TIDMOXIG
RNS Number : 4729C
Oxford Instruments PLC
13 June 2023
Oxford Instruments plc
Announcement of unaudited full-year results for the 12 months to
31 March 2023
Strong momentum driven by strategic positioning in structural
growth markets places the Group well for further growth
Oxford Instruments plc, a leading provider of high technology
products and systems for industry and research, today announces its
unaudited preliminary results for the 12 months to 31 March
2023
% change
Full year Full year
to to
31 March 31 March % change constant
Adjusted(1) 2023 2022 reported currency(4)
---------------------------------- --------- --------- -------- -----------
Revenue GBP444.7m GBP367.3m +21.1% +14.0%
Adjusted operating profit GBP80.5m GBP66.3m +21.4% +13.4%
Adjusted operating profit margin 18.1% 18.1% -
Adjusted profit before taxation GBP82.0m GBP65.9m +24.4%
Adjusted basic earnings per share 112.7p 94.3p +19.5%
Cash conversion(2) 88% 84%
Net cash(3) GBP100.2m GBP85.9m
---------------------------------- --------- --------- -------- -----------
Full year Full year
to to % change
31 March 31 March reported
Statutory 2023 2022
--------------------------- --------- --------- --------
Revenue GBP444.7m GBP367.3m +21.1%
Operating profit GBP72.4m GBP48.3m +49.9%
Operating profit margin 16.3% 13.2% +310bps
Profit before taxation GBP73.5m GBP47.6m +54.4%
Basic earnings per share 101.6p 67.1p +51.4%
Dividend per share for the
year (total) 19.5p 18.1p +7.7%
---------------------------- --------- --------- --------
Financial highlights
-- Strong growth in orders of 20.9% to GBP511.6m, 14.2% at constant currency
-- Reported order book of GBP319.6m, growth of 19.2% at constant currency
-- Revenue growth of 21.1%, 14.0% at constant currency, 70%
driven by volume, partially constrained by supply chain disruption
and export licence refusals
-- Adjusted operating profit of GBP80.5m, growth of 21.4% (13.4%
at constant currency) with currency tailwind supporting strong
growth. Margin in line with the prior year, despite the
inflationary environment, supply chain challenges and investment
across the Group to support growth
-- Net cash increased to GBP100.2m, with normalised cash conversion of 88%. Strong ROCE of 35%
-- Growth in total dividend of 7.7% to 19.5p
Operational highlights
-- Business model and strategy continues to drive strong order,
revenue and profit growth, with positive momentum in the second
half
-- Strong growth in our end markets - life science,
semiconductor, advanced materials, energy & environment, and
quantum - each with long-term sustainable structural growth
drivers
-- Accelerated growth driven by our market intimacy, product
leadership and successful product launches
-- Strong uplift to performance in Materials &
Characterisation and Service & Healthcare in the second half
with easing of supply chain; Research & Discovery performance
impacted by phasing of high value product installations and
investment for future growth
-- Increased focus on attractive North American and European
markets driving enhanced growth in these regions; China saw strong
order growth, with revenue in line with last year reflecting
disruptions in the first half which eased as demand rose post
Covid-19 lockdowns
-- New 2045 net zero commitment announced, building on 23%
in-year reduction in Scope 1 and 2 emissions per GBPm revenue
Summary and outlook
Ian Barkshire, Chief Executive of Oxford Instruments plc,
said:
"The Group's continued positive momentum reflects our
purpose-driven focus on structural growth markets that are enabling
a greener, healthier, more connected advanced society. Our deep
understanding of our customers' needs and the drivers of growth in
our markets, combined with our product leadership, our relentless
innovation, and our commitment to operational excellence - all key
elements of our well-embedded Horizon strategy - have supported a
strong set of results and underpinned continuing investment for
future growth.
"We have delivered growth in orders, revenue and profit, as well
as maintaining margin, with performance strengthened in the second
half as we converted our order book and realised the benefits of
new pricing structures.
"While mindful that the wider macroeconomic context remains
challenging, our record order book and strong positions in
attractive end markets underpin our confidence in the future growth
of the Group. Our strong balance sheet positions us well to invest
in people, infrastructure and innovation, and to make synergistic
acquisitions to augment our organic growth. Full year outlook is in
line with our expectations."
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 2
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.
The financial information for the year ended 31 March 2023 as
set out in this preliminary announcement does not constitute the
statutory accounts of the Group for the relevant year within the
meaning of section 435 of the Companies Act 2006. The financial
statements for the year ended 31 March 2023 are unaudited. These
accounts will be finalised on the basis of the financial
information presented by the Directors in the preliminary
announcement and will be delivered to the Registrar of Companies
following the Company's annual general meeting. The Consolidated
Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Statement of Changes in Equity and Consolidated
Statement of Cash Flows for the year ended 31 March 2022 and the
Consolidated Balance Sheet as at 31 March 2022 have been derived
from the full Group accounts published in the Annual Report and
Accounts 2022. These have been delivered to the Registrar of
Companies and on which the report of the independent auditors was
unqualified and did not contain a statement under section 498(2) or
section 498(3) of the Companies Act 2006.
The financial information in this preliminary announcement has
been prepared with regards to UK adopted international accounting
standards. The Group has applied all accounting standards and
interpretations issued relevant to its operations and effective for
accounting periods beginning on 1 April 2022. The IFRS accounting
policies have been applied consistently to all periods.
LEI: 213800J364EZD6UCE231
Oxford Instruments management will present its full year results
today in a webcast available for on-demand viewing from 08.00 UK
today (Tuesday 13 June 2023) at
www.oxinst.com/investors-content/financial-reports-and-presentations
.
Enquiries:
Oxford Instruments plc
Ian Barkshire, Chief Executive; Gavin Hill, Chief Financial
Officer
Julian Wais, Head of Investor Relations
Julian.wais@oxinst.com
Tel: 01865 393200
MHP Communications
Katie Hunt/Eleni Menikou/Veronica Farah
oxfordinstruments@mhpc.com
Tel: 020 3128 8100
Chief Executive's Review
As I reflect on the past 12 months - my last full year as Chief
Executive - I am proud of the Group's performance, with record
orders, accelerated organic revenue growth, strong profit growth
and margins in line with the previous year despite the inflationary
environment during the year, and the investment made to support
future growth. This marks another year of strong progress.
Our continued success stems from the commitment, innovation and
talent displayed daily by our people globally, combined with the
clarity and focus brought by our Horizon strategy, which is
thoroughly embedded across the Group, and in the way we work
together and place customers at the heart of everything we do. This
provides a solid foundation for future growth and margin
expansion.
From helping academic customers to achieve Nobel prize-winning
scientific breakthroughs, to supporting commercial customers'
productivity and enabling them to develop and apply the disruptive
technologies of tomorrow, we are making a positive impact on an
ever-changing world, in line with our overarching purpose to enable
a greener, healthier, more connected advanced society.
We provide market-leading differentiated technology and
expertise in markets with long-term structural growth drivers -
Healthcare & Life Science, Advanced Materials, Semiconductor,
Energy & Environment, Quantum Technology, and Research &
Fundamental Science - that provide a foundation for growth ahead of
the market. As we develop our market and customer intimacy, and
invest in the business, we are able to sell an increasing range of
products to existing customers, as well as adapting our products
and services for new and adjacent markets.
All these factors have contributed to our strong financial
performance in the year, with double-digit growth in reported
orders, revenue and adjusted operating profit, despite inflationary
pressures, a lag in price increases taking effect, and supply chain
challenges. With strong revenue growth and price increases
beginning to work through the order book, this resulted in a
positive second half weighting. Reported adjusted operating profit
for the year increased by 21.4%, while reported adjusted operating
margin was in line with the previous year at 18.1% (2022: 18.1%)
and broadly maintained at constant currency. We ended the year with
record order intake of GBP511.6m, with a book-to-bill ratio of 1.15
resulting in 22.8% growth in the order book to GBP319.6m at 31
March 2023 (2022: GBP260.2m). The strong performance was also
reflected in adjusted EPS increasing by 19.5% to 112.7p (2022:
GBP94.3m). With net cash of GBP100.2m at 31 March 2023 we are in a
strong position to invest in future organic and inorganic
growth.
Full year to Constant
31 March Reported currency
Group 2023 growth growth
-------------------- -------------- --------- ----------
Orders GBP511.6m 20.9% 14.2%
Revenue GBP444.7m 21.1% 14.0%
Adjusted operating
profit GBP80.5m 21.4% 13.4%
Adjusted operating 18.1% - (10bps)
margin
-------------------- -------------- --------- ----------
Our performance reflects increasing demand across our markets,
with particularly strong growth from our Advanced Materials,
Quantum Technology, Semiconductor and Healthcare & Life Science
markets. This has resulted in strong constant currency revenue
growth across each of our three sectors - Materials &
Characterisation (19.2%), Research & Discovery (8.1%), and
Service & Healthcare (9.6%). This was achieved despite
significant global supply chain shortages and ongoing Covid-related
disruption in China negatively impacting several of our
businesses.
Supply chain issues eased through the second half, supporting
stronger revenue as anticipated. Revenue into China was broadly in
line with the prior year, with double digit order growth supported
by increased funding as lockdown disruption eased. This growth rate
also reflected an increase in UK Government export licence refusals
to Chinese customers, particularly for quantum technology and
astronomy applications, offset by our continued shift in focus to
other growth markets within the country, such as life science and
renewable battery technology, in which there are fewer export
licence considerations. We also increased our focus on North
America, Europe, and Japan, in line with the increased demand in
several of our markets, including semiconductors and quantum. This
was reflected by strong constant currency revenue growth in these
regions (with the US up 35%, Europe up 16% and Japan up 25%).
Strategic progress
Our Horizon strategy continues to provide an important
framework; delivering tangible value and positive outcomes for
customers and stakeholders, and offering a blueprint for ongoing
growth. Strategic progress in the year is as follows.
Market intimacy is integral to our success as we develop
insights into the future of our markets, and how we can support
customers in accelerating their roadmaps which, in turn, ensures
our products are well positioned commercially. An example is the
deep insight we have developed across our portfolio of materials
analysis techniques to support the renewable battery market. This
has resulted in significant growth in orders and revenue. In
Healthcare & Life Science, our insight has resulted in the
development of new microscopy products and tailored software for
specialist markets.
Our focus is on nurturing existing markets, expanding into
adjacent markets and landing new key accounts. To drive this, we
have invested in the size and capabilities of regional sales and
marketing teams, equipping them to develop an in-depth
understanding of local markets.
Through the headwinds of the past few years, we have maintained
our focus on innovation and product development to ensure we remain
at the forefront of our markets. Our leading products are designed
with customer productivity and ease-of-use at their core, and
support our accelerating organic growth and improving gross
margins.
The combination of our market intimacy and focused approach to
product development has supported a three-year order CAGR of 15% to
both commercial and academic customers.
Operational excellence is a key focus as we seek to boost our
own productivity and shorten lead times to support the growing
demand for our products. We have continued to strengthen
relationships with strategic suppliers and further consolidate our
supply chain, with a view to long-term resilience and environmental
sustainability, and are investing to optimise production
capacity.
Our investment in building regional teams is also a key element
of our customer service and support strategy, enabling us to
improve response times by being closer to customers and by training
our service teams across a wider range of products. We are
developing a broad range of increasingly advanced and tailored
services which enhance our customers' capabilities and optimise
productivity, strengthening customer demand for recurring service
contracts. We also continue to invest in increasing digital and
remote service capabilities. These drive benefits for customers,
colleagues and the environment whilst improving our efficiency.
Investing for growth
Aligned with our Horizon strategy and future growth ambitions,
we have invested significantly during the year to bring new
products to market, and position ourselves to deliver process and
cost efficiencies. This includes reinforcing and extending
capabilities across the business, including investments in our
teams, infrastructure and IT.
Research and development
Customer-centric, market-led research and development (R&D)
is central to our success as it enables us to transform our
customers' outcomes. Investment in the year increased 9.8% to
GBP34.8m (2022: GBP31.7m), representing 7.8% (2022: 8.6%) of
revenue. Our Vitality Index (which measures the percentage of
revenue from products launched over the last three years) is 30%
(2022: 34%). This represents positive uptake from our newly
launched products and continued strong value across our portfolio
as we expand our reach into adjacent markets.
During the year we have brought a number of exciting new,
leading-edge products to market. These include:
-- New processes and techniques for both compound and silicon
semiconductor fabrication, including patented processes being
deployed to manufacture higher-performing power devices used across
commercial electronics and industrial applications
-- A battery-specific edition of our Cypher atomic force
microscope, advancing battery development through the direct
observation of critical chemical processes during operation
-- Our new large-scale cryogenic platforms which are advancing
the performance of quantum computers
-- A high-end extension to our optical microscopy portfolio,
Dragonfly 600, which provides healthcare and life science customers
with unprecedented imaging speed and quality.
People, productivity and infrastructure
We have made additional investment elsewhere to scale the
business, to drive enhanced productivity and shorten lead times for
our products. We have invested in enhanced IT systems, including a
new integrated customer and service relationship management system.
In response to our strong positive trajectory, and in anticipation
of continuing growth, we have invested in people across the
business, focusing on training and development as well as
selectively increasing headcount, with a particular focus on
production capacity, and regional sales and service.
Our purpose-built, state-of-the-art compound semiconductor
facility in Bristol, UK, is set to double our production capacity
in this important and growing market once it is fully operational,
which is expected to be later in the current financial year. We are
also making significant investment in extending our production
capacity and footprint at our Belfast, UK facility to address
growing demand for our range of advanced scientific cameras and
microscopy products.
Inorganic growth
Our strong balance sheet, with net cash of GBP100.2m at 31 March
2023, positions us well to make further acquisitions to augment our
strong organic growth. We maintain a pipeline of opportunities in a
number of target areas, aligned with our strategy.
We have been delighted with the performance of our August 2021
acquisition WITec, which we acquired in August 2021 and which is
part of Materials & Characterisation. In particular, WITec,
which specialises in Raman microscopy, has benefited from increased
sales due to our global channels to market and overlapping customer
base. The business has continued to perform ahead of our
expectations.
Inventory
We continue to maintain elevated inventory levels to mitigate
ongoing supply chain issues, and to ensure competitive lead
times.
A sustainable future
I am pleased to report strong progress in our longstanding work
to embed sustainability as an integral part of our values, which
influences not only day-to-day decisions within our own operations
but also actions in relation to our wider impact and stakeholders,
including supply chain partners. This year, our absolute Scope 1
and 2 emissions have reduced by 7%, while our emissions intensity
per GBPmillion of revenue- a helpful measure for a growing
organisation like ours - reduced by 23%. Since 2019 - our baseline
year - we have achieved a 66% reduction in emissions intensity. Our
absolute Scope 1 and 2 emissions have reduced by 55% over the same
period. This figure reflects changes in our portfolio as well as
energy saving and carbon reduction measures.
Our work continues, and we are delighted to announce our new,
accelerated commitment to reach net zero carbon emissions by 2045.
In addition, we have set shorter term targets to reduce our Scope 1
and 2 emissions by 50% and 70% respectively by 2030. Over the next
year we will submit our targets and roadmap to the Science Based
Targets initiative for formal validation. We will also continue the
work already underway with our supply chain to model a robust
reduction plan for Scope 3 emissions.
Supporting our employees also remains central to our values, and
in recognition of the impact of global inflationary pressures on
employee household budgets, we have taken action to support our
people in relation to the cost-of-living crisis. Accordingly, we
brought forward our Group-wide annual salary review from July to
April 2022, and followed this up with a further one-off
cost-of-living payment in October 2022 for employees most
impacted.
We are also focused on fostering a strong talent pipeline, as
well as investing in supporting and developing the talented people
we already employ. This year, we are taking on an increased number
of apprentices, across a broader range of disciplines. We have
expanded our internal development programmes, including the
development of future leaders, by increasing the number of
participants in our Leadership Programme.
More broadly, we continue to build an inclusive and progressive
culture, striving to be ahead of the curve in our equality,
diversity and inclusion targets, listening to and engaging with our
employees as we seek to create a culture where everyone feels able
to be their authentic self at work. To this end, we have created a
number of new employee impact groups in the year, with more planned
for the coming year.
And of course, our contribution to sustainability goes far
beyond the way in which we operate our business - indeed it is
central to our purpose, to enable a greener, healthier, more
connected advanced society. We help our customers to make a
tangible positive impact on the world in all these areas. Using our
products and services, customers are developing new materials and
approaches to enable the critical energy transition which will
directly impact everyone on the planet, as the world's governments
and businesses pursue the goal of reaching net zero carbon
emissions. In healthcare, our products are enabling medical
researchers to understand the fundamental mechanisms of disease,
accelerating their progress on new medicines and treatments. We are
also instrumental in the drive towards a more connected future,
where everyone, everywhere can access information whenever they
need - with a particularly meaningful impact in the emerging
economies where connectivity has been proven to improve lives and
increase prosperity. Our aspiration is that everything we do can
contribute to a more advanced society for all.
Supporting a smooth transition
In April 2023, I announced my intention to retire as Chief
Executive. As my time in post nears its end, I want to thank all my
colleagues, who have made the past 25 years so rewarding and
fulfilling. Their warmth, talent, and spirit of relentless
innovation have helped Oxford Instruments to become one of the most
exciting technology companies operating today, consistently
delivering positive impacts through disruptive change to the world.
