3rd Jun 2005 07:00
Oxford Instruments PLC03 June 2005 3 June 2005 Oxford Instruments plcAnnouncement of preliminary results for the year to 31 March 2005 Oxford Instruments plc ("Oxford Instruments" or "the Company"), the advancedinstrumentation business, today announced its preliminary results for the yearto 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 goodwillamortisation Nigel Keen, Chairman of Oxford Instruments plc, said: "The last year has beenone of immense change for Oxford Instruments. We have disposed of our Medicalbusiness, continued to address our operational performance, launched significantnew products and strengthened our senior management team with the arrival ofJonathan Flint as Chief Executive. We are now ready to accelerate the pace ofgrowth and our future strategy is focused on building upon our capabilities inthe high growth sectors of nanotechnology, molecular bioscience andenvironmental monitoring. "The execution of this strategy will involve a level of investment that willimpact profits for the next two years. The emerging markets coupled with ourtalents and infrastructure will provide significant opportunities to drive thebusiness 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 LynnShepherd at the Company's registered office at Old Station Way, Eynsham, Witney,Oxon OX29 4TL (email: [email protected]). No. of pages: 18 Chairman's Statement The last year has been one of immense change for Oxford Instruments. We havedisposed of our Medical business, continued to address our operationalperformance, launched significant new products and strengthened our seniormanagement team. The successful sale of the Medical business to VIASYS Healthcare Inc. enabled usto 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 tothe Oxford Instruments UK pension scheme. The remainder of the proceeds, aftercosts, is being held for reinvestment in the business. With the disposal of the Medical business, the organisation is now highlyfocused on the provision of tools for new high growth, high technologyindustries such as nanotechnology and molecular bioscience. We are at an important moment for Oxford Instruments. With an efficientoperating 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 Boarddecided to change the leadership of the business and in November 2004 I tookover day-to-day control of the business until the beginning of the new financialyear, when Jonathan Flint was appointed as Chief Executive. I welcome Jonathanto the Group and I look forward to working with him as he leads and grows ourbusiness from its established operating base. As a first step, he and I haveworked on a revised and clarified strategy for the business which is outlined inthe 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 continuingoperations before exceptional items and goodwill amortisation was £7.9 million,up £0.1 million on the previous year. Both turnover and operating profit weresignificantly 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 inthe previous year, turnover and pre-tax profit before goodwill amortisation andexceptional items of the continuing operations would have been £9.1 millionhigher 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 £0.7million to turnover and operating profit before goodwill amortisationrespectively. The discontinued Medical business made an operating loss beforeexceptional items of £0.1 million compared with an operating profit of £0.1million in the prior year. Within Analytical operating profit, before exceptional items and goodwillamortisation, increased to £6.6 million from £3.7 million. Our Microanalysis andIndustrial Products businesses continued to move ahead showing the fifthsuccessive year of profit growth. Our Plasma Technology business is thrivingfollowing the successful integration of the VG Semicon business and our X-rayTechnology business produced significant growth in turnover and profit driven bythe buoyant market for environmental monitoring tools. At Superconductivity operating profit, before exceptional items and goodwillamortisation, fell from £4.2 million to £0.8 million primarily due to lowermagnet sales and adverse raw material and foreign exchange movements. Ordersthis year were down 5% on last year reflecting the continuing reduction inbusiness from a significant customer. The NMR magnet business continues itstransformation programme. A series of business partnerships are being developedin order to return this part of the business to full financial health. ThePhysical Science business, which provides specialised magnet and cryogenicsystems to leading researchers throughout the world, has lost money in recentyears but is now close to break-even. Our Superconducting Wire business in theUSA continues to perform well. The monolith wire quality problem, which wasdisclosed