Picture of Oxford Instruments logo

OXIG Oxford Instruments News Story

0.000.00%
gb flag iconLast trade - 00:00
TechnologyAdventurousMid CapFalling Star

REG - Oxford Instruments - Half-Year Results

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221108:nRSH5957Fa&default-theme=true

RNS Number : 5957F  Oxford Instruments PLC  08 November 2022

Oxford Instruments plc

Announcement of half-year results for the six months to 30 September 2022

 

Strong demand from structural growth markets driving increased revenue, profit
and order book; expectations remain in line for full year

 

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 2022.

 

                                                                          % change
                                    Half year to  Half year to            organic
                                    30 September  30 September  % change  constant
 Adjusted(1)                         2022         2021          reported  currency(4)
 Revenue                            £200.5m       £170.1m       +17.9%    +10.2%
 Adjusted operating profit          £36.8m        £30.6m        +20.3%    +4.6%
 Adjusted operating profit margin   18.4%         18.0%         +40bps
 Adjusted profit before taxation    £37.3m        £30.2m        +23.5%
 Adjusted basic earnings per share  50.8p         41.2p         +23.3%
 Cash conversion(2)                 65%           53%
 Net cash(3)                        £97.1m        £70.1m

 

                                  Half year to  Half year to
                                  30 September  30 September  % change
 Statutory                         2022         2021          reported
 Revenue                          £200.5m       £170.1m       +17.9%
 Operating profit                 £26.3m        £21.8m        +20.6%
 Operating profit margin          13.1%         12.8%         +30bps
 Profit before taxation           £26.6m        £21.4m        +24.3%
 Basic earnings per share         35.9p         28.7p         +25.1%
 Dividend per share for the year  4.6p          4.4p          +4.5%

 

Financial highlights

 

·     Strong growth in orders of 18.7%, 13.0% at constant currency (+9.3%
organic constant currency)

·     Revenue growth of 10.2% at constant currency (+5.7% organic
constant currency), partially constrained by supply chain disruption and
export licence delays

·     Reported order book of £315.7m, growth of 28.7% at constant
currency (+25.3% organic constant currency)

·     Currency tailwind supported strong growth in adjusted operating
profit of 20.3%, with margin rising to 18.4%

·     Net cash increased to £97.1m despite increase in inventories to
support growth and mitigate supply chain disruption, as well as deferred
shipments due to export licence delays, resulting in normalised cash
conversion of 65%

·     Growth in interim dividend of 4.5%

 

Operational highlights

 

·     Structural growth markets driving strong order, revenue and profit
growth

·     Continued growth momentum: resilience of business model underpinned
by strategic priorities of market intimacy and relentless innovation, with
increased investment in R&D

·     Proactively managing global headwinds: price rises implemented to
protect margin; increased inventory partly mitigating supply chain disruption

·     Strong growth in Materials & Characterisation and Service &
Healthcare; Research & Discovery performance impacted by supply chain
disruption despite continued strong customer demand

·     Investment in new operations capacity and customer service
supporting future growth

·     WITec acquisition has performed strongly, with growth supported by
revenue synergies across the Group

 

Summary and outlook

 

Ian Barkshire, Chief Executive of Oxford Instruments plc, said:

 

"The Group has continued to deliver strong growth momentum despite the
challenging external landscape. Our purpose - to enable a greener, healthier,
more connected advanced society - together with our customer-centric,
market-focused strategy, is driving increasing demand from structural growth
markets for our world-class solutions.

"Our pipeline remains robust across all our end markets. We anticipate higher
production in the second half, combined with the positive impact of recent
price increases as we convert our record order book. This provides good
visibility for an expected improvement in trading in the second half, with
full-year trading at constant currency remaining in line with expectations.

"While mindful of the increasingly uncertain macroeconomic and geopolitical
landscape, our record order book demonstrates our positive trajectory and
underpins our confidence in the future growth potential of the Group.

"Our strong balance sheet positions us well to invest in the business and
consider further acquisitions, and we continue to selectively review a
pipeline of acquisition opportunities."

1.    Adjusted items exclude the amortisation and impairment of acquired
intangible assets, acquisition items, profit or loss on disposal of
operations, other significant non‑recurring items, and the mark-to-market
movement of financial derivatives. A full definition of adjusted numbers can
be found in the finance review and Note 2

2.    Cash conversion measures the percentage of adjusted cash from
operations to adjusted operating profit, as set out in the finance review.

3.    Net cash includes total borrowings, cash at bank and bank overdrafts
but excludes IFRS 16 lease liabilities.

4.    Constant currency numbers are prepared on a month-by-month basis
using the translational and transactional exchange rates which prevailed in
the previous year rather than the actual exchange rates which prevailed in the
year. Transactional exchange rates include the effect of our hedging
programme.

 

 

 

LEI: 213800J364EZD6UCE231

 

Number of pages: 34

 

Enquiries:

Oxford Instruments plc

Ian Barkshire, Chief Executive; Gavin Hill, Chief Financial Officer

Tel: 01865 393200

 

MHP Communications

Katie Hunt/Eleni Menikou/Veronica Farah

oxfordinstruments@mhpc.com

Tel: 020 3128 8100

 

 

Chief Executive's review

 

The Group has maintained its strong growth momentum despite the challenging
external landscape, demonstrating the continued resilience of our business
model. Our strategic focus on markets with structural growth is driving
increased demand for our world-class solutions, with double-digit revenue and
operating profit growth. Together with our record order book, this positive
trajectory underpins our confidence in the future growth potential of the
Group.

 

As a global provider of high technology products and services to many of the
world's leading companies and foremost scientific research institutes, we have
a crucial role to play in accelerating progress in critically important areas
of science and technology.

 

Our purpose - to enable a greener, healthier, more connected advanced society
- puts us at the heart of key developments and growth markets, while our
customer-centric, market-focused strategy (which we describe as our market
intimacy) ensures we are well placed to anticipate customers' needs, working
closely with them to create the products and services that will accelerate
their progress.

 

Long-term structural growth drivers underpinning resilient performance

The health and resilience of our chosen end markets (Semiconductor &
Communications, Advanced Materials, Healthcare & Life Science, Energy
& Environment and Quantum Technology) have played a critical role in our
strong performance during the period.

 

As customers respond to changing circumstances post-Covid-19 and seek
to accelerate progress towards a more sustainable future, we have seen our
markets' structural drivers reinforced across both academic and commercial
customers, stimulating funding and increasing demand. The superior
performance, unrivalled ease of use and global support we are able to deliver
across our range of products and services makes us the partner of choice for
leaders in their field across the globe. We were delighted, for example, that
the winners of the 2022 Nobel prizes for both chemistry and physics used our
equipment in the course of their transformational research.

 

Digital connectivity is shaping the society of the future, transforming
sectors and industries globally and bringing communities closer together,
enabling life-changing progress for billions. The resulting demand for data
management, increased connectivity and bandwidth, and ever-more sophisticated
electronics is fuelling rapid growth in our Semiconductor & Communications
markets, where our solutions help customers develop, produce, analyse and test
products, maximising performance and yield.

 

The global energy transition away from fossil fuels is creating demand for our
Materials & Characterisation solutions. The battery market, in particular,
is growing at pace, and our products provide crucial insights at every stage
of the production process, from research and development to failure analysis.

 

Similarly, in our Advanced Materials segment, our products are playing a
vital part in helping companies and academic institutions develop and
optimise the advanced materials which will create more valuable products and
use resources more efficiently, speeding the path to a more sustainable
society.

 

In Healthcare & Life Science, the pace of discovery is accelerating as
scientists are increasingly able to understand fundamental disease mechanisms.
Our products support this by enabling critical insights and measurement of the
efficacy of new medicines and therapies at the molecular and cellular level.

 

In the Quantum Technology market, we are working with world leaders in the
field as the market continues its evolution from earlier stage research into
applied R&D and the rapidly evolving commercial market, including the
transition to commercial data centres. Our deep expertise and specialised
cryogenic, optical and fabrication solutions for this market are supporting
our customers to accelerate their roadmaps and deliver the transformational
step changes required.

 

While our strategy is driving growth across the Group, there have been
significant global headwinds during the period, including supply chain
shortages and ongoing Covid-related disruptions, especially in China. This has
negatively impacted revenue in a number of our business units in the period.
We have proactively addressed the current inflationary environment across
employment, material and energy costs by successfully implementing price rises
to protect our margins. However, due to the phasing of our order book, we have
only started to see the benefit of these price increases towards the end of
the period, resulting in a slight impact on our operating margin. Our price
increases are starting to flow through, with greater benefit in the second
half of the year.

 

A further challenge during the period was an increase in the number of orders
to China requiring export licences, with a modest increase in refusals. This
has slowed delivery into China, impacting regional revenue in the period. To
address these headwinds we are shifting our focus to less sensitive growth
markets in China where we anticipate fewer licence issues.

 

WITec, the leading Raman and optical imaging solutions business which we
acquired in the previous financial year, has performed ahead of
our expectations, with strong growth supported by the exploitation of our
extensive customer base to drive revenue synergies across the Group. The
strength of our balance sheet positions us well to consider further
acquisitions, and we continue to selectively review a pipeline of
opportunities.

 

Horizon strategy drives resilience and continuing growth

The ongoing delivery of our Horizon strategy, which centres on driving
sustainable growth and increased margins, has also underpinned our good
performance. The key elements of Horizon are:

 

·     A focus on building our scale and capability in specific end
markets with long-term structural growth drivers, where we can sustain
leadership positions for technologies and products that create high value add
for customers.

·     Proactive engagement across the full technology cycle, from
research and applied R&D to high-volume manufacturing, to maximise the
returns from our core technologies, deepen our insight and position us to
benefit from each wave of growth and technology disruption.

·     Our deep market intimacy, which we use to inform our significant
and focused investment in innovative product development and best-in-class
service support.

·     A relentless dedication to continuous improvement, driving ongoing
synergies, efficiencies, and strong commercial processes across the Group.

·     Driving above-market growth through organic investments, further
augmented by complementary, value-adding acquisitions.

 

Progress on Horizon in the period

We have made further progress in the period, strengthening the four pillars of
our operating model: market intimacy; operational excellence; innovation and
product development; and customer service and support.

 

This strategy has resulted in strong growth to commercial and academic
customers in the half. Over the longer term, this represents a 19% compound
annual growth rate (CAGR) of orders from commercial customers since 2019 and a
6% CAGR from academic customers over the same period. In line with our
strategy of broadening our reach and addressing larger markets, commercial
customers now represent 53% of orders in the period, compared with 45% in
2019.

 

Our market intimacy has supported a strong contribution to growth from
products launched since the start of the Horizon strategy, and increased
returns from our investment in research and development. In the first half, it
has driven strong growth in existing markets and expansion into new and
adjacent markets, through our disruptive innovation as we continue to tailor
our products to optimise them for specific and new applications.

 

Our ongoing investment in operational excellence has played a key role in our
first-half performance, with our dedicated teams proactively managing the many
challenges during the period. We have continued to strengthen relationships
with strategic suppliers and to further consolidate our supply chain. We have
also increased inventory levels of critical parts to enable us to continue to
supply customers, as well as engineering out components where we anticipate
long-term critical shortages could occur. We have increased investment across
our operations, including additional automation of manufacturing processes and
efficiency improvements to our business management systems, for example
combining customer relationship management with sales management pipelines.

 

Despite these initiatives, we have continued to see shortages of critical
semiconductor and electronic components. This has particularly impacted our
Plasma, Andor and NanoScience business units, moderating revenue in the period
despite the healthy order book.

 

We continue to work with our suppliers to minimise the impact of component
shortages; however, production schedules continue to be impacted by delays in
supplier deliveries. We anticipate an improvement in the second half of the
year, but the situation remains dynamic.

 

While managing current headwinds, we continue to invest in our businesses for
the medium and long term, with a strong ongoing focus on disruptive innovation
and product development to ensure we remain at the forefront of our chosen
markets. Recent product launches and upgrades, designed with customer
productivity and ease of use at their core, are supporting our healthy order
pipeline.

 

Our Research and Development investment has increased to £18.2m (H1 2021:
£15.4m), an 18% rise, growing in line with sales and representing 9.1% (H1
2021: 9.1%) of revenue.

 

We remain focused on ensuring that we have the specialist talent,
infrastructure and facilities we need to support our customers and markets as
we grow our business. The construction of our new facility near Bristol, UK
for our Plasma Technology business is on track, and is set to be fully
operational by summer 2023.

 

We have made further progress with our customer service and support offering,
with revenue up by 16.6% as we embed our global service model, broadening the
range of services we offer and tailoring them to specific market segments.

 

We have increased profitability, driving efficiencies through leveraging our
scale, with further consolidation of our regional service teams and ongoing
training to enable them to address a wider range of products.

 

Continued order momentum and strong financial performance

As stated above, the Group delivered a strong financial performance in the
first half of the year, with strong growth in reported orders, revenue and
adjusted operating profit, and an increase in adjusted operating margin,
supported by a significant currency tailwind.

 

At constant currency there was double-digit order and revenue growth. Adjusted
operating profit of £32.0m (H1 2021: £30.6m), which grew by 4.6%, was held
back by a combination of supply chain challenges and the phasing of our price
increases in the period. This adversely impacted adjusted operating profit
margin, at 17.1% versus 18.0% at half year 2021.