It has been a privilege and an honour to lead such talent over the
past seven years, and I am delighted the company is in such a
strong position as I prepare to hand the baton on to my successor,
Richard Tyson. With a robust strategic foundation underpinning
growth in all key areas, I look forward to supporting a smooth
transition, and I wish Richard and the team every success in the
future.
Summary and outlook
The Group's continued positive momentum reflects our
purpose-driven focus on structural growth markets that are enabling
a greener, healthier, more connected advanced society. Our deep
understanding of our customers' needs and the drivers of growth in
our markets, combined with our product leadership, our relentless
innovation, and our commitment to operational excellence - all key
elements of our well-embedded Horizon strategy - have supported a
strong set of results and underpinned continuing investment for
future growth.
We have delivered growth in orders, revenue and profit, as well
as maintaining margin, with performance strengthened in the second
half as we converted our order book and realised the benefits of
new pricing structures.
While mindful that the wider macroeconomic context remains
challenging, our record order book and strong positions in
attractive end markets underpin our confidence in the future growth
of the Group. Our strong balance sheet positions us well to invest
in people, infrastructure and innovation, and to make synergistic
acquisitions to augment our organic growth. Full year outlook is in
line with our expectations.
Ian Barkshire
Chief Executive
12 June 2023
Operations review
The Group perform ed strongly in the year, with orders, revenue
and operating profit growing, and margin in line with the previous
year. The Operations Review provides performance headlines at Group
level, and more details regarding each of our three sectors:
Materials & Characterisation, Research & Discovery, and
Services & Healthcare.
Orders
Orders intake increased 20.9% to GBP511.6m (2022: GBP423.1m),
representing 14.2% growth on a constant currency basis.
Growing demand supported double digit order growth from both
academic institutions and commercial customers in the year, with
strong growth across all three sectors.
There was double-digit order growth in Healthcare & Life
Science, Advanced Materials, Semiconductor, Quantum Technology and
Energy & Environment markets. Within Semiconductor, orders
continued to be robust, with strong growth supported by our focus
on compound semiconductor process equipment. Our portfolio also
addresses every stage of the semiconductor cycle from research and
applied R&D to manufacturing support, providing us with greater
resilience, relative to traditional silicon production cycles.
There was particularly strong growth in Quantum Technology
supported by long-term governments funding programmes and our
increasing reach into leading commercial companies.
In Research & Fundamental Science, orders were broadly in
line with the previous year, as we continued to move away from
delivering large, one-off bespoke systems. This market now
represents just 3% of orders, due to our managed migration to
higher value markets.
Healthy demand across our regional markets resulted in strong
double-digit order growth in Europe and North America, with high
single digit growth in Asia. Within Asia, China had double digit
order growth, after the adverse impact of orders which received
export licence refusals, with positive momentum in the fourth
quarter as the country moved away from its lockdown strategy.
Revenue
Reported revenue grew by 21.1% to GBP444.7m (2022: GBP367.3m),
representing growth of 14.0% at constant currency. At constant
currency, there was growth of 19.2% in Materials &
Characterisation, 8.1% in Research & Discovery, and 9.6% in
Service & Healthcare, with ongoing supply chain issues
tempering growth through the year.
The strong order growth across our end markets supported 10.0%
constant currency revenue growth in Healthcare & Life Science,
24.1% in Quantum Technology, 15.6% in Energy & Environment and
25.2% in Advanced Materials. Within Semiconductor, supply chain
challenges limited the number of compound semiconductor processing
systems shipped, resulting in 8.9% constant currency growth - with
a book to bill of 1.21 in the year. Research & Fundamental
Science was 16.3% lower, as we focus away from this market, with it
now representing only 4% of Group revenue.
Profitability
The strong revenue performance in the second half of the year,
with supply chains easing, and price rises beginning to flow
through, supported an increase in full-year adjusted operating
profits to GBP80.5m, representing 13.4% growth on a constant
currency basis. Reported adjusted operating margin of 18.1% was in
line with the previous year, despite the inflationary environment,
supply chain challenges and our continued investment across the
Group for future growth.
% constant % of
currency(1) Group
growth revenue
vs full full
year to year to
31 March 31 March
End market Revenue 2022 2023
Advanced Materials GBP140.2m 25.2% 32%
Semiconductor & Communications GBP122.0m 8.9% 27%
Healthcare & Life
Science GBP85.2m 10.0% 19%
Energy & Environment GBP43.0m 15.6% 10%
Quantum Technology GBP35.3m 24.1% 8%
Research & Fundamental
Science GBP19.0m (16.3%) 4%
Sector review
Materials & Characterisation
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 (across our Asylum Research, NanoAnalysis, Magnetic Resonance
and WITec businesses), where our leading product performance, ease
of use and advanced analytics enhance our customers' capabilities,
provide actionable insights and increase their productivity. Our
portfolio of materials analysis solutions (including X-ray,
electron and magnetic resonance analysis systems and atomic force
and Raman microscopes) enable the measurement of the structures,
composition and critical properties that define the modern
world.
-- The fabrication of semiconductor devices and structures,
where our Plasma Technology business' portfolio of advanced etch
and deposition process systems enables our customers to create and
manipulate materials with atomic scale accuracy to manufacture
advanced compound semiconductor devices.
With a strong focus on accelerating our customers' applied
R&D, our products and services in this sector enable 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).
Key highlights
Full year Full year % constant
to 31 March to 31 March % reported currency(1)
2023 2022 growth growth
------------------------------ ------------- ------------- ----------- -------------
Orders GBP272.8m GBP219.2m +24.5% +18.3%
Revenue GBP234.5m GBP185.5m +26.4% +19.2%
Adjusted(2) operating profit GBP40.5m GBP26.1m +55.2% +45.2%
Adjusted(2) operating margin 17.3% 14.1%
Statutory operating profit GBP35.7m GBP20.8m
Statutory operating margin 15.2% 11.2%
1. For definition refer to note on page 2.
2. Details of adjusting items can be found in Note 2 to the full year financial statements.
The Materials & Characterisation sector delivered strong
constant currency order growth of 18.3% to GBP272.8m (2022:
GBP219.2m), with constant currency revenue increasing 19.2% to
GBP234.5m (2022: GBP185.5m). This was underpinned by strong
customer demand across our markets, aligned with the leading-edge
technology and ease of use features within our portfolio. There was
particularly strong growth into our largest markets - advanced
materials, semiconductor and energy & environment - which
together accounted for 90% of the sector's revenue. We also saw
growth into our healthcare and quantum markets within Materials
& Characterisation, albeit the majority of our activity in
these markets stems from our Research & Discovery sector. As a
result of the strong order intake, our Materials &
Characterisation order book increased by 34.5% to GBP156.0m at the
year-end (2022: GBP116.0m), representing growth on a constant
currency basis of 29.6%.
Our strong revenue growth, combined with leveraging efficiencies
across our teams and portfolio, resulted in significant growth in
adjusted operating profit, which increased by 45.2% at constant
currency to GBP40.5m (2022: GBP26.1m). This was supported by price
rises flowing through into second half deliveries, better
compensating for the inflationary pressures in the year. There was
a 320bps increase in the adjusted operating margin to 17.3% (2022:
14.1%) despite continued investment for future growth.
Operational, strategic and regional progress
During the year, we have continued to maximise synergies across
our portfolio of materials analysis solutions by leveraging our
market insights and in-depth knowledge of customers' workflows.
This enables us to offer an ever-broader range of tailored
solutions to existing customers, as well as expanding into larger,
faster growing markets. We increasingly see both existing and new
customers deploying a range of our products and techniques to
accelerate their progress and manage the quality of their output at
every stage from R&D to manufacturing. This approach has
enabled us to support the growth of WITec, extending its reach into
new geographies and markets, while in turn, WITec's ability to
measure the structural chemistry of materials has complemented our
existing portfolio, enabling us to provide solutions that fully
characterise the critical parameters of materials, systems and
devices at the nanoscale.
Our investment in regional sales teams and heightened
application focus through our nurture, expand and land strategy has
driven particularly strong growth in North America and Europe, as
well as growth in Asia. Within China, we had strong order growth,
and revenue growth of 6% in the year was supported by the easing of
Covid-related lockdowns in the second half of the year, despite
ongoing delays in receiving export licences and an increased number
of refusals.
We have delivered continued growth to both academic and
commercial customers, with commercial customers representing 58% of
revenue in the year (2022: 57%). Strong growth into academia was
supported by increased government funding into our markets as they
prioritise the development of semiconductor infrastructure, invest
in greener technologies, and advance their national quantum
programmes.
Our own production capacity to support the growing compound
semiconductor market will significantly increase with the move of
our Plasma Technology business, based in Bristol, UK, into
purpose-built, larger premises, later in the current financial
year. Comprising a state-of-the-art manufacturing area, with
increased clean-room space and advanced laboratories, it will
support further development of our leading-edge technologies in the
surging compound semiconductor market.
With good positions in a number of our end markets, the most
notable developments for Materials & Characterisation in year
are in the following:
Semiconductor & Communications (42% of revenue)
Semiconductor & Communications has delivered strong growth
in both orders and revenue. We have a broad reach across both the
emerging compound semiconductor market (representing c. 65% of our
semiconductor revenue in the year) with its strong environmental
and critical communication growth drivers, and the more established
silicon chip and electronic device market. Within these markets, we
provide solutions to support fundamental developments, applied
R&D and, increasingly, solutions for manufacturing-related
applications. This breadth of application provides us with a level
of protection from the cyclicality of the semiconductor market, as,
for example, R&D investment typically increases during periods
of lower production.
With governments including the US, Europe and Japan committing
tens of billions of pounds across the semiconductor market over a
five- to 10-year period, and significant investment by companies,
we have seen increased growth into research facilities and
specialist clean rooms, as they seek to enhance their regional
capabilities and safeguard security of supply. This has led to
growth across our portfolio in these regions.
In the compound semiconductor market, we are seeing increasing
demand driven by a number of factors, including the rise in digital
data flow, increasing requirements from hyperscale data centres,
surging demand for connectivity, the requirement for more
energy-efficient devices and the increased deployment of
human-machine interfaces such as facial recognition.
Supported by targeted new developments and product launches
across our portfolio, our systems are enabling the significant
increases in performance and yield, and the reductions in
production cost needed to make the transition to compound
semiconductors economically viable. For example, in gallium nitride
devices for improved power efficiency, our solution enables etch
control to a uniformity of half a nanometre - just a few atoms
thick. This results in a four-fold improvement in manufacturing
volumes, together with enhanced performance.
With proprietary expertise across a wide range of compound
semiconductors, including indium phosphide and silicon carbide as
well as gallium nitride, our systems are being used in a broad
range of important applications:
-- supporting the delivery of 5G connectivity to everyone,
everywhere in the world, via communication networks and data
communications centres - for example, scaling up to support the
processing needs of autonomous cars, which are expected to require
up to 20 terabytes of data an hour;
-- augmented reality applications, including micro LEDs and 3D
sensors, which are increasingly being deployed across phones,
cameras and cars;
-- proximity sensors in smartphones, in applications such as
facial recognition and contactless payment, where premium
performance is key; and
-- critical yield and performance in power semiconductors for
consumer electronics, such as USB-C fast chargers and truly
wireless charging.
Alongside growth in our compound semiconductor portfolio, we saw
growth in our imaging and analysis products. These are being used
extensively across the silicon semiconductor chip industry,
supporting production and development of next generation devices
which deliver unparalleled performance and productivity. Through
the year we have seen a reduction in orders and revenue for our
equipment and techniques used directly in manufacturing defect
review for consumer electronics. However, due to our leading
analytical performance, combined with manufacturers ramping up to
develop the next generation of chips - including 1- to 3-nanometre
nodes - we have seen a significant increase in orders and revenue
for applied R&D applications, demonstrating the resilience
afforded by our positioning across the technology lifecycle. This
has been supported by product launches of dedicated solutions for
our semiconductor customers for advanced characterisation at the
nanoscale for increasingly complex architecture - which is ever
more important as chips and devices continue to shrink in size.
In addition, our imaging and analysis products are deployed
across the broader electronics market including the development and
production of printed circuit boards and standard electronic
components such as resistors and capacitors.
Advanced Materials (34% of revenue)
Advanced materials play an increasingly important role in our
daily lives, enabling everything from the screens we watch and the
cars we drive to the structural materials that build our cities. We
have delivered very strong double-digit order and revenue growth in
this market, as both academic and commercial customers use our
equipment and techniques to develop and deploy higher performing
and more sustainable materials, products and modes of transport, in
pursuit of a greener future. We have seen particularly strong
growth into service laboratories and core facilities, where the
capabilities, versatility, and ease of use of our equipment and
software lend themselves to a wide range of applications.
With nearly all materials and products undergoing some form of
analysis, this continues to drive increasing demand across our
imaging and analysis systems. Our systems allow our customers to
measure down to the nanoscale, optimising the performance and
production of lighter, stronger, higher functioning materials from
early-stage research through to design and production.
In the year, we have seen strong growth in the analysis of
structural materials such as steel and concrete which together
account for around 15% of global CO(2) emissions. Here, we are
accelerating our customers' progress as they address the vital
challenge of making greener alternatives without compromising the
performance of the material. Examples include the development of
low-emission concrete recipes and self-healing concretes which can
repair cracking automatically. In metals, our products support the
development of new, low-carbon steels, and the recycling of
valuable materials such as aluminium for use in high-end
applications including aerospace, as part of the global push
towards a circular economy.
In addition, we have seen related growth into automotive and
aerospace applications, as structures evolve to facilitate
renewable power sources such as the large, heavy battery packs
currently needed in EVs.
The precision of our equipment also enables our products to
support the development and characterisation of so-called 2D
materials such as graphene, which are just one atom thick and have
unprecedented performance properties. Graphene is starting to make
its way into mainstream products including smartphones and wearable
devices as scientists and researchers learn how to harness its
capabilities. Other 2D materials are being used in areas such as
battery research, displays and next generation semiconductors,
where their electrical properties are being explored for their
potential to enhance performance.
Our products - particularly our atomic force microscopes - also
play a crucial role in helping scientists understand the properties
of polymers, including viscosity, adhesion, strength and hardness.
The integral role polymers play in a multitude of products used in
daily life, from tyres to fabrics and medical implants, underpins
our growth in this area.
Energy & Environment (14% of revenue)
From battery research to water quality, our systems play a
critical part in the development of a greener future as
governments, universities and commercial customers all over the
world seek to reduce negative environmental impacts and drive
positive change.
A particular area of strength for us is the battery market,
which has a key role to play in the transition from fossil fuels,
enabling sustainable travel and providing efficient and affordable
storage to complement renewable energy generation. With our
increasingly tailored solutions, which extend across our materials
and analysis portfolio, we enable our customers to address
challenges in every stage of the battery life cycle, from raw
materials and R&D through to quality control and failure
analysis, and end-of-life recycling. An example of this is our
recently launched Cypher Battery Edition atomic force microscope,
configured to enable the safe direct observation of battery
chemistry during operation.
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. Our solutions are also adopted to
ensure quality control, including particle analysis to detect
potentially harmful contamination within raw materials.
Our analysis solutions are also playing an increasing role in
the quest for a cleaner, less polluted environment. Customers,
including a major European marine science institute, are using our
systems to map the type and volume of microplastics across the
oceans - crucial in helping our understanding of the impact of
these pollutants on the wider ecosystem. Here, our leading Raman
microscopy system, combined with our Particle Scout software,
enables the categorisation and counting of microplastics and
industrial waste.
Elsewhere in our portfolio, our benchtop Magnetic Resonance
analysers provide a user-friendly interface to assess the levels of
fats, oils and grease in wastewater, helping to prevent the
fatbergs and pollution incidents which can occur when these build
up in sewer networks.
Healthcare & Life Science (6% revenue)
Healthcare & Life Science has delivered good growth through
the year. Customers are using our atomic force and Raman microscopy
equipment to explore biological systems, with applications in
cancer and heart disease, among many others. This includes the
imaging of living cells to measure their elasticity, structure and
the dynamics of DNA, which are used to discriminate between healthy
and diseased tissue.
Quantum Technology (3% of revenue)
With strong customer relationships across the quantum market,
and expertise in semiconductor processing and characterisation, we
are seeing increasing demand to support fabrication of the qubits
which form the basis of quantum computers. Our systems are
supporting the roadmap to develop quantum computers with higher
numbers of qubits, and greatly reduced defects. This will be
critical for the advancement of these transformational devices.
Research & Discovery
The sector comprises our Andor Technology, NanoScience and X-Ray
Technology businesses. It provides advanced solutions and unique
environments that enable imaging and analytical measurements down
to the atomic and molecular level, as well as ultra-low temperature
and high magnetic field environments. These are used across
scientific research and applied R&D, and commercial
applications. Our leading-edge technologies have a key role to play
across a range of fields, from accelerating developments in
medicine and material science to facilitating the growing
commercialisation of quantum technology.
