TIDMOXIG
RNS Number : 7934R
Oxford Instruments PLC
09 November 2021
The following amendments have been made to the 'Half-year
Results' announcement released on 9 November 2021 at 7:00am under
RNS No 7230R.
Owing to an omission of the word 'margin' in the Chief
Executive's quote, a change has been made. The quote should now
read:
"We are increasing our investment to take advantage of these
growth opportunities, providing the foundation for good growth and
medium-term margin expansion.
In addition, the word 'market' has been amended to 'markets' in
the second bullet under 'Operational Highlights'. The bullet should
now read:
"Global sustainability agenda strengthening the structural
growth drivers for our markets"
All other details remain unchanged.
The full amended text is shown below.
Oxford Instruments plc
Announcement of Half-year Results for the six months to 30
September 2021
Oxford Instruments plc, a leading provider of high technology
products and systems for industry and research, today announces its
Half-year Results for the six months to 30 September 2021.
% change
Half year Half year
to to organic
30 September 30 September % change constant
Adjusted(1) 2021 2020 reported currency(4)
---------------------------------- ------------ ------------ -------- -----------
Revenue GBP170.1m GBP140.3m +21.2% +26.8%
Adjusted operating profit GBP30.6m GBP24.3m +25.9% +28.0%
Adjusted operating profit margin 18.0% 17.3% +70bps
Adjusted profit before taxation GBP30.2m GBP23.7m +27.4%
Adjusted basic earnings per share 41.2p 32.8p +25.6%
Cash conversion(2) 48% 97%
Net cash(3) GBP70.1m GBP81.4m
---------------------------------- ------------ ------------ -------- -----------
1. Adjusted items exclude the amortisation and impairment of
acquired intangible assets, acquisition items, profit or loss on
disposal of operations, other significant non--recurring items, and
the mark-to-market movement of financial derivatives. A full
definition of adjusted numbers can be found in the Finance Review
and Note 1.
2. Cash conversion measures the percentage of adjusted cash from
operations to adjusted operating profit, as set out in the Finance
Review.
3. Net cash includes total borrowings, cash at bank and bank
overdrafts but excludes IFRS 16 lease liabilities.
4. Constant currency numbers are prepared on a month-by-month
basis using the translational and transactional exchange rates
which prevailed in the previous year rather than the actual
exchange rates which prevailed in the year. Transactional exchange
rates include the effect of our hedging programme. Organic numbers
remove the impact from the acquisition of WITec.
5. Return on sales is defined as adjusted profit before taxation
expressed as a percentage of revenue.
Half year Half year
to to
30 September 30 September % change
Statutory 2021 2020 reported
---------------------------------------- ------------ ------------ ---------
Revenue GBP170.1m GBP140.3m +21.2%
Operating profit GBP21.8m GBP20.8m +4.8%
Operating profit margin 12.8% 14.8% (200 bps)
Profit before taxation GBP21.4m GBP20.2m +5.9%
Basic earnings per share 28.7p 27.7p +3.6%
Interim dividend per share for the year 4.4p 4.1p +7.3%
---------------------------------------- ------------ ------------ ---------
Financial Highlights
-- Revenue growth of 26.8% at organic constant currency against
weak comparator period (+13.5% vs half year 2019)
-- Strong growth in orders of 18.3% at organic constant currency (+26.0% vs half year 2019)
-- Reported order book grew by 13.2% (13.3% at organic constant
currency), providing good visibility for the year ahead
-- Strong growth in adjusted operating profit with margin rising to 18.0%
-- Cash conversion of 48% reflects an increase in inventories to
support order intake and mitigate supply chain disruption, timing
of shipments and a resumption in capital expenditure
-- Growth in interim dividend of 7.3% to 4.4p per share
Operational Highlights
-- Improved financial performance reflecting strong position in
attractive, structural growth markets
-- Global sustainability agenda strengthening the structural growth drivers for our markets
-- Strong customer demand, with double-digit order growth across Europe, North America and Asia
-- Good strategic progress supporting profit growth and enhanced
margin; increased investment in future growth opportunities
-- Strong order and revenue growth across commercial and
academic customers reflecting buoyant semiconductor, advanced
materials and quantum markets, with recovery in life science
-- WITec acquisition complements existing portfolio, providing
additional opportunities for growth
-- Order conversion to revenue impacted by prolonged
customer-related administrative processes and delays in obtaining
export licences
Summary and Outlook:
Ian Barkshire, Chief Executive of Oxford Instruments plc,
said:
"We have emerged from the pandemic a stronger, more focused and
efficient business, even more aligned to the needs of our customers
in end markets with structural growth drivers. We are increasing
our investment to take advantage of these growth opportunities,
providing the foundation for good growth and medium-term margin
expansion.
"Whilst supply chain pressures will moderate conversion of
orders to revenue and drive cost inflation in the second half, our
strategic alignment to a range of attractive end markets, combined
with our strong opportunity pipeline and healthy order book,
provides us with good momentum going into the second half. Our
expectations for further progress in the year are unchanged."
Note: Oxford Instruments plc compiled analyst consensus forecast
for adjusted operating profit (year to 31 March 2022), is
GBP62.9m
LEI: 213800J364EZD6UCE231
Enquiries:
Oxford Instruments plc
Ian Barkshire, Chief Executive Gavin Hill, Group Finance
Director
Tel: 01865 393200
MHP Communications
Katie Hunt/Rachel Mann/Florence Mayo
Number of pages: 33
Tel: 020 3128 8100
Chief Executive's Review
Introduction
We emerge from the pandemic a stronger, more focused business,
even more aligned to the needs of our customers and addressing end
markets with long-term structural growth drivers providing a
foundation for good growth and medium-term margin expansion.
As a global provider of high technology products and solutions
to the world's leading industrial companies and foremost scientific
research institutes, we recognise our responsibility and role in
the advancement of society, helping to create a more sustainable
future. Our purpose, to enable a greener, healthier, more connected
advanced society for all, puts us at the heart of many global and
corporate sustainability initiatives. This has led to increased
demand for our world-class solutions and underpins our confidence
in our future growth potential.
The Group delivered a strong performance in the first half with
significant organic constant currency order, order book and revenue
growth, reflecting a robust recovery in demand from our commercial,
academic and government-funded customers across our end markets.
Continued profit and margin growth in the period highlights the
resilience of our business model and the operational efficiency
improvements embedded through our Horizon strategy across the
Group.
We have continued to make good progress in the delivery of our
strategy, building further on our market intimacy, successful new
product launches, and have made excellent progress with our
operational excellence and service transformation programmes.
In September we acquired WITec Wissenschaftliche Instrumente und
Technologie GmbH ("WITec"), a leading Raman and optical imaging
solutions business, further enhancing our market offering. With
excellent revenue synergies across our target markets, this
acquisition will strengthen our materials analysis solutions
portfolio, providing additional capabilities to our existing
customers and helping us expand into new and adjacent markets.
Key to our performance in the first half has been how our
employees have embraced new ways of working, helping us establish
and embed more effective and efficient ways to support and engage
with our global customers, optimise our internal operations and
deliver our strategic product roadmaps.
The Group has successfully developed a hybrid workplace model,
enabling us to better utilise our global resources and facilities
whilst maintaining the essential connectivity between our teams.
Our goal is to create a safe and vibrant workplace environment
where employees can build successful careers, make a personal
impact on the world, and enjoy a healthy work-life balance.
Strong structural market growth drivers: short-term pressures
largely mitigated in the half
Our end markets have remained robust throughout the pandemic.
The global economic recovery and increasing sustainability agenda
have strengthened and reinforced their underlying growth drivers,
providing greater impetus within governments and commercial
organisations. This is resulting in increased funding within our
target markets and is accelerating roadmaps for customers requiring
new, higher performing, easier-to-use solutions.
This is particularly evident in the expanding demand for
semiconductors, driven by the need for exponential increases in
digital data, connectivity, and bandwidth. Within life sciences,
the ability to accelerate the delivery of new medicines and
therapies at a fraction of the cost is being made possible by
understanding the fundamental disease mechanisms and the efficacy
of treatments at the cellular and molecular level. Materials are
the building blocks of modern society, and the development of new,
higher performing materials will play an ever-more important role
in delivering a pathway to a more sustainable society.
Whilst our chosen markets and customers are driving growth,
there remain bottlenecks which have impacted revenue, including
ongoing travel restrictions, limited access to some customer sites,
as well as prolonged administrative processes and continued delays
with export license.
Furthermore, the rapid recovery across the wider global economy
has led to increasing supply chain disruption and inflationary
pressures as we have progressed through the half. We continue to
mitigate operational challenges as we move into the second half
through building even stronger relationships with our strategic
supply chain partners and increasing forward orders of our own
inventory levels in specific areas. Throughout the first half, we
experienced inflationary headwinds including elevated logistics
costs and increased component and raw material pricing. The
strength of our brand and ongoing gains from our operational
excellence programme have provided some resilience in the first
half, and will be a key part in our mitigation against ongoing
inflationary pressures.
Results: strong financial performance and order momentum
The Group delivered a strong financial performance in the first
half with robust constant currency order, revenue, and operating
profit growth and a continued improvement in operating margin,
against both H1 2020 and H1 2019, highlighting the underlying
health of our end markets and the strength of our product
portfolio.
% organic % organic
constant constant
% reported % reported currency currency
growth vs growth vs growth vs growth vs
H1 2021 H1 2020 H1 2019 H1 2020 H1 2019
Orders GBP198.3m 12.9% 19.7% 18.3% 26.0%
Revenue GBP170.1m 21.2% 7.9% 26.8% 13.5%
Adjusted operating profit GBP30.6m 25.9% 16.8% 28.0% 17.6%
Adjusted operating margin 18.0% 70bps 140bps 50bps 80bps
--------------------------- ----------- ---------- ---------- ---------- ----------
Statutory operating profit GBP21.8m 4.8% 13.0%
--------------------------- ----------- ---------- ---------- ---------- ----------
Statutory operating margin 12.8% (200bps) 60bps
--------------------------- ----------- ---------- ---------- ---------- ----------
Reported orders for the Group increased to GBP198.3m (2020:
GBP175.7m) up 12.9%, representing 18.3% growth on an organic
constant currency basis against the comparative period. This growth
reflected significant demand from commercial customers and good
demand from academic and government-funded institutions. Compared
to H1 2019, the Group saw a 26.0% increase in orders, on an organic
constant currency basis, with double-digit increases in demand from
both academic and commercial customers.
From an end market perspective, increased customer demand
supported strong order growth across Healthcare & Lifescience,
Semiconductor & Communications, Quantum Technology and Energy
& Environment market segments. Orders to customers involved in
Research & Fundamental Science declined in the period, due in
part to ongoing covid-related disruption in this market
segment.
Strong demand also led to significant order growth across the
Materials & Characterisation and Research & Discovery
sectors, whilst progress with our service transformation supported
strong order growth in the Service & Healthcare sector.
At a regional level, we had strong double--digit order growth
across Europe, North America and Asia. Within Asia, orders to China
grew 19.6% on a constant currency basis (14.6% on a reported basis)
supported by strong growth to commercial customers across
Semiconductor, Advanced Materials, and Quantum applications.
Continued order momentum, together with the partial easing of
covid-related travel and customer site access restrictions
supported reported revenue growth of 21.2% to GBP170.1m (2020:
GBP140.3m), also representing strong growth relative to H1 2019.
WITec contributed GBP1.8m of revenue in the month following
acquisition.
Revenue grew in each of our sectors, up 34% in Materials &
Characterisation, 23% in Research & Discovery and 15% in
Service & Healthcare, on an organic constant currency basis,
with double--digit growth to both academic and commercial
customers.
The proportion of revenue to commercial customers increased to
50% in the period (2020: 46%).
From an end market perspective, we had strong revenue growth
across all our segments apart from Research & Fundamental
Science due to ongoing travel and customer site restrictions.
Strength of demand slightly increased the proportion of sales
within Semiconductor & Communications to 31% of revenue,
Advanced Materials to 30% of revenue and Quantum Technology to 7%
of revenue. Healthcare & Lifescience represented 19% of revenue
with Energy & Environment and Research & Fundamental
Science at 8% and 5% respectively.
Regionally, revenue profiles remained strongly influenced by the
timing and extent of the easing of covid-related restrictions,
affecting our ability to deliver on the strong underlying customer
demand seen within the order profile. This resulted in strong
revenue growth into Asia and North America, with Europe broadly in
line with the previous year on a constant currency basis, but
behind on a reported currency basis.
Our continued focus on driving operational efficiencies
supported growth in adjusted operating profit, up 25.9% to GBP30.6m
(2020: GBP24.3m) and an adjusted operating margin of 18.0%,
representing growth of 70 basis points on a reported basis or 10
basis points on a constant currency basis. Excluding the effect of
WITec, the adjusted operating profit would have been GBP30.4m, an
increase of 25.1%. This is despite the inflationary impacts
prevalent in the wider economy that resulted in elevated logistics
costs and increased component and raw material prices.
The strength of our markets and continued positive order
momentum resulted in 16.9% growth in the order book since March
2021, with significant growth within the Materials &
Characterisation and Service & Healthcare sectors. The organic
book-to-bill ratio for the period was 1.17.
