Final Results

Oxford Instruments PLC 6 June 2001 Release Date: 7.00am, 6 June 2001 Oxford Instruments plc Announcement of preliminary results for 2000/2001 Oxford Instruments plc, the advanced instrumentation business, today announced preliminary results for the year to 31 March 2001. * Record orders of £201 million, excluding the share of the OMT joint venture, up 19% on last year. * Group turnover for continuing operations, excluding the share of the OMT joint venture, up 21% at £183 million. * Operating profit on continuing operations of £6.5 million, including the £4.4 million share of the OMT joint venture. This compares with a profit last year of £0.8 million. * All businesses profitable in the second half of the year. * Restructuring and site consolidations completed as planned. * 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. Andrew Mackintosh, Chief Executive said: 'I am delighted to report that the benefits of our restructuring programme are now flowing through in the form of much improved profits in our wholly-owned businesses following a record year for orders. Whilst maintaining tight control on costs and ensuring we deliver further operational improvements, we intend to focus on growth segments where we can apply our strengths in technology and world-wide sales channels to create sustainable value for our shareholders.' 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 Preliminary 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). Chairman's statement Nigel Keen, Chairman of Oxford Instruments plc, said today:- 'The encouraging progress demonstrated in the first half of last year has continued in the second half. We achieved record orders in the year of £201 million (2000 - £169 million) and an operating profit for the wholly owned continuing businesses of £2.1 million (2000 - £5.0 million loss) in the year on turnover of £183 million (2000 - £151 million). All businesses were profitable in the second half of the year. Total pre-tax profits for continuing businesses of £5.7 million (2000 - £1.0 million) included an interest charge of £0.8 million and a reduced contribution to operating profits from Oxford Magnet Technology (OMT), our joint venture body-scanner business with Siemens, of £4.4 million (2000 - £5.8 million) on OMT turnover unchanged at £100 million. As expected, the tax rate of 47% on the profits of continuing businesses is significantly higher than normal as a result of losses in the UK which cannot be offset against profits elsewhere, particularly the USA. Closing net borrowings were £8.3 million, resulting from a cash outflow of £ 10.9 million during the year which included restructuring costs of £4.7 million and the acquisition for £3.9 million in October 2000 of the Austin Scientific cryogenics business, which is performing to plan. Working capital improved from 26% to 24% of sales, reflecting continued progress in improving operational efficiency. The Directors have recommended a final dividend of 6.0p, making a total of 8.4p, unchanged from last year. Progress in reshaping the business The restructuring of our major UK businesses initiated in September 1999 is delivering improved service to customers from a lower cost base. Together with the completion of three major site consolidations during the year, we have introduced a range of operational improvement programmes and cultural change. These are already delivering the forecast performance enhancements in the businesses, generating a substantial profit improvement in the past year. We expect further progress in the current year. The majority of the costs of the restructuring were provided in 1999/2000, but as announced at that time a final exceptional charge against profits of £1.4 million has been taken in 2000/01. In addition to our operational improvements we have focussed the businesses during the year by moving out of a number of unprofitable business areas. We have also sold two product lines which did not fit with our long-term strategy. The results of these activities are shown under Discontinued Operations. We have converted our investment in another product line into a stake in Oxford Diffraction, a new business supplying instrumentation to the biology research market. A similar model was used earlier in the year when we contributed key technology and contracts into a new company, Oxford Biosignals, in exchange for a minority interest in that company. During the year we also concluded a licence