Final Results
Oxford Instruments PLC
6 June 2002
6 June 2002
Oxford Instruments plc
Announcement of preliminary results for 2001/2002
Oxford Instruments plc, the advanced instrumentation business, today announced
preliminary results for the year to 31 March 2002.
• Group turnover at £214 million, up 17%.
• Gross profit increased from 29% to 31% of sales.
• Operating profit from wholly owned businesses of £5.3 million, up £3.1
million.
• Pre-tax profit before exceptional items of £9.0 million, up £3.2
million.
• Earnings per share before exceptional items of 14.6 pence, more than
double the prior year's result of 6.1 pence.
• Net borrowings reduced to £4.0 million from £8.3 million last year.
• A final dividend of 6.0 pence is proposed, leaving the total dividend
unchanged for the year at 8.4 pence.
Andrew Mackintosh, Chief Executive said:
"Over the past two years our intensive programme of operational improvement has
produced significant results. We have improved our ability to deliver quality
products on time to our customers, and hence generated improved financial
performance. Our technical and market leadership in a number of world-wide
markets provides a solid platform for further progress".
Enquiries: Oxford Instruments plc Tel: 01865 881437 Fax: 01865 884045
Nigel Keen, Chairman
Andrew Mackintosh, Chief Executive
Martin Lamaison, Financial Director
Citigate Dewe Rogerson Tel: 020 7638 9571 Fax: 020 7282 8189
Chris Barrie
For further copies of this Preliminary Results announcement please contact
Vinnetta Hutchings at the Company's registered office at Old Station Way,
Eynsham, Witney Oxon OX29 4TL (email: vinnetta.hutchings@oxinst.co.uk).
Chairman's statement
Nigel Keen, Chairman of Oxford Instruments plc, said today:-
"I am pleased to report significantly improved financial performance in the past
year despite challenging conditions in some of our international markets.
Orders for the year of £189 million were lower than the order intake of £201
million achieved in 2001. This was as a result of the anticipated slowdown in
orders from the industrial sector - in particular the semiconductor industry -
which was partially offset by strong orders for products used in life sciences
applications.
Turnover of continuing operations was £214 million, a 17% increase on the
previous year (2001 £183 million). This improvement results from significant
progress on a number of technically challenging 'legacy' projects as well as our
operational success in reducing our high order backlog.
Pre-tax profits of continuing operations excluding exceptional items were £9.0
million (2001 £5.8 million). This included an improved operating profit in the
wholly-owned businesses of £5.3 million (2001 £2.2 million) where gross profit
increased from 29% to 31% of sales as a result of improvements in our
operational efficiency, achieved in spite of weak markets.
Oxford Magnet Technology (OMT), our joint venture body scanner business with
Siemens, contributed an operating profit of £5.2 million (2001 £4.4 million).
An exceptional profit of £3.0 million resulted from the sale of surplus
property. Interest costs increased to £1.5 million (2001 £0.8 million)
reflecting an investment in working capital associated with the increased
turnover of both the wholly owned businesses and the joint venture.
Closing net borrowings were £4.0 million, a significant improvement on the
opening position of £8.3 million. The ratio of net working capital to sales in
the wholly-owned businesses improved from 24.1% to 23.6%, primarily driven by
more rapid cash collection. £5.2 million was received from the sale of the
surplus property.
The tax rate on profits of continuing businesses before exceptional items was
24%, down from 50% last year as a result of our increased capacity to absorb UK
tax losses. This led to a post-tax profit including exceptional items of £9.3
million (2001 £0.1 million loss), or 19.9p earnings per share. The Board has
recommended a final dividend of 6.0p, making a total for the year of 8.4p,
unchanged from last year (8.4p).
In anticipation of the end of the initial 15-year term of the OMT joint venture
in September 2004, Siemens - the majority shareholder and major customer - has
confirmed its intention to increase substantially its shareholding after that
date. While we understand that Siemens' preference is for an ongoing
relationship with Oxford Instruments, Siemens intends to exercise its right to
assume 100% control of OMT in 2004 if no alternative agreement is reached. We
are, therefore, exploring with both Siemens and other potential partners other
ways in which we can maximise the future returns in the market for medical
magnets using our world leadership in superconducting technology.
