Interim Results
Oxford Instruments PLC
21 November 2006
For release at: 7.00am, 21 November 2006
Oxford Instruments plc
Announcement of interim results for 2006/07
Oxford Instruments plc ("Oxford Instruments" or the "Group"), the high
technology tools and systems business, today announced interim results for the
six months to 30 September 2006.
Highlights include:
• Strong first half with like for like orders up 28% at £85.3m.
• Revenues increased by 19% to £72.1m on a like for like basis, 8% as
reported.
• Trading profit significantly improved to £2.0m compared to a loss of
£0.2m in the same period last year; adjusted profit before tax £1.7m
(2005: loss of £0.3m).
• Gross margins improved from 32.5% to 33.6% despite a £1.1m impact of
adverse currency and copper price movements.
• Adjusted earnings per share growth of 2.7p to 2.1p (2005: loss of 0.6p).
Basic loss per share 2.3p (2005: loss 0.6p).
• Recommended interim dividend of 2.4p per share, unchanged from the
previous year.
Nigel Keen, Chairman, said: "The growth strategy is showing early signs of
success and the foundations have been laid for delivering enhanced and
sustainable growth. Actions to accelerate new product development, open up new
routes to market and adopt a sharply focused commercial approach are yielding
results. This is reflected in improved order levels and revenues, which in turn
will yield growth in value for shareholders".
Enquiries:
Oxford Instruments plc Tel: 01865 393200
Jonathan Flint, Chief Executive
Kevin Boyd, Group Finance Director
Hogarth Partnership Limited Tel: 020 7357 9477
Rachel Hirst/Andrew Jaques
For further copies of this Interim Results announcement, please contact Lynn
Shepherd at the Group's registered office at Old Station Way, Eynsham, Witney,
Oxon OX29 4TL (email: lynn.shepherd@oxinst.co.uk).
Chairman's Statement
Nigel Keen, Chairman of Oxford Instruments plc, said today:
Introduction
On a like for like basis we had a strong first half, with orders up 28%,
revenues up 19% and trading profit improved to £2.0m compared to a loss of £0.2m
in the same period last year.
This improving result is against a background of great change for our company
over the last 18 months. The disposal of the medical business in March 2005 left
the way clear for us to concentrate on high growth areas, where our unique
technological expertise can be brought to bear to generate real value for our
shareholders and customers. The UK based volume magnet business, which
underperformed in recent years, was closed as part of a radical restructuring of
our superconductivity business in the year ended 31 March 2006. All parts of the
business are now on track and operating in growing markets where we can
demonstrate significant differentiation.
From this sound platform we can pursue our strategy for growth. As previously
announced we have significantly increased our R&D spend, targeting our
investment towards the rapid development of innovative products that give
immediate performance advantages to customers, in our chosen market sectors. Our
"voice of the customer" initiative ensures that all aspects of our product
development and marketing are guided by a vigorous interrogation and
understanding of customer and market needs.
Following the acquisitions and disposals of 2005, our strategic portfolio has
been reviewed. Our two targeted growth areas are Nanotools (tools for industry
working at the atomic and molecular level) and Biotools (tools for the emerging
life sciences industry). Both these markets are showing compound annual growth
rates of greater than 15% and are open to paradigm shifts through the
introduction of new technology. Oxford Instruments is well positioned to
participate in this growth through the development of valuable and innovative
technology.
This strategy is quantified in our Group wide corporate strategic model. This
model integrates all the business streams, and provides the benchmark against
which the strategic progress of the business is monitored. Using this model, we
plan for Oxford Instruments to double its turnover and at the same time improve
our return on sales by 10 percentage points over five years. The first six
months of that plan have seen significant progress.
Financial Summary
On a like for like basis, order intake in the first half of the year was up 28%
at £85.3 million (2005: £66.6 million), revenues increased by 19% to £72.1
million (2005: £60.5 million) while at the end of the half year the orderbook
stood at £57.1 million, an increase over the same period last year of 36% on a
like for like basis. These comparisons exclude the volume magnet business, which
as previously reported, was closed at the end of the last financial year.
Including this business, order intake grew 21% from £70.7 million and revenues
grew 8% from £66.7 million.
Gross margins improved from 32.5% to 33.6%, despite unfavourable movements in
exchange rates and an increase in the average price of copper from $1.6/lb last
year to $3.5/lb this year. The combined adverse effect of currency and copper
price movements is estimated to be approximately £1.1 million compared with the
first 6 months of last year.