Key highlights
Full year Full year % constant
to 31 March to 31 March % reported currency(1)
2023 2022 growth growth
Orders GBP160.4m GBP133.9m +19.8% +11.6%
Revenue GBP139.4m GBP120.3m +15.9% +8.1%
Adjusted(2) operating profit GBP18.0m GBP21.3m (15.5%) (21.1%)
Adjusted(2) operating margin 12.9% 17.7%
Statutory operating profit GBP11.3m GBP15.0m
Statutory operating margin 8.1% 12.5%
1. For definition refer to note on page 2.
2. Details of adjusting items can be found in Note 2 to the full year financial statements.
Increasing demand for our key enabling technologies,
particularly across our Quantum Technology and Healthcare &
Life Science markets, drove strong order growth of 19.8% to
GBP160.4m (2022: GBP133.9m), with momentum building through the
second half of the year. In addition, there was strong revenue
growth of 15.9% to GBP139.4m (2022: GBP120.3m). In scientific
camera and microscopy products, this was aided by the easing of
supply chain pressures and relaxation of China's lockdown
restrictions in the second half. However, for our high-value
cryogenic and magnet systems, unfavourable phasing of installations
(the point at which revenue is recognised for these products)
resulted in lower revenue in the year, despite higher production
volumes and strong order growth.
Adjusted operating profit at GBP18.0m (2022: GBP21.3m) was lower
than last year. This was due to increased investment in people and
processes in our scientific camera and microscopy business as we
increase production capacity and operational effectiveness. In
addition, profit was impacted by the lower revenue in the
cryogenics and magnets business as well as an unfavourable mix in
this business from the installation of the last of the legacy
complex bespoke systems. The lower adjusted operating margin of
12.9% (2022: 17.7%) reflected these factors.
Solid progress in the year
In the period we continued to focus on the key markets for the
sector, namely Healthcare & Life Science, Advanced Materials
and the evolving Quantum Technology market. The sector has a high
profile within the research-intensive academic market, with a high
proportion of sales made to academic customers. However, sales to
commercial customers represent a growing proportion of revenue, at
33% (2022: 26%), as we develop application-specific, easy-to-use
solutions based on our high-end, research-oriented platforms. In
addition to selling directly to end customers, where we have a
strong brand presence, we also access a broad range of other end
markets by providing key technologies to a growing portfolio of
strategic original equipment manufacturer (OEM) partners.
Supply chain challenges, lockdowns in China and extended delays
in obtaining UK export licences had a disproportionate impact on
the sector in the first half. However, the easing of supply chain
constraints and the lifting of Covid restrictions in China
supported a strong second half, resulting in double digit order and
revenue growth. This included significant order growth across our
cryogenic platforms for quantum computing and our optical
microscopy Healthcare & Life Science portfolio, underpinned by
increased demand and new product launches in the year. This
resulted in an increased orderbook of GBP119.2m (2022: GBP108.7m),
up 9.7%, and a book to bill of 1.15.
Investment from government and commercial customers in Europe
and the US has more than offset a significant reduction in academic
orders from China related to the Quantum and Astronomy markets, as
we move our focus towards markets with fewer export licence
restrictions. China now represents a smaller proportion of revenue
for the sector at 18% (2022: 25%), with significant growth into
North America, which now represents 37% (2022: 33%) of revenue.
The sector has good positions in a number of end markets, and
developments are as follows:
Healthcare and Life Science (39% of revenue)
We have seen continued strong momentum throughout the year for
our advanced microscopy solutions and dedicated analytical
software. We have enabled academic researchers, scientists and
pharmaceutical companies to accelerate progress towards a healthier
society, delivering improved treatments for neurological diseases
and cancers, and towards the eradication of diseases such as
malaria and polio. The significant progress in these fields is
being enabled by our advanced microscopy solutions which support
the improved understanding of fundamental disease mechanisms. With
our enhanced product range of advanced microscopy products, we now
enable fast, repeatable imaging of large molecular and cellular
samples with the highest possible resolution for the ultimate
research capability, whilst expanding the addressable market by
bringing research-grade capability to broader and much larger
markets through our disruptive, easy-to-use benchtop platform. This
has supported double-digit order growth, with enthusiastic market
acceptance of our new BC43 benchtop microscope, frequently bought
by core imaging facilities as a user-friendly, space-saving
workhorse to increase productivity at an attractive price point. It
has shown strong growth in cancer research and neuroscience
applications, such as studies into Alzheimer's disease and other
forms of dementia, enabling researchers and pharmaceutical
companies to look at the impact of new medicines and treatments. We
also received our first OEM order for multiple BC43 systems for
incorporation into a high throughput gene sequencing
instrument.
We have also seen significant order growth for our high-end
Dragonfly microscopy system, supported by the launch of a new model
with super spatial resolution capability. Dragonfly is being used
in areas including spatial genomics, a method for mapping cancer
markers rapidly to accelerate therapeutic breakthroughs, with its
high speed a particular benefit to researchers.
Our proprietary AI-powered analytical software packages can be
used across our portfolio, and with other manufacturers' equipment.
These enable the automated analysis and interpretation of
increasingly rich data sets, with sales of tailored packages for
neuroscience, cancer research and cell biology applications growing
strongly in the year. In addition to our microscopy portfolio, we
continued to see increasing demand and strong revenue growth for
our scientific cameras and laser modules through OEM partners in
fields including drug discovery and gene sequencing.
Advanced Materials (28% of revenue)
Demand for our material characterisation technologies - such as
our advanced measurement systems which integrate our
superconducting magnets and cryogenic systems, as well as our
portfolio of scientific cameras and optical spectrometers -
continues to be driven by interest in new material discoveries
aligned to global mega trends. Despite supply chain issues which
eased in the second half, we continue to see significant growth in
sales for technologies which enable fundamental material
characterisation.
Research & Fundamental Science (10% of revenue)
We continue to see long-term customer interest in our high-end
scientific cameras and specialised cryogenic and superconducting
magnet systems across a broad range of research themes including
astronomy, chemistry and physics research. In fluids and plasma
dynamics, our scientific cameras and spectrometers, with their
highly sensitive and ultrafast detectors, enable customers to
analyse phenomena on timescales as low as a billionth of a second.
These are being used to study the efficiency of combustion
processes in jet engines as new environmental fuels are developed,
as well as exploring the critical behaviour of plasmas used to
generate nuclear fusion, the ultimate solution to clean and
sustainable energy. Our products continue to support the leading
edge of science, with customers of our Andor camera and microscopy
equipment named as winners of the 2022 Nobel prizes for chemistry
and physics.
We are increasingly focusing on larger and more profitable
markets, with a reduced focus on bespoke, one-off complex systems,
particularly to academia. As a result of a controlled move away
from these systems, orders and revenue in research &
fundamental science were down in the year.
Quantum Technology (18% of revenue)
Oxford Instruments is at the heart of global research and
development in this dynamic and growing market, which is receiving
increased funding as both governments and commercial players seek
to deliver the vast potential of quantum technology.
During the year, all major governments announced quantum
technology funding programmes - with the UK government, for
example, committing to a GBP2.5 billion investment over the next 10
years. In addition, global technology and communication companies,
and a range of innovative smaller players, are breaking new
boundaries as they create ever-more powerful quantum computers
which are starting to move out of the laboratory and into
mainstream applications.
We are collaborating with many of the sector's key academic and,
increasingly, commercial institutions to accelerate progress
towards the adoption of quantum computers as a mainstream tool.
Quantum has the potential to transform our ability to solve
incredibly complex problems which are beyond today's capabilities,
disrupting existing markets such as finance, logistics, drug
discovery and chemistry. Our technology and service capabilities
are supporting these customers as they transition from the research
laboratory into commercial data centres, enabling the
transformation of established end markets as datacentres start to
provide quantum computing services direct to customers, undertaking
application trials on real world data.
With multiple quantum computing technologies still in trial, the
superconducting techniques which require cryogenic technologies
still dominate the use cases. Over the course of the year, we have
seen significant orders from tier 1 quantum providers, investing in
our cryogenic products as they increase their engineering
programmes to build 1,000 qubit-plus systems. However, our unique
position, supporting both cryogenic quantum environments and
optics-based quantum communication, through our scientific cameras,
puts us at the heart of multiple strands of this rapidly growing
market. Our highly sensitive, photon-counting camera remains the
leading imaging solution in quantum optics experiments involving
trapped ion and quantum entanglement measurements.
Within our Semiconductor & Communications and Energy &
Environment end markets (together representing 6% of revenue), we
continued to see strong demand for our key technologies, with
revenue broadly in line with the previous year.
Service & Healthcare
The Service & Healthcare sector comprises the Group's
service and support related to Oxford Instruments' own products,
and the support and service of third-party MRI scanners in Japan.
We offer tailored support packages for all our products, delivered
by a global network of product experts, application experts and
service engineers, both in person and via digital channels,
including online training, webinars and remote service support.
Key highlights
Full year
Full year to % constant
to 31 March 31 March % reported currency
2023 2022 growth growth
------------------------------ ------------- ---------- ----------- -----------
Orders GBP78.4m GBP70.0m +12.0% +6.4%
Revenue GBP70.8m GBP61.5m +15.1% +9.6%
Adjusted(2) operating profit GBP22.0m GBP18.9m +16.4% +8.5%
Adjusted(2) operating margin 31.1% 30.7%
Statutory operating profit GBP22.4m GBP18.9m
Statutory operating margin 31.6% 30.7%
1. For definition refer to note on page 2.
2. Details of adjusting items can be found in Note 2 to the full
year financial statements.
There was good growth in orders which increased 6.4% at constant
currency to GBP78.4m (2022: GBP70.0m). Revenue growth was strong,
increasing by 9.6% at constant currency to GBP70.8m (2022:
GBP61.5m). Growth in orders and revenue in North America and Europe
was strong but slightly lower than the prior year in Asia, which
was adversely impacted by first half Covid-related restrictions in
the region. There was strong growth momentum in the second half, as
restrictions eased.
Adjusted operating profit increased 8.5% at constant currency to
GBP22.0m (2022: GBP18.9m) reflecting the increased revenue, but
partially offset by the investment in expanding our global service
teams and lower revenues from Asia. This investment in the Service
& Healthcare offering resulted in the adjusted operating margin
decreasing by 30bps to 31.1% (2022: 30.7%).
Operational and strategic progress
Our service and support strategy, underpinned by Horizon, is
focused on three key pillars:
-- increased tailoring of our service offerings to specific end
applications and customer types;
-- the delivery of seamless customer service at every stage of the product life cycle;
-- the development of global processes which can be delivered
via a hybrid approach, both in region and digitally.
As we increase our portfolio and the scope of our services, we
are offering a range of support packages to match the needs and
budgets of our customers. This allows our customers to maximise
their capabilities, enhance their productivity and receive
immediate help and support when needed throughout the lifetime of
our systems. We use our market intimacy to develop products
appropriate to each end application and customer type. These
include tailored offerings across our life science microscopy
portfolio, where we are increasingly securing point of sale service
contracts for our benchtop systems. We are also seeing strong
growth in our Imaris life science analytical software, with
packages focused on cancer research, cell biology, neuroscience and
core facilities available on annual licences.
As the quantum market evolves into the commercial arena, we have
secured a number of contracts from commercial customers to provide
24/7 service capability and uptime to quantum computers situated in
hyperscale datacentres. This requires a dedicated team and approach
building on our experience in providing similar service capability
to MRI imaging systems and provides a good growth opportunity going
forward.
In pursuit of seamless customer service, we have continued to
invest in extending our regional teams and spares capacity to
ensure short lead times for in-person support and training visits,
as well as continuing to develop our digital and remote support
offerings. We are increasingly able to diagnose and resolve issues
within a few hours, using virtual reality as part of our digital
toolkit, and in many cases removing the need for engineers to make
site visits. Together, these developments result in greater
flexibility and convenience for customers and a more sustainable
offering, helping to limit our carbon footprint from business
travel.
We have also continued to focus on the third element of our
strategy, developing standard techniques and processes globally
which are implemented locally through our combined regional teams,
with teams increasingly trained to service multiple products. The
benefits of this approach include cost efficiencies from
best-practice procedures, deeper local customer intimacy and
improved response times.
The ongoing transformation of our approach to customer service
and support has increased the proportion of revenue from commercial
customers, who now represent 58% of our customer base in this
sector. Regionally, our increased investment in local teams in
North America and Europe has supported strong growth in both orders
and revenue to these geographies.
Our servicing of third-party MRI imaging equipment in Japan
continues to deliver excellent levels of service and support to our
customer base and revenue was broadly in line with the previous
year.
The Service & Healthcare sector remains on a strong upward
trajectory, with significant ongoing opportunities to support
revenue growth and margin expansion.
Finance Review
We delivered a strong financial performance with growth in
orders, revenue and underlying cash flow. We continue to invest in
resources and infrastructure across the business to support future
growth. Our balance sheet has been strengthened further to support
organic and non-organic growth opportunities.
Summary
Oxford Instruments uses certain alternative performance measures
to help it effectively monitor the performance of the Group as
management believes that these represent a more consistent measure
of underlying performance. Adjusted measures exclude the
amortisation and impairment of acquired intangible assets; other
significant non-recurring items; and the mark -- to -- market
movement of financial derivatives. All of these are included in the
statutory figures. Note 1 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 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.
Reported orders received increased by 20.9% to GBP511.6m (2022:
GBP423.1m), an increase of 14.2% at constant currency. 60% of
orders growth was volume driven, with the remainder from price
increases. At the end of the year, the Group's order book had
increased to GBP319.6m (31 March 2022: GBP260.2m), up 22.8% on a
reported basis and 19.2% at constant currency.
Reported revenue increased by 21.1% to GBP444.7m (2022:
GBP367.3m). Revenue, excluding currency effects, increased by
14.0%, with the movement in average currency exchange rates over
the year increasing reported revenue by GBP26.1m. This strong
growth was primarily volume driven, with 70% of the growth from
volume and 30% from price.
Adjusted operating profit increased by 21.4% to GBP80.5m (2022:
GBP66.3m). Adjusted operating profit, excluding currency effects,
increased by 13.4%, with a currency tailwind in the year of
GBP5.3m. Adjusted operating margin was held at 18.1% (2022: 18.1%)
as the business invested to support growth; excluding currency
effects, adjusted operating margin decreased by 10 basis points to
18.0%.
Statutory operating profit of GBP72.4m (2022: GBP48.3m) includes
the amortisation of acquired intangibles of GBP9.3m (2022: GBP9.5m)
and a credit of GBP3.0m (2022: charge of GBP6.4m) relating to the
movement in the mark-to-market valuation of uncrystallised currency
hedges for future years. Other adjusting non-recurring items
totalled GBP1.8m (2022: GBP2.1m).
Adjusted profit before tax grew by 24.4% to GBP82.0m (2022:
GBP65.9m), representing a margin of 18.4% (2022: 17.9%).
Statutory profit before tax increased by 54.4% to GBP73.5m
(2022: GBP47.6m), following the growth in operating profit and
favourable impact from the non-cash uncrystallised credit on
currency hedges. This represents a margin of 16.5% (2022:
13.0%).
Adjusted basic earnings per share grew by 19.5% to 112.7p (2022:
94.3p). Basic earnings per share were 101.6p (2022: 67.1p), an
increase of 51.4%.
Cash from operations of GBP72.9m (2022: GBP58.4m) represents 58%
(2022: 72%) cash conversion. During the year, we incurred
expenditure of GBP24.7m on the construction of our new
semiconductor facility near Bristol and a facility expansion in
High Wycombe; cash conversion on a normalised basis that excludes
this expenditure was 88%. Net cash after borrowings increased from
GBP85.9m on 31 March 2022 to GBP100.2m on 31 March 2023.
At the end of March, our revolving credit facility remained
undrawn, leaving approximately GBP108m of committed facilities.
This represents total headroom of just under GBP210m.
Income Statement
The Group's Income Statement is summarised below.
Year ended Year ended Change
31 March 31 March
2023 2022
GBPm GBPm
------------------------------------- ----------- ----------- -------
Revenue 444.7 367.3 +21.1%
------------------------------------- ----------- ----------- -------
Adjusted operating profit 80.5 66.3 +21.4%
------------------------------------- ----------- ----------- -------
Amortisation of acquired intangible
assets (9.3) (9.5)
Non-recurring items (1.8) (2.1)
Mark-to-market of currency hedges 3.0 (6.4)
------------------------------------- ----------- ----------- -------
Statutory operating profit 72.4 48.3 +49.9%
------------------------------------- ----------- ----------- -------
Net finance income/(cost)(1) 1.1 (0.7)
------------------------------------- ----------- ----------- -------
Adjusted profit before taxation 82.0 65.9 +24.4%
Statutory profit before taxation 73.5 47.6 +54.4%
------------------------------------- ----------- ----------- -------
Adjusted effective tax rate 20.7% 17.8%
Effective tax rate 20.3% 18.9%
Adjusted earnings per share
- basic 112.7p 94.3p +19.5%
Earnings per share - basic 101.6p 67.1p +51.4%
Dividend per share (total) 19.5p 18.1p +7.7%
------------------------------------- ----------- ----------- -------
2. Net finance costs for 2023 include a non-recurring charge of
GBP0.4m (2022: GBP0.3m) against the unwind of discount on WITec
contingent consideration.
