Final Results
Oxford Instruments PLC
03 June 2003
3rd June 2003
Oxford Instruments plc
Announcement of preliminary results for the year to 31 March 2003
Oxford Instruments plc, the advanced instrumentation business, today announced
preliminary results for the year to 31 March 2003.
• Orders held level with last year at £186m, a robust result in the
current economic climate (2002: £189m)
• Turnover from continuing businesses matched order intake at £187m
(2002: £212m), reflecting successful management of manufacturing lead-times
• Operating profits for continuing businesses before goodwill and
exceptional items up £0.2m to £6.9m, despite reduced turnover, showing benefits
of intensive cost reduction and operational improvement programmes
• Strong cash generation of £7.3m, driven by aggressive actions on stock
reduction and debtor control, demonstrating the improved operational efficiency
and quality of the business
• Recommended final dividend of 6.0p, making a total for the year of
8.4p, unchanged from last year
Andrew Mackintosh, Chief Executive said: "With our wholly-owned businesses now
on a stable operational footing, our primary objective remains to increase their
profitability. Against the background of uncertain world markets, we intend to
achieve this by focussing on cost control and margin improvement, rather than
relying on near-term volume growth. We will also continue to support and
develop our innovative capabilities, knowing that with the sound operational
platform we have created over the past three years, we can translate our
strengths in innovation into profitable, added-value products which have the
potential to become world market leaders."
Enquiries:
Oxford Instruments plc Tel: 01865 881437 Fax: 01865 884045
Andrew Mackintosh, 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 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
We set out in 1999 to transform the operational capability of the Company,
recognising that our undisputed innovative talents had not been consistently
translated into strong commercial returns. In the past three years, we have
focussed each business on an intensive programme of operational improvement
designed to upgrade radically the quality and cost-effectiveness of our service
to customers and to create enhanced value for our shareholders. I can report
that a number of the key customer-facing and financial measures of performance
in our wholly-owned businesses have demonstrated significant additional progress
during the past year. We will ensure that the programmes already in place
continue to deliver progressive financial benefits while we refine and then
deliver on the preferred strategic growth and value creation options for each
business. I would like to thank all of our employees for their contribution to
the progress which has been demonstrated during the year.
Orders for the year of £186 million were close to the levels achieved in 2002
(£189 million), a robust result in the current economic climate. The geographic
spread of activity was similar to 2002, with the USA and Asia in particular
holding up well. While demand from the semiconductor equipment sector declined
further, new orders from the scientific research segment increased during the
year.
Turnover for the year of £187 million matched the rate of receipt of new orders.
This was 12% lower than the previous year (£212 million) during which
operational improvements permitted the high order backlog to be reduced. Sales
into the scientific research markets grew to 25% of the total (2002 20%), but
this was offset by continued weakness in certain industrial sectors. In
particular, the semiconductor industry accounted for only 6% of sales, down from
13% in 2002.
Margins improved, with gross profit for continuing businesses increasing from
30.8% to 32.1%. Operating profits of continuing operations for the wholly-owned
businesses excluding exceptional items and goodwill improved to £6.9 million
(2002 £6.7 million). This encouraging result was achieved despite the further
downturn in semiconductor demand and on reduced turnover, confirming that the
cost reduction and operational improvement programmes over the past three years
have generated a strong platform for the ongoing business.
Exceptional items included redundancies of £1.7 million as we reduced our cost
base and a charge of £0.4 million incurred on the termination of the
distribution agreement of a loss-making product for 'sleep' analysis. Staff
numbers in the wholly-owned businesses were reduced by 13% during the year to
1,560 in March 2003. The incremental benefits in 2003/04 from this reduction
will be approximately £1.4 million. In October 2002, the loss-making 'Process
Systems' business was sold to its management for a consideration based primarily
on future performance and is shown as a discontinued business. This business
lost £0.7 million in the period until disposal (2002 £1.4 million loss).