 

With our price increases expected to favourably impact H2, and our seasonal
weighting of revenue to the second half, we anticipate improved constant
currency performance in the second half.

 

                                                    Constant
                                      Reported      currency
                                      growth vs     growth
                                      half year to  vs half year to
                                      30 September  30 September
 Group                      H12022    2021          2021
 Orders                     £235.3m   18.7%         13.0%
 Revenue                    £200.5m   17.9%         10.2%
 Adjusted operating profit  £36.8m    20.3%         4.6%
 Operating margin           18.4%     40bps         (90bps)

 

Orders

Orders increased to £235.3m from £198.3m, increasing by 18.7%. This
represented 13.0% growth on a constant currency basis.

 

From an end market perspective, we delivered double-digit order growth across
our key segments: Semiconductor & Communications, Advanced Materials,
Energy & Environment and Quantum Technologies. Strong growth across our
life science microscopy portfolio was offset by the phasing of OEM framework
orders, resulting in Healthcare & Life Science orders slightly lower than
the previous period on a constant currency basis, albeit ahead on a reported
basis. Our planned move away from large, one-off bespoke systems has resulted
in a managed decline in the Research & Fundamental Science market, now
representing 3% of orders received.

 

Healthy global demand resulted in double-digit order growth across our main
geographies: Europe, North America and Asia. Within Asia, orders in China
showed modest growth, despite the significant lockdowns, particularly in the
first quarter, with growth in product orders offset by a significant
reduction in service orders (which were constrained by the lockdowns). This
was supported by the continued implementation of procedures we put in place
during the early stages of Covid-19, enabling us to drive growth in product
orders and revenue, and service revenue.

 

From a sector perspective, Materials & Characterisation grew by 25.9% on a
constant currency basis and 31.6% on a reported basis to £135.4m (H1 2021:
£102.9m). Reported order growth was 3.8% in Research & Discovery, a 2.1%
decline at constant currency. This reflected continued strong demand across
our product portfolio, comprising increased direct end user orders, but a
lower contribution from framework OEM orders, due to delayed timing and the
ongoing move away from large, complex systems. Growth in service orders of
0.9% at constant currency was held back by the previously mentioned
lockdown-related decline in China.

 

Revenue

Reported revenue grew 17.9% to £200.5m (2021: £170.1m), representing growth
of 10.2% at constant currency. The supply chain challenges previously
mentioned particularly impacted our NanoScience, Andor Technology and Plasma
businesses, which affected the distribution of revenue in the period. As a
result, reported revenue growth was 28.0% in Materials & Characterisation,
3.2% in Research & Discovery and 16.6% in Service & Healthcare.

 

Stronger revenue growth into commercial customers relative to growth in
academia resulted in the proportion of commercial customers increasing to 51%
(2021: 50%) in the period. From an end market perspective, we had particularly
strong revenue growth across Quantum Technology, Advanced Materials and Energy
& Environment market segments, with strong growth across Healthcare &
Life Science. Revenue into Semiconductor & Communications was impacted by
reduced shipments from the Plasma business, despite a healthy and expanding
order book. Revenue in Research & Fundamental Science declined in line
with our strategy.

 

Regionally there was constant currency revenue growth of 12% in Europe, 23% in
North America and 4% in Asia.

 

Overall, the Group has delivered a strong performance due to the continued
execution of its strategy with diversification across the technology life
cycle, structural growth end markets, geographies and product range.

 

Dividend

Due to the Group's robust trading performance, the Board is declaring
an interim dividend of 4.6p per share (2021: 4.4p per share).

 

Board composition

We were delighted to welcome Reshma Ramachandran to our Board in September
2022 as a Non-Executive Director. Reshma is an engineer by training, with a
broad range of international experience and expertise at creating value
through digital transformations. She is currently Senior Vice President &
Group Head of Transformation at Adecco Group AG.

 

Shaping a sustainable future

Through our stated purpose - to enable a greener, healthier, more connected
advanced society - we are committed to making a positive impact on the world
through our solutions and services. Our purpose underpins our wholehearted
commitment to playing our part in creating a sustainable future throughout our
own operations, and by behaving as a responsible business.

 

This year, we are seeking to formalise our commitment to reach net zero
 (i.e. where we add no incremental greenhouse gases to the atmosphere) ahead
of our previously stated target of 2050. We are carrying out detailed analysis
to enable us to create an evidence-based net zero roadmap. Due to the great
strides we have made in the past, our own emissions represent a small
proportion of our overall footprint, which is dominated by our supply chain
and our customers' use of our end products.

 

In the period we have engaged with our strategic suppliers to better
understand how their sustainability programmes can support our progress to net
zero; we are also exploring how we can modify our products to reduce their
environmental impact. At the end of the financial year, we will outline our
specific commitments on our approach to our own operations (Scopes 1 and 2)
and those of our value chain (Scope 3).

 

We are also making strong progress with the social and governance aspects of
our sustainability programme. Our values shape each decision we make, and are
a particular source of strength when external circumstances are challenging,
as they have been this year. We recognise that cost-of-living pressures are
impacting people all over the world, including our employees. Earlier this
year, in line with our values, we brought forward our annual salary review by
three months so that colleagues would benefit from an immediate early uplift
in their income. In October 2022, we announced a further additional one-off
cost-of-living payment to support those employees earning up to £40,000 in
the UK or the equivalent in other high inflation regions of the world.

 

We are committed to creating a diverse workplace across all parts of the
organisation, so that all feel welcome and where difference is valued. We are
seeing a further uplift in engagement scores around diversity and inclusion
and will continue our work in this area. We continue to invest in our highly
capable workforce, whilst proactively recruiting individuals who come with
specific additional knowledge and skills to complement and extend the
capabilities of existing teams.

 

Sustainability has been a foundation of our business for many years; our
journey continues as we work to formalise our targets on key aspects of
environmental and social governance.

 

I want to thank all our employees for their continued energy and commitment to
delivering on our strategy and living our purpose and values every day. I am
grateful, as ever, for the vital contribution they make to our ongoing
success, and proud of the culture we are shaping together.

 

Summary and outlook

The Group has continued to deliver strong growth momentum despite the
challenging external landscape. Our purpose - to enable a greener, healthier,
more connected advanced society - together with our customer-centric,
market-focused strategy, is driving increasing demand from structural growth
markets for our world-class solutions. Our pipeline remains robust across all
our end markets. We anticipate higher production in the second half, combined
with the positive impact of recent price increases as we convert our record
order book. This provides good visibility for an expected improvement in
trading in the second half, with full-year trading at constant currency
remaining in line with expectations.

 

While mindful of the increasingly uncertain macroeconomic and geopolitical
landscape, our record order book demonstrates our positive trajectory and
underpins our confidence in the future growth potential of the Group.

 

Our strong balance sheet positions us well to invest in the business and
consider further acquisitions, and we continue to selectively review a
pipeline of acquisition opportunities.

 

Ian Barkshire

Chief Executive

 

7 November 2022

 

 

Operations review

 

Materials & Characterisation

 

Key highlights

 

                               Half year to 30 September 2022  % reported growth vs half year to 30 September 2021  % constant currency(1) growth vs half year to 30 September 2021
 Orders                        £135.4m                         +31.6%                                               +25.9%
 Revenue                       £108.7m                         +28.0%                                               +19.7%
 Adjusted(2) operating profit  £18.9m                          +45.4%                                               +23.1%
 Adjusted(2) operating margin  17.4%                           +210bps                                              +40bps
 Statutory operating profit    £17.2m                          +53.6%
 Statutory operating margin    15.8%                           +260bps

 

1.     For definition refer to note on page 2.

2.     Details of adjusting items can be found in Note 2 to the half year
financial statements.

 

Materials & Characterisation sector overview

The Materials & Characterisation sector has a broad customer base across a
wide range of applications for:

 

·     The imaging and analysis of materials down to the atomic level
(across our Asylum Research, NanoAnalysis, Magnetic Resonance and WITec
businesses), where our leading product performance, ease of use and advanced
analytics enhance our customers' capabilities, provide actionable insights and
increase their productivity. Our portfolio of materials analysis solutions
(including X-ray, electron and magnetic resonance analysis systems and atomic
force and Raman microscopes) enable the measurement of the structures,
composition and critical properties that define the modern world.

·     The fabrication of semiconductor devices and structures, where our
portfolio of advanced semiconductor etch and deposition process systems (in
our Plasma Technology business) provides our customers with the ability to
create and manipulate materials with atomic scale accuracy to manufacture
advanced compound semiconductor devices.

 

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).

 

Operational and strategic progress

In the period we have continued to focus on maximising the synergies across
our portfolio of materials analysis solutions by leveraging the strength of
our existing customer relationships and our in-depth knowledge of their
workflows. These insights have enabled us to offer a broader range of tailored
solutions to existing customers as they deploy multiple products and
techniques to accelerate their own development. They have also enabled us to
expand into larger and faster growing markets, with increased reach into
commercial markets. This approach has been a key element supporting the
successful integration and growth of WITec since its acquisition in the
previous year.

 

In our compound semiconductor processing systems, we have continued to enhance
both our range of dedicated platforms for use in high volume manufacturing and
our portfolio for applied R&D.

 

By focusing on the critical layers within a semiconductor that determine
device performance and productivity, we have driven strong growth to both
commercial and academic customers. Our Plasma Technology business's new UK
facility, which will increase our production capacity, is on track to become
fully operational in summer 2023. Comprising a state-of-the-art manufacturing
area and advanced laboratories, it will support the further development of our
leading-edge technologies and growth within the surging compound
semiconductor market.

 

Strong growth and margin enhancement in the period

The Materials & Characterisation sector delivered double-digit order,
revenue and profit growth in the period, with increased margins in the period
supported by our strategic focus on attractive and robust structural growth
end markets. This comprised double-digit order growth across both our
materials analysis and compound semiconductor processing solutions, and from
each of our key target markets for this sector: Semiconductor &
Communications, Advanced Materials, and Energy & Environment. We continue
to see sustained strong demand across each region, with double-digit order
growth across Europe, North America and Asia (including China, despite the
impact of repeated lockdowns in the period).

 

We also saw double-digit order growth to both academic and commercial
customers, with commercial customers representing 59% of orders in the period.
We continue to have a healthy pipeline across our portfolio as governments and
companies increase their investments in our target markets to deliver economic
growth and drive their own roadmaps.

 

In terms of revenue, the sector delivered strong growth to all regions and to
both academic and commercial customers, despite global shortages of critical
electronic components which significantly impacted our ability to convert the
healthy order book for our compound semiconductor systems. Advanced Materials,
Energy & Environment, and Quantum Technology segments all grew versus last
year, with Semiconductor & Communications broadly in line with the
previous year.

 

Reported operating margin for the sector increased to 17.4%, representing
15.7% at constant currency (2021: 15.3%), with constant currency operating
profit growth of 23.1% in the period (+17.2% organic, excluding the impact of
WITec), despite the previously mentioned supply chain challenges in Plasma
Technology.

 

Across the sector, our order book for future deliveries has increased by 34%
to £155m (March 2022: £116m). Growth on an organic constant currency basis
was 18.0%.

 

Impact of WITec

WITec was acquired on 31 August 2021 and contributed one month of results in
the half year to 30 September 2021, but six months in the half year to 30
September 2022. WITec generated orders of £10.3m (2021: £2.9m) and revenue
of £9.7m (2021: £1.8m). Ignoring the acquisition of WITec, the organic
growth rate in Materials & Characterisation orders was 19.2% at constant
currency with a 10.8% constant currency growth rate in revenue.

 

The sector has good positions in a number of our end markets, and developments
in these are as follows:

 

Semiconductor & Communications

This is a key focus for the sector. We have continued to deliver double-digit
order growth in the period, supported by our broad reach across R&D, the
manufacturing of mainstream silicon semiconductor devices, and the separate
compound semiconductor market, which enables the transformation of
communications and connectivity, and increases the energy efficiency of power
devices and consumer electronics.

 

The silicon semiconductor market is characterised by the ongoing need for
higher performing and more energy efficient solutions. This has led to the
continuing increased demand and well-publicised global shortages in advanced
semiconductors for markets such as automotive, and the proliferation of
semiconductor chips in consumer electronics, as well as the more cyclical
demand for the processing and memory chips required for personal computers.
One example of growth in this market is the increasing move towards autonomous
and intelligent cars to improve both safety and driving experience. From
Advanced Driver Assistance Systems to secure vehicle access, our analysis
systems are used to control the quality of critically important radars,
thermal cameras and sensors.

 

Our imaging and analysis systems are chosen for their unparalleled performance
and productivity, across the silicon semiconductor devices themselves, printed
circuit boards and more standard electronic components such as resistors and
capacitors. We are able to deliver fastest speed-to-result and simple
workflows that can be employed in industrial environments.

 

The leading precision and imaging performance of our systems, combined with
their impressive ease of use, remains a key differentiator in the substantial
corporate and academic R&D market. Here, our customers are developing next
generation devices as well as new disruptive technologies. We have seen
sustained demand for our analysis systems in the manufacturing of silicon
semiconductor devices, resulting in an overall increase in orders.