in the Interim Report in November 2004, has been fully provided for asan exceptional cost. The matter is now closed and the customer relationshipstrengthened. A new high performance superconducting wire has been developed andis now being introduced into our high field magnets. Earnings per share from our continuing operations, before exceptional items andgoodwill amortisation, were 10.9p (2004 12.0p) and the Board recommends a finaldividend of 6.0p making the total dividend of 8.4p for the year, unchanged fromlast year. This excludes the special interim dividend of 25.0p which was paid inMarch 2005. In this year of change the progress we have made towards our goals is due to ourtalented workforce and I would like to thank all of our employees for their hardwork in delivering a creditable improvement in performance. During the year Mike Hughes joined the Board as a Non-Executive Director. AsOxford Instruments enters a new era, Mike brings strengths to our Board with hisbroad operational experience allied with sound technical understanding. Looking ahead, we have selected a number of value-enhancing initiatives whichare outlined in the Strategy Statement. We have established a sound operatingbase and we will continue to focus on improving profitability and returns acrossour businesses by building on the momentum generated over recent years whilst atthe same time growing our turnover. Execution of this strategy will involve a level of investment that will impactthe financial results of the Group for the next two years. In the current yearwe estimate that there will be incremental product development expenditure of upto £5.0 million. Meanwhile our existing trading activities have a sound basefrom which to move forward steadily. Over the next few years the emergingmarkets coupled with our talents and infrastructure will provide significantopportunities to drive the business forward and increase value for ourshareholders. Chief Executive's Introduction I am delighted to have been appointed to lead Oxford Instruments through thenext important phase in its strategic development. Since joining the Group, Ihave spent my time getting to know our senior management and local managementteams as well as speaking with customers and key partners. I have also met manyof our staff in person and through our internet communication systems and havebeen encouraged by feedback from around the world. This two-way dialogue hasbeen invaluable in helping me shape my thoughts about the business. I have visited our operations and customers in the UK, North America and the FarEast. I have been enormously impressed by the quality of our people and thegreat respect that the Oxford Instruments brand carries throughout our globalcustomer community. The Group's technological and human assets are outstandingand, when coupled with growing demand in emerging high technology industries,offer a unique and valuable capability. Nanotechnology, molecular bioscience andenvironmental monitoring provide significant growth opportunities for OxfordInstruments. A key task for me will be to manage smoothly and successfully thetransition between old product lines and the new business model described in theStrategy Statement. Going forward, we will be running our business with a set ofaims and objectives concentrating on strategic repositioning, customer focus andnew product innovation. My priorities for 2005 are to refine, develop and implement the Group strategyby harnessing the strengths and resources of the business and by selectiveacquisitions. Oxford Instruments has an excellent technological heritage but ourposition in the value chain has sometimes hampered our ability to realisesufficient value from this technology. Our new strategic focus will allow us toleverage our capability in analytical instruments to provide direct to end usersa new generation of tools for nanotechnology, molecular bioscience andenvironmental monitoring. At the same time we will continue our initiatives toimprove efficiency and profitability by further use of low-cost production inEastern Europe and the Far East, including our new manufacturing facility inChina. Most importantly, I look forward to delivering shareholder value through thesuccessful implementation of our strategy. This will be done by uniting theOxford Instruments team behind our common objectives of growth through customerservice and new product innovation. Strategy Statement With the sale of the Medical business, much organisational complexity has beenremoved and the focus is now on commercialising our intellectual property andtechnological know-how in the development of valuable tools for new industrialand scientific markets. The continuation of the wide ranging efficiencyprogramme has created a solid platform from which to grow the business