Oxford Instruments Regulatory News (OXIG)

20 Nov 2007 07:01

Oxford Instruments PLC20 November 2007 20 November 2007 Oxford Instruments plc Announcement of half year results for 2007/08 Oxford Instruments plc, a leading provider of high technology tools and systemsfor industry and research, today announces its half year results for the sixmonths to 30 September 2007: • Strong operational performance in the first half with reported sales up 9% to £78.3 million (2006: £72.1 million); on a constant currency basis, sales growth was 15%; • Adjusted profit before tax (see note 2) grew to £1.8 million (2006: £1.7 million) despite considerable currency headwind; • Reported profit before tax, after exceptional items, increased by £3.0 million to £2.3 million (2006: loss £0.7million); • Acquisitions of VeriCold Technologies and Worldwide Analytical Systems will contribute to growth in the second half and beyond; • Recommended interim dividend of 2.4p, unchanged from last year. Nigel Keen, Chairman of Oxford Instruments plc, said: "Two years ago we set outour plan to double the size of the business in five years through organic andacquisitive growth. In the first half of this financial year, we have continuedto make good progress against this plan. The core markets of the business remain strong and our operational performancecontinues to improve. The Board continues to be confident that the Group's fullyear performance will meet expectations." Enquiries: Oxford Instruments plc Tel: 01865 393200 Jonathan Flint, Chief Executive Kevin Boyd, Group Finance Director Hogarth Partnership Limited Tel: 020 7357 9477 Rachel Hirst/Andrew Jaques For further copies of this Half Year Results announcement, please contact LynnShepherd at the Group's registered office at Tubney Woods, Abingdon, Oxon OX135QX (email: lynn.shepherd@oxinst.com). Chairman's Statement Nigel Keen, Chairman of Oxford Instruments plc, said today: Introduction The Group has shown a strong operational performance in the first half withreported sales up 9% on the same period last year. This growth is despite theadverse effect of changes in exchange rates, particularly the weakness of the USDollar. On a constant currency basis, the sales growth was 15%. Adjusted profitbefore tax (note 2) for the half year at £1.8m was ahead of the same period lastyear (2006: £1.7m). On a constant currency basis, adjusted profit before taxmore than doubled to £4.1m. In recent years, a number of exceptional charges have been made to reflect thecost of restructuring our business to improve operational performance. Thisrestructuring is now complete and the benefits are showing through. In addition,property disposals have yielded an exceptional profit in this period. As aresult, reported profit before tax, after exceptional items, for this half yearhas increased by £3.0m to £2.3m (2006: loss £0.7m). Our strategy to position the Group towards growth markets is beginning todeliver tangible results. We have seen strong performances throughout thebusiness. However, as previously reported, this progress has been offset to someextent by the expected reduction in sales relating to the Restriction ofHazardous Substances (RoHS) legislation and a softening in the North AmericanMRI market. Both our internal product development and acquisition programmes are focusedaround our strategic objective to provide tools for the emerging nanotechnologyand life sciences industries. Our focus on developing highly commercialtechnologies that uniquely meet our customers' needs is proving successful. Allrecent new product introductions have delivered their planned returns. Two years ago we set out our plan to double the size of the business in fiveyears through organic and acquisitive growth. In the first half of thisfinancial year, we have continued to make good progress against this plan. Wehave met our growth targets for organic growth. In addition we have made twoacquisitions, VeriCold Technologies GmbH and Worldwide Analytical Systems AG(WAS), which are described in the operational review. These acquisitions willcontribute to growth in the second half of the year and beyond, and give usaccess to important new markets and technologies. Financial Summary On a constant currency basis, revenues for the first half increased by 15% overthe same period last year. Of this growth, 13% was organic and 2% (£1.3 million)came from acquisitions made in the period. Reported revenues grew by 9% to £78.3million. Orders taken in the period exceeded this by £4.8 million at £83.1million. Gross margins fell from 41.6% to 40.0%, impacted by the adverse exchange ratemovements described above. Total operating expenses increased by £1.3 million to £29.3 million, £0.4million of which came from the acquisitions. Adjusted profit before tax (note 2) was £1.8 million (2006: £1.7 million), £0.1million of which was contributed by acquisitions. Reported profit before tax of£2.3 million (2006: loss £0.7 million) included £0.7 million exceptional gain onthe sale of two properties. Net debt at the period end was £14.8 million. The major movements in the periodincluded an increase in working capital of £6.8 million, acquisitions totalling£12.5 million, pension deficit reduction payments of £2.1 million and inflowsfrom the sale of property of £7.7 million. During the period under review we reached an agreement with those of ouremployees who are members of our UK defined benefit pension scheme. Thisresulted in an increase in the contributions that they make to the schemecoupled with a reduction in future benefits that will accrue to members of thescheme. While this does not affect the reported pension deficit, it will reducethe risk associated with future movements in pension liabilities. The Directors have recommended an interim dividend of 2.4 pence, unchanged fromthe previous year, payable on 7 April 2008. Operational Review Our Industrial Analysis business continues to grow with strong performances inits core market of high technology industrial instrumentation. Demand continuesto increase for instruments which provide information on the composition ofmaterials to enable the user to monitor compliance with environmentalregulation. Whilst demand for RoHS equipment has slackened, other sectors suchas Positive Material Identification (PMI) continue to fuel growth. The recentconcern about the presence of lead in toys has illustrated the increasingimportance of spectrographic analysis to ensure quality and safety control in awide range of industries. Oxford Instruments is working with leading toymanufacturers in using X-ray fluorescence analysers to ensure imported toys arefree from hazardous substances. In July, we acquired WAS based in Uedem, Germany. WAS has a recognised productrange in optical emission spectroscopy. This complements the X-ray fluorescencespectroscopy products of our Industrial Analysis Division, where we already havea leading position. The acquisition strengthens our position, particularly inthe metals recycling market, where we now have a full set of tools covering bothheavy and light elements. The integration of WAS is proceeding to plan and theacquisition is expected to contribute to sales growth and profits in the secondhalf of the year. Our X-Ray Technology business based in California produces small X-ray sourcesfor the analytical instrumentation market. Sales here have reduced from therecord high levels reached last year, due to the RoHS market decline. However,long term prospects for this business remain strong. NanoAnalysis had a strong half year. The new detectors introduced last year,INCAx-act and X3, are selling well and have contributed to record results fromthis business. INCAx-act utilises "dry" technology which allows the user toperform high sensitivity chemical analysis without needing to use liquidnitrogen to cool the detectors in the instrument. Plasma Technology saw a significant increase in turnover in the half year. Thiswas seen in all its sectors but was particularly helped by the new OpAl AtomicLayer Deposition (ALD) system. OpAl is a smaller version of the FlexAl ALDproduct launched last year which allows customers to fabricate structures oneatom thick for applications including electronics manufacture. For example, manydisplays on mobile phones are fabricated using ALD. Orders are already ahead ofexpectations for this new product. Whilst sales growth has been achieved, thecost of the extra investment in sales and distribution in this business hasreduced net margins during this half year. Our NanoScience business, under a new management team, is pursuing a strategy toconvert its innovative technology into competitive market leading products.Existing products on the market use liquid helium as a cooling agent. This isdifficult to handle and is becoming increasingly expensive. Our acquisition ofVeriCold, based in Ismaning, Germany, in July gives us the key technology toenable us to provide the very low temperatures associated with our productswithout liquid helium. Work is underway on the introduction of new productsmerging VeriCold technology with the existing Nanoscience capability incryogenics and magnetic fields. TritonTM and IntegraTM are the first examples of products employing thistechnology synergy. Triton is a new type of cooling device that does not requirea supply of liquefied gases to operate. This opens up previously inaccessiblemarkets, such as airport security, where very cold detectors will be required.Integra is a device which re-condenses the helium used to maintain very lowtemperatures, significantly reducing requirements for this expensive commodity.It