TIDMOXIG
RNS Number : 1176H
Oxford Instruments PLC
13 November 2018
Release Date: 7am Tuesday 13 November 2018
Oxford Instruments plc
Announcement of Half Year Results for the six months to 30
September 2018
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 2018.
Half year to Half year to % change
30 September 30 September
2018 2017
GBPm GBPm
Revenue(1) 147.0 132.1 +11.3%
Adjusted* operating profit(1) 21.0 18.8 +11.7%
Adjusted* profit before tax(1) 19.8 16.3 +21.5%
Profit before tax(1) 11.6 12.7 (8.7%)
Adjusted* basic earnings per share(1) 27.3p 22.3p +22.4%
Dividend per share (interim) 3.8p 3.7p +2.7%
Cash generated from operations(1) 21.4 3.7
Net debt 12.5 19.7
(1) Continuing operations
Financial Highlights:
-- Orders up 10.3% to GBP162.9m (2017: GBP147.7m), an increase of 12.0% at constant currency
-- Order book of GBP177.9m (31 March 2018: GBP153.0m, restated
for IFRS 15) up 16.3% (12.5% at constant currency)
-- The Group has adopted IFRS 15 'Revenue from Contracts with
Customers' and IFRS 16 'Leases'. The impact is to increase revenue
by GBP5.1m
-- Reported revenue increased by 11.3% to GBP147.0m (12.6% at constant currency)
-- Adjusted operating profit from continuing operations up 11.7%
to GBP21.0m (16.0% at constant currency) with margin rising to
14.3%
-- Adjusted profit before tax from continuing operations up 21.5% to GBP19.8m
-- Reported profit before tax down 8.7% to GBP11.6m due to
mark-to-market movement on currency derivatives
-- Strong cash conversion of 91.0% contributes to reduction in net debt to GBP12.5m
-- Interim dividend increased by 2.7% to 3.8p
Operational Highlights:
-- Continued progress with the implementation of our Horizon strategy
- Good underlying order and revenue growth
- Continued focus on innovation and R&D
- Further investment in sales, service and operational
capabilities, with increased focus on strategic procurement,
operational efficiencies and logistics
-- End markets and underlying drivers remain positive, with
strong growth from commercial and industrial customers
-- Strong financial performance across Materials &
Characterisation, driven by recently launched products, customer
application focus and positive end markets
-- Good first half performance in Research & Discovery,
driven by growth in Healthcare & Lifescience, and Quantum
Technologies end markets
-- Good order and order book growth in Service & Healthcare,
with growth in service contracts in OI Healthcare and increased
demand for services related to our own products
Outlook:
-- Our expectations for the current financial year remain
unchanged, supported by growth in constant currency orders and
order book, along with our anticipated second half seasonal
bias
Ian Barkshire, Chief Executive of Oxford Instruments plc, said:
"We continue to make good progress with the implementation of our
Horizon strategy whilst maintaining a focus on the near-term
delivery of improved performance. The strategy is now well embedded
across the Group and we are starting to see positive results with
good underlying order and revenue growth."
"Our commitment to provide leading product performance and
commercial solutions in markets with long-term growth drivers,
coupled with our increased investment in operating efficiencies,
will continue to drive progress."
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director
MHP Communications Tel: 020 3128 8100
Rachel Hirst / Luke Briggs
Number of pages: 41
*NOTE: Throughout this half year announcement we make reference
to adjusted numbers. A full definition of adjusted numbers can be
found in note 2. Where we make reference to constant currency
numbers these are prepared on a month by month basis using the
translational and transactional exchange rates which prevailed in
the previous year rather than the actual exchange rates which
prevailed in the year. Transactional exchange rates include the
effect of our hedging programme.
Chief Executive's Review
We were greatly saddened when Alan Thomson, our Chairman, passed
away on 22 July 2018. Alan had led the Board of the Company since
September 2016 and brought a wealth of experience and wisdom to the
role. His commitment and passion in working with us to drive
improvement, and his support, guidance and friendship have been
greatly valued. The process to appoint Alan's successor is underway
and, in the meantime, Steve Blair, our Senior Independent Director,
is operating as Interim Chairman.
Overview
We continue to make good progress with the implementation of our
Horizon strategy whilst maintaining a focus on the near-term
delivery of improved performance. The strategy is now well embedded
across the Group and we are starting to see positive results from
our increased focus on end market applications, with good
underlying order and revenue growth.
Our chosen end markets and their underlying growth drivers
remain positive and robust, with reported orders for the Group up
10.3% (12.0% at constant currency) to GBP162.9m (2017: GBP147.7m).
Each of our three sectors - Materials & Characterisation,
Research & Discovery, and Service & Healthcare - reported
order growth.
Reported revenue rose to GBP147.0m (2017: GBP132.1m), an
increase of 11.3% (12.6% at constant currency), with strong growth
in both the Materials & Characterisation and Research &
Discovery sectors. Revenue was slightly down in Service &
Healthcare due primarily to lower orders from our US Healthcare
business. Reported adjusted operating profit increased 11.7% to
GBP21.0m (2017: GBP18.8m), an increase of 16.0% at constant
currency, with strong growth across both the Materials &
Characterisation and Research & Discovery sectors partially
offset by a lower contribution from Service & Healthcare.
The order book, representing orders for future delivery, as at
30 September 2018 increased 16.3% on a reported basis (12.5% at
constant currency) since 31 March 2018.
Continuing adjusted basic earnings per share increased by 22.4%
to 27.3 pence (2017: 22.3 pence).
Good cash collection in the period further reduced net debt to
GBP12.5m, down from GBP19.7m at the year end.
Revenue from commercial and industrial customers increased in
the period driven by our enhanced customer application and market
focus. The proportion of revenue in the period from commercial
customers increased to 52.7%
(2017: 45.3%), with revenue associated with academic or
government funded customers remaining broadly in line with the same
period last year.
From an end-market perspective, we have seen strong order and
revenue growth in Advanced Materials and Healthcare &
Lifescience. Quantum Technologies revenue was up in the period,
with orders slightly down due to the phasing of order intake, but
with a strong future-looking pipeline. Semiconductor &
Communications revenue was broadly in line with last year, with
good order growth in the period and a healthy pipeline for both our
measurement and semiconductor processing solutions. Advanced
Materials represented 24% of sales, Quantum Technologies 10%, and
Healthcare & Lifescience and Semiconductor & Communications
representing 28% and 21% respectively. Energy and Environment each
represented 5%, with Research & Fundamental Science at 7%.
From a geographical perspective, we had strong constant currency
revenue growth across Asia and Europe of 18.9% and 10.8%
respectively, with growth of 5.3% in North America. Within Asia, we
had strong growth across the region, with China, Japan and the Rest
of Asia each achieving double digit growth relative to the
comparative period. Asia represented 41% of Group revenue, Europe
25%, North America 32% and Rest of World 2%. China represented 21%
of revenue, up from 17% in the previous half year.
This encouraging first half result has been achieved against a
backdrop of increasing global political tensions that have impacted
the overall international trading environment. We have seen a
slight tightening of the grant of export licences to certain
customers. In addition, the imposition of US sanctions and China
tariffs has had a modest impact on orders and revenues in the
period. We are monitoring this situation closely to mitigate, where
possible, any future impact.
Horizon Strategy Progress
We have maintained a sharp focus on our Horizon strategy to
deliver sustainable revenue growth and improved margins. In the
period we have continued to embed an increased commercial focus and
build capabilities across the Group, including extensive training
for all our customer facing teams. With our cohort of internal
operational champions now in place, we have increased our
investment and focus on the Operational Excellence aspect of
Horizon, with a specific focus on strategic procurement,
operational efficiencies and logistics. This will support our
future growth ambitions and contribute to margin improvement.
Sector Performance
Turning to the performance of our individual sectors:
Materials & Characterisation focuses on applied R&D and
commercial customers, enabling the fabrication and characterisation
of materials and devices down to the atomic scale. This sector
delivered a strong first half, with positive contributions from all
the constituent businesses, namely NanoAnalysis, Asylum Research
and Plasma Technology. Reported revenue increased by 20.0% to
GBP60.1m (2017: GBP50.1m), with reported adjusted operating profit
increasing to GBP9.7m (2017: GBP7.2m). Reported order growth of
13.7% to GBP69.5m (2017: GBP61.1m) contributed to a positive order
book growth for future deliveries. The enhanced results were driven
by strong demand for recently launched higher margin products, an
increased focus on end customer applications and operational
efficiencies. These elements contributed to an improved reported
operational margin of 170 basis points to 16.1% for the sector
(2017: 14.4%).
Research & Discovery provides advanced solutions that create
unique environments and enable measurements down to the molecular
and atomic level, used predominantly in fundamental and applied
research. Reported revenue increased by 13.4% to GBP54.3m (2017:
GBP47.9m), with reported adjusted operating profit increasing to
GBP4.8m (2017: GBP4.2m). This was driven by increased demand for
our scientific cameras and optical microscopy systems, as well as
increased revenues from our cryogenic systems and superconducting
magnets. Improved performance from Andor Technology and NanoScience
was partially offset by a softer first half performance from
Magnetic Resonance, X-ray Technology and Scienta Omicron in the
period. Reported order growth of 3.8% to GBP60.0m (2017: GBP57.8m),
contributed to order book growth of 5.0%. Operational margin for
the sector remained flat at 8.8% on a reported basis. The Group has
adopted IFRS 15 'Revenue from Contracts with Customers'. The
primary impact is the recognition of revenue on our complex
cryogenic and magnet systems on installation, rather than shipment.
The financial impact in the half year is to increase revenue by
GBP5.1m; we expect this difference to partially unwind in the
second half. The improvement plan within our NanoScience business
is progressing well under a new leadership team, with greater
commercial discipline and investment in sales and service
resources. Consquently we have seen an anticipated reduction in the
backlog of uninstalled complex systems.
Service & Healthcare provides customer service and support
for our own products and the service, sale and rental of
third-party healthcare imaging systems. Reported revenue for the
sector fell by 4.4% to GBP32.6m (2017: GBP34.1m) due to lower
volumes from our US Healthcare business, with a decline in reported
adjusted operating profit of 12.2% to GBP6.5m (2017: GBP7.4m). The
sector saw an increase in reported orders to GBP33.4m (2017:
GBP29.1m), up 14.8%. The sector's performance was impacted by the
ongoing strategic movement of our US Healthcare business towards a
higher proportion of service revenue and a change in mix of
upgrades and contract revenues associated with our own
products.
R&D
Innovation remains core to our Horizon strategy and we continue
to invest in products, solutions and technology that help our
customers improve their productivity and develop new capabilities.
We have maintained our focus on strategic investments in line with
our short, medium and longer-term roadmaps to expand our market
shares and provide growth into new market areas. Investment in
R&D initiatives was slightly lower in the period at GBP12.3m
(2017: GBP13.0m) due to the phasing of specific projects, timing of
associated spend and the receipt of additional external grant
funding.
People
As we continue with the implementation of Horizon, it is our
people that make the real difference. Our thanks go to all our
employees for their ongoing support of our strategy and for their
willingness to help us deliver an exceptional experience for our
customers.
Dividends
The Board has declared an interim dividend increase of 2.7% to
3.8 pence (2017: 3.7 pence), reflecting improvement in underlying
earnings per share.
Current Trading and Outlook
We continue to make good progress with the implementation of our
Horizon strategy whilst maintaining a focus on the near-term
delivery of improved performance. The strategy is now well embedded
across the Group and we are starting to see positive results with
good underlying order and revenue growth.
Our commitment to provide leading product performance and
commercial solutions in markets with long-term growth drivers
coupled with our increased investment in operating efficiencies
will continue to drive progress
Our expectations for the current financial year remain
unchanged, supported by growth in constant currency orders and
order book along with our anticipated second half seasonal
bias.