 

We are seeing increasing demand in the compound semiconductor market, driven
by the rise in digital data flow, surging demand for connectivity, the
requirement for more energy-efficient devices, and the increased deployment of
human‑machine interfaces such as facial recognition.

 

This has led to strong order growth across our compound semiconductor
processing systems, to both R&D and high-volume production customers. Our
growth is driven by our focus on developing solutions which can process and
control materials at the atomic scale for the critical layers within devices,
and which have the biggest impact on end device performance, cost, and yield.
Our systems and processes are being used in a multitude of end applications:

 

·     optical devices used across communication networks and data
communications centres;

·     augmented reality applications, including micro LEDs and 3D
sensors, which are increasingly being deployed across phones, cameras and
cars;

·     proximity sensors in smartphones, in applications such as face
recognition and contactless payment, where their premium performance is key;
and

·     critical yield and performance in power semiconductors for consumer
electronics, such as USB-C fast chargers, which can charge a smartphone in
just ten minutes.

 

We have also seen strong growth in academia, as universities invest in the
latest capabilities within their central facilities and specialist clean rooms
supported by sustained government funding.

 

Advanced Materials

Advanced materials are the building blocks of modern society, enabling
everything from the screens we watch and the cars we drive to the batteries
that power our world. The continued strong order and revenue growth for our
materials analysis systems and characterisation reflects the strength and
breadth of our end markets.

 

As customers seek to accelerate their progress in developing the new, higher
value materials that will enable a more sustainable net zero future, and the
new techniques that will support more responsible use of valuable and finite
resources, our solutions provide them with the capability to image, analyse
and ultimately control manufacturing. This has driven growth to both academic
and commercial customers for research and development through to production.
With nearly all materials and products undergoing some form of analysis, this
continues to drive increasing demand across our imaging and analysis systems.

 

Our systems allow our customers to measure down to the nanoscale, optimising
the performance and production of lighter, stronger, higher functioning
materials from early stage research through to design and production.

 

We have had strong growth in structural materials such as steel and concrete,
which together combine to account for around 15% of global CO(2) emissions.
The challenge of making greener alternatives without compromising the
performance of the material is critical to the green economy. These
macro-scale construction materials benefit greatly from nano-scale analysis.
Research into advanced concretes includes recipes which produce fewer carbon
emissions and the development of self-healing concretes which can repair
cracking automatically.

 

We also had strong growth into the automotive industry, as carmakers use our
systems to help create the lighter, stronger materials needed to offset the
weight of batteries, as well as performing quality control on their incoming
parts.

 

The acquisition of WITec has expanded the range of capabilities we can provide
to our customers, including, for example, for the development and
characterisation of 2D materials, so called because they are just one atom
deep. These new types of materials can be designed to have transformational
properties such as thermal and electrical, with the potential to provide
significant advantages across a wealth of applications.

 

Graphene, which is the best-known 2D material, is starting to make its way
into mainstream products including smartphones and wearable devices as
scientists and researchers learn how to harness its capabilities. Other 2D
materials are being used in areas such as battery research, displays and next
generation semiconductors, where their electrical properties are being
explored for their potential to enhance performance.

 

Our products - particularly our atomic force microscopes - also play a crucial
role in helping scientists understand the properties of polymers, including
viscosity, adhesion, strength and hardness. The integral role polymers
play in a multitude of products used in daily life, from tyres to fabrics and
medical implants, underpins our growth in this area.

 

Energy & Environment

Our systems are playing a critical part in the development of a greener future
as governments, academia and commercial customers seek to reduce negative
impacts on the planet and drive positive change.

 

Batteries play a key role in the transition from fossil fuels, enabling
sustainable travel and providing efficient and affordable storage to
complement renewable energy generation. We have developed tailored solutions
across our materials and analysis portfolio to address challenges in every
stage of the battery life cycle from raw materials and R&D through to
quality control and failure analysis, and end-of-life recycling.

 

With the active elements of a battery operating at the nanoscale, our products
help researchers better understand the fundamental chemistry and mechanisms
that affect battery capacity, charging rate and lifetime. Our solutions are
also adopted to ensure quality control, including particle analysis to detect
potentially harmful contamination within raw materials.

 

The unique breadth and relevance of our solutions across the battery market
means we are ideally placed to support our customers in developing the
solutions needed, both today and in the future.

 

Our analysis solutions are also starting to play a role in the quest for a
cleaner, less polluted environment. Customers are using our systems to assess
the type and volume of microplastics in water - crucial in helping their
understanding of the impact of these pollutants - and to assess the levels of
fats, oils and grease in wastewater, helping to prevent the fatbergs and
pollution incidents which can occur when these build up in sewer networks.

 

Healthcare & Life Science

Whilst still a relatively small proportion of revenue for the Materials &
Characterisation segment, we have continued to see growth in the Healthcare
& Life Science sector, with increasing demand for our solutions as
customers seek to deliver ever-more advanced medicines and treatments in
pursuit of a healthier society. The acquisition of WITec has enhanced our
offerings in this space, as its suite of products are ideally suited to the
study of living cells and their chemical structure.

 

Customers are also using our WITec products to characterise medical polymers
used in implants and stents, and to check the biocompatibility of treatments
and medicines. In biomolecular research, our atomic force microscopes are
being used to explore the mechanics of drug delivery - for example, whether a
particular particle attached to a drug can help it take effect more quickly.

 

Life Science remains an area for growth, as we build on our market intimacy
and tailor solutions to better meet customers' needs.

 

Quantum Technology

We continue to see Materials & Characterisation opportunities in quantum
technology markets, alongside our main quantum focus in Research &
Discovery. In particular, thanks to the combination of our expertise in
semiconductor processing and characterisation, and our relationships with
customers within the quantum market, we are seeing demand for our compound
semiconductor processing systems for the fabrication of quantum chips and
their subsequent characterisation.

 

 

Research & Discovery

 

Key highlights

 

 

                               Half year to 30 September 2022  % reported growth vs half year to 30 September 2021  % constant currency(1) growth vs half 2021
 Orders                        £62.8m                          +3.8%                                                (2.1%)
 Revenue                       £58.1m                          +3.2%                                                (4.4%)
 Adjusted(2) operating profit  £7.0m                           (19.5%)                                              (34.5%)
 Adjusted(2) operating margin  12.0%                           (350bps)                                             (490bps)
 Statutory operating profit    £3.9m                           (29.1%)
 Statutory operating margin    6.7%                            (310bps)

 

1.     For definition refer to note on page 2.

2.     Details of adjusting items can be found in Note 2 to the half year
financial statements.

 

The sector, which comprises our Andor Technology, NanoScience and X-Ray
Technology businesses, provides advanced solutions and unique environments
that enable imaging and analytical measurements down to the atomic and
molecular level, as well as ultra-low temperature and high magnetic field
environments, used across scientific research and applied R&D, and
commercial applications.

 

 

Research & Discovery overview

The sector has 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, advanced optical microscopes, spectrometers, laser engines and
X-ray tubes. Our ultra-low temperature cryogenic and high magnetic field
platforms provide versatile research platforms as well as dedicated
systems for more applied and increasingly routine use.

 

Operational and strategic progress

In addition to selling directly to end customers, where we have a strong brand
presence, we also access a broad range of additional end markets by providing
our key enabling technologies to strategic original equipment manufacturer
(OEM) partners. The sector's products play a key role across a broad range of
life, material, and physical science applications, and are at the centre of
the development and advancement of quantum technologies. In the period we
continued to focus on the key markets for the sector, namely Healthcare &
Life Science, Advanced Materials and the evolving Quantum Technology market.

 

We continue to develop tailored and easier-to-use solutions to support our
growth, both within academia and by expanding into adjacent commercial
markets. This has led to double-digit growth across our life science
microscopy portfolio, and our key enabling technologies, which are supporting
the rapid progress in quantum computing. We are increasingly focused on larger
and higher value markets with reduced activity for bespoke one-off complex
systems, particularly to academia. This resulted in strong order growth to
commercial customers, increasing to 33% of orders (2021: 29%) but a reduction
into academia.

 

In the period we had unfavourable phasing of large OEM framework orders for
our scientific cameras and X-ray tubes, as well as a significant reduction in
academic orders in China due to both the extended lockdown and an increase in
export licence controls for certain quantum applications.

 

This resulted in reported order growth of 3.8%, corresponding to a 2.1%
reduction at constant currency, despite the positive underlying market growth.

 

The previously mentioned supply chain challenges, lockdowns in China and
extended delays in obtaining export licences had a disproportionate impact on
revenue for the sector. This resulted in reported revenue growth of 3.2%,
representing a 4.4% reduction at constant currency.

 

The reduction in revenue for the period impacted adjusted operating profit of
£7.0m (2021: £8.7m), corresponding to £5.7m at constant currency, and
resulted in a reduction in operating margin to 12.0% (2021: 15.5%).

 

The healthy order book of £118m, a book to bill of 1.08, and an improving
supply chain provides confidence in a higher seasonal uplift to performance in
the second half of the year.

 

The sector has good positions in a number of our end markets, and developments
in these are as follows:

 

Quantum Technology

Oxford Instruments is at the heart of the extensive global research and
development programmes and the ongoing commercialisation of quantum
technology. We are collaborating with many of the sector's key players to
accelerate progress towards the adoption of quantum computers as a mainstream
tool to unlock complex challenges in areas such as finance, logistics, drug
discovery and chemistry. We are developing the technology to support customers
as they transition quantum computers from the research lab into mainstream
data centres, and are well poised to support the transformational disruption
of established end markets.

 

Our unique position, supporting both cryogenic quantum environments and
optics-based quantum communication, through our scientific cameras, puts us at
the heart of a rapidly growing market. Global technology companies and a range
of ambitious and innovative smaller players are breaking new boundaries as
they create ever-more powerful quantum computers which are starting to be used
for mainstream applications.

 

As an example, through our collaboration with Rigetti UK Ltd and a consortium
of partners, the UK's first commercial quantum computer - housed at our site
in Oxfordshire - is now available to partners through the cloud.

 

Healthcare & Life Science

The long-term structural growth drivers for the Healthcare & Life Science
market remain robust as academic researchers, scientists and pharmaceutical
companies push to accelerate progress towards a healthier society, delivering
improved treatments for neurological diseases and cancers and the eradication
of diseases such as malaria and polio. The significant progress in these
fields is being fuelled by the improved understanding of the fundamental
disease mechanisms at a molecular and cellular level.

 

We are supporting this transformation through our continued investment across
our portfolio of advanced microscopy solutions and dedicated analytical
software. Our goal is to enable the fast, repeatable imaging of large
molecular and cellular samples with the highest possible resolution for the
ultimate research capability, whilst expanding the addressable market by
bringing research-grade capability to broader and much larger markets through
our disruptive easy-to-use benchtop platform. Our enhanced portfolio has
supported double-digit order growth for our optical microscopy systems in the
period.

 

As an example, life scientists are using our high spatial resolution
microscopy systems to investigate and better understand how the nanoscale
molecular machines that perform fundamental biological functions operate and,
importantly, how diseases impact and change their performance. Understanding
the biological details at the nanoscale enables new treatments and medicines
to be designed to either stop or inhibit the disease mechanisms. Our recently
launched benchtop microscope enables researchers and pharmaceutical companies
to look at the impact of these new medicines and treatments in much larger
cell systems or parts of the body at an attractive price point. Intuitive,
easy and fast to operate, it makes high quality microscopy available beyond
the pure research arena in a format that is accessible to every life
scientist. The product has shown strong growth in cancer research, and
neuroscience applications such as studies into Alzheimer's disease and other
forms of dementia. Our AI-powered analytical software packages enable the
automated analysis and interpretation of the increasingly rich data sets being
acquired, with tailored packages for neuroscience, cancer research and cell
biology applications.

 

The phasing of OEM framework orders across our portfolio of scientific
cameras, X-ray tubes and lasers negatively impacted orders in the period.

 

Advanced Materials

The drive to develop new advanced materials with significantly enhanced
properties for use across a broad range of applications is supporting
sustained customer demand across our portfolio of key enabling technologies.
This has led to strong order growth from our optical spectroscopy and
scientific cameras across all regions and, in particular, to commercial
customers. Growth for our cryogenic and high magnetic field measurement
systems in Asia and the US was, however, more than offset by a reduction in
Europe. These systems are primarily used to measure the fundamental properties
within new and exotic materials, as well as sophisticated graphene-like 2D
structures, as researchers seek game-changing performance improvements.

 

Research & Fundamental Science

Within Research & Fundamental Science we continue to see long-term
customer interest in our high-end scientific cameras and specialised cryogenic
and superconducting magnet systems across a broad range of research themes
including astronomy, chemistry and physics research. These orders, which tend
to be lumpy in nature, were down in the period, in part due to the phasing of
customer orders as well as our own de-prioritisation towards larger and higher
value markets. Our products continue to support the forefront of science; for
example in September, our scientific cameras were used in NASA's successful
asteroid deflection test, while in October, customers of our Andor equipment
were named as the winners of the Nobel prizes for both chemistry and physics.