Total operating expenses increased by £0.3 million to £22.2 million (2005: £21.9
million). A saving of approximately £1.0 million was realised in the half year
from the closure of the magnet business. Underlying expenses for the remainder
of the business rose by £1.3 million. Of this increase, approximately £0.5
million was in R&D and £0.8 million was in additional selling expenses,
supporting the £19 million growth in orders taken in the period.
Trading profit increased by £2.2 million to £2.0 million (2005: £0.2 million
loss). Adjusted profit before tax (note 2) was £1.7 million (2005: loss £0.3
million).
Cash generated by operations at £2.3 million was £10.2 million higher than the
same period last year. Working capital increased by £1.0 million in the half
year compared with an increase of £8.2 million in the prior period. After
accounting for capital expenditure, tax, dividends and capitalised R&D, net cash
ended the period at £4.5 million, a reduction of £5.3 million over the last six
months.
For many years the Group has acted as an intermediary between suppliers and
certain of our OEM customers. We have recorded these transactions as purchases
from the suppliers and sales to the OEM customers. As a result of updated
contractual arrangements with these customers, the Board has decided that it is
more appropriate to account for these revenues as agency transactions rather
than accounting for them with the Group as principal. Whilst this has no effect
on profit, it has reduced revenue, and cost of sales in the six months to 30
September by £7.9 million. The prior period has been restated, an adjustment of
£8.6 million.
The Group uses derivative products to hedge its exposure to fluctuations in
foreign exchange rates and the price of copper. In common with a number of other
companies, we have decided that the additional costs of meeting the extensive
documentation requirements of IAS39 to apply hedge accounting cannot be
justified. Accordingly the Group will not use hedge accounting for these
derivatives. Net gains and losses on marking to market such derivatives at the
balance sheet date are disclosed in the income statement in Financial Income
(note 6).
As described in the Operational Review below, we have provided for a settlement
with a customer over a long running onerous contract. This has resulted in a
non-recurring charge of £2.2 million in the first half. If settlement is agreed
the associated cash effect would be expected to be £2.0 million.
The Directors have recommended an interim dividend of 2.4 pence, unchanged from
the previous year, payable on 10 April 2007.
Operational Review
Oxford Instruments Innovation, our in-house technology incubator, continues to
drive the accelerated development of new and innovative products. The Group's R&
D programme is running to plan.
Our NanoScience business is targeted at the research community and is now wholly
located at our Tubney Woods site where it manufactures bespoke, state of the art
products using our expertise in high magnetic fields and cryogenics. This
business consists of these activities including high technology, high field NMR
magnet products and their associated R&D and engineering.
The NanoScience business has been completely restructured with the appointment
of a new managing director and senior management team. The improved commercial
culture and new operating practices are already showing benefits. Customer
service levels have been improved and the business is performing ahead of
internal budgets. Starting from next year, a new range of products based on our
cryogenics capability and guided by extensive customer input ("voice of the
customer") will be launched into the academic and research market.
While underlying performance is improving, it is disappointing that we have had
to provide for the termination of a legacy contract relating to the provision of
a Hybrid magnet for the Grenoble High Magnetic Laboratory in France. This
contract was signed in 1997 and has encountered significant technological
difficulties. At the end of last year we were hopeful that we had found a
technical solution and had provided for the implementation costs. However, the
customer recently notified us of its decision to exercise its right to terminate
the contract, leaving us with no alternative other than to seek a financial
settlement. While we believe that we are close to such a settlement, none has
yet been agreed so we have provided for a one off charge of £2.2m. More
positively, this represents the drawing of a line under the last of the troubled
legacy contracts. This clears the way for us to focus resources on growth areas.
Our new commercial practices and risk mitigation strategy ensures that contracts
of this nature with unacceptably onerous commercial conditions will not be
entered into in future.
Order intake at our superconducting wire business in New Jersey (OST) was
slightly up on last year. This reflected continuing strong demand for our
product from the major wire users. In the half year, extra customers have been
added to our client list. The cost of copper (a major material component of
superconducting wire) has more than doubled in the half year. This has had an
adverse effect on margins and the profitability of the OST business.
Negotiations are continuing to pass on some of this increase to our customers.
This is expected to mitigate the effect on the second half year.
