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19 November 2008


Oxford Instruments maintains full-year expectations

For its first fiscal 2008/09 half-year (to end-September), the UK’s Oxford Instruments plc has reported sales of £92.8m, up 19% on £78.3m a year ago. The firm’s major trading currencies (the US dollar, Japanese Yen and particularly the Euro) contributed 7% of this growth. On a constant-currency basis, growth was 12%, of which 8% came from acquisitions.

In addition to a trading loss of £1.9m on revenue of £29.5m (almost flat on a year ago) for the Superconductivity business, the Analytical business (which includes Industrial Analysis, NanoAnalysis and Plasma Technology) contributed revenue of £63.3m (up from £49.6m a year ago) and a trading profit of £5.4m (up from £2.8m, contributing tom overall trading profit rising by £1.5m to £3.5m).

In particular, the Plasma Technology business (which makes etch and deposition equipment) has been supported by new atomic layer deposition (ALD) tools and demand for capital equipment in the high-brightness LEDs (HB-LEDs) and photovoltaic (PV) device markets.  

On 9 April (near the start of the half-year period), the firm acquired Technologies and Devices International Inc (TDI) of Silver Spring, MD, USA - which manufactures template substrates using hydride vapor phase epitaxy (HVPE) - for £1.2m, plus deferred consideration of £0.5m paid on 1 October. Further contingent consideration of up to £2.8m is payable based on post-acquisition revenue growth (the best estimate is currently £0.7m). Following acquisition, TDI contributed revenue of £0.4m and a loss before tax of £0.7m.

Apart from its acquisitions, Oxford Instruments has seen continued organic growth across its core products, although at a slower rate than last year. This reflects weakening in the growth of customer demand, particularly in the USA. However, the firm reckons that it has increased market share in key areas, helped by technical innovations and improvements in customer service levels. Aided by the favorable exchange rates, gross margin rose from 40.2% to 41.2%.

“We are now half way through our five-year plan and we are pleased to report continued growth in sales, margin and market share in the first half of this year,” says chairman Nigel Keen.

On 22 September the firm disposed of Oxford Instruments Plasma Technology’s loss-making molecular beam epitaxy (MBE) product line - which had a carrying value of £1.2m - to French MBE firm Riber SA for £0.3m, resulting in a loss of £0.9m. Despite this, Oxford Instruments' overall adjusted profit before tax rose by £0.8m to £2.6m, helped by the favorable currency movements. 

“The results of our investments to date provide a sound platform for growth,” says Keen. “The disposal of the MBE business in September has allowed us to focus on the new opportunities in HB-LEDs and PVs... We are investing in our TDI business to develop an [HVPE-based] industrial tool for the production of HB-LEDs,” he highlights.

Total orders for Oxford Instruments in the half-year to end September were £97.5m (exceeding revenues by £4.7m). “However, should there be a prolonged market downturn, organic growth will be more difficult to achieve,” Keen adds.

“Our product portfolio is strong, and we have good geographical spread, which should help to insulate us if there is a softening in demand in the second half of the year,” says Keen. “The benefits of our recent acquisitions and new product introductions together with the weakness of sterling are likely to have a positive effect during the remainder of this financial year. These factors underpin the board’s continued confidence in delivering a full-year performance that is in line with its expectations.”

In addition, “New opportunities for margin improvement are presenting themselves in the current business climate, as we have greater leverage with our suppliers as well as opportunities to reduce other costs,” says Keen. “We remain vigilant and will continue to take such action as necessary.”

*In the light of worsening conditions in the UK commercial property market, Oxford Instruments has renegotiated the terms of its option to sell the present site of its Plasma Technology plant, while preserving its beneficial commercial conditions. By postponing Plasma Technology's relocation to new premises (scheduled for 2009) by two years, the firm reckons on reducing its capital expenditure in the current financial year.

See related items:

Riber buys OIPT’s MBE business

Oxford Instruments acquires TDI

OIPT’s record orders keep it on target to double business by 2010

Search: OIPT ALD Etch

See: Oxford Instruments Company Profile