Ian Barkshire
Chief Executive
13 November 2018
Operations Review
Our Group reports in the following three sectors: Materials
& Characterisation, Research & Discovery, and Service &
Healthcare.
Materials & Characterisation
2018 2017 Growth Constant
GBPm GBPm Currency
Growth(1)
------------------------------ ------ ------ ------- -----------
Revenue 60.1 50.1 +20.0% +21.2%
------------------------------ ------ ------ ------- -----------
Adjusted(2) operating profit 9.7 7.2
------------------------------ ------ ------
Adjusted(2) operating margin 16.1% 14.4%
------------------------------ ------ ------
Profit before tax after
adjusting items 8.6 5.8
------------------------------ ------ ------
(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 Financial Statements
The Materials & Characterisation sector comprises
NanoAnalysis, Asylum Research and Plasma Technology. This sector
has a broad customer base across a wide range of applications for
the imaging and analysis of materials down to the atomic level, as
well as the fabrication of semiconductor devices and structures
through our range of advanced semiconductor etch and deposition
processes and systems. Our market leading product performance,
combined with customer focused solutions, continues to drive strong
growth by providing increased value to existing customers and the
identification and reach into new markets and applications. 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).
Materials & Characterisation delivered strong growth in
orders, revenue and profitability driven by our continued focus on
tailoring our product offering to specific end customer
applications that increase both the product value and the
addressable market. The success of recently launched higher margin
products and solutions strongly contributed to the sector's
performance in the period, which saw margins increase by 170 basis
points to 16.1%. Growth from industrial and commercial customers
increased their proportion of sales in the period to 58% of revenue
(2017: 48%), with the balance from academic and government funded
customers.
Looking at end-market segments, we saw strong growth in Advanced
Materials, which accounted for 39% of sales in the sector.
Semiconductor & Communications also represented 39% of sales
with Energy, Environment and Healthcare & Lifescience each
broadly similar at 8%, 7% and 6% of revenue, respectively. From a
geographic perspective, revenue grew in each of Europe, North
America and Asia.
Growth in the Advanced Materials market segment was strongly
supported by the continued success of our recently launched,
Symmetry(TM), super-fast material structure analyser and the
Ultim(TM) large area X-ray detectors as well as our portfolio of
atomic force microscopes. These products enable customers to
undertake significantly more accurate and much faster analysis,
driving both capability and productivity for customers in the
automotive and aerospace industries, as well as those analysing
metals, ceramics, composites and polymers. We also saw good growth
from customers engaged in energy generation, storage and
batteries.
We have continued to achieve success through our application
specific solutions, in particular new solutions for QA and QC in
the high-end additive manufacturing and 3D printing markets. Our
Symmetry(TM) material analyser enables the critical qualification
of the material properties, performance and quality of the additive
manufactured metal components and optimisation of the manufacturing
processes. This is of increasing interest within the automotive and
aerospace industries, which use additive manufacturing to produce
much lighter materials and more complex components than would be
possible using traditional methods. In addition, we have exploited
our expertise in particle analysis to develop a tailored solution
to provide quality control for the raw material feedstock used in
additive manufacturing, helping to avoid contamination that can
significantly impact the performance and properties of the
manufactured component or device.
Semiconductors remains a core market for the sector, where in
addition to our imaging and analysis products we provide etch and
deposition process solutions used across a range of advanced
compound semiconductor and silicon device applications. We are
entering what some call the 'decade of materials' - whereby
performance materials will enable applications and device
performance that silicon cannot. We are focusing on the global
trends in optoelectronics, discrete devices, nanomaterials and
research systems. Specifically, we are continuing to build on our
core research market by targeting growth applications within the
compound semiconductor device market with an overarching strategy
of tailoring our market leading research and applied R&D
products for production customers. As an example, we have developed
leading capabilities in several key process steps required for the
manufacture of power devices, MEMs sensors and vertical-cavity
surface-emitting lasers (VCSELs). VCSELs are increasingly being
used across a range of applications such as facial recognition on
smart phones, and for higher-speed communications within data
centres. We also see compound semiconductors providing growth in
discrete semiconductor devices, where the properties of compound
semiconductors allow faster, more energy efficient and higher
voltage power electronics. This enables enhanced wireless charging
capabilities and increased energy storage, providing longer range
electric vehicles and higher data communication rates and capacity
required for 5G networks.
Research & Discovery
2018 2017 Growth Constant
GBPm GBPm Currency
Growth(1)
------------------------- ------ ------ ------- -----------
Revenue 54.3 47.9 +13.4% +14.6%
------------------------- ------ ------ ------- -----------
Adjusted(2) operating
profit 4.8 4.2
------------------------- ------ ------
Adjusted(2) operating
margin 8.8% 8.8%
------------------------- ------ ------
Profit before tax after
adjusting items 1.9 0.1
------------------------- ------ ------
(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 Financial Statements
The Research & Discovery sector includes Andor Technology,
NanoScience and Magnetic Resonance, X-ray Technology and our
minority share in Scienta Omicron. This sector provides advanced
solutions that create unique environments and enable imaging and
analytical measurements down to the molecular and atomic level,
used predominantly in fundamental and applied research. We can
build on our relationships with customers working on breakthrough
applications in research to gain insights and support future
commercial applications.
The sector had an improved first half, with growth in orders,
revenue and profitability driven by a strong performance from our
optical microscopy systems, scientific cameras, cryogenic systems
and superconducting research magnets, providing growth in the
Healthcare & Lifescience and Quantum Technologies segments.
This was partially offset by a reduction in revenues from our
scientific X-ray tubes and benchtop magnetic resonance systems. The
sector has a high proportion of academic and government funded
customers, representing 65% of revenues. From a market perspective,
the Healthcare & Lifescience and Quantum Technologies segments
represented 40% and 25% of revenue respectively; Research &
Fundamental Science 18%, Advanced Materials 10%, with the balance
from Environment, Semiconductor & Communications, and Energy
customers.
Growth in Healthcare & Lifescience is supported by increased
research within neuroscience and customers involved in
developmental biology to image and analyse cells, tissues and
organs for the development of advanced medicines and the improved
understanding of fundamental disease mechanisms. Within this
segment, our Dragonfly(TM) optical microscopy portfolio continues
to gain customer recognition and market share through the provision
of improved image quality across larger and thicker samples.
We continue to see growth from customers involved in Quantum
Technologies with increased investment by large corporates and the
wider academic community across the EU, US and China in areas such
as quantum computing, secure communications, sensors and imaging.
We continue to work with leading companies and researchers
worldwide to provide the fundamental tools for research and the
development of solutions for commercial applications. The market
remains attractive with strong global research funding due to the
potential for significant market and technology disruption.
However, the nature of the sector means orders and revenue remain
irregular in value and frequency and are attracting an increased
scrutiny for export licenses. As previously mentioned, revenue
benefitted from the introduction of IFRS 15.
We have built on our market and technical leadership in
scientific cameras with the launch of a new range of application
specific cameras focusing on key market drivers including cell
biology, personalised medicine, astronomy and physical science
& quantum technology. Sona(TM) is tailored for the lifescience
market offering exceptional sensitivity to improve long-term live
cell analysis to help scientists gain a better understanding of
cellular processes; and Marana(TM) has been optimised for high
speed, high sensitivity imaging, supporting a broad range of
physical sciences, including astronomy applications involving the
search for near earth objects and space debris.
Research & Fundamental Science remains an attractive segment
for this sector with our range of optical components,
spectrographs, cryogenics and magnets providing customers with a
broad range of platforms and solutions used predominately across
the physical sciences. These included the BepiColumbo European
Space Agency mission to Mercury, which has incorporated our X-ray
detectors. The mission, launched in October, is seeking a deeper
understanding of the planet's origin and its impact on the solar
system.
Despite a softer first half, our benchtop magnetic resonance
analysers continue to see positive pipeline and we are gaining
further opportunities for our solutions across a range of food and
industrial applications as well as within the oil exploration
market. The market for our scientific X-ray tubes remains buoyant
with order growth in the period, although delayed shipments and
timing of orders has negatively impacted revenue and profitability
in the first half of the year. We expect to see some improvement in
the second half from both business units.
The Scienta Omicron joint venture created the largest player in
the ultra-high vacuum surface science field. The Group has a 47%
share in the joint venture. Following weak order intake last year,
we recorded a loss of GBP0.6m for the half year. Assisted by the
launch of new systems, orders are recovering, and we expect an
improved trading performance in the second half.
Service & Healthcare Sector
2018 2017 Growth Constant
GBPm GBPm Currency
Growth(1)
------------------------- ------ ------ ------- -----------
Revenue 32.6 34.1 (4.4)% (2.9)%
------------------------- ------ ------ ------- -----------
Adjusted(2) operating
profit 6.5 7.4
------------------------- ------ ------
Adjusted(2) operating
margin 19.9% 21.7%
------------------------- ------ ------
Profit before tax after
adjusting items 6.1 6.7
------------------------- ------ ------
(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 Financial Statements
The Service & Healthcare sector comprises the Group's
maintenance service contracts, billable repairs, training and
support services, and spare part sales related to Oxford
Instruments' own products under the OiService brand; and the sale,
service and rental of refurbished third-party MRI and CT machines
under the OI Healthcare brand.
Reported orders grew 14.8% to GBP33.4m (2017: GBP29.1m)
supported by increased demand for services related to our own
products under OiService as well as services within OI Healthcare,
with the order book for future deliveries up 15.0% to GBP46.9m
(2017: GBP40.8m).
Within OI Healthcare we have seen good progress in the growth of
service contracts to new customers as well as an improved
utilisation of our leasing fleet. Sales in the refurbished imaging
equipment market remained depressed compared to previous years with
weaker demand for new and used equipment, competitive market
limiting opportunities and depressing margins. In Japan, we have
signed a service agreement to start servicing Hitachi Healthcare's
Mitsubishi magnet-based MRI systems.
Within OiService we continue our drive to provide enhanced
support services tailored to customers' needs whilst improving our
efficiency and response time to customers through the utilisation
of mobile technologies. We have increased the number of application
specific seminars and completed a very successful second microscopy
summer school in collaboration with the Chinese Academy of
Sciences.
Reported revenue declined in the period due primarily to a lower
number of refurbished system sales within OI Healthcare which,
combined with a change in product mix from OiService, contributed
to a lower profit and margin in the period.
Finance Review
The Group has adopted IFRS 15 'Revenue from Contracts with
Customers' using the modified retrospective approach. Comparatives
have not been restated. The main difference is within our
NanoScience business, where the revenue recognition on complex
customised magnetic and cryogenic systems is deferred from being
primarily on transfer of rights and rewards of ownership to
completion of installation. The Group has adopted IFRS 16 'Leases'
in the 2018/19 financial year. The net impact of adopting IFRS 15
and IFRS 16 is to increase profit before tax by GBP2.2m. Further
detail on the impact of these new accounting standards is set out
in note 1.
Reported orders increased by 10.3% to GBP162.9m (2017:
GBP147.7m), an increase of 12.0% at constant currency. At the end
of the period the Group's order book for future deliveries stood at
GBP177.9m (31 March 2018: GBP134.0m). The order book as at 31 March
2018 restated on an IFRS 15 basis is GBP153.0m, against GBP134.0m
as previously reported. Against this IFRS 15 adjusted comparative
the order book grew 16.3% on a reported basis and 12.5% at constant
currency.
Reported revenue increased by 11.3% to GBP147.0m (2017:
GBP132.1m). Revenue, excluding currency effects, increased by
12.6%, with the movement in average currency exchange rates over
the half year reducing reported revenue by GBP1.7m.