Cash conversion of 48% reflects shipment timing, an increase in
inventories to support order growth and mitigate supply chain
challenges, as well as a resumption in capital expenditure.
The Group closed the half year with net cash of GBP70.1m after
the acquisition of WITec in August 2021.
Dividend
In line with the Group's progressive dividend policy, and due to
the Group's robust trading performance and positive cash generation
through the period, the Board is declaring an interim dividend of
4.4p per share (H1 2020: 4.1p).
Horizon strategy driving expansion in attractive markets and
delivering operational efficiencies
We continue to progress with our Horizon strategy, which has
underpinned financial performance in the first half. We have
heightened our focus on attractive end markets with positive
long-term structural growth drivers where we can sustain leadership
positions, whilst maintaining our relentless product innovation and
our drive to improve operational effectiveness and exploit
synergies across the Group.
We are positioned in niche segments within markets that are
underpinned by strong investment, where we deliver a high degree of
value for our customers as our premium products are typically
critical to enabling and accelerating their desired outcomes.
Our business model provides an element of resilience through the
breadth of drivers within our end markets and by engaging with
customers across the full technology cycle, from research to
applied R&D and high-tech manufacturing. This also means that
we are well positioned to benefit from each wave of
commercialisation and technology disruption.
Through our market intimacy we continue to identify additional
opportunities to deliver increased value to our customers and
achieve expansion within our chosen markets.
We have increased our investment in R&D, with a heightened
focus on new products and solutions that will create the most value
for our existing customers or enable us to expand into new or
adjacent markets.
Through our operational excellence programme, we continue to
drive efficiencies across the Group. This includes strengthening
our supply chain, building long-term strategic partnerships with
fewer suppliers, embedding improved manufacturing processes and
utilising centres of excellence to benefit delivery across the
wider Group.
Our service transformation programme is delivering growth by
providing a wider portfolio of support products targeted at
increasing customer capabilities productivity throughout their full
lifetime use of our products.
We are also changing the way in which we support our customers,
embracing remote service and support approaches, combined with
increased delivery through our regional teams supported by our
global expertise. Furthermore, the digitisation of our product
portfolio has allowed us to offer an increasing level of real time
insights that are enhancing customer capabilities and productivity.
The investment in our regional service teams and the embedding of
remote digital support capabilities ensures we can deliver our
global expertise locally, providing increased customer response
times and reduced travel.
To date, the Horizon strategy has delivered tangible gains
across the Group, improving our financial performance. Through
Horizon, we continue to have significant opportunities for further
gains that will support our growth and margin enhancement.
Increased R&D investment and enriched IP portfolio
We continue the development and delivery of highly innovative
and market--leading products and have increased our R&D
investment in the first half to support future growth. Our
heightened focus on our chosen end markets drives sustainable
differentiation for our products and delivers increased value for
our customers. In the period we made good strategic progress with
our product development roadmaps, launched several new products and
further enriched our IP portfolio. R&D spend in the period of
GBP15.1m (2020: GBP12.7m) has grown broadly in line with sales and
represents 8.8% of revenue.
Shaping a sustainable future
We were delighted to welcome Sir Nigel Sheinwald to the Board as
a Non--Executive Director in September. Sir Nigel will chair our
Board's sustainability committee with effect from November 2021,
when all Non-Executive Directors will also join the committee.
Nigel brings a wealth of skills and experience from his time as
Chair of Shell's sustainability committee and will support the
further development and delivery of our initiatives.
We believe that embedding sustainability throughout the Group
creates long-term value for all our stakeholders and will secure
our long--term success. In line with our purpose, we recognise that
the greatest impact we can make to a sustainable, net zero world is
in enabling our customers to deliver technologies that will aid the
drive towards a greener, healthier, more connected advanced
society. With regard to our own operations, we have an ambitious
and wide-ranging sustainability agenda based on our commitment to
net zero and the TCFD reporting framework.
Whilst the impact our facilities have on the environment is
relatively small, we have made great strides in reducing our carbon
footprint and we will continue in our efforts to minimise our
impact. As the world focuses on a transition to a low-carbon
economy we recognise the important role we play in supporting our
customers with their net zero ambitions, as well as encouraging
similar commitments throughout our supply chain.
We also believe that how we do business is as important as what
we do. Being inclusive is a core company value and is based on
respect for the individual and creating a sense of belonging. In
support of this, and to attract, retain, and enable the best people
to perform, we are dedicated to creating an inclusive environment
and culture, where difference is valued, and people are recognised
for what they deliver and bring to the team. This is also reflected
in our Board's commitment to meeting the targets that have been set
out in the Hampton--Alexander review through future appointments,
building on the progress we have made in recent years. This has
included Alison Wood taking the position of Senior Independent
Director, resulting in two female Chairs of our committees.
Our employees and customers are increasingly engaging with our
sustainability agenda. We have enhanced our communications across
all our stakeholders, gathering feedback as they help to shape our
future direction. This initiative is overseen by the Executive--led
sustainability committee, who drive and align the activities we
undertake across the Group.
We will publish our Sustainability and TCFD statements in
2022.
Investing in our employees and building on our capabilities
Our objective is to ensure that we have a high capability,
diverse workforce that enables us to better understand our
customers and markets. Building an organisation with a broad range
of perspectives and experiences increases our ability to innovate,
to make the right decisions and to exceed our customers'
expectations. We continue to invest in the capabilities we need to
deliver our strategy, which is underpinned by the combination of
our technical, end market and broad commercial expertise. This has
included the ongoing support and development of our employees and
augmenting our existing talent through the recruitment of
individuals with specific additional knowledge or skills.
I would like to thank all our employees for their continual
support, commitment and resilience during the year, for embracing
the changes we have made to our workplace model and for helping to
create a culture of inclusion that underpins our ongoing
success.
Summary and outlook
We have emerged from the pandemic a stronger, more focused and
efficient business, even more aligned to the needs of our customers
in end markets with structural growth drivers. We are increasing
our investment to take advantage of these growth opportunities,
providing the foundation for good growth and medium-term margin
expansion.
Whilst supply chain pressures will moderate conversion of orders
to revenue and drive cost inflation in the second half, our
strategic alignment to a range of attractive end markets, combined
with our strong opportunity pipeline and healthy order book,
provides us with good momentum going into the second half. Our
expectations for further progress in the year are unchanged.
Ian Barkshire
Chief Executive
8 November 2021
Operations Review
Materials & Characterisation
Orders
GBP102.9m +13.1%
(HY 2020: GBP91.0m)
+18.3% HY20
+36.9% HY19
Organic constant currency growth(1)
Revenue
GBP84.9m +30.2%
(HY 2020: GBP65.2m)
+34.2% HY20
+20.1% HY19
Organic constant currency growth(1)
Adjusted(2) operating profit
GBP13.0m
(HY 2020: GBP8.9m)
Adjusted(2) operating margin
15.3%
(HY 2020: 13.7%)
Statutory operating profit
GBP11.2m
(HY 2020: GBP7.8m)
1. For definition refer to note on page 1.
2. Details of adjusting items can be found in Note 2 to the Half Year Financial Statements.
The Materials & Characterisation sector has a broad customer
base across a wide range of applications for the imaging and
analysis of materials down to the atomic level (Asylum Research,
NanoAnalysis, Magnetic Resonance and newly acquired WITec) as well
as the fabrication of semiconductor devices and structures through
our range of advanced semiconductor etch and deposition process
systems (Plasma Technology).
The sector has a strong focus on accelerating our customers'
applied R&D, enabling the development of new devices and next
generation higher performing materials as well as enhancing
productivity in advanced manufacturing, quality assurance (QA) and
quality control (QC).
Our portfolio of imaging and analysis systems includes our range
of market--leading X-ray and electron analysis systems used in
conjunction with electron and ion microscopes, as well as our
performance-leading atomic force microscopes and magnetic resonance
analysers. Through our leading product performance, ease of use and
advanced analytics we enhance our customers' capabilities, provide
actionable insights and increase their productivity.
WITec's leading Raman microscopy solutions provide a
complementary offering to our existing portfolio of
characterisation products being used widely across our existing
academic and commercial customers for fundamental research, applied
R&D and quality control. The technique, which is used in
conjunction with and alongside our existing characterisation
solutions, broadens the capabilities that we can offer to our
existing customers whilst expanding opportunities in new market
areas. The acquisition, which completed on 31 August, will enable
the further exploitation of synergies across the sales, marketing
and service teams and increases the role we can play in supporting
our customers.
Our portfolio of advanced semiconductor etch and deposition
processing systems provide our customers with the ability to create
and manipulate materials with atomic scale accuracy and are used in
the fabrication of the advanced semiconductor devices used across a
wide range of industries.
We have leading expertise in compound semiconductor processing
with a portfolio of high-performance products specifically
optimised for R&D or high-volume manufacturing. Construction
has begun on our new facility, which will increase our capacity,
comprising both a state-of-the-art manufacturing area and advanced
laboratories to support the further development of our leading-edge
technologies.
The Materials & Characterisation sector delivered strong
growth and improved profitability supported by recovery in the
global economy and continued increased demand from semiconductor,
electronics and advanced materials end markets. Strong order growth
reflected positive demand across North America, Europe and Asia and
all our end markets. Order growth was strengthened by our increased
market focus and the success of recently launched products, with
significant growth to commercial customers, supported by continued
strong demand from academia.
The initial easing of customer and travel--related covid
restrictions continued to influence the regional revenue profile in
the period, and resulted in strong growth to Asia and North
America, with Europe slightly down on the previous year. As with
order growth, revenue was also driven by commercial customers,
supported by good growth to academia, reflecting end market demand
and a positive funding environment. Consequently, the proportion of
revenue from commercial customers increased to 61% (2020: 52%).
Performance in the period reflected the strength of end markets and
represented strong order and revenue growth relative to H1 2019.
The order book for future deliveries increased to GBP99.3m,
representing reported growth of 32.9% compared to March 2021.
From an end market perspective, we continued to see strong
underlying order growth from the Semiconductor & Communications
and Advanced Materials segments, building on growth in the previous
year. This was supported by ongoing strong order growth into
Healthcare & Lifescience as we expanded our customer
propositions within the segment.
Year-on-year order growth into the Energy & Environment
segment reflects a recovery in customer activity relative to the
previous year. Strong revenue growth for the sector comprised
double-digit growth across Healthcare & Lifescience,
Semiconductor & Communications, Energy & Environment, and
the Advanced Materials segment. Quantum-related revenue was down in
the period due to the phasing of shipments. The Semiconductor &
Communications segment increased to 51% of revenue for the sector
in line with our increasing product portfolio and end market
growth, with Advanced Materials 32%, Energy & Environment 12%
and Healthcare & Lifescience 4%.
Semiconductor & Communications
This is a key focus for the sector and delivered strong
double-digit order and revenue growth in the period. Growth has
been driven by the ongoing need for higher performing, more energy
efficient solutions to meet the demands of a bourgeoning data
economy, the focus on reduced environmental impacts and the
proliferation of semiconductor chips within consumer electronics.
The ramp up in global manufacturing capacity of mainstream silicon
chips and increased investment in the development of next
generation products has driven strong demand for our imaging and
dedicated analysis solutions. These are used for quality control at
multiple process stages in the fabrication of semiconductor
devices, such as helping to identify and characterise defects.
Our solutions are also being used to monitor the composition and
structure of the nanoscale vertical stacks within semiconductor
devices to ensure each new manufacturing process will deliver the
required final performance. As devices shrink in size and increase
in structural complexity, our characterisation solutions are
increasingly critical in enabling the development of next
generation devices and their effective transfer to production.
The compound semiconductor market remains buoyant with long-term
structural growth drivers due to their ability to transform
communications and increase the energy efficiency of power systems
and consumer electronics. This has driven strong demand for our
advanced compound semiconductor systems and proprietary
semiconductor processes. The development of our comprehensive
portfolio of production-dedicated systems over the past years,
combined with our strategic focus on providing improved process
performance for the critical layers within devices, has supported
strong growth to commercial customers. In data communications, the
increasing demands for faster data processing and connectivity are
driving the development of 5G and 6G networks, alongside hyperscale
data centres. Our expertise with gallium arsenide (GaAs) and indium
phosphide (InP) is helping drive our growth into these end device
applications, as they enable faster speeds, improve bandwidth and
can operate at higher temperatures.
We also had growth for our dedicated solutions for the
manufacture of devices used in augmented reality applications.
These include micro-LEDs and the 3D sensors that are increasingly
being deployed in mobile phones, cameras, cars and even
glasses.
Compound semiconductors play a significant role in providing a
pathway to net zero. The time criticality of shifting to a low
carbon economy continues to drive the shift towards increased
electricity usage and requires more efficient conversion,
generation and storage for power devices and consumer electronics.
This is driving strong growth for our silicon carbide (SiC) and
gallium nitride (GaN) solutions.
Within academia we had strong growth for our semiconductor
solutions as universities invested in the latest capabilities
within their central facilities and specialist clean rooms
supported by government funding.
Advanced Materials
Advanced Materials are the building blocks of modern society,
enabling everything from touch screens on handheld devices and
thinner drinks cans to the lightweight super alloys that provide
structural integrity in cars. Our market-leading portfolio of
imaging and analysis solutions support our customers to develop,
control and repeatably manufacture stronger, lighter and higher
performing materials across a broad range of end applications.