Revenue and orders
Total reported orders grew by 20.9% (+14.2% at constant
currency) to GBP511.6m. In Materials & Characterisation,
reported orders grew by 24.5% (+18.3% at constant currency), with
good growth across the portfolio of electron microscope analysers,
semiconductor processing systems, atomic force microscopes and
Raman systems. In Research & Discovery, we saw good growth of
19.8% (+11.6% at constant currency) in orders for our optical
imaging and microscopy systems, assisted by some large orders for
our cryogenic systems. Service & Healthcare increased by 12.0%
(+6.4% at constant currency).
Reported revenue of GBP444.7m (2022: GBP367.3m) increased by
21.1% (+14.0% at constant currency).
Reported revenue grew by 26.4% for Materials &
Characterisation (+19.2% at constant currency), with strong growth
for our electron microscope analysers and atomic force microscopes.
We saw growth in our semiconductor processing tools, though this
was tempered in the year by supply chain challenges and an increase
in export licence refusals.
Research & Discovery reported revenue growth of 15.9% (+8.1%
at constant currency) was supported by improved second half
production of our optical imaging and microscopy products, although
there was lower revenue from the unfavourable phasing in
installations of our cryogenic and magnet systems, in addition to
the impact from UK export licence constraints to China,
particularly to the quantum market.
Revenue growth from service of our own products, supported by
good growth in maintenance revenue from Life Science software and
products, has more than offset an expected small decline in revenue
from our MRI service business in Japan, resulting in reported
growth of 15.1% (+9.6% 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 1.15 (2022: 1.15).
On a geographical basis, revenue grew by 17.9% in Europe (+15.5%
at constant currency), supported by additional deliveries of our
electron analysers, optical and microscopy products and cryogenic
systems.
Revenue for North America increased by 53.5% on a reported basis
and by 36.3% at constant currency; with all businesses recording
good growth, and especially high demand for our semiconductor
processing systems.
Asia remains our largest region by revenue, with China
constituting 54% of regional revenue and 24% of total Group
revenue. Asia delivered revenue growth of 6.7% (+1.9% at constant
currency), with strong demand for our electron microscope analysers
and atomic force microscopes, offset by fewer deliveries of our
semiconductor processing systems due to supply chain challenges and
UK export licence rejections, and a pivot away from quantum-related
cryogenic systems caused by export licence constraints. Revenue in
China fell 4% on a constant currency basis.
Geographic revenue growth
2021/22 2021/22 %
% growth
2022/23 2022/23 % of Change at constant
GBPm GBPm % of total GBPm total GBPm growth currency
--------------- --------- ------------ -------- -------- -------- --------- -------------
Europe 104.9 24% 89.0 24% +15.9 17.9% 15.5%
North America 130.3 29% 84.9 23% +45.4 53.5% 36.3%
Asia 201.2 45% 188.6 51% +12.6 6.7% 1.9%
Rest of World 8.3 2% 4.8 2% +3.5 72.9% 66.7%
--------------- --------- ------------ -------- -------- -------- --------- -------------
444.7 367.3 +77.4 21.1% 14.0%
--------------- --------- ------------ -------- -------- -------- --------- -------------
The total reported order book grew by 22.8% (+19.2% at constant
currency). The order book, at constant currency, compared to 31
March 2022, increased by 29.5% for Materials &
Characterisation, with strong growth across all constituent
businesses. Research & Discovery grew by 7.7% at constant
currency, with strong demand for our imaging and microscopy
products. We also received a large commercial order for cryogenic
systems. However, the removal of previous years' orders due to UK
export licence rejections to China within the quantum sector
depressed the growth rate. Continued focus on own product service
resulted in growth of 25.3% (+21.0% at constant currency) from
Service & Healthcare.
Materials Research Service Total
GBPm & Characterisation & Discovery & Healthcare
-------------------------- -------------------- ------------- -------------- ------
Revenue: 2021/22 185.5 120.3 61.5 367.3
Constant currency growth 35.6 9.8 5.9 51.3
Currency 13.4 9.3 3.4 26.1
-------------------------- -------------------- ------------- -------------- ------
Revenue: 2022/23 234.5 139.4 70.8 444.7
-------------------------- -------------------- ------------- -------------- ------
Revenue growth: reported 26.4% 15.9% 15.1% 21.1%
Revenue growth: constant
currency 19.2% 8.1% 9.6% 14.0%
-------------------------- -------------------- ------------- -------------- ------
Gross profit
Gross profit grew by 22.6% to GBP230.2m (2022: GBP187.8m),
representing a gross profit margin of 51.8%, an increase of 70
basis points over last year. The business has been able to offset
the effects of cost inflation within costs of sales over the
year.
Adjusted operating profit and margin
Adjusted operating profit increased by 21.4% to GBP80.5m (2022:
GBP66.3m), representing an adjusted operating profit margin of
18.1% (2022: 18.1%). At constant currency, the adjusted operating
profit margin was 18.0%, a reduction of 10 basis points. In order
to support future growth ambitions and position ourselves to
deliver process and cost efficiencies we must invest across the
business, including in infrastructure, IT, and engineering and
operational capabilities. As a result, overhead growth tracks
revenue growth and offsets short-term pass through margin
enhancement.
Reported Materials & Characterisation adjusted operating
profit increased by 55.0% (+45.2% at constant currency) with
reported margin increasing by 320 basis points to 17.3% (2022:
14.1%). We have seen a high level of demand for our electron
microscope analysers and atomic force microscopes, driving an
improvement in profitability. In addition, the WITec business has
now been fully integrated into the Group, with combined sales teams
driving an improvement in demand.
Within Research & Discovery, our imaging and microscopy
business has had a strong second half of the year, despite a large
increase in UK export licence rejections. The business has seen
strong demand, supported by our new benchtop microscope for the
Life Science market. Investment in resources, IT systems and
infrastructure is being made to support the capture and delivery of
growth opportunities. Operational throughput of our standard
cryogenic and magnet systems has been constrained by a diversion of
resources towards completing the withdrawal from more complex
bespoke systems, which now make up a much smaller component of the
business. Difficulties in obtaining UK export licences for
cryogenic systems for quantum research in China has negatively
impacted year-on-year growth. These issues have resulted in a fall
in constant currency profit of 21.1% and a 480-basis point
reduction in adjusted operating margin to 12.9% for the segment.
Good order growth for our cryogenic systems, especially from North
America and Europe, is expected to contribute to an improved
trading performance for the 2023/24 financial year.
Service & Healthcare margin increased by 40 basis points to
31.1% (2022: 30.7%). At constant currency, the margin was 30.4%, a
decrease of 30 basis points.
Transaction and translation currency effects (including the
impact of transactional currency hedging) have increased reported
adjusted operating profit by GBP5.3m when compared to blended
hedged exchange rates for the prior period.
Research Service
Materials & &
GBPm & Characterisation Discovery Healthcare Total
------------------------------------ --------------------- ----------- ------------ ------
Adjusted operating profit: 2021/22 26.1 21.3 18.9 66.3
Constant currency growth 11.8 (4.5) 1.6 8.9
Currency 2.6 1.2 1.5 5.3
------------------------------------- -------------------- ----------- ------------ ------
Adjusted operating profit: 2022/23 40.5 18.0 22.0 80.5
------------------------------------- -------------------- ----------- ------------ ------
Adjusted operating margin(1)
: 2021/22 14.1% 17.7% 30.7% 18.1%
Adjusted operating margin(1)
: 2022/23 17.3% 12.9% 31.1% 18.1%
Adjusted operating margin(1)
(constant currency): 2022/23 17.1% 12.9% 30.4% 18.0%
------------------------------------- -------------------- ----------- ------------ ------
3. 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 grew by 49.9% to GBP72.4m (2022:
GBP48.3m), representing an operating profit margin of 16.3% (2022:
13.2%). Statutory operating profit is after the amortisation and
impairment of acquired intangible assets; other significant
non-recurring items; and the mark-to-market of financial
derivatives. The growth was driven by a strong trading performance,
supported by currency, along with a credit on the fair value
movement of forward currency contracts.
Adjusting items
Amortisation of acquired intangibles of GBP9.3m (2022: GBP9.5m)
relates to intangible assets recognised on acquisitions, being the
value of technology, customer relationships and brands.
Non-recurring items within operating profit total GBP1.8m. This
comprises a release of a property dilapidations provision of
GBP0.4m relating to the previously disposed OI Healthcare business,
offset by a charge of GBP0.5m that eliminates the profit arising in
the acquired WITec business from revaluing their inventories to
fair value, in accordance with accounting standards. We have also
incurred legal costs of GBP0.5m on protection of our IP due to a
third-party infringement, and restructuring costs of GBP0.4m
relating to the transfer of a business to a new location. An
impairment of capitalised development costs of GBP0.8m relates to
two small projects in our Plasma Technology business where the
development has been superseded by a new platform and the market
opportunity turned out to be smaller than forecast. We also
recorded in financial expenditure a non-recurring charge of GBP0.4m
against the unwind of discount on WITec contingent
consideration.
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 24
months forward from the end of the next reporting period. The Group
policy is to have in place at the beginning of the financial year
hedging instruments to cover up to 80% of its forecast
transactional exposure for the following 12 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 Consolidated Statement of Income as foreign
exchange and excluded from our calculation of adjusted profit
before tax. In the year this amounted to a credit of GBP3.0m (2022:
charge of GBP6.4m). The movement to a small net asset for
derivative financial instruments over the year reflects: (i) the
crystallisation of forward contracts that were hedging the 2022/23
financial year, which are recognised in adjusted operating profit;
and an uncrystallised increase in the mark-to-market valuation of
forward contracts from a rise in the value of sterling at the
balance sheet date against a blended rate achieved on US dollar
contracts that will mature over the next 12 months.
Net finance costs
The Group recorded adjusted net interest income of GBP1.5m
(2022: net cost of GBP0.4m) due to an increase in the interest
credit on pension scheme net assets and a rise in interest income
on our net cash balance. In addition, we recorded in financial
expenditure a non-recurring charge of GBP0.4m against the unwind of
discount on WITec contingent consideration.
Adjusted profit before tax and margin
Adjusted profit before tax increased by 24.4% to GBP82.0m (2022:
GBP65.9m). The adjusted profit before tax margin of 18.4% (2022:
17.9%) was above last year due to an increase in net finance
income.
Year ended Year ended
31 March 31 March
Reconciliation of statutory profit before 2023 2022
tax to adjusted profit before tax GBPm GBPm
------------------------------------------- ----------- -----------
Statutory profit before tax 73.5 47.6
Add back:
Amortisation and impairment of acquired
intangible assets 9.3 9.5
Non-recurring items in operating profit
(Note 1) 2.2 2.4
Mark-to-market of currency hedges (3.0) 6.4
------------------------------------------- ----------- -----------
Adjusted profit before tax 82.0 65.9
------------------------------------------- ----------- -----------
Statutory profit before tax and margin
Statutory profit before tax increased by 54.4% to GBP73.5m
(2022: GBP47.6m). Statutory profit before tax is after the
amortisation and impairment of acquired intangible assets; other
significant non-recurring items; and the mark-to-market of
financial derivatives. The statutory profit before tax margin of
16.5% (2022: 13.0%) was above last year principally due to the
credit from the mark-to market valuation movement on financial
derivatives.
Taxation
The adjusted tax charge of GBP17.0m (2022: GBP11.7m) represents
an effective tax rate of 20.7% (2022: 17.8%). The tax charge of
GBP14.9m (2022: GBP9.0m) represents an effective tax rate of 20.3%
(2022: 18.9%). The increase reflects prior year tax credits,
primarily relating to exercise of share options, as well as a
greater mix of profits from jurisdictions with higher tax rates
than our average. We expect the effective tax rate to rise in
2023/24 owing to the increase in the UK corporation tax rate.
Earnings per share
Adjusted basic earnings per share increased by 19.5% to 112.7p
(2022: 94.3p); adjusted diluted earnings per share grew by 19.7% to
111.3p (2022: 93.0p). Basic earnings per share increased by 51.4%
to 101.6p (2022: 67.1p); diluted earnings per share increased by
51.5% to 100.3p (2022: 66.2p).
The number of undiluted weighted average shares increased to
57.7m (2022: 57.5m).
Currency
The Group faces transactional and translational currency
exposure, most notably against the US dollar, euro and Japanese
yen. For the year, approximately 16% of Group revenue was
denominated in sterling, 53% in US dollars, 19% in euros, 10% 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 translation and transaction foreign currency
exposure for the full year is summarised below.
Adjusted
operating
GBPm (equivalent) Revenue profit
------------------- -------- -----------
Sterling 72.3 (97.9)
US dollar 233.8 105.8
Euro 85.8 37.4
Japanese yen 43.5 34.4
Chinese renminbi 6.2 (0.2)
Other 3.1 1.0
------------------- -------- -----------
444.7 80.5
------------------- -------- -----------
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 31 March 2023, the Group had currency hedges
in place extending up to 12 months forward.
For the full year 2023/24, our assessment of the currency impact
is, based on hedges currently in place and current currency rates,
a headwind to revenue and profit of GBP15m and GBP0.6m
respectively. Current currency rates on unhedged positions for the
year are GBP:USD 1.26; GBP:EUR 1.17; GBP:JPY 176.All currency
impacts are prior to mitigating pricing and cost actions. Uncertain
volume and timing of shipments and acceptances, currency mix and
rate volatility may significantly affect full-year currency
forecast effects.
Looking further ahead to the financial year 2024/25, based on
current currency rates, we would expect currency effects to have a
neutral impact to revenue and a GBP4.2m headwind to profit, owing
to an unwind of hedges crystalising in the previous financial year
at more favourable rates.
Acquisition of WITec
On 31 August 2021, the Group completed the purchase of 100% of
the share capital in WITec for an initial consideration of
EUR37.0m. Additional consideration of EUR5m was paid in December
2022 as a consequence of specific conditions on trading performance
being met.
Dividend
The Group's policy on the dividend takes into account changes to
underlying earnings, dividend cover, movements in currency and
demands on our cash. After a good year of trading, supported by
favourable currency movements, the Board is recommending a final
dividend of 14.9p (2022: 13.7p) per share. This would result in a
total dividend of 19.5p (2022: 18.1p) per share, growth of 7.7%. An
interim dividend of 4.6p per share was paid on 13 January 2023. The
final dividend will be paid, subject to shareholder approval, on 22
August 2023 to shareholders on the register as at 14 July 2023.
Cash flow
The Group cash flow is summarised below.
Year Year ended
ended 31 March
31 March 2022
2023 GBPm
GBPm
------------------------------------------------------ ---------- -----------
Adjusted operating profit 80.5 66.3
Depreciation and amortisation 10.8 9.4
------------------------------------------------------ ---------- -----------
Adjusted(1) EBITDA 91.3 75.7
Working capital movement (9.1) (11.8)
Equity settled share schemes 2.4 2.1
Pension scheme payments above charge to operating
profit (11.7) (7.6)
------------------------------------------------------ ---------- -----------
Cash from operations 72.9 58.4
Interest 0.4 (0.5)
Tax (5.7) (8.8)
Capitalised development expenditure (0.6) (0.7)
Net expenditure on tangible and intangible assets (32.1) (13.9)
Acquisition of subsidiaries, net of cash acquired (4.8) (30.6)
Acquisition-related costs - (0.4)
Dividends paid (10.6) (12.3)
Proceeds from issue of share capital and exercise
of share options 0.1 0.1
Payments made in respect of lease liabilities (5.6) (3.4)
Decrease in borrowings (0.5) (0.1)
------------------------------------------------------ ---------- -----------
Net increase/(decrease) in cash and cash equivalents
from continuing operations 13.5 (12.2)
------------------------------------------------------ ---------- -----------
4. 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 of GBP72.9m (2022: GBP58.4m) represents 58%
(2022: 72%) cash conversion. Cash conversion on a normalised basis
was 88% once we exclude capital expenditure relating to our new
semiconductor facility and a small facility expansion in High
Wycombe for a Materials & Characterisation business line. Cash
conversion is defined as cash from operations before business
reorganisation costs and pension scheme payments above charge to
operating profit, less capitalised development expenditure, capital
expenditure and payments made in respect of lease liabilities,
divided by adjusted operating profit.
Year Year ended
ended 31 March
31 March 2022
Reconciliation of cash generated from operations 2023 GBPm
to adjusted operating cash flow GBPm
----------------------------------------------------------- ---------- -----------
Cash from operations 72.9 58.4
Add back/(Deduct):
Pension scheme payments above charge to operating
profit 11.7 7.6
Capitalised development expenditure (0.6) (0.7)
Net expenditure on tangible and intangible assets (32.1) (13.9)
Payments made in respect of lease liabilities (5.6) (3.4)
----------------------------------------------------------- ---------- -----------
Adjusted cash from operations 46.3 48.0
----------------------------------------------------------- ---------- -----------
Cash conversion % (adjusted cash from operations/adjusted
operating profit) 58% 72%
----------------------------------------------------------- ---------- -----------
Cash conversion % (normalised(1) ) 88% 84%
----------------------------------------------------------- ---------- -----------
5. Cash conversion calculated on a normalised basis excludes
expenditure in the year of GBP24.7m (2022: GBP7.4m) on the new
semiconductor facility and the Materials & Characterisation
facility expansion in High Wycombe.
