Final Results
Oxford Instruments PLC
03 June 2005
3 June 2005
Oxford Instruments plc
Announcement of preliminary results for the year to 31 March 2005
Oxford Instruments plc ("Oxford Instruments" or "the Company"), the advanced
instrumentation business, today announced its preliminary results for the year
to 31 March 2005:
• Turnover of the continuing businesses was £156.5m compared to £147.6m in
the prior year
• Pre-tax profit* was £7.9m, up £0.1m on the prior year; at 2004 exchange
rates pre-tax profit* would have been £9.8m, up £2.0m on the prior year
• Analytical operating profit* grew strongly to £6.6m (2004 £3.7m) whilst
Superconductivity operating profit* declined to £0.8m (2004 £4.2m)
• The successful sale of the Medical business for £24.0m on 1 March 2005
allowed a special interim dividend of 25.0p per share (£11.8m) to be paid
to shareholders prior to the year end
• Metorex International Oy and Resonance Instruments Limited were acquired
in the year and are already earnings enhancing
• Earnings* per share were 10.9p per share (2004 12.0p)
• An unchanged final dividend of 6.0p per share is recommended making an
unchanged total for the year of 8.4p per share (excluding the special
interim dividend of 25.0p per share)
• There was an operating cash inflow of £7.1m for the year (2004 £17.8m)
• Net cash at 31 March 2005 was £26.5m (2004 £20.7m)
* For the continuing operations before exceptional items and goodwill
amortisation
Nigel Keen, Chairman of Oxford Instruments plc, said: "The last year has been
one of immense change for Oxford Instruments. We have disposed of our Medical
business, continued to address our operational performance, launched significant
new products and strengthened our senior management team with the arrival of
Jonathan Flint as Chief Executive. We are now ready to accelerate the pace of
growth and our future strategy is focused on building upon our capabilities in
the high growth sectors of nanotechnology, molecular bioscience and
environmental monitoring.
"The execution of this strategy will involve a level of investment that will
impact profits for the next two years. The emerging markets coupled with our
talents and infrastructure will provide significant opportunities to drive the
business forward and increase value for our shareholders."
Enquiries: Oxford Instruments plc Tel: 01865 881437 Fax: 01865 884045
Nigel Keen, Chairman
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 Preliminary 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).
No. of pages: 18
Chairman's Statement
The last year has been one of immense change for Oxford Instruments. We have
disposed of our Medical business, continued to address our operational
performance, launched significant new products and strengthened our senior
management team.
The successful sale of the Medical business to VIASYS Healthcare Inc. enabled us
to return capital to shareholders through the payment of a special dividend of
£11.8 million as well as supporting a special contribution of £6.0 million to
the Oxford Instruments UK pension scheme. The remainder of the proceeds, after
costs, is being held for reinvestment in the business.
With the disposal of the Medical business, the organisation is now highly
focused on the provision of tools for new high growth, high technology
industries such as nanotechnology and molecular bioscience.
We are at an important moment for Oxford Instruments. With an efficient
operating base, a focused portfolio and new products coming through to market,
it is time to accelerate the pace of growth. In order to achieve this, the Board
decided to change the leadership of the business and in November 2004 I took
over day-to-day control of the business until the beginning of the new financial
year, when Jonathan Flint was appointed as Chief Executive. I welcome Jonathan
to the Group and I look forward to working with him as he leads and grows our
business from its established operating base. As a first step, he and I have
worked on a revised and clarified strategy for the business which is outlined in
the Strategy Statement.
Group turnover of the continuing operations for the year to 31 March 2005 was
£156.5 million (2004 £147.6 million). Pre-tax profit for the continuing
operations before exceptional items and goodwill amortisation was £7.9 million,
up £0.1 million on the previous year. Both turnover and operating profit were
significantly impacted by the overall change in exchange rates during the year.
If the same exchange rates had applied during the year to 31 March 2005 as in
the previous year, turnover and pre-tax profit before goodwill amortisation and
exceptional items of the continuing operations would have been £9.1 million
higher at £165.6 million and £1.9 million higher at £9.8 million respectively.
The businesses acquired during the year contributed £7.5 million and £0.7
million to turnover and operating profit before goodwill amortisation
respectively. The discontinued Medical business made an operating loss before
exceptional items of £0.1 million compared with an operating profit of £0.1
million in the prior year.
Within Analytical operating profit, before exceptional items and goodwill
amortisation, increased to £6.6 million from £3.7 million. Our Microanalysis and
Industrial Products businesses continued to move ahead showing the fifth
successive year of profit growth. Our Plasma Technology business is thriving
following the successful integration of the VG Semicon business and our X-ray
Technology business produced significant growth in turnover and profit driven by
the buoyant market for environmental monitoring tools.
At Superconductivity operating profit, before exceptional items and goodwill
amortisation, fell from £4.2 million to £0.8 million primarily due to lower
magnet sales and adverse raw material and foreign exchange movements. Orders
this year were down 5% on last year reflecting the continuing reduction in
business from a significant customer. The NMR magnet business continues its
transformation programme. A series of business partnerships are being developed
in order to return this part of the business to full financial health. The
Physical Science business, which provides specialised magnet and cryogenic
systems to leading researchers throughout the world, has lost money in recent
years but is now close to break-even. Our Superconducting Wire business in the
USA continues to perform well. The monolith wire quality problem, which was
disclosed in the Interim Report in November 2004, has been fully provided for as
an exceptional cost. The matter is now closed and the customer relationship
strengthened. A new high performance superconducting wire has been developed and
is now being introduced into our high field magnets.