As indicated in our trading update on 26 March 2003, Oxford Magnet Technology
(OMT), the body scanner magnet business operated as a joint venture with
Siemens, contributed a much-reduced operating profit of £1.6 million (2002 £5.2
million). This reflected increased spend on the development of new products,
higher operational costs and lower selling prices. The initial 15-year term of
the OMT joint venture with Siemens comes to an end in September 2004. Taking
into account the poor recent trading performance of OMT and the increasing
dominance of Siemens as an OMT customer, we are continuing our discussions with
both Siemens and other potential partners to ensure that a continuing investment
in OMT after 2004 would be in the best interests of our shareholders. While
Siemens has indicated a preference for an ongoing relationship with Oxford
Instruments beyond that date, an agreement has not yet been reached
that appropriately reflects the unique skills and expertise that Oxford
Instruments believes it can bring to the market for MRI magnets and systems.
Currently, Siemens believes that the amount of any settlement resulting from an
end to the joint venture would not be material.
Closing net cash was a healthy £3.3 million, compared with net borrowings the
previous year of £4.0 million. The strong cash generation of £7.3 million
during the year was driven by aggressive programmes on stock reduction and
debtor control, a further indication of improved operational efficiency and
quality of the businesses. Interest and other finance charges during the year
were unchanged at £1.5 million.
The tax rate on profits of continuing businesses was 35%, up from 26% last year.
This is higher than the standard UK tax rate of 30% due to the higher tax
rates overseas, particularly the USA. Total reported earnings for the year of
£1.2 million (2002 £9.4 million) included after tax profits of £4.4 million
(2002 £7.8 million) from continuing businesses, exceptional losses of £1.7
million (2002 £2.5 million profit) and losses of £1.5 million (2002 £0.9 million
loss) from discontinued businesses. Earnings per share from continuing
businesses before exceptional items were 9.5 pence (2002 16.6 pence). The Board
has recommended a final dividend of 6.0 pence, making a total for the year of
8.4 pence, unchanged from last year.
The Company continues to account for pensions in accordance with SSAP 24.
However, following stock market and interest rate falls during the year, the
combined deficit of the three defined benefit pension plans under the proposed
FRS 17 accounting standard has increased from £5 million to £23 million after
deducting the related deferred tax asset. The principal (UK) scheme was closed
to new members in 2001 and contributions from both the Company and employees
will be reviewed as soon as the results of the triennial actuarial valuation, as
at 31 March 2003, are available.
During the year, Bernard Taylor joined the Board as a non-executive director.
Bernard is Vice Chairman of JPMorgan plc and brings to the Board valuable and
relevant expertise as we complete our recovery and drive the Company forward
strategically.
Our Superconductivity business is moving ahead strongly, while our Analytical
business is trading profitably and is well positioned to benefit from an
eventual market upturn. However, our Medical business has failed to show the
anticipated improvement in the year. Recognising that there are several strong
Medical product lines in the portfolio, we are taking urgent action to bring
more focus to this business and to ensure that value is restored.
The performance of the wholly-owned businesses in difficult economic
circumstances over the past twelve months has been encouraging and the volume of
new business since the start of 2003/04 has been similar to that at the start of
last year. We are determined in our efforts to build on this success and to
generate increased shareholder value.
Chief Executive's Review
Performance improvement
Over the past year, our operational improvement programmes have enabled all
businesses to improve the timeliness, lead time and quality of products
delivered to our customers. Maintaining the focus on these measures has been
critical at a time when conditions in a number of our markets have been
challenging. During the year, all our major manufacturing sites obtained
accreditation under the new ISO9000:2000 standard, well ahead of the December
2003 deadline. We were also very pleased that two of our businesses were
awarded Queen's Awards this year, another significant external recognition of
our achievements.
There are several key processes where a cross-business approach to operational
improvement is generating benefits across the Company. Improvements in the
management of our supply chains have contributed to stock reductions of 22% (£11
million), with opportunities for further progress going forward. We are also
implementing new sourcing arrangements for a number of commodity components and
sub-assemblies from low-cost countries. We expect this initiative to generate
significant additional savings in future years.
