TIDMOXIG
RNS Number : 1525P
Oxford Instruments PLC
15 November 2016
Release Date: 7am Tuesday 15 November 2016
Oxford Instruments plc
Announcement of Half Year Results for the six months to 30
September 2016
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 2016.
Half year Half year % change
to to
30 September 30 September
2016 2015
GBPm GBPm
Revenue 171.5 164.8 +4.1%
Adjusted* operating profit 19.0 20.0 -5.0%
Adjusted* profit before
tax 15.7 16.3 -3.7%
(Loss)/profit before tax (0.5) 6.1
Continuing adjusted* basic
earnings per share 21.4p 21.7p -1.4%
Dividend per share (interim) 3.7p 3.7p
Operating cash flow 3.7 11.7
Net debt 141.1 139.5
Financial Highlights:
-- Stable performance in challenging markets
-- Reported revenue up 4.1%, down 6.9% at constant currency
-- Adjusted profit before tax down 3.7%; reflecting lower sales
in OI Healthcare and continued weakness in Superconducting Wire
-- Increase in net debt reflecting working capital outflow and
payment of deferred consideration
-- Interim dividend maintained at 3.7 pence
Operational Highlights:
-- Group order book up 18.5% to GBP162.2 million, 5.1% at constant currency
-- NanoTechnology Tools: improvement in profits of 17.9% (13.7%
at constant currency), stronger margin and order book reflecting
success of new products and operational efficiencies
-- Industrial Products: resilient performance largely absorbed
ongoing weakness in Superconducting Wire
-- Service: growth in service revenues from NanoTechnology Tools
and Industrial Products sectors; reduced profits due to lower sales
for refurbished imaging systems in OI Healthcare, which we expect
to continue in current and future years
-- Increased investment in future growth: R&D spend up 11.9%
to GBP15.1 million, equivalent to 8.8% of revenue
-- Priorities for improvement and core capabilities identified to deliver sustainable growth
-- Continued focus on self-help and efficiencies to improve performance
-- Appointment of Alan Thomson as Chairman as previously reported
Outlook:
-- Revenue and order book are ahead of last year, but given
continued slower academic funding in the US and Europe and lower
sales in our OI Healthcare business, the Board expects the Group to
deliver a current year performance in line with last year
-- Looking further ahead, assuming no change to current foreign
exchange rates and assuming a constant mix of currency results, we
expect a benefit from currency of approximately GBP7 million to
operating profit in the 2017/18 financial year.
Ian Barkshire, Chief Executive of Oxford Instruments plc,
said:
"In challenging markets, Oxford Instruments has delivered a
stable performance. NanoTechnology Tools performed strongly, and
across the Group we made good progress with new product
introductions and self-help initiatives.
"The greater role of nanotechnology for use in research and a
broad range of industrial applications will continue to yield
long-term sustainable growth in demand for our high technology
solutions and services.
"Our increased focus on enhanced product solutions and services
across our existing and new markets will underpin future revenue
growth, with margin enhancement supported by the development of
operational excellence as a core capability across the Group."
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director
MHP Communications Tel: 020 3128 8100
Rachel Hirst / Jamie Ricketts
Number of pages: 39
*NOTE: Throughout this half year announcement we make reference
to adjusted numbers. These are presented as, in the opinion of the
Directors, they present a clearer picture of the business
performance. A full definition of adjusted numbers can be found in
note 2. Where we make reference to constant currency numbers these
are prepared using the exchange rates which prevailed in the
previous year rather than the actual exchange rates which prevailed
in the year.
Chief Executive's Review
Overview
Despite challenging markets, the business has continued to
deliver a stable performance in the first half underpinned by
growth in NanoTechnology Tools.
Reported revenue was up 4.1% to GBP171.5 million (2015: GBP164.8
million) although down 6.9% at constant currency. Adjusted
operating profit fell by 5.0% to GBP19.0 million (2015: GBP20.0
million) with an increase in profit in NanoTechnology Tools being
more than offset by a fall in Service.
The order book (orders for future delivery) at 30 September 2016
increased to GBP162.2 million, an increase of 18.5% (5.1% at
constant currency) compared to September 2015. Constant currency
order book grew in NanoTechnology Tools and Service by 7.0% and
14.6% respectively.
Continuing adjusted basic EPS fell by 1.4% to 21.4 pence (2015:
21.7 pence). Basic EPS was a negative 1.2 pence, largely as a
result of the mark-to-market of currency hedges.
Net debt at the end of the period increased as expected to
GBP141.1 million (2015: GBP139.5 million) partly due to an increase
in inventory ahead of planned shipments, a reduction in payables
and the payment of deferred consideration relating to previous
acquisitions.
Turning to the performance of our individual sectors,
NanoTechnology Tools saw reported revenue growth of 6.4% to GBP90.9
million (2015: GBP85.4 million), adjusted operating profit growth
of 17.9% to GBP11.2 million, with an increase in operating margin
of 120 basis points to 12.3%. This performance was achieved as a
result of the success of recently launched products, supported by
improved efficiencies.
Reported revenue in Industrial Products fell by 5.0% due to the
expected revenue decline in the Superconducting Wire business.
Revenue growth in the other parts of the sector grew by just over
1.0%, a good performance in the face of challenging end markets.
Reported adjusted operating profit fell by GBP0.3 million to GBP1.4
million (2015: GBP1.7 million) in the period, with a fall in profit
of GBP0.9 million within the Superconducting Wire business being
partially offset by profit growth in the sector's remaining
businesses.
Reported revenue grew by 11.2% in Service to GBP37.7 million
(2015: GBP33.9 million), driven by increased demand for services
relating to our own products. Our OI Healthcare business in the US
sells refurbished imaging systems and provides mobile imaging
solutions, maintenance services and replacement parts. Performance
in the first half was impacted by a lower level of sales of
refurbished systems compared to the prior year. This has been
driven by both a particularly high level of activity in the prior
year but also a recent change in software licensing policy by one
of the large original manufacturers. As a result we anticipate a
reduction in operating profit from the Healthcare component of our
Service division for the full year.
From a customer perspective, our end market segment distribution
remained relatively unchanged compared to the previous year, with
over half our revenue coming from research and academia.
On a geographical basis, reported revenue grew in Europe and
Asia by 5.6% and 14.2% respectively and declined by 5.1% in North
America. On a constant currency basis revenue grew by 0.7% in Asia
supported by strong growth in China; revenue in Europe and North
America declined by 4.2% and 14.7% respectively. The declines in
North America and Europe arise predominantly from reduced sales of
superconducting wire and lower levels of academic funding.
Whilst we have seen no material direct business impact due to
Brexit I have formed a senior committee to continue to monitor and
evaluate potential implications of any changing policies or trade
agreements.
People
The skills and experience of our people are key to the success
of our business. Our thanks go to all our employees for their
ongoing commitment, energy and contribution.
As previously reported, Alan Thomson was appointed Chairman
following the AGM on 13 September 2016. Alan took over from Nigel
Keen, who stepped down after 17 years. Also stepping down from the
Board at that time were Jock Lennox and Jennifer Allerton. We would
like to thank each of them for their valuable support and
contributions during their time with the Group.
R&D
We continue to invest in future products for our customers, and
in the period we have increased our investment in R&D
initiatives by 11.9% to GBP15.1 million (2015: GBP13.5
million).
Dividends
The Board has declared an interim dividend of 3.7 pence per
share (2015: 3.7 pence), in line with last year.
Delivering sustainable growth
In my first six months as Chief Executive I have focused on
identifying the priorities that will enable us to return to
long-term sustainable growth. I remain confident that the
increasing role of nanotechnology in both research and the
broadening range of industrial markets will provide long-term
structural growth for our products. In order to translate this
opportunity into long-term shareholder value I have identified a
number of areas for improvement that we will make core capabilities
across the Group.
Customer and Market Focus
We will enhance our approach to develop even deeper
relationships with our customers to ensure our products better meet
their current and future needs. This will enable us to enhance our
capabilities and better identify growth trends in both existing and
new market segments where we can provide increased value to our
customers. We will increasingly focus our capital investment and
sales efforts to align with customer needs and market trends where
we have the opportunity to build sustainable market-leading
positions.
Innovation and New Product Development
We will continue to build on our heritage of product innovation
investing in our customers' future, aligning our R&D roadmaps
with their needs. We will increase the exploitation of our
technical capabilities and synergies across the Group to create new
opportunities and enhance our new product delivery.
Delivering Enhanced Product Solutions
We will create more value for our customers by increasingly
offering enhanced product solutions that allow them to achieve
their outcomes more efficiently and effectively. For some of our
customers this will mean the presentation of results without the
need for further interpretation or intervention. For other
customers this will mean higher performing, easier to use
instruments that will increase their capabilities and productivity.
By way of example, our NanoScience business is increasingly
providing complete measurement systems, not just the cryogenic
hardware.
Delivering Operational Excellence
We will make operational excellence a core capability across the
Group. This includes how we manufacture and deliver our products
and services to our customers. In combination with our leading
products, this will provide the opportunity to drive efficiencies
and productivity gains to enhance our customers' experiences and
our profitability.
Current Trading and Outlook
The increased role of nanotechnology in both life and physical
sciences will continue to yield long-term sustainable growth in the
demand for our high technology solutions and services for use in
research and a broad range of industrial applications. We will
continue to invest in growing the business in our core markets
while further expanding into life sciences and other application
areas where we can create value for our customers.
Revenue and order book are ahead of last year, but given
continued slower academic funding in the US and Europe, and lower
sales in our OI Healthcare business, the Board expects the Group to
deliver a current year performance in line with last year.
Looking further ahead, assuming no change to current foreign
exchange rates and assuming a constant mix of currency results, we
expect a benefit from currency of approximately GBP7.0 million to
operating profit in the 2017/18 financial year.
Operations Review
Our Group reports in three sectors: NanoTechnology Tools,
Industrial Products and Service.