We have a particular focus on increasing our customers'
productivity, with our products providing additional value through
the tailoring of solutions for specific end applications.
Furthermore, we use our market intimacy to identify new
opportunities, markets and customers that might have not used our
equipment before. For example, our recently launched Xplore
elemental analyser, which is specifically designed to enable
routine analysis for non-expert users.
Strong order and revenue growth across our imaging and
analytical products came from a broad range of end applications and
industries, including steels, super alloys, textiles and polymers.
This was driven by end customer demand and market--leading
performance across our portfolio.
In particular, strong growth into advanced steels and super
alloys has supported the ability of our products to rapidly measure
with precision and reliability the nanoscale material structure,
which strongly determines the physical properties and inherent
value of the material. Our new advanced analytics greatly
simplifies the interpretation of the data, providing actionable
insights removing the need for specialist operators.
Our products are also used in the development of exotic new
materials such as graphene-like structures with ongoing research
working towards the long-term goal of transforming battery life and
semiconductor performance.
Energy & Environment
Strong growth in the Energy & Environment segment is
underpinned by sustained growth into battery-related markets and
the partial recovery across a range of end markets, including
forensics and environmental science.
Within batteries, the requirement for energy storage grows
almost daily, from the ubiquitous use of portable electric devices
to the rapidly growing market for electric vehicles. Ensuring that
this demand can be met requires the development of new technology
utilising different materials that will deliver enhanced
performance with less reliance on the finite and expensive rare
earth materials which are currently used. With the active elements
of a battery operating at the nanoscale, our products help
researchers better understand the fundamental chemistry and
mechanisms that affect battery capacity, charging rate and
lifetime. We have also experienced growth related to the increase
in global battery manufacturing capacity, with existing sites
expanding and new manufacturing facilities coming online. Our
solutions are adopted to ensure quality control, including particle
analysis to detect potentially harmful contamination within the
powder feedstock materials. We continue to develop our solutions to
drive improvements, with our new Feature Express(TM) product
reducing the measurement time by a factor of four, further
enhancing customer throughput and productivity.
Our benchtop NMR analysers and WITec Raman portfolio offer
academic researchers and industrial manufacturers the ability to
measure critical parameters that directly impact charging rates and
battery lifetime, as well as helping accelerate the development of
next generation battery material.
In support of the green economy, more people are choosing to
reduce their meat consumption and are increasingly adopting
plant-based alternatives. Our benchtop NMR is helping producers of
these meat substitutes to characterise fat and water content,
accelerating the development of healthy meat replacement products
that are comparable in taste.
Healthcare & Lifescience
We have continued to see growth in the Healthcare &
Lifescience sector, with increasing demand for our solutions to aid
quality control of electronics used in medical devices, such as
respirators, and microscale failure analysis of metallic catheters.
Our dedicated pharma solutions continue to help with contamination
analysis and the identification of counterfeit medicines. Whilst a
relatively small proportion of the sector, Lifescience remains an
area of focus with continued opportunity for growth as we build on
our market intimacy and tailor solutions for these applications.
The acquisition of WITec will further enhance our offerings in this
space as the technique is ideally suited for the study of living
cells, with our new Raman imaging techniques being used to develop
new drug formulations and delivery systems to improve patient
healthcare.
Research & Discovery
Orders
GBP60.5m +11.4%
(HY 2020: GBP54.3m)
+18.2% HY20
+10.8% HY19
Organic constant currency growth(1)
Revenue
GBP56.3m +16.6%
(HY 2020: GBP48.3m)
+23.2% HY20
+3.6% HY19
Organic constant currency growth(1)
Adjusted(2) operating profit
GBP8.7m
(HY 2020: GBP6.4m)
Adjusted(2) operating margin
15.5%
(HY 2020: 13.3%)
Statutory operating profit
GBP5.5m
(HY 2020: GBP3.2m)
1. For definition refer to note on page 1.
2. Details of adjusting items can be found in Note 1 to the Financial Statements.
The Research & Discovery sector, comprising Andor
Technology, NanoScience and X-Ray Technology, provides advanced
solutions and unique environments that enable imaging and
analytical measurements down to the atomic and molecular level,
predominantly used across scientific research and applied R&D,
with a higher proportion of sales to academia and a growing number
of commercial customers as we develop application--specific,
easy--to--use solutions based on our high-end research orientated
platforms.
Our imaging and analytical portfolio includes market-leading
scientific cameras, confocal microscopes, spectrometers, laser
engines and X-ray tubes. Our ultra-low temperature cryogenic and
high magnetic field platforms provide both versatile research
platforms as well as dedicated systems for more applied and
increasingly routine use.
In addition to selling directly to end customers, where we have
a strong brand presence, we also exploit our position across a
broad range of additional end markets by providing our key enabling
technologies to strategic OEM partners.
The sector's products play a key role across a broad range of
life, material, and physical science applications, with a critical
role within the development and advancement of quantum
technologies.
The underlying growth drivers in end markets have remained
robust, leading to strong order growth relative to the previous
year, as well as H1 2019. This comprised of sustained growth to
Quantum Technology and Advanced Materials applications and strong
recovery within Lifescience applications, which were significantly
subdued by covid in the previous year. The growth within Healthcare
& Lifescience was despite a return to normal run rates from the
surge in demand in the previous year for products used directly in
the fight against covid. From a regional perspective, this resulted
in double-digit order growth to Europe, North America and Asia,
with all regions booking orders ahead of the comparator period in
H1 2019.
The sector delivered strong revenue growth, up 23% on a constant
currency basis in the period and growth ahead of H1 2019. However,
the phasing and status in easing of covid-related restrictions at
our customers' sites continued to impact the profile by application
and region. Profitability for the sector was further enhanced in
the period with reported profit increasing to GBP8.7m (2020:
GBP6.4m), representing an adjusted operating margin of 15.5% (2020:
13.3%). This was supported by the continued realisation of tangible
gains through our Horizon strategy despite the previously mentioned
inflationary headwinds.
Strong underlying demand and a healthy order book resulted in
double-digit revenue growth across Healthcare & Lifescience,
Quantum Technology and Advanced Materials market segments, with
broadly in line contributions from the Semiconductor &
Communications and Energy & Environment segments. Revenue to
customers within the Research & Fundamental Science segment
declined in the year, with a slower covid recovery for these
typically larger and centrally funded projects.
Healthcare & Lifescience represented 37% of revenue, with
Advanced Materials and Quantum Technology increasing to 27% and 18%
respectively. Research & Fundamental Science fell to 14%, with
Semiconductor & Communications and Energy & Environment
representing 3% and 2% of revenue respectively.
By geography, revenue grew strongly in North America and Asia
due to the earlier easing of travel restrictions, increasing their
proportion of sales to 35% and 38% respectively. Europe remained
broadly in line with the previous year on a constant currency
basis, representing 26% of revenue. Considerable revenue growth to
academic customers increased their proportion of revenue to 71%,
outperforming high single-digit constant currency growth to
commercial customers.
Healthcare & Lifescience
The positive momentum in the second half of last year continued
within the Healthcare & Lifescience segment with an increasing
number of customers' labs and facilities re-opening around the
world after temporary closures. The long-term market growth drivers
of improving the health and wellbeing of society remain robust,
driven by an ageing population and an increasing focus on improved
and cost-effective healthcare provision. This is subsequently
driving the need for more successful, faster drug discovery and the
enhanced efficacy of new treatments, therapies and medicines.
Strong demand supported double-digit order and revenue growth in
the period with orders ahead of the comparative period in H1
2019.
Our solutions help end users to better understand the
fundamental disease mechanisms leading to disease states, such as
Alzheimer's, Parkinson's, diabetes and cancer at a cellular and
molecular level. Through our market intimacy initiatives, we have
continued to develop solutions and key enabling technologies that
specifically address the needs of customers within these fields.
For example, in cancer research, we have seen strong growth for our
high sensitivity scientific cameras for tumour imaging, enabling
rapid and accurate diagnostic screening of patient samples. There
is also growing interest in the smaller but emerging field of real
time operating theatre imaging, enabling surgeons to directly
observe the location and extent of the tumour ensuring all cancer
cells are removed, whilst reducing the removal of healthy tissue.
Within research, our microscopy systems, combined with our recently
launched cancer analysis software package, are providing new
insights into the mechanisms that cause tumour, growth by
identifying proteins that counteract uncontrolled cell division and
suppress tumours. One such protein is polo kinase, which has now
been the focus of 34 clinical trials for cancer treatment.
We have had strong growth into pharma applications, where our
key enabling technologies are at the heart of strategic OEM
partners' equipment across a broad range of applications including
diagnostic X-ray imaging, cell analysis and gene sequencing.
In the period, we saw a reduction in the sales to covid-related
applications, such as on-chip diagnostic testing and screening, as
adequate levels of infrastructure were established around the
world. We are now seeing run rates return to pre-covid levels for
this market segment.
Quantum Technology
We continue to see the transition of quantum computing into
applied R&D and commercial applications due to the recent
breakthroughs in technology and the hugely disruptive potential of
this technology to existing markets, such as pharmaceuticals,
logistics, and financial services. This is driving further
investment by national governments and corporates across
fundamental research, applied R&D and commercially available
systems, resulting in an emerging eco-system of national
laboratories, technology starts-ups, global service providers and
end users.
As a result, we are seeing increased demand across our portfolio
of cryogenic platforms tailored to enable both high throughput
screening of new quantum devices and commercial quantum computing
platforms for the emerging cloud-based quantum computing market.
The development of secure communication systems based on quantum
technology drove growth in demand for our scientific cameras.
Advanced Materials
Growth in the Advanced Materials segment reflected continued and
sustained customer demand to explore and characterise the
properties of materials across a broad range of applications
including sensors, semiconductors and batteries. This has driven
increased sales of our cryogenic and high magnetic field
measurement systems which enable the measurement of fundamental
parameters such as the electron transport and superconductivity
within new and exotic materials as well as graphene-like
structures. We are also seeing increased demand for our optical
spectrometers and scientific cameras to researchers as well as
within a range of instruments through strategic OEM
relationships.
Research & Fundamental Science
Within Research & Fundamental Science we continue to see
long-term customer interest in our specialised cryogenic and
superconducting magnet systems, and high-end scientific cameras
across a broad range of research themes including astronomy,
chemistry and physics research. These orders, which tend be lumpy
in nature, were slightly down in the period compared to the
previous year despite a positive forward--looking pipeline. In the
period, we were able to install further systems for the
multi--system order to the extreme environments laboratory in the
Institute of Beijing.
Service & Healthcare
Orders
GBP34.9m +14.8%
(HY 2020: GBP30.4m)
+22.7% HY20
+27.3% HY19
Organic constant currency growth(1)
Revenue
GBP28.9m +7.8%
(HY 2020: GBP26.8m)
+15.3% HY20
+16.9% HY19
Organic constant currency growth(1)
Adjusted(2) operating profit
GBP8.9m
(HY 2020: GBP9.0m)
Adjusted(2) operating margin
30.8%
(HY 2020: 33.6%)
Statutory operating profit
GBP8.9m
(HY 2020: GBP9.0m)
1. For definition refer to note on page 1.
2. Details of adjusting items can be found in Note 1 to the Financial Statements.
The Service & Healthcare sector comprises the Group's
maintenance service contracts, billable repairs, training and
support services, and spare part sales related to Oxford
Instruments' own products, and the support and service of
third-party MRI scanners in Japan.
We have continued to drive our service transformation, building
on the successful progress in the previous year and resulting in
strong order and revenue growth. Furthermore, good progress
resulted in adjusted operating profit and margin being
significantly ahead of H1 2019, however margin was slightly
depressed relative to the comparator period, with an increase in
service delivery costs as travel restrictions eased. Orders and
revenues related to the support of third-party MRI scanners in
Japan were broadly in line with the previous year.
Our service offerings complement our market-leading product
performance, providing a key differentiator for us in our markets.
Our service transformation builds on our excellent reputation,
developing a broader suite of service offerings to better support
our customers, increase their capabilities and accelerate their
outcomes throughout the lifetime usage of our products.
As part of our service transformation, and building on our
market intimacy, we are developing a portfolio of tailored service
offerings for specific end applications as well as for academic and
commercial customers. Providing connectivity across our products
enables increased levels of remote support as well as the provision
of actionable insights to improve productivity.
Building on our positive experiences of delivering high levels
of service continuity through the peak of the pandemic, we are
moving to a regionally led service model where our global processes
are implemented locally through our regional teams. By exploiting
the synergies across our local teams, utilising remote centres of
excellence and cross-product trained field engineers, we can
respond more quickly to customer requests, improve our efficiency
and reduce our travel footprint.
To support our transformation, we are implementing a Group-wide
Field Service Management system, which will be integrated into our
overall Customer Management System.
Whilst we are still in the early phases of our transformation,
we have already delivered strong growth and have significant scope
for further developments that will increase the value and breadth
of our portfolio and contribute to the ongoing success of our
Horizon strategy.