Improvements in operational performance
Over the past two years our intensive programme of operational improvement has
produced significant results. We have improved our ability to deliver quality
products on time to our customers, and hence generated improved financial
performance.
We have transformed the way we convert our creativity and innovation into
cost-effective products by introducing new project management techniques across
the business. New products are being launched faster following this initiative,
including several during the past year.
The work of our central procurement team has matured, bringing significant
component and service cost savings. The focus for this team has expanded to
drive improvements in the whole supply chain, from supplier to customer. This
is helping to bring down costs and to increase the consistency of our delivery
to customers.
Our world-wide sales infrastructure, managed through the businesses with central
administrative co-ordination, provides a cost-effective way for businesses to
develop their overseas sales channels. In the past year we have been investing
heavily in Asia, including opening a new office in Shanghai. We now have over
80 employees in the region.
In general, our technically advanced products are sold through personal contact
with the customer. However, we also market an extensive range of spare parts
and accessories and in February 2002 opened an e-commerce shop front ('OI
Direct') attached to our new web site. We see this as a useful complementary
sales route to our more traditional channels.
While our reputation for technical innovation is outstanding, we recognise that
we need to improve the management and exploitation of the intellectual property
we create. In the past year we have begun to invest in a co-ordinated
initiative to train and educate our staff in the use of IP to improve our
competitiveness and generate new future revenue streams.
Our businesses rely critically on the contribution from individuals and teams of
people. While we value the business benefits stemming from our inspirational
culture, we are introducing new techniques to support staff in clarifying and
communicating the expectations and rewards of improved performance. These
include a bonus scheme for managers based on 'economic value added' designed to
generate more efficient use of capital in the business.
Many of these programmes are long-term. While they are already producing early
results, we intend to continue to focus on these cross-business initiatives,
which will deliver further fundamental improvements in performance in the
future, by creating excellence in the key processes used to serve our customers.
The company has gone through many changes over the past two years and I would
like to express my appreciation to our employees who have embraced this
opportunity to improve their contribution to the business.
Analytical
Turnover for the year increased by 26% to £83.0 million (2001 £65.6 million),
boosted by record deliveries in the first half to customers in the semiconductor
and telecommunications markets who had placed orders the previous year. Turnover
in the second half benefited from a £2.6 million contribution from the
acquisition in October 2001 of CMI International, a Chicago-based business which
designs and manufactures industrial quality control products.
Operating profits increased to £6.4 million (2001 £2.7 million), while gross
margins across the range of products were sustained during the year.
The rate of receipt of new orders was approximately 21% down on the previous
year, reflecting the marked slowdown in the semiconductor and telecommunications
markets, as well as a general softness in the wide range of industrial markets
served by the Analytical business, particularly in the USA. The cost base of
the business has been adjusted accordingly, with headcount today 14% down from
the peak of the previous year.
We have now completed successfully multiple installations of the new hardware
platform for our market-leading 'INCA' chemical analysis product launched in
October 2001. This cost-reduced and flexible unit allows us to extend the range
of market segments accessed by this product. Initial deliveries of a unique
hand-held portable device for materials analysis have begun into European
markets being driven by new environmental regulations, while other applications
for this product, which uses a patented nanotechnology-based key component, show
significant promise.
Early performance of the CMI International business acquired in October 2001 for
£1.4 million has been encouraging, with a profitable performance in the first
six months. Initial assimilation of this business with our existing Industrial
Products line is now complete and we are investing in the Chicago base (now
called Oxford Instruments Measurement Systems) to allow additional products to
be assembled there.
While the rate of receipt of new orders in the Analytical business appears to
have stabilised, the near-term future of the cyclic industrial markets for this
business is uncertain. Our priority is to increase further the quality of our
offering to our customers through faster delivery times with attractive new
products, while maintaining tight control on costs.