NanoTechnology Tools
2016 2015 Growth Constant
GBPm GBPm Currency
Growth(1)
------------- ------ ------ ------- -----------
Revenue 90.9 85.4 6.4% (4.9%)
------------- ------ ------ ------- -----------
Adjusted(2)
Operating
Profit 11.2 9.5
------------- ------ ------
Adjusted(2)
Operating
Margin 12.3% 11.1%
------------- ------ ------
(1) Excludes foreign exchange
(2) Details of adjusting items can be found in Note 2 of these
Financial Statements
The NanoTechnology Tools sector produces our highest technology
products, which are sold primarily to academic and industrial
research customers. Over three quarters of the revenues of the
products and associated services within this sector come from
research and academia with over a quarter of this coming from
biological sciences. Our customers in this sector are exploring
fundamental science through to the practical application of
nanotechnology, in a broad range of customer application segments.
In the physical and life science research fields, our tools are
used to advance the frontiers of science, and we count many Nobel
laureates amongst our customers. Our relationships with customers
working on breakthrough applications in research and industry allow
us to gain insight into future commercial areas. This informs our
roadmaps, ensuring we continue to offer the most relevant range of
products for the broad base of research and industrial customers
with whom we work.
The NanoTechnology Tools sector comprises two divisions:
NanoCharacterisation, which includes NanoAnalysis, Andor Technology
and Asylum Research; and NanoSolutions, which includes NanoScience,
Plasma Technology and our minority share in the ScientaOmicron
JV.
Our NanoTechnology Tools sector continues to show improvement,
with increased profitability despite a backdrop of reduced funding
in academic markets. The slow release of academic funding and
weaker industrial markets are particularly impacting order intake
in the Americas and Eastern Europe. We continue to see strong
growth in China as the move to a higher technology economy
continues to drive the demand for high performance products. Whilst
overall academic funding remains subdued, we see continued demand
in the nanotechnology arena, with particular growth in the newly
emerging quantum technology segment. The strength of our brand and
the ongoing success of our recent product launches have allowed us
to maintain pricing in these challenging market conditions, driving
improved profitability across the sector. Our focus on solutions
that offer increased performance and ease of use is creating more
value for our customers, providing them with additional information
and higher productivity.
Our NanoAnalysis business delivers leading-edge solutions and
services that enable materials characterisation and sample
manipulation at the nano scale. Our products are used on electron
microscopes and ion-beam systems in academic institutions and
industrial applications including semi-conductors, renewable
energy, mining, metallurgy and forensics. NanoAnalysis continues to
deliver a strong technical and financial performance. We are
creating more value for our customers by providing application
specific solutions that tackle new and emerging industrial
applications in steels and metals manufacturing, and precision
manufacturing. We have extended our AZtec range of automated
particle analysis products to address specific applications for
contamination control in the automotive and data storage
industries. AZtecClean supports automotive manufacturers in
certifying the cleanliness of their parts according to the ISO
16232 standard. AZtecHPA allows the identification of nano sized
particles that cause hard disk failures with a proprietary
classification scheme enabling the identification of contamination
back to the source and supplier. This provides higher productivity
levels and improved consistency of results between suppliers.
Andor Technology is a global leader in the design and
manufacture of high performance scientific imaging cameras,
spectroscopy solutions and microscopy systems for research and
industrial markets. Andor continues to show good progress in the
year driven by the continued success of strong product launches and
a focus on ongoing efficiencies across the business. We have
completed the transfer and integration of our Canadian production
facility and commenced shipping these products from Belfast. We
continue to improve our camera performance in our physical science
markets and have built on our world class sCMOS knowhow to deliver
the iStar sCMOS camera. We recently launched our flagship 3D
microscopy platform, Dragonfly, which resolves many of the barriers
life science researchers face when using conventional confocal
microscopy. Dragonfly lets researchers capture sharper and higher
contrast images at high speeds, something they have never been able
to do before. Dragonfly utilises our unique optical illumination
system combined with our sensitive cameras to deliver unprecedented
performance, resolution and sensitivity. The lower light level
causes less sample damage, which is critical to cancer researchers
who need to visualise deep into their samples, enabling more
accurate data analysis. In addition, the uniformed illumination
combined with acquisition speed enables researchers working with
brain samples to practically capture images across large samples
with sufficient resolution and integrity. Dragonfly uses our new
software platform, Fusion, providing ease of use and immediate
visual feedback of acquired images.
Asylum Research is the technology leader in atomic force
microscopy (AFM) for both materials and bioscience applications.
Asylum has been particularly impacted by the slowdown in research
funding in US and European markets. This has resulted in a
contraction in the overall scanning probe microscopy (SPM) market
and we have made appropriate reductions to the cost base as a
result. Despite this, we continue to invest in Asylum as we see
good growth potential through a broader range of platforms and
solutions for our customers. We have added electrochemical
capabilities to our Cypher AFM to provide the best platform for
those undertaking research into batteries and energy storage
devices. Cypher offers superior environmental control and
unprecedented imaging resolution, of great importance within this
area of research. A recent Nobel Prize winner is using our AFM for
his current research into new flexible materials that could be used
for applications such as wearable electronics and other flexible
nano-devices. As our AFMs continue to be used by customers needing
the highest performing systems, we are looking at how we can offer
this level of performance to a broader range of customers.
Plasma Technology provides material etch and deposition
processes and solutions to semi-conductor research laboratories and
advanced specialised production facilities that develop devices and
materials for novel applications in nanotechnology. Recovery in the
Plasma business is starting to gain momentum, with a stronger order
intake in the first half of the year. We have shifted our focus and
capabilities to provide customers with the broader range of
processes they need to give them the capabilities they are
searching for. Growth was seen in the US, while European markets
remained stable with increasing opportunities in Asia. We are
seeing increased market interest in the recently enhanced PlasmaPro
100 largely due to its wide range of processes and its flexibility.
As an extension to this product, the new Polaris tool is gaining
ground with highly competitive process performance, especially for
the etching of silicon carbide for power semiconductor
applications.
NanoScience designs, manufactures and supports market-leading
research tools that enable quantum technologies, new materials and
device development in the physical sciences. We have increased
revenues driven by the strength of sales of our recently launched
next generation Triton and Optistat Dry products, primarily linked
to increased global funding in quantum technologies, cementing our
market and technical leadership. Product, engineering consultancy
and service revenues all improved on the same period last year. We
continue to provide higher value for our research customers through
increased productivity, throughput and integrated measurement
systems, providing a solution to our customers working in quantum
technologies and physical sciences at low and ultra-low
temperatures.
The ScientaOmicron joint venture created the largest player in
the Ultra-High Vacuum surface science field. The integration and
ongoing restructuring of ScientaOmicron continues in line with
expectations. The financial performance is improving and continuing
to make good progress toward profitability. The Group has a 47%
share in the joint venture.
Industrial Products
2016 2015 Growth Constant
GBPm GBPm Currency
Growth(1)
------------- ------ ------ ------- -----------
Revenue 43.7 46.0 (5.0%) (14.3%)
------------- ------ ------ ------- -----------
Adjusted(2)
Operating
Profit 1.4 1.7
------------- ------ ------
Adjusted(2)
Operating
Margin 3.2% 3.7%
------------- ------ ------
(1) Excludes foreign exchange
(2) Details of adjusting items can be found in Note 2 of these
Financial Statements
Our Industrial Products sector sells more mature, though still
technically advanced, products primarily to industrial customers.
57% of the sector's products and service revenues come from
industrial customers who are working in areas such as the
environment, construction and energy. In the industrial field, our
tools are used to improve production efficiency, ensure high
standards of quality control and demonstrate compliance with
environmental legislation. The proportion of the revenue from MRI
wire continued to decline and now accounts for 29%. Industrial
Products comprises the Industrial Analysis, Superconducting Wire
and X-ray Technology businesses.
The sector saw a decline in sales due to the reduced demand for
superconducting wire from our customers who manufacture MRI systems
as previously reported. Continued weakness across the metals and
construction markets reduced the demand from our customers in these
sectors. However, the launch of new products, combined with
improved efficiencies across this sector, has delivered an improved
profitability from the Industrial portfolio if we exclude the
decline in Superconducting Wire.
Industrial Analysis designs and sells a range of spectrometers
into a broad range of industrial markets. Our customers span global
industries from metals, steel foundries and scrap recycling through
to automotive, solar, petrochemicals, cement, recycling, and food
and agriculture. Our customers continue to be impacted by declining
commodity and oil prices. However, despite the difficult trading
conditions we continue to make margin improvements through our new
product introductions, improved routes to market and further
business efficiencies. Our new products include a new nuclear
magnetic resonance (NMR) analyser, the GeoSpec 12, offering
improved shale measurements, expanding our range of
industry-leading rock core analysers. We continue to focus on
operational excellence and are working to maximise uptime for our
industrial customers. We have seen an increase in the sales of our
Pulsar benchtop NMR spectroscopy system across academic customers
and a broad range of industrial applications. We have recently
launched the Hero(TM) window for our handheld XRF analysers,
allowing hot samples up to 400degC to be directly analysed for
alloying elements, minimising the downtime previously required to
let samples cool before analysis.
Our Superconducting Wire business supplies wire for customers
manufacturing MRI scanners and those working in high magnetic field
research and National and International science facilities. During
the first half of the year we successfully completed the supply of
the last batch of MRI wire to an OEM and renegotiated the future
long-term supply of wire with another MRI manufacturer. The
long-term market fundamentals remain challenging with continued
pricing pressures and uncertainty regarding the funding of large
international facilities.
Our X-ray Technology business supplies X-ray sources for
industry, research and medical applications including material
composition analysis, real time medical imaging and analysis of
multi-layer printed circuit boards. We have increased revenues in
the period and continue to see interest in our integrated X-ray
sources from medical applications and electronic OEM customers. We,
however, continue to be impacted by softening in our industrial
customers' end markets.
Service Sector
2016 2015 Growth Constant
GBPm GBPm Currency
Growth(1)
------------- ------ ------ ------- -----------
Revenue 37.7 33.9 11.2% (0.9%)
------------- ------ ------ ------- -----------
Adjusted(2)
Operating
Profit 6.4 8.8
------------- ------ ------
Adjusted(2)
Operating
Margin 17.0% 26.0%
------------- ------ ------
(1) Excludes foreign exchange
(2) Details of adjusting items can be found in Note 2 of these
Financial Statements
The Service sector comprises the Group's maintenance service
contracts, billable repairs and spare part sales for Oxford
Instruments' own products; and the service, sale and rental of
refurbished third party MRI and CT machines under the OI Healthcare
brand.