Earnings per share from our continuing operations, before exceptional items and
goodwill amortisation, were 10.9p (2004 12.0p) and the Board recommends a final
dividend of 6.0p making the total dividend of 8.4p for the year, unchanged from
last year. This excludes the special interim dividend of 25.0p which was paid in
March 2005.
In this year of change the progress we have made towards our goals is due to our
talented workforce and I would like to thank all of our employees for their hard
work in delivering a creditable improvement in performance.
During the year Mike Hughes joined the Board as a Non-Executive Director. As
Oxford Instruments enters a new era, Mike brings strengths to our Board with his
broad operational experience allied with sound technical understanding.
Looking ahead, we have selected a number of value-enhancing initiatives which
are outlined in the Strategy Statement. We have established a sound operating
base and we will continue to focus on improving profitability and returns across
our businesses by building on the momentum generated over recent years whilst at
the same time growing our turnover.
Execution of this strategy will involve a level of investment that will impact
the financial results of the Group for the next two years. In the current year
we estimate that there will be incremental product development expenditure of up
to £5.0 million. Meanwhile our existing trading activities have a sound base
from which to move forward steadily. Over the next few years the emerging
markets coupled with our talents and infrastructure will provide significant
opportunities to drive the business forward and increase value for our
shareholders.
Chief Executive's Introduction
I am delighted to have been appointed to lead Oxford Instruments through the
next important phase in its strategic development. Since joining the Group, I
have spent my time getting to know our senior management and local management
teams as well as speaking with customers and key partners. I have also met many
of our staff in person and through our internet communication systems and have
been encouraged by feedback from around the world. This two-way dialogue has
been invaluable in helping me shape my thoughts about the business.
I have visited our operations and customers in the UK, North America and the Far
East. I have been enormously impressed by the quality of our people and the
great respect that the Oxford Instruments brand carries throughout our global
customer community. The Group's technological and human assets are outstanding
and, when coupled with growing demand in emerging high technology industries,
offer a unique and valuable capability. Nanotechnology, molecular bioscience and
environmental monitoring provide significant growth opportunities for Oxford
Instruments. A key task for me will be to manage smoothly and successfully the
transition between old product lines and the new business model described in the
Strategy Statement. Going forward, we will be running our business with a set of
aims and objectives concentrating on strategic repositioning, customer focus and
new product innovation.
My priorities for 2005 are to refine, develop and implement the Group strategy
by harnessing the strengths and resources of the business and by selective
acquisitions. Oxford Instruments has an excellent technological heritage but our
position in the value chain has sometimes hampered our ability to realise
sufficient value from this technology. Our new strategic focus will allow us to
leverage our capability in analytical instruments to provide direct to end users
a new generation of tools for nanotechnology, molecular bioscience and
environmental monitoring. At the same time we will continue our initiatives to
improve efficiency and profitability by further use of low-cost production in
Eastern Europe and the Far East, including our new manufacturing facility in
China.
Most importantly, I look forward to delivering shareholder value through the
successful implementation of our strategy. This will be done by uniting the
Oxford Instruments team behind our common objectives of growth through customer
service and new product innovation.
Strategy Statement
With the sale of the Medical business, much organisational complexity has been
removed and the focus is now on commercialising our intellectual property and
technological know-how in the development of valuable tools for new industrial
and scientific markets. The continuation of the wide ranging efficiency
programme has created a solid platform from which to grow the business and we
are now ready to develop and take to market the products which will deliver
sustainable growth for the benefit of all of the Group's stakeholders.
Following internal reviews and external studies of our respective strengths and
market opportunities, we have refocused our future strategy on building upon our
key strength which lies in our deep understanding of the world at the atomic and
molecular level. Our business model reflects the convergence between the
physical and biological sciences, meaning that an overlapping set of tools can
serve both markets.
We will become a leading provider of a new generation of tools and systems for
both the physical and bioscience sectors, based on our ability to observe and
manipulate matter at the smallest scale. From chemical and material analysis, to
molecular structure and atomic deposition, we will expand our offering of tools
focused on comprehensive solutions to atomic and molecular level problems. We
will build on our capability to create specialised environments such as ultralow
temperature or high magnetic fields, to provide systems to observe and
characterise matter at very small scales, and to start manipulating and building
structures at the atomic level. As well as developing new processes and
environments we will also actively seek to grow our customer support revenues to
provide stable long term earnings in order to match the more volatile cashflow
associated with new product introduction.
There are many areas of outstanding technical competence within Oxford
Instruments. These will be brought together as we operate increasingly as one
company. For example, we will continue to generate competitive advantage though
integrated wire and magnet design and will also bring the instrumentation skills
in our Analytical instruments business to bear elsewhere in the organisation.
This will facilitate our move towards providing total solutions direct to end
users. This growth strategy will be coupled with an ongoing focus on operational
improvement, using low cost sources of production. We already have extensive
skills in serving the nanotechnology, molecular bioscience and environmental
monitoring markets and we plan to invest in growing our capabilities both
organically and by acquisition. Because we are focused on providing tools as
distinct from nano-engineered products, Oxford Instruments will be well
positioned to benefit from the early stages of the development of this new
industry.
With this clear vision of the future direction for the Group we will regularly
report on the progress made by the business against this strategic framework.