Medical
Turnover of £39.3 million for the year (2001 £38.5 million) was below our
expectations. In addition, margins were adversely affected by the final mix of
both products and sales channels and this resulted in an operating loss for the
year of £1.5 million (2001 £0.2 million operating profit).
Following the changes in manufacturing management at the half year, we saw a
significant improvement in operational efficiency in the last quarter, helped by
better use of the new IT system. This recent improvement provides a responsive
and efficient base for the further reduction of customer lead-times of products
in the current year.
Two recent major product launches into the neurology sector aimed at
strengthening our competitive position in the US market are an important part of
our growth plans. These complement the innovative obstetrics hardware and
software product launches earlier in the year, which are now starting to sell
well. Increased turnover from new products will help to compensate for the loss
of some third-party business previously sold through our overseas subsidiaries.
With new sales management in place, focus is now on improved direction of the
world-wide sales channels. Margin improvements are forecast from targeting the
sale of high-margin products through high-margin channels using improved data
from the new IT system. Our products are competitive and our manufacturing
operations are now structured to support a more actively focussed sales effort.
Superconductivity
Turnover of the wholly-owned Superconductivity business increased to £91.4
million (2001 £78.9 million), driven by a strong flow of high quality new
orders and good progress in reducing the large order backlog of technically
demanding 'legacy' projects. One more major project in this category is due for
delivery in 2003. The anticipated improvement in second half performance
resulted in an operating profit of £0.4 million for the year, reversing the £0.7
million operating loss of the previous year.
The world-leading 'Discovery' magnet product used for drug discovery and
development has been very well received by the market. While the first unit is
currently being installed in Japan we have been investing heavily to enable us
to deliver significant volumes of this flagship magnet and others in the family
over the coming years.
All measures of operational performance moved forward strongly during the year.
For example our quality initiatives have enabled us to reduce by 50% the number
of problems encountered during customer installation of our complex products.
While our performance has improved, this has been on the back of an
unsustainable cost base. The efficiency improvements we have made have given us
the opportunity to lower our costs. To implement this we have recently
announced that we are eliminating some 60 posts in the UK magnet business, an
11% reduction. This will ensure that the successful efforts of the past two
years leading to improved internal efficiency will translate into a sustainably
profitable business going forward.
Separately, our US-based superconducting material, magnet service and cryogenics
business had another successful year, including the receipt of an award from a
major customer, Siemens Medical Solutions, of the 'Top Plus' highest rating as a
supplier. The business was also successful in obtaining significant US
government funding for continuing development of 'High Temperature
Superconductors' which have potential future uses in a range of industrial and
power applications.
The 49% share of OMT, our joint venture with Siemens, generated operating
profits of £5.2 million (2001 £4.4 million) on increased turnover of £125
million (2001 £100 million). While record unit volumes were delivered to
customers, high engineering costs and lower sales prices limited profits'
growth. The recent purchase of Marconi Medical (an OMT customer) by Philips
Medical continues to create a level of uncertainty about volumes going forward.
Prospects
Our technical and market leadership in a number of world-wide markets, when
combined with our much-improved internal operations, provides a solid platform
for further recovery and growth of the company.
The cost base in our Analytical business has been reduced in response to current
market conditions. Although we are not planning for a market recovery before
the second half of this year, we would expect to see some improvement in world
trade activity at that time. Changes have been made in our Medical business
which is expected to recover performance going forward. Demand for our
Superconductivity products is encouraging and this business is now placed to
make significant margin improvements, particularly towards the end of the year.
Our business priority continues to be to provide outstandingly innovative,
timely and cost-effective solutions to customer needs and thereby generate
improved profitability. We will continue to take the steps necessary to
generate further sustained improvement in value for shareholders.