Our OI Healthcare business in the US sells refurbished imaging
systems and provides mobile imaging solutions, maintenance services
and replacement parts. Performance in the first half was impacted
by a lower level of sales of refurbished systems compared to the
prior year, which we expect to continue. This has been driven by
both a particularly high level of activity in the prior year but
also a recent change in software licensing policy by one of the
large original manufacturers. As a result we anticipate a reduction
in operating profit from the Healthcare component of our Service
division for the full year.
We continue to see an increase in our revenues from the support
and additional services related to our own products in
NanoTechnology Tools and Industrial Products. We are focusing on
expanding the range of services we offer customers. This includes
the recent launch of new consumable webstores in the USA, Europe
and China. These, alongside our existing webstores, enable
customers to easily find and purchase consumables, services and
training for both our products and other related activities.
Finance Review
The business had a stable performance in the first half of 2016.
Reported revenue grew by 4.1% to GBP171.5 million (2015: GBP164.8
million), with adjusted operating profit declining by 5.0% to
GBP19.0 million (2015: GBP20.0 million). Revenue, excluding
currency effects, declined by 6.9%, with the movement in average
currency exchange rates over the last year positively impacting
reported revenue by GBP18.0 million. Orders during the period were
broadly flat at GBP181.4 million (2015: GBP183.9 million). At the
end of the period the Group order book for future deliveries stood
at GBP162.2 million (2015: GBP136.9 million), growth of 18.5% (5.1%
at constant currency).
Adjusted operating profit, excluding currency effects, declined
by 13.5%. Adjusted operating margin fell by 100 basis points to
11.1% (2015: 12.1%), due to a fall in margin from our Service
sector arising from lower Healthcare sales and a reduction in
profitability from our Superconducting Wire business. Adjusted
operating profit includes realised losses on the maturity of
currency hedges resulting from the devaluation of Sterling against
the US Dollar, Euro and Japanese Yen since the inception of the
hedges.
Non-recurring items and acquisition related costs were GBP1.7
million and the mark-to-market valuation of currency hedges in
place was a loss of GBP6.4 million.
Adjusted profit before tax of GBP15.7 million (2015: GBP16.3
million) represents a margin of 9.2% (2015: 9.9%). A loss before
tax of GBP0.5 million (2015: profit of GBP6.1 million) is after the
mark-to-market of unrealised currency hedges.
Continuing adjusted basic earnings per share fell by 1.4% to
21.4 pence (2015: 21.7 pence). Earnings per share was a loss of 1.2
pence (2015: 4.9 pence).
Cash generated from operations fell by 68.4% to GBP3.7 million,
primarily due to an increase in inventories ahead of planned
shipments and a reduction in payables. Adjusted operating cash
(defined as adjusted EBITDA, less working capital, capitalised
research & development and capital expenditure) represents
10.5% (2015: 69.5%) of adjusted operating profit. Free cash flow
declined to GBP0.4 million (2015: GBP7.5 million). Deferred
consideration paid in the first half of this year and the increase
in working capital led to an increase in net debt to GBP141.1
million from GBP128.2 million at the year end, representing a net
debt to EBITDA ratio (for banking covenant purposes) of 2.6 times,
comfortably within our banking covenant of 3.5 times.
Adjusted operating profit is stated before amortisation of
acquired intangibles, non-recurring items and acquisition-related
costs, and the mark-to-market valuation of unrealised currency
hedges.
1. Income statement
The Group's income statement is summarised below.
Table 1: Income statement
Half year Half year Change
to to
30 September 30 September
2016 2015
GBPm GBPm
------------------------------- -------------- -------------- --------
Revenue 171.5 164.8 +4.1%
------------------------------- -------------- -------------- --------
Gross profit 82.7 75.3 +9.8%
Administrative expenses (63.7) (55.3)
------------------------------- -------------- -------------- --------
Adjusted operating profit 19.0 20.0 -5.0%
Net finance costs (3.3) (3.7)
------------------------------- -------------- -------------- --------
Adjusted profit before
tax 15.7 16.3 -3.7%
Amortisation of acquired
intangibles (8.1) (8.4)
Non-recurring items and
acquisition-related costs (1.7) (2.6)
Mark-to-market of currency
hedges (6.4) 0.8
------------------------------- -------------- -------------- --------
(Loss)/profit before tax (0.5) 6.1
Tax (0.2) (3.1)
------------------------------- -------------- -------------- --------
(Loss)/profit for the
period (0.7) 3.0
------------------------------- -------------- -------------- --------
Effective tax rate(1) 22.3% 23.9%
Continuing adjusted earnings
per share - basic 21.4p 21.7p -1.4%
Continuing adjusted earnings
per share - diluted 21.3p 21.6p -1.4%
Earnings per share - basic (1.2)p 4.9p n/a
Earnings per share - diluted (1.2)p 4.9p n/a
Dividend per share 3.70p 3.70p
------------------------------- -------------- -------------- --------
(1) The effective tax rate is calculated excluding amortisation
on acquired intangibles, non-recurring items and
acquisition-related costs, and the mark-to-market of financial
derivatives
1.1 Revenue
Reported revenue of GBP171.5 million (2015: GBP164.8 million)
increased by 4.1%. NanoTechnology Tools and Service grew by 6.4%
and 11.2% respectively while Industrial Products declined by
5.0%.
The depreciation of Sterling against the US Dollar, Euro and
Japanese Yen has increased reported revenue by GBP18.0 million.
Revenue growth, excluding currency effects, showed a decline of
6.9% with NanoTechnology Tools declining by 4.9%, Service by 0.9%
and Industrial Products by 14.3%.
At constant currency, revenue grew by 0.7% in Asia with strong
growth in China. Revenue in Europe, North America and Rest of World
declined by 4.2%, 14.7% and 23.8% respectively.
The transfer of our Omicron business into a joint venture,
ScientaOmicron, led to a reduction in revenue of GBP2.0 million
compared to the comparative period as under equity accounting we no
longer consolidate the joint venture's revenue.
1.2 Gross profit
Gross profit grew by 9.8% to GBP82.7 million (2015: GBP75.3
million), representing a gross profit margin of 48.2%, an increase
of 250 basis points over last year. At constant currency, gross
margin was 47.3%, an increase of 160 basis points.
1.3 Operating profit
Adjusted operating profit declined by 5.0% to GBP19.0 million
(2015: GBP20.0 million), representing an adjusted operating profit
margin of 11.1%, a decrease of 100 basis points against last year.
The NanoTechnology Tool margin rose by 120 basis points to 12.3%
(2015: 11.1%) while lower Healthcare sales led to margin falling in
Service to 17.0% (2015: 26.0%). A reduction in profit made by the
Superconducting Wire business led to fall in margin in Industrial
Products of 50 basis points to 3.2% (2015: 3.7%). Adjusted
operating profit includes realised losses on the maturity of
currency hedges resulting from the devaluation of Sterling against
the US Dollar, Euro and Japanese Yen since the inception of the
hedges.
Our ScientaOmicron joint venture showed a loss of GBP0.5 million
in the period, an improvement of GBP1.0 million against the
comparative period (which includes four months when the joint
venture was in operation and two months when Omicron was a 100%
subsidiary of the Group).
Currency effects (including the impact of transactional currency
hedging) have increased reported adjusted operating profit by
GBP1.7 million when compared to blended hedged exchange rates for
the comparative period. Blended hedged exchange rates for the US
Dollar, Euro and Japanese Yen against Sterling are all at stronger
rates than last year.
At constant currency the adjusted operating profit margin was
11.3%, a decline of 80 basis points.
1.4 Non-recurring items and acquisition related costs
Net non-recurring items and acquisition-related costs during the
period were GBP1.7 million. Acquisition related costs were GBP0.9
million comprising professional fees and final deferred
consideration (including the unwind of discount) on financial
commitments made by Andor Technology ('Andor') prior to its
acquisition by Oxford Instruments. In the period we have written
down development costs of GBP0.7 million on a specific project that
has been stopped as we focus and direct resources so as to
accelerate key projects. The ScientaOmicron joint venture incurred
restructuring costs in the period of GBP0.1 million.
The Group uses derivative products to hedge its exposure to
fluctuations in foreign exchange rates. It is Group policy to have
in place at the beginning of the financial year hedging instruments
to cover 80% of its forecast transactional exposure for that year.
The Group has decided that the additional costs of meeting the
extensive documentation requirements of IAS 39 to apply hedge
accounting to these foreign exchange hedges cannot be justified.
Accordingly, the Group does not use hedge accounting for these
derivatives.
Net movements on marking-to-market such derivatives at the
balance sheet date are disclosed in the Income Statement as
financial expenditure and excluded from our calculation of adjusted
profit before tax.
The mark-to-market loss in respect of derivative financial
instruments was GBP6.4 million (2015: GBP0.8 million gain). This
reflects the fair value on currency derivatives that are hedging
future transactional currency exposures for the Group. The
unrealised loss is attributable to a fall in the value of Sterling
at the balance sheet date against the US Dollar, Euro and Japanese
Yen, against a blended rate achieved on forward contracts that will
mature over the next eighteen months.
1.5 Net finance costs
The Group's net finance costs fell by GBP0.4 million to GBP3.3
million (2015: GBP3.7 million) with finance charges falling by
GBP0.3 million to GBP2.8 million, pension financing charges falling
by GBP0.2 million to GBP0.6 million and financial income falling by
GBP0.1 million.
1.6 Profit before tax
Adjusted profit before tax fell by 3.7% to GBP15.7 million
(2015: GBP16.3 million). The adjusted profit before tax margin
declined 70 basis points to 9.2% (2015: 9.9%).
A loss before tax of GBP0.5 million (2015: profit of GBP6.1
million) is after the mark-to-market charge on derivative financial
instruments of GBP6.4 million.
1.7 Amortisation of acquired intangibles
Amortisation of acquired intangibles of GBP8.1 million relates
to intangible assets identified on acquisitions, being the value of
technology, customer relationships and brands.
