TIDMOXIG
RNS Number : 7338E
Oxford Instruments PLC
10 November 2020
Release date: 10 November 2020
Oxford Instruments plc
Announcement of half-year results for the six months to 30
September 2020
Oxford Instruments plc, a leading provider of high technology
products and systems for industry and research, today announces its
half-year results for the six months to 30 September 2020.
Half year Half year
to to
30 September 30 September % change
2020 2019 % change constant
GBPm GBPm reported currency
---------------------------------------- ------------- ------------- --------- ---------
Revenue(1) 140.3 157.6 (11.0%) (11.0%)
Adjusted(2) operating profit(1) 24.3 26.2 (7.3%) (11.5%)
Adjusted(2) profit before tax(1) 23.7 25.8 (8.1%)
Profit before tax(1) 20.2 18.9 +6.9%
Adjusted(2) basic earnings per share(1) 32.8p 36.0p (8.9%)
Dividend per share (half-year) 4.1p -
Cash generated from operations(1) 23.3 15.3 +52.3%
Net cash 81.4 14.2
---------------------------------------- ------------- ------------- --------- ---------
1. Continuing operations.
Financial highlights:
-- Reported orders up 6.0% to GBP175.7m (2019: GBP165.7m), an
increase of 5.9% at constant currency; book-to-bill ratio of
1.25
-- Order book of GBP204.6m (31 March 2020: GBP175.0m), up 16.9% (16.6% at constant currency)
-- Reported and constant currency revenue down by 11.0% to
GBP140.3m, affected by customer site closures and the introduction
of new covid-related working practices
-- Adjusted operating profit from continuing operations down
7.3% at GBP24.3m (a decline of 11.5% at constant currency)
-- Adjusted operating margin of 17.3% (2019: 16.6%), sustained
at 16.6% constant currency despite the revenue decline
-- Net cash grew to GBP81.4m, aided by good operating cash flow
(97% cash conversion). At the end of September, the Group had total
headroom of approximately GBP214m, including the undrawn GBP105m
credit facility
-- Robust half-year trading performance and strong order book
supports an interim dividend of 4.1p
Operational highlights:
-- Continued progress with our Horizon strategy; accelerating
market intimacy and the transformation of our customer services
-- Strong order growth driven by:
-- Continued demand from both academic and commercial customers
-- Buoyant demand in Semiconductor & Communications, Quantum
Technology and Advanced Materials market segments
-- Good growth in North America and Asia offset by a modest decline in Europe
-- Revenues held back by covid-related disruption in customer
installation and acceptances; manufacturing sites remained
operational and are adapting to new covid-safe working
practices
-- Strong margin performance driven by improved service
profitability, tangible gains from Horizon strategy and cost
controls
-- Continued investment in our strategic product development
programme; R&D spend maintained at GBP12.7m providing a healthy
pipeline of future product launches
-- Long-term growth drivers for end markets remain robust
Summary and Outlook:
Ian Barkshire, Chief Executive of Oxford Instruments plc,
said:
The Group is positioned to be a leading provider of high
technology products and services to the world's leading industrial
customers and scientific research communities to image, analyse and
manipulate materials down to the atomic and molecular level. This
allows us to live up to our purpose of facilitating a greener
economy, increased connectivity, improved health and leaps in
scientific understanding.
We have seen strong order growth in the first half of the year
with a good improvement in the order book. Orders have grown across
our academic and commercial customer base, particularly for our
compound semiconductor process solutions and quantum cryogenic and
magnet systems. Covid-related customer disruption has affected
installation and commissioning activities. This, along with the
introduction of new covid-safe working practices across our
manufacturing sites, has led to a fall in revenue over the first
half. Gains from our Horizon strategy and cost control enabled
sustained operating margins despite lower revenue. The dedication,
agility and resilience of our employees during this difficult
period underpins our confidence in our ability to service and
support the needs of our customers.
We are adjusting to the external and internal effects of the
pandemic and expect uncertainty to remain high. However, robust
trading during the first half, combined with a strong order book,
gives us confidence for the second half, absent a material increase
in covid--related disruption that could impact facility or customer
site access. We expect full-year performance to be a little behind
last year on a constant currency basis, ahead of current analyst
forecasts.
The transformation of the Group through our Horizon strategy has
provided a solid foundation for future growth. Our focus on markets
with sustainable long-term growth drivers, our continuous drive for
greater efficiencies and our ability to respond to evolving
customer needs mean that we remain well positioned to navigate the
current challenges and return to long-term sustainable growth and
margin improvement.
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director
MHP Communications Tel: 020 3128 8572
Rachel Hirst
Number of pages: 30
2. Throughout this report we make reference to adjusted numbers.
A full definition of adjusted numbers can be found in Note 2 to the
Condensed Consolidated Financial Statements. Where we make
reference to constant currency numbers, these are prepared on a
month-by-month basis using the translational and transactional
exchange rates which prevailed in the previous year rather than the
actual exchange rates which prevailed in the year. Transactional
exchange rates include the effect of our hedging programme.
NOTE: Oxford Instruments plc compiled analyst forecasts for
adjusted operating profit (year to 31 March 2021), published since
the AGM trading update, range from GBP36m to GBP45m.
Chief Executive's Review
Introduction
As a global provider of high technology products and solutions
to the world's leading industrial companies and scientific research
communities, we recognise our responsibility and role in the
advancement of society, helping to create a more sustainable
future. Through our core purpose we are addressing some of the
world's most pressing challenges, by enabling a greener economy,
increased connectivity, improved health, and leaps in scientific
understanding. The underlying long-term growth drivers for our
chosen markets remain relevant and robust despite the
coronavirus.
The Group has delivered a resilient first half performance
considering the severity of the global disruption caused by the
covid pandemic. This disruption has impacted our customers and end
markets by varying amounts depending on regional and local
responses to contain the virus, which have included reduced access
to customer sites, protracted administrative processes and travel
restrictions. Whilst we have kept all our sites open during this
time, implementing covid-safe workplaces impacted our manufacturing
capacity in the first half.
While these factors had a significant impact on first quarter
performance, we have seen a steady improvement through the second
quarter with continued positive momentum in orders and revenue
through the period. The combination of prudent cost control
measures, improved commercial practices, the transformation of our
customer service approach and ongoing gains from our operational
excellence programme supported a sustained operational margin for
the Group despite reduced revenue.
We have continued to make good progress with the implementation
of our Horizon strategy and have accelerated certain elements to
align our operations more closely to their end markets. This has
resulted in the transfer of our Magnetic Resonance business to the
Materials & Characterisation sector, allowing us to better
exploit sales, marketing and service synergies, providing increased
reach and improved support for our target customers and
applications.
We remain focused on addressing a broad and diverse range of
attractive end markets where our key enabling technologies enable
customers to image, analyse and manipulate materials down to the
atomic and molecular level, supporting their long-term growth. By
addressing the academic, applied R&D and high-tech
manufacturing segments, we are engaged throughout the technology
cycle and are well positioned to benefit from each wave of
commercialisation and technology disruption.
Results
Reported orders for the Group increased to GBP175.7m (2019:
GBP165.7m) up 6.0% (5.9% at constant currency), reflecting strong
growth from commercial customers and improved demand from academic
and Government-funded institutions. Looking at our end markets, we
saw strong growth across the Semiconductor & Communications,
Quantum Technology and Advanced Materials segments, partially
offset by lower contributions from the Healthcare &
Lifescience, Energy & Environment and Research &
Fundamental Science segments. This in turn led to strong growth in
the Materials & Characterisation sector and a modest decline
from our Research & Discovery sector. The initial phase in the
transformation of our customer service approach supported good
order growth for the Service & Healthcare sector. At a regional
level, good order growth across North America and Asia was
partially offset by a small decline in orders in Europe, where
customer activity, local restrictions and reduced access have been
most pronounced. Within Asia, orders for China grew by 18%
supported by strong growth within Semiconductor and Advanced
Materials end markets.
Revenue for the Group was impacted throughout the period by
covid-related disruption to the fulfilment of customer orders. This
resulted in a decline in reported and constant currency revenue to
GBP140.3m (2019: GBP157.6m) a reduction of 11.0%, with a decline
across the Materials & Characterisation and Research &
Discovery sectors of 10.9% and 16.4% respectively. The Service
& Healthcare sector delivered modest growth supported by
increased demand for the services related to our own products. The
combination of customer disruption and product mix in the period
resulted in the proportion of revenue from academic customers
increasing slightly to 54% (2019: 52%) in the first half. Operating
margin was maintained at 16.6% on a constant currency basis
supported by gains realised in the period from our Horizon strategy
and cost controls.
From an end market perspective, we saw good constant currency
revenue growth for the Semiconductor & Communications (30% of
Group revenue) customer segment with strong growth for Quantum
Technology (6% of revenue). In the Advanced Materials segment (27%
of revenue), despite positive order and revenue growth to
commercial customers, we saw a double-digit decline in revenue due
to deferred shipments and temporary academic customer site
closures. The Healthcare & Lifescience (20% of revenue) and
Energy & Environment (8% of revenue) segments were strongly
impacted by the logistics of accessing customer sites and the
reduced academic customer activity in Europe and America during the
period. Revenue for the Research & Fundamental Science market
segment (9% of revenue) was in line with the comparable period last
year.
From a geographical perspective, regional Government and
customer responses to the pandemic dominated revenue profiles, with
the strongest impacts being felt in North America and Europe, down
26% and 12% respectively. Asia delivered revenue broadly in line
with previous first half as it recovered earlier from the first
wave of the pandemic, allowing access to customer sites.
With good order growth and a deferral of revenue in the period,
the order book, representing orders for future delivery, increased
by 17% on a constant currency basis since March 2020, with
significant growth in Materials & Characterisation and good
growth across Research & Discovery and Service &
Healthcare. The book-to-bill ratio for the period increased to
1.25.
Continued good cash collection, reflected in cash conversion of
97% in the period, resulted in an improved net cash position of
GBP81.4m, up from GBP67.5m at year end.
Sector performance
Turning to the performance of the individual sectors:
Materials & Characterisation provides products and solutions
that enable the fabrication and characterisation of materials down
to the atomic scale, predominantly supporting customers across
applied R&D as well as the production and manufacture of high
technology products. Orders for the sector increased by 16.5% to
GBP91.0m (2019: GBP78.1m), with growth from both academic and
commercial customers, underpinned by strong growth to customers
within the Semiconductor & Communications segment and improved
demand within the Advanced Materials, Quantum and Healthcare &
Lifescience segments. Order growth was strong in North America and
Asia, supported by good growth in Europe. Reported and constant
currency revenue of GBP65.2m (2019: GBP73.2m) declined by 10.9%,
predominantly due to covid-related issues at our customers' sites.
The impact was most pronounced among our higher-margin measurement
and characterisation solutions where growth from Semiconductor
& Communications and Quantum customers was offset by delayed
shipments to other segments within Europe and North America.
Reduced revenue, combined with a lower proportion of higher margin
product, negatively impacted profitability within the period with
reported adjusted operating profit declining by 27.0% to GBP8.9m
(2019: GBP12.2m), representing a reduction of 32.0% at constant
currency. Consequently, reported operational margin fell by 300
basis points (down 400 basis points at constant currency) to 13.7%
(2019: 16.7%). The combination of strong orders and delayed
shipments resulted in order book growth of 43.8% to GBP76.8m (March
2020: GBP53.4m).
Research & Discovery provides advanced solutions that create
unique environments and enable the imaging and analytical
measurements down to the atomic and molecular level, used
predominately within scientific research and applied R&D.
Revenue and orders for the sector were significantly impacted in
the first quarter by covid-related disruption to our academic
customers in life sciences and semiconductor research.
Whilst we have seen increased momentum through the second
quarter, this initial impact led to reduced volumes of our
scientific cameras and optical microscopy solutions in the period.
This more than offset strong order and an in-line revenue
performance across our product portfolio of cryogenic platforms,
specialised high magnetic field systems and scientific X-ray tubes.
This resulted in reported and constant currency revenue being down
16.4% to GBP48.3m (2019: GBP57.8m) in the period. Growth in Quantum
Technology related revenue was more than offset by reductions
across Healthcare & Lifescience and Semiconductor &
Communications end markets with other segments remaining broadly in
line with the previous year. Profitability for the sector was
supported by realising tangible operational improvements through
our Horizon strategy and careful cost management in the period.
This resulted in an improvement in reported operational margin of
220 basis points to 13.3% (2019: 11.1%) up 120 basis points at
constant currency, with reported adjusted operating profit flat at
GBP6.4m (2019: GBP6.4m) representing a reduction of 7.5% at
constant currency. The reported order book increased by 5.3% to
GBP101.7m (March 2020: GBP96.5m).
