Interim Results - 6 Months to 30 September 1999

Oxford Instruments PLC 23 November 1999 ANNOUNCEMENT OF 1999/2000 INTERIM RESULTS Oxford Instruments plc, the advanced instrumentation company, today announced Consolidated Interim Results (Unaudited) for the half year to 30 September 1999 as follows: Half year to Half year to 30 Sep 1999 30 Sep 1998 * Group turnover, excluding share of joint £76.4 million £78.7 million venture * Profit of continuing operations, before £0.5 million £5.7 million exceptional items and taxation * Exceptional reorganisation costs £(6.5) million nil * Closing net cash £5.4 million £9.4 million * Earnings per share from continuing 0.7 pence 7.7 pence operations, excluding exceptional items * (Losses) earnings per share (basic and (31.3)pence 7.0 pence diluted) * Dividend per share 2.4 pence 2.4 pence * Net assets per share 197.4 pence 201.2 pence Enquiries: Oxford Instruments plc Tel: 01865 881437 Andrew Mackintosh, Chief Executive Martin Lamaison, Financial Director Citigate Dewe Rogerson Tel: 0171 638 9571 John Rudofsky Chairman's statement Nigel Keen, Chairman of Oxford Instruments plc, said today:- In my first statement as Chairman of Oxford Instruments I can report substantial progress in reshaping the Group to improve our service to customers from a reduced cost base. The first phase of our business reorganisation, which was announced in September 1999, is substantially complete and we can now accelerate work on key areas for operational improvement helped by the new business structure. We remain on track to deliver the substantial improvements outlined in September. The poor results for the last six months emphasise the critical importance of this major initiative for the business. Financial summary Our overall orders for continuing operations were up 1% on the equivalent period last year, with the moving annual total (excluding our Oxford Magnet Technology joint venture with Siemens) now £167 million This is despite very subdued demand for our products in Japan. Turnover in the first half from the continuing operations was stable at £76 million. Margins remain tight as a result of continued competitive pressure and increased costs as we work through a number of projects delayed by technical difficulties. The operating loss from the wholly-owned businesses is balanced by our share of the operating profit of the joint venture. The result is a pre-exceptional pre-tax profit from continuing operations of £0.5 million. An exceptional charge of £6.5 million has been taken to cover the costs of the reorganisation announced in September 1999. Our results also include, as previously announced, the profit on the sale of the Nuclear Measurements business of £2.9 million and also the recognition of the write off through the Profit and Loss Account of goodwill previously written off against reserves of £12 million in respect of both this disposal and the closure of our scanning probe microscopy business. In the latter case we have entered into an agreement with a leading supplier to this market to provide it with key proprietary components. There was a net cash outflow of £0.6 million following the sale and purchase of businesses. The Directors have recommended an Interim Dividend of 2.4 pence per share, unchanged from last year. Operational review Oxford Magnet Technology As forecast, Oxford Magnet Technology (OMT) has continued its strong performance, with the moving annual total of shipments now £108 million. Market conditions remained buoyant, though not quite at the record levels of last year and OMT's main customers are maintaining their positions in the market place. As previously reported, shipments last year were inflated by the large opening backlog, however the business is now meeting all customer delivery requirements. We continue to invest in joint projects between our Superconductivity business and OMT and the creation of a single UK management team in the former will accelerate this process. Instrumentation Overall turnover from continuing businesses was down 5%, with strong growth from our telecommunications markets offset by weak demand from other industries. Margins continue to be under pressure, but remained stable. We have successfully transferred to the UK the bulk of the 'Auburn' US-based business acquired in April 1999. This resulted in significantly increased costs in the first half as we invest in this business. Customers are including Auburn