Interim Results
Oxford Instruments PLC
22 November 2005
22 November 2005
Oxford Instruments plc
Announcement of interim results for 2005/06
Oxford Instruments plc ("Oxford Instruments" or "The Company"), the advanced
instrumentation business, today announced interim results for the six months to
30 September 2005.
• Revenue of £75.3m (2004 £66.8m) reflected the increase in orders to
£80.9m (2004 £68.1m)
• Recent acquisitions contributed to both revenue and profit from
operations
• The product innovation programme is delivering results with the
HyperSense DNP-NMR programme ahead of milestones
• Loss before income tax but after amortisation of acquired intangibles,
restructuring and other non-recurring costs and financial income and
expenditure was £0.3m (2004 loss £0.9m)
• Total loss per share 0.6p (2004 loss 2.2p) reflects absence of
restructuring and other costs
• Net cash, after all bank borrowings, at the end of the half was
£12.6m (2004 £10.5m)
• Recommended interim dividend of 2.4p, unchanged from last year
• As separately announced today, Charles Holroyd and Steven Parker are
appointed to the Group Board
• The current review indicates higher Group revenue in the second half
that should result in the outcome for the full year being in line with
expectations
Jonathan Flint, Chief Executive of Oxford Instruments plc, said: "Our new
strategic thrust is starting to deliver top line growth and our new
organisational structure will provide a focus for improved customer service and
innovation. Actions are now underway to accelerate new product development, open
up new routes to market and increase efficiencies across our operations, aimed
at providing growth in profitability."
Enquiries: Oxford Instruments plc Tel: 01865 881437 Fax: 01865 884045
Jonathan Flint,
Chief Executive
Martin Lamaison,
Financial Director
Hogarth Partnership Limited Tel: 020 7357 9477 Fax: 020 7357 8533
Rachel Hirst
Andrew Jaques
For further copies of this Interim Results announcement, please contact Lynn
Shepherd at the Company's registered office at Old Station Way, Eynsham, Witney
Oxon OX29 4TL (email:lynn.shepherd@oxinst.co.uk).
Interim Results Announcement for the six months ended 30 September 2005
Chairman's Statement
Nigel Keen, Chairman of Oxford Instruments plc, said today:
As announced earlier this year, Oxford Instruments is focusing its strategy on
being the leading provider of a new generation of tools and systems for work at
the atomic and molecular level. This strategy exploits our technological
capability to serve the needs of customers in the physical and bioscience
sectors. We aim to grow by introducing a range of innovative new systems as well
as by improving our existing products. Our new instruments will increasingly be
sold direct to end-users. The related ongoing service and support activities to
our customers will deliver a growing percentage of revenues going forward. In
addition to focusing on organic growth we plan to undertake selective
acquisitions which will accelerate the achievement of our strategic goals.
Financial Summary
The Group has previously presented its results in accordance with UK GAAP. As is
now required, these results, together with comparative information, have been
determined and presented under International Financial Reporting Standards
(IFRS). A full report on the transition to IFRS was published on the Group's
website (www. oxford-instruments.com) on 12 October 2005. This shows the main
changes that IFRS made to the reporting of the Group's results.
Orders for the six months to 30 September 2005 were £80.9 million, up £12.8
million on the first half last year, and finished ahead of internal forecasts.
Revenue for the half was £75.3 million, up £8.5 million on the same period last
year.
There was a loss from operations of £0.2 million (2004 profit £2.5 million). The
reduction in profits for the period compared with the first half of the previous
year reflected our planned investment in innovative new products and markets,
lower revenues and margins at Magnet Technology and at Plasma Technology, price
competition in the NanoAnalysis market, one off costs of Superconductivity
patent litigation, now settled, and the impact on overheads following the sale
of the Medical business at the end of 2005.
Gross expenditure on R&D increased during the period to £6.5 million compared
with £5.1 million in the prior year. Of this amount £1.3 million was capitalised
under the new IFRS rules offset by a charge of £0.4 million for amortisation of
R&D expenditure, which had been capitalised and included on the opening IFRS
balance sheet. The resulting P&L charge for the half was £5.6 million. This net
difference of £0.9 million is the only substantial difference between the
results shown above prepared under IFRS and those which would have been
presented previously under UK GAAP.