opens up new market possibilities such as the tools required to developquantum computing. Triton and Integra have been successful with early orderintake exceeding expectations and initial customer reaction enthusiastic.Professor Amir Yacoby at Harvard University said "One of the objectives insetting up my new laboratory has been to expand our activity in cryogenicphysics, without increasing our liquid helium usage. In using Integra we expectto have an additional cryogenic system with very little liquid heliumconsumption and without compromising the measurement capabilities demanded ofour research". Our Superconducting Wire business showed steady revenue performance withincreased volume offsetting the lower Sterling value of the sales made in USDollars. The requirements of the Deficit Reduction Act passed by the US Senatein February 2006 caused a slowdown in new MRI installations in the USA, thoughsales elsewhere remain strong. The international ITER project, to produce powerthrough nuclear fusion, continues to progress. Our high performance wireproducts have been qualified for use in the project and first orders ofsuperconducting wire are expected by the end of the financial year. We areincreasing our production capacity to meet this potentially significant demand.In June, we announced the creation of an alliance between Oxford SuperconductingTechnology and Alstom Magnets & Superconductors, focused on winning supplycontracts in the EU for superconducting wire for ITER. Austin Scientific manufactures and refurbishes cryogenic pumps andrefrigerators. Following the successful move into new industrial sectors of itsmarket this business is showing strong sales growth albeit from a low base. Our Molecular Biotools business has graduated from being a technology start upto a profitable trading entity. This has been driven by the success of ourHyperSense(R) Dynamic Nuclear Polarisation equipment. DNP is a technique fordramatically improving the sensitivity of NMR analysis and has proven a successwith researchers around the world. In the half year, ten units have beendelivered to customers, doubling last year's production rate. China Our trading in China remains strong with demand being particularly buoyant forour NanoScience and Industrial Analysis products. Orders in the half year haverisen by 38% reflecting our increasingly effective distribution channels andstrong brand image. Property In July, we announced the completion of the sale of our vacant properties atAbingdon and Eynsham in the UK. These properties had become surplus to operatingrequirements following an earlier restructuring of our business. The netproceeds from the sale were £7.7m (book value £7m). In September we received planning permission for a new facility for our PlasmaTechnology business. This will provide us with a state-of-the-art facility andfurther enhance our opportunities for growth. A large proportion of the fundingfor this site will come from the already contracted sale of our current propertyin Yatton. People Significant cultural change has been achieved in the Group. This underpins oursuccessful drive for growth. I would like to thank our workforce for theircontinued effort to transform Oxford Instruments into a world classorganisation. Outlook The core markets of the business remain strong and our operational performancecontinues to improve. The Board continues to be confident that the Group's fullyear performance will meet expectations. Nigel Keen Chairman 20 November 2007 Group Income Statement Half year ended 30 September 2007- unaudited Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 As restated Notes £m £m £m ------ --------- --------- ---------Revenue 3 78.3 72.1 161.6Cost of sales (47.0) (42.1) (95.0) --------- --------- ---------Gross profit 31.3 30.0 66.6Trading expenses excluding costof goods sold 4 (29.3) (28.0) (58.3) --------- --------- --------- Trading profit 3 2.0 2.0 8.3 Other operating income 6 0.7 - -Amortisation of acquiredintangibles (0.4) (0.1) (1.1)Restructuring and non-recurringcosts - (2.4) (5.2) --------- --------- ---------Operating profit/(loss) 2.3 (0.5) 2.0Financial income 7 4.9 4.3 8.5Financial expenditure 8 (4.9) (4.5) (9.2) --------- --------- ---------Profit/(loss) before income tax 2.3 (0.7) 1.3 Income tax expense 9 (0.8) (0.7) (2.8) --------- --------- ---------Profit/(loss) for the periodattributable to equityshareholders of the parent 1.5 (1.4) (1.5) --------- --------- --------- pence pence pence --------- --------- ---------Earnings per shareBasic earnings per share 10 3.0 (2.9) (3.2)Diluted earnings per share 10 3.0 (2.9) (3.2) Dividends per shareDividends paid 11 2.4 2.4 8.4Dividends proposed 11 2.4 2.4 8.4 --------- --------- --------- Total dividends £m £m £m --------- --------- ---------Dividends paid 1.2 1.2 4.0Dividends