agreement for proprietary technology to a major oil exploration business. We intend to continue broadening the range of commercial outlets for our innovative capabilities by working with others in areas which fall outside our focussed strategy. Our staff have worked hard through a period of rapid and significant change over the past year and it is through their efforts that our recovery is on track. With their continued support the business is expected further to improve its position in its chosen markets over the coming year. Superconductivity Turnover has increased by 27% to £78.9 million and this has resulted in a significantly decreased operating loss of £0.7 million (2000 - £3.5 million loss) for the year. The total number of late projects decreased by 60% during the year as we worked through a significant proportion of our outstanding customer commitments. Key internal and field quality measures have shown significant improvements as our operational improvement programmes contribute to the recovery. We have made significant progress in strengthening our links with our major customers. As a result we now have long-term contracts in place for the supply of magnets, wire and after-sales MRI magnet service to all our major OEM customers. Most importantly to the business going forward, we have made progress with the 'legacy contracts' which have been holding back profits. However, as forecast, there remains a small number of loss-making contracts which contain a significant level of technical risk and these will continue to absorb valuable resource until they are completed. We have received multiple orders worth several million pounds for our world-leading 'Discovery' magnet for use in biological research and drug development first announced last summer. We are making excellent progress in scaling up for the efficient production of these leading-edge magnet systems to take advantage of our strong market position. A critical component of this magnet is the wire made by our successful US-based superconducting wire business. Analytical Strong orders were translated into increased turnover of £65.6 million (2000 - £49.5 million) and this contributed to a return to profitability of the Analytical business. Operating profits of £2.8 million (2000 - £1 million loss) were generated in the year, during which we completed the site consolidations and other business rationalisation announced in the previous year. Orders from the semiconductor industry grew particularly strongly and our Plasma Technology business generated record results, recognised by a Queens Award for Enterprise. We are seeing a recent slowdown in orders from this market segment. However we expect to maintain our investment in applications expertise and customer support infrastructure to benefit from the anticipated long-term growth in the demand for semiconductor devices made with the help of our products. As a result of a continued commitment to new product development during the year, we have launched new products used for routine chemical analysis in three growing market segments: a high-end product for use in research laboratories, an on-line system for process control in the petrochemicals industry and a patented hand-held device for portable use in materials analysis. We have been encouraged by the initial sales volumes through new strategic partnerships, particularly with Horiba in Japan and CEM Corp. for the food industry in the USA. These new products and relationships, together with the healthy order book, will help to offset any decline in the semiconductor business in the coming year. Medical As forecast at the half-year, sales in the second half increased by 28% over the first half, resulting in turnover for the year of £38.6 million (2000 - £ 39.3 million). Following the site consolidation earlier in the year, overheads have been tightly controlled and the business recovered to make a small operating profit of £0.1 million in the year (2000 - £0.5 million loss). Investment in process improvement has contributed to improved volumes and efficiencies. In particular we have reduced significantly our lead-times on a wide range of single-use products, allowing ex-stock delivery to customers world-wide. Innovative new products are key to the future of this business. Our new ' Sonicaid' labour and delivery monitor launched earlier this year has now received formal approval from the US Food and Drug Administration, clearing the way for