Service & Healthcare provides customer service and support
for our own products and the service of third-party MRI scanners in
Japan. In the period we accelerated the transformation of our
customer service approach to better support our customers as they
manage through the covid pandemic. This has involved changing our
service product offerings and the way in which we provide support
to our customers around the world. Through the provision of
increased digital products, remote services and better leveraging
our global footprint we maintained high levels of support for our
customers throughout the period. Revenue grew by 1.1% on a reported
and constant currency basis to GBP26.8m (2019: GBP26.5m). Increased
reported and constant currency operational profit margin for the
sector of 490 basis points to 33.6% (2019: 28.7%) was supported by
improved operational efficiencies and favourable product mix.
Reported and constant currency adjusted operating profit
increased by 18.4% to GBP9.0m (2019: GBP7.6m). Order growth of 3.8%
on a reported basis to GBP30.4m (2019: GBP29.3m) was driven by
increased demand for services related to our own products and
represents 3.1% growth at constant currency.
Covid response
The early actions we took in response to covid enabled us to
maintain business continuity throughout the evolving phases of the
pandemic. Our approach has enabled us to respond quickly to the
associated ongoing global business disruption. These actions
included establishing procedures and working practices to make our
manufacturing sites and offices safe to work in, and ensuring those
staff working off-site had full and secure access to the systems
they required to undertake their roles.
Our priorities during this time have remained the health and
wellbeing of our employees and the provision of support to our
customers, helping them navigate their own operational challenges.
Our hybrid workplace model, with its clear practices and
procedures, guides each of our sites in line with the local
situation and government guidelines. This has provided clarity and
structure across our global business enabling us to maintain and
optimise business continuity.
We have continued to develop and refine working practices across
our sites and business functions to enable increased operational
output and efficiencies. This has included the introduction of
shifts in some of our facilities to deliver improved output whilst
maintaining covid-safe workspaces.
The Group prudently took part in the UK Government's Job
Retention Scheme given the highly uncertain market outlook at the
start of the crisis. This involved a small number of employees
being furloughed where they could not undertake their work
remotely. However, by the end of June all furloughed colleagues had
returned to work. In light of the resilience of the Group's
performance in the period, we have now repaid all of the UK
Government support.
Horizon progress
We have continued with the implementation of our Horizon
strategy to strengthen our resilience through the ongoing market
disruption as well as deliver sustainable future growth and margin
improvement. In the period we continued the development of our
capabilities and maintained our focus on improved market intimacy,
operational excellence, enhanced delivery of R&D programmes and
customer service transformation. This included continued investment
in the development of our employees and undertaking selective
recruitment to further enhance specific skills and capabilities to
provide the foundation for future growth.
In response to covid-related market disruption and associated
changes to our customer needs, we accelerated the delivery of our
market intimacy programmes and the transformation of our service
offering. From a market intimacy perspective, we expanded our
digital marketing capabilities to offer additional webinars, online
product launches, virtual conferences and higher value website
content. Deeper market intimacy continues to provide valuable
insights into our customers' strategic priorities, which allows us
to identify additional opportunities for growth in existing and new
adjacent markets. The strength of our market intimacy, alongside
our enhanced digital presence and the success of recently launched
products, has supported order growth in the period. From a service
and support perspective, with travel restrictions and reduced
customer site access, we accelerated the development and deployment
of our digital and remote service capabilities and improved our "in
region" service reach and capacity by cross-training our existing
service teams. Our operational excellence programme continued to
progress and contributed to margin enhancement in the period.
R&D
The development and delivery of highly innovative and
market-leading products and key enabling technologies that deliver
ongoing, sustainable value for our customers remains a central
pillar within our Horizon strategy. Throughout the period, we have
remained focused on our strategic R&D programme maintaining our
progress and investment in this area, providing a healthy pipeline
of future product launches. In the period we launched several new
products in line with original expectations and further enriched
our IP portfolio. R&D spend in the period of GBP12.7m (2019:
GBP13.0m) is broadly in line with the previous year and represents
9.1% of sales.
People
I would like to thank all our employees for their commitment
during these challenging times, the support they have given each
other and their innovative approaches to ensuring our customers
continue to receive a world-class experience from Oxford
Instruments.
Our employees are fundamental to our ongoing business progress
and I remain delighted by their continued engagement with our
Horizon strategy. Their passion to both improve our business and
support our customers has been demonstrated through their actions
and agility throughout the unprecedented disruption caused by the
coronavirus.
Dividend
Robust trading and positive cash generation through the period
has resulted in the Board declaring an interim dividend of 4.1p per
share, following last year's declared interim dividend of 4.1p,
which, during the early stages of the pandemic, the Board decided
not to pay.
Summary and outlook
The Group is positioned to be a leading provider of high
technology products and services to the world's leading industrial
customers and scientific research communities to image, analyse and
manipulate materials down to the atomic and molecular level. This
allows us to live up to our purpose of facilitating a greener
economy, increased connectivity, improved health and leaps in
scientific understanding.
We have seen strong order growth in the first half of the year
with a good improvement in the order book. Orders have grown across
our academic and commercial customer base, particularly for our
compound semiconductor process solutions and quantum cryogenic and
magnet systems. Covid-related customer disruption has affected
installation and commissioning activities. This, along with the
introduction of new covid-safe working practices across our
manufacturing sites, has led to a fall in revenue over the first
half. Gains from our Horizon strategy and cost control enabled
sustained operating margins despite lower revenue. The dedication,
agility and resilience of our employees during this difficult
period underpins our confidence in our ability to service and
support the needs of our customers.
We are adjusting to the external and internal effects of the
pandemic and expect uncertainty to remain high. However, robust
trading during the first half, combined with a strong order book,
gives us confidence for the second half, absent a material increase
in covid--related disruption that could impact facility or customer
site access. We expect full-year performance to be a little behind
last year on a constant currency basis, ahead of current analyst
forecasts.
The transformation of the Group through our Horizon strategy has
provided a solid foundation for future growth. Our focus on markets
with sustainable long-term growth drivers, our continuous drive for
greater efficiencies and our ability to respond to evolving
customer needs mean that we remain well positioned to navigate the
current challenges and return to long-term sustainable growth and
margin improvement.
Ian Barkshire
Chief Executive
10 November 2020
Operations Review
Materials & Characterisation
Constant
2020 2019 currency
GBPm GBPm Growth growth(1)
--------------------------------------- ----- ----- ------- ----------
Revenue 65.2 73.2 (10.9%) (10.9%)(1)
--------------------------------------- ----- ----- ------- ----------
Adjusted(2) operating profit 8.9 12.2 (27.0%) (32.0%)(1)
--------------------------------------- ----- ----- ------- ----------
Adjusted(2) operating margin 13.7% 16.7%
--------------------------------------- ----- -----
Operating profit after adjusting items 7.8 11.0
--------------------------------------- ----- -----
1. For definition, refer to note on page 2 of highlights.
2. Details of adjusting items can be found in Note 2 of the
Condensed Consolidated Financial Statements.
The Materials & Characterisation sector comprises Asylum
Research, NanoAnalysis, Magnetic Resonance and Plasma Technology.
In the period we transferred the Magnetic Resonance business to
this sector, better aligning the portfolio with end customer
applications and enabling further exploitation of synergies across
the sales, marketing, and service teams. The sector has a broad
customer base across a wide range of applications for the imaging
and analysis of materials down to the atomic level as well as the
fabrication of semiconductor devices and structures through our
range of advanced semiconductor etch and deposition process
systems. Our portfolio of imaging and analysis systems includes our
range of market-leading X-ray and electron analysis systems used in
conjunction with electron and ion microscopes as well as our
performance-leading atomic force microscopes and NMR analysers. The
sector has a strong focus on supporting and accelerating our
customers' applied R&D, enabling the development of new
devices, next generation higher performance materials and enhancing
productivity in advanced manufacturing, quality assurance (QA) and
quality control (QC). We provide leading product performance,
improved ease of use and enhanced productivity, with analytics and
information to aid the interpretation of acquired data.
Materials & Characterisation delivered strong growth in
reported orders; covid-related disruptions negatively impacted
shipments and installations in the period, resulting in a reduction
in revenue, adjusted operating profit and operating margin for the
sector. Strong order performance was supported by continued
positive underlying demand from our end markets, our enhanced
market intimacy and the success of recently launched products.
Order growth was evenly split across commercial and academic
customers with the strongest growth in Asia and good growth in
North America, Europe was broadly in line with the previous first
half. Revenue was significantly impacted by covid-related
disruptions, affecting regions, markets, and customer types
differently. This resulted in a reduction in revenue from
commercial customers, while academic-related revenues were broadly
in line with the previous year.Strongest declines were in Europe
and North America where the severity and length of disruption has
been largest; revenue in Asia was broadly in line with the previous
year. Consequently, the proportion of revenue from commercial
customers reduced to 52% (2019: 57%). The order book for future
deliveries grew by 43.8% to GBP76.8m (2019: GBP53.4m).
From an end market perspective, we continued to see strong
underlying demand and order growth from the Semiconductor &
Communications and Advanced Materials segments, despite further
weakening from automotive and aerospace customers. We also had good
order growth from Quantum Technology and Healthcare &
Lifescience segments. Orders in Energy & Environment were down
due to subdued academic activity in the period. The combination of
regional variations within our end markets and differing levels of
covid disruption resulted in good revenue growth in Semiconductor
& Communications and Quantum Technology, and a reduction across
Advanced Materials, Energy & Environment and Healthcare &
Lifescience, predominately due to their higher proportion of
customers within Europe and North America. Semiconductor &
Communications represented 47% of sales in the sector, Advanced
Materials 35% with Energy & Environment 11%, and Healthcare
& Lifescience 3%.
The Semiconductor & Communications segment delivered
double-digit order and revenue growth and remains a significant
focus for the sector. We provide imaging and analysis products as
well as etch and deposition process solutions used across a broad
range of silicon and compound semiconductor device applications. We
saw strong growth of our imaging and analysis solutions into
mainstream silicon semiconductor and electronics applications in
line with end market growth. Here our market-leading spatial
resolution, ease of use and analytical integrity support the
development of next generation technologies, the transfer to
production of new designs and the quality control and assurance
within production. AztecWave(TM), which we launched in the period,
allows a step change in the ease of use and measurement of the low
concentration materials and essential dopants required to achieve
performance from semiconductor wafers, devices and bond wires.
The compound semiconductor market remains buoyant with resilient
long-term sustainable growth drivers due to the ability of compound
semiconductor devices to transform the energy efficiency of power
electronics, dramatically increase connectivity and bandwidth, and
enable faster communications. In the period, our strategic focus on
improving the key process steps for the critical layers which
determine end device performance supported order growth into power
electronics applications such as example chargers, optoelectronic
structures and lasers used in data communications, and sensors for
autonomous vehicles. Order growth of our measurement and
semiconductor processing solutions has been further supported by
our strategy to tailor product offerings for the specific needs of
academic, corporate R&D and production customers.
Our expertise in semiconductor processing and characterisation
is providing good growth within Quantum Technology markets where
the uniformity, high purity and surface structure of the deposited
materials are critical to the performance and lifetime of quantum
devices. We have developed dedicated processing solutions for the
specific materials being used within quantum R&D to directly
address customer needs.
Our growth in the Advanced Materials segment is due to the
continued drive to develop, control and repeatably manufacture
stronger, lighter and higher performing materials across a broad
range of end markets including automotive, textiles, displays,
energy generation and construction. Our imaging and analysis
products help our customers develop new higher performing materials
and improve their manufacturing yields.
These advanced materials provide the pathway to transform end
application performance, supporting the move towards reduced raw
material usage and a lower end-to-end carbon footprint. As an
example, the launch of our faster structural material analyser,
Symmetry-S2(TM), in combination with our new application specific
software, is being used by a major steel manufacturer to refine
their processes in the development and process control of next
generation advanced steels and super alloys required by automotive
manufacturers to reduce vehicle weight whilst retaining structural
integrity. The enhanced speed of our system and automated software,
which uses a proprietary machine learning algorithm, reduces the
characterisation process from many hours down to minutes.
We have had continued strong demand and order growth in the
analysis of advanced polymers, which are being developed for and
utilised across a diverse range of applications including lower
cost photovoltaics, enhanced performance displays and flexible bio
implants. Our advanced atomic force microscopes enable the accurate
characterisation of the mechanical and physical properties and the
robustness of the polymers under changing environmental conditions.
These properties determine their value and utility for each target
application.
Whilst orders and revenue within the Environment & Energy
segment declined in the period due to covid-related market
disruption we continue to see sustainable long-term growth drivers
and opportunities for growth across applications such as batteries
and photovoltaics.
