REG - Oxford Instruments - Half-Year Results
12/11/2024 07:00
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RNS Number : 7929L Oxford Instruments PLC 12 November 2024
Oxford Instruments plc half-year results 2024/25
Good performance with positive momentum into H2
In line with full-year expectations
Oxford Instruments plc, a leading provider of high technology products and
systems for industry and research, today (12 November 2024) announces its
interim results for the six months to 30 September 2024.
Richard Tyson, Chief Executive Officer of Oxford Instruments plc, said:
"The Group has delivered a good first half performance, with both divisions
growing, reflecting strong demand in our semiconductor and materials analysis
markets which more than offset the well-documented softer demand from the
healthcare & life science market. I would like to thank the incredibly
talented team across the Group for their significant contribution to these
results and the transformation that is underway as we unlock Oxford
Instruments' full potential.
"Order intake for the first half has been robust, with underlying book-to-bill
above one, and our healthy order book provides good visibility, although the
timing of the recovery in our healthcare & life science market remains
uncertain. As expected, margin was impacted by currency and the mix effect
of strong growth in Advanced Technologies. However, at constant currency,
Group profit improved and Imaging & Analysis (more than 95% of FY24
profit) margins were stable at over 23%.
We expect to deliver our typical stronger trading performance in the second
half, supported by delivery of some larger orders in Advanced Technologies and
efficiency improvements. As a result, we expect to report a performance for
the full year in line with expectations on a constant currency basis."
"We have made good progress with our medium-term strategic priorities. Our
actions to rebalance our regional activity are driving strong growth,
particularly in North America and Asia ex-China, the simplification of the
business is well underway, and the first phases of our operational performance
programme have identified further value creation opportunities ahead. This
underlines our confidence that we can improve the returns from the business in
the medium term."
Adjusted(1) Half year 2024/25 Half year 2023/24 % change reported % change constant currency(4)
Revenue £225.8m £209.7m +7.7% +10.4%
Adjusted operating profit £33.9m £36.5m (7.1%) +3.6%
Adjusted operating profit margin 15.0% 17.4% (240bps) (110bps)
Adjusted profit before taxation £34.6m £37.5m (7.7%)
Adjusted basic earnings per share 44.7p 49.4p (9.5%)
Normalised cash conversion(2) 17% 41%
Net cash(3) £39.3m £79.1m
Statutory Half year 2024/25 Half year 2023/24 % change reported
Revenue £225.8m £209.7m +7.7%
Operating profit £31.1m £28.6m +8.7%
Operating profit margin 13.8% 13.6% +20bps
Profit before taxation £31.7m £29.6m +7.1%
Basic earnings per share 41.6p 38.6p +7.8%
Dividend per share (interim) 5.1p 4.9p +4.1%
Financial highlights
· Strong revenue growth of 10.4% at constant currency ('CC')
· Orders up 2.6% (CC) with underlying book-to-bill of 1.01 (Imaging
& Analysis: 1.04)
· Adjusted operating profit up 3.6% at CC (2023: £36.5m)
· CC adjusted operating profit margin of 16.3% (2023: 17.4%),
reflecting:
- Imaging & Analysis CC margin of 24.6% maintained
- mix effect of stronger growth from Advanced Technologies
- continued investment in operational improvement
· Growth in both divisions:
- Imaging & Analysis: 6.0% CC revenue growth with strong
margins maintained
- Advanced Technologies: 21.4% CC revenue growth with good
visibility of margin improvements
· Strong balance sheet with £39.3m net cash and cash conversion
expected to improve in H2
- Low normalised cash conversion of 17% reflects normal
seasonality and increased working capital due to timing of quantum contract
cash receipts; improvement expected in H2
· Growth in interim dividend of 4.1% to 5.1p reflects confidence in
the future
Significant strategic progress
· Regional rebalancing driving strong revenue growth in North
America (up 32.2% at constant currency) and Asia ex-China, offsetting impact
of pivot to new markets in China
· Investment in new products and market-leading technology driving
strong CC revenue growth in semiconductor (+26.9%) and materials analysis
(+9.6%) offsetting softer healthcare & life science market (-17.3%)
· Imaging and Analysis simplified with operational transformation
well underway
- Four business units integrated to one, with reduced operating
costs
- First wave of operational transformation underway; second wave
on track
- Acquisition of nanoindentation tools developer FemtoTools
completed, enhancing capabilities in materials research and semiconductor
applications
· Good progress towards return to profitability in Advanced
Technologies
- 'Fix, improve and grow' programme progressing well, with new
reference customers added
- New compound semiconductor facility ramping up as planned, with
strong double digit revenue growth, a strong pipeline and customer demo
requests up 60% year on year
- Good progress made towards returning quantum business to
profitability with first deliveries to a key global technology customer, order
book rebuilt and costs reduced
Order book and efficiency improvements provide good visibility for the full
year
· Order book of £294.9m (31 March 2024: £301.5m)
- Expect continued strong demand in semiconductors and materials
analysis, stabilised healthcare & life science order demand and larger
orders in Advanced Technologies
Notes
1. Adjusted items exclude the amortisation and impairment of
acquired intangible assets, acquisition items, business reorganisation costs,
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 3.
2. Normalised cash conversion measures the percentage of
adjusted cash from operations to adjusted operating profit, as set out in the
finance review.
3. Net cash includes total borrowings, cash at bank and bank
overdrafts but excludes IFRS 16 lease liabilities.
4. Constant currency numbers are prepared on a month-by-month
basis using the translational and transactional exchange rates which prevailed
in the previous year rather than the actual exchange rates which prevailed in
the year. Transactional exchange rates include the effect of our hedging
programme.
The financial information in this preliminary announcement has been prepared
in accordance with UK adopted international accounting standards and IAS 34
interim financial reporting. The Group has applied all accounting standards
and interpretations issued relevant to its operations and effective for
accounting periods beginning on 1 April 2024. The UK adopted IFRS accounting
policies have been applied consistently to all periods.
LEI: 213800J364EZD6UCE231
Oxford Instruments management will present its half-year results at Deutsche
Numis, 45 Gresham Street, London EC2V 7BF, to analysts and investors at 10.00
today (12 November 2024). The presentation will be streamed live at
https://brrmedia.news/OXIG_IR24/25 (https://brrmedia.news/OXIG_IR24/25) and a
recording will be made available later today at
www.oxinst.com/investors-content/financial-reports-and-presentations.
Enquiries:
Oxford Instruments plc 07776 433916
Richard Tyson, Chief Executive Officer Stephen.lamacraft@oxinst.com (mailto:Stephen.lamacraft@oxinst.com)
Gavin Hill, Chief Financial Officer
Stephen Lamacraft, Head of Investor Relations
MHP Group 07710 117517
Katie Hunt/Tim Rowntree/Eleni Menikou/Veronica Farah oxfordinstruments@mhpgroup.com (mailto:oxfordinstruments@mhpgroup.com)
Notes to Editors
About Oxford Instruments plc
Oxford Instruments provides academic and commercial organisations worldwide
with market-leading scientific technology and expertise across its key market
segments: materials analysis, semiconductors, and healthcare & life
science.
Innovation is the driving force behind Oxford Instruments' growth and success,
supporting its core purpose to accelerate the breakthroughs that create a
brighter future for our world. The vigorous search for new ways to make our
world greener, healthier and more productive is driving unprecedented levels
of R&D investment in new materials and techniques to support productivity
and decarbonisation worldwide, creating a significant opportunity for Oxford
Instruments to grow.
Oxford Instruments holds a unique position to anticipate global drivers and
connect academic researchers with commercial applications engineers, acting as
a catalyst that powers real world progress.
Founded in 1959 as the first technology business to be spun out
from Oxford University, Oxford Instruments is now a global, FTSE250
company listed on the London Stock Exchange (OXIG).
For more information, visit www.oxinst.com
Chief Executive Officer's Review
Good half-year performance with positive progress made on organisational
transformation
I am pleased to report a good performance for the half. We have delivered
10.4% revenue growth at constant currency, primarily driven by growth in our
semiconductor and materials analysis markets, more than offsetting a softer
performance in healthcare & life science. Both divisions delivered revenue
growth (Imaging & Analysis up 6.0% and Advanced Technologies up 21.4%,
both at constant currency).
Our strong revenue performance supported growth in adjusted operating profit
of 3.6% at constant currency. Imaging & Analysis maintained its excellent
margins and, as anticipated, the mix effect of stronger revenue growth in
Advanced Technologies, together with ongoing strategic investment, resulted in
a 110bps reduction in adjusted operating margin at constant currency to 16.3%
(2023: 17.4%).
Demand has been robust. Order intake of £224.6m (2023: £224.3m), was 2.6%
ahead of the prior year on a constant currency basis, with growth in
semiconductor orders, healthcare & life science broadly flat in a
challenging external market, and materials analysis slightly behind prior
year. The orderbook provides good visibility for the remainder of the year,
supported by strong pipelines in all markets and geographies.
Group Half year 2024/25 Half year 2023/24 % change reported % change constant currency
Orders £224.6m £224.3m +0.1% +2.6%
Revenue £225.8m £209.7m +7.7% +10.4%
Adjusted operating profit £33.9m £36.5m (7.1%) +3.6%
Adjusted operating margin 15.0% 17.4% (240bps) (110bps)
Positive operational and strategic progress
A year on from joining Oxford Instruments, I am encouraged by the initial
progress we have made on the delivery of our medium-term strategic priorities,
including the restructure of the Group into two new divisions: Imaging &
Analysis and Advanced Technologies. Our new divisional structure streamlines
and simplifies the Group's operations, providing greater transparency on
performance and, crucially, facilitating the delivery of profitable growth.
Imaging & Analysis (95%+ FY24 operating profit) has delivered a strong
performance in the half, with revenue and adjusted operating profit up 6.0%
and 5.4% respectively at constant currency, and with the division's excellent
margin maintained. This is a particularly pleasing outcome in the context of
softer healthcare & life science revenue. Ongoing demand for our
differentiated product range remains strong, with 6% order growth and
book-to-bill positive, at 1.04.
Advanced Technologies has made good progress towards a return to
profitability, with 21.4% revenue growth, reduced overheads and good order
book visibility.
Both divisions have taken tangible actions in line with the priorities we set
out in June, with the benefits of the reductions in their cost bases expected
to be realised in the second half. Our operational transformation programme is
underway, and early insights indicate further opportunities for future value
creation.
From a market perspective, we are focused on three core markets. We have seen
strong growth in semiconductor, with reported revenue of £69.5m (up 26.9% at
constant currency), stemming from both silicon and compound semiconductor
applications, and benefiting both divisions. We delivered 9.6% constant
currency revenue growth to £95.7m in materials analysis, reflecting the
strength of our differentiated product portfolio, and pleasing progress on
adoption of new product lines. Growth in these markets more than offset
reduced revenue of £34.8m in healthcare & life science, which reflected a
reduction in orders from key original equipment manufacturers (OEM) combined
with wider destocking, now stabilising. In other markets, Advanced
Technologies made the first deliveries of quantum orders to a key global
technology customer, marking the beginning of an ongoing partnership.
