TIDMOXIG
RNS Number : 3008T
Oxford Instruments PLC
14 November 2023
Oxford Instruments plc
Announcement of half-year results for the six months to 30
September 2023
Leading positions in structural growth markets drove revenue,
profit and order book increases
Oxford Instruments plc, a leading provider of high technology
products and systems for industry and research, today (14 November
2023) announces its interim results for the six months to 30
September 2023.
Half year Half year
to to
30 September 30 September % change constant
Adjusted(1) 2023 2022 reported currency(4)
---------------------------------- ------------- ------------- -------- -----------
Revenue GBP209.7m GBP200.5m +4.6% +7.5%
Adjusted operating profit GBP36.5m GBP36.8m (0.8%) +6.5%
Adjusted operating profit margin 17.4% 18.4% (100bps) (20bps)
Adjusted profit before taxation GBP37.5m GBP37.3m +0.5%
Adjusted basic earnings per share 49.4p 50.8p (2.8%)
Normalised cash conversion(2) 41% 65%
Net cash(3) GBP79.1m GBP97.1m
---------------------------------- ------------- ------------- -------- -----------
Half year Half year
to to
30 September 30 September % change
Statutory 2023 2022 reported
--------------------------- ------------ ------------ --------
Revenue GBP209.7m GBP200.5m +4.6%
Operating profit GBP28.6m GBP26.3m +8.7%
Operating profit margin 13.6% 13.1% +50bps
Profit before taxation GBP29.6m GBP26.6m +11.3%
Basic earnings per share 38.6p 35.9p +7.5%
Dividend per share for the
year 4.9p 4.6p +6.5%
---------------------------- ------------ ------------ --------
Financial highlights
-- Revenue growth of 7.5% at constant currency driven by
particularly good growth in Research & Discovery.
-- Constant currency growth in order book of 10% to GBP332m
following positive book-to-bill of 1.07.
-- Orders slightly down (2.3%) at constant currency against
strong comparator period (2022: up 18.7%).
-- Adjusted operating profit of GBP36.5m (2022: GBP36.8m),
growth of 6.5% at constant currency.
-- Constant currency adjusted operating profit margin of 18.2%
was broadly in line with last year (2022: 18.4%), reflecting a
slightly increased gross margin offset by investments in the
period; reported margin at 17.4% after currency headwind.
-- Normalised cash conversion of 41% reflects an adjustment for
capital expenditure on capacity expansion and inventory build-up
ahead of transfer of operations to new facility and is expected to
return to historic rates in the second half.
-- Growth in interim dividend of 6.5% to 4.9p.
Strategic and operational highlights
-- Leading positions in key markets in Healthcare & Life
Science, Semiconductor (with a high proportion to compound
semiconductor) and Advanced Materials driving good book-to-bill and
7.5% constant currency revenue growth.
-- Strong revenue growth in Healthcare & Life Science (+22%
at constant currency) and Advanced Materials (+12%); our robust
performance in Semiconductor & Communications (+2%)
demonstrates our resilience within the cyclical semiconductor
market.
-- Revenue growth primarily driven by Europe and Asia. Strong
constant currency revenue growth of 18% in China, where we have
begun to pivot to a broader customer base, as demonstrated by order
growth of 4% at constant currency.
-- Strong customer demand for our leading product portfolio
which supports Advanced Materials research and our latest optical
microscopy systems and imaging software for the Healthcare &
Life Science market.
-- Strong double-digit growth to academic customers across our
markets, offsetting slower phasing of orders from semiconductor and
quantum commercial customers.
-- Investment in infrastructure to support future growth: new
GBP75m state-of-the-art facility for compound semiconductor systems
in Bristol; beginning GBP15m extension of production capacity in
Belfast to meet growing Life Science demand. Continued investment
(GBP2m in H1) in operational and IT capabilities to drive process
and cost efficiencies.
Summary and outlook
Richard Tyson, Chief Executive Officer of Oxford Instruments
plc, said:
"This is a very robust set of results for Oxford Instruments.
Our focus on specialist niches within structural growth markets has
supported strong revenue and adjusted operating profit growth at
constant currency (7.5% and 6.5% respectively), and our positive
book-to-bill of 1.07 and order book growth of 10% demonstrates
continued strong global demand for our leading products and
services.
"We enter the second half with a strong order book and a good
pipeline, remaining mindful of the current macroeconomic and
political climate. Our operational improvement programme is
expected to support an increase in production, underpinning our
confidence in an improvement in second half trading, with our
normal seasonal second half weighting. Our expectations for the
full year trading performance are unchanged.
"Having joined Oxford Instruments six weeks ago, I have been
busy getting to know the business. I have already spent a
considerable amount of time meeting our people and customers, and
immersing myself in the business. These early meetings have
reinforced my reasons for joining and the key strengths which drive
Oxford Instruments' leading position in the marketplace. These
include differentiated, innovative and value-add technologies,
outstanding colleagues with deep expertise, and leading positions
in structural growth markets.
"Oxford Instruments has made progress over recent years in
becoming more commercial, with increased customer intimacy and
end-market focus. This remains an important strategic focus, with
further opportunity to enhance the Group's customer interface and
new product development.
"I believe there is a substantial opportunity to pair this with
enhanced operational performance and effectiveness to deliver even
better outcomes for customers, together with margin expansion and
attractive, sustainable growth. Our strong financial position also
supports the current elevated levels of organic investment for
future growth and our ability to selectively make acquisitions to
augment that growth.
" The Group is in a strong position with exciting prospects. We
will continue to build on Oxford Instruments' excellent reputation
amongst the world's leading companies and scientific research
communities. I look forward to working with the team to build on
these strong foundations"
Notes
1. Adjusted items exclude the amortisation and impairment of
acquired intangible assets, acquisition items, 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. Normalised 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 in this preliminary announcement has
been prepared in accordance with UK adopted international
accounting standards and IAS 34 interim financial reporting. The
Group has applied all accounting standards and interpretations
issued relevant to its operations and effective for accounting
periods beginning on 1 April 2023. The IFRS accounting policies
have been applied consistently to all periods.
LEI: 213800J364EZD6UCE231
Oxford Instruments management will present its interim results
in a webcast available for on-demand viewing from 08.00 UK today
(Tuesday 14 November 2023) at
www.oxinst.com/investors-content/financial-reports-and-presentations
.
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Richard Tyson, Chief Executive Officer; Gavin Hill, Chief
Financial Officer
Julian Wais, Head of Investor Relations Tel: 07720 999764
Julian.wais@oxinst.com
MHP Group Tel: 020 3128 8100
Tim Rowntree/Katie Hunt/Eleni Menikou/Veronica Farah
oxfordinstruments@mhpgroup.com
Notes to Editors
About Oxford Instruments plc
Oxford Instruments designs, supplies and supports
high-technology products and systems which allow the world's
leading companies and scientific research communities to image,
analyse and manipulate materials down to the atomic and molecular
level. The Group's products and services help its customers to
accelerate R&D, increase manufacturing productivity and make
ground-breaking discoveries across its key market segments:
Semiconductor & Communications, Advanced Materials, Healthcare
& Life Science, Energy & Environment and Quantum
Technology.
Innovation is the driving force behind Oxford Instruments'
growth and success, supporting its core purpose to enable a
greener, healthier, more connected advanced society. Founded in
1959 as the first technology business to be spun out from Oxford
University, Oxford Instruments is now a global company listed on
the FTSE250 index of the London Stock Exchange (OXIG). Its
customer-centric, market-focused strategy creates competitive
advantage through understanding the technical and commercial
challenges in markets with long-term structural growth drivers.
For more information, visit www.oxinst.com
Chief Executive Officer's Review
As I write for the first time as Chief Executive Officer, having
joined Oxford Instruments at the start of October, I am pleased to
report on the Group's robust performance in the half year to 30
September 2023.
The company's strategic focus on structural growth markets,
together with the strength and differentiation of the product
portfolio, has driven growth in revenue and adjusted operating
profit in a challenging macroeconomic landscape and provides a
strong platform for future growth. Demand is strong across each of
our end markets and geographies despite these macro headwinds, with
revenue growth across our three sectors, and a positive
book-to-bill giving good visibility to the year end and beyond.
The Group's adjusted operating margin has remained broadly flat
on a constant currency basis, despite our ongoing elevated levels
of investment in people, infrastructure and operations as we
position the business to capitalise on future demand for our
products and services. There continues to be a range of
opportunities for organic investment in operating infrastructure
and systems that can deliver enhanced future performance for the
Group, our customers, and shareholders.
Value-added products for diversified markets underpinning
resilience
Our leading positions in six structural growth end markets,
combined with the breadth of our offer, global footprint and reach
into both academic and commercial markets, provide Oxford
Instruments with the ability to adapt and grow through varying
economic cycles within markets and geographies. Our differentiated,
value-adding products accelerate our customers' progress across the
technology development and production cycle from fundamental
research to commercial R&D and high-volume production,
providing further resilience to macroeconomic uncertainty.
These strengths are evident in the performance in the half,
where Group revenue growth at constant currency was driven by
particularly strong performances in Healthcare & Life Science
(+22%), Advanced Materials (+12%) and Research & Fundamental
Science (+12%). Semiconductor & Communications performance was
robust (+2%), reflecting its resilient positioning within the
broader, more cyclical market. Energy & Environment was
slightly down (-4%) as was Quantum Technology (-8%), with the
quantum market typically subject to lumpiness due to the value of
systems and phasing of orders.
In the first half we achieved notable growth in revenue from
academic customers across all key segments, reflecting increased
global investment in our markets, as these are closely aligned with
national scientific priorities. This investment aims to drive
progress in a range of areas from life sciences to greener
technologies and advanced materials, as well as enhanced
semiconductor capabilities. This has mitigated a lengthening of
commercial order cycles in some markets, particularly
semiconductor, which has resulted in first half orders slightly
lower than last year. Overall, a positive book-to-bill ratio in the
first half resulted in a 10% increase in our order book.
Robust financial performance
Reported growth Constant currency growth
Half year to vs half year to vs half year to
Group 30 September 2023 30 September 2022 30 September 2022
-------------------------- ------------------- ------------------ ------------------------
Orders GBP224.3m (4.7%) (2.3%)
Revenue GBP209.7m +4.6% +7.5%
Adjusted operating profit GBP36.5m (0.8%) +6.5%
Adjusted operating margin 17.4% (100bps) (20bps)
-------------------------- ------------------- ------------------ ------------------------
Reported revenue for the period was GBP209.7m (2022: GBP200.5m),
representing growth of 7.5% on a constant currency basis.
Strong revenue growth from academic customers resulted in a
shift in the relative proportion of sales between academic and
commercial customers, with a 55%/45% split in favour of academic
customers versus 49%/51% in the comparative period in 2022.
On a constant currency basis growth was primarily driven by
Research & Discovery, up 17.7% to GBP66.6m (H1 2022: GBP58.1m).
Materials & Characterisation revenue grew by 3% to GBP109.3m
(H1 2022: GBP108.7m). Service & Healthcare revenue was up 4.2%
to GBP33.8m (2022: GBP33.7m).
Asia, our largest geographic market, representing 48% of Group
revenue, has performed strongly, with 9% constant currency revenue
growth. This is largely due to 18% constant currency revenue growth
in China, where we are entering new and adjacent markets, and where
the Chinese government is increasing investment in green
technologies, semiconductor and healthcare. We have begun to pivot
towards markets within China which are less impacted by UK export
licence restrictions, generating order growth and a healthy order
book and ongoing pipeline. Revenue growth in Europe and Asia more
than offset a decline in North American revenues due to delays in
the conversion of pipeline opportunities into orders.
Structurally growing and resilient end markets
Our resilience has been further borne out by our positive
performance in the Semiconductor & Communications market (27%
of revenue), where constant currency revenue is up 2% on last year,
reflecting strong growth in compound semiconductor applications
(which represent more than 60% of our activity in the semiconductor
market) and commercial R&D. We are seeing strong revenue growth
across a range of advanced compound semiconductor applications,
including power semiconductors, augmented and virtual reality
applications, as well as strong academic sales into central
facilities and R&D clean rooms as universities invest in the
latest technology to enable them to explore new applications. Our
strengths in the advanced compound semiconductor market more than
offset the widely noted softening in mainstream silicon
semiconductor production markets.
Our biggest growth areas in the half year have been in
Healthcare & Life Science (21% of revenue) and Advanced
Materials (33% of revenue). In Healthcare & Life Science we
have delivered strong direct sales of our microscopy portfolio
(notably our new flagship benchtop microscope BC43, which has made
high quality, affordable imaging capabilities accessible to a range
of new audiences). We have also made significant sales of our key
technologies, including BC43, into original equipment manufacturing
(OEM) partners, and have seen continued demand for our Imaris
imaging software, which has now added a dedicated neuroscience
edition. Revenue for Healthcare & Life Science is up 22% at
constant currency.
