Interim Results

Oxford Instruments PLC 13 November 2001 13 November 2001 Oxford Instruments plc Announcement of interim results for 2001/02 Oxford Instruments plc, the advanced instrumentation group, today announced consolidated interim results for the half year to September 2001. * Orders for the wholly-owned businesses increased by 2% on the first half last year to £94 million. * Turnover for the wholly-owned businesses up by 35% to £104 million. * Operating profit for the wholly-owned businesses increased to £2.4 million, compared with a loss of £1.4 million for the first half last year. * Pre-tax profits increased to £6.1 million (2000 £0.5 million) including £2.7 million from the share of the OMT joint venture operating profit and £1.8 million from the sale of a surplus property. * Net borrowings were £11.3 million, a net £3 million outflow during the period. * Interim dividend is held at 2.4 pence. Andrew Mackintosh, Chief Executive said: ' I am pleased to be able to report a further substantial improvement in our financial performance over the past six months as forecast. This reflects material progress in the operational efficiency of our businesses as a result of major reorganisation over the past two years. We are approaching the future with confidence, given that our technical strength allied to increasingly effective execution will enable us to compete successfully in 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 Chris Barrie No. of pages: 12 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). Chairman's Statement Nigel Keen, Chairman of Oxford Instruments plc, said today: 'The encouraging financial results for the last 6 months have been achieved following the restructuring programme carried out over the past two years. Orders for the period of £94 million (2000 £92 million) from the wholly-owned businesses held up well, increasing by 2% over the same period last year. Orders from the markets for research products were particularly strong, counteracting weakness in the semiconductor and other industrial segments. Turnover of £104 million for the period was 35% higher (2000 £77 million), reflecting further material progress in reducing the high order backlog and improving operational efficiency. Pre-tax profits before exceptional items increased to £4.3 million (2000 £0.9 million). This comprised a £3.8 million improvement in operating profit of the wholly-owned businesses to £2.4 million (2000 £1.4 million loss), with a contribution of £2.7 million (2000 £2.5 million) from the share of the operating profits of Oxford Magnet Technology (OMT), our joint venture with Siemens. Interest payable was £0.8 million. In total, pre-tax profits for the period were £6.1 million (2000 £0.5 million), which included an exceptional profit of £1.8 million from the sale of a surplus property following the restructuring. Net borrowings at the half-year were £11.3 million, reflecting a net cash outflow of £3.0 million in the period. This included an increase in working capital as a result of higher turnover offset by the receipt of £3.0 million from the sale of the property. The Directors have recommended an interim dividend of 2.4p, unchanged from last year. Operational review Analytical Turnover for the period increased by 58% to £44 million (2000 £28 million), reflecting the delivery to customers of a substantial proportion of the record orders received in the second half of last year. Operating profits moved forward strongly to £4.1 million (2000 £0.4 million). However, as forecast, the rate of receipt of new orders in the period is 18% down on the average for last year, reflecting the slowdown in orders from the semiconductor industry and a continuing general weakness in the American market. We have recently launched a major new hardware platform for our market-leading 'INCA' chemical analysis product. The reduced size and modern design of this unit is easier to manufacture and allows more effective integration with our customers' equipment. We announced on 29 October 2001 the acquisition of the assets of USA-based CMI International for $2.2 million, a market-leader in the measurement of thin metallic coatings for a range of industrial applications. This business complements our existing product lines serving industrial quality control markets. Medical Despite stable orders and increased turnover of £19 million (2000 £17 million), losses of £0.8 million (2000 £0.9 million loss) were incurred in the period. As a result of this, changes to the management and structure of operations have been made to improve capacity and efficiency going forward. Investment in the future continues both through new products and the creation of new alliances to broaden our range of products and sales channels. We recently