and weare now ready to develop and take to market the products which will deliversustainable growth for the benefit of all of the Group's stakeholders. Following internal reviews and external studies of our respective strengths andmarket opportunities, we have refocused our future strategy on building upon ourkey strength which lies in our deep understanding of the world at the atomic andmolecular level. Our business model reflects the convergence between thephysical and biological sciences, meaning that an overlapping set of tools canserve both markets. We will become a leading provider of a new generation of tools and systems forboth the physical and bioscience sectors, based on our ability to observe andmanipulate matter at the smallest scale. From chemical and material analysis, tomolecular structure and atomic deposition, we will expand our offering of toolsfocused on comprehensive solutions to atomic and molecular level problems. Wewill build on our capability to create specialised environments such as ultralowtemperature or high magnetic fields, to provide systems to observe andcharacterise matter at very small scales, and to start manipulating and buildingstructures at the atomic level. As well as developing new processes andenvironments we will also actively seek to grow our customer support revenues toprovide stable long term earnings in order to match the more volatile cashflowassociated with new product introduction. There are many areas of outstanding technical competence within OxfordInstruments. These will be brought together as we operate increasingly as onecompany. For example, we will continue to generate competitive advantage thoughintegrated wire and magnet design and will also bring the instrumentation skillsin our Analytical instruments business to bear elsewhere in the organisation.This will facilitate our move towards providing total solutions direct to endusers. This growth strategy will be coupled with an ongoing focus on operationalimprovement, using low cost sources of production. We already have extensiveskills in serving the nanotechnology, molecular bioscience and environmentalmonitoring markets and we plan to invest in growing our capabilities bothorganically and by acquisition. Because we are focused on providing tools asdistinct from nano-engineered products, Oxford Instruments will be wellpositioned to benefit from the early stages of the development of this newindustry. With this clear vision of the future direction for the Group we will regularlyreport 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), PlasmaTechnology (plasma etching and deposition equipment) and X-ray Technology (lowpower X-ray tubes and sources). Superconductivity includes Magnet Technology(NMR, ICR and MRI magnet systems), Physical Science (magnet and cryogenicsystems for applied research customers), Molecular Biotools (Dynamic NuclearPolarising systems to enhance NMR sensitivity), Superconducting Wire (wire forsuperconducting magnets), MRI magnet service (cryogenic maintenance of hospitalMRI magnets) and Austin Scientific Technology (cryogenic pumps and compressors). Since the end of the year a new business area has been formed, OxfordInstruments Innovation, which includes the Molecular Biotools activity that waspreviously part of Superconductivity together with other new instrumentprojects. 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 beforeexceptional items and goodwill amortisation improved to £6.6 million (2004 £3.7million). Our Industrial Products business continues to grow. The Metorex businessacquired in September 2004 has now been integrated, is operating profitably andwas earnings enhancing in the year. Metorex, as well as providing advancedsensor technology, brings to our product offerings hand-held EDXRF (energydispersive X-ray fluorescence) and optical emission instruments with particularapplication in the environmental and scrap metal sorting markets. Thisacquisition is consistent with the market trend towards hand-heldinstrumentation. The 'X-Strata960' instrument has been launched for the qualitycontrol measurement of metal coatings in the electronics and metal finishingindustry. We have also begun to transfer the manufacture of our range ofhand-held coating thickness products from Chicago to our facility in Shanghai. The market for our X-ray Microanalysis business, providing analyticalinstruments for electron microscopes, remained steady. The convenience and costadvantages of our recently introduced 'INCADryCool' non liquid nitrogen samplecooler are gaining increased recognition among our customers and several othermajor new product development programmes are underway. In addition, with theacquisition of HKL Technology A/S in April 2005, the product portfolio has beensignificantly enhanced with the