The invention and commercialisation of innovative new products remains a
critical process for all our businesses. We continue to refine our approach to
the development of new products, aiming to maximise the commercial success of
our R & D investment (£12.6 million, or 7% of sales in 2003). In parallel, we
are driving a fundamental change in our approach to the active management of
intellectual property. One measure of this is the 17 new patents awarded in the
last two years, a significant increase in activity. We have also signed a
long-term agreement with Cambridge University involving the creation of a new
laboratory set up to exploit intellectual property developed over a number of
years within the Company relating to superconducting detectors.
The improvement in key operational processes is being supported by structured
work on enhancing the performance culture in the organisation. Performance
reviews of staff are now more closely linked to business plans and budgets.
Individual and team performance is linked to financial rewards, while succession
plans for key roles have been developed. We have also articulated the values by
which we work and to which we aspire in order to help all staff understand
better how to contribute to the business.
Our multi-year programme to upgrade our IT infrastructure has reached an
important milestone, with all UK manufacturing sites now generating business
benefits from the extra flexibility provided by running the new IT packages. We
aim to shorten product lead times by linking our overseas sales offices into the
network, allowing, for example, direct entry of customer orders into the
UK-based manufacturing system from the USA.
As we have consolidated our improved operational performance over the past year,
we have started to explore in more depth the strategic growth options for each
business. With the help of external expertise, we now have a clearer view of
our opportunities for both organic and acquisition-led growth for the Company.
This will help to guide our strategic priorities going forwards.
Analytical
Turnover of the business in the year dropped by 24% to £61.6 million (2002 £81.2
million) as a result of the collapse in demand from the semiconductor and
telecommunications capital equipment market. Turnover into other industrial
segments was reasonably stable, with demand from Asia outside Japan remaining
strong. Operating profits recovered in the second half, generating £2.8 million
profit for the year (2002 £7.9 million). Gross margins were maintained despite
significant pricing pressure in challenging markets.
Orders for our market-leading 'INCA' product used for the chemical analysis of
materials increased during the year, helped by the introduction of a new
software package which automates the routine analysis of very small particles.
This product line also benefited from a continued strong sales performance in
Japan by our partner, Horiba.
Efficient new product development is critical for future profitability. Our new
'Horizon' hand-held spectrometer is designed for rapid and accurate measurement
of chemical properties of materials such as alloys in the field. It uses a
unique nanotechnology based X-ray source designed and manufactured by our X-ray
Technology business in California. Initial sales of this product have been
encouraging and we expect further growth from this highly differentiated product
as we explore new applications and receive further government approvals during
the coming year. Another major new spectrometer platform - the 'Twin-X' - was
launched in February 2003 and initial sales have been made successfully. This
product hits a new price/performance point for chemical analysis in the
industrial quality control market and is expected to lead to incremental sales
growth in the future.
We have matched our investment in new product development to market demand,
concentrating on the roll-out of the recently launched new products, while
reducing our investment in areas such as new equipment for the optical
communications industries until the future for these markets becomes clearer.
Staff numbers have been reduced by 16% to 536 during the year and we will
continue to manage our costs in line with the order prospects.
Recent new orders for the Analytical business have shown some recovery and we
have been encouraged recently by the award of a contract from a major
semiconductor device manufacturer, a new account for the Company. The new
product launches will increase our competitiveness and we enter the new
financial year with a lower cost base. The business will be a beneficiary of
any cyclical recovery, although in the short term it is unclear whether any
prolongation of the SARS epidemic will affect sales in the important Asian
market.
Medical
Turnover for the year of £36.3 million was 8% down (2002 £39.3 million),
primarily as a result of the decision to reduce the volume of non-core
third-party products being sold through our overseas sales channels.
Performance in the second half improved as a result of initiatives driven by new
management appointments made at the half year, but the operating loss before
exceptional items for the year was still £0.8 million (2002 £1.5 million loss).