1.8 Tax
The tax charge (excluding tax on non-recurring items and on the
amortisation of acquired intangibles) of GBP3.5 million (2015:
GBP3.9 million) represents an effective tax rate of 22.3% (2015:
23.9%). The decrease is due to a change in the proportional mix in
territories where profits are generated.
1.9 Earnings per share (EPS)
Continuing adjusted basic earnings per share and continuing
adjusted diluted earnings per share, after adjusting for
amortisation of intangibles and non-recurring items, decreased by
1.4%. After amortisation of acquired intangibles, non-recurring
items and acquisition related costs (including the mark-to-market
of derivative financial instruments), basic and diluted earnings
per share were both a negative 1.2 pence.
Undiluted weighted average shares have stayed flat at 57.1
million.
2.0 Foreign Exchange
The Group faces transactional and translational currency
exposure, most notably against the US Dollar, Euro and Japanese
Yen. For the first half of the year, approximately 10% of Group
revenue was denominated in Sterling, 61% in US Dollars, 16% in
Euros, 8% in Japanese Yen and 5% in other currencies. The Group has
both translational and transactional exposure. Translational
exposures arise on the consolidation of overseas company results
into Sterling. Transactional exposures arise where the currency of
sale or purchase transactions differs from the functional currency
in which each company prepares its local accounts.
The Group maintains a hedging programme against its net
transactional exposure using internal projections of expected
currency trading transactions expected to arise over a period
extending from 12 to 24 months. As at 30 September 2016 the Group
had currency hedges in place extending up to 18 months forward.
We have seen recent weakening of Sterling against our major
trading currencies. If currencies were to continue at current
levels and assuming a constant mix of currency results, we expect a
currency benefit of approximately GBP7 million to operating profit
in the 2017/18 financial year.
2. Dividend
The Group's policy is to increase the total dividend each year
in line with the increase in underlying earnings. As adjusted basic
earnings per share were at a similar level to last year, the Board
has declared an interim dividend of 3.7 pence, in line with last
year. The dividend will be paid on 7 April 2017 to shareholders on
the register as at 10 March 2017.
3. Cash flow
The Group cash flow is summarised below.
Table 2: Cash flow
Half year Half year
to to
30 September 30 September
2016 2015
GBPm GBPm
------------------------------------- -------------- --------------
Adjusted operating profit 19.0 20.0
Non-cash items 5.7 4.7
------------------------------------- -------------- --------------
Adjusted EBITDA 24.7 24.7
Working capital movement (17.0) (5.3)
Acquisition related costs
paid (0.8) (1.2)
Restructuring costs - (3.5)
Pension scheme payments above
charge to op. profit (3.5) (3.3)
Equity settled share schemes - 0.2
Loss on disposal of plant
and equipment 0.3 0.1
------------------------------------- -------------- --------------
Cash generated from operations 3.7 11.7
Interest (2.6) (2.8)
Tax (0.7) (1.4)
------------------------------------- -------------- --------------
Free cash flow 0.4 7.5
Capitalised development expenditure (4.0) (3.3)
Expenditure on tangible and
intangible assets (2.0) (2.3)
Acquisition of subsidiaries,
net of cash acquired (6.8) (15.6)
Increase in long term receivables - (3.1)
Dividends paid (2.1) (2.1)
Increase in borrowings 11.6 10.8
------------------------------------- -------------- --------------
Net decrease in cash and cash
equivalents from continuing
operations (2.9) (8.1)
------------------------------------- -------------- --------------
Note: Adjusted EBITDA is earnings before interest, tax,
depreciation, intangible amortisation, mark-to-market of financial
derivatives and other non-cash items
3.1 Cash generated from operations
Cash generated from operations in the year decreased by 68.4% to
GBP3.7 million (2015: GBP11.7 million). Adjusted operating cash
(defined as adjusted EBITDA, less working capital, capitalised
research & development and capital expenditure) represents
10.5% (2015: 69.5%) of adjusted operating profit due to an outflow
of working capital over the period. Free cash flow declined to
GBP0.4 million (2015: GBP7.5 million).
The business normally experiences a working capital outflow in
the first half of the year resulting in a cash conversion rate much
lower than seen at the year end. This half year cash conversion has
been impacted by three principal factors. First, an increase in
inventories of GBP5.0 million reflects work in progress and
inventory building prior to the second half across NanoTechnology
Tools and Industrial Products, in line with anticipated shipments.
Second, within the Healthcare business we have had a build up of
refurbished imaging system inventory prior to sale or rental in the
second half of the year. Finally, we have experienced a reduction
in payables due to phasing of payments compared to the year end
and, in addition, within our optical microscopy business, we
transferred a significant manufacturing component from an external
supplier to self manufacture, resulting in a one-off reduction this
year of GBP2.0 million in payables.
3.2 Interest
Net interest paid was GBP2.6 million (2015: GBP2.8 million),
broadly in line with last year.
3.3 Tax
Tax paid was GBP0.7 million (2015: GBP1.4 million), the
reduction reflecting utilisation of brought forward tax losses.
3.4 Investment in research and development (R&D)
Total cash spend on R&D in the year was GBP15.1 million,
equivalent to 8.8% of revenue, (2015: GBP13.5 million, 8.2% of
revenue). A reconciliation between the amounts charged to the
Income Statement and the cash spent is given below:
Table 3: Investment in research and development (R&D)
Half year Half year
to to
30 September 30 September
2016 2015
GBPm GBPm
----------------------------------- -------------- --------------
R&D expense charged to the
Income Statement 13.3 11.8
Less: depreciation of R&D
related fixed assets (0.4) (0.4)
Add: amounts capitalised as
fixed assets 0.2 0.4
Less: amortisation of R&D
costs capitalised as intangibles (2.0) (1.6)
Add: amounts capitalised as
intangible assets 4.0 3.3
----------------------------------- -------------- --------------
Total cash spent on R&D during
the year 15.1 13.5
----------------------------------- -------------- --------------
3.5 Financing
The increase in borrowings reflects the draw-down of debt on our
multi-currency revolving credit facility.
4. Acquisitions
Acquisition of subsidiaries relates to the final payment of
deferred consideration of US$ 10.1 million (GBP6.5 million) for
Medical Imaging Resources, Inc ('MIR') and GBP0.3 million
attributable to the purchase of Asylum Research Corporation
('Asylum').
5. Net debt and funding
5.1 Net debt
Net debt increased in the period from GBP128.2 million to
GBP141.1 million. Free cash flow of GBP0.4 million was before
acquisition payments, capital and expenditure, capitalised research
and development, and dividend payments. Expenditure of GBP6.8
million relates to deferred consideration payable for MIR and
Asylum. The Group invested in tangible and intangible assets of
GBP2.0 million and capitalised research and development of GBP4.0
million.
In October 2016 we paid deferred consideration of Canadian
Dollar 5.0 million (GBP3.1 million) on financial commitments made
by Andor. Net debt at the end of the 2016/17 financial year is
expected to be marginally above the previous financial year.
Table 4: Movement in net debt
GBPm
------------------------------------- -------
Net debt as at 31 March 2016 128.2
Free cash flow (0.4)
Capital expenditure on tangible and
intangible assets 2.0
Capitalised development expenditure 4.0
Acquisitions, net of cash acquired
and loan to associate 6.8
Dividends paid 2.1
Foreign exchange (1.6)
------------------------------------- -------
Net debt as at 30 September 2016 141.1
------------------------------------- -------
5.2 Funding
The Group has in place an unsecured multi-currency revolving
facility agreement which is committed until February 2020. The
facility has been entered into with a group of three banks and
comprises a Sterling denominated multi-currency facility of GBP100
million and a US Dollar denominated multi-currency facility of
$37.0 million.
The Group has also issued a bilateral private placement note of
GBP44.5 million, which matures in 2021 and a GBP25.0 million
amortising fixed rate loan from the European Investment Bank that
matures in 2020. In addition, the Group has uncommitted facilities
of GBP21.2 million.
Debt covenants are net debt to EBITDA less than 3.5 times,
reducing to 3.0 times from 31 March 2017 thereafter, and EBITDA to
interest greater than 4.0 times. As at 30 September 2016 net debt
to EBITDA was at 2.6 times and EBITDA to interest was 9.5
times.
6. Pensions
The Group has defined benefit pension schemes in the UK and USA.
Both have been closed to new entrants since 2001 and closed to
future accrual from July 2010.
At 30 September 2016, the net liability arising from our defined
benefit scheme obligations was GBP47.5 million (2015 year end:
GBP35.0 million), an increase of GBP12.5 million. Macroeconomic
conditions have resulted in a fall in bond yields leading to a
reduction in the discount rate and an increase in liabilities. An
increase in the value of scheme assets has partially offset the
movement in liabilities.
7. Forward-Looking Statements
This document contains certain forward-looking statements. The
forward-looking statements reflect the knowledge and information
available to the Company during the preparation and up to the
publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may
occur in the future thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit
forecast by the Company.
