TIDMOXIG
RNS Number : 0394T
Oxford Instruments PLC
12 November 2019
Release Date: 7am Tuesday 12 November 2019
Oxford Instruments plc
Announcement of Half Year Results for the six months to 30
September 2019
Oxford Instruments plc, a leading provider of high technology
products and systems for industry and research, today announces its
Half Year Results for the six months to 30 September 2019.
Half year to Half year % change % change constant
30 September to reported currency
2019 30 September
2018
GBPm GBPm
Revenue(1) 166.3 147.0 +13.1% +9.1%
Adjusted* operating profit(1) 25.8 21.0 +22.9% +12.4%
Adjusted* profit before
tax(1) 25.4 19.8 +28.3%
Profit before tax(1) 18.0 11.6 +55.2%
Adjusted* basic earnings
per share(1) 35.5p 27.3p +30.0%
Dividend per share (interim) 4.1p 3.8p +7.9%
Cash generated from operations(1) 16.4 21.4 (23.4)%
Net cash/(debt) 14.2 (12.5)
(1) Continuing operations
Financial Highlights:
-- Orders up 6.4% to GBP173.3 million (2018: GBP162.9 million),
an increase of 2.8% at constant currency; book-to-bill ratio of
1.04
-- Order book of GBP186.8 million (31 March 2019: GBP171.6
million), up 8.9% (+6.0% at constant currency)
-- Reported revenue increased by 13.1% to GBP166.3 million (+9.1% at constant currency)
-- Adjusted operating profit from continuing operations up 22.9%
at GBP25.8 million (+12.4% at constant currency)
-- Adjusted operating margin of 15.5% (2018: 14.3%), 14.7% at constant currency
-- Reported profit before tax up 55.2% to GBP18.0 million after
mark-to-mark movement on currency derivatives and other adjusting
items
-- Net cash of GBP14.2 million following cash conversion of 65%
and one-off US pension termination payment
-- Interim dividend increased by 7.9% to 4.10 pence
Operational Highlights:
-- Good progress with Horizon, delivering continued growth and improved operating margin
-- Market intimacy enabled new growth opportunities from
academic and commercial customers, which more than offset softening
in silicon semiconductor, electronics and automotive production
markets
-- Materials & Characterisation delivered a strong
performance underpinned by increased sales across Semiconductor
& Communications, Advanced Materials and Energy &
Environment segments
-- Research & Discovery saw growth across Healthcare &
Lifescience, Quantum Technology and Fundamental Research
segments
-- Increased focus on customer support services related to our
own products delivered an improved performance in Service &
Healthcare
-- Improved commercial practices and gains from our operational
excellence programme contributed to increased profitability in the
period
-- Focus on customer applications driving success of recently
launched products and the development of richer future product
roadmaps and IP portfolio; total cash spend on R&D equivalent
to 7.8% of sales
-- Underlying order growth impacted by some softer end markets and the phasing of OEM orders
-- Our access to all phases of the technology cycle - from
academic research through to commercial production - provided
resilience against uncertain macroeconomic backdrop
Summary and Outlook:
Ian Barkshire, Chief Executive of Oxford Instruments plc,
said:
The Group has delivered a strong first half performance, with
revenue, profit and order growth against a backdrop of uncertain
macroeconomic conditions. Our customer centric approach has
delivered growth within existing markets and expansion into new
adjacent markets.
The breadth of our product portfolio and the diversity of our
end-markets, together with our focus on understanding customer
needs and responding to market changes, underpin our ability to
deliver further growth and margin improvement. We expect the second
half of the financial year to benefit from the normal seasonal
bias, with expectations for the current financial year remaining
unchanged on a constant currency basis.
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director
MHP Communications Tel: 020 3128 8100
Rachel Hirst / Alice McLaren
Number of pages: 34
*NOTE: Throughout this half-year announcement we make reference
to adjusted numbers. A full definition of adjusted numbers can be
found in Note 2. Where we make reference to constant currency
numbers, 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.
NOTE: Oxford Instruments plc compiled analyst forecast range for
adjusted operating profit (year to 31 March 2020): GBP51.5 million
to GBP53.0 million, with an average consensus of GBP52.4
million.
Chief Executive's Review
Introduction
Oxford Instruments provides high technology products and
services to the world's leading industrial companies and scientific
research communities, exploiting our world-class ability to image,
analyse and manipulate materials down to the atomic and molecular
level. Our core purpose is to support our customers in addressing
some of the world's most pressing challenges, enabling a greener
economy, increased connectivity, improved health, and leaps in
scientific understanding.
We continue to make good progress with the implementation of our
Horizon strategy whilst maintaining a focus on the near-term
delivery of improved performance. Our customer-centric approach
provides valuable market insights that deliver growth within
existing markets and allow us to identify opportunities in new
adjacent markets. These insights are driving increased success for
recently launched products and the development of a richer future
product roadmap. The implementation of improved commercial
practices, combined with gains from our operational excellence
programme, contributed to improved profitability in the period, and
provide the foundation for further growth. We remain focused on
addressing a broad and diverse range of attractive end markets with
long-term growth drivers. By addressing the academic, applied
R&D and high technology manufacturing segments, we are engaged
throughout the technology cycle and are well positioned to benefit
from each wave of commercialisation and market disruption.
Overview
The Group has delivered a strong first half performance, with
revenue, profit and order growth against a backdrop of uncertain
macroeconomic conditions. Reported revenue increased 13.1% (9.1% at
constant currency) to GBP166.3 million (2018: GBP147.0 million),
with good growth across each of our sectors - Materials &
Characterisation, Research & Discovery and Service &
Healthcare. We had strong constant currency revenue growth from
both academic and commercial customers, increasing by 8% and 10%
respectively. The proportion of revenue from commercial customers
remained broadly unchanged at 51%.
From an end market perspective, we saw constant currency growth
across each of our target customer segments, with Healthcare &
Lifescience up 6% (27% of Group revenue), Semiconductor &
Communications up 8% (22% of revenue), Quantum Technology up 6% (8%
of revenue), Energy & Environment up 16% (10% of revenue),
Advanced Materials up 9% (23% of revenue) and Research &
Fundamental Science up 14% (10% of revenue) resulting in a
relatively unchanged end market distribution from 31 March 2019.
While we saw further softening in specific markets such as silicon
semiconductor, electronics and automotive production, our focus on
customer outcomes has enabled us to find growth opportunities
elsewhere.
From a geographical perspective, constant currency revenue grew
in Europe, North America and Asia by 18%, 8% and 4% respectively.
In Asia we continue to make good progress in China, with revenue up
14% relative to the comparative period. Asia represented 40% of
Group revenue at constant currency, Europe 27%, North America 32%
and Rest of World 1%. Within Asia, China represented an unchanged
proportion of Group revenue at 21%.
Increased volumes and the benefit from our improved business
processes and commercial practices, combined with gains from our
operational excellence programme, drove reported adjusted operating
profit up 22.9% to GBP25.8 million (2018: GBP21.0 million), an
increase of 12.4% at constant currency. The Materials &
Characterisation and Research & Discovery sectors both
delivered double-digit constant currency growth. In our Service
& Healthcare sector, strong profit growth from the increased
demand for the services related to our own products was partially
offset by reduced contribution from OI Healthcare in the period due
to the phasing of system sales. Reported operating margin increased
to 15.5% (2018: 14.3%) representing margin of 14.7% at constant
currency.
Continuing adjusted basic earnings per share increased by 30.0%
to 35.5 pence (2018: 27.3 pence).
Reported orders for the Group increased to GBP173.3 million
(2018: GBP162.9 million) up 6.4% (2.8% at constant currency). We
saw growth from academic and commercial customers being partially
offset by reduced activity within the silicon semiconductor,
electronics and automotive markets. The Materials &
Characterisation and Service & Healthcare sectors increased
orders on a constant currency basis, with Research & Discovery
marginally down in the period due primarily to the phasing of
larger customer orders within our X-ray Technology business.
Continued order growth resulted in a book-to-bill ratio for the
period of 1.04.
The order book, representing orders for future delivery, as at
30 September 2019 increased 8.9% on a reported basis (6.0% at
constant currency) since the year end, driven predominately by
growth in Materials & Characterisation and the servicing of our
own products.
Good cash collection in the period resulted in an improved Group
net cash position of GBP14.2 million, up from GBP6.7 million at the
year end.
Horizon strategy progress
We have maintained a sharp focus on our Horizon strategy to
deliver sustainable revenue growth and improved margins. In the
period we have continued to increase our commercial focus and build
capabilities across the Group. We continue to see opportunities for
further revenue and margin improvement delivered through the
Horizon strategy. With good progress across our Market Intimacy,
Innovation and Product Development, and Operational Excellence
programmes, we have now started the transformation of our Customer
Service approach, representing the fourth point of the Oxford
Instruments operating model. As part of this programme we will be
reviewing the way in which we provide support to our customers as
well as expanding the breadth of service offerings and
capabilities, including services to support performance
enhancements and yield management packages.
Sector performance
Turning to the performance of our individual sectors:
Materials & Characterisation provides products and solutions
that enable the fabrication and characterisation of materials down
to the atomic scale, predominantly supporting customers across
applied R&D as well as the production and manufacture of high
technology products. The sector delivered a strong and enhanced
first half performance underpinned by growth from both commercial
and academic customers across the Semiconductor &
Communications, Advanced Materials, and Energy & Environment
customer segments. Revenue of GBP69.8 million (2018: GBP60.1
million) represented an increase of 12.3% at constant currency,
with adjusted operating profit increasing to GBP12.2 million (2018:
GBP9.7 million), growth of 16.5% at constant currency. Orders grew
to GBP74.5 million (2018: GBP69.5 million), up 3.9% at constant
currency, contributing to positive order book growth for future
deliveries. Reported operational margin for the sector increased by
140 basis points (+60 basis points at constant currency) to 17.5%
(2018: 16.1%).
Research & Discovery provides advanced solutions that create
unique environments and enable imaging and analytical measurements
down to the molecular and atomic level, used predominantly in
scientific research and applied R&D. Revenue increased to
GBP61.2 million, up 8.7% at constant currency (2018: GBP54.3
million) supported by growth from academic and commercial customers
across the Healthcare & Lifescience, Quantum Technology, and
Research & Fundamental Science segments. Adjusted operating
profit increased to GBP6.4 million (2018: GBP4.8 million), up 16.7%
at constant currency, supported by improved operational
efficiencies within the sector and manufacturing yield improvements
of our scientific X-ray tubes. Orders of GBP61.9 million (2018:
GBP60.0 million) were broadly flat at constant currency, partially
held back in the period by the phasing of large OEM customer orders
in our X-ray Technology business. Operational margin for the sector
grew 170 basis points (+70 basis points at constant currency) to
10.5% (2018: 8.8%) on a reported basis.