Our NanoAnalysis business, which provides instrumentation for use with electron
microscopes, had a particularly strong half year. Order intake grew by 30% and
revenues grew by 20%. Strong customer demand, high levels of customer service
and the introduction of new products all helped to boost trading. We introduced
two new detector products, X-act and X-3. Our industrial customers (who, for
example, use our equipment to perform defect analysis on railway tracks) benefit
from the tenfold speed improvement offered by X-act. Our research customers,
looking at developing new nanomaterials, particularly value the threefold
increased sensitivity of X-3. Early demand for these new products is strong and
should serve to keep our NanoAnalysis products at the forefront of the market.
In addition, two new products in the NanoAnalysis sector involving innovative
technology are being developed, ready for launch next year.
Last year we combined our industrial analysis businesses into a single
organisational entity. This enabled the sales force to focus on the highly
competitive industrial market, which contributed to order growth and improved
performance. Orders are up 32% on the same period last year and margins have
risen. Output levels from our factories in High Wycombe and Finland have reached
record levels. Requirements for hand held instrumentation to meet environmental
legislation continue to be a driving force behind this growth. Sales of our
X-ray tubes have also reached record levels and we have expanded our
manufacturing capacity by 50% to cope with demand.
Our Biotools business has had a good half year. As previously reported, the
HyperSense Dynamic Nuclear polarisation product has been launched to positive
customer response. HyperSense has the potential to revolutionise many analytical
applications including the development of new pharmaceuticals. Following a
significant order from GE, our planned order in-take for this year has already
been achieved. Work is under way to increase manufacturing capacity for the next
year. Also, in the Biotools area we produce low resolution bench top NMR
instrumentation for use in industrial markets. At the beginning of the year,
this market was soft, but in the last few months has recovered. This business is
currently running ahead of internal forecasts cumulatively.
First half trading for our Plasma Technology business is significantly stronger
than the same period last year. The company provides a range of material
fabrication equipment and has seen a considerable increase in orders as a result
of greater sales focus and an easing of the difficult market environment
experienced last year. Orders for the first half were up by 68% and revenues
were up by 11%. Focus on low cost sourcing over the last two years and greater
market stability has resulted in an improvement in margins.
In China, six products are currently being manufactured in our Shanghai
facility. Transfer of products has proved to be a challenging task, although we
are beginning to reap the benefits of the lower cost manufacturing. Revenues in
China are up 10% on the equivalent period last year. In Japan we continue to
service MRI units through our long term relationship with Siemens and Toshiba.
Product sales in Japan are in line with plan.
Our Eynsham manufacturing site (previously the location of the magnet technology
business) has now been vacated and is available for sale. We continue to market
our property in Abingdon. In Bristol, we plan to vacate the site occupied by our
Plasma Technology business, and have obtained planning consent for redevelopment
for residential use. Our Plasma Technology business will move into a new purpose
built facility in the vicinity. In California, we have moved into larger
premises to enable us to increase capacity for our X-ray tube business, where
demand is particularly strong. In Boston, we have moved into larger premises,
reflecting the higher turnover that we are experiencing in the US. This also
allows us to set up a new applications laboratory to serve our life sciences
customers on the East Coast.
People
These successes are closely linked to a new commercial culture in our company.
Staff have participated in commercial development programmes and our "Innovate"
seminars, which encourage creative and market orientated thinking. Supporting
the cultural change initiative, six new senior managers have been recruited into
the business. These new recruits come from highly market-focused organisations,
which will serve to further reinvigorate our market-orientated approach.
I would like to thank all our staff for their contributions in the half year.
Outlook
The growth strategy is showing early signs of success and the foundations have
been laid for delivering enhanced and sustainable growth. Actions to accelerate
new product development, open up new routes to market and adopt a sharply
focused commercial approach are yielding results. This is reflected in improved
order levels and revenues, which in turn will yield growth in value for
shareholders.
