Interim Results
Oxford Instruments PLC
11 November 2003
11 November 2003
Oxford Instruments plc
Announcement of interim results for 2003/04
Oxford Instruments plc, the advanced instrumentation Company, today announced
consolidated interim results for the half year to September 2003.
• Profit before tax for the continuing operations of the wholly-owned
businesses, excluding exceptional items, increased by 17% to
£2.4 million, a good performance in challenging trading conditions;
• Turnover matched order intake at £87.3 million;
• Cash up £2.1 million since year end to £5.4 million, helped by further
reductions in stock levels;
• Recommended interim dividend of 2.4 pence, unchanged from last year;
• Sale of 49% share of Oxford Magnet Technology to Siemens in a cash
deal worth £9.1 million also announced today; key supplier
relationships between Oxford Instruments and Siemens to continue.
Andrew Mackintosh, Chief Executive of Oxford Instruments plc, said: "Our focus
on cost control has shown benefits in the first half and we will maintain our
priority work in these areas. We have increased our expenditure on product
development during the period in order to capitalise on the demand for
differentiated market-leading products. We will continue to explore strategic
opportunities to generate increased value from our positions in medical
instrumentation. The material progress we have made in a number of key areas
gives us confidence in our ability to achieve high levels of returns for our
shareholders in the future."
Enquiries: Oxford Instruments plc Tel: 01865 881437 Fax: 01865 884045
Nigel Keen, Chairman
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 Interim Results announcement please contact Vinnetta
Hutchings (email: vinnetta.hutchings@oxinst.co.uk) at the Company's registered
office at Old Station Way, Eynsham, Witney Oxon OX29 4TL.
Chairman's Statement
Nigel Keen, Chairman of Oxford Instruments plc, said today:
The past 6 months has been a period of intense activity and progress. We have
focussed on developing the strategic opportunities in all our businesses as
their markets improve, as well as continuing our emphasis on operational
efficiency, and we have resolved satisfactorily the uncertainties surrounding
our investment in Oxford Magnet Technology.
Financial Summary
Orders for the 6 months to 30 September 2003 of £87.4 million (2002 £94.7
million) were on target, despite continued low investment levels from our
customers in the semiconductor equipment market. Turnover matched orders at
£87.3 million (2002 £94.5 million).
Profit before tax for the continuing operations of the wholly-owned businesses
before exceptional items increased by 17% to £2.4 million (2002 £2.1 million).
This was a good performance in challenging trading conditions and was achieved
in spite of an increase of £0.7 million in UK pension costs. Cash increased
from £3.3 million at the year end to £5.4 million (2002 £10.3 million
borrowings), helped by further reductions in stock levels, which fell another
12% in the period following a 22% fall during last year. The directors have
recommended an interim dividend of 2.4p, unchanged from last year.
Oxford Magnet Technology
We have announced separately this morning the successful outcome of our
discussions with Siemens on the future of our investment in Oxford Magnet
Technology (OMT). Siemens has agreed to purchase our 49% share of OMT for a
total consideration of £9.1 million, which includes royalties for the ongoing
use of certain intellectual property. Key supply relationships between the
companies will continue, with extended contracts agreed for Oxford Instruments
to continue supplying Siemens with both high-performance wire and field service
facilities in the USA as well as third party distribution in Japan. The
transaction is subject to formal approval under German competition law.
Operational Review
Analytical
Turnover of continuing operations for the period of £28.6 million (2002 £32.6
million) reflected a continued decline in demand from the semiconductor and
telecommunications markets. Turnover from other segments was similar to last
year. Operating profits improved significantly to £1.5 million (2002 £0.8
million) following the cost-control programmes implemented last year.
Sales from an early application of our new 'Horizon' hand-held spectrometer have
been impacted by delays in obtaining government approvals and we are, therefore,
accelerating the development of alternative market applications to generate
near-term orders. Orders for our award-winning new 'Twin-X' chemical analysis
spectrometer are running ahead of forecast.
On 3 October 2003 we announced the acquisition of the assets of Thermo VG
Semicon, a leading UK-based supplier of specialist semiconductor processing
equipment, for a maximum consideration of US$1.3 million. We have now received
the first significant order, worth over US$1.0 million, from an industrial
customer making semiconductor components. In the 6 months to June 2003 Thermo
VG Semicon, which is a strong strategic fit to our existing plasma technology
business, reported sales of US$4.0 million.