Service & Healthcare provides customer service and support
for our own products and the service, sale and rental of
third-party healthcare imaging systems. Revenue of GBP35.3 million
(2018: GBP32.6 million) grew by 4.0% at constant currency, driven
predominantly by increased sales of services and support related to
our own products. Adjusted operating profit increased to GBP7.2
million (2018: GBP6.5 million), up 3.1% at constant currency.
Strong growth in orders related to our own products were partially
offset by the timing of system orders in our US OI Healthcare
business resulting in reported orders of GBP36.9 million (2018:
GBP33.4 million), an increase of 6.3% at constant currency.
Operational margin for the sector grew 50 basis points (-10 basis
points at constant currency) to 20.4% (2018: 19.9%) on a reported
basis.
R&D
The development and delivery of highly innovative and
market-leading technology that delivers ongoing, sustainable value
for our customers remains a central theme within our Horizon
strategy. Our enhanced customer-centric, market-focused approach is
identifying increasingly attractive development opportunities,
enriching our IP portfolio and driving our investment decisions
across the Group. Through Horizon we are exploiting our technical
capabilities and synergiesboth within the Group and with external
partners to deliver key products faster. R&D spend in the
period rose to GBP13.0 million (2018: GBP12.0 million),
representing 7.8% of sales, reflecting both the increased
opportunities available and our commitment to delivering
sustainable growth.
People
Our employees are fundamental to our business progress and I
remain delighted by their continued engagement with our Horizon
strategy. We continue to invest in the development of our teams and
the processes and tools to help them be successful. I would like to
thank all our employees for their continued commitment to offering
our customers a world-class experience and their part in helping to
address some of the world's most pressing challenges.
Dividends
The Board has declared an interim dividend increase of 7.9% to
4.1 pence (2018: 3.8 pence), reflecting improvement in underlying
earnings per share.
Current trading and outlook
The Group has delivered a strong first half performance, with
revenue, profit and order growth against a backdrop of uncertain
macroeconomic conditions. Our customer-centric approach has
delivered growth within existing markets and expansion into new
adjacent markets.
The breadth of our product portfolio and the diversity of our
end markets, together with our focus on understanding customer
needs and responding to market changes, underpin our ability to
deliver further growth and margin improvement. We expect the second
half of the financial year to benefit from the normal seasonal
bias, with expectations for the current financial year remaining
unchanged on a constant currency basis.
Ian Barkshire
Chief Executive
12 November 2019
Operations Review
Our Group reports in the following three sectors: Materials
& Characterisation, Research & Discovery, and Service &
Healthcare.
Materials & Characterisation
2019 2018 Growth Constant
GBPm GBPm Currency
Growth(1)
------------------------------ ------ ------ ------- -----------
Revenue 69.8 60.1 +16.1% +12.3%
------------------------------ ------ ------ ------- -----------
Adjusted(2) operating profit 12.2 9.7 +25.8% +16.5%
------------------------------ ------ ------ ------- -----------
Adjusted(2) operating margin 17.5% 16.1%
------------------------------ ------ ------
Profit before tax after
adjusting items 11.0 8.6
------------------------------ ------ ------
(1) For definition refer to note on page 2 of highlights.
(2) Details of adjusting items can be found in Note 2 to the
condensed Financial Statements.
The Materials & Characterisation sector comprises Asylum
Research, NanoAnalysis and Plasma Technology. This sector has a
broad customer base across a wide range of applications for the
imaging and analysis of materials down to the atomic level as well
as the fabrication of semiconductor devices and structures through
our range of advanced semiconductor etch and deposition process
systems. Our portfolio of imaging systems include our range of
market-leading X-ray and electron analysis systems used in
conjunction with electron and ion microscopes as well as our
performance-leading atomic force microscopes. The sector has a
strong focus on supporting and accelerating our customers' applied
R&D, enabling the development of new devices and next
generation higher performance materials as well as enhanced
productivity in advanced manufacturing, quality assurance ("QA")
and quality control ("QC"). Our products provide market-leading
performance, ease of use and data analytics.
Materials & Characterisation delivered strong growth in both
revenue and operating profit with good order growth. A core
strength of the sector is the market diversification and reach
across academic and corporate R&D, and commercial production
customers. Improved performance in the period was supported by the
success of new and recently launched products, and our increased
focus on tailoring our product offerings to specific end-customer
applications, raising the product value and expanding our
addressable markets. This led to strong revenue growth from both
academic and commercial customers in the period, with the latter
accounting for 55% of revenue. Increased volumes,
application-tailored products and operational efficiencies all
contributed to reported adjusted operating margin increasing 140
basis points to 17.5% (2018: 16.1%).
Looking at end markets, increased revenue was driven by growth
in each of the three main application segments of Advanced
Materials, Semiconductor & Communications, and Energy &
Environment. Advanced Materials represented 38% of sales in the
sector, Semiconductor & Communications 40%, with Energy &
Environment 15%, and Healthcare & Lifescience 6%.
Geographically, we saw strong growth in Europe and good growth in
North America and Asia.
We had double-digit revenue growth in Advanced Materials due to
positive end markets, despite the ongoing weakness in orders from
automotive manufacturing customers. This growth was driven by the
continued demand for lighter, stronger and higher functioning
materials, combined with our leading market performance. Our
measurement solutions are used to aid the development of next
generation products and components as well as in the quality
control and quality assurance of current manufactured products.
Applications include the development of safer cars and planes with
improved fuel consumption, and advanced new materials for wind
turbine blades and medical implants. We continue to see growth in
more routine applications including the optimisation of razor blade
coatings, the quality control of ceramics used in mobile phone
applications and increasing the strength of thinner aluminium drink
cans to reduce their raw material consumption. These applications
have led to strong growth across our range of Symmetry(TM) material
structural analysers, X-ray detectors and atomic force microscopes
("AFM").
We continue to develop new products and tailored applications to
target specific end-customer applications and grow our addressable
market. In the period we launched Jupiter(TM), our first large
sample AFM which can accept objects the size of a semiconductor
wafer or tablet computer. This builds on our market-leading AFM
product performance and reputation in the research market.
Jupiter(TM) provides high resolution, faster results and simpler
user experience to multi-user sites and industrial manufacturers,
significantly expanding our addressable customer base. This has
already driven significant growth to customers needing to
characterise thin films and coatings. We have seen continued growth
in sales into additive manufacturing through the launch of
AZtecAM(TM), a dedicated analysis package for this market
segment.
Semiconductor & Communications delivered strong revenue
growth and remains a significant market segment. Here we provide
imaging and analysis products, as well as etch and deposition
process solutions used across a range of advanced compound
semiconductor and silicon device applications. Whilst we have seen
continued weakness and associated reduced sales of our imaging and
analysis solutions into silicon semiconductor and electronics
customers, we have had continued strong growth and demand across
our portfolio of etch and deposition solutions underpinned by our
leading performance and expertise in compound semiconductors.
The compound semiconductor market remains buoyant with strong,
long-term market drivers, due to the ability of compound
semiconductor devices to dramatically transform the performance of
power electronics, connectivity and communications. In the period
we have seen growth in a number of key areas; our gallium arsenide
and indium phosphide solutions support the increased speed and
infrastructure capacity required to deliver the desired
transformation and connectivity, for example telecommunication data
centres and the rise in the data economy. Silicon carbide and
gallium nitride solutions are being used to develop more efficient
and faster power devices, enabling greater electric vehicle range
and faster charging times. Demand for increased communications is
driving growth across sensors and optoelectronic devices such as 3D
sensors for facial recognition and heads up displays.
Our growth has been further supported by our ability to tailor
our product offerings to specifically meet the needs of academic,
corporate R&D and production customers. For example, we are now
offering dedicated production-ready systems with key enabling
processes, market-leading wafer throughput and reduced time to
service.
We have seen growth in the Energy & Environment segment
driven by the increased activities related to battery research and
quality control, and in the development of improved efficiency and
performance photovoltaic materials. This has included increased
sales of our AFM products, and our advanced high resolution
ultra-sensitive Extreme(TM) X-ray analyser remains the market
leader in imaging the internal chemistry and active interfaces of
batteries at the nanoscale. In the period we launched
AZtecMineral(TM), a tailored solution building on the benefits of
our existing products to optimise mining and ore processing. In
combination with the high sensitivity provided by Extreme(TM), this
is supporting the more efficient mining and recovery of
lithium-based materials.
Research & Discovery
2019 2018 Growth Constant
GBPm GBPm Currency
Growth(1)
------------------------- ------ ------ ------- -----------
Revenue 61.2 54.3 +12.7% +8.7%
------------------------- ------ ------ ------- -----------
Adjusted(2) operating
profit 6.4 4.8 +33.3% +16.7%
------------------------- ------ ------ ------- -----------
Adjusted(2) operating
margin 10.5% 8.8%
------------------------- ------ ------
Profit before tax after
adjusting items 3.2 1.9
------------------------- ------ ------
(1) For definition refer to note on page 2 of highlights.
(2) Details of adjusting items can be found in Note 2 to the
condensed Financial Statements.
The Research & Discovery sector includes Andor Technology,
Magnetic Resonance, NanoScience, X-ray Technology and our minority
share in Scienta Omicron. This sector provides advanced solutions
that create unique environments and enable imaging and analytical
measurements down to the molecular and atomic level, used
predominantly in fundamental and applied research. We build on our
relationships with customers working on breakthrough applications
in research to gain insights and support future commercial
applications. We have strong brand recognition and leading product
performance in our chosen market segments. Our increased
applications focus has supported strong growth to commercial
customers in addition to good growth from academic and
Government-funded research. Revenue from industrial and commercial
customers increased to 35%, with 65% of sales from the academic and
Government-funded research community.
Strong revenue and double-digit profit growth were driven from
across our product portfolio with continued growth from the main
target application segments of Healthcare & Lifescience
(representing 41% of revenue), Quantum Technology (19% of revenue),
and Research & Fundamental Science (24% of revenue). Revenue
growth was supported by an increased demand and improved
operational performance in NanoScience, with profit growth
supported by manufacturing yield improvements of our scientific
X-ray tubes and an improved contribution from the Scienta Omicron
joint venture. Order growth was offset by the phasing of framework
OEM orders for our X-ray Technology business and of higher value
rock core analysis systems.
Within Healthcare & Lifescience, demand continued to be
driven by researchers seeking to uncover more about the pathology
of disease states, helping to reveal more accurate cellular details
at better resolution and higher speeds. This has driven increased
revenue across our portfolio of microscopy systems, analysis and
visualisation software and scientific research cameras. A
significant proportion of sales are being used to understand the
origins and progression of cancers and neurological disorders, such
as Alzheimer's and Parkinson's, and to contribute to the
development of new treatment approaches. The attractive advanced
microscopy market has led to increased competitor activity which
has moderated order growth in the period. We continue to focus on
adding value to our products, building on our market-leading
capabilities. For instance, the latest release of Imaris(TM)
utilises sophisticated management of large data sets to enable the
practical and efficient analysis and interpretation over multiple
length scales from the big picture down to the molecular detail.
