Oxford Instruments plc Chairman’s AGM Statement 2015
Oxford Instruments plc, a leading provider of high technology tools and systems for industry and research, is holding its annual general meeting today in which the Chairman, Nigel Keen will make the following statement:
“As previously reported, the year to March 2015 was a testing time for Oxford Instruments. In the first half of the year, despite overall increases in orders and revenues, progress was adversely impacted by weaker demand in Japan and tough trading conditions for our Plasma Technology business. In the second half we encountered a combination of headwinds that unexpectedly put our short-term performance projections off-course. Three factors were primarily at play: the sudden tightening of trade sanctions for sales to Russia, a slower-than-expected recovery in Japanese markets, and weaker trading in our Industrial Analysis business.
In response to the downturn in trading conditions, we rapidly implemented a wide-ranging programme to bring our cost-base in line with our trading environment. Our team has rallied to the challenge and I want to thank all our staff for responding so vigorously and for retaining their enthusiasm and creativity despite the difficult conditions.
In addition to our focus on restructuring the Group, we have taken positive strategic steps that will help drive future growth. Last year we increased our investment in R&D to underpin future organic growth. This year, we acquired Medical Imaging Resources in the USA, and formed a joint venture between our Omicron business and Scienta Scientific AB in Sweden. I am pleased to say that both ventures are performing as planned.
Professor Sir Richard Friend joined the Board of Oxford Instruments on 1 September 2014. Richard brings with him strong technical capability and valuable contacts in the worldwide academic community and we welcome him as a director.
Adjusted operating profit is ahead of the same period last year benefiting from the reduction in overheads that resulted from last year’s restructuring. Percentage gross margins have been maintained
The slow start to the year that we discussed in our June results statement has meant that orders and sales for the year to date are below the same period last year on a constant currency organic basis. However as expected, orders in June and July have been significantly ahead of the first two months of the year.
Excluding the Omicron business which was put into a Joint Venture earlier in the year, revenues are ahead of the same period in the previous year and margins have improved due to a positive product mix and the effects of the cost reduction programme announced last year.
Performance in Asia has been strong in our NanoCharacterisation sector but more subdued in the more R&D focused NanoSolutions sector.
In North America and Europe the markets are relatively flat.
We are seeing a modest decline in orders in Industrial Products. This is most marked in our Industrial Analysis business in China where demand for products for recycling and in the metals analysis markets is softer.
Competition from new Asian entrants in the MRI market has resulted in the established MRI systems manufacturers exerting significant price pressure on their supply base. Consequently we believe that sales of superconducting wire to these manufacturers will be down some 15% on the prior year at reduced margins. We believe that this will impact this year’s profit in this business by approximately £2.5m. Negotiations with these customers are currently ongoing, the outcome of which is likely to adversely affect future years.
The Service sector is performing well and is ahead of prior year on a like for like and reported basis.
Whilst the macro economic backdrop remains challenging, our Nanotechnologies and Service businesses remain robust and are benefiting from the restructuring actions of last year. However we have reduced our expectations for the full year primarily due to the changing market dynamics in our superconducting wire business described above and the difficult trading environment for our Chinese Industrial Products division.
Nanotechnology will continue to yield long term structural growth in demand for high technology tools. Our strategy is focused on growing the business in our core markets of physical and materials science, and exploiting convergence to expand into life sciences. This, combined with our continuing investment in new products, underpins the Board’s view that the Group is well positioned to deliver its growth strategy over the medium term.”
Jonathan Flint (Chief Executive) and Kevin Boyd (Group Finance Director) will host a conference call for analysts and investors on this announcement at 09:00 am (UK time), today 8 September. To join the call, please use the dial-in numbers below:
Dial: +44 02031394830
Oxford Instruments plc
Tel: 01865 393200
Jonathan Flint, Chief Executive
Kevin Boyd, Group Finance Director
Tel: 020 3128 8100
Rachel Hirst / Jamie Ricketts