 

 

Service & Healthcare

 

Key highlights

                               Half year to 30 September 2022  % reported growth vs half year to 30 September 2021  %  constant currency(1) growth vs half year to 30 September 2021
 Orders                        £37.1m                          +6.3%                                                +0.9%
 Revenue                       £33.7m                          +16.6%                                               +10.7%
 Adjusted(2) operating profit  £10.9m                          +22.5%                                               +15.7%
 Adjusted(2) operating margin  32.3%                           +150bps                                              +140bps
 Statutory operating profit    £11.3m                          +27.0%
 Statutory operating margin    33.5%                           +270bps

 

 

1.     For definition refer to note on page 2.

2.     Details of adjusting items can be found in Note 2 to the half year
financial statements.

 

The Service & Healthcare sector comprises the Group's service and support
related to Oxford Instruments' own products, and the support and service of
third-party MRI scanners in Japan.

 

Service & Healthcare overview

We have continued to progress with our customer service transformation,
offering a broader range of service products to increase our customers'
capabilities throughout the lifetime use of our systems. We continue to use
our market intimacy to develop our tailored service offerings for specific end
applications, as well as for academic and commercial customers. This has
supported strong revenue growth in the period, with a particularly strong
uplift in Europe and North America. The implementation of our regionally led
service model, where global processes are implemented locally through our
combined regional teams, and where teams are trained to service multiple
products, has continued to drive efficiency and ensure consistent high quality
with improved customer response times.

 

This supported double-digit growth in adjusted operating profit, with a 150
basis points increase in adjusted operating margin to 32.3%.

 

Sales of Imaris life science analytical software licences have grown strongly
in the year, in part as a result of having provided free introductory licences
to customers during the Covid-19 pandemic to support home working. We have
successfully converted many of these to fee-paying licences now that customers
have experienced the value, analytical capabilities and increased insights
that our solutions provide.

 

Building on the positive momentum triggered by our effective response to
pandemic restrictions, we continue to extend our delivery of digital and
remote support services, which offer customers both speed of response and
convenience. As well as having a sustainability benefit by reducing our travel
footprint, we are increasingly able to diagnose and resolve issues within a
few hours, using virtual reality as part of our digital toolkit, and in many
cases removing the need for engineers to make site visits.

 

Our servicing of third-party MRI imaging equipment in Japan continues to
deliver excellent levels of service and support to our customer base.

 

The Service & Healthcare sector remains on a strong upward trajectory,
with significant ongoing opportunities to drive further revenue and margin
expansion.

 

 

Finance review

 

We delivered a robust financial performance with growth in orders, revenue and
underlying cash flow, supported by a strong currency tailwind.

 

Oxford Instruments uses certain alternative performance measures to help it
effectively monitor the performance of the Group as management believes that
these represent a more consistent measure of underlying performance. Adjusted
items exclude the amortisation of acquired intangible assets; acquisition
items; profit or loss on disposal of operations; other significant
non-recurring items; and the mark‑to‑market movement of financial
derivatives. All of these are included in the statutory figures. Note 2
provides further analysis of the adjusting items in reaching adjusted profit
measures. Definitions of the Group's material alternative performance
measures, along with reconciliation to their equivalent IFRS measure, are
included within the finance review.

 

Summary

The Group trades in many currencies and makes reference to constant currency
numbers to remove the impact of currency effects in the year. These are
prepared on a month-by-month basis using the translational and transactional
exchange rates which prevailed in the previous year rather than the actual
exchange rates which prevailed in the year. Transactional exchange rates
include the effect of our hedging programme.

 

Reported orders increased by 18.7% to £235.3m (2021: £198.3m), an increase
of 13.0% at constant currency (+9.3% organic constant currency, which excludes
the impact of WITec). At the end of the period, the Group's order book for
future deliveries stood at £315.7m (30 September 2021: £231.6m). The order
book grew 36.3% on a reported basis and 28.7% at constant currency (+25.3%
organic constant currency).

 

Reported revenue increased by 17.9% to £200.5m (2021: £170.1m). Revenue,
excluding currency effects, increased by 10.2% (+5.7% organic constant
currency), with the movement in average currency exchange rates over the year
increasing reported revenue by £13.1m.

 

Adjusted operating profit increased by 20.3% to £36.8m (2021: £30.6m) with a
currency tailwind in the half year of £4.8m. Adjusted operating profit,
excluding currency effects, increased by 4.6%. Adjusted operating margin
increased by 40 basis points to 18.4% (2021: 18.0%). Excluding currency
effects, adjusted operating margin decreased by 90 basis points to 17.1%.
Constant currency margin has faced downward pressure from: (i) price rises not
yet offsetting inflationary pressures due to phasing of the order book; and,
(ii) lower shipment growth than anticipated not supporting investment in
headcount made to support growth and deliver improvements to operations.

 

Statutory operating profit includes the amortisation of acquired intangibles
of £4.3m (2021: £3.8m) and a charge of £6.1m (2021: £3.8m) relating to
the movement in the mark-to-market valuation of uncrystallised currency hedges
for future years.

 

Statutory operating profit of £26.3m (2021: £21.8m) increased by 20.6%.

 

Adjusted profit before tax grew by 23.5% to £37.3m (2021: £30.2m),
representing a margin of 18.6% (2021: 17.8%). Statutory profit before tax grew
by 24.3% to £26.6m (2021: £21.4m). This represents a margin of 13.3% (2021:
12.6%).

 

Adjusted basic earnings per share grew by 23.3% to 50.8p (2021: 41.2p). Basic
earnings per share were 35.9p (2021: 28.7p), an increase of 25.1%.

 

Cash generated from operations of £26.6m (2021: £18.4m) represents 47%
(2021: 50%) cash conversion. During the half year, we incurred expenditure of
£6.4m on the construction of our new semiconductor facility near Bristol;
cash conversion on a normalised basis, which excludes this expenditure, was
65% (2021: 53%). Cash conversion was depressed by an increase in inventories
to provide operational resilience, export licence delays, and the phasing of
shipments close to the half year as we awaited delivery of components from
our suppliers. Despite this, net cash increased from £85.9m on 31 March 2021
to £97.1m as at 30 September 2022.

 

Our revolving credit facility remains undrawn, leaving approximately £115m
of committed facilities. This represents total headroom of over £210m,
including net cash on the balance sheet.

 

 

Income statement

The Group's income statement is summarised below.

 

                                                           Half year to
                                             30 September  30 September
                                             2022          2021
                                             £m            £m            Change
 Revenue                                     200.5         170.1         +17.9%
 Adjusted operating profit                   36.8          30.6          +20.3%
 Amortisation of acquired intangible assets  (4.3)         (3.8)
 Non-recurring items                         (0.1)         (1.2)
 Mark-to-market of currency hedges           (6.1)         (3.8)
 Statutory operating profit                  26.3          21.8          +20.6%
 Net finance income/(costs)(1)               0.3           (0.4)

 Adjusted profit before taxation             37.3          30.2          +23.5%
 Statutory profit before taxation            26.6          21.4          +24.3%

 Adjusted effective tax rate                 21.4%         21.5%
 Effective tax rate                          22.2%         22.9%

 Adjusted earnings per share - basic         50.8p         41.2p         +23.3%
 Earnings per share - basic                  35.9p         28.7p         +25.1%

 Dividend per share (total)                  4.6p          4.4p          +4.5%

1.     Net finance costs for 2022 include a non-recurring charge of £0.2m
(2021: -) against the unwind of discount on WITec contingent consideration.

 

Revenue and orders

Total reported orders grew by 18.7% (+13.0% at constant currency) to £235.3m.
Excluding the impact of WITec, organic constant currency orders grew by 9.3%.
In Materials & Characterisation, reported orders grew by 31.6% (+25.9% at
constant currency; 19.2% organic constant currency), driven by strong demand
for our electron microscope analysers and semiconductor processing systems. In
Research & Discovery, we saw good growth in orders for our optical imaging
and microscopy products, offset by fewer orders in our cryogenic and complex
magnet business as we reorientate the business away from bespoke systems.
Lower orders in X-Ray Technology were primarily due to phasing of OEM orders.
As a result, reported orders grew by 3.8% (-2.1% at constant currency) for the
segment. Service & Healthcare increased by 6.3% (+0.9% at constant
currency).

 

Reported revenue of £200.5m (2021: £170.1m) increased by 17.9% (+10.2% at
constant currency and 5.7% organic constant currency). Reported revenue grew
by 28.0% for Materials & Characterisation (+19.7% at constant currency;
10.8% organic constant currency), with strong growth for our electron
microscope analysers and atomic force microscopes. Constant currency growth
was held back by lower than expected production of semiconductor processing
systems owing to supply chain issues.

 

Operational and supply chain challenges, as well as export licence delays,
have also held back the conversion of orders into revenue in Research &
Discovery, resulting in reported revenue growth of 3.2% (-4.4% at constant
currency). Revenue growth from service of our own products resulted in
reported growth of 16.6% (+10.7% 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% (2021: 117%) with conversion in Materials &
Characterisation offsetting the challenges in Research & Discovery.

 

 

Geographic revenue growth

(30 September 2021 restated to reflect correct allocation of WITec revenue)

 

                Half year to  Half year to  Half year to  Half year to
                30 September  30 September  30 September  30 September                   % growth
                2022          2022          2021          2021          Change  %        at constant
 £m             £m            % of total    % of total    % of total    £m      growth   currency
 Europe         43.4          22%           38.5          23%           +4.9    12.7%    11.7%
 North America  58.3          29%           41.4          24%           +16.9   40.8%    23.4%
 Asia           97.2          48%           88.2          52%           +9.0    10.2%    4.0%
 Rest of World  1.6           1%            2.0           1%            (0.4)   (20.0%)  (20.0%)
                200.5         100%          170.1         100%          +30.4   17.9%    10.2%

 

On a geographical basis, revenue grew by 12.7% in Europe (+11.7% at constant
currency), supported by additional deliveries of our electron analysers and
semiconductor process systems. Constant currency orders grew by 11.8%.

 

Revenue for North America increased by 40.8% on a reported basis and by 23.4%
at constant currency, with good demand for our semiconductor processing
systems. Orders grew by 11.0% at constant currency, with good demand for our
semiconductor processing systems, optical imaging and microscopy products.

 

Asia remains our largest region by revenue, with China constituting 58% of
regional revenue and 28% of total Group revenue. Asia delivered revenue growth
of 10.2% (+4.0% at constant currency) with strong demand for our electron
microscope analysers offset by fewer deliveries of our semiconductor
processing systems due to supply chain challenges and delays caused by the UK
export licence process. Orders for the region at organic constant currency
grew by 13.3%, driven by strong demand for electron microscope analysers and
semiconductor processing systems.

 

The total reported order book grew by 36.3% (28.7% at constant currency)
compared to 30 September 2021 to £315.7m. The order book, at constant
currency, compared to 30 September 2021, increased by 45.6% for Materials
& Characterisation, with strong growth across all constituent businesses.
Growth on an organic constant currency basis was 47.1% for Materials &
Characterisation. Research & Discovery grew by 16.5% at constant currency,
with strong demand for our imaging and microscopy products. Supply chain
disruption has led to slower order conversion than would normally be expected,
placing upward pressure on the order book. Continued focus on own product
service resulted in growth of 14.7% at constant currency from Service &
Healthcare.

 

                                        Materials &       Research &      Service &
 £m                                     Characterisation  Discovery       Healthcare     Total
 Revenue: 2021/22                       84.9              56.3            28.9           170.1
 Constant currency growth               16.7              (2.5)           3.1            17.3
 Revenue at constant currency: 2022/23  101.6             53.8            32.0           187.4
 Currency                               7.1               4.3             1.7            13.1
 Revenue: 2022/23                       108.7             58.1            33.7           200.5

 Revenue growth: reported               28.0%             3.2%            16.6%          17.9%
 Revenue growth: constant currency      19.7%             (4.4%)          10.7%          10.2%

 

Gross profit

Gross profit grew by 18.7% to £104.1m (2021: £87.7m), representing a gross
profit margin of 51.9%, an increase of 30 basis points over last year.

 

Adjusted operating profit and margin

Adjusted operating profit increased by 20.3% to £36.8m (2021: £30.6m),
representing an adjusted operating profit margin of 18.4%, an increase of 40
basis points against last year. At constant currency, the adjusted operating
profit margin was 17.1%, a decrease of 90 basis points.

 

Reported Materials & Characterisation adjusted operating profit increased
by 45.4% (+23.1% at constant currency) with reported margin increasing by 210
basis points to 17.4% (2021: 15.3%). We have seen a high level of shipments of
our electron microscope analysers but supply chain disruption led to a weaker
level of shipments from our semiconductor processing systems business.

 

Within Research & Discovery our imaging and microscopy business has been
hampered by operational and supply chain disruption, as well as export licence
delays, resulting in slow conversion of a strong order book. In addition,
operational throughput of our standard cryogenic and magnet systems has been
constrained by a diversion of resources to completing the withdrawal from more
complex bespoke systems, which now make up a much smaller component of the
business. We have been increasing headcount to drive future growth and deliver
improvements to our operational capacity and processes. The lower level of
shipments, combined with price rises not fully translating into revenue owing
to phasing of the order book, have resulted in a fall in profit and a 350
basis point reduction in adjusted operating margin to 12.0% (2021: 15.5%). At
constant currency, the margin was 10.6%, a fall of 490 basis points. We expect
both businesses to improve operational productivity in the second half of the
year.