Improved rendering and machine learning algorithms lead to
automation and statistically meaningful analysis of biological
structures and systems.
Our high sensitivity cameras, which offer enhanced performance
at low light levels, are being used to measure and observe the
interaction with individual biomolecules in real time. This
continues to drive growth with our strategic OEM partners for a
range of applications including gene sequencing and clinical
screening solutions, which are used for drug feasibility studies
and in the development of personalised medicines.
Quantum Technology continues to attract funding from both
Governments and private industry, with increased long-term
investment being announced within Europe, China and Japan,
targeting quantum computing, cryptography and sensors. We continue
to see increased demand for our cryogenic platforms, which are used
for both fundamental research into quantum effects and in the
development towards practical quantum computers. We have had
increased sales of our Teslatron(TM) system, which provides low
temperatures and high magnetic fields for the development and
characterisation of quantum materials and sensors. We are also
seeing increased demand for our high sensitivity and high-speed
cameras in the growing area of quantum optics for applications
across fundamental science through to secure communications and
quantum computing.
Within Research & Fundamental Science, we continued to see
growth in sales of our high field magnets and research instruments.
In addition, astronomy remains an attractive market for us, with
demand for higher performance cameras in order to meet the
increasing requirements of modern astronomy. Through the successful
collaboration with end customers within the astronomy market, we
have launched Balor(TM), our new large area camera, whose unique
features, including large field of view, enable it to capture a
much larger area of the sky with improved resolution and stability.
This enables the practical tracking of significantly smaller space
junk, easier tracking of near-earth asteroids and enhanced solar
studies, which are important due to the dramatic impact these can
have on satellite and earth-based communications.
Service & Healthcare Sector
2019 2018 Growth Constant
GBPm GBPm Currency
Growth(1)
------------------------- ------ ------ ------- -----------
Revenue 35.3 32.6 +8.3% +4.0%
------------------------- ------ ------ ------- -----------
Adjusted(2) operating
profit 7.2 6.5 +10.8% +3.1%
------------------------- ------ ------ ------- -----------
Adjusted(2) operating
margin 20.4% 19.9%
------------------------- ------ ------
Profit before tax after
adjusting items 6.8 6.1
------------------------- ------ ------
(1) For definition refer to note on page 2 of highlights.
(2) Details of adjusting items can be found in Note 2 to the
condensed Financial Statements.
The Service & Healthcare sector comprises the Group's
maintenance service contracts, billable repairs, training and
support services, and spare part sales related to Oxford
Instruments' own products under the OiService brand; and the sale,
service and rental of refurbished third-party MRI and CT machines
under the OI Healthcare brand.
Good order, revenue and profit growth at constant currency in
the period through the increased demand for services and support
related to our own products was partially offset by the timing of
system orders within our US OI Healthcare business.
Revenue from our OI Healthcare businesses was broadly flat with
adjusted operating profit slightly down on last year owing to the
phasing of system orders. Utilisation of our mobile MRI fleet
remains strong and we continue our focus on building a healthy
service orderbook.
The Service & Healthcare sector is now a focal point within
the evolution of our Horizon strategy. We have initiated the
transformation of our customer service approach by reviewing the
way in which we provide support to our customers as well as
expanding the breadth of service product offerings and
capabilities. This includes the tailoring of service products to
end market applications and customer segments. For example, for
industrial customers, we are introducing services to support
performance enhancements and yield management packages. Our launch
of Plasmaview(TM) process control software supports this transition
for our semiconductor customers, allowing us to provide a broader
range of diagnostic and process optimisation services both online
and remotely. Whilst still at the early stages, we have already
built a pipeline of opportunities and have seen an uplift in
service-related revenue and profitability.
Finance Review
Reported orders increased by 6.4% to GBP173.3 million (2018:
GBP162.9 million), an increase of 2.8% at constant currency. At the
end of the period the Group's order book for future deliveries
stood at GBP186.8 million (31 March 2019: GBP171.6 million). The
order book grew 8.9% on a reported basis and 6.0% at constant
currency.
Reported revenue increased by 13.1% to GBP166.3 million (2018:
GBP147.0 million). Revenue, excluding currency effects, increased
by 9.1%, with the movement in average currency exchange rates
against the comparative period increasing reported revenue by
GBP5.9 million.
Adjusted operating profit increased by 22.9% to GBP25.8 million
(2018: GBP21.0 million) with the movement in exchange rates against
the comparative period increasing adjusted operating profit by
GBP2.2 million. Adjusted operating profit, excluding currency
effects, increased by 12.4%. Adjusted operating margin increased by
120 basis points to 15.5% (2018: 14.3%), supported by a currency
tailwind. Excluding currency effects, adjusted operating margin
increased by 40 basis points to 14.7%.
Adjusted profit before tax grew by 28.3% to GBP25.4 million
(2018: GBP19.8 million), representing a margin of 15.3% (2018:
13.5%).
Adjusting items consist of amortisation of acquired intangibles
of GBP4.8 million and a charge of GBP2.6 million relating to the
movement in the mark-to-market valuation of uncrystallised currency
hedges for future years.
After adjusting items, the Group recorded an operating profit of
GBP18.4 million (2018: GBP13.7 million) and profit before tax of
GBP18.0 million (2018: GBP11.6 million).
Adjusted basic earnings per share grew by 30.0% to 35.5 pence
(2018: 27.3 pence). Basic earnings per share grew by 59.0% to 24.8
pence (2018: 15.6 pence).
Cash generated from operations of GBP16.4 million (2018: GBP21.4
million), represents 65% (2018: 91%) cash conversion. Net cash
increased from GBP6.7 million on 31 March 2019 to GBP14.2
million.
Adjusted operating profit is stated before impairment and
amortisation of goodwill and acquired intangibles, the
mark-to-market valuation of unexpired currency hedges, and other
adjusting items, as set out in Note 2 to the Half-year Financial
Statements.
Under the rules for audit tendering and rotation implemented in
2016, the Group is required to replace our current auditors, KPMG
LLP, no later than 31 March 2021, effective for the 31 March 2022
year end. The Audit Committee has decided to undertake a
comprehensive and thorough competitive tender process for the audit
in the first quarter of 2020. The Committee expects to invite at
least one challenger firm to participate in this process. Depending
on the outcome of the tender, we expect to make an appointment
prior to our 31 March 2020 year end, effective for the 31 March
2021 year end. This appointment will be subject to Shareholder
approval at the next AGM to be held in September 2020.
Income Statement
The Group's Income Statement is summarised below.
Half year Half year Change
to 30 to 30
September September
2019 2018
GBPm GBPm
-------------------------------------------------- ----------- ----------- -------
Revenue 166.3 147.0 13.1%
Gross profit 82.2 73.9 11.2%
Administrative expenses (55.3) (52.0)
Share of profit of associate - (0.6)
Foreign exchange (1.1) (0.3)
-------------------------------------------------- ----------- ----------- -------
Adjusted operating profit 25.8 21.0 22.9%
Net finance costs (0.4) (1.2)
-------------------------------------------------- ----------- ----------- -------
Adjusted profit before tax 25.4 19.8 28.3%
Amortisation of acquired intangibles (4.8) (4.7)
Non-recurring items - (0.6)
Mark-to-market of currency hedges (2.6) (2.9)
-------------------------------------------------- ----------- ----------- -------
Profit before tax 18.0 11.6 55.2%
Tax from continuing operations (3.8) (2.7)
-------------------------------------------------- ----------- ----------- -------
Profit for the period from continuing operations 14.2 8.9
-------------------------------------------------- ----------- ----------- -------
Adjusted effective tax rate(1) 20.1% 21.2%
Continuing adjusted earnings per share
- basic 35.5p 27.3p 30.0%
Continuing earnings per share - basic 24.8p 15.6p 59.0%
Continuing adjusted earnings per share
- diluted 35.1p 27.0p 30.0%
Continuing earnings per share - diluted 24.6p 15.4p 59.7%
Dividend per share 4.10p 3.80p 7.9%
-------------------------------------------------- ----------- ----------- -------
1. The adjusted effective tax rate is calculated excluding
amortisation of acquired intangibles, the mark-to-market of
financial derivatives, and other adjusting items.
Orders and revenue
Total reported orders grew by 6.4% (2.8% at constant currency)
to GBP173.3 million. Orders, at constant currency, increased by
3.9% for Materials & Characterisation, declined by 0.5% for
Research & Discovery and increased by 6.3% for Service &
Healthcare. The decline in Research & Discovery was principally
due to the phasing of OEM orders within X-Ray Technology.
Reported revenue of GBP166.3 million (2018: GBP147.0 million)
increased by 13.1% (9.1% at constant currency). Reported revenue
increased by 16.1% for Materials & Characterisation, 12.7% for
Research & Discovery and 8.3% for Service & Healthcare.
The book-to-bill ratio (orders received to goods and services
billed in the period) for the half year was 1.04.
Revenue, at constant currency, increased by 12.3% for Materials
& Characterisation, with a particularly strong performance from
all constituent businesses. Constant currency growth was 8.7% in
Research & Discovery, with good progress from Andor Technology
and an improvement in NanoScience and X-Ray Technology. Service
& Healthcare constant currency revenue grew by 4.0%, with good
growth from the service of our own products.
On a geographical basis, at constant currency, revenue grew by
18.4% in Europe, 7.8% in North America, 4.3% in Asia and 15.0% in
Rest of World.
The total reported order book grew by 8.9% (6.0% at constant
currency) to GBP186.8 million compared to 31 March 2019. The order
book, at constant currency, increased by 10.4% for Materials &
Characterisation, 0.7% for Research & Discovery and 13.6% in
Service & Healthcare. All constituent businesses grew their
order book over the half year, with the exception of X-Ray
Technology as previously explained.
Materials Research Service Total
GBPm & Characterisation & Discovery & Healthcare
----------------------------------- -------------------- ------------- -------------- ------
Revenue: Half year 2018/19 60.1 54.3 32.6 147.0
----------------------------------- -------------------- ------------- -------------- ------
Underlying movement 7.4 4.7 1.3 13.4
Foreign exchange 2.3 2.2 1.4 5.9
----------------------------------- -------------------- ------------- -------------- ------
Revenue: Half year 2019/20 69.8 61.2 35.3 166.3
----------------------------------- -------------------- ------------- -------------- ------
Revenue growth: reported 16.1% 12.7% 8.3% 13.1%
Revenue growth: constant currency 12.3% 8.7% 4.0% 9.1%
----------------------------------- -------------------- ------------- -------------- ------
Reclassification of costs
During the year we have reviewed the classification of costs
within the Income Statement, with a focus on whether items are
reported within cost of sales or operating expenses. As a result,
certain reclassifications were made, the most significant being
that outward freight costs and sales commissions paid to employees
and external agents are reported within cost of sales rather than
within selling and marketing expenses. This is considered to be a
better presentation since gross margin is now a clearer indicator
of commercial performance and overheads a clearer indicator of cost
control.