Sales to commercial and industrial customers were up by 23% on the prior year,
reflecting our focus on making further inroads into applications for
commercial applied R&D and production markets. Academic revenue was
broadly flat year on year.
Regionally, our actions to rebalance our focus, including the reconfiguring of
the Americas team, and increased investment in marketing in the region, has
delivered strong revenue growth in North America (up 32% at constant
currency). This combined with strong growth in Japan and elsewhere in Asia,
and continued good growth in Europe, has more than offset the anticipated
reduction in China revenue which resulted from our decision to pivot to new
markets both within and beyond the country. We are continuing to share best
practice and streamline processes in our regional sales and marketing
structures with a view to generating further efficiencies.
Underlying book-to-bill of 1.01 (1.04 in Imaging & Analysis), meant we had
a healthy order book of £294.9m at the end of the half year (31 March 2024:
£301.5m), giving good visibility for the remainder of the year.
People at the centre of our success
I am grateful to my colleagues for their significant contribution to these
results, and their support for the transformation that is underway as we seek
to unlock the full potential of Oxford Instruments. The leadership of the
business has engaged at pace with the delivery of our strategic priorities. I
have also been impressed with the adaptability and agility colleagues have
shown Group-wide as we have forged ahead with structural change,
simplification and the pursuit of operational excellence, while continuing to
focus on our core strengths. Our talented teams are fundamental to Oxford
Instruments' ongoing success.
To support the delivery of our strategic programme, we have bolstered our
senior leadership with new hires, including the appointment of a new Chief
Information Officer, a Group Programmes Director, new leadership for our
EMEA-I region and new senior hires in the USA.
New divisional structure and market focus
Our exceptional technology, strong talent base, well-distributed regional
infrastructure and choice of markets give us a strong platform from which to
grow. We highlighted in June the significant opportunities ahead - and the
fact that to capture them in full and achieve industry-leading margins, we
needed to structure Oxford Instruments differently. During the half we have
restructured the business into the two new divisions we set out in June:
Imaging & Analysis and Advanced Technologies.
Imaging & Analysis comprises our microscopy and cameras business (Andor
and our materials analysis businesses Asylum Research, Magnetic Resonance,
NanoAnalysis and WITec), with recent adjusted operating profit margin history
22-24%. The division represents c. 70% of group revenue, and the businesses
within it have strong existing synergies and a track record of success. They
provide similar relatively small-scale imaging and analysis equipment and
software, have common business models, go to market strategies and margins,
and they address a similar client base in their three key markets in materials
analysis, healthcare & life science, and semiconductors.
Our new Advanced Technologies division (representing c. 30% of Group revenue)
comprises our compound semiconductor business Plasma Technology and our
quantum-focused business NanoScience, together with the much smaller X-Ray
Technology business (recent adjusted operating profit margin history 0-4%).
They sell much lower volumes of larger-scale complex systems into very
specialised markets with unique growth drivers and principally separate
customer bases. These businesses require a dedicated, focused approach to
leverage their well-invested base, deliver improved margins and achieve their
full growth and margin potential.
Our deep dive strategic review highlighted that 90% of our revenue is
generated in three primary markets - materials analysis, semiconductors, and
healthcare & life science. All three have clear sustainability drivers
with high single digit structural growth potential. Quantum technology, a much
smaller contributor to our current revenue, also represents a growth
opportunity, though its trajectory is less linear.
Imaging & Analysis
The Imaging & Analysis division develops and manufactures microscopes,
scientific cameras, analytical instruments and software, with manufacturing
bases in the UK (High Wycombe and Belfast), Europe (Aix-en-Provence, Ulm and
Zurich) and the USA (Santa Barbara).
Key highlights
Imaging & Analysis Half year 2024/25 Half year 2023/24 % change reported % change constant currency(1)
Orders £157.5m £152.8m +3.1% +6.0%
Revenue £153.9m £149.4m +3.0% +6.0%
Adjusted(2) operating profit £35.9m £37.0m (3,0%) +5.4%
Adjusted(2) operating margin 23.3% 24.8% (150bps) (20bps)
1. For definition refer to note on page 2.
2. Details of adjusting items can be found in note 3 to the
half-year financial statements.
We have delivered robust growth in Imaging & Analysis (which represents
68% of group revenue), with 6.0% constant currency growth in both revenue and
orders. The division's strong margin performance was maintained at constant
currency, with the reported decline of 150bps resulting from currency
headwind.
Revenue growth was underpinned by a notably strong performance in
semiconductor, up 39% year on year at constant currency (primarily into
silicon semiconductor applications) and good growth in materials analysis, up
12% at constant currency. Both markets saw growth in sales of products
relating to electron and Raman microscopy.
Revenue performance in healthcare & life science was below last year, as a
weaker market translated into a reduction in OEM sales, and wider destocking.
This impacted profitability in our primary life science business in Belfast,
including the trading performance of our recent acquisition First Light. As a
result, we have undertaken a cost reduction programme to rightsize the
business. Orders in the market segment were slightly up year on year, with
strong demand for microscopy products offsetting lower demand from OEMs.
Activity in the half has focused on the delivery of the strategic priorities
intended to take the division from 'good to great', including simplification,
streamlining and implementing a step change in operational performance,
together with the sharing of best go-to-market practice across regions.
Four existing business units have been consolidated under one leadership team,
with associated cost savings driven by delayering. An early priority for the
new team will be to create a shared R&D route map and consolidated product
portfolio, as well as continuing to identify and exploit cross-selling
opportunities, given similar customer base and routes to market. In a further
move to simplify previous structures, we have instigated a new marketing
centre of excellence for Imaging & Analysis. This initiative will create a
single cross-division function to replace individual business unit marketing
teams, with the intention of better serving our customers while removing
duplication.
Actions taken to strengthen the Group's position in North America, as part of
the wider rebalancing of our regional position, have had a positive impact on
revenue in Imaging & Analysis, with double digit year-on-year growth in
the region. The division has also delivered strong double digit growth in
Japan and South East Asia, and a good performance in Europe.
Our operational transformation programme is well underway, currently focusing
on the cameras workstream at our microscopy and scientific camera facility in
Belfast. Led by our Chief Transformation Officer, the programme team is
upskilling colleagues, designing more efficient production processes and
reconfiguring production areas. We have made significant progress to date:
- teams have been trained in the fundamentals of performance
management, with the introduction of daily, weekly and monthly review
meetings;
- the layout of the factory floor is being reorganised and
equipment enhancements are underway;
- root cause problem solving has been introduced;
- improved sales and operations planning has been put in place,
supporting a reduction in stock levels with associated cost efficiencies and
working capital benefits.
The actions taken to date have delivered a 30%+ improvement in labour
productivity, together with a 27% reduction in in-process failures, and the
programme is on track to deliver a 10% reduction in inventory by the end of
the financial year.
Maturity assessments and detailed on-site investigations carried out since the
start of the programme have identified significantly greater opportunity for
improvement than had been anticipated. While this will require more work than
we expected, it also provides more scope for productivity, revenue and margin
enhancement. Wave two of the programme, beginning in January, will cover two
areas, one remaining focused on Belfast to address systems capabilities, with
the second getting underway in our Advanced Technologies quantum facility in
Oxford.
We were pleased to augment our strong capabilities in materials analysis with
the acquisition of nanoindentation instrumentation developer FemtoTools for
£15.8m, completed during the period. This bolt-on acquisition has introduced
a new technique for Oxford Instruments, as well as giving FemtoTools access to
our much broader customer base. FemtoTools will be integrated into our
material analysis product lines, taking advantage of the wider streamlining
and restructuring underway in this part of the business.
Imaging & Analysis market dynamics
The division focuses on our three core markets: materials analysis,
semiconductor and healthcare & life science, with strong positions in each
thanks to our differentiated product ranges and ongoing investment in
innovation.
We have delivered a strong performance in semiconductor, with revenue up 39%
at constant currency. In this division, our focus is primarily on silicon
semiconductor applications, where the breadth of our capabilities, from
supporting early stage academic research through to quality assurance and
failure analysis in production settings, provides resilience to the inherent
cyclicality of the silicon semiconductor market. Our technology is a key
differentiator here: this year, we have made good progress on adoption of our
new Unity detector for electron microscopy into semiconductor applications,
such as the rapid identification of nickel contamination for a tier 1
commercial customer. Our new semiconductor-specific Raman microscope, capable
of analysing 300mm wafers, has also been adopted by tier 1 commercial
customers in the US and Japan.
With strong double digit growth in commercial semiconductor customers,
representing the majority of semiconductor revenue in the division, we have
also seen notably strong growth (over 80% year on year) to academic customers.
Materials analysis has performed well, with 12% revenue growth, underpinned by
growth in sales to commercial customers. We have seen strong growth in
structural materials analysis and the analysis of metals, alloys and
composites, together with applications in energy and environment including
safety applications for nuclear energy. The successful use of Unity in a
mineral analysis application led to it being cited, for the first time, in an
academic paper, for enabling researchers to acquire their samples 18 times
faster than via the traditional method.
In healthcare & life science, revenue for the half was down 17% in a
softer market, and against a strong comparator, primarily as a result of lower
OEM orders and wider destocking relating to our Belfast microscopy and
scientific cameras facility. We have responded to this by rightsizing the
Belfast facility and pausing planned expansion.
Healthcare & life science orders were marginally up year on year, with
continued strong demand for microscopes and broader life science applications,
and an uptick in sales of our Dragonfly confocal microscope. Sales of our
Imaris software were maintained at previous robust levels. The structural
growth drivers for this market remain in place, supporting our view on
medium-term growth rates.
Overall, assuming continuation of current demand and pipeline conversion, our
positive book to bill and healthy order book, combined with the realisation of
cost efficiencies, support a stronger second half revenue and profit weighting
in this division.
Advanced Technologies
The Advanced Technologies division develops and manufactures compound
semiconductor fabrication capital equipment (Severn Beach, UK), cryogenic and
superconducting magnet technology (Oxford, UK), and X-ray tubes (Scotts
Valley, USA).
Key highlights
Advanced Technologies Half year 2024/25 Half year 2023/24 % change reported % change constant currency(1)
Orders £67.1m £71.5m (6.2%) (4.8%)
Revenue £71.9m £60.3m +19.2% +21.4%
Adjusted(2) operating profit (£2.0m) (£0.5m) (300.0%) (140.0%)
Adjusted(2) operating margin (2.8%) (0.8%) (200bps) (80bps)
1. For definition refer to note on page 2.
2. Details of adjusting items can be found in note 3 to the
half-year financial statements.
The two larger businesses in this division each benefit from a dedicated,
focused approach to reflect their specialist markets (compound semiconductor
and quantum), unique growth drivers and principally separate customer bases.