proposed 1.2 1.2 4.0 --------- --------- --------- £m £m £mAdjusted profit before tax 2 1.8 1.7 7.5 --------- --------- --------- pence pence pence --------- --------- ---------Adjusted earnings per shareBasic earnings per share 10 2.3 2.1 9.6Diluted earnings per share 10 2.2 2.1 9.5 --------- --------- --------- Group Statement of Recognised Income and Expense Half year ended 30 September 2007 - unaudited Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Foreign exchange translationdifferences (0.1) (1.1) (1.7)Actuarial gain in respect of postretirement benefits - - 22.1Deferred tax in respect of postretirement benefits (0.6) - (6.7)Recycling of fair value movements ofavailable for sale equity securities - - 0.2 --------- --------- ---------Net (loss)/profit recognised directlyin equity (0.7) (1.1) 13.9Profit/(loss) for the period 1.5 (1.4) (1.5) --------- --------- ---------Total recognised income/(expense) forthe year attributable to equityshareholders of the parent 0.8 (2.5) 12.4 --------- --------- --------- Group Balance Sheet As at 30 September 2007 - unaudited As at As at As at 30 Sept 30 Sept 31 March 2007 2006 2007 Notes £m £m £m ------ --------- --------- ---------AssetsNon-current assetsProperty, plant and equipment 23.0 21.7 21.5Intangible assets 41.2 16.8 18.1Available for sale equity securities 0.6 1.0 0.6Deferred tax assets 11.8 18.9 11.6 --------- --------- --------- 76.6 58.4 51.8 Current assetsInventories 30.9 28.6 25.6Trade and other receivables 44.1 37.7 45.1Current income tax recoverable 0.5 - 0.5Derivative financial instruments 1.2 0.2 0.5Cash and cash equivalents 8.5 5.4 3.9Held for sale assets - 6.9 7.0 --------- --------- --------- 85.2 78.8 82.6 --------- --------- ---------Total assets 161.8 137.2 134.4 --------- --------- --------- EquityCapital and reserves attributable tothe Company's equity holdersShare capital 2.5 2.4 2.5Share premium 21.1 20.2 20.9Other reserves 0.1 0.1 0.1Translation reserve (0.9) (0.2) (0.8)Retained earnings 32.8 20.2 33.1 --------- --------- --------- 15 55.6 42.7 55.8 --------- --------- --------- LiabilitiesNon-current liabilitiesBank loans 20.2 - -Other payables 2.4 0.4 0.2Retirement benefit obligations 28.9 54.2 30.8Deferred tax liabilities 7.4 - - --------- --------- --------- 58.9 54.6 31.0 Current liabilitiesBank loans 0.1 0.5 1.0Bank overdrafts 3.0 0.4 1.1Trade and other payables 38.2 33.5 40.2Current income tax payables 2.1 0.1 1.8Derivative financial instruments 0.6 0.1 0.2Provisions 3.3 5.3 3.3 --------- --------- --------- 47.3 39.9 47.6 --------- --------- ---------Total liabilities 106.2 94.5 78.6 --------- --------- ---------Total liabilities and equity 161.8 137.2 134.4 --------- --------- --------- Group Statement of Cash Flows Half year ended 30 September 2007 - unaudited Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Profit/(loss) for the period 1.5 (1.4) (1.5)Adjustments for:Income tax expense 0.8 0.7 2.8Net financial expense - 0.2 0.7Restructuring and non-recurring costs - 2.4 5.2Amortisation of acquired intangibles 0.4 0.1 1.1Other operating income (0.7) - -Depreciation of property, plant andequipment 1.8 1.8 3.4Amortisation of research anddevelopment 1.0 0.5 1.5 --------- --------- ---------Earnings before interest, tax,depreciation and amortisation 4.8 4.3 13.2Loss on disposal of property, plantand equipment - - 0.2Cost of equity settled employee shareschemes - - 0.2Restructuring costs paid - (1.7) (2.9)Cash payments to the pension scheme(more)/less than the charge to theincome statement (1.7) 0.7 (0.7) --------- --------- ---------Operating cash flows before movementsin working capital 3.1 3.3 10.0Increase in inventories (3.2) (1.6) 0.6Decrease/(increase) in receivables 1.7 6.5 (2.3)Decrease in payables (5.0) (5.7) -Decrease in provisions (0.3) (0.2) (0.3) --------- --------- ---------Cash (absorbed)/generated byoperations (3.7) 2.3 8.0Interest paid (0.4) (0.1) (0.3)Income taxes paid (0.8) (1.4) (2.5) --------- --------- ---------Net cash from operating activities (4.9) 0.8 5.2 --------- --------- ---------Cash flows from investing activitiesProceeds from sale of property, plantand equipment - - 0.1Proceeds from sale of held for saleassets 7.7 - -Proceeds from sale of available forsale equity securities - - 0.3Interest received 0.1 0.1 0.2Acquisition of subsidiaries, net ofcash acquired (12.5) (0.1) (0.3)Acquisition of property, plant andequipment (2.3) (2.5) (4.4)Capitalised development expenditure (2.8) (2.2) (5.6) --------- --------- ---------Net cash from investing activities (9.8) (4.7) (9.7) --------- --------- --------- Cash flows from financing activitiesProceeds from issue of share capital 0.2 - 0.8Proceeds from the disposal of own shares - - -Increase/(decrease) in borrowings 18.5 (2.4) (1.9)Dividends paid (1.2) (1.2) (4.0) --------- --------- ---------Net