Medical
Turnover for the period was up 3% to £17.7 million, generating a return to
profit of £0.1 million for the half year (2002 £0.7 million loss). Performance
was helped by lower overheads (8% down on the same period last year) and by a
continued strong performance from our 'Synergy' product used for muscle and
nerve measurements, as well as from the associated needles.
The restructuring of our supply chain for electroencephalography products is now
complete and this will result in incremental margin improvement going forward.
Gross margins showed an increase on last year, helped by new low-cost sourcing
arrangements, which are expected to bring further benefits in the second half.
While the operating performance of the business is improving, we continue to
review our strategic options to ensure that we generate an acceptable return for
our shareholders from the business.
Superconductivity
The volume of new orders received in the period was above target. However
turnover of £41.0 million was down 8% on last year (2002 £44.7 million).
Operating profits of £0.9 million were also down on the comparable period (2002
£2.4 million), impacted by continuing development investment in high field
magnets as well as reduced wire sales.
We have now successfully installed two high-field 'Discovery' magnets, used for
new drug discovery research. The outstanding performance of these systems has
confirmed the excellence of our product offerings in the growing market for
bioanalytical research tools. The costs of achieving this leadership have been
higher than forecast, however the experience gained from developing the early
units is already translating into improved designs. We therefore remain
confident that margins will improve over the next year and that 'Discovery' will
be a significant growth driver for the business. Elsewhere, test and
installation delays on other high field magnets also held back margins in the
magnet business. Design and process modifications underway will improve
performance in the coming months.
On 19 August 2003 we announced that we had obtained primary supplier status to
Thermo Electron Corporation for the magnets used in a new generation of
bio-tools for scientific and medical research. Early deliveries of production
units for this exciting new application are now being made.
Turnover and profits from our US-based superconducting wire business were
impacted in the first half by the continuation of operational problems
previously reported at OMT. OMT is an important customer for superconducting
wire and therefore as part of the arrangements for the sale of our investment in
OMT, we have strengthened our supplier relationship by extending our existing
wire contract.
We have received orders for evaluation quantities of wire for the new 'ITER'
programme (a US$5 billion multinational project designed to generate clean
energy from nuclear fusion reactions). If this project is constructed as
planned it will generate a very significant additional requirement for
superconducting wire over the next few years. We have also developed two highly
innovative wire products which have been used to generate world record magnetic
fields. These may enable the creation of new commercial magnet products in the
future.
Prospects
We are not relying on a near-term market recovery, but continue to implement
robust actions of our own to improve efficiencies across the businesses and to
grow profitable sales, in particular in our Superconductivity business where
margins are set to improve going forward. The outlook for the second half is in
line with the Board's expectations.
Group Profit and Loss Account
Half year ended 30 September 2003 - unaudited
Half year to 30 September 2003
Continuing operations
Before Exceptional Interest in Total
exceptional items joint
items and venture
interest in
joint
venture
Notes £ million £ million £ million £ million
Turnover
Group and share of joint venture turnover 2 87.3 - 10.8 98.1
Less share of joint venture turnover 3 - - (10.8) (10.8)
Group turnover 2 87.3 - - 87.3
Cost of sales (58.2) - - (58.2)