addition of the best in class EBSD (electronbackscatter 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 themarket for use with electron microscopes. Our Plasma Technology business has shown good profitability in the year despiteno significant upturn in the compound semiconductor market. A vigorous programmeof product introduction based on extensive customer research has been startedand the benefits of this are expected in the next financial year. Particulardevelopments to produce the equipment for manufacturing high brightness LEDs(light emitting diodes) are under way. The market for high brightness LEDs isgrowing with widespread utilisation already being seen in the automotiveindustry. These products are very energy efficient which is expected to lead totheir increasing use in the domestic market. The VG Semicon molecular beamepitaxy business acquired in October 2003 has now been integrated into thePlasma Technology facility in Yatton and the costs of closing the East Grinsteadfactory, which amounted to £1.0 million, have been included within exceptionalcosts. Our X-ray Technology business grew strongly last year on a broadening customerbase and with especially strong sales from low power X-ray sources. This growthwas in part driven by increasingly demanding new environmental legislation andalthough last year may have been exceptional in this regard, we are wellpositioned 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 beforeexceptional items and goodwill amortisation declined to £0.8 million (2004 £4.2million). As previously announced the business took steps to reduce its UK costbase in both June 2004 and in March 2005 and the redundancy costs of £1.2million have been included within the exceptional costs for the year. As previously signalled, the Magnet Technology business had a poor year due tolower than expected volumes from Varian, its largest customer, although goodprogress has been made on reducing costs by the introduction of leanmanufacturing techniques and low cost sourcing initiatives. For many years,Oxford Instruments has maintained a sound business by providing NMR magnets tosystems integrators which use the magnets as part of their NMR systems sold toend users. However recently the market has polarised into the supply of highfield, technologically demanding magnets and low field, commodity magnets. Inthis latter market, the system integrators are tending to source low fieldmagnets in-house. In order to ensure an orderly transition to this new way ofdoing business we have entered into a new three year contract with Varian forthe supply of magnets. This contract took effect from 1 April 2005. Oxford Instruments remains the world leader in high field magnets and hasrecently broadened the range of these magnets based on its newly developed highperformance 'RRP' superconducting wire. These include the 'Actively Shielded'800 MHz magnet, which also uses new coil structures. This new technology reducesstray fields significantly which in turn reduces the space our customers need toinstall 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 withprototype testing at our customers' premises due to start shortly. In additionwe have successfully installed six of our 900 MHz 'Discovery' magnets. Ourstrategy is now to focus on high value magnets with clear competitive advantageand to exploit them where possible as end user systems either on our own or withothers. The Physical Science business moved towards break-even during the year againststable markets for its refrigeration and spectroscopy products. It hassuccessfully launched a number of new cryo-free products, which offersignificantly improved ease of use for customers as they do not require fillingwith cryogens after installation. The level of demand for large customerspecific magnets for government sponsored research remained steady. We continueto do well on high-visibility science programmes and in particular we have won anumber of orders with the National High Magnet Field Laboratory in Florida. The Molecular Biotools business was formed in April 2004 within the UKSuperconductivity business. It was created to exploit the technology licencedexclusively from GE Healthcare to develop certain applications of a novelmagnet-based sample preparation technique in the life sciences market. The firstmajor project is to produce a DNP (dynamic nuclear polarisation) preparationunit 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 aboutthe prospects for the new product. Molecular Biotools acquired ResonanceInstruments in September 2004. The skills and intellectual property acquired aremaking a significant contribution to the DNP project as well as giving uscapability that can be used in the low cost end user NMR instrument markets. Theacquisition was earnings enhancing in the