In Advanced Materials, growing numbers of customers are using
our technology to understand how materials perform in both academic
and commercial settings. The breadth of techniques we offer enables
customers to characterise and precisely measure the properties and
behaviour of materials and devices.
Customers choose our products to accelerate their progress in
optimising and improving existing materials such as steel and
aluminium, as well as to help them develop the new advanced
materials needed to deliver a sustainable future. This has resulted
in continuing strong demand for our imaging and analytical
products, and 12% revenue growth for this segment.
Energy and Environment (10% of revenue) provides a significant
market opportunity as our products have a key role to play in
delivering a greener future, from helping scientists understand the
impacts of pollution to helping manufacturers to design more
efficient energy storage. Revenue for this sector was behind a
strong comparator period, but demand remains strong, with order
growth of 8.8% at constant currency.
In Quantum Technology (6% of revenue), we are playing an
important role in supporting the transition from fundamental
research to the commercialisation of quantum computing. Key
developments in the half include the installation of our equipment
to support commercial quantum computers in datacentres in Japan and
the UK, with related service contracts to support 24/7 uptime.
Phasing of installations has resulted in lower revenue in the half,
but with a strong pipeline we anticipate a stronger second
half.
Research & Fundamental Science, our smallest segment (4% of
Group revenue), has performed strongly in the half, with 11.7%
constant currency growth versus the corresponding period in
2022.
Adjusted operating profit grew by 6.5% at constant currency.
Despite our significant investment in infrastructure, operations
and people, we have delivered margin broadly in line with the
corresponding period in 2022 at 18.2% (-20bps).
Demand for our products and services remains strong across each
of our end markets and geographies, and a positive book-to-bill of
1.07 in the first half resulted in a closing order book of GBP332m
(constant currency growth of 10%).
Orders were slightly down (2.3%) on a strong comparator period
at constant currency, largely due to lengthening order cycles in
commercial markets and other external factors, including extended
lead times for the third-party electron microscopes for which we
provide key analytical equipment.
Investing for sustainable growth
We continue to invest significantly in infrastructure and
systems, together with reinforcing key teams to support the ongoing
growth of our business. This is in addition to our longstanding
prioritisation of investment in R&D, set out below.
Our focus in this area is on enhancing productivity, continuing
to shorten lead times and boosting capacity, to put us in the best
possible position to support demand and enhance our returns.
Our most significant current infrastructure investments are in
our UK manufacturing hubs, with the creation of a GBP75m
purpose-built compound semiconductor fabrication facility, outside
Bristol, and an additional facility for Andor Belfast (at a cost of
GBP15m), both designed to ensure we can meet the growing global
demand for our products.
The Bristol facility, on track to be fully operational in Q1
2024, will double our production capacity in the growing compound
semiconductor market, with state-of-the-art manufacturing
facilities including increased cleanroom space and advanced
laboratories. The facility has been designed to the 'very good'
environmental specification through BREEAM, the leading
certification system for sustainable buildings, with heat source
pumps and a solar array.
In Belfast, the purchase of a building adjacent to our current
site will unlock substantial growth in production capacity and
facilitate improved production workflows for our scientific
cameras, microscopy and optical spectrometer products to meet
heightened demand. As with the Bristol site, sustainable principles
will drive the choices made for the fit out, which is underway, and
is expected to take 24 months, with completion in autumn 2025.
A further development in the half was the consolidation of two
Tokyo sites to a new, highly sustainable, certified 4-star DBJ
(Development Bank of Japan) green building.
Ongoing investment in systems and operations (GBP2m in this half
year) includes the rollout of our new customer relationship
management platform, which is supporting market intimacy and the
delivery of our nurture, land and expand approach by enhancing our
ability to leverage synergies across sales, marketing and service
teams. Parallel investments in IT and financial systems are
designed to unlock efficiencies and enhance our productivity. We
are also focusing on delivering operational improvements to ensure
our production processes are seamless and efficient, and
strengthening and consolidating our supply chain.
Headcount developments in the half include the recruitment of
additional service engineers and within our customer contact
centres to ensure customers have ready access to in-person support
in regions where we have a geographically disparate installation
base, such as China.
Continuous market-led innovation
Innovation remains central to Oxford Instruments' priorities. In
order to maintain a strong product pipeline and retain our leading
edge in our chosen markets, we make significant investment in our
own research and development. We have invested GBP19.7m in R&D
over the half, representing 9.4% (2022: 8.7%) of revenue.
New product launches have included a new materials analysis
instrument with the ability to collect and analyse data in a matter
of minutes which would previously take hours; a compact dilution
refrigerator with a price point and small footprint which make it
accessible to a wide range of laboratories, and an extension to our
compound semiconductor atomic layer deposition range for advanced
quantum, photonics and electronics applications.
Each new product has its own drivers, but all have been
developed based on our intimate understanding of our markets and
built to address the challenges faced by our customers.
A talented and engaged team
Having joined Oxford Instruments six weeks ago, I have been busy
getting to know the business. I have already spent a considerable
amount of time meeting our people and customers. These meetings
have reinforced my reasons for joining and the key strengths which
drive Oxford Instruments' leading position in the marketplace.
These include differentiated, innovative and value-add
technologies, outstanding colleagues with deep expertise, and
leading positions in structural growth markets.
I have been extremely impressed by the talent, passion and
commitment demonstrated by my new colleagues, and I am grateful for
the warm welcome they have given me. Oxford Instruments' people are
highly motivated and very able, and I am very confident in our
ability to drive the business forward together. I am delighted to
record that our recent annual engagement survey, completed in
September, recorded a positive engagement score of 78%, and that
well over three quarters of employees shared their views, which we
are now taking on board.
This year has seen the expansion of our network of employee
impact groups, to include a focus on neurodiversity. We are also
making positive progress on our push to increase the number of
women in leadership roles and, on a related note, have now met the
recommendations of the FTSE Women Leaders review, with women now
holding three of the seven positions on our Board.
I look forward to continuing to build on the excellent progress
made to date. Driving a positive company culture, in which engaged
employees understand how they contribute to our strategy and
purpose, and feel able to deliver their best, is one of my central
priorities. I am delighted to have such strong foundations from
which to build.
Dividend
As a result of the Group's robust trading performance, the Board
is declaring an interim dividend of 4.9p per share, up 6.5% (2022:
4.6p per share).
Outlook
We enter the second half with a strong order book and a robust
pipeline, remaining mindful of the current macro environment. Our
operational improvement programme is expected to support an
increase in production, supporting our confidence in an improvement
in second half trading, with our normal seasonal second half
weighting. Our expectations for the full year trading performance
are unchanged.
Having joined Oxford Instruments six weeks ago, I have been busy
getting to know the business. I have already spent a considerable
amount of time meeting our people and customers.
Oxford Instruments has made significant progress over recent
years in becoming more commercial, with increased customer intimacy
and end-market focus. This remains an important strategic focus. I
believe there is a substantial opportunity to pair this with
enhanced operational effectiveness to deliver even better outcomes
for customers, together with margin expansion and attractive,
sustainable growth for shareholders. Our strong financial position
also supports continued investment for organic growth and to make
selective acquisitions to augment that growth.
I believe the Group is in a strong position with exciting
prospects. We will continue to build on Oxford Instruments'
excellent reputation amongst the world's leading companies and
scientific research communities. I look forward to working with the
team to build on these strong foundations.
Richard Tyson
Chief Executive Officer
13 November 2023
Operations review
Materials & Characterisation
The Materials & Characterisation sector has a broad customer
base across a wide range of applications for:
-- 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 manufacture 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
Half year
Half year to % constant
to 30 September 30 September % reported currency(1)
2023 2022 growth growth
------------------------------ ----------------- -------------- ----------- -------------
Orders GBP117.0m GBP135.4m (13.6%) (11.4%)
Revenue GBP109.3m GBP108.7m +0.6% +3.1%
Adjusted(2) operating profit GBP17.4m GBP18.9m (7.9%) +0.5%
Adjusted(2) operating margin 15.9% 17.4%
Statutory operating profit GBP15.9m GBP17.2m
Statutory operating margin 14.5% 15.8%
1. For definition refer to note on page 2.
2. Details of adjusting items can be found in Note 2 to the half- year financial statements.
Operational, strategic and regional progress
The Materials & Characterisation sector has performed
robustly in the half year to September, with revenue and order book
growth demonstrating our resilience in a challenging macroeconomic
backdrop. Revenue grew by 3% at constant currency, with strong
growth in Advanced Materials markets, and with Semiconductor &
Communications broadly in line with last year. Together these
customer segments account for more than three quarters of the
sector's revenue.
Regionally, Asia has performed particularly strongly, with
double digit revenue growth at constant currency, including 23%
growth in China, where the easing of Covid restrictions and a
reduction of supply chain shortages have further contributed to our
growth. Revenue in Europe is broadly in line with last year, while
in North America, phasing held back first half revenue.
Orders for the sector remain ahead of revenue, with a
book-to-bill of 1.07 including strong double-digit growth to
academic customers across all our markets. We have seen a
lengthening in the purchasing cycle from commercial customers,
leading to a softening in industrial orders in Semiconductor and
Advanced Materials despite a healthy pipeline. Long lead times for
electron microscopes, which are manufactured by third parties, have
also impacted the phasing of orders for our electron microscope
analytical solutions which are bought as accessories for these
devices. This resulted in orders for the sector being 11.4% behind
a strong comparator period at constant currency (2022:
GBP135.4m).
Adjusted operating profit was GBP17.4m (2022: GBP18.9m) after
the investment in our new Bristol facility, and significant
investment to support increased productivity. This, together with a
currency headwind, was reflected in the margin of 15.9% (2022:
17.4%), which was 50bps lower at constant currency.
The growth of revenue from academic customers reflects increased
government spending into our markets, as institutes and
universities seek to advance progress on greener technologies and
advanced materials R&D, as well as increased semiconductor
capabilities.
Key strategic developments in the half include continued
expansion of our compound semiconductor solutions to commercial
customers and some notable wins to new tier 1 key accounts. The
ongoing fit out of our new purpose-built compound semiconductor
facility outside Bristol, UK, is proceeding as expected. The site
comprises a state-of-the-art manufacturing area, with increased
clean-room space and advanced laboratories, and will enable a
significant ramping up in the development of leading-edge
technologies. We have moved a first cohort of office-based staff to
the new building, and production trials are now taking place. We
anticipate completing the full transition to the new facility in Q1
2024, which will double production capacity.
We continue to derive significant benefit from the successful
integration of our WITec Raman microscopy business (acquired in
August 2021), and from increased collaboration across our materials
analysis portfolio, expanding customer and regional reach and
deepening our market intimacy. Together, these positive
developments are driving double digit order and revenue growth for
WITec, and supporting the wider Materials & Characterisation
sector.
Semiconductor & Communications (41% of revenue)
Semiconductor & Communications applications continue to
represent the largest proportion of revenue in the Materials &
Characterisation sector. This is due to our broad reach across both
the rapidly growing compound semiconductor market and the
mainstream silicon chip market and consumer electronics markets,
and our ability to support customers at every stage from early
academic research and development to high volume commercial
production.
Revenue from compound semiconductor applications and applied
R&D in the silicon market has been strong in the first half,
more than offsetting the ongoing softness in silicon chip markets
we indicated at full year 2022/23. This resulted in a slight
increase in revenue on the prior year overall. The breadth of our
offering across the compound and silicon markets, and through the
R&D, production and quality control cycle, provides us with
additional resilience in the cyclical semiconductor market.
Our Plasma Technology compound semiconductor business, which
accounts for over 60% of the Group's semiconductor revenue,
develops and supplies the equipment and processes used to make the
semiconductor wafers and devices which support today's high
technology applications, and the development of next generation
technology. These applications include power devices, 5G
connectivity, truly wireless charging, augmented reality and the
energy-efficient chips used in data centres, which are vital to
support the rapid growth in communications and projected increases
by data-hungry AI applications.
Our role ranges from early-stage academic R&D to volume
manufacturing, yield and quality control, enabling the production
of high quality, high yield wafers. A particular area of strength,
and source of pricing power, is our ability to improve outcomes for
the layers within structures and devices which have the biggest
impact on performance and yield.
Elsewhere in the sector, customers across academia and industry
continue to choose our analysis tools to image and analyse the
properties and performance of both silicon and compound devices at
the atomic scale, supporting R&D, quality control and defect
analysis. This accounts for the remaining proportion of our
semiconductor revenue. Here, demand has been softer into metrology
and defect review, but remains strong in applied R&D, further
demonstrating the resilience provided by the breadth of our
offering.
We continue to expect sustained demand, with a strong pipeline
for commercial customers, and with orders from academic customers
growing, as higher levels of government funding enable investment
in central clean room facilities and the latest analytical
equipment.
