Final Results

Oxford Instruments PLC 13 June 2000 Oxford Instruments plc Announcement of preliminary results for 1999/2000 Oxford Instruments plc, the advanced instrumentation group, today announced preliminary results for the year to 31 March 2000. * Group turnover for continuing operations, excluding the Group's share of the OMT joint venture, was £160.1 million (1999 £159.7 million). * Loss on continuing operations, before exceptional items and taxation was £0.8 million reflecting in particular reduced margins on a number of old technically complex long term projects. This compares with a profit last year of £12.7 million. * A final dividend of 6.0 pence per share is proposed, leaving the total dividend unchanged for the year at 8.4 pence per share. * A major group restructuring programme is well underway and on course to deliver £4 million of cost savings in 2000/2001. Two of the three new business streams created by the reorganisation returned to profitability in the second half. * An exceptional charge of £7.3 million has been taken in 1999/2000 and a further £1.6 million will be charged in 2000/2001 to cover reorganisation costs. * Closing net cash was £2.6 million. Chief Executive, Andrew Mackintosh, said: 'Whilst I am disappointed with this year's outcome, we are making real progress with the 'TopFlight' reorganisation programme which is on track to deliver the forecast improvements in performance. Our streamlined organisation coupled with our strong technological and market position gives us the opportunity to benefit from the encouraging level of new orders in most of our markets.' 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 John Rudofsky For further copies of this Preliminary Results announcement please contact Liz Whitehall at the Company's registered office at Old Station Way, Eynsham, Witney Oxon OX8 1TL (email: liz.whitehall@oxinst.co.uk). Chairman's statement Nigel Keen, Chairman of Oxford Instruments plc, said today:- 'Orders for our wholly-owned continuing operations were £168.6m, virtually unchanged from the previous year. Shipments of £160.1m were also close to last year (£159.7m). However the pre-tax pre-exceptional loss for continuing businesses was £0.8m as a result of significantly reduced margins, primarily from the costs of progressing a limited number of old and technically complex projects in our Superconductivity business. Following disappointing results in the first half of the year and a wide-ranging review of operational effectiveness, we initiated a major co-ordinated programme under the name 'TopFlight' in September 1999 to address our organisational structure and cost base. This reorganisation will result in an exceptional charge totalling £8.9m, of which £7.3m has been charged against the results for the year to 31 March 2000 and £1.6m will be charged in 2000/01, consistent with the FRS12 accounting standard. The closing cash balance was £2.6m, down £3.4m during the year. The Directors have recommended a final dividend of 6.0p, making a total of 8.4p, unchanged from last year. Progress with reorganisation We have made good progress with our reorganisation. The new UK management teams put in place after September 1999, supported by a recently strengthened Board, are building on the initial changes announced at that time. Several of our wholly owned UK operations have been merged into three new businesses, providing us with the opportunity to exploit a number of synergies. As forecast we are on target to deliver £4m of cost savings from the reorganisation and improvement programmes in 2000/01. In the current year we will carry out the major site relocations already announced, improving our space utilisation and hence releasing 35% of our UK site space for disposal or other use. The extensive programme to upgrade our IT systems is proceeding to plan and we are now concentrating on delivering improved operational efficiency from the installed systems. Together with several other Group-wide process improvement programmes already underway, including centrally driven procurement, these changes are creating a strong base from which to grow a consistently profitable business. Two of the new businesses formed from the restructuring returned to profitability in the second half of last year. All senior management are now incentivised on targets related to the improved use of capital as well as profit achievement. Changes in our markets The level of new orders has been encouraging during a year when our priorities have been to improve our operational performance. Our major market in America has stayed strong, while our Asian markets have grown significantly from a low base as investment increases in that region. Japan remains the exception and very subdued demand from both research and industrial customers