10 November 2020

Half Year Results

Oxford Instruments plc, a leading provider of high technology products and systems for industry and research, today announces its half-year results for the six months to 30 September 2020.

1. Continuing operations.

Financial highlights:

• Reported orders up 6.0% to £175.7m (2019: £165.7m), an increase of 5.9% at constant currency; book-to-bill ratio of 1.25
• Order book of £204.6m (31 March 2020: £175.0m), up 16.9% (16.6% at constant currency)
• Reported and constant currency revenue down by 11.0% to £140.3m, affected by customer site closures and the introduction of new covid-related working practices
• Adjusted operating profit from continuing operations down 7.3% at £24.3m (a decline of 11.5% at constant currency)
• Adjusted operating margin of 17.3% (2019: 16.6%), sustained at 16.6% constant currency despite the revenue decline
• Net cash grew to £81.4m, aided by good operating cash flow (97% cash conversion). At the end of September, the Group had total headroom of approximately £214m, including the undrawn £105m credit facility
• Robust half-year trading performance and strong order book supports an interim dividend of 4.1p

Operational highlights:

• Continued progress with our Horizon strategy; accelerating market intimacy and the transformation of our customer services
• Strong order growth driven by:
• Continued demand from both academic and commercial customers
• Buoyant demand in Semiconductor & Communications, Quantum Technology and Advanced Materials market segments
• Good growth in North America and Asia offset by a modest decline in Europe
• Revenues held back by covid-related disruption in customer installation and acceptances; manufacturing sites remained operational and are adapting to new covid-safe working practices
• Strong margin performance driven by improved service profitability, tangible gains from Horizon strategy and cost controls
• Continued investment in our strategic product development programme; R&D spend maintained at £12.7m providing a healthy pipeline of future product launches
• Long-term growth drivers for end markets remain robust

Summary and Outlook:

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

"The Group is positioned to be a leading provider of high technology products and services to the world’s leading industrial customers and scientific research communities to image, analyse and manipulate materials down to the atomic and molecular level. This allows us to live up to our purpose of facilitating a greener economy, increased connectivity, improved health and leaps in scientific understanding.

"We have seen strong order growth in the first half of the year with a good improvement in the order book. Orders have grown across our academic and commercial customer base, particularly for our compound semiconductor process solutions and quantum cryogenic and magnet systems. Covid-related customer disruption has affected installation and commissioning activities. This, along with the introduction of new covid-safe working practices across our manufacturing sites, has led to a fall in revenue over the first half. Gains from our Horizon strategy and cost control enabled sustained operating margins despite lower revenue. The dedication, agility and resilience of our employees during this difficult period underpins our confidence in our ability to service and support the needs of our customers.

"We are adjusting to the external and internal effects of the pandemic and expect uncertainty to remain high. However, robust trading during the first half, combined with a strong order book, gives us confidence for the second half, absent a material increase in covid‑related disruption that could impact facility or customer site access. We expect full-year performance to be a little behind last year on a constant currency basis, ahead of current analyst forecasts.

"The transformation of the Group through our Horizon strategy has provided a solid foundation for future growth. Our focus on markets with sustainable long-term growth drivers, our continuous drive for greater efficiencies and our ability to respond to evolving customer needs mean that we remain well-positioned to navigate the current challenges and return to long-term sustainable growth and margin improvement."

^2. Throughout this report we make reference to adjusted numbers. A full definition of adjusted numbers can be found in Note 2 to the Condensed Consolidated Financial Statements. Where we make reference to constant currency numbers, these are prepared on a month-by-month basis using the translational and transactional exchange rates which prevailed in the previous year rather than the actual exchange rates which prevailed in the year. Transactional exchange rates include the effect of our hedging programme.

NOTE: Oxford Instruments plc compiled analyst forecasts for adjusted operating profit (year to 31 March 2021), published since the AGM trading update, range from £36m to £45m.