Gross profit
Gross profit increased by 11.2% to GBP82.2 million (2018:
GBP73.9 million), representing a gross profit margin of 49.4%.
Adjusted operating profit
Adjusted operating profit increased by 22.9% to GBP25.8 million
(2018: GBP21.0 million), representing an adjusted operating profit
margin of 15.5%, an increase of 120 basis points against last year.
At constant currency, the adjusted operating profit margin was
14.7%, an increase of 40 basis points.
Materials & Characterisation's margin increased by 140 basis
points to 17.5% (2018: 16.1%). At constant currency, the margin was
16.7%, an increase of 60 basis points.
Research & Discovery's adjusted operating margin increased
to 10.5% (2018: 8.8%), an increase of 170 basis points. At constant
currency, the margin was 9.5%, an increase of 70 basis points.
Service & Healthcare's margin increased by 50 basis points
to 20.4% (2018: 19.9%). At constant currency, the margin was 19.8%,
a reduction of 10 basis points.
Our share of the Scienta Omicron joint venture showed an
adjusted result after tax of zero for the period, against an
adjusted loss of GBP0.6 million for the comparative period.
Materials Research Service Total
GBPm & & & Healthcare
Characterisation Discovery
---------------------------- ------------------ ----------- -------------- ------
Adjusted operating profit:
Half year 2018/19 9.7 4.8 6.5 21.0
---------------------------- ------------------ ----------- -------------- ------
Underlying movement 1.6 0.8 0.2 2.6
Foreign exchange 0.9 0.8 0.5 2.2
---------------------------- ------------------ ----------- -------------- ------
Adjusted operating profit:
Half year 2019/20 12.2 6.4 7.2 25.8
---------------------------- ------------------ ----------- -------------- ------
Margin: 2018/19 16.1% 8.8% 19.9% 14.3%
Margin: 2019/20 17.5% 10.5% 20.4% 15.5%
---------------------------- ------------------ ----------- -------------- ------
Adjusting items
Amortisation of acquired intangibles of GBP4.8 million relates
to intangible assets recognised on acquisitions, being the value of
technology, customer relationships and brands.
The Group uses derivative products to hedge its short-term
exposure to fluctuations in foreign exchange rates. It is Group
policy to have in place at the beginning of the financial year
hedging instruments to cover approximately 80% of its forecast
transactional exposure for that year. 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 marking-to-market derivatives in respect of
future periods are disclosed in the Income Statement as foreign
exchange and excluded from our calculation of adjusted profit
before tax.
The mark-to-market loss in respect of derivative financial
instruments was GBP2.6 million (2018: GBP2.9 million loss). This
reflects the movement on currency derivatives that are hedging
future transactional currency exposures for the Group. The
half-year position reflects an uncrystallised loss arising from a
fall in the value of Sterling at the balance sheet date against a
blended rate achieved on the US Dollar, Euro and Japanese Yen
forward contracts that will mature over the next 18 months.
Net finance costs
The Group's adjusted net finance costs fell by GBP0.8 million to
GBP0.4 million (2018: GBP1.2 million) with net finance charges
falling by GBP0.6 million to GBP0.4 million, supported by a refund
of overpaid interest for previous years of GBP0.2 million, and
pension financing charges falling by GBP0.2 million to zero,
reflecting the movement from a net pension deficit as at 31 March
2019 to a small net pension asset as at 30 September 2019.
Profit before tax
Adjusted profit before tax increased by 28.3% to GBP25.4 million
(2018: GBP19.8 million). The adjusted profit before tax margin rose
to 15.3% (2018: 13.5%).
Profit before tax of GBP18.0 million (2018: GBP11.6 million) is
after the mark-to-market movement on derivative financial
instruments and amortisation of acquired intangibles.
Tax
The adjusted tax charge of GBP5.1 million (2018: GBP4.2 million)
represents an effective tax rate of 20.1% (2018: 21.2%). The
reduction reflects a change in the geographical mix of profits.
Earnings per share
Adjusted basic earnings per share increased by 30.0% to 35.5
pence (2018: 27.3 pence); adjusted diluted earnings per share grew
by 30.0% to 35.1 pence (2018: 27.0 pence). Basic earnings per share
increased by 59.0% to 24.8 pence (2018: 15.6 pence); diluted
earnings per share grew by 59.7% to 24.6 pence (2018: 15.4
pence).
The number of undiluted weighted average shares remained
constant at 57.2 million.
Foreign exchange
The Group faces transactional and translational currency
exposure, most notably against the US Dollar, Euro and Japanese
Yen. For the year, approximately 13% of Group revenue was
denominated in Sterling, 57% in US Dollars, 19% in Euros, 10% in
Japanese Yen and 1% in other currencies. Our adjusted operating
profit currency exposure for the half year in Sterling equivalent
is short Sterling GBP35.2 million, long US Dollar GBP38.1 million,
long Euro GBP19.3 million, long Japanese Yen GBP9.4 million, short
Chinese Renminbi GBP4.5 million and short other currencies GBP1.3
million. Translational exposures arise on the consolidation of
overseas company results into Sterling. Transactional exposures
arise where the currency of sale or purchase transactions differs
from the functional currency in which each company prepares its
local accounts.
The Group maintains a hedging programme against its net
transactional exposure using internal projections of expected
currency trading transactions expected to arise over a period
extending from 12 to 24 months. As at 30 September 2019 the Group
had currency hedges in place extending up to eighteen months
forward.
Currency effects (including the impact of transactional currency
hedging) have increased half year reported adjusted operating
profit by GBP2.2 million, when compared to blended hedged exchange
rates for the comparative period. We estimate that the full-year
currency effect, based on currency rates prevailing at the end of
October 2019, will be approximately a benefit of GBP3.0 million to
adjusted operating profit.
For the full year 2020/21, our assessment of the currency impact
is, based on hedges currently in place and spot rates prevailing as
at 31 October 2019, a benefit to adjusted operating profit of
GBP1.0 million. As an example sensitivity, if we assume a 5%
appreciation of Sterling against our major trading currencies, then
the impact is a reduction in adjusted operating profit of GBP2.7
million.
The actual currency impact will be dependent on currency rates
at the time of shipments and customer acceptances, as well as the
currency mix, and is thus subject to a high degree of
uncertainty.
Dividend
The Group's policy is to increase the dividend each year in line
with the increase in underlying earnings, considering movements in
currency. The Board has proposed to increase the interim dividend
by 7.9% to 4.10 pence (2018: 3.80 pence). The interim dividend will
be paid on 14 April 2020 to Shareholders on the register as at 6
March 2020.
Cash flow
The Group's cash flow is summarised below.
Half year Half year
to 30 to 30
September September
2019 2018
GBPm GBPm
------------------------------------------------------ ----------- -----------
Adjusted operating profit 25.8 21.0
Depreciation and amortisation 5.2 5.4
------------------------------------------------------ ----------- -----------
Adjusted EBITDA 31.0 26.4
Working capital movement (10.4) (1.2)
Purchase of rental assets held for subsequent
sale (0.1) (0.6)
Equity settled share schemes 2.0 0.4
Share of loss from associate - 0.6
Business reorganisation items - (0.7)
Pension scheme payments above charge to operating
profit (6.1) (3.5)
------------------------------------------------------ ----------- -----------
Cash generated from operations 16.4 21.4
Interest (1.1) (2.3)
Tax (3.5) (4.7)
Capitalised development expenditure (2.2) (1.5)
Expenditure on tangible and intangible assets (2.0) (3.4)
Decrease in long-term receivables 0.5 0.6
Dividends paid (2.2) (2.1)
Proceeds from issue of share capital and exercise 0.2 -
of share options
Payments made in respect of lease liabilities (1.6) (1.6)
Decrease in borrowings - (8.6)
------------------------------------------------------ ----------- -----------
Net increase/(decrease) in cash and cash equivalents
from continuing operations 4.5 (2.2)
------------------------------------------------------ ----------- -----------
Note: Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation of acquired intangibles, mark-to-market
of financial derivatives, and other adjusting items.
Cash generated from operations
Cash generated from operations of GBP16.4 million (2018: GBP21.4
million), represents 65% (2018: 91%) cash conversion. Cash
conversion is defined as cash generated from operations before
pension scheme payments, less capitalised development expenditure,
capital expenditure and payments made in respect of finance
leases/adjusted operating profit. Payments made in respect of
finance leases are now included within our definition of cash
conversion to retain a like-for-like comparison following the
introduction of IFRS 16.
Working capital rose by GBP10.4 million, reflecting an increase
in inventories of GBP3.8 million, a decrease in receivables of
GBP3.6 million and a reduction in payables and customer deposits of
GBP10.2 million. The increase in inventories is primarily to
support shipments in the second half of the year. Receivables fell
by less than expected owing to a higher number of shipments
occurring closer to the half year end compared to the previous
year, with the effect that issued invoices are not due by the half
year end and are thus not payable. The reduction in payables and
customer deposits is primarily due to a reduction in deferred
revenue due to a change in timing of invoicing of service
contracts, a fall in customer deposits due to revenue recognised on
acceptance close to the half year end, and the timing of payments
made on the operational excellence consultancy support. We expect
the cash conversion ratio to improve for the full year.
The increase in the cost of equity settled share schemes is due
to a catch-up charge relating to a correction in the valuation of
management share option incentive schemes.
Pension
Pension costs included a payment of $2.9 million (GBP2.3
million) to the US pension scheme as part settlement of termination
liabilities. We expect a second and final payment of approximately
$1.6 million will be made prior to the year end.
Interest
Net interest paid was GBP1.1 million (2018: GBP2.3 million).
Cash interest is higher than the charge in the Income Statement due
to timing differences on the payment of interest on private
placement loan notes.
Tax
Tax paid was GBP3.5 million (2018: GBP4.7 million); the current
period includes a cash settlement to HMRC of GBP4.0 million in
April 2019, partially offset by a tax refund in the US following
the closure of prior period submissions.