Nigel Keen
Chairman
21 November 2006
Group Income Statement
Half year ended 30 September 2006 - unaudited
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2006 2005 2006
Notes £m £m £m
As restated* As restated*
-------------------- ------ ---------- ---------- ----------
Revenue 3 72.1 66.7 147.4
Cost of sales (47.9) (45.0) (99.3)
-------------------- ------ ---------- ---------- ----------
Gross profit 24.2 21.7 48.1
Net operating expenses (22.2) (21.9) (43.7)
-------------------- ------ ---------- ---------- ----------
Trading profit/(loss) 3 2.0 (0.2) 4.4
Other operating income - 0.1 2.0
Amortisation of acquired
intangibles (0.1) (0.1) (0.2)
Restructuring and non-recurring
costs 5 (2.4) - (6.7)
-------------------- ------ ---------- ---------- ----------
Operating loss (0.5) (0.2) (0.5)
Financial income 6 4.3 4.1 8.1
Financial expenditure 7 (4.5) (4.2) (8.5)
-------------------- ------ ---------- ---------- ----------
Loss before income tax (0.7) (0.3) (0.9)
Income tax expense 8 (0.7) - (2.5)
-------------------- ------ ---------- ---------- ----------
Loss for the period attributable
to (1.4) (0.3) (3.4)
equity shareholders of the parent ------ ---------- ---------- ----------
--------------------
pence pence pence
-------------------- ------ ---------- ---------- ----------
Earnings per share - continuing
Basic earnings per share 9 (2.9) (0.6) (7.2)
Diluted earnings per share 9 (2.9) (0.6) (7.1)
Dividends per share
Dividends paid 10 2.4 - 6.0
Dividends proposed 10 2.4 2.4 8.4
-------------------- ------ ---------- ---------- ----------
Total dividends £m £m £m
-------------------- ------ ---------- ---------- ----------
Dividends paid 1.2 - 2.9
Dividends proposed 1.2 1.2 4.0
-------------------- ------ ---------- ---------- ----------
* See note 1 for detail of the restatement.
Group Statement of Recognised Income and Expense
Half year ended 30 September 2006 - unaudited
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
-------------------- ---------- ---------- ----------
Foreign exchange translation
differences (1.1) 0.4 0.9
Cash flow hedges - effective portion - (0.3) (0.3)
Deferred tax on the above - 0.1 0.1
Actuarial loss in respect of post
retirement benefits - - (10.3)
Deferred tax on the above - - 3.1
Impairment of carrying value of
investment - - (0.2)
-------------------- ---------- ---------- ----------
Net loss recognised directly in equity (1.1) 0.2 (6.7)
Loss for the period (1.4) (0.3) (3.4)
-------------------- ---------- ---------- ----------
Total recognised expense for the year
- attributable to equity holders of
the parent (2.5) (0.1) (10.1)
-------------------- ---------- ---------- ----------
Total recognised expense for the year (2.5) (0.1) (10.1)
Effect of adoption of IAS 32 and IAS
39, net of tax on 1 April 2005 - cash
flow hedges - 0.2 0.2
-------------------- ---------- ---------- ----------
(2.5) 0.1 (9.9)
-------------------- ---------- ---------- ----------
Group Balance Sheet
Half year ended 30 September 2006 - unaudited
As at As at As at
30 Sept 30 Sept 31 March
2006 2005 2006
Notes £m £m £m
-------------------- ------ ---------- ---------- ----------
Assets
Non-current assets
Property, plant and equipment 21.7 23.1 23.4
Intangible assets 16.8 15.8 15.6
Available for sale equity securities 1.0 1.6 1.0
Deferred tax assets 18.9 16.6 19.1
-------------------- ------ ---------- ---------- ----------
58.4 57.1 59.1
Current assets
Inventories 28.6 29.7 27.1
Trade and other receivables 37.7 39.4 45.3
Current income tax recoverable - 0.3 0.9
Derivative financial instruments 0.2 0.6 0.1
Cash and cash equivalents 5.4 18.7 13.9
Held for sale assets 6.9 5.5 5.0
-------------------- ------ ---------- ---------- ----------
78.8 94.2 92.3
-------------------- ------ ---------- ---------- ----------
Total assets 137.2 151.3 151.4
-------------------- ------ ---------- ---------- ----------
Equity
Capital and reserves attributable to
the Company's equity holders
Share capital 2.4 2.4 2.4
Share premium 20.2 20.0 20.2
Other reserves 0.1 0.1 0.1
Translation reserve (0.2) 0.4 0.9
Retained earnings 20.2 36.1 22.8