Operating efficiency has been improved significantly during the year, with stock
levels down 36% and average product lead times reduced by over 50%. Staff
numbers have been reduced by 11%, lowering the cost base further for 2003/04.
The 'Synergy' product, launched in 2001 for the improved clinical measurement
and analysis of nerve and muscle problems, continues to grow its market, with
unit sales up by over 10% last year. Sales of neurology accessories, including
the world-leading range of 'Teca' single-use needles, have held up well and are
starting to benefit from recent increased management focus. This is aimed at
improving our sales channels outside the USA and at developing an enhanced range
of accessories.
Our distribution relationship with Compumedics, an Australian supplier of
products for sleep analysis, has been terminated. Product acceptance by
European customers in particular had been disappointing and integration of the
software with our neurology products was poor. Losses associated with the
termination of this product line during the year were £0.4 million.
We have recently renegotiated a key agreement for the supply of
electroencephalography products, used by neurologists for the measurement and
analysis of brain function. Product manufacture and testing will now be carried
out by the supplier and we will become a distributor of the product in key
territories where our sales channel strengths allow us to generate an acceptable
margin. It is estimated that this will result in an improvement of around £0.5
million in the contribution of this product line in 2003/04.
Overall, performance of the Medical business remained below expectations. We
have taken preliminary action to reduce the losses on key product lines, while
maintaining the focus on operational efficiency, margin improvement and cost
reduction. The strategic review of the business in the past year will guide
ongoing product line changes designed to further improve returns.
Superconductivity
Turnover of £88.7 million (2002 £91.4 million) matched the intake of new orders,
which were above the level of the previous year. By comparison, the turnover in
2002 was inflated by the delivery during that year of a number of large and
overdue projects. Operating profits increased to £4.7 million (2002 £0.3
million) as the business began to show significant benefits from the investments
made over the past three years. The one remaining 'legacy' project still under
construction passed a major technical milestone in the year and is due for
completion in 2003/04.
The launch of the world-leading 'Discovery' magnet used for new drug discovery
has continued to make good technical progress. Following the successful
operation of the first unit in Japan in the first half of the year, a second is
currently under installation while a third unit is being prepared for delivery.
Further magnets are being tested in-house and are demonstrating significant
improvements in performance and internal yield. The launch costs of this
flagship product have been higher than originally expected and this has
temporarily held back margin improvement and profits growth in the second half.
However, we expect the benefits of this investment will materialise rapidly both
in increased 'Discovery' shipments going forward as well as in higher unit
profitability. We have also already used the knowledge and expertise gained to
launch other smaller products in the 'Discovery' product family into this
growing market.
The business continues to drive for further improvements in operating
efficiency. Its cost base going forward will benefit in the future from the
reduction of 100 staff numbers made in the first half of the year (12% of the
total), while operational indicators including on-time delivery and lead times
all continue to show significant improvements.
Following the resolution of the majority of the past technical problems, the
magnet business has started in the past year to explore a number of new product
developments, particularly into the life sciences market where there are several
growth opportunities in addition to those presented by the 'Discovery' product
family. Separately, the recent launch of a new range of modular ultra-low
temperature equipment will also serve a variety of research applications,
including the study of quantum computers for which a major government-funded
joint project involving the Company, Oxford University and Hitachi is now under
way.
Our superconducting wire business had another good year, maintaining its
position as a leading supplier of wire for MRI body scanner magnets. The
business is investing aggressively in cost and lead time reduction programmes
with its customers to improve its efficiency and to maintain competitiveness. A
new wire involving significant technical innovation and designed to enable the
construction of ultra high field magnets is attracting customer interest.
Our MRI magnet field service business in the USA received a 'Top Plus' award
from Siemens Medical Systems (SMS) for the second year in a row. In addition,
we won the 'Best Practices in Technology' award from SMS, recognising our
particular excellence in this area.
