REG - Oxford Instruments - Half-year Results
09/11/2021 07:00
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RNS Number : 7230R Oxford Instruments PLC 09 November 2021
Oxford Instruments plc
Announcement of Half-year Results for the six months to 30 September 2021
Oxford Instruments plc, a leading provider of high technology products and
systems for industry and research, today announces its Half-year Results for
the six months to 30 September 2021.
% change
Half year to Half year to organic
30 September 30 September % change constant
Adjusted(1) 2021 2020 reported currency(4)
Revenue £170.1m £140.3m +21.2% +26.8%
Adjusted operating profit £30.6m £24.3m +25.9% +28.0%
Adjusted operating profit margin 18.0% 17.3% +70bps
Adjusted profit before taxation £30.2m £23.7m +27.4%
Adjusted basic earnings per share 41.2p 32.8p +25.6%
Cash conversion(2) 48% 97%
Net cash(3) £70.1m £81.4m
1. Adjusted items exclude the amortisation and impairment of acquired
intangible assets, acquisition items, profit or loss on disposal of
operations, other significant non‑recurring items, and the mark-to-market
movement of financial derivatives. A full definition of adjusted numbers can
be found in the Finance Review and Note 1.
2. Cash conversion measures the percentage of adjusted cash from
operations to adjusted operating profit, as set out in the Finance Review.
3. Net cash includes total borrowings, cash at bank and bank overdrafts
but excludes IFRS 16 lease liabilities.
4. Constant currency numbers are prepared on a month-by-month basis
using the translational and transactional exchange rates which prevailed in
the previous year rather than the actual exchange rates which prevailed in the
year. Transactional exchange rates include the effect of our hedging
programme. Organic numbers remove the impact from the acquisition of WITec.
5. Return on sales is defined as adjusted profit before taxation
expressed as a percentage of revenue.
Half year to Half year to
30 September 30 September % change
Statutory 2021 2020 reported
Revenue £170.1m £140.3m +21.2%
Operating profit £21.8m £20.8m +4.8%
Operating profit margin 12.8% 14.8% (200 bps)
Profit before taxation £21.4m £20.2m +5.9%
Basic earnings per share 28.7p 27.7p +3.6%
Interim dividend per share 4.4p 4.1p +7.3%
Financial Highlights
· Revenue growth of 26.8% at organic constant currency against weak
comparator period (+13.5% vs half year 2019)
· Strong growth in orders of 18.3% at organic constant currency
(+26.0% vs half year 2019)
· Reported order book grew by 13.2% (13.3% at organic constant
currency), providing good visibility for the year ahead
· Strong growth in adjusted operating profit with margin rising to
18.0%
· Cash conversion of 48% reflects an increase in inventories to
support order intake and mitigate supply chain disruption, timing of shipments
and a resumption in capital expenditure
· Growth in interim dividend of 7.3% to 4.4p per share
Operational Highlights
· Improved financial performance reflecting strong position in
attractive, structural growth markets
· Global sustainability agenda strengthening the structural growth
drivers for our market
· Strong customer demand, with double-digit order growth across
Europe, North America and Asia
· Good strategic progress supporting profit growth and enhanced
margin; increased investment in future growth opportunities
· Strong order and revenue growth across commercial and academic
customers reflecting buoyant semiconductor, advanced materials and quantum
markets, with recovery in life science
· WITec acquisition complements existing portfolio, providing
additional opportunities for growth
· Order conversion to revenue impacted by prolonged customer-related
administrative processes and delays in obtaining export licences
Summary and Outlook:
( )
Ian Barkshire, Chief Executive of Oxford Instruments plc, said:
"We have emerged from the pandemic a stronger, more focused and efficient
business, even more aligned to the needs of our customers in end markets with
structural growth drivers. We are increasing our investment to take advantage
of these growth opportunities, providing the foundation for good growth and
medium-term expansion.
"Whilst supply chain pressures will moderate conversion of orders to revenue
and drive cost inflation in the second half, our strategic alignment to a
range of attractive end markets, combined with our strong opportunity pipeline
and healthy order book, provides us with good momentum going into the second
half. Our expectations for further progress in the year are unchanged."
Note: Oxford Instruments plc compiled analyst consensus forecast for adjusted
operating profit (year to 31 March 2022), is £62.9m
LEI: 213800J364EZD6UCE231
Enquiries:
Oxford Instruments plc
Ian Barkshire, Chief Executive Gavin Hill, Group Finance Director
Tel: 01865 393200
MHP Communications
Katie Hunt/Rachel Mann/Florence Mayo
Number of pages: 33
Tel: 020 3128 8100
Chief Executive's Review
Introduction
We emerge from the pandemic a stronger, more focused business, even more
aligned to the needs of our customers and addressing end markets with
long-term structural growth drivers providing a foundation for good growth and
medium-term margin expansion.
As a global provider of high technology products and solutions to the world's
leading industrial companies and foremost scientific research institutes,
we recognise our responsibility and role in the advancement of society,
helping to create a more sustainable future. Our purpose, to enable a greener,
healthier, more connected advanced society for all, puts us at the heart of
many global and corporate sustainability initiatives. This has led to
increased demand for our world-class solutions and underpins our confidence
in our future growth potential.
The Group delivered a strong performance in the first half with significant
organic constant currency order, order book and revenue growth, reflecting a
robust recovery in demand from our commercial, academic and government-funded
customers across our end markets. Continued profit and margin growth in the
period highlights the resilience of our business model and the operational
efficiency improvements embedded through our Horizon strategy across the
Group.
We have continued to make good progress in the delivery of our strategy,
building further on our market intimacy, successful new product launches, and
have made excellent progress with our operational excellence and service
transformation programmes.
In September we acquired WITec Wissenschaftliche Instrumente und Technologie
GmbH ("WITec"), a leading Raman and optical imaging solutions business,
further enhancing our market offering. With excellent revenue synergies across
our target markets, this acquisition will strengthen our materials analysis
solutions portfolio, providing additional capabilities to our existing
customers and helping us expand into new and adjacent markets.
Key to our performance in the first half has been how our employees have
embraced new ways of working, helping us establish and embed more effective
and efficient ways to support and engage with our global customers, optimise
our internal operations and deliver our strategic product roadmaps.
The Group has successfully developed a hybrid workplace model, enabling us to
better utilise our global resources and facilities whilst maintaining the
essential connectivity between our teams. Our goal is to create a safe and
vibrant workplace environment where employees can build successful careers,
make a personal impact on the world, and enjoy a healthy work-life balance.
Strong structural market growth drivers: short-term pressures largely
mitigated in the half
Our end markets have remained robust throughout the pandemic. The global
economic recovery and increasing sustainability agenda have strengthened and
reinforced their underlying growth drivers, providing greater impetus within
governments and commercial organisations. This is resulting in increased
funding within our target markets and is accelerating roadmaps for customers
requiring new, higher performing, easier-to-use solutions.
This is particularly evident in the expanding demand for semiconductors,
driven by the need for exponential increases in digital data, connectivity,
and bandwidth. Within life sciences, the ability to accelerate the delivery
of new medicines and therapies at a fraction of the cost is being made
possible by understanding the fundamental disease mechanisms and the efficacy
of treatments at the cellular and molecular level. Materials are the building
blocks of modern society, and the development of new, higher performing
materials will play an ever-more important role in delivering a pathway to a
more sustainable society.
Whilst our chosen markets and customers are driving growth, there remain
bottlenecks which have impacted revenue, including ongoing travel
restrictions, limited access to some customer sites, as well as prolonged
administrative processes and continued delays with export license.
Furthermore, the rapid recovery across the wider global economy has led to
increasing supply chain disruption and inflationary pressures as we have
progressed through the half. We continue to mitigate operational challenges as
we move into the second half through building even stronger relationships with
our strategic supply chain partners and increasing forward orders of our own
inventory levels in specific areas. Throughout the first half, we experienced
inflationary headwinds including elevated logistics costs and increased
component and raw material pricing. The strength of our brand and ongoing
gains from our operational excellence programme have provided some resilience
in the first half, and will be a key part in our mitigation against ongoing
inflationary pressures.
Results: strong financial performance and order momentum
The Group delivered a strong financial performance in the first half with
robust constant currency order, revenue, and operating profit growth and a
continued improvement in operating margin, against both H1 2020 and H1 2019,
highlighting the underlying health of our end markets and the strength of our
product portfolio.
H1 2021 % reported growth vs H1 2020 % reported growth vs H1 2019 % organic constant currency growth vs H1 2020 % organic constant currency growth vs H1 2019
Orders £198.3m 12.9% 19.7% 18.3% 26.0%
Revenue £170.1m 21.2% 7.9% 26.8% 13.5%
Adjusted operating profit £30.6m 25.9% 16.8% 28.0% 17.6%
Adjusted operating margin 18.0% 70bps 140bps 50bps 80bps
Statutory operating profit £21.8m 4.8% 13.0%
Statutory operating margin 12.8% (200bps) 60bps
Reported orders for the Group increased to £198.3m (2020: £175.7m) up 12.9%,
representing 18.3% growth on an organic constant currency basis against the
comparative period. This growth reflected significant demand from commercial
customers and good demand from academic and government-funded institutions.
Compared to H1 2019, the Group saw a 26.0% increase in orders, on an organic
constant currency basis, with double-digit increases in demand from both
academic and commercial customers.
From an end market perspective, increased customer demand supported strong
order growth across Healthcare & Lifescience, Semiconductor &
Communications, Quantum Technology and Energy & Environment market
segments. Orders to customers involved in Research & Fundamental Science
declined in the period, due in part to ongoing covid-related disruption in
this market segment.
Strong demand also led to significant order growth across the Materials &
Characterisation and Research & Discovery sectors, whilst progress with
our service transformation supported strong order growth in the Service &
Healthcare sector.
At a regional level, we had strong double‑digit order growth across Europe,
North America and Asia. Within Asia, orders to China grew 19.6% on a constant
currency basis (14.6% on a reported basis) supported by strong growth to
commercial customers across Semiconductor, Advanced Materials, and Quantum
applications.
Continued order momentum, together with the partial easing of covid-related
travel and customer site access restrictions supported reported revenue growth
of 21.2% to £170.1m (2020: £140.3m), also representing strong
growth relative to H1 2019. WITec contributed £1.8m of revenue in the month
following acquisition.
Revenue grew in each of our sectors, up 34% in Materials &
Characterisation, 23% in Research & Discovery and 15% in Service &
Healthcare, on an organic constant currency basis, with double‑digit growth
to both academic and commercial customers.
The proportion of revenue to commercial customers increased to 50% in the
period (2020: 46%).
From an end market perspective, we had strong revenue growth across all our
segments apart from Research & Fundamental Science due to ongoing travel
and customer site restrictions. Strength of demand slightly increased the
proportion of sales within Semiconductor & Communications to 31% of
revenue, Advanced Materials to 30% of revenue and Quantum Technology to 7% of
revenue. Healthcare & Lifescience represented 19% of revenue with Energy
& Environment and Research & Fundamental Science at 8% and 5%
respectively.
Regionally, revenue profiles remained strongly influenced by the timing and
extent of the easing of covid-related restrictions, affecting our ability to
deliver on the strong underlying customer demand seen within the order
profile. This resulted in strong revenue growth into Asia and North America,
with Europe broadly in line with the previous year on a constant currency
basis, but behind on a reported currency basis.
Our continued focus on driving operational efficiencies supported growth in
adjusted operating profit, up 25.9% to £30.6m (2020: £24.3m) and an adjusted
operating margin of 18.0%, representing growth of 70 basis points on a
reported basis or 10 basis points on a constant currency basis. Excluding the
effect of WITec, the adjusted operating profit would have been £30.4m, an
increase of 25.1%. This is despite the inflationary impacts prevalent in the
wider economy that resulted in elevated logistics costs and increased
component and raw material prices.
The strength of our markets and continued positive order momentum resulted in
16.9% growth in the order book since March 2021, with significant growth
within the Materials & Characterisation and Service & Healthcare
sectors. The organic book-to-bill ratio for the period was 1.17.
Cash conversion of 48% reflects shipment timing, an increase in inventories to
support order growth and mitigate supply chain challenges, as well as a
resumption in capital expenditure.
The Group closed the half year with net cash of £70.1m after the acquisition
of WITec in August 2021.
Dividend
In line with the Group's progressive dividend policy, and due to the Group's
robust trading performance and positive cash generation through the period,
the Board is declaring an interim dividend of 4.4p per share (H1 2020: 4.1p).