Gavin Hill
Group Finance Director
15 November 2016
Condensed Consolidated Statement of Income
Half year ended 30 September 2016 - unaudited
Half Year to 30 Half Year to
Sept 2016 30 Sept 2015
Adjusted Adjusting Total Adjusted Adjusting Total
items* items*
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
Revenue 3 171.5 - 171.5 164.8 - 164.8
Cost of sales (88.8) - (88.8) (89.5) - (89.5)
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
Gross profit 82.7 - 82.7 75.3 - 75.3
Research and development 4 (13.3) (0.7) (14.0) (11.8) - (11.8)
Selling and marketing (31.0) - (31.0) (28.3) - (28.3)
Administration
and shared services (15.5) (8.8) (24.3) (15.6) (13.3) (28.9)
Share of loss
of associate,
net of tax (0.4) (0.1) (0.5) - (0.2) (0.2)
Other operating
income - - - - 3.2 3.2
Foreign exchange
(loss)/gain (3.5) - (3.5) 0.4 - 0.4
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
Operating profit 19.0 (9.6) 9.4 20.0 (10.3) 9.7
Other financial
income 0.1 - 0.1 0.2 0.8 1.0
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
Financial income 0.1 - 0.1 0.2 0.8 1.0
Interest charge
on pension scheme
net liabilities (0.6) - (0.6) (0.8) - (0.8)
Other financial
expenditure (2.8) (6.6) (9.4) (3.1) (0.7) (3.8)
Financial expenditure (3.4) (6.6) (10.0) (3.9) (0.7) (4.6)
(Loss)/profit
before income
tax from continuing
operations 3 15.7 (16.2) (0.5) 16.3 (10.2) 6.1
Income tax (expense)/credit 8 (3.5) 3.3 (0.2) (3.9) 0.8 (3.1)
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
(Loss)/profit
for the period
from continuing
operations 12.2 (12.9) (0.7) 12.4 (9.4) 3.0
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
Loss from discontinued
operations after
tax - - - (0.3) - (0.3)
(Loss)/profit
for the period
attributable to
equity holders
of the parent 12.2 (12.9) (0.7) 12.1 (9.4) 2.7
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
pence pence pence pence
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
Earnings per share
Basic earnings
per share 9
From continuing
operations 21.4 (1.2) 21.7 5.3
From discontinued
operations - - (0.4) (0.4)
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
From (loss)/profit
for the period 21.4 (1.2) 21.3 4.9
Diluted earnings
per share 9
From continuing
operations 21.3 (1.2) 21.6 5.2
From discontinued
operations - - (0.3) (0.3)
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
From loss/profit
for the period 21.3 (1.2) 21.3 4.9
Dividends per
share
Dividends paid 10 3.70 3.70
Dividends proposed 10 3.70 3.70
----------------------------- ------ --------- ---------- ------- --------- ---------- -------
* 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 Income
Half year ended 30 September 2016 - unaudited
Year to 31 March
2016
Adjusted Adjusting Total
items*
Notes GBPm GBPm GBPm
---------------------------------- ------ --------- ---------- --------
Revenue 3 361.6 - 361.6
Cost of sales (199.7) (1.0) (200.7)
--------------------------------------- ------ --------- ---------- --------
Gross profit 161.9 (1.0) 160.9
Research and development 4 (24.6) - (24.6)
Selling and marketing (59.8) - (59.8)
Administration and shared
services (33.4) (23.0) (56.4)
Share of loss of associate,
net of tax (0.2) (1.3) (1.5)
Other operating income - 4.9 4.9
Foreign exchange gain 0.7 - 0.7
--------------------------------------- ------ --------- ---------- --------
Operating profit 44.6 (20.4) 24.2
---
Other financial income - - -
---- ---------------------------------- ------ --------- ---------- -------- ---
Financial income - - -
Interest charge on pension
scheme net liabilities (1.7) - (1.7)
Other financial expenditure (5.9) (3.5) (9.4)
-------- ---
Financial expenditure (7.6) (3.5) (11.1)
Profit before income
tax from continuing
operations 37.0 (23.9) 13.1
Income tax (expense)/credit 8 (8.9) 5.0 (3.9)
--------------------------------------- ------ --------- ---------- --------
Profit for the period
from continuing operations 28.1 (18.9) 9.2
--------------------------------------- ------ --------- ---------- --------
Loss from discontinued
operations after tax (0.3) (1.9) (2.2)
Profit for the period
attributable to equity
holders of the parent 27.8 (20.8) 7.0
--------------------------------------- ------ --------- ---------- --------
Earnings per share
Basic earnings per share 9
From continuing operations 49.2 16.1
From discontinued operations (0.5) (3.9)
--------------------------------------- ------ --------- ---------- --------
From profit for the
period 48.7 12.2
Diluted earnings per
share 9
From continuing operations 49.1 16.1
From discontinued operations (0.5) (3.8)
--------------------------------------- ------ --------- ---------- --------
From profit for the
period 48.6 12.3
Dividends per share
Dividends paid 10 13.0
Dividends proposed 10 13.0
--------------------------------------- ------ --------- ---------- --------
*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 2015 - unaudited
Half year Half Year
to year to
to
30 Sept 30 Sept 31 March
2016 2015 2016
GBPm GBPm GBPm
--------------------------------------- ---------- -------- ---------
(Loss)/profit for the period (0.7) 2.7 7.0
Other comprehensive income/(expense):
Items that may be reclassified
subsequently to profit or loss
Foreign exchange differences
recycled from other comprehensive
income on disposal of subsidiary - 1.8 -
Foreign exchange translation
differences 14.7 (2.1) 5.6
Net foreign exchange loss on
disposal of subsidiaries taken
to the Income Statement - - 1.2
Gain/(loss) on effective portion
of changes in fair value of
cash flow hedges, net of amounts
recycled 0.1 0.1 (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 (loss)/gain in
respect of post retirement
benefits (15.1) 10.5 13.6
Tax on items that will not
be reclassified to profit or
loss 2.7 (2.2) (2.6)
--------------------------------------- ---------- -------- ---------
Total other comprehensive income 2.4 8.1 17.7
Total comprehensive income
for the period attributable
to equity shareholders of the
parent 1.7 10.8 24.7
--------------------------------------- ---------- -------- ---------
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2016 - 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 2016 2.9 61.5 0.1 9.7 68.8 143.0
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Total comprehensive income:
Loss for the period - - - - (0.7) (0.7)
Other comprehensive income:
* Foreign exchange translation differences - - - 14.7 - 14.7
* Gain on effective portion of changes in fair value of
cash flow hedges, net of amounts recycled - - 0.1 - - 0.1
* Remeasurement loss in respect of post-retirement
benefits - - - - (15.1) (15.1)
* Tax on items recognised directly in other
comprehensive income - - - - 2.7 2.7
------------------------------------------------------------
Total comprehensive income/(expense)
attributable to equity shareholders
of the parent - - 0.1 14.7 (13.1) 1.7
Transactions with owners
recorded directly in equity:
* Credit in respect of employee service costs settled
by award of share options - - - - - -
* Dividends payable - - - - (7.4) (7.4)
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Total transactions with
owners recorded directly
in equity: - - - - (7.4) (7.4)
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Balance at 30 September
2016 2.9 61.5 0.2 24.4 48.3 137.3
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Foreign
Share exchange
Share premium Other translation Retained
capital account reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Balance at 1 April 2015 2.9 61.5 0.2 2.9 58.0 125.5
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Total comprehensive income:
Profit for the period - - - - 2.7 2.7
Other comprehensive income:
* Foreign exchange differences recycled from other
comprehensive income on disposal of subsidiary - - - 1.8 - 1.8
* Foreign exchange translation differences - - - (2.1) - (2.1)
* Gain on effective portion of changes in fair value of
cash flow hedges, net of amounts recycled - - 0.1 - - 0.1
* Remeasurement gain in respect of post-retirement
benefits - - - - 10.5 10.5
* Tax on items recognised directly in other
comprehensive income - - - - (2.2) (2.2)
------------------------------------------------------------
Total comprehensive income/(expense)
attributable to equity shareholders
of the parent - - 0.1 (0.3) 11.0 10.8
Transactions with owners
recorded directly in equity:
* Credit in respect of employee service costs settled
by award of share options - - - - 0.2 0.2
* Dividends payable - - - - (7.4) (7.4)
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Total transactions with
owners recorded directly
in equity: - - - - (7.2) (7.2)
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Balance at 30 September
2015 2.9 61.5 0.3 2.6 61.8 129.1
------------------------------------------------------------ ------- ------- -------- ----------- -------- ------
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2016 - unaudited continued
Foreign
Share exchange
Share premium Other translation Retained
capital account reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 1 April 2015 2.9 61.5 0.2 2.9 58.0 125.5
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total comprehensive income:
Profit for the year - - - - 7.0 7.0
Other comprehensive income:
* Foreign exchange translation differences - - - 5.6 - 5.6
* Net foreign exchange loss on disposal of subsidiaries
taken to the Income Statement - - - 1.2 - 1.2
* Loss on effective portion of changes in fair value of
cash flow hedges, net of amounts recycled - - (0.1) - - (0.1)
* Remeasurement gain in respect of post-retirement
benefits - - - - 13.6 13.6
* Tax on items recognised directly in other
comprehensive income - - - - (2.6) (2.6)
------------------------------------------------------------
Total comprehensive (expense)/income
attributable to equity
shareholders of the parent - - (0.1) 6.8 18.0 24.7
Transactions with owners
recorded directly in equity:
* Charge in respect of employee service costs settled
by award of share options - - - - 0.4 0.4
* Dividends payable - - - - (7.6) (7.6)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total transactions with
owners recorded directly
in equity: - - - - (7.2) (7.2)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 31 March 2016 2.9 61.5 0.1 9.7 68.8 143.0
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Condensed Consolidated Statement of Financial Position
As at 30 September 2016 - unaudited
As at As at As at
30 Sept 30 Sept 31 March
2016 2015 2016
Notes GBPm GBPm GBPm
Assets
Non-current assets
Property, plant and equipment 36.0 35.2 35.2
Intangible assets 220.7 225.8 220.8
Investment in associate 12.6 14.4 13.1
Long-term receivables 3.6 3.1 3.4
Deferred tax assets 21.5 17.8 19.0
294.4 296.3 291.5