continued to hold back our business there. Orders in Europe were flat and the weakness of the Euro significantly increased the competition for available business there, impacting margins. However our medical products subsidiaries in Spain and Italy performed well. During the year we bought out our Eastern European analytical products distributor to strengthen our direct sales in this expanding region. Operational review Superconductivity The loss of £5.3m, on turnover of £71.3m (down 3% on the previous year) does not reflect the operational progress we are making in this business. First time pass rates and product installations have improved significantly and a number of late and loss-making projects were completed in the year, including a number of 'firsts' that reinforce our strong reputation for product innovation. However we have not made adequate progress in reducing our large order backlog and so have recently decided to invest in increased resources to accelerate this recovery whilst maintaining service levels in our current business. Margins will therefore continue to remain depressed during the current year as we bring customer delivery times down. Disposal of non-core product lines and consolidation of sites will further help to focus the business. Margins on new orders have improved, new technical risk management procedures are in place and we remain the world leader in a market that continues to generate exciting growth opportunities. Analytical (previously 'Instrumentation') Increased shipments in the second half of the year helped to improve the performance of our Analytical business and resulted in turnover for the year of £49.5m, up 5% on the previous year, and in a return to profitability in the second half. Our Plasma Technology business experienced strong volume growth on the back of increased demand from telecommunications applications, but competition, the strength of the pound and product mix dampened margins in other markets. As forecast in my interim statement we will be reducing our Analytical sites in the UK from three to two. Once the site relocation is complete towards the end of the year, this will lower costs and allow the business to operate more effectively. Medical (previously 'Medical Systems') Our Medical business was also profitable in the second half of the year, following actions taken by new management installed after the restructuring in September 1999. Turnover for the year was £39.3m, close to last year. Sales of our new 'Synergy Notebook' product were strong, as was demand for our single-use needle electrodes. Orders grew for third party products, reflecting the strength of our sales network. A review of the product portfolio and our target markets has led to a redesign of certain sales channels in overseas markets to match more closely local customer buying patterns. We have also developed new strategic alliances to attack the growing market for instrumentation for the analysis of sleep disorders. Following the start of the 'TopFlight' programme, we have made significant improvements in product quality and needle manufacturing capacity, while consolidation of the business onto a single site will be complete at the end of June 2000 as forecast. Oxford Magnet Technology Our joint venture with Siemens producing magnets for MRI has continued to perform well, with shipments in the year of £101m. After a record year last year end-user demand has remained steady, helped by system price reductions. New clinical applications for this technology continue to be developed. Our cost-reduction programmes are making good progress, with manufacturing lead-times reduced by a further 20% during the year. In November 1999 we demonstrated the prototype of a revolutionary new 'high-field open' magnet designed to increase patient comfort during examination. During the year we also successfully renewed a long-term contract with one of our major customers. Board changes Following my election to the role of Chairman in July 1999, the Board has been strengthened by the arrival of two new non-executive directors, Peter Morgan and Peter Hill. Sir Martin Wood, founder of the Company and Deputy Chairman, has announced his decision to retire from the Board at the Annual General Meeting but will continue to make his wide experience and scientific contacts available to the Company. His enthusiasm, vision and leadership have been an inspiration to all those with whom he has worked during the 41 years' life of the Company. I am delighted that Mike Brady has agreed to take over the role of Deputy Chairman in Sir Martin's place. Prospects Our businesses continue to occupy very strong technology and market positions in world-wide markets. Our 'TopFlight' re-engineering programme is creating an organisation that can better meet