Working capital increased by GBP9.1m. Inventories increased by
GBP15.6m as we prioritised securing component supplies in the face
of continued supply chain disruption and uncertainty. Receivables
increased by GBP21.5m, reflecting the high number of orders,
shipments and acceptances in the final month of the year compared
to last year, particularly with reference to high-value
semiconductor process systems, resulting in an increase in
invoicing against customer deposits, installation and acceptances.
This was offset by an increase in payables and customer deposits of
GBP28.0m.
Interest
Net interest received was GBP0.4m (2022: GBP0.5m paid), the
improvement reflecting the higher interest income received on our
net cash balance.
Tax
Tax paid was GBP5.7m (2022: GBP8.8m). The Group benefitted from
accelerated capital allowances on the new semiconductor facility
currently under construction, partly contributing to cash tax being
lower than the accounting charge.
Investment in Research and Development (R&D)
Total cash spend on R&D in the year was GBP34.8m, equivalent
to 7.8% of sales (2022: GBP31.7m, 8.6% of sales). A reconciliation
between the adjusted amounts charged to the Consolidated Statement
of Income and the cash spent is given below:
Year Year ended
ended 31 March
31 March 2022
2023 GBPm
GBPm
----------------------------------------------------- ---------- -----------
R&D expense charged to the Consolidated Statement
of Income 36.7 32.8
Depreciation of R&D-related fixed assets (0.3) (0.2)
Amounts capitalised as fixed assets - 0.3
Amortisation and impairment of R&D costs previously
capitalised as intangibles (2.2) (1.9)
Amounts capitalised as intangible assets 0.6 0.7
----------------------------------------------------- ---------- -----------
Total cash spent on R&D during the year 34.8 31.7
----------------------------------------------------- ---------- -----------
Net cash and funding
Net cash
Cash from operations in the year was partially offset by an
increase in capital expenditure and payment of deferred
consideration for the acquired WITec business, resulting in an
increase in the Group's net cash position after borrowings at 31
March 2023 to GBP100.2m (31 March 2022: GBP85.9m). The Group
invested in tangible and intangible assets of GBP32.3m, of which
GBP23.1m relates to payments associated with the new semiconductor
facility under construction.
To 31 March 2023, we had incurred costs of GBP31.3m on the new
semiconductor facility under construction. For the financial year
ended 31 March 2024, we expect additional payments of approximately
GBP10m to complete the facility. We are also planning to expand our
operations in Belfast over the next 18 months to support the growth
of our imaging and microscopy business, particularly into Life
Science markets.
Movement in net cash GBPm
------------------------------------------------------- -------
Net cash after borrowings as at 31 March 2022 85.9
------------------------------------------------------- -------
Cash generated from operations 72.9
Interest 0.4
Tax (5.7)
Capitalised development expenditure (0.6)
Capital expenditure on tangible and intangible assets (9.2)
Capital expenditure on new semiconductor facility (23.1)
Acquisition of subsidiaries (4.8)
Dividend paid (10.6)
Payments made in respect of lease liabilities (5.6)
Other items 0.6
------------------------------------------------------- -------
Net cash after borrowings as at 31 March 2023 100.2
------------------------------------------------------- -------
Year ended Year ended
31 March 31 March
2023 2022
Net cash including lease liabilities GBPm GBPm
------------------------------------------------- ----------- -----------
Net cash after borrowings 100.2 85.9
Lease liabilities (31.4) (18.4)
------------------------------------------------- ----------- -----------
Net cash and lease liabilities after borrowings 68.8 67.5
------------------------------------------------- ----------- -----------
Return on capital employed (ROCE)
ROCE measures effective management of capital employed relative
to the profitability of the business. ROCE is calculated as
adjusted operating profit less amortisation of intangible assets
divided by average capital employed. Capital employed is defined as
assets (excluding cash, pension, tax and derivative assets) less
liabilities (excluding tax, debt and derivative liabilities).
Average capital employed is defined as the average of the closing
balance at the current and prior year end. ROCE has risen to 35.2%,
(2022: 34.7%), with the change principally reflecting a higher
level of earnings, partially offset by the investment in the new
semiconductor facility in Bristol which has increased property,
plant and equipment, and right of use assets.
Year ended Year ended
31 March 31 March
2023 2022
Return on capital employed GBPm GBPm
---------------------------------------------- ----------- -----------
Adjusted operating profit 80.5 66.3
Amortisation of acquired intangible assets (9.3) (9.5)
---------------------------------------------- ----------- -----------
Adjusted operating profit after amortisation
of acquired intangible assets 71.2 56.8
---------------------------------------------- ----------- -----------
Property, plant and equipment 59.3 31.7
Right-of-use assets 31.4 17.9
Intangible assets 132.1 140.7
Long-term receivables 0.5 -
Inventories 81.4 65.3
Trade and other receivables 125.0 104.7
Non-current lease payables (26.2) (14.9)
Non-current provisions - (0.1)
Trade and other payables (171.2) (149.5)
Current lease payables (5.2) (3.5)
Current provisions (7.6) (7.7)
---------------------------------------------- ----------- -----------
Capital employed 219.5 184.6
---------------------------------------------- ----------- -----------
Average capital employed 202.1 163.5
---------------------------------------------- ----------- -----------
Return on capital employed (ROCE) 35.2% 34.7%
---------------------------------------------- ----------- -----------
Return on invested capital (ROIC)
ROIC measures the after-tax return on the total capital invested
in the business. It is calculated as adjusted operating profit
after tax divided by average invested capital. Invested capital is
total equity less net cash, including lease liabilities. Average
invested capital is defined as the average of the closing balance
at the current and prior year end. Oxford Instruments aims to
deliver high returns, measured by a return on capital in excess of
our weighted average cost of capital. ROIC fell slightly on the
previous year due to an increase in property assets and leases
offsetting the positive effect of growth in adjusted operating
profit after taxation.
Year ended Year ended
31 March 31 March
2023 2022
Return on invested capital GBPm GBPm
-------------------------------------------- ----------- -----------
Adjusted operating profit 80.5 66.3
Adjusted taxation (17.0) (11.7)
-------------------------------------------- ----------- -----------
Adjusted operating profit after taxation 63.5 54.6
-------------------------------------------- ----------- -----------
Total equity 344.0 316.4
Net cash after borrowings (including lease
liabilities) (68.8) (67.5)
-------------------------------------------- ----------- -----------
Invested capital 275.2 248.9
-------------------------------------------- ----------- -----------
Average invested capital 261.2 212.5
-------------------------------------------- ----------- -----------
Return on invested capital (ROIC) 24.3% 25.7%
-------------------------------------------- ----------- -----------
Funding
On 2 July 2018, the Group entered into an unsecured
multi-currency revolving facility agreement, which is committed
until June 2025. The facility has been entered into with two banks
and comprises a euro-denominated multi-currency facility of
EUR50.0m (GBP44m) and a US dollar-denominated multi-currency
facility of $80.0m (GBP64.0m).
Debt covenants are net debt to EBITDA of less than 3.0 times and
EBITDA to interest greater than 4.0 times. As at 31 March 2023 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 31 March 2023 was GBP26.4m (2022:
GBP51.7m). The value of scheme assets fell to GBP251.5m (2021:
GBP351.7m) due to a fall in value of the scheme's gilt holdings and
other liability matching assets. Scheme liabilities decreased to
GBP225.1m (GBP300.0m), principally due to an increase in the
discount rate and a decrease in the inflation-linked
assumptions.
Pension recovery payments above charge to operating profit total
GBP11.7m (2022: GBP7.6m). During the year, an advance payment of
GBP4.0m was made to allow the Trustees to meet collateral calls to
swap counterparties under the Liability Driven Investment scheme.
These funds were not required and while the company has the right
to recover this advance through making reduced payments in the
future, it is not expected to do so.
The scheme's actuarial valuation review, rather than the
accounting basis, determines our cash payments into the scheme. The
Liability Driven Investment strategy is working as intended, with
the actuarial deficit falling during the year, in line with
expectations. The cash contributions into the scheme are expected
to continue until 2025/26, at which point we expect, based on
current assumptions, for the scheme to achieve self-sufficiency.
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 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 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 currency
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
Chief Financial Officer
12 June 2023
CONSOLIDATED STATEMENT OF INCOME
Year ended 31 March 2023
2023 2022
------------------------------ -------------------------------- --------------------------------
Adjusting Adjusting
Adjusted items((1) Total Adjusted items((1) Total
GBPm ) GBPm GBPm ) GBPm
GBPm GBPm
----------------------------- ---------- ---------- -------- ---------- ---------- --------
Revenue 444.7 - 444.7 367.3 - 367.3
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Cost of sales (214.5) - (214.5) (179.5) - (179.5)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Gross profit 230.2 - 230.2 187.8 - 187.8
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Research and development (35.9) (0.8) (36.7) (32.8) - (32.8)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Selling and marketing (65.4) - (65.4) (52.5) - (52.5)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Administration and
shared services (52.9) (10.3) (63.2) (42.2) (11.6) (53.8)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Foreign exchange gain/(loss) 4.5 3.0 7.5 6.0 (6.4) (0.4)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Operating profit 80.5 (8.1) 72.4 66.3 (18.0) 48.3
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Financial income 2.7 - 2.7 0.5 - 0.5
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Financial expenditure (1.2) (0.4) (1.6) (0.9) (0.3) (1.2)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Profit/(loss) before
income tax 82.0 (8.5) 73.5 65.9 (18.3) 47.6
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Income tax (expense)/credit (17.0) 2.1 (14.9) (11.7) 2.7 (9.0)
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Profit/(loss) for
the year attributable
to equity shareholders
of the parent 65.0 (6.4) 58.6 54.2 (15.6) 38.6
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Earnings per share pence pence pence pence
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Basic earnings per
share
----------------------------- -------------------------------- --------------------------------
From profit for the
year 112.7 101.6 94.3 67.1
------------------------------ ---------- ---------- -------- ---------- ---------- --------
Diluted earnings
per share
----------------------------- -------------------------------- --------------------------------
From profit for the
year 111.3 100.3 93.0 66.2
------------------------------ ---------- ---------- -------- ---------- ---------- --------
1 Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in Note 1.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 March 2023
2023 2022
GBPm GBPm
----------------------------------------------------------- ------ -----
Profit for the year 58.6 38.6
----------------------------------------------------------- ------ -----
Other comprehensive income/(expense):
----------------------------------------------------------- ------ -----
Items that may be reclassified subsequently to
Consolidated Statement of Income
----------------------------------------------------------- ------ -----
Foreign exchange translation differences 5.3 1.0
----------------------------------------------------------- ------ -----
Items that will not be reclassified to Consolidated
Statement of Income
----------------------------------------------------------- ------ -----
Remeasurement (loss)/gain in respect of post-retirement
benefits (38.6) 27.3
----------------------------------------------------------- ------ -----
Tax credit/(charge) on items that will not be reclassified
to Consolidated Statement of Income 9.7 (6.8)
----------------------------------------------------------- ------ -----
Total other comprehensive (expense)/income (23.6) 21.5
----------------------------------------------------------- ------ -----
Total comprehensive income for the year attributable
to equity shareholders of the parent 35.0 60.1
----------------------------------------------------------- ------ -----
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2023
2023 2022
GBPm GBPm
--------------------------------------------------- ----- -----
Assets
--------------------------------------------------- ----- -----
Non-current assets
--------------------------------------------------- ----- -----
Property, plant and equipment 59.3 31.7
--------------------------------------------------- ----- -----
Right-of-use assets 31.4 17.9
--------------------------------------------------- ----- -----
Intangible assets 132.1 140.7
--------------------------------------------------- ----- -----
Long-term receivables 0.5 -
--------------------------------------------------- ----- -----
Derivative financial instruments 0.4 -
--------------------------------------------------- ----- -----
Retirement benefit asset 26.4 51.7
--------------------------------------------------- ----- -----
Deferred tax assets 12.5 13.7
--------------------------------------------------- ----- -----
262.6 255.7
--------------------------------------------------- ----- -----
Current assets
--------------------------------------------------- ----- -----
Inventories 81.4 65.3
--------------------------------------------------- ----- -----
Trade and other receivables 125.0 104.7
--------------------------------------------------- ----- -----
Current income tax receivable 0.5 0.8
--------------------------------------------------- ----- -----
Derivative financial instruments 1.6 1.0
--------------------------------------------------- ----- -----
Cash and cash equivalents 112.7 96.4
--------------------------------------------------- ----- -----
321.2 268.2
--------------------------------------------------- ----- -----
Total assets 583.8 523.9
--------------------------------------------------- ----- -----
Equity
--------------------------------------------------- ----- -----
Capital and reserves attributable to the company's
equity shareholders
--------------------------------------------------- ----- -----
Share capital 2.9 2.9
--------------------------------------------------- ----- -----
Share premium 62.6 62.5
--------------------------------------------------- ----- -----
Other reserves 0.2 0.2
--------------------------------------------------- ----- -----
Translation reserve 12.9 7.6
--------------------------------------------------- ----- -----
Retained earnings 265.4 243.2
--------------------------------------------------- ----- -----
344.0 316.4
--------------------------------------------------- ----- -----
Liabilities
--------------------------------------------------- ----- -----
Non-current liabilities
--------------------------------------------------- ----- -----
Bank loans 0.9 1.3
--------------------------------------------------- ----- -----
Lease payables 26.2 14.9
--------------------------------------------------- ----- -----
Derivative financial instruments - 0.3
--------------------------------------------------- ----- -----
Provisions - 0.1
--------------------------------------------------- ----- -----
Deferred tax liabilities 7.8 15.4
--------------------------------------------------- ----- -----
34.9 32.0
--------------------------------------------------- ----- -----
Current liabilities
--------------------------------------------------- ----- -----
Bank loans and overdrafts 11.6 9.2
--------------------------------------------------- ----- -----
Trade and other payables 171.2 149.5
--------------------------------------------------- ----- -----
Lease payables 5.2 3.5
--------------------------------------------------- ----- -----
Current income tax payables 8.1 4.5
--------------------------------------------------- ----- -----
Derivative financial instruments 1.2 1.1
--------------------------------------------------- ----- -----
Provisions 7.6 7.7
--------------------------------------------------- ----- -----
204.9 175.5
--------------------------------------------------- ----- -----
Total liabilities 239.8 207.5
--------------------------------------------------- ----- -----
Total liabilities and equity 583.8 523.9
--------------------------------------------------- ----- -----
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 31 March 2023
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------------- ------- -------------- ----------- ------------ -------
As at 1 April 2022 2.9 62.5 0.2 7.6 243.2 316.4
------------------ ---------------- ------- -------------- ----------- ------------ -------
Total
comprehensive
income/(expense):
------------------ -----------------------------------------------------------------------------
Profit for the
year - - - - 58.6 58.6
------------------ ---------------- ------- -------------- ----------- ------------ -------
Other
comprehensive
income/(expense):
------------------ -----------------------------------------------------------------------------
- Foreign exchange
translation
differences - - - 5.3 - 5.3
------------------ ---------------- ------- -------------- ----------- ------------ -------
- Remeasurement
loss in respect
of post-
retirement
benefits - - - - (38.6) (38.6)
------------------ ---------------- ------- -------------- ----------- ------------ -------
- Tax credit on
items that will
not be
reclassified to
Consolidated
Statement
of Income - - - - 9.7 9.7
------------------ ---------------- ------- -------------- ----------- ------------ -------
Total
comprehensive
income
attributable to
equity
shareholders of
the
parent - - - 5.3 29.7 35.0
------------------ ---------------- ------- -------------- ----------- ------------ -------
Transactions with
owners recorded
directly in
equity:
------------------ -----------------------------------------------------------------------------
- Credit in
respect of
employee service
costs settled by
award of share
options - - - - 2.4 2.4
------------------ ---------------- ------- -------------- ----------- ------------ -------
- Tax credit in
respect of share
options - - - - 0.7 0.7
------------------ ---------------- ------- -------------- ----------- ------------ -------
- Proceeds from
shares issued - 0.1 - - - 0.1
------------------ ---------------- ------- -------------- ----------- ------------ -------
- Dividends - - - - (10.6) (10.6)
------------------ ---------------- ------- -------------- ----------- ------------ -------
Total transactions
with owners
recorded directly
in equity: - 0.1 - - (7.5) (7.4)
------------------ ---------------- ------- -------------- ----------- ------------ -------
As at 31 March
2023 2.9 62.6 0.2 12.9 265.4 344.0
------------------ ---------------- ------- -------------- ----------- ------------ -------
As at 1 April 2021 2.9 62.4 0.2 6.6 194.1 266.2
-------------------------------------- --- ----- --- ----- ------------- -------
Total comprehensive income/(expense):
-------------------------------------- --- ----- --- ----- ------------- -------
Profit for the year - - - - 38.6 38.6
-------------------------------------- --- ----- --- ----- ------------- -------
Other comprehensive income/(expense):
-------------------------------------- --- ----- --- ----- ------------- -------
- Foreign exchange translation
differences - - - 1.0 - 1.0
-------------------------------------- --- ----- --- ----- ------------- -------
- Remeasurement gain in respect
of post-
retirement benefits - - - - 27.3 27.3
-------------------------------------- --- ----- --- ----- ------------- -------
- Tax charge on items that
will not be reclassified
to Consolidated Statement
of Income - - - - (6.8) (6.8)
-------------------------------------- --- ----- --- ----- ------------- -------
Total comprehensive income
attributable to equity shareholders
of the parent - - - 1.0 59.1 60.1
-------------------------------------- --- ----- --- ----- ------------- -------
Transactions with owners
recorded directly in equity:
-------------------------------------- --- ----- --- ----- ------------- -------
- Credit in respect of employee
service costs settled by
award of share options - - - - 2.1 2.1
-------------------------------------- --- ----- --- ----- ------------- -------
- Tax credit in respect of
share options - - - - 0.2 0.2
-------------------------------------- --- ----- --- ----- ------------- -------
- Proceeds from shares issued - 0.1 - - - 0.1
-------------------------------------- --- ----- --- ----- ------------- -------
- Dividends - - - - (12.3) (12.3)
-------------------------------------- --- ----- --- ----- ------------- -------
Total transactions with
owners recorded directly
in equity: - 0.1 - - (10.0) (9.9)
-------------------------------------- --- ----- --- ----- ------------- -------
As at 31 March 2022 2.9 62.5 0.2 7.6 243.2 316.4
-------------------------------------- --- ----- --- ----- ------------- -------
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.