Horizon strategy driving expansion in attractive markets and delivering
operational efficiencies
We continue to progress with our Horizon strategy, which has underpinned
financial performance in the first half. We have heightened our focus on
attractive end markets with positive long-term structural growth drivers where
we can sustain leadership positions, whilst maintaining our relentless product
innovation and our drive to improve operational effectiveness and exploit
synergies across the Group.
We are positioned in niche segments within markets that are underpinned by
strong investment, where we deliver a high degree of value for our customers
as our premium products are typically critical to enabling and accelerating
their desired outcomes.
Our business model provides an element of resilience through the breadth of
drivers within our end markets and by engaging with customers across the full
technology cycle, from research to applied R&D and high-tech
manufacturing. This also means that we are well positioned to benefit from
each wave of commercialisation and technology disruption.
Through our market intimacy we continue to identify additional opportunities
to deliver increased value to our customers and achieve expansion within our
chosen markets.
We have increased our investment in R&D, with a heightened focus on new
products and solutions that will create the most value for our existing
customers or enable us to expand into new or adjacent markets.
Through our operational excellence programme, we continue to drive
efficiencies across the Group. This includes strengthening our supply chain,
building long-term strategic partnerships with fewer suppliers, embedding
improved manufacturing processes and utilising centres of excellence to
benefit delivery across the wider Group.
Our service transformation programme is delivering growth by providing a wider
portfolio of support products targeted at increasing customer capabilities
productivity throughout their full lifetime use of our products.
We are also changing the way in which we support our customers, embracing
remote service and support approaches, combined with increased delivery
through our regional teams supported by our global expertise. Furthermore, the
digitisation of our product portfolio has allowed us to offer an increasing
level of real time insights that are enhancing customer capabilities and
productivity. The investment in our regional service teams and the embedding
of remote digital support capabilities ensures we can deliver our global
expertise locally, providing increased customer response times and reduced
travel.
To date, the Horizon strategy has delivered tangible gains across the Group,
improving our financial performance. Through Horizon, we continue to have
significant opportunities for further gains that will support our growth and
margin enhancement.
Increased R&D investment and enriched IP portfolio
We continue the development and delivery of highly innovative and
market‑leading products and have increased our R&D investment in the
first half to support future growth. Our heightened focus on our chosen end
markets drives sustainable differentiation for our products and delivers
increased value for our customers. In the period we made good strategic
progress with our product development roadmaps, launched several new products
and further enriched our IP portfolio. R&D spend in the period of £15.1m
(2020: £12.7m) has grown broadly in line with sales and represents 8.8% of
revenue.
Shaping a sustainable future
We were delighted to welcome Sir Nigel Sheinwald to the Board as a
Non‑Executive Director in September. Sir Nigel will chair our Board's
sustainability committee with effect from November 2021, when all
Non-Executive Directors will also join the committee.
Nigel brings a wealth of skills and experience from his time as Chair of
Shell's sustainability committee and will support the further development and
delivery of our initiatives.
We believe that embedding sustainability throughout the Group creates
long-term value for all our stakeholders and will secure our long‑term
success. In line with our purpose, we recognise that the greatest impact we
can make to a sustainable, net zero world is in enabling our customers to
deliver technologies that will aid the drive towards a greener, healthier,
more connected advanced society. With regard to our own operations, we have an
ambitious and wide-ranging sustainability agenda based on our commitment to
net zero and the TCFD reporting framework.
Whilst the impact our facilities have on the environment is relatively small,
we have made great strides in reducing our carbon footprint and we will
continue in our efforts to minimise our impact. As the world focuses on a
transition to a low-carbon economy we recognise the important role we play in
supporting our customers with their net zero ambitions, as well as encouraging
similar commitments throughout our supply chain.
We also believe that how we do business is as important as what we do. Being
inclusive is a core company value and is based on respect for the individual
and creating a sense of belonging. In support of this, and to attract, retain,
and enable the best people to perform, we are dedicated to creating an
inclusive environment and culture, where difference is valued, and people are
recognised for what they deliver and bring to the team. This is also reflected
in our Board's commitment to meeting the targets that have been set out in the
Hampton‑Alexander review through future appointments, building on the
progress we have made in recent years. This has included Alison Wood taking
the position of Senior Independent Director, resulting in two female Chairs of
our committees.
Our employees and customers are increasingly engaging with our sustainability
agenda. We have enhanced our communications across all our stakeholders,
gathering feedback as they help to shape our future direction. This initiative
is overseen by the Executive‑led sustainability committee, who drive and
align the activities we undertake across the Group.
We will publish our Sustainability and TCFD statements in 2022.
Investing in our employees and building on our capabilities
Our objective is to ensure that we have a high capability, diverse workforce
that enables us to better understand our customers and markets. Building an
organisation with a broad range of perspectives and experiences increases our
ability to innovate, to make the right decisions and to exceed our customers'
expectations. We continue to invest in the capabilities we need to deliver our
strategy, which is underpinned by the combination of our technical, end market
and broad commercial expertise. This has included the ongoing support and
development of our employees and augmenting our existing talent through the
recruitment of individuals with specific additional knowledge or skills.
I would like to thank all our employees for their continual support,
commitment and resilience during the year, for embracing the changes we have
made to our workplace model and for helping to create a culture of inclusion
that underpins our ongoing success.
Summary and outlook
We have emerged from the pandemic a stronger, more focused and efficient
business, even more aligned to the needs of our customers in end markets with
structural growth drivers. We are increasing our investment to take advantage
of these growth opportunities, providing the foundation for good growth and
medium-term margin expansion.
Whilst supply chain pressures will moderate conversion of orders to revenue
and drive cost inflation in the second half, our strategic alignment to a
range of attractive end markets, combined with our strong opportunity pipeline
and healthy order book, provides us with good momentum going into the second
half. Our expectations for further progress in the year are unchanged.
Ian Barkshire
Chief Executive
8 November 2021
Operations Review
Materials & Characterisation
Orders
£102.9m +13.1%
(HY 2020: £91.0m)
+18.3% HY20
+36.9% HY19
Organic constant currency growth(1)
Revenue
£84.9m +30.2%
(HY 2020: £65.2m)
+34.2% HY20
+20.1% HY19
Organic constant currency growth(1)
( )
Adjusted(2) operating profit
£13.0m
(HY 2020: £8.9m)
Adjusted(2) operating margin
15.3%
(HY 2020: 13.7%)
Statutory operating profit
£11.2m
(HY 2020: £7.8m)
1. For definition refer to note on page 1.
2. Details of adjusting items can be found in Note 2 to the Half Year
Financial Statements.
The Materials & Characterisation sector has a broad customer base across a
wide range of applications for the imaging and analysis of materials down to
the atomic level (Asylum Research, NanoAnalysis, Magnetic Resonance and newly
acquired WITec) as well as the fabrication of semiconductor devices and
structures through our range of advanced semiconductor etch and deposition
process systems (Plasma Technology).
The sector has a strong focus on accelerating our customers' applied R&D,
enabling the development of new devices and next generation higher performing
materials as well as enhancing productivity in advanced manufacturing, quality
assurance (QA) and quality control (QC).
Our portfolio of imaging and analysis systems includes our range of
market‑leading X-ray and electron analysis systems used in conjunction with
electron and ion microscopes, as well as our performance-leading atomic force
microscopes and magnetic resonance analysers. Through our leading product
performance, ease of use and advanced analytics we enhance our customers'
capabilities, provide actionable insights and increase their productivity.
WITec's leading Raman microscopy solutions provide a complementary offering to
our existing portfolio of characterisation products being used widely across
our existing academic and commercial customers for fundamental research,
applied R&D and quality control. The technique, which is used in
conjunction with and alongside our existing characterisation solutions,
broadens the capabilities that we can offer to our existing customers whilst
expanding opportunities in new market areas. The acquisition, which completed
on 31 August, will enable the further exploitation of synergies across the
sales, marketing and service teams and increases the role we can play in
supporting our customers.
Our portfolio of advanced semiconductor etch and deposition processing systems
provide our customers with the ability to create and manipulate materials with
atomic scale accuracy and are used in the fabrication of the advanced
semiconductor devices used across a wide range of industries.
We have leading expertise in compound semiconductor processing with a
portfolio of high-performance products specifically optimised for R&D or
high-volume manufacturing. Construction has begun on our new facility, which
will increase our capacity, comprising both a state-of-the-art manufacturing
area and advanced laboratories to support the further development of our
leading-edge technologies.
The Materials & Characterisation sector delivered strong growth and
improved profitability supported by recovery in the global economy and
continued increased demand from semiconductor, electronics and advanced
materials end markets. Strong order growth reflected positive demand across
North America, Europe and Asia and all our end markets. Order growth was
strengthened by our increased market focus and the success of recently
launched products, with significant growth to commercial customers, supported
by continued strong demand from academia.
The initial easing of customer and travel‑related covid restrictions
continued to influence the regional revenue profile in the period, and
resulted in strong growth to Asia and North America, with Europe slightly down
on the previous year. As with order growth, revenue was also driven by
commercial customers, supported by good growth to academia, reflecting end
market demand and a positive funding environment. Consequently, the proportion
of revenue from commercial customers increased to 61% (2020: 52%). Performance
in the period reflected the strength of end markets and represented strong
order and revenue growth relative to H1 2019. The order book for future
deliveries increased to £99.3m, representing reported growth of 32.9%
compared to March 2021.
From an end market perspective, we continued to see strong underlying order
growth from the Semiconductor & Communications and Advanced Materials
segments, building on growth in the previous year. This was supported by
ongoing strong order growth into Healthcare & Lifescience as we expanded
our customer propositions within the segment.
Year-on-year order growth into the Energy & Environment segment reflects
a recovery in customer activity relative to the previous year. Strong revenue
growth for the sector comprised double-digit growth across Healthcare &
Lifescience, Semiconductor & Communications, Energy & Environment, and
the Advanced Materials segment. Quantum-related revenue was down in the period
due to the phasing of shipments. The Semiconductor & Communications
segment increased to 51% of revenue for the sector in line with our increasing
product portfolio and end market growth, with Advanced Materials 32%, Energy
& Environment 12% and Healthcare & Lifescience 4%.
Semiconductor & Communications
This is a key focus for the sector and delivered strong double-digit order and
revenue growth in the period. Growth has been driven by the ongoing need for
higher performing, more energy efficient solutions to meet the demands of a
bourgeoning data economy, the focus on reduced environmental impacts and the
proliferation of semiconductor chips within consumer electronics. The ramp up
in global manufacturing capacity of mainstream silicon chips and increased
investment in the development of next generation products has driven strong
demand for our imaging and dedicated analysis solutions. These are used for
quality control at multiple process stages in the fabrication of semiconductor
devices, such as helping to identify and characterise defects.
Our solutions are also being used to monitor the composition and structure of
the nanoscale vertical stacks within semiconductor devices to ensure each new
manufacturing process will deliver the required final performance. As devices
shrink in size and increase in structural complexity, our characterisation
solutions are increasingly critical in enabling the development of next
generation devices and their effective transfer to production.
The compound semiconductor market remains buoyant with long-term structural
growth drivers due to their ability to transform communications and increase
the energy efficiency of power systems and consumer electronics. This has
driven strong demand for our advanced compound semiconductor systems and
proprietary semiconductor processes. The development of our comprehensive
portfolio of production-dedicated systems over the past years, combined with
our strategic focus on providing improved process performance for the critical
layers within devices, has supported strong growth to commercial customers. In
data communications, the increasing demands for faster data processing and
connectivity are driving the development of 5G and 6G networks, alongside
hyperscale data centres. Our expertise with gallium arsenide (GaAs) and indium
phosphide (InP) is helping drive our growth into these end device
applications, as they enable faster speeds, improve bandwidth and can operate
at higher temperatures.
We also had growth for our dedicated solutions for the manufacture of devices
used in augmented reality applications. These include micro-LEDs and the 3D
sensors that are increasingly being deployed in mobile phones, cameras, cars
and even glasses.
Compound semiconductors play a significant role in providing a pathway to net
zero. The time criticality of shifting to a low carbon economy continues to
drive the shift towards increased electricity usage and requires more
efficient conversion, generation and storage for power devices and consumer
electronics. This is driving strong growth for our silicon carbide (SiC) and
gallium nitride (GaN) solutions.
Within academia we had strong growth for our semiconductor solutions as
universities invested in the latest capabilities within their central
facilities and specialist clean rooms supported by government funding.