Both are making good progress with actions to 'fix, improve and grow' the
division, resulting in strong revenue growth, up 21.4% for the half. This
performance reflects the ramp up in our new compound semiconductor facility
and the first deliveries of an ongoing series of orders to a key customer in
quantum. The increase in the half-year loss relates primarily to a
standardisation of stock provisioning. The actions taken and the positive
progress made in the first half give us confidence in the return to
profitability for the full year.
Regionally, revenue has grown strongly in North America and Europe, more than
offsetting a reduction in revenue from China, following the withdrawal from
quantum commercial activities and some sensitive compound semiconductor
applications in the country.
Orders overall were slightly behind last year, largely reflecting the lumpy
order profile of the large capital equipment typically sold in the division.
Compound semiconductor operational developments and market dynamics
Our new compound semiconductor facility at Severn Beach, near Bristol, UK,
continues to scale, with revenue and manufacturing output in line with plans.
The business has continued to deliver strong double digit revenue growth as it
takes advantage of the improved layout and process flow at the purpose-built
facility versus the legacy site, and the increasingly modular approach to
assembly which continues to support lead time improvements.
The facility is on track to be fully operational within the financial year,
with its new state-of-the-art cleanroom having reached specification, and the
first systems being installed in January 2025, while final bids are under
consideration for the sale of our legacy site. The business is focused on
driving efficiencies and improving customer service, which has already
delivered a significant improvement (up by more than 40 percentage points) in
the volume of spares being shipped to customers within 24 hours.
Our ability to carry out atomic scale processing, etching and deposing layers
in semiconductor devices atom by atom, is a key differentiator for our
compound semiconductor operations. We enable next generation device
architectures for better performance, helping our production customers to
improve wafer performance, yield and therefore cost per wafer. Our advanced
capabilities are attracting attention from tier 1 technology companies in
applications including augmented reality, next generation power devices,
hyperscale data centres and new developments in bio-sensing. We were
particularly pleased to secure a key customer within the Nvidia supply chain
for a fibreoptic laser application in the half, deploying our equipment to
drive the development of hyperscale data centres for power-hungry AI
applications. This continues to be a growth area for the business. Trials for
a silicon carbide atomic layer deposition application with a Tier 1 power
device manufacturer for the automotive supply chain have been successfully
completed. Gallium nitride orders made last year are now being installed,
ramping capacity for next generation power devices in USB-C fast chargers.
Sample demonstration requests, a key leading indicator for the business, are
up by over 60% year on year, with several of the world's top technology
companies engaged in trials. These requests reflect growing engagement with
the production customers we are increasingly targeting. With commercial
customers taking longer, on average, to convert than academic customers, we
continue to focus on growing our pipeline and building our understanding of
sales cycles.
From a regional perspective, we have seen strong revenue growth in the US,
Europe and South East Asia, supported by US CHIPs Act funding and parallel
stimulus programmes elsewhere.
With good order book cover for the remainder of FY24/25 and a record pipeline,
the new facility is in a strong position to continue to deliver revenue growth
at the full year and beyond.
Quantum operational developments and market dynamics
Our quantum business, based outside Oxford, is making good progress towards a
return to profitability. As set out above, we have delivered the first two of
our modular Proteox QX systems to a high-profile technology customer as part
of an ongoing partnership. Further deliveries are anticipated in the second
half. With its square shape, the QX is designed for scalability and
flexibility, with customers easily able to join multiple systems together. Its
modular design is a key differentiator which will allow customers to control
more qubits (quantum bits) than ever before. This significant milestone will
enable our customer to scale significantly past current cryogenic
refrigeration limitations to deliver its quantum roadmap.
Our partnership with Oxford Quantum Circuits continues, with preparations
underway for additional 'quantum as a service' data centre roll outs to follow
those which are already operational in Tokyo, Japan, Galicia, Spain, and
Reading, UK. Here, our dilution refrigerators provide vital cooling for
quantum systems which are available on a commercial basis, with customers able
to buy time for their quantum research. Together with the dilution
refrigerators, we also support 24-7 uptime with a comprehensive service
package.
We are well placed to support customers across the spectrum in quantum, with
our range of products extending from compact refrigerators, which can easily
be accommodated in small laboratory settings, to large systems for commercial
customers, as referenced above. With growing demand for our products in this
fast-paced, but unpredictable market, orders are up 9% year on year. This
reflected strong growth in North America, Europe and Japan, which has more
than offset our withdrawal from new quantum sales into China, which was
previously an important market for the business.
A key focus for this business is to continue to address the operational and
productivity challenges which have hampered growth in recent years, in order
to restore profitability and enable scaling. Over the first half year, we have
made progress with productivity initiatives, and have also addressed supply
chain management and inventory challenges which became apparent following the
introduction of a new ERP system. This has allowed us to strengthen output
through the first half.
Tiger teams have worked to improve product quality, optimise the new ERP
system, and expedite procurement timelines. With support from the Group's new
Programmes Director, the team have also targeted front end processes to
accelerate release to operations. Early progress on value engineering has
highlighted further opportunities to drive efficiencies, and we have engaged
an external consultant to support us with this project, beginning in November.
From January 2025, this facility will be the focus of Wave 2 of the
operational transformation programme, which is currently underway at our
Belfast Imaging & Analysis facility, with significant productivity
enhancements expected.
Positive impact and progress to net zero
Our deep scientific expertise and our market-leading technology means we are
well placed to deliver on our purpose: to accelerate the breakthroughs that
create a brighter future for our world. In common with all my colleagues, I am
very proud of the contribution our products make to enabling global progress,
from the development of personalised treatments for cancer to facilitating the
path to decarbonisation through our extensive role in the battery ecosystem.
We want to support a brighter future through the way we run our organisation
too. Earlier this year, we set a new target to achieve net zero in Scopes 1
and 2 by 2030, and sooner if we can. I am pleased today to announce our
commitment to cut our Scope 3 emissions by 25% by the same date, against a
2023/24 baseline. We have set out how we will reach our ambitious targets in
our Net Zero Transition Plan, created in line with the guidelines provided by
the Transition Plan Taskforce, and published today. We are now in the process
of submitting our targets to the Science Based Targets initiative for
validation.
Our commitment to operating sustainably encompasses not just the environmental
commitments we make, but also the social impact we have on our employees and
our communities, and our ethical approach to doing business. We have
reconfirmed our approach to each of these areas through the launch of our new
Code of Conduct earlier this month.
Board changes
Anticipating the departure of Mary Waldner after nine years' service as
Director in February 2025, in line with best practice in relation to her
tenure and independence, we acted to ensure smooth succession for the role of
Audit and Risk Committee Chair, held by Mary until the annual general meeting
(AGM) on 25 July 2024. We were pleased to appoint Hannah Nichols as Chair of
the Audit and Risk Committee, with effect from the conclusion of the AGM.
Hannah joined Oxford Instruments as a Non-Executive Director on 1 January
2024, and with her strong financial expertise, extensive international
experience and track record of driving transformational change, she is well
placed to fulfil this role.
Reshma Ramachandran stood down as a Non-Executive Director with effect from
the conclusion of the AGM, due to her appointment to a new executive role
externally, which restricted the amount of time she was able to commit to her
role with Oxford Instruments. The Board sincerely thanks Reshma for the
valuable contributions she made during her time as a Director.
Dividend
The Board is declaring an interim dividend of 5.1p per share, (2023: 4.9p per
share), a 4.1% increase, reflecting confidence in the future.
Summary and outlook
Having joined Oxford Instruments just over a year ago, I am pleased with the
progress we are making, both in terms of in-year delivery and the longer-term
transformation of the business.
The Group has delivered a good first half performance, with both divisions
growing, reflecting strong demand in our semiconductor and materials analysis
markets which more than offset the well-documented softer demand from the
healthcare & life science market. I would like to thank the incredibly
talented team across the Group for their significant contribution to these
results and the transformation that is underway as we unlock Oxford
Instruments' full potential.
Order intake for the first half has been robust, with underlying book-to-bill
above one, and our healthy order book provides good visibility, although the
timing of the recovery in our healthcare & life science market remains
uncertain. As expected, margin was impacted by currency and the mix effect
of strong growth in Advanced Technologies. However, at constant currency,
Group profit improved and Imaging & Analysis (more than 95% of FY24
profit) margins were stable at over 23%.
We expect to deliver our typical stronger trading performance in the second
half, supported by delivery of some larger orders in Advanced Technologies and
efficiency improvements. As a result, we expect to report a performance for
the full year in line with expectations on a constant currency basis.
We have made good progress with our medium-term strategic priorities. Our
actions to rebalance our regional activity are driving strong growth,
particularly in North America and Asia ex-China, the simplification of the
business is well underway, and the first phases of our operational performance
programme have identified further value creation opportunities ahead. This
underlines our confidence that we can improve the returns from the business in
the medium term.
Richard Tyson
Chief Executive Officer
11 November 2024
Finance Review
Summary
Reported orders were broadly flat at £224.6m (2023: £224.3m), an increase of
2.6% at constant currency. Revenue increased by 7.7% to £225.8m (2023:
£209.7m). Revenue at constant currency increased by 10.4%.
Adjusted operating profit at constant currency increased by 3.6%. Due to a
currency headwind of £3.9m, adjusted operating profit decreased by 7.1% to
£33.9m (2023: £36.5m). As expected, adjusted operating margin at constant
currency decreased by 110 basis points to 16.3% reflecting the mix effect of
stronger revenue growth from Advanced Technologies and ongoing investment in
operational improvement. Reported adjusted operating margin, after currency
effects, decreased by 240 basis points to 15.0% (2023: 17.4%).
Statutory operating profit increased by 8.7% to £31.1m (2023: £28.6m). This
includes amortisation of acquired intangibles of £4.7m, net non-recurring
charges of £0.8m and a credit of £2.7m relating to the movement in the
mark-to-market valuation of financial derivatives.
Adjusted profit before tax fell by 7.7% to £34.6m (2023: £37.5m),
representing a margin of 15.3% (2023: 17.9%). Statutory profit before tax grew
by 7.1% to £31.7m (2023: £29.6m).
The adjusted effective tax rate increased to 25.1% (2023: 24.0%) due to a
change in the geographical mix of profits. A lower adjusted operating profit
due to currency effects and the higher tax rate resulted in a fall in adjusted
basic earnings per share of 9.5% to 44.7p (2023: 49.4p). Basic earnings per
share was 41.6p (2023: 38.6p), an increase of 7.8%.
Cash generated from operations was lower at £4.6m (2023: £7.4m), primarily
due to seasonality and an increase in working capital, as outlined below,
representing negative cash conversion of 1% (2023: negative 21%). Normalised
cash conversion was 17%. Net cash after borrowings fell from £83.8m on
31 March 2024 to £39.3m on 30 September 2024. The Group has approximately
£191m of committed facilities, representing total headroom of circa £230m,
including net cash on the balance sheet.