customer needs in our markets from a lower cost base. Our top priority is to succeed with this programme, which will return the Group to profitability and will improve our use of capital. We are committed to ensuring that our businesses earn an improving and sustainable return, thereby delivering value to our shareholders and rewarding their support for the business during this transition.' Group Profit and Loss Account Year ended 31 March 2000 Continuing Exceptional Discontinued 2000 operations items operations Notes £000 £000 £000 £000 ------------------------------------------------------------------------------ Turnover Group and share of joint 1 200,479 - 589 201,068 venture turnover Less: share of joint 5 (40,378) - - (40,378) venture's turnover ----------------------------------------------- Group turnover 1 160,101 - 589 160,690 (including acquisition of £1,596,000) Cost of sales (114,446) (765) (737)(115,948) ----------------------------------------------- Gross profit 45,655 (765) (148) 44,742 Net operating expenses 4 (52,514) (6,582) (335) (59,431) ----------------------------------------------- Group operating loss (including acquisition loss (6,859) (7,347) (483) (14,689) of £741,000) Share of operating profit 5 5,800 - - 5,800 of joint venture ----------------------------------------------- Total operating loss: 1 Group and share of joint venture (1,059) (7,347) (483) (8,889) Profit on sale of discontinued business before goodwill - - 2,855 2,855 Goodwill previously written off to reserves - - (11,986) (11,986) Group net interest receivable (payable) 226 - (32) 194 Share of joint venture's net interest receivable 3 - - 3 ----------------------------------------------- Loss on ordinary activities before tax (830) (7,347) (9,646) (17,823) Tax on loss on ordinary activities (767) 26 (906) (1,647) ----------------------------------------------- Loss for the financial year attributable to shareholders (1,597) (7,321) (10,552) (19,470) -------------------------------------- Dividends 6 (3,941) -------- Retained loss for the financial year (23,411) -------- Losses per share 7 pence pence pence pence Basic losses per share (3.4) (15.5) (22.4) (41.3) Diluted losses per share (3.4) (15.5) (22.3) (41.2) Group Profit and Loss Account Year ended 31 March 1999 Continuing Discontinued 1999 operations operations Notes £000 £000 £000 ------------------------------------------------------------------------------ Turnover Group and share of joint venture 1 turnover 208,907 8,124 217,031 Less: share of joint venture's 5 turnover (49,220) - (49,220) ------------------------------------ Group turnover 1 159,687 8,124 167,811 Cost of sales (104,192) (6,030) (110,222) ------------------------------------ Gross profit 55,495 2,094 57,589 Net operating expenses 4 (50,500) (3,110) (53,610) ------------------------------------ Group operating profit (loss) 4,995 (1,016) 3,979 Share of operating profit of 5 joint venture 7,165 - 7,165 ------------------------------------ Total operating profit (loss): Group and share of joint venture 1 12,160 (1,016) 11,144 Profit on sale of discontinued business before goodwill - - - Goodwill previously written off to reserves - - - Group net interest receivable 694 (136) 558 Share of joint venture's net interest payable (183) - (183) ------------------------------------ Profit (loss) on ordinary activities before tax 12,671 (1,152) 11,519 Tax on profit on ordinary activities (4,027) 357 (3,670) ------------------------------------ Profit (loss) for the financial year attributable to shareholders 8,644 (795) 7,849 -------------------------- Dividends 6 (3,971) ------- Retained profit for the financial year 3,878 ------- Earnings per share 7 pence pence pence Basic earnings (losses) per share 17.8 (1.6) 16.2 Diluted earnings (losses) per share 17.8 (1.6) 16.2 Group Statement of Total Recognised Gains and Losses Year ended 31 March 2000 2000 1999 £000 £000 ------------------------------------------------------------------------------ (Loss) profit for the financial year (19,470) 7,849 Exchange differences on foreign currency net investments of the Group 28 1,014 ------------------- Total recognised gains and losses for the financial year (19,442) 8,863 ------------------- Group Balance Sheet 2000 1999 £000 £000 ------------------------------------------------------------------------------ Fixed assets Intangible assets - goodwill 2,798 - Intangible assets - negative goodwill (1,191) (1,624) Tangible assets 40,815 42,749 Investments: Share of gross assets of joint venture 11,772 13,266 Share of gross liabilities of joint venture (8,069) (9,263) --------------------- Net investment in joint venture 3,703 4,003 Other investments 1,321 1,059 --------------------- Total investments 5,024 5,062 --------------------- Total fixed