products in their capital cycle planning for next year and we remain confident about these opportunities. As part of the restructuring we have announced the consolidation of our manufacturing activity in Fremont, California back to the UK, but our other US west coast activities are unaffected. Looking forward, we are planning additional site rationalisation in the UK, under the recently appointed Managing Director, although this will not affect our Bristol-based Plasma Technology business. As previously announced we have recently formed a technology and marketing relationship with Horiba Ltd., a Japanese market leader in analytical instruments. This opens up new distribution channels for products from both companies from next year. Superconductivity Orders for this business fell by 10% compared with the prior year, reflecting reduced government funding for research in Japan and an increased focus on market profitability and technical risk assessment which has led us to reject some potential orders. Turnover increased by 4%. Our programmes aimed at increasing internal efficiency are showing some improvements in operations and the new single UK management structure for the Superconductivity business created through our 'TopFlight' reorganisation programme will accelerate progress. Margins will remain depressed while we continue to incur costs associated with finishing certain technically complex projects. However margins on new business are improving. Our superconducting wire business delivered another steady performance on the back of the continued demand from its MRI magnet customers. Medical Systems Orders increased by 6% on the same period in the prior year, helped by strong third-party sales and the successful launch of a portable version of our 'Synergy' product used for the measurement of muscle voltages. Margins continued to be affected by changes in product and territory mix. Under the new management team installed as part of the restructuring we will complete the integration of the acquired Vickers neurology business by consolidating all our UK activities onto one site in Old Woking, UK. This programme will be complete by the end of June 2000 and will result in lower costs and a more integrated business base from which we can drive forward. Board and senior management changes In line with the management changes and business reorganisation of the last few months, including the appointment of three new managing directors for the UK businesses, we have strengthened the Board by the appointment of two new independent non-executive directors, as announced last week. Peter Morgan and Peter Hill will bring broad business experience and additional commercial focus to the Company. Prospects Through the first phase of the 'TopFlight' programme we have put in place a new management structure in the operating businesses with an increased emphasis on customers, production efficiencies and a lower cost base. Disruption to the business is being kept to a minimum as we work through the programme. The new structure will allow us better to lever the synergies that exist across the Group, to enable rapid improvement in key processes and to improve allocation of scarce resources. Our priority remains to achieve significant operational improvements and we are focussing in particular on procurement and manufacturing yield savings as well as accelerating our new product introduction and increasing sales channel efficiency. Compared to the first half, we expect performance in the second half to recover although the cost savings from the restructuring will not make a significant contribution until next year. We have new management in place and through the recent changes we have created a stronger base from which to build the business. Group Profit and Loss Account Half year ended 30 September 1999 (Unaudited) Half year to 30 September 1999 Continuing Exceptional Discontinued Total operations Items operations Notes £000 £000 £000 £000 ----------------------------------------------------------------------------- Turnover 1 Group and share of joint 96,617 - 532 97,149 venture turnover 3 Less: share of joint (20,792) - - (20,792) venture's turnover ---------------------------------------------- 2 Group turnover 75,825 - 532 76,357 Cost of sales (51,602) - (646) (52,248) ---------------------------------------------- Gross profit 24,223 - (114) 24,109 4 Net operating expenses (26,713) (6,500) (103) (33,316) ---------------------------------------------- 