Investment in Research and Development ("R&D")
Total cash spend on R&D in the half year was GBP13.0
million, equivalent to 7.8% of sales (2018: GBP12.0 million, 8.2%
of sales). During the half year we have invested in additional
systems to support projects and sample production for new processes
within our semiconductor solutions business. Development costs for
a new analyser for electron microscopy have been capitalised in the
first half of the year. A reconciliation between the amounts
charged to the Income Statement and the cash spent is given
below:
Half year Half year
to 30 to 30
September September
2019 2018
GBPm GBPm
-------------------------------------------------- ----------- -----------
R&D expense charged to the Income Statement 11.9 12.0
Amounts capitalised as fixed assets 0.1 -
Amortisation of R&D costs previously capitalised
as intangibles (1.2) (1.5)
Amounts capitalised as intangible assets 2.2 1.5
-------------------------------------------------- ----------- -----------
Total cash spent on R&D during the year 13.0 12.0
-------------------------------------------------- ----------- -----------
Net cash and funding
Net cash
Cash generation in the half year increased the Group's net cash
from GBP6.7 million at the start of the year to GBP14.2 million on
30 September 2019. Cash generated from operations was GBP16.4
million. The Group invested GBP2.2 million in capitalised
development costs and GBP2.0 million in tangible and intangible
assets.
Movement in net cash GBPm
------------------------------------------------------- ------
Net cash as at 31 March 2019 6.7
------------------------------------------------------- ------
Cash generated from operations 16.4
Interest (1.1)
Tax (3.5)
Capitalised development expenditure (2.2)
Capital expenditure on tangible and intangible assets (2.0)
Dividends paid (2.2)
Foreign exchange and other items 2.1
------------------------------------------------------- ------
Net cash as at 30 September 2019 14.2
------------------------------------------------------- ------
Funding
On 2 July 2018 the Group entered into an unsecured
multi-currency revolving facility agreement, which is committed
until June 2023 with one-year extension options at the end of the
first and second years. The facility has been entered into with two
banks and comprises a Euro denominated multi-currency facility of
EUR50.0 million and a US Dollar denominated multi-currency facility
of $80.0 million.
Debt covenants are net debt to EBITDA less than 3.0 times and
EBITDA to interest greater than 4.0 times. As at 30 September 2019,
the business had net cash.
Pensions
The Group has defined benefit pension schemes in the UK and USA.
Both have been closed to new entrants since 2001 and closed to
future accrual from 2010.
At 30 September 2019, we recorded a net asset of GBP2.6 million
from defined benefit scheme obligations (31 March 2019: net
liability of GBP6.5 million). The movement of GBP9.1 million from a
net liability to net asset position was primarily due to the
contributions paid in the period. Total scheme assets at 30
September 2019 were GBP353.1 million (31 March 2019: GBP311.4
million) while liabilities were GBP350.5 million (31 March 2019:
GBP317.9 million).
We are progressing with the process to terminate the US defined
benefit pension scheme. This will extinguish all liabilities of the
scheme. We expect to complete the project by the end of the
financial year.
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, Strategy and Operations sections of
the 2019 Annual Report. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are
described in the Finance Review.
The diverse nature of the Group, combined with its financial
strength, provides a solid foundation for a sustainable business.
The Directors have reviewed the Group's forecasts and flexed them
to incorporate a number of potential scenarios relating to changes
in trading performance. The Directors believe that the Group will
be able to operate within its existing debt facilities. This review
also considered hedging arrangements in place. The Directors
believe that the Group is well placed to manage its business risks
successfully.
The Financial Statements have been prepared on a going concern
basis, based on the Directors' opinion, after making reasonable
enquiries, that the Group has adequate resources to continue in
operational existence for the foreseeable future.
Forward-looking statements
This document contains certain forward-looking statements. The
forward-looking statements reflect the knowledge and information
available to the Company during the preparation and up to the
publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may
occur in the future thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit
forecast by the Company.
Gavin Hill
Group Finance Director
12 November 2019
Responsibility Statement of the Directors in respect of the
Half-year Financial Statements
We confirm that to the best of our knowledge:
-- the condensed set of Financial Statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of Financial Statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
Ian Barkshire Gavin Hill
Chief Executive Group Finance Director
12 November 2019
Condensed Consolidated Income Statement
Half year ended 30 September 2019 - unaudited
Half year to 30 September Half year to 30 September
2019 2018 as restated
*2
----------------------------- -----------------------------
Adjusted Adjusting Total Adjusted Adjusting Total
items items
*1 *1
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Revenue 4 166.3 - 166.3 147.0 - 147.0
Cost of sales (84.1) - (84.1) (73.1) - (73.1)
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Gross profit 82.2 - 82.2 73.9 - 73.9
Research and development 5 (11.9) - (11.9) (12.0) - (12.0)
Selling and marketing (25.1) - (25.1) (24.6) - (24.6)
Administration and
shared services (18.3) (4.8) (23.1) (15.4) (4.7) (20.1)
Share of (loss)/profit
of associate, net of
tax - - - (0.6) 0.3 (0.3)
Foreign exchange loss (1.1) (2.6) (3.7) (0.3) (2.9) (3.2)
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Operating profit 25.8 (7.4) 18.4 21.0 (7.3) 13.7
Financial income 0.5 - 0.5 0.1 - 0.1
Interest charge on
pension scheme net
liabilities - - - (0.2) - (0.2)
Other financial expenditure (0.9) - (0.9) (1.1) (0.9) (2.0)
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Financial expenditure (0.9) - (0.9) (1.3) (0.9) (2.2)
Profit/(loss) before
income tax 4 25.4 (7.4) 18.0 19.8 (8.2) 11.6
Income tax (expense)/credit (5.1) 1.3 (3.8) (4.2) 1.5 (2.7)
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Profit/(loss) for the
period from continuing
operations 20.3 (6.1) 14.2 15.6 (6.7) 8.9
Profit from discontinued
operations after tax 7 - - - - - -
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Profit/(loss) for the
period attributable
to equity holders of
the parent 20.3 (6.1) 14.2 15.6 (6.7) 8.9
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Earnings per share pence pence pence pence
Basic earnings per
share 3
From continuing operations 35.5 24.8 27.3 15.6
From discontinued - - - -
operations
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
From profit for the
period 35.5 24.8 27.3 15.6
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Diluted earnings per
share 3
From continuing operations 35.1 24.6 27.0 15.4
From discontinued - - - -
operations
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
From profit for the
period 35.1 24.6 27.0 15.4
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
Dividends per share 9
Dividends paid 3.8 3.7
Dividends proposed 4.1 3.8
------------------------------ ---- --------- ---------- ------ --------- ---------- ------
*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.
*2 Details of restatement of prior period numbers can be found
in Note 1.
Condensed Consolidated Income Statement - Continued
Half year ended 30 September 2019 - unaudited
Year to 31 March 2019
as restated *2
----------------------------
Adjusted Adjusting Total
items
*1
Note GBPm GBPm GBPm
--------------------------------------------- ---- -------- --------- -------
Revenue 4 333.6 - 333.6
Cost of sales (166.6) - (166.6)
--------------------------------------------- ---- -------- --------- -------
Gross profit 167.0 - 167.0
Research and development 5 (24.8) - (24.8)
Selling and marketing (52.1) - (52.1)
Administration and shared services (39.4) (9.9) (49.3)
Share of profit of associate, net of
tax 0.2 0.3 0.5
Foreign exchange loss (1.2) (1.5) (2.7)
--------------------------------------------- ---- -------- --------- -------
Operating profit 49.7 (11.1) 38.6
Financial income 0.3 - 0.3
Interest charge on pension scheme net
liabilities (0.3) - (0.3)
Other financial expenditure (2.2) (0.9) (3.1)
--------------------------------------------- ---- -------- --------- -------
Financial expenditure (2.5) (0.9) (3.4)
Profit/(loss) before income tax 4 47.5 (12.0) 35.5
Income tax (expense)/credit (10.4) 3.6 (6.8)
--------------------------------------------- ---- -------- --------- -------
Profit/(loss) for the period from continuing
operations 37.1 (8.4) 28.7
Profit from discontinued operations after
tax 7 - 1.3 1.3
--------------------------------------------- ---- -------- --------- -------
Profit/(loss) for the period attributable
to equity holders of the parent 37.1 (7.1) 30.0
--------------------------------------------- ---- -------- --------- -------
Earnings per share pence pence
Basic earnings per share 3
From continuing operations 64.9 50.1
From discontinued operations - 2.3
--------------------------------------------- ---- -------- --------- -------
From profit for the period 64.9 52.4
--------------------------------------------- ---- -------- --------- -------
Diluted earnings per share 3
From continuing operations 64.3 49.7
From discontinued operations - 2.3
--------------------------------------------- ---- -------- --------- -------
From profit for the period 64.3 52.0
--------------------------------------------- ---- -------- --------- -------
Dividends per share 9
Dividends paid 13.3
Dividends proposed 14.4
--------------------------------------------- ---- -------- --------- -------
*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.
*2 Details of restatement of prior period numbers can be found
in Note 1.
Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2019 - unaudited
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- ------
Profit for the period 14.2 8.9 30.0
Other comprehensive income/(expense):
Items that may be reclassified subsequently
to profit or loss
Foreign exchange translation differences 2.7 4.6 4.2
Items that will not be reclassified to profit
or loss
Remeasurement gain in respect of post-retirement
benefits 3.3 2.1 2.5
Tax charge on items that will not be reclassified
to profit or loss (0.6) (0.4) (0.5)
-------------------------------------------------- ---------- ---------- ------
Total other comprehensive income 5.4 6.3 6.2
Total comprehensive income for the period
attributable to equity Shareholders of the
parent 19.6 15.2 36.2
-------------------------------------------------- ---------- ---------- ------
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2019 - unaudited
Share Share Other Foreign Retained Total
capital premium reserves exchange earnings
account translation
reserve
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- --------- ------------ --------- -----
As at 1 April 2019 2.9 61.7 0.2 13.4 124.0 202.2
Total comprehensive income/(expense):
Profit for the period - - - - 14.2 14.2
Other comprehensive income/(expense):
- Foreign exchange translation
differences - - - 2.7 - 2.7
- Remeasurement gain in
respect of post-retirement
benefits - - - - 3.3 3.3
- Tax on items recognised
directly in other comprehensive
income - - - - (0.6) (0.6)
-------------------------------------- -------- -------- --------- ------------ --------- -----
Total comprehensive income
attributable to equity
Shareholders of the parent - - - 2.7 16.9 19.6
Transactions with owners
recorded directly in equity:
- Proceeds from exercise
of share options - - - - 0.2 0.2
- Credit in respect of
employee service costs
settled by award of share
options - - - - 2.0 2.0
- Tax credit in respect - - - - - -
of share options
- Dividends paid or accrued - - - - (8.3) (8.3)
-------------------------------------- -------- -------- --------- ------------ --------- -----
Total transactions with
owners recorded directly
in equity: - - - - (6.1) (6.1)
As at 30 September 2019 2.9 61.7 0.2 16.1 134.8 215.7
-------------------------------------- -------- -------- --------- ------------ --------- -----
As at 1 April 2018 2.9 61.7 0.2 9.2 105.6 179.6
Impact of adoption of IFRS
15 - - - - (7.0) (7.0)
-------------------------------------- -------- -------- --------- ------------ --------- -----
2.9 61.7 0.2 9.2 98.6 172.6
Total comprehensive income/(expense):
Profit for the period - - - - 8.9 8.9
Other comprehensive income/(expense):
- Foreign exchange translation
differences - - - 4.6 - 4.6
- Remeasurement gain in
respect of post-retirement
benefits - - - - 2.1 2.1
- Tax on items recognised
directly in other comprehensive
income - - - - (0.4) (0.4)
-------------------------------------- -------- -------- --------- ------------ --------- -----
Total comprehensive income
attributable to equity
Shareholders of the parent - - - 4.6 10.6 15.2
Transactions with owners
recorded directly in equity:
- Proceeds from exercise - - - - - -
of share options
- Credit in respect of
employee service costs
settled by award of share
options - - - - 0.4 0.4
- Tax credit in respect - - - - - -
of share options
- Dividends paid or accrued - - - - (7.6) (7.6)
-------------------------------------- -------- -------- --------- ------------ --------- -----
Total transactions with
owners recorded directly
in equity: - - - - (7.2) (7.2)
As at 30 September 2018 2.9 61.7 0.2 13.8 102.0 180.6
-------------------------------------- -------- -------- --------- ------------ --------- -----
Condensed Consolidated Statement of Changes in Equity -
Continued
Half year ended 30 September 2019 - unaudited
Share Share Other Foreign Retained Total
capital premium reserves exchange earnings
account translation
reserve
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- --------- ------------ --------- -----
As at 1 April 2018 2.9 61.7 0.2 9.2 105.6 179.6
Impact of adoption of IFRS
15 - - - - (7.2) (7.2)
-------------------------------------- -------- -------- --------- ------------ --------- -----
2.9 61.7 0.2 9.2 98.4 172.4
Total comprehensive income/(expense):
Profit for the period - - - - 30.0 30.0
Other comprehensive income/(expense):
- Foreign exchange translation
differences - - - 4.2 - 4.2
- Remeasurement gain in
respect of post-retirement
benefits - - - - 2.5 2.5
- Tax on items recognised
directly in other comprehensive
income - - - - (0.5) (0.5)
-------------------------------------- -------- -------- --------- ------------ --------- -----
Total comprehensive income
attributable to equity
Shareholders of the parent - - - 4.2 32.0 36.2
Transactions with owners
recorded directly in equity:
- Proceeds from exercise
of share options - - - - 0.2 0.2
- Credit in respect of
employee service costs
settled by award of share
options - - - - 0.8 0.8
- Tax credit in respect
of share options - - - - 0.2 0.2
- Dividends paid or accrued - - - - (7.6) (7.6)
-------------------------------------- -------- -------- --------- ------------ --------- -----
Total transactions with
owners recorded directly
in equity: - - - - (6.4) (6.4)
As at 31 March 2019 2.9 61.7 0.2 13.4 124.0 202.2
-------------------------------------- -------- -------- --------- ------------ --------- -----
Condensed Consolidated Statement of Financial Position
As at 30 September 2019 - unaudited
Note As at As at As at
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------- ---- ------------- ------------- ---------
Assets
Non-current assets
Property, plant and equipment 24.5 23.9 24.2
Right of use assets 8.8 9.7 8.8
Intangible assets 149.8 156.8 152.5
Investment in associate 6 4.6 3.8 4.6
Long-term receivables - 0.9 0.3
Retirement benefit asset 3.4 - -
Deferred tax assets 16.0 15.4 15.3
----------------------------------------- ---- ------------- ------------- ---------
207.1 210.5 205.7
----------------------------------------- ---- ------------- ------------- ---------
Current assets
Inventories 65.5 64.6 60.8
Trade and other receivables 75.1 61.9 78.3
Current income tax receivable 0.8 2.1 2.4
Derivative financial instruments 10 0.9 1.0 1.1
Cash and cash equivalents 42.1 18.9 35.2
----------------------------------------- ---- ------------- ------------- ---------
184.4 148.5 177.8
----------------------------------------- ---- ------------- ------------- ---------
Total assets 391.5 359.0 383.5
----------------------------------------- ---- ------------- ------------- ---------
Equity
Capital and reserves attributable to the
Company's equity Shareholders
Share capital 2.9 2.9 2.9
Share premium 61.7 61.7 61.7
Other reserves 0.2 0.2 0.2
Translation reserve 16.1 13.8 13.4
Retained earnings 134.8 102.0 124.0
----------------------------------------- ---- ------------- ------------- ---------
215.7 180.6 202.2
----------------------------------------- ---- ------------- ------------- ---------
Liabilities
Non-current liabilities
Bank loans 27.9 27.3 27.9
Lease payables 5.8 7.5 6.0
Retirement benefit obligations - 9.9 6.5
Provisions 1.0 1.3 1.1
Deferred tax liabilities 6.6 5.2 6.3
----------------------------------------- ---- ------------- ------------- ---------
41.3 51.2 47.8
----------------------------------------- ---- ------------- ------------- ---------
Current liabilities
Bank loans and overdrafts - 4.1 0.6
Trade and other payables 109.1 99.9 116.9
Lease payables 3.4 2.3 3.0
Retirement benefit obligations 0.8 - -
Current income tax payables 3.5 4.7 4.3
Accrued dividend 6.1 5.5 -
Derivative financial instruments 10 4.2 1.6 1.1
Provisions 7.4 9.1 7.6
----------------------------------------- ---- ------------- ------------- ---------
134.5 127.2 133.5
----------------------------------------- ---- ------------- ------------- ---------
Total liabilities 175.8 178.4 181.3
----------------------------------------- ---- ------------- ------------- ---------
Total liabilities and equity 391.5 359.0 383.5
----------------------------------------- ---- ------------- ------------- ---------
Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2019 - unaudited
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
Note GBPm GBPm GBPm
-------------------------------------------------- ---- ---------- ---------- ------
Profit for the period from continuing
operations 14.2 8.9 30.0
Profit for the period from discontinued
operations 7 - - (1.3)
-------------------------------------------------- ---- ---------- ---------- ------
Profit for the period from continuing
operations 14.2 8.9 28.7
Adjustments for:
Income tax expense 3.8 2.7 6.8
Net financial expense 0.4 2.1 3.1
Fair value movement on financial derivatives 2.6 2.9 1.5
Restructuring costs - relating to associate - 0.3 0.3
Past service cost on defined benefit pension
scheme - - 0.3
Share of impairment recognised by associate - (0.6) (0.6)
Amortisation of acquired intangibles 4.8 4.7 9.6
Depreciation of right of use assets 1.8 1.7 3.3
Depreciation of property, plant and equipment 2.2 2.2 3.9
Amortisation and impairment of capitalised
development costs 1.2 1.5 3.5
Amortisation and impairment of capitalised
software costs - - 0.3
-------------------------------------------------- ---- ---------- ---------- ------
Adjusted earnings before interest, tax,
depreciation and amortisation 31.0 26.4 60.7
Loss on disposal of plant, property and
equipment - - 0.2
Charge in respect of equity settled employee
share schemes 2.0 0.4 0.8
Share of loss/(profit) of associate - 0.6 (0.2)
Restructuring costs paid - (0.7) (0.7)
Cash payments to the pension scheme more
than the charge to operating profit (6.1) (3.5) (7.1)
-------------------------------------------------- ---- ---------- ---------- ------
Operating cash flows before movements
in working capital 26.9 23.2 53.7
Increase in inventories (3.8) (7.9) (4.0)
Decrease/(increase) in receivables 3.6 12.6 (3.5)
(Decrease)/increase in payables and provisions (9.7) (7.7) 4.1
(Decrease)/increase in customer deposits (0.5) 1.8 7.1
Purchase of rental assets held for subsequent
sale (0.1) (0.6) (1.1)
-------------------------------------------------- ---- ---------- ---------- ------
Cash generated from operations 16.4 21.4 56.3
Interest paid (1.6) (2.3) (3.5)
Income taxes paid (3.5) (4.7) (8.7)
-------------------------------------------------- ---- ---------- ---------- ------
Net cash from operating activities - continuing
operations 11.3 14.4 44.1
Net cash from operating activities - discontinued
operations 1.6 - -
-------------------------------------------------- ---- ---------- ---------- ------
Net cash from operating activities 12.9 14.4 44.1
-------------------------------------------------- ---- ---------- ---------- ------
Cash flows from investing activities
Acquisition of property, plant and equipment (2.0) (2.4) (4.1)
Acquisition of intangible assets - (1.0) (2.2)
Capitalised development expenditure (2.2) (1.5) (3.5)
Decrease in long-term receivables 0.5 0.6 1.1
Interest received 0.5 - 0.3
-------------------------------------------------- ---- ---------- ---------- ------
Net cash used in investing activities (3.2) (4.3) (8.4)
-------------------------------------------------- ---- ---------- ---------- ------
Cash flows from financing activities
Proceeds from exercise of share options 0.2 - 0.2
Payments made in respect of lease liabilities (1.6) (1.6) (3.2)
Repayment of borrowings - (8.6) (11.5)
Dividends paid (2.2) (2.1) (7.6)
-------------------------------------------------- ---- ---------- ---------- ------
Net cash used in financing activities (3.6) (12.3) (22.1)
-------------------------------------------------- ---- ---------- ---------- ------
Net increase/(decrease) in cash and cash
equivalents 6.1 (2.2) 13.6
Cash and cash equivalents at beginning
of the period 35.2 20.7 20.7
Effect of exchange rate fluctuations on
cash held 0.8 0.4 0.9
-------------------------------------------------- ---- ---------- ---------- ------
Cash and cash equivalents at end of the
period 42.1 18.9 35.2
-------------------------------------------------- ---- ---------- ---------- ------
Notes to the Half-year Financial Statements
Half-year ended 30 September 2019 - unaudited
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 EU. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated Financial
Statements of the Group for the year ended 31 March 2019.
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 2019 are not the Company's statutory accounts for
that financial year. Those accounts have been reported on by the
Company's auditors and delivered to the registrar of companies. The
report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of Financial
Statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated Financial Ftatements for the year ended 31
March 2019 except as note below.
Prior period adjustment
During the year, the Directors reviewed the classification of
costs in the Income Statement with a particular focus on whether
items are reported within cost of sales or operating expenses. As a
result of this review a number of reclassifications were made the
most significant being that outward freight costs and commissions
paid to employees and external agents are better presented within
cost of sales rather than within selling and marketing expenses.