brought to market in record time a significant new software product which aids the diagnosis of the health of a baby during late pregnancy. This will contribute to our growing instrument sales into the obstetrics sector, supporting our new 'FM800' fetal monitor, which is now selling well. Superconductivity Turnover grew by 27% on the same period last year to £41 million (2000 £32 million), reflecting continuing good progress in increasing capacity and successfully completing a number of technically demanding but low-margin projects. We have made further encouraging progress with the limited number of 'legacy contracts' which continue to slow down the recovery of this business. One key project has been delivered successfully during the period, while good technical and commercial progress has been made on two others. There remains however substantial technical risk in these projects until they are complete. Our US-based wire and MRI magnet service business continues to perform well, supplying increased volumes of wire to MRI magnet businesses. Customers have recently used our unique wire product to produce the world's most intense magnetic field in a magnet which could be used in significant volumes by the next generation of particle accelerators. The loss for the period of £0.9 million (2000 £0.9 million loss) was in line with internal recovery forecasts, reinforcing our confidence that investment over the past two years in project management and other process improvement is paying off. Trading is expected to improve in the second half of the year as we commence deliveries to customers of our world-leading 'Discovery' magnets used for drug development. Oxford Magnet Technology The 49% share of OMT, our joint venture with Siemens, generated operating profits for the period of £2.7 million (2000 £2.5 million) on turnover up 18% on the equivalent period last year. Pricing pressure is likely in the future to be intensified by recent consolidation in the customer base for OMT's products. Discussions continue with Siemens over the future of OMT beyond the initial term of the joint venture which ends in September 2004. Siemens, who is also the principal customer of the business, expects to increase its shareholding in OMT under any future arrangement. We have not yet been able to agree a revised financial structure for the relationship after 2004 which reflects the interests of our shareholders. Board change Richard Wakeling decided to step down from the Board in September 2001 after 6 years as a non-executive director. He has provided valuable advice and support to the Company during the major changes over the past few years. We wish him well with his future plans. Prospects The priority for the business remains to achieve further improvement in operational efficiency and we expect additional material progress over the next few months. We continue to focus on initiatives that improve the standard of our service to customers through the timely delivery of high quality products. Turnover in the second half of the year is expected to remain at current levels as increased shipments from the high order backlog in our Medical and Superconductivity businesses offset the expected reduction in turnover from our Analytical business. Our objective moving into next year is to ensure that all businesses are operating with reduced delivery times to customers so that we can compete aggressively for increased shares of the markets we serve.' Group Profit and Loss Account Half year ended 30 September 2001 - unaudited Half year to 30 September 2001 Continuing Exceptional Total operations items Notes £000 £000 £000 Turnover Group and share of joint venture 1 126,751 - 126,751 turnover Less share of joint venture turnover 3 (22,692) - (22,692) Group turnover 2 104,059 - 104,059 Cost of sales (72,613) - (72,613) Gross profit 31,446 - 31,446 Net operating expenses (29,016) - (29,016) Group operating profit 2 2,430 - 2,430 Share of operating profit of joint 3 2,657 - 2,657 venture Total operating profit Group and share of joint venture 5,087 - 5,087 Profit on disposal of property - 1,826 1,826 Profit before interest 5,087 1,826 6,913 Total net interest payable (784) - (784) Profit on ordinary activities before 4,303 1,826 6,129 tax Tax on profit on ordinary activities 6 (1,597) - (1,597) Profit for the period attributable 7 2,706 1,826 4,532 to shareholders Dividends 8 (1,126) Retained profit for the period 3,406 pence Pence pence Earnings per share - basic and 7 5.8 3.9 9.7 diluted Group Profit and Loss Account Half year ended 30 September 2000 - unaudited Half year to 30 September 2000 Year to As restated 31 March Continuing Exceptional Discontinue Total 2001 operations items operations As restated Notes £000 £000 £000 £000 £000 