cash from financing activities 17.5 (3.6) (5.1) --------- --------- ---------Net increase/(decrease) in cashequivalents 2.8 (7.5) (9.6)Cash and cash equivalents at beginningof the period 2.8 12.7 12.7Effect of exchange rate fluctuationson cash held (0.1) (0.2) (0.3) --------- --------- ---------Cash and cash equivalents at end ofthe period 5.5 5.0 2.8 --------- --------- --------- Notes on the Half Year Financial Statements Half year ended 30 September 2007 - unaudited 1 BASIS OF PRESENTATION OF ACCOUNTS Oxford Instruments plc (the Company) is a company incorporated in England andWales. The condensed Group half year financial statements consolidate those ofthe Company and its subsidiaries (together referred to as the Group). They havebeen prepared in accordance with International Financial Reporting Standard(IFRS) IAS 34 Interim Financial Reporting. They do not include all of theinformation required for full annual financial statements, and should be read inconjunction with the consolidated financial statements of the Group for the yearended 31 March 2007. The half year results are unaudited. The summary of results for the year ended31 March 2007 is an extract from the published consolidated financial statementsof the Group for that period which have been reported on by the Group's auditorsand delivered to the Registrar of Companies. The audit report (i) wasunqualified, (ii) did not include a reference to any matters to which theauditors drew attention by way of emphasis without qualifying their report, and(iii) did not contain a statement under section 237(2) or (3) of the CompaniesAct 1985. The half year financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the Group'spublished consolidated financial statements for the year ended 31 March 2007. Atthe prior year end the Directors reviewed the classification of operating costsbetween costs of goods sold and overhead categories and consequently thepreviously published figures for the half year to 30 September 2006 have beenrestated in this document. The effect has been to reduce cost of sales by £5.8mand increase selling and marketing costs, administration and shared services andresearch and development by £1.4m, £3.9m and £0.5m respectively. The previouslypublished figures for the year to 31 March 2007 do not require restatement sincethe new classification was applied when these were first published. The principal exchange rates used to translate the Group's overseas results wereas follows: Half year to 30 Half year to 30 Year to 31 Sept 2007 Sept 2006 March 2007 Average Period end Average Period end Average Period end --------- --------- --------- --------- --------- ---------US Dollar 2.00 2.04 1.84 1.87 1.89 1.96Euro 1.47 1.43 1.46 1.47 1.47 1.47Yen 237 234 213 221 221 232 --------- --------- --------- --------- --------- --------- 2 RECONCILIATION BETWEEN PROFIT AND ADJUSTED PROFIT Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Profit/(loss) before tax 2.3 (0.7) 1.3Other operating income (0.7) - -Amortisation of acquired intangibleassets 0.4 0.1 1.1Restructuring and non-recurring costs - 2.4 5.2Financial instruments (see below) (0.2) (0.1) (0.1) --------- --------- ---------Adjusted profit before tax 1.8 1.7 7.5 --------- --------- --------- Under IAS 39, derivative financial instruments are recognised initially at fairvalue - this includes the fixed forward and option based foreign exchangecontracts the Group has entered into in order to manage its exposure to foreignexchange rate movements. Subsequent to initial recognition, derivative financialinstruments are measured at fair value. The group does not take advantage of thehedge accounting rules provided for in IAS 39 since that standard requirescertain stringent criteria to be met in order to hedge account, which, in theparticular circumstances of the Group, are considered by the Board not to bringany significant economic benefit. Accordingly, the Group accounts for itsderivative financial instruments as trading instruments with the profit or losson remeasurement to fair value being taken immediately to the income statement.Adjusted profit for the year is stated before changes in the valuation of theseinstruments so that the underlying performance of the Group can more clearly beseen. 