Operating Review
Following the sale of Medical, the Group's business consists of two main areas,
Analytical and Superconductivity. Analytical includes Industrial Products
(environmental and quality control instruments), X-ray Microanalysis
(identification of chemical elements and crystalline structures), Plasma
Technology (plasma etching and deposition equipment) and X-ray Technology (low
power X-ray tubes and sources). Superconductivity includes Magnet Technology
(NMR, ICR and MRI magnet systems), Physical Science (magnet and cryogenic
systems for applied research customers), Molecular Biotools (Dynamic Nuclear
Polarising systems to enhance NMR sensitivity), Superconducting Wire (wire for
superconducting magnets), MRI magnet service (cryogenic maintenance of hospital
MRI magnets) and Austin Scientific Technology (cryogenic pumps and compressors).
Since the end of the year a new business area has been formed, Oxford
Instruments Innovation, which includes the Molecular Biotools activity that was
previously part of Superconductivity together with other new instrument
projects.
Analytical
Orders and turnover for the year were £67.3 million (2004 £60.6 million) and
£69.8 million (2004 £58.5 million) respectively. Operating profit before
exceptional items and goodwill amortisation improved to £6.6 million (2004 £3.7
million).
Our Industrial Products business continues to grow. The Metorex business
acquired in September 2004 has now been integrated, is operating profitably and
was earnings enhancing in the year. Metorex, as well as providing advanced
sensor technology, brings to our product offerings hand-held EDXRF (energy
dispersive X-ray fluorescence) and optical emission instruments with particular
application in the environmental and scrap metal sorting markets. This
acquisition is consistent with the market trend towards hand-held
instrumentation. The 'X-Strata960' instrument has been launched for the quality
control measurement of metal coatings in the electronics and metal finishing
industry. We have also begun to transfer the manufacture of our range of
hand-held coating thickness products from Chicago to our facility in Shanghai.
The market for our X-ray Microanalysis business, providing analytical
instruments for electron microscopes, remained steady. The convenience and cost
advantages of our recently introduced 'INCADryCool' non liquid nitrogen sample
cooler are gaining increased recognition among our customers and several other
major new product development programmes are underway. In addition, with the
acquisition of HKL Technology A/S in April 2005, the product portfolio has been
significantly enhanced with the addition of the best in class EBSD (electron
backscatter diffraction) instrumentation. With our existing market leading EDS
(energy dispersive spectroscopy) and WDS (wave length dispersive spectroscopy)
systems we now offer the best combination of elemental analysis systems in the
market for use with electron microscopes.
Our Plasma Technology business has shown good profitability in the year despite
no significant upturn in the compound semiconductor market. A vigorous programme
of product introduction based on extensive customer research has been started
and the benefits of this are expected in the next financial year. Particular
developments to produce the equipment for manufacturing high brightness LEDs
(light emitting diodes) are under way. The market for high brightness LEDs is
growing with widespread utilisation already being seen in the automotive
industry. These products are very energy efficient which is expected to lead to
their increasing use in the domestic market. The VG Semicon molecular beam
epitaxy business acquired in October 2003 has now been integrated into the
Plasma Technology facility in Yatton and the costs of closing the East Grinstead
factory, which amounted to £1.0 million, have been included within exceptional
costs.
Our X-ray Technology business grew strongly last year on a broadening customer
base and with especially strong sales from low power X-ray sources. This growth
was in part driven by increasingly demanding new environmental legislation and
although last year may have been exceptional in this regard, we are well
positioned to exploit this growth area in future.
Superconductivity
Orders and turnover for the year were £79.7 million (2004 £83.6 million) and
£86.7 million (2004 £89.1 million) respectively. Operating profit before
exceptional items and goodwill amortisation declined to £0.8 million (2004 £4.2
million). As previously announced the business took steps to reduce its UK cost
base in both June 2004 and in March 2005 and the redundancy costs of £1.2
million have been included within the exceptional costs for the year.
As previously signalled, the Magnet Technology business had a poor year due to
lower than expected volumes from Varian, its largest customer, although good
progress has been made on reducing costs by the introduction of lean
manufacturing techniques and low cost sourcing initiatives. For many years,
Oxford Instruments has maintained a sound business by providing NMR magnets to
systems integrators which use the magnets as part of their NMR systems sold to
end users. However recently the market has polarised into the supply of high
field, technologically demanding magnets and low field, commodity magnets. In
this latter market, the system integrators are tending to source low field
magnets in-house. In order to ensure an orderly transition to this new way of
doing business we have entered into a new three year contract with Varian for
the supply of magnets. This contract took effect from 1 April 2005.
Oxford Instruments remains the world leader in high field magnets and has
recently broadened the range of these magnets based on its newly developed high
performance 'RRP' superconducting wire. These include the 'Actively Shielded'
800 MHz magnet, which also uses new coil structures. This new technology reduces
stray fields significantly which in turn reduces the space our customers need to
install systems. The first of these new 800 MHz magnets is now at field. Our
'ActivelyCooled' 600 MHz and 700 MHz magnets have also progressed well with
prototype testing at our customers' premises due to start shortly. In addition
we have successfully installed six of our 900 MHz 'Discovery' magnets. Our
strategy is now to focus on high value magnets with clear competitive advantage
and to exploit them where possible as end user systems either on our own or with
others.
The Physical Science business moved towards break-even during the year against
stable markets for its refrigeration and spectroscopy products. It has
successfully launched a number of new cryo-free products, which offer
significantly improved ease of use for customers as they do not require filling
with cryogens after installation. The level of demand for large customer
specific magnets for government sponsored research remained steady. We continue
to do well on high-visibility science programmes and in particular we have won a
number of orders with the National High Magnet Field Laboratory in Florida.