year. Superconducting wire volumes remained strong, based on growth in the market forhospital MRI magnets, but the profitability of the business was adverselyaffected by sales price erosion and rising raw material prices, particularlycopper. The monolith wire quality problem, which was disclosed in the InterimReport in November 2004, has been fully provided for as an exceptional cost. Thematter is now closed and the customer relationship strengthened. We havedeveloped a new highly efficient 'RRP' wire which has been tested successfullyin a number of new Oxford Instruments magnets. The International ThermonuclearEnergy Reactor (ITER) project, an internationally backed programme to try togenerate huge quantities of power from sea water, is expected to receive formalgovernmental go-ahead shortly. This project will provide an opportunity forsignificant wire supply in the coming years. We have supplied materials underthe qualification programme and have met the required specification. We plan toinvest 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 ofthe installed base in the USA. As the organisation grows it is able to offer anincreasingly attractive service to its customers. The Austin Scientific cryogenic pump and compressor business had a steady yearand 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, itwas sold to VIASYS Healthcare Inc. on 1 March 2005 and has been treated as adiscontinued business in the results for the year. The sale will now allow us tofocus on the growth and development of our Analytical and Superconductivitybusinesses. Group-led Initiatives Customer focusSince November 2004 we have undertaken a number of programmes to ensure that theGroup becomes more customer focused, concentrating on providing products andservices which present innovative solutions to customer problems. In particularwe ensure that the 'Voice of the Customer' plays a key part in our new productintroduction and customer service activities. Coupled with these customer focusinitiatives the Group has set a target for increased service revenues. As partof our intent to become more customer facing the focus of our existing tradingactivities is increasingly on new product introduction. InnovationReflecting the Group strategy as outlined in the Strategy Statement a small newmanagement team, Oxford Instruments Innovation, has been formed reporting to theChief Executive to drive forward the various new investment initiatives focusedon the markets we address. This team will recommend, implement and control theincremental revenue investment programmes designed to generate products capableof creating growth and profits which will be significant in Group terms. ManufacturingOur focus on lean manufacturing continues and our initiatives during the yearhave cut the lead-time in some products by half. During the year we won a HighlyCommended National Training Award for our lean manufacturing training programme. Low cost sourcingWe have increased the amount of product and components sourced from low costregions of the world, particularly China. We opened a service centre and factoryin Shanghai in August 2004. This is already providing high quality service toour Chinese customers and local assembly of some of our hand-held products hasbeen started. Continued growth in the proportion of our value creationundertaken in China is expected. JapanThe 'Sir Martin Wood Prize' ceremony was again held in Japan and has becomeestablished as a significant annual event in the Japanese scientific researchcommunity calendar. The prize is awarded for the most promising post graduateresearch undertaken in the field of condensed matter science. Future InvestmentAs we move forward to deliver our strategy we will be making considerableinvestment, both in product development costs and in the pursuit of productinfill acquisition opportunities. These investments will be geared to restoringsales growth to the business and to deliver increasing profits, which areexpected to enhance shareholder value. Group Profit and Loss AccountYear ended 31 March 2005 Continuing operations Discontinued 2005 Before Exceptional Sub-total operations exceptional items items Notes £m £m £m £m £m ----------------- ------ -------- -------- ------- -------- --------TurnoverGroup and share ofjoint 156.5 - 156.5 25.6 182.1venture turnoverLess share of joint - - - - -venture turnover ----------------- ------ -------- -------- ------- -------- --------Group turnover(includingacquisitions 2, 6 156.5 - 156.5 25.6 182.1of £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 operatingprofit/(loss)before 2 7.4 (5.7) 1.7 (0.1) 1.6goodwillamortisationGoodwill (1.1) - (1.1) - (1.1)amortisation ----------------- ------ -------- -------- ------- -------- -------- Group operatingprofit/(loss)(includingacquisition profit 2 6.3 (5.7) 0.6 (0.1) 0.5of£0.3m)Share of operating - - - - -loss of joint venture----------------- ------ -------- -------- ------- -------- --------Total operatingprofit/(loss)Group and share ofjoint 6.3 (5.7) 0.6 (0.1) 0.5ventureGain on disposal ofdiscontinuedbusiness 7 - - - 6.0 6.0before goodwillGain on disposal of - - - - -joint venturebefore goodwillGoodwill previouslywritten off againstreserves 7 - - - (3.6) (3.6)Profit on thedisposal - 0.2 0.2 - 0.2of property ----------------- ------ -------- -------- ------- -------- --------Profit/(loss)before 6.3 (5.5) 0.8 2.3 3.1interest and taxTotal net interestreceivable/ 5 0.5 - 0.5 - 0.5(payable) ----------------- ------ -------- -------- ------- -------- --------Profit/(loss) onordinary activitiesbefore tax 6.8 (5.5) 1.3 2.3 3.6Tax on profit/(loss) on (2.8) 0.9 (1.9) (0.1) (2.0)ordinary activities ----------------- ------ -------- -------- ------- -------- --------Profit/(loss) forthefinancial yearattributable to 4.0 (4.6) (0.6) 2.2 1.6shareholders ----------------- ------ -------- -------- ------- -------- Dividends payableto 8 (15.8)shareholders ----------------- ------ -------- -------- ------- -------- --------Retained loss forthe (14.2)financial year ------ -------- -------- ------- -------- ------------------------- pence pence pence pence pence ----------------- ------ -------- -------- ------- -------- --------Earnings per share 9 Basic earnings persharebefore goodwill 10.9 (9.9) 1.0 4.5 5.5amortisationBasic and dilutedearnings per share 8.7 (9.9) (1.2) 4.5 3.3----------------- ------ -------- -------- ------- -------- -------- Group Profit and Loss AccountYear 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---------------- ------ ------- ------- ------- ------- -------- -------TurnoverGroup andshare of jointventureturnover 147.6 - 10.8 158.4 34.7 193.1Less share ofjoint ventureturnover 7 - - (10.8) (10.8) - (10.8)---------------- ------ ------- ------- ------- ------- -------- -------Group turnover 2 147.6 - - 147.6 34.7 182.3Cost of sales (102.8) - - (102.8) (19.0) (121.8)---------------- ------ ------- ------- ------- ------- -------- -------Grossprofit/(loss) 44.8 - - 44.8 15.7 60.5 Net operatingexpenses 3 (37.6) (1.6) - (39.2) (15.6) (54.8) ---------------- ------ ------- ------- ------- ------- -------- -------Groupoperatingprofit/(loss)beforegoodwillamortisation 2 7.9 (1.6) - 6.3 0.1 6.4Goodwillamortisation (0.7) - - (0.7) - (0.7)---------------- ------ ------- ------- ------- ------- -------- ------- Groupoperatingprofit/(loss) 2 7.2 (1.6) - 5.6 0.1 5.7Share ofoperating lossof jointventure 7 - - (0.2) (0.2) - (0.2)---------------- ------ ------- ------- ------- ------- -------- -------Total operatingprofit/(loss)Group andshare of joint 7.2 (1.6) (0.2) 5.4 0.1 5.5ventureGain on disposal - - - - - -of discontinuedbusiness beforegoodwillGain ondisposal ofjoint venturebeforegoodwill 7 - - 6.8 6.8 - 6.8Goodwillpreviouslywritten offagainstreserves 7 - - (0.2) (0.2) - (0.2)Profit on the - - - - - -disposal of property ---------------- ------ ------- ------- ------- ------- -------- -------Profit/(loss)beforeinterest andtax 7.2 (1.6) 6.4 12.0 0.1 12.1Total netinterestreceivable/(payable) 5 (0.1) - (0.1) (0.2) - (0.2)---------------- ------ ------- ------- ------- ------- -------- -------Profit/(loss)on ordinaryactivitiesbefore tax 7.1 (1.6) 6.3 11.8 0.1 11.9Tax onprofit/(loss)on ordinaryactivities (2.1) 0.4 0.1 (1.6) (0.3) (1.9)---------------- ------ ------- ------- ------- ------- -------- -------Profit/(loss)for thefinancial yearattributabletoshareholders 5.0 (1.2) 6.4 10.2 (0.2) 10.0---------------- ------ ------- ------- ------- ------- -------- Dividendspayable toshareholders 8 (3.9)---------------- ------ ------- ------- ------- ------- -------- -------Retainedprofit for thefinancial year 6.1---------------- ------ ------- ------- ------- ------- -------- ------- pence pence pence pence pence pence---------------- ------ ------- ------- ------- ------- -------- -------Earnings pershare 9 Basic earningsper sharebeforegoodwillamortisation 12.0 (2.4) 13.7 23.3 (0.6) 22.7Basic anddilutedearnings pershare 10.6 (2.4) 13.7 21.9 (0.6) 21.3---------------- ------ ------- ------- ------- ------- -------- ------- Group Statement of Total Recognised Gains and LossesYear ended 31 March 2005 2005 2004 £m £m-------------------------------- ---------- ----------Profit for the financial year 1.6 10.0Exchange differences on foreign currency net investmentsof the 0.1 (2.8)Group -------------------------------- ---------- ----------Total recognised gains and losses relating to the 1.7 7.2financial year -------------------------------- ---------- ---------- Group Balance SheetAs at 31 March 2005 2005 2004 As restated Notes £m £m--------------------------- ------ ---------- ----------Fixed