3 RESULTS BY BUSINESS Information is presented in the consolidated half year financial statements inrespect of the Group's two business segments. These are the primary basis of oursegmental reporting. Our Analytical business provides measurement andfabrication instruments for industrial and commercial customers. OurSuperconductivity business provides materials, tools and systems for industrialand government customers working at the frontiers of science. Segment results include items directly attributable to a segment as well asthose which can be allocated on a reasonable basis. Half year to 30 September 2007 Analytical Superconductivi Total ty £m £m £m ------------ ------------ ------------Revenue 49.6 28.7 78.3 ------------ ------------ ------------ Trading profit before costs of OII 2.8 0.6 3.4Costs of OII (1.4) ------------ ------------ ------------Trading profit 2.0Other operating income 0.7Amortisation of acquired intangibles (0.4) ------------ ------------ ------------Operating profit 2.3Net financial expense -Income tax expense (0.8) ------------ ------------ ------------Profit for the period 1.5 ------------ ------------ ------------ Segment net assets 56.9 34.1 91.0Unallocated net assets (35.4) ------------ ------------ ------------Total net assets 55.6 ------------ Research and development to enhance and develop existing products is undertakenwithin both the Analytical and Superconductivity business segments. In additionOxford Instruments Innovation (OII) carries out initial investigations into newproduct lines that would not normally be undertaken by the operating businesses.Trading profit is shown both before and after OII costs so as to give a moremeaningful indication of the performance of the business segments. Half year to 30 September 2006 Analytical Superconductivi Total ty £m £m £m ------------ ------------ ------------Revenue 43.3 28.8 72.1 ------------ ------------ ------------ Trading profit/(loss) before costsof 3.6 (0.1) 3.5OIICosts of OII (1.5) ------------ ------------ ------------Trading profit 2.0Amortisation of acquired intangibles (0.1)Restructuring and non-recurring costs (2.4) ------------ ------------ ------------ Operating loss (0.5)Net financial expense (0.2)Income tax expense (0.7) ------------ ------------ ------------Loss for the period (1.4) ------------ ------------ ------------ Segment net assets 36.5 31.0 67.5Unallocated net assets (24.8) ------------ ------------ ------------Total net assets 42.7 ------------ Year to 31 March 2007 Analytical Superconductivi Total ty £m £m £m ------------ ------------ ------------Revenue 100.7 60.9 161.6 ------------ ------------ ------------ Trading profit before costs of OII 10.1 1.6 11.7Costs of OII (3.4) ------------ ------------ ------------Trading profit 8.3Amortisation of acquired intangibles (1.1)Restructuring and non-recurring costs (5.2) ------------ ------------ ------------ Operating profit 2.0Net financial expense (0.7)Income tax expense (2.8) ------------ ------------ ------------Loss for the period (1.5) ------------ ------------ ------------ Segment net assets 37.6 29.8 67.4Unallocated net assets (11.6) ------------ ------------ ------------Total net assets 55.8 ------------ 4 TRADING EXPENSES EXCLUDING COST OF GOODS SOLD Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 As restated £m £m £m --------- --------- ---------Selling and marketing costs 13.2 12.5 26.7Administration and shared services 10.1 9.8 20.3Foreign exchange gain (0.1) (0.4) (0.8)Research and development (note 5) 6.1 6.1 12.1 --------- --------- --------- 29.3 28.0 58.3 --------- --------- --------- 5 RESEARCH AND DEVELOPMENT Total research and development spend by the group is as follows: Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 As restated £m £m £m --------- --------- ---------Total cash spent on research anddevelopment during the year 7.9 7.8 16.2Less: amount capitalised (2.8) (2.2) (5.6)Add: amortisation of amountspreviously capitalised 1.0 0.5 1.5 --------- --------- ---------Research and development charged toincome statement 6.1 6.1 12.1 --------- --------- --------- 6 OTHER OPERATING INCOME Other operating income comprises the profit on disposal of held for salefreehold properties in Abingdon and Eynsham, UK. 7 FINANCIAL INCOME Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Bank interest receivable 0.1 0.1 0.2Expected return on pension schemeassets 4.6 4.1 8.2Mark to market gain in respect ofderivative financial instruments 0.2 0.1 0.1 --------- --------- --------- 4.9 4.3 8.5 --------- --------- --------- 8 FINANCIAL EXPENDITURE Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Interest payable and similar chargeson bank loans and overdrafts 0.4 0.1 0.3Interest charge on pension schemeliabilities 4.5 4.4 8.9 --------- --------- --------- 4.9 4.5 9.2 --------- --------- --------- 9 TAXATION The Group estimates that its weighted average tax rate for the full year will be37% (2006 40%) and the tax charge for the period has been calculated using thisrate. In the prior year no tax relief was obtained in respect of therestructuring and non-recurring costs. It has been announced that the UK corporation tax rate will change from 30% to28% with effect from 1 April 2008. This has resulted in the group's deferred taxasset being reduced by £0.6m. To the extent that this amount relates to deferredtax assets which, on initial recognition, were recognised in equity it has beencharged directly to equity. The balance has been charged to income. 