assets 47,446 46,187 --------------------- Current assets Stocks 36,114 34,481 Debtors 63,208 63,867 Cash at bank and in hand 5,709 9,130 --------------------- 105,031 107,478 --------------------- Creditors: amounts falling due within one year Bank loans and overdrafts (3,105) (3,099) Other creditors (53,284) (47,214) --------------------- (56,389) (50,313) --------------------- Net current assets 48,642 57,165 --------------------- Total assets less current liabilities 96,088 103,352 Provisions for liabilities and charges (8,552) (4,441) --------------------- Net assets employed 87,536 98,911 --------------------- Capital and reserves Called up share capital 2,392 2,389 Share premium account 18,656 18,556 Other reserves 15,930 15,930 Profit and loss account 50,558 62,036 --------------------- Equity shareholders' funds 87,536 98,911 --------------------- Reconciliation of Movements in Equity Shareholders' Funds 2000 1999 £000 £000 ------------------------------------------------------------------------------ (Loss) profit for the financial year (19,470) 7,849 Dividends paid and proposed (3,941) (3,971) --------------------- Retained (loss) profit for the financial year (23,411) 3,878 Exchange differences on foreign currency net investments 28 1,014 New share capital subscribed 103 84 Shares repurchased and cancelled during the year - (5,323) Goodwill written back to profit and loss account 11,986 - Goodwill written off to reserves (81) (149) --------------------- Net reduction to equity shareholders' funds (11,375) (496) Opening equity shareholders' funds 98,911 99,407 --------------------- Closing equity shareholders' funds 87,536 98,911 --------------------- Consolidated Cash Flow Statement 2000 1999 Notes £000 £000 ------------------------------------------------------------------------------ Net cash (outflow) inflow from operating 8 activities (1,563) 12,908 Dividend from joint venture 4,358 3,087 Returns on investments and servicing of finance 8 491 643 Taxation (119) (7,485) Capital expenditure and financial investment 8 (4,062) (6,247) Acquisitions 3 (3,454) (149) Disposals 3 5,896 - Equity dividends paid (5,095) (2,896) ---------------------- Cash outflow before management of liquid resources and financing (3,548) (139) Management of liquid resources 8 5,041 (182) Financing 8 103 (5,239) ---------------------- Increase (decrease) in cash in the year 1,596 (5,560) ---------------------- Reconciliation of Net Cash Flow to Movement in Net Funds 2000 1999 £000 £000 ------------------------------------------------------------------------------ Increase (decrease) in cash in the year 1,596 (5,560) Change in liquid resources (5,041) 182 Translation difference 18 93 ---------------------- Movement in net funds in the year (3,427) (5,285) Opening net funds 6,031 11,316 ---------------------- Closing Net funds 2,604 6,031 ---------------------- Movement in Net Funds At Exchange Cash At 31 March rate movement 31 March 2000 effect in year 1999 £000 £000 £000 £000 ------------------------------------------------------------------------------ Cash at bank and in hand 4,209 131 1,489 2,589 Bank overdrafts (2,187) 20 107 (2,314) -------------------------------------------- Net cash 2,022 151 1,596 275 Cash on deposit 1,500 - (5,041) 6,541 Debt due within one year (918) (133) - (785) -------------------------------------------- Net funds 2,604 18 (3,445) 6,031 -------------------------------------------- Notes on the Preliminary Financial Statements 1. Accounting policies and results by business groups The Group profit and loss account and balance sheet for the years ended 31 March 2000 and 31 March 1999 have been prepared on a basis consistent with the accounting policies disclosed in the Group's Report and Accounts 1999. In addition, the Company has adopted the new Financial Reporting Standards: FRS 15 'Tangible Fixed Assets' and FRS 16 'Current Tax'. This had no significant effect on reported results. The results for continuing operations analysed by business groups were as follows:- Turnover Operating (Loss) Profit 2000 1999 2000 1999 £000 £000 £000 £000 ------------------------------------------------------------------------------ Superconductivity 71,328 73,556 (5,332) 1,233 Analytical 49,470 47,001 (982) 3,466 Medical 39,303 39,130 (545) 296 ------------------------------------------- 160,101 159,687 (6,859) 4,995 Share of OMT jv (49%) 40,378 49,220 5,800 7,165 ------------------------------------------- 200,479 208,907 (1,059) 12,160 ------------------------------------------- 2. Exchange rates The principal exchange rates used to translate the Group's overseas results were as follows: - Year to 31 March 2000 Year to 31 March 1999 Average Average Average Year End Contract Average Year End Contract Rate Rate Rate Rate Rate Rate ------------------------------------------------------------------------------ US Dollar 1.61 1.60 1.62 1.65 1.61 1.60 Yen 178 164 203 213 191 198 Euro 1.56 1.67 1.54 1.47 1.50 1.45 ------------------------------------------------------------------------------ 3. Disposals and Acquisitions During the year the Group sold its Nuclear Measurements business, based in Oak Ridge, Tennessee, USA, for US$9.5 million and its Scanning Probe Microscopy business, based in Cambridge, UK for £80,000. The results of these businesses are shown under Discontinued Operations in the Group Profit and Loss Account. The Group acquired the instrumentation business of Auburn International Inc. in April 1999 for US$4.5 million and part of the East European distribution network of Rofa in December 1999 for £580,000. 4. Net operating expenses and exceptional items Net operating expenses comprise: 2000 1999 £000 £000 ------------------------------------------------------------------------------ Distribution costs 33,334 32,872 Research and development costs 11,429 12,524 Administrative expenses 8,086 8,214 -------------------- Net operating expenses, excluding exceptional items 52,849 53,610 Exceptional costs 6,582 - -------------------- Net operating expenses 59,431 53,610 -------------------- Exceptional items, both in cost of sales and net operating expenses, relate to continuing activities and include the costs incurred in connection with the reorganisation of the Group's UK based businesses into a simplified operational structure and the business improvement programme announced on 16 September 1999, as well as the costs of reorganising the Group's Board and senior management. A further £1,593,000 of expected costs relating to the reorganisation is required by FRS 12 to be recorded in the year ending 31 March 2001. 5. Joint venture The Group owns 49% of the issued share capital of Oxford Magnet Technology Limited ('OMT') of 3,000,000 £1 ordinary shares. 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 in accordance with FRS 9. 6. Dividends per share Dividends per share are as follows:- 2000 1999 pence pence ------------------------------------------------------------------------------ Interim Dividend 2.4 2.4 Final Dividend 6.0 6.0 ------------------ 8.4 8.4 ------------------ The record date for the final dividend of 6.0p per share in respect of the year ended 31 March 2000 will be 8 September 2000, and subject to approval of shareholders at the Annual General Meeting on 1 August 2000, payment will be made on 4 October 2000. 7. Losses/earnings per share Basic and diluted (losses) earnings per share have been calculated on the weighted average of 47,174,731 shares (1999 48,449,234 shares) and 47,284,179 shares (1999 48,562,938 shares) in issue during the year respectively. 8. Cash flows netted in the cash flow statement 2000 1999 £000 £000 ------------------------------------------------------------------------------ Operating (loss) profit (14,689) 3,979 Depreciation charges and amortisation 5,494 4,998 Change in stocks (3,684) (69) Change in debtors 1,553 3,410 Change in creditors 9,763 590 --------------------- Net cash (outflow) inflow from operating activities (1,563) 12,908 --------------------- Interest received 593 952 Interest paid (102) (309) --------------------- Net cash inflow from returns on investments and servicing of finance 491 643 --------------------- Purchase of fixed assets (4,806) (5,683) Sale of fixed assets 1,321 345 Investments acquired (577) (909) --------------------- Net cash outflow for capital expenditure and financial investment (4,062) (6,247) --------------------- Decrease in term deposits 5,041 1,459 Decrease in term loans - (1,641) --------------------- Net cash inflow (outflow) from management of liquid resources 5,041 (182) --------------------- Repurchase and cancellation of ordinary shares - (5,323) Issue of ordinary shares including share premium 103 84 --------------------- Net cash inflow (outflow) from financing 103 (5,239) --------------------- 9. Report and Accounts The financial information set out in this preliminary results announcement does not constitute the Company's statutory accounts for the years ended 31 March 2000 or 31 March 1999 but is derived from those accounts. This announcement was approved by the Board of Directors on 13 June 2000. Statutory accounts for 1998/99 have been delivered to the Registrar of Companies, whereas those for 1999/00 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The Company is registered in England Number 775598. 10. The Annual General Meeting The Annual General Meeting will be held on Tuesday, 1 August 2000 at 2.30pm at the offices of Oxford Instruments Superconductivity Limited, Tubney Woods, Abingdon, Oxon OX13 5QX.

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