The increase in R & D expenditure on innovative new products across the Group,
coupled with the increased spend on accelerated routes to market for our magnet
products, amounted to £1.5 million. This forms part of the expected annual
spending of up to £5 million referred to in our announcement in June 2005.
The loss before income tax, but after amortisation of acquired intangibles,
restructuring and other non-recurring costs and financial income and expenditure
was £0.3 million, compared with a loss of £0.9 million in the prior year.
Net cash, after all bank borrowing, decreased to £12.6 million, an outflow of
£13.9 million in the half year. This reflected the seasonal pattern as well as
£3.1 million spent on acquisitions.
The Directors have recommended an interim dividend of 2.4 pence, unchanged from
the previous year, payable on 6th April 2006.
The results for the first half of the year were in line with the guidance
included in the September AGM statement and, as in previous years, a stronger
second half is expected.
Operational Review
Analytical
The Analytical group of businesses now comprises NanoAnalysis, formerly our
MicroAnalysis business, Plasma Technology and Industrial Analysis, which
includes X-ray Technology.
In the first half, the Analytical group had higher orders of £39.3 million (2004
£31.2 million) and higher revenue of £35.1 million (2004 £30.0 million). The
increase in sales came from the recent Metorex and HKL acquisitions, both of
which contributed to profit in the first half. Despite this, profit from
operations of £2.0 million (2004 £2.7 million) was lower, reflecting lower
revenue at Plasma Technology, increasing price competition in the nanoanalysis
market and the impact on overheads following the disposal of the Medical
business.
The NanoAnalysis business has been so named because the high resolution
capabilities of our systems match our customers' need to operate at the smallest
level. Our recently launched range of INCADryCool products for the electron
microscope now offers customers high performance, without the expense and safety
issues of handling liquid nitrogen. The business has just completed an important
sale to Oxford University of an integrated suite of detector products. This is
the first system that combines the HKL electron backscatter diffraction product,
acquired earlier this year, with our energy and wavelength dispersive products.
Full benefits from integrating HKL will start in the second half.
In our Plasma Technology business, orders were higher than last year, with a
number of significant orders for the high brightness light emitting diodes
market. These semiconducting devices are expected to replace many forms of
traditional lighting over the next decade due to their low energy consumption
and longevity. However, since the traditional semiconductor market of this
business remains slow, we took action, in October, to reduce the cost base, and
this will benefit ongoing trading.
Our Industrial Analysis business, consisting of our operations in High Wycombe,
Helsinki, Chicago and Scotts Valley, has now been organised as a single entity.
This will improve our ability to address the sizeable industrial analytical
market, particularly the growing environmental sector, with renewed focus. In
June, we launched two new products to help customers comply with increasingly
stringent environmental legislation around the world. This half year also saw
the successful launch of the revised Horizon Isotope product in France for
monitoring lead in paint, and we successfully installed our first three
X-Strata960 units for thickness measurement of surface layers.
Superconductivity
The Superconductivity group of businesses now includes Physical Sciences, Magnet
Technology, Superconducting Wire, MRI magnet service and Austin Scientific.
In the first half, the Superconductivity group had higher orders of £41.6
million (2004 £36.9 million) and higher revenue of £40.2 million (2004 £36.8
million). The loss from operations of £2.2 million (2004 £0.2 million) includes
good performances from superconducting wire, MRI service and Austin Scientific,
but this has been offset by expenditure on the new product development programme
referred to below and trading losses due to revenue shortfall at Magnet
Technology.
Physical Sciences, which provides magnet and cryogenic systems for applied
research customers, experienced improving orders. In particular, the cryocooler
area benefited from the growing interest in research into nanotechnology and
quantum computing.
Our Magnet Technology business continues to have a difficult time. It makes NMR,
ICR and MRI magnet systems for third parties, which then supply end users with
instrument systems, of which the magnet is a major component. Volumes of NMR
magnets sold through OEMs have reduced in the half year, however a number of
initiatives are underway to reposition the business closer to end user
customers. In particular, we have launched 'Magnets Direct', a programme that
provides an opportunity for end users to purchase superconducting magnets direct
from Oxford Instruments, instead of through the system integrators. Although
there is much to be done before the new routes to market are confirmed, initial
customer reaction has been positive.
