constitute statutory accounts as defined by Section 435 of the
Companies Act 2006. The comparative figures for the financial year
ended 31 March 2013 are not the company's statutory accounts for
that financial year. Those accounts have been reported on by the
company's auditors and delivered to the registrar of companies. The
report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Significant Accounting Policies
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31
March 2013, except as explained below.
Adoption of new and revised standards
The following standards and interpretations are applicable to
the Group and have been adopted as they are mandatory for the year
ended 31 March 2014.
Amendments to IAS 1 Presentation of Items of Other Comprehensive
Income: The amendments require that an entity present separately
the items of other comprehensive income that may be reclassified to
profit or loss in the future from those that would never be
reclassified to profit or loss. The adoption of this standard has
had no significant impact.
Amendments to IAS 19 Employee Benefits: The amendments require
immediate recognition of actuarial gains and losses in other
comprehensive income and eliminate the corridor method. The
principal amendment that will affect most entities with a defined
benefit plan is the requirement to calculate net interest income or
expense using the discount rate used to measure the defined benefit
obligation. The new standard requires retrospective application and
will impact the Group's Income Statement and Statement of
Comprehensive Income as a result of the changes in assessing the
return on pension scheme assets. A prior year restatement has been
made to reflect these changes, which is explained in further detail
below.
IFRS 13 Fair Value Measurement: This is a new standard to
replace existing guidance on fair value measurement in different
IFRSs with a single definition of fair value, a framework for
measuring fair values and disclosures about fair value
measurements. This standard applies to assets, liabilities and an
entity's own equity instruments that, under other IFRSs, are
required or permitted to be measured at fair value or when
disclosure of fair value is provided. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date, i.e. an exit price. The adoption of this
standard has had no significant impact.
Amendments to IFRS 7 Disclosures - Offsetting Financial Assets
and Financial Liabilities: The amendment requires specific
disclosure for financial assets and financial liabilities within
the scope of the common disclosures. The adoption of this standard
has had no significant impact.
At present, there are no other new standards, amendments to
standards or interpretations mandatory for the first time for the
year ending 31 March 2014.
Notes on the Half Year Financial Statements
Half year ended 30 September 2013 - unaudited
1 BASIS OF PREparATION OF ACCOUNTS continued
Restatement
As a result of the amendments to IAS 19 Employee Benefits, the
Group has changed its accounting policy with respect to determining
the income or expense related to its defined benefit pension
scheme. The standard prescribes that an interest expense or income
is calculated on the net defined benefit liability by applying the
discount rate to the net defined benefit liability. This replaces
the interest expense on the defined benefit obligation and the
expected return on plan assets. In addition, the revised standard
clarifies the treatment for scheme administration expenses. The
revised standard requires retrospective application, therefore the
table below reflects the adjustments made to the comparative
amounts for the period to 30 September 2012 and the year to 31
March 2013.
These comprise the reversal of the interest expense on the
defined benefit obligation (30 September 2012: GBP5.2m, 31 March
2013: GBP10.4m) and the interest income on pension scheme assets
(30 September 2012: GBP4.8m, 31 March 2013: GBP9.5m) to be replaced
by a net interest expense (30 September 2012: GBP0.8m, 31 March
2013: GBP1.7m) and an increase in the scheme administration
expenses charged to the consolidated income statement (30 September
2012: GBP0.2m, 31 March 2013: GBP0.4m). The associated income tax
has been restated accordingly. Actuarial losses recognised in the
consolidated statement of comprehensive income (30 September 2012:
GBP7.7m, 31 March 2013: GBP16.9m) have been restated into a
re-measurement loss of (30 September 2012: GBP7.1m, 31 March 2013:
GBP15.7m) with the associated income tax also restated.
30 September 31 March 2013
2012 GBPm
GBPm
Consolidated income statement
Increase in administrative and shared
service expenses (0.2) (0.4)
Decrease in finance expense 4.4 8.7
Decrease in finance income (4.8) (9.5)
Decrease in income tax expense 0.1 0.2
------------- --------------
Decrease in profit for the period (0.5) (1.0)
Decrease in basic and diluted earnings
per share (0.9p) (1.8p)
------------- --------------
Consolidated statement of comprehensive
income
Other comprehensive income:
Decrease in re-measurement of defined
benefit plans 0.6 1.2
Decrease in income tax on other comprehensive
income (0.1) (0.2)
------------- --------------
Increase in other comprehensive income 0.5 1.0
------------- --------------
The revised standard stipulates that actuarial gains and losses
are recognised immediately in the periods in which they occur. The
Group already adopted this policy and therefore there are no
changes to the consolidated balance sheet and consolidated cash
flow statement.