Advanced Materials
Advanced Materials are the building blocks of modern society, enabling
everything from touch screens on handheld devices and thinner drinks cans to
the lightweight super alloys that provide structural integrity in cars. Our
market-leading portfolio of imaging and analysis solutions support our
customers to develop, control and repeatably manufacture stronger, lighter and
higher performing materials across a broad range of end applications.
We have a particular focus on increasing our customers' productivity, with our
products providing additional value through the tailoring of solutions for
specific end applications. Furthermore, we use our market intimacy to identify
new opportunities, markets and customers that might have not used our
equipment before. For example, our recently launched Xplore elemental
analyser, which is specifically designed to enable routine analysis for
non-expert users.
Strong order and revenue growth across our imaging and analytical products
came from a broad range of end applications and industries, including steels,
super alloys, textiles and polymers. This was driven by end customer demand
and market‑leading performance across our portfolio.
In particular, strong growth into advanced steels and super alloys has
supported the ability of our products to rapidly measure with precision and
reliability the nanoscale material structure, which strongly determines the
physical properties and inherent value of the material. Our new advanced
analytics greatly simplifies the interpretation of the data, providing
actionable insights removing the need for specialist operators.
Our products are also used in the development of exotic new materials such as
graphene-like structures with ongoing research working towards the long-term
goal of transforming battery life and semiconductor performance.
Energy & Environment
Strong growth in the Energy & Environment segment is underpinned
by sustained growth into battery-related markets and the partial recovery
across a range of end markets, including forensics and environmental science.
Within batteries, the requirement for energy storage grows almost daily, from
the ubiquitous use of portable electric devices to the rapidly growing market
for electric vehicles. Ensuring that this demand can be met requires the
development of new technology utilising different materials that will deliver
enhanced performance with less reliance on the finite and expensive rare earth
materials which are currently used. With the active elements of a battery
operating at the nanoscale, our products help researchers better understand
the fundamental chemistry and mechanisms that affect battery capacity,
charging rate and lifetime. We have also experienced growth related to the
increase in global battery manufacturing capacity, with existing sites
expanding and new manufacturing facilities coming online. Our solutions are
adopted to ensure quality control, including particle analysis to detect
potentially harmful contamination within the powder feedstock materials. We
continue to develop our solutions to drive improvements, with our new Feature
Express™ product reducing the measurement time by a factor of four, further
enhancing customer throughput and productivity.
Our benchtop NMR analysers and WITec Raman portfolio offer academic
researchers and industrial manufacturers the ability to measure critical
parameters that directly impact charging rates and battery lifetime, as well
as helping accelerate the development of next generation battery material.
In support of the green economy, more people are choosing to reduce their meat
consumption and are increasingly adopting plant-based alternatives. Our
benchtop NMR is helping producers of these meat substitutes to characterise
fat and water content, accelerating the development of healthy meat
replacement products that are comparable in taste.
Healthcare & Lifescience
We have continued to see growth in the Healthcare & Lifescience sector,
with increasing demand for our solutions to aid quality control of
electronics used in medical devices, such as respirators, and microscale
failure analysis of metallic catheters. Our dedicated pharma solutions
continue to help with contamination analysis and the identification of
counterfeit medicines. Whilst a relatively small proportion of the sector,
Lifescience remains an area of focus with continued opportunity for growth as
we build on our market intimacy and tailor solutions for these applications.
The acquisition of WITec will further enhance our offerings in this space as
the technique is ideally suited for the study of living cells, with our new
Raman imaging techniques being used to develop new drug formulations and
delivery systems to improve patient healthcare.
Research & Discovery
Orders
£60.5m +11.4%
(HY 2020: £54.3m)
+18.2% HY20
+10.8% HY19
Organic constant currency growth(1)
Revenue
£56.3m +16.6%
(HY 2020: £48.3m)
+23.2% HY20
+3.6% HY19
Organic constant currency growth(1)
( )
Adjusted(2) operating profit
£8.7m
(HY 2020: £6.4m)
Adjusted(2) operating margin
15.5%
(HY 2020: 13.3%)
Statutory operating profit
£5.5m
(HY 2020: £3.2m)
1. For definition refer to note on page 1.
2. Details of adjusting items can be found in Note 1 to the Financial
Statements.
The Research & Discovery sector, comprising Andor Technology, NanoScience
and X-Ray Technology, provides advanced solutions and unique environments that
enable imaging and analytical measurements down to the atomic and molecular
level, predominantly used across scientific research and applied R&D, with
a higher proportion of sales to academia and a growing number of commercial
customers as we develop application‑specific, easy‑to‑use solutions
based on our high-end research orientated platforms.
Our imaging and analytical portfolio includes market-leading scientific
cameras, confocal microscopes, spectrometers, laser engines and X-ray tubes.
Our ultra-low temperature cryogenic and high magnetic field platforms provide
both versatile research platforms as well as dedicated systems for more
applied and increasingly routine use.
In addition to selling directly to end customers, where we have a strong brand
presence, we also exploit our position across a broad range of additional end
markets by providing our key enabling technologies to strategic OEM partners.
The sector's products play a key role across a broad range of life, material,
and physical science applications, with a critical role within the
development and advancement of quantum technologies.
The underlying growth drivers in end markets have remained robust, leading
to strong order growth relative to the previous year, as well as H1 2019.
This comprised of sustained growth to Quantum Technology and Advanced
Materials applications and strong recovery within Lifescience applications,
which were significantly subdued by covid in the previous year. The growth
within Healthcare & Lifescience was despite a return to normal run rates
from the surge in demand in the previous year for products used directly in
the fight against covid. From a regional perspective, this resulted in
double-digit order growth to Europe, North America and Asia, with all regions
booking orders ahead of the comparator period in H1 2019.
The sector delivered strong revenue growth, up 23% on a constant currency
basis in the period and growth ahead of H1 2019. However, the phasing and
status in easing of covid-related restrictions at our customers' sites
continued to impact the profile by application and region. Profitability for
the sector was further enhanced in the period with reported profit increasing
to £8.7m (2020: £6.4m), representing an adjusted operating margin of 15.5%
(2020: 13.3%). This was supported by the continued realisation of tangible
gains through our Horizon strategy despite the previously mentioned
inflationary headwinds.
Strong underlying demand and a healthy order book resulted in double-digit
revenue growth across Healthcare & Lifescience, Quantum Technology and
Advanced Materials market segments, with broadly in line contributions from
the Semiconductor & Communications and Energy & Environment segments.
Revenue to customers within the Research & Fundamental Science segment
declined in the year, with a slower covid recovery for these typically larger
and centrally funded projects.
Healthcare & Lifescience represented 37% of revenue, with Advanced
Materials and Quantum Technology increasing to 27% and 18% respectively.
Research & Fundamental Science fell to 14%, with Semiconductor &
Communications and Energy & Environment representing 3% and 2% of revenue
respectively.
By geography, revenue grew strongly in North America and Asia due to the
earlier easing of travel restrictions, increasing their proportion of sales to
35% and 38% respectively. Europe remained broadly in line with the previous
year on a constant currency basis, representing 26% of revenue. Considerable
revenue growth to academic customers increased their proportion of revenue to
71%, outperforming high single-digit constant currency growth to commercial
customers.
Healthcare & Lifescience
The positive momentum in the second half of last year continued within the
Healthcare & Lifescience segment with an increasing number of customers'
labs and facilities re-opening around the world after temporary closures. The
long-term market growth drivers of improving the health and wellbeing of
society remain robust, driven by an ageing population and an increasing focus
on improved and cost-effective healthcare provision. This is subsequently
driving the need for more successful, faster drug discovery and the enhanced
efficacy of new treatments, therapies and medicines. Strong demand supported
double-digit order and revenue growth in the period with orders ahead of the
comparative period in H1 2019.
Our solutions help end users to better understand the fundamental disease
mechanisms leading to disease states, such as Alzheimer's, Parkinson's,
diabetes and cancer at a cellular and molecular level. Through our market
intimacy initiatives, we have continued to develop solutions and key enabling
technologies that specifically address the needs of customers within these
fields. For example, in cancer research, we have seen strong growth for our
high sensitivity scientific cameras for tumour imaging, enabling rapid and
accurate diagnostic screening of patient samples. There is also growing
interest in the smaller but emerging field of real time operating theatre
imaging, enabling surgeons to directly observe the location and extent of the
tumour ensuring all cancer cells are removed, whilst reducing the removal of
healthy tissue. Within research, our microscopy systems, combined with our
recently launched cancer analysis software package, are providing new insights
into the mechanisms that cause tumour, growth by identifying proteins that
counteract uncontrolled cell division and suppress tumours. One such protein
is polo kinase, which has now been the focus of 34 clinical trials for cancer
treatment.
We have had strong growth into pharma applications, where our key enabling
technologies are at the heart of strategic OEM partners' equipment across a
broad range of applications including diagnostic X-ray imaging, cell analysis
and gene sequencing.
In the period, we saw a reduction in the sales to covid-related applications,
such as on-chip diagnostic testing and screening, as adequate levels of
infrastructure were established around the world. We are now seeing run rates
return to pre-covid levels for this market segment.
Quantum Technology
We continue to see the transition of quantum computing into applied R&D
and commercial applications due to the recent breakthroughs in technology and
the hugely disruptive potential of this technology to existing markets, such
as pharmaceuticals, logistics, and financial services. This is driving further
investment by national governments and corporates across fundamental research,
applied R&D and commercially available systems, resulting in an emerging
eco-system of national laboratories, technology starts-ups, global service
providers and end users.
As a result, we are seeing increased demand across our portfolio of cryogenic
platforms tailored to enable both high throughput screening of new quantum
devices and commercial quantum computing platforms for the emerging
cloud-based quantum computing market. The development of secure communication
systems based on quantum technology drove growth in demand for our scientific
cameras.
Advanced Materials
Growth in the Advanced Materials segment reflected continued and sustained
customer demand to explore and characterise the properties of materials across
a broad range of applications including sensors, semiconductors and batteries.
This has driven increased sales of our cryogenic and high magnetic field
measurement systems which enable the measurement of fundamental parameters
such as the electron transport and superconductivity within new and exotic
materials as well as graphene-like structures. We are also seeing increased
demand for our optical spectrometers and scientific cameras to researchers as
well as within a range of instruments through strategic OEM relationships.
Research & Fundamental Science
Within Research & Fundamental Science we continue to see long-term
customer interest in our specialised cryogenic and superconducting magnet
systems, and high-end scientific cameras across a broad range of research
themes including astronomy, chemistry and physics research. These orders,
which tend be lumpy in nature, were slightly down in the period compared to
the previous year despite a positive forward‑looking pipeline. In the
period, we were able to install further systems for the multi‑system order
to the extreme environments laboratory in the Institute of Beijing.
Service & Healthcare
Orders
£34.9m +14.8%
(HY 2020: £30.4m)
+22.7% HY20
+27.3% HY19
Organic constant currency growth(1)
Revenue
£28.9m +7.8%
(HY 2020: £26.8m)
+15.3% HY20
+16.9% HY19
Organic constant currency growth(1)
( )
Adjusted(2) operating profit
£8.9m
(HY 2020: £9.0m)
Adjusted(2) operating margin
30.8%
(HY 2020: 33.6%)
Statutory operating profit
£8.9m
(HY 2020: £9.0m)
1. For definition refer to note on page 1.
2. Details of adjusting items can be found in Note 1 to the Financial
Statements.
The Service & Healthcare sector comprises the Group's maintenance service
contracts, billable repairs, training and support services, and spare part
sales related to Oxford Instruments' own products, and the support and service
of third-party MRI scanners in Japan.
We have continued to drive our service transformation, building on the
successful progress in the previous year and resulting in strong order and
revenue growth. Furthermore, good progress resulted in adjusted operating
profit and margin being significantly ahead of H1 2019, however margin was
slightly depressed relative to the comparator period, with an increase in
service delivery costs as travel restrictions eased. Orders and revenues
related to the support of third-party MRI scanners in Japan were broadly in
line with the previous year.
Our service offerings complement our market-leading product performance,
providing a key differentiator for us in our markets. Our service
transformation builds on our excellent reputation, developing a broader suite
of service offerings to better support our customers, increase their
capabilities and accelerate their outcomes throughout the lifetime usage of
our products.
As part of our service transformation, and building on our market intimacy, we
are developing a portfolio of tailored service offerings for specific end
applications as well as for academic and commercial customers. Providing
connectivity across our products enables increased levels of remote support as
well as the provision of actionable insights to improve productivity.
