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. â€¢ Revenue of Â£75.3m (2004 Â£66.8m) reflected the increase in orders to Â£80.9m (2004 Â£68.1m) â€¢ Recent acquisitions contributed to both revenue and profit from operations â€¢ The product innovation programme is delivering results with the HyperSense DNP-NMR programme ahead of milestones â€¢ Loss before income tax but after amortisation of acquired intangibles, restructuring and other non-recurring costs and financial income and expenditure was Â£0.3m (2004 loss Â£0.9m) â€¢ Total loss per share 0.6p (2004 loss 2.2p) reflects absence of restructuring and other costs â€¢ Net cash, after all bank borrowings, at the end of the half was Â£12.6m (2004 Â£10.5m) â€¢ Recommended interim dividend of 2.4p, unchanged from last year â€¢ As separately announced today, Charles Holroyd and Steven Parker are appointed to the Group Board â€¢ 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 Â£80.9 million, up Â£12.8 million on the first half last year, and finished ahead of internal forecasts. Revenue for the half was Â£75.3 million, up Â£8.5 million on the same period last year. There was a loss from operations of Â£0.2 million (2004 profit Â£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 Â£6.5 million compared with Â£5.1 million in the prior year. Of this amount Â£1.3 million was capitalised under the new IFRS rules offset by a charge of Â£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 Â£5.6 million. This net difference of Â£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 Â£1.5 million. This forms part of the expected annual spending of up to Â£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 Â£0.3 million, compared with a loss of Â£0.9 million in the prior year. Net cash, after all bank borrowing, decreased to Â£12.6 million, an outflow of Â£13.9 million in the half year. This reflected the seasonal pattern as well as Â£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 Â£39.3 million (2004 Â£31.2 million) and higher revenue of Â£35.1 million (2004 Â£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 Â£2.0 million (2004 Â£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 Â£41.6 million (2004 Â£36.9 million) and higher revenue of Â£40.2 million (2004 Â£36.8 million). The loss from operations of Â£2.2 million (2004 Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£2.1m. Further consideration of up to â‚¬1m is payable based on post acquisition sales. The Group's best estimate of this deferred consideration at the current time is Â£0.3m. HKL contributed turnover of Â£0.7m and profit before income tax of Â£0.1m to the Group in the period to 30 September 2005. Accounting policy Fair value Book value adjustments to the Group Â£m Â£m Â£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 Â£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 Â£m Â£m Â£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 Â£m Â£m Â£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 Â£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 Â£m Â£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) ----------------------------------- ---------- ---------- This information is provided by RNS The company news service from the London Stock Exchange

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