Current assets
Inventories 69.8 68.8 61.1
Trade and other receivables 79.2 71.5 77.5
Current income tax receivable 2.4 4.1 2.7
Derivative financial instruments - 2.3 1.5
Assets of discontinued
operations held for sale 7 - 1.2 -
Cash and cash equivalents 20.9 15.3 21.8
172.3 163.2 164.6
Total assets 466.7 459.5 456.1
----------------------------------- ------ -------- -------- ---------
Equity
Capital and reserves attributable
to the Company's equity
shareholders
Share capital 2.9 2.9 2.9
Share premium 61.5 61.5 61.5
Other reserves 0.2 0.3 0.1
Translation reserve 24.4 2.6 9.7
Retained earnings 48.3 61.8 68.8
137.3 129.1 143.0
Liabilities
Non-current liabilities
Bank loans 154.0 154.8 147.0
Other payables - 1.2 -
Retirement benefit obligations 47.5 40.5 35.0
Deferred tax liabilities 1.8 7.1 5.7
----------------------------------- ------ -------- -------- ---------
203.3 203.6 187.7
Current liabilities
Bank loans and overdrafts 8.0 - 3.0
Trade and other payables 87.3 102.6 102.4
Current income tax payables 3.5 5.2 2.1
Accrued dividend 5.3 5.3 -
Derivative financial instruments 10.9 2.0 5.8
Liabilities of discontinued
operations held for sale 7 - 0.4 -
Provisions 11.1 11.3 12.1
----------------------------------- ------ -------- -------- ---------
126.1 126.8 125.4
Total liabilities 329.4 330.4 313.1
Total liabilities and
equity 466.7 459.5 456.1
----------------------------------- ------ -------- -------- ---------
Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2016 - unaudited
Half year Half year Year
to to to
30 Sept 30 Sept 31 March
2016 2015 2016
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------
(Loss)/profit for the period
from continuing operations (0.7) 3.0 9.2
Adjustments for:
Income tax (credit)/expense 0.2 3.1 3.9
Net financial expense 9.9 3.6 11.1
Reversal of acquisition related
fair value adjustments - - 1.0
Acquisition related costs 0.7 0.8 2.5
Restructuring costs - 0.6 2.9
Restructuring costs - relating
to associate 0.1 0.2 1.3
Loss on disposal of subsidiary - - 0.9
Contingent consideration deemed
no longer payable - (3.2) (4.9)
Contingent consideration -
further amount deemed payable - 0.7 -
Share of loss from associate 0.4 - 0.2
Impairment loss of assets
held for sale - 2.8 -
Amortisation and impairment
of acquired intangibles 8.1 8.4 16.7
Depreciation of property,
plant and equipment 3.3 3.1 6.3
Amortisation and impairment
of capitalised development
costs 2.7 1.6 3.9
-------------------------------------- ---------- ---------- ---------
Adjusted earnings before interest,
tax, depreciation and amortisation 24.7 24.7 55.0
Loss on disposal of plant,
property and equipment 0.3 0.1 0.1
Cost of equity settled employee
share schemes - 0.2 0.4
Acquisition related costs
paid (0.8) (1.2) (1.8)
Restructuring costs paid - (3.5) (4.7)
Cash payments to the pension
scheme more than the charge
to operating profit (3.5) (3.3) (6.7)
-------------------------------------- ---------- ---------- ---------
Operating cash flows before
movements in working capital 20.7 17.0 42.3
(Increase)/decrease in inventories (5.0) (6.7) 2.7
Decrease in receivables 3.7 7.6 9.3
Decrease in payables and provisions (15.3) (9.4) (1.2)
Increase/(decrease) in customer
deposits 0.1 3.2 (0.5)
Purchase of rental assets
held for subsequent sale (0.5) - (3.0)
Cash generated by operations 3.7 11.7 49.6
Interest paid (2.6) (2.8) (5.6)
Income taxes paid (0.7) (1.4) (3.5)
-------------------------------------- ---------- ---------- ---------
Net cash from operating activities 0.4 7.5 40.5
-------------------------------------- ---------- ---------- ---------
Cash flows from investing
activities
Acquisition of subsidiaries
- deferred consideration paid (6.8) (15.6) (27.1)
Acquisition of property, plant
and equipment (1.9) (2.1) (2.5)
Acquisition of intangible
assets (0.1) (0.2) (0.2)
Net cash flow on disposal
of subsidiary - - 0.6
Capitalised development expenditure (4.0) (3.3) (8.2)
-------------------------------------- ---------- ---------- ---------
Net cash used in investing
activities (12.8) (21.2) (37.4)
-------------------------------------- ---------- ---------- ---------
Cash flows from financing
activities
Increase in long-term receivables - (3.1) (3.0)
Increase in borrowings 11.6 10.8 4.6
Dividends paid (2.1) (2.1) (7.6)
-------------------------------------- ---------- ---------- ---------
Net cash generated from/(used
in) financing activities 9.5 5.6 (6.0)
-------------------------------------- ---------- ---------- ---------
Net decrease in cash and cash
equivalents from continuing
operations (2.9) (8.1) (2.9)
Decrease in cash from discontinued
operations - (0.4) (0.9)
Cash and cash equivalents
at beginning of the period 20.4 25.1 25.1
Effect of exchange rate fluctuations
on cash held 1.6 (1.3) (0.9)
-------------------------------------- ---------- ---------- ---------
Cash and cash equivalents
at end of the period 19.1 15.3 20.4
-------------------------------------- ---------- ---------- ---------
Reconciliation of changes in cash and cash equivalents
to movement in net debt
Half year Half year Year
to to to
30 Sept 30 Sept 31 March
2016 2015 2016
GBPm GBPm GBPm
--------------------------------- ---------- ---------- ---------
Decrease in cash and cash
equivalents (2.9) (8.5) (3.8)
Effect of foreign exchange
rate changes on cash and cash
equivalents 1.6 (1.3) (0.9)
--------------------------------- ---------- ---------- ---------
(1.3) (9.8) (4.7)
Cash inflow from increase
in debt (11.6) (10.8) (4.6)
Increase in net debt in the
period (12.9) (20.6) (9.3)
Net debt at start of the period (128.2) (118.9) (118.9)
--------------------------------- ---------- ---------- ---------
Net debt at the end of the
period (141.1) (139.5) (128.2)
--------------------------------- ---------- ---------- ---------
Notes on the Half Year Financial Statements
Half year ended 30 September 2016 - unaudited
1 BASIS OF PREparATION OF ACCOUNTS
Reporting entity
Oxford Instruments plc 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 2016.
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 2016 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 2016, except as explained below.
Adoption of new and revised standards
At present, there are no other new standards, amendments to
standards or interpretations mandatory for the first time for the
year ending 31 March 2017.
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 2016.
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
2016 2015 2016
US Dollar 1.30 1.51 1.44
Euro 1.16 1.36 1.26
Yen 132 181 162
--------------------------- ---------- ---------- ---------
Average translation rates US Dollar Euro Yen
--------------------------- ---------- ---------- ---------
Half year to 30 September
2016
April 1.45 1.27 159
May 1.46 1.30 159
June 1.41 1.27 150
July 1.35 1.21 138
August 1.32 1.18 134
September 1.31 1.16 132
--------------------------- ---------- ---------- ---------
Average translation rates
year ended 30 March 2016 US Dollar Euro Yen
April 1.50 1.37 180
May 1.52 1.37 186
June 1.55 1.40 192
July 1.57 1.41 194
August 1.55 1.39 190
September 1.53 1.36 184
October 1.53 1.38 184
November 1.53 1.41 186
December 1.49 1.39 181
January 1.45 1.33 175
February 1.40 1.29 165
March 1.41 1.27 160
--------------------------- ---------- ----- ----
2 NON-GAAP MEASURES
The Directors present the following non-GAAP measures 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
2016 2015 2016
GBPm GBPm GBPm
------------------------------------- ---------- ---------- ---------
(Loss)/profit before income
tax from continuing operations (0.5) 6.1 13.1
Reversal of acquisition related
fair value adjustments to
inventory - - 0.2
Reversal of acquisition related
fair value adjustments to
property, plant and equipment - - 0.8
Acquisition related costs 0.7 0.8 2.5
Restructuring costs - 0.8 2.9
Restructuring costs - relating
to associate 0.1 - 1.3
Loss on disposal of subsidiary - - 0.9
Amortisation and impairment
of acquired intangibles 8.1 8.4 16.7
Impairment loss on assets
held for sale - 2.8 -
One-off impairment of capitalised
development costs 0.7 - -
Contingent consideration -
further amount deemed payable - 0.7 -
Contingent consideration deemed
no longer payable - (3.2) (4.9)
Unwind of discount in respect
of deferred consideration
and acquisition related accruals 0.2 0.7 0.8
Mark to market loss/(gain)
in respect of derivative financial
instruments 6.4 (0.8) 2.7
Adjusted profit before income
tax from continuing operations 15.7 16.3 37.0
Share of taxation (3.5) (3.9) (8.9)
------------------------------------- ---------- ---------- ---------
Adjusted profit from continuing
operations 12.2 12.4 28.1
------------------------------------- ---------- ---------- ---------
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.
Restructuring costs relating to the Group's investment in
ScientaOmicron relate to the ongoing integration programme of the
former Scienta and Omicron businesses.
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
contingent consideration relating to business combinations.
During the year the Group has impaired development costs of
GBP0.7 million on a specific project that has been stopped as we
focus and direct resources so as to accelerate key projects.
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.
In the prior year the reversal of acquisition related fair value
adjustments to inventory and property, plant and equipment were
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.
Prior year restructuring costs comprise one-off costs in respect
of the cost reduction programme begun in 2014/15, including an
impairment of inventory and capitalised development costs in the
Plasma Technology business in relation to the exit from the HBLED
market.
In the prior half year the Group classified its Austin
Scientific Business as held for sale and recognised an impairment
charge of GBP2.8 million to reduce the carrying value of the net
assets of the Austin Scientific Business to the fair value less
costs to sell. By the year end, this amount had been transferred to
discontinued operations.
In the prior year, the Group made a loss on disposal of its
Omicron business of GBP0.9 million and GBP4.9 million was released
relating to contingent consideration on the acquisition of Asylum
Research Corporation following the end of the earnout period.
In calculating the share of tax attributable to adjusted profit
before tax in 2011 a one-off recognition of deferred tax assets
relating to the Group's UK businesses of GBP11.3 million 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 prior half year deferred tax of GBP0.4
million reversed and consequently was excluded from the tax
attributable to adjusted profit before tax.