us to open up sales channels for this product in the USA. Orders for the range of products for sleep analysis supplied by our partner Compumedics increased in the second half, with a number of sales to leading institutions in Europe and the USA. Oxford Magnet Technology (OMT) Our 49% share of the OMT joint venture profits for the year were down 25% to £ 4.4 million as a result of continuing market pressure on product margins and increased engineering spend. The initial 15-year term of the OMT joint venture with Siemens ends in September 2004 at which time the joint venture can be terminated at the option of either party. Siemens is both the controlling shareholder and biggest customer of OMT. We have therefore initiated discussions with Siemens about their future strategy for OMT and how Oxford Instruments can contribute to the relationship. At this stage it is too early to say what the outcome of these discussions will be. Prospects We have continued to invest in the development of new products, spending £10.3 million last year, 5.6% of sales. Significant growth opportunities have been created by a number of new products recently launched. However we intend to maintain our focus on further operational improvement to ensure that we translate these new opportunities into commercial success. The business entered 2001/2 with a healthy order book equivalent to several months' turnover, as a result of record orders received last year. This strong order position provides a solid platform from which we expect to deliver further growth in profits from the wholly-owned businesses during the year. We also intend over the next few months to resolve the future of the OMT joint venture. Oxford Instruments commands a leading position in a range of technically advanced markets in healthcare, industry and research which have high barriers to entry. We bring outstanding innovation, world-wide sales channels, shared key resources and an increasing level of operational excellence to these growing business opportunities. As our financial performance continues to improve, we are focussing on growth areas in attractive markets where we can apply our strengths to add real value to our customers and hence generate improved returns to our shareholders.' Group Profit and Loss Account Year ended 31 March 2001 Continuing Exceptional Discontinued operations items operations 2001 Notes £000 £000 £000 £000 Turnover Group and share 1 219,814 - 2,096 221,910 of joint venture turnover Less share of 5 (36,775) - - (36,775) joint venture turnover -------- -------- -------- ------- Group turnover 1 183,039 - 2,096 185,135 (including acquisition of £2,615,000) Cost of sales (130,473) (445) (2,927) (133,845) -------- -------- -------- ------- Gross 52,566 (445) (831) 51,290 profit/(loss) Net operating 4 (50,465) (988) (1,287) (52,740) expenses -------- -------- -------- ------- Group operating profit/(loss) (including 2,101 (1,433) (2,118) (1,450) acquisition profit of £487,000) Share of 5 4,350 - - 4,350 operating profit of joint venture -------- -------- -------- ------- Total operating profit/(loss): Group and share of 1 6,451 (1,433) (2,118) 2,900 joint venture Profit on sale of discontinued business before goodwill - - 599 599 Goodwill - - - - previously written off to reserves Net interest (792) - - (792) payable -------- -------- -------- ------- Profit/(loss) on 5,659 (1,433) (1,519) 2,707 ordinary activities before tax Tax on profit on (2,683) - - (2,683) ordinary activities -------- -------- -------- ------- Profit/(loss) for the financial year attributable to 2,976 (1,433) (1,519) 24 shareholders ====== ====== ====== Dividends 6 (3,942) ------- Retained loss (3,918) for the financial year ======= Earnings/(losses) 7 pence pence pence pence per share Basic 6.3 (3.0) (3.2) 0.1 earnings/(losses) per share Diluted 6.3 (3.0) (3.2) 0.1 earnings/(losses) per share 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 1 191,396 - 9,672 201,068 of joint venture turnover Less share of 5 (40,378) - - (40,378) joint venture turnover --------- -------- -------- ------- Group turnover 1 151,018 - 9,672 160,690 Cost of sales (105,695) (765) (9,488) (115,948) --------- -------- -------- ------- Gross 45,323 (765) 184 44,742 profit/(loss) Net operating 4 (50,317) (6,582) (2,532) (59,431) expenses --------- -------- -------- ------- Group operating (4,994) (7,347) (2,348) (14,689) loss Share of 5 5,800 - - 5,800 operating profit of joint venture --------- -------- -------- ------- Total operating profit/(loss): Group and share 1 806 (7,347) (2,348) (8,889) of joint venture Profit on sale - - 2,855 2,855 of discontinued business before goodwill Goodwill - - (11,986) (11,986) previously written off to reserves Net interest 197 - - 197 receivable --------- -------- -------- ------- Profit/(loss) 1,003 (7,347) (11,479) (17,823) on ordinary activities before tax Tax on (767) 26 (906) (1,647) profit/(loss) on ordinary activities --------- -------- -------- ------- Profit/(loss) 236 (7,321) (12,385) (19,470) for the financial year attributable to shareholders ====== ====== ====== Dividends 6 (3,941) ------- Retained loss (23,411) for the financial year ====== Earnings/(losses) 7 pence pence pence pence per share Basic 0.5 (15.5) (26.3) (41.3) earnings/(losses) per share Diluted 0.5 (15.5) (26.2) (41.2) earnings/(losses) per share Group Statement of Total Recognised Gains and Losses Year ended 31 March 2001 2001 2000 £000 £000 Profit/(loss) for the financial year 24 (19,470) Exchange differences on foreign currency net investments of 3,311 28 the Group ------- -------- Total recognised gains and losses for the financial year 3,335 (19,442) ------- -------- Group Balance Sheet As at 31 March 2001 2001 2000 £000 £000 Fixed assets Intangible assets - goodwill 5,341 2,798 Intangible assets - negative goodwill (758) (1,191) Tangible assets 43,731 40,815 Investments: Share of gross assets of joint venture 15,937 11,772 Share of gross liabilities of joint venture (13,176) (8,069) ------- -------- Net investment in joint venture 2,761 3,703 Other investments 2,260 1,321 ------- -------- Total investments 5,021 5,024 ------- -------- Total fixed assets 53,335 47,446 ------- -------- Current assets Stocks 43,696 36,114 Debtors 66,325 63,208 Cash at bank and in hand 1,643 5,709 ------- -------- 111,664 105,031 ------- -------- Creditors: amounts falling due within one year Bank loans and overdrafts (9,959) (3,105) Other creditors (61,933) (53,284) ------- -------- (71,892) (56,389) ------- -------- Net current assets 39,772 48,642 Total assets less current liabilities 93,107 96,088 Provisions for liabilities and charges (6,178) (8,552) ------- -------- Net assets employed 86,929 87,536 ======= ======= Capital and reserves Called up share capital 2,392 2,392 Share premium account 18,656 18,656 Other reserves 15,930 15,930 Profit and loss account 49,951 50,558 ------- -------- Equity shareholders' funds 86,929 87,536 ======= ======= Reconciliation of Movements in Equity Shareholders' Funds 2001 2000 £000 £000 Profit/(loss) for the financial year 24 (19,470) Dividends paid and proposed (3,942) (3,941) ------- -------- Retained loss for the financial year (3,918) (23,411) Exchange differences on foreign currency net investments 3,311 28 New share capital subscribed - 103 Goodwill written back to profit and loss account - 11,986 Goodwill written off to reserves - (81) ------- -------- Net reduction to equity shareholders' funds (607) (11,375) Opening equity shareholders' funds 87,536 98,911 ------- -------- Closing equity shareholders' funds 86,929 87,536 ===== ====== Consolidated Cash Flow Statement 2001 2000 Notes £000 £000 Net cash outflow from operating activities 8 (1,925) (1,563) Dividend from joint venture 3,691 4,358 Returns on investments and servicing of finance 8 (432) 491 Taxation (250) (119) Capital expenditure and financial investment 8 (6,229) (4,062) Acquisitions 3 (3,911) (3,454) Disposals 3 1,983 5,896 Equity dividends paid (3,953) (5,095) ------- -------- Cash outflow before management of liquid resources and financing (11,026) (3,548) Management of liquid resources 8 9,500 5,041 Financing 8 - 103 ------- -------- (Decrease)/increase in cash in the year (1,526) 1,596 ===== ====== Reconciliation of Net Cash Flow to Movement in Net (Debt)/Funds 2001 2000 £000 £000 (Decrease)/increase in cash in the year (1,526) 1,596 Change in liquid resources (9,500) (5,041) Translation difference 106 18 ------- -------- Movement in net funds in the year (10,920) (3,427) Opening net funds 2,604 6,031 ------- -------- Closing net (debt)/funds (8,316) 2,604 ======= ======= Movement in Net (Debt)/Funds At 31 March Exchange rate Cash movement At 31 2001 effect in year March 2000 £000 £000 £000 £000 Cash at bank and 1,643 216 (2,782) 4,209 in hand Bank overdrafts (1,119) (188) 1,256 (2,187) ------- -------- ------- -------- Net cash 524 28 (1,526) 2,022 Cash on deposit - - (1,500) 1,500 Debt due within (8,840) 78 (8,000) (918) one year ------- -------- ------- -------- Net (debt)/funds (8,316) 106 (11,026) 2,604 ======= ======= ====== ======= 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 2001 and 31 March 2000 have been prepared on a basis consistent with the accounting policies disclosed in the Group's Annual Report and Accounts 2000. The results for continuing operations analysed by business groups were as follows: Turnover Operating profit/(loss) 2001 2000 2001 2000 £000 £000 £000 £000 Superconductivity 78,862 62,245 (748) (3,467) Analytical 65,603 49,470 2,752 (982) Medical 38,574 39,303 97 (545) ------- -------- ------- -------- 183,039 151,018 2,101 (4,994) Share of OMT jv (49%) 36,775 40,378 4,350 5,800 ------- -------- ------- -------- 219,814 191,396 6,451 806 ======= ======= ====== ======= 2. Exchange rates The principal exchange rates used to translate the Group's overseas results were as follows: Year to 31 March 2001 Year to 31 March 2000 Average Average Average Year end Contract Average Year end contract rate rate Rate rate rate rate US Dollar 1.48 1.42 1.56 1.61 1.60 1.62 Yen 164 178 179 178 164 203 Euro 1.64 1.61 1.61 1.56 1.67 1.54 3. Acquisitions and disposals In October 2000, the Group acquired the Austin Scientific Company, a cryogenic refrigeration and pump business based in Texas, USA, for a net cash outflow of £3.9 million. During the year the Group sold its cathodoluminescence and accessories business, based in Oxford, UK, for £1.3 million and its beamlines business also based in Oxford, UK for £0.7 million. The results of these businesses are shown under discontinued operations in the Group profit and loss account. 4. Net operating expenses and exceptional items Net operating expenses for continuing businesses comprise: 2001 2000 £000 £000 Distribution costs 31,690 31,863 Research and development costs 10,349 11,051 Administrative expenses 8,426 7,403 ------- -------- Net operating expenses, excluding exceptional costs 50,465 50,317 ====== ====== Total exceptional items of £1.4 million (2000 £7.3 million) include the final 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 in September 1999. 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. OMT 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: 2001 2000 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 2001 will be 7 September 2001, and subject to approval of shareholders at the Annual General Meeting on 31 July 2001, payment will be made on 4 October 2001. 7. Earnings per share Basic and diluted earnings per share have been calculated on the weighted average of 47,072,059 shares (2000 47,174,731 shares) and 47,091,625 shares (2000 47,284,179 shares) in issue during the year, respectively. 8. Cash flows netted in the cash flow statement 2001 2000 £000 £000 Operating loss (1,450) (14,689) Depreciation charges 5,510 5,941 Amortisation of goodwill 198 (96) Net profit on disposal of fixed assets (324) (351) Change in stocks (9,556) (3,684) Change in debtors (3,731) 1,553 Change in creditors 10,048 4,812 Change in provisions (2,620) 4,951 ------- ------- Net cash outflow from operating activities (1,925) (1,563) ====== ====== Interest received 176 593 Interest paid (608) (102) ------- ------- Net cash (outflow)/inflow from returns on investments and (432) 491 servicing of finance ====== ====== Purchase of fixed assets (6,413) (4,806) Sale of fixed assets 527 1,321 Investments acquired (343) (577) ------- -------- Net cash outflow for capital expenditure and financial (6,229) (4,062) investment ====== ====== Decrease in term deposits 1,500 5,041 Increase in term loans 8,000 - ------- ------- Net cash inflow from management of liquid resources 9,500 5,041 ====== ====== Issue of ordinary shares including share premium - 103 ------- ------- Net cash inflow from financing - 103 ====== ====== 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 2001 or 31 March 2000 but is derived from those accounts. This announcement was approved by the Board of Directors on 6 June 2001. Statutory accounts for 1999/2000 have been delivered to the Registrar of Companies, whereas those for 2000/2001 will be delivered following the Company's Annual General Meeting on 31 July 2001. 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, 31 July 2001 at 2.30pm at the offices of Oxford Instruments plc, Old Station Way, Eynsham, Witney, Oxon OX29 4TL.

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