Group Profit and Loss Account
Year ended 31 March 2002
Continuing operations
Before Exceptional 2002
exceptional
items items
Notes £000 £000 £000
Turnover
Group and share of joint venture turnover 1 260,280 - 260,280
Less share of joint venture turnover 5 (46,600) - (46,600)
Group turnover (including acquisition of 1 213,680 - 213,680
£2,551,000)
Cost of sales (147,611) - (147,611)
Gross profit 66,069 - 66,069
Net operating expenses 4 (60,750) - (60,750)
Group operating profit (including 5,319 - 5,319
acquisition profit of £85,000)
Share of operating profit of joint venture 5 5,213 - 5,213
Total operating profit: Group and share of 1 10,532 - 10,532
joint venture
Profit on disposal of properties - 3,034 3,034
Profit on sale of discontinued businesses - - -
before goodwill
Profit before interest 10,532 3,034 13,566
Total net interest payable (1,526) - (1,526)
Profit on ordinary activities before tax 9,006 3,034 12,040
Tax on profit on ordinary activities (2,132) (560) (2,692)
Profit for the financial year attributable 6,874 2,474 9,348
to shareholders
Dividends 6 (3,931)
Retained profit for the financial year 5,417
pence pence pence
Earnings per share 7
Basic earnings per share 14.6 5.3 19.9
Diluted earnings per share 14.6 5.3 19.9
Group Profit and Loss Account
Year ended 31 March 2001 - as restated
Continuing operations Discontinued 2001
Before operations
exceptional Exceptional
items items
Notes £000 £000 £000 £000
Turnover
Group and share of joint venture 1 219,814 - 2,096 221,910
turnover
Less share of joint venture turnover 5 (36,775) - - (36,775)
Group turnover 1 183,039 - 2,096 185,135
Cost of sales (130,473) (445) (2,927) (133,845)
Gross profit/(loss) 52,566 (445) (831) 51,290
Net operating expenses 4 (50,367) (988) (1,287) (52,642)
Group operating profit/(loss) 2,199 (1,433) (2,118) (1,352)
Share of operating profit of joint 5 4,350 - - 4,350
venture
Total operating profit/(loss): Group
and share of joint venture 1 6,549 (1,433) (2,118) 2,998
Profit on disposal of properties - - - -
Profit on sale of discontinued - - 599 599
businesses before goodwill
Profit/(loss) before interest 6,549 (1,433) (1,519) 3,597
Total net interest payable (792) - - (792)
Profit/(loss) on ordinary activities 5,757 (1,433) (1,519) 2,805
before tax
Tax on profit/(loss) on ordinary (2,869) - - (2,869)
activities
Profit/(loss) for the financial year 2,888 (1,433) (1,519) (64)
attributable to shareholders
Dividends 6 (3,942)
Retained loss for the financial year (4,006)
pence pence pence pence
Earnings/(losses) per share 7
Basic earnings/(losses) per share 6.1 (3.0) (3.2) (0.1)
Diluted earnings/(losses) per share 6.1 (3.0) (3.2) (0.1)
Group Statement of Total Recognised Gains and Losses
Year ended 31 March 2002
2002 2001
As restated
Note £000 £000
Profit/(loss) for the financial year 9,348 (64)
Exchange differences on foreign currency net investments of the Group (144) 3,656
Total recognised gains and losses for the financial year 9,204 3,592
Prior year adjustments 1 2,841
Total recognised gains and losses for the financial year 12,045
Group Balance Sheet
As at 31 March 2002
2002 2001
As restated
£000 £000
Fixed assets
Goodwill 4,826 5,341
Negative goodwill (398) (930)
Intangible assets 4,428 4,411
Tangible assets 38,849 43,731
Investments:
Share of gross assets of joint venture 19,299 15,937
Share of gross liabilities of joint venture (16,009) (13,176)
Net investment in joint venture 3,290 2,761
Other investments 2,450 2,260
Total investments 5,740 5,021
Total fixed assets 49,017 53,163
Current assets
Stocks 48,518 43,696
Debtors 67,410 69,338
Cash at bank and in hand 4,806 1,643
120,734 114,677