Adjusted operating profit from continuing operations increased
by 11.7% to GBP21.0m (2017: GBP18.8m). Adjusted operating profit
from continuing operations, excluding currency effects, increased
by 16.0%. Adjusted operating margin from continuing operations
increased by 10 basis points to 14.3% (2017: 14.2%).
The effect of IFRS 15 is to increase revenue by GBP5.1m and
adjusted operating profit by GBP2.3m for the half year. This
difference between revenue recognition on product installation
compared to product shipment is expected to partially unwind in the
second half of the year. Against the previous half year, the Group
was unable to satisfy additional customer orders to the value of
GBP1.7m following the refusal of government export licences and
compliance with US sanction legislation. In the half year we have
engaged consultants to accelerate the operational excellence
element of our Horizon strategy and incurred restructuring costs,
primarily on the closure of a small facility in North America.
These costs totalled GBP1.0m and have been included within adjusted
operating profit.
Adjusted profit before tax from continuing operations grew by
21.5% to GBP19.8m (2017: GBP16.3m). Recorded within the comparative
period under discontinued operations is a post-tax profit of
GBP45.6m from the sale of Industrial Analysis, which was completed
on 3 July 2017.
Adjusting items include amortisation of acquired intangibles of
GBP4.7m and a net charge of GBP0.6m relating to loan note
make-whole settlement payments and a net credit relating to our
joint venture, Scienta Omicron. The movement in the mark-to-market
valuation of currency hedges for future years gave rise to a charge
of GBP2.9m.
Adjusted profit before tax from continuing operations of
GBP19.8m (2017: GBP16.3m) represents a margin of 13.5% (2017:
12.3%). After adjusting items, the Group recorded a profit before
tax of GBP11.6m (2017: GBP12.7m).
Continuing adjusted basic earnings per share grew by 22.4% to
27.3 pence (2017: 22.3 pence). Continuing basic earnings per share
was 15.6 pence (2017: 17.5 pence).
Cash generated from operations of GBP21.4m (2017: GBP3.7m),
represents 91.0% (2017: 12.8%) cash conversion. Net debt decreased
from GBP19.7m on 31 March 2018 to GBP12.5m, representing a net debt
to EBITDA ratio (for banking covenant purposes) of 0.2 times; our
banking covenant is set at 3.0 times.
Adjusted operating profit is stated before impairment and
amortisation of goodwill and acquired intangibles, business
reorganisation items, the mark-to-market valuation of unexpired
currency hedges, and other adjusting items, as set out in Note 2 to
the condensed Financial Statements.
Income Statement
The Group's Income Statement is summarised below.
Half year Half year
to to
30 September 30 September
2018 2017
GBPm GBPm Change
------------------------------------------------- ------------ ------------ -------
Revenue 147.0 132.1 +11.3%
Gross profit 78.7 67.7 +16.2%
Administrative overheads (56.8) (48.7)
Share of (loss)/profit of associate (0.6) -
Foreign exchange (0.3) (0.2)
------------------------------------------------- ------------ ------------ -------
Adjusted operating profit 21.0 18.8 +11.7%
Net finance costs (1.2) (2.5)
------------------------------------------------- ------------ ------------ -------
Adjusted profit before tax 19.8 16.3 +21.5%
Amortisation of acquired intangibles (4.7) (5.6)
Non-recurring items (0.6) (0.6)
Mark-to-market of currency hedges (2.9) 2.6
------------------------------------------------- ------------ ------------ -------
Profit before tax 11.6 12.7
Tax from continuing operations (2.7) (2.7)
------------------------------------------------- ------------ ------------ -------
Profit for the period from continuing operations 8.9 10.0
------------------------------------------------- ------------ ------------ -------
Adjusted effective tax rate(1) 21.2% 22.1%
Continuing adjusted earnings per share -
basic 27.3p 22.3p +22.4%
Continuing earnings per share - basic 15.6p 17.5p (10.9%)
Continuing adjusted earnings per share -
diluted 27.0p 22.1p +22.2%
Continuing earnings per share - diluted 15.4p 17.4p (11.5%)
Dividend per share 3.80p 3.70p +2.7%
------------------------------------------------- ------------ ------------ -------
1. The adjusted effective tax rate is calculated by excluding
the tax effects of impairment of non-current assets, amortisation
on acquired intangibles, non-recurring items, the mark-to-market of
financial derivatives, and other adjusting items.
Orders and Revenue
Total reported orders grew by 10.3% (12.0% at constant currency)
to GBP162.9m. Orders, at constant currency, increased by 15.2% for
Materials & Characterisation, 5.5% for Research & Discovery
and 16.8% for Service & Healthcare.
Reported revenue of GBP147.0m (2017: GBP132.1m) increased by
11.3% (12.6% at constant currency). Reported revenue increased by
20.0% for Materials & Characterisation, 13.4% for Research
& Discovery and declined by 4.4% for Service &
Healthcare.
The book-to-bill ratio (orders received to goods and services
billed in the period) for the half year was 1.11.
Revenue, at constant currency, increased by 21.2% for Materials
& Characterisation with good growth across all constituent
businesses. Growth of 14.6% in Research & Discovery was driven
by a high level of installations in NanoScience and good growth
within Andor Technology. A decline of 2.9% for Service &
Healthcare is a result of selling fewer refurbished imaging
systems.
On a geographical basis, at constant currency, revenue grew by
10.8% in Europe, 5.3% in North America, 18.9% in Asia and 66.7% for
the Rest of World.
After adjusting the comparative period for IFRS 15, total
reported order book grew by 16.3% (12.5% at constant currency). The
order book, at constant currency, compared to 31 March 2018,
increased by 33.3% for Materials & Characterisation, 5.0% for
Research & Discovery, and 9.4% for Service &
Healthcare.
Materials Research Service &
GBPm & Characterisation & Discovery Healthcare Total*
--------------------------- ------------------- ------------ ----------- ------
Revenue: Half year 2017/18 50.1 47.9 34.1 132.1
--------------------------- ------------------- ------------ ----------- ------
Underlying movement 10.6 7.0 (1.0) 16.6
Foreign exchange (0.6) (0.6) (0.5) (1.7)
--------------------------- ------------------- ------------ ----------- ------
Revenue: Half year 2018/19 60.1 54.3 32.6 147.0
--------------------------- ------------------- ------------ ----------- ------
Revenue growth: reported +20.0% +13.4% (4.4%) +11.3%
Revenue growth: constant
currency +21.2% +14.6% (2.9%) +12.6%
* Excluding inter-sector revenue
Gross profit
Gross profit increased by 16.2% to GBP78.7m (2017: GBP67.7m),
representing a gross profit margin of 53.5%, an increase of 230
basis points over last year.
Operating profit
Adjusted operating profit from continuing operations increased
by 11.7% to GBP21.0m (2017: GBP18.8m), representing an adjusted
operating profit margin of 14.3%, an increase of 10 basis points
against last year. Materials & Characterisation margin rose by
170 basis points to 16.1% (2017: 14.4%). Research & Discovery's
adjusted operating margin was flat at 8.8% (2017: 8.8%). Service
& Healthcare margin declined by 180 basis points to 19.9%
(2017: 21.7%).
An increase in administrative overheads of 16.6% from GBP48.7m
to GBP56.8m primarily reflects an investment in sales and service
resources and training, operations, a reduction in capitalised
R&D and an increase in IT costs. In addition, the end of the
transition agreement with Hitatchi High-Technologies following the
sale of Industrial Analysis and the sale of two freehold properties
last year has led to a rise in annual net administrative overheads
of GBP1.6m. Commissions and logistics costs are included within
administrative overheads.
Our share of the Scienta Omicron joint venture showed an
adjusted loss of GBP0.6m for the year, against a break-even
position for the comparative period. After adjusting items, our
share of the Scienta Omicron joint venture was a loss of
GBP0.3m.
Currency effects (including the impact of transactional currency
hedging) have reduced reported adjusted operating profit by GBP0.8m
when compared to blended hedged exchange rates for the comparative
period.
At constant currency, the adjusted operating profit margin was
14.7%, an increase of 50 basis points.
Materials Research Service &
GBPm & Characterisation & Discovery Healthcare Total
--------------------------- ------------------- ------------ ----------- -----
Adjusted operating profit:
Half year 2017/18 7.2 4.2 7.4 18.8
--------------------------- ------------------- ------------ ----------- -----
Underlying movement 2.8 1.0 (0.8) 3.0
Foreign exchange (0.3) (0.4) (0.1) (0.8)
--------------------------- ------------------- ------------ ----------- -----
Adjusted operating profit:
Half year 2018/19 9.7 4.8 6.5 21.0
--------------------------- ------------------- ------------ ----------- -----
Margin: Half year 2017/18 14.4% 8.8% 21.7% 14.2%
Margin: Half year 2018/19 16.1% 8.8% 19.9% 14.3%
Adjusting items
Amortisation of acquired intangibles of GBP4.7m relates to
intangible assets recognised on acquisitions, being the value of
technology, customer relationships and brands.
Non-recurring items were a net charge of GBP0.6m. During the
period we repaid GBP11.6m of the principal outstanding on loan
notes as a condition of the sale of Industrial Analysis. The
make-whole settlement cost due at the time of the repayment was
GBP0.9m. In addition, we recognised a net gain of GBP0.3m on
adjustments relating to our Scienta Omicron joint venture.
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 marking-to-market derivatives in respect of
future periods are disclosed in the Income Statement as foreign
exchange and excluded from our calculation of adjusted profit
before tax.
The mark-to-market loss in respect of derivative financial
instruments was GBP2.9m (2017: GBP2.6m gain). This reflects a
movement from a net fair value asset to a small net liability
position on currency derivatives that are hedging future
transactional currency exposures for the Group compared to the
previous year end. The un-crystallised balance sheet liability is
attributable to a fall in the value of Sterling at the balance
sheet date against a blended rate achieved on US Dollar, Euro and
Japanese Yen forward contracts that will mature over the next
eighteen months.
Net finance costs
The Group's adjusted net finance costs fell by GBP1.3m to
GBP1.2m (2017: GBP2.5m) with net finance charges falling by GBP1.2m
to GBP1.0m and pension financing charges falling by GBP0.1m to
GBP0.2m.
Profit before tax
Continuing adjusted profit before tax increased by 21.5% to
GBP19.8m (2017: GBP16.3m). The adjusted profit before tax margin
increased by 120 basis points to 13.5% (2017: 12.3%).
Profit before tax of GBP11.6m (2017: GBP12.7m) is after the
mark-to-market movement on derivative financial instruments,
amortisation of acquired intangibles and other adjusting items.
Tax
The adjusted tax charge from continuing operations of GBP4.2m
(2017: GBP3.6m) represents an effective tax rate of 21.2% (2017:
22.1%). The current tax liability includes a provision of GBP2.9m
in respect of a historical financing structure. The statutory
effective tax rate is 23.3%.
Earnings per share
Continuing adjusted basic earnings per share increased by 22.4%
to 27.3 pence (2017: 22.3 pence); continuing adjusted diluted
earnings per share were 27.0 pence (2017: 22.1 pence).
The number of undiluted weighted average shares have increased
by 0.1m to 57.2m.
Foreign exchange
The Group faces transactional and translational currency
exposure, most notably against the US Dollar, Euro and Japanese
Yen. For the half year, approximately 16% of Group revenue was
denominated in Sterling, 54% in US Dollars, 19% in Euros, 10% in
Japanese Yen and 1% in other currencies. Translational exposures
arise on the consolidation of overseas company results into
Sterling. Transactional exposures arise where the currency of sale
or purchase transactions differs from the functional currency in
which each company prepares its local accounts.