The superconducting wire business had a good half year with volumes at record
levels. Progress is being made in preparation for the international ITER fusion
project. With European qualification of our wire achieved and US qualification
well advanced, plans to accommodate the potentially significant increase in
volumes of wire are being finalised. Our new generation of high performance
conductor, known as RRP, achieved its first commercial application in an Oxford
Instruments' NMR magnet. At the same time a world record of 950 MHz for NMR
field strength was established. We also made further progress in the production
of a commercially usable high temperature superconducting wire, which is used in
much the same way as conventional superconducting wire. The Austin Scientific
cryogenic component business had a strong half.
Although order intake of the Superconductivity business overall in the first
half has been promising, there remain a number of risks in the second half year,
in particular the development of new routes to market for the Magnet Technology
business.
Asia
The commitment we have made to Asia means that we are well placed to participate
in the expected growth in the region.
Orders generated by our sales and service organisation in China continued to
grow. In addition, our new Shanghai factory is working with our US manufacturing
operations to take on low-cost production of selected products, initially for
the Chinese market.
In Japan, sales and service to the MRI market continued to grow, whilst sales of
other Group products remained steady. With our strong reputation in the research
market, we are in a good position to benefit from the improved confidence within
the Japanese economy.
New product development and acquisition programme
The Oxford Instruments Innovation group, formed at the beginning of the
financial year to spearhead radical new product development, is already
delivering results. The first of our major new products, HyperSense, has been
successfully launched with higher than expected customer interest. HyperSense is
the first commercial implementation of Dynamic Nuclear Polarisation for NMR. The
new system has the potential to improve dramatically the sensitivity of NMR
experiments in a number of research and industrial environments. The first
HyperSense unit has successfully passed factory acceptance testing and is
undergoing installation at Queen Mary's College, London. Two more HyperSense
systems are being installed at Birmingham University and Pfizer over the coming
weeks. In addition to these BETA site implementations, we received our first
revenue generating HyperSense order, ahead of schedule, for delivery in February
2006.
Good progress has been made with two major new developments in the
nanotechnology area. These are scheduled for launch in the first half of 2006.
We are also implementing a vigorous programme to evolve and enhance our
portfolio of traditional products. Our first 950 MHz NMR magnet incorporating
our new high performance RRP superconducting wire was delivered and is being
installed at Oxford University.
In April, the Group acquired HKL Technology A/S, a specialist in electron
backscatter diffraction (EBSD), which strengthens our current market leading
NanoAnalysis product range.
Group Structure and Board
We have taken important steps to implement a new organisational structure, with
the aim of reinforcing central strategic decision making and major new product
development. As part of that restructuring, we are announcing today two new
appointments to the Group Board. Charles Holroyd, in addition to his continuing
responsibilities for Analytical businesses, has been appointed Group Operations
Director. Steven Parker, in addition to his continuing US Superconductivity
responsibilities, has been appointed Group Commercial Director. In their new
roles, Charles and Steven will support the Board in harnessing the capabilities
that exist across the Group.
Outlook and Prospects
Much progress has been achieved towards laying the foundations for delivering
enhanced and sustainable growth. Actions are now underway to accelerate new
product development, open up new routes to market and increase efficiencies
across our operations, aimed at providing growth in profitability.
Our current review indicates higher Group revenue in the second half that should
result in the outcome for the full year being in line with expectations.