Building on our positive experiences of delivering high levels of service
continuity through the peak of the pandemic, we are moving to a regionally led
service model where our global processes are implemented locally through our
regional teams. By exploiting the synergies across our local teams, utilising
remote centres of excellence and cross-product trained field engineers, we can
respond more quickly to customer requests, improve our efficiency and reduce
our travel footprint.
To support our transformation, we are implementing a Group-wide Field Service
Management system, which will be integrated into our overall Customer
Management System.
Whilst we are still in the early phases of our transformation, we have already
delivered strong growth and have significant scope for further developments
that will increase the value and breadth of our portfolio and contribute to
the ongoing success of our Horizon strategy.
Finance Review
Strong order growth
up 18.3% at organic constant currency to £198.3m
Order book growth
up 13.3% at organic constant currency to £231.6m
Improved margin
18.0%
Cash conversion supporting growing business and managing supply chain
disruption
£70.1m net cash
Summary
Oxford Instruments plc uses certain alternative performance measures to help
it effectively monitor the performance of the Group as management believe that
these represent a more consistent measure of underlying performance. Adjusted
items exclude the amortisation and impairment of acquired intangible assets;
acquisition‑related items; profit or loss on disposal of operations; other
significant non-recurring items; and the mark-to-market movement of financial
derivatives. All of these are included in the statutory figures. Note 2
provides further analysis of the adjusting items in reaching adjusted profit
measures. Definitions of the Group's material alternative performance measures
along with reconciliation to their equivalent IFRS measure are included within
the Finance Review.
The Group trades in many foreign currencies and makes reference to constant
currency numbers to remove the impact of currency effects in the year. These
are prepared on a month‑by‑month basis using the translational
and transactional exchange rates which prevailed in the previous year rather
than the actual exchange rates which prevailed in the year. Transactional
exchange rates include the effect of our hedging programme.
The acquisition of WITec was completed on 31 August 2021. Growth rates
expressed on an organic basis remove the impact of the acquired business for
the period under ownership.
Reported orders increased by 12.9% to £198.3m (2020: £175.7m), an organic
constant currency increase of 18.3%. At the end of the period, the Group's
order book for future deliveries stood at £231.6m (30 September 2020:
£204.6m). The order book grew 13.2% on a reported basis and 13.3% at organic
constant currency.
Reported revenue increased by 21.2% to £170.1m (2020: £140.3m). Organic
revenue, excluding currency effects, increased by 26.8%, with the movement in
average currency exchange rates over the year reducing reported revenue by
£9.6m.
Adjusted operating profit increased by 25.9% to £30.6m (2020: £24.3m).
Organic adjusted operating profit, excluding currency effects, increased by
28.0%, with a currency headwind in the year of £0.7m. Adjusted operating
margin increased by 70 basis points to 18.0% (2020: 17.3%). Excluding currency
effects, adjusted operating margin increased by 10 basis points to 17.4%.
Statutory operating profit includes the amortisation of acquired intangibles
of £3.8m, acquisition‑related costs of £0.3m, a £0.9m margin adjustment
relating to the sale of WITec inventories in the period that had been revalued
on acquisition, and a charge of £3.8m relating to the movement in the
mark-to-market valuation of uncrystallised currency hedges for future years.
Statutory operating profit of £21.8m (2020: £20.8m) grew by 4.8%.
Adjusted profit before tax grew by 27.4% to £30.2m (2020: £23.7m),
representing a margin of 17.8% (2020: 16.9%).
Statutory profit before tax grew by 5.9% to £21.4m (2020: £20.2m),
representing a margin of 12.6% (2020: 14.4%). The decline on last year was
due to the mark‑to‑market movement on currency hedges and the WITec gross
margin adjustment.
Adjusted basic earnings per share grew by 25.6% to 41.2p (2020: 32.8p). Basic
earnings per share were 28.7p (2020: 27.7p), growth of 3.6%.
Cash generated from operations of £17.5m (2020: £23.3m) represents 48%
(2020: 97%) cash conversion. Cash conversion was depressed by raw material
purchases to support business growth and mitigate shortages. In addition,
timing of shipments led to an increase in receivables, and we also resumed
capital investments. Net cash decreased from £97.6m on 31 March 2021 to
£70.1m on 30 September 2021, after consideration paid (net of cash acquired)
of £30.0m for the acquisition of WITec.
At the end of September, our revolving credit facility remained undrawn,
leaving approximately £100m of committed facilities. This represents total
headroom of approximately £172m.
Income Statement
The Group's Income Statement is summarised below.
Half year to Half year to
30 September 30 September
2021 2020
£m £m Change
Revenue 170.1 140.3 +21.2%
Adjusted operating profit 30.6 24.3 +25.9%
Amortisation of acquired intangible assets (3.8) (4.3)
Non-recurring items (1.2) -
Mark-to-market of currency hedges (3.8) 0.8
Statutory operating profit 21.8 20.8 +4.8%
Net finance costs (0.4) (0.6)
Adjusted profit before taxation 30.2 23.7 +27.4%
Statutory profit before taxation 21.4 20.2 +5.9%
Adjusted effective tax rate 21.5% 20.7%
Effective tax rate 22.9% 21.3%
Adjusted earnings per share - basic 41.2p 32.8p +25.6%
Earnings per share - basic 28.7p 27.7p +3.6%
Dividend per share (interim) 4.4p 4.1p +7.3%
Orders and revenue
Following the acquisition of WITec, the business is recorded within the
Materials & Characterisation segment. Growth rates expressed on an organic
basis exclude the impact of WITec.
Total reported orders grew by 12.9% (+18.3% at organic constant currency) to
£198.3m. Reported orders grew by 13.1% (+16.9% at organic constant currency)
for Materials & Characterisation, by 11.4% (+18.2% at constant currency)
for Research & Discovery and by 14.8% (+22.7% at constant currency) for
Service & Healthcare.
Reported revenue of £170.1m (2020: £140.3m) increased by 21.2% (+26.8% at
organic constant currency) against a weak comparator period impacted by the
covid-19 pandemic. Reported revenue grew by 30.2% for Materials &
Characterisation (+34.2% at organic constant currency), with strong growth for
our semiconductor processing tools and analysers for electron microscopes.
WITec contributed revenue of £1.8m to the Group's result for the period.
Strong revenue growth for our cryogenic and complex magnets, in addition to
improved deliveries from our imaging and microscopy business following a weak
comparator period, resulted in growth for Research & Discovery of 16.6%
(+23.2% at constant currency). Revenue growth from service of our own products
resulted in reported growth of 7.8% (+15.3% at constant currency) for Service
& Healthcare.
The book-to-bill ratio (orders received to goods and services billed in the
period) for the year was 117% (2020: 125%).
On a geographical basis, revenue fell by 3.0% in Europe (-0.7% at constant
currency) due to the phasing of deliveries and a planned reduction in the
number of bespoke orders for semiconductor processing tools. Revenue for North
America increased by 22.2% on a reported basis and by 32.8% at constant
currency, supported by good demand for electron microscope analysers and a
recovery in demand for our imaging and microscopy products. Asia delivered
strong growth of 36.8% (+44.1% at constant currency), strongly driven by
demand for our semiconductor processing tools and analysers for electron
microscopes.
Orders and revenue for China during the half constituted 27% and 30%
respectively of the Group total.
Geographic revenue growth
Half year to 30 September 2021 Half year to 30 September 2020 % growth
% % Change % at constant
£m of total £m of total £m growth currency
Europe 39.3 23% 40.5 29% (1.2) (3.0%) (0.7%)
North America 41.3 24% 33.8 24% +7.5 +22.2% +32.8%
Asia 87.4 52% 63.9 46% +23.5 +36.8% +44.1%
Rest of World 2.1 1% 2.1 1% - - +19.0%
170.1 100% 140.3 100% +29.8 +21.2% +28.1%
The total reported order book grew by 13.2% (13.3% at organic constant
currency) against 30 September 2020. The order book, at organic constant
currency, compared to 30 September 2020, increased by 25.9% for Materials
& Characterisation, with strong growth across all constituent businesses.
Research & Discovery fell slightly by 1.5% at constant currency, with good
recovery in orders for our imaging products offset by a planned acceptance of
fewer complex orders in our cryogenic and magnet business, combined with a
phasing difference in OEM orders for X-Ray Technology. Continued focus on own
product service resulted in growth of 33.8% from Service & Healthcare.
Materials & Research & Service &
£m Characterisation Discovery Healthcare Total
Revenue: half year to 30 September 2020 65.2 48.3 26.8 140.3
Constant currency growth/(decline) 22.3 11.2 4.1 37.6
Revenue at organic constant currency: half year to 30 September 2021 87.5 59.5 30.9 177.9
Acquisition 1.8 - - 1.8
Foreign exchange (4.4) (3.2) (2.0) (9.6)
Revenue: half year to 30 September 2021 84.9 56.3 28.9 170.1
Revenue growth: reported +30.2% +16.6% +7.8% +21.2%
Revenue growth: organic constant currency +34.2% +23.2% +15.3% +26.8%
Gross profit
Gross profit grew by 22.7% to £86.8m (2020: £71.5m), representing a gross
profit margin of 51.0%. The adjusted gross profit margin of 51.6% is 60 basis
points over last year.
Adjusted operating profit and margin
Following the acquisition of WITec, the business is recorded within the
Materials & Characterisation segment. Growth rates expressed on an organic
basis exclude the impact of WITec.
Adjusted operating profit increased by 25.9% to £30.6m (2020: £24.3m),
representing an adjusted operating profit margin of 18.0%, an increase of 70
basis points against last year. At constant currency, the adjusted operating
profit margin was 17.4%, an increase of 10 basis points.
Reported Materials & Characterisation adjusted operating profit increased
by 46.1% (+42.7% at organic constant currency) with reported margin increasing
by 160 basis points to 15.3% (2020: 13.7%). This was attributable to growth
from our higher margin material analysis systems. WITec contributed adjusted
operating profit of £0.2m in the period following completion.
Research & Discovery's adjusted operating margin increased to 15.5% (2020:
13.3%), growth of 220 basis points. At constant currency, the margin was
15.1%, an increase of 180 basis points, with strong trading improving margins
across our optical imaging and cryogenic and complex magnet businesses.
Service & Healthcare margin decreased by 280 basis points to 30.8% (2020:
33.6%). At constant currency, the margin was 30.4%, a decrease of 320 basis
points, due to an increase in service delivery cost as travel restrictions
eased.
Currency effects (including the impact of transactional currency hedging) have
reduced adjusted operating profit by £0.7m when compared to blended hedged
exchange rates for the comparative period.
Materials & Research & Service &
£m Characterisation Discovery Healthcare Total
Adjusted operating profit: half year to 30 September 2020 8.9 6.4 9.0 24.3
Constant currency growth 3.8 2.6 0.4 6.8
Adjusted operating profit at organic constant currency: half year to 30 12.7 9.0 9.4 31.1
September 2021
Acquisition 0.2 - - 0.2
Currency 0.1 (0.3) (0.5) (0.7)
Adjusted operating profit: half year to 30 September 2021 13.0 8.7 8.9 30.6
Adjusted operating margin(1): half year to 30 September 2020 13.7% 13.3% 33.6% 17.3%
Adjusted operating margin(1): half year to 30 September 2021 15.3% 15.5% 30.8% 18.0%
Adjusted operating margin(1) (constant currency): half year to 30 September 14.4% 15.1% 30.4% 17.4%
2021
1. Adjusted margin is calculated as adjusted operating profit divided by
revenue. Adjusted margin at constant currency is defined as adjusted operating
profit at constant currency divided by revenue at constant currency.
Statutory operating profit and margin
Statutory operating profit increased by 4.8% to £21.8m (2020: £20.8m),
representing an operating profit margin of 12.8%, a decrease of 200 basis
points against last year, due to the mark-to-market charge on currency hedges
and the WITec gross margin adjustment on acquisition. Statutory operating
profit is after the amortisation and impairment of acquired intangible assets;
acquisition‑related items; profit or loss on disposal of operations; other
significant non-recurring items; and the mark-to-market of financial
derivatives.
Adjusting items
Amortisation of acquired intangibles of £3.8m relates to intangible assets
recognised on acquisitions, being the value of technology, customer
relationships, and brands.
Non-recurring items comprise £0.3m of professional fees on the acquisition of
WITec GmbH. In addition, a charge of £0.9m has been taken to eliminate the
profit arising in the acquired WITec business from a revaluation of their
inventories to fair value, in accordance with accounting standards.