The 49% share of OMT, our joint venture with Siemens, generated operating
profits of £1.6 million (2002 £5.2 million) on total turnover of £115 million
(2002 £125 million). Increased development spend associated with the launch of
several new products, high production costs and lower customer prices all
contributed to the reduction in profits. Following a recent decision by Philips
Medical to continue to source the majority of its magnets elsewhere, Siemens is
likely to become an increasingly dominant customer for OMT. While production
efficiency is expected to recover, the other pressures on the business will
continue.
Prospects
With our wholly-owned businesses now on a stable operational footing, our
primary objective remains to increase their profitability. Against the
background of uncertain world markets, we intend to achieve this by focussing on
cost control and margin improvement, rather than relying on near-term volume
growth. Several of our product lines are capable of significant and profitable
development over the medium term and we will maintain investment in these
activities, so that we are best positioned to benefit as markets recover.
We have made considerable progress in eliminating product lines which are not,
or do not have a prospect of, making an adequate contribution to the overall
financial performance of the business. This remains an ongoing process and we
are taking further actions to ensure that all businesses deliver an improved
return to investors.
We will continue to support and develop our innovative capabilities, knowing
that with the sound operational platform we have created over the past three
years we can translate our strengths in innovation into profitable added-value
products which have the potential to become world market leaders.
Group Profit and Loss Account
Year ended 31 March 2003
Continuing operations Discontinued 2003
Before operations
exceptional Exceptional Sub-
items items total
Notes £000 £000 £000 £000 £000
Turnover
Group and share of joint venture 1 230,722 - 230,722 671 231,393
turnover
Less share of joint venture turnover 5 (44,129) - (44,129) - (44,129)
Group turnover 1 186,593 - 186,593 671 187,264
Cost of sales 3 (126,733) (387) (127,120) (546) (127,666)
Gross profit 59,860 (387) 59,473 125 59,598
Net operating expenses 3 (53,138) (1,712) (54,850) (809) (55,659)
Group operating profit/(loss) before 3 6,871 (2,099) 4,772 (522) 4,250
goodwill amortisation
Goodwill amortisation (149) - (149) (162) (311)
Group operating profit 6,722 (2,099) 4,623 (684) 3,939
Share of operating profit of joint 5 1,605 - 1,605 - 1,605
venture
Total operating profit:
Group and share of joint venture 1 8,327 (2,099) 6,228 (684) 5,544
Loss on disposal of discontinued 6 - - - (1,569) (1,569)
business
Profit on disposal of properties - - - - -
Profit before interest and tax 8,327 (2,099) 6,228 (2,253) 3,975
Total net interest payable 7 (1,480) - (1,480) (75) (1,555)
Profit/(loss) on ordinary activities 6,847 (2,099) 4,748 (2,328) 2,420
before tax
Tax on profit/(loss) on ordinary (2,384) 389 (1,995) 811 (1,184)
activities
Profit/(loss) for the financial year 4,463 (1,710) 2,753 (1,517) 1,236
attributable to shareholders
Dividends 8 (3,935)
Retained loss for the financial year (2,699)
pence pence pence pence pence
Earnings per share 9
Basic earnings per share before 9.9 (3.7) 6.2 (3.0) 3.2
goodwill amortisation
Basic and diluted earnings per share 9.5 (3.7) 5.8 (3.2) 2.6
Group Profit and Loss Account
Year ended 31 March 2002
Continuing operations Discontinued 2002
Before operations
exceptional Exceptional Sub-
items items total
Notes £000 £000 £000 £000 £000
Turnover
Group and share of joint venture 1 258,485 - 258,485 1,795 260,280
turnover
Less share of joint venture 5 (46,600) - (46,600) - (46,600)
turnover
Group turnover 1 211,885 - 211,885 1,795 213,680
Cost of sales (146,542) - (146,542) (1,069) (147,611)