Estimates
The preparation of half year financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these Half Year Financial Statements, the
significant judgements made by management in applying the group's
accounting policies and key sources of estimation uncertainty were
the same as those that applied to the Consolidated Financial
Statements as at and for the year ended 31 March 2013.
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
1 BASIS OF PREparATION OF ACCOUNTS continued
Going concern
The condensed consolidated half year financial statements have
been prepared on a going concern basis, based on the Directors'
opinion, after making reasonable enquiries, that the Group has
adequate resources to continue in operational existence for the
foreseeable future.
Exchange rates
The principal exchange rates used to translate the Group's
overseas results were as follows:
Half year Half year
Period end rates to to Year to
30 Sept 30 Sept 31 March
2013 2012 2013
US Dollar 1.62 1.61 1.52
Euro 1.20 1.26 1.18
Yen 159 126 143
-------------------------------- ---------- ---------- ---------
Average translation rates US Dollar Euro Yen
-------------------------------- ---------- ---------- ---------
Half year to 30 September 2013
Quarter 1 1.53 1.18 150
Quarter 2 1.55 1.17 152
Year to 31 March 2013
Quarter 1 1.58 1.23 127
Quarter 2 1.59 1.26 125
Quarter 3 1.61 1.24 132
Quarter 4 1.56 1.19 142
-------------------------------- ---------- ---------- ---------
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
2 NON-GAAP MEASURES
The Directors present the following non-GAAP measure as they
believe it gives a better indication of the underlying performance
of the business.
RECONCILIATION BETWEEN PROFIT BEFORE INCOME TAX AND ADJUSTED
PROFIT
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
as restated* as restated*
GBPm GBPm GBPm
----------------------------------------- ---------- ------------- -------------
Profit before income tax 17.7 16.3 28.4
Reversal of acquisition related fair
value adjustments to inventory - 0.2 0.5
Acquisition related costs 0.8 0.6 2.1
Amortisation and impairment of acquired
intangibles 5.1 5.4 13.8
Unwind of discount in respect of
deferred consideration 0.5 - 0.2
Mark to market (gain)/loss in respect
of derivative financial instruments (3.5) - 2.0
----------------------------------------- ---------- ------------- -------------
Adjusted profit before income tax 20.6 22.5 47.0
Share of taxation (4.4) (4.0) (9.7)
----------------------------------------- ---------- ------------- -------------
Adjusted profit 16.2 18.5 37.3
----------------------------------------- ---------- ------------- -------------
* See note 1 of this Half Year Report for details of restatement
of comparative information
The reversal of acquisition related fair value adjustments to
inventory are excluded from adjusted profit to provide a measure
that includes results from acquired businesses on a consistent
basis over time to assist comparison of performance. Acquisition
related costs comprise professional fees incurred in relation to
mergers and acquisitions activity and any consideration which,
under IFRS 3 (revised), falls to be treated as a post-acquisition
employment expense.
In common with a number of other companies adjusted profit
excludes the non-cash amortisation and impairment of acquired
intangible assets and the unwind of discounts in respect of
deferred consideration relating to business combinations.
In calculating the share of tax attributable to adjusted profit
before tax in the year ended 31 March 2011 a one-off recognition of
deferred tax assets relating to the Group's UK businesses of
GBP11.3m was excluded. At that time the Group announced its
intention to exclude the reversal of this deferred tax from the
calculation of the share of tax attributable to adjusted profit
before tax in the years in which it reverses. In the year ended 31
March 2013 deferred tax of GBP3.3m was reversed. In the current
period deferred tax of GBP1.2m (2012: GBP3.2m) has reversed and
consequently been excluded from the tax attributable to adjusted
profit before tax.
