Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oxford Instruments PLC (OXINF, Financial) reported a strong first half performance with a 10.4% revenue growth at constant currency, driven by growth in new materials and semiconductor markets.
- The company maintained excellent margins in its imaging and analysis division, contributing the majority of the group's profit with a margin of over 24%.
- The strategic pivot from China to other markets has been successful, with strong growth in the US and other parts of Asia offsetting the anticipated reduction in China revenue.
- Oxford Instruments PLC (OXINF) has made significant progress in its operational transformation program, particularly in its Belfast facility, leading to improved productivity and inventory management.
- The company has a strong order book, providing good visibility into the second half, with an underlying book to bill ratio of 1.01.
Negative Points
- The healthcare and life sciences market showed weakness, impacting overall results despite the strong performance in other sectors.
- Currency headwinds negatively impacted reported revenue and profit, with a 5.8 million reduction in revenue and a 3.9 million reduction in profit.
- The advanced technologies division, while showing revenue growth, reported a loss due to higher facility running costs and inventory provisioning.
- The effective tax rate increased to 25.1% due to a change in the geographical mix of profits, affecting overall profitability.
- Cash conversion was below expectations at 17%, partly due to timing mismatches in capital contracts and higher working capital requirements.
Q & A Highlights
Q: Can you provide more specifics on the stabilization of the healthcare market and the impact of the Dragonfly system introduction?
A: The healthcare market has stabilized with order intake now in line with the previous year, despite a strong comparator due to the Dragonfly system's success. Orders from OEMs have improved through Q2, and Dragonfly continues to perform well, indicating potential benefits in H2. (Respondent: Unidentified_1)
Q: What is the expected impact of the national insurance hike on margins next year?
A: The national insurance hike will have an impact of about £1.62 million for the group, which is not overly significant. We aim to pass on costs through pricing adjustments where possible. (Respondent: Unidentified_2)
Q: Is there a risk of pre-emptive ordering in North America due to potential tariff changes with a new President?
A: There is no evidence of pre-emptive ordering due to potential tariff changes. Our strategy remains aligned to handle any such changes, similar to how we managed during the previous tariff adjustments. (Respondent: Unidentified_1)
Q: Can you clarify the working capital situation related to the quantum contracts?
A: We received large deposits for quantum contracts in the previous financial year, causing a mismatch in working capital. We expect cash inflow from these contracts to start in H1 of next year, with a neutral impact on working capital in H2. (Respondent: Unidentified_2)
Q: Are you still confident in achieving your medium-term margin targets despite FX headwinds?
A: Yes, despite a 10% FX headwind this year, we remain confident in achieving our medium-term margin targets. The strategic actions and opportunities identified should help us reach our 20% margin goal. (Respondent: Unidentified_1)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