The Group maintains a hedging programme against its net
transactional exposure using internal projections of expected
currency trading transactions expected to arise over a period
extending from 12 to 24 months. As at 30 September 2018 the Group
had currency hedges in place extending up to eighteen months
forward.
Dividend
The Group's policy is to increase the dividend each year in line
with the increase in underlying earnings, considering movements in
currency. The Board has proposed to increase the interim dividend
by 2.7% to 3.8 pence. The interim dividend will be paid on 8 April
2019 to Shareholders on the register as at 1 March 2019.
Cash flow
The Group cash flow is summarised below.
Half year Half year
to to
30 September 30 September
2018 2017
GBPm GBPm
---------------------------------------------------------- ------------ ------------
Adjusted operating profit 21.0 18.8
Depreciation and amortisation 5.4 4.0
---------------------------------------------------------- ------------ ------------
Adjusted EBITDA 26.4 22.8
Working capital movement (1.2) (15.0)
Purchase of rental assets held for subsequent sale (0.6) (0.6)
Loss on disposal of property, plant and equipment - 0.2
Equity settled share schemes 0.4 0.5
Share of loss/(profit) from associate 0.6 -
Business reorganisation items (0.7) (0.7)
Pension scheme payments above charge to operating
profit (3.5) (3.5)
Cash generated from operations 21.4 3.7
Interest (2.3) (1.0)
Tax (4.7) (2.5)
Capitalised development expenditure (1.5) (3.1)
Expenditure on tangible and intangible assets (3.4) (2.4)
Increase in investment in associate - (2.1)
Proceeds from sale of subsidiary undertaking - 73.0
Decrease in long-term receivables 0.6 -
Dividends paid (2.1) (2.1)
Proceeds from issue of share capital - 0.2
Payments made in respect of lease liabilities (1.6) -
Decrease in borrowings (8.6) (77.6)
---------------------------------------------------------- ------------ ------------
Net decrease in cash and cash equivalents from continuing
operations (2.2) (13.9)
---------------------------------------------------------- ------------ ------------
Note: Adjusted EBITDA is earnings before interest, tax,
depreciation, intangible amortisation, mark-to-market of financial
derivatives and other non-cash adjusting items.
Cash generated from operations
Cash generated from operations of GBP21.4m (2017: GBP3.7m),
represents 91.0% (2017: 12.8%) cash conversion. The impact of IFRS
16 is to recognise a lease liability and corresponding asset for
leases previously classified as operating leases. As a result, the
depreciation charge for the half year includes an additional
GBP1.7m reflecting the increase in asset base. Compared to the
comparative period, cash generated from operations is also higher
by GBP1.7m. 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 lease liabilities / adjusted operating
profit. Payments made in respect of lease liabilities are now
included within our definition of cash conversion to retain a
like-for-like comparison following the introduction of IFRS 16.
The working capital outflow of GBP1.2m reflects an increase in
inventories of GBP7.9m, a decrease in receivables of GBP12.6m, a
decrease in payables of GBP7.7m and an increase in customer
deposits of GBP1.8m. The increase in inventories primarily reflects
an increase in work in progress and components to support our
planned production schedule in the second half of the year,
particularly for our deposition and etch process solutions and
optical imaging systems.
Interest
Net interest paid was GBP2.3m (2017: GBP1.0m). This includes
loan note make-whole payments of GBP0.9m as a consequence of
repaying loan note principal following the sale of Industrial
Analysis. Net interest paid in the comparative period was low due
to payment timing differences.
Tax
Tax paid was GBP4.7m (2017: GBP2.5m), the comparative period
benefiting from tax deductions on allowable adjusting items and
utilisation of brought forward tax losses.
Investment in research and development ('R&D')
Total cash spend on R&D in the half year was GBP12.3m,
equivalent to 8.4% of sales, (2017: GBP13.0m, 9.8% of sales). The
small decrease reflects lower material costs incurred this year and
a change in timing of receipt of government grants. A
reconciliation between the amounts charged to the Income Statement
and the cash spent is given below:
Half year Half year
to to
30 September 30 September
2018 2017
GBPm GBPm
----------------------------------------------------- ------------ ------------
R&D expense charged to the Income Statement 12.3 11.4
Amounts capitalised as fixed assets - 0.1
Amortisation and impairment of R&D costs capitalised
as intangibles (1.5) (1.6)
Amounts capitalised as intangible assets 1.5 3.1
----------------------------------------------------- ------------ ------------
Total cash spent on R&D during the year 12.3 13.0
----------------------------------------------------- ------------ ------------
Investment in Associate
In the comparative period, the shareholders of Scienta Omicron
agreed to a capital injection to strengthen the balance sheet of
the joint venture and ensure future liquidity in support of the
business strategy. Our share was GBP2.1m and was paid in September
2017.
Disposals
The sale of Industrial Analysis was completed on 3 July 2017. A
post-tax profit of GBP45.6m is recorded within discontinued
operations for the comparative period.
Net debt and funding
Net debt
Net debt decreased in the period from GBP19.7m to GBP12.5m. Cash
generated from operations was GBP21.4m. The Group invested in
capitalised development costs of GBP1.5m and tangible and
intangible assets of GBP3.4m.
Movement in net debt GBPm
------------------------------------------------------ ------
Net debt as at 31 March 2018 19.7
------------------------------------------------------ ------
Cash generated from operations (21.4)
Interest 2.3
Tax 4.7
Capitalised development expenditure 1.5
Capital expenditure on tangible and intangible assets 3.4
Dividends paid 2.1
Other items 0.2
------------------------------------------------------ ------
Net debt as at 30 September 2018 12.5
------------------------------------------------------ ------
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.
In this half year the Group repaid, as a pre-condition relating
to the sale of Industrial Analysis, GBP11.6m of its bilateral
private placement note, leaving an outstanding note of GBP27.9m,
which matures in March 2021. Associated make-whole settlement costs
of GBP0.9m have been included within non-recurring items.
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 2018
net debt to EBITDA was at 0.2 times and EBITDA to interest was 21.3
times.
Pensions
The Group has defined benefit pension schemes in the UK and USA.
Both have been closed to new entrants since 2001 and closed to
future accrual from 2010.
At 30 September 2018, the net liability arising from our defined
benefit scheme obligations was GBP9.9m (31 March 2018: GBP15.3m), a
fall of GBP5.4m. The reduction in the deficit was primarily due to
the contributions paid in the period and a rise in the discount
rate. Total scheme assets at 30 September 2018 were GBP285.7m (31
March 2018: GBP289.5m) while liabilities were GBP295.6m (31 March
2018: GBP304.8m).
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Performance, Strategy and Operations sections.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Financial
Review.
The diverse nature of the Group, combined with its financial
strength, provides a solid foundation for a sustainable business.
The Directors have reviewed the Group's forecasts and flexed them
to incorporate a number of potential scenarios relating to changes
in trading performance. The Directors believe that the Group will
be able to operate within its existing debt facilities. This review
also considered hedging arrangements in place. The Directors
believe that the Group is well placed to manage its business risks
successfully.
The Financial Statements have been prepared on a going concern
basis, based on the Directors' opinion, after making reasonable
enquires, that the Group has adequate resources to continue in
operational existence for the foreseeable future.
Forward-looking statements
This document contains certain forward-looking statements. The
forward-looking statements reflect the knowledge and information
available to the Company during the preparation and up to the
publication of this document. By their very nature, these
statements depend upon circumstances and relate to events that may
occur in the future thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit
forecast by the Company.
Gavin Hill
Group Finance Director
13 November 2018
Condensed Consolidated Statement of Income
Half year ended 30 September 2018 - unaudited
Half Year to 30 Sept Half Year to 30 Sept
2018 2017
Adjusted Adjusting Total Adjusted Adjusting Total
items* items*
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
Revenue 3 147.0 - 147.0 132.1 - 132.1
Cost of sales (68.3) - (68.3) (64.4) - (64.4)
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
Gross profit 78.7 - 78.7 67.7 - 67.7
Research and development 4 (12.3) - (12.3) (11.4) - (11.4)
Selling and marketing (28.9) - (28.9) (25.4) - (25.4)
Administration and
shared services (15.6) (4.7) (20.3) (11.9) (5.9) (17.8)
Share of loss of associate,
net of tax (0.6) 0.3 (0.3) - (0.3) (0.3)
Foreign exchange (loss)/gain (0.3) (2.9) (3.2) (0.2) 2.6 2.4
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
Operating profit/(loss) 21.0 (7.3) 13.7 18.8 (3.6) 15.2
Other financial income 0.1 - 0.1 0.1 - 0.1
-------------------------------- ---------
Financial income 0.1 - 0.1 0.1 - 0.1
Interest charge on
pension scheme net (0.2) - (0.2) (0.3) - (0.3)
liabilities
Other financial expenditure (1.1) (0.9) (2.0) (2.3) - (2.3)
Financial expenditure (1.3) (0.9) (2.2) (2.6) - (2.6)
Profit/(loss) before
income tax from continuing
operations 3 19.8 (8.2) 11.6 16.3 (3.6) 12.7
Income tax (expense)/credit 7 (4.2) 1.5 (2.7) (3.6) 0.9 (2.7)
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
Profit/(loss) for
the period from continuing
operations 15.6 (6.7) 8.9 12.7 (2.7) 10.0
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
Profit/(loss) from
discontinued operations
after tax 6 - - - 0.3 45.3 45.6
Profit/(loss) for
the period attributable
to equity holders
of the parent 15.6 (6.7) 8.9 13.0 42.6 55.6
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
pence pence pence pence
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
Earnings per share
Basic earnings per
share 8
From continuing operations 27.3 15.6 22.3 17.5
From discontinued
operations 6 - - 0.5 79.9
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
From profit/(loss)
for the period 27.3 15.6 22.8 97.4
Diluted earnings per
share 8
From continuing operations 27.0 15.4 22.1 17.4
From discontinued
operations 6 - - 0.5 79.5
-------------------------------- ------ --------- ---------- ------- --------- ----------
From profit/(loss)
for the period 27.0 15.4 22.6 96.9
Dividends per share
Dividends paid 9 3.70 3.70
Dividends proposed 9 3.80 3.70
-------------------------------- ------ --------- ---------- ------- --------- ---------- -------
* Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in note 2 of this Half Year Report.
Condensed Consolidated Statement of Income
Half year ended 30 September 2018 - unaudited
Year to 31 March 2018
Adjusted Adjusting Total
items*
Notes GBPm GBPm GBPm
-------------------------------------- ------ --------- ---------- --------
Revenue 3 296.9 - 296.9
Cost of sales (146.0) - (146.0)
------------------------------------------- ------ --------- ---------- --------
Gross profit 150.9 - 150.9
Research and development 4 (23.4) - (23.4)
Selling and marketing (53.9) - (53.9)
Administration and shared services (28.5) (12.1) (40.6)
Share of profit/(loss) of associate,
net of tax 0.5 (2.4) (1.9)
Other operating income - 3.3 3.3
Foreign exchange gain 0.9 3.1 4.0
------------------------------------------- ------ --------- ---------- --------
Operating profit/(loss) 46.5 (8.1) 38.4
Other financial income 0.3 - 0.3
-------------------------------------------
Financial income 0.3 - 0.3
Interest charge on pension
scheme net liabilities (0.6) - (0.6)
Other financial expenditure (3.9) - (3.9)
--------
Financial expenditure (4.5) - (4.5)
Profit/(loss) before income
tax from continuing operations 3 42.3 (8.1) 34.2
Income tax expense 7 (10.1) (4.5) (14.6)
------------------------------------------- ------ --------- ---------- --------
Profit/(loss) for the year
from continuing operations 32.2 (12.6) 19.6
------------------------------------------- ------ --------- ---------- --------
(Loss)/profit from discontinued
operations after tax 6 (0.4) 46.3 45.9
Profit for the year attributable
to equity holders of the parent 31.8 33.7 65.5
------------------------------------------- ------ --------- ---------- --------
Earnings per share
Basic earnings per share 8
From continuing operations 56.3 34.3
From discontinued operations (0.7) 80.2
------------------------------------------- ------ --------- ---------- --------
From profit for the year 55.6 114.5
Diluted earnings per share 8
From continuing operations 56.1 34.1
From discontinued operations (0.7) 80.0
------------------------------------------- ------ --------- ---------- --------
From profit for the year 55.4 114.1
Dividends per share
Dividends paid 9 13.0
Dividends proposed 9 13.3
------------------------------------------- ------ --------- ---------- --------
*Adjusted numbers are stated to give a better understanding of
the underlying business performance. Details of adjusting items can
be found in note 2 of this Half Year Report.
Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2018 - unaudited
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- ---------
Profit for the period 8.9 55.6 65.5
Other comprehensive income/(expense):
Items that may be reclassified subsequently
to profit or loss
Foreign exchange translation differences 4.6 (5.4) (8.8)
Net cumulative foreign exchange gain
on disposal of subsidiaries recycled
to the Income Statement - (4.8) (4.8)
Items that will not be reclassified subsequently
to profit or loss
Remeasurement gain/(loss) in respect
of post retirement benefits 2.1 (0.8) 2.2
Tax on items that will not be reclassified
to profit or loss (0.4) 0.2 (0.9)
-------------------------------------------------- ---------- ---------- ---------
Total other comprehensive income/(expense) 6.3 (10.8) (12.3)
Total comprehensive income for the period
attributable to equity shareholders of
the parent 15.2 44.8 53.2
-------------------------------------------------- ---------- ---------- ---------
Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2018 - unaudited
Foreign
Share exchange
Share premium Other translation Retained
capital account reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 1 April 2018 2.9 61.7 0.2 9.2 105.6 179.6
Impact of adoption of IFRS 15 - - - - (7.0) (7.0)
Total comprehensive income:
Profit for the period - - - - 8.9 8.9
Other comprehensive income:
* Foreign exchange translation differences - - - 4.6 - 4.6
* Remeasurement gain in respect of post-retirement
benefits - - - - 2.1 2.1
* Tax on items recognised directly in other
comprehensive income - - - - (0.4) (0.4)
------------------------------------------------------------
Total comprehensive income attributable
to equity shareholders of the parent - - - 4.6 10.6 15.2
Transactions with owners recorded
directly in equity:
* Charge in respect of employee service costs settled
by award of share options - - - - 0.4 0.4
* Dividends payable - - - - (7.6) (7.6)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total transactions with owners recorded
directly in equity: - - - - (7.2) (7.2)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 30 September 2018 2.9 61.7 0.2 13.8 102.0 180.6
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Foreign
Share exchange
Share premium Other translation Retained
capital account reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 1 April 2017 2.9 61.5 0.2 22.8 45.1 132.5
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total comprehensive income:
Profit for the period - - - - 55.6 55.6
Other comprehensive income:
* Foreign exchange translation differences - - - (5.4) - (5.4)
* Net foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement - - - (4.8) - (4.8)
* Remeasurement loss in respect of post-retirement
benefits - - - - (0.8) (0.8)
* Tax on items recognised directly in other
comprehensive income - - - - 0.2 0.2
------------------------------------------------------------
Total comprehensive (expense)/income
attributable to equity shareholders
of the parent - - - (10.2) 55.0 44.8
Transactions with owners recorded
directly in equity:
* Proceeds from issue of shares - 0.2 - - - 0.2
* Charge in respect of employee service costs settled
by award of share options - - - - 0.5 0.5
* Dividends payable - - - - (7.4) (7.4)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total transactions with owners recorded
directly in equity: - 0.2 - - (6.9) (6.7)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 30 September 2017 2.9 61.7 0.2 12.6 93.2 170.6
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Condensed Consolidated Statement of Changes in Equity
continued
Half year ended 30 September 2018 - unaudited
Foreign
Share exchange
Share premium Other translation Retained
capital account reserves reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 1 April 2017 2.9 61.5 0.2 22.8 45.1 132.5
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total comprehensive income:
Profit for the year - - - - 65.5 65.5
Other comprehensive income:
* Foreign exchange translation differences - - - (8.8) - (8.8)
* Net foreign exchange gain on disposal of subsidiaries
taken to the Income Statement - - - (4.8) - (4.8)
* Remeasurement gain in respect of post-retirement
benefits - - - - 2.2 2.2
* Tax on items recognised directly in other
comprehensive income - - - - (0.9) (0.9)
------------------------------------------------------------
Total comprehensive (expense)/income
attributable to equity shareholders
of the parent - - - (13.6) 66.8 53.2
Transactions with owners recorded
directly in equity:
* Proceeds from issue of shares - 0.2 - - - 0.2
* Charge in respect of employee service costs settled
by award of share options - - - - 1.1 1.1
* Dividends paid - - - - (7.4) (7.4)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Total transactions with owners
recorded directly in equity: - 0.2 - - (6.3) (6.1)
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Balance at 31 March 2018 2.9 61.7 0.2 9.2 105.6 179.6
------------------------------------------------------------ ------- ------- -------- ----------- -------- -----
Condensed Consolidated Statement of Financial Position
As at 30 September 2018 - unaudited
As at As at As at
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
Assets
Non-current assets
Property, plant and equipment 23.9 29.3 22.8
Right of use assets 9.7 - -
Intangible assets 156.8 164.9 158.7
Investment in associate 3.8 5.7 4.1
Long-term receivables 0.9 2.1 1.4
Deferred tax assets 15.4 28.8 13.4
210.5 230.8 200.4
Current assets
Inventories 64.6 48.6 45.9
Trade and other receivables 61.9 67.8 73.3
Current income tax receivable 2.1 3.9 2.5
Derivative financial instruments 1.0 2.3 2.4
Cash and cash equivalents 18.9 14.3 20.7
148.5 136.9 144.8
Total assets 359.0 367.7 345.2
---------------------------------------- -------- -------- ---------
Equity
Capital and reserves attributable
to the Company's equity shareholders
Share capital 2.9 2.9 2.9
Share premium 61.7 61.7 61.7
Other reserves 0.2 0.2 0.2
Translation reserve 13.8 12.6 9.2
Retained earnings 102.0 93.2 105.6
180.6 170.6 179.6
Liabilities
Non-current liabilities
Bank loans 27.3 59.2 39.4
Lease payables 7.5 - -
Retirement benefit obligations 9.9 22.5 15.3
Provisions 1.3 - 1.7
Deferred tax liabilities 5.2 10.3 6.1
---------------------------------------- -------- -------- ---------
51.2 92.0 62.5
Current liabilities
Bank loans and overdrafts 4.1 0.6 1.0
Trade and other payables 99.9 79.0 85.5
Lease payables 2.3 - -
Current income tax payables 4.7 9.3 6.2
Accrued dividend 5.5 5.3 -
Derivative financial instruments 1.6 1.0 0.4
Provisions 9.1 9.9 10.0
---------------------------------------- -------- -------- ---------
127.2 105.1 103.1
Total liabilities 178.4 197.1 165.6
---------------------------------------- -------- -------- ---------
Total liabilities and equity 359.0 367.7 345.2
---------------------------------------- -------- -------- ---------
Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2018 - unaudited
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
----------------------------------------------- ---------- ---------- ---------
Profit for the period 8.9 55.6 65.5
Profit for the year from discontinued
operations - (45.6) (45.9)
----------------------------------------------- ---------- ---------- ---------
Profit for the year from continuing
operations 8.9 10.0 19.6
Adjustments for:
Income tax expense 2.7 2.7 14.6
Net financial expense 2.1 2.5 4.2
Fair value movement on financial derivatives 2.9 (2.6) (3.1)
Restructuring costs - 0.3 1.2
Restructuring costs - relating to associate 0.3 0.3 0.4
Net profit on disposal of buildings - - (3.3)
Share of impairment recognised by associate (0.6) - 2.0
Amortisation and impairment of acquired
intangibles 4.7 5.6 10.9
Depreciation of property, plant and
equipment 2.2 2.4 4.7
Depreciation of right of use assets 1.7 - -
Amortisation of capitalised development
costs 1.5 1.6 4.4
----------------------------------------------- ---------- ---------- ---------
Adjusted earnings before interest,
tax, depreciation and amortisation 26.4 22.8 55.6
Loss on disposal of plant, property
and equipment - 0.2 0.3
Cost of equity settled employee share
schemes 0.4 0.5 1.1
Share of loss/(profit) from associate 0.6 - (0.5)
Restructuring costs paid (0.7) (0.7) (1.3)
Cash payments to the pension scheme
more than the charge to operating profit (3.5) (3.5) (7.9)
----------------------------------------------- ---------- ---------- ---------
Operating cash flows before movements
in working capital 23.2 19.3 47.3
Increase in inventories (7.9) (6.6) (4.5)
Decrease/(increase) in receivables 12.6 (1.3) (14.4)
(Decrease)/increase in payables and
provisions (7.7) (9.2) 2.8
Increase in customer deposits 1.8 2.1 2.9
Purchase of rental assets held for
later resale (0.6) (0.6) (0.7)
Cash generated by operations 21.4 3.7 33.4
Interest paid (2.3) (1.0) (2.1)
Income taxes paid (4.7) (2.5) (3.8)
----------------------------------------------- ---------- ---------- ---------
Net cash from operating activities
- continuing operations 14.4 0.2 27.5
Net cash from operating activities
- discontinued operations - 1.9 3.0
----------------------------------------------- ---------- ---------- ---------
Net cash flow from operating activities 14.4 2.1 30.5
----------------------------------------------- ---------- ---------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment - - 9.3
Acquisition of property, plant and
equipment (2.4) (2.2) (4.3)
Acquisition of intangible assets (1.0) (0.2) (0.5)
Net cash flow on disposal of businesses - 73.0 71.2
Capitalised development expenditure (1.5) (3.1) (5.8)
Increase in investment in associate - (2.1) (2.1)
Decrease in long-term receivables 0.6 - 0.9
----------------------------------------------- ---------- ---------- ---------
Net cash (used in)/generated from investing
activities - continuing operations (4.3) 65.4 68.7
----------------------------------------------- ---------- ---------- ---------
Cash flows from financing activities
Proceeds from issue of share capital - 0.2 0.2
Payments made in respect of lease liabilities (1.6) - -
Decrease in borrowings (8.6) (77.6) (96.8)
Dividends paid (2.1) (2.1) (7.4)
----------------------------------------------- ---------- ---------- ---------
Net cash used in financing activities (12.3) (79.5) (104.0)
----------------------------------------------- ---------- ---------- ---------
Net decrease in cash and cash equivalents (2.2) (12.0) (4.8)
Cash and cash equivalents at beginning
of the period 20.7 26.5 26.5
Effect of exchange rate fluctuations
on cash held 0.4 (0.8) (1.0)
----------------------------------------------- ---------- ---------- ---------
Cash and cash equivalents at end of
the period 18.9 13.7 20.7
----------------------------------------------- ---------- ---------- ---------
Condensed Consolidated Statement of Cash Flows continued
Half year ended 30 September 2018 - unaudited
Reconciliation of changes in cash and cash equivalents to movement
in net debt
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ---------
Decrease in cash and cash equivalents (2.2) (12.0) (4.8)
Effect of foreign exchange rate changes
on cash and cash equivalents 0.4 (0.8) (1.0)
------------------------------------------ ---------- ---------- ---------
(1.8) (12.8) (5.8)
Cash outflow from decrease in borrowings 8.6 77.6 96.8
Movement in accrued interest 0.4 (1.0) (1.0)
Amortisation of prepaid issuance fees - - (0.4)
Movement in net debt in the period 7.2 63.8 89.6
Net debt at start of the period (19.7) (109.3) (109.3)
------------------------------------------ ---------- ---------- ---------
Net debt at the end of the period (12.5) (45.5) (19.7)
------------------------------------------ ---------- ---------- ---------
Notes on the Half Year Financial Statements
Half year ended 30 September 2018 - unaudited
1 BASIS OF PREparATION OF ACCOUNTS
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 2018.
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 2018 are not the company's statutory accounts for
that financial year. Those accounts have been reported on by the
Company's auditors and delivered to the registrar of companies. The
report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31
March 2018, except as explained below.
Adoption of new and revised standards
i. IFRS 9 Financial Instruments
The Group adopted IFRS 9 on 1 April 2018. IFRS 9 addresses the
classification, measurement and derecognition of financial
instruments, introduces a new impairment model for financial assets
and new rules for hedge accounting. It replaces IAS 39 Financial
Instruments guidance and comprehensive updates have been made to
IFRS 7 Financial Instruments: Disclosure and IAS 32 Financial
Instruments: Presentation. The adoption of IFRS 9 has had no
material impact on the Group's results.
ii. IFRS 15 Revenue from Contracts with Customers
The Group adopted IFRS 15 using the modified retrospective
approach on 1 April 2018, which means that the cumulative impact on
adoption has been recognised in retained earnings as of 1 April
2018. Comparative information has not been restated. IFRS 15
provides a single, principles-based, five-step model to be applied
to all sales contracts, based on the transfer of control of goods
and services to customers, and it replaces the separate model for
goods and services of IAS 18 Revenue. The impact on adoption of
IFRS 15 was a decrease in retained earnings of GBP7.0m, net of tax;
an increase in inventory of GBP11.0m; an increase in customer
deposits of GBP19.0m; an increase in deferred income of GBP1.0m;
and an increase in deferred tax assets of GBP2.0m.
iii. IFRS 16 Leases
The Group adopted IFRS 16 using the modified retrospective
approach on 1 April 2018. IFRS 16 provides a single model for
lessees which recognises a right of use asset and lease liability
for all leases that are longer than one year or that are not
classified as low value. The impact on adoption of IFRS 16 was the
recognition of right of use assets totalling GBP10.7m on the
balance sheet and corresponding lease liabilities of GBP10.7m.
The table below summarises the effect that IFRS 15 and IFRS 16
have had on the Group Income Statement during the period to 30
September 2018.
Pre IFRS IFRS 16
15 IFRS 15
& IFRS 16 Adjustment Adjustment As reported
Continuing operations - adjusted GBPm GBPm GBPm GBPm
Revenue 141.9 5.1 - 147.0
Operating profit 18.7 2.3 - 21.0
Net finance expense (1.1) - (0.1) (1.2)
---------------------------------- ---------- ----------- ----------- ------------
Profit before tax 17.6 2.3 (0.1) 19.8
Tax charge (3.7) (0.5) - (4.2)
---------------------------------- ---------- ----------- ----------- ------------
Profit after tax 13.9 1.8 (0.1) 15.6
---------------------------------- ---------- ----------- ----------- ------------
The impact of the adoption of IFRS 15 on the Group Income
Statement shown above relates solely to the Research &
Discovery segment.
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 2018.
Going concern
The condensed consolidated half year financial statements have
been prepared on a going concern basis, based on the Directors'
opinion, after making reasonable enquiries, that the Group has
adequate resources to continue in operational existence for the
foreseeable future.
Exchange rates
The principal exchange rates used to translate the Group's
overseas results were as follows:
Half year Half year
Period end rates to to Year to
30 Sept 30 Sept 31 March
2018 2017 2018
US Dollar 1.30 1.34 1.40
Euro 1.12 1.13 1.14
Yen 148 151 149
-------------------------------- ---------- ---------- ---------
Average translation rates US Dollar Euro Yen
-------------------------------- ---------- ---------- ---------
Half year to 30 September 2018
April 1.39 1.14 150
May 1.36 1.14 148
June 1.33 1.14 146
July 1.32 1.13 146
August 1.30 1.12 144
September 1.29 1.11 146
-------------------------------- ---------- ---------- ---------
Average translation rates year ended
31 March 2018 US Dollar Euro Yen
April 1.27 1.18 142
May 1.29 1.17 143
June 1.29 1.14 144
July 1.31 1.13 146
August 1.30 1.10 143
September 1.31 1.11 146
October 1.33 1.13 150
November 1.32 1.13 149
December 1.34 1.12 151
January 1.39 1.13 153
February 1.41 1.14 151
March 1.40 1.14 149
-------------------------------------- ---------- ----- ----
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 8. 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
Profit/(loss)
before income
Operating profit/(loss) tax
Half Half Half Half
year year Year year year Year
to to to to to to
30 30 31 30 30 31
Sep Sep Mar Sep Sep Mar
2018 2017 2018 2018 2017 2018
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- -------- -------- -------- ------ ------ -------
Statutory measure from continuing operations 13.7 15.2 38.4 11.6 12.7 34.2
Restructuring costs - 0.3 1.2 - 0.3 1.2
Restructuring costs - relating to associate 0.3 0.3 0.4 0.3 0.3 0.4
Net profit on disposal of buildings - - (3.3) - - (3.3)
Business reorganisation items 0.3 0.6 (1.7) 0.3 0.6 (1.7)
Share of impairment recognised by associate (0.6) - 2.0 (0.6) - 2.0
Amortisation of acquired intangibles 4.7 5.6 10.9 4.7 5.6 10.9
Mark-to-market loss/(gain) in respect
of derivative financial instruments 2.9 (2.6) (3.1) 2.9 (2.6) (3.1)
Loan note make-whole payable - - - 0.9 - -
---------------------------------------------- -------- -------- -------- ------ ------ -------
Adjusted measure from continuing operations 21.0 18.8 46.5 19.8 16.3 42.3
Share of taxation (4.2) (3.6) (10.1)
---------------------------------------------- -------- -------- -------- ------ ------ -------
Adjusted profit for the period from
continuing operations 15.6 12.7 32.2
---------------------------------------------- -------- -------- -------- ------ ------ -------
Adjusted effective tax rate 21.2% 22.1% 23.9%
---------------------------------------------- -------- -------- -------- ------ ------ -------
Restructuring costs
Prior year restructuring costs of GBP1.2m primarily relate to
the Group's US Healthcare business and include GBP0.5m to
successfully defend a legal claim relating to a prior
acquisition.
Restructuring costs - relating to associate
Restructuring costs relating to the Group's associate comprise
costs incurred during the disposal of its Vacgen subsidiary. Prior
year restructuring costs relating to the Group's associate relate
to exceptional costs incurred by the associate arising from the
merger of the Scienta and Omicron businesses.
Net profit on disposal of buildings
The Group recorded a net profit on disposal of GBP3.3m during
the prior year following the disposal of two buildings previously
held under property, plant and equipment.
Share of impairment recognised by associate
During the prior year the Group's equity accounted associate
recognised an impairment relating to the disposal of its Vacgen
subsidiary. The Group's preliminary share of this impairment was
GBP2.0m. Following the completion and finalisation of the
transaction, GBP0.6m of the initial impairment provision has been
reversed.
Amortisation of acquired intangibles
Adjusted profit excludes the non-cash amortisation and
impairment of acquired intangible assets and goodwill.
Mark-to-market movements in respect of derivative financial
instruments
Under IFRS 9, all derivative financial instruments are
recognised initially at fair value. Subsequent to initial
recognition, they are also measured at fair value. In respect of
instruments used to hedge foreign exchange risk and interest rate
risk the Group does not take advantage of the hedge accounting
rules provided for in IFRS 9 since that standard requires certain
stringent criteria to be met in order to hedge account, which, in
the particular circumstances of the Group, are considered by the
Board not to bring any significant economic benefit. Accordingly,
the Group accounts for these derivative financial instruments at
fair value through profit or loss. To the extent that instruments
are hedges of future transactions, adjusted profit for the year is
stated before changes in the valuation of these instruments so that
the underlying performance of the Group can be more clearly
seen.
Loan note make-whole payable
During the period to 30 September 2018 the Group repaid GBP11.6m
of the principal outstanding on its loan notes. This payment was
necessary due to material changes to the Group's structure
following the disposal of its Industrial Analysis business during
July 2017. The costs of GBP0.9m relate to the make-whole balance
payable upon settlement of the GBP11.6m principal.
Share of taxation
Adjusting items include the income tax on each of the items
described above. In addition, during the prior year the tax rate in
the United States reduced from 35% to 21%. As a result, this
reduced the Group's deferred tax asset by GBP5.4m. This was
excluded from the calculation of share of taxation attributable to
adjusted profit before tax.
3 SEGMENT Information
The Group has ten operating segments. These operating segments
have been combined into three aggregated operating segments to the
extent that they have similar economic characteristics, with
relevance to products and services, type and class of customer,
methods of sale and distribution and the regulatory environment in
which they operate. Each of these three aggregated operating
segments is a reportable segment.
The Group's internal management structure and financial
reporting systems differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed
below:
-- the Materials & Characterisation segment comprises a
group of businesses focusing on applied R&D and commercial
customers, enabling the fabrication and characterisation of
materials and devices down to the atomic scale;
-- the Research & Discovery segment comprises a group of
businesses providing advanced solutions that create unique
environments and enable measurements down to the molecular and
atomic level which are used in fundamental research; and
-- the Service & Healthcare segment provides customer
service and support for the Group's products and the service, sale
and rental of third party healthcare imaging systems.
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 this
format when reporting to the Group's Board of Directors.
Results from continuing operations
Half year to 30 September 2018
Materials Research
& & Service &
Characterisation Discovery Healthcare Total
GBPm GBPm GBPm GBPm
---------------------------- ---------------- ----------
External revenue 60.1 54.3 32.6 147.0
Inter-segment revenue - - -
---------------------------- ---------------- ----------
Total segment revenue 60.1 54.3 32.6
Segment operating profit
from continuing operations 9.7 4.8 6.5 21.0
---------------------------- ---------------- --------- ---------- -----
Results from continuing operations
Half year to 30 September 2017
Materials Research
& & Service &
Characterisation Discovery Healthcare Total
GBPm GBPm GBPm GBPm
---------------------------- ---------------- ----------
External revenue 50.1 47.9 34.1 132.1
Inter-segment revenue - 0.1 -
---------------------------- ---------------- ----------
Total segment revenue 50.1 48.0 34.1
Segment operating profit
from continuing operations 7.2 4.2 7.4 18.8
---------------------------- ---------------- --------- ---------- -----
Results from continuing operations
Year to 31 March 2018
Materials Research Service &
& &
Characterisation Discovery Healthcare Total
GBPm GBPm GBPm GBPm
---------------------------- ---------------- ----------
External revenue 118.1 112.0 66.8 296.9
Inter-segment revenue - 0.1 -
---------------------------- ---------------- ----------
Total segment revenue 118.1 112.1 66.8
Segment operating profit
from continuing operations 20.1 13.8 12.6 46.5
---------------------------- ---------------- --------- ---------- -----
The adjusted loss after tax of GBP0.6m (prior half year: GBPnil;
prior full year: GBP0.5m profit) from the Group's associate is
reported within the Research & Discovery segment.
Reconciliation of reportable segment profit
Unallocated
Materials Research Service Group
& Characterisation & Discovery & Healthcare items Total
Half year to 30 September
2018 GBPm GBPm GBPm GBPm GBPm
----------------------------- -------------------- ------------- -------------- ------------ ------
Operating profit for
reportable
segments from continuing
operations 9.7 4.8 6.5 - 21.0
Restructuring costs -
relating
to associate - (0.3) - - (0.3)
Share of impairment
recognised
by associate - 0.6 - - 0.6
Amortisation of acquired
intangibles (1.1) (3.2) (0.4) - (4.7)
Fair value movement on
financial
derivatives - - - (2.9) (2.9)
Financial income - - - 0.1 0.1
Financial expenditure - - - (2.2) (2.2)
---------------------------- -------------------- ------------- -------------- ------------ --------
Profit/(loss) before income
tax from continuing
operations 8.6 1.9 6.1 (5.0) 11.6
---------------------------- -------------------- ------------- -------------- ------------ --------
Unallocated
Materials Research Service Group
& Characterisation & Discovery & Healthcare items Total
Half year to 30 September
2017 GBPm GBPm GBPm GBPm GBPm
----------------------------- -------------------- ------------- -------------- ------------ ------
Operating profit for
reportable
segments from continuing
operations 7.2 4.2 7.4 - 18.8
Restructuring costs (0.1) - (0.2) - (0.3)
Restructuring costs -
relating
to associate - (0.3) - - (0.3)
Amortisation of acquired
intangibles (1.3) (3.8) (0.5) - (5.6)
Fair value movement on
financial
derivatives - - - 2.6 2.6
Financial income - - - 0.1 0.1
Financial expenditure - - - (2.6) (2.6)
---------------------------- -------------------- ------------- -------------- ------------ --------
Profit before income tax
from
continuing operations 5.8 0.1 6.7 0.1 12.7
---------------------------- -------------------- ------------- -------------- ------------ --------
Unallocated
Materials Research Service Group
& Characterisation & Discovery & Healthcare items Total
Year to 31 March 2018 GBPm GBPm GBPm GBPm GBPm
---------------------------- -------------------- ------------- -------------- ------------ -------
Operating profit for
reportable
segments from continuing
operations 20.1 13.8 12.6 - 46.5
Restructuring costs (0.3) - (0.9) - (1.2)
Restructuring costs -
relating
to associate - (0.4) - - (0.4)
Net profit on disposal of
buildings - - - 3.3 3.3
Share of impairment
recognised
by associate - (2.0) - - (2.0)
Amortisation of acquired
intangibles (2.5) (7.3) (1.1) - (10.9)
Fair value movement on
financial
derivatives - - - 3.1 3.1
Financial income - - - 0.3 0.3
Financial expenditure - - - (4.5) (4.5)
--------------------------- -------------------- ------------- -------------- ------------ ---------
Profit before income tax
from
continuing operations 17.3 4.1 10.6 2.2 34.2
--------------------------- -------------------- ------------- -------------- ------------ ---------
4 RESEARCH AND DEVELOPMENT
The total research and development spend by the Group is as
follows:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- ---------
Research and development expense charged
to the consolidated statement of income 12.3 11.4 23.4
Less: depreciation of R&D related fixed
assets - - (0.1)
Add: amounts capitalised as fixed assets - 0.1 0.1
Less: amortisation and impairment of
R&D costs previously capitalised as intangibles (1.5) (1.6) (4.4)
Add: amounts capitalised as intangible
assets 1.5 3.1 5.8
Total cash spent on research and development
during the period 12.3 13.0 24.8
-------------------------------------------------- ---------- ---------- ---------
5 INVESTMENT IN ASSOCIATE
The Group's share of loss in its equity accounted associate,
Scienta Scientific AB ("Scienta"), for the period was GBP0.3m
(prior half year: GBP0.3m loss; prior full year: GBP1.9m loss). The
Group did not receive any dividends from the associate in the
current or prior periods.
During the 6 months to 30 September 2017 the Group invested a
further GBP2.1m in its equity accounted associate.
6 DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS
On 3 July 2017 the Group disposed of its Industrial Analysis
business for a final consideration of GBP82.8m.
Industrial
Analysis
Effect of disposal on the financial position of the Group 2017/18
GBPm
--------------------------------------------------------------- -----------
Goodwill (4.3)
Acquired intangibles (0.1)
Other intangibles (4.7)
Property, plant and equipment (2.4)
Inventory (11.5)
Trade and other receivables (9.8)
Cash and cash equivalents (6.0)
Trade and other payables 8.6
Provisions 0.8
Tax balances (0.4)
--------------------------------------------------------------- -----------
Net assets divested (29.8)
--------------------------------------------------------------- -----------
Consideration received, satisfied in cash 82.8
Cash disposed of (6.0)
Transaction expenses (5.6)
--------------------------------------------------------------- -----------
Net cash inflow 71.2
--------------------------------------------------------------- -----------
Carrying value of net assets disposed of (excluding cash and
cash equivalents) (23.8)
Recognition of provision on disposal (2.1)
Currency translation differences transferred from translation
reserve 4.8
--------------------------------------------------------------- -----------
Gain on disposal 50.1
Tax charge on gain on disposal (2.3)
--------------------------------------------------------------- -----------
Gain on disposal net of tax 47.8
--------------------------------------------------------------- -----------
Discontinued operations
In the period to 30 September 2017 the Group's Industrial
Analysis business was classified as a discontinued operation. It
was considered a major class of business on the basis that it was
previously an operating segment and referred to in the Group
Strategic Report.
The Group results were re-presented to reflect the
classification of the Group's Industrial Analysis business as a
discontinued operation.
During the period to 30 September 2018 there were no
transactions relating to discontinued operations.
Note that figures included in the results of discontinued
operations for the half year to 30 September 2017 were preliminary
and subject to revision during the finalisation of the financial
statements for the year to 31 March 2018.
Industrial Superconducting
Results of discontinued operations
- half year to 30 Sep 2017 Analysis Wire Total
GBPm GBPm GBPm
-------------------------------------------- ----------- ---------------- -------
Revenue 16.8 - 16.8
Expenses (16.1) - (16.1)
-------------------------------------------- ----------- ---------------- -------
Adjusted profit before tax 0.7 - 0.7
Income tax charge (0.4) - (0.4)
-------------------------------------------- ----------- ---------------- -------
Adjusted profit after tax 0.3 - 0.3
-------------------------------------------- ----------- ---------------- -------
Adjusting items:
Amortisation and impairment of acquired
intangibles (0.1) - (0.1)
One off costs arising as a result
of disposal (2.2) - (2.2)
Property sale costs - (0.2) (0.2)
Income tax on adjusting items 0.8 - 0.8
-------------------------------------------- ----------- ---------------- -------
Loss after tax (1.2) (0.2) (1.4)
-------------------------------------------- ----------- ---------------- -------
Gain on disposal 50.8 - 50.8
Tax on gain on disposal (3.8) - (3.8)
-------------------------------------------- ----------- ---------------- -------
Profit/(loss) from discontinued operations
after tax 45.8 (0.2) 45.6
-------------------------------------------- ----------- ---------------- -------
The one off costs arising as a result of the disposal comprise a
GBP1.8 million impairment of capitalised development costs in
respect of a project which was discontinued as a result of the sale
of the Industrial Analysis division along with related on-going
costs incurred in the current year.
The property sale costs related to the ongoing sale of a surplus
freehold property.
Industrial
Results of discontinued operations - full year to 31 Mar
2018 Analysis
GBPm
---------------------------------------------------------- -----------
Revenue 16.8
Expenses (16.3)
---------------------------------------------------------- -----------
Adjusted profit before tax 0.5
Income tax charge (0.9)
---------------------------------------------------------- -----------
Adjusted loss after tax (0.4)
---------------------------------------------------------- -----------
Adjusting items:
Amortisation of acquired intangibles (0.1)
One-off costs arising as a result of disposal (2.2)
Income tax on adjusting items 0.8
---------------------------------------------------------- -----------
Loss after tax (1.9)
---------------------------------------------------------- -----------
Gain on disposal 50.1
---------------------------------------------------------- -----------
Tax on gain on disposal (2.3)
---------------------------------------------------------- -----------
Profit from discontinued operations after tax 45.9
---------------------------------------------------------- -----------
Earnings per share from discontinued operations
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
------------------------------------ ----------- ---------- ---------
Adjusted basic earnings/(loss) per
share - 0.5 (0.7)
Adjusted diluted earnings/(loss)
per share - 0.5 (0.7)
Total basic earnings per share - 79.9 80.2
Total diluted earnings per share - 79.5 80.0
------------------------------------ ----------- ---------- ---------
Cash flows from discontinued operations
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
GBPm GBPm GBPm
--------------------------------------- ----------- ---------- ---------
Net cash generated from operating
activities - 1.9 3.0
Net cash generated from investing
activities - 73.0 71.2
Net cash used in financing activities - - -
--------------------------------------- ----------- ---------- ---------
7 TAXATION
The total effective tax rate on profits for the half year is
23.3% (prior half year: 21.3%). The weighted average tax rate in
respect of adjusted profit before tax (see note 2) for the half
year is 21.2% (prior half year: 22.1%). For the full year the Group
expects the tax rate in respect of adjusted profit before tax to be
22.0%.
8 earnings per share
a) Basic
The calculation of basic earnings per share is based on the
profit or loss for the period after taxation and a weighted average
number of ordinary shares outstanding during the period, excluding
shares held by the Employee Share Ownership Trust, as follows:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
Shares Shares Shares
million million million
------------------------------------------ ---------- ---------- ---------
Weighted average number of shares
outstanding 57.4 57.3 57.4
Less: weighted average number of
shares held by Employee Share Ownership
Trust (0.2) (0.2) (0.2)
------------------------------------------ ---------- ---------- ---------
Weighted average number of shares
used in calculation of earnings
per share 57.2 57.1 57.2
------------------------------------------ ---------- ---------- ---------
b) Diluted
The following table shows the effect of share options on the
calculation of both adjusted and unadjusted diluted basic earnings
per share.
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
Shares Shares Shares
million million million
--------------------------------------- ---------- ---------- ---------
Number of ordinary shares per basic
earnings per share calculations 57.2 57.1 57.2
Effect of shares under option 0.5 0.3 0.2
--------------------------------------- ---------- ---------- ---------
Number of ordinary shares per diluted
earnings per share calculations 57.7 57.4 57.4
--------------------------------------- ---------- ---------- ---------
9 dividends per share
The following dividends per share were paid by the Group:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
pence pence pence
---------------------------------- ---------- ---------- ---------
Previous period interim dividend 3.70 3.70 3.70
Previous period final dividend - - 9.30
---------------------------------- ---------- ---------- ---------
3.70 3.70 13.00
---------------------------------- ---------- ---------- ---------
The following dividends per share were proposed by the Group in
respect of each accounting period presented:
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2018 2017 2018
pence pence pence
------------------ ---------- ---------- ---------
Interim dividend 3.80 3.70 3.70
Final dividend - - 9.60
------------------ ---------- ---------- ---------
3.80 3.70 13.30
------------------ ---------- ---------- ---------
The final dividend for the year to 31 March 2018 was approved by
shareholders at the Annual General Meeting held on 11 September
2018. Accordingly it is no longer at the discretion of the company
and has been included as a liability as at 30 September 2018. It
was paid on 19 October 2018.
The interim dividend for the year to 31 March 2019 of 3.80 pence
was approved by the Board on 13 November 2018 and has not been
included as a liability as at 30 September 2018. The interim
dividend will be paid on 8 April 2019 to shareholders on the
register at the close of business on 1 March 2019.