assetsIntangible assets - goodwill 6 9.3 2.6Tangible assets 28.6 32.6Investments 1.6 1.6--------------------------- ------ ---------- ----------Total fixed assets 39.5 36.8--------------------------- ------ ---------- ----------Current assetsStocks 23.9 28.5Debtors 47.5 58.9Cash at bank and in hand 29.7 23.2--------------------------- ------ ---------- ---------- 101.1 110.6--------------------------- ------ ---------- ----------Creditors: amounts falling due within oneyearBank 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 97.4Creditors: 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 reservesCalled up share capital 2.4 2.4Share premium account 19.4 19.0Investment in own shares (2.7) (2.7)Other reserves 16.0 16.0Profit and loss account 46.9 57.4--------------------------- ------ ---------- ----------Equity shareholders' funds 10 82.0 92.1--------------------------- ------ ---------- ---------- Group Cash Flow StatementYear ended 31 March 2005 2005 2004 Notes £m £m------------------------------- ------ --------- ---------Net cash inflow from operating activities 11 7.1 17.8Returns 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 8.5Equity dividends paid (15.8) (3.9)------------------------------- ------ --------- ---------Cash inflow before management of liquid resourcesand 5.5 17.5financingManagement 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 FundsYear ended 31 March 2005 2005 2004 Note £m £m------------------------------- ------ --------- ---------Increase in cash in the year 5.5 2.9Change in liquid resources 0.4 14.8Translation difference (0.1) (0.3)------------------------------- ------ --------- ---------Movement in net funds in the year 5.8 17.4Opening 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 March2005 and 31 March 2004 have been prepared on a basis consistent with theaccounting policies disclosed in the Group's Annual Report and Accounts 2004with the exception of UITF 38. The Group has adopted UITF 38 'Accounting for ESOP Trusts' and the relatedamendments to UITF 17 'Employee Share Schemes' in the year. In previous periodsthe purchase cost of these shares were treated as fixed asset investments. Theeffect of UITF 38 has been to recognise the net carrying value of shares held bythe trust as a deduction in shareholders' funds rather than as a fixed assetinvestment. The impact of the change in accounting policy is disclosed in Note10. The principal exchange rates used to translate the Group's overseas results andtransactions 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 1.63Euro 1.47 1.45 1.43 1.45 1.50 1.49Yen 198 202 187 191 191 183----------- -------- -------- -------- -------- -------- -------- 2. Results by business The results for continuing wholly-owned operations before exceptional itemsanalysed 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 24.6Superconductivity 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 19.2Research and development costs 11.3 10.4Administrative expenses 7.9 7.3Goodwill amortisation 1.1 0.7------------------------------ ----------- -----------Net operating expenses 39.8 37.6------------------------------ ----------- ----------- Exceptional items for the year ended 31 March 2005 relate to continuingoperations. In the year ended 31 March 2004 exceptional items of £1.1m relate todiscontinued 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) - -issuesRedundancy 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 aspecific wire quality issue at the US superconducting wire manufacturing plant,redundancy costs arising in the Superconductivity business and restructuringcosts (redundancy expenses, stock write-off and surplus lease costs) followingthe acquisition of Metorex International Oy and Resonance Instruments Limited inSeptember 2004, costs relating to the closure of the East Grinstead site andexpenses associated with the replacement of the Chief Executive. Exceptional items for the year ended 31 March 2004 comprise redundancy costsincurred as the Medical business reduced its overseas cost base and costs of theCambridge based operations of Superconductivity prior to the spin out of ARKeXLimited. 