-------------------- ------ ---------- ---------- ----------
13 42.7 59.0 46.4
-------------------- ------ ---------- ---------- ----------
Liabilities
Non-current liabilities
Deferred consideration 0.4 0.8 0.5
Retirement benefit obligations 54.2 44.0 53.4
-------------------- ------ ---------- ---------- ----------
54.6 44.8 53.9
Current liabilities
Borrowings 0.5 2.8 2.9
Bank overdrafts 0.4 3.3 1.2
Trade and other payables 33.5 35.0 38.7
Current income tax liabilities 0.1 1.8 1.9
Derivative financial instruments 0.1 0.3 0.3
Provisions 5.3 4.3 6.1
-------------------- ------ ---------- ---------- ----------
39.9 47.5 51.1
-------------------- ------ ---------- ---------- ----------
Total liabilities 94.5 92.3 105.0
-------------------- ------ ---------- ---------- ----------
Total liabilities and equity 137.2 151.3 151.4
-------------------- ------ ---------- ---------- ----------
Group Statement of Cash Flows
Half year ended 30 September 2006 - unaudited
Half year Half year Year to
to to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
-------------------- ------- --------- ---------- ---------
Loss for the period (1.4) (0.3) (3.4)
Adjustments for:
Income tax expense 0.7 - 2.5
Net financial expense 0.2 0.1 0.4
Restructuring and non-recurring
costs 2.4 - 6.7
Amortisation of acquired
intangibles 0.1 0.1 0.2
Other operating income - (0.1) (2.0)
Depreciation of property, plant and
equipment 1.8 1.8 3.7
Amortisation of research and
development 0.5 0.4 1.1
------------------------- --------- ---------- ---------
Earnings before interest, tax,
depreciation and amortisation 4.3 2.0 9.2
Loss/(profit) on disposal of
property, plant and equipment - (0.2) 0.3
Cost of equity settled employee
share schemes - 0.2 0.3
Restructuring costs paid (1.7) (2.1) (3.1)
Cash payments to the pension scheme
less/(more) than the charge to the
income statement 0.7 0.4 (1.2)
------------------------- --------- ---------- ---------
Operating cash flows before
movements in working capital 3.3 0.3 5.5
Increase in inventories (1.6) (5.6) (6.5)
Decrease in receivables 6.5 7.4 2.0
Decrease in payables (5.7) (9.6) (5.4)
Decrease in provisions (0.2) (0.4) (0.3)
------------------------- --------- ---------- ---------
Cash generated by operations 2.3 (7.9) (4.7)
Interest paid (0.1) (0.3) (0.6)
Income taxes paid (1.4) (1.1) (2.7)
-------------------- ------- --------- ---------- ---------
Net cash from operating activities 0.8 (9.3) (8.0)
Cash flows from investing
activities
Proceeds from sale of property,
plant and equipment - 0.2 -
Proceeds from sale of held for sale
assets - - 0.6
Proceeds from sale of available for
sale equity securities - 0.1 2.2
Interest received 0.1 0.5 0.9
Acquisition of subsidiaries, net of
cash acquired (0.1) (3.1) (3.9)
Acquisition of property, plant and
equipment (2.5) (1.8) (4.2)
Capitalised development expenditure (2.2) (1.3) (2.6)
-------------------- ------- --------- ---------- ---------
Net cash from investing activities (4.7) (5.4) (7.0)
-------------------- ------- --------- ---------- ---------
Cash flows from financing activities
Proceeds from issue of share capital - 0.6 0.8
Proceeds from the disposal of own shares - 0.1 0.1
(Decrease)/increase in short term borrowings (2.4) 0.7 0.8
Dividends paid (1.2) - (2.9)
-------------------- --------- ---------- ---------
Net cash from financing activities (3.6) 1.4 (1.2)
-------------------- --------- ---------- ---------
Net decrease in cash equivalents (7.5) (13.3) (16.2)
Cash and cash equivalents at beginning of the 12.7 28.6 28.6
period
Revaluation of cash balances on adoption of
IAS 32 - (0.1) (0.1)
and IAS 39
Effect of exchange rate fluctuations on cash (0.2) 0.2 0.4
held --------- ---------- ---------
--------------------
Cash and cash equivalents at end of the period 5.0 15.4 12.7
-------------------- --------- ---------- ---------
Notes on the Interim Financial Statements
Half year ended 30 September 2006 - unaudited
1 BASIS OF PRESENTATION OF ACCOUNTS
Oxford Instruments plc (the Company) is a company incorporated in England and
Wales. The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the Group).