In the period we launched AZtecBattery(TM), a tailored software
solution to provide quality control and assurance for the
feedstocks used to manufacture the anodes and cathodes within
batteries. Our analysis solutions are also being used to optimise
the lifetime and performance of batteries through the
characterisation of the composition and structure of the
electrolytes that enable the transfer of charge during operation of
the battery.
The Healthcare & Lifescience segment, which is a relatively
small proportion of the sector, provides an opportunity for growth
as we develop and tailor solutions for specific applications. In
the period we received increased orders supported by the launch of
AZtecPharma(TM), which has the required regulatory certification
and traceable workflows for use across the pharmaceutical and
biomedical industry.
It has been developed in collaboration with major manufacturers
who are using it to identify foreign body contamination within and
on the surface of medicine tablets. Our video rate atomic force
microscopes are being used across a broad range of biomechanics and
viral studies, including covid, due to its ability to observe the
dynamic responses of biological material to environmental and
pharmaceutical treatments in real time.
Research & Discovery
Constant
2020 2019 currency
GBPm GBPm Growth growth(1)
--------------------------------------- ----- ----- ------- ----------
Revenue 48.3 57.8 (16.4%) (16.4%)(1)
--------------------------------------- ----- ----- ------- ----------
Adjusted(2) operating profit 6.4 6.4 -% (7.5%)(1)
--------------------------------------- ----- ----- ------- ----------
Adjusted(2) operating margin 13.3% 11.1%
--------------------------------------- ----- -----
Operating profit after adjusting items 3.2 3.2
--------------------------------------- ----- -----
1. For definition, refer to note on page 2 of highlights.
2. Details of adjusting items can be found in Note 2 of the
Condensed Consolidated Financial Statements.
The Research & Discovery sector includes Andor Technology,
NanoScience and X-Ray Technology. This sector provides advanced
solutions that create unique environments and enable imaging and
analytical measurements down to the molecular and atomic level,
used predominantly in fundamental and applied research. We build on
our relationships with customers, working on breakthrough
applications in research to gain insights and support future
commercial applications. We have strong brand recognition and
leading product performance in our chosen market segments.
Revenues and orders for the sector were significantly impacted
by disruptions caused by coronavirus in the period. The disruption
was most severe in the first quarter with continued improvement and
positive momentum through the second quarter. The severity of the
impact in the first quarter was largely due to the reduced activity
at many of our target customer sites due to temporary closures,
reduced occupancy or restricted access as well as reduced
manufacturing capacity as we adapted our sites to covid-safe
workplaces and established new working practices. Customer
disruption was most pronounced within Europe and North America and
across our academic research customers in life science applications
leading to reduced orders and revenues for our scientific cameras
and optical microscopy solutions in the period. This more than
offset strong order growth in Quantum Technology and Advanced
Materials and an in-line revenue performance for our portfolio of
cryogenic and high magnetic field systems and scientific X-ray
tubes.
This resulted in reported revenue for the sector falling 16.4%
to GBP48.3m. From an end market perspective, growth in Quantum
Technology was more than offset by reductions in Healthcare &
Lifescience and Semiconductor & Communications markets with
Advanced Materials, Research & Fundamental Science and Energy
& Environment segments being broadly in line with the previous
first half year.
Profitability for the sector was enhanced by the realisation of
tangible gains from the Horizon business improvements established
in previous years and through careful cost management in the
period.
This resulted in an increase in reported operational margins to
13.3% (2019: 11.1%) representing an improvement to 12.3% at
constant currency. Reported adjusted operating profit remained at
GBP6.4m representing a fall of 7.5% at constant currency.
Looking at the end market segments, within Healthcare &
Lifescience, as previously mentioned, demand in Europe and North
America was significantly subdued during the first quarter with
temporary or partial site closures at academic research facilities
and central research laboratories. The long-term fundamental market
drivers of improving the health and wellbeing of society remain
robust, driven by the need to better understand fundamental disease
mechanisms at the cellular and molecular level, and for the
development of new treatments, therapies and personalised
medicines. As our customers' restrictions have eased, we have seen
increased order levels with bookings in the second quarter being in
line with the previous year. Our portfolio of advanced microscopy
systems, analysis and visualisation software solutions and
scientific cameras remain key enabling technologies to help our
customers better understand the origins and progression of diseases
such as cancer and neurological disorders like Alzheimer's, as well
as the development of new medicines and treatments. As an example,
the CRISPR technique, which can be thought of as a pair of genetic
scissors that can cut and edit specific
sequences of DNA and was recognised with this year's Nobel
prize, is an important part of the cell biologists' tool box with
increased interest in its potential within cancer research. The
method relies on extremely weak light signals and therefore
requires highly sensitive scientific cameras such as our iXon(TM).
Within the segment, we received increased demand from customers and
our OEM partners involved in covid-related initiatives. This
included use of our cameras within diagnostic testing equipment and
researchers using our broad range of products to study the virus,
understanding its genetic sequence, mutations, how it attacks
patients' cells and organs and the response from their immune
system.
Sales of our analysis and visualisation software were broadly in
line with the previous year with customers able to utilise our
products whilst working remotely from their facilities. Conversely,
sales of our optical microscopy systems were significantly impacted
in the first quarter with continued recovery through the second
quarter and a building pipeline of future sales opportunities.
Quantum Technology continues to attract increased funding from
governments and commercial customers because of the potential to
transform computing, cryptography and sensor capabilities, in turn
disrupting diverse end markets such as banking and healthcare. This
has supported increased demand for our cryogenic platforms and high
field magnet systems for both fundamental research into quantum
effects, new quantum materials and in the development toward
practical quantum computers. Our recently launched Proteox(TM)
cryogenic system is gaining market traction across leading academic
and commercial customers and we are delighted to be a key partner
with Rigetti, a US based quantum systems provider, in a UK
government funded consortium to build the UK's first commercial
quantum computer. Proteox(TM) will be at the heart of the system
and we will be part of the team to build and operate the computer
which will be housed at our Oxford facility.
Within the Advanced Materials segment our cryogenic platforms,
high field magnet systems, scientific cameras and optical
components are being used to explore and characterise the
fundamental properties of next generation materials such as
graphene-related two-dimensional sheets for use across a broad
range of applications, including semiconductors, sensors and
communication devices.
Within Research & Fundamental Science we continue to see
long-term customer interest in our specialised cryogenic and
superconducting magnet systems, and high-end scientific cameras
across a broad range of research themes including astronomy and
fundamental physics, chemistry and materials research. In the half
we received further grants to develop more sensitive cameras for
the tracking of space debris with continued long-term interest in
astronomy applications. The SOFIA space telescope, which NASA used
to recently discover water on the moon, uses one of our cameras to
guide the telescope and optically track the objects of interest. In
the period, the first two systems for the Institute of Physics in
Beijing were installed as part of the multisystem order into their
extreme environments laboratory.
Service & Healthcare
Constant
2020 2019 currency
GBPm GBPm Growth growth(1)
--------------------------------------- ----- ----- ------ ----------
Revenue 26.8 26.6 +1.1% +1.1%(1)
--------------------------------------- ----- ----- ------ ----------
Adjusted(2) operating profit 9.0 7.6 +18.4% +18.4%(1)
--------------------------------------- ----- ----- ------ ----------
Adjusted(2) operating margin 33.6% 28.%
--------------------------------------- ----- -----
Operating profit after adjusting items 9.0 7.6
--------------------------------------- ----- -----
1. For definition, refer to note on page 2 of highlights.
2. Details of adjusting items can be found in Note 2 of the
Condensed Consolidated Financial Statements.
The Service & Healthcare sector comprises the Group's
maintenance service contracts, billable repairs, training and
support services, and spare part sales related to Oxford
Instruments' own products; and the support and service of
third-party MRI scanners in Japan.
In the first half the sector delivered order and revenue growth
driven by increased demand for support services related to our own
products. Revenue from our Japan MRI service operations were
broadly in line with the previous year, with our team continuing to
provide the same levels of support to hospitals throughout the
disruption. Improved operational efficiencies and higher value
products contributed to improved profitability in the half with
adjusted operating profit increasing 18.4% to GBP9.0m with reported
operating margin up 490 basis points to 33.6%.
To meet the changing needs of our customers as a result of
covid, as previously mentioned, we accelerated the transformation
of our customer support services including adapting our service
offerings, introducing remote access products and changing the way
in which we are organised and deliver our services.
With travel restrictions in place across many international
borders we maximised our "in-region" capacity through
cross-training of our existing engineers to cover a broader
portfolio. Where customer site access was not possible, we were
able to utilise our virtual reality "Live Assist" capabilities to
enable remote product repair and commissioning. In the period we
also made it easier for customers to reach our technical support
teams through the launch of a live chat functionality on our
website, allowing them to either quickly resolve their query or
efficiently establish the next course of action. These new
approaches were well received by customers, improving their
productivity and minimising downtime, whilst increasing our own
service capacity and efficiency. With customers' attitudes changing
we have now released remote-only service contract options for some
of our products.
For those customers who had restricted access to their
facilities during the pandemic we helped them connect to and
remotely operate their equipment or securely access their data
remotely for further analysis. We also assisted customers to safely
shut down their systems remotely, and as they returned to their
workplaces, to resume operations and bring their systems back
online.
In addition, we increased the number and range of virtual
training programmes that were available both for purchase and with
free access.
Whilst we have accelerated the early phase of the transformation
of our services offering, we have significant scope for further
developments that will increase the value and breadth of support to
our customers and contribute to the ongoing success of our Horizon
strategy.
Finance Review
In January 2020, the Group disposed of its minority equity stake
in the Scienta Omicron joint venture to existing Shareholders. In
the following month, the Group completed the disposal of its OI
Healthcare business in the US. For the purposes of comparative
reporting, OI Healthcare has been classified as a discontinued
operation.
Reported orders increased by 6.0% to GBP175.7m (2019:
GBP165.7m), an increase of 5.9% at constant currency. At the end of
the period, the Group's order book for future deliveries stood at
GBP204.6m (31 March 2020: GBP175.0m). The order book grew 16.9% on
a reported basis and 16.6% at constant currency.
Reported and constant currency revenue on a continuing basis
declined by 11.0% to GBP140.3m (2019: GBP157.6m).
Adjusted operating profit from continuing operations decreased
by 7.3% to GBP24.3m (2019: GBP26.2m). Adjusted operating profit,
excluding currency effects, decreased by 11.5% with a currency
tailwind of GBP1.1m. Adjusted operating margin from continuing
operations increased by 70 basis points to 17.3% (2019: 16.6%).
Excluding currency effects, adjusted operating margin was flat at
16.6%.
Adjusted profit before tax from continuing operations declined
by 8.1% to GBP23.7m (2019: GBP25.8m), representing a margin of
16.9% (2019: 16.4%).
Amortisation of acquired intangibles was GBP4.3m and the
business incurred a credit of GBP0.8m relating to the movement in
the mark-to-market valuation of uncrystallised currency hedges for
future years. There were no other adjusting items in the
period.
After adjusting items, the Group recorded an operating profit of
GBP20.8m (2019: GBP19.3m), an increase of 7.8%, and profit before
tax of GBP20.2m (2019: GBP18.9m), an increase of 6.9%.
Continuing adjusted basic earnings per share fell by 8.9% to
32.8p (2019: 36.0p). Continuing basic earnings per share were 27.7p
(2019: 26.0p), growth of 6.5%.
Cash generated from operations of GBP23.3m (2019: GBP15.3m)
represents 97% (2019: 62%) cash conversion. Net cash increased from
GBP67.5m on 31 March 2020 to GBP81.4m, aided by good operating cash
flow.
At the end of September, our revolving credit facility remained
undrawn, leaving approximately GBP105m of committed facilities.
This represents total headroom of about GBP214m. The Group has
outstanding private placement loan notes of GBP27.9m, which mature
on 31 March 2021, at which point headroom will fall to GBP186m.
Adjusted operating profit is stated before amortisation of
acquired intangibles, restructuring costs, the mark-to-market
valuation of unexpired currency hedges, and other adjusting items,
as set out in Note 2 to the Financial Statements.
2020 2019
GBPm GBPm Growth
-------------------------- ----- ----- ------
Revenue 140.3 157.6 (11%)
Adjusted operating profit 24.3 26.2 (7.3%)
-------------------------- ----- ----- ------
Income Statement
The Group's Income Statement is summarised below.
