Oxford Instruments PLC Final Results -6-

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 Balance at 31 March 
  2012                                   2.8      60.2        0.1           0.6       63.4    127.1 
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Consolidated Statement of Cash Flows year ended 31 March 2013

 
                                                         2013    2012 
                                                         GBPm    GBPm 
-----------------------------------------------------  ------  ------ 
Profit for the year                                      22.0    24.8 
Adjustments for: 
Income tax expense                                        7.6    11.3 
Net financial expense/(income)                            3.7   (1.4) 
Other operating income                                      -   (7.0) 
Acquisition related fair value adjustments 
 to inventory                                             0.5     1.7 
Acquisition related costs                                 2.1     1.5 
Amortisation and impairment of acquired intangibles      13.8    11.2 
Depreciation of property, plant and equipment             4.6     4.8 
Amortisation and impairment of capitalised 
 development costs                                        3.9     5.2 
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Adjusted earnings before interest, tax, depreciation 
 and amortisation                                        58.2    52.1 
Loss on disposal of plant, property and equipment         0.2     0.5 
Cost of equity settled employee share schemes             1.4     1.0 
Acquisition related costs paid                          (1.2)   (1.0) 
Cash payments to the pension scheme more than 
 the charge to operating profit                         (5.3)   (4.5) 
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Operating cash flows before movements in working 
 capital                                                 53.3    48.1 
Decrease/(Increase) in inventories                        4.7   (0.2) 
Increase in receivables                                 (9.4)   (1.7) 
Increase in payables and provisions                       2.8     5.7 
Decrease in customer deposits                           (1.0)   (1.4) 
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Cash generated from operations                           50.4    50.5 
Interest paid                                           (0.5)   (1.1) 
Income taxes paid                                       (8.4)   (7.8) 
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Net cash from operating activities                       41.5    41.6 
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Cash flows from investing activities 
Proceeds from sale of property, plant and equipment         -     0.1 
Proceeds from sale of product line and subsidiary         1.0     7.3 
Acquisition of subsidiaries, net of cash acquired      (20.1)  (51.6) 
Acquisition of property, plant and equipment            (8.6)   (5.6) 
Capitalised development expenditure                     (4.6)   (2.4) 
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Net cash used in investing activities                  (32.3)  (52.2) 
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Cash flows from financing activities 
Proceeds from issue of share capital                      0.4    38.0 
Repayment of borrowings                                     -  (13.1) 
Increase in borrowings                                      -     2.5 
Dividends paid                                          (5.6)   (4.8) 
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Net cash from financing activities                      (5.2)    22.6 
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Net increase in cash and cash equivalents                 4.0    12.0 
Cash and cash equivalents at beginning of the 
 year                                                    35.1    23.7 
Effect of exchange rate fluctuations on cash 
 held                                                     0.1   (0.6) 
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Cash and cash equivalents at end of the year             39.2    35.1 
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 Reconciliation of changes in cash and cash equivalents 
  to movement in net cash 
 Increase in cash and cash equivalents                 4.0    12.0 
 Effect of foreign exchange rate changes 
  on cash and cash equivalents                         0.1   (0.6) 
--------------------------------------------------  ------  ------ 
                                                       4.1    11.4 
 Cash outflow from decrease in debt                      -    13.1 
 Cash inflow from increase in debt                       -   (2.5) 
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 Movement in net cash in the year                      4.1    22.0 
 Net cash at start of the year                        35.1    13.1 
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 Net cash at the end of the year                      39.2    35.1 
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   1     NON-GAAP MEASURES

The Directors present the following non-GAAP measures as they consider that they give a better indication of the underlying performance of the business.

RECONCILIATION BETWEEN PROFIT BEFORE INCOME TAX AND ADJUSTED PROFIT

 
                                                         Year to    Year to 
                                                        31 March   31 March 
                                                            2013       2012 
                                                            GBPm       GBPm 
-----------------------------------------------------  ---------  --------- 
 Profit before income tax                                   29.6       36.1 
 Reversal of acquisition related fair value 
  adjustments to inventory                                   0.5        1.7 
 Gain on disposal of product line                              -      (7.0) 
 Acquisition related costs                                   2.1        1.5 
 Amortisation and impairment of acquired intangibles        13.8       11.2 
 Unwind of discount in respect of deferred 
  consideration                                              0.2          - 
 Mark to market loss/(gain) in respect of derivative 
  financial instruments                                      2.0      (1.5) 
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 Adjusted profit before income tax                          48.2       42.0 
 Share of taxation                                         (9.9)      (8.8) 
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 Adjusted profit for the year                               38.3       33.2 
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The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide a measure that will include results from acquired businesses on a consistent basis over time to assist comparison of performance. Acquisition related costs comprise professional fees incurred in relation to mergers and acquisitions activity and any consideration which, under IFRS3 (revised), falls to be treated as a post acquisition employment expense.

In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets.

Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does not take advantage of the hedge accounting rules provided for in IAS 39 since that standard requires certain stringent criteria to be met in order to hedge account, which, in the particular circumstances of the Group, are considered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts for these derivative financial instruments at fair value through profit or loss. To the extent that instruments are hedges of future transactions, adjusted profit for the year is stated before changes in the valuation of these instruments so that the underlying performance of the Group can more clearly be seen.

In calculating the share of tax attributable to adjusted profit before tax in 2011 a one-off recognition of deferred tax assets relating to the Group's UK businesses of GBP11.3m was excluded. At that time the Group announced its intention to exclude the reversal of this deferred tax from the calculation of the share of tax attributable to adjusted profit before tax in the years in which it reverses. In the current period deferred tax of GBP3.3 million (2012: GBP4.6 million) has reversed and consequently been excluded from the tax attributable to adjusted profit before tax.

During the prior year the Group:

- disposed of a product line for a consideration of GBP8.1m. GBP1.0m of the consideration was deferred for one year. The product line was part of the Industrial Products segment. The profit on disposal was GBP7.0m.

- transferred its ownership of Technologies and Devices Inc (TDI) to Ostendo, a privately owned company based in California. The Group has received 650,000 shares of Ostendo common stock plus $0.9m in cash. The Group considers the fair value of the shares to be nil. The profit on disposal was nil.