10 EARNINGS PER SHARE a) Basic The calculation of basic earnings per share is based on the profit or loss forthe period after taxation and a weighted average number of ordinary sharesoutstanding during the period, excluding shares held by the Employee ShareOwnership Trust, as follows: Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Profit/(loss) for the period 1.5 (1.4) (1.5) --------- --------- --------- Shares Shares Shares million million million --------- --------- ---------Weighted average number of sharesoutstanding 49.3 48.8 48.9Less shares held by Employee ShareOwnership Trust 0.6 0.8 0.7 --------- --------- ---------Weighted average number of shares usedin calculation of earnings per share 48.7 48.0 48.2 --------- --------- --------- b) Diluted The following table shows the effect of share options on the calculation ofdiluted basic earnings per share. However, in the prior period since there was aloss in the period that effect was antidilutive and so was excluded from thecalculation of diluted basic earnings per share in that period. Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 Shares Shares Shares million million million --------- --------- ---------Number of ordinary shares per basicearnings per share calculations 48.7 48.0 48.2Effect of shares under option 0.2 0.2 0.3 --------- --------- ---------Number of ordinary shares per dilutedearnings per share calculations 48.9 48.2 48.5 --------- --------- --------- c) Adjusted The earnings per share before other operating income, amortisation of acquiredintangibles, restructuring and non-recurring costs, and mark to market gains orlosses in respect of certain derivatives are as follows: Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 pence pence pence --------- --------- ---------Basic 2.3 2.1 9.6Diluted 2.2 2.1 9.5 --------- --------- --------- A reconciliation of the profit for the periods used to calculate basic earningsper share to the adjusted profit used to calculate the adjusted earnings pershare shown above is set out below: Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Adjusted profit before income tax(note 2) 1.8 1.7 7.5Taxation (0.7) (0.7) (2.8) --------- --------- ---------Adjusted profit for the period 1.1 1.0 4.7 --------- --------- --------- 11 DIVIDENDS PER SHARE The following dividends per share were paid by the Group: Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 pence pence pence --------- --------- ---------Previous period interim dividend 2.4 2.4 2.4Previous period final dividend - - 6.0 --------- --------- --------- 2.4 2.4 8.4 --------- --------- --------- The following dividends per share were proposed by the Group in respect of eachaccounting period presented: Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 pence pence pence --------- --------- ---------Interim dividend 2.4 2.4 2.4Final dividend - - 6.0 --------- --------- --------- 2.4 2.4 8.4 --------- --------- --------- The interim dividend for the year to 31 March 2008 of 2.4 pence was approved bythe Board on 20 November 2007 and has not been included as a liability as at 30September 2007. The interim dividend will be paid on 7 April 2008 toshareholders on the register at the close of business on 29 February 2008. 12 ACQUISITIONS Worldwide Analytical Systems AG During the period from 25 July 2007 to 2 August 2007 the Group acquired 100% ofthe voting rights of Worldwide Analytical Systems AG based in Uedem, Germany fora net cash consideration of £9.5m. The company is a leading manufacturer of Arc/Spark optical emission instrumentation. In the period subsequent to acquisition the company contributed profit of £0.1mto the Group. The additional revenue and profit which would have been earned bythe Group had the acquisition taken place on the first day of the financial yearis not known since it is not possible to calculate the synergistic benefitswhich would have arisen in that period. The following table gives a provisionalanalysis of the assets acquired and the goodwill arising. Provisional Provisional Provisional fair value fair value book value adjustments to the Group £m £m £m --------- --------- ---------Intangible assets 0.1 13.5 13.6Property, plant and equipment 1.2 - 1.2Deferred tax assets - 0.3 0.3Inventories 2.0 (0.2) 1.8Receivables 1.1 - 1.1Net overdraft (0.3) - (0.3)Payables and provisions (2.4) (0.5) (2.9)Deferred tax liabilities - (4.7) (4.7)Borrowings (0.8) - (0.8) --------- --------- ---------Total net assets acquired 9.3Goodwill 0.2 --------- --------- ---------Net cash outflow in respect of thepurchase* 9.5Add overdraft acquired 0.3 --------- --------- ---------Net cash outflow on acquisition 9.8 --------- --------- --------- * Includes costs associated with the acquisition of £0.2m. The review of intangible assets acquired is still ongoing and will be completedby the year end. The book value of the assets acquired is based on themanagement accounts at the date of acquisition. The fair value adjustmentsrelate to the recognition of technology related intangible assets, the reductionof certain inventories to net realisable value and the provision for certainliabilities. The goodwill comprises the value attributable to the employeeworkforce as well as expected revenue and cost synergies that will arise following the integration of the business into the Group. VeriCold Technologies GmbH On 19 August 2007 the Group acquired 100% of the voting rights in VeriColdTechnologies GmbH based in Ismaning, Germany for a net cash consideration of£2.0m. Further contingent consideration of up to €5.5m is payable based on postacquisition orders revenue growth. The Group's best estimate of this contingentconsideration at the current time is £2.1m. The company is a manufacturer ofpulse tube refrigerators. In the period subsequent to acquisition the company contributed neither a profitnor a loss. The additional revenue and profit which would have been earned bythe Group had the acquisition taken place on the first day of the financial yearis not known since it is not possible to calculate the synergistic benefitswhich would have arisen in that period. The following table gives a provisionalanalysis of the assets acquired and the goodwill arising. Provisional Provisional Provisional fair value fair value book value adjustments to the Group £m £m £m --------- --------- ---------Intangible assets - 6.7 6.7Property, plant and equipment 0.1 - 0.1Deferred tax assets - 0.3 0.3Inventories 0.8 (0.3) 0.5Receivables 0.2 - 0.2Payables and provisions (1.2) (0.4) (1.6)Deferred tax liabilities - (2.4) (2.4) --------- --------- ---------Total net assets acquired 3.8Goodwill 0.3 --------- --------- ---------Total purchase cost 4.1Less contingent consideration (2.1) --------- --------- ---------Net cash outflow in respect of thepurchase/acquisition 2.0 --------- --------- --------- * Includes costs associated with the acquisition of £0.1m. The review of intangible assets acquired is still ongoing and will be completedby the year end. The book value of the assets acquired is based on themanagement accounts at the date of acquisition. The fair value adjustmentsrelate to the recognition of both customer and technology related intangibleassets, the reduction of certain inventories to net realisable value and theprovision for certain liabilities. The goodwill comprises the value attributableto the employee workforce as well as expected revenue and cost synergies thatwill arise following the integration of the business into the Group. 13 PENSIONS The Group does not perform actuarial valuations at the half year unless aparticularly significant event has occurred during that period. The Group hasapplied actuarial assumptions at 30 September 2007 consistent with those used at31 March 2007. Accordingly, no actuarial gain or loss arises in respect ofpensions. The actuarial assumptions will be reviewed at 31 March 2008. 14 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO NET CASH Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Increase/(decrease) in cash and cashequivalents 2.8 (7.5) (9.6)Effect of foreign exchange ratechanges on cash and cash equivalents (0.1) (0.2) (0.3) --------- --------- --------- 2.7 (7.7) (9.9) Cash outflow from decrease in debt 1.0 2.4 1.9Cash inflow from increase in debt (19.5) - -Borrowings acquired on acquisition (0.8) - - --------- --------- ---------Movement in net debt in the period (16.6) (5.3) (8.0)Net cash at start of the period 1.8 9.8 9.8 --------- --------- ---------Net (debt)/cash at end of the period (14.8) 4.5 1.8 --------- --------- --------- Analysed as:Cash and cash equivalents (per BalanceSheet) 8.5 5.4 3.9Bank overdrafts (3.0) (0.4) (1.1) --------- --------- --------- Cash and cash equivalents (perStatement of Cash Flows) 5.5 5.0 2.8Borrowings (20.3) (0.5) (1.0) --------- --------- ---------Net (debt)/cash at end of the period (14.8) 4.5 1.8 --------- --------- --------- 15 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS Half year to Half year to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 £m £m £m --------- --------- ---------Total recognised income/(expense) forthe period 0.8 (2.5) 12.4Credit in respect of employee servicecosts settled by award of shareoptions - - 0.2Proceeds from shares issued 0.2 - 0.8Dividends paid (1.2) (1.2) (4.0)Opening equity shareholders' funds 55.8 46.4 46.4 --------- --------- ---------Closing equity shareholders' funds 55.6 42.7 55.8 --------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange