12 November 2024

Half-year results: Good performance with positive momentum into H2, in line with full-year expectations

Financial highlights

Strong revenue growth of 10.4% at constant currency (‘CC’)

Orders up 2.6% (CC) with underlying book-to-bill of 1.01 (Imaging & Analysis: 1.04)

Adjusted operating profit up 3.6% at CC (2023: £36.5m)

CC adjusted operating profit margin of 16.3% (2023: 17.4%), reflecting:

- Imaging & Analysis CC margin of 24.6% maintained

- mix effect of stronger growth from Advanced Technologies

- continued investment in operational improvement

Growth in both divisions:

- Imaging & Analysis: 6.0% CC revenue growth with strong margins maintained

- Advanced Technologies: 21.4% CC revenue growth with good visibility of margin improvements

Strong balance sheet with £39.3m net cash and cash conversion expected to improve in H2

- Low normalised cash conversion of 17% reflects normal seasonality and increased working capital due to timing of quantum contract cash receipts; improvement expected in H2

Growth in interim dividend of 4.1% to 5.1p reflects confidence in the future

Significant strategic progress

Regional rebalancing driving strong revenue growth in North America (up 32.2% at constant currency) and Asia ex-China, offsetting impact of pivot to new markets in China

Investment in new products and market-leading technology driving strong CC revenue growth in semiconductor (+26.9%) and materials analysis (+9.6%) offsetting softer healthcare & life science market (-17.3%)

Imaging and Analysis simplified with operational transformation well underway

- Four business units integrated to one, with reduced operating costs

- First wave of operational transformation underway; second wave on track

- Acquisition of nanoindentation tools developer FemtoTools completed, enhancing capabilities in materials research and semiconductor applications

Good progress towards return to profitability in Advanced Technologies

- ‘Fix, improve and grow’ programme progressing well, with new reference customers added

- New compound semiconductor facility ramping up as planned, with strong double digit revenue growth, a strong pipeline and customer demo requests up 60% year on year
- Good progress made towards returning quantum business to profitability with first deliveries to a key global technology customer, order book rebuilt and costs reduced

Order book and efficiency improvements provide good visibility for the full year

Order book of £294.9m (31 March 2024: £301.5m)

• Expect continued strong demand in semiconductors and materials analysis, stabilised healthcare & life science order demand and larger orders in Advanced Technologies

Richard Tyson, Chief Executive Officer of Oxford Instruments plc, said:

The Group has delivered a good first half performance, with both divisions growing, reflecting strong demand in our semiconductor and materials analysis markets which more than offset the well-documented softer demand from the healthcare & life science market. I would like to thank the incredibly talented team across the Group for their significant contribution to these results and the transformation that is underway as we unlock Oxford Instruments’ full potential.

Order intake for the first half has been robust, with underlying book-to-bill above one, and our healthy order book provides good visibility, although the timing of the recovery in our healthcare & life science market remains uncertain. As expected, margin was impacted by currency and the mix effect of strong growth in Advanced Technologies. However, at constant currency, Group profit improved and Imaging & Analysis (more than 95% of FY24 profit) margins were stable at over 23%.

We expect to deliver our typical stronger trading performance in the second half, supported by delivery of some larger orders in Advanced Technologies and efficiency improvements. As a result, we expect to report a performance for the full year in line with expectations on a constant currency basis.

We have made good progress with our medium-term strategic priorities. Our actions to rebalance our regional activity are driving strong growth, particularly in North America and Asia ex-China, the simplification of the business is well underway, and the first phases of our operational performance programme have identified further value creation opportunities ahead. This underlines our confidence that we can improve the returns from the business in the medium term.

Notes

1. Adjusted items exclude the amortisation and impairment of acquired intangible assets, acquisition items, business reorganisation costs, other significant non-recurring items, and the mark-to-market movement of financial derivatives. A full definition of adjusted numbers can be found in the finance review and Note 3.
2. Normalised cash conversion measures the percentage of adjusted cash from operations to adjusted operating profit, as set out in the finance review.
3. Net cash includes total borrowing, cash at bank and bank overdrafts but excludes IFRS 16 lease liabilities.
4. Constant currency numbers are prepared on a month-by-month basis using the translational and transactional exchange rates which prevailed in the previous year rather than the actual exchange rates which prevailed in the year. Transactional exchange rates include the effect of our hedging programme.

The financial information in this preliminary announcement has been prepared in accordance with UK adopted international accounting standards and IAS 34 interim financial reporting. The Group has applied all accounting standards and interpretations issued relevant to its operations and effective for accounting periods beginning on 1 April 2024. The UK adopted IFRS accounting policies have been applied consistently to all periods.

LEI: 213800J364EZD6UCE231