10 FAIR value of financial instruments
The fair values of financial assets and liabilities together
with the carrying amounts shown in the Consolidated Statement of
Financial Position are as follows:
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
Fair 30 Sept 30 Sept 30 Sept 30 Sept 31 March 31 March
value 2018 2018 2017 2017 2018 2018
hierarchy GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ---------- -------- -------- -------- -------- --------- ---------
Assets carried at amortised cost
Long-term receivables 0.9 0.9 2.1 2.1 1.4 1.4
Trade receivables 49.9 49.9 53.4 51.6 61.4 61.4
Other receivables 8.3 8.3 11.1 11.1 8.2 8.2
Cash and cash equivalents 18.9 18.9 14.3 14.3 20.7 20.7
---------------------------------- ---------- -------- -------- -------- -------- --------- ---------
Assets carried at fair value
Derivative financial instruments:
- Foreign currency contracts 2 1.0 1.0 2.3 2.3 2.4 2.4
---------------------------------- ---------- -------- -------- -------- -------- --------- ---------
Liabilities carried at fair value
Derivative financial instruments:
- Foreign currency contracts 2 (1.6) (1.6) (1.0) (1.0) (0.4) (0.4)
Liabilities carried at amortised
cost
Trade and other payables (58.6) (58.6) (54.1) (54.1) (58.1) (58.1)
Lease payables (9.8) (9.8) - - - -
Bank overdraft - - (0.6) (0.6) - -
Borrowings (31.4) (31.4) (59.2) (59.2) (40.4) (40.4)
---------------------------------- ------ ------ ------ ------ ------ ------
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using
market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is
estimated by discounting the future contracted principal and
interest cash flows using the market rate of interest at the
reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one
year, the carrying amount is deemed to reflect the fair value. All
other receivables/payables are discounted to determine their fair
value. Advances received are excluded from other payables above as
these are not considered to be financial liabilities.
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 RELATED PARTIES
All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries
are eliminated on consolidation.
During the period, the Group supplied services and materials to
its associate, Scienta Omicron Gmbh, on an arm's length basis. The
following transactions occurred during the period:
Revenue Purchases Receivables
Half year to 30 September 2018 GBPm GBPm GBPm
-------------------------------- -------- ---------- ------------
Scienta Omicron GmbH - 0.7 2.1
-------------------------------- -------- ---------- ------------
Revenue Purchases Receivables
Half year to 30 September 2017 GBPm GBPm GBPm
-------------------------------- -------- ---------- ------------
Scienta Omicron GmbH - - 3.6
-------------------------------- -------- ---------- ------------
Revenue Purchases Receivables
Full year to 31 March 2018 GBPm GBPm GBPm
-------------------------------- -------- ---------- ------------
Scienta Omicron GmbH 0.6 - 3.0
-------------------------------- -------- ---------- ------------
Included on the balance sheet is a long-term loan receivable of
GBP0.9m (Septemper 2017: GBP2.1m, March 2018: GBP1.4m) and a
current loan receivable of GBP1.1m (September 2017: GBP1.5m, March
2018: GBP1.1m) due from the Scienta. The loan is repayable at the
end of May 2020. During the period the Group received interest
charged on the loan of GBP0.1m (Six months to September 2017:
GBP0.1m, Year to March 2018: GBP0.2m).
Principal Risks and Uncertainties
The Group has in place a risk management structure and internal
controls which are designed to identify, manage and mitigate
risk.
In common with all businesses, Oxford Instruments faces a number
of risks and uncertainties which could have a material impact on
the Group's long term performance.
On pages 35 to 38 of its 2018 Annual Report and Accounts (a copy
of which is available at www.oxford-instruments.com), the Company
set out what the Directors regarded as being the principal risks
and uncertainties facing the Group's long term performance and
these are largely reproduced in the table below, with some
amendments to reflect recent changes in the assessment of certain
risks. Many of these risks are inherent to Oxford Instruments as a
global business and they remain valid as regards their potential
impact during the remainder of the second half of the year.
The impact of the economic and end market environments in which
the Group's businesses operate are considered in the Half Year
Statement of this Half Year Report, together with an indication if
management is aware of any likely change in this situation.
ID Specific Risk Context Risk Possible Impact Control Mitigation
Mechanisms
1 Technical Risk The Group Failure of the Lower returns 'Voice of the Understanding
provides high advanced through loss of Customer' customer needs /
technology technologies market share & approach to drive expectations and
equipment and applied by the reduced the product targeted new
systems to its Group to produce profitability. development road product
customers. commercial map; development
products, Negative impact programme
capable of being on the Group's Formal new to maintain and
manufactured and reputation. product strengthen
sold profitably. development stage product
gate process to positioning.
manage R&D
Stage gate
Product lifecycle process in
management product
development to
challenge
commercial
business case
and mitigate
technical risks.
Operational
practices around
sales-production
matching and
inventory
management to
mitigate
stock
obsolescence
risks.
----------------- ----------------- ----------------- ----------------- ------------------ -----------------
2 Routes to market In some Backward Loss of a key Customer intimacy Product
instances the vertical route to market; to match product differentiation
Group's products integration by new competitors; performance to to promote
are components OEMs lower sales and customer needs; advantages of OI
of higher level profitability. equipment &
systems, sold by solutions;
OEMs Positioning of OI
and thus the brand and Strategic
Group does not marketing marketing with
control its directly to end OEMs to sell
route to market. users performance of
the combined
system;
Broadening the
OEM customer
base;
Direct marketing
to end users
----------------- ----------------- ----------------- ----------------- ------------------ -----------------
ID Specific Risk Context Risk Possible Impact Control Mitigation
Mechanisms
3 Economic Government Reduction in Lower sales and Market intimacy Market
environment expenditure may global research profitability and diversification
become funding identification - increasing
constrained in of alternative penetration into
key markets markets corporate
customers not
dependent on
external funding
----------------- ----------------- ------------------ ----------------- ----------------- -----------------
4 International The Group Changes in Loss of specific Contract Broad global
trade risks operates in the export customers review and customer base;
global markets geopolitical and markets, protection contractual
and can be landscape adversely against protection
required to resulting in affecting breach in
secure export a complete turnover the event
licences from embargo that export
governments. (sanctions) licence is
on trade Reduction in net withheld
with selling price to
specific customers in
nations / markets Preferential
challenges adversely tariff rates on
to selling affected by Regional certain products
to specific tariffs and pricing sold
end users. potential strategies.
increases to
input costs, Contractual
National resulting in terms and
trade lower gross conditions
disputes may margins
result in
the
introduction
of tariffs
on both
imported
goods and
exports.
----------------- ----------------- ------------------ ----------------- ----------------- -----------------
5 Brexit related The UK will Supply chain Delays in Strategic supply Limited
risks leave the EU disruption in the production and chain review; stock-piling of
event of a no shipping key components;
deal finished goods. Preparing
Brexit and application for
disruption to Authorised
shipping Lower sales and Economic
products. profitability. Customer Operator status
intimacy and to facilitate
Increased cost monitoring of movement of
of production funded projects. goods.
Lower for purchases
participation in with EU content. Product pricing
EU- funded & strategic
research projects Salary sourcing Market
post Brexit. inflation. reviews. diversification
Loss of key
Tariffs on skills, and/or
imports from EU increased
countries to the recruitment, Skills and Long--term
UK; and/or salary capabilities pricing
costs. reviews. agreements for
key suppliers
and strategic
International sourcing review.
Trade committee.
UK becomes less Pricing
attractive to EU strategy.
nationals as a
place to work Renewal of UK
work permit
scheme to
facilitate
employment of
non--UK/EU
nationals.
----------------- ----------------- ------------------ ----------------- ----------------- -----------------
ID Specific Risk Context Risk Possible Impact Control Mitigation
Mechanisms
6 Supply chain risk The Group Supply chain Disruption to Procurement Buffer stocks of
operates a disruption in customers. strategy to key components;
strategic make particular for manage stock
or buy policy single source Lower sales and availability Where possible,
and outsources a components profitability dual source
significant leading to supply is sought
proportion production Negative impact
of the costs of delays and on the Group's
production to potentially lost reputation.
benefit from revenue.
economies of
scale and
natural currency
hedges.
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
7 People A number of the Key employees Lower sales and HR people Succession
Group's leave and profitability strategy for management
employees have effective retention & plans;
business replacements are recruitment of Technical career
critical skills. not recruited on staff with key paths;
a timely basis skills Renewal of UK
work permit
scheme to
facilitate
employment of
non UK / EU
nationals
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
8 IT risk Elements of Increasing risk Loss of business IT security On-going
production, of data loss / critical data policy & evolution of
financial and breach through and / or associated security levels
other systems cyber-attack, financial loss standards and in consultation
rely on IT viruses or protection with IT security
availability malware. systems. partners to
ensure
"Zero-day" Internal IT changes are
incidents, where governance to in-line with
new viruses or maintain those current threats.
malware can protection
spread before systems and our Inter alia, we
security vendors incident deliver user
can response education,
respond improved
represent a configuration,
particularly internal testing
high risk and new tools
where
appropriate.
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
9 Operational risk Business units' Loss of all or Delayed Business Principal sites
production part of a major shipments Continuity Plans have detailed
facilities are production leading to lower in place BCPs which
typically facility sales and include plans to
located at a profitability restore or
single site relocate
Use of production in
contractual the event of a
protection to major incident.
mitigate
financial Mechanisms such
consequences of as clauses for
delayed delivery limitation of
liability /
liability caps /
exclusion of
consequential
losses in sales
contracts
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
10 Pensions The Group's Movements in the Additional cash Regular review The Group has
calculated actuarial required by the of investment closed its
pension deficit assumptions may Group to fund strategy. defined benefit
is sensitive to have an the deficit. pension schemes
changes in the appreciable Reduction in net Liability in the UK and US
actuarial effect on the assets. hedging to future
assumptions. reported pension programme to accrual.
deficit. mitigate
exposure to The Group has a
movements in funding plan in
interest rates place to reduce
and inflation the pension
deficit over the
short to medium
term.
------------------ ----------------- ----------------- ----------------- ----------------- -----------------
ID Specific Risk Context Risk Possible Impact Control Mitigation
Mechanisms
11 Foreign exchange The Group's Adverse foreign Reduced Natural hedging Strategic
volatility sterling cost currency profitability to offset procurement in USD,
basis is higher movements foreign Euros & Yen.
than its currency sales
sterling through
revenue sources procurement in
meaning that a foreign
significant currencies;
proportion of
the Group's Hedging Short-term exposure
profit is made programme to volatility is
in foreign managed by hedging
currencies. programme (forward
contracts)
----------------- ---------------- ----------------- ----------------- ---------------- --------------------
12 Legal / The Group Infringement of Potential loss Formal 'Freedom Confirmation of
compliance risk operates in a a third party's of future to Operate' 'Freedom to
complex intellectual revenue; assessment to Operate' during new
technological property identify product development
environment and financial potential IP stage gate process
competitors may compensation issues during
seek to protect product
their position development;
through
intellectual
property rights
----------------- ---------------- ----------------- ----------------- ---------------- --------------------
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;
-- 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
13 November 2018
Independent review report to Oxford Instruments plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2018 which comprises the Condensed
Consolidated Statement of Income, the Condensed Consolidated
Statement of Comprehensive Income, Condensed Consolidated Statement
of Financial Position, Condensed Consolidated Statement of Changes
in Equity, Condensed Consolidated Statement of Cash Flows and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2018 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Greg Watts
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
13 November 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFETLALFLIT
(END) Dow Jones Newswires
November 13, 2018 02:01 ET (07:01 GMT)
Oxford Instruments (LSE:OXIG)
Historical Stock Chart
From Apr 2024 to May 2024
Oxford Instruments (LSE:OXIG)
Historical Stock Chart
From May 2023 to May 2024