 

Service & Healthcare margin increased by 150 basis points to 32.3% (2021:
30.8%) as a result of in-year contract efficiencies in Healthcare & Life
Science. At constant currency, the margin was 32.2%, an increase of 140
basis points owing to our focus on improving service revenue on our own
products.

 

Currency effects (including the impact of transactional currency hedging) have
increased reported adjusted operating profit by £4.8m when compared to
blended exchange rates net of hedges for the comparative period.

 

                                                            Materials &       Research &      Service &
 £m                                                         Characterisation  Discovery       Healthcare     Total
 Adjusted operating profit: 2021/22                         13.0              8.7             8.9            30.6
 Constant currency growth                                   3.0               (3.0)           1.4            1.4
 Adjusted operating profit at constant currency: 2022/23    16.0              5.7             10.3           32.0
 Currency                                                   2.9               1.3             0.6            4.8
 Adjusted operating profit: 2022/23                         18.9              7.0             10.9           36.8

 Adjusted operating margin(1): 2021/22                      15.3%             15.5%           30.8%          18.0%
 Adjusted operating margin(1): 2022/23                      17.4%             12.0%           32.3%          18.4%
 Adjusted operating margin(1) (constant currency): 2022/23  15.7%             10.6%           32.2%          17.1%

1.     Adjusted operating margin is calculated as adjusted operating
profit divided by revenue. Adjusted operating margin at constant currency is
defined as adjusted operating profit at constant currency divided by revenue
at constant currency.

 

Statutory operating profit and margin

Statutory operating profit grew by 20.6% to £26.3m (2021: £21.8m),
representing an operating profit margin of 13.1%. Good growth in statutory
operating profit is due to an improved trading performance from the business,
supported by currency benefits.

 

Adjusting items

Amortisation of acquired intangibles of £4.3m (2021: £3.8m) relates to
intangible assets recognised on acquisitions, being the value of technology,
customer relationships and brands. The increase in the charge from last year
reflects the additional amortisation on intangibles recognised following the
acquisition of WITec.

 

Non-recurring items within operating profit of £0.1m comprise the release of
a property dilapidations provision of £0.4m relating to the previously
disposed OI Healthcare business, offset by a charge of £0.5m that eliminates
the profit arising in the acquired WITec business from revaluing 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 24 months forward from the end of the next
reporting period. The Group's policy is to have in place at the beginning of
the financial year hedging instruments to cover up to 80% of its forecast
transactional exposure for the following twelve months and, subject to
pricing, up to 20% of exposures for the next six months. The Group has decided
that the additional costs of meeting the extensive documentation requirements
of IFRS 9 to apply hedge accounting to these foreign exchange hedges cannot be
justified. Accordingly, the Group does not use hedge accounting for these
derivatives.

 

Net movements on mark-to-market derivatives in respect of transactional
currency exposures of the Group in future periods are disclosed in the income
statement as foreign exchange and excluded from our calculation of adjusted
profit before tax. In the half year this amounted to a charge of £6.1m (2021:
£3.8m charge). The increase in the net liability for derivative financial
instruments from 31 March 2022 reflects: (i) the crystallisation of forward
contracts that were hedging the first half of this financial year, which are
recognised in adjusted operating profit, and; (ii) an uncrystallised reduction
in the mark-to-market valuation of forward contracts from the large fall in
the value of Sterling at the balance sheet date against a blended rate
achieved on US Dollar forward contracts that will mature over the next 18
months.

 

Net finance costs

The Group's recorded net interest income was higher at £0.5m (2021: net cost
of £0.4m), due to an increase in the interest credit on pension scheme net
assets and a rise in interest income on our net cash balance. In addition, we
recorded in financial expenditure a non-recurring charge of £0.2m against the
unwind of discount on WITec contingent consideration.

 

Adjusted profit before tax and margin

Adjusted profit before tax increased by 23.5% to £37.3m (2021: £30.2m). The
adjusted profit before tax margin of 18.6% (2021: 17.8%) was above last year
due to the effect of currency offsetting a small decline in constant currency
margin.

 

                                                                              Half year to  Half year to
                                                                              30 September  30 September
                                                                              2022          2021
 Reconciliation of statutory profit before tax to adjusted profit before tax  £m            £m
 Statutory profit before tax                                                  26.6          21.4
 Add back:
 Amortisation of acquired intangible assets                                   4.3           3.8
 Non-recurring items (Note 2)                                                 0.3           1.2
 Mark-to-market of currency hedges                                            6.1           3.8
 Adjusted profit before tax                                                   37.3          30.2

 

Statutory profit before tax and margin

Statutory profit before tax increased by 24.3% to £26.6m (2021: £21.4m). The
statutory profit before tax margin of 13.3% (2021: 12.6%) was above last
year, principally due to the increase in reported margin offsetting the
increased charge from the mark-to-market valuation movement on financial
derivatives.

 

Taxation

The adjusted tax charge of £8.0m (2021: £6.5m) represents an effective tax
rate of 21.4% (2021: 21.5%). The tax charge of £5.9m (2021: £4.9m)
represents an effective tax rate of 22.2% (2021: 22.9%).

 

The half-year tax rate has been calculated based on the expected effective tax
rate for the year of 20.8% (having made certain assumptions about where
profits will arise) and reflects the effect of the benefit of enhanced capital
allowances for the fit out of the new semiconductor facility.

 

The tax rate is expected to increase to approximately 23% in the year to 31
March 2024, given the previously announced increase in the corporation tax
rate in the UK. Again this forecast rate is dependent on the location of
profits and the potential availability of certain tax incentives.

 

Earnings per share

Adjusted basic earnings per share increased by 23.3% to 50.8p (2021: 41.2p);
adjusted diluted earnings per share grew by 23.3% to 50.2p (2021: 40.7p).
Basic and diluted earnings per share increased by 25.1% to 35.9p (2021: 28.7p)
and 35.4p (2021: 28.3p) respectively.

 

The number of undiluted weighted average shares increased to 57.7m (2021:
57.5m).

 

Currency

The Group faces transactional and translational currency exposure, most
notably against the US Dollar, Euro and Japanese Yen. For the half year,
approximately 15% of Group revenue was denominated in Sterling, 56% in US
Dollars, 19% in Euros, 8% 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          30.2     (29.7)
 US Dollar         113.1    47.7
 Euro              37.4     13.3
 Japanese Yen      15.9     4.9
 Chinese Renminbi  2.9      0.6
 Other             1.0      -
                   200.5    36.8

 

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 2022, the
Group had currency hedges in place extending up to 18 months forward.

 

For the full year 2022/23, our assessment of the currency impact is, based on
hedges currently in place and forecast currency rates, a tailwind of
approximately £28.0m to revenue, and £3.5m to profit. The currency tailwind
to profit is forecast to be a little lower than at the half year due to a
higher proportion of forward contracts crystallising in the second half of the
year. Forecast currency rates on unhedged positions are: GBP:USD 1.17; GBP:EUR
1.16; GBP:JPY 170. The tailwind to operating profit is due to stronger
Sterling currency rates achieved on hedges in place for 2022/23 against the
previous year being more than offset by unhedged transactional and
translational exposures against actual currency rates achieved in 2021/22 due
primarily to the weakness in Sterling against the US Dollar. Uncertain volume
and timing of shipments and acceptances, currency mix and rate volatility may
significantly affect full-year currency forecast effects.

 

Looking further ahead to the financial year 2023/24, based on the above
currency assumptions, we would expect currency effects to have a broadly
neutral impact to revenue and a £1.8m benefit to operating profit.

 

Acquisition of WITec

On 31 August 2021, the Group completed the purchase of 100% of the share
capital in WITec for an initial consideration of €37.0m. Additional
consideration of up to €5m is conditional on trading performance over a
period of twelve months following completion. This payment is expected to be
made in full early in the second half of the year. The business has integrated
well into our regional and segmental structure and, during this half year,
contributed constant currency revenue of £9.5m (2021: £1.8m) and constant
currency adjusted operating profit of £1.0m (2021: £0.2m).

 

Dividend

The Group's policy on the dividend takes into account changes to underlying
earnings, dividend cover, movements in currency and demands on our cash.
After a good first half year of trading, the Board has declared an interim
dividend of 4.6p per share (2021: 4.4p per share), growth of 4.5%. The interim
dividend will be paid on 13 January 2023 to shareholders on the register as at
2 December 2022.

 

Cash flow

The Group's cash flow is summarised below.

 

                                                                     Half year to  Half year to
                                                                     30 September  30 September
                                                                     2022          2021
                                                                     £m            £m
 Adjusted operating profit                                           36.8          30.6
 Depreciation and amortisation                                       5.1           4.1
 Adjusted(1) EBITDA                                                  41.9          34.7
 Working capital movement                                            (12.6)        (13.6)
 Equity settled share schemes                                        1.2           1.1
 Pension scheme payments above charge to operating profit            (3.9)         (3.8)
 Cash from operations                                                26.6          18.4
 Interest                                                            0.1           (0.5)
 Tax                                                                 (2.6)         (4.0)
 Capitalised development expenditure                                 (0.1)         (0.2)
 Expenditure on tangible and intangible assets                       (11.5)        (5.5)
 Acquisition of subsidiaries, net of cash acquired                   -             (30.6)
 Acquisition-related costs                                           -             (0.3)
 Dividends paid                                                      (7.9)         (2.4)
 Proceeds from issue of share capital and exercise of share options  -             0.1
 Payments made in respect of lease liabilities                       (1.5)         (1.3)
 Decrease in borrowings                                              (0.1)         -
 Net increase/(decrease) in cash and cash equivalents                3.0           (26.3)

1.     Adjusted EBITDA is defined as adjusted operating profit before
depreciation and amortisation of capitalised development costs. The
consolidated statement of cash flows provides further analysis of the
definition of adjusted EBITDA.

 

Cash from operations

Cash from operations of £26.6m (2021: £18.4m) represents 47% (2021: 50%)
cash conversion. Cash conversion on a normalised basis was 65% (2021: 53%)
once we exclude expenditure relating to our new semiconductor facility. Cash
conversion has been tempered by an increase in inventories to provide greater
operational resilience. In addition, a high level of shipments close to half
year due to late supplier deliveries has increased receivables. Cash
conversion is defined as cash from operations before business reorganisation
costs and pension scheme payments above charge to operating profit, less
capitalised development expenditure, capital expenditure and payments made in
respect of lease liabilities divided by adjusted operating profit.

 

                                                                              Half year to  Half year to
                                                                              30 September  30 September
                                                                              2022          2021
 Reconciliation of cash generated from operations to adjusted operating cash  £m            £m
 flow
 Cash from operations                                                         26.6          18.4
 Add back:
 Pension scheme payments above charge to operating profit                     3.9           3.8
 Capitalised development expenditure                                          (0.1)         (0.2)
 Expenditure on tangible and intangible assets                                (11.5)        (5.5)
 Payments made in respect of lease liabilities                                (1.5)         (1.3)
 Adjusted cash from operations                                                17.4          15.2
 Cash conversion % (adjusted cash from operations/adjusted operating profit)  47%           50%
 Cash conversion % (normalised(1))                                            65%           53%

1.     Cash conversion calculated on a normalised basis excludes
expenditure in the half year of £6.4m (2021: £0.9m) on the new semiconductor
facility.

 

In order to mitigate supply chain challenges and provide greater resilience to
operations, we have been increasing our levels of buffer stock and extending
stock order lead times, resulting in an increase in inventories of £12.8m.
Furthermore, delays in receiving UK export licences have contributed to an
increase in finished goods. An increase in receivables of £13.9m reflects the
high number of shipments made close to the half year end as we managed late
deliveries of components from our suppliers. Stronger order growth has
resulted in an increase in the level of customer deposits, leading to an
increase in payables and customer deposits of £14.1m.

 

Pension

Pension recovery payments above charge to operating profit total £3.9m (2021:
£3.8m).

 

Interest

Net interest received was £0.1m (2021: £0.5m paid), reflecting the increased
returns on our positive cash balances.

 

Tax

Tax paid was £2.6m (2021: £4.0m).

 

Investment in Research and Development (R&D)

Total cash spend on R&D in the half year was £17.5m, equivalent to 8.7%
of sales (2021: £15.1m, 8.9% of sales). A reconciliation between the adjusted
amounts charged to the consolidated statement of income and the cash spent is
given below:

 

                                                                          Half year to  Half year to
                                                                          30 September  30 September
                                                                          2022          2021
                                                                          £m            £m
 R&D expense charged to the consolidated statement of income              18.2          15.4
 Depreciation of R&D-related fixed assets                                 (0.2)         (0.1)
 Amounts capitalised as fixed assets                                      -             0.3
 Amortisation and impairment of R&D costs capitalised as intangibles      (0.6)         (0.7)
 Amounts capitalised as intangible assets                                 0.1           0.2
 Total cash spent on R&D during the year                                  17.5          15.1

 

 

Net cash and funding

Net cash

Cash from operations in the full year was partially offset by an increase in
capital expenditure, resulting in an increase in the Group's net cash position
from £85.9m at 31 March 2022 to £97.1m on 30 September 2022. The Group
invested in tangible and intangible assets of £11.6m, of which £6.4m relates
to payments associated with the new semiconductor facility.