Finance Review
Strong order growth
up 18.3% at organic constant currency to GBP198.3m
Order book growth
up 13.3% at organic constant currency to GBP231.6m
Improved margin
18.0%
Cash conversion supporting growing business and managing supply
chain disruption
GBP70.1m net cash
Summary
Oxford Instruments plc uses certain alternative performance
measures to help it effectively monitor the performance of the
Group as management believe that these represent a more consistent
measure of underlying performance. Adjusted items exclude the
amortisation and impairment of acquired intangible assets;
acquisition--related items; profit or loss on disposal of
operations; other significant non-recurring items; and the
mark-to-market movement of financial derivatives. All of these are
included in the statutory figures. Note 2 provides further analysis
of the adjusting items in reaching adjusted profit measures.
Definitions of the Group's material alternative performance
measures along with reconciliation to their equivalent IFRS measure
are included within the Finance Review.
The Group trades in many foreign currencies and makes reference
to constant currency numbers to remove the impact of currency
effects in the year. These are prepared on a month--by--month basis
using the translational and transactional exchange rates which
prevailed in the previous year rather than the actual exchange
rates which prevailed in the year. Transactional exchange rates
include the effect of our hedging programme.
The acquisition of WITec was completed on 31 August 2021. Growth
rates expressed on an organic basis remove the impact of the
acquired business for the period under ownership.
Reported orders increased by 12.9% to GBP198.3m (2020:
GBP175.7m), an organic constant currency increase of 18.3%. At the
end of the period, the Group's order book for future deliveries
stood at GBP231.6m (30 September 2020: GBP204.6m). The order book
grew 13.2% on a reported basis and 13.3% at organic constant
currency.
Reported revenue increased by 21.2% to GBP170.1m (2020:
GBP140.3m). Organic revenue, excluding currency effects, increased
by 26.8%, with the movement in average currency exchange rates over
the year reducing reported revenue by GBP9.6m.
Adjusted operating profit increased by 25.9% to GBP30.6m (2020:
GBP24.3m). Organic adjusted operating profit, excluding currency
effects, increased by 28.0%, with a currency headwind in the year
of GBP0.7m. Adjusted operating margin increased by 70 basis points
to 18.0% (2020: 17.3%). Excluding currency effects, adjusted
operating margin increased by 10 basis points to 17.4%.
Statutory operating profit includes the amortisation of acquired
intangibles of GBP3.8m, acquisition--related costs of GBP0.3m, a
GBP0.9m margin adjustment relating to the sale of WITec inventories
in the period that had been revalued on acquisition, and a charge
of GBP3.8m relating to the movement in the mark-to-market valuation
of uncrystallised currency hedges for future years. Statutory
operating profit of GBP21.8m (2020: GBP20.8m) grew by 4.8%.
Adjusted profit before tax grew by 27.4% to GBP30.2m (2020:
GBP23.7m), representing a margin of 17.8% (2020: 16.9%).
Statutory profit before tax grew by 5.9% to GBP21.4m (2020:
GBP20.2m), representing a margin of 12.6% (2020: 14.4%). The
decline on last year was due to the mark--to--market movement on
currency hedges and the WITec gross margin adjustment.
Adjusted basic earnings per share grew by 25.6% to 41.2p (2020:
32.8p). Basic earnings per share were 28.7p (2020: 27.7p), growth
of 3.6%.
Cash generated from operations of GBP17.5m (2020: GBP23.3m)
represents 48% (2020: 97%) cash conversion. Cash conversion was
depressed by raw material purchases to support business growth and
mitigate shortages. In addition, timing of shipments led to an
increase in receivables, and we also resumed capital investments.
Net cash decreased from GBP97.6m on 31 March 2021 to GBP70.1m on 30
September 2021, after consideration paid (net of cash acquired) of
GBP30.0m for the acquisition of WITec.
At the end of September, our revolving credit facility remained
undrawn, leaving approximately GBP100m of committed facilities.
This represents total headroom of approximately GBP172m.
Income Statement
The Group's Income Statement is summarised below.
Half year Half year
to to
30 September 30 September
2021 2020
GBPm GBPm Change
------------------------------------------- ------------ ------------ ------
Revenue 170.1 140.3 +21.2%
------------------------------------------- ------------ ------------ ------
Adjusted operating profit 30.6 24.3 +25.9%
------------------------------------------- ------------ ------------ ------
Amortisation of acquired intangible assets (3.8) (4.3)
Non-recurring items (1.2) -
Mark-to-market of currency hedges (3.8) 0.8
------------------------------------------- ------------ ------------ ------
Statutory operating profit 21.8 20.8 +4.8%
------------------------------------------- ------------ ------------ ------
Net finance costs (0.4) (0.6)
------------------------------------------- ------------ ------------ ------
Adjusted profit before taxation 30.2 23.7 +27.4%
------------------------------------------- ------------ ------------ ------
Statutory profit before taxation 21.4 20.2 +5.9%
------------------------------------------- ------------ ------------ ------
Adjusted effective tax rate 21.5% 20.7%
Effective tax rate 22.9% 21.3%
Adjusted earnings per share - basic 41.2p 32.8p +25.6%
Earnings per share - basic 28.7p 27.7p +3.6%
Dividend per share (interim) 4.4p 4.1p +7.3%
------------------------------------------- ------------ ------------ ------
Orders and revenue
Following the acquisition of WITec, the business is recorded
within the Materials & Characterisation segment. Growth rates
expressed on an organic basis exclude the impact of WITec.
Total reported orders grew by 12.9% (+18.3% at organic constant
currency) to GBP198.3m. Reported orders grew by 13.1% (+16.9% at
organic constant currency) for Materials & Characterisation, by
11.4% (+18.2% at constant currency) for Research & Discovery
and by 14.8% (+22.7% at constant currency) for Service &
Healthcare.
Reported revenue of GBP170.1m (2020: GBP140.3m) increased by
21.2% (+26.8% at organic constant currency) against a weak
comparator period impacted by the covid-19 pandemic. Reported
revenue grew by 30.2% for Materials & Characterisation (+34.2%
at organic constant currency), with strong growth for our
semiconductor processing tools and analysers for electron
microscopes. WITec contributed revenue of GBP1.8m to the Group's
result for the period.
Strong revenue growth for our cryogenic and complex magnets, in
addition to improved deliveries from our imaging and microscopy
business following a weak comparator period, resulted in growth for
Research & Discovery of 16.6% (+23.2% at constant currency).
Revenue growth from service of our own products resulted in
reported growth of 7.8% (+15.3% at constant currency) for Service
& Healthcare.
The book-to-bill ratio (orders received to goods and services
billed in the period) for the year was 117% (2020: 125%).
On a geographical basis, revenue fell by 3.0% in Europe (-0.7%
at constant currency) due to the phasing of deliveries and a
planned reduction in the number of bespoke orders for semiconductor
processing tools. Revenue for North America increased by 22.2% on a
reported basis and by 32.8% at constant currency, supported by good
demand for electron microscope analysers and a recovery in demand
for our imaging and microscopy products. Asia delivered strong
growth of 36.8% (+44.1% at constant currency), strongly driven by
demand for our semiconductor processing tools and analysers for
electron microscopes.
Orders and revenue for China during the half constituted 27% and
30% respectively of the Group total.
Geographic revenue growth
Half year to 30 September Half year to 30 September
2021 2020 % growth
--------------------------- ---------------------------
% % Change % at constant
GBPm of total GBPm of total GBPm growth currency
-------------- ---------- --------------- ---------- --------------- ------ ------ -----------
Europe 39.3 23% 40.5 29% (1.2) (3.0%) (0.7%)
North America 41.3 24% 33.8 24% +7.5 +22.2% +32.8%
Asia 87.4 52% 63.9 46% +23.5 +36.8% +44.1%
Rest of World 2.1 1% 2.1 1% - - +19.0%
-------------- ---------- --------------- ---------- --------------- ------ ------ -----------
170.1 100% 140.3 100% +29.8 +21.2% +28.1%
-------------- ---------- --------------- ---------- --------------- ------ ------ -----------
The total reported order book grew by 13.2% (13.3% at organic
constant currency) against 30 September 2020. The order book, at
organic constant currency, compared to 30 September 2020, increased
by 25.9% for Materials & Characterisation, with strong growth
across all constituent businesses. Research & Discovery fell
slightly by 1.5% at constant currency, with good recovery in orders
for our imaging products offset by a planned acceptance of fewer
complex orders in our cryogenic and magnet business, combined with
a phasing difference in OEM orders for X-Ray Technology. Continued
focus on own product service resulted in growth of 33.8% from
Service & Healthcare.
Materials Research
& & Service &
GBPm Characterisation Discovery Healthcare Total
--------------------------------------------------------------------- ---------------- --------- ---------- ------
Revenue: half year to 30 September 2020 65.2 48.3 26.8 140.3
Constant currency growth/(decline) 22.3 11.2 4.1 37.6
--------------------------------------------------------------------- ---------------- --------- ---------- ------
Revenue at organic constant currency: half year to 30 September 2021 87.5 59.5 30.9 177.9
Acquisition 1.8 - - 1.8
Foreign exchange (4.4) (3.2) (2.0) (9.6)
--------------------------------------------------------------------- ---------------- --------- ---------- ------
Revenue: half year to 30 September 2021 84.9 56.3 28.9 170.1
--------------------------------------------------------------------- ---------------- --------- ---------- ------
Revenue growth: reported +30.2% +16.6% +7.8% +21.2%
Revenue growth: organic constant currency +34.2% +23.2% +15.3% +26.8%
--------------------------------------------------------------------- ---------------- --------- ---------- ------
Gross profit
Gross profit grew by 22.7% to GBP86.8m (2020: GBP71.5m),
representing a gross profit margin of 51.0%. The adjusted gross
profit margin of 51.6% is 60 basis points over last year.
Adjusted operating profit and margin
Following the acquisition of WITec, the business is recorded
within the Materials & Characterisation segment. Growth rates
expressed on an organic basis exclude the impact of WITec.
Adjusted operating profit increased by 25.9% to GBP30.6m (2020:
GBP24.3m), representing an adjusted operating profit margin of
18.0%, an increase of 70 basis points against last year. At
constant currency, the adjusted operating profit margin was 17.4%,
an increase of 10 basis points.
Reported Materials & Characterisation adjusted operating
profit increased by 46.1% (+42.7% at organic constant currency)
with reported margin increasing by 160 basis points to 15.3% (2020:
13.7%). This was attributable to growth from our higher margin
material analysis systems. WITec contributed adjusted operating
profit of GBP0.2m in the period following completion.
Research & Discovery's adjusted operating margin increased
to 15.5% (2020: 13.3%), growth of 220 basis points. At constant
currency, the margin was 15.1%, an increase of 180 basis points,
with strong trading improving margins across our optical imaging
and cryogenic and complex magnet businesses.
Service & Healthcare margin decreased by 280 basis points to
30.8% (2020: 33.6%). At constant currency, the margin was 30.4%, a
decrease of 320 basis points, due to an increase in service
delivery cost as travel restrictions eased.
Currency effects (including the impact of transactional currency
hedging) have reduced adjusted operating profit by GBP0.7m when
compared to blended hedged exchange rates for the comparative
period.
Materials Research
& & Service &
GBPm Characterisation Discovery Healthcare Total
---------------------------------------------------------------------- ---------------- --------- ---------- -----
Adjusted operating profit: half year to 30 September 2020 8.9 6.4 9.0 24.3
Constant currency growth 3.8 2.6 0.4 6.8
---------------------------------------------------------------------- ---------------- --------- ---------- -----
Adjusted operating profit at organic constant currency: half year to
30 September 2021 12.7 9.0 9.4 31.1
Acquisition 0.2 - - 0.2
Currency 0.1 (0.3) (0.5) (0.7)
---------------------------------------------------------------------- ---------------- --------- ---------- -----
Adjusted operating profit: half year to 30 September 2021 13.0 8.7 8.9 30.6
---------------------------------------------------------------------- ---------------- --------- ---------- -----
Adjusted operating margin(1) : half year to 30 September 2020 13.7% 13.3% 33.6% 17.3%
Adjusted operating margin(1) : half year to 30 September 2021 15.3% 15.5% 30.8% 18.0%
Adjusted operating margin(1) (constant currency): half year to 30
September 2021 14.4% 15.1% 30.4% 17.4%
---------------------------------------------------------------------- ---------------- --------- ---------- -----
1. Adjusted margin is calculated as adjusted operating profit
divided by revenue. Adjusted margin at constant currency is defined
as adjusted operating profit at constant currency divided by
revenue at constant currency.
Statutory operating profit and margin
Statutory operating profit increased by 4.8% to GBP21.8m (2020:
GBP20.8m), representing an operating profit margin of 12.8%, a
decrease of 200 basis points against last year, due to the
mark-to-market charge on currency hedges and the WITec gross margin
adjustment on acquisition. Statutory operating profit is after the
amortisation and impairment of acquired intangible assets;
acquisition--related items; profit or loss on disposal of
operations; other significant non-recurring items; and the
mark-to-market of financial derivatives.
Adjusting items
Amortisation of acquired intangibles of GBP3.8m relates to
intangible assets recognised on acquisitions, being the value of
technology, customer relationships, and brands.