Creditors: amounts falling due within one year
Bank loans and overdrafts (7,982) (9,959)
Other creditors (59,759) (61,933)
(67,741) (71,892)
Net current assets 52,993 42,785
Total assets less current liabilities 102,010 95,948
Creditors: amounts falling due after one year (808) -
Provisions for liabilities and charges (6,036) (6,178)
Net assets employed 95,166 89,770
Capital and reserves
Called up share capital 2,395 2,392
Share premium account 18,776 18,656
Other reserves 15,930 15,930
Profit and loss account 58,065 52,792
Equity shareholders' funds 95,166 89,770
Reconciliation of Movements in Equity Shareholders' Funds
2002 2001
As restated
£000 £000
Profit/(loss) for the financial year 9,348 (64)
Dividends paid and proposed (3,931) (3,942)
Retained profit/(loss) for the financial year 5,417 (4,006)
Exchange differences on foreign currency net investments (144) 3,656
New share capital subscribed 123 -
Net increase/(reduction) in equity shareholders' funds 5,396 (350)
Opening equity shareholders' funds 89,770 90,120
Closing equity shareholders' funds 95,166 89,770
Consolidated Cash Flow Statement
2002 2001
Notes £000 £000
Net cash inflow/(outflow) from operating activities 8 6,642 (1,925)
Dividend from joint venture 2,793 3,691
Returns on investments and servicing of finance 8 (1,104) (432)
Taxation (231) (250)
Capital expenditure and financial investment 8 1,566 (6,229)
Acquisitions 3 (1,423) (3,911)
Disposals - 1,983
Equity dividends paid (3,939) (3,953)
Cash inflow/(outflow) before management of liquid resources 4,304 (11,026)
and financing
Management of liquid resources 8 (1,000) 9,500
Financing 8 123 -
Increase/(decrease) in cash in the year 3,427 (1,526)
Reconciliation of Net Cash Flow to Movement in Net Debt
2002 2001
£000 £000
Increase/(decrease) in cash in the year 3,427 (1,526)
Change in liquid resources 1,000 (9,500)
Translation difference (95) 106
Movement in net debt in the year 4,332 (10,920)
Opening net debt/(funds) (8,316) 2,604
Closing net debt (3,984) (8,316)
Movement in Net Debt
At Exchange Cash At
31 March rate movement 31 March
2002 effect in year 2001
£000 £000 £000 £000
Cash at bank and in hand 4,806 (139) 3,302 1,643
Bank overdrafts (188) 1 930 (1,119)
Net cash 4,618 (138) 4,232 524
Debt due within one year (7,794) 46 1,000 (8,840)
Debt due after one year (808) (3) (805) -
Net debt (3,984) (95) 4,427 (8,316)
Notes on the Preliminary Financial Statements
1.Accounting policies and results by business groups
The Group profit and loss account and balance sheet for the years ended 31 March
2002 and 31 March 2001 have been prepared on a basis consistent with the
accounting policies disclosed in the Group's Annual Report and Accounts 2001,
subject to the application of new accounting standards as discussed below.
The Company has adopted the transitional provisions of FRS 17 'Retirement
Benefits' and has adopted FRS 18 'Accounting Policies' and FRS 19 'Deferred Tax'
during the year.
The adoption of FRS 19 has resulted in the restatement of the prior year's
profit and loss account, balance sheet and statement of recognised gains and
losses. Application of the standard has resulted in the creation of a deferred
tax asset of £3.0 million at 31 March 2001 in respect of timing differences and
has required the restatement of goodwill on the recognition of deferred tax
assets in an acquired company. The net prior year adjustment was £2.8 million.
The adoption of FRS 17 (transitional provisions) and FRS 18 has had no effect on
the Group results. The adoption of the transitional provisions of FRS 17 results
in fuller disclosure of retirement benefits in the Annual Report and Accounts.