The comparative figures for the financial year ended 31 March 2006 are not 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 (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985. Except as noted below and
in note 2, this interim financial information has been prepared applying the
accounting policies and presentation that were applied in the preparation of the
Company's published consolidated financial statements for the year ended 31
March 2006.
The Group has adopted a new accounting policy in respect of a certain revenue
stream. The Directors now consider that a more appropriate treatment of this
revenue stream is as an agency arrangement. Previously the Group had accounted
for the revenue as principal. The change has the effect of reducing both revenue
and cost of sales by £7.9m (2005: half year £8.6m, full year £19.8m). There is
no change to the balance sheet or equity at any reporting date.
The principal exchange rates used to translate the Group's overseas results were
as follows:
Half year to 30 Half year to 30 Year to 31
Sept 2006 Sept 2006 March 2006
Average Period end Average Period end Average Period end
-------- -------- -------- -------- -------- -------- --------
US Dollar 1.84 1.87 1.82 1.77 1.79 1.73
Euro 1.46 1.47 1.46 1.47 1.46 1.43
Yen 213 221 200 201 202 205
-------- -------- -------- -------- -------- -------- --------
2 RECONCILIATION BETWEEN PROFIT AND ADJUSTED PROFIT
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
------------------------ ---------- ---------- ----------
Loss before tax (0.7) (0.3) (0.9)
Other operating income - (0.1) (2.0)
Amortisation of acquired intangible
assets 0.1 0.1 0.2
Restructuring and non-recurring costs
(note 5) 2.4 - 6.7
Financial instruments (see below) (0.1) - -
------------------------ ---------- ---------- ----------
Adjusted profit/(loss) before tax 1.7 (0.3) 4.0
------------------------ ---------- ---------- ----------
Under IAS 39, derivative financial instruments are recognised initially at fair
value - this includes the forward exchange contracts the Group has entered into
in order to manage its exposure to foreign exchange rate movements. Subsequent
to initial recognition, derivative financial instruments are measured at fair
value. In the prior year, the Group hedge accounted for its derivative financial
instruments in order to minimise the potential volatility in the income
statement. However, IAS 39 requires certain stringent criteria to be met in
order to continue to hedge account, which, in the particular circumstances of
the Group, are considered by the Board not to bring any significant economic
benefit. Accordingly, with effect from 1 April 2006, the Group has ceased to
hedge account for all of its existing derivative financial instruments and
instead will account for them as trading instruments with the profit or loss on
remeasurement to fair value being taken immediately to the income statement.
Adjusted profit for the year is stated before changes in the valuation of these
instruments so that the underlying performance of the Group can more clearly be
seen.
3 RESULTS BY BUSINESS
Segment information is presented in the consolidated interim financial
statements in respect of the Group's business segments, which are the primary
basis of segment reporting. The business segment reporting reflects the Group's
management structure.
Segment results include items directly attributable to a segment as well as
those which can be allocated on a reasonable basis.
Half year to 30 September 2006
Analytical Superconductivity Total
£m £m £m
------------------- ----------- ----------- -----------
Revenue 43.3 28.8 72.1
------------------- ----------- ----------- -----------
Trading profit/(loss) before costs of OII 3.6 (0.1) 3.5
Costs of OII (1.5)
------------------- ----------- ----------- -----------
Trading profit 2.0
Amortisation of acquired intangibles (0.1)
Restructuring and non-recurring costs (2.4)
------------------- ----------- ----------- -----------
Operating loss (0.5)
Net financial expense (0.2)
Income tax expense (0.7)
------------------- ----------- ----------- -----------
Loss for the period (1.4)
------------------- ----------- ----------- -----------
Net segment assets 36.5 31.0 67.5
------------------- ----------- ----------- -----------
Research and Development to enhance and develop existing products is undertaken
within both the Analytical and Superconductivity business segments. In addition
Oxford Instruments Innovation (OII) carries out initial investigations into new
product lines that would not normally be undertaken by the operating businesses.
Trading profit is shown both before and after OII costs so as to give a more
meaningful indication of the performance of the business segments.