Non-recurring items comprise GBP0.3m of professional fees on the
acquisition of WITec GmbH. In addition, a charge of GBP0.9m has
been taken to eliminate the profit arising in the acquired WITec
business from a revaluation of their inventories to fair value, in
accordance with accounting standards.
The Group uses derivative products to hedge its short-term
exposure to fluctuations in foreign exchange rates. Our hedging
policy allows for forward contracts to be entered into up to 18
months forward from the end of the next reporting period. Group
policy is to have in place at the beginning of the financial year
hedging instruments to cover approximately 80% of its forecast
transactional exposure for the following twelve months and, subject
to pricing, up to 20% of exposures for the next six months. The
Group has decided that the additional costs of meeting the
extensive documentation requirements of IFRS 9 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 mark-to-market derivatives in respect of
transactional currency exposures of the Group in future periods are
disclosed in the Income Statement as foreign exchange and excluded
from our calculation of adjusted profit before tax. In the half
year this amounted to a charge of GBP3.8m (2020: GBP0.8m credit).
The fall in the net asset for derivative financial instruments over
the half year reflects an uncrystallised reduction in the
mark-to-market valuation of forward contracts from a fall in the
value of Sterling at the balance sheet date against a blended rate
achieved on US Dollar, Euro and Japanese Yen forward contracts that
will mature over the next 18 months.
Net finance costs
The Group's adjusted net interest costs fell by GBP0.2m to
GBP0.4m (2020: GBP0.6m), principally due to the repayment of
private placement notes at the year end.
Adjusted profit before tax and margin
Adjusted profit before tax increased by 27.4% to GBP30.2m (2020:
GBP23.7m). The adjusted profit before tax margin of 17.8% (2020:
16.9%) was above last year due to an increase in the adjusted
operating margin and lower net finance costs.
Reconciliation of statutory profit before tax to adjusted profit
before tax
Half year Half year
to to
30 September 30 September
2021 2020
GBPm GBPm
------------------------------------------- ------------ ------------
Statutory profit before tax 21.4 20.2
Add back (Note 1):
Amortisation of acquired intangible assets 3.8 4.3
Other non-recurring items 1.2 -
Mark-to-market of currency hedges 3.8 (0.8)
------------------------------------------- ------------ ------------
Adjusted profit before tax 30.2 23.7
------------------------------------------- ------------ ------------
Statutory profit before tax and margin
Statutory profit before tax increased by 5.9% to GBP21.4m (2020:
GBP20.2m). Statutory profit before tax is after the amortisation
and impairment of acquired intangible assets; acquisition-related
items; profit or loss on disposal of operations; other significant
non--recurring items; and the mark-to-market of financial
derivatives. The profit before tax margin of 12.6% (2020: 14.4%)
was lower than last year due to the charge from the mark-to-market
movement on financial derivatives and WITec gross margin adjustment
on inventories.
Taxation
The adjusted tax charge of GBP6.5m (2020: GBP4.9m) represents an
effective tax rate of 21.5% (2020: 20.7%). The tax charge of
GBP4.9m (2020: GBP4.3m) represents an effective tax rate of 22.9%
(2020: 21.3%). The increase in tax rate reflects the revaluation of
deferred tax provisions arising from the announced increase in the
UK corporation tax rate with effect from 1 April 2023.
Earnings per share
Adjusted basic earnings per share increased by 25.6% to 41.2p
(2020: 32.8p); adjusted diluted earnings per share grew by 25.6% to
40.7p (2020: 32.4p). Basic earnings per share increased by 3.6% to
28.7p (2020: 27.7p); diluted earnings per share grew by 3.3% to
28.3p (2020: 27.4p).
The number of undiluted weighted average shares increased to
57.5m (2020: 57.3m).
Foreign exchange
The Group faces transactional and translational currency
exposure, most notably against the US Dollar, Euro and Japanese
Yen. For the half year, approximately 26% of Group revenue was
denominated in Sterling, 46% in US Dollars, 17% in Euros, 9% in
Japanese Yen and 2% in other currencies. 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's foreign currency exposure for the half year is
summarised below.
Adjusted
operating
GBPm (equivalent) Revenue profit
------------------ ------- ---------
Sterling 45.3 (13.5)
US Dollar 78.0 22.2
Euro 29.1 13.8
Japanese Yenw 15.0 8.4
Chinese Renminbi 2.3 0.4
Other 0.4 (0.7)
------------------ ------- ---------
170.1 30.6
------------------ ------- ---------
The Group maintains a hedging programme against its net
transactional exposure using internal projections of currency
trading transactions expected to arise over a period extending from
12 to 24 months. As at 30 September 2021, the Group had currency
hedges in place extending up to 18 months forward.
For the full year 2021/22, our assessment of the currency impact
is, based on hedges currently in place and forecast currency rates,
a headwind of approximately GBP17.0m to revenue and GBP1.8m to
profit. Forecast currency rates for the full year are: GBP:USD
1.38; GBP:EUR 1.18; GBP:JPY 156. For the full year 2022/23, using
the same assumptions, there is an additional headwind of GBP5.7m to
profit owing to the unwinding of currency hedges that have a
positive benefit in 2021/22. This impact is prior to mitigating
pricing and cost actions. Currency headwind guidance is lower than
given at the previous year end owing to a small favourable movement
in currency. Uncertain volume and timing of shipments and
acceptances, currency mix and FX volatility may significantly
affect full-year currency forecast effects.
Acquisition of WITec GmbH
On 31 August 2021, the Group completed the purchase of 100% of
the share capital in WITec GmbH for an initial consideration of
EUR37.0m (GBP31.7m). Additional consideration of up to EUR5m
(GBP4.3m) is conditional on trading performance over a period of
twelve months following completion.
Dividend
The Group's policy is to increase the dividend each year in line
with the increase in underlying earnings, considering movements in
currency. After a strong half year of trading, the Board has
declared an interim dividend of 4.4p per share (2020: 4.1p per
share), equivalent to growth of 7.3%. The interim dividend will be
paid on 14 January 2022.
Cash flow
The Group's cash flow is summarised below.
Half year Half year
to to
30 September 30 September
2021 2020
GBPm GBPm
--------------------------------------------------------------------- ------------ ------------
Adjusted operating profit 30.6 24.3
Depreciation and amortisation 4.1 4.1
--------------------------------------------------------------------- ------------ ------------
Adjusted(1) EBITDA 34.7 28.4
Working capital movement (14.2) (3.0)
Equity settled share schemes 1.1 1.1
Non-recurring items (0.3) 0.5
Pension scheme payments above charge to operating profit (3.8) (3.7)
--------------------------------------------------------------------- ------------ ------------
Cash from operations 17.5 23.3
Interest (0.5) (1.0)
Tax (4.0) (4.0)
Capitalised development expenditure (0.2) (0.5)
Expenditure on tangible and intangible assets (5.5) (1.1)
Acquisition of subsidiaries, net of cash acquired (30.0) -
Dividends paid (2.4) -
Proceeds from issue of share capital and exercise of share options 0.1 0.1
Payments made in respect of lease liabilities (1.3) (1.3)
Decrease in borrowings - -
--------------------------------------------------------------------- ------------ ------------
Net increase in cash and cash equivalents from continuing operations (26.3) 15.5
--------------------------------------------------------------------- ------------ ------------
1. Adjusted EBITDA is defined as adjusted operating profit
before depreciation and amortisation of capitalised development
costs. The Consolidated Statement of Cash Flows provides further
analysis of the definition of adjusted EBITDA.
Cash from operations
Cash from operations was GBP17.5m (2020: GBP23.3m). After
adjusting for non-recurring items and pension scheme payments above
the charge to operating profit, less capitalised development
expenditure, capital expenditure and payments made in respect of
lease liabilities gives an adjusted cash from operations figure of
GBP14.6m (2020: GBP23.6m). This represents 48% (2020: 97%) cash
conversion, reflecting timing of shipments and planned inventory
increases, along with a resumption in capital expenditure, some of
which related to the new facility for our semiconductor
business.
Reconciliation of cash generated from operations to adjusted
operating cash flow
Half year Half year
to to
30 September 30 September
2021 2020
GBPm GBPm
---------------------------------------------------------------------------- ------------ ------------
Cash from operations 17.5 23.3
Add back:
Non-recurring items 0.3 (0.5)
Pension scheme payments above charge to operating profit 3.8 3.7
Capitalised development expenditure (0.2) (0.5)
Expenditure on tangible and intangible assets (5.5) (1.1)
Payments made in respect of lease liabilities (1.3) (1.3)
---------------------------------------------------------------------------- ------------ ------------
Adjusted cash from operations 14.6 23.6
---------------------------------------------------------------------------- ------------ ------------
Cash conversion % (adjusted cash from operations/adjusted operating profit) 48% 97%
---------------------------------------------------------------------------- ------------ ------------
Working capital increased by GBP14.2m. In addition to business
growth placing upward pressure on inventories, we are increasing
our inventory levels to mitigate supply chain disruptions,
especially across electronic components. Furthermore, delays in the
introduction of a new duty free certificate regime in China has led
to a rise in finished goods; this is expected to unwind during the
second half of the year. As a result, inventories rose by GBP1.7m;
we expect higher inventory levels to remain in place for the
foreseeable future until we see greater resilience in the supply
chain. Receivables increased by GBP5.9m, primarily due to some
large shipments made close to the half year end. Payables and
customer deposits decreased by GBP6.6m.
We have commenced construction of our new facility near Bristol
for our Plasma Technology business. Delays due to the sourcing of
materials will result in the deferral of some expenditure into next
year. We now expect costs of approximately GBP12m to be incurred in
the financial year 2021/22, with GBP20m falling into the following
year. The business will enter a 20-year lease on completion of
construction, which is anticipated during the second half of the
2022/23 financial year.
Pension
Pension recovery payments above charge to operating profit total
GBP3.8m (2020: GBP3.7m).
Interest
Net interest paid was GBP0.5m (2020: GBP1.0m), the reduction
reflecting the repayment of private placement notes at the end of
the last financial year.
Tax
Tax paid was GBP4.0m (2020: GBP4.0m), with cash tax in both
years benefiting from utilisation of prior year losses carried
forward.
Investment in Research and Development (R&D)
Total cash spend on R&D in the half year was GBP15.1m,
equivalent to 8.8% of sales (2020: GBP12.7m, 9.0% of sales). A
reconciliation between the adjusted amounts charged to the Income
Statement and the cash spent is given below:
Half year Half year
to to
30 September 30 September
2021 2020
GBPm GBPm
-------------------------------------------------------------------- ------------ ------------
R&D expense charged to the Income Statement 15.4 13.2
Depreciation of R&D-related fixed assets (0.1) -
Amounts capitalised as fixed assets 0.3 -
Amortisation and impairment of R&D costs capitalised as intangibles (0.7) (1.0)
Amounts capitalised as intangible assets 0.2 0.5
-------------------------------------------------------------------- ------------ ------------
Total cash spent on R&D during the half year 15.1 12.7
-------------------------------------------------------------------- ------------ ------------
Net cash and funding
Net cash after borrowings
Cash from operations in the half year was offset by the payment
of initial consideration for the acquisition of WITec GmbH,
resulting in a decrease in the Group's net cash position from
GBP97.6m at 31 March 2021 to GBP70.1m on 30 September 2021. Cash
generated from operations was GBP17.5m (2020: GBP23.3m). The Group
invested in capitalised development costs of GBP0.2m and tangible
and intangible assets of GBP5.5m, with investments in semiconductor
processing development tools and infrastructure. Of the total
capital expenditure of GBP5.5m, GBP0.9m relates to payments
associated with the new semiconductor facility currently under
construction.
Movement in net cash GBPm
------------------------------------------------------ ------
Net cash as at 31 March 2021 97.6
------------------------------------------------------ ------
Cash generated from operations 17.5
Interest (0.5)
Tax (4.0)
Capitalised development expenditure (0.2)
Capital expenditure on tangible and intangible assets (5.5)
Acquisition of subsidiaries (30.0)
Dividends paid (2.4)
Other items (2.4)
------------------------------------------------------ ------
Net cash after borrowings as at 30 September 2021 70.1
------------------------------------------------------ ------
As at As at
30 September 30 September
2021 2020
Net cash including lease liabilities GBPm GBPm
------------------------------------------------ ------------ ------------
Net cash after borrowings 70.1 81.4
Lease liabilities (12.9) (7.3)
------------------------------------------------ ------------ ------------
Net cash and lease liabilities after borrowings 57.2 74.1
------------------------------------------------ ------------ ------------
Funding
On 2 July 2018, the Group entered into an unsecured
multi-currency revolving facility agreement, which is committed
until June 2024 with one-year extension options at the end of the
first and second years. The facility has been entered into with two
banks and comprises a Euro-denominated multi-currency facility of
EUR50.0m (GBP42m) and a US Dollar-denominated multi-currency
facility of $80.0m (GBP58m). The facility has been extended by one
year to June 2025.
Debt covenants are net debt to EBITDA less than 3.0 times and
EBITDA to interest greater than 4.0 times. As at 31 March and 30
September 2021 the business had net cash.
Pensions
The Group has a defined benefit pension scheme in the UK. This
has been closed to new entrants since 2001 and closed to future
accrual from 2010.