The Group holds none (2022: 2,370) of its own shares in an
employee benefit trust. The cost of these shares is included within
retained earnings.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 March 2023
2023 2022
GBPm GBPm
------------------------------------------------------ ------ ------
Profit for the year 58.6 38.6
------------------------------------------------------ ------ ------
Adjustments for:
------------------------------------------------------ ------ ------
Income tax expense 14.9 9.0
------------------------------------------------------ ------ ------
Net financial (income)/expense (1.1) 0.7
------------------------------------------------------ ------ ------
Fair value movement on financial derivatives (3.0) 6.4
------------------------------------------------------ ------ ------
Release of provision on disposal (0.4) -
------------------------------------------------------ ------ ------
WITec post-acquisition gross margin adjustment 0.5 1.7
------------------------------------------------------ ------ ------
Acquisition-related costs - 0.4
------------------------------------------------------ ------ ------
Restructuring costs 0.4 -
------------------------------------------------------ ------ ------
Intellectual property litigation costs 0.5 -
------------------------------------------------------ ------ ------
Impairment of capitalised development costs 0.8 -
------------------------------------------------------ ------ ------
Amortisation and impairment of acquired intangibles 9.3 9.5
------------------------------------------------------ ------ ------
Depreciation of right-of-use assets 4.6 3.4
------------------------------------------------------ ------ ------
Depreciation of property, plant and equipment 4.8 4.1
------------------------------------------------------ ------ ------
Amortisation of capitalised development costs 1.4 1.9
------------------------------------------------------ ------ ------
Adjusted earnings before interest, tax, depreciation
and amortisation 91.3 75.7
------------------------------------------------------ ------ ------
Charge in respect of equity settled employee
share schemes 2.4 2.1
------------------------------------------------------ ------ ------
Cash payments to the pension scheme more than the
charge to operating profit (11.7) (7.6)
------------------------------------------------------ ------ ------
Operating cash flows before movements in working
capital 82.0 70.2
------------------------------------------------------ ------ ------
Increase in inventories (15.6) (0.1)
------------------------------------------------------ ------ ------
Increase in receivables (21.5) (21.6)
------------------------------------------------------ ------ ------
Increase in payables and provisions 18.8 11.4
------------------------------------------------------ ------ ------
Increase/(decrease) in customer deposits 9.2 (1.5)
------------------------------------------------------ ------ ------
Cash generated from operations 72.9 58.4
------------------------------------------------------ ------ ------
Interest paid (0.7) (0.5)
------------------------------------------------------ ------ ------
Income taxes paid (5.7) (8.8)
------------------------------------------------------ ------ ------
Net cash from operating activities 66.5 49.1
------------------------------------------------------ ------ ------
Cash flows from investing activities
------------------------------------------------------ ------ ------
Proceeds from sale of property, plant and equipment 0.2 -
------------------------------------------------------ ------ ------
Acquisition of property, plant and equipment (32.3) (13.9)
------------------------------------------------------ ------ ------
Acquisition of intangible assets - (0.1)
------------------------------------------------------ ------ ------
Acquisition of subsidiaries, net of cash acquired (4.8) (30.6)
------------------------------------------------------ ------ ------
Acquisition-related costs - (0.4)
------------------------------------------------------ ------ ------
Capitalised development expenditure (0.6) (0.7)
------------------------------------------------------ ------ ------
Interest received 1.1 0.1
------------------------------------------------------ ------ ------
Net cash used in investing activities (36.4) (45.6)
------------------------------------------------------ ------ ------
Cash flows from financing activities
------------------------------------------------------ ------ ------
Proceeds from issue of share capital 0.1 0.1
------------------------------------------------------ ------ ------
Interest paid on lease payables (0.5) (0.3)
------------------------------------------------------ ------ ------
Repayment of lease payables (5.1) (3.1)
------------------------------------------------------ ------ ------
Repayment of borrowings (0.5) (0.1)
------------------------------------------------------ ------ ------
Dividends paid (10.6) (12.3)
------------------------------------------------------ ------ ------
Net cash used in financing activities (16.6) (15.7)
------------------------------------------------------ ------ ------
Net increase/(decrease) in cash and cash equivalents 13.5 (12.2)
------------------------------------------------------ ------ ------
Cash and cash equivalents at beginning of the year 87.7 97.6
------------------------------------------------------ ------ ------
Effect of exchange rate fluctuations on cash held 0.3 2.3
------------------------------------------------------ ------ ------
Cash and cash equivalents at end of the year 101.5 87.7
------------------------------------------------------ ------ ------
Comprised of:
------------------------------------------------------ ------ ------
Cash and cash equivalents as per the Consolidated
Statement of Financial Position 112.7 96.4
------------------------------------------------------ ------ ------
Bank overdrafts (11.2) (8.7)
------------------------------------------------------ ------ ------
101.5 87.7
------------------------------------------------------ ------ ------
1 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 year from continuing
operations, 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 2. 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 continuing operations
2023 2022
---------------------------------------- --------------------------- --------------------
Operating Profit Operating Profit
Profit before income Profit before
GBPm tax GBPm income
GBPm tax
GBPm
---------------------------------------- --------- ---------------- ----------- -------
Statutory measure 72.4 73.5 48.3 47.6
---------------------------------------- --------- ---------------- ----------- -------
Release of provision on disposal (0.4) (0.4) - -
---------------------------------------- --------- ---------------- ----------- -------
Acquisition-related costs - - 0.4 0.4
---------------------------------------- --------- ---------------- ----------- -------
WITec post-acquisition gross margin
adjustment 0.5 0.5 1.7 1.7
---------------------------------------- --------- ---------------- ----------- -------
Restructuring costs 0.4 0.4 - -
---------------------------------------- --------- ---------------- ----------- -------
Intellectual property litigation
costs 0.5 0.5 - -
---------------------------------------- --------- ---------------- ----------- -------
Impairment of capitalised development
costs 0.8 0.8 - -
---------------------------------------- --------- ---------------- ----------- -------
Amortisation and impairment of acquired
intangibles 9.3 9.3 9.5 9.5
---------------------------------------- --------- ---------------- ----------- -------
Fair value movement on financial
derivatives (3.0) (3.0) 6.4 6.4
---------------------------------------- --------- ---------------- ----------- -------
Unwind of discount in respect of
contingent consideration 0.4 0.3
---------------------------------------- --------------------------- --------------------
Total non-GAAP adjustments 8.1 8.5 18.0 18.3
---------------------------------------- --------- ---------------- ----------- -------
Adjusted measure 80.5 82.0 66.3 65.9
---------------------------------------- --------- ---------------- ----------- -------
Adjusted income tax expense (17.0) (11.7)
---------------------------------------- --------------------------- --------------------
Adjusted profit for the year 80.5 65.0 66.3 54.2
---------------------------------------- --------- ---------------- ----------- -------
Adjusted effective tax rates 20.7% 17.8%
---------------------------------------- --------------------------- --------------------
Release of provision on disposal
These represent the release of the provision on disposal of the
OI Healthcare business in the US in 2020.
Acquisition-related costs
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 fair value, based on selling price less costs to sell.
The adjustments in the current and prior periods relate to the
gross margin which would have been earned on post-acquisition sales
to 31 March 2023, but which has been absorbed into the acquisition
date fair value. This will not recur, as all such inventory at the
acquisition date had been delivered to customers by 31 March
2023.
Restructuring costs
These represent the costs of one-off restructuring charges
within the Materials & Characterisation segment.
Intellectual property litigation costs
These represent one-off legal costs in the Research &
Discovery segment to defend our intellectual property.
Impairment of capitalised development costs
During the year, 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.
Unwind of discount in respect of contingent consideration
Adjusted profit excludes the unwind of the discount in respect
of the contingent consideration on the acquisition
of WITec.
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 after borrowings
2023 2022
GBPm GBPm
----------------------------------------------------- ----- ------
Net increase/(decrease) in cash and cash equivalents 13.5 (12.2)
----------------------------------------------------- ----- ------
Effect of exchange rate fluctuations on cash held 0.3 2.3
----------------------------------------------------- ----- ------
Movement in net cash in the year 13.8 (9.9)
----------------------------------------------------- ----- ------
Covid-19 loan at WiTec acquired - (1.8)
----------------------------------------------------- ----- ------
Repayment of borrowings 0.5 -
----------------------------------------------------- ----- ------
Net cash after borrowings at the start of the year 85.9 97.6
----------------------------------------------------- ----- ------
Net cash after borrowings at the end of the year 100.2 85.9
----------------------------------------------------- ----- ------
Reconciliation of net cash to Statement of Financial
Position
2023 2022
GBPm GBPm
------------------------------------------------- ------ -----
Covid-19 loan at WiTec (1.3) (1.8)
------------------------------------------------- ------ -----
Overdrafts (11.2) (8.7)
------------------------------------------------- ------ -----
Cash and cash equivalents 112.7 96.4
------------------------------------------------- ------ -----
Net cash after borrowings at the end of the year 100.2 85.9
------------------------------------------------- ------ -----
2 Earnings per share
Basic earnings per ordinary share (EPS) is calculated by
dividing the profit attributable to equity shareholders of the
parent
by the weighted average number of ordinary shares in issue
during the year, excluding ordinary shares held by the Employee
Share Ownership Trust, which have been treated as if they had been
cancelled. The weighted average number of shares used in the
calculation is as follows:
2023 2022
Shares Shares
million million
------------------------------------------------------ -------- --------
Weighted average number of shares outstanding 57.7 57.7
------------------------------------------------------ -------- --------
Less: weighted average number of shares held by
Employee Share Ownership Trust - (0.2)
------------------------------------------------------ -------- --------
Weighted average number of shares used in calculation
of basic earnings per share 57.7 57.5
------------------------------------------------------ -------- --------
During the year, all shares were transferred out of the Employee
Share Ownership Trust, and the trust was subsequently closed.
Therefore there are no shares held by the trust at 31 March
2023.
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.
The following table shows the effect of share options on the
calculation of diluted earnings per share:
2023 2022
Shares Shares
million million
--------------------------------------------------- -------- --------
Number of ordinary shares per basic earnings per
share calculations 57.7 57.5
--------------------------------------------------- -------- --------
Effect of shares under option 0.7 0.8
--------------------------------------------------- -------- --------
Number of ordinary shares per diluted earnings per
share calculations 58.4 58.3
--------------------------------------------------- -------- --------
Basic and diluted EPS are based on the profit for the period
attributable to equity shareholders of the parent, as reported in
the condensed consolidated statement of income. Adjusted and
diluted adjusted EPS are based on adjusted profit for the period,
as reported in note 2:
2023 2022
---------------------------------------------- --------------- -----------------------------------
GBPm Pence GBPm Pence
---------------------------------------------- ------ ------- -------------------- -------------
Underlying profit attributable to
equity shareholders of the parent/underlying
EPS 58.6 101.6 38.6 67.1
---------------------------------------------- ------ ------- -----------------------------------
Total underlying adjustments to profit
before tax (Note 2) 8.5 14.7 18.3 31.8
---------------------------------------------- ------ ------- -----------------------------------
Related tax effects (2.1) (3.6) (2.7) (4.6)
---------------------------------------------- ------ ------- -----------------------------------
Adjusted profit attributable to equity
shareholders of the parent/adjusted
EPS 65.0 112.7 54.2 94.3
---------------------------------------------- ------ ------- -----------------------------------
Diluted underlying EPS 100.3 66.2
---------------------------------------------- --------------- -----------------------------------
Diluted adjusted EPS 111.3 93.0
---------------------------------------------- --------------- -----------------------------------
3. Segment information
The Group has nine 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.
The Group's internal management structure and financial
reporting systems have been amended to differentiate the three
aggregated operating segments based on the economic characteristics
discussed above.
Reportable segment results include items directly attributable
to a segment as well as those which can be allocated on a
reasonable 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.
On 31 August 2021, the Group acquired 100% of the issued share
capital of WITec which has been integrated into the Materials &
Characterisation segment.
Depreciation 2023 2022
GBPm GBPm
----------------------------- ----- -----
Materials & Characterisation 5.1 3.8
----------------------------- ----- -----
Research & Discovery 1.7 1.5
----------------------------- ----- -----
Service & Healthcare - 0.7
----------------------------- ----- -----
Unallocated Group items 2.6 1.5
----------------------------- ----- -----
9.4 7.5
----------------------------- ----- -----
Capital expenditure 2023 2022
GBPm GBPm
----------------------------- ----- -----
Materials & Characterisation 28.6 11.4
----------------------------- ----- -----
Research & Discovery 2.7 1.7
----------------------------- ----- -----
Service & Healthcare - 0.1
----------------------------- ----- -----
Unallocated Group items 1.0 0.7
----------------------------- ----- -----
32.3 13.9
----------------------------- ----- -----
Amortisation and impairment 2023 2022
GBPm GBPm
-------------------------------- ----- -------
Materials & Characterisation 5.2 5.0
-------------------------------- ----- -------
Research & Discovery 6.3 6.4
-------------------------------- ----- -------
Service & Healthcare - -
-------------------------------- ----- -------
Unallocated Group items - -
-------------------------------- ----- -------
11.5 11.4
-------------------------------- ----- -------
2023 2022
Capitalised development costs GBPm GBPm
-------------------------------- ----- -----
Materials & Characterisation 0.4 0.7
-------------------------------- ----- -----
Research & Discovery 0.2 -
-------------------------------- ----- -----
Service & Healthcare - -
-------------------------------- ----- -----
Unallocated Group items - -
-------------------------------- ----- -----
0.6 0.7
-------------------------------- ----- -----
2023 2022
Revenue GBPm GBPm
--------------- ----- -----
UK 29.4 20.2
--------------- ----- -----
China 107.4 103.9
--------------- ----- -----
Japan 46.7 39.0
--------------- ----- -----
USA 121.2 79.9
--------------- ----- -----
Germany 32.1 28.1
--------------- ----- -----
Rest of Europe 43.4 40.7
--------------- ----- -----
Rest of Asia 47.1 45.7
--------------- ----- -----
Rest of World 17.4 9.8
--------------- ----- -----
444.7 367.3
--------------- ----- -----
2023 2022
Non-current assets (excluding deferred GBPm GBPm
tax)
----------------------------------------- ----- -----
UK 189.6 182.8
----------------------------------------- ----- -----
Germany 34.8 32.7
----------------------------------------- ----- -----
USA 13.9 14.2
----------------------------------------- ----- -----
Japan 1.9 2.4
----------------------------------------- ----- -----
China 2.9 1.8
----------------------------------------- ----- -----
Rest of Europe 6.5 7.2
----------------------------------------- ----- -----
Rest of Asia 0.2 0.3
----------------------------------------- ----- -----
Rest of World 0.3 0.6
----------------------------------------- ----- -----
250.1 242.0
----------------------------------------- ----- -----
Results
Materials & Characterisation Research Service &
GBPm & Discovery Healthcare Total
2023 GBPm GBPm GBPm
----------------------------- ---------------------------- ------------ ----------- -------
Total segment revenue 234.5 139.4 70.8 444.7
----------------------------- ---------------------------- ------------ ----------- -------
Segment adjusted operating
profit 40.5 18.0 22.0 80.5
----------------------------- ---------------------------- ------------ ----------- -------
Materials & Research Service &
Characterisation & Discovery Healthcare Total
2022 GBPm GBPm GBPm GBPm
------------------------------ ------ ------------ ----------- -------
Total segment revenue 185.5 120.3 61.5 367.3
------------------------------ ------ ------------ ----------- -------
Segment adjusted operating
profit 26.1 21.3 18.9 66.3
------------------------------ ------ ------------ ----------- -------
Revenue in the Materials & Characterisation and Research
& Discovery segments represents the sale of products. Revenue
in the Service & Healthcare segment relates to service income.
No individual customer accounts for more than 10% of total
revenue.
As at 31 March 2023, the Group had unfulfilled performance
obligations under IFRS 15 of GBP319.6m (2022: GBP260.2m). It is
anticipated that GBP303.0m (2022: GBP250.5m) of this balance will
be satisfied within one year. The remainder is anticipated to be
satisfied in the following financial year.