The Group uses derivative products to hedge its short-term exposure to
fluctuations in foreign exchange rates. Our hedging policy allows for forward
contracts to be entered into up to 18 months forward from the end of the next
reporting period. Group policy is to have in place at the beginning of the
financial year hedging instruments to cover approximately 80% of its forecast
transactional exposure for the following twelve months and, subject to
pricing, up to 20% of exposures for the next six months. The Group has decided
that the additional costs of meeting the extensive documentation requirements
of IFRS 9 to apply hedge accounting to these foreign exchange hedges cannot be
justified. Accordingly, the Group does not use hedge accounting for these
derivatives.
Net movements on mark-to-market derivatives in respect of transactional
currency exposures of the Group in future periods are disclosed in the Income
Statement as foreign exchange and excluded from our calculation of adjusted
profit before tax. In the half year this amounted to a charge of £3.8m (2020:
£0.8m credit). The fall in the net asset for derivative financial instruments
over the half year reflects an uncrystallised reduction in the mark-to-market
valuation of forward contracts from a fall in the value of Sterling at the
balance sheet date against a blended rate achieved on US Dollar, Euro and
Japanese Yen forward contracts that will mature over the next 18 months.
Net finance costs
The Group's adjusted net interest costs fell by £0.2m to £0.4m (2020:
£0.6m), principally due to the repayment of private placement notes at the
year end.
Adjusted profit before tax and margin
Adjusted profit before tax increased by 27.4% to £30.2m (2020: £23.7m). The
adjusted profit before tax margin of 17.8% (2020: 16.9%) was above last year
due to an increase in the adjusted operating margin and lower net finance
costs.
Reconciliation of statutory profit before tax to adjusted profit before tax
Half year to Half year to
30 September 30 September
2021 2020
£m £m
Statutory profit before tax 21.4 20.2
Add back (Note 1):
Amortisation of acquired intangible assets 3.8 4.3
Other non-recurring items 1.2 -
Mark-to-market of currency hedges 3.8 (0.8)
Adjusted profit before tax 30.2 23.7
Statutory profit before tax and margin
Statutory profit before tax increased by 5.9% to £21.4m (2020: £20.2m).
Statutory profit before tax is after the amortisation and impairment of
acquired intangible assets; acquisition-related items; profit or loss on
disposal of operations; other significant non‑recurring items; and the
mark-to-market of financial derivatives. The profit before tax margin of 12.6%
(2020: 14.4%) was lower than last year due to the charge from the
mark-to-market movement on financial derivatives and WITec gross margin
adjustment on inventories.
Taxation
The adjusted tax charge of £6.5m (2020: £4.9m) represents an effective tax
rate of 21.5% (2020: 20.7%). The tax charge of £4.9m (2020: £4.3m)
represents an effective tax rate of 22.9% (2020: 21.3%). The increase in tax
rate reflects the revaluation of deferred tax provisions arising from the
announced increase in the UK corporation tax rate with effect from 1 April
2023.
Earnings per share
Adjusted basic earnings per share increased by 25.6% to 41.2p (2020: 32.8p);
adjusted diluted earnings per share grew by 25.6% to 40.7p (2020: 32.4p).
Basic earnings per share increased by 3.6% to 28.7p (2020: 27.7p); diluted
earnings per share grew by 3.3% to 28.3p (2020: 27.4p).
The number of undiluted weighted average shares increased to 57.5m (2020:
57.3m).
Foreign exchange
The Group faces transactional and translational currency exposure, most
notably against the US Dollar, Euro and Japanese Yen. For the half year,
approximately 26% of Group revenue was denominated in Sterling, 46% in US
Dollars, 17% in Euros, 9% in Japanese Yen and 2% in other currencies.
Translational exposures arise on the consolidation of overseas company results
into Sterling. Transactional exposures arise where the currency of sale or
purchase transactions differs from the functional currency in which each
company prepares its local accounts.
The Group's foreign currency exposure for the half year is summarised below.
Adjusted
operating
£m (equivalent) Revenue profit
Sterling 45.3 (13.5)
US Dollar 78.0 22.2
Euro 29.1 13.8
Japanese Yenw 15.0 8.4
Chinese Renminbi 2.3 0.4
Other 0.4 (0.7)
170.1 30.6
The Group maintains a hedging programme against its net transactional exposure
using internal projections of currency trading transactions expected to arise
over a period extending from 12 to 24 months. As at 30 September 2021, the
Group had currency hedges in place extending up to 18 months forward.
For the full year 2021/22, our assessment of the currency impact is, based on
hedges currently in place and forecast currency rates, a headwind of
approximately £17.0m to revenue and £1.8m to profit. Forecast currency rates
for the full year are: GBP:USD 1.38; GBP:EUR 1.18; GBP:JPY 156. For the full
year 2022/23, using the same assumptions, there is an additional headwind of
£5.7m to profit owing to the unwinding of currency hedges that have a
positive benefit in 2021/22. This impact is prior to mitigating pricing and
cost actions. Currency headwind guidance is lower than given at the previous
year end owing to a small favourable movement in currency. Uncertain volume
and timing of shipments and acceptances, currency mix and FX volatility may
significantly affect full-year currency forecast effects.
Acquisition of WITec GmbH
On 31 August 2021, the Group completed the purchase of 100% of the share
capital in WITec GmbH for an initial consideration of €37.0m (£31.7m).
Additional consideration of up to €5m (£4.3m) is conditional on trading
performance over a period of twelve months following completion.
Dividend
The Group's policy is to increase the dividend each year in line with the
increase in underlying earnings, considering movements in currency. After a
strong half year of trading, the Board has declared an interim dividend of
4.4p per share (2020: 4.1p per share), equivalent to growth of 7.3%. The
interim dividend will be paid on 14 January 2022.
Cash flow
The Group's cash flow is summarised below.
Half year to Half year to
30 September 30 September
2021 2020
£m £m
Adjusted operating profit 30.6 24.3
Depreciation and amortisation 4.1 4.1
Adjusted(1) EBITDA 34.7 28.4
Working capital movement (14.2) (3.0)
Equity settled share schemes 1.1 1.1
Non-recurring items (0.3) 0.5
Pension scheme payments above charge to operating profit (3.8) (3.7)
Cash from operations 17.5 23.3
Interest (0.5) (1.0)
Tax (4.0) (4.0)
Capitalised development expenditure (0.2) (0.5)
Expenditure on tangible and intangible assets (5.5) (1.1)
Acquisition of subsidiaries, net of cash acquired (30.0) -
Dividends paid (2.4) -
Proceeds from issue of share capital and exercise of share options 0.1 0.1
Payments made in respect of lease liabilities (1.3) (1.3)
Decrease in borrowings - -
Net increase in cash and cash equivalents from continuing operations (26.3) 15.5
1. Adjusted EBITDA is defined as adjusted operating profit before
depreciation and amortisation of capitalised development costs. The
Consolidated Statement of Cash Flows provides further analysis of the
definition of adjusted EBITDA.
Cash from operations
Cash from operations was £17.5m (2020: £23.3m). After adjusting for
non-recurring items and pension scheme payments above the charge to operating
profit, less capitalised development expenditure, capital expenditure and
payments made in respect of lease liabilities gives an adjusted cash from
operations figure of £14.6m (2020: £23.6m). This represents 48% (2020:
97%) cash conversion, reflecting timing of shipments and planned inventory
increases, along with a resumption in capital expenditure, some of which
related to the new facility for our semiconductor business.
Reconciliation of cash generated from operations to adjusted operating cash
flow
Half year to Half year to
30 September 30 September
2021 2020
£m £m
Cash from operations 17.5 23.3
Add back:
Non-recurring items 0.3 (0.5)
Pension scheme payments above charge to operating profit 3.8 3.7
Capitalised development expenditure (0.2) (0.5)
Expenditure on tangible and intangible assets (5.5) (1.1)
Payments made in respect of lease liabilities (1.3) (1.3)
Adjusted cash from operations 14.6 23.6
Cash conversion % (adjusted cash from operations/adjusted operating profit) 48% 97%
Working capital increased by £14.2m. In addition to business growth placing
upward pressure on inventories, we are increasing our inventory levels to
mitigate supply chain disruptions, especially across electronic components.
Furthermore, delays in the introduction of a new duty free certificate regime
in China has led to a rise in finished goods; this is expected to unwind
during the second half of the year. As a result, inventories rose by £1.7m;
we expect higher inventory levels to remain in place for the foreseeable
future until we see greater resilience in the supply chain. Receivables
increased by £5.9m, primarily due to some large shipments made close to the
half year end. Payables and customer deposits decreased by £6.6m.
We have commenced construction of our new facility near Bristol for our Plasma
Technology business. Delays due to the sourcing of materials will result in
the deferral of some expenditure into next year. We now expect costs of
approximately £12m to be incurred in the financial year 2021/22, with £20m
falling into the following year. The business will enter a 20-year lease on
completion of construction, which is anticipated during the second half of the
2022/23 financial year.
Pension
Pension recovery payments above charge to operating profit total £3.8m (2020:
£3.7m).
Interest
Net interest paid was £0.5m (2020: £1.0m), the reduction reflecting the
repayment of private placement notes at the end of the last financial year.
Tax
Tax paid was £4.0m (2020: £4.0m), with cash tax in both years benefiting
from utilisation of prior year losses carried forward.
Investment in Research and Development (R&D)
Total cash spend on R&D in the half year was £15.1m, equivalent to 8.8%
of sales (2020: £12.7m, 9.0% of sales). A reconciliation between the adjusted
amounts charged to the Income Statement and the cash spent is given below:
Half year to Half year to
30 September 30 September
2021 2020
£m £m
R&D expense charged to the Income Statement 15.4 13.2
Depreciation of R&D-related fixed assets (0.1) -
Amounts capitalised as fixed assets 0.3 -
Amortisation and impairment of R&D costs capitalised as intangibles (0.7) (1.0)
Amounts capitalised as intangible assets 0.2 0.5
Total cash spent on R&D during the half year 15.1 12.7
Net cash and funding
Net cash after borrowings
Cash from operations in the half year was offset by the payment of initial
consideration for the acquisition of WITec GmbH, resulting in a decrease in
the Group's net cash position from £97.6m at 31 March 2021 to £70.1m on 30
September 2021. Cash generated from operations was £17.5m (2020: £23.3m).
The Group invested in capitalised development costs of £0.2m and tangible and
intangible assets of £5.5m, with investments in semiconductor processing
development tools and infrastructure. Of the total capital expenditure of
£5.5m, £0.9m relates to payments associated with the new semiconductor
facility currently under construction.
Movement in net cash £m
Net cash as at 31 March 2021 97.6
Cash generated from operations 17.5
Interest (0.5)
Tax (4.0)
Capitalised development expenditure (0.2)
Capital expenditure on tangible and intangible assets (5.5)
Acquisition of subsidiaries (30.0)
Dividends paid (2.4)
Other items (2.4)
Net cash after borrowings as at 30 September 2021 70.1
As at As at
30 September 30 September
2021 2020
Net cash including lease liabilities £m £m
Net cash after borrowings 70.1 81.4
Lease liabilities (12.9) (7.3)
Net cash and lease liabilities after borrowings 57.2 74.1
Funding
On 2 July 2018, the Group entered into an unsecured multi-currency revolving
facility agreement, which is committed until June 2024 with one-year
extension options at the end of the first and second years. The facility has
been entered into with two banks and comprises a Euro-denominated
multi-currency facility of €50.0m (£42m) and a US Dollar-denominated
multi-currency facility of $80.0m (£58m). The facility has been extended by
one year to June 2025.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to
interest greater than 4.0 times. As at 31 March and 30 September 2021 the
business had net cash.
Pensions
The Group has a defined benefit pension scheme in the UK. This has been closed
to new entrants since 2001 and closed to future accrual from 2010.
On an IAS 19 basis, the surplus arising from our defined benefit pension
scheme obligations on 30 September 2021 was £25.0m (31 March 2021: £16.3m).
The value of scheme assets increased to £359.3m (31 March 2021: £340.2m).
Scheme liabilities increased to £334.3m (31 March 2021: £323.9m) due to
movements in the discount rate and inflation rates. The discount rate
decreased from 2.1% to 2.0% because of a reduction in bond yields, and the
assumed inflation rates for RPI and CPI have increased from 3.1% to 3.3% and
from 2.5% to 2.7% respectively, reflecting economic conditions at the balance
sheet date.