The Molecular Biotools business was formed in April 2004 within the UK
Superconductivity business. It was created to exploit the technology licenced
exclusively from GE Healthcare to develop certain applications of a novel
magnet-based sample preparation technique in the life sciences market. The first
major project is to produce a DNP (dynamic nuclear polarisation) preparation
unit to allow faster NMR analysis. This new system, branded 'Hyper-Sense',
attracted significant interest at the annual ENC (Experimental NMR Conference)
tradeshow in April 2005. The programme is on track and we remain confident about
the prospects for the new product. Molecular Biotools acquired Resonance
Instruments in September 2004. The skills and intellectual property acquired are
making a significant contribution to the DNP project as well as giving us
capability that can be used in the low cost end user NMR instrument markets. The
acquisition was earnings enhancing in the year.
Superconducting wire volumes remained strong, based on growth in the market for
hospital MRI magnets, but the profitability of the business was adversely
affected by sales price erosion and rising raw material prices, particularly
copper. The monolith wire quality problem, which was disclosed in the Interim
Report in November 2004, has been fully provided for as an exceptional cost. The
matter is now closed and the customer relationship strengthened. We have
developed a new highly efficient 'RRP' wire which has been tested successfully
in a number of new Oxford Instruments magnets. The International Thermonuclear
Energy Reactor (ITER) project, an internationally backed programme to try to
generate huge quantities of power from sea water, is expected to receive formal
governmental go-ahead shortly. This project will provide an opportunity for
significant wire supply in the coming years. We have supplied materials under
the qualification programme and have met the required specification. We plan to
invest in new plant to support this activity and the rest of the wire business.
The MRI magnet service business grew last year reflecting the steady growth of
the installed base in the USA. As the organisation grows it is able to offer an
increasingly attractive service to its customers.
The Austin Scientific cryogenic pump and compressor business had a steady year
and sees the opportunity for sales growth and low cost manufacturing in China.
Discontinued Business
Following the restructuring of the Medical business over the last few years, it
was sold to VIASYS Healthcare Inc. on 1 March 2005 and has been treated as a
discontinued business in the results for the year. The sale will now allow us to
focus on the growth and development of our Analytical and Superconductivity
businesses.
Group-led Initiatives
Customer focus
Since November 2004 we have undertaken a number of programmes to ensure that the
Group becomes more customer focused, concentrating on providing products and
services which present innovative solutions to customer problems. In particular
we ensure that the 'Voice of the Customer' plays a key part in our new product
introduction and customer service activities. Coupled with these customer focus
initiatives the Group has set a target for increased service revenues. As part
of our intent to become more customer facing the focus of our existing trading
activities is increasingly on new product introduction.
Innovation
Reflecting the Group strategy as outlined in the Strategy Statement a small new
management team, Oxford Instruments Innovation, has been formed reporting to the
Chief Executive to drive forward the various new investment initiatives focused
on the markets we address. This team will recommend, implement and control the
incremental revenue investment programmes designed to generate products capable
of creating growth and profits which will be significant in Group terms.
Manufacturing
Our focus on lean manufacturing continues and our initiatives during the year
have cut the lead-time in some products by half. During the year we won a Highly
Commended National Training Award for our lean manufacturing training programme.
Low cost sourcing
We have increased the amount of product and components sourced from low cost
regions of the world, particularly China. We opened a service centre and factory
in Shanghai in August 2004. This is already providing high quality service to
our Chinese customers and local assembly of some of our hand-held products has
been started. Continued growth in the proportion of our value creation
undertaken in China is expected.
Japan
The 'Sir Martin Wood Prize' ceremony was again held in Japan and has become
established as a significant annual event in the Japanese scientific research
community calendar. The prize is awarded for the most promising post graduate
research undertaken in the field of condensed matter science.
Future Investment
As we move forward to deliver our strategy we will be making considerable
investment, both in product development costs and in the pursuit of product
infill acquisition opportunities. These investments will be geared to restoring
sales growth to the business and to deliver increasing profits, which are
expected to enhance shareholder value.