Turnover Group and 1 96,535 - 1,511 98,046 221,910 share of joint venture turnover Less share 3 (19,525) - - (19,525) (36,775) of joint venture turnover Group 2 77,010 - 1,511 78,521 185,135 turnover Cost of (54,524) (157) (1,427)(56,108) (133,845) sales Gross profit 22,486 (157) 84 22,413 51,290 /(loss) Net (23,838) (607) (740)(25,185) (52,642) operating expenses Group 2 (1,352) (764) (656) (2,772) (1,352) operating loss Share of 3 2,483 - - 2,483 4,350 operating profit of joint venture Total operating profit/ (loss) Group and 1,131 (764) (656) (289) 2,998 share of joint venture Profit on 5 - - 1,010 1,010 599 sale of discontinued business Profit/ 1,131 (764) 354 721 3,597 (loss) before interest Total net (184) - - (184) (792) interest payable Profit/ 947 (764) 354 537 2,805 (loss) on ordinary activities before tax Tax on 6 (220) 22 24 (174) (2,869) profit/ (loss) on ordinary activities Profit/ 7 727 (742) 378 363 (64) (loss) for the period attributable to shareholders Dividends 8 (1,131) (3,942) Retained (768) (4,006) loss for the period pence pence pence pence pence Earnings/ 7 1.6 (1.6) 0.8 0.8 (0.1) (losses) per share - basic and diluted Group Statement of Total Recognised Gains and Losses Half year ended 30 September 2001 - unaudited Half Half Year year to year to to 30 Sep 30 Sep 31 Mar 2001 2000 2001 As As restated restated Notes £000 £000 £000 Profit/(loss) for the period 4,532 363 (64) Exchange differences on foreign currency net (1,172) 2,335 3,656 investments of the Group Total recognised gains and losses relating to 3,360 2,698 3,592 the period Prior year adjustments 1 2,841 Total gains and losses recognised since last Annual Report 6,201 Group Balance Sheet Half year ended 30 September 2001 - unaudited As As As at at at 30 Sep 30 Sep 31 Mar 2001 2000 2001 As As restated restated Notes £000 £000 £000 Fixed assets Goodwill 4,927 2,581 5,341 Negative goodwill (664) (1,195) (930) Intangible assets 4,263 1,386 4,411 Tangible assets 42,221 40,388 43,731 Investments Share of gross assets of joint venture 16,350 14,599 15,937 Share of gross liabilities of joint (11,926) (9,278) (13,176) venture Net investment in joint venture 4,424 5,321 2,761 Other investments 2,154 1,247 2,260 Total investments 6,578 6,568 5,021 Total fixed assets 53,062 48,342 53,163 Current assets Stocks 48,631 42,653 43,696 Debtors 64,007 64,803 69,338 Cash at bank and in hand 3,776 3,000 1,643 116,414 110,456 114,677 Creditors: amounts falling due within one year Bank loans and overdrafts (15,079) (8,466) (9,959) Other creditors (56,317) (51,839) (61,933) (71,396) (60,305) (71,892) Net current assets 45,018 50,151 42,785 Total assets less current liabilities 98,080 98,493 95,948 Provisions for liabilities and charges (6,076) (6,806) (6,178) Net assets employed 92,004 91,687 89,770 Capital and reserves Called up share capital 2,392 2,392 2,392 Share premium account 18,656 18,656 18,656 Other reserves 15,930 15,930 15,930 Profit and loss account 55,026 54,709 52,792 Equity shareholders' funds 9 92,004 91,687 89,770 Group Cash Flow Statement Half year ended 30 September 2001 - unaudited Half Half Year year to year to to 30 Sep 30 Sep 31 Mar 2001 2000 2001 Notes £000 £000 £000 Net cash outflow from operating activities 10 (3,085) (9,350) (1,925) Dividend from joint venture - - 3,691 Returns on investments and servicing of 10 (546) (54) (432) finance Taxation 426 1,914 (250) Capital expenditure and financial investment 10 284 (1,990) (6,229) Acquisitions - - (3,911) Disposals - 1,356 1,983 Equity dividends paid - - (3,953) Cash outflow before management of liquid (2,921) (8,124) (11,026) resources and financing Management of liquid resources 10 2,000 4,997 9,500 Decrease in cash in the period (921) (3,127) (1,526) Reconciliation of Net Cash Flow to Movement in Net Debt Half year ended 30 September 2001 - unaudited Half year Half year Year to to to 30 Sep 30 Sep 31 Mar 2001 2000 2001 Notes £000 £000 £000 Decrease in cash in the (921) (3,127) (1,526) period Change in liquid resources (2,000) (4,997) (9,500) Translation difference (66) 54 106 Movement in net funds in the (2,987) (8,070) (10,920) period Opening net (debt)/funds (8,316) 2,604 2,604 Closing net debt 11 (11,303) (5,466) (8,316) Notes on the Interim Financial Statements Half year ended 30 September 2001 - unaudited 1. Basis of presentation of accounts The Group profit and loss account and balance sheet for the half years ended 30 September 2001 and 30 September 2000 have been prepared on a basis consistent with the accounting policies disclosed in the Group's Report and Accounts 2001, subject to the application of FRS 19 as discussed below. Discontinued operations include the cathodoluminescence and accessories business sold in June 2000, together with the operations of the Accelerator Technology Group including the beamlines business sold in January 2001. The Group has adopted FRS 19 'Deferred Tax' in the period, resulting in the restatement of prior periods' profit and loss accounts, balance sheets and statements of recognised gains and losses. Application of the standard has resulted in the creation of a deferred tax asset of £2.8 million (£3.0 million at 30 September 2000 and 31 March 2001) in respect of timing differences and has required the restatement of goodwill on the recognition of deferred tax assets in an acquired company. 