Advanced Materials (36% of revenue)
We are capitalising on the widespread appetite to understand and
improve the properties of materials across a multitude of markets,
to develop new materials to address the challenges of today and
tomorrow through our advanced materials analysis tools. Our ability
to image and analyse down to the nanoscale enables manufacturers to
control the quality of today's advanced materials, and scientists
to gain unparalleled insights into the materials they study, from
long-standing but ever-evolving materials such as steel and
concrete to newer materials such as graphene.
Our revenue growth of 10% at constant currency, reflects the
breadth of use for our leading product ranges. Growth in the half
has come primarily from academic customers, as university research
departments invest in the latest high-end analytical equipment for
their service labs and core facilities to study the properties of
new and existing materials. The ease of use and range of
capabilities of our equipment and software lend themselves
particularly well to these settings.
Sustainability drivers remain strong in this segment, with an
increase in research and development into structural materials such
as steel and concrete, which together account for some 15% of
global carbon emissions. Customer are using our equipment to
develop and deploy greener alternatives, such as lighter, stronger
and lower carbon steels, superalloys and concrete, without
compromising performance.
We have seen strong revenue growth related to so-called
two-dimensional (2D) materials, such as graphene, which can be just
one atom deep. Many times stronger than steel, electrically
conductive and incredibly lightweight and flexible, graphene has
the potential to be deployed in a multitude of areas from drug
delivery and implants to next generation electronics, composites
and energy storage. Other 2D materials are also being explored for
their abilities as insulators and transistors.
Our products also play a crucial role in understanding the
properties of polymers, used in a multitude of products from tyres
to fabrics and medical implants. Our analytical tools - in
particular our atomic force microscopes - help scientists in
commercial and academic settings to measure and tune the
fundamental properties of strength, viscosity, adhesion and
hardness to optimise performance for specific applications.
Energy & Environment (15% of revenue)
Our ability to help customers understand the impacts of
pollution and climate change and to develop effective solutions for
a greener future is a key driver of growth. Customers use our
analytical tools to support their work in a range of areas, from
renewable energy generation and storage to pollution prevention, as
well as the sourcing of the minerals needed across a range of
applications.
As an example, our tailored support at every stage of the
battery life cycle from raw materials and R&D to quality
control and failure analysis is a key contributor to revenue in
this sector. With a broad range of techniques across our imaging
and analysis portfolio we accelerate customers' understanding of
the fundamental chemistry and mechanisms affecting battery
capacity, charging rate and lifetime, as well as supporting quality
control and defect review.
We are also seeing strong demand in environmental applications
for our analysis tools and software, as customers seek to
understand and address airborne causes of pollution, and pollutants
of water such as microplastics, fats, oils and greases.
Revenue for the segment was down 2% at constant currency.
Healthcare & Life Science ( 5% revenue), Research and
Fundamental Science (2% revenue) and Quantum Technology (1% of
revenue)
While these segments contribute a relatively small percentage of
overall revenue, the Materials & Characterisation sector is
active in all three , and benefits from synergies with the Research
& Discovery sector. We continue to drive order and revenue
growth into Life Science applications as we build our market
intimacy and increasingly tailor our solutions to address this
market. Our portfolio of atomic force microscopes and Raman imaging
systems can provide unique insights into real time biological
functions, the health of cells and tissue as well as the efficacy
of new medicines.
We have seen double digit revenue growth In Research &
Fundamental Science as universities deploy our equipment to
accelerate their research.
In Quantum Technology, customers are using our compound
semiconductor processing systems to manufacture and characterise
the quantum chips (known as qubits) which are the units which store
information in quantum computers. Our analytical tools are also
deployed to optimise the performance of these 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 play a key role across
a range of fields, from accelerating developments in medicine and
material science to facilitating the growing commercialisation of
quantum technology.
Key highlights
Half year
Half year to % constant
to 30 September 30 September % reported currency(1)
2023 2022 growth growth
------------------------------ ----------------- -------------- ----------- -------------
Orders GBP67.8m GBP62.8m +8.0% +10.0%
Revenue GBP66.6m GBP58.1m +14.6% +17.7%
Adjusted(2) operating profit GBP9.6m GBP7.0m +37.1% +44.3%
Adjusted(2) operating margin 14.4% 12.0%
Statutory operating profit GBP5.6m GBP3.9m
Statutory operating margin 8.4% 6.7%
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.
Operational, strategic and regional progress
The Research & Discovery segment delivered an excellent
performance in the half, with strong constant currency growth in
orders (up 10%), revenue (up 17.7%), adjusted operating profit (up
44.3%) and margin (up 240bps). Growth has primarily been driven by
strong sales and demand for our optical microscopy, scientific
camera, and optical spectroscopy products. The Healthcare &
Life Science sector has seen particularly strong growth, with
revenue up 27% due to strong sales of our microscopy portfolio, as
well as sales of our key technologies into original equipment
manufacturing (OEM) partners, driving reach into wider life science
markets. We have also seen strong double digit revenue growth into
Advanced Materials applications as customers use our analytical and
imaging equipment to investigate the properties of a wide range of
materials.
Orders and revenue have grown at constant currency across all
key regions and territories, including China. Our focus on
attractive markets and the success of recently launched products
have supported strong constant currency revenue growth in Europe
(35%), the US (14%) and Japan (75%). Within China our focus has
been on growing our revenue in Healthcare, Advanced Materials and
Energy & Environment applications. This, together with the end
of Covid-related lockdowns, has supported our strong performance.
Within China, our pivoted focus into Healthcare & Life Science
and Advanced Material applications has more than offset the
previously reported, ongoing headwinds of export licence
restrictions, particularly for Quantum and Astronomy markets.
Adjusted constant currency operating profit and margin have
grown by 44% and 280bps respectively. Growth has been driven by
increased demand for our leading products, partially offset by
increased investment in operational capacity in our Belfast
facility.
In common with Materials & Characterisation, we have seen
strong growth to academic customers across the segment, as
governments and universities invest in our systems to equip central
imaging facilities. However, OEM orders and significant investments
by commercial customers for our optical microscopy and X-ray
products have also seen strong single digit growth to industrial
accounts.
As revenue is only recognised for our large cryogenics and
high-field magnet systems once they have been installed, we expect
a stronger performance in the second half of the year than the
first, given our strong pipeline and several key anticipated orders
to Tier 1 commercial customers.
Continued strong operational performance across our X-Ray tube
business has driven strong order, revenue and profit growth in the
half. The performance is supported by increasing end market demand
across a range of end applications and with the market-leading
performance, quality, and operational lifetime of our X-ray
sources, cementing a strong performance for the half and ongoing
positive momentum.
We are making significant investment in people and processes,
boosting production capacity and operational effectiveness across
the sector, to support the growing demand for our products and
services. In particular, as demand grows for our optical
microscopes and scientific cameras, we are investing GBP15m in the
purchase and fit out of an additional building, adjacent to our
existing Andor Belfast site, to boost our operational capacity. The
site expansion will significantly enhance our production and
R&D capacity, allowing us to meet demand from our growing
customer base once operational in autumn 2025. Further developments
in the half include the launch of our compact, fast turnaround
ProteoxS dilution refrigerator for physics applications including
Quantum. The unit has a smaller footprint and lower cost than other
refrigerators in the market, while offering reliable low
temperatures, making it accessible to a wider range of research
laboratories and budgets.
We are pleased to note that all three Nobel Prize winners for
science in 2023 (Medicine, Chemistry and Physics) used our
equipment in their groundbreaking research.
Healthcare & Life Science (44% of revenue)
Our equipment and software play a key role in accelerating
progress towards a healthier society, as academic researchers,
scientists and pharmaceutical companies seek to better understand
fundamental disease mechanisms at a molecular and cellular level in
order to design more effective treatments.
We are seeing continued growth in the Healthcare & Life
Science segment, the largest contributor to revenue in the Research
& Discovery sector. Revenue is up more than 25% in the half
year, with strong sales of our BC43 benchtop microscope and growth
in sales of our dedicated analytical and visualisation Imaris
software solutions. Good order growth and a strong pipeline give
confidence for a continuing strong performance.
Positive momentum has continued for our advanced microscopy
solutions and dedicated analytical software, with the first
integrations of our BC43 benchtop microscope into OEMs' equipment,
which is used to access a broader range of life science
applications. We have launched a new dedicated Neuroscience edition
of our Imaris software with AI-powered neuron visualisation
capabilities, which is enabling the acceleration of research into
dementia and depression, by supporting understanding of brain
structure and functions.
Advanced Materials (28% of revenue)
We have a dedicated focus on building market share for advanced
materials applications across our portfolio of spectrographs,
scientific cameras, X-ray sources and specialised cryogenic and
high magnetic field systems, with the benefit of synergies with
Materials & Characterisation. This has resulted in strong
double-digit order and revenue growth for this segment. Customers
use our equipment to support their understanding of the fundamental
properties of new materials, to enhance the capabilities of
existing materials, and in quality assurance and quality control
applications.
Quantum Technology (16% of revenue)
Revenue in the Quantum Technology segment has grown by 6% in the
half, as we collaborate with universities, quantum computing
start-ups and major tier 1 communication companies. Strong sales
into Europe, Japan and the US have more than offset the expected
revenue reductions from China due to export licence
restrictions.
Oxford Instruments has a key role to play in this rapidly
growing sector, which continues to evolve from the research
laboratory to drive practical applications. Quantum computers are
already used in commercial applications from chemistry to logistics
and finance. The future impact of quantum is expected to be even
more significant, with the potential to help tackle climate change
and transform our ability to develop revolutionary medicines. We
are particularly well placed to benefit from the shift from pure
science to mainstream applications, given our ability to support a
number of areas, including cryogenics, quantum laser applications
and (in our Materials & Characterisation sector) the
fabrication of qubits.
With a strong opportunity pipeline, we anticipate orders
strengthening following a slower start in the first half.
Research & Fundamental Science (7% of revenue)
We have seen strong order and revenue growth into this sector,
particularly in the fields of fluid and plasma dynamics, where
customers are deploying our highly specialised high speed
scientific cameras to capture the evolving dynamics of physical
processes, such as fusion reactions at sub nanosecond intervals. In
astronomy, we are building market share in Europe and North America
through optimised solutions for large sky surveys, including
exoplanet detection and near-earth asteroid detection, and
atmospheric research.
Semiconductor & Communications (3% of revenue) and Energy
& Environment (2% of revenue)
We continue to see good demand for our technologies in these
markets. This is primarily from researchers looking at the
fundamental properties and disruptive use of new materials in these
markets.
Service & Healthcare
The Service & Healthcare sector comprises the Group's
servicing and support offering 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
Half year
Half year to % constant
to 30 September 30 September % reported currency(1)
2023 2022 growth growth
------------------------------ ----------------- -------------- ----------- -------------
Orders GBP39.5m GBP37.1m +6.5% +10.5%
Revenue GBP33.8m GBP33.7m +0.3% +4.2%
Adjusted(2) operating profit GBP9.5m GBP10.9m (12.8%) (7.3%)
Adjusted(2) operating margin 28.1% 32.3%
Statutory operating profit GBP9.5m GBP11.3m
Statutory operating margin 28.1% 33.5%
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.
Operational and strategic progress
The Service & Healthcare sector has made steady progress in
the period. Revenue grew by 4% at constant currency, with 11% order
growth and a 35% year-on-year increase in the order book
demonstrating growing demand for our services products, including
subscriptions. Operating profit and margin were down in the half
due to investment in capabilities and infrastructure to support
further growth, as well as some elevated costs in the period for
liquid helium required to support our MRI customers in Japan.
Specific areas of increased investment include additional service
engineers and customer care centre staff, and costs associated with
our new Group-wide CRM and field management platform, which is
already generating more opportunities and an improved customer
experience.
We have seen strong revenue growth to academic customers in
Service & Healthcare, as increasing numbers of customers take
out point-of-sale service contracts for our benchtop systems, and
as sales of our tailored life science packages for our Imaris
imaging software continue to grow. Sales to academic customers
accounted for 49% of revenue in the half, with the share of
academic sales up six percentage points versus the prior year.
Commercial sales were broadly in line with the prior year.
We continue to deliver double digit order growth for service
related to our own products through the provision of a wider range
of tailored and digital offerings. Our servicing of third-party MRI
imaging equipment in Japan continues to deliver excellent support
to our customer base, with growth in both orders and revenue.
Regionally, constant currency revenue was slightly up across all
three key markets (North America, Asia and Europe), with growth
strongest in Asia, up 5 %. We have seen significant growth in
orders in Europe and Asia, largely driven by growth in Japan and
China.
Our service and support strategy 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 service approach, both in region and digitally.