Nigel Keen Chairman
22 November 2005
Group Income Statement
Half year ended 30 September 2005 - unaudited
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
Notes £m £m £m
---------------------------------------------------------------------------
Revenue 2 75.3 66.8 154.8
Cost of sales (53.6) (46.4) (110.4)
---------------------------------------------------------------------------
Gross profit 21.7 20.4 44.4
Net operating expenses (21.9) (17.9) (37.0)
---------------------------------------------------------------------------
(Loss)/profit from
operations 2 (0.2) 2.5 7.4
Amortisation of acquired
intangibles (0.1) (0.1) (1.3)
Restructuring and other
non-recurring costs 3 0.1 (3.3) (6.0)
---------------------------------------------------------------------------
Operating (loss)/profit (0.2) (0.9) 0.1
Financial income 4 4.1 2.9 5.3
Financial expenditure 5 (4.2) (2.9) (5.3)
---------------------------------------------------------------------------
(Loss)/profit before income
tax (0.3) (0.9) 0.1
Income tax expense 6 - (0.2) (1.7)
---------------------------------------------------------------------------
Loss after taxation
Profit from discontinued (0.3) (1.1) (1.6)
operations after tax 2 - 0.1 7.2
---------------------------------------------------------------------------
(Loss)/profit for the period (0.3) (1.0) 5.6
---------------------------------------------------------------------------
pence pence pence
---------------------------------------------------------------------------
Earnings per share -
continuing 7
Basic earnings per share (0.6) (2.4) (3.0)
Diluted earnings per share (0.6) (2.4) (3.1)
Earnings per share - total
Basic earnings per share (0.6) (2.2) 12.2
Diluted earnings per share (0.6) (2.2) 12.0
Dividends
Dividends paid 8 - - 33.4
Dividends proposed 8 2.4 2.4 33.4
---------------------------------------------------------------------------
Group Statement of Recognised Income and Expense
Half year ended 30 September 2005 - unaudited
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
Notes £m £m £m
---------------------------------------------------------------------------
Foreign exchange
translation
differences 0.4 0.1 -
Cash flow hedges -
effective portion (0.3) - -
Deferred tax on the above 0.1 - -
Actuarial loss in respect
of post 9 - (3.1) (6.1)
retirement benefits
Deferred tax on the above - 1.0 1.9
---------------------------------------------------------------------------
Net income recognised
directly in equity 0.2 (2.0) (4.2)
(Loss)/profit for the
period (0.3) (1.0) 5.6
---------------------------------------------------------------------------
Total - current period items (0.1) (3.0) 1.4
Adoption of IAS 32 and
IAS 39 12b 0.2 - -
---------------------------------------------------------------------------
Total recognised income/
(expense) for the period 11 0.1 (3.0) 1.4
---------------------------------------------------------------------------
Group Balance Sheet
Half year ended 30 September 2005 - unaudited
As at As at As at
30 Sept 30 Sept 31 March
2005 2004 2005
Notes £m £m £m
-----------------------------------------------------------------
Assets
Non-current assets
Property, plant and
equipment 23.1 26.5 23.0
Intangible assets 10 15.8 13.9 12.5
Investments 1.6 1.6 1.6
Deferred income tax
assets 16.6 15.9 15.1
-----------------------------------------------------------------
57.1 57.9 52.2
Current assets
Inventories 29.7 31.7 23.9
Trade and other
receivables 39.7 54.9 46.8
Derivative financial
instruments 0.6 - -
Cash and cash
equivalents 18.7 18.1 29.7
Held for sale assets 5.5 5.9 5.4
-----------------------------------------------------------------
94.2 110.6 105.8
-----------------------------------------------------------------
Total assets 151.3 168.5 158.0
-----------------------------------------------------------------
Equity
Capital and reserves
attributable to the
Company's equity
holders
Share capital 20.1 18.7 19.1
Other reserves 16.0 16.0 16.0
Translation reserve 0.4 0.1 -
Retained earnings 22.5 34.0 22.9
-----------------------------------------------------------------
59.0 68.8 58.0
-----------------------------------------------------------------
Liabilities
Non-current
liabilities
Borrowings 0.8 1.7 1.1
Retirement benefit
obligations 44.0 40.8 43.3
-----------------------------------------------------------------
44.8 42.5 44.4
Current liabilities
Borrowings 2.8 4.1 2.1
Bank overdrafts 3.3 3.5 1.1
Trade and other payables 35.0 43.9 44.3
Current income tax
liabilities 1.8 1.0 1.3
Derivative financial
instruments 0.3 - -
Provisions for other
liabilities and charges 4.3 4.7 6.8
-----------------------------------------------------------------
47.5 57.2 55.6
-----------------------------------------------------------------
Total liabilities 92.3 99.7 100.0
-----------------------------------------------------------------
Total liabilities and
equity 151.3 168.5 158.0
-----------------------------------------------------------------
Group Statement of Cash Flows under Direct Method
Half year ended 30 September 2005 - unaudited
