Interim Results
13 November 2002
Oxford Instruments plc
Announcement of interim results for 2002/03
Oxford Instruments plc, the advanced instrumentation group, today announced
consolidated interim results for the half year to September 2002.
Orders from the wholly owned businesses improved to £95m in challenging markets
(2001: £94m)
Group turnover of £95m (2001: £104m) reflecting success in reducing order
lead-times
Net borrowings reduced to £10.3m (2001: £11.3m)
Operating profit before exceptional items for wholly owned businesses of £1.8m
(2001: £2.4m)
Pre-tax profit before exceptional items of £2.3m (2001: £4.3m)
Interim dividend of 2.4p unchanged from last year
Andrew Mackintosh, Chief Executive said: "Our businesses have performed well in
challenging markets on the back of recent restructuring. The superconductivity
business is now well placed for further growth, while tight cost control and
additional operational improvements are being applied to the analytical and
medical businesses. Our technical strength combined with our investment in
improved operational capability means we are well positioned in challenging
markets to drive profits and shareholder value forward."
Enquiries: Oxford Instruments plc Tel: 01865 881437 Fax: 01865 881944
Nigel Keen, Chairman
Andrew Mackintosh, Chief
Executive
Martin Lamaison, Financial
Director
Citigate Dewe Rogerson Tel: 020 7638 9571 Fax: 020 7282 8190
Chris Barrie
For further copies of this Interim Results announcement please contact Vinnetta
Hutchings at the Company's registered office at Old Station Way, Eynsham,
Witney Oxon OX29 4TL (email: vinnetta.hutchings@oxinst.co.uk).
Interim Results Announcement for the six months ended 30 September 2002
Chairman's Statement
Nigel Keen, Chairman of Oxford Instruments plc, said today:
"The markets for our high technology products and services have been
challenging throughout the period and the results we have achieved demonstrate
the resilience of the company following the improvement programmes which we
have completed over the last two years.
Financial Summary
Orders for the period of £95 million (2001 £94 million) from the wholly-owned
businesses have held up well, particularly in the market for research
equipment.
Turnover of £95 million (2001 £104 million) matched the order intake, following
our success last year in reducing the high order backlog.
Pre-tax profits before exceptional items were £2.3 million (2001 £4.3 million).
These comprised an operating profit from the wholly-owned businesses of £1.8
million (2001 £2.4 million), and a reduced contribution of £1.2 million (2001 £
2.7 million) from our share of the operating profits of Oxford Magnet
Technology (OMT), the joint venture with Siemens. Total net interest payable
was £0.7 million (2001 £0.8 million). Exceptional costs in the period of £0.6
million related to redundancies in the Superconductivity business announced in
June 2002. Net borrowings at the half year were £10.3 million (2001 £11.3
million).
The directors have recommended an interim dividend of 2.4p, unchanged from last
year.
Operational Review
Analytical
The Analytical business broke even (2001 £4.1 million operating profit) on
turnover for the period down £10.2 million (23%) to £33.3 million. Demand from
the semiconductor and telecommunications markets continues to be weak,
particularly in the USA. However, markets in Asia remain strong across a range
of industrial segments.
Continued investment in new products, including software additions to our
market-leading INCA product, together with ongoing procurement savings have
enabled gross margins to be maintained despite significant pricing pressure.
Staff numbers have been reduced by 60 (10%) since 31 March 2002 to reflect the
reduced order level and we are currently reviewing our cost base in response to
a further recent deterioration of the prospects for our products in the
semiconductor industry.
In October 2002, the operations and net assets of the Process Systems product
line was sold to the management for a consideration primarily based on future
performance. Losses on this product line were £0.4 million in the first half
and the disposal will result in a post-tax write-down of goodwill of
approximately £1.1 million in the second half. The CMI International business
acquired in October 2001 is trading profitably.