As we increase our portfolio and the scope of our services, our
range of support packages has expanded to meet the needs and
budgets of our customers. This allows customers to maximise their
capabilities, enhance their productivity and receive immediate help
and support when needed throughout the lifetime of our systems. Our
depth of sector knowledge is a key differentiator, with our market
intimacy and deep scientific expertise enabling us to develop
products appropriate to each end application and customer type.
We have continued to invest in extending our regional teams and
spares capacity to provide shorter lead times for in-person support
and training visits, as well as continuing to develop our digital
and remote support offerings. We are focusing on increasing our
customers' productivity by diagnosing and resolving issues in
hours, through our virtual reality and digital toolkit. This
reduces the need for engineer visits, improving efficiency and
reducing our carbon footprint. We continue to design more advanced
capabilities into our products, including increased data analytics
which have unlocked new revenue streams for remote health checks
and system calibration.
We have also continued to focus on the third element of our
strategy, developing standard infrastructure and processes globally
which are implemented by our regional services teams. This includes
cross-training service engineers to service multiple products. The
benefits of this approach include cost efficiencies from
best-practice procedures, deeper local customer intimacy and
improved response times.
In parallel with our investment in people, we are implementing a
project to complete our business systems customer suite, with the
implementation of the new Group-wide CRM for marketing, sales and
service referenced above. The sales element of the CRM, which is
already live, is improving lead follow up, while the full system,
once complete, will support the effective running of our Services
function through standardisation and simplification.
Overall, the Service & Healthcare sector remains on a strong
upward trajectory, with significant ongoing opportunities to
support revenue growth and margin expansion.
Finance review
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 items exclude the amortisation
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. All of
these are included in the statutory figures. Note 2 provides--
further analysis of the adjusting items in reaching adjusted profit
measures. Definitions of the Group's material alternative
performance measures, along with reconciliation to their equivalent
IFRS measure, are included within the finance review.
The Group trades in many 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.
Summary
Reported orders in the period decreased by 4.7% to GBP224.3m
(2022: GBP235.3m), a decrease of 2.3% at constant currency, against
a strong comparator period. At the end of the period, the Group's
order book stood at GBP331.7m (30 September 2022: GBP315.7m). The
order book increased by 5.1% on a reported basis and 10.1% at
constant currency with a book-to-bill in the period of 1.07 times
(2022: 1.17 times).
Revenue increased by 4.6% to GBP209.7m (2022: GBP200.5m).
Revenue, excluding currency effects, increased by 7.5%, with the
movement in average currency exchange rates over the year reducing
reported revenue by GBP5.9m. We would expect the second half of the
financial year to benefit from the normal seasonal bias.
Adjusted operating profit excluding currency effects, increased
by 6.5%. However, due to a currency headwind of GBP2.7m, adjusted
operating profit decreased by 0.8% to GBP36.5m (2022: GBP36.8m).
Excluding currency impacts, the adjusted operating margin decreased
by 20 basis points to 18.2% reflecting a slightly increased gross
margin offset by investment in ERP systems and operational
capability to support future growth and deliver process
efficiencies. Including currency, the adjusted operating margin
decreased by 100 basis points to 17.4% (2022: 18.4%).
Statutory operating profit of GBP28.6m (2022: GBP26.3m)
increased by 8.7%. This includes amortisation of acquired
intangibles of GBP4.6m (2022: GBP4.3m) and a charge of GBP2.4m
(2022: GBP6.1m) relating to the movement in the mark-to-market
valuation of uncrystallised currency hedges for future years. We
also recognised non-recurring costs of GBP0.9m (2022: GBP0.1m).
Adjusted profit before tax grew by 0.5% to GBP37.5m (2022:
GBP37.3m), representing a margin of 17.9% (2022: 18.6%). Statutory
profit before tax grew by 11.3% to GBP29.6m (2022: GBP26.6m). This
represents a margin of 14.1% (2022: 13.3%).
The adjusted effective tax rate increased to 24.0% (2022:
21.4%), following the increase in the UK corporation tax rate in
April 2023. As a result, adjusted basic earnings per share fell by
2.8% to 49.4p (2022: 50.8p). Basic earnings per share were 38.6p
(2022: 35.9p), an increase of 7.5%.
As expected, cash generated from operations was lower at GBP7.4m
(2022: GBP26.6m). This represents negative cash conversion of 21%
(2022: +47%). As we prepare for the move of operations to the new
compound semiconductor facility in Bristol in the third quarter, we
have built inventory to enable us to supply customers, as well as
continuing to incur ongoing capital expenditure related to the new
site. In addition, the previously reported significant increase in
export licence delays and refusals have also led to higher
inventories, as well as a need to refund previously received
customer deposits.
Excluding these items, cash conversion on a normalised basis was
41% (2022: 65%). We expect an improvement in cash conversion in the
second half and anticipate it to be more in line with historic
conversion rates. Net cash after borrowings fell from GBP100.2m as
at 31 March 2023 to GBP79.1m on 30 September 2023.
Our revolving credit facility remains undrawn, leaving
approximately GBP109m of committed facilities. This represents
total headroom of just under GBP190m, including net cash on the
balance sheet.
Income statement
The Group's income statement is summarised below.
Half year Half year
to to
30 September 30 September
2023 2022 Change
GBPm GBPm
------------------------------------------- ------------- ------------- --------
Revenue 209.7 200.5 +4.6%
------------------------------------------- ------------- ------------- --------
Adjusted operating profit 36.5 36.8 (0.8%)
------------------------------------------- ------------- ------------- --------
Amortisation of acquired intangible assets (4.6) (4.3)
Non-recurring items (0.9) (0.1)
Mark-to-market of currency hedges (2.4) (6.1)
------------------------------------------- ------------- ------------- --------
Statutory operating profit 28.6 26.3 +8.7%
------------------------------------------- ------------- ------------- --------
Net finance income 1.0 0.3
------------------------------------------- ------------- ------------- --------
Adjusted profit before taxation 37.5 37.3 +0.5%
Statutory profit before taxation 29.6 26.6 +11.3%
------------------------------------------- ------------- ------------- --------
Adjusted effective tax rate 24.0% 21.4%
Effective tax rate 24.7% 22.2%
Adjusted earnings per share - basic 49.4p 50.8p (2.8%)
Earnings per share - basic 38.6p 35.9p +7.5%
Dividend per share (total) 4.9p 4.6p +6.5%
------------------------------------------- ------------- ------------- --------
1. Net finance costs for 2022 include a non-recurring charge of
GBP0.2m against the unwind of discount on WITec contingent
consideration.
Revenue and orders
Total reported orders fell by 4.7% (-2.3% at constant currency)
to GBP224.3m. In Materials & Characterisation, reported orders
were lower by 13.6% (-11.4% at constant currency). This was against
a comparator period of very strong growth of just under 26% at
constant currency. In the period we saw macroeconomic concerns
leading to a delay in placing orders across industrial markets and
we are in the process of pivoting our pipelines towards customers
who are less susceptible to export licence concerns. In Research
& Discovery, we saw good growth in orders for our optical
imaging and microscopy products, and some large OEM framework
orders for X-Ray Technology. As a result, reported orders grew by
8.0% (+10.0% at constant currency) for the segment. Service &
Healthcare orders increased by 6.5% (+10.5% at constant
currency).
Reported revenue of GBP209.7m (2022: GBP200.5m) increased by
4.6% (+7.5% at constant currency). For Materials &
Characterisation, reported revenue grew by 0.6% (+3.1% at constant
currency) as shipments of our electron microscope analysers fell
marginally against a strong comparator period and we saw a
significant rise in export licence delays for these products, which
has led to the build-up of a large amount of finished goods
awaiting export approval. Despite an increase in UK export licence
rejections to China, we have seen a good increase in shipments of
semiconductor processing systems.
Good demand for our Life Science products, alongside an
improvement in operational execution, has driven reported revenue
growth in Research & Discovery of 14.6% (+17.7% at constant
currency). We have also had good demand from OEMs for our X-Ray
tubes. Revenue growth from the service of our products supported
reported growth of 0.3% (+4.2% 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 1.07 times (2022: 1.17
times).
Geographic revenue growth
Half year Half year Half year Half year
to to to to
30 September 30 September 30 September 30 September Change % growth
2023 2023 2022 2022 at constant
GBPm GBPm % of total GBPm % of total GBPm % growth currency
-------------- ------------- ------------- ------------- ------------- -------- -------- -------------
Europe 48.9 24% 43.4 22% +5.5 12.7% 12.2%
North America 54.6 26% 58.3 29% (3.7) (6.3%) (2.9%)
Asia 101.6 48% 97.2 48% +4.4 4.5% 8.7%
Rest of
World 4.6 2% 1.6 1% +3.0 +188% +188%
-------------- ------------- ------------- ------------- ------------- -------- -------- -------------
209.7 100% 200.5 100% +9.2 4.6% 7.5%
-------------- ------------- ------------- ------------- ------------- -------- -------- -------------
On a geographical basis, revenue grew by 12.7% in Europe (+12.2%
at constant currency), supported by additional deliveries of
semiconductor process systems and optical and microscopy products.
Orders grew by 9.9% at constant currency, supported by good demand
for our semiconductor processing systems and some large OEM orders
for our X-Ray tubes.
Revenue for North America was lower by 6.3% on a reported basis
and down 2.9% at constant currency. We experienced a lengthening of
commercial order cycles. In addition, unfavourable phasing of
academic budgets for our semiconductor processing tools contributed
to a weaker first half for the region. These issues also
contributed to a decline in constant currency orders of 8.1%,
although pipelines remain strong across our end markets.
Asia remains our largest region by revenue, with China
constituting 64% of regional revenue and 31% of total Group
revenue, following strong order intake in the previous financial
year. Asia delivered revenue growth of 4.5% (+8.7% at constant
currency) with strong demand for our atomic force microscopes,
optical and microscopy products, and semiconductor processing
tools. Orders for the region fell by 5.3% at constant currency, due
to a lower number of orders from Japan and Korea, partially offset
by a small amount of growth in China. Orders for China constituted
26% of Group orders in the half year.
The total reported order book grew by 5.1% (10.1% at constant
currency) to GBP331.7m compared to 30 September 2022. The order
book, at constant currency, compared to 30 September 2022,
increased by 6.8% for Materials & Characterisation, with strong
growth across all constituent businesses. Research & Discovery
grew by 5.4% at constant currency, with good demand for our imaging
and microscopy products and X-Ray tubes. The Service &
Healthcare order book grew by 35.1% at constant currency as we
continue to focus on the service of our own products.
Materials Research Service
GBPm & Characterisation & Discovery & Healthcare Total
---------------------------------- ------------------- ------------ ------------- -------
Revenue: HY 2022/23 108.7 58.1 33.7 200.5
Constant currency growth 3.4 10.3 1.4 15.1
---------------------------------- ------------------- ------------ ------------- -------
Revenue at constant currency:
2023/24 112.1 68.4 35.1 215.6
Currency (2.8) (1.8) (1.3) (5.9)
---------------------------------- ------------------- ------------ ------------- -------
Revenue: HY 2023/24 109.3 66.6 33.8 209.7
---------------------------------- ------------------- ------------ ------------- -------
Revenue growth: reported 0.6% 14.5% 0.3% 4.6%
Revenue growth: constant currency 3.1% 17.7% 4.2% 7.5%
---------------------------------- ------------------- ------------ ------------- -------
Gross profit
Gross profit grew by 6.6% to GBP111.0m (2022: GBP104.1m),
representing a gross profit margin of 52.9%, an increase of 100
basis points over last year.
Adjusted operating profit and margin
Adjusted operating profit excluding currency effects, increased
by 6.5%. However, due to a currency headwind of GBP2.7m, reported
adjusted operating profit decreased by 0.8% to GBP36.5m (2022:
GBP36.8m). Excluding currency impacts, the adjusted operating
margin decreased by 20 basis points to 18.2% as we continue to
invest in ERP systems and operational capability to support future
growth and deliver process efficiencies. Including currency
impacts, the adjusted operating margin decreased by 100 basis
points to 17.4% (2022: 18.4%).
Reported Materials & Characterisation adjusted operating
profit decreased by 7.9% (+0.5% at constant currency) with reported
margin falling 150 basis points to 15.9% (2022: 17.4%). Fewer
shipments of our electron microscope analysers against a strong
comparative period were offset by higher revenue from our
semiconductor processing tools.
Within Research & Discovery our imaging and microscopy
business has grown well, supported by good demand, an improvement
in operational execution and an alleviation of prior year supply
chain disruption. Profit growth in our imaging and microscopy
business was partially offset by a slower than expected improvement
in operational output of our standard cryogenic and magnet systems,
due in part to a diversion of resources to completing the last of
the more complex bespoke systems. The segment recorded growth in
reported profit of 37.1% (+44.3% at constant currency) and an
improvement in margin to 14.4%, representing growth of 240 basis
points.
Service & Healthcare reported adjusted operating profit fell
by 12.8% (7.3% at constant currency); primarily due to an increase
in helium and parts prices within our Japan MRI business.