4. Pensions costs Before adjustments relating to the impact of the Medical disposal the employer'sannual costs in connection with the two largest defined benefit pension schemesin the UK and USA under SSAP 24 are set out below and compared with theestimated annual expense under FRS 17 and the cash contributions made during theyear: 2005 2004 £m £m -------------------------------- ---------- ----------SSAP 24 expense 3.4 3.8FRS 17 net expense 3.8 4.1Actual net cash contributions 2.7 2.8-------------------------------- ---------- ---------- The assets and liabilities of the UK and USA schemes at 31 March 2005 under FRS17 were: 2005 2004 £m £m -------------------------------- ---------- ----------Assets 101.8 91.5Present 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 0.2Interest payable and similar charges on bank loans andoverdrafts (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 OyOn 13 September 2004 the Group acquired 89.5% of the share capital of MetorexInternational Oy ('Metorex') based in Helsinki, Finland. A further 9.6% wasacquired during January 2005. At 31 March 2005 the Group owned 99.1% of theshare capital of Metorex, with an expectation that the remaining share capitalwill 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 byinstalments in May 2005 and June 2006. Accounting policy Fair value Book value adjustments to the Group £m £m £m ------------------------- ---------- ---------- ----------Tangible fixed assets 0.1 - 0.1Stocks 1.4 (0.6) 0.8Debtors 1.4 - 1.4Creditors (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 5.3Less consideration deferred (1.3)------------------------- ---------- ---------- ----------Net cash outflow in respect of thepurchase 4.0Less net cash acquired -------------------------- ---------- ---------- ----------Net cash outflow on acquisition 4.0------------------------- ---------- ---------- ---------- The book value of the assets acquired are based on the management accounts atthe date of acquisition. The accounting policy adjustments reflect the alignmentof accounting policies in respect of stock provisioning and project basedcontracts. There were no fair value adjustments. Resonance Instruments LimitedThe Group acquired Resonance Instruments Limited based in Witney, Oxfordshire on21 September 2004 for a net cash consideration of £1.8 million. A further £1.3mpayment is deferred and payable over the next two years based on futureperformance and staff retention. Book value and fair value to the Group £m --------------------------------- ------------------Tangible fixed assets 0.1Stocks 0.4Debtors 0.4Creditors (0.6)Provisions (0.1)--------------------------------- ------------------Total net assets 0.2Goodwill 2.9--------------------------------- ------------------Total purchase cost 3.1Less consideration deferred (1.3)--------------------------------- ------------------Net cash outflow in respect of the purchase 1.8Less net cash acquired ---------------------------------- ------------------Net cash outflow on acquisition 1.8--------------------------------- ------------------ The book value of the assets acquired are based on the management accounts atthe date of acquisition. No material accounting policy or fair value adjustmentswere required. In the prior year ended 31 March 2004 the Group acquired the business and assetsof VG Semicon for a total consideration of £0.3m of which £0.2m was payable atthe time of acquisition. 7. Disposals Medical businessOn 1 March 2005 the Group sold its Medical business, headquartered in Old WokingUK. The aggregate gross cash consideration, including the repayment ofinter-company loans was £24.0m. The transaction comprised the sale of the entireshare capital of certain subsidiaries and the Medical related business andassets within certain other subsidiary companies. The resultant profit ondisposal before goodwill was £6.0m. Included within the provisions on disposalis an amount of £1.7m for the related pension deficit. The results of the Medical business are shown as discontinued operations in theGroup profit and loss account. There was a net profit on disposal of the business as follows: £m ----------------------------------------- ----------Gross cash consideration 24.0Net tangible assets sold (12.8)Net expenses (1.0)Provisions (4.2)----------------------------------------- ----------Gain on the sale of net tangible assets 6.0Less goodwill previously written off against reserves (3.6)----------------------------------------- ----------Net profit on disposal 2.4----------------------------------------- ---------- Cash received 24.0Net expenses paid ------------------------------------------ ----------Cash inflow on disposal 24.0----------------------------------------- ---------- Oxford Magnet TechnologyOn 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 again on disposal of £6.8m before goodwill of £0.2m previously written offagainst reserves. The results of OMT were equity accounted in accordance withFRS 9 for the three months ended 30 June 2003, up to which date it wasconsidered joint control existed, and from this date when it was considered thatjoint control ceased until the date of disposal, the investment was accountedfor as a minority investment in accordance with FRS 2. 8. Dividends per shareDividends per share are as follows: 2005 2004 pence pence ----------------------------------- --------- ---------Interim dividend 2.4 2.4Special interim dividend 25.0 -Related Shares:
Oxford Instruments