On an IAS 19 basis, the surplus arising from our defined benefit
pension scheme obligations on 30 September 2021 was GBP25.0m (31
March 2021: GBP16.3m). The value of scheme assets increased to
GBP359.3m (31 March 2021: GBP340.2m). Scheme liabilities increased
to GBP334.3m (31 March 2021: GBP323.9m) due to movements in the
discount rate and inflation rates. The discount rate decreased from
2.1% to 2.0% because of a reduction in bond yields, and the assumed
inflation rates for RPI and CPI have increased from 3.1% to 3.3%
and from 2.5% to 2.7% respectively, reflecting economic conditions
at the balance sheet date.
The scheme's actuarial valuation review, rather than the
accounting basis, determines our cash payments into the scheme. The
cash contributions into the scheme are expected to continue until
2025/26, at which point we expect, based on current assumptions,
the scheme to achieve self-sufficiency. In the half year 2021,
these contributions amounted to GBP3.8m. We are reviewing the
results of the recent triennial review although we do not expect
any changes to the current recovery plan. The scheme rules provide
that in the event of a surplus remaining after settling contractual
obligations to members, the Group may determine how the surplus is
utilised.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Performance Highlights, Chief Executive's Review
and Operations Review sections of this Half-year Report. The
financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Finance Review.
Trading for the Group has been strong during the first half of
the year. The Group has prepared and reviewed a number of scenarios
for the Group based on key risks noted for the business and the
potential impact on orders, trading and cash flow performance. In
addition, the Group has overlaid the risk of long-term adverse
movements in foreign exchange rates to our cash flow forecasts. The
Board is satisfied, having considered the sensitivity analysis, as
well as its funding facilities, that the Group has adequate
resources to continue in operational existence for the foreseeable
future.
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
8 November 2021
Principal Risks and Uncertainties
Information regarding the risk management process in place at
the Group is set out on page 66 of the 2021 Report and Financial
Statements. The principal risks and uncertainties identified
through that process are set out on pages 66 to 70 of the 2021
Report and Financial Statements and can be found on the Group's
website at www.oxinst.com .
In keeping with the risk management process, the Group has
performed a quarterly update of its risk register as at 30
September 2021.
It has evaluated the disclosures made on pages 66 to 70 of the
2021 Report and Financial Statements and has concluded that all bar
one of the risks identified remain relevant for the remainder of
the year ending 31 March 2022 and that there are no other
significant risks to be disclosed. A summary of the risks and
uncertainties identified in the 2021 Report and Financial
Statements is set out below:
-- impact of covid-19;
-- political risk;
-- routes to market;
-- technical risk;
-- supply chain risk;
-- cyber risk;
-- legal/compliance risk;
-- adverse movements in long-term foreign currency rates;
-- people;
-- operational risk; and
-- pensions.
The Board considers the Brexit-related risks set out on page 69
of the 2021 Report and Financial Statements are no longer
significant. While the Group has experienced some additional costs
associated with freight into the EU, the financial impact has not
been significant. Further, the other Brexit-related risks
identified have not materialised to date, although the potential
shortage of key skills remains relevant. However, this is covered
in the people risk.
Regarding covid-19, the Group has been largely resilient to its
effects. However, the potential for disruption at an operational
and customer level remains, albeit mitigated by widespread
vaccinations and revised working practices.
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 UK adopted IAS 34 Interim Financial Reporting;
and
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance 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 Guidance 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
8 November 2021
Condensed Consolidated Statement of Income
Half year ended 30 September 2021
Half year to 30 September 2021 Half year to 30 September 2020
---------------------------------- ----------------------------------
Adjusting Adjusting
Adjusted items(1) Total Adjusted items(1) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Revenue 4 170.1 - 170.1 140.3 - 140.3
Cost of sales (82.4) (0.9) (83.3) (68.8) - (68.8)
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Gross profit 87.7 (0.9) 86.8 71.5 - 71.5
Research and development 5 (15.4) - (15.4) (13.2) - (13.2)
Selling and marketing (22.9) - (22.9) (19.8) - (19.8)
Administration and shared services (21.2) (4.1) (25.3) (14.6) (4.3) (18.9)
Foreign exchange gain/(loss) 2.4 (3.8) (1.4) 0.4 0.8 1.2
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Operating profit 30.6 (8.8) 21.8 24.3 (3.5) 20.8
Interest credit on pension scheme net
assets 0.2 - 0.2 0.4 - 0.4
Other financial income 0.1 - 0.1 0.1 - 0.1
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Financial income 0.3 - 0.3 0.5 - 0.5
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Financial expenditure (0.7) - (0.7) (1.1) - (1.1)
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Profit/(loss) before income tax 4 30.2 (8.8) 21.4 23.7 (3.5) 20.2
Income tax (expense)/credit (6.5) 1.6 (4.9) (4.9) 0.6 (4.3)
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Profit/(loss) for the half year
attributable to equity Shareholders of
the parent 23.7 (7.2) 16.5 18.8 (2.9) 15.9
---------------------------------------- ---- ----------- ------------ ------- ----------- ------------ -------
Earnings per
share pence pence pence pence
-------------------- ----- ----- ----- -----
Basic earnings
per share 3
From profit for
the half year 41.2 28.7 32.8 27.7
-------------------- ----- ----- ----- -----
Diluted earnings
per share 3
From profit for
the half year 40.7 28.3 32.4 27.4
-------------------- ----- ----- ----- -----
Dividends per
share 8
Dividends paid 4.1 -
Dividends proposed 4.4 4.1
-------------------- ----- ----- ----- -----
1. Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in Note 2.
Year to 31 March 2021
----------------------------
Adjusting
Adjusted items(1) Total
Note GBPm GBPm GBPm
----------------------------------------------------------------------------- ---- -------- --------- -------
Revenue 4 318.5 - 318.5
Cost of sales (153.7) - (153.7)
----------------------------------------------------------------------------- ---- -------- --------- -------
Gross profit 164.8 - 164.8
Research and development 5 (30.0) (1.3) (31.3)
Selling and marketing (44.5) - (44.5)
Administration and shared services (34.5) (8.8) (43.3)
Foreign exchange gain 0.9 6.4 7.3
----------------------------------------------------------------------------- ---- -------- --------- -------
Operating profit 56.7 (3.7) 53.0
Interest credit on pension scheme net assets 0.9 - 0.9
Other financial income 0.2 - 0.2
----------------------------------------------------------------------------- ---- -------- --------- -------
Financial income 1.1 - 1.1
----------------------------------------------------------------------------- ---- -------- --------- -------
Financial expenditure (1.9) - (1.9)
----------------------------------------------------------------------------- ---- -------- --------- -------
Profit/(loss) before income tax 4 55.9 (3.7) 52.2
Income tax (expense)/credit (10.8) 0.4 (10.4)
----------------------------------------------------------------------------- ---- -------- --------- -------
Profit/(loss) for the year attributable to equity Shareholders of the parent 45.1 (3.3) 41.8
----------------------------------------------------------------------------- ---- -------- --------- -------
Earnings per share pence pence
----------------------------------------------------------------------------- ---- -------- --------- -------
Basic earnings per share 3
From profit for the year 78.6 72.8
----------------------------------------------------------------------------- ---- -------- --------- -------
Diluted earnings per share 3
From profit for the year 77.6 71.9
----------------------------------------------------------------------------- ---- -------- --------- -------
Dividends per share 8
Dividends paid -
Dividends proposed 17.0
----------------------------------------------------------------------------- ---- -------- --------- -------
1. Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in Note 2.
The attached notes form part of these Financial Statements.
Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2021
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
GBPm GBPm GBPm
-------------------------------------------------------------------------------- ------------ ------------ --------
Profit for the period 16.5 15.9 41.8
Other comprehensive income/(expense):
Items that may be reclassified subsequently to Consolidated Statement of Income
Foreign exchange translation differences 1.3 (2.0) (4.9)
Items that will not be reclassified to Consolidated Statement of Income
Remeasurement gain/(loss) in respect of post-retirement benefits 4.7 (33.7) (30.8)
Tax (charge)/credit on items that will not be reclassified to
Consolidated Statement of Income (1.2) 6.4 5.5
-------------------------------------------------------------------------------- ------------ ------------ --------
Total other comprehensive income/(expense) 4.8 (29.3) (30.2)
-------------------------------------------------------------------------------- ------------ ------------ --------
Total comprehensive income/(expense) for the period
attributable to equity Shareholders of the parent 21.3 (13.4) 11.6
-------------------------------------------------------------------------------- ------------ ------------ --------
Condensed Consolidated Statement of Financial Position
As at 30 September 2021
As at
As at 30 September As at
30 September 2020 31 March
2021 as restated1 2021
Note GBPm GBPm GBPm
----------------------------------------------------------------------- ---- ------------ ------------ --------
Assets
Non-current assets
Property, plant and equipment 25.6 20.5 21.1
Right-of-use assets 12.4 7.0 7.3
Intangible assets 148.7 130.3 122.6
Derivative financial instruments 9 - - 1.1
Retirement benefit asset 25.0 1.1 16.3
Deferred tax assets 14.2 13.9 13.1
----------------------------------------------------------------------- ---- ------------ ------------ --------
225.9 172.8 181.5
----------------------------------------------------------------------- ---- ------------ ------------ --------
Current assets
Inventories 66.3 59.1 58.7
Trade and other receivables 86.9 68.1 75.6
Current income tax receivables 0.6 0.2 1.9
Derivative financial instruments 9 2.6 1.0 5.0
Cash and cash equivalents 119.3 136.6 128.0
----------------------------------------------------------------------- ---- ------------ ------------ --------
275.7 265.0 269.2
----------------------------------------------------------------------- ---- ------------ ------------ --------
Total assets 501.6 437.8 450.7
----------------------------------------------------------------------- ---- ------------ ------------ --------
Equity
Capital and reserves attributable to the Company's equity Shareholders
Share capital 2.9 2.9 2.9
Share premium 62.5 62.4 62.4
Other reserves 0.2 0.2 0.2
Translation reserve 7.9 9.5 6.6
Retained earnings 205.4 164.5 194.1
----------------------------------------------------------------------- ---- ------------ ------------ --------
278.9 239.5 266.2
----------------------------------------------------------------------- ---- ------------ ------------ --------
Liabilities
Non-current liabilities
Lease payables 10.1 5.1 4.9
Derivative financial instruments 9 0.5 - -
Provisions - 0.7 0.7
Deferred tax liabilities 7.3 1.1 4.9
----------------------------------------------------------------------- ---- ------------ ------------ --------
17.9 6.9 10.5
----------------------------------------------------------------------- ---- ------------ ------------ --------
Current liabilities
Bank loans and overdrafts 2 49.2 55.2 30.4
Trade and other payables 137.9 120.4 126.1
Lease payables 2.8 2.2 2.6
Current income tax payables 5.3 4.5 6.2
Derivative financial instruments 9 - 1.1 -
Provisions 9.6 8.0 8.7
----------------------------------------------------------------------- ---- ------------ ------------ --------
204.8 191.4 174.0
----------------------------------------------------------------------- ---- ------------ ------------ --------
Total liabilities 222.7 198.3 184.5
----------------------------------------------------------------------- ---- ------------ ------------ --------
Total liabilities and equity 501.6 437.8 450.7
----------------------------------------------------------------------- ---- ------------ ------------ --------
1. Details of restatement of prior period numbers can be found in Note 1.
The Financial Statements were approved by the Board of Directors
on 8 November 2021 and signed on its behalf by:
Ian Barkshire
Director
Gavin Hill
Director
Company number: 775598
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2021
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 1 April 2021 2.9 62.4 0.2 6.6 194.1 266.2
Total comprehensive income/(expense):
Profit for the half year - - - - 16.5 16.5
Other comprehensive income/(expense):
- Foreign exchange translation differences - - - 1.3 - 1.3
- Remeasurement gain in respect of post--retirement
benefits - - - - 4.7 4.7
- Tax charge on items that will not be reclassified to
Consolidated Statement of Income - - - - (1.2) (1.2)
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total comprehensive income attributable to equity
Shareholders of the parent - - - 1.3 20.0 21.3
Transactions with owners recorded directly in equity:
- Credit in respect of employee service costs settled by
award of share options - - - - 1.1 1.1
- Tax credit in respect of share options - - - - - -
- Proceeds from shares issued - 0.1 - - - 0.1
- Dividends - - - - (9.8) (9.8)
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total transactions with owners recorded directly in equity: - 0.1 - - (8.7) (8.6)
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 30 September 2021 2.9 62.5 0.2 7.9 205.4 278.9
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 1 April 2020 2.9 62.2 0.2 11.5 174.8 251.6
Total comprehensive income/(expense):
Profit for the half year - - - - 15.9 15.9
Other comprehensive (expense)/income:
- Foreign exchange translation differences - - - (2.0) - (2.0)
- Remeasurement loss in respect of post-retirement benefits - - - - (33.7) (33.7)
- Tax credit on items that will not be reclassified to
Consolidated Statement of Income - - - - 6.4 6.4
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total comprehensive expense attributable to equity
Shareholders of the parent - - - (2.0) (11.4) (13.4)
Transactions with owners recorded directly in equity:
- Credit in respect of employee service costs settled by
award of share options - - - - 1.1 1.1
- Tax credit in respect of share options - - - - - -
- Proceeds from shares issued - 0.2 - - - 0.2
- Dividends - - - - - -
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total transactions with owners recorded directly in equity: - 0.2 - - 1.1 1.3
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 30 September 2020 2.9 62.4 0.2 9.5 164.5 239.5
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 1 April 2020 2.9 62.2 0.2 11.5 174.8 251.6
Total comprehensive income/(expense):
Profit for the half year - - - - 41.8 41.8
Other comprehensive (expense)/income:
- Foreign exchange translation differences - - - (4.9) - (4.9)
- Remeasurement loss in respect of post--retirement
benefits - - - - (30.8) (30.8)
-Tax credit on items that will not be reclassified to
Consolidated Statement of Income - - - - 5.5 5.5
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total comprehensive (expense)/income attributable to equity
Shareholders of the parent - - - (4.9) 16.5 11.6
Transactions with owners recorded directly in equity:
- Credit in respect of employee service costs settled by
award of share options - - - - 1.8 1.8
- Tax credit in respect of share options - - - - 1.0 1.0
- Proceeds from shares issued - 0.2 - - - 0.2
- Dividends - - - - - -
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total transactions with owners recorded directly in equity: - 0.2 - - 2.8 3.0
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 31 March 2021 2.9 62.4 0.2 6.6 194.1 266.2
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Other reserves comprise the capital redemption reserve, which
represents the nominal value of shares repurchased and then
cancelled during the year ended 31 March 1999.