Group Profit and Loss Account
Year ended 31 March 2005
Continuing operations Discontinued 2005
Before Exceptional Sub-total operations
exceptional items
items
Notes £m £m £m £m £m
----------------- ------ -------- -------- ------- -------- --------
Turnover
Group and share of
joint 156.5 - 156.5 25.6 182.1
venture turnover
Less share of joint - - - - -
venture turnover
----------------- ------ -------- -------- ------- -------- --------
Group turnover
(including
acquisitions 2, 6 156.5 - 156.5 25.6 182.1
of £7.5m)
Cost of sales (110.4) (1.9) (112.3) (13.2) (125.5)
----------------- ------ -------- -------- ------- -------- --------
Gross profit/(loss) 46.1 (1.9) 44.2 12.4 56.6
Net operating 3 (39.8) (3.8) (43.6) (12.5) (56.1)
expenses
----------------- ------ -------- -------- ------- -------- --------
Group operating
profit/(loss)
before 2 7.4 (5.7) 1.7 (0.1) 1.6
goodwill
amortisation
Goodwill (1.1) - (1.1) - (1.1)
amortisation
----------------- ------ -------- -------- ------- -------- --------
Group operating
profit/(loss)
(including
acquisition profit 2 6.3 (5.7) 0.6 (0.1) 0.5
of
£0.3m)
Share of operating - - - - -
loss of joint
venture
----------------- ------ -------- -------- ------- -------- --------
Total operating
profit/(loss)
Group and share of
joint 6.3 (5.7) 0.6 (0.1) 0.5
venture
Gain on disposal of
discontinued
business 7 - - - 6.0 6.0
before goodwill
Gain on disposal of - - - - -
joint venture
before goodwill
Goodwill previously
written off against
reserves 7 - - - (3.6) (3.6)
Profit on the
disposal - 0.2 0.2 - 0.2
of property
----------------- ------ -------- -------- ------- -------- --------
Profit/(loss)
before 6.3 (5.5) 0.8 2.3 3.1
interest and tax
Total net interest
receivable/ 5 0.5 - 0.5 - 0.5
(payable)
----------------- ------ -------- -------- ------- -------- --------
Profit/(loss) on
ordinary activities
before tax 6.8 (5.5) 1.3 2.3 3.6
Tax on profit/
(loss) on (2.8) 0.9 (1.9) (0.1) (2.0)
ordinary activities
----------------- ------ -------- -------- ------- -------- --------
Profit/(loss) for
the
financial year
attributable to 4.0 (4.6) (0.6) 2.2 1.6
shareholders
----------------- ------ -------- -------- ------- --------
Dividends payable
to 8 (15.8)
shareholders
----------------- ------ -------- -------- ------- -------- --------
Retained loss for
the (14.2)
financial year ------ -------- -------- ------- -------- --------
-----------------
pence pence pence pence pence
----------------- ------ -------- -------- ------- -------- --------
Earnings per share 9
Basic earnings per
share
before goodwill 10.9 (9.9) 1.0 4.5 5.5
amortisation
Basic and diluted
earnings per share 8.7 (9.9) (1.2) 4.5 3.3
----------------- ------ -------- -------- ------- -------- --------
Group Profit and Loss Account
Year ended 31 March 2004
Continuing operations Discontinued 2004
Before Exceptional Interest in Sub-total operations
exceptional items and joint venture
items terminated
business
Notes £m £m £m £m £m £m
---------------- ------ ------- ------- ------- ------- -------- -------
Turnover
Group and
share of joint
venture
turnover 147.6 - 10.8 158.4 34.7 193.1
Less share of
joint venture
turnover 7 - - (10.8) (10.8) - (10.8)
---------------- ------ ------- ------- ------- ------- -------- -------
Group turnover 2 147.6 - - 147.6 34.7 182.3
Cost of sales (102.8) - - (102.8) (19.0) (121.8)
---------------- ------ ------- ------- ------- ------- -------- -------
Gross
profit/(loss) 44.8 - - 44.8 15.7 60.5
Net operating
expenses 3 (37.6) (1.6) - (39.2) (15.6) (54.8)
---------------- ------ ------- ------- ------- ------- -------- -------
Group
operating
profit/(loss)
before
goodwill
amortisation 2 7.9 (1.6) - 6.3 0.1 6.4
Goodwill
amortisation (0.7) - - (0.7) - (0.7)
---------------- ------ ------- ------- ------- ------- -------- -------
Group
operating
profit/(loss) 2 7.2 (1.6) - 5.6 0.1 5.7
Share of
operating loss
of joint
venture 7 - - (0.2) (0.2) - (0.2)
---------------- ------ ------- ------- ------- ------- -------- -------
Total operating
profit/(loss)
Group and
share of joint 7.2 (1.6) (0.2) 5.4 0.1 5.5
venture
Gain on disposal - - - - - -
of discontinued
business before
goodwill
Gain on
disposal of
joint venture
before
goodwill 7 - - 6.8 6.8 - 6.8
Goodwill
previously
written off
against
reserves 7 - - (0.2) (0.2) - (0.2)
Profit on the - - - - - -
disposal of
property
---------------- ------ ------- ------- ------- ------- -------- -------
Profit/(loss)
before
interest and
tax 7.2 (1.6) 6.4 12.0 0.1 12.1
Total net
interest
receivable/(pa
yable) 5 (0.1) - (0.1) (0.2) - (0.2)
---------------- ------ ------- ------- ------- ------- -------- -------
Profit/(loss)
on ordinary
activities
before tax 7.1 (1.6) 6.3 11.8 0.1 11.9
Tax on
profit/(loss)
on ordinary
activities (2.1) 0.4 0.1 (1.6) (0.3) (1.9)
---------------- ------ ------- ------- ------- ------- -------- -------
Profit/(loss)
for the
financial year
attributable
to
shareholders 5.0 (1.2) 6.4 10.2 (0.2) 10.0
---------------- ------ ------- ------- ------- ------- --------
Dividends
payable to
shareholders 8 (3.9)
---------------- ------ ------- ------- ------- ------- -------- -------
Retained
profit for the
financial year 6.1
---------------- ------ ------- ------- ------- ------- -------- -------
pence pence pence pence pence pence
---------------- ------ ------- ------- ------- ------- -------- -------
Earnings per
share 9
Basic earnings
per share
before
goodwill
amortisation 12.0 (2.4) 13.7 23.3 (0.6) 22.7
Basic and
diluted
earnings per
share 10.6 (2.4) 13.7 21.9 (0.6) 21.3
---------------- ------ ------- ------- ------- ------- -------- -------
Group Statement of Total Recognised Gains and Losses
Year ended 31 March 2005
2005 2004
£m £m
-------------------------------- ---------- ----------