Medical
Operating losses for the half year were slightly lower at £0.7 million (2001 £
0.8 million loss) on turnover of £17.3 million (2001 £19.2 million). The
decrease in turnover follows the decision to reduce the volume of non-core
third-party business being sold through our overseas sales channels. Sales of
neurology products into the important American market remained strong and new
channels for obstetrics products have been signed up. Gross margins for the
period held up well as we focus on sales of higher margin products while
improvement programmes are yielding lower product costs and customer lead times
have been significantly reduced.
Overall, sales volumes remain below target and therefore decisive action has
been taken to improve profit performance. Under a new managing director the
business has been restructured into three product groups with a clearer focus
and market segment accountability. The new management structure is intended to
drive increased volume and cost control while strategic growth options for each
product line are reviewed.
Superconductivity
Turnover increased to £44.7 million (2001 £41.4 million) on the back of
increasing orders. Operating profits recovered strongly to £1.9 million (2001 £
0.9 million loss) as a result of the increased turnover and significantly
improved margins. The one remaining substantial `legacy project', due for
delivery in 2003, has passed a major technical milestone in the period.
The first unit of the world-leading `Discovery' magnet used for new drug
discovery has been successfully installed in Japan, while several other units
are at an advanced stage of manufacture. Margins and working capital will
improve as further deliveries of this major new product are made over the next
12 months.
Additional major margin improvement and lead-time reduction initiatives in the
business have been initiated under a new operations director. The cost base
going forward will also benefit from the reduction of 100 posts during the
first half at a cost of £0.6 million with an annualised saving of £2.5 million.
Separately, our US-based superconducting material, magnet service and
cryogenics business is performing well under a new managing director and a new
wire product announced recently will aid the construction of high-field magnets
for pharmaceutical applications.
Our 49% share of OMT, the joint venture with Siemens, generated £1.2 million
operating profit in the period (2001 £2.7 million). Turnover was down 4% on the
same period last year, impacted partly by changes to medical reimbursement in
Japan. Margins were affected by unusually high production costs and product
mix.
Discussions with Siemens and other potential partners continue over possible
alliances following the end of the initial term of the OMT joint venture in
September 2004. Meanwhile, our Superconductivity business has set up a new
research initiative aimed at capturing and exploiting its world-leading
technology for use in MRI applications.
Board appointment
I am pleased to welcome Bernard Taylor to the Board as a non-executive director
with immediate effect. Bernard is Vice Chairman of JP Morgan plc and brings
valuable and relevant expertise as we complete our recovery and drive the
business forward strategically.
Prospects
The actions we have taken in the first half of the year are planned to improve
profit and cash performance in the second half. Our Superconductivity business
is expected to show continued progress as a result of robust orders and a lower
cost base. Markets for our Analytical business remain depressed, but innovative
new products and lower product and overhead costs will aid profitability. The
changes in our Medical business are anticipated to generate both short-term
operational improvements and sharper strategic focus, while the OMT joint
venture is expected to show some recovery.
Our businesses have strong technical and market positions, supported by
much-improved operational capability. We will use this platform to drive
further profits growth and to create shareholder value."