Gross profit 65,343 - 65,343 726 66,069
Net operating expenses 3 (58,601) - (58,601) (2,149) (60,750)
Group operating profit/(loss) 6,731 - 6,731 (1,099) 5,632
before goodwill amortisation
Goodwill amortisation 11 - 11 (324) (313)
Group operating profit 6,742 - 6,742 (1,423) 5,319
Share of operating profit of joint 5 5,213 - 5,213 - 5,213
venture
Total operating profit:
Group and share of joint venture 1 11,955 - 11,955 (1,423) 10,532
Loss on disposal of discontinued - - - - -
business
Profit on disposal of properties 3 - 3,034 3,034 - 3,034
Profit before interest and tax 11,955 3,034 14,989 (1,423) 13,566
Total net interest payable 7 (1,383) - (1,383) (143) (1,526)
Profit/(loss) on ordinary 10,572 3,034 13,606 (1,566) 12,040
activities before tax
Tax on profit/(loss) on ordinary (2,755) (560) (3,315) 623 (2,692)
activities
Profit/(loss) for the financial 7,817 2,474 10,291 (943) 9,348
year attributable to shareholders
Dividends 8 (3,931)
Retained profit for the financial 5,417
year
pence pence pence pence pence
Earnings per share 9
Basic earnings per share before 16.6 5.3 21.9 (1.6) 20.3
goodwill amortisation
Basic and diluted earnings per 16.6 5.3 21.9 (2.0) 19.9
share
Group Statement of Total Recognised Gains and Losses
Year ended 31 March 2003
2003 2002
Note £000 £000
Profit for the financial year 1,236 9,348
Exchange differences on foreign currency net investments of the Group (3,346) (144)
Total recognised gains and losses relating to the financial year (2,110) 9,204
Prior year adjustments 1 - 2,841
Total gains and losses recognised since the last Annual Report (2,110) 12,045
Group Balance Sheet
As at 31 March 2003
2003 2002
Note £000 £000
Fixed assets
Goodwill 2,724 4,826
Negative goodwill - (398)
Intangible assets 2,724 4,428
Tangible assets 35,620 38,849
Investments
Share of gross assets of joint venture 20,128 19,299
Share of gross liabilities of joint venture (18,369) (16,009)
Net investment in joint venture 1,759 3,290
Other investments 2,323 2,450
Total investments 4,082 5,740
Total fixed assets 42,426 49,017
Current assets
Stocks 36,456 48,518
Debtors 61,071 67,410
Cash at bank and in hand 6,411 4,806
103,938 120,734
Creditors: amounts falling due within one year
Bank loans and overdrafts (3,080) (7,982)
Other creditors (48,775) (59,759)
(51,855) (67,741)
Net current assets 52,083 52,993
Total assets less current liabilities 94,509 102,010
Creditors: amounts falling due after one year - (808)
Provisions for liabilities and charges (5,344) (6,036)
Net assets employed 89,165 95,166
Capital and reserves
Called up share capital 2,396 2,395
Share premium account 18,819 18,776
Other reserves 15,930 15,930
Profit and loss account 52,020 58,065
Equity shareholders' funds 10 89,165 95,166
Group Cash Flow Statement
Year ended 31 March 2003
2003 2002
Notes £000 £000
Net cash inflow from operating activities 11 14,913 6,642
Dividend from joint venture 2,473 2,793
Returns on investments and servicing of finance 11 (1,185) (1,104)
Taxation (1,973) (231)
Capital expenditure and financial investment 11 (2,833) 1,566
Acquisitions and disposals 6 (371) (1,423)
Equity dividends paid (3,931) (3,939)
Cash inflow before management of liquid resources and financing 7,093 4,304
Management of liquid resources 11 (5,795) (1,000)
Financing 11 44 123
Increase in cash in the year 1,342 3,427
Reconciliation of Net Cash Flow to Movement in Net Funds/(Debt)
Year ended 31 March 2003
2003 2002
Note £000 £000
Increase in cash in the year 1,342 3,427
Change in liquid resources 5,795 1,000
Translation difference 178 (95)
Movement in net funds/(debt) in the year 7,315 4,332
Opening net debt (3,984) (8,316)
Closing net funds/(debt) 12 3,331 (3,984)
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
2003 and 31 March 2002 have been prepared on a basis consistent with the
accounting policies disclosed in the Group's Annual Report and Accounts 2002.