Consolidated Statement of Income
The Group's Condensed Consolidated Statement of Income is summarised below:
£m Half year Half year Change
2024/25
2023/24
%
Revenue 225.8 209.7 +7.7%
Adjusted operating profit 33.9 36.5 (7.1%)
Amortisation of acquired intangible assets (4.7) (4.6)
Non-recurring items (2.9) (0.9)
Mark-to-market of currency hedges 2.7 (2.4)
Release of contingent consideration 2.1 -
Statutory operating profit 31.1 28.6 +8.7%
Net finance income(1) 0.6 1.0
Adjusted profit before taxation 34.6 37.5 (7.7%)
Statutory profit before taxation 31.7 29.6 +7.1%
Adjusted effective tax rate 25.1% 24.0%
Effective tax rate 24.0% 24.7%
Adjusted earnings per share - basic 44.7p 49.4p (9.5%)
Earnings per share - basic 41.6p 38.6p +7.8%
Dividend per share (interim) 5.1p 4.9p +4.1%
1. Net finance income for 2024 includes a non-cash charge of
£0.1m against the unwind of discount on FemtoTools contingent consideration
Orders and revenue
Orders of £224.6m (2023: £224.3m) grew by 2.6% at constant currency. A
strengthening in sterling resulted in orders being broadly flat on last year.
In Imaging & Analysis, constant currency orders grew by 6.0% with good
growth across our electron microscopy range of products, particularly into
semiconductor applications. In Advanced Technologies, we saw a small decline
in constant currency orders of 4.8% due primarily to a deferral of framework
orders within our X-Ray Technology business. Orders for our semiconductor
processing systems were in line with last year, and we delivered order growth
for our cryogenic systems, which are used in quantum computing
applications.
Revenue of £225.8m (2023: £209.7m) grew by 10.4% at constant currency. A
strengthening in sterling resulted in a currency headwind of £5.8m, with
reported growth of 7.7%. Constant currency revenue increased by 6.0% for
Imaging & Analysis with strong demand for our electron microscopy range
offsetting fewer shipments of our imaging and microscopy products due to
weakness in life science markets.
Strong demand for our semiconductor processing systems, alongside the
successful achievement of specific milestones on the first part of a large
order for bespoke cryogenic systems to a key customer for quantum computing
applications, drove constant currency growth of 21.4% for Advanced
Technologies.
The total underlying book-to-bill ratio (orders received to goods and services
billed in the period) for the half year was 1.01 times (2023: 1.07 times),
with a positive underlying book-to-bill of 1.04 times in Imaging &
Analysis. Underlying book-to-bill removes the impact of prior year orders to
China cancelled due to UK export licence restrictions.
Geographic revenue growth
Half year 2024/25 Half year Half year Half year Change Change Constant currency change
£m
2024/25
2023/24
2023/24
£m
%
%
% of total
£m
% of total
Europe 53.3 24% 48.9 24% +4.4 +9.0% +11.2%
North America 70.5 31% 54.6 26% +15.9 +29.1% +32.2%
Asia 97.2 43% 101.6 48% (4.4) (4.3%) (1.5%)
Rest of World 4.8 2% 4.6 2% +0.2 +4.3% +6.5%
225.8 100% 209.7 100% +16.1 +7.7% +10.4%
On a geographical basis, revenue grew by 9.0% in Europe (+11.2% at constant
currency), supported by additional deliveries of semiconductor processing
systems. Orders declined by 11.8% at constant currency, with fewer orders for
semiconductor processing systems, where orders tend to be lumpy in nature, and
a fall in orders for our X-Ray tubes as we see an adjustment for over-stocking
from some of our larger OEM customers.
Revenue for North America grew by 29.1% on a reported basis and 32.2% at
constant currency, with good growth across our electron microscopy range of
products and semiconductor processing systems. Orders increased by 20.0% at
constant currency.
Asia remains our largest region by revenue, with China constituting 51% of
regional revenue and 22% of total Group revenue, a lower proportion than last
year. Fewer shipments and the withdrawal from certain markets in China
resulted in Asia revenue falling by 4.3% (-1.5% at constant currency), with
strong demand for our electron microscopy products mitigating fewer shipments
of semiconductor processing tools and lower revenue from life science OEM
customers. Orders for the region increased by 2.3% at constant currency, with
demand from south-east Asia and Japan offsetting a decline in China. Orders
for China constituted 22% of Group orders in the half year against 26% last
year.
The total reported order book of £294.9m fell by 2.2% (+0.7% at constant
currency) compared to 31 March 2024. The order book, compared to 31 March
2024, increased by 2.8% for Imaging & Analysis. Advanced Technologies'
order book fell by 6.5%, due to the timing of deliveries of some large capital
items and phasing of OEM orders for our X-Ray tubes.
£m Imaging & Analysis Advanced Technologies Total
Revenue: half year 2023/24 149.4 60.3 209.7
Constant currency growth 9.0 12.9 21.9
Currency (4.5) (1.3) (5.8)
Revenue: half year 2024/25 153.9 71.9 225.8
Revenue growth: reported 3.0% 19.2% 7.7%
Revenue growth: constant currency 6.0% 21.4% 10.4%
Adjusted operating profit and margin
Adjusted operating profit at constant currency increased by 3.6%. A currency
headwind of £3.9m resulted in reported adjusted operating profit decreasing
by 7.1% to £33.9m (2023: £36.5m). Constant currency adjusted operating
margin decreased by 110 basis points to 16.3% reflecting the mix effect of
stronger revenue growth from Advanced Technologies and investment. After
currency effects, the adjusted operating margin decreased by 240 basis points
to 15.0% (2023: 17.4%).
Imaging & Analysis adjusted operating profit at constant currency
increased by 5.4%. After currency, reported margin was broadly flat at 24.6%
(2023: 24.8%). Strong demand for our electron microscopy products more than
offset a decline in shipments of imaging cameras to the Life Science OEM
market and weakness in demand for imaging and microscopy products. This
impacted profitability within our primary life science business in Belfast,
including the recently acquired First Light business.
We have instigated a restructuring programme across the new division to
improve efficiencies and drive productivity. In addition, we are removing cost
from our primary life science business cost base in response to the weakness
in demand, while also continuing to invest in operational improvements. These
actions are expected to support an improvement in the second half trading
performance.
While we have seen an increase in revenue from our semiconductor processing
systems, profit growth has been tempered by the absorption of additional costs
of the new semiconductor processing systems facility and dual costs of
operating both facilities in the half year. Good progress on the cryogenic
platforms for a large quantum customer supported a lower loss within our
principal quantum business. As a result, Advanced Technologies recorded a loss
of £1.2m, against a loss of £0.5m last year, with lower losses made in our
primary cryogenic platform business being offset by a deferral of framework
orders for our X-Ray Technology business and an increase to the inventory
provision following a standardisation of policy across the Group. The strong
order book, continued milestone progress against a large quantum project,
restructuring actions and an operational improvement programme, are expected
to support an improvement in the run rate profitability of the business in the
second half of the year.
£m Imaging & Analysis Advanced Technologies Total
Adjusted operating profit: half year 2023/24 37.0 (0.5) 36.5
Constant currency (CC) growth 2.0 (0.7) 1.3
Currency (3.1) (0.8) (3.9)
Adjusted operating profit: half year 2024/25 35.9 (2.0) 33.9
Adjusted operating margin(1) half year 2023/24 24.8% (0.8%) 17.4%
Adjusted operating margin(1) half year 2024/25 23.3% (2.8%) 15.0%
Adjusted operating margin(1) (CC): half year 2024/25 24.6% (1.6%) 16.3%
1. Adjusted operating margin is calculated as adjusted operating
profit divided by revenue.
Adjusted operating margin at constant currency is defined as adjusted
operating profit at constant currency divided by revenue at constant
currency.
Statutory operating profit and margin
Statutory operating profit grew by 8.7% to £31.1m (2023: £28.6m),
representing an operating profit margin of 13.8%. The increase in statutory
operating profit has been supported by a reduction in non-recurring charges
that is offsetting a decline in reported adjusted operating profit, due to a
currency headwind.
Adjusting items
Amortisation of acquired intangibles of £4.7m relates to intangible assets
recognised on acquisitions, being the value of technology, customer
relationships and brands.
During the first half the Group commenced a restructuring programme to deliver
productivity and efficiency benefits following the new divisional structure,
as well as yielding cost savings where we are seeing short-term order
weakness. This resulted in restructuring costs of £2.2m. Non-recurring items
within operating profit also comprise costs of £0.7m on transactions over the
first half and a £2.1m release of contingent consideration against the
acquisition of First Light.
The Group uses derivative products to hedge its short-term exposure to
fluctuations in foreign exchange rates. 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
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 credit of £2.7m (2023:
£2.4m charge).
Net finance costs
The Group's recorded net interest income was lower at £0.6m (2023: £1.0),
due to lower bank interest and an unwind of discount on contingent acquisition
consideration.
Adjusted profit before tax and margin
Adjusted profit before tax decreased by 7.7% to £34.6m (2023: £37.5m). The
adjusted profit before tax margin of 15.3% (2023: 17.9%) was lower than last
year primarily due to the mix effects of higher growth in Advanced
Technologies, investment and a currency headwind on operating profit.
Half year 2024/25 Half year 2023/24
Reconciliation of statutory profit before tax to adjusted profit before tax £m £m
Statutory profit before tax 31.7 29.6
Add back:
Amortisation of acquired intangible assets 4.7 4.6
Non-recurring items (note 3) 0.9 0.9
Mark-to-market of currency hedges (2.7) 2.4
Adjusted profit before tax 34.6 37.5
Statutory profit before tax and margin
Statutory profit before tax increased by 7.1% to £31.7m (2023: £29.6m). The
statutory profit before tax margin of 14.0% (2023: 14.1%) was flat on last
year due to the mark-to-market valuation movement on financial derivatives
offset by adverse currency effects.
Taxation
The adjusted tax charge of £8.7m (2023: £9.0m) represents an effective tax
rate of 25.1% (2023: 24.0%) due to a change in the geographical mix of
profits. The statutory tax charge of £7.6m (2023: £7.3m) represents an
effective tax rate of 24.0% (2023: 24.7%). The half-year tax rate has been
calculated based on the expected effective tax rate for the year of 24.5%
(having made certain assumptions about where profits will arise).
Earnings per share
Adjusted basic earnings per share decreased by 9.5% to 44.7p (2023: 49.4p)
primarily due to currency headwind on operating profit and the higher
effective tax rate; adjusted diluted earnings per share fell by 9.4% to 44.1p
(2023: 48.7p). Basic and diluted earnings per share increased by 7.8% to 41.6p
(2023: 38.6p) and 7.9% to 41.1p (2023: 38.1p) respectively.
The number of undiluted weighted average shares increased to 58.0m (2023:
57.7m) following vesting and issuance of share options.
Currency
The Group faces transactional and translational currency exposure, most
notably against the US Dollar, Euro and Japanese Yen.
The Group's foreign currency exposure for the half year is summarised
below.
£m (equivalent) Revenue Adjusted operating profit
Sterling 27.9 (92.0)
US Dollar 124.2 88.4
Euro 49.9 25.1
Japanese Yen 14.4 7.8
Chinese Renminbi 3.6 3.2
Other 5.8 1.4
225.8 33.9
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. On 30 September 2024, the Group
had currency hedges in place extending up to 18 months forward.
For the full year 2024/25, our assessment of the currency impact is, based on
hedges currently in place and forecast currency rates, a headwind of
approximately £13.3m to revenue, and £8.3m to profit. Forecast currency
rates for the year on unhedged positions are: GBP:USD 1.30; GBP:EUR 1.20;
GBP:JPY 199.
Looking further ahead to the financial year 2025/26, based on the above
currency assumptions, we would expect currency effects to have a headwind of
approximately £2.2m to revenue, and £2.8m to profit.
Acquisition of First Light Imaging SAS
On 9 January 2024 the Group completed the purchase of 100% of the shared
capital of First Light Imaging SAS for consideration of €16.3m. Additional
consideration of €3.0m, conditional on trading performance over the first
year following completion, is no longer expected to be payable due to delays
in two large OEM programmes and Life Science market weakness in China. During
the half year, the business contributed revenue of £1.4m and an operating
loss of £0.5m.
Acquisition of FemtoTools AG
On 28 June 2024 the Group completed the purchase of 100% of the shared capital
of FemtoTools AG for consideration of CHF 17.9m. Additional consideration of
up to CHF 5.5m is conditional on trading performance over a period of 33
months following completion. During the period under ownership the business
contributed revenue of £2.2m and operating profit of £0.6m.
Dividend
The Group's policy on the dividend considers changes to underlying earnings,
dividend cover, movements in currency and demands on our cash. The Board
remains confident in the long-term performance of the business and has
declared an interim dividend of 5.1p per share (2023: 4.9p per share), growth
of 4.1%. The interim dividend will be paid on 10 January 2025 to shareholders
on the register as of 29 November 2024.
Consolidated statement of cash flows
The Group's consolidated statement of cash flow is summarised below.
Half year Half year
2024/25
2023/24
£m £m
Adjusted operating profit 33.9 36.5
Depreciation and amortisation 5.8 5.4
Adjusted(1) EBITDA 39.7 41.9
Working capital movement (29.6) (31.6)
Non-recurring costs (2.9) -
Equity settled share schemes 1.5 1.1
Pension scheme payments above charge to operating profit (4.1) (4.0)
Cash from operations 4.6 7.4
Interest 0.6 1.2
Tax (11.3) (7.9)
Capitalised development expenditure (0.7) (0.3)
Expenditure on tangible and intangible assets (8.8) (16.7)
Acquisition of subsidiaries (15.4) -
Dividends paid (9.2) -
Proceeds from issue of share capital and exercise of share options - 0.1
Payments made in respect of lease liabilities (2.6) (2.6)
Decrease in borrowings (0.6) (0.1)
Net decrease in cash and cash equivalents (43.4) (18.9)
1. Adjusted EBITDA is defined as adjusted operating profit before
depreciation and amortisation of capitalised development costs.
Cash from operations of £4.6m (2023: £7.4m) represents negative cash
conversion of 1% (2023: negative 21%). During the first half we incurred
expenditure of £4.5m on the final stage of the semiconductor systems facility
in Bristol, dual running costs of the two semiconductor systems facilities of
£0.5m, and £0.3m on the Belfast facility, where fit-out has been suspended
temporarily. In addition, £0.9m of customer deposits were refunded following
export licence rejections and we booked business reorganisation and
transaction costs of £2.9m. On a normalised basis, which excludes these
costs, cash conversion was 17% (2023: 41%). Cash conversion is defined as
cash from operations before business reorganisation costs, transaction costs
and pension scheme payments above charge to operating profit, less capitalised
development expenditure, capital expenditure and payments made in respect of
lease liabilities divided by adjusted operating profit.
Half year Half year 2023/24
2024/25
Reconciliation of cash generated from operations to adjusted operating cash £m £m
flow
Cash from operations 4.6 7.4
Add back:
Non-recurring items 2.9 0.7
Pension scheme payments above charge to operating profit 4.1 4.0
Capitalised development expenditure (0.7) (0.3)
Expenditure on tangible and intangible assets (8.8) (16.7)
Payments made in respect of lease liabilities (2.6) (2.6)
Adjusted cash from operations (0.5) (7.5)
Cash conversion % (adjusted cash from operations/adjusted operating (1%) (21%)
profit)
Cash conversion % (normalised(1)) 17% 41%
1. Cash conversion calculated on a normalised basis excludes
expenditure in the half year of £5.3m on facility capacity expansion, and
£0.9m on customer deposits returned due to UK export licence rejections
Working capital increased by £29.6m; inventories and receivables increased by
£9.0m and £4.1m respectively, and payables fell by £16.5m. The increase in
inventory reflects a high level of work-in-progress to support shipments in
Q3. Our focus on inventory control is expected to deliver a reduction in
inventory during the second half of the year.
Other movements reflect phasing of cash receipts on a long-term quantum
contract. During the half year we shipped the first of several cryogenic
systems and recognised revenue on the achievement of factory acceptance
testing on two other systems. The timing of these orders is such that customer
deposits were received in previous years, and payments on shipment and
customer acceptance will be received over the next 18 months. The total
working capital impact of this long-term contract in the half-year is £8.3m.
In addition, a larger proportion of shipments were made towards the end of the
half year. This has resulted in an increase in receivables, which is expected
to fully unwind in the second half.
Pension
Pension recovery payments above charge to operating profit total £4.1m (2023:
£4.0m).
Interest
Net interest received was £0.6m (2023: £1.2m), reflecting interest received
on our foreign currency cash balances, partially offset by overdraft balances
on our main sterling accounts due to timing of foreign currency hedges.
Tax
Tax paid was £11.3m (2023: £7.9m); the increase relating to higher payments
on account following the increase in the UK corporation tax rate.
Investment in Research and Development (R&D)
Total cash spend on R&D in the half year was £20.7m, equivalent to 9.2%
of sales (2023: £19.7m, 9.4% of sales). A reconciliation between the adjusted
amounts charged to the consolidated statement of income and the cash spent is
given below:
Half year Half year 2023/24
2024/25
£m £m
R&D expense charged to the consolidated statement of income 20.3 19.7
Amortisation and impairment of R&D costs capitalised as intangibles (0.3) (0.3)
Amounts capitalised as intangible assets 0.7 0.3
Total cash spent on R&D during the year 20.7 19.7
Net cash and funding
Net cash
Cash from operations in the full year was offset by capital expenditure and
initial consideration of £15.4m paid on the acquisition of FemtoTools. After
tax and dividend payments, the Group's net cash position decreased from
£83.8m on 31 March 2024 to £39.3m on 30 September 2024.
Movement in net cash £m
Net cash after borrowings on 31 March 2024 83.8
Cash generated from operations 4.6
Interest 0.6
Tax (11.3)
Capitalised development expenditure (0.7)
Capital expenditure on tangible and intangible assets (8.8)
Acquisition of subsidiaries (15.4)
Payments made in respect of lease obligations (2.6)
Dividends paid (9.2)
Other items and FX (1.7)
Net cash after borrowings on 30 September 2024 39.3
Half year Half year
2024/25
2023/24
Net cash including lease liabilities £m £m
Net cash after borrowings 39.3 79.1
Lease liabilities (31.2) (34.8)
Net cash and lease liabilities after borrowings 8.1 44.3
Funding
The Group has a four-year unsecured multi-currency revolving facility
agreement, with two extension options, comprising a euro-denominated
multi‑currency facility of €95.0m (£79m) and a US Dollar-denominated
multi‑currency facility of $150.0m (£112m). Debt covenants are net debt to
EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. At
30 September 2024 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 2024 was £19.2m (31 March 2024: £16.1m).
The Scheme's assets are hedged against gilt yields, whereas the accounting
liabilities are valued based on corporate bond yields. The small improvement
in the surplus from 31 March 2024 reflects company contributions paid over the
period. The value of scheme assets decreased to £237.8m (31 March 2024:
£239.7m) and scheme liabilities decreased to £218.6m (31 March 2024:
£223.6m).
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 31 March 2025, at which point we expect,
based on current assumptions, the scheme to achieve self-sufficiency.
Following this date we have agreed with the trustees to continue voluntary
contributions as we explore buy-out options for the scheme. 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 and Chief Executive Officer's 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
11 November 2024
Condensed consolidated statement of income
Half year ended 30 September 2024
Half year to 30 September 2024 Half year to 30 September 2023
Adjusted Adjusting items (note 3) Total Adjusted Adjusting items (note 3) Total
Note £m £m £m £m £m £m
Revenue 2 225.8 - 225.8 209.7 - 209.7
Cost of sales (108.5) - (108.5) (98.7) - (98.7)
Gross profit 117.3 - 117.3 111.0 - 111.0
Research and development 4 (20.3) - (20.3) (19.7) - (19.7)
Selling and marketing (37.9) - (37.9) (34.2) - (34.2)
Administration and shared services (26.1) (5.5) (31.6) (28.2) (5.5) (33.7)
Foreign exchange gain/(loss) 0.9 2.7 3.6 7.6 (2.4) 5.2
Operating profit 33.9 (2.8) 31.1 36.5 (7.9) 28.6
Financial income 1.6 - 1.6 1.9 - 1.9
Financial expenditure (0.9) (0.1) (1.0) (0.9) - (0.9)
Profit/(loss) before income tax 3 34.6 (2.9) 31.7 37.5 (7.9) 29.6
Income tax (expense)/credit (8.7) 1.1 (7.6) (9.0) 1.7 (7.3)
Profit/(loss) for the period attributable to equity shareholders of the parent 25.9 (1.8) 24.1 28.5 (6.2) 22.3
Earnings per share pence pence pence pence
Basic earnings per share 7
From profit for the period 44.7 41.6 49.4 38.6
Diluted earnings per share 7
From profit for the period 44.1 41.1 48.7 38.1
The attached notes form part of these Financial Statements.