2 Group operating loss (2,490) (6,500) (217) (9,207) 3 Share of operating profit of 2,813 - - 2,813 joint venture ---------------------------------------------- Total operating profit (loss): 323 (6,500) (217) (6,394) Group and share of joint venture 5 Profit on sale of discontinued - - 2,858 2,858 business 5 Goodwill previously written off - - (11,986) (11,986) to reserves Net interest receivable(payable) 214 - (16) 198 --------------------------------------------- Profit (loss) before taxation 537 (6,500) (9,361) (15,324) 6 Tax on profit (loss) on (188) 1,640 (913) 539 ordinary activities --------------------------------------------- 7 Profit (loss) for the period 349 (4,860) (10,274) (14,785) attributable to shareholders ----------------------------------- 8 Dividend (1,138) -------- Retained loss for the period (15,923) -------- pence pence pence pence --------------------------------------------- 7 Earnings (losses) per share - 0.7 (10.3) (21.7) (31.3) basic and diluted Group Profit and Loss Account Half year ended 30 September 1998 (Unaudited) Half year to 30 September 1998 Year to Continuing Discontinued Total 31 Mar 99 operations operations Notes £000 £000 £000 £000 ---------------------------------------------------------------------------- Turnover 1 Group and share of joint 100,126 3,610 103,736 217,031 venture turnover 3 Less: share of joint (25,026) - (25,026) (49,220) venture's turnover --------------------------------------------- 2 Group turnover 75,100 3,610 78,710 167,811 Cost of sales (48,561) (2,771) (51,332) (110,222) --------------------------------------------- Gross profit 26,539 839 27,378 57,589 Net operating expenses (24,714) (1,322) (26,036) (53,610) --------------------------------------------- 2 Group operating profit (loss) 1,825 (483) 1,342 3,979 3 Share of operating profit of 3,660 - 3,660 7,165 joint venture --------------------------------------------- Total operating profit (loss): 5,485 (483) 5,002 11,144 Group and share of joint venture 5 Profit on sale of discontinued - - - - business 5 Goodwill previously written off - - - - to reserves Net interest receivable(payable) 205 (67) 138 375 ---------------------------------------------- Profit (loss) before taxation 5,690 (550) 5,140 11,519 6 Tax on profit (loss) on (1,849) 176 (1,673) (3,670) ordinary activities ---------------------------------------------- 7 Profit (loss) for the period 3,841 (374) 3,467 7,849 attributable to shareholders ----------------------- 8 Dividend (1,138) (3,971) -------------------- Retained profit for the period 2,329 3,878 -------------------- pence pence pence pence --------------------------------------------- 7 Earnings (losses) per share - 7.7 (0.7) 7.0 16.2 basic and diluted Group Statement of Total Recognised Gains and Losses Half year ended 30 September 1999 (Unaudited) Half year to Half year to Year to 30 Sep 1999 30 Sep 1998 31 Mar 1999 £000 £000 £000 ------------------------------------------------------------------------------ (Loss) profit after tax for the period (14,785) 3,467 7,849 Exchange differences on foreign (568) (386) 1,014 currency net investments ------------------------------------- Total recognised gains and losses for (15,353) 3,081 8,863 the period ------------------------------------- Group Balance Sheet Half year ended 30 September 1999 (Unaudited) As at As at As at 30 Sep 1999 30 Sep 1998 31 Mar 1999 £000 £000 £000 Notes------------------------------------------------------------------------- Fixed assets Intangible assets - goodwill 2,442 - - Intangible assets - negative goodwill (1,408) - (1,624) Tangible assets 41,977 43,314 42,749 Investments Share of gross assets of joint 14,225 15,483 13,266 venture Share of gross liabilities of joint (8,237) (10,733) (9,263) venture ------------------------------------- Net investment in joint venture 5,988 4,750 4,003 Other investments 1,147 813 1,059 ------------------------------------- 7,135 5,563 5,062 ------------------------------------- Total fixed assets 50,146 48,877 46,187 Current assets Stocks 37,403 34,070 34,481 Debtors 60,786 55,287 63,867 Cash at bank and in hand 7,913 11,015 9,130 ------------------------------------- 106,102 100,372 107,478 ------------------------------------- Creditors: amounts falling due within one year Bank loans and overdrafts (2,492) (1,606) (3,099) Other creditors (48,502) (46,774) (47,214) ------------------------------------- (50,994) (48,380) (50,313) ------------------------------------- Net current assets Due within one year 55,108 50,221 57,165 Debtors due after more than one year - 1,771 - ------------------------------------- 55,108 51,992 57,165 ------------------------------------- Total assets less current liabilities 105,254 100,869 103,352 Provisions for liabilities and charges (10,917) (4,813) (4,441) ------------------------------------- Net assets employed 94,337 96,056 98,911 ------------------------------------- 9 Shareholders' funds 94,337 96,056 98,911 ------------------------------------- The Group Balance Sheet as at 30 September 1998 has been restated to reflect FRS12. Group Cash Flow Statement Half year ended 30 September 1999 (Unaudited) Half year to Half year to Year to 30 Sep 1999 30 Sep 1998 31 Mar 1999 £000 £000 £000 Notes------------------------------------------------------------------------- 10 Net cash inflow from operating 46 8,140 12,908 activities Dividend from joint venture - - 3,087 10 Returns on investments and servicing 477 627 643 of finance Taxation (639) (1,444) (7,485) 10 Capital expenditure and financial (2,424) (3,992) (6,247) investment Acquisitions (2,876) - (149) Disposals 5,901 - - Equity dividends paid (1,138) - (2,896) ------------------------------------- Cash (outflow) inflow before (653) 3,331 (139) management of liquid resources and financing 10 Management of liquid resources 791 482 (182) 10 Financing 13 (5,271) (5,239) ------------------------------------- Increase (decrease) in cash in the 151 (1,458) (5,560) period ------------------------------------- Reconciliation of Net Cash Flow to Movement in Net Funds Half year ended 30 September 1999 (Unaudited) Half year to Half year to Year to 30 Sep 1999 30 Sep 1998 31 Mar 1999 £000 £000 £000 Notes------------------------------------------------------------------------- Increase (decrease) in cash in the period 151 (1,458) (5,560) Change in liquid resources (791) (482) 182 Translation difference 30 33 93 ----------------------------------- Movement in net funds in the period (610) (1,907) (5,285) Opening net funds 6,031 11,316 11,316 ----------------------------------- 11 Closing net funds 5,421 9,409 6,031 ----------------------------------- Notes on the Interim Financial Statements Half year ended 30 September 1999 (Unaudited) 1. Basis of preparation of accounts The Group profit and loss account and balance sheet for the half years ended 30 September 1999 and 30 September 1998 have been prepared on a basis consistent with the accounting policies disclosed in the Group's Report and Accounts 1999. The operations of Nuclear Measurements in Oak Ridge, Tennessee and the scanning probe microscopy business in Cambridge, UK were discontinued on 1 April 1999 and 30 September 1999 respectively, see note 5 below. The results of these operations are shown as Discontinued Operations. 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 99 30 Sep 98 31 Mar 99 Average Period End Average Period End Average Period End ----------------------------------------------------------------------------- US Dollar 1.61 1.65 1.66 1.70 1.65 1.61 Euro 1.52 1.55 1.51 1.45 1.47 1.50 Yen 187 175 231 231 213 191 ----------------------------------------------------------------------------- 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 1999 30 Sep 1998 30 Sep 1999 30 Sep 1998 £000 £000 £000 £000 ------------------------------------------------------------------------------ Superconductivity 35,573 34,261 (590) 562 Instrumentation 20,917 21,954 (1,295) 658 Medical 19,335 18,885 (605) 605 ------------------------------------------------------ 75,825 75,100 (2,490) 1,825 Share of OMT jv (49%) 20,792 25,026 2,813 3,660 ------------------------------------------------------ 96,617 100,126 323 5,485 ------------------------------------------------------ 3. 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 under Financial Reporting Standard (FRS) 9. 4. Exceptional items Exceptional items relate to continuing activities and include the costs currently expected to be incurred during the current financial year in connection with the reorganisation of the Group's businesses into a simplified operational structure as announced in September 1999, as well as the costs of reorganising the Group's Board and senior management. 