The scheme's actuarial valuation review, rather than the accounting basis,
determines our cash payments into the scheme. The cash contributions into the
scheme are expected to continue until 2025/26, at which point we expect, based
on current assumptions, the scheme to achieve self-sufficiency. In the half
year 2021, these contributions amounted to £3.8m. We are reviewing the
results of the recent triennial review although we do not expect any changes
to the current recovery plan. The scheme rules provide that in the event of a
surplus remaining after settling contractual obligations to members, the Group
may determine how the surplus is utilised.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Performance Highlights, Chief Executive's Review and Operations Review
sections of this Half-year Report. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described in the
Finance Review.
Trading for the Group has been strong during the first half of the year. The
Group has prepared and reviewed a number of scenarios for the Group based on
key risks noted for the business and the potential impact on orders, trading
and cash flow performance. In addition, the Group has overlaid the risk of
long-term adverse movements in foreign exchange rates to our cash flow
forecasts. The Board is satisfied, having considered the sensitivity analysis,
as well as its funding facilities, that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Forward-looking statements
This document contains certain forward-looking statements. The forward-looking
statements reflect the knowledge and information available to the Company
during the preparation and up to the publication of this document. By their
very nature, these statements depend upon circumstances and relate to events
that may occur in the future, thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit forecast
by the Company.
Gavin Hill
Group Finance Director
8 November 2021
Principal Risks and Uncertainties
Information regarding the risk management process in place at the Group is set
out on page 66 of the 2021 Report and Financial Statements. The principal
risks and uncertainties identified through that process are set out on pages
66 to 70 of the 2021 Report and Financial Statements and can be found on the
Group's website at www.oxinst.com (http://www.oxinst.com) .
In keeping with the risk management process, the Group has performed a
quarterly update of its risk register as at 30 September 2021.
It has evaluated the disclosures made on pages 66 to 70 of the 2021 Report and
Financial Statements and has concluded that all bar one of the risks
identified remain relevant for the remainder of the year ending 31 March 2022
and that there are no other significant risks to be disclosed. A summary of
the risks and uncertainties identified in the 2021 Report and Financial
Statements is set out below:
· impact of covid-19;
· political risk;
· routes to market;
· technical risk;
· supply chain risk;
· cyber risk;
· legal/compliance risk;
· adverse movements in long-term foreign currency rates;
· people;
· operational risk; and
· pensions.
The Board considers the Brexit-related risks set out on page 69 of the 2021
Report and Financial Statements are no longer significant. While the Group has
experienced some additional costs associated with freight into the EU, the
financial impact has not been significant. Further, the other Brexit-related
risks identified have not materialised to date, although the potential
shortage of key skills remains relevant. However, this is covered in the
people risk.
Regarding covid-19, the Group has been largely resilient to its effects.
However, the potential for disruption at an operational and customer level
remains, albeit mitigated by widespread vaccinations and revised working
practices.
Responsibility Statement of the Directors
in respect of the Half-year Financial Statements
We confirm that to the best of our knowledge:
· the condensed set of Financial Statements has been prepared in
accordance with UK adopted IAS 34 Interim Financial Reporting; and
· the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
Ian Barkshire
Chief Executive
Gavin Hill
Group Finance Director
8 November 2021
Condensed Consolidated Statement of Income
Half year ended 30 September 2021
Half year to 30 September 2021 Half year to 30 September 2020
Adjusting Adjusting
Adjusted items(1) Total Adjusted items(1) Total
Note £m £m £m £m £m £m
Revenue 4 170.1 - 170.1 140.3 - 140.3
Cost of sales (82.4) (0.9) (83.3) (68.8) - (68.8)
Gross profit 87.7 (0.9) 86.8 71.5 - 71.5
Research and development 5 (15.4) - (15.4) (13.2) - (13.2)
Selling and marketing (22.9) - (22.9) (19.8) - (19.8)
Administration and shared services (21.2) (4.1) (25.3) (14.6) (4.3) (18.9)
Foreign exchange gain/(loss) 2.4 (3.8) (1.4) 0.4 0.8 1.2
Operating profit 30.6 (8.8) 21.8 24.3 (3.5) 20.8
Interest credit on pension scheme net assets 0.2 - 0.2 0.4 - 0.4
Other financial income 0.1 - 0.1 0.1 - 0.1
Financial income 0.3 - 0.3 0.5 - 0.5
Financial expenditure (0.7) - (0.7) (1.1) - (1.1)
Profit/(loss) before income tax 4 30.2 (8.8) 21.4 23.7 (3.5) 20.2
Income tax (expense)/credit (6.5) 1.6 (4.9) (4.9) 0.6 (4.3)
Profit/(loss) for the half year attributable to equity Shareholders of the 23.7 (7.2) 16.5 18.8 (2.9) 15.9
parent
Earnings per share pence pence pence pence
Basic earnings per share 3
From profit for the half year 41.2 28.7 32.8 27.7
Diluted earnings per share 3
From profit for the half year 40.7 28.3 32.4 27.4
Dividends per share 8
Dividends paid 4.1 -
Dividends proposed 4.4 4.1
1. Adjusted numbers are stated to give a better understanding of the
underlying business performance. Details of adjusting items can be found in
Note 2.
Year to 31 March 2021
Adjusting
Adjusted items(1) Total
Note £m £m £m
Revenue 4 318.5 - 318.5
Cost of sales (153.7) - (153.7)
Gross profit 164.8 - 164.8
Research and development 5 (30.0) (1.3) (31.3)
Selling and marketing (44.5) - (44.5)
Administration and shared services (34.5) (8.8) (43.3)
Foreign exchange gain 0.9 6.4 7.3
Operating profit 56.7 (3.7) 53.0
Interest credit on pension scheme net assets 0.9 - 0.9
Other financial income 0.2 - 0.2
Financial income 1.1 - 1.1
Financial expenditure (1.9) - (1.9)
Profit/(loss) before income tax 4 55.9 (3.7) 52.2
Income tax (expense)/credit (10.8) 0.4 (10.4)
Profit/(loss) for the year attributable to equity Shareholders of the parent 45.1 (3.3) 41.8
Earnings per share pence pence
Basic earnings per share 3
From profit for the year 78.6 72.8
Diluted earnings per share 3
From profit for the year 77.6 71.9
Dividends per share 8
Dividends paid -
Dividends proposed 17.0
1. Adjusted numbers are stated to give a better understanding of the
underlying business performance. Details of adjusting items can be found in
Note 2.
The attached notes form part of these Financial Statements.
Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2021
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£m £m £m
Profit for the period 16.5 15.9 41.8
Other comprehensive income/(expense):
Items that may be reclassified subsequently to Consolidated Statement of
Income
Foreign exchange translation differences 1.3 (2.0) (4.9)
Items that will not be reclassified to Consolidated Statement of Income
Remeasurement gain/(loss) in respect of post-retirement benefits 4.7 (33.7) (30.8)
Tax (charge)/credit on items that will not be reclassified to
Consolidated Statement of Income (1.2) 6.4 5.5
Total other comprehensive income/(expense) 4.8 (29.3) (30.2)
Total comprehensive income/(expense) for the period 21.3 (13.4) 11.6
attributable to equity Shareholders of the parent
Condensed Consolidated Statement of Financial Position
As at 30 September 2021
As at
As at 30 September As at
30 September 2020 31 March
2021 as restated1 2021
Note £m £m £m
Assets
Non-current assets
Property, plant and equipment 25.6 20.5 21.1
Right-of-use assets 12.4 7.0 7.3
Intangible assets 148.7 130.3 122.6
Derivative financial instruments 9 - - 1.1
Retirement benefit asset 25.0 1.1 16.3
Deferred tax assets 14.2 13.9 13.1
225.9 172.8 181.5
Current assets
Inventories 66.3 59.1 58.7
Trade and other receivables 86.9 68.1 75.6
Current income tax receivables 0.6 0.2 1.9
Derivative financial instruments 9 2.6 1.0 5.0
Cash and cash equivalents 119.3 136.6 128.0
275.7 265.0 269.2
Total assets 501.6 437.8 450.7
Equity
Capital and reserves attributable to the Company's equity Shareholders
Share capital 2.9 2.9 2.9
Share premium 62.5 62.4 62.4
Other reserves 0.2 0.2 0.2
Translation reserve 7.9 9.5 6.6
Retained earnings 205.4 164.5 194.1
278.9 239.5 266.2
Liabilities
Non-current liabilities
Lease payables 10.1 5.1 4.9
Derivative financial instruments 9 0.5 - -
Provisions - 0.7 0.7
Deferred tax liabilities 7.3 1.1 4.9
17.9 6.9 10.5
Current liabilities
Bank loans and overdrafts 2 49.2 55.2 30.4
Trade and other payables 137.9 120.4 126.1
Lease payables 2.8 2.2 2.6
Current income tax payables 5.3 4.5 6.2
Derivative financial instruments 9 - 1.1 -
Provisions 9.6 8.0 8.7
204.8 191.4 174.0
Total liabilities 222.7 198.3 184.5
Total liabilities and equity 501.6 437.8 450.7
1. Details of restatement of prior period numbers can be found in Note
1.
The Financial Statements were approved by the Board of Directors on 8 November
2021 and signed on its behalf by:
Ian Barkshire
Director
Gavin Hill
Director
Company number: 775598
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2021
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
£m £m £m £m £m £m
As at 1 April 2021 2.9 62.4 0.2 6.6 194.1 266.2
Total comprehensive income/(expense):
Profit for the half year - - - - 16.5 16.5
Other comprehensive income/(expense):
- Foreign exchange translation differences - - - 1.3 - 1.3
- Remeasurement gain in respect of post‑retirement benefits - - - - 4.7 4.7
- Tax charge on items that will not be reclassified to Consolidated Statement - - - - (1.2) (1.2)
of Income
Total comprehensive income attributable to equity Shareholders of the parent - - - 1.3 20.0 21.3
Transactions with owners recorded directly in equity:
- Credit in respect of employee service costs settled by award of share - - - - 1.1 1.1
options
- Tax credit in respect of share options - - - - - -
- Proceeds from shares issued - 0.1 - - - 0.1
- Dividends - - - - (9.8) (9.8)
Total transactions with owners recorded directly in equity: - 0.1 - - (8.7) (8.6)
As at 30 September 2021 2.9 62.5 0.2 7.9 205.4 278.9
As at 1 April 2020 2.9 62.2 0.2 11.5 174.8 251.6
Total comprehensive income/(expense):
Profit for the half year - - - - 15.9 15.9
Other comprehensive (expense)/income:
- Foreign exchange translation differences - - - (2.0) - (2.0)
- Remeasurement loss in respect of post-retirement benefits - - - - (33.7) (33.7)
- Tax credit on items that will not be reclassified to Consolidated Statement - - - - 6.4 6.4
of Income
Total comprehensive expense attributable to equity Shareholders of the parent - - - (2.0) (11.4) (13.4)
Transactions with owners recorded directly in equity:
- Credit in respect of employee service costs settled by award of share - - - - 1.1 1.1
options
- Tax credit in respect of share options - - - - - -
- Proceeds from shares issued - 0.2 - - - 0.2
- Dividends - - - - - -
Total transactions with owners recorded directly in equity: - 0.2 - - 1.1 1.3
As at 30 September 2020 2.9 62.4 0.2 9.5 164.5 239.5
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
£m £m £m £m £m £m
As at 1 April 2020 2.9 62.2 0.2 11.5 174.8 251.6
Total comprehensive income/(expense):
Profit for the half year - - - - 41.8 41.8
Other comprehensive (expense)/income:
- Foreign exchange translation differences - - - (4.9) - (4.9)
- Remeasurement loss in respect of post‑retirement benefits - - - - (30.8) (30.8)
-Tax credit on items that will not be reclassified to Consolidated Statement - - - - 5.5 5.5
of Income
Total comprehensive (expense)/income attributable to equity Shareholders of - - - (4.9) 16.5 11.6
the parent
Transactions with owners recorded directly in equity:
- Credit in respect of employee service costs settled by award of share - - - - 1.8 1.8
options
- Tax credit in respect of share options - - - - 1.0 1.0
- Proceeds from shares issued - 0.2 - - - 0.2
- Dividends - - - - - -
Total transactions with owners recorded directly in equity: - 0.2 - - 2.8 3.0
As at 31 March 2021 2.9 62.4 0.2 6.6 194.1 266.2
Other reserves comprise the capital redemption reserve, which represents the
nominal value of shares repurchased and then cancelled during the year ended
31 March 1999.
The foreign exchange translation reserve comprises all foreign exchange
differences arising since 1 April 2004 from the translation of the Group's net
investments in foreign subsidiaries into Sterling.
Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2021
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
Note £m £m £m
Profit for the period 16.5 15.9 41.8
Adjustments for:
Income tax expense 4.9 4.3 10.4
Net financial expense 0.4 0.6 0.8
Fair value movement on financial derivatives 3.8 (0.8) (6.4)
Restructuring costs 0.3 - 0.4
WITec post-acquisition gross margin adjustment 0.9 - -
Impairment of capitalised development costs - - 1.3
Amortisation of acquired intangibles 3.8 4.3 8.4
Depreciation of right-of-use assets 1.6 1.4 2.8
Depreciation of property, plant and equipment 1.8 1.7 3.8
Amortisation of capitalised development costs 0.7 1.0 2.5
Adjusted earnings before interest, tax, depreciation and amortisation 34.7 28.4 65.8
Charge in respect of equity settled employee share schemes 1.1 1.1 1.8
Restructuring costs (paid)/received (0.3) 0.5 0.3
Cash payments to the pension scheme more than the charge to operating profit (3.8) (3.7) (15.5)
Operating cash flows before movements in working capital 31.7 26.3 52.4
Increase in inventories (1.7) (0.6) (1.3)
(Increase)/decrease in receivables (5.9) 2.1 (10.5)
Increase/(decrease) in payables and provisions (6.7) (8.4) 11.3
Increase/(decrease) in customer deposits 0.1 3.9 (2.2)
Cash generated from operations 17.5 23.3 49.7
Interest paid (0.5) (1.0) (1.6)
Income taxes paid (4.0) (4.0) (6.3)
Net cash from operating activities 13.0 18.3 41.8
Cash flows from investing activities
Proceeds from sale of property, plant and equipment - 0.1 0.2
Acquisition of property, plant and equipment (5.5) (1.2) (4.2)
Acquisition of subsidiaries, net of cash acquired (30.0) - -
Capitalised development expenditure (0.2) (0.5) (0.9)
Net cash used in investing activities (35.7) (1.6) (4.9)
Cash flows from financing activities
Proceeds from issue of share capital 0.1 0.1 0.2
Payments made in respect of lease liabilities (1.3) (1.3) (2.8)
Repayment of borrowings - - (27.9)
Dividends paid (2.4) - -
Net cash used in financing activities (3.6) (1.2) (30.5)
Net (decrease)/increase in cash and cash equivalents (26.3) 15.5 6.4
Cash and cash equivalents at beginning of the period 97.6 95.4 95.4
Effect of exchange rate fluctuations on cash held 0.8 (1.6) (4.2)
Cash and cash equivalents at end of the period 72.1 109.3 97.6
Cash and cash equivalents as per the Consolidated Statement of Financial 119.3 136.6 128.0
Position
Bank overdrafts 9 (47.2) (27.3) (30.4)
Net cash and cash equivalents in the Consolidated Statement of Financial 72.1 109.3 97.6
Position
Notes to the Half-year Financial Statements
Half year ended 30 September 2021
1 Basis of preparation
Reporting entity
Oxford Instruments plc is a company incorporated in England and Wales. The
condensed consolidated half-year Financial Statements consolidate the results
of the Company and its subsidiaries (together referred to as the "Group").
They have been prepared and approved by the Directors in accordance with
International Financial Reporting Standard (IFRS) IAS 34 Interim Financial
Reporting as adopted by the UK. They do not include all of the information
required for full annual financial statements, and should be read in
conjunction with the consolidated Financial Statements of the Group for the
year ended 31 March 2021.
The financial information contained herein is unaudited and does not
constitute statutory accounts as defined by Section 435 of the Companies Act
2006. The comparative figures for the financial year ended 31 March 2021 are
not the Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditors and delivered to the registrar
of companies. The report of the auditors was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed set of Financial Statements has been prepared
applying the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated Financial Statements for
the year ended 31 March 2021.
Prior period restatement
In early 2021, the Financial Reporting Council (FRC) submitted a request for
further information on the Group's Report and Financial Statements for the
year ended 31 March 2020. The review conducted by the FRC was based solely on
the Group's published Report and Financial Statements and does not provide any
assurance that the Report and Financial Statements are correct in all material
respects.
Following the completion of this review, the Directors concluded during the
prior full year that the overdraft balances of Group entities should be
separately presented gross on the Consolidated Statement of Financial
Position, rather than netted off against cash and cash equivalents held either
by the same entity, or other Group entities, with the same bank. These
overdrafts are held with the Group's relationship banks. More details can be
found in the Accounting Policies note of the 2021 Report and Financial
Statements where the prior year was restated.
As a result, the Consolidated Statement of Financial Position as at 30
September 2020 has been restated as follows:
As at As at
30 September 30 September
2020 2020
(as reported) Restatement (restated)
Consolidated Statement of Financial Position £m £m £m
Current assets
Cash and cash equivalents 109.3 27.3 136.6
Current liabilities
Bank loans and overdrafts (27.9) (27.3) (55.2)
Net assets 81.4 - 81.4
The restatement did not result in any change to reported profit, earnings per
share, net assets or cash flows reported in the 2020 half-year report.
Estimates
The preparation of half-year Financial Statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these half-year Financial Statements, the significant judgements
made by management in applying the Group's accounting policies and key sources
of estimation uncertainty were the same as those that applied to the
consolidated Financial Statements as at and for the year ended 31 March 2021.
Going concern
The condensed consolidated half-year Financial Statements have been prepared
on a going concern basis, based on the Directors' opinion, after making
reasonable enquiries, that the Group has adequate resources to continue in
operational existence for the foreseeable future.
Exchange rates
The principal exchange rates used to translate the Group's overseas results
were as follows:
Half year to Half year to Year to
30 September 30 September 31 March
Period end rates 2021 2020 2021
US Dollar 1.35 1.29 1.38
Euro 1.16 1.10 1.17
Japanese Yen 150 136 152
Japanese
Average translation rates US Dollar Euro Yen
Half year to 30 September 2021
April 1.38 1.16 152
May 1.40 1.16 153
June 1.40 1.16 154
July 1.39 1.17 153
August 1.38 1.17 152
September 1.36 1.16 151
Japanese
Average translation rates US Dollar Euro Yen
Year to 31 March 2021
April 1.25 1.14 134
May 1.25 1.13 134
June 1.24 1.11 133
July 1.27 1.11 136
August 1.33 1.11 140
September 1.32 1.11 139
October 1.29 1.11 136
November 1.34 1.12 139
December 1.35 1.12 140
January 1.37 1.12 142
February 1.39 1.14 146
March 1.39 1.16 151
2 Non-GAAP measures
In the preparation of adjusted numbers, the Directors exclude certain items in
order to assist with comparability between peers and to give what they
consider to be a better indication of the underlying performance of the
business. These adjusting items are excluded in the calculation of adjusted
operating profit, adjusted profit before tax, adjusted profit for the period,
adjusted EBITDA, adjusted EPS, adjusted cash conversion and adjusted effective
tax rate. Details of adjusting items are given below.
Adjusted EBITDA is calculated by adding back depreciation of property, plant
and equipment, depreciation of right-of-use assets and amortisation of
intangible assets to adjusted operating profit, and can be found in the
Consolidated Statement of Cash Flows. The calculation of adjusted EPS can be
found in Note 3. Adjusted effective tax rate is calculated by dividing the
share of tax attributable to adjusted profit before tax by adjusted profit
before tax. The definition of cash conversion is set out in the Finance
Review.
Reconciliation between operating profit and profit before income tax and
adjusted profit from operations
Half year to 30 September 2021 Half year to 30 September 2020 Year to 31 March 2021
Operating Profit before Operating Profit before Operating Profit before
profit income tax profit income tax profit income tax
£m £m £m £m £m £m
Statutory measure 21.8 21.4 20.8 20.2 53.0 52.2
Business reorganisation items 0.3 0.3 - - 0.4 0.4
WITec post-acquisition gross margin adjustment 0.9 0.9 - - - -
Impairment of capitalised development costs - - - - 1.3 1.3
Amortisation and impairment of acquired intangibles 3.8 3.8 4.3 4.3 8.4 8.4
Fair value movement on financial derivatives 3.8 3.8 (0.8) (0.8) (6.4) (6.4)
Total non-GAAP adjustments 8.8 8.8 3.5 3.5 3.7 3.7
Adjusted measure 30.6 30.2 24.3 23.7 56.7 55.9
Adjusted income tax expense (6.5) (4.9) (10.8)
Adjusted profit for the period 30.6 23.7 24.3 18.8 56.7 45.1
Adjusted effective tax rates 21.5% 20.7% 19.3%
Business reorganisation items
These represent the costs of one-off charges incurred at the balance sheet
date relating to the acquisition of WITec Wissenschaftliche Instrumente und
Technologie GmbH ("WITec").
WITec post-acquisition gross margin adjustment
The finished goods and work in progress inventories were revalued to
provisional fair value, based on selling price less costs to sell. The £0.9m
adjustment relates to the gross margin which would have been earned on
post-acquisition sales to 30 September 2021, but which has been absorbed into
the acquisition date fair value. This will not recur, once all such inventory
at the acquisition date has been delivered to customers.
Impairment of capitalised development costs
During the year to 31 March 2021, the Group reviewed the capitalised
development costs to ensure they remained directly related to targeted
product or software developments. The one-off non-cash impairment relates to
delays in market launch of specific development projects within the Materials
& Characterisation segment.
Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired
intangible assets and goodwill.
Fair value movement on financial derivatives
Under IFRS 9, all derivative financial instruments are recognised initially at
fair value. Subsequent to initial recognition, they are also measured at fair
value. In respect of instruments used to hedge foreign exchange risk and
interest rate risk, the Group does not take advantage of the hedge accounting
rules provided for in IFRS 9 since that standard requires certain stringent
criteria to be met in order to hedge account, which, in the particular
circumstances of the Group, are considered by the Board not to bring any
significant economic benefit. Accordingly, the Group accounts for these
derivative financial instruments at fair value through profit or loss. To the
extent that instruments are hedges of future transactions, adjusted profit for
the year is stated before changes in the valuation of these instruments so
that the underlying performance of the Group can be more clearly seen.
Adjusted income tax expense
Adjusting items include the income tax on each of the items described above.
Reconciliation of changes in cash and cash equivalents to movement in net cash
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£m £m £m
Net (decrease)/increase in cash and cash equivalents (26.3) 15.5 6.4
Effect of exchange rate fluctuations on cash held 0.8 (1.6) (4.2)
(25.5) 13.9 2.2
Repayment of borrowings - - 27.9
Increase in borrowings (2.0) - -
Movement in net cash in the period (27.5) 13.9 30.1
Net cash at start of the year 97.6 67.5 67.5
Net cash at the end of the period 70.1 81.4 97.6
Reconciliation of net cash to Statement of Financial Position
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£m as restated(1) £m
Loan notes - unsecured - (27.9) -
Covid-19 loan at WITec (2.0) - -
Overdrafts (47.2) (27.3) (30.4)
Cash and cash equivalents 119.3 136.6 128.0
Net cash at the end of the period 70.1 81.4 97.6
1. Prior period numbers have been restated. Details can be found in Note
1.
3 Earnings per share
Basic and diluted EPS from continuing operations are based on the result for
the period from continuing operations, as reported in the Consolidated
Statement of Income. Basic and diluted EPS from total operations are based on
the result for the period attributable to equity Shareholders of the parent.
Adjusted and diluted adjusted EPS are based on adjusted profit for the period
from continuing operations. The profit measures noted above are divided by
the weighted average number of ordinary shares outstanding during the period
excluding shares held by the Employee Share Ownership Trust. The table below
reconciles these different profit measures.
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£m £m £m
Profit for the year attributable to equity Shareholders of the parent 16.5 15.9 41.8
Adjusting items:
Business reorganisation items 0.3 - 0.4
WITec post-acquisition gross margin adjustment 0.9 - -
Impairment of capitalised development costs - - 1.3
Amortisation and impairment of acquired intangibles 3.8 4.3 8.4
Fair value movement on financial derivatives 3.8 (0.8) (6.4)
Adjusted income tax expense (1.6) (0.6) (0.4)
Adjusted profit for the year 23.7 18.8 45.1
The weighted average number of shares used in the calculation excludes shares
held by the Employee Share Ownership Trust, and is as follows:
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
Shares Shares Shares
million million million
Weighted average number of shares outstanding 57.6 57.4 57.5
Less: weighted average number of shares held by Employee Share Ownership Trust (0.1) (0.1) (0.1)
Weighted average number of shares used in calculation of basic earnings per 57.5 57.3 57.4
share
The following table shows the effect of share options on the calculation of
diluted earnings per share:
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
Shares Shares Shares
million million million
Number of ordinary shares per basic earnings per share calculations 57.5 57.3 57.4
Effect of shares under option 0.8 0.7 0.7
Number of ordinary shares per diluted earnings per share calculations 58.3 58.0 58.1
For the purposes of calculating diluted and diluted adjusted EPS, the weighted
average number of ordinary shares is adjusted to include the weighted average
number of ordinary shares that would be issued on the conversion of all
potentially dilutive ordinary shares expected to vest, relating to the
Company's share-based payment plans. Potential ordinary shares are only
treated as dilutive when their conversion to ordinary shares would decrease
EPS or increase loss per share.