Profit for the financial year 1.6 10.0
Exchange differences on foreign currency net investments
of the 0.1 (2.8)
Group
-------------------------------- ---------- ----------
Total recognised gains and losses relating to the 1.7 7.2
financial year
-------------------------------- ---------- ----------
Group Balance Sheet
As at 31 March 2005
2005 2004
As restated
Notes £m £m
--------------------------- ------ ---------- ----------
Fixed assets
Intangible assets - goodwill 6 9.3 2.6
Tangible assets 28.6 32.6
Investments 1.6 1.6
--------------------------- ------ ---------- ----------
Total fixed assets 39.5 36.8
--------------------------- ------ ---------- ----------
Current assets
Stocks 23.9 28.5
Debtors 47.5 58.9
Cash at bank and in hand 29.7 23.2
--------------------------- ------ ---------- ----------
101.1 110.6
--------------------------- ------ ---------- ----------
Creditors: amounts falling due within one
year
Bank loans and overdrafts (3.2) (2.5)
Other creditors (44.9) (47.5)
--------------------------- ------ ---------- ----------
(48.1) (50.0)
--------------------------- ------ ---------- ----------
Net current assets 53.0 60.6
--------------------------- ------ ---------- ----------
Total assets less current liabilities 92.5 97.4
Creditors: amounts falling due after one year (1.1) -
Provisions for liabilities and charges (9.4) (5.3)
--------------------------- ------ ---------- ----------
Net assets employed 82.0 92.1
--------------------------- ------ ---------- ----------
Capital and reserves
Called up share capital 2.4 2.4
Share premium account 19.4 19.0
Investment in own shares (2.7) (2.7)
Other reserves 16.0 16.0
Profit and loss account 46.9 57.4
--------------------------- ------ ---------- ----------
Equity shareholders' funds 10 82.0 92.1
--------------------------- ------ ---------- ----------
Group Cash Flow Statement
Year ended 31 March 2005
2005 2004
Notes £m £m
------------------------------- ------ --------- ---------
Net cash inflow from operating activities 11 7.1 17.8
Returns on investments and servicing of finance 11 0.5 (0.1)
Taxation (2.1) (2.4)
Capital expenditure and financial investment 11 (2.4) (2.2)
Acquisitions 6 (5.8) (0.2)
Disposals 7 24.0 8.5
Equity dividends paid (15.8) (3.9)
------------------------------- ------ --------- ---------
Cash inflow before management of liquid resources
and 5.5 17.5
financing
Management of liquid resources 11 (0.4) (14.8)
Financing 11 0.4 0.2
------------------------------- ------ --------- ---------
Increase in cash in the year 5.5 2.9
------------------------------- ------ --------- ---------
Reconciliation of Net Cash Flow to Movement in Net Funds
Year ended 31 March 2005
2005 2004
Note £m £m
------------------------------- ------ --------- ---------
Increase in cash in the year 5.5 2.9
Change in liquid resources 0.4 14.8
Translation difference (0.1) (0.3)
------------------------------- ------ --------- ---------
Movement in net funds in the year 5.8 17.4
Opening net funds 20.7 3.3
------------------------------- ------ --------- ---------
Closing net funds 12 26.5 20.7
------------------------------- ------ --------- ---------
Notes on the Preliminary Financial Statements
1. Basis of presentation of accounts
The Group profit and loss account and balance sheet for the years ended 31 March
2005 and 31 March 2004 have been prepared on a basis consistent with the
accounting policies disclosed in the Group's Annual Report and Accounts 2004
with the exception of UITF 38.
The Group has adopted UITF 38 'Accounting for ESOP Trusts' and the related
amendments to UITF 17 'Employee Share Schemes' in the year. In previous periods
the purchase cost of these shares were treated as fixed asset investments. The
effect of UITF 38 has been to recognise the net carrying value of shares held by
the trust as a deduction in shareholders' funds rather than as a fixed asset
investment. The impact of the change in accounting policy is disclosed in Note
10.
The principal exchange rates used to translate the Group's overseas results and
transactions were as follows:
Year to 31 March 2005 Year to 31 March 2004
Average Year end Average contract Average Year end Average contract
rate rate rate rate rate rate
----------- -------- -------- -------- -------- -------- --------
US Dollar 1.85 1.89 1.80 1.69 1.84 1.63
Euro 1.47 1.45 1.43 1.45 1.50 1.49
Yen 198 202 187 191 191 183
----------- -------- -------- -------- -------- -------- --------
2. Results by business
The results for continuing wholly-owned operations before exceptional items
analysed by business were as follows:
Turnover Operating profit Net operating assets
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
------------- -------- -------- -------- -------- -------- --------
Analytical 69.8 58.5 6.6 3.7 25.1 24.6
Superconductivity 86.7 89.1 0.8 4.2 27.1 30.2
------------- -------- -------- -------- -------- -------- --------
156.5 147.6 7.4 7.9 52.2 54.8
-------- -------- -------- --------
Goodwill (1.1) (0.7)
amortisation -------- --------
6.3 7.2
-------- --------
3. Net operating expenses and exceptional items
Net operating expenses for continuing operations before exceptional items:
2005 2004
£m £m
------------------------------ ----------- -----------
Distribution costs 19.5 19.2
Research and development costs 11.3 10.4
Administrative expenses 7.9 7.3
Goodwill amortisation 1.1 0.7
------------------------------ ----------- -----------
Net operating expenses 39.8 37.6
------------------------------ ----------- -----------
Exceptional items for the year ended 31 March 2005 relate to continuing
operations. In the year ended 31 March 2004 exceptional items of £1.1m relate to
discontinued operations.