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
£m £m £m
--------------------------------------------------------------------
Cash flows from operating
activities
Cash receipts from customers 80.1 88.4 185.9
Cash paid to suppliers and
employees (88.0) (90.8) (177.6)
--------------------------------------------------------------------
Cash generated from
operations (7.9) (2.4) 8.3
Interest paid (0.3) (0.1) (0.2)
Income taxes paid (1.1) (1.7) (2.2)
--------------------------------------------------------------------
Net cash from operating
activities (9.3) (4.2) 5.9
--------------------------------------------------------------------
Cash flows from investing
activities
Proceeds from sale of
property, plant
and equipment 0.2 0.1 0.8
Proceeds from sale of
investment 0.1 - -
Interest received 0.5 0.4 0.7
Disposal of subsidiary, net
of cash disposed - - 24.0
Acquisition of subsidiaries,
net of cash acquired (3.1) (4.7) (5.8)
Acquisition of property,
plant and equipment (1.8) (1.5) (3.2)
Development expenditure (1.3) (0.4) (1.2)
--------------------------------------------------------------------
Net cash from investing
activities (5.4) (6.1) 15.3
--------------------------------------------------------------------
Cash flows from financing
activities
Proceeds from issue of share
capital 0.6 0.1 0.4
Proceeds from the disposal
of own shares 0.1 - -
Proceeds from increase in
short term borrowings 0.7 2.5 0.6
Dividends paid - - (15.7)
--------------------------------------------------------------------
Net cash from financing
activities 1.4 2.6 (14.7)
--------------------------------------------------------------------
Net (decrease)/increase in
cash equivalents (13.3) (7.7) 6.5
Cash and cash equivalents at
beginning of the period 28.6 22.3 22.3
Revaluation of cash balances
on adoption of IAS 32 and IAS 39 (0.1) - -
Effect of exchange rate
fluctuations on cash held 0.2 - (0.2)
--------------------------------------------------------------------
Cash and cash equivalents at
end of the period 15.4 14.6 28.6
--------------------------------------------------------------------
Notes on the Interim Financial Statements
Half year ended 30 September 2005 - unaudited
1. Basis of presentation of accounts and transition from UK GAAP to IFRS
accounting policies
The Group's consolidated financial statements were prepared in accordance with
UK Generally Accepted Accounting Principles (UK GAAP) until 31 March 2005. EU
law (IAS Regulation EC 1606/2002) requires that the next annual consolidated
financial statements of the Group, for the year ending 31 March 2006, be
prepared in accordance with International Financial Reporting Standards (IFRS)
adopted for use in the EU ("adopted IFRS").
On 12 October 2005 the Group published a report "Oxford Instruments plc -
Conversion to IFRS". This report sets out the Group's IFRS accounting policies
and the disclosures required by IFRS 1 concerning the transition from UK GAAP to
IFRS. The report is available on the investor section of the Group's website (
www.oxford-instruments.com). Printed copies can be obtained from the Company
Secretary's office at Company Secretary, Oxford Instruments plc, Old Station
Way, Eynsham, Witney, Oxon OX29 4TL. In addition Note 12 provides
reconciliations between the equity and profit for the period as previously
reported under UK GAAP and IFRS.
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRS in issue that either are
endorsed by the EU and effective (or available for early adoption) at 31 March
2005 or are expected to be endorsed and effective (or available for early
adoption) at 31 March 2006, the Group's first annual reporting date at which it
is required to use adopted IFRS. Based on these adopted and unadopted IFRS, the
directors have made assumptions about the accounting policies expected to be
applied, which are as set out in the report mentioned above "Oxford Instruments
plc - Conversion to IFRS", when the first annual IFRS financial statements are
prepared for the year ending 31 March 2006.
In particular, the directors have assumed that IAS 19 'Employee Benefits' issued
by the International Accounting Standards Board will be adopted by the EU in
sufficient time that it will be available for use in the annual IFRS financial
statements for the year ending 31 March 2006.
In addition, the adopted IFRS that will be effective (or available for early
adoption) in the annual financial statements for the year ending 31 March 2006
are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ending 31 March 2006.
The policies set out in the report "Oxford Instruments plc - Conversion to IFRS"
have been consistently applied to all the years presented except for those
relating to the classification and measurement of financial instruments. The
Group has made use of the exemption available under IFRS 1 to only apply IAS 32
and IAS 39 from 1 April 2005. The comparative figures have not been restated for
IAS 32 and IAS 39. IFRS 5 'Non-current assets held for sale and discontinued
operations' has been adopted voluntarily in the comparative periods.