 

To date we have incurred costs of £14.6m on the new semiconductor facility,
which is currently undergoing internal fit-out. As we progress towards
completion, we expect additional payments of approximately £12m in the second
half of this year, with a further £10m in the following financial year.

 

 Movement in net cash                                   £m
 Net cash after borrowings as at 31 March 2022          85.9
 Cash generated from operations                         26.6
 Interest                                               0.1
 Tax                                                    (2.6)
 Capitalised development expenditure                    (0.1)
 Capital expenditure on tangible and intangible assets  (11.5)
 Dividend paid                                          (7.9)
 Other items                                            6.6
 Net cash after borrowings as at 30 September 2022      97.1

 

                                                  Half year to  Half year to
                                                  30 September  30 September
                                                  2022          2021
 Net cash including lease liabilities             £m            £m
 Net cash after borrowings                        97.1          70.1
 Lease liabilities                                (31.4)        (12.9)
 Net cash and lease liabilities after borrowings  65.7          57.2

 

The increase in lease liabilities reflects the commencement of a 20-year lease
on the new semiconductor facility, which is currently undergoing its internal
fit-out.

 

Funding

On 2 July 2018, the Group entered into an unsecured multi-currency revolving
facility agreement, which is committed until June 2025. The facility has
been entered into with two banks and comprises a Euro-denominated
multi‑currency facility of €50.0m (£43m) and a US Dollar-denominated
multi‑currency facility of $80.0m (£70m).

 

Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to
interest greater than 4.0 times. As at 30 September 2022 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 2022 was £24.5m (31 March 2022: £51.7m).
The significant increase in gilt rates has reduced both the value of the
scheme's assets and accounting liabilities, resulting in a smaller surplus.
The value of scheme assets decreased to £241.2m (31 March 2022: £351.7m) and
scheme liabilities decreased to £216.7m (31 March 2022: £300.0m).

 

An advance payment of £4.0m was made in October 2022 to allow the trustees to
meet collateral calls to swap counterparties under the liability driven
investment scheme in case gilt yields worsen. It is not expected that these
funds will be required and the company has the right to recover this advance
through making reduced payments in the future.

 

The scheme's actuarial valuation review, rather than the accounting basis,
determines our cash payments into the scheme. The cash contributions into the
scheme are expected to continue until 2025/26, at which point we expect, based
on current assumptions, the scheme to achieve self-sufficiency. The scheme
rules provide that in the event of a surplus remaining after settling
contractual obligations to members, the Group may determine how the surplus is
utilised.

 

Going concern

The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
performance highlights, Chief Executive's review and operations review
sections of this half year report. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described in the
finance review.

 

Trading for the Group has been good during the half year. The Group has
prepared and reviewed a number of scenarios for the Group based on key risks
noted for the business and the potential impact on orders, trading and cash
flow performance. In addition, the Group has overlaid the risk of long-term
adverse movements in currency rates to our cash flow forecasts. The Board is
satisfied, having considered the sensitivity analysis, as well as its funding
facilities, that the Group has adequate resources to continue in operational
existence for the foreseeable future.

 

Forward-looking statements

This document contains certain forward-looking statements. The forward-looking
statements reflect the knowledge and information available to the company
during the preparation and up to the publication of this document. By their
very nature, these statements depend upon circumstances and relate to events
that may occur in the future, thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit forecast
by the company.

 

Gavin Hill

Chief Financial Officer

 

7 November 2022

 

Principal risks and uncertainties

 

Information regarding the risk management process in place at the Group is set
out on pages 77 to 79 of the 2022 Report and Financial Statements. The
principal risks and uncertainties identified through that process are set out
on pages 80 to 84 of the 2022 Report and Financial Statements and can be
found on the Group's website at www.oxinst.com.

 

In keeping with the risk management process, the Group has performed a
quarterly update of its risk register as at 30 September 2022.

It has evaluated the disclosures made on pages 80 to 84 of the 2022 Report and
Financial Statements and has concluded that all of the risks identified
continue to be relevant for the remainder of the year ending 31 March 2023.
Further it considers that there are no additional significant risks to be
disclosed. A summary of the risks and uncertainties identified in the 2022
Report and Financial Statements is set out below:

 

·     Geopolitical risk;

·     Supply chain risk;

·     Routes to market;

·     Technical risk;

·     Inflation;

·     Legal/compliance risk;

·     New Covid variant;

·     Adverse movements in long-term foreign currency rates;

·     IT risk;

·     People;

·     Operational risk;

·     Climate change; and

·     Pensions.

 

The Board considers that geopolitical risks have increased since the
publication of the 2022 Report and Financial Statements. For example, we have
seen heightened adverse sentiment towards China from the US and a higher
number of UK export licence delays and rejections. In addition, the Board
considers that economic volatility in the UK in particular may exacerbate
inflationary risks.

 

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 Report and Financial
Statements that could do so.

 

Ian
Barkshire
Gavin Hill

Chief
Executive
Chief Financial Officer

 

7 November 2022

Condensed consolidated statement of income

Half year ended 30 September 2022

 

                                                                                 Half year to 30 September 2022         Half year to 30 September 2021
                                                                                              Adjusted                               Adjusted
                                                                                 Adjusting    items(1)     Total        Adjusting    items(1)     Total
                                                                           Note  £m           £m           £m           £m           £m           £m
 Revenue                                                                   4     200.5        -            200.5        170.1        -            170.1
 Cost of sales                                                                   (96.4)       -            (96.4)       (82.4)       -            (82.4)
 Gross profit                                                                    104.1        -            104.1        87.7         -            87.7
 Research and development                                                  5     (18.2)       -            (18.2)       (15.4)       -            (15.4)
 Selling and marketing                                                           (29.2)       -            (29.2)       (22.9)       -            (22.9)
 Administration and shared services                                              (23.1)       (4.4)        (27.5)       (21.2)       (5.0)        (26.2)
 Foreign exchange gain/(loss)                                                    3.2          (6.1)        (2.9)        2.4          (3.8)        (1.4)
 Operating profit                                                                36.8         (10.5)       26.3         30.6         (8.8)        21.8
 Interest credit on pension scheme net assets                                    0.6          -            0.6          0.2          -            0.2
 Other financial income                                                          0.3          -            0.3          0.1          -            0.1
 Financial income                                                                0.9          -            0.9          0.3          -            0.3
 Financial expenditure                                                           (0.4)        (0.2)        (0.6)        (0.7)        -            (0.7)
 Profit before income tax                                                  4     37.3         (10.7)       26.6         30.2         (8.8)        21.4
 Income tax (expense)/credit                                                     (8.0)        2.1          (5.9)        (6.5)        1.6          (4.9)
 Profit for the period attributable to equity shareholders of the parent         29.3         (8.6)        20.7         23.7         (7.2)        16.5

 Earnings per share                                                              pence                     pence        pence                     pence
 Basic earnings per share                                                  3
 From profit for the period                                                      50.8                      35.9         41.2                      28.7

 Diluted earnings per share                                                3
 From profit for the period                                                      50.2                      35.4         40.7                      28.3

1.     Adjusted numbers are stated to give a better understanding of the
underlying business performance. Details of adjusting items can be found in
Note 2

 

                                                     Year to 31 March 2022
                                                               Adjusting
                                                     Adjusted  items(1)   Total
                                               Note  £m        £m         £m
 Revenue                                       4     367.3     -          367.3
 Cost of sales                                       (179.5)   -          (179.5)
 Gross profit                                        187.8     -          187.8
 Research and development                      5     (32.8)    -          (32.8)
 Selling and marketing                               (52.5)    -          (52.5)
 Administration and shared services                  (42.2)    (11.6)     (53.8)
 Foreign exchange gain/(loss)                        6.0       (6.4)      (0.4)
 Operating profit                                    66.3      (18.0)     48.3
 Interest credit on pension scheme net assets        0.4       -          0.4
 Other financial income                              0.1       -          0.1
 Financial income                                    0.5       -          0.5
 Financial expenditure                               (0.9)     (0.3)      (1.2)
 Profit before income tax                      4     65.9      (18.3)     47.6
 Income tax (expense)/credit                         (11.7)    2.7        (9.0)
 Profit for the period attributable to equity
 shareholders of the parent                          54.2      (15.6)     38.6

 Earnings per share                                  pence                pence
 Basic earnings per share                      3
 From profit for the period                          94.3                 67.1

 Diluted earnings per share                    3
 From profit for the period                          93.0                 66.2

1.     Adjusted numbers are stated to give a better understanding of the
underlying business performance. Details of adjusting items can be found in
Note 2

 

The attached notes form part of these financial statements.

 

 

Condensed consolidated statement of comprehensive income

Half year ended 30 September 2022

 

                                                                              Half year to  Half year to  Year to
                                                                              30 September  30 September  31 March
                                                                              2022          2021          2022
                                                                              £m            £m            £m
 Profit for the period                                                        20.7          16.5          38.6

 Other comprehensive income/(expense):
 Items that may be reclassified subsequently to condensed consolidated
 statement of income
 Foreign exchange translation differences                                     9.1           1.3           1.0

 Items that will not be reclassified to condensed consolidated statement of
 income
 Remeasurement (loss)/gain in respect of post-retirement benefits             (31.8)        4.7           27.3
 Tax credit/(charge) on remeasurement in respect of post-retirement benefits  7.9           (1.2)         (6.8)
 Total other comprehensive (expense)/income                                   (14.8)        4.8           21.5
 Total comprehensive income for the period attributable to equity             5.9           21.3          60.1
 shareholders of the parent

 

 

Condensed consolidated statement of financial position

As at 30 September 2022

 

                                                                               As at         As at         As at
                                                                               30 September  30 September  31 March
                                                                               2022          2021          2022
                                                                         Note  £m            £m            £m
 Assets
 Non-current assets
 Property, plant and equipment                                                 41.0          25.6          31.7
 Right-of-use assets                                                           31.1          12.4          17.9
 Intangible assets                                                             138.4         148.7         140.7
 Long-term receivables                                                         0.1           -             -
 Derivative financial instruments                                        9     0.1           -             -
 Retirement benefit asset                                                      24.5          25.0          51.7
 Deferred tax assets                                                           14.1          14.2          13.7
                                                                               249.3         225.9         255.7
 Current assets
 Inventories                                                                   79.5          66.3          65.3
 Trade and other receivables                                                   118.2         86.9          104.7
 Current income tax receivable                                                 0.9           0.6           0.8
 Derivative financial instruments                                        9     0.1           2.6           1.0
 Cash and cash equivalents                                               9     118.9         119.3         96.4
                                                                               317.6         275.7         268.2
 Total assets                                                                  566.9         501.6         523.9

 Equity
 Capital and reserves attributable to the company's equity shareholders
 Share capital                                                                 2.9           2.9           2.9
 Share premium                                                                 62.5          62.5          62.5
 Other reserves                                                                0.2           0.2           0.2
 Translation reserve                                                           16.7          7.9           7.6
 Retained earnings                                                             233.3         205.4         243.2
                                                                               315.6         278.9         316.4
 Liabilities
 Non-current liabilities
 Bank loans                                                              9     1.1           -             1.3
 Lease payables                                                                27.2          10.1          14.9
 Derivative financial instruments                                        9     1.2           0.5           0.3
 Provisions                                                                    0.1           -             0.1
 Deferred tax liabilities                                                      7.5           7.3           15.4
                                                                               37.1          17.9          32.0
 Current liabilities
 Bank loans and overdrafts                                               9     20.7          49.2          9.2
 Trade and other payables                                                      167.8         137.9         149.5
 Lease payables                                                                4.2           2.8           3.5
 Current income tax payables                                                   6.7           5.3           4.5
 Derivative financial instruments                                        9     7.8           -             1.1
 Provisions                                                                    7.0           9.6           7.7
                                                                               214.2         204.8         175.5
 Total liabilities                                                             251.3         222.7         207.5
 Total liabilities and equity                                                  566.9         501.6         523.9

 

The financial statements were approved by the Board of Directors on 7 November
2022 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 2022

 

                                                                                Share    Share    Other     Translation  Retained
                                                                                capital  premium  reserves  reserve      earnings  Total
                                                                                £m       £m       £m        £m           £m        £m
 As at 1 April 2022                                                             2.9      62.5     0.2       7.6          243.2     316.4
 Total comprehensive income/(expense):
 Profit for the half year                                                       -        -        -         -            20.7      20.7
 Other comprehensive income/(expense):
 - Foreign exchange translation differences                                     -        -        -         9.1          -         9.1
 - Remeasurement loss in respect of post‑retirement benefits                    -        -        -         -            (31.8)    (31.8)
 - Tax credit on items that will not be reclassified to condensed consolidated  -        -        -         -            7.9       7.9
 statement of income
 Total comprehensive income/(expense) attributable to equity shareholders of    -        -        -         9.1          (3.2)     5.9
 the parent

 Transactions with owners recorded directly in equity:
 - Credit in respect of employee service costs settled by award of share        -        -        -         -            1.2       1.2
 options
 - Dividends                                                                    -        -        -         -            (7.9)     (7.9)
 Total transactions with owners recorded directly in equity:                    -        -        -         -            (6.7)     (6.7)
 As at 30 September 2022                                                        2.9      62.5     0.2       16.7         233.3     315.6

 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 condensed consolidated  -        -        -         -            (1.2)     (1.2)
 statement 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
 - 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

 

                                                                                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 year                                                            -        -        -         -            38.6      38.6
 Other comprehensive income/(expense):
 - Foreign exchange translation differences                                     -        -        -         1.0          -         1.0
 - Remeasurement gain in respect of post‑retirement benefits                    -        -        -         -            27.3      27.3
 - Tax credit on items that will not be reclassified to condensed consolidated  -        -        -         -            (6.8)     (6.8)
 statement of income
 Total comprehensive income attributable to equity shareholders of the parent   -        -        -         1.0          59.1      60.1

 Transactions with owners recorded directly in equity:
 - Credit in respect of employee service costs settled by award of share        -        -        -         -            2.1       2.1
 options
 - Tax credit in respect of share options                                       -        -        -         -            0.2       0.2
 - Proceeds from shares issued                                                  -        0.1      -         -            -         0.1
 - Dividends                                                                    -        -        -         -            (12.3)    (12.3)
 Total transactions with owners recorded directly in equity:                    -        0.1      -         -            (10.0)    (9.9)
 As at 31 March 2022                                                            2.9      62.5     0.2       7.6          243.2     316.4

 

Other reserves comprise the capital redemption reserve, which represents the
nominal value of shares repurchased and then cancelled during the year ended
31 March 1999.

 

The foreign exchange translation reserve comprises all foreign exchange
differences arising since 1 April 2004 from the translation of the Group's net
investments in foreign subsidiaries into Sterling.

 

 

Condensed consolidated statement of cash flows

Half year ended 30 September 2022

 

                                                                                     Half year to  Half year to  Year to
                                                                                     30 September  30 September  31 March
                                                                                     2022          2021          2022
                                                                               Note  £m            £m            £m
 Profit for the period                                                               20.7          16.5          38.6
 Adjustments for:
 Income tax expense                                                                  5.9           4.9           9.0
 Net financial (income)/expense                                                      (0.3)         0.4           0.7
 Fair value movement on financial derivatives                                        6.1           3.8           6.4
 Release of provision on disposal                                                    (0.4)         -             -
 WITec post-acquisition gross margin adjustment                                      0.5           0.9           1.7
 Acquisition related costs                                                           -             0.3           0.4
 Amortisation and impairment of acquired intangibles                                 4.3           3.8           9.5
 Depreciation of right-of-use assets                                                 1.9           1.6           3.4
 Depreciation of property, plant and equipment                                       2.6           1.8           4.1
 Amortisation of capitalised development costs                                       0.6           0.7           1.9
 Adjusted earnings before interest, tax, depreciation and amortisation               41.9          34.7          75.7
 Charge in respect of equity settled employee share schemes                          1.2           1.1           2.1
 Cash payments to the pension scheme more than the charge to operating profit        (3.9)         (3.8)         (7.6)
 Operating cash flows before movements in working capital                            39.2          32.0          70.2
 (Increase) in inventories                                                           (12.8)        (1.7)         (0.1)
 (Increase) in receivables                                                           (13.9)        (5.9)         (21.6)
 Increase/(decrease) in payables and provisions                                      0.3           (6.1)         11.4
 Increase/(decrease) in customer deposits                                            13.8          0.1           (1.5)
 Cash generated from operations                                                      26.6          18.4          58.4
 Interest paid                                                                       -             (0.5)         (0.5)
 Income taxes paid                                                                   (2.6)         (4.0)         (8.8)
 Net cash from operating activities                                                  24.0          13.9          49.1
 Cash flows from investing activities
 Proceeds from sale of property, plant and equipment                                 0.1           -             -
 Acquisition of property, plant and equipment                                        (11.6)        (5.5)         (13.9)
 Acquisition of subsidiaries, net of cash acquired                             6     -             (30.6)        (30.6)
 Acquisition related costs                                                           -             (0.3)         (0.4)
 Acquisition of intangible assets                                                    -             -             (0.1)
 Capitalised development expenditure                                                 (0.1)         (0.2)         (0.7)
 Interest received                                                                   0.1           -             0.1
 Net cash used in investing activities                                               (11.5)        (36.6)        (45.6)
 Cash flows from financing activities
 Proceeds from issue of share capital                                                -             0.1           0.1
 Interest paid on lease liabilities                                                  (0.3)         (0.1)         (0.3)
 Repayment of lease liabilities                                                      (1.2)         (1.2)         (3.1)
 Repayment of borrowings                                                             (0.1)         -             (0.1)
 Dividends paid                                                                      (7.9)         (2.4)         (12.3)
 Net cash used in financing activities                                               (9.5)         (3.6)         (15.7)
 Net increase/(decrease) in cash and cash equivalents                                3.0           (26.3)        (12.2)
 Cash and cash equivalents at the beginning of the period                            87.7          97.6          97.6
 Effect of exchange rate fluctuations on cash held                                   8.0           0.8           2.3
 Cash and cash equivalents at the end of the period                                  98.7          72.1          87.7

 Comprised of:
 Cash and cash equivalents as per the condensed consolidated statement of            118.9         119.3         96.4
 financial position
 Bank overdrafts                                                               9     (20.2)        (47.2)        (8.7)
 Net cash and cash equivalents in the condensed consolidated statement of            98.7          72.1          87.7
 financial position

 

 

Notes to the half-year financial statements

Half year ended 30 September 2022

 

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 2022.

 

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 2022 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 2022.

 

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 2022.

 

Going concern

The Directors have considered the adoption of the going concern basis of
preparation for these half-year financial statements. The Directors have
reviewed cash flow forecasts prepared for a period of 18 months from the date
of approval of these condensed accounts.

 

At the end of the reporting period the Group had £212.4m of available
liquidity including £97.1m of net cash and £115.3m of the undrawn revolving
credit facility ('RCF'). In reviewing the cash flow forecasts the Directors
considered the current trading position of the Group and the likely capital
expenditure and working capital requirements. Trading for the Group has been
good during the first half year, with improved operating cash conversion (65%)
when compared with the prior half year (53%), and the expected capital
expenditure for our semiconductor facility coming to an end. The Group has
prepared and reviewed a number of scenarios for the Group based on key risks
noted for the business and the potential impact on orders, trading and cash
flow performance. In addition, the Group has overlaid the risk of long-term
adverse movements in currency rates to our cash flow forecasts. The cashflow
forecasts show that the Group expects to comply with the covenants included
within the RCF agreement throughout the review period.

 

Taking into account the current cash level and the committed facilities the
Directors are confident that the Group will have sufficient funds to allow it
to continue to operate. After reviewing the projections and sensitivity
analysis the Directors believe that it is appropriate to prepare the half-year
financial statements on a going concern basis.

 

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                2022          2021          2022
 US Dollar                       1.12          1.35          1.32
 Euro                            1.14          1.16          1.18
 Japanese Yen                    162           150           160

 Average translation rates       US Dollar     Euro          Japanese Yen
 Half year to 30 September 2022
 April                           1.28          1.19          161
 May                             1.26          1.18          163
 June                            1.24          1.17          164
 July                            1.22          1.18          164
 August                          1.19          1.18          162
 September                       1.14          1.15          161

 Average translation rates       US Dollar     Euro          Japanese Yen
 Year to 31 March 2022
 April                           1.38          1.16          152
 May                             1.40          1.16          153
 June                            1.40          1.16          154
 July                            1.39          1.17          153
 August                          1.38          1.17          152
 September                       1.36          1.16          151
 October                         1.36          1.17          153
 November                        1.35          1.18          153
 December                        1.34          1.18          153
 January                         1.35          1.19          155
 February                        1.34          1.20          155
 March                           1.33          1.19          157

 

 

2 Non-GAAP measures

In the preparation of adjusted numbers, the Directors exclude certain items in
order to assist with comparability between peers and to give what they
consider to be a better indication of the underlying performance of the
business. These adjusting items are excluded in the calculation of adjusted
operating profit, adjusted profit before tax, adjusted profit for the year
from continuing operations, adjusted EBITDA, adjusted EPS, adjusted cash
conversion and adjusted effective tax rate. Details of adjusting items
are given below.

 

Adjusted EBITDA is calculated by adding back depreciation of property, plant
and equipment, depreciation of right-of-use assets and amortisation of
intangible assets to adjusted operating profit, and can be found in the
condensed consolidated statement of cash flows. The calculation of adjusted
EPS can be found in Note 3. Adjusted effective tax rate is calculated by
dividing the share of tax attributable to adjusted profit before tax by
adjusted profit before tax. The definition of cash conversion is set out in
the finance review.

 

Reconciliation between operating profit and profit before income tax and
adjusted profit

 

                                                            Half year to 30 September 2022      Half year to 30 September     Year to 31 March

2021
2022
                                                            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                                          26.3              26.6              21.8           21.4           48.3       47.6
 Acquisition related costs                                  -                 -                 0.3            0.3            0.4        0.4
 Release of provision on disposal                           (0.4)             (0.4)             -              -              -          -
 WITec post-acquisition gross margin adjustment             0.5               0.5               0.9            0.9            1.7        1.7
 Amortisation and impairment of acquired intangibles        4.3               4.3               3.8            3.8            9.5        9.5
 Fair value movement on financial derivatives               6.1               6.1               3.8            3.8            6.4        6.4
 Unwind of discount in respect of contingent consideration  -                 0.2               -              -              -          0.3
 Total non-GAAP adjustments                                 10.5              10.7              8.8            8.8            18.0       18.3
 Adjusted measure                                           36.8              37.3              30.6           30.2           66.3       65.9
 Adjusted income tax expense                                                  (8.0)                            (6.5)                     (11.7)
 Adjusted profit for the period                                               29.3                             23.7                      54.2
 Adjusted effective tax rates                                                 21.4%                            21.5%                     17.8%

 

Acquisition related costs

These represent the costs of one-off charges incurred at the balance sheet
dates relating to the acquisition of WITec Wissenschaftliche Instrumente und
Technologie GmbH ("WITec").

 

Release of provision on disposal

This represents the release of the provision on disposal of the OI Healthcare
business in the US in 2020.

 

WITec post-acquisition gross margin adjustment

The finished goods and work in progress inventories were revalued to fair
value, based on selling price less costs to sell. The adjustments in the
current and prior periods relate to the gross margin which would have been
earned on post-acquisition sales to 30 September 2022, but which have been
absorbed into the acquisition date fair value. All such inventory at the
acquisition date has now been delivered to customers and therefore these will
not recur.

 

Amortisation and impairment of acquired intangibles

Adjusted profit excludes the non-cash amortisation and impairment of acquired
intangible assets and goodwill.

 

Fair value movement on financial derivatives

Under IFRS 9, all derivative financial instruments are recognised initially at
fair value. Subsequent to initial recognition, they are also measured at fair
value. In respect of instruments used to hedge foreign exchange risk and
interest rate risk, the Group does not take advantage of the hedge accounting
rules provided for in IFRS 9 since that standard requires certain stringent
criteria to be met in order to hedge account, which, in the particular
circumstances of the Group, are considered by the Board not to bring any
significant economic benefit. Accordingly, the Group accounts for these
derivative financial instruments at fair value through profit or loss. To the
extent that instruments are hedges of future transactions, adjusted profit for
the period is stated before changes in the valuation of these instruments so
that the underlying performance of the Group can be more clearly seen.

 

Unwind of discount in respect of contingent consideration

Adjusted profit excludes the unwind of the discount in respect of the
contingent consideration on the acquisition of WITec.

 

Adjusted income tax expense

Adjusting items include the income tax on each of the items described above.

 

Reconciliation of changes in cash and cash equivalents to movement in net cash

 

                                                       Half year to  Half year to  Year to
                                                       30 September  30 September  31 March
                                                       2022          2021          2022
                                                       £m            £m            £m
 Net increase/(decrease) in cash and cash equivalents  3.0           (26.3)        (12.2)
 Effect of exchange rate fluctuations on cash held     8.0           0.8           2.3
 Movement in net cash in the period                    11.0          (25.5)        (9.9)
 Net cash at the start of the period                   87.7          97.6          97.6
 Net cash at the end of the period                     98.7          72.1          87.7

 

Reconciliation of net cash to condensed statement of financial position

 

                                    Half year to  Half year to  Year to
                                    30 September  30 September  31 March
                                    2022          2021          2022
                                    £m            £m            £m
 Overdrafts                         (20.2)        (47.2)        (8.7)
 Cash and cash equivalents          118.9         119.3         96.4
 Net cash at the end of the period  98.7          72.1          87.7

 

 

3 Earnings per share

Basic earnings per ordinary share (EPS) is calculated by dividing the profit
attributable to equity shareholders of the parent by the weighted average
number of ordinary shares in issue during the year, excluding ordinary shares
held by the Employee Share Ownership Trust, which have been treated as if they
had been cancelled. The weighted average number of shares used in the
calculation is as follows:

 

                                                                                 Half year to  Half year to  Year to
                                                                                 30 September  30 September  31 March
                                                                                 2022          2021          2022
                                                                                 Shares        Shares        Shares
                                                                                 million       million       million
 Weighted average number of shares outstanding                                   57.7          57.6          57.7
 Less: weighted average number of shares held by Employee Share Ownership Trust  -             (0.1)         (0.2)
 Weighted average number of shares used in calculation of basic earnings per     57.7          57.5          57.5
 share

 

For the purposes of calculating diluted and diluted adjusted EPS, the weighted
average number of ordinary shares is adjusted to include the weighted average
number of ordinary shares that would be issued on the conversion of all
potentially dilutive ordinary shares expected to vest, relating to the
company's share-based payment plans. Potential ordinary shares are only
treated as dilutive when their conversion to ordinary shares would decrease
EPS.

 

The following table shows the effect of share options on the calculation of
diluted earnings per share:

 

                                                                        Half year to  Half year to  Year to
                                                                        30 September  30 September  31 March
                                                                        2022          2021          2022
                                                                        Shares        Shares        Shares
                                                                        million       million       million
 Number of ordinary shares per basic earnings per share calculations    57.7          57.5          57.5
 Effect of shares under option                                          0.7           0.8           0.8
 Number of ordinary shares per diluted earnings per share calculations  58.4          58.3          58.3

 

Basic and diluted EPS are based on the profit for the period attributable to
equity shareholders of the parent, as reported in the condensed consolidated
statement of income. Adjusted and diluted adjusted EPS are based on adjusted
profit for the period, as reported in note 2:

 

                                                                                 Half year to 30 September 2022      Half year to 30 September     Year to 31 March

2021
2022
                                                                                 £m                Pence             £m             Pence          £m         Pence
 Underlying profit attributable to equity shareholders of the parent/Underlying  20.7              35.9              16.5           28.7           38.6       67.1
 EPS
 Total underlying adjustments to profit before
 tax (Note 2)                                                                    10.7              18.5              8.8            15.3           18.3       31.8
 Related tax effects                                                             (2.1)             (3.6)             (1.6)          (2.8)          (2.7)      (4.6)
 Adjusted profit attributable to equity shareholders of the parent/adjusted EPS  29.3              50.8              23.7           41.2           54.2       94.3
 Diluted underlying EPS                                                                            35.4                             28.3                      66.2
 Diluted adjusted EPS                                                                              50.2                             40.7                      93.0

 

 

4 Segment information

The Group has nine operating segments. These operating segments have been
combined into three aggregated operating segments to the extent that they have
similar economic characteristics, with relevance to products and services,
type and class of customer, methods of sale and distribution and the
regulatory environment in which they operate. Each of these three aggregated
operating segments is a reportable segment. The aggregated operating segments
are as follows:

 

·     the Materials & Characterisation segment comprises a group of
businesses focusing on applied R&D and commercial customers, enabling the
fabrication and characterisation of materials and devices down to the atomic
scale;

·     the Research & Discovery segment comprises a group of
businesses providing advanced solutions that create unique environments and
enable measurements down to the molecular and atomic level which are used in
fundamental research; and

·     the Service & Healthcare segment provides customer service and
support for the Group's products and the service of third-party healthcare
imaging systems.

 

The Group's internal management structure and financial reporting systems
reflect the three aggregated operating segments based on the economic
characteristics discussed above.

 

Reportable segment results include items directly attributable to a segment as
well as those which can be allocated on a reasonable basis. The operating
results of each are regularly reviewed by the Chief Operating Decision Maker,
which is deemed to be the Board of Directors. Discrete financial information
is available for each segment and used by the Board of Directors for decisions
on resource allocation and to assess performance. No asset information is
presented below as this information is not presented in reporting to the
Group's Board of Directors.

 

On 31 August 2021, the Group acquired 100% of the issued share capital of
WITec, which was integrated into the Materials & Characterisation segment
on acquisition.

 

Results

 

                                    Materials &       Research &      Service &
                                    Characterisation  Discovery       Service &      Total
 Half year to 30 September 2022     £m                £m              £m             £m
 Total segment revenue              108.7             58.1            33.7           200.5

 Segment adjusted operating profit  18.9              7.0             10.9           36.8

                                    Materials &       Research &      Service &
                                    Characterisation  Discovery       Service &      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       Service &      Total
 Year to 31 March 2022              £m                £m              £m             £m
 Total segment revenue              185.5             120.3           61.5           367.3

 Segment adjusted operating profit  26.1              21.3            18.9           66.3

 

Revenue in the Materials & Characterisation and Research & Discovery
segments represents the sale of products. Revenue in the Service &
Healthcare segment relates to service income.

 

Reconciliation of reportable segment profit

 

                                                      Materials &       Research &      Service &      Unallocated
                                                      Characterisation  Discovery       Healthcare     Group items  Total
 Half year to 30 September 2022                       £m                £m              £m             £m           £m
 Segment adjusted operating profit                    18.9              7.0             10.9           -            36.8
 Release of provision on disposal                     -                 -               0.4            -            0.4
 WITec post-acquisition gross margin adjustment       (0.5)             -               -              -            (0.5)
 Amortisation and impairment of acquired intangibles  (1.2)             (3.1)           -              -            (4.3)
 Fair value movement on financial derivatives         -                 -               -              (6.1)        (6.1)
 Financial income                                     -                 -               -              0.9          0.9
 Financial expenditure                                -                 -               -              (0.6)        (0.6)
 Profit/(loss) before income tax                      17.2              3.9             11.3           (5.8)        26.6

 

                                                      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
 Acquisition related 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
 Year to 31 March 2022                                £m                £m              £m             £m           £m
 Segment adjusted operating profit                    26.1              21.3            18.9           -            66.3
 Acquisition related costs                            (0.4)             -               -              -            (0.4)
 WITec post-acquisition gross margin adjustment       (1.7)             -               -              -            (1.7)
 Amortisation and impairment of acquired intangibles  (3.2)             (6.3)           -              -            (9.5)
 Fair value movement on financial derivatives         -                 -               -              (6.4)        (6.4)
 Financial income                                     -                 -               -              0.5          0.5
 Financial expenditure                                -                 -               -              (1.2)        (1.2)
 Profit/(loss) before income tax                      20.8              15.0            18.9           (7.1)        47.6

 

 

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
                                                                            2022          2021          2022
                                                                            £m            £m            £m
 R&D expense charged to the condensed consolidated statement of income      18.2          15.4          32.8
 Less: depreciation of R&D-related fixed assets                             (0.2)         (0.1)         (0.2)
 Add: amounts capitalised as fixed assets                                   -             0.3           0.3
 Less: amortisation of R&D costs previously capitalised as intangibles      (0.6)         (0.7)         (1.9)
 Add: amounts capitalised as intangible assets                              0.1           0.2           0.7
 Total cash spent on R&D during the period                                  17.5          15.1          31.7

 

 

6 Acquisition of WITec

On 31 August 2021, the Group acquired 100% of the issued share capital of
WITec Wissenschaftliche Instrumente und Technologie GmbH ("WITec") on a
cash-free, debt-free basis for consideration of €42m (£36.0m), of which
€5m (£4.3m) was conditional on trading performance over a period of twelve
months from the acquisition. The conditions for the deferred consideration
were meeting certain revenue, order and margin thresholds and have been met.
WITec is a leading designer and manufacturer of Raman microscopy imaging
solutions, based in Ulm, Germany.

 

The book and fair value of the assets and liabilities acquired is given in the
table below. Fair value adjustments have been made to better align the
accounting policies of the acquired business with the Group accounting
policies and to reflect the fair value of assets and liabilities acquired. The
business has been integrated into the Materials & Characterisation
segment.

 

                                                               Book value  Adjustments  Fair value
                                                               £m          £m           £m
 Intangible assets                                             -           8.3          8.3
 Property, plant and equipment                                 0.2         -            0.2
 Right-of-use assets                                           2.8         -            2.8
 Inventories                                                   5.3         2.6          7.9
 Trade and other receivables                                   3.0         -            3.0
 Deferred tax                                                  0.2         (3.0)        (2.8)
 Trade and other payables                                      (2.1)       -            (2.1)
 Lease liabilities                                             (2.8)       -            (2.8)
 Provisions                                                    (0.5)       -            (0.5)
 Bank loans                                                    (1.9)       -            (1.9)
 Cash                                                          1.7         -            1.7
 Net assets acquired                                           5.9         7.9          13.8
 Goodwill                                                                               20.6
 Total consideration                                                                    34.4
 Net debt acquired                                                                      0.2
 Deferred consideration after discounting to transaction date                           (3.6)
 Creditor in respect of working capital adjustment                                      (0.4)
 Net cash outflow relating to the acquisition                                           30.6

 

The goodwill arising is considered to represent the value of the acquired
workforce and the value of technology that has not been individually fair
valued.

 

Acquisition related costs in the prior year of £0.4m were expensed to the
condensed consolidated statement of income as an adjusting item in the
administration and shared services cost line.

 

If the acquisition had occurred on the first day of the prior year, the
acquisition would have contributed to the prior half-year results additional
revenue of £5.3m, additional adjusted operating profit of £0.3m and
additional statutory profit before tax of £0.3m.

 

 

7 Taxation

The total effective tax rate on profits for the half year is 22.2% (2021:
22.9%). The weighted average tax rate in respect of adjusted profit before
tax (see Note 2) for the half year is 21.4% (2021: 21.5%).

 

For the full year, the Group expects the tax rate in respect of adjusted
profit before tax to be 20.8%.

 

 

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
                                   2022          2021          2022
                                   pence         pence         pence
 Previous period interim dividend  -             4.1           4.1
 Previous period final dividend    13.7          -             12.9
 Current period interim dividend   -             -             4.4
                                   13.7          4.1           21.4

 

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
                   2022          2021          2022
                   pence         pence         pence
 Interim dividend  4.6           4.4           4.4
 Final dividend    -             -             13.7
                   4.6           4.4           18.1

 

The interim dividend for the year to 31 March 2022 of 4.4 pence was approved
by the Board on 8 November 2021 and was paid on 14 January 2022. The final
dividend for the year to 31 March 2022 of 13.7 pence was approved by
shareholders at the Annual General Meeting on 28 July 2022 and was paid on 23
August 2022.

 

The interim dividend for the year to 31 March 2023 of 4.6 pence per share was
approved by a sub-committee of the Board on 7 November 2022 and has not been
included as a liability as at 30 September 2022. The interim dividend is
expected to be paid on 13 January 2023 to shareholders on the register on the
record date of 2 December 2022, with an ex-dividend date of 3 December 2022
and with the last date of election for the Dividend Reinvestment Plan (DRIP)
being 20 December 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 2022      Half year to 30 September 2021      Year to 31 March

 2022
                                                     Carrying                            Carrying                            Carrying
                                         Fair value  amount            Fair value        amount            Fair value        amount     Fair value
                                         hierarchy   £m                £m                £m                £m                £m         £m
 Assets carried at amortised cost
 Long-term receivables                               0.1                                 -                                   -
 Trade receivables                                   86.2                                66.8                                74.8
 Other receivables and accrued income                26.7                                14.1                                21.4
 Cash and cash equivalents                           118.9                               119.3                               96.4
 Assets carried at fair value
 Derivative financial instruments:
 - Foreign currency contracts            2           0.2               0.2               2.6               2.6               1.0        1.0
 Liabilities carried at fair value
 Derivative financial instruments:
 - Foreign currency contracts            2           (9.0)             (9.0)             (0.5)             (0.5)             (1.4)      (1.4)
 Liabilities carried at amortised cost
 Trade and other payables                            (87.2)                              (64.0)                              (87.0)
 Bank overdrafts                                     (20.2)                              (47.2)                              (8.7)
 Borrowings                                          (1.6)                               (2.0)                               (1.8)
 Lease payables                                      (31.4)                              (12.9)                              (18.4)

 

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 2021 which, for
reporting purposes, has been updated to 30 September 2022 by a qualified
independent actuary.

 

At 31 March 2022, the scheme actuary calculated a retirement benefit asset of
£51.7m, being the net of £351.7m of assets and a present value of future
liabilities of £300.0m.

 

In the period to 30 September 2022, there has been an increase in the discount
rate from 2.8% to 5.1% and significant changes to market conditions have
reduced the value of the scheme's obligations. The impact of these changes has
decreased the benefit obligation to £216.7m (31 March 2022: £300.0m). There
have been no changes to the demographic assumptions associated with
the scheme.

 

The Group has agreed a basis for deficit recovery payments with the trustees
of the UK pension scheme. The deficit recovery payments are payable through to
and including 2026 and will rise by approximately 3% per annum. The deficit
recovery payment for the period was £4.1m (year to 31 March 2022: £8.0m).
However, significant changes in market conditions reduced the scheme's assets
during the period. As a result, the fair value of plan assets decreased to
£241.2m (31 March 2022: £351.7m).

 

The overall effect is that for the purposes of IAS 19 the surplus on the
scheme decreased from £51.7m to £24.5m.

 

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

 

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 2022 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.

 

We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2022 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.

 

Basis for conclusion

We conducted our review in accordance with the International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.

 

As disclosed in Note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".

 

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.

 

This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.

 

Responsibilities of Directors

The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.

 

In preparing the half-yearly financial report, the Directors are responsible
for assessing the group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the
company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the basis for conclusion paragraph of
this report.

 

Use of our report

Our report has been prepared in accordance with the terms of our engagement to
assist the company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose.  No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent.  Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.

 

 

 

BDO LLP

Chartered Accountants

Reading, UK

 

7 November 2022

 

BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  IR VDLFBLFLEFBD

Recent news on Oxford Instruments

See all news