The Directors consider this to be a better presentation since gross
margin is now a clearer indicator of commercial performance and
overheads a clearer indicator of cost control. Consequently, the
previously published figures for the half year to 30 September 2018
and the year to 31 March 2019 have been restated. The effect on the
half year to 30 September 2018 has been to increase cost of sales
by GBP4.8m and reduce research and development costs by GBP0.3m,
selling and marketing costs by GBP4.3m and administration and
shared services by GBP0.2m. The effect on the year to 31 March 2019
has been to increase cost of sales by GBP10.0m and reduce research
and development costs by GBP0.6m, selling and marketing costs by
GBP9.2m and administration and shared services by GBP0.2m. There is
no impact on any other primary statement at any reporting date.
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 2019.
Going concern
The condensed consolidated half-year Financial Statements have
been prepared on a going concern basis, based on the Directors'
opinion, after making reasonable enquiries, that the Group has
adequate resources to continue in operational existence for the
foreseeable future.
Exchange rates
The principal exchange rates used to translate the Group's
overseas results were as follows:
Period-end rates Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
----------------- ---------- ---------- ------
US Dollar 1.23 1.30 1.30
Euro 1.13 1.12 1.16
Japanese Yen 133 148 144
----------------- ---------- ---------- ------
Average translation rates US Dollar Euro Japanese
Yen
Half year to 30 September 2019
------------------------------- --------- ---- --------
April 1.30 1.16 144
May 1.28 1.15 142
June 1.27 1.13 138
July 1.26 1.12 136
August 1.23 1.11 132
September 1.23 1.12 132
------------------------------- --------- ---- --------
Average translation rates US Dollar Euro Japanese
Yen
Year to 31 March 2019
-------------------------- --------- ---- --------
April 1.39 1.14 150
May 1.36 1.14 148
June 1.33 1.14 146
July 1.32 1.13 146
August 1.30 1.12 144
September 1.29 1.11 146
October 1.29 1.13 145
November 1.28 1.13 144
December 1.28 1.12 142
January 1.30 1.13 142
February 1.31 1.15 145
March 1.30 1.16 144
-------------------------- --------- ---- --------
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 year from continuing
operations, adjusted EBITDA, adjusted EPS, adjusted cash conversion
and adjusted effective tax rate. Details of adjusting items are
given below.
Adjusted EBITDA is calculated by adding back depreciation of
property, plant and equipment, depreciation of right of use assets
and amortisation of intangible assets to adjusted operating profit,
and can be found in the Consolidated Statement of Cash Flows. The
calculation of adjusted EPS can be found in Note 3. Adjusted
effective tax rate is calculated by dividing the share of tax
attributable to adjusted profit before tax by adjusted profit
before tax. The definition of cash conversion is set out in the
Finance Review.
Reconciliation between operating profit and profit before income
tax and adjusted profit from continuing operations
Half year to Half year to Year to 31
30 September 30 September March 2019
2019 2018
------------------ ------------------ ------------------
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 from
continuing operations 18.4 18.0 13.7 11.6 38.6 35.5
Restructuring costs - relating
to associate - - 0.3 0.3 0.3 0.3
--------------------------------- --------- ------- --------- ------- --------- -------
Business reorganisation
items - - 0.3 0.3 0.3 0.3
Past service cost on defined
benefit pension scheme - - - - 0.3 0.3
Share of impairment recognised
by associate - - (0.6) (0.6) (0.6) (0.6)
Amortisation and impairment
of acquired intangibles 4.8 4.8 4.7 4.7 9.6 9.6
Mark-to-market loss in
respect of derivative financial
instruments 2.6 2.6 2.9 2.9 1.5 1.5
Loan note make-whole payable - 0.9 0.9
--------------------------------- --------- ------- --------- ------- --------- -------
Total non-GAAP adjustments 7.4 7.4 7.3 8.2 11.1 12.0
Adjusted measure from continuing
operations 25.8 25.4 21.0 19.8 49.7 47.5
Share of taxation (5.1) (4.2) (10.4)
--------------------------------- --------- ------- --------- ------- --------- -------
Adjusted profit for the
year from continuing operations 25.8 20.3 21.0 15.6 49.7 37.1
--------------------------------- --------- ------- --------- ------- --------- -------
Adjusted effective tax
rates 20.1% 21.2% 21.9%
Restructuring costs - relating to associate
These represent the Group's share of mergers and acquisition
costs and other one-off items incurred by the associate.
Past service cost on defined benefit pension scheme
As at 31 March 2019, the IAS 19 defined benefit pension balance
sheet liability includes an allowance of GBP0.3m for the expected
cost of equalising Guaranteed Minimum Pension ("GMP") between males
and females.
GMP is a portion of pension that was accrued by individuals who
were contracted out of the UK State Second Pension prior to 6 April
1997. Historically, there was an inequality of benefits between
male and female members who have GMP. A High Court case concluded
on 26 October 2018 and confirmed that GMPs need to be
equalised.
Share of impairment recognised by associate
During the year to 31 March 2018 the Group's equity accounted
associate recognised an impairment relating to the disposal of its
Vacgen subsidiary. The Group's share of this impairment was
GBP2.0m. Following the completion and finalisation of the
transaction, GBP0.6m of the impairment was been reversed in the
year to 31 March 2019.
Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and
impairment of acquired intangible assets and goodwill.
Mark-to-market loss in respect of derivative financial
instruments
Under IFRS 9, all derivative financial instruments are
recognised initially at fair value. Subsequent to initial
recognition, they are also measured at fair value. In respect of
instruments used to hedge foreign exchange risk and interest rate
risk, the Group does not take advantage of the hedge accounting
rules provided for in IFRS 9 since that standard requires certain
stringent criteria to be met in order to hedge account, which, in
the particular circumstances of the Group, are considered by the
Board not to bring any significant economic benefit. Accordingly,
the Group accounts for these derivative financial instruments at
fair value through profit or loss. To the extent that instruments
are hedges of future transactions, adjusted profit for the year is
stated before changes in the valuation of these instruments so that
the underlying performance of the Group can be more clearly
seen.
Loan note make-whole payable
During the year to 31 March 2019 the Group repaid GBP11.6m of
the principal outstanding on its loan notes. This payment was
necessary due to material changes to the Group's structure
following the disposal of its Industrial Analysis business during
July 2017. The costs of GBP0.9m relate to the make-whole balance
payable upon settlement of the GBP11.6m principal.
Share of taxation
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 Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- ------
Net increase/(decrease) in cash and cash
equivalents 6.1 (2.2) 13.6
Effect of foreign exchange rate changes on
cash and cash equivalents 0.8 0.4 0.9
------------------------------------------- ---------- ---------- ------
6.9 (1.8) 14.5
Repayment of borrowings - 8.6 11.5
Movement in accrued interest 0.6 0.4 0.4
Movement in net cash in the period 7.5 7.2 26.4
Net cash/(debt) at start of the period 6.7 (19.7) (19.7)
------------------------------------------- ---------- ---------- ------
Net cash/(debt) at the end of the period 14.2 (12.5) 6.7
------------------------------------------- ---------- ---------- ------
Reconciliation of net cash/(debt) to Statement of Financial
Position
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ------
Loan notes - unsecured (27.9) (28.5) (28.5)
Bank loans - unsecured - (2.9) -
Cash and cash equivalents (per Balance Sheet) 42.1 18.9 35.2
---------------------------------------------- ---------- ---------- ------
Net cash/(debt) at the end of the period 14.2 (12.5) 6.7
---------------------------------------------- ---------- ---------- ------
3 Earnings per share
Basic and diluted EPS from continuing operations are based on
the result for the year from continuing operations, as reported in
the Group Income Statement. Basic and diluted EPS from total
operations are based on the result for the year attributable to
equity Shareholders of the parent. Adjusted and diluted adjusted
EPS are based on adjusted profit for the year from continuing
operations. The profit measures noted above are divided by the
weighted average number of ordinary shares outstanding during the
year, excluding shares held by the Employee Share Ownership Trust.
The table below reconciles these different profit measures.
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
GBPm GBPm GBPm
---------------------------------------------------- ---------- ---------- ------
Profit for the year attributable to equity
Shareholders of the parent 14.2 8.9 30.0
Discontinued operations - - (1.3)
Adjusting items:
Business reorganisation items - 0.3 0.3
Past service cost on defined benefit pension
scheme - - 0.3
Share of impairment recognised by associate - (0.6) (0.6)
Amortisation and impairment of acquired intangibles 4.8 4.7 9.6
Mark-to-market gain in respect of derivative
financial instruments 2.6 2.9 1.5
Loan note make-whole payable - 0.9 0.9
Income tax credit (1.3) (1.5) (3.6)
---------------------------------------------------- ---------- ---------- ------
Adjusted profit for the year from continuing
operations 20.3 15.6 37.1
---------------------------------------------------- ---------- ---------- ------
The weighted average number of shares used in the calculation
excludes shares held by the Employee Share Ownership Trust, and is
as follows:
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
Shares Shares Shares
million million million
---------------------------------------------- ---------- ---------- -------
Weighted average number of shares outstanding 57.4 57.4 57.4
Less: weighted average number of shares held
by Employee Share Ownership Trust (0.2) (0.2) (0.2)
---------------------------------------------- ---------- ---------- -------
Weighted average number of shares used in
calculation of basic earnings per share 57.2 57.2 57.2
---------------------------------------------- ---------- ---------- -------
The following table shows the effect of share options on the
calculation of diluted earnings per share:
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
Shares Shares Shares
million million million
----------------------------------------------- ---------- ---------- -------
Number of ordinary shares per basic earnings
per share calculations 57.2 57.2 57.2
Effect of shares under option 0.6 0.5 0.5
----------------------------------------------- ---------- ---------- -------
Number of ordinary shares per diluted earnings
per share calculations 57.8 57.7 57.7
----------------------------------------------- ---------- ---------- -------
4 Segment information
The Group has ten 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, sale and
rental of third-party healthcare imaging systems.
The Group's internal management structure and financial
reporting systems have been amended to differentiate the three
aggregated operating segments on the basis of 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. Inter-segment pricing is determined on an arm's
length basis. The operating results of each are regularly reviewed
by the Chief Operating Decision Maker, which is deemed to be the
Board of Directors. Discrete financial information is available for
each segment and used by the Board of Directors for decisions on
resource allocation and to assess performance. No asset information
is presented below as this information is not presented in
reporting to the Group's Board of Directors.