5. Loss on disposal of businesses The disposal of the Nuclear Measurements business produced a profit on sale of net tangible assets of £2,858,000. Goodwill previously written off to reserves of £11,450,000 was written off through the Profit & Loss Account. The closure of the Cambridge based scanning probe microscopy business resulted in goodwill of £536,000, previously written off to reserves, being written off through the Profit & Loss Account. 6. Taxation The tax charge for the half year ended 30 September 1999 has been based on the estimated effective rate applicable to each significant category of income and cost for the full year. 7. Earnings per share Earnings per share (EPS) has been calculated using losses of £14,785,000 (1998 earnings of £3,467,000) and weighted average shares of 47,210,514 (1998 49,577,137) for basic EPS and 47,292,747 (1998 49,720,002) for diluted EPS respectively. 8. Dividends per share An interim dividend of 2.4p (1998 2.4p) will be paid on 29 March 2000 to shareholders registered at the close of business on 25 February 2000, the record date. The shares will be marked 'ex-dividend' on 21 February 2000. 9. Movements in equity shareholders' funds Half year to Half year to Year to 30 Sep 1999 30 Sep 1998 31 Mar 1999 £000 £000 £000 ------------------------------------------------------------------------------ (Loss) profit for the period (14,785) 3,467 7,849 Dividends paid and proposed (1,138) (1,138) (3,971) Shares repurchased and cancelled in - (5,309) (5,323) the period Exchange differences on foreign currency (568) (386) 1,014 net investments New share capital subscribed 13 38 84 Goodwill written off during the period (82) (23) (149) Goodwill written back to profit and loss 11,986 - - account ------------------------------------ Net reduction in equity shareholders' funds (4,574) (3,351) (496) Opening equity shareholders' funds 98,911 99,407 99,407 ------------------------------------ Closing equity shareholders' funds 94,337 96,056 98,911 ------------------------------------ 10. Cash flows netted in the consolidated cash flow statement Half year to Half year to Year to 30 Sep 1999 30 Sep 1998 31 Mar 1999 £000 £000 £000 ------------------------------------------------------------------------------ Operating (loss)profit (9,207) 1,342 3,979 Depreciation charges and amortisation 2,751 2,572 4,998 Change in stocks (4,695) (291) (69) Change in debtors 3,371 7,046 3,410 Change in creditors 7,826 (2,529) 590 ------------------------------------- Net cash inflow from operating activities 46 8,140 12,908 ------------------------------------- Interest received 529 665 952 Interest paid (52) (38) (309) ------------------------------------- Net cash inflow from returns on investments 477 627 643 and servicing of finance ------------------------------------- Purchase of fixed assets (2,379) (3,638) (5,683) Sale of fixed assets 144 177 345 Investments acquired (189) (531) (909) ------------------------------------- Net cash outflow for capital expenditure (2,424) (3,992) (6,247) and financial investment ------------------------------------- Decrease in term deposits 1,059 2,000 1,459 Decrease in term loans (268) (1,518) (1,641) ------------------------------------- Net cash inflow (outflow) from management 791 482 (182) of liquid resources ------------------------------------- Issue of ordinary shares including share 13 38 84 premium Repurchase of own shares - (5,309) (5,323) ------------------------------------- Net cash inflow (outflow) from financing 13 (5,271) (5,239) ------------------------------------- 11. Movements in net funds As at Exchange Cash As at 30 Sep 99 rate movement in 31 Mar 99 effect period £000 £000 £000 £000 ----------------------------------------------------------------------------- Cash at bank on demand 2,431 64 (222) 2,589 Bank overdrafts (1,922) 19 373 (2,314) ---------------------------------------------- Net cash 509 83 151 275 Cash on deposit 5,482 - (1,059) 6,541 Debt due within one year (570) (53) 268 (785) ---------------------------------------------- Net funds 5,421 30 (640) 6,031 ---------------------------------------------- 12. Report and Accounts 1999 The comparative figures for the financial year ended 31 March 1999 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 1999 are available from the Company's registered office by applying to the Company Secretary, Oxford Instruments plc, Old Station Way, Eynsham, Witney, Oxon, OX8 1TL. The Company is registered in England Number 775598. 19/11/99 10:14

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