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 2001 30 Sep 2000 31 Mar 2001 Average Period End Average Period End Average Period End US Dollar 1.43 1.47 1.52 1.48 1.48 1.42 Euro 1.62 1.61 1.64 1.68 1.64 1.61 Yen 175 175 162 160 164 178 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 2001 30 Sep 2000 30 Sep 2001 30 Sep 2000 £000 £000 £000 £000 Analytical 43,534 27,581 4,142 381 Medical 19,169 16,934 (849) (874) Superconductivity 41,356 32,495 (863) (859) 104,059 77,010 2,430 (1,352) Share of OMT jv (49%) 22,692 19,525 2,657 2,483 126,751 96,535 5,087 1,131 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 2001 30 Sep 2000 £000 £000 49% of joint venture turnover 29,027 24,494 Less 49% of sales by OMT to Group (3,468) (2,193) Less 49% of sales by Group to OMT (2,867) (2,776) Group share of joint venture turnover 22,692 19,525 4. Exceptional Items Exceptional items for the period to 30 September 2000 related to continuing activities and included the costs incurred in connection with the reorganisation of the Group's UK based businesses. 5. Disposal of businesses In the period to 30 September 2000 the Group sold its cathodoluminescence and accessories business for a cash consideration of £1.4 million. There was a net profit on disposal of £1.0 million. There were no disposals in the period to 30 September 2001. 6. Taxation The tax charge for the half year ended 30 September 2001 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 £4,532,000 (2000 £363,000) and weighted average shares of 46,929,456 (2000 47,109,456) for basic EPS and 46,972,248 (2000 47,113,498) for diluted EPS respectively. 8. Dividends per share An interim dividend of 2.4p (2000 2.4p) will be paid on 22 March 2002 to shareholders registered at the close of business on 22 February 2002, the record date. The shares will be marked 'ex-dividend' on 20 February 2002. Notes on the Interim Financial Statements (Continued) 9. Movements in Equity Shareholders' Funds Half Half year Year year to to to 30 Sep 30 Sep 31 Mar 2001 2000 2001 As As restated restated £000 £000 £000 Profit/(loss) for the period 4,532 363 (64) Dividends paid and proposed (1,126) (1,131) (3,942) Retained profit/(loss) for the period 3,406 (768) (4,006) Exchange differences on foreign currency net (1,172) 2,335 3,656 investments Net increase/(reduction) in equity 2,234 1,567 (350) shareholders' funds Opening equity shareholders' funds 89,770 90,120 90,120 Closing equity shareholders' funds 92,004 91,687 89,770 10. Cash flows netted in the cash flow statement Half Half Year year to year to to 30 30 31 Mar Sep 2001 Sep 2000 2001 As As restated restated £000 £000 £000 Group operating profit/(loss) 2,430 (2,772) (1,352) Depreciation charges 2,990 2,689 5,510 Amortisation of goodwill 149 (48) 100 Net profit on disposal of fixed assets 16 89 (324) Change in stocks (5,278) (5,976) (9,556) Change in debtors 4,179 863 (3,731) Change in creditors (7,396) (3,697) 10,048 Change in provisions (175) (498) (2,620) Net cash outflow from operating activities (3,085) (9,350) (1,925) Interest received 11 118 176 Interest paid (557) (172) (608) Net cash outflow from the servicing of finance (546) (54) (432) Purchase of fixed assets (2,704) (2,400) (6,413) Sale of fixed assets 2,988 410 527 Investments acquired - - (343) Net cash inflow/(outflow) from capital 284 (1,990) (6,229) expenditure and financial investment Decrease in term deposits - 1,500 1,500 Increase in term loans 2,000 3,497 8,000 Net cash inflow from management of liquid 2,000 4,997 9,500 resources Notes on the Interim Financial Statements (Continued) 11. Movement in Net Debt As at Exchange Rate Cash movement As at 30 Sep 2001 Effect in period 31 Mar 2001 £000 £000 £000 £000 Cash at bank 3,776 (45) 2,178 1,643 and in hand Bank overdrafts (4,223) (5) (3,099) (1,119) Net cash (447) (50) (921) 524 Debt due within (10,856) (16) (2,000) (8,840) one year Net debt (11,303) (66) (2,921) (8,316) 12. Report and Accounts 2001 The comparative figures for the financial year ended 31 March 2001 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 Report and Accounts 2001 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.

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