The comparative figures for the financial year ended 31 March 2005 are not the
Company's statutory accounts for the financial year. Those amounts, which were
prepared under UK GAAP, 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 statements under section 237(2) or (3) of the
Companies Act 1985.
The principal exchange rates used to translate the Group's overseas results were
as follows:
Half year to Half year to Year to
30 Sept 2005 30 Sept 2004 31 March 2005
Period Period Year
Average end Average end Average end
----------------------------------------------------------------------
US Dollar 1.82 1.77 1.79 1.81 1.85 1.89
Euro 1.46 1.47 1.48 1.46 1.47 1.45
Yen 200 201 198 199 198 202
----------------------------------------------------------------------
2. 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 2005
Analytical Superconductivity Total
£m £m £m
----------------------------------------------------------------------------
Revenue 35.1 40.2 75.3
----------------------------------------------------------------------------
Profit/(loss) from
operations 2.0 (2.2) (0.2)
Amortisation of acquired
intangibles - (0.1) (0.1)
Restructuring and other
non-recurring costs - 0.1 0.1
----------------------------------------------------------------------------
Operating profit/(loss) 2.0 (2.2) (0.2)
Net financing expense (0.1)
Income tax expense -
----------
Loss for the period (0.3)
----------
Net operating assets 27.3 33.6 60.9
----------------------------------------------------------------------------
Half year to 30 September 2004
Analytical Superconductivity Total
£m £m £m
----------------------------------------------------------------------------
Revenue 30.0 36.8 66.8
----------------------------------------------------------------------------
Profit/(loss) from 2.7 (0.2) 2.5
operations
Amortisation of acquired
intangibles (0.1) - (0.1)
Restructuring and other
non-recurring costs (0.8) (2.5) (3.3)
----------------------------------------------------------------------------
Operating profit/(loss) 1.8 (2.7) (0.9)
Net financing expense -
Income tax expense (0.2)
----------
Loss for the period
before discontinued
operations (1.1)
Profit from discontinued
operations 0.1
----------
Loss for the period (1.0)
----------
Net operating assets 24.1 32.3 56.4
----------------------------------------------------------------------------
Year to 31 March 2005
Analytical Superconductivity Total
£m £m £m
----------------------------------------------------------------------------
Revenue 68.8 86.0 154.8
----------------------------------------------------------------------------
Profit from operations 6.8 0.6 7.4
Amortisation of acquired
intangibles (1.2) (0.1) (1.3)
Restructuring and other
non-recurring costs (2.7) (3.3) (6.0)
----------------------------------------------------------------------------
Operating profit/(loss) 2.9 (2.8) 0.1
Net financing expense -
Income tax expense (1.7)
----------
Loss for the period
before discontinued
operations (1.6)
Profit from discontinued
operations 7.2
----------
Profit for the period 5.6
----------
Net operating assets 22.9 26.9 49.8
----------------------------------------------------------------------------
Discontinued operations
The results of the Medical business prior to its disposal on 1 March 2005 were
as follows:
Half year to Year to
30 Sept 31 March
2004 2005
£m £m
------------------------------------------------------------
Revenue 14.5 25.6
------------------------------------------------------------
Profit from operations 0.2 -
Net finance expense (0.1) (0.2)
Profit on sale of business - 8.1
------------------------------------------------------------
Profit before tax 0.1 7.9
Income tax expense - (0.7)
------------------------------------------------------------
Profit for the period from
discontinued operations 0.1 7.2
------------------------------------------------------------
pence pence
Basic earnings per share -
discontinued operations 0.2 15.2
Diluted earnings per share -
discontinued operations 0.2 15.1
------------------------------------------------------------
3. Restructuring and other non-recurring costs
Restructuring and other non-recurring costs can be analysed as follows:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
£m £m £m
------------------------------------------------------------------
Superconducting wire
quality issues - 1.5 1.5
Redundancy costs - 0.7 3.0
Post acquisition
restructuring - 1.1 1.2
Impairment of held for
sale assets - - 0.5
Profit on disposal of
property - - (0.2)
Profit on disposal of
investment (0.1) - -
------------------------------------------------------------------
(0.1) 3.3 6.0
------------------------------------------------------------------
4. Financial income
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
£m £m £m
------------------------------------------------------------------
Interest receivable 0.5 0.4 0.7
Expected return on
pension scheme
assets 3.6 2.5 4.6
------------------------------------------------------------------
4.1 2.9 5.3
------------------------------------------------------------------
5. Financial expenditure
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
£m £m £m
------------------------------------------------------------------
Interest payable and
similar charges
on bank loans and
overdrafts 0.3 0.1 0.2
Interest charge on
pension scheme
liabilities 3.9 2.8 5.1
------------------------------------------------------------------
Total interest payable 4.2 2.9 5.3
------------------------------------------------------------------
6. Taxation
The Group estimates that its weighted average tax rate for the full year will be
60%. Due to the loss during the first half, no net tax has been provided at 30
September 2005. A liability in respect of overseas tax of £1.6m arose during the
period. A corresponding deferred tax asset in relation to UK losses has been
recognised which will reverse during the second half of the year. The weighted
average rate reflects the inability to offset taxable losses arising in one
jurisdiction against taxable profits arising in other jurisdictions.