The foreign exchange translation reserve comprises all foreign
exchange differences arising since 1 April 2004 from the
translation of the Group's net investments in foreign subsidiaries
into Sterling.
Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2021
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
Note GBPm GBPm GBPm
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Profit for the period 16.5 15.9 41.8
Adjustments for:
Income tax expense 4.9 4.3 10.4
Net financial expense 0.4 0.6 0.8
Fair value movement on financial derivatives 3.8 (0.8) (6.4)
Restructuring costs 0.3 - 0.4
WITec post-acquisition gross margin adjustment 0.9 - -
Impairment of capitalised development costs - - 1.3
Amortisation of acquired intangibles 3.8 4.3 8.4
Depreciation of right-of-use assets 1.6 1.4 2.8
Depreciation of property, plant and equipment 1.8 1.7 3.8
Amortisation of capitalised development costs 0.7 1.0 2.5
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Adjusted earnings before interest, tax, depreciation and amortisation 34.7 28.4 65.8
Charge in respect of equity settled employee share schemes 1.1 1.1 1.8
Restructuring costs (paid)/received (0.3) 0.5 0.3
Cash payments to the pension scheme more than the charge to operating
profit (3.8) (3.7) (15.5)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Operating cash flows before movements in working capital 31.7 26.3 52.4
Increase in inventories (1.7) (0.6) (1.3)
(Increase)/decrease in receivables (5.9) 2.1 (10.5)
Increase/(decrease) in payables and provisions (6.7) (8.4) 11.3
Increase/(decrease) in customer deposits 0.1 3.9 (2.2)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash generated from operations 17.5 23.3 49.7
Interest paid (0.5) (1.0) (1.6)
Income taxes paid (4.0) (4.0) (6.3)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash from operating activities 13.0 18.3 41.8
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment - 0.1 0.2
Acquisition of property, plant and equipment (5.5) (1.2) (4.2)
Acquisition of subsidiaries, net of cash acquired (30.0) - -
Capitalised development expenditure (0.2) (0.5) (0.9)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash used in investing activities (35.7) (1.6) (4.9)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash flows from financing activities
Proceeds from issue of share capital 0.1 0.1 0.2
Payments made in respect of lease liabilities (1.3) (1.3) (2.8)
Repayment of borrowings - - (27.9)
Dividends paid (2.4) - -
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash used in financing activities (3.6) (1.2) (30.5)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net (decrease)/increase in cash and cash equivalents (26.3) 15.5 6.4
Cash and cash equivalents at beginning of the period 97.6 95.4 95.4
Effect of exchange rate fluctuations on cash held 0.8 (1.6) (4.2)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash and cash equivalents at end of the period 72.1 109.3 97.6
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash and cash equivalents as per the Consolidated Statement of Financial
Position 119.3 136.6 128.0
Bank overdrafts 9 (47.2) (27.3) (30.4)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash and cash equivalents in the Consolidated Statement of Financial
Position 72.1 109.3 97.6
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Notes to the Half-year Financial Statements
Half year ended 30 September 2021
1 Basis of preparation
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 UK. 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 2021.
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 2021 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 2021.
Prior period restatement
In early 2021, the Financial Reporting Council (FRC) submitted a
request for further information on the Group's Report and Financial
Statements for the year ended 31 March 2020. The review conducted
by the FRC was based solely on the Group's published Report and
Financial Statements and does not provide any assurance that the
Report and Financial Statements are correct in all material
respects.
Following the completion of this review, the Directors concluded
during the prior full year that the overdraft balances of Group
entities should be separately presented gross on the Consolidated
Statement of Financial Position, rather than netted off against
cash and cash equivalents held either by the same entity, or other
Group entities, with the same bank. These overdrafts are held with
the Group's relationship banks. More details can be found in the
Accounting Policies note of the 2021 Report and Financial
Statements where the prior year was restated.
As a result, the Consolidated Statement of Financial Position as
at 30 September 2020 has been restated as follows:
As at As at
30 September 30 September
2020 2020
(as reported) Restatement (restated)
Consolidated Statement of Financial Position GBPm GBPm GBPm
Current assets
Cash and cash equivalents 109.3 27.3 136.6
Current liabilities
Bank loans and overdrafts (27.9) (27.3) (55.2)
--------------------------------------------- ------------- ----------- ------------
Net assets 81.4 - 81.4
--------------------------------------------- ------------- ----------- ------------
The restatement did not result in any change to reported profit,
earnings per share, net assets or cash flows reported in the 2020
half-year report.
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 2021.
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
to to Year to
30 September 30 September 31 March
Period end rates 2021 2020 2021
----------------- ------------ ------------ --------
US Dollar 1.35 1.29 1.38
Euro 1.16 1.10 1.17
Japanese Yen 150 136 152
----------------- ------------ ------------ --------
Japanese
Average translation rates US Dollar Euro Yen
------------------------------- --------- ---- --------
Half year to 30 September 2021
April 1.38 1.16 152
May 1.40 1.16 153
June 1.40 1.16 154
July 1.39 1.17 153
August 1.38 1.17 152
September 1.36 1.16 151
------------------------------- --------- ---- --------
Japanese
Average translation rates US Dollar Euro Yen
-------------------------- --------- ---- --------
Year to 31 March 2021
April 1.25 1.14 134
May 1.25 1.13 134
June 1.24 1.11 133
July 1.27 1.11 136
August 1.33 1.11 140
September 1.32 1.11 139
October 1.29 1.11 136
November 1.34 1.12 139
December 1.35 1.12 140
January 1.37 1.12 142
February 1.39 1.14 146
March 1.39 1.16 151
-------------------------- --------- ---- --------
2 Non-GAAP measures
In the preparation of adjusted numbers, the Directors exclude
certain items in order to assist with comparability between peers
and to give what they consider to be a better indication of the
underlying performance of the business. These adjusting items are
excluded in the calculation of adjusted operating profit, adjusted
profit before tax, adjusted profit for the period, adjusted EBITDA,
adjusted EPS, adjusted cash conversion and adjusted effective tax
rate. Details of adjusting items are given below.
Adjusted EBITDA is calculated by adding back depreciation of
property, plant and equipment, depreciation of right-of-use assets
and amortisation of intangible assets to adjusted operating profit,
and can be found in the Consolidated Statement of Cash Flows. The
calculation of adjusted EPS can be found in Note 3. Adjusted
effective tax rate is calculated by dividing the share of tax
attributable to adjusted profit before tax by adjusted profit
before tax. The definition of cash conversion is set out in the
Finance Review.
Reconciliation between operating profit and profit before income
tax and adjusted profit from operations
Half year to 30 September Half year to 30 September
2021 2020 Year to 31 March 2021
--------------------------- --------------------------- ------------------------
Operating Profit before Operating Profit before Operating Profit before
profit income tax profit income tax profit income tax
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Statutory measure 21.8 21.4 20.8 20.2 53.0 52.2
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Business reorganisation items 0.3 0.3 - - 0.4 0.4
WITec post-acquisition gross
margin adjustment 0.9 0.9 - - - -
Impairment of capitalised
development costs - - - - 1.3 1.3
Amortisation and impairment of
acquired intangibles 3.8 3.8 4.3 4.3 8.4 8.4
Fair value movement on financial
derivatives 3.8 3.8 (0.8) (0.8) (6.4) (6.4)
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Total non-GAAP adjustments 8.8 8.8 3.5 3.5 3.7 3.7
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Adjusted measure 30.6 30.2 24.3 23.7 56.7 55.9
Adjusted income tax expense (6.5) (4.9) (10.8)
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Adjusted profit for the period 30.6 23.7 24.3 18.8 56.7 45.1
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Adjusted effective tax rates 21.5% 20.7% 19.3%
---------------------------------- ----------- -------------- ----------- -------------- --------- -------------
Business reorganisation items
These represent the costs of one-off charges incurred at the
balance sheet date relating to the acquisition of WITec
Wissenschaftliche Instrumente und Technologie GmbH ("WITec").
WITec post-acquisition gross margin adjustment
The finished goods and work in progress inventories were
revalued to provisional fair value, based on selling price less
costs to sell. The GBP0.9m adjustment relates to the gross margin
which would have been earned on post-acquisition sales to 30
September 2021, but which has been absorbed into the acquisition
date fair value. This will not recur, once all such inventory at
the acquisition date has been delivered to customers.
Impairment of capitalised development costs
During the year to 31 March 2021, the Group reviewed the
capitalised development costs to ensure they remained directly
related to targeted product or software developments. The one-off
non-cash impairment relates to delays in market launch of specific
development projects within the Materials & Characterisation
segment.
Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and
impairment of acquired intangible assets and goodwill.
Fair value movement on financial derivatives
Under IFRS 9, 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 IFRS 9 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.
Adjusted income tax expense
Adjusting items include the income tax on each of the items
described above.
Reconciliation of changes in cash and cash equivalents to
movement in net cash
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
GBPm GBPm GBPm
----------------------------------------------------- ------------ ------------ --------
Net (decrease)/increase in cash and cash equivalents (26.3) 15.5 6.4
Effect of exchange rate fluctuations on cash held 0.8 (1.6) (4.2)
----------------------------------------------------- ------------ ------------ --------
(25.5) 13.9 2.2
Repayment of borrowings - - 27.9
Increase in borrowings (2.0) - -
----------------------------------------------------- ------------ ------------ --------
Movement in net cash in the period (27.5) 13.9 30.1
Net cash at start of the year 97.6 67.5 67.5
----------------------------------------------------- ------------ ------------ --------
Net cash at the end of the period 70.1 81.4 97.6
----------------------------------------------------- ------------ ------------ --------
Reconciliation of net cash to Statement of Financial
Position
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
GBPm as restated(1) GBPm
---------------------------------- ------------ -------------- --------
Loan notes - unsecured - (27.9) -
Covid-19 loan at WITec (2.0) - -
Overdrafts (47.2) (27.3) (30.4)
Cash and cash equivalents 119.3 136.6 128.0
---------------------------------- ------------ -------------- --------
Net cash at the end of the period 70.1 81.4 97.6
---------------------------------- ------------ -------------- --------
1. Prior period numbers have been restated. Details can be found in Note 1.
3 Earnings per share
Basic and diluted EPS from continuing operations are based on
the result for the period from continuing operations, as reported
in the Consolidated Statement of Income. Basic and diluted EPS from
total operations are based on the result for the period
attributable to equity Shareholders of the parent. Adjusted and
diluted adjusted EPS are based on adjusted profit for the period
from continuing operations. The profit measures noted above are
divided by the weighted average number of ordinary shares
outstanding during the period excluding shares held by the Employee
Share Ownership Trust. The table below reconciles these different
profit measures.