The results for continuing pre-exceptional operations analysed by business
groups were as follows:
Turnover Operating profit/(loss)
2002 2001 2002 2001
As restated
£000 £000 £000 £000
Analytical 82,975 65,603 6,468 2,752
Medical 39,353 38,574 (1,511) 195
Superconductivity 91,352 78,862 362 (748)
213,680 183,039 5,319 2,199
Share of OMT joint venture (49%) 46,600 36,775 5,213 4,350
260,280 219,814 10,532 6,549
2.Exchange rates
The principal exchange rates used to translate the Group's overseas results were
as follows:
Year to 31 March 2002 Year to 31 March 2001
Average Average
contract contract
Average Year end Average Year end
rate rate rate rate rate rate
US Dollar 1.43 1.42 1.47 1.48 1.42 1.56
Yen 180 189 159 164 178 179
Euro 1.62 1.63 1.59 1.64 1.61 1.61
3.Acquisitions
The Group acquired the business and assets of CMI International Corporation
based in Chicago, USA, on 23 October 2001 for a net cash consideration of $2.0
million.
4.Net operating expenses and exceptional items
Net operating expenses for continuing businesses pre-exceptional items comprise:
2002 2001
As restated
£000 £000
Distribution costs 36,380 31,690
Research and development costs 13,217 10,349
Administrative expenses 11,153 8,328
Net operating expenses 60,750 50,367
Exceptional items comprise a profit before tax of £3.0 million on disposal of
properties in the year to 31 March 2002 and a cost of £1.4 million last year,
being the final costs incurred in connection with the reorganisation of the
Group's UK based businesses.
5.Joint venture
The Group owns 49% of the issued share capital of Oxford Magnet Technology
Limited ('OMT') of 3,000,000 £1 ordinary shares. OMT is engaged in advanced
instrumentation and is registered and operates in England. The Group has
accounted for its interest in OMT as a joint venture in accordance with FRS 9.
6.Dividends per share
Dividends per share are as follows:
2002 2001
pence pence
Interim dividend 2.4 2.4
Proposed final dividend 6.0 6.0
8.4 8.4
The record date for the final dividend of 6.0 pence per share in respect of the
year ended 31 March 2002 will be 6 September 2002, and subject to approval of
shareholders at the Annual General Meeting on 30 July 2002, payment will be made
on 4 October 2002.
7.Earnings per share
Basic and diluted earnings per share have been calculated on the weighted
average of 46,878,981 shares (2001 47,072,059 shares) and 47,048,258 shares
(2001 47,091,625 shares) in issue during the year, respectively.
8.Net cashflow from operating activities and cash flows netted in the cash
flow statement
2002 2001
As restated
£000 £000
Group operating profit/(loss) 5,319 (1,352)
Depreciation charges 6,220 5,510
Amortisation of goodwill 313 100
Net loss/(profit) on disposal of fixed assets 25 (324)
Change in stocks (3,730) (9,556)
Change in debtors 1,402 (3,731)
Change in creditors (2,774) 10,048
Change in provisions (133) (2,620)
Net cash inflow/(outflow) from operating activities 6,642 (1,925)
Interest received 50 176
Interest paid (1,154) (608)
Net cash outflow from returns on investments and servicing of finance (1,104) (432)
Purchase of fixed assets (4,806) (6,413)
Sale of fixed assets 6,786 527
Investments acquired (414) (343)
Net cash inflow/(outflow) for capital expenditure and financial investment 1,566 (6,229)
Decrease in term deposits - 1,500
(Decrease)/increase in term loans (1,000) 8,000
Net cash (outflow)/inflow from management of liquid resources (1,000) 9,500
Issue of ordinary shares including share premium 123 -
Net cash inflow from financing 123 -
9.Report and Accounts
The financial information set out in this preliminary results announcement does
not constitute the Company's statutory accounts for the years ended 31 March
2002 or 31 March 2001 but is derived from those accounts. This announcement was
approved by the Board of Directors on 6 June 2002. Statutory accounts for 2000/
2001 have been delivered to the Registrar of Companies, whereas those for 2001/
2002 will be delivered following the Company's Annual General Meeting on 30 July
2002. The auditors have reported on those accounts; their report was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
The Company is registered in England Number 775598.
10.The Annual General Meeting
The Annual General Meeting will be held on Tuesday, 30 July 2002 at 2.30pm at
the offices of Oxford Instruments Superconductivity Limited, Tubney Woods,
Abingdon, Oxon OX13 5QX.
This information is provided by RNS
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