Gross profit 29.1 - - 29.1
Net operating expenses 4 (26.6) (0.2) - (26.8)
Group operating profit before goodwill 2.8 (0.2) - 2.6
amortisation
Goodwill amortisation (0.3) - - (0.3)
Group operating profit 2 2.5 (0.2) - 2.3
Share of operating loss of joint venture - - (0.2) (0.2)
Total operating profit - Group and share of 2.5 (0.2) (0.2) 2.1
joint venture
Loss on disposal of discontinued business - - - -
Profit before interest and tax 2.5 (0.2) (0.2) 2.1
Total net interest payable 5 (0.1) - (0.1) (0.2)
Profit on ordinary activities before tax 2.4 (0.2) (0.3) 1.9
Tax on profit on ordinary activities 6 (0.8) - 0.1 (0.7)
Profit for the period attributable to 1.6 (0.2) (0.2) 1.2
shareholders 7
Dividends 8 (1.1)
Retained profit for the period 0.1
pence pence pence pence
Earnings per share 7
Basic earnings per share before goodwill 3.9 (0.4) (0.5) 3.0
amortisation
Basic and diluted earnings per share 3.4 (0.4) (0.5) 2.5
Group Profit and Loss Account
Half year ended 30 September 2002 - unaudited
Half year to 30 September 2002 Year to
Continuing operations Discontinued 31 March
Before Exceptional Interest Sub-total operations Total 2003
exceptional items in
items and joint
interest in venture
joint
venture
£ £ £ £ £ £ £
Notes million million million million million million million
Turnover
Group and share of joint venture 2 94.5 - 21.8 116.3 0.7 117.0 231.4
turnover
Less share of joint venture turnover 3 - - (21.8) (21.8) - (21.8) (44.1)
Group turnover 2 94.5 - - 94.5 0.7 95.2 187.3
Cost of sales (64.1) - - (64.1) (0.6) (64.7) (127.7)
Gross profit 30.4 - - 30.4 0.1 30.5 59.6
Net operating expenses 4 (27.9) (0.6) - (28.5) (0.8) (29.3) (55.7)
Group operating profit before 2.5 (0.6) - 1.9 (0.5) 1.4 4.2
goodwill
amortisation
Goodwill amortisation - - - - (0.2) (0.2) (0.3)
Group operating profit 2 2.5 (0.6) - 1.9 (0.7) 1.2 3.9
Share of operating profit of joint - - 1.2 1.2 - 1.2 1.6
venture
Total operating profit - Group and 2.5 (0.6) 1.2 3.1 (0.7) 2.4 5.5
share of
joint venture
Loss on disposal of discontinued - - - - - - (1.5)
business
Profit before interest and tax 2.5 (0.6) 1.2 3.1 (0.7) 2.4 4.0
Total net interest payable 5 (0.4) - (0.2) (0.6) (0.1) (0.7) (1.6)
Profit on ordinary activities before 2.1 (0.6) 1.0 2.5 (0.8) 1.7 2.4
tax
Tax on profit on ordinary activities 6 (0.8) 0.2 (0.2) (0.8) 0.2 (0.6) (1.2)
Profit for the period attributable to 1.3 (0.4) 0.8 1.7 (0.6) 1.1 1.2
shareholders 7
Dividends 8 (1.1) (3.9)
Retained loss for the period - (2.7)
pence pence pence pence pence pence pence
Earnings per share 7
Basic earnings per share before 2.6 (0.8) 1.7 3.5 (0.9) 2.6 3.2
goodwill
amortisation
Basic and diluted earnings per share 2.6 (0.8) 1.7 3.5 (1.1) 2.4 2.6
Group Statement of Total Recognised Gains and Losses
Half year ended 30 September 2003 - unaudited
Half year to Half year to Year to
30 Sept 2003 30 Sept 2002 31 March 2003
£ million £ million £ million
Profit for the period 1.2 1.1 1.2
Exchange differences on foreign currency net (1.3) (3.8) (3.3)
investments of the Group
Total recognised gains and losses relating to the (0.1) (2.7) (2.1)
period
Group Balance Sheet
Half year ended 30 September 2003 - unaudited
As at As at As at
30 Sept 2003 30 Sept 2002 31 March 2003
Notes £ million £ million £ million
Fixed assets
Goodwill 2.4 4.4 2.7
Negative goodwill - (0.1) -
Intangible assets 2.4 4.3 2.7
Tangible assets 33.8 37.5 35.6
Investments
Share of gross assets of joint venture - 17.3 20.1
Share of gross liabilities of joint venture - (13.2) (18.3)
Net investment in joint venture 3 - 4.1 1.8
Other investments 3.8 2.4 2.3
Total investments 3.8 6.5 4.1
Total fixed assets 40.0 48.3 42.4
Current assets
Stocks 32.1 42.4 36.5
Debtors 55.9 66.1 61.1
Cash at bank and in hand 6.9 3.4 6.4
94.9 111.9 104.0
Creditors: amounts falling due within one year
Bank loans and overdrafts (1.5) (13.0) (3.1)
Other creditors (40.1) (49.3) (48.8)
(41.6) (62.3) (51.9)
Net current assets 53.3 49.6 52.1
Total assets less current liabilities 93.3 97.9 94.5
Creditors: amounts falling due after one year - (0.7) -
Provisions for liabilities and charges (5.3) (5.8) (5.3)