Under IAS 39, all derivative financial instruments are
recognised initially at fair value. Subsequent to initial
recognition, they are also measured at fair value. In respect of
instruments used to hedge foreign exchange risk and interest rate
risk the Group does not take advantage of the hedge accounting
rules provided for in IAS 39 since that standard requires certain
stringent criteria to be met in order to hedge account, which, in
the particular circumstances of the Group, are considered by the
Board not to bring any significant economic benefit. Accordingly,
the Group accounts for these derivative financial instruments at
fair value through profit or loss. To the extent that instruments
are hedges of future transactions, adjusted profit for the year is
stated before changes in the valuation of these instruments so that
the underlying performance of the Group can be more clearly
seen.
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
3 SEGMENT Information
The Group has six operating segments. These operating segments
have been combined into three aggregated operating segments to the
extent that they have similar economic characteristics, with
relevance to products and services, type and class of customer,
methods of sale and distribution and the regulatory environment in
which they operate. Each of these three aggregated operating
segments is a reportable segment.
The Group's internal management structure and financial
reporting systems differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed
below:
-- the Nanotechnology Tools segment contains a group of businesses supplying similar products, characterised by a high degree of customisation and high unit prices. These are the Group's highest technology products serving research customers in both the public and private sectors;
-- the Industrial Products segment contains a group of
businesses supplying high technology products and components
manufactured in medium volume for industrial customers; and
-- the Service segment contains the Group's service business as
well as service revenues from other parts of the Group.
Reportable segment results include items directly attributable
to a segment as well as those which can be allocated on a
reasonable basis. Inter-segment pricing is determined on an arm's
length basis. The operating results of each are regularly reviewed
by the Chief Operating Decision Maker, which is deemed to be the
Board of Directors. Discrete financial information is available for
each segment and used by the Board of Directors for decisions on
resource allocation and to assess performance. No asset information
is presented below as this information is not presented in
reporting to the Group's Board of Directors.
Half year to 30 September 2013
Nanotechnology Industrial
Tools Products Service Total
GBPm GBPm GBPm GBPm
------------------------- -------------- -------
External revenue 77.0 57.0 32.3 166.3
Inter-segment revenue 0.1 1.0 -
------------------------- -------------- -------
Total segment revenue 77.1 58.0 32.3
Segment operating profit 7.4 8.1 6.5 22.0
------------------------- -------------- ---------- ------- -----
Half year to 30 September 2012
Nanotechnology Industrial
Tools Products Service Total
as restated* as restated* as restated* as restated*
GBPm GBPm GBPm GBPm
------------------------- -------------- ------------
External revenue 80.7 60.9 29.2 170.8
Inter-segment revenue 0.2 0.6 0.1
------------------------- -------------- ------------
Total segment revenue 80.9 61.5 29.3
Segment operating profit 10.3 7.5 5.8 23.6
------------------------- -------------- ------------ ------------ ------------
* See note 1 of this Half Year Report for details of restatement
of comparative information
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
Year to 31 March 2013
Nanotechnology Industrial
Tools Products Service Total
as restated* as restated* as restated* as restated*
GBPm GBPm GBPm GBPm
------------------------- -------------- ------------
External revenue 165.8 124.5 60.5 350.8
Inter-segment revenue 0.3 0.6 0.1
------------------------- -------------- ------------
Total segment revenue 166.1 125.1 60.6
Segment operating profit 20.6 17.3 11.4 49.3
------------------------- -------------- ------------ ------------ ------------
Reconciliation of reportable segment profit
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
as restated* as restated*
GBPm GBPm GBPm
------------------------------------------- ---------- ------------- -------------
Operating profit for reportable segments 22.0 23.6 49.3
Reversal of acquisition related fair
value adjustments to inventory - (0.2) (0.5)
Acquisition related costs (0.8) (0.6) (2.1)
Amortisation of acquired intangibles (5.1) (5.4) (13.8)
Financial income 3.7 0.2 0.3
Financial expenditure (2.1) (1.3) (4.8)
------------------------------------------ ---------- ------------- -------------
Profit before income tax 17.7 16.3 28.4
------------------------------------------ ---------- ------------- -------------
* See note 1 of this Half Year Report for details of restatement
of comparative information
4 RESEARCH AND DEVELOPMENT
Total research and development spend by the Group is as
follows:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
GBPm GBPm GBPm
---------------------------------------- ---------- ---------- ---------
Research and development expense
charged to the consolidated statement
of income 12.0 12.1 24.3
Less: depreciation of R&D related
fixed assets (0.3) (0.1) (0.7)
Add: amounts capitalised as fixed
assets 0.7 0.4 0.8
Less: amortisation and impairment
of R&D costs previously capitalised
as intangibles (1.8) (2.1) (3.9)
Add: amounts capitalised as intangible
assets 2.4 1.8 4.6
Total cash spent on research and
development during the period 13.0 12.1 25.1
---------------------------------------- ---------- ---------- ---------
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
5 ACQUISITIONS
Asylum Research Corporation
In the prior year, on 19 December 2012 the Group acquired the
trade and certain assets of Asylum Research Corporation for an
initial cash consideration of GBP19.8m. Further contingent
consideration of between GBP2.0m and GBP31.6m is payable based on
post acquisition business performance. At 30 September 2013 GBP6.5m
is provided in the accounts in respect of this contingent
consideration being the fair value of the contingent consideration
payable. Asylum Research is a leading manufacturer of atomic force
and scanning probe microscopes and is headquartered in Santa
Barbara, USA with subsidiaries in the UK, Germany and Taiwan.