Currency effects for the Group (including the impact of
transactional currency hedging) depressed reported adjusted
operating profit by GBP2.7m, primarily due to a depreciation of the
Japanese Yen against Sterling.
Materials Research Service
GBPm & Characterisation & Discovery & Healthcare Total
----------------------------------- ------------------- ------------ ------------- -------
Adjusted operating profit: 2022/23 18.9 7.0 10.9 36.8
Constant currency growth 0.1 3.1 (0.8) 2.4
----------------------------------- ------------------- ------------ ------------- -------
Adjusted operating profit at
constant currency: 2023/24 19.0 10.1 10.1 39.2
Currency (1.6) (0.5) (0.6) (2.7)
Adjusted operating profit: 2023/24 17.4 9.6 9.5 36.5
----------------------------------- ------------------- ------------ ------------- -------
Adjusted operating margin (1)
: 2022/23 17.4% 12.0% 32.3% 18.4%
Adjusted operating margin (1)
: 2023/24 15.9% 14.4% 28.1% 17.4%
Adjusted operating margin (1)
(constant currency): 2023/24 16.9% 14.8% 28.8% 18.2%
----------------------------------- ------------------- ------------ ------------- -------
1. Adjusted operating margin is calculated as adjusted operating
profit divided by revenue. Adjusted operating 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 8.7% to GBP28.6m (2022:
GBP26.3m), representing an operating profit margin of 13.6%. Growth
in statutory operating profit is supported by a lower
mark-to-market charge on financial derivatives.
Adjusting items
Amortisation of acquired intangibles of GBP4.6m (2022: GBP4.3m)
relates to intangible assets recognised on acquisitions, being the
value of technology, customer relationships and brands.
Non-recurring items within operating profit were GBP0.9m in the
period.
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's 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 twelve months
and, subject to pricing, up to 20% of exposures for the next six
months. The Group has decided that the additional costs of meeting
the extensive documentation requirements of IFRS 9 to apply hedge
accounting to these foreign exchange hedges cannot be justified.
Accordingly, the Group does not use hedge accounting for these
derivatives.
Net movements on mark-to-market derivatives in respect of
transactional currency exposures of the Group in future periods are
disclosed in the income statement as foreign exchange and excluded
from our calculation of adjusted profit before tax. In the half
year this amounted to a charge of GBP2.4m (2022: GBP6.1m charge).
The small increase in the net asset for derivative financial
instruments from 31 March 2023 reflects: (i) the crystallisation of
forward contracts that were hedging the first half of this
financial year, which are recognised in adjusted operating profit,
and; (ii) an uncrystallised movement in the mark-to-market
valuation of forward contracts at the balance sheet date on forward
contracts that will mature over the next 18 months.
Net finance costs
The Group's recorded net interest income was higher at GBP1.0m
(2022: GBP0.5m), due to an increase in interest rates earned on our
cash balances.
Adjusted profit before tax and margin
Adjusted profit before tax increased by 0.5% to GBP37.5m (2022:
GBP37.3m). The adjusted profit before tax margin of 17.9% (2022:
18.6%) was lower than last year largely due to currency
effects.
Half year Half year
to to
30 September 30 September
2023 2022
Reconciliation of statutory profit before tax GBPm GBPm
to adjusted profit before tax
---------------------------------------------- ------------- -------------
Statutory profit before tax 29.6 26.6
Add back:
Amortisation of acquired intangible assets 4.6 4.3
Non-recurring items (Note 2) 0.9 0.3
Mark-to-market of currency hedges 2.4 6.1
---------------------------------------------- ------------- -------------
Adjusted profit before tax 37.5 37.3
---------------------------------------------- ------------- -------------
Statutory profit before tax and margin
Statutory profit before tax increased by 11.3% to GBP29.6m
(2022: GBP26.6m). The statutory profit before tax margin of 14.1%
(2022: 13.3%) was above last year, principally due to the lower
charge from the mark-to-market valuation movement on financial
derivatives.
Taxation
The adjusted tax charge of GBP9.0m (2022: GBP8.0m) represents an
effective tax rate of 24.0% (2022: 21.4%); the increase being
primarily due to the increase in the UK corporation tax rate from 1
April 2023. The tax charge of GBP7.3m (2022: GBP5.9m) represents an
effective tax rate of 24.7% (2022: 22.2%). The increase is due to
the rise in the UK corporation tax rate and a small increase in
non-deductible costs.
The half-year tax rate has been calculated based on the expected
effective tax rate for the year of 24.2% (having made certain
assumptions about where profits will arise).
Earnings per share
Adjusted basic earnings per share decreased by 2.8% to 49.4p
(2022: 50.8p) primarily due to the higher effective tax rate;
adjusted diluted earnings per share fell by 3.0% to 48.7p (2022:
50.2p). Basic and diluted earnings per share increased by 7.5% to
38.6p (2022: 35.9p) and 38.1p (2022: 35.4p) respectively, with the
mark-to-market movement on financial derivatives offsetting the
rise in the effective tax rate.
The number of basic weighted average shares remained at 57.7m
(2022: 57.7m). Issuance of new shares to satisfy share option
exercises will result in an increase in the number of shares in the
second half of the year.
Currency
The Group faces transactional and translational currency
exposure, most notably against the US Dollar, Euro and Japanese
Yen. For the half year, approximately 17% of Group revenue was
denominated in Sterling, 55% in US Dollars, 19% in Euros, 7% in
Japanese Yen and 2% in other currencies. Translational exposures
arise on the consolidation of overseas company results into
Sterling. Transactional exposures arise where the currency of sale
or purchase transactions differs from the functional currency in
which each company prepares its local accounts.
The Group's foreign currency exposure for the half year is
summarised below.
Adjusted
operating
GBPm (equivalent) Revenue profit
-------------------- --------- ----------
Sterling 36.5 (49.4)
US Dollar 114.3 57.9
Euro 40.7 14.7
Japanese Yen 15.1 12.4
Chinese Renminbi 2.4 0.8
Other 0.7 0.1
-------------------- --------- ----------
209.7 36.5
-------------------- --------- ----------
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 30 September 2023, the Group had currency
hedges in place extending up to 18 months forward.
For the full year 2023/24, our assessment of the currency impact
is, based on hedges currently in place and forecast currency rates,
a headwind of GBP11.8m to revenue, and GBP3.1m to profit. The
currency headwind is in part due to a higher than anticipated
exposure to the Japanese Yen. Forecast currency rates for the year
on unhedged positions are: GBP:USD 1.23; GBP:EUR 1.15; GBP:JPY
185.
Looking further ahead to the financial year 2024/25, based on
the above currency assumptions, we would expect currency effects to
have a small tailwind of GBP2.2m to revenue and a GBP2.8m headwind
to operating profit. Uncertain volume and timing of shipments and
acceptances, currency mix and FX rate volatility, may significantly
affect forecast currency outcomes.
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. The Board remains confident in the long term
performance of the business and has declared an interim dividend of
4.9p per share (2022: 4.6p per share), growth of 6.5%. The interim
dividend will be paid on 12 January 2024 to shareholders on the
register as at 1 December 2023.
Cash flow
The Group's cash flow is summarised below.
Half year Half year
to to
30 September 30 September
2023 2022
GBPm GBPm
----------------------------------------------------- ------------- -------------
Adjusted operating profit 36.5 36.8
Depreciation and amortisation 5.4 5.1
----------------------------------------------------- ------------- -------------
Adjusted (1) EBITDA 41.9 41.9
Working capital movement (31.6) (12.6)
Equity settled share schemes 1.1 1.2
Pension scheme payments above charge to operating
profit (4.0) (3.9)
----------------------------------------------------- ------------- -------------
Cash from operations 7.4 26.6
Interest 1.2 0.1
Tax (7.9) (2.6)
Capitalised development expenditure (0.3) (0.1)
Expenditure on tangible and intangible assets (16.7) (11.5)
Dividends paid - (7.9)
Proceeds from issue of share capital and exercise
of share options 0.1 -
Payments made in respect of lease liabilities (2.6) (1.5)
Decrease in borrowings (0.1) (0.1)
----------------------------------------------------- ------------- -------------
Net (decrease)/increase in cash and cash equivalents (18.9) 3.0
----------------------------------------------------- ------------- -------------
1. Adjusted EBITDA is defined as adjusted operating profit
before depreciation and amortisation of capitalised development
costs. The consolidated statement of cash flows provides further
analysis of the definition of adjusted EBITDA.
Cash from operations
Cash from operations of GBP7.4m (2022: GBP26.6m) represents
negative cash conversion of 21% (2022: +47%). During the first half
we incurred expenditure of GBP12.2m on the new semiconductor
facility in Bristol, including new metrology tools. This amount
also included GBP3.0m relating to the build-up of inventory ahead
of the move of operations in the third quarter. Expenditure of
GBP4.1m was incurred on the purchase and strip-out of a new
facility in Belfast for our optical imaging and microscopy
business, and the fit-out of a new office and customer
demonstration centre in Tokyo. In addition, the business suffered
from exceptional cash outflows of GBP6.3m in relation to export
licence rejections and delays, covering the refund of customer
deposits and a high level of finished goods awaiting export licence
clearance. On a normalised basis, which excludes these items, cash
conversion was 41% (2022: 65%). Cash conversion is defined as cash
from operations before transaction 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.
Half year Half year
to to
30 September 30 September
2023 2022
Reconciliation of cash generated from operations GBPm GBPm
to adjusted operating cash flow
---------------------------------------------------------- ------------- -------------
Cash from operations 7.4 26.6
Add back:
Transaction costs 0.7 -
Pension scheme payments above charge to operating
profit 4.0 3.9
Capitalised development expenditure (0.3) (0.1)
Expenditure on tangible and intangible assets (16.7) (11.5)
Payments made in respect of lease liabilities (2.6) (1.5)
---------------------------------------------------------- ------------- -------------
Adjusted cash from operations (7.5) 17.4
---------------------------------------------------------- ------------- -------------
Cash conversion % (adjusted cash from operations/adjusted
operating profit) (21%) 47%
---------------------------------------------------------- ------------- -------------
Cash conversion % (normalised (1) ) 41% 65%
---------------------------------------------------------- ------------- -------------
1. Cash conversion calculated on a normalised basis excludes
expenditure in the half year of GBP16.3m on capacity expansion and
GBP6.3m relating to export licence refusals and delays.
Inventory levels have increased due to build costs incurred on
long lead time new cryogenic platforms and accelerated raw material
purchases ahead of an ERP implementation. In addition, we have made
some strategic inventory purchases to avoid cost inflation.
Pension
Pension recovery payments above charge to operating profit total
GBP4.0m (2022: GBP3.9m).
Interest
Net interest received was GBP1.2m (2022: GBP0.1m), reflecting an
increase in interest rate on our cash balances.
Tax
Tax paid was GBP7.9m (2022: GBP2.6m); the increase primarily
relating to higher payments on account following the increase in
the UK corporation tax rate.
Investment in Research and Development (R&D)
Total cash spend on R&D in the half year was GBP19.7m,
equivalent to 9.4% of sales (2022: GBP17.5m, 8.7% of sales). A
reconciliation between the adjusted amounts charged to the
consolidated statement of income and the cash spent is given
below:
Half year Half year
to to
30 September 30 September
2023 2022
GBPm GBPm
----------------------------------------------------- ------------- -------------
R&D expense charged to the consolidated statement
of income 19.7 18.2
Depreciation of R&D-related fixed assets - (0.2)
Amounts capitalised as fixed assets - -
Amortisation and impairment of R&D costs capitalised
as intangibles (0.3) (0.6)
Amounts capitalised as intangible assets 0.3 0.1
----------------------------------------------------- ------------- -------------
Total cash spent on R&D during the year 19.7 17.5
----------------------------------------------------- ------------- -------------
Net cash and funding
Net cash
Cash from operations in the half year was offset by an increase
in capital expenditure, resulting in a decrease in the Group's net
cash position from GBP100.2m at 31 March 2023 to GBP79.1m on 30
September 2023.
To date we have incurred costs of GBP38.0m on the new
semiconductor facility, which is expected to be complete by the end
of the fiscal year. We expect further payments of approximately
GBP5.3m in the second half of this year and GBP1.9m in Q1 25 to
complete the project (including move and hook-up costs). We are in
the early stages of a process to sell the current facility, with
completion planned for H1 25. The estimated cost for the expansion
in Belfast is not expected to exceed GBP15m; of which GBP2.1m has
been incurred in H1 24, with the remainder to be phased over the
next 24 months.