4 Segment information
The Group has eight operating segments. These operating segments have been
combined into three aggregated operating segments to the extent that they have
similar economic characteristics, with relevance to products and services,
type and class of customer, methods of sale and distribution and the
regulatory environment in which they operate. Each of these three aggregated
operating segments is a reportable segment. The aggregated operating segments
are as follows:
· the Materials & Characterisation segment comprises a group of
businesses focusing on applied R&D and commercial customers, enabling the
fabrication and characterisation of materials and devices down to the atomic
scale;
· the Research & Discovery segment comprises a group of
businesses providing advanced solutions that create unique environments and
enable measurements down to the molecular and atomic level which are used in
fundamental research; and
· the Service & Healthcare segment provides customer service and
support for the Group's products and the service of third-party healthcare
imaging systems.
Reportable segment results include items directly attributable to a segment as
well as those which can be allocated on a reasonable basis. Inter-segment
pricing is determined on an arm's length basis. The operating results of each
are regularly reviewed by the Chief Operating Decision Maker, which is deemed
to be the Board of Directors. Discrete financial information is available for
each segment and used by the Board of Directors for decisions on resource
allocation and to assess performance. No asset information is presented below
as this information is not presented in reporting to the Group's Board of
Directors.
Results from operations
Materials & Research & Service &
Characterisation Discovery Healthcare Total
Half year to 30 September 2021 £m £m £m £m
Total segment revenue 84.9 56.3 28.9 170.1
Segment adjusted operating profit 13.0 8.7 8.9 30.6
Materials & Research & Service &
Characterisation Discovery Healthcare Total
Half year to 30 September 2020 £m £m £m £m
Total segment revenue 65.2 48.3 26.8 140.3
Segment adjusted operating profit 8.9 6.4 9.0 24.3
Materials & Research & Service &
Characterisation Discovery Healthcare Total
Year to 31 March 2021 £m £m £m £m
Total segment revenue 148.6 113.4 56.5 318.5
Segment adjusted operating profit 20.3 19.5 16.9 56.7
Revenue in the Materials & Characterisation and Research & Discovery
segments represents the sale of products. Revenue in the Service &
Healthcare segment relates to service income.
Reconciliation of reportable segment profit
Materials & Research & Service & Unallocated
Characterisation Discovery Healthcare Group items Total
Half year to 30 September 2021 £m £m £m £m £m
Segment adjusted operating profit 13.0 8.7 8.9 - 30.6
Restructuring costs (0.3) - - - (0.3)
WITec post-acquisition gross margin adjustment (0.9) - - - (0.9)
Amortisation and impairment of acquired intangibles (0.6) (3.2) - - (3.8)
Fair value movement on financial derivatives - - - (3.8) (3.8)
Financial income - - - 0.3 0.3
Financial expenditure - - - (0.7) (0.7)
Profit/(loss) before income tax 11.2 5.5 8.9 (4.2) 21.4
Materials & Research & Service & Unallocated
Characterisation Discovery Healthcare Group items Total
Half year to 30 September 2020 £m £m £m £m £m
Segment adjusted operating profit 8.9 6.4 9.0 - 24.3
Amortisation and impairment of acquired intangibles (1.1) (3.2) - - (4.3)
Fair value movement on financial derivatives - - - 0.8 0.8
Financial income - - - 0.5 0.5
Financial expenditure - - - (1.1) (1.1)
Profit before income tax 7.8 3.2 9.0 0.2 20.2
Materials & Research & Service & Unallocated
Characterisation Discovery Healthcare Group items Total
Year to 31 March 2021 £m £m £m £m £m
Segment adjusted operating profit 20.3 19.5 16.9 - 56.7
Restructuring costs (0.4) - - - (0.4)
Impairment of capitalised development costs (1.3) - - - (1.3)
Amortisation and impairment of acquired intangibles (2.0) (6.4) - - (8.4)
Fair value movement on financial derivatives - - - 6.4 6.4
Financial income - - - 1.1 1.1
Financial expenditure - - - (1.9) (1.9)
Profit before income tax 16.6 13.1 16.9 5.6 52.2
5 Research and development (R&D)
The total research and development spend by the Group is as follows:
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£m £m £m
R&D expense charged to the Consolidated Statement of Income 15.4 13.2 30.0
Depreciation of R&D-related fixed assets (0.1) - (0.1)
Amounts capitalised as fixed assets 0.3 - 0.6
Amortisation and impairment of R&D costs previously capitalised as (0.7) (1.0) (2.5)
intangible assets
Amounts capitalised as intangible assets 0.2 0.5 0.9
Total cash spent on R&D during the period 15.1 12.7 28.9
6 Acquisition of WITec
On 31 August 2021, the Group acquired 100% of the issued share capital of
WITec Wissenschafliche Instrumente und Technologie GmbH ("WITec") on a
cash-free, debt-free basis for consideration of €42m, of which €5m is
conditional on trading performance over a period of twelve months from the
acquisition. The conditions for the deferred consideration are meeting certain
revenue, order and margin thresholds. In the calculations below, it has been
assumed that these thresholds have been met. WITec is a leading designer and
manufacturer of Raman microscopy imaging solutions, based in Ulm, Germany.
The book and provisional fair value of the assets and liabilities acquired is
given in the table below. Provisional values have been used for all assets and
liabilities other than inventory because the initial acquisition accounting is
incomplete at the date of this report. As a result, the amount of tax
deductible goodwill is not known as at the date of this report. The business
is being integrated into the Materials & Characterisation segment.
Provisional Provisional
Book value adjustments fair value
£m £m £m
Property, plant and equipment 0.2 - 0.2
Right-of-use assets 2.7 - 2.7
Inventories 5.7 4.0 9.7
Trade and other receivables 1.9 - 1.9
Cash and cash equivalents 1.7 - 1.7
Trade and other payables (2.0) - (2.0)
Lease payables (2.7) - (2.7)
Provisions (0.5) - (0.5)
Bank loans (2.0) - (2.0)
Net assets acquired 5.0 4.0 9.0
Goodwill 27.0
Total cash spent on R&D during the period 36.0
Cash acquired (1.7)
Deferred consideration (4.3)
Net cash outflow relating to the acquisition 30.0
The goodwill arising is considered to represent the value of the acquired
workforce and the value of technology that has not yet been individually fair
valued.
Acquisition-related costs of £0.3m (£0.4m in the year to 31 March 2021) have
been expensed in the Condensed Consolidated Statement of Income and recorded
as an adjusting item due to the one-off nature (see Note 2).
The acquisition contributed revenue of £1.8m, adjusted operating profit of
£0.2m and a statutory loss before tax of £0.7m to the Group's result for the
period.
7 Taxation
The total effective tax rate on profits for the half year is 22.9% (prior half
year: 21.3%). The weighted average tax rate in respect of adjusted profit
before tax (see Note 2) for the half year is 21.5% (prior half year: 20.7%).
For the full year, the Group expects the tax rate in respect of adjusted
profit before tax to be 22.4%.
8 Dividends per share
The following dividends per share were paid by the Group:
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
pence pence pence
Previous period interim dividend 4.1 - -
Previous period final dividend - - -
4.1 - -
The following dividends per share were proposed by the Group in respect of
each accounting period presented:
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
pence pence pence
Interim dividend 4.4 4.1 4.1
Final dividend - - 12.9
4.4 4.1 17.0
The final dividend for the year to 31 March 2021 was approved by Shareholders
at the Annual General Meeting held on 21 September 2021. Accordingly, it is
no longer at the discretion of the Company and has been included as a
liability as at 30 September 2021. It was paid on 15 October 2021.
The interim dividend for the year to 31 March 2022 of 4.4 pence was approved
by the Board on 8 November 2021 and has not been included as a liability as at
30 September 2021. The interim dividend will be paid on 14 January 2022 to
Shareholders on the register on the record date of 3 December 2021. The
ex-dividend date will be 2 December 2021. The last date of election for the
Dividend Reinvestment Plan (DRIP) is 21 December 2021. This represents a
change from the previously indicated timetable, which suggested that the
ex-dividend, record and DRIP election dates would occur in March 2022.
9 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying amount is a
reasonable approximation of fair value.
Half year to 30 September 2021 Half year to 30 September 2020 as restated(1) Year to 31 March 2021
Fair value Carrying Fair Carrying Fair Carrying Fair
hierarchy amount value amount value amount value
level £m £m £m £m £m £m
Assets carried at amortised cost
Trade receivables 66.8 54.4 59.3
Other receivables and accrued income 14.1 9.7 12.2
Cash and cash equivalents 119.3 136.6 128.0
Assets carried at fair value
Derivative financial instruments:
- Foreign currency contracts 2 2.6 2.6 1.0 1.0 6.1 6.1
Liabilities carried at fair value
Derivative financial instruments:
- Foreign currency contracts 2 (0.5) (0.5) (1.1) (1.1) - -
Liabilities carried at amortised cost
Trade and other payables (64.0) (57.5) (67.7)
Bank overdrafts (47.2) (27.3) (30.4)
Borrowings (2.0) (27.9) -
Lease payables (12.9) (7.3) (7.5)
1. Prior period numbers have been restated. Details can be found in Note
1.
The following summarises the major methods and assumptions used in estimating
the fair values of financial instruments reflected in the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by
discounting the future contracted principal and interest cash flows using the
market rate of interest at the reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the
carrying amount is deemed to reflect the fair value. All other
receivables/payables are discounted to determine their fair value. Advances
received are excluded from other payables above as these are not considered
to be financial liabilities.
Lease payables
The lease liability is measured at amortised cost using the effective interest
method.
Fair value hierarchy
The table above gives details of the valuation method used in arriving at the
fair value of financial instruments. The different levels have been
identified as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets and liabilities;
· Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
· Level 3: inputs for the asset or liability that are not based on
observable market data.
There have been no transfers between levels during the year.
10 Retirement benefit obligations
The Group operates a defined benefit plan in the UK. A full actuarial
valuation of the UK plan was carried out as at 31 March 2018 which, for
reporting purposes, has been updated to 30 September 2021 by a qualified
independent actuary.
At 31 March 2021, the scheme actuary calculated a retirement benefit asset of
£16.3m. In the period to 30 September 2021, there has been a reduction in the
discount rate from 2.1% to 2.0%, and an increase in the assumed level of CPI
and RPI inflation rates by 0.2% (to 2.7% and 3.3% from 2.5% and 3.1%
respectively at 31 March 2021). The impact of these changes has increased the
benefit obligation to £334.3m (31 March 2021: £323.9m).
The Group has agreed a basis for deficit recovery payments with the trustees
of the UK pension scheme. The deficit recovery payments are payable through to
and including 2026 and will rise by approximately 3% per annum. The deficit
recovery payment for the period was £4.0m (year to 31 March 2021: £7.8m
plus an additional one-off payment of £8.1m). In addition, the scheme's
assets generated a higher return than the discount rate. As a result, the fair
value of plan assets increased to £359.3m (31 March 2021: £340.2m).
The overall effect is that for the purposes of IAS 19 the surplus on the
scheme increased from £16.3m to £25.0m.
11 Related parties
All transactions with related parties are conducted on an arm's length basis
and in accordance with normal business terms. Transactions between the Company
and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Independent Review Report to Oxford Instruments plc
Introduction
We have been engaged by the Company to review the condensed set of Financial
Statements in the half-yearly financial report for the six months ended
30 September 2021 which comprises the Condensed Consolidated Statement of
Income, Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed Consolidated Statement
of Changes in Equity and Condensed Consolidated Statement of Cash Flows.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been
approved by the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group will be
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this interim financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity", issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2021 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting its responsibilities in respect of half-yearly
financial reporting in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Reading, UK
8 November 2021
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
ends
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