7. Earnings per share
a) Basic
The calculation of total basic earnings per share is based on the profit for the
period 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
2005 2004 2005
£m £m £m
------------------------------------------------------------------
(Loss)/profit for the period (0.3) (1.0) 5.6
------------------------------------------------------------------
Shares Shares Shares
million million million
------------------------------------------------------------------
Weighted average number
of shares outstanding 48.4 48.1 48.1
Less shares held by Employee
Share Ownership Trust 0.9 1.0 1.0
------------------------------------------------------------------
Weighted average number
of shares used in
calculation of earnings
per share 47.5 47.1 47.1
------------------------------------------------------------------
Continuing earnings per share have been based on the profit after tax but before
discontinued operations as disclosed in the income statement.
b) Adjusted
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
£m £m £m
------------------------------------------------------------------
Basic earnings per share
before amortisation of
acquired intangibles,
restructuring and other
non-recurring costs and
discontinued operations (0.6) 3.1 10.3
------------------------------------------------------------------
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
2005 2004 2005
£m £m £m
------------------------------------------------------------------
(Loss)/profit for the period (0.3) (1.0) 5.6
Amortisation of acquired
intangible assets 0.1 0.1 1.3
Restructuring and other
non-recurring costs (0.1) 3.3 6.0
Tax impact of the above - (0.8) (0.8)
Profit after tax in
respect of discontinued
operations - (0.1) (7.2)
------------------------------------------------------------------
Adjusted (loss)/profit (0.3) 1.5 4.9
------------------------------------------------------------------
c) Diluted
Diluted earnings per share have been calculated using the same numerators as set
out in (a) and b) above and by reference to the following number of shares:
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
Shares Shares Shares
million million million
------------------------------------------------------------------
Number of ordinary shares
per basic earnings per share
calculations 47.5 47.1 47.1
Effect of shares under option 0.5 0.4 0.5
------------------------------------------------------------------
Number or ordinary shares
per diluted earnings per share
calculations 48.0 47.5 47.6
------------------------------------------------------------------
8. 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
2005 2004 2005
pence pence pence
------------------------- ----------- ----------- -----------
Previous period final
dividend - - 6.0
Current period interim
dividend - - 2.4
Special dividend - - 25.0
------------------------- ----------- ----------- -----------
- - 33.4
------------------------- ----------- ----------- -----------
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
2005 2004 2005
pence pence pence
------------------------- ----------- ----------- -----------
Interim dividend 2.4 2.4 2.4
Special dividend - - 25.0
Final dividend - - 6.0
------------------------- ----------- ----------- -----------
2.4 2.4 33.4
------------------------- ----------- ----------- -----------
The special dividend relates to a one off return of capital to shareholders
following the disposal of the Group's Medical business.
The interim dividend for the year to 31 March 2006 of 2.4 pence per share was
approved by the Board on 22 November 2005 and has not been included as a
liability as at 30 September 2005. This interim dividend will be paid on
6 April 2006 to shareholders on the register at the close of business on
10 March 2006.
9. Pensions
The Group does not acquire 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 2005 consistent with those used
at 31 March 2005. Accordingly, no actuarial gain or loss arises in respect of
pensions. The actuarial assumptions will be reviewed at 31 March 2006 and it
is expected that an actuarial gain or loss will arise for the full year.