3 SEGMENT Information
The Group has eight 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, rental and
refurbished asset sales 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 2016
NanoTechnology Industrial
Tools Products Service Total
GBPm GBPm GBPm GBPm
------------------------ -------------- ---------- ------- -----
External revenue 90.9 42.9 37.7 171.5
Inter-segment revenue - 0.8 -
------------------------ -------------- ---------- -------
Total segment revenue 90.9 43.7 37.7
Segment operating
profit from continuing
operations 11.2 1.4 6.4 19.0
------------------------ -------------- ---------- ------- -----
Half year to 30 September 2015
NanoTechnology Industrial
Tools Products Service Total
GBPm GBPm GBPm GBPm
------------------------ -------------- ---------- ------- -----
External revenue 85.4 45.5 33.9 164.8
Inter-segment revenue - 0.5 -
------------------------ -------------- ---------- -------
Total segment revenue 85.4 46.0 33.9
Segment operating
profit from continuing
operations 9.5 1.7 8.8 20.0
------------------------ -------------- ---------- ------- -----
Year to 31 March 2016
NanoTechnology Industrial
Tools Products Service Total
GBPm GBPm GBPm GBPm
------------------------ -------------- ---------- ------- -----
External revenue 187.3 95.9 78.4 361.6
Inter-segment revenue 0.1 0.7 -
------------------------ -------------- ---------- -------
Total segment revenue 187.4 96.6 78.4
Segment operating
profit from continuing
operations 21.3 4.5 18.8 44.6
------------------------ -------------- ---------- ------- -----
Reconciliation of reportable segment profit from continuing
operations
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2016 2015 2016
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ---------
Operating profit for reportable
segments from continuing
operations 19.0 20.0 44.6
Reversal of acquisition related
fair value adjustments to
inventory - - (0.2)
Reversal of acquisition related
fair value adjustments to
property, plant and equipment - - (0.8)
Acquisition related costs (0.7) (0.8) (2.5)
Restructuring costs - (0.8) (2.9)
Restructuring costs - relating
to associate (0.1) - (1.3)
Loss on disposal of subsidiary - - (0.9)
Amortisation of acquired
intangibles (8.1) (8.4) (16.7)
Impairment loss on assets
held for sale - (2.8) -
One-off impairment of capitalised
development costs (0.7) - -
Contingent consideration
- further amount deemed payable - (0.7) -
Contingent consideration
deemed no longer payable - 3.2 4.9
Financial income 0.1 1.0 -
Financial expenditure (10.0) (4.6) (11.1)
----------------------------------- ---------- ---------- ---------
Profit before income tax
from continuing operations (0.5) 6.1 13.1
----------------------------------- ---------- ---------- ---------
4 RESEARCH AND DEVELOPMENT
Adjusted research and development spend by the Group is as
follows:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2016 2015 2016
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------
Research and development
expense charged to the consolidated
statement of income 13.3 11.8 24.6
Less: depreciation of R&D
related fixed assets (0.4) (0.4) (0.8)
Add: amounts capitalised
as fixed assets 0.2 0.4 1.2
Less: amortisation and impairment
of R&D costs previously
capitalised as intangibles (2.0) (1.6) (3.9)
Add: amounts capitalised
as intangible assets 4.0 3.3 8.2
Total cash spent on research
and development during the
period 15.1 13.5 29.3
-------------------------------------- ---------- ---------- ---------
5 ACQUISITIONS - prior period
Medical Imaging Resources, Inc.
On 1 May 2015 the Group acquired 100% of the issued share
capital of Medical Imaging Resources, Inc. (MIR) for a net cash
consideration of GBP8.7 million. Further contingent consideration
of up to GBP6.3 million was payable based on the performance of the
Oxford Instruments Healthcare business in the year to 31 March
2016. MIR specialises in the build, lease and service of mobile
medical imaging labs.
The book and fair values of the assets and liabilities acquired
are 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 and to reflect the fair value of
assets and liabilities acquired. The business has been acquired for
the purpose of integrating into the Oxford Instruments Healthcare
business where it is believed that a number of synergies can be
obtained.
Provisional Provisional
Book value Adjustments Fair value
GBPm GBPm GBPm
---------------------------- ---------- ------------ -----------
Intangible fixed assets - 5.7 5.7
Tangible fixed assets 3.8 0.5 4.3
Inventories 1.4 0.1 1.5
Trade and other receivables 0.9 - 0.9
Trade and other payables (1.7) - (1.7)
Deferred tax 0.2 (0.4) (0.2)
Net debt (2.6) - (2.6)
---------------------------- ---------- ------------ -----------
Net assets acquired 2.0 5.9 7.9
Goodwill 4.5
---------------------------- ---------- ------------ -----------
Total consideration 12.4
Net debt acquired 2.6
Contingent consideration
at acquisition (6.3)
---------------------------- ---------- ------------ -----------
Net cash outflow relating
to the acquisition 8.7
---------------------------- ---------- ------------ -----------
The goodwill arising is not tax deductible and is considered to
represent the value of the acquired workforce and synergistic
benefits expected to arise from the acquisition. Further contingent
consideration of GBP6.5 million was paid during May 2016 based on
the performance of the Oxford Instruments Healthcare business in
the year to 31 March 2016. The difference of GBP0.2 million between
contingent consideration at acquisition and that paid during May
2016 was due to foreign currency movements.
The book value of receivables in the tables above represents the
gross contractual amounts receivable.
6 INVESTMENT IN ASSOCIATE - prior period
On 27 May 2015 the Group entered into a strategic alliance with
GD Intressenter AB of Sweden ("GDI") to create the world's largest
company in the highly specialised Ultra High Vacuum Surface Science
field. The alliance comprises Oxford Instruments' Omicron
Nanotechnology GmbH ("Omicron") and associated subsidiaries and
GDI's Scienta Scientific AB ("Scienta") and associated
subsidiaries. Scienta Scientific AB is registered and has its
principal place of business in Sweden.
In consideration for new shares in Scienta, Oxford Instruments
transferred all of its shares in the capital of Omicron to Scienta.
Oxford Instruments holds a 47% interest in the share capital of
Scienta and GDI holds 53%. The investment has been accounted for as
an associate taking into account the following factors:
- The Group holds substantial, but minority, voting rights
(47%). All other rights are controlled by a single shareholder;
- The Group has a minority number of non-executive board seats
(two of five), with the remaining seats held by representatives of
GDI;
- Whilst the Group has certain veto rights in respect of key
decisions, it cannot unilaterally direct the activities of the
Scienta Group.
The book value of the net assets disposed of was GBP14.9
million. The value of the shareholding acquired in Scienta was
considered to be GBP14.6 million and as a result a GBP0.3 million
loss on disposal arose on the transaction. In addition, a further
GBP0.6 million has been provided in respect of certain liabilities
arising from the transaction.
The Group's share of loss in its equity accounted associate for
the period was GBP0.5 million (half year to September 2015: GBP0.2
million; full year to March 2016: GBP1.5 million).
7 DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS - prior period
On 23 November 2015 the Group disposed of its Austin Scientific
business for a final consideration of GBP0.6 million.
Effect of disposal on the financial 2016
position of the Group
GBPm
---------------------------------------------- ------
Other intangible assets (1.7)
Property, plant and equipment (0.2)
Inventory (1.4)
Trade and other receivables (0.5)
Trade and other payables 0.3
Net assets divested (3.5)
---------------------------------------------- ------
Consideration received, satisfied in
cash 0.6
Cash disposed of -
Transaction expenses (0.1)
---------------------------------------------- ------
Net cash inflow 0.5
---------------------------------------------- ------
Carrying value of net assets disposed
of (3.5)
Impairment of net assets to fair value
less costs to sell 2.8
Currency translation differences transferred
from translation reserve 0.7
---------------------------------------------- ------
Gain on disposal before impairment 0.5
Less impairment loss (2.8)
---------------------------------------------- ------
Loss on disposal (2.3)
Tax on loss on disposal 0.4
---------------------------------------------- ------
Loss on disposal net of tax (1.9)
---------------------------------------------- ------
Discontinued operations
At 30 September 2016 the Group's Austin Scientific business was
classified as a discontinued operation. It was considered a major
class of business on the basis that it was previously an operating
segment referred to in the Group Strategic Report.
Half Half year Year to
year to
to
30 Sept 30 Sept 31 March
Results of discontinued operations 2016 2015 2016
GBPm GBPm GBPm
------------------------------------ --------- ---------- ---------
Revenue - 1.7 2.3
Expenses - (2.1) (2.8)
------------------------------------ --------- ---------- ---------
Loss from operating activities
before tax - (0.4) (0.5)
Tax - 0.1 0.2
------------------------------------ --------- ---------- ---------
Loss from operating activities
after tax - (0.3) (0.3)
------------------------------------ --------- ---------- ---------
Loss on disposal (2.3)
Tax on loss on disposal 0.4
----------------------------------------------- ---------- ---------
Loss from discontinued operations
after tax (2.2)
----------------------------------------------- ---------- ---------
Basic loss per share (pence) - (0.5) (3.9)
------------------------------------ --------- ---------- ---------
Diluted loss per share (pence) - (0.5) (3.8)
------------------------------------ --------- ---------- ---------
Half Half year Year to
year to
to
30 Sept 30 Sept 31 March
Cash flows from discontinued 2016 2015 2016
operations
GBPm GBPm GBPm
------------------------------------ --------- ---------- ---------
Net cash used in operating
activities - (0.4) (0.9)
Net cash from investing activities - - -
Net cash from financing activities - - -
Net cash flows - (0.4) (0.9)
------------------------------------ --------- ---------- ---------
8 TAXATION
The total effective tax rate on profits for the half year is 40%
(2015: 35%). The weighted average tax rate in respect of adjusted
profit before tax (see note 2) for the half year is 22% (2015:
24%).
9 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
2016 2015 2016
Shares Shares Shares
million million million
-------------------------------- ---------- ---------- ---------
Weighted average number
of shares outstanding 57.3 57.3 57.3
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 57.1 57.1 57.1
-------------------------------- ---------- ---------- ---------
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
2016 2015 2016
Shares Shares Shares
million million million
------------------------------- ---------- ---------- ---------
Number of ordinary shares
per basic earnings per share
calculations 57.1 57.1 57.1
Effect of shares under option 0.1 0.2 0.1
------------------------------- ---------- ---------- ---------
Number of ordinary shares
per diluted earnings per
share calculations 57.2 57.3 57.2
------------------------------- ---------- ---------- ---------
10 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
2016 2015 2016
pence pence pence
-------------------------------- ---------- ---------- ---------
Previous period interim
dividend 3.70 3.70 3.70
Previous period final dividend - - 9.30
-------------------------------- ---------- ---------- ---------
3.70 3.70 13.00
-------------------------------- ---------- ---------- ---------
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
2016 2015 2016
pence pence pence
------------------ ---------- ---------- ---------
Interim dividend 3.70 3.70 3.70
Final dividend - - 9.30
------------------ ---------- ---------- ---------
3.70 3.70 13.00
------------------ ---------- ---------- ---------
The final dividend for the year to 31 March 2016 was approved by
shareholders at the Annual General Meeting held on 13 September
2016. Accordingly it is no longer at the discretion of the company
and has been included as a liability as at 30 September 2016. It
was paid on 20 October 2016.