Half year to 30 September 2005 (as restated)
Analytical Superconductivity Total
£m £m £m
----------- ----------- -----------
Revenue 35.1 31.6 66.7
------------------- ----------- ----------- -----------
Trading profit/(loss) before costs of
OII 2.0 (1.3) 0.7
Costs of OII (0.9)
------------------- ----------- ----------- -----------
Trading loss (0.2)
Other operating income 0.1
Amortisation of acquired intangibles (0.1)
------------------- ----------- ----------- -----------
Operating loss (0.2)
Net financial expense (0.1)
Income tax expense -
------------------- ----------- ----------- -----------
Loss for the period (0.3)
------------------- ----------- ----------- -----------
Net segment assets 34.0 37.8 71.8
------------------- ----------- ----------- -----------
Year to 31 March 2006 (as restated)
Analytical Superconductivity Total
£m £m £m
----------- ----------- -----------
Revenue 80.7 66.7 147.4
------------------- ----------- ----------- -----------
Trading profit before costs of OII 6.1 0.3 6.4
Costs of OII (2.0)
------------------- ----------- ----------- -----------
Trading profit 4.4
Other operating income 2.0
Amortisation of acquired intangibles (0.2)
Restructuring and non-recurring costs (6.7)
------------------- ----------- ----------- -----------
Operating loss (0.5)
Net financial expense (0.4)
Income tax expense (2.5)
------------------- ----------- ----------- -----------
Loss for the period (3.4)
------------------- ----------- ----------- -----------
Net segment assets 33.9 33.7 67.6
------------------- ----------- ----------- -----------
4 RESEARCH AND DEVELOPMENT
Total research and development spend by the group is as follows:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
Total cash spent on research and
development 7.3 6.5 13.2
during the year
Less: amount capitalised (2.2) (1.3) (2.6)
Add: amortisation of amounts
previously capitalised 0.5 0.4 1.1
------------------------ ---------- ---------- ----------
Research and development charged to
income statement 5.6 5.6 11.7
------------------------ ---------- ---------- ----------
5 RESTRUCTURING AND NON-RECURRING COSTS
Restructuring and non-recurring costs for the half year comprise a £2.2m
provision for the settlement of an onerous contract and £0.2m in respect of
costs associated with the exit from the held for sale factory which became
surplus to requirements following the restructuring of the UK magnet business in
2006 (see below).
Restructuring costs for the year ended 31 March 2006 relate to the restructuring
of the UK magnet business and restructuring at Plasma Technology in Yatton,
Bristol. The cost comprises stock write-downs of £3.7m, redundancy and similar
costs of £1.0m, halted research and development costs of £0.8m, supplier
commitments of £0.7m and other costs of £0.5m.
6 FINANCIAL INCOME
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
---------- ---------- ----------
Bank interest receivable 0.1 0.5 0.9
Expected return on pension scheme
assets 4.1 3.6 7.2
Mark to market gain in respect of
derivative financial instruments 0.1 - -
------------------------ ---------- ---------- ----------
4.3 4.1 8.1
---------- ---------- ----------
7 FINANCIAL EXPENDITURE
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
------------------------ ---------- ---------- ----------
Interest payable and similar charges
on bank loans and overdrafts 0.1 0.3 0.6
Interest charge on pension scheme
liabilities 4.4 3.9 7.9
------------------------ ---------- ---------- ----------
4.5 4.2 8.5
------------------------ ---------- ---------- ----------
8 TAXATION
The Group estimates that its weighted average tax rate for the full year will be
40% (2005:60%) and the tax charge for the period has been calculated using this
rate. No tax relief is expected to be obtained in respect of the restructuring
and non-recurring costs.
9 EARNINGS PER SHARE
a) Basic
The calculation of basic earnings per share is based on the loss for the period
after taxation and a weighted average number of ordinary shares outstanding
during the period, excluding shares held by the Employee Share Ownership Trust,
as follows:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
---------- ---------- ----------
Loss for the period (1.4) (0.3) (3.4)
------------------------ ---------- ---------- ----------
Shares Shares Shares
million million million
---------- ---------- ----------
Weighted average number of shares
outstanding 48.8 48.4 48.6
Less shares held by Employee Share
Ownership Trust (0.8) (0.9) (0.9)
------------------------ ---------- ---------- ----------
Weighted average number of shares used
in calculation of earnings per share 48.0 47.5 47.7
------------------------ ---------- ---------- ----------
b) Diluted
Diluted earnings per share have been calculated using the same numerator as set
out in (a) above and by reference to the following number of shares:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
Shares Shares Shares
million million million
---------- ---------- ----------
Number of ordinary shares per basic
earnings per share calculations 48.0 47.5 47.7
Effect of shares under option 0.2 0.5 0.5
------------------------ ---------- ---------- ----------
Number of ordinary shares per diluted
earnings per share calculations 48.2 48.0 48.2
------------------------ ---------- ---------- ----------
c) Adjusted
The earnings per share before other operating income, amortisation of acquired
intangibles, restructuring and non-recurring costs, and mark to market gains or
losses in respect of certain derivatives are as follows:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
pence pence pence
------------------------ ---------- ---------- ----------
Basic 2.1 (0.6) 3.9
Diluted 2.1 (0.6) 3.8
------------------------ ---------- ---------- ----------
A reconciliation of the profit for the periods used to calculate basic earnings
per share to the adjusted profit used to calculate the adjusted earnings per
share shown above is set out below:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
------------------------ ---------- ---------- ----------
Adjusted profit/(loss) before tax
(Note 2) 1.7 (0.3) 4.0
Taxation (0.7) - (2.2)
------------------------ ---------- ---------- ----------
Adjusted profit/(loss) 1.0 (0.3) 1.8
------------------------ ---------- ---------- ----------
10 DIVIDENDS PER SHARE
The following dividends per share were paid by the Group:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
pence pence pence
------------------------ ---------- ---------- ----------
Previous period interim dividend 2.4 - -
Previous period final dividend - - 6.0
------------------------ ---------- ---------- ----------
2.4 - 6.0
------------------------ ---------- ---------- ----------
The following dividends per share were proposed by the Group in respect of each
accounting period presented:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
pence pence pence
------------------------ ---------- ---------- ----------
Interim dividend 2.4 2.4 2.4
Final dividend - - 6.0
------------------------ ---------- ---------- ----------
2.4 2.4 8.4
---------- ---------- ----------
The interim dividend for the year to 31 March 2007 of 2.4 pence was approved by
the Board on 21 November 2006 and has not been included as a liability as at 30
September 2006. The interim dividend will be paid on 10 April 2007 to
shareholders on the register at the close of business on 9 March 2007.
11 PENSIONS
The Group does not perform actuarial valuations at the half year unless a
particularly significant event has occurred during that period. The Group has
applied actuarial assumptions at 30 September 2006 consistent with those used at
31 March 2006. Accordingly, no actuarial gain or loss arises in respect of
pensions. The actuarial assumptions will be reviewed at 31 March 2007.
12 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO NET CASH
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
------------------------ ---------- ---------- ----------
Decrease in cash and cash equivalents (7.5) (13.3) (16.2)
Effect of foreign exchange rate
changes on cash and cash equivalents (0.2) 0.2 0.4
Revaluation of cash balances on
adoption of IAS 32 and IAS 39 - (0.1) (0.1)
------------------------ ---------- ---------- ----------
(7.7) (13.2) (15.9)
Cash outflow from decrease in debt 2.4 - -
Cash inflow from increase in debt - (0.7) (0.8)
------------------------ ---------- ---------- ----------
Movement in net cash in the period (5.3) (13.9) (16.7)
Net cash at start of the period 9.8 26.5 26.5
------------------------ ---------- ---------- ----------
Net cash at end of the period 4.5 12.6 9.8
------------------------ ---------- ---------- ----------
Analysed as:-
Cash and cash equivalents (per Balance 5.4 18.7 13.9
Sheet)
Bank overdrafts (0.4) (3.3) (1.2)
------------------------ ---------- ---------- ----------
Cash and cash equivalents (per Statement of
Cash 5.0 15.4 12.7
Flows)
Borrowings (0.5) (2.8) (2.9)
------------------------ ---------- ---------- ----------
Net cash at end of the period 4.5 12.6 9.8
------------------------ ---------- ---------- ----------
13 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2006 2005 2006
£m £m £m
------------------------ ---------- ---------- ----------
Total recognised expense for the
period (2.5) (0.1) (10.1)
Credit in respect of employee service
costs settled by award of share
options - 0.2 0.3
Proceeds from shares issued - 0.6 0.8
Disposal of own shares held - 0.1 0.1
Dividends paid (1.2) - (2.9)
Opening equity shareholders' funds 46.4 58.0 58.0
Arising on adoption of IAS 32 and IAS
39 - 0.2 0.2
------------------------ ---------- ---------- ----------
Closing equity shareholders' funds 42.7 59.0 46.4
------------------------ ---------- ---------- ----------
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