Reconciliation of reportable segment profit
Materials Research Service Unallocated
& & Discovery & Healthcare Group items Total
2023 Characterisation GBPm GBPm GBPm GBPm
GBPm
-------------------------- ----------------- ------------ ------------- ------------ -------
Segment adjusted
operating profit 40.5 18.0 22.0 - 80.5
-------------------------- ----------------- ------------ ------------- ------------ -------
Restructuring costs (0.4) - - - (0.4)
-------------------------- ----------------- ------------ ------------- ------------ -------
Release of provision
on disposal - - 0.4 - 0.4
-------------------------- ----------------- ------------ ------------- ------------ -------
Intellectual property
litigation costs - (0.5) - - (0.5)
-------------------------- ----------------- ------------ ------------- ------------ -------
Impairment of capitalised
development costs (0.8) - - - (0.8)
-------------------------- ----------------- ------------ ------------- ------------ -------
WITec post-acquisition
gross margin adjustment (0.5) - - - (0.5)
-------------------------- ----------------- ------------ ------------- ------------ -------
Amortisation and
impairment of acquired
intangibles (3.1) (6.2) - - (9.3)
-------------------------- ----------------- ------------ ------------- ------------ -------
Fair value movement
on financial derivatives - - - 3.0 3.0
-------------------------- ----------------- ------------ ------------- ------------ -------
Financial income - - - 2.7 2.7
-------------------------- ----------------- ------------ ------------- ------------ -------
Financial expenditure - - - (1.6) (1.6)
-------------------------- ----------------- ------------ ------------- ------------ -------
Profit before income
tax 35.7 11.3 22.4 4.1 73.5
-------------------------- ----------------- ------------ ------------- ------------ -------
Materials Research Service Unallocated
2022 & Characterisation & & Healthcare Group items Total
GBPm Discovery GBPm GBPm GBPm
GBPm
-------------------------- ------------------- ---------- ------------- ------------ -------
Segment adjusted
operating profit 26.1 21.3 18.9 - 66.3
-------------------------- ------------------- ---------- ------------- ------------ -------
Acquisition-related
costs (0.4) - - - (0.4)
-------------------------- ------------------- ---------- ------------- ------------ -------
WITec post-acquisition
gross margin adjustment (1.7) - - - (1.7)
-------------------------- ------------------- ---------- ------------- ------------ -------
Amortisation and
impairment of acquired
intangibles (3.2) (6.3) - - (9.5)
-------------------------- ------------------- ---------- ------------- ------------ -------
Fair value movement
on financial derivatives - - - (6.4) (6.4)
-------------------------- ------------------- ---------- ------------- ------------ -------
Financial income - - - 0.5 0.5
-------------------------- ------------------- ---------- ------------- ------------ -------
Financial expenditure - - - (1.2) (1.2)
-------------------------- ------------------- ---------- ------------- ------------ -------
Profit/(loss) before
income tax 20.8 15.0 18.9 (7.1) 47.6
-------------------------- ------------------- ---------- ------------- ------------ -------
4. Research and development (R&D)
The total research and development spend by the Group is as
follows:
Materials & Research
Characterisation & Discovery Total
2023 GBPm GBPm GBPm
---------------------------------------- ----------------- ------------ -------
R&D expense charged to the Consolidated
Statement of Income 26.5 10.2 36.7
---------------------------------------- ----------------- ------------ -------
Less: depreciation of R&D-related
fixed assets - (0.3) (0.3)
---------------------------------------- ----------------- ------------ -------
Less: amortisation and impairment
of R&D costs previously capitalised
as intangibles (2.1) (0.1) (2.2)
---------------------------------------- ----------------- ------------ -------
Add: amounts capitalised as intangible
assets 0.4 0.2 0.6
---------------------------------------- ----------------- ------------ -------
Total cash spent on R&D during the
year 24.8 10.0 34.8
---------------------------------------- ----------------- ------------ -------
Materials Research
& Characterisation & Discovery Total
2022 GBPm GBPm GBPm
------------------------------------------- ------------------- ------------ -----
R&D expense charged to the Consolidated
Statement of Income 23.0 9.8 32.8
------------------------------------------- ------------------- ------------ -----
Less: depreciation of R&D-related fixed
assets - (0.2) (0.2)
------------------------------------------- ------------------- ------------ -----
Add: amounts capitalised as fixed assets - 0.3 0.3
------------------------------------------- ------------------- ------------ -----
Less: amortisation of R&D costs previously
capitalised as intangibles (1.8) (0.1) (1.9)
------------------------------------------- ------------------- ------------ -----
Add: amounts capitalised as intangible
assets 0.7 - 0.7
------------------------------------------- ------------------- ------------ -----
Total cash spent on R&D during the
year 21.9 9.8 31.7
------------------------------------------- ------------------- ------------ -----
5. Acquisition of WITec
On 31 August 2021, the Group acquired 100% of the issued share
capital of WITec Wissenschaftliche Instrumente und Technologie GmbH
('WITec') on a cash-free, debt-free basis for consideration of
EUR42m (GBP36.0m), of which EUR5m (GBP4.3m) was conditional on
trading performance over a period of 12 months from the
acquisition. The conditions for the deferred consideration were
meeting certain revenue, order and margin thresholds. WITec is a
leading designer and manufacturer of Raman microscopy imaging
solutions, based in Ulm, Germany. The business has been integrated
into the Materials & Characterisation segment.
Contingent consideration of GBP4.8m was paid during January 2023
based on the performance of the WITec business in the year to 31
August 2022. The difference of GBP0.5m between contingent
consideration provided at acquisition and that paid in January 2023
was due to an adjustment to the net assets purchased.
Acquisition-related costs in the prior year of GBP0.4m (2021:
GBP0.4m) were expensed to the Consolidated Statement of Income as
an adjusting item in the administration and shared services cost
line. There were no acquisition-related costs in the current
year.
If the acquisition had occurred on the first day of the prior
year the acquisition would have contributed revenue of GBP14.3m,
adjusted operating profit of GBP2.8m and a statutory loss before
tax of GBP0.3m to the Group's profit for the year ended 31 March
2022.
Income tax expense 2023 2022
GBPm GBPm
-------------------------------------------------------- ----- -----
Recognised in the Consolidated Statement of Income
-------------------------------------------------------- ----- -----
Current tax expense
-------------------------------------------------------- ----- -----
Current year 10.2 9.0
-------------------------------------------------------- ----- -----
Adjustment in respect of prior years 0.3 (1.0)
-------------------------------------------------------- ----- -----
10.5 8.0
-------------------------------------------------------- ----- -----
Deferred tax expense
-------------------------------------------------------- ----- -----
Origination and reversal of temporary differences 5.1 1.2
-------------------------------------------------------- ----- -----
Adjustment in respect of prior years (0.7) (0.2)
-------------------------------------------------------- ----- -----
4.4 1.0
-------------------------------------------------------- ----- -----
Total tax expense 14.9 9.0
-------------------------------------------------------- ----- -----
Reconciliation of effective tax rate
-------------------------------------------------------- ----- -----
Profit before income tax 73.5 47.6
-------------------------------------------------------- ----- -----
Income tax using the weighted average statutory tax
rate of 21% (2022: 21%) 15.4 10.0
-------------------------------------------------------- ----- -----
Effect of:
-------------------------------------------------------- ----- -----
Tax rates other than the weighted average statutory
rate 0.3 0.1
-------------------------------------------------------- ----- -----
Change in rate at which deferred tax recognised 1.0 0.6
-------------------------------------------------------- ----- -----
Non-taxable income and expenses (1.4) (0.3)
-------------------------------------------------------- ----- -----
Tax incentives not recognised in the Consolidated
Statement of Income - (0.2)
-------------------------------------------------------- ----- -----
Adjustment in respect of prior years (0.4) (1.2)
-------------------------------------------------------- ----- -----
Total tax expense 14.9 9.0
-------------------------------------------------------- ----- -----
Taxation (credit)/charge recognised directly in other
comprehensive income
-------------------------------------------------------- ----- -----
Deferred tax - relating to employee benefits (9.7) 6.8
-------------------------------------------------------- ----- -----
Taxation credit recognised directly in equity
-------------------------------------------------------- ----- -----
Deferred tax - relating to share options (0.7) (0.2)
-------------------------------------------------------- ----- -----
On 5 March 2021 it was announced that the rate of UK corporation
tax would be increased to 25% from 1 April 2023. This change was
substantively enacted on 24 May 2021. As such, the UK deferred tax
assets and liabilities have been calculated based on the enacted
rate of 25% as utilisation will occur after that date.
The Group carries tax provisions in relation to uncertain tax
positions arising from the possible outcome of negotiations with
tax authorities. The provisions have been calculated based on the
probable outcome of those negotiations from a range of
possibilities and assume that the tax authorities have full
knowledge of the facts. Such provisions are a reflection of the
geographical spread of the Group's operations and the variety of
jurisdictions in which it carries out its activities.
7 . Dividends per share
The following dividends per share were paid by the Group:
2023 2022
pence pence
--------------------------------- ------ ------
Previous period interim dividend - 4.1
--------------------------------- ------ ------
Previous period final dividend 13.7 12.9
--------------------------------- ------ ------
Current period interim dividend 4.6 4.4
--------------------------------- ------ ------
18.3 21.4
--------------------------------- ------ ------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
2023 2022
pence pence
----------------- ------ ------
Interim dividend 4.6 4.4
----------------- ------ ------
Final dividend 14.9 13.7
----------------- ------ ------
19.5 18.1
----------------- ------ ------
The final dividend for the year to 31 March 2022 of 13.7 pence
per share was approved by shareholders at the Annual General
Meeting on 28 July 2022 and was paid on 23 August 2022. The interim
dividend for the year to 31 March 2023 of 4.6 pence was a pproved
by a sub-committee of the Board on 7 November 2022 and was paid on
13 January 2023.
The proposed final dividend of 14.9 pence per share was not
provided at the year end and is subject to shareholder approval at
the Annual General Meeting on 28 July 2023. It is expected to be
paid on 22 August 2023, to shareholders on the register on the
record date of 14 July 2023, with an ex-dividend date of 13 July
2023 and with the last date of election for the Dividend
Reinvestment Plan (DRIP) being 01 August 2023.
8. Exchange rates
The principal exchange rates to sterling used were:
Year-end rates 2023 2022
--------------- ---- ----
US dollar 1.24 1.32
--------------- ---- ----
Euro 1.14 1.18
--------------- ---- ----
Japanese yen 165 160
--------------- ---- ----
Average translation rates
2023 US Dollar Euro Japanese
Yen
---------- --------- ---- --------
April 1.28 1.19 161
---------- --------- ---- --------
May 1.26 1.18 163
---------- --------- ---- --------
June 1.24 1.17 164
---------- --------- ---- --------
July 1.22 1.18 164
---------- --------- ---- --------
August 1.19 1.18 162
---------- --------- ---- --------
September 1.14 1.15 161
---------- --------- ---- --------
October 1.13 1.15 166
---------- --------- ---- --------
November 1.17 1.16 169
---------- --------- ---- --------
December 1.20 1.14 162
---------- --------- ---- --------
January 1.22 1.13 159
---------- --------- ---- --------
February 1.22 1.14 163
---------- --------- ---- --------
March 1.22 1.14 165
---------- --------- ---- --------
Average translation rates
2022 US Dollar Euro Japanese
Yen
-------------------------- --------- ---- --------
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
-------------------------- --------- ---- --------
October 1.36 1.17 153
-------------------------- --------- ---- --------
November 1.35 1.18 153
-------------------------- --------- ---- --------
December 1.34 1.18 153
-------------------------- --------- ---- --------
January 1.35 1.19 155
-------------------------- --------- ---- --------
February 1.34 1.20 155
-------------------------- --------- ---- --------
March 1.33 1.19 157
-------------------------- --------- ---- --------
9. Annual general meeting
The Annual General Meeting will be held on 28 July 2023.
Detailed arrangements in respect of the AGM will be advised in due
course.
10. Risk Management
Audit, risk and internal control Approach to risk management
Approach to risk management
An ongoing process for identifying, evaluating and managing the
significant risks faced by the Group is embedded in all business
units. Day-to-day management of this process has been delegated by
the Board to the Executive Directors.
Details of the process are set out in the Audit and Risk
Committee Report in the Annual Report and Financial Statements. The
current risk management and internal control systems have been in
place throughout the financial year and up to the date of approval
of the Report and Financial Statements, and are subject to annual
review by the Board. In respect of the year ended 31 March 2023,
the Board considered that these processes remained effective.
Summaries of our risk management framework and process can be
found below and on page [XX], respectively.
The Board has carried out a robust assessment of the principal
risks facing the Group, including those which threaten its business
model, future performance, solvency and liquidity. Details of all
major risks identified, and the mitigating actions adopted, are
reported to and reviewed by the Board and the Audit and Risk
Committee on at least a quarterly basis. The principal risks set
out below provide an overview of the major risks and uncertainties
faced by the Group. All operating businesses follow a standard
process for risk identification and reporting. The process is
further described on below. On a regular basis, each business
reviews and updates its risk register which is then reported to the
Chief Executive. If a material risk changes or arises, this is
reported to the Chief Executive, at which time there is a
discussion on the adequacy of the mitigating actions taken. In
addition, the Board and the Audit and Risk Committee consider risks
to the Group's strategic objectives which arise at a Group level
and develop appropriate actions to manage and mitigate these risks
where possible.
Priorities during financial year ended 31 March 2023
During the year ended 31 March 2023 the principal priority was
the integration of the processes for identifying, evaluating, and
reporting on climate -- related risks and opportunities across the
Group, as set out in the TCFD statement. These processes have been
successfully integrated into the wider enterprise risk management
processes and the detailed assessment of key risks using a
standardised methodology, as performed by the business units across
the Group.
In compliance with the Financial Conduct Authority's Listing
Rule 14.3.27, the climate -- related financial disclosures
consistent with the TCFD Recommendations and Recommended
Disclosures have been included within the TCFD Statement in the
Annual Report and Financial Statements, which also encompasses
further information regarding the Group's exposure to climate --
related risks and opportunities.
Risk governance framework
The key accountabilities and features of our risk governance
framework are set out below:
Operational Management Responsible for risk management and
control within the business and, through the Management Board,
implementing Board policies on risk and control.
Guided by the internal audit and assurance function, completes
detailed risk reviews on a quarterly basis.
Internal audit and assurance function Assesses the adequacy and
effectiveness of the management of significant risk areas and
provides oversight of operational management's front -- line and
assurance activities.
Further information regarding the scope of internal audit and
assurance activities is set out below
Audit and Risk Committee Reviews the internal financial controls
and systems that identify, assess, manage and monitor financial
risks, and other internal control and risk management systems. More
information regarding the work of the Committee can be found in the
Report and Financial Statements
Board Oversees the internal control framework, and determines
the nature and extent of the principal risks the company is willing
to take in order to achieve its long-term strategic objectives.
Ultimately accountable for approving the adequacy and effectiveness
of internal controls operated by the Group.
Internal control
The internal control framework includes central direction,
oversight and risk management of the key activities within the
Group. This framework includes a financial planning process which
comprises a five -- year planning model and a detailed annual
budget which is subject to Board approval. All Group businesses'
results are reported monthly and include variance analysis to
budget and the prior year. Management also prepares monthly
reforecasts.
Control activities include policies and procedures for
appropriate authorisation and approval of transactions, the
application of financial reporting standards and reviews of
significant judgements and financial performance. Financial,
regulatory and operational controls, procedures and risk activities
across the Group are reviewed by the Group's internal audit and
assurance function or are subject to separate review by subject
matter experts where required (eg health and safety and product
compliance).
The internal control framework has been designed to manage,
rather than eliminate, material risks to the achievement of
strategic and business objectives and can provide only reasonable,
and not absolute, assurance against material misstatement or loss.
Due to inherent limitations, internal controls over financial
reporting may not prevent or detect all misstatements. There has
been no material change to the Group's internal control framework
during the period covered by this Report and Financial
Statements.