The interim dividend for the year to 31 March 2017 of 3.7 pence
was approved by the Board on 15 November 2016, the same value as
the previous year and has not been included as a liability as at 30
September 2016. The interim dividend will be paid on 7 April 2017
to shareholders on the register at the close of business on 10
March 2017.
11 FAIR value of financial instruments
The fair values of financial assets and liabilities together
with the carrying amounts shown in the Consolidated Statement of
Financial Position are as follows:
Fair
Carrying Fair Carrying Fair Carrying value
amount value amount value amount 31
Fair 30 Sept 30 Sept 30 Sept 30 Sept 31 March March
value 2016 2016 2015 2015 2016 2016
hierarchy GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ---------- -------- -------- -------- -------- --------- ------
Assets carried at amortised
cost
Trade receivables 69.2 69.2 58.4 58.4 67.2 67.2
Other receivables 6.4 6.4 5.7 5.7 6.0 6.0
Cash and cash equivalents 20.9 20.9 15.3 15.3 21.8 21.8
---------------------------- ---------- -------- -------- -------- -------- --------- ------
Assets carried at fair
value
Derivative financial
instruments:
- Copper hedging contracts
(designated as an IAS
39 hedge) 2 - - 0.2 0.2 - -
- Foreign currency
contracts 2 - - 2.1 2.1 1.5 1.5
---------------------------- ---------- -------- -------- -------- -------- --------- ------
- - 2.3 2.3 1.5 1.5
---------------------------- ---------- -------- -------- -------- -------- --------- ------
Liabilities carried
at fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 (10.9) (10.9) (2.0) (2.0) (5.8) (5.8)
- Copper hedging contracts
(designated as an IAS
39 hedge) 2 - - - - (0.1) (0.1)
Contingent consideration 3 - - (19.1) (19.1) (6.6) (6.6)
--------------------------- ------- ------- ------- ------- ------- -------
(10.9) (10.9) (21.1) (21.1) (12.5) (12.5)
--------------------------- ------- ------- ------- ------- ------- -------
Liabilities carried
at amortised cost
Trade and other payables (55.9) (55.9) (69.5) (69.5) (82.4) (82.4)
Bank overdraft (1.8) (1.8) - - (1.4) (1.4)
Borrowings (160.2) (160.2) (154.8) (154.8) (148.6) (148.6)
--------------------------- ------- ------- ------- ------- ------- -------
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using
market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is
estimated by discounting the future contracted principal and
interest cash flows using the market rate of interest at the
reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the carrying amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine their fair
value. Advances received are excluded from other payables above as
these are not considered to be financial liabilities.
Contingent consideration
The fair value of contingent consideration is estimated based on
the forecast future performance of the acquired business over a
timeframe determined as part of the acquisition agreement,
discounted as appropriate. Key assumptions include growth rates,
expected selling volumes and prices and direct costs during the
period.
Fair value hierarchy
The table above gives details of the valuation method used in
arriving at the fair value of financial instruments. The different
levels have been identified as follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on
observable market data.
There have been no transfers between levels during the year.
Contingent consideration relates to amounts payable in respect
of acquisitions. It is reassessed at the end of each year to its
fair value.
30 Sep 30 Sep 31 March
2016 2015 2016
Contingent consideration GBPm GBPm GBPm
--------------------------------------- ------ ------ --------
Balance brought forward at beginning
of period 6.6 17.5 17.5
Fair value of contingent consideration
on acquisitions in the year - 6.7 6.3
Unwind of discount in respect of
contingent consideration - 0.7 0.6
Contingent consideration paid (6.5) (2.6) (13.3)
Increase in contingent consideration - 0.7 -
Contingent consideration released
to the consolidated statement of
income - (3.2) (4.9)
Effect of movement in foreign exchange (0.1) (0.7) 0.4
--------------------------------------- ------ ------ --------
Balance carried forward at end of
period - 19.1 6.6
--------------------------------------- ------ ------ --------
12 RELATED PARTIES
All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries
are eliminated on consolidation.
During the period, the Group supplied services and materials to
its associate, Scienta Omicron Gmbh, on an arm's length basis. The
following transactions occurred during the period:
Revenue Receivables
Half year to 30 September 2016 GBPm GBPm
-------------------------------- -------- ------------
Scienta Omicron GmbH 0.1 3.6
-------------------------------- -------- ------------
Revenue Receivables
Half year to 30 September 2015 GBPm GBPm
-------------------------------- -------- ------------
Scienta Omicron GmbH 0.3 3.4
-------------------------------- -------- ------------
Included in receivables is a non-current loan receivable of
GBP3.6 million (2015: GBP3.1 million). The loan is repayable at the
end of May 2020. During the period the Group received interest
charged on the loan of GBP0.1m (2015: GBP0.1m).
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 22 to 24 of its 2016 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.
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.
Specific Risk Context Risk Possible Impact Associated Mitigation
strategic
priorities
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Technical Risk The Group Failure of the Lower 'Realising the The Group has
provides high advanced profitability and Brand' moved away from
technology technologies financial large scale,
equipment and applied by the returns. 'Liberating Cash' single customer
systems to its Group to produce Negative impact development
customers. commercial on the Group's programmes
products, reputation. towards
capable of being more commercially
manufactured and orientated
sold profitably. products.
The New Product
Introduction
programme that
any new R&D
projects must
pass through
provides
a framework
within which the
commercial
viability of
projects are
scrutinised and
assessed.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Economic Government spend Demand for the Lower 'Realising the The Group has a
Environment on R&D has been Group's products profitability and Brand' broad spread of
constrained. may be lower than financial customers,
anticipated. returns. 'Delivering applications and
Shareholder geographical
Value' markets.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Acquisitions Part of the Appropriate Lower 'Realising the Extensive
growth of Oxford acquisition profitability and Brand' financial,
Instruments is targets may fail financial technical and
planned to come to provide the returns. 'Inventing the commercial due
from acquisitions planned value. Management focus Future' diligence is
which provide taken away from undertaken by the
the Group with the core business 'Adding Personal Group during
complementary in order to Value' any acquisition
technologies. manage programmes.
integration
issues. Each transaction
has a
comprehensive
post acquisition
integration plan
which is
monitored
at the highest
level.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Foreign Exchange A significant The Group's Lower 'Delivering The Group seeks
Volatility proportion of the profit levels are profitability and Shareholder to mitigate the
Group's profit is exposed to financial returns Value' exposure to
made in foreign fluctuations in transactional
currencies. Most exchange rates. 'Liberating Cash' risk by the use
costs are of natural hedges
in Sterling. wherever
possible.
The remaining
transactional
foreign exchange
risk in any year
is mitigated
through the use
of forward and
non-premium
option exchange
contracts.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Political Risk The Group Changes in An inability to 'Delivering Maintain a
operates in political sell certain Shareholder diversified
global markets relations may products to Value' geographical
and can be affect the certain countries customer base.
required to granting of 'Liberating Cash'
secure export licences. Ensure low
licences from commitment to
government. inventory before
attaining export
licences
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Customer The Group's These customers Lost sales, 'Delivering Attempt to
Concentration Superconducting can exert decreased margins Shareholder broaden customer
Wire business in significant Value' base to include
reliant on a customer power in all OEMS
small number of terms of price 'Liberating Cash'
MRI manufacturers and volume Explore
as customers . alternative
applications for
superconducting
wire
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Outsourcing The Group's Failures in the Disruption to 'Liberating Cash' Relationships
strategic plan supply chain customers. with outsourcing
includes the impacting sales. Negative impact 'Realising the businesses are
outsourcing of a on the Group's Brand' monitored closely
significantly reputation. and any potential
higher proportion issues are
of acted upon
the costs of its swiftly to avoid
products to disruption.
benefit from
economies of Where practical
scale and natural dual sources are
currency hedges. used for key
components and
services.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Pensions The Group's Movements in the Additional cash 'Delivering The Group has
calculated actuarial required by the Shareholder closed its
pension deficit assumptions may Group to fund the Value' defined benefit
is sensitive to have an deficit. pension schemes
changes in the appreciable Reduction in net 'Liberating Cash' in the UK and US
actuarial effect on the assets. to future
assumptions. reported pension accrual.
deficit.
The Group has a
funding plan in
place to reduce
the pension
deficit over the
short to medium
term.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
People A number of the The employee Lower 'Adding Personal The Group
Group's employees leaves the Group. profitability and Value' undertakes a
are business financial regular employee
critical. returns. 'Inventing the survey and
Future' implements and
reviews resulting
action
plans.
A comprehensive
succession
planning process
is in place,
together with a
talent network
which
identifies and
manages contacts
with people who
could provide
external
succession for
critical
current and
future roles.
A management
development
programme
provides exposure
to key skills
needed for
growth. Regular
individual
performance
reviews take
place.
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Routes to Market In some instances The systems Lower 'Inventing the Use of the stage
the Group's integrator profitability and Future' gate process and
products are switches supplier financial 'Voice of the
components of denying the returns. 'Realising the Customer' to make
higher level Group's route to Brand' sure that the
systems and thus market. Group's products
the are the best in
Group does not the market.
control its route
to market. Co-marketing with
system
integrators to
promote the
merits of the
Group's products
to end
customers.
Seeking to
increase the
number of
integrators
supplied by the
Group .
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
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.
Ian Barkshire, Chief Executive Gavin Hill, Group Finance Director
15 November 2016
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 2016 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 2016 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Greg Watts
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
15 November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFSALVLSLIR
(END) Dow Jones Newswires
November 15, 2016 02:00 ET (07:00 GMT)
Oxford Instruments (LSE:OXIG)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
Oxford Instruments (LSE:OXIG)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024