Net assets employed 88.0 91.4 89.2
Capital and reserves
Called up share capital 2.4 2.4 2.4
Share premium account 18.8 18.8 18.8
Other reserves 16.0 16.0 16.0
Profit and loss account 50.8 54.2 52.0
Equity shareholders' funds 10 88.0 91.4 89.2
Group Cash Flow Statement
Half year ended 30 September 2003 - unaudited
Half year to Half year to Year to
30 Sept 2003 30 Sept 2002 31 March 2003
Notes £ million £ million £ million
Net cash inflow/(outflow) from operating activities 11 4.0 (2.7) 14.9
Dividend from joint venture - - 2.5
Returns on investments and servicing of finance 11 (0.1) (0.6) (1.2)
Taxation (0.9) (1.1) (2.0)
Capital expenditure and financial investment 11 (0.8) (2.0) (2.8)
Acquisitions and disposals - - (0.4)
Equity dividends paid - - (3.9)
Cash inflow/(outflow) before management of 2.2 (6.4) 7.1
liquid resources and financing
Management of liquid resources 11 (2.7) 2.6 (5.8)
(Decrease)/increase in cash in the period (0.5) (3.8) 1.3
Reconciliation of Net Cash Flow to Movement in Net Funds/(Debt)
Half year ended 30 September 2003 - unaudited
Half year to Half year to Year to
30 Sept 2003 30 Sept 2002 31 March 2003
Note £ million £ million £ million
(Decrease)/increase in cash in the period (0.5) (3.8) 1.3
Change in liquid resources 2.7 (2.6) 5.8
Translation difference (0.1) 0.1 0.2
Movement in net funds/(debt) in the period 2.1 (6.3) 7.3
Opening net funds/(debt) 3.3 (4.0) (4.0)
Closing net funds/(debt) 12 5.4 (10.3) 3.3
Notes on the Interim Financial Statements
Half year ended 30 September 2003 - unaudited
1. Basis of presentation of accounts
The Group profit and loss account and balance sheet for the half years ended 30
September 2003 and 30 September 2002 have been prepared on a basis consistent
with the accounting policies disclosed in the Group's Report and Accounts 2003.
The comparative figures for the financial year ended 31 March 2003 are extracted
from the Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditors and delivered to the Registrar
of Companies. The report of the auditors was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985. Copies of the
Annual Report and Accounts 2003 are available from the Company's registered
office by applying to the Company Secretary, Oxford Instruments plc, Old Station
Way, Eynsham, Witney, Oxon, OX29 4TL. The Company is registered in England
Number 775598.
Discontinued operations comprise the On-line Process Systems business sold in
October 2002.
The principal exchange rates used to translate the Group's overseas results were
as follows:
Half year to Half year to Year to
30 Sept 2003 30 Sept 2002 31 March 2003
Average Period end Average Period end Average Year end
US Dollar 1.62 1.66 1.50 1.57 1.54 1.58
Euro 1.43 1.43 1.59 1.59 1.56 1.45
Yen 191 186 186 191 188 187
2.Results by business group for continuing wholly-owned operations before
exceptional items
Turnover Operating profit/(loss)
Half year to Half year to Half year to Half year to
30 Sept 2003 30 Sept 2002 30 Sept 2003 30 Sept 2002
£ million £ million £ million £ million
Analytical 28.6 32.6 1.5 0.8
Medical 17.7 17.2 0.1 (0.7)
Superconductivity 41.0 44.7 0.9 2.4
87.3 94.5 2.5 2.5
3. Investment in Oxford Magnet Technology
At 30 September 2003 the Company owned 49% of the issued share capital of Oxford
Magnet Technology Limited (OMT). It is engaged in advanced instrumentation and
is registered and operates in England.
During the extended negotiations concerning the future ownership of OMT, Siemens
has become increasingly involved in the direction of the joint venture,
particularly in recent months. As a result it had become clear by the end of
June 2003, shortly after the announcement of the year end results, that the
Oxford Instruments' Directors on the OMT Board were no longer exercising joint
control and therefore accounting for the investment in OMT as a joint venture
was no longer appropriate.
The results of OMT have therefore been 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 the investment has been accounted for as a minority investment in
accordance with FRS 2.