Group Profit and Loss Account
Half year ended 30 September 2002 - unaudited
Half year to 30 September 2002
Continuing operations
Before Exceptional Total
exceptional items
items
Notes £000 £000 £000
Turnover
Group and share of joint venture 2 117,027 - 117,027
turnover
Less share of joint venture turnover 3 (21,764) - (21,764)
Group turnover 2 95,263 - 95,263
Cost of sales (64,717) - (64,717)
Gross profit 30,546 - 30,546
Net operating expenses 4 (28,702) (595) (29,297)
Group operating profit 2 1,844 (595) 1,249
Share of operating profit of joint 1,216 - 1,216
venture
Total operating profit
Group and share of joint venture 3,060 (595) 2,465
Profit on disposal of properties - - -
Profit before interest 3,060 (595) 2,465
Total net interest payable 5 (750) - (750)
Profit on ordinary activities before 2,310 (595) 1,715
tax
Tax on profit on ordinary activities 6 (785) 202 (583)
Profit for the period attributable 7 1,525 (393) 1,132
to shareholders
Dividends 8 (1,123)
Retained profit for the period 9
Pence pence pence
Earnings per share - basic and 7 3.2 (0.8) 2.4
diluted
Group Profit and Loss Account
Half year ended 30 September 2001 - unaudited
Half year to 30 September 2001 Year to
Continuing operations 31 March
Before Exceptional Total 2002
exceptional items
items
Notes £000 £000 £000 £000
Turnover
Group and share of joint 2 126,751 - 126,751 260,280
venture turnover
Less share of joint venture 3 (22,692) - (22,692) (46,600)
turnover
Group turnover 2 104,059 - 104,059 213,680
Cost of sales (72,613) - (72,613) (147,611)
Gross profit 31,446 - 31,446 66,069
Net operating expenses (29,016) - (29,016) (60,750)
Group operating profit 2 2,430 - 2,430 5,319
Share of operating profit of 2,657 - 2,657 5,213
joint venture
Total operating profit
Group and share of joint 5,087 - 5,087 10,532
venture
Profit on disposal of 4 - 1,826 1,826 3,034
properties
Profit before interest 5,087 1,826 6,913 13,566
Total net interest payable 5 (784) - (784) (1,526)
Profit on ordinary activities 4,303 1,826 6,129 12,040
before tax
Tax on profit on ordinary 6 (1,597) - (1,597) (2,692)
activities
Profit for the period 7 2,706 1,826 4,532 9,348
attributable to shareholders
Dividends 8 (1,126) (3,931)
Retained profit for the period 3,406 5,417
Pence pence Pence pence
Earnings per share - basic and 7 5.8 3.9 9.7 19.9
diluted
Group Statement of Total Recognised Gains and Losses
Half year ended 30 September 2002 - unaudited
Half year Half year Year to
to to
31 Mar
30 Sep 30 Sep
2002
2002 2001
Note £000 £000 £000
Profit for the period 1,132 4,532 9,348
Exchange differences on foreign (3,849) (1,172) (144)
currency net investments of the Group
Total recognised gains and losses (2,717) 3,360 9,204
relating to the period
Prior year adjustments 1 - 2,841 2,841
Total gains and losses recognised since (2,717) 6,201 12,045
the last Annual Report
Group Balance Sheet
Half year ended 30 September 2002 - unaudited
As at As at As at
30 Sep 30 Sep 31 Mar 2002
2002 2001
Note £000 £000 £000
Fixed assets
Goodwill 4,391 4,927 4,826
Negative goodwill (132) (664) (398)
Intangible assets 4,259 4,263 4,428
Tangible assets 37,454 42,221 38,849
Investments
Share of gross assets of joint venture 17,277 16,350 19,299
Share of gross liabilities of joint (13,174) (11,926) (16,009)
venture
Net investment in joint venture 4,103 4,424 3,290
Other investments 2,429 2,154 2,450
Total investments 6,532 6,578 5,740
Total fixed assets 48,245 53,062 49,017
Current assets
Stocks 42,376 48,631 48,518
Debtors 66,128 64,007 67,410
Cash at bank and in hand 3,370 3,776 4,806
111,874 116,414 120,734
Creditors: amounts falling due within
one year
Bank loans and overdrafts (12,958) (15,079) (7,982)
Other creditors (49,313) (56,317) (59,759)
(62,271) (71,396) (67,741)
Net current assets 49,603 45,018 52,993
Total assets less current liabilities 97,848 98,080 102,010
Creditors: amounts falling due after (731) - (808)
one year
Provisions for liabilities and charges (5,751) (6,076) (6,036)
Net assets employed 91,366 92,004 95,166
Capital and reserves
Called up share capital 2,396 2,392 2,395
Share premium account 18,815 18,656 18,776
Other reserves 15,930 15,930 15,930