Movement in net cash GBPm
------------------------------------------------------ ------
Net cash after borrowings as at 31 March 2023 100.2
------------------------------------------------------ ------
Cash generated from operations 7.4
Interest 1.2
Tax (7.9)
Capitalised development expenditure (0.3)
Capital expenditure on tangible and intangible assets (16.7)
Payments made in respect of lease obligations (2.6)
Dividend paid -
Other items/FX (2.2)
------------------------------------------------------ ------
Net cash after borrowings as at 30 September 2023 79.1
------------------------------------------------------ ------
Half year Half year
to to
30 September 30 September
2023 2022
Net cash including lease liabilities GBPm GBPm
------------------------------------------------ ------------- -------------
Net cash after borrowings 79.1 97.1
Lease liabilities (34.8) (31.4)
------------------------------------------------ ------------- -------------
Net cash and lease liabilities after borrowings 44.3 65.7
------------------------------------------------ ------------- -------------
The increase in lease liabilities reflects the lease signed
during the period for the new office and customer demonstration
centre in Tokyo.
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 (GBP43m) and a US Dollar-denominated multi -- currency
facility of $80.0m (GBP66m).
Debt covenants are net debt to EBITDA less than 3.0 times and
EBITDA to interest greater than 4.0 times. At 30 September 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 30 September 2023 was GBP11.3m (31
March 2023: GBP26.4m). The Scheme's assets are hedged against gilt
yields, whereas the accounting liabilities are valued based on
corporate bond yields. Gilt rates have risen by more than corporate
bond yields, which has resulted in the Scheme's assets falling more
than the accounting liabilities, resulting in a smaller surplus.
The value of scheme assets decreased to GBP218.5m (31 March 2023:
GBP251.5m) and scheme liabilities decreased to GBP207.2m (31 March
2023: GBP225.1m).
The scheme's actuarial valuation review, rather than the
accounting basis, determines our cash payments into the scheme. The
cash contributions into the scheme are expected to continue until
2025/26, at which point we expect, based on current assumptions,
the scheme to achieve self-sufficiency. 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
Officer's review and operations review sections of this half year
report. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the
finance review.
Trading for the Group has been good during the half 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 at least 12 months from the data of the
interim financial statements.
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
13 November 2023
Condensed consolidated statement of income
Half year ended 30 September 2023
Half year to 30 Half year to 30 September
September 2023 2022
--------------------------- -----------------------------
Adjusted Adjusting Total Adjusted Adjusting Total
items(1) items(1)
Note GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Revenue 4 209.7 - 209.7 200.5 - 200.5
Cost of sales (98.7) - (98.7) (96.4) - (96.4)
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Gross profit 111.0 - 111.0 104.1 - 104.1
Research and development 5 (19.7) - (19.7) (18.2) - (18.2)
Selling and marketing (34.2) - (34.2) (29.2) - (29.2)
Administration and
shared services (28.2) (5.5) (33.7) (23.1) (4.4) (27.5)
Foreign exchange gain/(loss) 7.6 (2.4) 5.2 3.2 (6.1) (2.9)
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Operating profit 36.5 (7.9) 28.6 36.8 (10.5) 26.3
Financial income 1.9 - 1.9 0.9 - 0.9
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Financial expenditure (0.9) - (0.9) (0.4) (0.2) (0.6)
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Profit before income
tax 4 37.5 (7.9) 29.6 37.3 (10.7) 26.6
Income tax expense (9.0) 1.7 (7.3) (8.0) 2.1 (5.9)
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Profit for the period
attributable to equity
Shareholders of the
parent 28.5 (6.2) 22.3 29.3 (8.6) 20.7
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Earnings per share pence pence pence pence
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Basic earnings per
share 3
From profit for the
period 49.4 38.6 50.8 35.9
----------------------------- ---- -------- --------- ------ --------- ---------- ------
Diluted earnings per
share 3
From profit for the
period 48.7 38.1 50.2 35.4
----------------------------- ---- -------- --------- ------ --------- ---------- ------
(1) Adjusted numbers are stated to give a better understanding
of the underlying business performance. Details of adjusting items
can be found in Note 2.
Condensed consolidated statement of income (continued)
Half year ended 30 September 2023
Year to 31 March 2023
----------------------------
Adjusted Adjusting Total
items(1)
Note GBPm GBPm GBPm
-------------------------------------- ---- -------- --------- -------
Revenue 4 444.7 - 444.7
Cost of sales (214.5) - (214.5)
-------------------------------------- ---- -------- --------- -------
Gross profit 230.2 - 230.2
Research and development 5 (35.9) (0.8) (36.7)
Selling and marketing (65.4) - (65.4)
Administration and shared services (52.9) (10.3) (63.2)
Foreign exchange gain 4.5 3.0 7.5
-------------------------------------- ---- -------- --------- -------
Operating profit 80.5 (8.1) 72.4
Financial income 2.7 - 2.7
Financial expenditure (1.2) (0.4) (1.6)
-------------------------------------- ---- -------- --------- -------
Profit before income tax 4 82.0 (8.5) 73.5
Income tax expense (17.0) 2.1 (14.9)
-------------------------------------- ---- -------- --------- -------
Profit for the period attributable to
equity Shareholders of the parent 65.0 (6.4) 58.6
-------------------------------------- ---- -------- --------- -------
Earnings per share pence pence
Basic earnings per share 3
From profit for the period 112.7 101.6
-------------------------------------- ---- -------- --------- -------
Diluted earnings per share 3
From profit for the period 111.3 100.3
-------------------------------------- ---- -------- --------- -------
(1) Adjusted numbers are stated to give a better understanding
of the underlying business performance. Details of adjusting items
can be found in Note 2.
Condensed consolidated statement of comprehensive income
Half year ended 30 September 2023
Half year Half year Year
to to to
30 September 30 September 31 March
2023 2022 2023
GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- ---------
Profit for the period 22.3 20.7 58.6
Other comprehensive (expense)/income:
Items that may be reclassified subsequently
to condensed consolidated statement of
income
Foreign exchange translation differences (0.2) 9.1 5.3
Items that will not be reclassified
to condensed consolidated statement of
income
Remeasurement loss in respect of post-retirement
benefits (19.4) (31.8) (38.6)
Tax credit on items that will not be
reclassified to condensed consolidated
statement of income 4.8 7.9 9.7
------------------------------------------------- ------------- ------------- ---------
Total other comprehensive expense (14.8) (14.8) (23.6)
Total comprehensive income for the period
attributable to equity Shareholders of
the parent 7.5 5.9 35.0
------------------------------------------------- ------------- ------------- ---------
Condensed consolidated statement of financial position
As at 30 September 2023
As at As at As at
30 September 30 September 31 March
2023 2022 2023
as restated(1)
Note GBPm GBPm GBPm
---------------------------------- ---- ------------- --------------- ---------
Assets
Non-current assets
Property, plant and equipment 73.1 41.0 59.3
Right-of-use assets 34.5 31.1 31.4
Intangible assets 127.3 138.4 132.1
Long-term receivables 1.2 0.1 0.5
Derivative financial instruments 8 - 0.1 0.4
Retirement benefit asset 11.3 24.5 26.4
Deferred tax assets 12.6 14.1 12.5
---------------------------------------- ------------- --------------- ---------
260.0 249.3 262.6
---------------------------------- ---- ------------- --------------- ---------
Current assets
Inventories 104.1 79.5 81.4
Trade and other receivables 107.2 102.7 113.2
Current income tax receivable 0.8 0.9 0.5
Derivative financial instruments 8 2.3 0.1 1.6
Cash and cash equivalents 101.7 118.9 112.7
---------------------------------------- ------------- --------------- ---------
316.1 302.1 309.4
---------------------------------- ---- ------------- --------------- ---------
Total assets 576.1 551.4 572.0
---------------------------------- ---- ------------- --------------- ---------
Equity
Capital and reserves attributable to the company's
equity shareholders
Share capital 2.9 2.9 2.9
Share premium 62.6 62.5 62.6
Other reserves 0.2 0.2 0.2
Translation reserve 12.7 16.7 12.9
Retained earnings 273.2 233.3 265.4
---------------------------------------- ------------- --------------- ---------
351.6 315.6 344.0
---------------------------------- ---- ------------- --------------- ---------
Liabilities
Non-current liabilities
Bank loans 0.7 1.1 0.9
Lease payables 29.8 27.2 26.2
Derivative financial instruments 8 0.4 1.2 -
Provisions - 0.1 -
Deferred tax liabilities 3.9 7.5 7.8
---------------------------------------- ------------- --------------- ---------
34.8 37.1 34.9
---------------------------------- ---- ------------- --------------- ---------
Current liabilities
Bank loans and overdrafts 21.9 20.7 11.6
Trade and other payables 149.0 152.3 159.4
Lease payables 5.0 4.2 5.2
Current income tax payables 7.2 6.7 8.1
Derivative financial instruments 8 0.9 7.8 1.2
Provisions 5.7 7.0 7.6
---------------------------------------- ------------- --------------- ---------
189.7 198.7 193.1
---------------------------------- ---- ------------- --------------- ---------
Total liabilities 224.5 235.8 228.0
---------------------------------- ---- ------------- --------------- ---------
Total liabilities and equity 576.1 551.4 572.0
---------------------------------------- ------------- --------------- ---------
(1) Details of restatement of prior period numbers can be found
in note 1.
Condensed consolidated statement of changes in equity
Half year ended 30 September 2023
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- --------- ----------- --------- -------
As at 1 April 2023 2.9 62.6 0.2 12.9 265.4 344.0
Total comprehensive (expense)/income:
Profit for the period - - - - 22.3 22.3
Other comprehensive (expense)/income:
- Foreign exchange translation
differences - - - (0.2) - (0.2)
- Remeasurement loss in
respect of post-retirement
benefits - - - - (19.4) (19.4)
- Tax credit on items that
will not be reclassified
to Consolidated Statement
of Income - - - - 4.8 4.8
-------------------------------------- -------- -------- --------- ----------- --------- -------
Total comprehensive(expense)/income
attributable to equity
Shareholders of the parent - - - (0.2) 7.7 7.5
Transactions with owners
recorded directly in equity:
- Credit in respect of
employee service costs
settled by award of share
options - - - - 1.1 1.1
- Tax charge in respect
of share options - - - - (1.0) (1.0)
Total transactions with
owners recorded directly
in equity: - - - - 0.1 0.1
As at 30 September 2023 2.9 62.6 0.2 12.7 273.2 351.6
-------------------------------------- -------- -------- --------- ----------- --------- -------
As at 1 April 2022 2.9 62.5 0.2 7.6 243.2 316.4
Total comprehensive income/(expense):
Profit for the period - - - - 20.7 20.7
Other comprehensive income/(expense):
- Foreign exchange translation
differences - - - 9.1 - 9.1
- Remeasurement loss in
respect of post-retirement
benefits - - - - (31.8) (31.8)
- Tax credit on items that
will not be reclassified
to Consolidated Statement
of Income - - - - 7.9 7.9
-------------------------------------- -------- -------- --------- ----------- --------- -------
Total comprehensive income/(expense)
attributable to equity
Shareholders of the parent - - - 9.1 (3.2) 5.9
Transactions with owners
recorded directly in equity:
- Credit in respect of
employee service costs
settled by award of share
options - - - - 1.2 1.2
- Dividends - - - - (7.9) (7.9)
Total transactions with
owners recorded directly
in equity: - - - - (6.7) (6.7)
As at 30 September 2022 2.9 62.5 0.2 16.7 233.3 315.6
-------------------------------------- -------- -------- --------- ----------- --------- -------
Condensed consolidated statement of changes in equity
(continued)
Half year ended 30 September 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 period - - - - 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
-------------------------------------- -------- ------------- --------- ----------- --------- -------
Other reserves comprise the capital redemption reserve, which
represents the nominal value of shares repurchased and then
cancelled during the year ended 31 March 1999.
The foreign exchange translation reserve comprises all foreign
exchange differences arising since 1 April 2004 from the
translation of the Group's net investments in foreign subsidiaries
into Sterling.