Exceptional items can be analysed as follows:
2005 2004
Net operating Net operating
Cost of sales expenses expenses
£m £m £m
----------------------- ---------- ----------- -----------
Superconducting wire quality (1.5) - -
issues
Redundancy costs - (1.2) (1.6)
Post acquisition restructuring (0.4) (0.7) -
Site closure costs - (1.0) -
Chief Executive replacement - (0.9) -
----------------------- ---------- ----------- -----------
(1.9) (3.8) (1.6)
----------------------- ---------- ----------- -----------
Exceptional items for the year ended 31 March 2005 comprise costs relating to a
specific wire quality issue at the US superconducting wire manufacturing plant,
redundancy costs arising in the Superconductivity business and restructuring
costs (redundancy expenses, stock write-off and surplus lease costs) following
the acquisition of Metorex International Oy and Resonance Instruments Limited in
September 2004, costs relating to the closure of the East Grinstead site and
expenses associated with the replacement of the Chief Executive.
Exceptional items for the year ended 31 March 2004 comprise redundancy costs
incurred as the Medical business reduced its overseas cost base and costs of the
Cambridge based operations of Superconductivity prior to the spin out of ARKeX
Limited.
4. Pensions costs
Before adjustments relating to the impact of the Medical disposal the employer's
annual costs in connection with the two largest defined benefit pension schemes
in the UK and USA 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:
2005 2004
£m £m
-------------------------------- ---------- ----------
SSAP 24 expense 3.4 3.8
FRS 17 net expense 3.8 4.1
Actual net cash contributions 2.7 2.8
-------------------------------- ---------- ----------
The assets and liabilities of the UK and USA schemes at 31 March 2005 under FRS
17 were:
2005 2004
£m £m
-------------------------------- ---------- ----------
Assets 101.8 91.5
Present value of scheme liabilities (145.2) (128.7)
-------------------------------- ---------- ----------
Deficit in the schemes (43.4) (37.2)
Related deferred tax asset 13.4 11.4
-------------------------------- ---------- ----------
Net pension liability (30.0) (25.8)
-------------------------------- ---------- ----------
5. Total net interest receivable/(payable)
2005 2004
£m £m
-------------------------------- ---------- ----------
Interest receivable on deposits at short call 0.7 0.2
Interest payable and similar charges on bank loans and
overdrafts (0.2) (0.3)
-------------------------------- ---------- ----------
Group net interest receivable/(payable) 0.5 (0.1)
Share of joint venture net interest payable - (0.1)
-------------------------------- ---------- ----------
Total net interest receivable/(payable) 0.5 (0.2)
-------------------------------- ---------- ----------
6. Acquisitions
Metorex International Oy
On 13 September 2004 the Group acquired 89.5% of the share capital of Metorex
International Oy ('Metorex') based in Helsinki, Finland. A further 9.6% was
acquired during January 2005. At 31 March 2005 the Group owned 99.1% of the
share capital of Metorex, with an expectation that the remaining share capital
will be acquired in due course. The total cash consideration was £5.3m of which
£4.0m had been paid at 31 March 2005 and the remaining £1.3m is payable by
instalments in May 2005 and June 2006.
Accounting
policy Fair value
Book value adjustments to the Group
£m £m £m
------------------------- ---------- ---------- ----------
Tangible fixed assets 0.1 - 0.1
Stocks 1.4 (0.6) 0.8
Debtors 1.4 - 1.4
Creditors (1.7) (0.1) (1.8)
Provisions (0.1) - (0.1)
------------------------- ---------- ---------- ----------
Total net assets 1.1 (0.7) 0.4
------------------------- ---------- ----------
Goodwill 4.9
------------------------- ---------- ---------- ----------
Total purchase cost 5.3
Less consideration deferred (1.3)
------------------------- ---------- ---------- ----------
Net cash outflow in respect of the
purchase 4.0
Less net cash acquired -
------------------------- ---------- ---------- ----------
Net cash outflow on acquisition 4.0
------------------------- ---------- ---------- ----------
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.
Resonance Instruments Limited
The Group acquired Resonance Instruments Limited based in Witney, Oxfordshire on
21 September 2004 for a net cash consideration of £1.8 million. A further £1.3m
payment is deferred and payable over the next two years based on future
performance and staff retention.
Book value and
fair
value to the
Group
£m
--------------------------------- ------------------
Tangible fixed assets 0.1
Stocks 0.4
Debtors 0.4
Creditors (0.6)
Provisions (0.1)
--------------------------------- ------------------
Total net assets 0.2
Goodwill 2.9
--------------------------------- ------------------
Total purchase cost 3.1
Less consideration deferred (1.3)
--------------------------------- ------------------
Net cash outflow in respect of the purchase 1.8
Less net cash acquired -
--------------------------------- ------------------
Net cash outflow on acquisition 1.8
--------------------------------- ------------------
The book value of the assets acquired are based on the management accounts at
the date of acquisition. No material accounting policy or fair value adjustments
were required.
In the prior year ended 31 March 2004 the Group acquired the business and assets
of VG Semicon for a total consideration of £0.3m of which £0.2m was payable at
the time of acquisition.
7. Disposals
Medical business
On 1 March 2005 the Group sold its Medical business, headquartered in Old Woking
UK. The aggregate gross cash consideration, including the repayment of
inter-company loans was £24.0m. The transaction comprised the sale of the entire
share capital of certain subsidiaries and the Medical related business and
assets within certain other subsidiary companies. The resultant profit on
disposal before goodwill was £6.0m. Included within the provisions on disposal
is an amount of £1.7m for the related pension deficit.
The results of the Medical business are shown as discontinued operations in the
Group profit and loss account.