Condensed consolidated statement of comprehensive income
Half year ended 30 September 2024
Half year to Half year to
30 September 2024 30 September 2023
£m £m
Profit for the period 24.1 22.3
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to condensed consolidated
statement of income
Foreign exchange translation differences (4.4) (0.2)
Items that will not be reclassified to condensed consolidated statement of
income
Remeasurement loss in respect of post-retirement benefits (1.4) (19.4)
Tax credit on items that will not be reclassified to condensed consolidated 0.4 4.8
statement of income
Total other comprehensive expense (5.4) (14.8)
Total comprehensive income for the period attributable to equity shareholders 18.7 7.5
of the parent
Condensed consolidated statement of financial position
As at 30 September 2024
As at As at
30 September 2024 31 March 2024
as restated (1)
Note £m £m
Assets
Non-current assets
Property, plant and equipment 86.4 80.5
Intangible assets 152.4 138.2
Right-of-use assets 29.7 32.4
Long-term receivables 1.2 1.3
Derivative financial instruments 10 0.6 0.2
Retirement benefit asset 11 19.2 16.1
Deferred tax assets 11.9 13.7
301.4 282.4
Current assets
Inventories 116.4 108.1
Trade and other receivables 113.9 114.7
Current income tax receivable 3.1 1.0
Derivative financial instruments 10 4.6 2.3
Cash and cash equivalents 53.0 97.8
291.0 323.9
Total assets 592.4 606.3
Equity
Capital and reserves attributable to the company's equity shareholders
Share capital 2.9 2.9
Share premium 62.6 62.6
Other reserves 0.2 0.2
Translation reserve 3.0 7.4
Retained earnings 308.0 292.6
376.7 365.7
Liabilities
Non-current liabilities
Bank loans 0.7 0.9
Lease payables 27.0 28.6
Retirement benefit obligations 11 0.3 -
Derivative financial instruments 10 - -
Deferred tax liabilities 14.8 12.9
42.8 42.4
Current liabilities
Bank loans and overdrafts 13.0 13.1
Trade and other payables 144.7 166.2
Lease payables 4.2 4.8
Current income tax payables 4.2 7.6
Derivative financial instruments 10 0.1 0.1
Provisions 6.7 6.4
172.9 198.2
Total liabilities 215.7 240.6
Total liabilities and equity 592.4 606.3
(1) Details of restatement of prior period numbers can be found in note 8.
Condensed consolidated statement of changes in equity
Half year ended 30 September 2024
Share capital Share premium Other reserves Translation reserve Retained earnings Total
£m £m £m £m £m £m
As at 1 April 2024 2.9 62.6 0.2 7.4 292.6 365.7
Profit for the period - - - - 24.1 24.1
Foreign exchange translation differences - - - (4.4) - (4.4)
Remeasurement loss in respect of post-retirement benefits - - - - (1.4) (1.4)
Tax credit on items that will not be reclassified to condensed consolidated - - - - 0.4 0.4
statement of income
Total comprehensive (expense)/income - - - (4.4) 23.1 18.7
Share-based payment transactions - - - - 1.5 1.5
Income tax on share-based payment transactions - - - - - -
Dividends - - - - (9.2) (9.2)
Total transactions with owners: - - - - (7.7) (7.7)
As at 30 September 2024 2.9 62.6 0.2 3.0 308.0 376.7
As at 1 April 2023 2.9 62.6 0.2 12.9 265.4 344.0
Profit for the period - - - - 22.3 22.3
Foreign exchange translation differences - - - (0.2) - (0.2)
Remeasurement loss in respect of post-retirement benefits - - - - (19.4) (19.4)
Tax credit on items that will not be reclassified to condensed consolidated - - - - 4.8 4.8
statement of income
Total comprehensive (expense)/income - - - (0.2) 7.7 7.5
Share-based payment transactions - - - - 1.1 1.1
Income tax on share-based payment transactions - - - - (1.0) (1.0)
Dividends - - - - - -
Total transactions with owners: - - - - 0.1 0.1
As at 30 September 2023 2.9 62.6 0.2 12.7 273.2 351.6
Condensed consolidated statement of cash flows
Half year ended 30 September 2024
Half year to Half year to
30 September 2024 30 September 2023
£m £m
Cash flows from operating activities
Profit for the period 24.1 22.3
Adjustments for:
Income tax expense 7.6 7.3
Net financial income (0.6) (1.0)
Fair value movement on financial derivatives (2.7) 2.4
Release of contingent consideration (2.1) -
Amortisation of right-of-use assets 2.5 2.7
Depreciation of property, plant and equipment 3.0 2.4
Amortisation of intangible assets 5.0 4.9
Charge in respect of equity settled employee share schemes 1.5 1.1
Contributions paid to the pension scheme more than the charge to operating (4.1) (4.0)
profit
Increase in inventories (9.0) (22.9)
(Increase)/decrease in receivables (4.1) 3.8
Decrease in payables and provisions (12.8) (17.2)
(Decrease)/increase in customer deposits (3.7) 5.6
Cash generated from operations 4.6 7.4
Interest paid (0.6) (0.5)
Income taxes paid (11.3) (7.9)
Net cash (used in)/from operating activities (7.3) (1.0)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 0.1 0.1
Acquisition of property, plant and equipment (8.9) (16.5)
Acquisition of intangible assets - (0.3)
Acquisition of subsidiaries, net of cash acquired (15.4) -
Capitalised development expenditure (0.7) (0.3)
Interest received 1.2 1.7
Net cash used in investing activities (23.7) (15.3)
Cash flows from financing activities
Proceeds from issue of share capital - 0.1
Interest paid on lease payables (0.3) (0.4)
Repayment of lease payables (2.3) (2.2)
Repayment of borrowings (0.6) (0.1)
Dividends paid (9.2) -
Net cash used in financing activities (12.4) (2.6)
Change in cash and cash equivalents (43.4) (18.9)
Cash and cash equivalents at beginning of the year 85.5 101.5
Effect of exchange rate fluctuations on cash held (1.7) (2.3)
Cash and cash equivalents at end of the period 40.4 80.3
Comprised of:
Cash and cash equivalents as per the condensed consolidated statement of 53.0 101.7
financial position
Bank overdrafts (12.6) (21.4)
40.4 80.3
Notes to the half-year financial statements
Half year ended 30 September 2024
1 Basis of preparation
Reporting entity
Oxford Instruments plc is a company incorporated in England and Wales. The
condensed consolidated half-year set of 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 UK adopted IAS 34 Interim Financial Reporting. 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 2024. The Group Financial Statements were prepared
in accordance with UK adopted International Accounting Standards (IAS) in
conformity with the requirements of the Companies Act 2006 and interpretations
issued by the IFRS Interpretations Committee (IFRIC) applicable to companies
reporting under UK adopted IFRS.
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 2024 are
not the Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditors and delivered to the registrar
of companies. The report of the auditors was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
The Board of Directors approved the Condensed Consolidated Interim Financial
Statements on 11 November 2024.
Significant accounting policies
As required by the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority, the condensed set of Financial Statements has been prepared
applying the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated Financial Statements for
the year ended 31 March 2024.
Changes in accounting standards
The IASB (International Accounting Standards Board) issued a new Standard,
IFRS 18 Presentation and Disclosure in Financial Statements, on 9 April 2024
that will replace IAS 1 Presentation of Financial Statements. The purpose of
the new standard is to provide more consistent presentation of financial
information across preparers as it is acknowledged that existing standards
have given flexibility to present information in different ways. IFRS 18 will
not impact the recognition or measurement of items in the financial
statements. Many of the existing presentation principles in IAS 1 are
retained, but there are some more specific requirements that will require the
Group to make some changes in its future Annual Report and Interim Financial
Statements.
The new Standard is not yet endorsed by the UK Endorsement Board 'UKEB' but is
expected to be applicable for reporting periods beginning on or after 1
January 2027. Comparative information for 2026 will need to be restated when
the 2027 Interim Financial Statements and Annual Report and Accounts are
published and early adoption is expected to be permitted.
The Group has started an initial review of the Standard and expects changes to
the presentation of the income statement. The process of assessing the
financial impact on the Consolidated Financial Statements will continue during
2024 and 2025.
There are no other new standards or interpretations issued by the IASB that
had a significant impact on the Consolidated Financial Statements.
There are no standards or amendments that are not yet effective and that would
be expected to have a material impact on the Group in the current or future
reporting periods and on foreseeable future transactions.
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 2024,
other than one key new area:
Acquisition of FemtoTools AG (FemtoTools)
On the acquisition of a business in order to comply with IFRS 3 (Revised)
Business Combinations it is necessary to reflect the assets and liabilities
acquired at their fair value. This requires certain estimates and assumptions
in relation to, inter alia, the forecast performance of the acquired business,
the expected life of certain intangible assets and the likely future customer
base of the business. In order to assist in undertaking this Fair Value
exercise, the Group appointed an external firm of advisors. The exercise is
incomplete as at the date of this report so the fair value adjustments are
reported on a provisional basis. The provisional fair value adjustments
arising from this review are set out in Note 8.
Going concern
The Financial Statements have been prepared on a going concern basis based on
the Directors' opinion, after making reasonable enquiries, that the Group has
adequate resources to continue in operational existence for the foreseeable
future.
The Finance Review discloses information relevant to the Group's financial
position, its cash flows, borrowing facilities and liquidity.
The directors have considered the appropriateness of the going concern basis
of preparation following a detailed assessment of the risks to the Group as
outlined above, and have a reasonable expectation that the Group will be able
to continue operating and meet its liabilities as they fall due over a period
of 12 months from approval of these half year financial statements.
On 19 March 2024 the Group entered into a new multi-currency revolving
facility agreement, which is committed until March 2028 with 15-month and
12-month extension options at the end of the first and second years
respectively. The facility has been entered into with four banks and comprises
a Euro-denominated multi-currency facility of €95m and a US Dollar
denominated multi-currency facility of $150m. Debt covenants are net debt to
EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. At
the date of approving these financial statements, the facility remains
undrawn.
The relatively diverse nature of the Group together with its current financial
strength provides a solid foundation. In its going concern assessment, the
directors considered several scenarios, including base case and downside
scenarios. The assessment is based on board approved budget, incorporating
severe but plausible scenarios in the forecast. These scenarios reflected a
25% reduction in group's performance, a 25% increase in working capital and a
third scenario of incorporating both. In each scenario the Group's cash
balances remained positive and the facility remains undrawn throughout the
going concern period to 12 November 2025.
Based on this assessment, incorporating a review of current position, the
scenarios, the principal risks and mitigation, the Directors have a reasonable
expectation that the group will be able to continue operating and meet its
liabilities as they fall due over a period of 12 months from approval of these
half year financial statements and there are no material uncertainties which
may cast significant doubt over its ability to continue as a going concern.
2 Segment information
The Group's operating segments were previously combined into three aggregated
operating segments; Materials & Characterisation, Research &
Discovery, and Service & Healthcare. From 1 April 2024, these have now
been combined into two new 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 two aggregated
operating segments is a reportable segment. In the previous structure, service
revenue for operating segments was reported within Service & Healthcare,
in the new structure service revenue is reported within each respective
operating segment. The aggregated operating segments are as follows:
- the Imaging & Analysis segment comprises a group of businesses
focussing on microscopy, cameras, analytical instruments and software; and
- the Advanced Technologies segment comprises a group of businesses
focussing on compound semiconductor fabrication equipment, cryogenic and
superconducting magnet technology and X-ray tubes.