When the Group released its first half comparative figures under IFRS in
October 2005 the actuarial loss for the year to 31 March 2005 was established
by independent actuaries and half of this was apportioned to the first half
of that year.
10. Acquisitions
HKL Technologies A/S
The Group acquired HKL Technologies A/S based in Hobro, Denmark on 4 April 2005
for a net cash consideration of £2.1m. Further consideration of up to €1m is
payable based on post acquisition sales. The Group's best estimate of this
deferred consideration at the current time is £0.3m. HKL contributed turnover of
£0.7m and profit before income tax of £0.1m to the Group in the period to 30
September 2005.
Accounting
policy Fair value
Book value adjustments to the Group
£m £m £m
--------------------------- ---------- ---------- ----------
Property, plant and
equipment 0.2 (0.1) 0.1
Inventories 0.3 (0.1) 0.2
Receivables 0.6 - 0.6
Payables (0.7) - (0.7)
--------------------------- ---------- ---------- ----------
Total net assets/
(liabilities) 0.4 (0.2) 0.2
Goodwill 2.2
----------
Total purchase cost 2.4
Less consideration deferred (0.3)
----------
Net cash outflow in respect
of the purchase * 2.1
Less net cash acquired -
----------
Net cash outflow on
acquisition 2.1
----------
* Includes costs associated with the acquisition
of £0.1m.
The book value of the assets acquired are based on the management accounts at
the date of acquisition. The accounting policy adjustments reflect the alignment
of accounting policies in respect of stock provisioning and project based
contracts. There were no fair value adjustments.
The goodwill is recorded on the balance sheet as a component of intangible
assets.
11. Group statement of changes in equity
Half year to Half year to Year to
30 Sept 30 Sept 31 March
2005 2004 2005
£m £m £m
-------------------------- ---------- ---------- ----------
Total recognised income/
(expense) for the period 0.1 (3.0) 1.4
Credit in respect of
employee service
costs settled by award of
share options 0.2 0.1 0.2
Proceeds from shares
issued 0.6 - 0.4
Disposal of own shares held 0.1 - -
Dividends paid - - (15.7)
Opening equity
shareholders' funds 58.0 71.7 71.7
---------- ---------- ----------
Closing equity
shareholders' funds 59.0 68.8 58.0
---------- ---------- ----------
12. Transition to IFRS
a) Reconciliation of total equity
Year to Half year to As at
31 March 30 Sept 1 April
2005 2004 2004
£m £m £m
-------------------------- ---------- ---------- ----------
Total equity as previously
reported under UK GAAP 82.0 90.0 92.1
Adjustments on adoption of
IFRS:
Retirement benefit
obligations (40.4) (40.0) (36.5)
Capitalised development
costs 4.0 4.9 4.7
Goodwill and intangible
assets (0.8) (0.1) (0.4)
Proposed dividends 2.9 3.9 2.8
Deferred tax 11.3 10.7 9.7
Other (1.0) (0.6) (0.7)
-------------------------- ---------- ---------- ----------
Total equity under IFRS 58.0 68.8 71.7
-------------------------- ---------- ---------- ----------
b) Reconciliation of total equity at 1 April
2005 following adoption of IAS 32 and IAS 39
1 April
2005
£m
------------------------------------------- -----------
Total equity as previously reported under 58.0
IFRS as at 31 March 2005
Adjustments on adoption of IAS 32 and IAS 39:
Cashflow hedges - derivative instruments 0.3
Deferred tax on the above (0.1)
------------------------------------------- -----------
Total equity under IFRS at 1 April 2005 58.2
------------------------------------------- -----------
c) Reconciliation of profit for the period
Year to Half year to
31 March 30 Sept
2005 2004
£m £m
----------------------------------- ---------- ----------
Profit/(loss) for the period under
UK GAAP 1.6 (1.2)
Amortisation of goodwill and other
intangibles (0.2) 0.3
Held for sale assets (0.3) 0.1
Capitalised development costs (0.2) 0.3
Discontinued operations 5.0 (0.1)
Pensions - finance charge (0.5) (0.3)
Taxation 0.2 0.1
Other - (0.2)
Profit/(loss) for the period under
IFRS 5.6 (1.0)
----------------------------------- ---------- ----------
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