The prior year adjustment relates to the adoption of FRS 19 'Deferred Tax' in
the year ended 31 March 2002.
The results for continuing operations before exceptional items analysed by
business groups were as follows:
Turnover Operating profit/(loss)
2003 2002 2003 2002
£000 £000 £000 £000
Analytical 61,618 81,180 2,790 7,891
Medical 36,342 39,353 (820) (1,511)
Superconductivity 88,633 91,352 4,752 362
186,593 211,885 6,722 6,742
Share of OMT joint venture (49%) 44,129 46,600 1,605 5,213
230,722 258,485 8,327 11,955
The results for continuing operations before exceptional items for the wholly
owned businesses by half year were as follows:
2002 2002 2003 2003
First Second First Second
half half half half
£000 £000 £000 £000
Turnover
Analytical 43,104 38,076 32,665 28,953
Medical 19,169 20,184 17,246 19,096
Superconductivity 41,356 49,996 44,681 43,952
103,629 108,256 94,592 92,001
Operating profit/(loss)
Analytical 5,275 2,616 750 2,040
Medical (849) (662) (640) (180)
Superconductivity (863) 1,225 2,418 2,334
3,563 3,179 2,528 4,194
2. Exchange rates
The principal exchange rates used to translate the Group's overseas results were
as follows:
Year to 31 March 2003 Year to 31 March 2002
Average Average
contract contract
Average Year end Average Year end
rate rate rate rate rate rate
US Dollar 1.54 1.58 1.50 1.43 1.42 1.47
Yen 188 187 176 180 189 159
Euro 1.56 1.45 1.59 1.62 1.63 1.59
3. Net operating expenses and exceptional items
Net operating expenses for continuing businesses pre-exceptional items comprise:
2003 2002
£000 £000
Distribution costs 30,877 35,528
Research and development costs 12,641 12,932
Administrative expenses 9,471 10,152
Goodwill amortisation 149 (11)
Net operating expenses 53,138 58,601
Exceptional items for the year ended 31 March 2003 relate to continuing
activities. These comprise combined redundancy costs of £1.7 million across all
businesses and £0.4 million costs incurred by Medical on the termination of its
distribution agreement of its loss-making sleep product line.
Exceptional items for the year ended 31 March 2002 comprise a profit before tax
of £3.0 million on disposal of properties.
4. Pensions costs
The employer's annual costs in connection with the three defined benefit pension
schemes in the UK, US and Japan under SSAP 24 are set out below and compared
with the estimated annual expense under FRS 17 and the cash contributions made
during the year:
2003
£ million
SSAP 24 expense 2.4
FRS 17 net expense 3.3
Actual cash contributions 3.3
The assets and liabilities of the schemes at 31 March 2003 under FRS 17 were:
2003
£ million
Assets 73.8
Present value of scheme liabilities (106.7)
Deficit in the schemes (32.9)
Related deferred tax asset 10.0
Net pension liability (22.9)
In addition, during the year the company made contributions of £460,000 to a
number of defined contribution pension schemes.
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.
6. Acquisitions and disposals
There were no acquisitions in the year ended 31 March 2003. In the prior year
ended 31 March 2002, the Group acquired the business and assets of CMI
International Corporation based in Chicago, USA.
On 1 July 2002 part of the Cambridge-based Thin Films business was transferred
to Cambridge University for nil consideration. There was no profit or loss on
disposal. The intellectual property connected with the Thin Films business has
been licensed to Cambridge University, with Oxford Instruments benefiting from a
royalty stream from any future commercial developments.
On 10 October 2002 the Group sold its On-line Process Systems business, based in
North Andover, USA for deferred consideration of £0.3 million. The loss on
disposal was £1.6 million. The results of this business are shown as
discontinued operations in the Group Profit and Loss Account.