The book and fair value of the assets and liabilities acquired
is given in the table below. Fair value adjustments have been made
to better align the accounting policies of the acquired business
with the Group accounting policies. The business was acquired for
the purpose of integrating into the Nanotechnology Tools segment
where it is believed that synergies can be obtained particularly in
respect of routes to market.
Book value Adjustments Fair value
GBPm GBPm GBPm
------------------------------------------ ----------- ------------ -----------
Intangible fixed assets - 14.4 14.4
Tangible fixed assets 0.4 (0.1) 0.3
Inventories 2.4 (0.3) 2.1
Trade and other receivables 1.7 - 1.7
Trade and other payables (2.3) (0.2) (2.5)
Deferred tax - 0.3 0.3
------------------------------------------ ----------- ------------ -----------
Net assets acquired 16.3
Goodwill 2.2 14.1 9.3
------------------------------------------ ----------- ------------ -----------
Total consideration 25.6
Contingent consideration at acquisition (5.8)
------------------------------------------ ----------- ------------ -----------
Net cash outflow relating to the
acquisition 19.8
------------------------------------------ ----------- ------------ -----------
The goodwill arising is tax deductible in full and is considered
to represent the value of the acquired workforce and synergistic
benefits expected to arise from the acquisition.
6 TAXATION
The total effective tax rate on profits for the half year is 25%
(2012: 31%). The weighted average tax rate in respect of adjusted
profit before tax (see note 2) for the half year is 21% (2012:
18%).
The Group estimates that its full year weighted average tax rate
in respect of adjusted profit before tax will be 21%.
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
7 earnings per share
a) Basic
The calculation of basic earnings per share is based on the
profit or loss for the period after taxation and a weighted average
number of ordinary shares outstanding during the period, excluding
shares held by the Employee Share Ownership Trust, as follows:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
Shares Shares Shares
million million million
------------------------------------------ ---------- ---------- ---------
Weighted average number of shares
outstanding 56.9 56.2 56.4
Less: weighted average number of
shares held by Employee Share Ownership
Trust (0.2) (0.2) (0.2)
------------------------------------------ ---------- ---------- ---------
Weighted average number of shares
used in calculation of earnings
per share 56.7 56.0 56.2
------------------------------------------ ---------- ---------- ---------
b) Diluted
The following table shows the effect of share options on the
calculation of both adjusted and unadjusted diluted basic earnings
per share.
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
Shares Shares Shares
million million million
--------------------------------------- ---------- ---------- ---------
Number of ordinary shares per basic
earnings per share calculations 56.7 56.0 56.2
Effect of shares under option 0.5 1.0 0.6
--------------------------------------- ---------- ---------- ---------
Number of ordinary shares per diluted
earnings per share calculations 57.2 57.0 56.8
--------------------------------------- ---------- ---------- ---------
Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2013 - unaudited
8 dividends per share
The following dividends per share were paid by the Group:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
pence pence pence
---------------------------------- ---------- ---------- ---------
Previous period interim dividend 3.05 2.772 2.772
Previous period final dividend - - 7.228
---------------------------------- ---------- ---------- ---------
3.05 2.772 10.000
---------------------------------- ---------- ---------- ---------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2013 2012 2013
Pence pence Pence
------------------ ---------- ---------- ---------
Interim dividend 3.36 3.05 3.05
Final dividend - - 8.15
------------------ ---------- ---------- ---------
3.36 3.05 11.20
------------------ ---------- ---------- ---------
The final dividend for the year to 31 March 2013 was approved by
shareholders at the Annual General Meeting held on 10 September
2013. Accordingly is it no longer at the discretion of the company
and has been included as a liability as at 30 September 2013. It
was paid on 24 October 2013.