Results from continuing operations
Half year to 30 September 2019 Materials Research Service Total
& Characterisation & Discovery & Healthcare
GBPm GBPm GBPm GBPm
---------------------------------- ------------------- ------------ ------------- -----
External revenue 69.8 61.2 35.3 166.3
Inter-segment revenue - - -
---------------------------------- ------------------- ------------ -------------
Total segment revenue 69.8 61.2 35.3
---------------------------------- ------------------- ------------ -------------
Segment adjusted operating profit
from continuing operations 12.2 6.4 7.2 25.8
---------------------------------- ------------------- ------------ ------------- -----
Half year to 30 September 2018 Materials Research Service Total
& Characterisation & Discovery & Healthcare
GBPm GBPm GBPm GBPm
---------------------------------- ------------------- ------------ ------------- -----
External revenue 60.1 54.3 32.6 147.0
Inter-segment revenue - - -
---------------------------------- ------------------- ------------ -------------
Total segment revenue 60.1 54.3 32.6
---------------------------------- ------------------- ------------ -------------
Segment adjusted operating profit
from continuing operations 9.7 4.8 6.5 21.0
---------------------------------- ------------------- ------------ ------------- -----
Year to 31 March 2019 Materials Research Service Total
& Characterisation & Discovery & Healthcare
GBPm GBPm GBPm GBPm
---------------------------------- ------------------- ------------ ------------- -----
External revenue 137.9 125.2 70.5 333.6
Inter-segment revenue - - -
---------------------------------- ------------------- ------------ -------------
Total segment revenue 137.9 125.2 70.5
---------------------------------- ------------------- ------------ -------------
Segment adjusted operating profit
from continuing operations 22.1 12.7 14.9 49.7
---------------------------------- ------------------- ------------ ------------- -----
Reconciliation of reportable segment profit from continuing
operations
Half year to 30 September Materials Research Service Unallocated Total
2019 & Characterisation & Discovery & Healthcare Group
items
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------------- ------------ ------------- ----------- -----
Segment adjusted operating
profit from continuing
operations 12.2 6.4 7.2 - 25.8
Amortisation and impairment
of acquired intangibles (1.2) (3.2) (0.4) - (4.8)
Fair value movement on
financial derivatives - - - (2.6) (2.6)
Financial income - - - 0.5 0.5
Financial expenditure - - - (0.9) (0.9)
-------------------------------- ------------------- ------------ ------------- ----------- -----
Profit/(loss) before income
tax from continuing operations 11.0 3.2 6.8 (3.0) 18.0
-------------------------------- ------------------- ------------ ------------- ----------- -----
Half year to 30 September Materials Research Service Unallocated Total
2018 & Characterisation & Discovery & Healthcare Group
items
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------------- ------------ ------------- ----------- -----
Segment adjusted operating
profit from continuing
operations 9.7 4.8 6.5 - 21.0
Restructuring costs -
relating to associates - (0.3) - - (0.3)
Share of impairment recognised
by associate - 0.6 - - 0.6
Amortisation and impairment
of acquired intangibles (1.1) (3.2) (0.4) - (4.7)
Fair value movement on
financial derivatives - - - (2.9) (2.9)
Financial income - - - 0.1 0.1
Financial expenditure - - - (2.2) (2.2)
-------------------------------- ------------------- ------------ ------------- ----------- -----
Profit/(loss) before income
tax from continuing operations 8.6 1.9 6.1 (5.0) 11.6
-------------------------------- ------------------- ------------ ------------- ----------- -----
Year to 31 March 2019 Materials Research Service Unallocated Total
& Characterisation & Discovery & Healthcare Group
items
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------------- ------------ ------------- ----------- -----
Segment adjusted operating
profit from continuing
operations 22.1 12.7 14.9 - 49.7
Restructuring costs -
relating to associates - (0.3) - - (0.3)
Past service cost on defined
benefit pension scheme - - - (0.3) (0.3)
Share of impairment recognised
by associate - 0.6 - - 0.6
Amortisation and impairment
of acquired intangibles (2.4) (6.4) (0.8) - (9.6)
Fair value movement on
financial derivatives - - - (1.5) (1.5)
Financial income - - - 0.3 0.3
Financial expenditure - - - (3.4) (3.4)
-------------------------------- ------------------- ------------ ------------- ----------- -----
Profit/(loss) before income
tax from continuing operations 19.7 6.6 14.1 (4.9) 35.5
-------------------------------- ------------------- ------------ ------------- ----------- -----
5 Research and development ("R&D")
The total research and development spend by the Group is as
follows:
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018 as restated*
as restated*
GBPm GBPm GBPm
-------------------------------------------------- ---------- ------------- -------------
R&D expense charged to the Consolidated Statement
of Income 11.9 12.0 24.8
Less: depreciation of R&D-related fixed assets - - (0.1)
Add: amounts capitalised as fixed assets 0.1 - 0.1
Less: amortisation of R&D costs previously
capitalised as intangibles (1.2) (1.5) (3.5)
Add: amounts capitalised as intangible assets 2.2 1.5 3.5
-------------------------------------------------- ---------- ------------- -------------
Total cash spent on R&D during the year 13.0 12.0 24.8
-------------------------------------------------- ---------- ------------- -------------
* Details of restatement of prior period numbers can be found in
Note 1.
6 Investment in associate
The Group's share of profit in its equity accounted associate,
Scienta Scientific AB ("Scienta"), for the period was GBPnil (prior
half year: GBP0.3m loss; prior full year: GBP0.5m profit). The
Group did not receive any dividends from the associate in the
current or prior periods.
7 Discontinued operations
During the period the Group received GBP1.6m being a receipt of
additional proceeds in respect of the sale of the Industrial
Analysis business in July 2017.
During the prior year the Group recognised GBP1.6m, of income
representing additional proceeds due in respect of the sale of the
Industrial Analysis business in July 2017 and an associated tax
charge of GBP0.3m.
8 Taxation
The total effective tax rate on profits for the half year is
21.1% (prior half year: 23.3%). The weighted average tax rate in
respect of adjusted profit before tax (see Note 2) for the half
year is 20.1% (prior half year: 21.2%).
For the full year the Group expects the tax rate in respect of
adjusted profit before tax to be 20.0%.
9 Dividends per share
The following dividends per share were paid by the Group:
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
pence pence pence
----------------- ---------- ---------- ------
Interim dividend 3.8 3.7 3.7
Final dividend - - 9.6
----------------- ---------- ---------- ------
3.8 3.7 13.3
----------------- ---------- ---------- ------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
pence pence pence
--------------------------------- ---------- ---------- ------
Previous period interim dividend 4.1 3.8 3.8
Previous period final dividend - - 10.6
--------------------------------- ---------- ---------- ------
4.1 3.8 14.4
--------------------------------- ---------- ---------- ------
The final dividend for the year to 31 March 2019 was approved by
Shareholders at the Annual General Meeting held on 10 September
2019. Accordingly, it is no longer at the discretion of the Company
and has been included as a liability as at 30 September 2019. It
was paid on 18 October 2019.
The interim dividend for the year to 31 March 2020 of 4.1 pence
was approved by the Board on 12 November 2019 and has not been
included as a liability as at 30 September 2019. The interim
dividend will be paid on 14 April 2020 to Shareholders on the
register at the close of business on 6 March 2020.
10 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Half year to Half year to Year to 31
30 September 30 September March 2019
2019 2018
---------------- ---------------- ----------------
Fair Carrying Fair Carrying Fair Carrying Fair
value amount value amount value amount value
hierachy
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- -------- ------ -------- ------ -------- ------
Assets carried at
amortised cost
Long-term receivables - 0.9 0.3
Trade receivables 63.4 49.9 64.7
Other receivables 7.0 8.3 10.0
Cash and cash equivalents 42.1 18.9 35.2
-------------------------- --------- -------- ------ -------- ------ -------- ------
Assets carried at
fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 0.9 0.9 1.0 1.0 1.1 1.1
-------------------------- --------- -------- ------ -------- ------ -------- ------
Liabilities carried
at fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 (4.2) (4.2) (1.6) (1.6) (1.1) (1.1)
-------------------------- --------- -------- ------ -------- ------ -------- ------
Liabilities carried
at amortised cost
Trade and other payables (56.6) (58.6) (65.7)
Borrowings (27.9) (31.4) (28.5)
Lease payables (9.2) (9.8) (9.0)
-------------------------- --------- -------- ------ -------- ------ -------- ------
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using
market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is
estimated by discounting the future contracted principal and
interest cash flows using the market rate of interest at the
reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the carrying amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine their fair
value. Advances received are excluded from other payables above as
these are not considered to be financial liabilities.
Lease payables
The lease liability is measured at amortised cost using the
effective interest method.
Fair value hierachy
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.
11 Related parties
All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
During the period, the Group supplied services and materials to,
and purchased services and materials from, a subsidiary of its
associate on an arm's length basis. It had the following
transactions during the period:
Transactions with ScientaOmicron GmbH Half Half Year
year year to 31
to 30 to 30 March
September September 2019
2019 2018
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ------
Purchases - 0.7 0.7
Receivables at period end - 2.1 1.4
Included on the Balance Sheet is a long-term loan receivable of
GBPnil (September 2018: GBP0.9m, March 2019: GBP0.3m) and a current
loan receivable of GBP0.8m (September 2018: GBP1.1m, March 2019:
GBP1.1m) due from Scienta Scientific AB. The loan is repayable by
the end of May 2020. During the period the Group received interest
charged on the loan of GBP0.1m (six months to September 2018:
GBP0.1m, year to March 2019: GBP0.2m).
Independent review report to Oxford Instruments plc
Conclusion
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 2019 which comprises the Condensed
Consolidated Statement of Income, the Condensed Consolidated
Statement of Comprehensive Income, Condensed Consolidated Statement
of Financial Position, Condensed Consolidated Statement of Changes
in Equity, Condensed Consolidated Statement of Cash Flows and the
related explanatory notes.
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 2019 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
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.
The impact of uncertainties due to the UK exiting the European
Union on our review
Uncertainties related to the effects of Brexit are relevant to
understanding our review of the condensed financial statements.
Brexit is one of the most significant economic events for the UK,
and at the date of this report its effects are subject to
unprecedented levels of uncertainty of outcomes, with the full
range of possible effects unknown. An interim review cannot be
expected to predict the unknowable factors or all possible future
implications for a company and this is particularly the case in
relation to Brexit.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The Directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Mike Barradell
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
12 November 2019
Principal Risks and Uncertainties
Information regarding the risk management process in place at
the Group is set out on page 43 of the 2019 Annual Report. The
principal risks and uncertainties identified through that process
are set out on pages 44 to 47 of the 2019 Annual Report 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 2019. It has evaluated the disclosures made on pages 44
to 47 of the 2019 Annual Report and has concluded that the risks
identified remain relevant for the remainder of the year-ending 31
March 2020 and that there are no other significant risks to be
disclosed. A summary of the risks identified is set out below:
-- routes to market;
-- technical risk;
-- economic environment;
-- political risk;
-- legal/compliance risk;
-- Brexit-related risks;
-- adverse movements in long-term foreign currency rates;
-- supply chain risk;
-- people;
-- IT risk;
-- operational risk; and
-- pensions.
The continuing lack of clarity relating to Brexit means that
uncertainty over the potential impact of Brexit remains. The Group
has assessed the key risks arising from Brexit and concluded that
the most significant short-term risks arise from a possible no-deal
Brexit, due to the potential disruption to the supply chain that
could arise as a result.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFSALFLLLIA
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