Profit and loss account 54,225 55,026 58,065
Equity shareholders' funds 10 91,366 92,004 95,166
Group Cash Flow Statement
Half year ended 30 September 2002 - unaudited
Half year to Half year to Year to 31
30 Sep 2002 30 Sep 2001 Mar 2002
Notes £000 £000 £000
Net cash (outflow)/inflow from 11 (2,675) (3,085) 6,642
operating activities
Dividend from joint venture - - 2,793
Returns on investments and 11 (605) (546) (1,104)
servicing of finance
Taxation (1,156) 426 (231)
Capital expenditure and financial 11 (2,028) 284 1,566
investment
Acquisitions - - (1,423)
Equity dividends paid - - (3,939)
Cash (outflow)/inflow before (6,464) (2,921) 4,304
management of liquid resources and
financing
Management of liquid resources 11 2,674 2,000 (1,000)
Financing 40 - 123
(Decrease)/increase in cash in the (3,750) (921) 3,427
period
Reconciliation of Net Cash Flow to Movement in Net Debt
Half year ended 30 September 2002 - unaudited
Half year to Half year to Year to
30 Sep
30 Sep 31 Mar 2002
2001
2002
Note £000 £000 £000
(Decrease)/increase in cash in the (3,750) (921) 3,427
period
Change in liquid resources (2,674) (2,000) 1,000
Translation difference 89 (66) (95)
Movement in net debt in the period (6,335) (2,987) 4,332
Opening net debt (3,984) (8,316) (8,316)
Closing net debt 12 (10,319) (11,303) (3,984)
Notes on the Interim Financial Statements
Half year ended 30 September 2002 - unaudited
1. Basis of presentation of accounts
The Group profit and loss account and balance sheet for the half years ended 30
September 2002 and 30 September 2001 have been prepared on a basis consistent
with the accounting policies disclosed in the Group's Report and Accounts 2002.
The comparative figures for the financial year ended 31 March 2002 are
extracted from the Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
Copies of the Annual Report and Accounts 2002 are available from the Company's
registered office by applying to the Company Secretary, Oxford Instruments plc,
Old Station Way, Eynsham, Witney, Oxon, OX29 4TL. The Company is registered in
England Number 775598.
The Group adopted FRS 19 `Deferred Tax' in the period ended 30 September 2001,
resulting in the restatement of prior periods' profit and loss accounts,
balance sheets and statements of recognised gains and losses. Application of
the standard resulted in the creation of a deferred tax asset of £2.8 million
at 30 September 2001.
The principal exchange rates used to translate the Group's overseas results
were as follows:
Half year to Half year to Year to
30 Sep 2002 30 Sep 2001 31 Mar 2002
Average Period End Average Period End Average Year End
US Dollar 1.50 1.57 1.43 1.47 1.43 1.42
Euro 1.59 1.59 1.62 1.61 1.62 1.63
Yen 186 191 175 175 180 189
2. Results by business group for continuing operations
Turnover Operating profit/(loss)
Half year to Half year to Half year to Half year to
30 Sep 2002 30 Sep 2001 30 Sep 2002 30 Sep 2001
£000 £000 £000 £000
Analytical 33,336 43,534 (14) 4,142
Medical 17,246 19,169 (695) (849)
Superconductivity 44,681 41,356 1,958 (863)
95,263 104,059 1,249 2,430
Share of OMT joint 21,764 22,692 1,216 2,657
venture (49%)
117,027 126,751 2,465 5,087
Notes on the Interim Financial Statements (Continued)
3. Joint venture
The Group owns 49% of the issued share capital of Oxford Magnet Technology
Limited (OMT). It is engaged in advanced instrumentation and is registered and
operates in England. The Group has accounted for its interest in OMT as a joint
venture.
The Group's share of the joint venture turnover as shown in the Group profit
and loss account has been derived after adjusting for trading between the Group
and OMT as follows:
Half year to Half year to
30 Sep 2002 30 Sep 2001
£000 £000
49% of joint venture turnover 27,887 29,027
less 49% of sales by OMT to Group (2,937) (3,468)
less 49% of sales by Group to OMT (3,186) (2,867)
Group share of joint venture turnover 21,764 22,692
4. Exceptional Items
Exceptional items for the period to 30 September 2002 relate to continuing
activities and comprise redundancy costs. Exceptional items in the prior
periods relate to the sale of surplus factories.