There was a net profit on disposal of the business as follows:
£m
----------------------------------------- ----------
Gross cash consideration 24.0
Net tangible assets sold (12.8)
Net expenses (1.0)
Provisions (4.2)
----------------------------------------- ----------
Gain on the sale of net tangible assets 6.0
Less goodwill previously written off against reserves (3.6)
----------------------------------------- ----------
Net profit on disposal 2.4
----------------------------------------- ----------
Cash received 24.0
Net expenses paid -
----------------------------------------- ----------
Cash inflow on disposal 24.0
----------------------------------------- ----------
Oxford Magnet Technology
On 4 December 2003 the Company sold its 49% interest in Oxford Magnet Technology
('OMT') to Siemens plc. The proceeds on disposal were £8.5m giving rise to a
gain on disposal of £6.8m before goodwill of £0.2m previously written off
against reserves. The results of OMT were equity accounted in accordance with
FRS 9 for the three months ended 30 June 2003, up to which date it was
considered joint control existed, and from this date when it was considered that
joint control ceased until the date of disposal, the investment was accounted
for as a minority investment in accordance with FRS 2.
8. Dividends per share
Dividends per share are as follows:
2005 2004
pence pence
----------------------------------- --------- ---------
Interim dividend 2.4 2.4
Special interim dividend 25.0 -
Proposed final dividend 6.0 6.0
----------------------------------- --------- ---------
33.4 8.4
----------------------------------- --------- ---------
The record date for the final dividend of 6.0p per share in respect of the year
ended 31 March 2005 will be 30 September 2005, and subject to approval of
shareholders at the Annual General Meeting on 20 September 2005, payment will be
made on 28 October 2005.
9. Earnings per share
Basic and diluted earnings per share have been calculated on the weighted
average of 47.1 million shares (2004 46.9 million shares) and 47.6 million
shares (2004 47.1 million shares) in issue during the year, respectively.
10. Reconciliation of movements in equity shareholders' funds
2005 2004
As restated
Note £m £m
-------------------------------- ------ -------- ---------
Profit for the financial year 1.6 10.0
Dividends paid and proposed (15.8) (3.9)
-------------------------------- ------ -------- ---------
Retained (loss)/profit for the financial year (14.2) 6.1
Exchange differences on foreign currency net 0.1 (2.8)
investments
Goodwill written back to the profit and loss 3.6 0.2
account
Change in investment in own shares - 0.1
New share capital subscribed 0.4 0.2
-------------------------------- ------ -------- ---------
Net (reduction)/increase in equity shareholders' (10.1) 3.8
funds
-------------------------------- ------ -------- ---------
Opening equity shareholders' funds - as reported 92.1 89.2
Prior year adjustment 1 - (0.9)
-------------------------------- ------ -------- ---------
Opening equity shareholders' funds - as restated 92.1 88.3
-------------------------------- ------ -------- ---------
Closing equity shareholders' funds 82.0 92.1
-------------------------------- ------ -------- ---------
11. Net cashflow from operating activities and cash flows netted in
the cashflow statement
2005 2004
£m £m
---------------------------------- --------- ----------
Group operating profit 0.5 5.7
Depreciation charges 4.4 4.9
Amortisation of goodwill 1.1 0.7
Net profit on disposal of fixed assets (0.1) (0.1)
Change in stocks 0.3 6.9
Change in debtors 1.9 1.2
Change in creditors (1.8) (1.4)
Change in provisions 0.8 (0.1)
---------------------------------- --------- ----------
Net cash inflow from operating activities 7.1 17.8
---------------------------------- --------- ----------
Interest received 0.7 0.2
Interest paid (0.2) (0.3)
---------------------------------- --------- ----------
Net cash inflow/(outflow) from returns on investments and
servicing of finance 0.5 (0.1)
---------------------------------- --------- ----------
Purchase of fixed assets (3.2) (2.4)
Sale of fixed assets 0.8 0.5
Investments acquired - (0.3)
---------------------------------- --------- ----------
Net cash outflow for capital expenditure and financial
investment (2.4) (2.2)
---------------------------------- --------- ----------
Increase in term deposits (1.0) (14.0)
Increase/(decrease) in term loans 0.6 (0.8)
---------------------------------- --------- ----------
Net cash outflow from management of liquid resources (0.4) (14.8)
---------------------------------- --------- ----------
Issue of ordinary shares including share premium 0.4 0.2
---------------------------------- --------- ----------
Net cash inflow from financing 0.4 0.2
---------------------------------- --------- ----------
12. Movement in net funds
At Exchange Cash At
31 March rate movement 31 March
2005 effect in year 2004
£m £m £m £m
-------------------- --------- --------- --------- ---------
Cash at bank and in hand 14.7 (0.2) 5.7 9.2
Bank overdrafts (1.1) - (0.2) (0.9)
-------------------- --------- --------- --------- ---------
Net cash 13.6 (0.2) 5.5 8.3
Cash on deposit 15.0 - 1.0 14.0
Debt due within one year (2.1) 0.1 (0.6) (1.6)
-------------------- --------- --------- --------- ---------
Net funds 26.5 (0.1) 5.9 20.7
-------------------- --------- --------- --------- ---------
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
2005 or 31 March 2004 but is derived from those accounts. This announcement was
approved by the Board of Directors on 3 June 2005. Statutory accounts for 2003/
2004 have been delivered to the Registrar of Companies, whereas those for 2004/
2005 will be delivered following the Company's Annual General Meeting on 20
September 2005. 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, 20 September 2005 at 2.30pm
at the offices of Oxford Instruments plc, Old Station Way, Eynsham, Witney,
Oxon, OX29 4TL.
This information is provided by RNS
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