The key components designed to provide effective internal
control within the Group include:
- a formal schedule of matters reserved to the Board for
decision and specific terms of reference for each of its
Committees; other than these matters, the Board delegates to the
Chief Executive, who in turn reviews the delegation of authorities
throughout the management structure;
- the Group's internal management beneath the Board is led by
the Management Board. Its membership comprises the Executive
Directors, senior managers with Group -- wide functional
responsibilities and the heads of the principal businesses of the
Group's activities. Day -- to -- day responsibility for the
management of the Group is delegated to the Management Board. The
responsibility is based on the identification of separate
businesses for each of the Group's activities, for which there are
clearly defined lines of management responsibilities at all levels
up to and including the Group Board, and the Group's accounting and
reporting functions reflect this organisation;
- whilst financial executives within Group businesses report to
their own operational head, there is also a well -- established and
acknowledged functional reporting relationship through to the Chief
Financial Officer;
- the Board reviews strategic issues and options formally once a
year during the annual strategic planning process and during the
year as appropriate. In addition, the Executive Directors maintain
a five -- year planning model of the Group and its individual
businesses;
- annual budgets are prepared for each of the Group's businesses
which include monthly figures for turnover, profit, capital
expenditure, cash flow and borrowings. The budgets are reviewed
through the Group management structure and result in a Group
financial budget which is considered and approved by the Board;
- the businesses prepare monthly management accounts which
compare the actual operating result with both the budget and prior
year. They also prepare rolling reforecasts for orders, turnover,
operating profit and cash. These are reviewed by the Board at each
of its scheduled meetings;
- the Board approves all acquisition and divestment proposals
and there are established procedures for the planning, approval and
monitoring of capital expenditure;
- for all major investments, the performance of at least the
first 12 months against the original proposal is reviewed by the
Board;
- internal audits are carried out through a system of regular
reviews of the financial and non -- financial internal controls at
each site. This is further explained in the Audit and Risk
Committee Report in the Annual Report and Financial Statements
- the Board receives regular updates on pensions,
sustainability, business ethics, and health and safety, and the
Audit and Risk Committee receives regular updates on treasury, tax,
insurance and litigation;
- authorisation limits are set at appropriate levels throughout
the Group; compliance with these limits is monitored by the Chief
Financial Officer and the Group assurance function;
- there is a detailed and risk -- based delegation of authority
structure in place for sales contracts and managing commercial
risks. Contracts with onerous terms and conditions (such as
unlimited liability contracts) require approval by either the Chief
Executive or Chief Financial Officer;
- the International Trade Committee monitors, considers action
and makes recommendations around the management of key risks
relating to international trade, including sanctions, export
controls and customs; and as regards the UK pension scheme, the
Group nominates half of the Trustee Directors of the Corporate
Trustee to the pension scheme, involves as appropriate its own
independent actuary to review actuarial assumptions, agrees the
investment policy with the Trustee, works with the Trustee on its
investment sub -- committee to deal with day -- to -- day
investment matters, ensures there is an independent actuarial
valuation every three years, and agrees funding levels to provide
adequate funding to meet the benefit payments to the members as
they fall due.
Risk management process
The diagram below summarises our methodical approach to risk
management. The principal risks and uncertainties
detailed below are monitored utilising this risk management
process.
Alignment with strategy
The broad range of potential factors which could impact the
Group are considered and those which have a significant effect on
its ability to deliver its strategy are determined to be principal
risks and uncertainties.
Evaluation of risk
Careful consideration is given to:
i) the specific scenarios in which the risk could manifest;
and
ii) the various potential impacts which the risk could
present.
Mitigation implementation
Suitable management actions or robust control mechanisms are
determined, developed and implemented.
Review risk
An embedded, cyclical process review:
i) determination of principal risks and uncertainties; and
ii) the effectiveness of the implemented mitigation
mechanisms.
Emerging risks
The Board is required to complete a robust assessment of the
company's emerging and principal risks and confirms that it
performed such an evaluation during the financial year.
It is recognised that emerging risks can also be principal
risks. A detailed description of the principal risks and the
activities to mitigate these are set out below.
The identification and evaluation of emerging risks is derived
from the Group's quarterly risk reporting framework. The output
from the business units' detailed risk registers is reviewed by the
Group Head of Risk and Assurance and the Chief Financial Officer
every quarter. Any new risks reported by the business units are
specifically identified and discussed as part of this process.
Further, there is a formal review of emerging risks at the year
end, with commentary provided to the Audit and Risk Committee as
part of its review of the Group risk register and principal risks
and uncertainties. No emerging risks have been identified during
the latest review.
Principal risks and uncertainties
Principal risks are reported and discussed at every meeting of
the Audit and Risk Committee. For Oxford Instruments, principal
risks are generally those that could have a significant adverse
impact on the Group's business model, financial performance,
liquidity or reputation. The Audit and Risk Committee also
considers emerging risks within the risk management framework. A
formal review of emerging risks is conducted around the year end.
For the year ended 31 March 2023, the output of this assessment was
an increase in the level of geopolitical risk and a decrease in the
level of risk relating to Oxford Instruments' legacy defined
benefit pension scheme. . Further information is set out below. As
set out above, no emerging risks were identified.
The principal risks and uncertainties are set out below.
A minor change in the Group's approach to risk management during
the year ended 31 March 2023 was the update of the scoring matrix
for key risks at Group level and amendment to the bandings for the
estimated impact of a risk arising, albeit risks continue to be
categorised in a matrix based on the expected likelihood of the
risk arising and their estimated impact. Business units continue to
perform a detailed assessment of key risks using a standardised
methodology. This now includes climate -- related risks and
opportunities, which were integrated into the wider enterprise risk
management processes during the year ended 31 March 2023. The
output is reported to the Group and is the basis for the
compilation of the quarterly Group risk register by the risk
management function, in collaboration with the Executive Directors.
The resulting Group risk register is reported to the Audit and Risk
Committee every quarter.
Principal risks and uncertainties matrix
To facilitate meaningful comparison of the relative importance
of the principal risks and uncertainties at a Group level, these
have been mapped onto a probability and impact matrix. This matrix
includes arrows which indicate the change in the risk in comparison
to the prior year's assessment. The methodology for mapping the
risks uses the Group's assessment of the residual risk, being the
probability of the risk occurring and the potential impact it may
have, taking account of any mitigating actions and controls that
have been implemented.
The output of this assessment is shown in the Annual Report and
Financial Statements. The most significant risks are located in the
top right quadrant of the chart, while those assessed as being the
least significant are found in the bottom left. The chart shows
that the Group's assessment of geopolitical risk has increased
compared to the prior year, while the risk relating to pensions has
decreased.
The risk management process identified 13 principal risks which
are set out below. The narrative provides a summary of the risk,
explains why it is relevant to the Group and also sets out the
potential consequences should the risk materialise, together with
the mechanisms used for risk mitigation. Risks are managed by the
Board and are not assigned an individual risk owner.
1. Geopolitical
Context: The Group operates in global markets
and is required to comply with relevant regulations including,
but not limited to, sanctions, tariffs and export controls.
Government policy on the export of specific technologies and the
approval of particular end users is subject to foreign policy
objectives which can change over time.
Risk
Changes in the geopolitical landscape or an escalation in global
trade tensions resulting in major obstacles to trade with customers
in key markets. This can arise from sanctions, export licence
refusals, trade tariffs, trade embargoes, or nations seeking to
reduce reliance on imports in strategic technologies through the
development of domestic competition and/or protectionist measures.
We are seeing tighter UK Government export control policy,
particularly in relation to exports to China, resulting in an
increase in export licence refusals. Furthermore, the business is
exposed to changes in both US and German export licence
regulations.
Possible impact
- A contraction in export volumes to key markets and
consequential loss of revenue and reputational damage
- Restrictions on the provision of after sales service, leading
to lower service contract revenues
- Reduced access to key markets may impact research and
development (R&D) investment decisions owing to adverse impacts
on business cases
- Lower net pricing to key markets adversely affecting marginal revenue
- Increases to input costs and lower gross margins
Control mechanisms
- Engagement with UK Government and regulatory authorities
- Contract review and protection against breach of contract
should export licences be withheld
- Long -- term investment planning strategies
Mitigation
- Focus on lower -- risk markets and end users
- Broad global customer base; contractual protection
- Market diversification
Change in the year: no change
2. Supply chain
Context: The Group operates a global supply chain, sourcing from
many suppliers across a wide range of categories. For certain
technologies, there are limited alternative sources.
Risk
- Operational disruption or price increases, due to supply chain
shortages, particularly in electronic components
- Suppliers de-committing orders due to their inability to
supply as a result of internal production issues.
- Change of supplier ownership resulting in loss of supply
- Regulatory changes or economic viability causing suppliers to
discontinue production, impacting the long-term availability of key
components
Possible impact
- Short-term delays or hiatus in our production arising from component shortages
- Poor customer service
- Reputational damage
- Lost revenue
- Downward pressure on margins
- Increased lead times and potential of being unable to fulfil orders
- Increased stock holding adversely impacting cash conversion
Control mechanisms
- Sales and operational planning process
- Group strategic sourcing programme to consolidate demand and manage key supplier risks
- Sourcing of alternative options and/or buffer stocks in
relation to high -- risk suppliers
- Long -- term contracts with key suppliers
Mitigation
- Strategic, selective and diversified supplier base
- Long -- term demand planning
- Buffer stock in extended supply chain
- Relationship management with key suppliers
- Responsive and adaptive engineering change process
Change in the year: no change
3. Routes to market
Context: In some instances, the Group's products are components
of higher-level systems sold by original equipment manufacturers
(OEMs), and thus the Group does not control its route to
market.
Risk
Vertical integration by OEMs
Possible impact
- Loss of key customers/routes to market
- Reduction in sales volumes and/or pricing and lower profitability
Control mechanisms
- Customer intimacy to match product performance to customer needs
- Positioning of the Oxford Instruments brand and marketing directly to end users
Mitigation
- Strategic relationships with OEMs to sell performance of combined systems
- Product differentiation to promote advantages of Oxford
Instruments' equipment and solutions
- Direct marketing to end users
Change in the year: no change
4. New Product Introduction (NPI)
Context: The Group provides high-technology equipment, systems
and services to its customers.
Risk
- Failure of the advanced technologies applied by the Group to
produce commercially viable products
Possible impact
- Loss of market share or negative pricing pressure, resulting
in lower turnover and reduced profitability
- Additional NPI expenditure
- Adverse impact on the Group's brand and reputation
Control mechanism
- 'Voice of the Customer' customer listening approach and market
intimacy to direct product development activities
- Formal NPI processes to prioritise investment and to manage R&D expenditure
- Product life cycle management
Mitigation
- Understanding customer needs/expectations and targeted new
product development programme to maintain and strengthen product
positioning
- Stage gate process in product development to challenge
commercial business case and mitigate technical risks
- Operational practices around sales-production matching and
inventory management to mitigate stock obsolescence risks
Change in the year: n/a
5 Market risk: Recession/inflation
Context: Demand from the Group's customer base may be reduced if
there is a global contraction in investment in R&D and
commercial investment. Further, global inflation may place upward
pressure on key elements of the cost base such as labour and
materials.
Risk
- Lower demand for the Group's products and services
- Rises in key cost drivers such as people costs, energy, components, and raw materials
- For sales of long lead-time items, requirement to make
inflationary estimates when pricing, which may be inaccurate
Possible impact
- Decrease in sales volumes
- Increased cost of production leading to a reduction in
operating profit if not offset by sufficient price increases
- Potential for under-recovery of increases if inflation
estimates are too low, or reduction in order volumes if competitors
do not react similarly
Control mechanism
- Strategic focus on growth markets
- Price reviews
- Inflation protection in commercial response to long lead-time
tenders and long-term agreements
Ability to address inflationary pressures
- through price management reviews
- Reviews of key drivers of financial performance
-
Change in the year: no change
6 Information technology
Context: Elements of production, financial and other systems
rely on IT availability.
Risk
- Cyber -- attack on the Group's IT infrastructure
- Ransomware/spread of viruses or malware
Possible impact
- System failure/data loss and sustained disruption to production operations
- Loss of business -- critical data
- Financial and reputational damage
Control mechanisms
- Suite of IT protection mechanisms including penetration
testing, regular backups, virtual machines, and cyber reviews
- External IT security consultants
- Internal IT governance to maintain protection systems and our incident response
- Employee awareness training
Mitigation
- Managed service with third -- party security specialists providing incident monitoring
- Regular review, monitoring and testing of key security
measures to assess adequacy of protection against known threats
- Upgrade of enterprise resource planning (ERP) and other internal systems
- End user education and phishing simulation exercises
Change in the year: n/a
7 Legal and regulatory compliance
Context: The Group operates in a complex technological and
regulatory environment, particularly in areas such as export
controls and product compliance. Competitors may seek to protect
their position through intellectual property (IP) rights and the
Group may at times experience unintentional regulatory or IP
compliance issues.
Risk
- Infringement of a third party's intellectual property
- Regulatory breach
Possible impact
- Potential loss of future revenue
- Future royalty payments
- Payment of damages
- Fines and non -- financial sanctions such as restrictions on
trade, exclusion from public procurement contracts Reputational
damage
Control mechanisms
- Formal 'Freedom to Operate' assessment to identify potential
IP issues during product development
- Internal control framework including policies, procedures and
training in risk areas such as bribery and corruption, sanctions
and export controls
- Product compliance teams
Mitigation
- Confirmation of 'Freedom to Operate' during new product development stage gate process
- Compliance monitoring programme over key risk areas
Change in the year: n/a
8. Adverse movements in long-term foreign currency rates
Context: A high proportion of the Group's revenue is in foreign
currencies, notably US dollars, while the cost base is
predominantly denominated in sterling.
Risk
- Long -- term strengthening of sterling against key currencies
such as the US dollar, Japanese yen and the euro
Possible impact
- Reduced revenue and profitability
Control mechanisms
- Treasury management of short -- term hedging programme
- Strategic management of currency exposure
Mitigation
- Review of supply chain currency base
- Active review of net exposure in key currencies
Change in the year: n/a
9. Global pandemic/catastrophe causes major disruption
Context: The Group operates in a global market. Supply and
demand can be materially affected in the short-term by major global
events such as pandemics, conflict or natural disaster.
Risk
Potential reduction in customer demand, disruption to supply
chains and Group operations leading to cancelled orders / reduced
order intake, delays in production, and/or installation at customer
sites
Possible impact
- Lower delivery volumes and reduced order book leading to lower
revenue and downward pressure on pricing
- Delays in both manufacturing and service activity leading to
lost or delayed product and service revenue
Control mechanism
- Sales production matching and contract review process
- Horizon strategy to focus on attractive markets for long -- term growth
- Operational reviews
- Strategic review of location of service personnel compared to installed base
Mitigation
- Sales and operational planning processes
- Contractual protection
- Safe ways of working and changes to shift patterns to maximise capacity
- Remote service activities
- Strategic procurement, working with supply chain to mitigate risk
Change in the year: n/a
10. People and capability
Context: Delivering and protecting core capability and knowledge
is a strategic priority for the Group.
Risk
- Challenges in attracting and retaining high -- quality talent in a tight labour market
- Shortage of key capabilities required to meet the Group's strategic priorities
Possible impact
- Salary inflation and/or additional recruitment costs
- Adverse impact on NPI
- Operational disruption
- Lower sales and profitability
Control mechanisms
Strategic focus on the employee experience, including career
development, communications and competitive remuneration. to
differentiate Oxford Instruments
Mitigation
- Talent management and succession processes
- Leadership and technical development programmes
- Hybrid and remote working policies to facilitate location-agnostic appointments
- Visa sponsorship registration for employee mobility
- Comprehensive internal communications
- Regular updates to benefits packages to maintain competitiveness
Change in the year: n/a
11. Business interruption: operational
Context: Business units' production facilities are typically
located at a single site.
Risk
Sustained disruption to production arising from a major incident
at a site
Possible impact
- Inability to fulfil orders in the short term, resulting in a
reduction in sales and profitability
- Additional, non-recurring overhead costs
Control mechanisms
- Contingency plans are in place for all manufacturing sites
- Contractual clauses to limit financial consequences of delayed delivery
Mitigation
- Detailed responses in contingency plans can reduce downtime
arising from incidents and facilitate the restoration or relocation
of production
- Standard sales contracts include clauses for limitation of
liability, liquidated damages and the exclusion of consequential
losses
- Business interruption insurance
12. Climate change
Context: Climate change generates both risks and opportunities.
Our response needs to address risks and optimise opportunities.
More detail on our approach is set out in our Task Force for
Climate-Related Disclosures Report on pages
Risk
- The transition from fossil fuels to a low -- carbon/net zero
economy may require significant changes in materials used and
production methods that may impact our own operations and those of
our suppliers
- Chronic changes in weather and extreme weather events may
disrupt supply chains, operations, and logistics
Possible impact
- Rises in production costs and product development costs to reduce all
- CO2 emissions linked to our products Delayed production and/or
installation leading to delayed revenue
- Reputational damage or loss of investment arising from failure
to anticipate or address climate risk
- More expensive freight and packaging costs
Control mechanisms
- Sustainability Committee
- Climate -- related risks and opportunities evaluation and
reporting embedded in operating businesses
- Strategic sourcing
- Product compliance groups
Mitigation
- Product compliance teams have an established methodology to
deal with changes to environmental regulations
- Investment in product development to capitalise on the
opportunities for our key enabling technologies to help customers
address climate-related challenges
- Investment in CO2 reduction solutions
Change in the year: no change
13. Pensions
Context: The funding requirement for the company's legacy
defined benefit pension scheme varies, based on investment
performance and external factors.
Risk
The actuarial pension deficit is sensitive to movements in
actuarial assumptions and returns on investments. The factors
affecting these assumptions are influenced by wider macro --
economic factors that are largely outside of the Group's
control
Possible impact
- Variations to the current deficit recovery plan
- Increase in the annual levy paid to the Pension Protection Fund
Control mechanisms
- Ongoing review of investment strategy, including active
control of risk, by the trustee's investment sub -- committee
- Liability hedging programme to mitigate exposure to movements
in interest rates and inflation
- Reduced exposure to equity markets
Mitigation
- The Group closed its UK defined benefit pension scheme to future accrual in 2010
- The Group has a funding plan in place to eliminate the actuarial deficit by 2025/26
Change in the year: no change
ENDS
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June 13, 2023 02:00 ET (06:00 GMT)
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