5. Net interest payable
Half year to Half year to
30 Sep 2002 30 Sep 2001
£000 £000
Interest receivable on deposits at short call 12 12
Interest payable and similar charges on bank (579) (558)
loans and overdrafts
Group net interest payable (567) (546)
Share of joint venture net interest payable (183) (238)
Total net interest payable (750) (784)
6. Taxation
The tax charge for the half year ended 30 September 2002 has been based on the
estimated effective rate applicable to each significant category of income for
the full year.
7. Earnings per share
Earnings per share (EPS) has been calculated using profits of £1,132,000 (2001
£4,532,000) and weighted average shares of 46,796,489 (2001 46,929,456) for
basic EPS and 47,023,173 (2001 46,972,248) for diluted EPS respectively.
8. Dividends per share
An interim dividend of 2.4p (2001 2.4p) will be paid on 24 March 2003 to
shareholders registered at the close of business on 21 February 2003, the
record date. The shares will be marked `ex-dividend' on 19 February 2003.
Notes on the Interim Financial Statements (Continued)
9. Post Balance Sheet event
In October 2002, as part of our programme to eliminate loss making activities,
the operations and net assets of the Process Systems product group based in
North Andover, USA, a small part of the Analytical business, were sold to the
management team for an estimated consideration of £0.3 million. This is
primarily based on future performance.
The disposal will give rise to a write down of goodwill of approximately £1.1
million after tax. In the half year to 30 September 2002 and the 12 months to
31 March 2002 the Process Systems product group made operating losses, before
goodwill amortisation, of £0.4 million and £1.1 million respectively.
10. Reconciliation of movements in Equity Shareholders' Funds
Half year to Half year Year to
30 Sep 2002 to
31 Mar 2002
30 Sep 2001
£000 £000 £000
Profit for the period 1,132 4,532 9,348
Dividends paid and proposed (1,123) (1,126) (3,931)
Retained profit for the period 9 3,406 5,417
Exchange differences on foreign currency (3,849) (1,172) (144)
net investments
New share capital subscribed 40 - 123
Net (reduction)/increase in equity (3,800) 2,234 5,396
shareholders' funds
Opening equity shareholders' funds 95,166 89,770 89,770
Closing equity shareholders' funds 91,366 92,004 95,166
Notes on the Interim Financial Statements (Continued)
11. Cash flows netted in the cash flow statement
Half year to Half Year to
30 Sep 2002
year to 31 Mar 2002
30 Sep 2001
£000 £000 £000
Group operating profit 1,249 2,430 5,319
Depreciation charges 2,935 2,990 6,220
Amortisation of goodwill 169 149 313
Net loss on the disposal of fixed assets 60 16 25
Change in stocks 4,472 (5,278) (3,730)
Change in debtors (828) 4,179 1,402
Change in creditors (10,680) (7,396) (2,774)
Change in provisions (52) (175) (133)
Net cash (outflow)/inflow from operating (2,675) (3,085) 6,642
activities
Interest received 12 11 50
Interest paid (617) (557) (1,154)
Net cash outflow from the servicing of (605) (546) (1,104)
finance
Purchase of fixed assets (1,984) (2,704) (4,806)
Sale of fixed assets 68 2,988 6,786
Investments acquired (112) - (414)
Net cash (outflow)/inflow from capital (2,028) 284 1,566
expenditure and financial investment
Increase/(decrease) in term loans 2,674 2,000 (1,000)
Net cash inflow/(outflow) from management 2,674 2,000 (1,000)
of liquid resources
Issue of ordinary shares including share 40 - 123
premium
Net cash inflow from financing 40 - 123
12. Movement in Net Debt
As at Exchange Cash As at
movement
30 Sep 2002 rate period 31 Mar
2002
effect
£000 £000 £000 £000
Cash at bank and in hand 3,370 15 (1,451) 4,806
Bank overdrafts (2,522) (35) (2,299) (188)
Net cash 848 (20) (3,750) 4,618
Debt due within one year (10,436) 32 (2,674) (7,794)
Debt due after one year (731) 77 - (808)
Net debt (10,319) 89 (6,424) (3,984)
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