The Group's share of the joint venture turnover for the three months to 30 June
2003 as shown in the Group profit and loss account has been derived after
adjusting for trading between the Group and OMT as follows:
Half year to Half year to
30 Sept 2003 30 Sept 2002
£ million £ million
49% of joint venture turnover 14.0 27.9
Less 49% of sales by OMT to Group (1.3) (2.9)
Less 49% of sales by Group to OMT (1.9) (3.2)
Group share of joint venture turnover 10.8 21.8
4. Exceptional items
Exceptional items for the periods to 30 September 2003 and 2002 relate to
continuing activities and comprise redundancy costs. For the period to 30
September 2003 the costs related to the Medical business and in the prior period
to the Superconductivity business.
5. Total net interest payable
Half year to Half year to
30 Sept 2003 30 Sept 2002
£ million £ million
Interest payable and similar charges on bank loans and overdrafts (0.1) (0.5)
Group net interest payable (0.1) (0.5)
Share of joint venture net interest payable (0.1) (0.2)
Total net interest payable (0.2) (0.7)
6. Taxation
The tax charge for the half year ended 30 September 2003 has been based on the
estimated effective rate applicable to each significant category of income for
the full year.
7. Earnings per share
Earnings per share (EPS) has been calculated using profits of £1.2 million (2002
£1.1 million) and weighted average shares of 46.9 million (2002 46.8 million)
for basic EPS and 46.9 million (2002 47.0 million) for diluted EPS respectively.
8. Dividends per share
An interim dividend of 2.4p (2002 2.4p) will be paid on 26 March 2004 to
shareholders registered at the close of business on 27 February 2004, the record
date. The shares will be marked 'ex-dividend' on 25 February 2004.
9. Contingent liability
As disclosed in the Notes on the Financial Statements in the Annual Report and
Accounts 2003, one of the new Analytical products has been subject to testing
requirements in one country for a specific application. The testing of all
suppliers' equipment used for this purpose has been completed but the results
and supplier approvals have not yet been announced. However, proposed changes to
national regulations announced during October 2003 appear to have increased the
risk that a product modification or recall may be required for this application.
Clarification is being sought. In the event that action is required as a result
of these changes the additional net costs are unlikely to exceed £2.0 million.
10. Reconciliation of movements in Equity Shareholders' Funds
Half year to Half year to Year to
30 Sept 2003 30 Sept 2002 31 March 2003
£ million £ million £ million
Profit for the period 1.2 1.1 1.2
Dividends paid and proposed (1.1) (1.1) (3.9)
Retained profit/(loss) for the period 0.1 - (2.7)
Exchange differences on foreign currency net (1.3) (3.3)
investments (3.8)
Net reduction in equity shareholders' funds (1.2) (3.8) (6.0)
Opening equity shareholders' funds 89.2 95.2 95.2
Closing equity shareholders' funds 88.0 91.4 89.2
11. Cash flows netted in the cash flow statement
Half year to Half year to Year to
30 Sept 2003 30 Sept 2002 31 March 2003
£ million £ million £ million
Group operating profit 2.3 1.2 3.9
Depreciation charges 2.6 2.9 5.7
Amortisation of goodwill 0.3 0.2 0.3
Net (profit)/loss on the disposal of fixed assets (0.1) 0.1 0.1
Change in stocks 4.0 4.5 10.9
Change in debtors 4.7 (0.8) 5.4
Change in creditors (9.7) (10.7) (10.7)
Change in provisions (0.1) (0.1) (0.7)
Net cash inflow/(outflow) from operating activities 4.0 (2.7) 14.9
Interest paid (0.1) (0.6) (1.2)
Net cash outflow from the servicing of finance (0.1) (0.6) (1.2)
Purchase of fixed assets (0.9) (2.0) (3.0)
Sale of fixed assets 0.1 0.1 0.3
Investments acquired - (0.1) (0.1)
Net cash outflow from capital expenditure and financial (0.8) (2.0) (2.8)
investment
(Decrease)/increase in term loans (2.7) 2.6 (5.8)
Net cash (outflow)/inflow from management of liquid (2.7) 2.6 (5.8)
resources
12. Movement in Net Funds
As at Exchange Cash movement As at
30 Sept 2003 rate effect in period 31 March 2003
£ million £ million £ million £ million
Cash at bank and in hand 6.9 (0.1) 0.6 6.4
Bank overdrafts (1.5) - (1.1) (0.4)
Net cash 5.4 (0.1) (0.5) 6.0
Debt due within one year - - 2.7 (2.7)
Net funds 5.4 (0.1) 2.2 3.3
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