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
GBPm GBPm GBPm
---------------------------------------------------------------------- ------------ ------------ --------
Profit for the year attributable to equity Shareholders of the parent 16.5 15.9 41.8
Adjusting items:
Business reorganisation items 0.3 - 0.4
WITec post-acquisition gross margin adjustment 0.9 - -
Impairment of capitalised development costs - - 1.3
Amortisation and impairment of acquired intangibles 3.8 4.3 8.4
Fair value movement on financial derivatives 3.8 (0.8) (6.4)
Adjusted income tax expense (1.6) (0.6) (0.4)
---------------------------------------------------------------------- ------------ ------------ --------
Adjusted profit for the year 23.7 18.8 45.1
---------------------------------------------------------------------- ------------ ------------ --------
The weighted average number of shares used in the calculation
excludes shares held by the Employee Share Ownership Trust, and is
as follows:
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
Shares Shares Shares
million million million
-------------------------------------------------------------------------------- ------------ ------------ --------
Weighted average number of shares outstanding 57.6 57.4 57.5
Less: weighted average number of shares held by Employee Share Ownership Trust (0.1) (0.1) (0.1)
-------------------------------------------------------------------------------- ------------ ------------ --------
Weighted average number of shares used in calculation of basic earnings per
share 57.5 57.3 57.4
-------------------------------------------------------------------------------- ------------ ------------ --------
The following table shows the effect of share options on the
calculation of diluted earnings per share:
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
Shares Shares Shares
million million million
---------------------------------------------------------------------- ------------ ------------ --------
Number of ordinary shares per basic earnings per share calculations 57.5 57.3 57.4
Effect of shares under option 0.8 0.7 0.7
---------------------------------------------------------------------- ------------ ------------ --------
Number of ordinary shares per diluted earnings per share calculations 58.3 58.0 58.1
---------------------------------------------------------------------- ------------ ------------ --------
For the purposes of calculating diluted and diluted adjusted
EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would
be issued on the conversion of all potentially dilutive ordinary
shares expected to vest, relating to the Company's share-based
payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease
EPS or increase loss per share.
4 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 aggregated operating segments
are as follows:
-- the Materials & Characterisation segment comprises a
group of businesses focusing on applied R&D and commercial
customers, enabling the fabrication and characterisation of
materials and devices down to the atomic scale;
-- the Research & Discovery segment comprises a group of
businesses providing advanced solutions that create unique
environments and enable measurements down to the molecular and
atomic level which are used in fundamental research; and
-- the Service & Healthcare segment provides customer
service and support for the Group's products and the service of
third-party healthcare imaging systems.
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.
Results from operations
Materials Research
& & Service &
Characterisation Discovery Healthcare Total
Half year to 30 September 2021 GBPm GBPm GBPm GBPm
---------------------------------- ---------------- --------- ---------- -----
Total segment revenue 84.9 56.3 28.9 170.1
---------------------------------- ---------------- --------- ---------- -----
Segment adjusted operating profit 13.0 8.7 8.9 30.6
---------------------------------- ---------------- --------- ---------- -----
Materials Research
& & Service &
Characterisation Discovery Healthcare Total
Half year to 30 September 2020 GBPm GBPm GBPm GBPm
---------------------------------- ---------------- --------- ---------- -----
Total segment revenue 65.2 48.3 26.8 140.3
---------------------------------- ---------------- --------- ---------- -----
Segment adjusted operating profit 8.9 6.4 9.0 24.3
---------------------------------- ---------------- --------- ---------- -----
Materials Research
& & Service &
Characterisation Discovery Healthcare Total
Year to 31 March 2021 GBPm GBPm GBPm GBPm
---------------------------------- ---------------- --------- ---------- -----
Total segment revenue 148.6 113.4 56.5 318.5
---------------------------------- ---------------- --------- ---------- -----
Segment adjusted operating profit 20.3 19.5 16.9 56.7
---------------------------------- ---------------- --------- ---------- -----
Revenue in the Materials & Characterisation and Research
& Discovery segments represents the sale of products. Revenue
in the Service & Healthcare segment relates to service
income.
Reconciliation of reportable segment profit
Materials Research
& & Service & Unallocated
Characterisation Discovery Healthcare Group items Total
Half year to 30 September 2021 GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Segment adjusted operating profit 13.0 8.7 8.9 - 30.6
Restructuring costs (0.3) - - - (0.3)
WITec post-acquisition gross margin adjustment (0.9) - - - (0.9)
Amortisation and impairment of acquired intangibles (0.6) (3.2) - - (3.8)
Fair value movement on financial derivatives - - - (3.8) (3.8)
Financial income - - - 0.3 0.3
Financial expenditure - - - (0.7) (0.7)
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Profit/(loss) before income tax 11.2 5.5 8.9 (4.2) 21.4
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Materials Research
& & Service & Unallocated
Characterisation Discovery Healthcare Group items Total
Half year to 30 September 2020 GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Segment adjusted operating profit 8.9 6.4 9.0 - 24.3
Amortisation and impairment of acquired intangibles (1.1) (3.2) - - (4.3)
Fair value movement on financial derivatives - - - 0.8 0.8
Financial income - - - 0.5 0.5
Financial expenditure - - - (1.1) (1.1)
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Profit before income tax 7.8 3.2 9.0 0.2 20.2
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Materials Research
& & Service & Unallocated
Characterisation Discovery Healthcare Group items Total
Year to 31 March 2021 GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Segment adjusted operating profit 20.3 19.5 16.9 - 56.7
Restructuring costs (0.4) - - - (0.4)
Impairment of capitalised development costs (1.3) - - - (1.3)
Amortisation and impairment of acquired intangibles (2.0) (6.4) - - (8.4)
Fair value movement on financial derivatives - - - 6.4 6.4
Financial income - - - 1.1 1.1
Financial expenditure - - - (1.9) (1.9)
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
Profit before income tax 16.6 13.1 16.9 5.6 52.2
---------------------------------------------------- ---------------- --------- ---------- ----------- -----
5 Research and development (R&D)
The total research and development spend by the Group is as
follows:
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
-------------------------------------------------------------------------------- ------------ ------------ --------
GBPm GBPm GBPm
R&D expense charged to the Consolidated Statement of Income 15.4 13.2 30.0
Depreciation of R&D-related fixed assets (0.1) - (0.1)
Amounts capitalised as fixed assets 0.3 - 0.6
Amortisation and impairment of R&D costs previously capitalised as intangible
assets (0.7) (1.0) (2.5)
Amounts capitalised as intangible assets 0.2 0.5 0.9
-------------------------------------------------------------------------------- ------------ ------------ --------
Total cash spent on R&D during the period 15.1 12.7 28.9
-------------------------------------------------------------------------------- ------------ ------------ --------
6 Acquisition of WITec
On 31 August 2021, the Group acquired 100% of the issued share
capital of WITec Wissenschafliche Instrumente und Technologie GmbH
("WITec") on a cash-free, debt-free basis for consideration of
EUR42m, of which EUR5m is conditional on trading performance over a
period of twelve months from the acquisition. The conditions for
the deferred consideration are meeting certain revenue, order and
margin thresholds. In the calculations below, it has been assumed
that these thresholds have been met. WITec is a leading designer
and manufacturer of Raman microscopy imaging solutions, based in
Ulm, Germany.
The book and provisional fair value of the assets and
liabilities acquired is given in the table below. Provisional
values have been used for all assets and liabilities other than
inventory because the initial acquisition accounting is incomplete
at the date of this report. As a result, the amount of tax
deductible goodwill is not known as at the date of this report. The
business is being integrated into the Materials &
Characterisation segment.
Provisional Provisional
Book value adjustments fair value
GBPm GBPm GBPm
--------------------------------------------- ---------- ----------- -----------
Property, plant and equipment 0.2 - 0.2
Right-of-use assets 2.7 - 2.7
Inventories 5.7 4.0 9.7
Trade and other receivables 1.9 - 1.9
Cash and cash equivalents 1.7 - 1.7
Trade and other payables (2.0) - (2.0)
Lease payables (2.7) - (2.7)
Provisions (0.5) - (0.5)
Bank loans (2.0) - (2.0)
--------------------------------------------- ---------- ----------- -----------
Net assets acquired 5.0 4.0 9.0
--------------------------------------------- ---------- ----------- -----------
Goodwill 27.0
--------------------------------------------- ---------- ----------- -----------
Total cash spent on R&D during the period 36.0
--------------------------------------------- ---------- ----------- -----------
Cash acquired (1.7)
Deferred consideration (4.3)
--------------------------------------------- ---------- ----------- -----------
Net cash outflow relating to the acquisition 30.0
--------------------------------------------- ---------- ----------- -----------
The goodwill arising is considered to represent the value of the
acquired workforce and the value of technology that has not yet
been individually fair valued.
Acquisition-related costs of GBP0.3m (GBP0.4m in the year to 31
March 2021) have been expensed in the Condensed Consolidated
Statement of Income and recorded as an adjusting item due to the
one-off nature (see Note 2).
The acquisition contributed revenue of GBP1.8m, adjusted
operating profit of GBP0.2m and a statutory loss before tax of
GBP0.7m to the Group's result for the period.
7 Taxation
The total effective tax rate on profits for the half year is
22.9% (prior half year: 21.3%). The weighted average tax rate in
respect of adjusted profit before tax (see Note 2) for the half
year is 21.5% (prior half year: 20.7%).
For the full year, the Group expects the tax rate in respect of
adjusted profit before tax to be 22.4%.
8 Dividends per share
The following dividends per share were paid by the Group:
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
pence pence pence
--------------------------------- ------------ ------------ --------
Previous period interim dividend 4.1 - -
Previous period final dividend - - -
--------------------------------- ------------ ------------ --------
4.1 - -
--------------------------------- ------------ ------------ --------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
Half year Half year
to to Year to
30 September 30 September 31 March
2021 2020 2021
pence pence pence
----------------- ------------ ------------ --------
Interim dividend 4.4 4.1 4.1
Final dividend - - 12.9
----------------- ------------ ------------ --------
4.4 4.1 17.0
----------------- ------------ ------------ --------
The final dividend for the year to 31 March 2021 was approved by
Shareholders at the Annual General Meeting held on 21 September
2021. Accordingly, it is no longer at the discretion of the Company
and has been included as a liability as at 30 September 2021. It
was paid on 15 October 2021.
The interim dividend for the year to 31 March 2022 of 4.4 pence
was approved by the Board on 8 November 2021 and has not been
included as a liability as at 30 September 2021. The interim
dividend will be paid on 14 January 2022 to Shareholders on the
register on the record date of 3 December 2021. The ex-dividend
date will be 2 December 2021. The last date of election for the
Dividend Reinvestment Plan (DRIP) is 21 December 2021. This
represents a change from the previously indicated timetable, which
suggested that the ex-dividend, record and DRIP election dates
would occur in March 2022.
9 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Half year to 30
Half year to 30 September September 2020 Year to 31 March
2021 as restated(1) 2021
----------------------------- ----------------- ------------------
Fair value Carrying Fair Carrying Fair Carrying Fair
hierarchy amount value amount value amount value
level GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----------- --------- ----- ---------- ----- ---------- ------
Assets carried
at amortised
cost
Trade receivables 66.8 54.4 59.3
Other receivables
and accrued
income 14.1 9.7 12.2
Cash and
cash equivalents 119.3 136.6 128.0
------------------ ----------- --------- ----- ---------- ----- ---------- ------
Assets carried
at fair
value
Derivative
financial
instruments:
- Foreign
currency
contracts 2 2.6 2.6 1.0 1.0 6.1 6.1
------------------ ----------- --------- ----- ---------- ----- ---------- ------
Liabilities
carried
at fair
value
Derivative
financial
instruments:
- Foreign
currency
contracts 2 (0.5) (0.5) (1.1) (1.1) - -
------------------ ----------- --------- ----- ---------- ----- ---------- ------
Liabilities
carried
at amortised
cost
Trade and
other payables (64.0) (57.5) (67.7)
Bank overdrafts (47.2) (27.3) (30.4)
Borrowings (2.0) (27.9) -
Lease payables (12.9) (7.3) (7.5)
------------------ ----------- --------- ----- ---------- ----- ---------- ------
1. Prior period numbers have been restated. Details can be found in Note 1.
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.
Lease payables
The lease liability is measured at amortised cost using the
effective interest method.
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.
10 Retirement benefit obligations
The Group operates a defined benefit plan in the UK. A full
actuarial valuation of the UK plan was carried out as at 31 March
2018 which, for reporting purposes, has been updated to 30
September 2021 by a qualified independent actuary.
At 31 March 2021, the scheme actuary calculated a retirement
benefit asset of GBP16.3m. In the period to 30 September 2021,
there has been a reduction in the discount rate from 2.1% to 2.0%,
and an increase in the assumed level of CPI and RPI inflation rates
by 0.2% (to 2.7% and 3.3% from 2.5% and 3.1% respectively at 31
March 2021). The impact of these changes has increased the benefit
obligation to GBP334.3m (31 March 2021: GBP323.9m).
The Group has agreed a basis for deficit recovery payments with
the trustees of the UK pension scheme. The deficit recovery
payments are payable through to and including 2026 and will rise by
approximately 3% per annum. The deficit recovery payment for the
period was GBP4.0m (year to 31 March 2021: GBP7.8m plus an
additional one-off payment of GBP8.1m). In addition, the scheme's
assets generated a higher return than the discount rate. As a
result, the fair value of plan assets increased to GBP359.3m (31
March 2021: GBP340.2m).
The overall effect is that for the purposes of IAS 19 the
surplus on the scheme increased from GBP16.3m to GBP25.0m.
11 Related parties
All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
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 2021 which comprises the Condensed
Consolidated Statement of Income, Condensed Consolidated Statement
of Comprehensive Income, Condensed Consolidated Statement of
Financial Position, Condensed Consolidated Statement of Changes in
Equity and Condensed Consolidated Statement of Cash Flows.
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.
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 Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
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 Financial Reporting Council for use
in the United Kingdom. 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
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 2021 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
Reading, UK
8 November 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
[ends]
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IR UPGMPGUPGUBB
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November 09, 2021 04:34 ET (09:34 GMT)
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