The interim dividend for the year to 31 March 2013 of 3.36 pence
was approved by the Board on 12 November 2013, 10 % higher than the
previous year and has not been included as a liability as at 30
September 2013. The interim dividend will be paid on 7 April 2014
to shareholders on the register at the close of business on 7 March
2014.
9 POST BALANCE SHEET EVENTS
On 8 November the Group acquired 100% of the share capital of
RMG Technology Ltd for cash consideration of GBP6m and deferred
consideration of up to GBP4m payable in April 2015. RMG Technology
Ltd is a UK business specialising in Laser Induced Breakdown
Spectrography. Some of the disclosure required by IFRS3 has been
omitted since, due to the timing of the acquisition, the initial
accounting is incomplete at the date of this publication.
Principal Risks and Uncertainties
The Group has in place a risk management structure and internal
controls which are designed to identify, manage and mitigate
risk.
In common with all businesses, Oxford Instruments faces a number
of risks and uncertainties which could have a material impact on
the Group's long term performance.
On pages 26 and 27 of its 2013 Annual Report and Accounts (a
copy of which is available at www.oxford-instruments.com), the
Company set out what the Directors regarded as being the principal
risks and uncertainties facing the Group's long term performance
and these are reproduced in the table below. Many of these risks
are inherent to Oxford Instruments as a global business and they
remain valid as regards their potential impact during the remainder
of the second half of the year.
Specific Risk Context Risk
Technical risk The Group provides high Failure of the advanced
technology equipment technologies applied
and systems to its customers. by the Group to produce
commercial products,
capable of being manufactured
and sold profitably.
-------------------------------- -------------------------------
Outsourcing The Group's strategic Failures in the supply
plan includes the outsourcing chain impacting sales.
of a significantly higher
proportion of the costs
of its products to benefit
from economies of scale
and natural currency
hedges.
-------------------------------- -------------------------------
Acquisitions Part of the growth of Appropriate acquisition
Oxford Instruments is targets may not be available
planned to come from in the necessary timescale.
acquisitions which provide Alternatively, once
the Group with complementary acquired, targets may
technologies. fail to provide the
planned value.
-------------------------------- -------------------------------
People A number of the Group's The employee leaves
employees are business the Group
critical.
-------------------------------- -------------------------------
Economic environment The recent global recession Demand for the Group's
and prevailing economic products may be lower
downturn have resulted than anticipated.
in cuts to both government
and private sector spending.
-------------------------------- -------------------------------
Pensions The Group's calculated Movements in the actuarial
pension deficit is sensitive assumptions may have
to changes in actuarial an appreciable effect
assumptions. on the reported pension
deficit.
-------------------------------- -------------------------------
Foreign exchange A significant proportion The Group's profit levels
volatility of the Group's profit are exposed to fluctuations
is made in foreign currencies. in exchange rates.
-------------------------------- -------------------------------
Routes to market In some instances the The system integrator
Group's products are switches supplier, denying
components of higher the Group's route to
level systems and thus market.
the Group does not control
its route to market.
-------------------------------- -------------------------------
The impact of the economic and end market environments in which
the Group's businesses operate are considered in the Half Year
Statement of this Half Year Report, together with an indication if
management is aware of any likely change in this situation.
Responsibility Statement of the Directors in respect of the Half
Year Financial Statements
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Jonathan Flint, Chief Executive Kevin Boyd, Group Finance Director
12 November 2013
Independent review report to Oxford Instruments plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2013 which comprises the Condensed
Consolidated Statement of Income, the Condensed Consolidated
Statement of Comprehensive Income, Condensed Consolidated Statement
of Financial Position, Condensed Consolidated Statement of Changes
in Equity, Condensed Consolidated Statement of Cash Flows and the
related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this 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
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2013 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Simon Haydn-Jones
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
12 November 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GLBDBDBBBGXD
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