Condensed consolidated statement of cash flows
Half year ended 30 September 2023
Half year Half year Year to
to to 31 March
30 September 30 September 2023
2023 2022
as restated(1)
GBPm GBPm GBPm
--------------------------------------------- ------------- --------------- ---------
Profit for the period 22.3 20.7 58.6
Adjustments for:
Income tax expense 7.3 5.9 14.9
Net financial income (1.0) (0.3) (1.1)
Fair value movement on financial derivatives 2.4 6.1 (3.0)
Release of provision on disposal - (0.4) (0.4)
WITec post-acquisition gross margin
adjustment - 0.5 0.5
Transaction related costs 0.7 - -
Restructuring costs - - 0.4
Intellectual property litigation costs 0.2 - 0.5
Impairment of capitalised development
costs - - 0.8
Amortisation and impairment of acquired
intangibles 4.6 4.3 9.3
Depreciation of right-of-use assets 2.7 1.9 4.6
Depreciation of property, plant and
equipment 2.4 2.6 4.8
Amortisation of capitalised development
costs 0.3 0.6 1.4
Adjusted earnings before interest,
tax, depreciation and amortisation 41.9 41.9 91.3
Charge in respect of equity settled
employee share schemes 1.1 1.2 2.4
Cash payments to the pension scheme
more than the charge to operating profit (4.0) (3.9) (11.7)
--------------------------------------------- ------------- --------------- ---------
Operating cash flows before movements
in working capital 39.0 39.2 82.0
Increase in inventories (22.9) (12.8) (15.6)
Decrease/(increase) in receivables 3.8 (8.3) (19.6)
(Decrease)/increase in payables and
provisions (18.1) (5.3) 16.9
Increase in customer deposits 5.6 13.8 9.2
Cash generated from operations 7.4 26.6 72.9
Interest paid (0.5) - (0.7)
Income taxes paid (7.9) (2.6) (5.7)
--------------------------------------------- ------------- --------------- ---------
Net cash (used by)/from operating activities (1.0) 24.0 66.5
--------------------------------------------- ------------- --------------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 0.1 0.1 0.2
Acquisition of property, plant and equipment (16.5) (11.6) (32.3)
Acquisition of subsidiaries, net of
cash acquired - - (4.8)
Acquisition of intangible assets (0.3) - -
Capitalised development expenditure (0.3) (0.1) (0.6)
Interest received 1.7 0.1 1.1
--------------------------------------------- ------------- --------------- ---------
Net cash used in investing activities (15.3) (11.5) (36.4)
--------------------------------------------- ------------- --------------- ---------
Cash flows from financing activities
Proceeds from issue of share capital 0.1 - 0.1
Interest paid on lease payables (0.4) (0.3) (0.5)
Repayment of lease payables (2.2) (1.2) (5.1)
Repayment of borrowings (0.1) (0.1) (0.5)
Dividends paid - (7.9) (10.6)
--------------------------------------------- ------------- --------------- ---------
Net cash used in financing activities (2.6) (9.5) (16.6)
--------------------------------------------- ------------- --------------- ---------
Net (decrease)/increase in cash and
cash equivalents (18.9) 3.0 13.5
Cash and cash equivalents at the beginning
of the period 101.5 87.7 87.7
Effect of exchange rate fluctuations
on cash held (2.3) 8.0 0.3
--------------------------------------------- ------------- --------------- ---------
Cash and cash equivalents at the end
of the period 80.3 98.7 101.5
--------------------------------------------- ------------- --------------- ---------
Comprised of:
Cash and cash equivalents as per the
consolidated statement of financial
position 101.7 118.9 112.7
Bank overdrafts (21.4) (20.2) (11.2)
--------------------------------------------- ------------- --------------- ---------
80.3 98.7 101.5
(1) Details of restatement of prior period numbers can be found
in note 1.
Notes to the half-year financial statements
Half year ended 30 September 2023
1 Basis of preparation
Reporting entity
Oxford Instruments plc is a company incorporated in England and
Wales. The condensed consolidated half-year financial statements
consolidate the results of the Company and its subsidiaries
(together referred to as the "Group"). They have been prepared and
approved by the Directors in accordance with International
Financial Reporting Standard ("IFRS") IAS 34 Interim Financial
Reporting as adopted by the UK. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the consolidated Financial
Statements of the Group for the year ended 31 March 2023.
The financial information contained herein is unaudited and does
not constitute statutory accounts as defined by Section 435 of the
Companies Act 2006. The comparative figures for the financial year
ended 31 March 2023 are not the Company's statutory accounts for
that financial year. Those accounts have been reported on by the
Company's auditors and delivered to the registrar of companies. The
report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
The Board of Directors approved the Condensed Consolidated
Interim Financial Statements on 13 November 2023.
Significant accounting policies
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of Financial
Statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31
March 2023.
Prior period restatement
As reported in the statutory accounts for the year ended 31
March 2023, a restatement has been made for the presentation of
receivable and payable balances in the prior year.
The Directors concluded that separate value-added tax (VAT)
receivable and payable balances, within the same VAT group, or
within individual registrations, of group entities, held on the
condensed consolidated statement of financial position at 31
September 2022 should have been netted off with one another, rather
than presented gross.
As a result, the condensed consolidated statement of financial
position as at 30 September 2022 and condensed consolidated
statement of cash flows for the period ended 30 September 2022 has
been restated as follows:
30 September 30 September
2022 2022 (restated)
(as reported)
Restatement
GBPm GBPm GBPm
----------------------------------------------- -------------- ------------ ----------------
Condensed consolidated statement of financial
position
----------------------------------------------- -------------- ------------ ----------------
Current assets
----------------------------------------------- -------------- ------------ ----------------
Trade and other receivables 118.2 (15.5) 102.7
----------------------------------------------- -------------- ------------ ----------------
Current liabilities
----------------------------------------------- -------------- ------------ ----------------
Trade and other payables (167.8) 15.5 (152.3)
----------------------------------------------- -------------- ------------ ----------------
Condensed consolidated statement of cash
flows
----------------------------------------------- -------------- ------------ ----------------
Increase in receivables (13.9) 5.6 (8.3)
----------------------------------------------- -------------- ------------ ----------------
Increase/(decrease) in payables and provisions 0.3 (5.6) (5.3)
----------------------------------------------- -------------- ------------ ----------------
The restatement did not result in any change to reported profit,
earnings per share, net assets or net cash from operating
activities reported in the 2022 half-year financial statements.
Changes in accounting standards
IFRS 17 Insurance Contracts provides consistent principles for
all aspects of accounting for insurance contracts within the scope
of the standard. The standard is effective for years beginning on
or after 1 January 2023 with a requirement to restate
comparatives.
The Group has reviewed whether its arrangements meet the
accounting definition of an insurance contract. While some
contracts may transfer an element of insurance risk, they relate to
warranty and service type agreements that are issued in connection
with the Group's sales of its goods or services and therefore will
continue to be measured under IFRS 15 Revenue from Contracts with
Customers and IAS 37 Provisions, Contingent Liabilities and
Contingent Assets.
Parent company financial guarantees, meet the IFRS 17 definition
of insurance contracts. Whilst there could be an impact on
individual sets of financial statements of companies within the
Group these have not impacted the condensed consolidated interim
financial statements for the period to 30 September 2023 and are
not expected to have an impact for the full year. The Directors are
not aware of any other contracts where IFRS 17 would have an impact
on the condensed consolidated interim financial statements.
IAS 12 Income Taxes has been amended to incorporate revisions
for 'deferred tax related to assets and liabilities arising from a
single transaction' and 'international tax reform: pillar two model
rules'. There is no material impact on the Group as a result of the
amendments.
Estimates
The preparation of half-year financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these half-year financial statements, the
significant judgements made by management in applying the Group's
accounting policies and key sources of estimation uncertainty were
the same as those that applied to the consolidated financial
statements as at and for the year ended 31 March 2023.
Going concern
The Directors have considered the adoption of the going concern
basis of preparation for these half-year financial statements. The
Directors have reviewed cash flow forecasts prepared for a period
of 18 months from the date of approval of these condensed
accounts.
At the end of the reporting period the Group had GBP188.0m of
available liquidity including GBP79.1m of net cash and GBP108.9m of
the undrawn revolving credit facility ('RCF'). In reviewing the
cash flow forecasts the Directors considered the current trading
position of the Group and the likely capital expenditure and
working capital requirements. Trading for the Group has been good
during the first half year, though because of significant capital
expenditure and exceptional export licence rejection and delays we
have reported a negative cash flow conversion (-21%). On a
normalised basis, which excludes these items, cash conversion was
40%. 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
cashflow forecasts show that the Group expects to comply with the
covenants included within the RCF agreement throughout the review
period.
Taking into account the current cash level and the committed
facilities the Directors are confident that the Group will have
sufficient funds to allow it to continue to operate. After
reviewing the projections and sensitivity analysis the Directors
believe that it is appropriate to prepare the half-year financial
statements on a going concern basis.
2 Non-GAAP measures
In the preparation of adjusted numbers, the Directors exclude
certain items in order to assist with comparability between peers
and to give what they consider to be a better indication of the
underlying performance of the business. These adjusting items are
excluded in the calculation of adjusted operating profit, adjusted
profit before tax, adjusted profit for the period, adjusted EBITDA,
adjusted EPS, adjusted cash conversion and adjusted effective tax
rate. Details of adjusting items are given below.
Adjusted EBITDA is calculated by adding back depreciation of
property, plant and equipment, depreciation of right-of-use assets
and amortisation of intangible assets to adjusted operating profit,
and can be found in the condensed consolidated statement of cash
flows. The calculation of adjusted EPS can be found in Note 3.
Adjusted effective tax rate is calculated by dividing the share of
tax attributable to adjusted profit before tax by adjusted profit
before tax. The definition of cash conversion is set out in the
Finance Review.
Reconciliation between operating profit and profit before income
tax and adjusted profit
Half year Half year to
to 30 September Year to 31
30 September 2022 March 2023
2023
------------------ ------------------ ------------------
Operating Profit Operating Profit Operating Profit
profit before profit before profit before
income income income
tax tax tax
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- ------- --------- ------- --------- -------
Statutory measure 28.6 29.6 26.3 26.6 72.4 73.5
--------------------------------- --------- ------- --------- ------- --------- -------
Release of provision on
disposal - - (0.4) (0.4) (0.4) (0.4)
Transaction related costs 0.7 0.7 - - - -
WITec post-acquisition
gross margin adjustment - - 0.5 0.5 0.5 0.5
Restructuring costs - - - - 0.4 0.4
Intellectual property litigation
costs 0.2 0.2 - - 0.5 0.5
Impairment of capitalised
development costs - - - - 0.8 0.8
Amortisation and impairment
of acquired intangibles 4.6 4.6 4.3 4.3 9.3 9.3
Fair value movement on
financial derivatives 2.4 2.4 6.1 6.1 (3.0) (3.0)
Unwind of discount in respect
of contingent consideration - 0.2 0.4
--------------------------------- --------- ------- --------- ------- --------- -------
Total non-GAAP adjustments 7.9 7.9 10.5 10.7 8.1 8.5
Adjusted measure 36.5 37.5 36.8 37.3 80.5 82.0
Adjusted income tax expense (9.0) (8.0) (17.0)
--------------------------------- --------- ------- --------- ------- --------- -------
Adjusted profit for the
period 36.5 28.5 36.8 29.3 80.5 65.0
--------------------------------- --------- ------- --------- ------- --------- -------
Adjusted effective tax
rates 24.0% 21.4% 20.7%
Release of provision on disposal
These represent the release of the provision on disposal of the
OI Healthcare business in the US in 2020.
Transaction related costs
These represent the costs of one-off charges incurred at the
balance sheet date relating to transactional work.
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 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 in the prior
period.
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 prior 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 period
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 in the prior periods exclude 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
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
GBPm GBPm GBPm
----------------------------------------- ------------- ---------- ---------
Net (decrease)/increase in cash and cash
equivalents (18.9) 3.0 13.5
Effect of exchange rate fluctuations on
cash held (2.3) 8.0 0.3
----------------------------------------- ------------- ---------- ---------
Movement in net cash in the period (21.2) 11.0 13.8
Repayment of borrowings 0.1 0.2 0.5
Net cash after borrowings at the start
of the period 100.2 85.9 85.9
----------------------------------------- ------------- ---------- ---------
Net cash after borrowings at the end
of the period 79.1 97.1 100.2
----------------------------------------- ------------- ---------- ---------
Reconciliation of net cash to Statement of Financial
Position
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
GBPm GBPm GBPm
------------------------------------- ------------- ---------- ---------
Covid-19 loan at WITec (1.2) (1.6) (1.3)
Overdrafts (21.4) (20.2) (11.2)
Cash and cash equivalents 101.7 118.9 112.7
------------------------------------- ------------- ---------- ---------
Net cash after borrowings at the end
of the period 79.1 97.1 100.2
------------------------------------- ------------- ---------- ---------
3 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 period. The weighted average number of shares used in
the calculation is as follows:
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
Shares Shares Shares
million million million
-------------------------------------------- ------------- ---------- ---------
Weighted average number of shares used
in calculation of basic earnings per share 57.7 57.7 57.7
-------------------------------------------- ------------- ---------- ---------
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:
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
Shares Shares Shares
million million million
--------------------------------------------- ------------- ---------- ---------
Number of ordinary shares per basic earnings
per share calculations 57.7 57.7 57.7
Effect of shares under option 0.8 0.7 0.7
--------------------------------------------- ------------- ---------- ---------
Number of ordinary shares per diluted
earnings per share calculations 58.5 58.4 58.4
--------------------------------------------- ------------- ---------- ---------
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:
Half year Half year to
to 30 September Year to 31
30 September 2022 March 2023
2023
GBPm Pence GBPm Pence GBPm Pence
------------------------------- ------- ------ ------- ------ ------ ------
Underlying profit attributable
to equity shareholders
of the parent/Underlying
EPS 22.3 38.6 20.7 35.9 58.6 101.6
------------------------------- ------- ------ ------- ------ ------ ------
Total underlying adjustments
to profit before tax (Note
2) 7.9 13.7 10.7 18.5 8.5 14.7
Related tax effects (1.7) (2.9) (2.1) (3.6) (2.1) (3.6)
------------------------------- ------- ------ ------- ------ ------ ------
Adjusted profit attributable
to equity shareholders
of the parent/adjusted
EPS 28.5 49.4 29.3 50.8 65.0 112.7
------------------------------- ------- ------ ------- ------ ------ ------
Diluted underlying EPS 38.1 35.4 100.3
Diluted adjusted EPS 48.7 50.2 111.3
------------------------------- ------- ------ ------- ------ ------ ------
4 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 reflect 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.