Half year Half year
to to
30 September 30 September
2020 2019
GBPm GBPm Change
------------------------------------------------- ------------ ------------ -------
Revenue 140.3 157.6 (11.0%)
Adjusted gross profit 71.5 79.5 (10.1%)
Administrative expenses (47.6) (52.2)
Share of profit/(loss) of associate - -
Foreign exchange 0.4 (1.1)
------------------------------------------------- ------------ ------------ -------
Adjusted operating profit 24.3 26.2 (7.3%)
Net finance costs (0.6) (0.4)
------------------------------------------------- ------------ ------------ -------
Adjusted profit before tax 23.7 25.8 (8.1%)
Amortisation of acquired intangibles (4.3) (4.4)
Non-recurring items - -
Mark-to-market of currency hedges 0.8 (2.5)
------------------------------------------------- ------------ ------------ -------
Profit before tax 20.2 18.9 +6.9%
------------------------------------------------- ------------ ------------ -------
Tax from continuing operations (4.3) (4.0)
------------------------------------------------- ------------ ------------ -------
Profit for the period from continuing operations 15.9 14.9
------------------------------------------------- ------------ ------------ -------
Adjusted effective tax rate(1) 20.7% 20.2%
Continuing adjusted earnings per share - basic 32.8p 36.0p (8.9%)
Continuing earnings per share - basic 27.7p 26.0p +6.5%
Continuing adjusted earnings per share - diluted 32.4p 35.6p (9.0%)
Continuing earnings per share - diluted 27.4p 25.8p +6.2%
Dividend per share 4.1p -
------------------------------------------------- ------------ ------------ -------
1. The adjusted effective tax rate is calculated excluding
amortisation of acquired intangibles, the mark-to-market of
financial derivatives, and other adjusting items.
Orders and revenue
Total reported orders grew by 6.0% (5.9% at constant currency)
to GBP175.7m. Orders, at constant currency, grew by 16.5% for
Materials & Characterisation, declined by 6.9% for Research
& Discovery and grew by 3.1% for Service & Healthcare. The
decline in Research & Discovery was principally due to a
reduction in orders for our cameras and spectroscopy products in
the academic sector.
Reported and constant currency revenue of GBP140.3m (2019:
GBP157.6m) decreased by 11.0%. Reported revenue fell by 10.9% for
Materials & Characterisation and 16.4% for Research &
Discovery. Service & Healthcare reported revenue grew by
1.1%.
The book-to-bill ratio (orders received to goods and services
billed in the period) for the year was 1.25.
Revenue, at constant currency, declined by 10.9% for Materials
& Characterisation partly due to customer disruption from covid
that hampered our ability to ship product to customer sites, and
the impact on production capacity from the implementation of new
safe working practices. A constant currency decline of 16.4% in
Research & Discovery was impacted by production constraints as
our manufacturing sites adapted to new covid working practices, as
well as being unable to complete high value product installations
in Asia ahead of the period end owing to customer site closures and
travel constraints on service personnel.
Service & Healthcare constant currency revenue grew by 1.1%,
with good growth from the service of our own products.
Revenue from Asia of GBP63.9m (a constant currency decline of
0.8%) constitutes 46% of total Group revenue, with China being 54%
and 25% of the regional and Group totals respectively. Revenue from
Europe of GBP40.5m (a constant currency decline of 12.0%) is 29% of
total Group revenue. North America's constant currency revenue
declined by 26% to GBP33.8m, proportionate to 24% of total Group
revenue. The Rest of World revenue for the period was GBP2.0m,
constant currency growth of 40%.
The total reported order book grew by 16.9% (16.6% at constant
currency) to GBP204.6m (2019: GBP175.0m). The order book, at
constant currency, compared to 31 March 2020, increased by 44.9%
for Materials & Characterisation, 5.5% for Research &
Discovery and fell by 1.3% for Service & Healthcare. This good
growth has been supported by revenue not recognised in the year
owing to delayed shipments and installations.
Materials Research Service
GBPm & Characterisation & Discovery & Healthcare Total
-------------------------------------------- ------------------- ------------ ------------- -------
Revenue(1) : Half year to 30 September 2019 73.2 57.8 26.6 157.6
-------------------------------------------- ------------------- ------------ ------------- -------
Underlying movement (8.0) (9.5) 0.2 (17.3)
Foreign exchange - - - -
-------------------------------------------- ------------------- ------------ ------------- -------
Revenue(1) : Half year to 30 September 2020 65.2 48.3 26.8 140.3
-------------------------------------------- ------------------- ------------ ------------- -------
Revenue growth: reported (10.9%) (16.4%) +1.1% (11.0%)
Revenue growth: constant currency (10.9%) (16.4%) +1.1% (11.0%)
-------------------------------------------- ------------------- ------------ ------------- -------
1. From continuing operations.
Adjusted gross profit
Adjusted gross profit fell by 10.1% to GBP71.5m (2019:
GBP79.5m), representing a gross profit margin of 51.0%, a decline
of 40 basis points over last year.
Adjusted operating profit
Adjusted operating profit from continuing operations decreased
by 7.3% to GBP24.3m (2019: GBP26.2m), representing an adjusted
operating profit margin of 17.3%, an increase of 70 basis points
against last year. At constant currency, the adjusted operating
profit margin was 16.6%, in line with last year.
Materials & Characterisation margin declined by 300 basis
points to 13.7% (2019: 16.7%) with the margin in NanoAnalysis
falling on lower revenue. Margins in Plasma Technology have
remained broadly constant and we have seen good growth in Asylum
Research's margins. Following an internal reorganisation, the
Magnetic Resonance product range and the costs of a small research
facility in Finland are now recorded within Materials &
Characterisation. Both were previously recorded within Research
& Discovery. At constant currency the margin was 12.7%.
Research & Discovery's adjusted operating margin increased
to 13.3% (2019: 11.1%), growth of 220 basis points. At constant
currency, the margin was 12.3%. Margin growth was supported by the
installation of some significant complex magnet and cryogenic
systems for NanoScience. Good cost control and favourable product
mix within Andor Technology prevented margin dilution from a fall
in revenue.
Service & Healthcare margin increased by 490 basis points to
33.6% (2019: 28.7%) owing to our focus on improving service revenue
on our own products, combined with some large upgrades in Andor
Technology. At constant currency, the margin was 33.6%.
Currency effects (including the impact of transactional currency
hedging) have increased reported adjusted operating profit by
GBP1.1m when compared to blended hedged exchange rates for the
comparative period.
Materials Research Service
GBPm & Characterisation & Discovery & Healthcare Total
------------------------------------------------------------- ------------------- ------------ ------------- -----
Adjusted operating profit(1) : Half year to 30 September 2019 12.2 6.4 7.6 26.2
------------------------------------------------------------- ------------------- ------------ ------------- -----
Underlying movement (3.9) (0.5) 1.4 (3.0)
Foreign exchange 0.6 0.5 - 1.1
------------------------------------------------------------- ------------------- ------------ ------------- -----
Adjusted operating profit(1) : Half year to 30 September 2020 8.9 6.4 9.0 24.3
------------------------------------------------------------- ------------------- ------------ ------------- -----
Margin: Half year to 30 September 2019 16.7% 11.1% 28.6% 16.6%
Margin: Half year to 30 September 2020 13.7% 13.3% 33.6% 17.3%
------------------------------------------------------------- ------------------- ------------ ------------- -----
1. From continuing operations.
Adjusting items
Amortisation of acquired intangibles of GBP4.3m relates to
intangible assets recognised on acquisitions, being the value of
technology, customer relationships and brands.
The Group uses derivative products to hedge its short-term
exposure to fluctuations in foreign exchange rates. It is Group
policy to have in place at the beginning of the financial year
hedging instruments to cover 80% of its forecast transactional
exposure for that year. The Group has decided that the additional
costs of meeting the extensive documentation requirements of IFRS 9
to apply hedge accounting to these foreign exchange hedges cannot
be justified. Accordingly, the Group does not use hedge accounting
for these derivatives.
Net movements on 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 current
year this amounted to a credit of GBP0.8m (2019: GBP2.5m charge).
The period-end asset primarily reflects an uncrystallised gain
arising from a rise in the value of Sterling at the balance sheet
date against a blended rate achieved on US Dollar, Euro and
Japanese Yen forward contracts that will mature over the next
twelve months.
There were no other adjusting items booked in the period.
Net finance costs
The Group's adjusted net finance costs were GBP0.6m (2019:
GBP0.4m), the small increase due to a refund of overpaid interest
last year.
Profit before tax
Continuing adjusted profit before tax fell by 8.1% to GBP23.7m
(2019: GBP25.8m). The adjusted profit before tax margin of 16.9%
(2019: 16.4%) was above last year due good cost control offsetting
lower revenue, as well as a small currency tailwind.
Continuing profit before tax of GBP20.2m (2019: GBP18.9m) is
after the mark-to-market movement on derivative financial
instruments, and amortisation of acquired intangibles.
Tax
The adjusted tax charge from continuing operations of GBP4.3m
(2019: GBP4.0m) represents an effective tax rate of 20.7% (2019:
20.2%), the increase reflecting a change in the geographical mix of
profits earned.
Earnings per share
Continuing adjusted basic earnings per share decreased by 8.9%
to 32.8p (2019: 36.0p); continuing adjusted diluted earnings per
share fell by 9.0% to 32.4p (2019: 35.6p). Continuing basic
earnings per share increased by 6.5% to 27.7p (2019: 26.0p) and
continuing diluted earnings per share grew by 6.2% to 27.4p (2019:
25.8p).
The number of undiluted weighted average shares increased
marginally to 57.3m.
Foreign exchange
The Group faces transactional and translational currency
exposure, most notably against the US Dollar, Euro and Japanese
Yen. Translational exposures arise on the consolidation of overseas
company results into Sterling. Transactional exposures arise where
the currency of sale or purchase transactions differs from the
functional currency in which each company prepares its local
accounts. With many of the manufacturing sites residing in the UK,
the Group has a significant cost base in Sterling.
Foreign currency exposure
The Group's foreign currency exposure for the half year is
summarised below.
Adjusted
operating
GBPm (equivalent) Revenue profit
------------------ ------- ----------
Sterling 26.0 (30.8)
US Dollar 66.9 28.1
Euro 30.3 18.4
Japanese Yen 14.3 8.6
Chinese Renminbi 2.4 0.6
Other 0.4 (0.6)
------------------ ------- ----------
140.3 24.3
------------------ ------- ----------
The Group maintains a hedging programme against its net
transactional exposure using internal projections of currency
trading transactions expected to arise over a period extending from
12 to 24 months. As at 30 September 2020, the Group had currency
hedges in place extending up to 18 months forward.
For the second half of this financial year, our assessment of
the currency impact is, based on hedges currently in place and
forecast rates, a reduction in revenue of GBP1.0m and an increase
in adjusted operating profit of GBP0.2m. As an example sensitivity
for the second half of the year, if we assume a 5% appreciation of
Sterling against our major trading currencies from forecast rates,
then, with the benefit of hedging in place, the estimated impact is
a reduction in revenue and adjusted operating profit of GBP7.9m and
GBP1.3m respectively. Uncertain volume and timing of shipments and
acceptances, currency mix and FX volatility may significantly
affect second half currency effects. Forecast rates for the second
half are - GBP:USD 1.30; GBP:EUR 1.11; GBP:JPY 135.
Disposal of OI Healthcare - discontinued operations
On 24 February 2020, the Group sold the OI Healthcare business
in the US to MXR Imaging, Inc, for a consideration of $14.9m
(GBP11.5m). The business has been treated as a discontinued
operation within the comparatives.
Disposal of Scienta Omicron
On 29 January 2020, the Group sold its 47% share in Scienta
Omicron to a group of existing Shareholders in the joint venture
for a consideration of SEK 147m (GBP11.7m). For the comparative
period, the Group did not record a profit from the joint
venture.
Dividend
The Group's policy is to increase the dividend each year in line
with the increase in underlying earnings, considering movements in
currency. Following the high uncertainty created by the impact of
covid, the Board decided not to pay the 2019/20 interim dividend of
4.1p per share and then did not declare a final dividend. A better
than expected trading performance, growth in the order book and
good cash generation has resulted in the Board proposing an interim
dividend of 4.1p for the 2020/21 financial year. The interim
dividend will be paid on 14 April 2021 to shareholders on the
register as at 5 March 2021. Monies received under the UK
government's furlough scheme were fully repaid in the period.
Cash flow
The Group cash flow is summarised below.
Half year Half year
to to
30 September 30 September
2020 2019
GBPm GBPm
--------------------------------------------------------------------- ------------ ------------
Adjusted operating profit 24.3 26.2
Depreciation and amortisation 4.1 4.5
--------------------------------------------------------------------- ------------ ------------
Adjusted EBITDA 28.4 30.7
Working capital movement (3.0) (11.3)
Equity settled share schemes 1.1 2.0
Share of profit/(loss) from associate - -
Business reorganisation items 0.5 -
Pension scheme payments above charge to operating profit (3.7) (6.1)
--------------------------------------------------------------------- ------------ ------------
Cash generated from operations 23.3 15.3
Interest (1.0) (1.1)
Tax (4.0) (3.5)
Capitalised development expenditure (0.5) (2.2)
Expenditure on tangible and intangible assets (1.1) (1.5)
Decrease in long-term receivables - 0.5
Dividends paid - (2.2)
Proceeds from issue of share capital and exercise of share options 0.1 0.2
Payments made in respect of lease liabilities (1.3) (1.4)
Decrease in borrowings - -
--------------------------------------------------------------------- ------------ ------------
Net increase in cash and cash equivalents from continuing operations 15.5 4.1
--------------------------------------------------------------------- ------------ ------------
Note: Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation of acquired intangibles and the
mark-to-market of financial derivatives.
Cash generated from operations
Cash generated from operations of GBP23.3m (2019: GBP15.3m)
represents 97% (2019: 62%) cash conversion. Cash conversion is
defined as cash generated from operations before non-recurring
items and pension scheme payments, less capitalised development
expenditure, capital expenditure and payments made in respect of
finance leases/adjusted operating profit.
Working capital rose by GBP3.0m. Inventories rose by GBP0.6m
with additional finished goods due to shipments held over the year
end following closure of customer sites. Receivables declined by
GBP2.1m and payables and customer deposits decreased by GBP4.5m,
partly due to a clearing of payable balances prior to
implementation of a new ERP in Asylum Research just after the half
year end.
The reduction in the cost of equity settled share schemes is due
to a catch-up charge relating to a correction in the valuation of
management share option incentive schemes made in the comparative
period.
Pension
Pension costs relate to recovery payments made to the UK defined
benefit pension scheme. Under the current actuarial plan, payments
are scheduled to continue until 2026.
Interest
Net interest paid was GBP1.0m (2019: GBP1.1m), broadly in line
with last year.
Tax
Tax paid was GBP4.0m (2019: GBP3.5m).
Investment in Research and Development (R&D)
Total cash spend on R&D in the half year was GBP12.7m,
equivalent to 9.1% of sales (2019: GBP13.0m, 8.2% of sales). A
reconciliation between the adjusted amounts charged to the Income
Statement and the cash spent is given below:
Half year Half year
to to
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------------------- ------------ ------------
R&D expense charged to the Income Statement 13.2 11.9
Amounts capitalised as fixed assets - 0.1
Amortisation of R&D costs previously capitalised as intangibles (1.0) (1.2)
Amounts capitalised as intangible assets 0.5 2.2
---------------------------------------------------------------- ------------ ------------
Total cash spent on R&D during the year 12.7 13.0
---------------------------------------------------------------- ------------ ------------
Net debt and funding
Net debt
Good cash generation in the half year increased the Group's net
cash position from GBP67.5m to GBP81.4m. Cash generated from
operations was GBP23.3m (2019: GBP15.3m). The Group invested in
capitalised development costs of GBP0.5m and tangible and
intangible assets of GBP1.1m.
Movement in net debt GBPm
------------------------------------------------------ -----
Net cash as at 31 March 2020 67.5
------------------------------------------------------ -----
Cash generated from operations 23.3
Interest (1.0)
Tax (4.0)
Capitalised development expenditure (0.5)
Capital expenditure on tangible and intangible assets (1.1)
Dividends paid -
Other items (2.8)
------------------------------------------------------ -----
Net cash as at 30 September 2020 81.4
------------------------------------------------------ -----
Funding
On 2 July 2018, the Group entered into a new unsecured
multi-currency revolving facility agreement, which is committed
until June 2023 with one-year extension options at the end of the
first and second years. The facility has been entered into with two
banks and comprises a Euro-denominated multi-currency facility of
EUR50.0m and a US Dollar-denominated multi-currency facility of
$80.0m.
We have agreed with our banks to extend the facility by one year
to June 2024, with an option to request an extension for a further
year in one year's time.
The Group has outstanding bilateral private placement notes of
GBP27.9m, which mature on 31 March 2021.
Debt covenants are net debt to EBITDA less than 3.0 times and
EBITDA to interest greater than 4.0 times. As at 30 September 2020
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.
At 30 September 2020, the net surplus arising from our defined
benefit pension scheme obligations was GBP1.1m (31 March 2020:
GBP30.7m). A significant fall in corporate bond yields has resulted
in a lower discount rate and, combined with changes to the assumed
level of inflation, has resulted in a higher value being placed on
the scheme's liabilities. The increase in liabilities has been
partially mitigated by contributions paid and the return on the
scheme's assets being higher than the discount rate over the
period. Total scheme assets at 30 September 2020 were GBP352.9m (31
March 2020: GBP321.4m) while liabilities were GBP351.8m (31 March
2020: GBP290.7m).
We terminated the US defined benefit pension scheme at the end
of the last fiscal year. All payments made last year were in full
and final settlement of the scheme's liabilities.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Performance Highlights, Chief Executive's Review
and Operations Review sections of this Half-year Report. The
financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Finance Review.
Considering the global health crisis resulting from the outbreak
of covid and the impact that has already materialised in terms of
disruption to operations and customer activity, it is reasonable to
expect that the future performance of the Group will be adversely
affected. Due to the continuing global uncertainty, there is
greater volatility and uncertainty in trading outcomes for the year
ahead. The Board has prepared and reviewed several scenarios for
the Group's future performance based on varying degrees of
disruption caused by covid on orders, trading and cash flow
performance. In addition, the Group has overlaid the risk of
long-term adverse movements in foreign exchange rates to our cash
flow forecasts as an additional sensitivity to those forecasts. The
outcome of this assessment shows that the Group can operate within
its current facilities, without the need to obtain any new
facilities, for a period of not less than twelve months from the
date of this report. The Board is satisfied, having considered the
current cash position, the sensitivity analysis, as well as its
committed funding facilities, that the Group has adequate resources
to continue in operational existence for the foreseeable future.
Consequently, the Condensed Consolidated Financial Statements
continue to be prepared on a going concern basis.
Forward-looking statements
This document contains certain forward-looking statements. The
forward-looking statements reflect the knowledge and information
available to the Company during the preparation and up to the
publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may
occur in the future, thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit
forecast by the Company.
Gavin Hill
Group Finance Director
10 November 2020
Principal Risks and Uncertainties
Information regarding the risk management process in place at
the Group is set out on page 50 of the 2020 Annual Report. The
principal risks and uncertainties identified through that process
are set out on pages 50 to 54 of the 2020 Annual Report and can be
found on the Group's website at www.oxinst.com.
In keeping with the risk management process, the Group has
performed a quarterly update of its risk register as at 30
September 2020. It has evaluated the disclosures made on pages 50
to 54 of the 2020 Annual Report and has concluded that the risks
identified remain relevant for the remainder of the year ending 31
March 2021 and that there are no other significant risks to be
disclosed.
A summary of the risks identified is set out below:
-- impact of covid;
-- routes to market;
-- technical risk;
-- supply chain risk;
-- political risk;
-- Brexit-related risks;
-- IT risk;
-- legal/compliance risk;
-- adverse movements in long-term foreign currency rates;
-- people;
-- operational risk; and
-- pensions.
The ongoing negotiations relating to the United Kingdom's future
trading relationship with the European Union at the end of the
transition phase mean that uncertainty over the potential impact of
Brexit remains. The Group has assessed the key risks arising from
Brexit and concluded that the most significant short-term risks
arise from potential disruption to the movement of goods both into
and out of Great Britain and Northern Ireland.
The future impact of covid continues to create uncertainty and
the potential for heightened disruption at an operational and
customer level remains. The possible impacts arising from both
Brexit and covid create significant uncertainty at a macro-economic
level. Operationally, this uncertainty could cause supply chain
disruption leading to an adverse impact on production and,
ultimately, deliveries to customers.
Responsibility Statement of the Directors in respect of the
Half-year Financial Statements
We confirm that to the best of our knowledge:
-- the condensed set of Financial Statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of Financial Statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
Ian Barkshire
Chief Executive
Gavin Hill
Group Finance Director
10 November 2020
Condensed Consolidated Statement of Income
Half year ended 30 September 2020 - unaudited
Half year to 30 September 2020 Half year to 30 September 2019 as restated(2)
---------------------------------- -------------------------------------------------
Adjusting Adjusting
Adjusted items(1) Total Adjusted items(1) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Revenue 4 140.3 - 140.3 157.6 - 157.6
Cost of sales (68.8) - (68.8) (78.1) - (78.1)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Gross profit 71.5 - 71.5 79.5 - 79.5
Research and development 5 (13.2) - (13.2) (11.9) - (11.9)
Selling and marketing (19.8) - (19.8) (23.4) - (23.4)
Administration and shared
services (14.6) (4.3) (18.9) (16.9) (4.4) (21.3)
Foreign exchange
gain/(loss) 0.4 0.8 1.2 (1.1) (2.5) (3.6)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Operating profit/(loss) 24.3 (3.5) 20.8 26.2 (6.9) 19.3
Interest credit on
pension scheme net
assets 0.4 - 0.4 - - -
Other financial income 0.1 - 0.1 0.5 - 0.5
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Financial income 0.5 - 0.5 0.5 - 0.5
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Financial expenditure (1.1) - (1.1) (0.9) - (0.9)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Profit/(loss) before
income tax 4 23.7 (3.5) 20.2 25.8 (6.9) 18.9
Income tax
(expense)/credit (4.9) 0.6 (4.3) (5.2) 1.2 (4.0)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Profit/(loss) for the
half year from
continuing operations 18.8 (2.9) 15.9 20.6 (5.7) 14.9
Loss from discontinued
operations after tax 7 - - - (0.3) (0.4) (0.7)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Profit/(loss) for the
half year attributable
to equity holders of the
parent 18.8 (2.9) 15.9 20.3 (6.1) 14.2
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Earnings per share pence pence pence pence
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Basic earnings per share 3
From continuing
operations 32.8 27.7 36.0 26.0
From discontinued
operations - - (0.5) (1.2)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
From profit for the half
year 32.8 27.7 35.5 24.8
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Diluted earnings per
share 3
From continuing
operations 32.4 27.4 35.6 25.8
From discontinued
operations - - (0.5) (1.2)
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
From profit for the half
year 32.4 27.4 35.1 24.6
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
Dividends per share 9
Dividends paid - 3.8
Dividends proposed(3) 4.1 4.1
------------------------- ---- ----------- ------------ ------- ---------------- ------------------ -----------
1. Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in Note 2.
2. Details of restatement of prior period numbers can be found
in the basis of preparation. The restatement had no impact on total
profit for the prior period.
3. Payment of the prior period interim dividend which was
proposed by the Board on 12 November 2019 has been suspended until
further notice.
Year to 31 March 2020
----------------------------
Adjusting
Adjusted items(1) Total
Note GBPm GBPm GBPm
------------------------------------------------------------------------ ---- -------- --------- -------
Revenue 4 317.4 - 317.4
Cost of sales (158.6) (0.4) (159.0)
------------------------------------------------------------------------ ---- -------- --------- -------
Gross profit/(loss) 158.8 (0.4) 158.4
Research and development 5 (26.6) (7.1) (33.7)
Selling and marketing (47.7) - (47.7)
Administration and shared services (34.7) (8.3) (43.0)
Share of profit of associate, net of tax 0.7 6.5 7.2
Foreign exchange loss - (1.4) (1.4)
------------------------------------------------------------------------ ---- -------- --------- -------
Operating profit/(loss) 50.5 (10.7) 39.8
Interest credit on pension scheme net assets - - -
Other financial income 0.3 - 0.3
------------------------------------------------------------------------ ---- -------- --------- -------
Financial income 0.3 - 0.3
------------------------------------------------------------------------ ---- -------- --------- -------
Financial expenditure (1.3) - (1.3)
------------------------------------------------------------------------ ---- -------- --------- -------
Profit/(loss) before income tax 4 49.5 (10.7) 38.8
Income tax (expense)/credit (9.3) 2.5 (6.8)
------------------------------------------------------------------------ ---- -------- --------- -------
Profit/(loss) for the year from continuing operations 40.2 (8.2) 32.0
(Loss)/profit from discontinued operations after tax 7 (0.5) 2.3 1.8
------------------------------------------------------------------------ ---- -------- --------- -------
Profit/(loss) for the year attributable to equity holders of the parent 39.7 (5.9) 33.8
------------------------------------------------------------------------ ---- -------- --------- -------
Earnings per share pence pence
------------------------------------------------------------------------ ---- -------- --------- -------
Basic earnings per share 3
From continuing operations 70.2 55.9
From discontinued operations (0.9) 3.1
------------------------------------------------------------------------ ---- -------- --------- -------
From profit for the year 69.3 59.0
------------------------------------------------------------------------ ---- -------- --------- -------
Diluted earnings per share 3
From continuing operations 69.5 55.3
From discontinued operations (0.9) 3.1
------------------------------------------------------------------------ ---- -------- --------- -------
From profit for the year 68.6 58.4
------------------------------------------------------------------------ ---- -------- --------- -------
Dividends per share 9
Dividends paid 14.4
Dividends proposed -
------------------------------------------------------------------------ ---- -------- --------- -------
1. Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in Note 2.
Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2020 - unaudited
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------------------------------------------- ------------ ------------ --------
Profit for the half year/year 15.9 14.2 33.8
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences (2.0) 2.7 2.5
Net cumulative foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement - - (4.4)
Items that will not be reclassified to profit or loss
Remeasurement (loss)/gain in respect of post-retirement benefits (Note 11) (33.7) 3.3 26.8
Tax credit/(charge) on items that will not be reclassified to profit or loss 6.4 (0.6) (5.1)
----------------------------------------------------------------------------- ------------ ------------ --------
Total other comprehensive (expense)/income (29.3) 5.4 19.8
----------------------------------------------------------------------------- ------------ ------------ --------
Total comprehensive (expense)/income for the half year
attributable to equity Shareholders of the parent (13.4) 19.6 53.6
----------------------------------------------------------------------------- ------------ ------------ --------
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2020 - unaudited
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 1 April 2020 2.9 62.2 0.2 11.5 174.8 251.6
Total comprehensive income:
Profit for the half year - - - - 15.9 15.9
Other comprehensive (expense)/income:
- Foreign exchange translation differences - - - (2.0) - (2.0)
- Remeasurement loss in respect of post--retirement
benefits - - - - (33.7) (33.7)
-Tax credit on items that will not be reclassified to
profit or loss - - - - 6.4 6.4
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total comprehensive expense attributable to equity
Shareholders of the parent - - - (2.0) (11.4) (13.4)
Transactions with owners recorded directly in equity:
- Proceeds from exercise of share options - - - - - -
- Credit in respect of employee service costs settled by
award of share options - - - - 1.1 1.1
- Tax credit in respect of share options - - - - - -
- Proceeds from shares issued - 0.2 - - - 0.2
- Dividends - - - - - -
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total transactions with owners recorded directly in equity: - 0.2 - - 1.1 1.3
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 30 September 2020 2.9 62.4 0.2 9.5 164.5 239.5
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 1 April 2019 2.9 61.7 0.2 13.4 124.0 202.2
Total comprehensive income:
Profit for the half year - - - - 14.2 14.2
Other comprehensive income/(expense):
- Foreign exchange translation differences - - - 2.7 - 2.7
-Remeasurement gain in respect of post--retirement benefits - - - - 3.3 3.3
-Tax charge on items that will not be reclassified to
profit or loss - - - - (0.6) (0.6)
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total comprehensive income attributable to equity
Shareholders of the parent - - - 2.7 16.9 19.6
Transactions with owners recorded directly in equity:
- Proceeds from exercise of share options - - - - 0.2 0.2
-Credit in respect of employee service costs settled by
award of share options - - - - 2.0 2.0
- Tax credit in respect of share options - - - - - -
- Proceeds from shares issued - - - - - -
- Dividends - - - - (8.3)
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Total transactions with owners recorded directly in equity: - - - - (6.1) (6.1)
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
As at 30 September 2019 2.9 61.7 0.2 16.1 134.8 215.7
----------------------------------------------------------- ------- ------- -------- ----------- -------- ------
Share Share Other Translation Retained
capital premium reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
As at 1 April 2019 2.9 61.7 0.2 13.4 124.0 202.2
Total comprehensive income:
Profit for the year - - - - 33.8 33.8
Other comprehensive income/(expense):
- Foreign exchange translation differences - - - 2.5 - 2.5
-Net cumulative foreign exchange gain on disposal of
subsidiaries recycled to the Income Statement - - - (4.4) - (4.4)
-Remeasurement gain in respect of post--retirement benefits - - - - 26.8 26.8
-Tax charge on items that will not be reclassified to profit
or loss - - - - (5.1) (5.1)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total comprehensive (expense)/income attributable to equity
Shareholders of the parent - - - (1.9) 55.5 53.6
Transactions with owners recorded directly in equity:
- Proceeds from exercise of share options - - - - 0.2 0.2
-Credit in respect of employee service costs settled by
award of share options - - - - 3.1 3.1
- Tax credit in respect of share options - - - - 0.2 0.2
- Proceeds from shares issued - 0.5 - - - 0.5
- Dividends - - - - (8.2) (8.2)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total transactions with owners recorded directly in equity: - 0.5 - - (4.7) (4.2)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
As at 31 March 2020 2.9 62.2 0.2 11.5 174.8 251.6
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Condensed Consolidated Statement of Financial Position
As at 30 September 2020 - unaudited
As at As at As at
30 September 30 September 31 March
2020 2019 2020
Note GBPm GBPm GBPm
----------------------------------------------------------------------- ---- ------------ ------------ --------
Assets
Non-current assets
Property, plant and equipment 20.5 24.5 21.8
Right-of-use assets 7.0 8.8 8.2
Intangible assets 130.3 149.8 135.5
Investment in associate 6 - 4.6 -
Retirement benefit asset 11 1.1 3.4 30.7
Deferred tax assets 13.9 16.0 17.3
----------------------------------------------------------------------- ---- ------------ ------------ --------
172.8 207.1 213.5
----------------------------------------------------------------------- ---- ------------ ------------ --------
Current assets
Inventories 59.1 65.5 58.8
Trade and other receivables 68.1 75.1 71.1
Current income tax receivable 0.2 0.8 0.2
Derivative financial instruments 10 1.0 0.9 0.9
Cash and cash equivalents 109.3 42.1 95.4
----------------------------------------------------------------------- ---- ------------ ------------ --------
237.7 184.4 226.4
----------------------------------------------------------------------- ---- ------------ ------------ --------
Total assets 410.5 391.5 439.9
----------------------------------------------------------------------- ---- ------------ ------------ --------
Equity
Capital and reserves attributable to the Company's equity Shareholders
Share capital 2.9 2.9 2.9
Share premium 62.4 61.7 62.2
Other reserves 0.2 0.2 0.2
Translation reserve 9.5 16.1 11.5
Retained earnings 164.5 134.8 174.8
----------------------------------------------------------------------- ---- ------------ ------------ --------
239.5 215.7 251.6
----------------------------------------------------------------------- ---- ------------ ------------ --------
Liabilities
Non-current liabilities
Bank loans - 27.9 -
Lease payables 5.1 5.8 6.5
Derivative financial instruments 10 - - 0.9
Provisions 0.7 1.0 0.9
Deferred tax liabilities 1.1 6.6 10.2
----------------------------------------------------------------------- ---- ------------ ------------ --------
6.9 41.3 18.5
----------------------------------------------------------------------- ---- ------------ ------------ --------
Current liabilities
Bank loans 27.9 - 27.9
Trade and other payables 120.4 109.1 125.1
Lease payables 2.2 3.4 2.1
Retirement benefit obligations 11 - 0.8 -
Current income tax payables 4.5 3.5 4.6
Accrued dividend - 6.1 -
Derivative financial instruments 10 1.1 4.2 2.6
Provisions 8.0 7.4 7.5
----------------------------------------------------------------------- ---- ------------ ------------ --------
164.1 134.5 169.8
----------------------------------------------------------------------- ---- ------------ ------------ --------
Total liabilities 171.0 175.8 188.3
----------------------------------------------------------------------- ---- ------------ ------------ --------
Total liabilities and equity 410.5 391.5 439.9
----------------------------------------------------------------------- ---- ------------ ------------ --------
Consolidated Statement of Cash Flows
Half year ended 30 September 2020 - unaudited
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
Note GBPm GBPm GBPm
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Profit for the half year/year 15.9 14.2 33.8
Loss/(profit) for the half year/year from discontinued operations 7 - 0.7 (1.8)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Profit for the half year/year from continuing operations 15.9 14.9 32.0
Adjustments for:
Income tax expense 4.3 4.0 6.8
Net financial expense 0.6 0.4 1.0
Fair value movement on financial derivatives (0.8) 2.5 1.4
Restructuring costs - - 0.2
Adjustments relating to defined benefit pension schemes - - (0.6)
Profit on disposal of associate 6 - - (6.5)
Impairment of inventory - - 0.4
Impairment of capitalised development costs - - 7.1
Amortisation of acquired intangibles 4.3 4.4 8.7
Depreciation of right-of-use assets 1.4 1.5 3.4
Depreciation of property, plant and equipment 1.7 1.8 3.5
Amortisation of capitalised development costs 1.0 1.2 2.7
Amortisation of capitalised software costs - - 0.3
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Adjusted earnings before interest, tax, depreciation and amortisation 28.4 30.7 60.4
Charge in respect of equity settled employee share schemes 1.1 2.0 3.1
Share of profit of associate - - (0.7)
Restructuring costs received/(paid) 0.5 - (0.6)
Cash payments to the pension scheme more than the charge to operating
profit (3.7) (6.1) (10.0)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Operating cash flows before movements in working capital 26.3 26.6 52.2
Increase in inventories (0.6) (4.8) (2.3)
Decrease in receivables 2.1 3.5 3.3
(Decrease)/increase in payables and provisions (8.4) (9.5) 2.5
Increase/(decrease) in customer deposits 3.9 (0.5) 6.6
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash generated from operations 23.3 15.3 62.3
Interest paid (1.0) (1.6) (1.0)
Income taxes paid (4.0) (3.5) (6.1)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash from operating activities - continuing operations 18.3 10.2 55.2
Net cash from operating activities - discontinued operations - 0.7 -
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash from operating activities 18.3 10.9 55.2
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 0.1 - 0.1
Acquisition of property, plant and equipment (1.2) (1.5) (4.4)
Net cash flow on disposal of associate - - 11.7
Capitalised development expenditure (0.5) (2.2) (2.8)
Decrease in long-term receivables - 0.5 1.4
Interest received - 0.5 -
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash (used in)/generated from investing activities - continuing
operations (1.6) (2.7) 6.0
Net cash generated from investing activities - discontinued operations - 1.0 8.7
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash (used in)/generated from investing activities (1.6) (1.7) 14.7
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash flows from financing activities
Proceeds from issue of share capital 0.1 - 0.5
Proceeds from exercise of share options - 0.2 0.2
Payments made in respect of lease liabilities (1.3) (1.4) (3.3)
Repayment of borrowings - - (0.6)
Dividends paid - (2.2) (8.2)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash used in financing activities - continuing operations (1.2) (3.4) (11.4)
Net cash generated from financing activities - discontinued operations - 0.3 -
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net cash used in financing activities (1.2) (3.1) (11.4)
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Net increase in cash and cash equivalents 15.5 6.1 58.5
Cash and cash equivalents at beginning of the year 95.4 35.2 35.2
Effect of exchange rate fluctuations on cash held (1.6) 0.8 1.7
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Cash and cash equivalents at end of the period 109.3 42.1 95.4
-------------------------------------------------------------------------- ---- ------------ ------------ --------
Notes to the Half-year Financial Statements
Half year ended 30 September 2020 - unaudited
1 Basis of preparation
Reporting entity
Oxford Instruments plc is a company incorporated in England and
Wales. The condensed consolidated half-year Financial Statements
consolidate the results of the Company and its subsidiaries
(together referred to as the "Group"). They have been prepared and
approved by the Directors in accordance with International
Financial Reporting Standard ("IFRS") IAS 34 Interim Financial
Reporting as adopted by the EU. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated Financial
Statements of the Group for the year ended 31 March 2020.
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 2020 are not the Company's statutory accounts for
that financial year. Those accounts have been reported on by the
Company's auditor and delivered to the registrar of companies. The
report of the auditor was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
Significant accounting policies
As required by the Disclosure 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 2020 except as noted below.
Prior period restatement
The prior period to 30 September 2019 has been restated as a
result of the Group disposing of the OI Healthcare business in the
US on 21 February 2020. Further information can be found in Note
7.
Composition of segments
During the period, the Directors reviewed the composition of the
aggregated operating segments. The customer base of the Magnetic
Resonance operating segment was found to be more closely aligned to
that of the Materials & Characterisation segment and the
decision was taken to move the Magnetic Resonance segment from the
Research & Discovery segment to the Materials &
Characterisation segment. The management of the segment was also
realigned at the same time. The segmental information for the prior
period has been restated to reflect the amended aggregated
operating segments.
The prior year segmental information has also been restated to
reflect the disposal of the OI Healthcare business in the US.
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 2020.
Going concern
The condensed consolidated half-year Financial Statements have
been prepared on a going concern basis, based on the Directors'
opinion, after making reasonable enquiries, that the Group has
adequate resources to continue in operational existence for the
foreseeable future.
In reaching this opinion the Directors noted that the Group had
a net cash balance of GBP81.4m at 30 September 2020 and generated
GBP18.4m of cash from operating activities in the first half of the
year in spite of the disruption to the business caused by covid. In
addition, the Directors regularly monitor forward-looking
indicators such as order intake which give confidence that not only
does the Group have adequate financial resources to continue in
operational existence for the foreseeable future, it also has a
strong pipeline of opportunities for the future. The Board is
satisfied, having considered its funding facilities, as well as the
forward-looking indicators, that the Group has adequate resources
to continue in operational existence for the foreseeable
future.
Exchange rates
The principal exchange rates used to translate the Group's
overseas results were as follows:
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
Period end rates GBPm GBPm GBPm
----------------- ------------ ------------ --------
US Dollar 1.29 1.23 1.24
Euro 1.10 1.13 1.13
Japanese Yen 136 133 134
----------------- ------------ ------------ --------
Japanese
Average translation rates US Dollar Euro Yen
------------------------------- --------- ---- --------
Half year to 30 September 2020
April 1.25 1.14 134
May 1.25 1.13 134
June 1.24 1.11 133
July 1.27 1.11 136
August 1.33 1.11 140
September 1.32 1.11 139
------------------------------- --------- ---- --------
Japanese
Average translation rates US Dollar Euro Yen
-------------------------- --------- ---- --------
Year to 31 March 2020
April 1.30 1.16 144
May 1.28 1.15 142
June 1.27 1.13 138
July 1.26 1.12 136
August 1.23 1.11 132
September 1.23 1.12 132
October 1.26 1.14 136
November 1.28 1.16 139
December 1.30 1.17 142
January 1.32 1.18 143
February 1.30 1.19 144
March 1.27 1.16 139
-------------------------- --------- ---- --------
2 Non-GAAP measures
In the preparation of adjusted numbers, the Directors exclude
certain items in order to assist with comparability between peers
and to give what they consider to be a better indication of the
underlying performance of the business. These adjusting items are
excluded in the calculation of adjusted operating profit, adjusted
profit before tax, adjusted profit for the year from continuing
operations, adjusted EBITDA, adjusted EPS, adjusted cash conversion
and adjusted effective tax rate. Details of adjusting items are
given below.
Adjusted EBITDA is calculated by adding back depreciation of
property, plant and equipment, depreciation of right-of-use assets
and amortisation of intangible assets to adjusted operating profit,
and can be found in the Consolidated Statement of Cash Flows. The
calculation of adjusted EPS can be found in Note 3. Adjusted
effective tax rate is calculated by dividing the share of tax
attributable to adjusted profit before tax by adjusted profit
before tax. The definition of cash conversion is set out in the
Finance Review.
Reconciliation between operating profit and profit before income
tax and adjusted profit from continuing operations
Half year to Half year to Year to
30 September 30 September 31 March 2020
2020 2019 as restated
------------------- ------------------
Profit Profit Profit
Operating before Operating before Operating before
income income income
profit tax profit tax profit tax
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- ------- ---------- ------- --------- -------
Statutory measure from continuing
operations 20.8 20.2 19.3 18.9 39.8 38.8
Restructuring costs - - - - 0.2 0.2
-------------------------------------- --------- ------- ---------- ------- --------- -------
Business reorganisation items - - - - 0.2 0.2
Adjustments relating to defined
benefit pension schemes - - - - (0.6) (0.6)
Impairment of inventory - - - - 0.4 0.4
Impairment of capitalised development
costs - - - - 7.1 7.1
Profit on disposal of associate - - - - (6.5) (6.5)
Amortisation of acquired intangibles 4.3 4.3 4.4 4.4 8.7 8.7
Fair value movement on financial
derivatives (0.8) (0.8) 2.5 2.5 1.4 1.4
-------------------------------------- --------- ------- ---------- ------- --------- -------
Total non-GAAP adjustments 3.5 3.5 6.9 6.9 10.7 10.7
-------------------------------------- --------- ------- ---------- ------- --------- -------
Adjusted measure from continuing
operations 24.3 23.7 26.2 25.8 50.5 49.5
Income tax expense (4.9) (5.2) (9.3)
-------------------------------------- --------- ------- ---------- ------- --------- -------
Adjusted profit for the year
from continuing operations 24.3 18.8 26.2 20.6 50.5 40.2
-------------------------------------- --------- ------- ---------- ------- --------- -------
Adjusted effective tax rates 20.7% 20.2% 18.8%
-------------------------------------- --------- ------- ---------- ------- --------- -------
Restructuring costs
These represent the costs of one-off changes to senior
management within the Research & Discovery segment.
Adjustments relating to defined benefit pension schemes
During the year ended 31 March 2020, the Group recognised a
one-off accounting gain on the termination of its US defined
benefit pension scheme.
Impairment of inventory
During the year ended 31 March 2020, the Group implemented a new
ERP system at a site within the Research & Discovery division.
In reconciling the inventory on the new system, a need for an
impairment in respect of certain historic inventory differences was
identified. This was treated as an adjusting item due to its
one-off nature.
Impairment of capitalised development costs
During the year ended 31 March 2020, the Group reviewed the
capitalised development costs to ensure they remained directly
related to targeted product or software developments. The one-off
non-cash impairment relates to the Materials & Characterisation
segment, comprising software intangibles in Asylum Research,
historical balances on general process development in Plasma
Technology and product development in NanoAnalysis that has been
affected by a reduction in orders as a result of covid.
Profit on disposal of associate
During the year the Group made a profit on disposal of its
shareholding in Scienta Scientific AB. See Note 6. This has been
treated as an adjusting item due to its non-recurring nature.
Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and
impairment of acquired intangible assets and goodwill.
Fair value movement on financial derivatives
Under IFRS 9, all derivative financial instruments are
recognised initially at fair value. Subsequent to initial
recognition, they are also measured at fair value. In respect of
instruments used to hedge foreign exchange risk and interest rate
risk, the Group does not take advantage of the hedge accounting
rules provided for in IFRS 9 since that standard requires certain
stringent criteria to be met in order to hedge account, which, in
the particular circumstances of the Group, are considered by the
Board not to bring any significant economic benefit. Accordingly,
the Group accounts for these derivative financial instruments at
fair value through profit or loss. To the extent that instruments
are hedges of future transactions, adjusted profit for the year is
stated before changes in the valuation of these instruments so that
the underlying performance of the Group can be more clearly
seen.
Share of taxation
Adjusting items include the income tax on each of the items
described above.
Reconciliation of changes in cash and cash equivalents to
movement in net cash
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------------- ------------ ------------ --------
Net increase in cash and cash equivalents 15.5 6.1 58.5
Effect of exchange rate fluctuations on cash held (1.6) 0.8 1.7
-------------------------------------------------- ------------ ------------ --------
13.9 6.9 60.2
Repayment of borrowings - - 0.6
Movement in accrued interest - 0.6 -
-------------------------------------------------- ------------ ------------ --------
Movement in net cash in the half year 13.9 7.5 60.8
Net cash at start of the year 67.5 6.7 6.7
-------------------------------------------------- ------------ ------------ --------
Net cash at the end of the half year 81.4 14.2 67.5
-------------------------------------------------- ------------ ------------ --------
Reconciliation of net cash to Statement of Financial
Position
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------- ------------ ------------ --------
Loan notes - unsecured (27.9) (27.9) (27.9)
Cash and cash equivalents 109.3 42.1 95.4
------------------------------------- ------------ ------------ --------
Net cash at the end of the half year 81.4 14.2 67.5
------------------------------------- ------------ ------------ --------
3 Earnings per share
Basic and diluted EPS from continuing operations are based on
the result for the year from continuing operations, as reported in
the Group Income Statement. Basic and diluted EPS from total
operations are based on the result for the year attributable to
equity Shareholders of the parent. Adjusted and diluted adjusted
EPS are based on adjusted profit for the year from continuing
operations. The profit measures noted above are divided by the
weighted average number of ordinary shares outstanding during the
year, excluding shares held by the Employee Share Ownership Trust.
The table below reconciles these different profit measures.
Half year
to
Half year
to 30 September Year to
30 September 2019 31 March
2020 as restated 2020
GBPm GBPm GBPm
---------------------------------------------------------------------- ------------ ------------ --------
Profit for the year attributable to equity Shareholders of the parent 15.9 14.2 33.8
Discontinued operations - 0.7 (1.8)
Adjusting items:
Business reorganisation items - - 0.2
Adjustments relating to defined benefit pension schemes - - (0.6)
Impairment of inventory - - 0.4
Impairment of capitalised development costs - - 7.1
Profit on disposal of associate - - (6.5)
Amortisation of acquired intangibles 4.3 4.4 8.7
Fair value movement on financial derivatives (0.8) 2.5 1.4
Adjusted income tax expense (0.6) (1.2) (2.5)
---------------------------------------------------------------------- ------------ ------------ --------
Adjusted profit for the year from continuing operations 18.8 20.6 40.2
---------------------------------------------------------------------- ------------ ------------ --------
The weighted average number of shares used in the calculation
excludes shares held by the Employee Share Ownership Trust, and is
as follows:
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
Shares Shares Shares
million million million
-------------------------------------------------------------------------------- ------------ ------------ --------
Weighted average number of shares outstanding 57.4 57.4 57.4
Less: weighted average number of shares held by Employee Share Ownership Trust (0.1) (0.2) (0.1)
-------------------------------------------------------------------------------- ------------ ------------ --------
Weighted average number of shares used in calculation of basic earnings per
share 57.3 57.2 57.3
-------------------------------------------------------------------------------- ------------ ------------ --------
The following table shows the effect of share options on the
calculation of diluted earnings per share:
For the purposes of calculating diluted and diluted adjusted
EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would
be issued on the conversion of all potentially dilutive ordinary
shares expected to vest, relating to the Company's share-based
payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease
EPS or increase loss per share.
4 Segment information
The Group has eight operating segments. These operating segments
have been combined into three aggregated operating segments to the
extent that they have similar economic characteristics, with
relevance to products and services, type and class of customer,
methods of sale and distribution and the regulatory environment in
which they operate. Each of these three aggregated operating
segments is a reportable segment. The aggregated operating segments
are as follows:
-- the Materials & Characterisation segment comprises a
group of businesses focusing on applied R&D and commercial
customers, enabling the fabrication and characterisation of
materials and devices down to the atomic scale;
-- the Research & Discovery segment comprises a group of
businesses providing advanced solutions that create unique
environments and enable measurements down to the molecular and
atomic level which are used in fundamental research; and
-- the Service & Healthcare segment provides customer
service and support for the Group's products and the service of
third-party healthcare imaging systems.
The Group's internal management structure and financial
reporting systems have been amended to differentiate the three
aggregated operating segments based on the economic characteristics
discussed above.
Reportable segment results include items directly attributable
to a segment as well as those which can be allocated on a
reasonable basis. Inter-segment pricing is determined on an arm's
length basis. The operating results of each are regularly reviewed
by the Chief Operating Decision Maker, which is deemed to be the
Board of Directors. Discrete financial information is available for
each segment and used by the Board of Directors for decisions on
resource allocation and to assess performance. No asset information
is presented below as this information is not presented in
reporting to the Group's Board of Directors.
The results of the half year to 30 September 2019 and year to 31
March 2020 have been restated to reflect Magnetic Resonance moving
from the Research & Discovery segment to the Materials &
Characterisation segment. Further information can be found in Note
1.
The results of the half year to 30 September 2019 have been
restated to reflect the classification of the OI Healthcare
business as a discontinued operation. OI Healthcare was included
within the Service & Healthcare aggregated operating segment.
Further information can be found in Note 7.
Results from continuing operations
Materials Research Service
& & &
Characterisation Discovery Healthcare Total
Half year to 30 September 2020 GBPm GBPm GBPm GBPm
------------------------------------------------------------- ---------------- --------- ---------- -----
Total segment revenue 65.2 48.3 26.8 140.3
------------------------------------------------------------- ---------------- --------- ---------- -----
Segment adjusted operating profit from continuing operations 8.9 6.4 9.0 24.3
------------------------------------------------------------- ---------------- --------- ---------- -----
Materials Research Service
& & &
Characterisation Discovery Healthcare Total
Half year to 30 September 2019 as restated GBPm GBPm GBPm GBPm
------------------------------------------------------------- ---------------- ---------- ---------- -----
Total segment revenue 73.2 57.8 26.6 157.6
------------------------------------------------------------- ---------------- ---------- ---------- -----
Segment adjusted operating profit from continuing operations 12.2 6.4 7.6 26.2
------------------------------------------------------------- ---------------- ---------- ---------- -----
Materials Research Service
& & &
Characterisation Discovery Healthcare Total
Year to 31 March 2020 as restated GBPm GBPm GBPm GBPm
---------------------------------- ---------------- --------- ---------- -----
Total segment revenue 145.8 117.8 53.8 317.4
---------------------------------- ---------------- --------- ---------- -----
Segment adjusted operating profit
from continuing operations 21.0 14.5 15.0 50.5
---------------------------------- ---------------- --------- ---------- -----
Reconciliation of reportable segment profit from continuing
operations
Materials Research Service
& & & Unallocated
Characterisation Discovery Healthcare Group items Total
Half year to 30 September 2020 GBPm GBPm GBPm GBPm GBPm
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Segment adjusted operating profit from continuing
operations 8.9 6.4 9.0 - 24.3
Amortisation of acquired intangibles (1.1) (3.2) - - (4.3)
Fair value movement on financial derivatives - - - 0.8 0.8
Financial income - - - 0.5 0.5
Financial expenditure - - - (1.1) (1.1)
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Profit before income tax from continuing operations 7.8 3.2 9.0 0.2 20.2
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Materials Research Service
& & & Unallocated
Characterisation Discovery Healthcare Group items Total
Half year to 30 September 2019 as restated GBPm GBPm GBPm GBPm GBPm
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Segment adjusted operating profit from continuing
operations 12.2 6.4 7.6 - 26.2
Amortisation of acquired intangibles (1.2) (3.2) - - (4.4)
Fair value movement on financial derivatives - - - (2.5) (2.5)
Financial income - - - 0.5 0.5
Financial expenditure - - - (0.9) (0.9)
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Profit/(loss) before income tax from continuing
operations 11.0 3.2 7.6 (2.9) 18.9
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Materials Research Service
& & & Unallocated
Characterisation Discovery Healthcare Group items Total
Year to 31 March 2020 as restated GBPm GBPm GBPm GBPm GBPm
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
Segment adjusted operating profit from continuing
operations 21.0 14.5 15.0 - 50.5
Restructuring costs (0.1) (0.1) - - (0.2)
Adjustments relating to defined benefit pension schemes - - - 0.6 0.6
Impairment of inventory - (0.4) - - (0.4)
Impairment of capitalised development costs (6.3) (0.8) - - (7.1)
Profit on disposal of associate - 6.5 - - 6.5
Amortisation of acquired intangibles (2.3) (6.4) - - (8.7)
Fair value movement on financial derivatives - - - (1.4) (1.4)
Financial income - - - 0.3 0.3
Financial expenditure - - - (1.3) (1.3)
Profit/(loss) before income tax from continuing
operations 12.3 13.3 15.0 (1.8) 38.8
--------------------------------------------------------- ---------------- --------- ---------- ----------- -----
5 Research and development ("R&D")
The total adjusted research and development spend by the Group
is as follows:
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
R&D expense charged to the Consolidated Statement of Income 13.2 11.9 26.6
Add: amounts capitalised as fixed assets - 0.1 0.1
Less: amortisation of R&D costs previously capitalised as intangibles (1.0) (1.2) (2.7)
Add: amounts capitalised as intangible assets 0.5 2.2 2.8
---------------------------------------------------------------------- ------------ ------------ --------
Total cash spent on R&D during the year 12.7 13.0 26.8
---------------------------------------------------------------------- ------------ ------------ --------
6 Investment in associate
The Group held a 47% interest in the ordinary share capital of
Scienta Scientific AB. Scienta Scientific AB is registered and has
its principal place of business in Sweden. On 28 January 2020, the
Group sold its holdings in Scienta Scientific AB for GBP11.7m in
cash.
The Group's share of profit in its equity accounted associate
for the prior half year was GBPnil and for the period to 28 January
2020 was GBP0.7m. The Group did not receive any dividend from the
associate in the current or prior periods.
The profit on disposal recognised in the accounts to 31 March
2020 was GBP6.5m.
7 Disposal of subsidiary and discontinued operations
On 21 February 2020, the Group disposed of its OI Healthcare
business in the US for a final consideration of $14.9m, of which
$1.5m is held in escrow for twelve months pending any claims from
the purchaser.
In the year to 31 March 2020 the OI Healthcare business was
classified as a discontinued operation. It was considered a major
class of business on the basis of its size and that it was
previously an operating segment and referred to in the Group's
Strategic Report.
The 2019 half-year results have been restated to reflect the
classification of the OI Healthcare business as a discontinued
operation.
During the current period to 30 September 2020 there were no
transactions relating to discontinued operations.
Half year Half year Half year
to to to
Half year
to 30 September 30 September 30 September
30 September 2020 2019 2019
2020 Industrial as restated Industrial
OI Healthcare Analysis OI Healthcare Analysis
Results of discontinued operations GBPm GBPm GBPm GBPm
-------------------------------------------- ------------- ------------ ------------- ------------
Revenue - - 8.7 -
Expenses - - (9.1) -
-------------------------------------------- ------------- ------------ ------------- ------------
Adjusted loss before tax - - (0.4) -
Income tax credit - - 0.1 -
-------------------------------------------- ------------- ------------ ------------- ------------
Adjusted loss after tax - - (0.3) -
-------------------------------------------- ------------- ------------ ------------- ------------
Adjusting items:
Amortisation of acquired intangibles - - (0.5) -
Income tax on adjusting items - - 0.1 -
-------------------------------------------- ------------- ------------ ------------- ------------
Loss from discontinued operations after tax - - (0.7) -
-------------------------------------------- ------------- ------------ ------------- ------------
Year to
31 March
Year to 2020
31 March
2020 Industrial
OI Healthcare Analysis
Results of discontinued operations GBPm GBPm
----------------------------------------------------- ------------- ----------
Revenue 14.8 -
Expenses (15.5) -
----------------------------------------------------- ------------- ----------
Adjusted loss before tax (0.7) -
Income tax credit 0.2 -
----------------------------------------------------- ------------- ----------
Adjusted loss after tax (0.5) -
----------------------------------------------------- ------------- ----------
Adjusting items:
Restructuring costs (0.1) (0.2)
Amortisation of acquired intangibles (0.8) -
Income tax on adjusting items 0.3 -
----------------------------------------------------- ------------- ----------
Loss after tax (1.1) (0.2)
Gain on disposal 3.1 -
----------------------------------------------------- ------------- ----------
Profit/(loss) from discontinued operations after tax 2.0 (0.2)
----------------------------------------------------- ------------- ----------
Half year
to
Half year
to 30 September
30 September 2019 Year to
31 March
2020 as restated 2020
GBPm GBPm GBPm
--------------------------------------------- ------------ ------------ --------
Cash flows from discontinued operations
Net cash generated from operating activities - 0.7 -
Net cash generated from investing activities - 1.0 8.7
Net cash used in financing activities - 0.3 -
--------------------------------------------- ------------ ------------ --------
Half year
to
Half year
to 30 September Year to
30 September 2019 31 March
2020 as restated 2020
Earnings per share from discontinued operations pence pence pence
------------------------------------------------ ------------ ------------ --------
Adjusted basic loss per share - (0.5) (0.9)
Adjusted diluted loss per share - (0.5) (0.9)
Total basic loss per share - (1.2) 3.1
Total diluted loss per share - (1.2) 3.1
------------------------------------------------ ------------ ------------ --------
8 Taxation
The total effective tax rate on profits for the half year is
21.3% (prior half year as restated: 21.2%). The weighted average
tax rate in respect of adjusted profit before tax (see Note 2) for
the half year is 20.7% (prior half year as restated: 20.2%).
For the full year the Group expects the tax rate in respect of
adjusted profit before tax to be 21.0%.
9 Dividends per share
The following dividends per share were paid by the Group:
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
pence pence pence
--------------------------------- ------------ ------------ --------
Previous period interim dividend - 3.8 3.8
Previous period final dividend - - 10.6
--------------------------------- ------------ ------------ --------
- 3.8 14.4
--------------------------------- ------------ ------------ --------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
Half year Half year
to to Year to
30 September 30 September 31 March
2020 2019 2020
pence pence pence
----------------- ------------ ------------ --------
Interim dividend 4.1 4.1 4.1
Final dividend - - -
----------------- ------------ ------------ --------
4.1 4.1 4.1
----------------- ------------ ------------ --------
The interim dividend for the year to 31 March 2020 of 4.1p was
approved by the Board on 12 November 2019, and had been intended to
be paid on 14 April 2020 to Shareholders on the register at close
of business on 6 March 2020. On 30 March 2020, the Board decided to
suspend payment of this dividend. Subsequently, the Board has
decided not to pay this dividend.
The interim dividend for the year to 31 March 2021 of 4.1p was
approved by the Board on 9 November 2020 and has not been included
as a liability as at 30 September 2020. The interim dividend will
be paid on 14 April 2021 to Shareholders on the register at the
close of business on 5 March 2021.
10 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Half year to Half year to Year to 31
30 September 30 September March 2020
2020 2019
-------------------- --------------------
Carrying Carrying Carrying
Fair
value amount Fair value amount Fair value amount Fair value
hierarchy GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- -------- ---------- -------- ---------- -------- ----------
Assets carried at
amortised cost
Trade receivables 54.4 63.4 59.7
Other receivables 9.7 7.0 7.7
Cash and cash equivalents 109.3 42.1 95.4
-------------------------- --------- -------- ---------- -------- ---------- -------- ----------
Assets carried at
fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 1.0 1.0 0.9 0.9 0.9 0.9
-------------------------- --------- -------- ---------- -------- ---------- -------- ----------
Liabilities carried
at fair value
Derivative financial
instruments:
- Foreign currency
contracts 2 (1.1) (1.1) (4.2) (4.2) (3.5) (3.5)
-------------------------- --------- -------- ---------- -------- ---------- -------- ----------
Liabilities carried
at amortised cost
Trade and other payables (57.5) (56.6) (65.9)
Bank loans (27.9) (27.9) (27.9)
Lease payables (7.3) (9.2) (8.6)
-------------------------- --------- -------- ---------- -------- ---------- -------- ----------
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using
market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is
estimated by discounting the future contracted principal and
interest cash flows using the market rate of interest at the
reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the carrying amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine their fair
value. Advances received are excluded from other payables above as
these are not considered to be financial liabilities.
Lease payables
The lease liability is measured at amortised cost using the
effective interest method.
Fair value hierarchy
The table above gives details of the valuation method used in
arriving at the fair value of financial instruments. The different
levels have been identified as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based on observable market data.
There have been no transfers between levels during the year.
11 Retirement benefit obligations
The Group operates a defined benefit plan in the UK. A full
actuarial valuation of the UK plan was carried out as at 31 March
2018 which, for reporting purposes, has been updated to 30
September 2020 by a qualified independent actuary.
At 31 March 2020, the scheme actuary calculated a retirement
benefit asset of GBP30.7m. In the period to 30 September 2020,
there has been a significant fall in corporate bond yields, which
reduced the discount rate from 2.5% to 1.6%, and an increase in the
assumed level of CPI and RPI inflation rates by 0.3% (to 2.2% and
2.9% from 1.9% and 2.6% respectively at 31 March 2020). The impact
of these changes has increased the benefit obligation to GBP351.8m
(31 March 2020: GBP290.7m).
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 GBP3.9m (year to 31 March 2020: GBP7.6m). In addition,
the scheme's assets generated a higher return than the discount
rate. As a result, the fair value of plan assets increased to
GBP352.9m (31 March 2020: GBP321.4m).
The overall effect is that for the purposes of IAS 19 the
surplus on the scheme reduced from GBP30.7m to GBP1.1m.
12 Related parties
All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note.
Included in the Consolidated Statement of Financial Position at
30 September 2019 was a current loan receivable of GBP0.8m due from
Scienta Scientific AB. The loan was repaid in February 2020. During
the prior period to 30 September 2019, the Group received interest
charged on the loan of GBP0.1m (year to 31 March 2020:
GBP0.1m).
Independent Review Report to Oxford Instruments plc
Introduction
We have been engaged by the Company to review the condensed set
of Financial Statements in the half-yearly financial report for the
six months ended 30 September 2020 which comprises the Condensed
Consolidated Statement of Income, Condensed Consolidated Statement
of Comprehensive Income, Condensed Consolidated Statement of
Changes in Equity, Condensed Consolidated Statement of Financial
Position and Condensed Consolidated Statement of Cash Flows.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of Financial Statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual Financial Statements of the
Group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of Financial Statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of Financial Statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of Financial Statements
in the half-yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as adopted by
the European Union, and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
Reading, UK
10 November 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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