Prior period results have been adjusted to reflect the new operating segments.
The Group's internal management structure and financial reporting systems
differentiate the two 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 Executive Directors. Discrete financial information
is available for each segment and used by the Executive 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 Executive Directors.
On 9th January 2024, the Group acquired 100% of the issued share capital of
First Light Imaging which has been integrated into the Imaging & Analysis
segment. On 28th June 2024, the Group acquired 100% of the issued share
capital of FemtoTools which has been integrated into the Imaging &
Analysis segment. Further information can be found in Note 8.
Results
Half year to 30 September 2024 Imaging & Analysis Advanced Technologies Total
£m £m £m
External product revenue 126.0 60.5 186.5
External service revenue 27.9 11.4 39.3
Total external revenue 153.9 71.9 225.8
Inter-segment product revenue - 0.6
Total segment revenue 153.9 72.5
Segment adjusted operating profit 35.9 (2.0) 33.9
Half year to 30 September 2023 Imaging & Analysis Advanced Technologies Total
£m £m £m
External product revenue 124.9 51.2 176.1
External service revenue 24.5 9.1 33.6
Total external revenue 149.4 60.3 209.7
Inter-segment product revenue - 0.8
Total segment revenue 149.4 61.1
Segment adjusted operating profit 37.0 (0.5) 36.5
Revenue in the Imaging & Analysis and Advanced Technologies segments
represents the sale of products and service income. No individual customer
accounts for more than 10% of revenue.
Reconciliation of reportable segment profit
Half year to 30 September 2024 Imaging & Analysis Advanced Technologies Unallocated Group items Total
£m £m £m £m
Segment adjusted operating profit/(loss) 35.9 (2.0) - 33.9
Restructuring costs and charges associated with management changes (1.6) (0.4) (0.2) (2.2)
Transaction-related costs (0.5) (0.2) - (0.7)
Amortisation and impairment of acquired intangibles (4.7) - - (4.7)
Fair value movement on financial derivatives - - 2.7 2.7
Financial income - - 1.6 1.6
Financial expenditure - - (1.0) (1.0)
Release of contingent consideration 2.1 - - 2.1
Profit/(loss) before income tax 31.2 (2.6) 3.1 31.7
Half year to 30 September 2023 Imaging & Analysis Advanced Technologies Unallocated Group items Total
£m £m £m £m
Segment adjusted operating profit/(loss) 37.0 (0.5) - 36.5
Transaction-related costs (0.4) (0.3) - (0.7)
Intellectual property litigation - (0.2) - (0.2)
Amortisation and impairment of acquired intangibles (4.6) - - (4.6)
Fair value movement on financial derivatives - - (2.4) (2.4)
Financial income - - 1.9 1.9
Financial expenditure - - (0.9) (0.9)
Profit/(loss) before income tax 32.0 (1.0) (1.4) 29.6
The Group's revenue by destination of the end user is as follows:
Revenue Half year to Half year to
30 September 2024 30 September 2023
£m £m
UK 8.9 12.8
China 49.4 65.1
Japan 15.1 16.0
USA 64.6 51.2
Germany 21.2 15.4
Rest of Europe 23.2 20.7
Rest of Asia 32.7 20.5
Rest of World 10.7 8.0
225.8 209.7
3 Adjusting items
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. In determining whether an event or transaction is an adjusting item,
the Directors consider quantitative as well as qualitative factors such as the
frequency or predictability of occurrence.
These adjusting items are excluded in the calculation of adjusted operating
profit, adjusted profit before tax, adjusted profit for the period, adjusted
EBITDA (defined as adjusted operating profit before depreciation and
amortisation of capitalised development costs), 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, amortisation 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 7. 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 Half year to
30 September 2024 30 September 2023
Operating profit Profit before income tax Operating profit Profit before income tax
£m £m £m £m
Statutory measure 31.1 31.7 28.6 29.6
Intellectual property litigation settlement - - - -
Adjustments relating to defined benefit pension schemes - - - -
Transaction-related costs 0.7 0.7 0.7 0.7
Restructuring costs and charges associated with management changes 2.2 2.2 - -
Intellectual property litigation costs - - 0.2 0.2
Amortisation and impairment of acquired intangibles 4.7 4.7 4.6 4.6
Fair value movement on financial derivatives (2.7) (2.7) 2.4 2.4
Unwind of discount in respect of contingent consideration - 0.1 - -
Release of contingent consideration (2.1) (2.1) - -
Total adjusting items 2.8 2.9 7.9 7.9
Adjusted measure 33.9 34.6 36.5 37.5
Adjusted income tax expense (8.7) (9.0)
Adjusted profit 33.9 25.9 36.5 28.5
Adjusted effective tax rates 25.1% 24.0%
Intellectual property litigation settlement
This represents one-off settlement income in the Advanced Technologies segment
from defending our intellectual property.
Adjustments relating to defined benefit pension schemes
During the prior year, the Group recognised a one-off charge of £0.4m in
respect of removing the pension increase exchange at retirement option for
deferred members.
Transaction-related costs
These represent the costs of one-off charges incurred at the balance sheet
date relating to transactional work.
Restructuring costs and charges associated with management changes
In the current year, these represent the costs of one-off restructuring within
the group. In the prior year, these represent £1.7m of costs associated with
the relocation of production facilities within the semiconductor business and
charges of £2.0m incurred in respect of the recruitment of the CEO and
one-off dual-running costs associated with this appointment.
Intellectual property litigation costs
These represent one-off legal costs to defend our intellectual property.
Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired
intangible assets.
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
This represents the unwind of the discount in respect of the contingent
consideration on the acquisition of FemtoTools (Note 8).
Release of contingent consideration
This represents the release of the earn-out provision in respect of the
acquisition of First Light Imaging.
Adjusted income tax expense
Statutory income tax is adjusted for the income tax impact on the adjusting
items described above. In the prior year, adjusted income tax also includes a
prior year adjustment in relation to deferred tax recognised on the Asylum
intangibles.
Reconciliation of changes in cash and cash equivalents to movement in net cash
after borrowings
Half year to Year to
30 September 2024 31 March
2024
£m £m
Net decrease in cash and cash equivalents (43.4) (13.1)
Effect of exchange rate fluctuations on cash held (1.7) (2.9)
Movement in net cash in the year (45.1) (16.0)
Bank loans at First Light Imaging acquired - (2.2)
Repayment of borrowings 0.6 1.8
Net cash after borrowings at the start of the period 83.8 100.2
Net cash after borrowings at the end of the period 39.3 83.8
Reconciliation of net cash after borrowings to Statement of Financial Position
Half year to Year to
30 September 2024 31 March
2024
£m £m
Bank loans at First Light Imaging (0.4) (0.8)
Covid-19 loan at WITec (0.7) (0.9)
Overdrafts (12.6) (12.3)
Cash and cash equivalents 53.0 97.8
Net cash after borrowings at the end of the period 39.3 83.8
4 Research and development (R&D)
The total research and development spend by the Group is as follows:
Half year to Half year to
30 September 2024 30 September 2023
£m £m
R&D expense charged to the condensed consolidated statement of income 20.3 19.7
Less: amortisation of R&D costs previously capitalised as intangibles (0.3) (0.3)
Add: amounts capitalised as intangible assets 0.7 0.3
Total cash spent on R&D during the period 20.7 19.7
5 Taxation
The total effective tax rate on profits for the half year is 24.0% (prior half
year: 24.7%). The weighted average tax rate in respect of adjusted profit
before tax (see Note 3) for the half year is 25.1% (prior half year: 24.0%).
For the full year the Group expects the tax rate in respect of adjusted profit
before tax to be 24.5%.
6 Dividends
The following dividends per share were paid by the Group:
Half year to Half year to
30 September 2024 30 September 2023
pence pence
Previous period final dividend 15.9 -
Current period interim dividend - -
15.9 -
The following dividends per share were proposed by the Group in respect of
each accounting period presented:
Half year to Half year to
30 September 2024 30 September 2023
pence pence
Interim dividend 5.1 4.9
Final dividend - -
5.1 4.9
The interim dividend for the year to 31 March 2024 of 4.9 pence was approved
by a sub-committee of the Board on 13 November 2023 and was paid on 12 January
2024. The final dividend for the year to 31 March 2024 of 15.9 pence per share
was approved by Shareholders at the Annual General Meeting on 25 July 2024 and
was paid on 20 August 2024.
The interim dividend for the year to 31 March 2025 of 5.1 pence per share was
approved by a sub-committee of the Board on 5 November 2024 and has not been
included as a liability as at 30 September 2024. The interim dividend is
expected to be paid on 10 January 2025 to Shareholders on the register on the
record date of 29 November 2024, with an ex-dividend date of 28 November 2024
and with the last date of election for the Dividend Reinvestment Plan (DRIP)
being 17 December 2024.
7 Earnings per share
Basic earnings per ordinary share (EPS) is calculated by dividing the profit
attributable to equity shareholders of the parent by the weighted average
number of ordinary shares in issue during the period, excluding ordinary
shares held by the Employee Benefit Trust, which have been treated as if they
had been cancelled.
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 weight average number of shares used in the
calculation and the effect of share options on the calculation of diluted
earnings per share:
Half year to Half year to
30 September 2024 30 September 2023
Shares Shares
million million
Weighted average number of shares used in calculation of basic earnings per 58.0 57.7
share
Effect of shares under option 0.7 0.8
Number of ordinary shares per diluted earnings per share calculations 58.7 58.5
Basic and diluted EPS are based on the profit for the period attributable to
equity shareholders of the parent, as reported in the consolidated statement
of income. Adjusted and diluted adjusted EPS are based on adjusted profit for
the period, as reported in Note 3:
Half year to Half year to
30 September 2024 30 September 2023
£m Pence £m Pence
Profit attributable to equity shareholders of the parent/Basic EPS 24.1 41.6 22.3 38.6
Total underlying adjustments to profit before tax (Note 3) 2.9 5.0 7.9 13.7
Related tax effects (1.1) (1.9) (1.7) (2.9)
Adjusted profit attributable to equity shareholders of the parent/adjusted EPS 25.9 44.7 28.5 49.4
Diluted basic EPS 41.1 38.1
Diluted adjusted EPS 44.1 48.7
8 Acquisitions
Acquisition of First Light Imaging
On 9 January 2024, the Group acquired 100% of the issued share capital of
First Light Imaging SAS ("First Light Imaging") on a cash-free, debt-free
basis for consideration of €19.3m (£16.6m), of which €3.0m (£2.5m) was
conditional on trading performance over a period of twelve months from the
acquisition. The conditions for the contingent consideration were meeting
certain revenue, order and margin thresholds. In the calculations below, it
was assumed that these thresholds were to be met.
Retrospective adjustment for prior year business combination accounting
A restatement has been made in the prior year, in relation to a fair value
adjustment to inventory at acquisition of First Light Imaging.