7. Total net interest payable
2003 2002
£000 £000
Interest receivable on deposits at short call 17 50
Interest payable and similar charges on bank loans and overdrafts (1,185) (1,172)
Group net interest payable (1,168) (1,122)
Share of joint venture net interest payable (387) (404)
Total net interest payable (1,555) (1,526)
The interest payable and similar charges on bank loans and overdrafts includes a
£577,000 (2002 £223,000) charge arising from US dollar: Sterling swap
arrangements that were in place during the year. This is the cost of managing
the cash and borrowings between the UK and US and arises from the interest rate
differential between Sterling and US dollar. The increase in cost compared to
the prior year reflects both a widening in the interest rate deferential and an
increase in the amount of the currency being swapped. Just prior to the year end
the swap amount was substantially reduced.
8. Dividends per share
Dividends per share are as follows:
2003 2002
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 2003 will be 5 September 2003, and subject to approval of
shareholders at the Annual General Meeting on 29 July 2003, payment will be made
on 3 October 2003.
9. Earnings per share
Basic and diluted earnings per share have been calculated on the weighted
average of 46,802,662 shares (2002 46,878,981 shares) and 47,072,160 shares
(2002 47,048,258 shares) in issue during the year, respectively.
10. Reconciliation of Movements in Equity Shareholders' Funds
2003 2002
£000 £000
Profit for the financial year 1,236 9,348
Dividends paid and proposed (3,935) (3,931)
Retained (loss)/profit for the financial year (2,699) 5,417
Exchange differences on foreign currency net investments (3,346) (144)
New share capital subscribed 44 123
Net (reduction)/increase in equity shareholders' funds (6,001) 5,396
Opening equity shareholders' funds 95,166 89,770
Closing equity shareholders' funds 89,165 95,166
11. Net cashflow from operating activities and cash flows netted in the
cashflow statement
2003 2002
£000 £000
Group operating profit 3,939 5,319
Depreciation charges 5,656 6,220
Amortisation of goodwill 311 313
Net loss on disposal of fixed assets 123 25
Change in stocks 10,903 (3,730)
Change in debtors 5,426 1,402
Change in creditors (10,683) (2,774)
Change in provisions (762) (133)
Net cash inflow from operating activities 14,913 6,642
Interest received 17 50
Interest paid (1,202) (1,154)
Net cash outflow from returns on investments and servicing of finance (1,185) (1,104)
Purchase of fixed assets (2,967) (4,806)
Sale of fixed assets 246 6,786
Investments acquired (112) (414)
Net cash (outflow)/inflow from capital expenditure and financial investment (2,833) 1,566
Decrease in term loans (5,795) (1,000)
Net cash outflow from management of liquid resources (5,795) (1,000)
Issue of ordinary shares including share premium 44 123
Net cash inflow from financing 44 123
12. Movement in Net Funds/(Debt)
At Exchange Reclassification Cash At
31 March rate movement 31 March
2003 effect in year 2002
£000 £000 £000 £000 £000
Cash at bank and in hand 6,411 120 - 1,485 4,806
Bank overdrafts (352) (21) - (143) (188)
Net cash 6,059 99 - 1,342 4,618
Debt due within one year (2,728) (1) (728) 5,795 (7,794)
Debt due after one year - 80 728 - (808)
Net funds/(debt) 3,331 178 - 7,137 (3,984)
13. 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
2003 or 31 March 2002 but is derived from those accounts. This announcement was
approved by the Board of Directors on 3 June 2003. Statutory accounts for 2001/
2002 have been delivered to the Registrar of Companies, whereas those for 2002/
2003 will be delivered following the Company's Annual General Meeting on 29 July
2003. 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.
14. The Annual General Meeting
The Annual General Meeting will be held on Tuesday, 29 July 2003 at 2.30pm at
the offices of Oxford Instruments Superconductivity Limited, Tubney Woods,
Abingdon, Oxon, OX13 5QX.
This information is provided by RNS
The company news service from the London Stock Exchange ND
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