Results
Half year to 30 September 2023 Materials Research Service
& Characterisation & Discovery & Healthcare Total
GBPm GBPm GBPm GBPm
---------------------------------- ------------------- ------------ ------------- -------
Total segment revenue 109.3 66.6 33.8 209.7
---------------------------------- ------------------- ------------ ------------- -------
Segment adjusted operating profit 17.4 9.6 9.5 36.5
---------------------------------- ------------------- ------------ ------------- -------
Half year to 30 September 2022 Materials Research Service
& Characterisation & Discovery & Healthcare Total
GBPm GBPm GBPm GBPm
---------------------------------- ------------------- ------------ ------------- -------
Total segment revenue 108.7 58.1 33.7 200.5
---------------------------------- ------------------- ------------ ------------- -------
Segment adjusted operating profit 18.9 7.0 10.9 36.8
---------------------------------- ------------------- ------------ ------------- -------
Year to 31 March 2023 Materials Research Service
& Characterisation & Discovery & Healthcare Total
GBPm 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
---------------------------------- ------------------- ------------ ------------- -------
Revenue in the Materials & Characterisation and Research
& Discovery segments relates to the sale of products. Revenue
in the Service & Healthcare segment relates to service
income.
Reconciliation of reportable segment profit
Half year to 30 September Materials Research Service Unallocated
2023 & Characterisation & Discovery & Healthcare Group Total
items
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------------- ------------ ------------- ----------- -------
Segment adjusted operating
profit 17.4 9.6 9.5 - 36.5
Transaction related costs - (0.7) - - (0.7)
Intellectual property
litigation costs - (0.2) - - (0.2)
Amortisation and impairment
of acquired intangibles (1.5) (3.1) - - (4.6)
Fair value movement on
financial derivatives - - - (2.4) (2.4)
Financial income - - - 1.9 1.9
Financial expenditure - - - (0.9) (0.9)
---------------------------- ------------------- ------------ ------------- ----------- -------
Profit/(loss) before
income tax 15.9 5.6 9.5 (1.4) 29.6
---------------------------- ------------------- ------------ ------------- ----------- -------
Half year to 30 September Materials Research Service Unallocated
2022 & Characterisation & Discovery & Healthcare Group Total
items
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------------- ------------ ------------- ----------- -------
Segment adjusted operating
profit 18.9 7.0 10.9 - 36.8
Release of provision
on disposal - - 0.4 - 0.4
WITec post-acquisition
gross margin adjustment (0.5) - - - (0.5)
Amortisation and impairment
of acquired intangibles (1.2) (3.1) - - (4.3)
Fair value movement on
financial derivatives - - - (6.1) (6.1)
Financial income - - - 0.9 0.9
Financial expenditure - - - (0.6) (0.6)
---------------------------- ------------------- ------------ ------------- ----------- -------
Profit/(loss) before
income tax 17.2 3.9 11.3 (5.8) 26.6
---------------------------- ------------------- ------------ ------------- ----------- -------
Year to 31 March 2023 Materials Research Service Unallocated
& Characterisation & Discovery & Healthcare Group Total
items
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
---------------------------- ------------------- ------------ ------------- ----------- -------
Revenue Half year Half year Year to
to to 30 31 March
30 September September 2023
2023 2022
GBPm GBPm GBPm
--------------- ------------- ---------- ---------
UK 12.8 10.4 29.4
China 65.1 56.8 107.4
Japan 16.0 16.8 46.7
USA 51.2 55.2 121.2
Germany 15.4 14.9 32.1
Rest of Europe 20.7 18.1 43.4
Rest of Asia 20.5 23.6 47.1
Rest of World 8.0 4.7 17.4
--------------- ------------- ---------- ---------
Total 209.7 200.5 444.7
--------------- ------------- ---------- ---------
5 Research and development (R&D)
The total research and development spend by the Group is as
follows:
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
GBPm GBPm GBPm
-------------------------------------------- ----- ---------- ---------
R&D expense charged to the Consolidated
Statement of Income 19.7 18.2 36.7
Less: depreciation of R&D-related fixed
assets - (0.2) (0.3)
Add: amounts capitalised as fixed assets - - -
Less: amortisation of R&D costs previously
capitalised as intangibles (0.3) (0.6) (2.2)
Add: amounts capitalised as intangible
assets 0.3 0.1 0.6
-------------------------------------------- ----- ---------- ---------
Total cash spent on R&D during the year 19.7 17.5 34.8
-------------------------------------------- ----- ---------- ---------
6 Taxation
The total effective tax rate on profits for the half year is
24.7% (2022: 22.2%). The weighted average tax rate in respect of
adjusted profit before tax (see Note 2) for the half year is 24.0%
(2022: 21.4%).
For the full year the Group expects the tax rate in respect of
adjusted profit before tax to be 24.2%.
7 Dividends per share
The following dividends per share were paid by the Group:
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
pence pence pence
-------------------------------- -------------- ---------- ---------
Previous period final dividend - 13.7 13.7
Current period interim dividend - - 4.6
-------------------------------- -------------- ---------- ---------
- 13.7 18.3
----------------------------------------------- ---------- ---------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
Half year Half year Year
to to 30 to
30 September September 31 March
2023 2022 2023
pence pence pence
----------------- ------------- ---------- ---------
Interim dividend 4.9 4.6 4.6
Final dividend - - 14.9
----------------- ------------- ---------- ---------
4.9 4.6 19.5
----------------- ------------- ---------- ---------
The interim dividend for the year to 31 March 2023 of 4.6 pence
was approved by a sub-committee of the Board on 7 November 2022 and
was paid on 13 January 2023. The final dividend for the year to 31
March 2023 of 14.9 pence was approved by Shareholders at the Annual
General Meeting on 19 September 2023 and was paid on 12 October
2023.
The interim dividend for the year to 31 March 2024 of 4.9 pence
per share was approved by a sub-committee of the Board on 7
November 2023 and has not been included as a liability as at 30
September 2023. The interim dividend is expected to be paid on 12
January 2024 to Shareholders on the register on the record date of
1 December 2023, with an ex-dividend date of 30 November 2023 and
with the last date of election for the Dividend Reinvestment Plan
(DRIP) being 19 December 2023.
8 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
As at As at As at 31 March
30 September 30 September 2023
2023 2022 as restated
as restated (2)
(1,2)
---------------- ---------------- ----------------
Fair Carrying Fair Carrying Fair Carrying Fair
value amount value amount value amount value
hierarchy
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---------- -------- ------ -------- ------ -------- ------
Assets carried at
amortised cost
Long-term receivables 1.2 0.1 0.5
Trade receivables 82.0 86.2 92.4
Other receivables
and accrued income 11.1 6.0 8.4
Cash and cash equivalents 101.7 118.9 112.7
-------------------------- ---------- -------- ------ -------- ------ -------- ------
Assets carried at
fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 2.3 2.3 0.2 0.2 2.0 2.0
-------------------------- ---------- -------- ------ -------- ------ -------- ------
Liabilities carried
at fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 (1.3) (1.3) (9.0) (9.0) (1.2) (1.2)
-------------------------- ---------- -------- ------ -------- ------ -------- ------
Liabilities carried
at amortised cost
Trade and other payables (59.9) (64.6) (79.9)
Bank overdrafts (21.4) (20.2) (11.2)
Borrowings (1.2) (1.7) (1.3)
Lease payables (34.8) (31.4) (31.4)
-------------------------- ---------- -------- ------ -------- ------ -------- ------
(1) Details of restatement of prior period numbers can be found
in note 1.
(2) The other receivables and accrued income and trade and other
payables balances in the table above, as at 30 September 2022 and
31 March 2023, have been restated to remove the tax-related
balances which do not meet the accounting definition of financial
assets and liabilities. As a result, at 30 September 2022, other
receivables and accrued income were reduced by GBP5.2m, while trade
and other payables were reduced by GBP7.1m; at 31 March 2023, other
receivables and accrued income were reduced by GBP5.8m, while trade
and other payables were reduced by GBP6.1m.
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using
market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is
estimated by discounting the future contracted principal and
interest cash flows using the market rate of interest at the
reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the carrying amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine their fair
value. Advances received are excluded from other payables above as
these are not considered to be financial liabilities. Tax related
receivables and payables are excluded from the above table as these
are not considered to be financial assets and liabilities.
Lease payables
The lease liability is measured at amortised cost using the
effective interest method.
Fair value hierarchy
The table above gives details of the valuation method used in
arriving at the fair value of financial instruments. The different
levels have been identified as follows:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets and liabilities,
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based
on observable market data.
There have been no transfers between levels during the year.
9 Retirement benefit obligations
The Group operates a defined benefit plan in the UK. A full
actuarial valuation of the UK plan was carried out as at 31 March
2021 which, for reporting purposes, has been updated to 30
September 2023 by a qualified independent actuary.
At 31 March 2023, the scheme actuary calculated a retirement
benefit asset of GBP26.4m, being the net of GBP251.5m of assets and
a present value of future liabilities of GBP225.1m.
In the period to 30 September 2023, there has been an increase
in the discount rate from 4.8% to 5.5% and significant changes to
market conditions have reduced the value of the scheme's
obligations. The impact of these changes has decreased the benefit
obligation to GBP207.2m (31 March 2023: GBP225.1m). There have been
no material changes to the demographic assumptions associated with
the scheme.
The Group has agreed a basis for deficit recovery payments with
the trustees of the UK pension scheme. The deficit recovery
payments are payable through to and including 2026 and will rise by
approximately 3% per annum. The deficit recovery payment for the
period was GBP4.2m (year to 31 March 2023: GBP8.2m as well as an
additional one-off payment of GBP4.0m). However, significant
changes in market conditions reduced the scheme's assets during the
period. As a result, the fair value of plan assets decreased to
GBP218.5m (31 March 2022: GBP251.5m).
The overall effect is that for the purposes of IAS 19 the
surplus on the scheme decreased from GBP26.4m to GBP11.3m.
10 Related parties
There have been no related party transactions in the first 6
months of the current financial year which have materially affected
the financial position or performance of the Group.
Related parties are consistent with those disclosed in the
Group's annual report for the year ended 31 March 2023.
Principal risks and uncertainties
Information regarding the risk management process in place at
the Group is set out on pages 94 to 96 of the 2023 Report and
Financial Statements.
The principal risks and uncertainties identified through that
process are set out on pages 97 to 101 of the 2023 Report and
Financial Statements and can be found on the Group's website at
www.oxinst.com .
In keeping with the risk management process, the Group has
performed a quarterly update of its risk register as at 30
September 2023. It has evaluated the disclosures made on pages 97
to 101 of the 2023 Report and Financial Statements and has
concluded that all of the risks identified continue to be relevant
for the remainder of the year ending 31 March 2024.
Further it considers that there are no additional significant
risks to be disclosed.
A summary of the risks and uncertainties identified in the 2023
Report and Financial Statements is set out below:
-- Geopolitical risk;
-- Supply chain risk;
-- Routes to market risk;
-- New Product Introduction risk
-- Market risk: Recession/inflation
-- Information Technology risk
-- Legal and regulatory compliance risk
-- Risk of adverse movements in long-term foreign currency rates
-- Risk that a global pandemic/catastrophe causes major disruption
-- People and capability risk
-- Business interruption: operational risk
-- Climate change risk; and
-- Pensions risk.
Responsibility statement of the Directors in respect of the
half-year financial statements
The Directors confirm that, to the best of their knowledge:
-- the condensed consolidated interim financial statements has
been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the UK; and
-- the interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed consolidated interim financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
By order of the Board
Richard Tyson Gavin Hill
Chief Executive Officer Chief Financial Officer
13 November 2023
Independent review report to Oxford Instruments plc
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises the condensed
consolidated statement of income, condensed consolidated statement
of comprehensive income, condensed consolidated statement of
financial position, condensed consolidated statement of changes in
equity, condensed consolidated statement of cash flows, and the
related explanatory notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
Reading, UK
13 November 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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