In the consolidated financial statements for the year ended 31 March 2024,
provisional values for the book and fair value of the assets and liabilities
acquired were used because the initial acquisition accounting was incomplete
as at the date of the report. A fair value adjustment has been made to the
provisionally reported amounts, reducing inventory by £0.3m with a
corresponding increase in goodwill. The book and fair value of the assets and
liabilities acquired given in the table below, are no longer provisional.
As a result, the condensed consolidated statement of financial position as at
31 March 2024 has been restated as follows:
31 March 2024 Restatement 31 March 2024 (restated)
£m £m £m
Condensed consolidated statement of financial position
Non-current assets
Intangible assets 137.9 0.3 138.2
Current assets
Inventories 108.4 (0.3) 108.1
The restatement did not result in any change to reported profit, earnings per
share, net assets or net cash from operating activities reported in the 2024
full-year financial statements.
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.
Book value Adjustments Fair value
£m £m £m
Intangible assets 0.1 10.3 10.4
Property, plant and equipment 0.5 - 0.5
Right-of-use assets 0.7 - 0.7
Inventories 1.7 (0.3) 1.4
Trade and other receivables 2.9 - 2.9
Deferred tax - (2.6) (2.6)
Trade and other payables (2.1) - (2.1)
Lease liabilities (0.7) - (0.7)
Bank loans (2.2) - (2.2)
Cash 0.6 - 0.6
Net assets acquired 1.5 7.4 8.9
Goodwill 5.7
Total consideration 14.6
Net debt acquired 1.6
Contingent consideration after discounting to transaction date (2.3)
Net cash outflow relating to the acquisition 13.9
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 period of £0.1m were expensed to the
condensed consolidated statement of income as an adjusting item in the
administration and shared services cost line. Acquisition related costs in the
prior year of £0.7m were expensed to the condensed consolidated statement of
income as an adjusting item in the administration and shared services cost
line.
The acquisition contributed revenue of £0.6m, adjusted operating loss of
£0.6m and a statutory loss before tax of £0.6m to the Group's profit for the
prior year.
If the acquisition had occurred on the first day of the prior year the
acquisition would have contributed revenue of £5.7m, adjusted operating
profit of £0.3m and a statutory result before tax of £0.3m for the year
ended 31 March 2024.
During the period, £0.5m of deferred consideration in relation to a net asset
adjustment was paid. This is included within "acquisition net of subsidiaries,
net of cash acquired" in the period in the condensed consolidated statement of
cash flows.
It is now expected that the thresholds to pay the remaining contingent
consideration will not be met and the payable has been released to the
condensed consolidated statement of income (Note 3).
Acquisition of FemtoTools
On 28 June 2024, the Group acquired 100% of the issued share capital of
FemtoTools AG ("FemtoTools") on a cash-free, debt-free basis for consideration
of CHF 17.9m (£15.8m), with a further CHF 5.5m (£4.8m) was conditional on
trading performance over a period of 33 months from the acquisition. The
conditions for the contingent consideration were meeting certain revenue,
order and margin thresholds. In the calculations below, it has been assumed
that these thresholds will be met.
The book and provisional fair value of the assets and liabilities acquired is
given in the table below. Provisional values have been used for all assets and
liabilities, including contingent tax, because the initial acquisition
accounting is incomplete at the date of this report. 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.
Book value Provisional adjustments Provisional fair value
£m £m £m
Intangible assets - 11.3 11.3
Property, plant and equipment 0.3 - 0.3
Inventories 0.6 - 0.6
Trade and other receivables 0.9 - 0.9
Deferred tax 0.1 (2.3) (2.2)
Trade and other payables (0.8) - (0.8)
Retirement benefit obligations (0.3) - (0.3)
Provisions (0.1) - (0.1)
Cash 1.1 - 1.1
Net assets acquired 1.8 9.0 10.8
Goodwill 8.8
Total consideration 19.6
Net cash acquired (1.1)
Contingent consideration after discounting to transaction date (3.6)
Net cash outflow relating to the acquisition 14.9
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 period of £0.3m were expensed to the
condensed consolidated statement of income as an adjusting item in the
administration and shared services cost line. There were no acquisition
related costs in the prior year in relation to this acquisition.
The acquisition contributed revenue of £2.2m, adjusted operating profit of
£0.6m and a statutory loss before tax of £0.8m in the period.
If the acquisition had occurred on the first day of the year the acquisition
would have contributed revenue of £3.5m, adjusted operating profit of £0.4m
and a statutory result before tax of £0.4m in the period.
9 Goodwill
Goodwill
£m
Cost
Balance at 1 April 2023 124.6
Additions - business combinations (as restated Note 8) 5.7
Effect of movements in foreign exchange rates (0.8)
Balance at 31 March 2024 and 1 April 2024 as restated (Note 8) 129.5
Additions - business combinations 8.8
Effect of movements in foreign exchange rates (1.7)
Balance at 30 September 2024 136.6
Impairment losses
Balance at 1 April 2023 22.9
Effect of movements in foreign exchange rates (0.3)
Balance at 31 March 2024 and 1 April 2024 22.6
Effect of movements in foreign exchange rates (0.7)
Balance at 30 September 2024 21.9
Carrying amounts
Balance at 1 April 2023 101.7
Balance at 31 March 2024 and 1 April 2024 as restated (Note 8) 106.9
Balance at 30 September 2024 114.7
Goodwill acquired in a business combination is allocated, at acquisition, to
the cash generating units ("CGUs") that are expected to benefit from that
business combination. The carrying amount of goodwill was allocated to
individual CGUs as follows:
Half year to As at
30 September 2024 31 March 2024
as restated (1)
£m £m
Imaging & Analysis
NanoAnalysis 9.8 9.9
Magnetic Resonance 2.3 2.3
WITec 20.4 21.0
Andor 66.8 67.0
FemtoTools 8.8 -
Advanced Technologies
NanoScience 6.6 6.7
114.7 106.9
(1) Details of restatement of prior period numbers can be found in note 8.
In the current and prior period, Andor includes a goodwill amount of £5.7m
relating to the acquisition of First Light Imaging as shown in Note 8. In the
current period, a provisional goodwill amount of £8.8m relates to the
acquisition of FemtoTools as also shown in Note 8. All other movements in the
year relate to changes in exchange rates.
10 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying amount is a
reasonable approximation of fair value.
As at Year to
30 September 2024 31 March 2024
Fair value hierarchy Carrying amount Fair value Carrying amount Fair value
£m £m £m £m
Financial assets measured at fair value
Derivative financial assets:
- Foreign currency contracts 2 5.2 5.2 2.5 2.5
Financial assets measured at amortised cost
Long-term receivables 1.2 1.3
Trade receivables 82.2 84.9
Other receivables and accrued income 16.9 15.1
Cash and cash equivalents 53.0 97.8
Financial liabilities measured at fair value
Derivative financial liabilities:
- Foreign currency contracts 2 (0.1) (0.1) (0.1) (0.1)
- Contingent consideration 3 (3.6) (3.6) (2.8) (2.8)
Financial liabilities measured at amortised cost
Trade and other payables (58.4) (75.8)
Bank overdrafts (12.6) (12.3)
Borrowings (1.1) (1.7)
Lease payables (31.2) (33.4)
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. Tax related receivables and payables are excluded
from the above table as these are not considered to be financial assets and
liabilities.
Lease payables
The lease liability is measured at amortised cost using the effective interest
method.
Fair value hierarchy
The table above gives details of the valuation method used in arriving at the
fair value of financial instruments. The different levels have been identified
as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets
and liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based on observable
market data.
There have been no transfers between levels during the period.
11 Retirement benefit assets and 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 2024 by a qualified
independent actuary.
At 31 March 2024, the scheme actuary calculated a retirement benefit asset of
£16.1m, being the net of £239.7m of assets and a present value of future
liabilities of £223.6m.
In the period to 30 September 2024, there has been an increase in the discount
rate from 4.8% to 5.0% and changes to market conditions have reduced the value
of the scheme's obligations. The impact of these changes has decreased the
benefit obligation to £218.6m (31 March 2024: £223.6m). There have been no
material changes to the demographic assumptions associated with the scheme.
The Group has agreed a basis for deficit recovery payments with the trustees
of the UK pension scheme. The deficit recovery payments are payable through to
and including 2026 and will rise by approximately 3% per annum. The deficit
recovery payment for the period was £4.4m (year to 31 March 2024: £8.5m).
However, changes in market conditions reduced the scheme's assets during the
period. As a result, the fair value of plan assets decreased to £237.8m (31
March 2024: £239.7m).
The overall effect is that for the purposes of IAS 19 the surplus on the
scheme increased from £16.1m to £19.2m.
On acquisition of FemtoTools AG on 28 June 2024, the Group now operates a
defined benefit pension scheme in Switzerland. At 30 September 2024 the
overall position of the scheme is a deficit of £0.3m which comprises a
defined benefit obligation of £1.9m and a fair value of plan assets of
£1.6m.
12 Related parties
There have been no related party transactions in the first 6 months of the
current financial year which have materially affected the financial position
or performance of the Group.
Related parties are consistent with those disclosed in the Group's annual
report for the year ended 31 March 2024.
Principal risks and uncertainties
Information regarding the risk management process in place at the Group is set
out on pages 70 to 73 of the 2024 Report and Financial Statements.
The principal risks and uncertainties identified through that process are set
out on pages 73 to 78 of the 2024 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 2024. It has
evaluated the disclosures made on pages 73 to 78 of the 2024 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 2025.
Further it considers that there are no additional significant risks to be
disclosed.
A summary of the risks and uncertainties identified in the 2024 Report and
Financial Statements is set out below:
· Geopolitical risk
· Operational transformation risk
· Supply chain risk
· Routes to market risk
· New Product Introduction risk
· Macroeconomic risk
· Cyber / Information Technology risk
· Legal and regulatory compliance risk
· People and capability risk
· Business interruption risk
· Climate change risk
The Board has reviewed the risk ratings set out on page 73 and considers that
no update is required based on either the potential impact or likelihood of
the risk materialising.
Responsibility statement of the directors in respect of the half-year
financial statements
The Directors confirm that, to the best of their knowledge:
· the condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by
the UK; and
· the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed consolidated interim
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
Richard Tyson Gavin Hill
Chief Executive Officer Chief Financial Officer
11 November 2024
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 2024 is not prepared,
in all material respects, in accordance with UK adopted IAS 34 Interim
Financial Reporting 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 2024 which comprises the condensed consolidated statement of income,
condensed consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed consolidated statement
of changes in equity, condensed consolidated statement of cash flows, and the
related explanatory notes.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). 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
(IAS) in conformity with the requirements of the Companies Act 2006 and
interpretations issued by the IFRS Interpretations Committee (IFRIC)
applicable to companies reporting under UK adopted IFRS. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with UK adopted IAS 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 (Revised), however future events or conditions may cause the
group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement 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
11 November 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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