TIDMAND
RNS Number : 3674U
Andor Technology plc
02 December 2013
2 December 2013
ANDOR TECHNOLOGY PLC
Preliminary Results for the year ended 30 September 2013
Andor Technology plc (AND.L, "Andor" or the "Group"), a global
leader in the development and manufacture of high performance
scientific digital cameras for academic, industrial and government
applications, today announces preliminary results for the year
ended 30 September 2013.
Financial Highlights
Financial performance in line with revised Group
expectations:
-- Turnover of GBP54.6m (2012: GBP58.3m)
-- Gross margin increased to 56.2% (2012: 55.7%)
-- Adjusted* operating profit in line with revised expectations at GBP7.2m (2012: GBP9.8m)
-- Adjusted* PBT in line with revised expectations at GBP7.4m (2012: GBP10.0m)
-- Adjusted* EPS down 23% to 21.2 pence (2012: 27.5 pence)
-- Net cash up 34% to GBP22.9m (2012: GBP17.1m)
-- Recommended final dividend per share increased by 7.5% to 2.15 pence (2012: 2 pence)
*Adjusted results are before the amortisation of acquired
intangibles
Operational Highlights
-- Full year order intake at record levels
-- sCMOS sales to research customers up 39%
-- Strengthened portfolio through new product introductions
-- 33% growth in opening order book for FY 14
-- Broadened Andor's target market and opportunity with two
strategic acquisitions after the year-end:
o Acquisition of Spectral Applied Research Inc., adding a
patented product set and strengthening our Group's position in the
Systems segment
o Acquisition of Apogee Imaging Systems Inc., significantly
broadening our Group's mid-range camera offering
Commenting on the results, Colin Walsh, Chairman, said:
"We enter 2014 in a strong and confident position. First and
foremost, we start the year as a larger Group with a strengthened
product set and a significantly enhanced opportunity, thanks to our
two recent acquisitions. Coupled with this is the strength of our
opening order book: up one third from the same time last year.
Whilst challenges remain, a number of indicators are beginning to
point to more positive conditions across our markets. Those
indicators, coupled with our strengthened position and improved
gross margins support our confidence in delivering on our
expectations in the year ahead."
A briefing for equity research analysts will take place today at
09.30 at the offices of Investec, 2 Gresham Street, EC2V 7QP. If
you would like to attend, please contact FTI Consulting.
Enquiries:
Andor Technology Conor Walsh, Chief Executive +44 (0) 28 9023
plc Alan Lilley, Finance Director 7126
+44 (0) 20 7597
Investec Keith Anderson/Dominic Emery 4000
+44 (0) 20 7831
FTI Consulting Matt Dixon/Tracey Bowditch 3113
Chairman's Statement for the year ending 30 September 2013
2013 has been a year of challenge and change for Andor. I am
pleased to report that the Group has delivered on its revised
financial expectations, achieving revenue for the full year of
GBP54.6m (2012: GBP58.3m) and adjusted profit before tax of GBP7.4m
(2012: GBP10.0m). The year ended strongly with order intake at
record levels and, as a result, we are entering 2014 in a strong
and confident position.
With government expenditure in research curtailed across our
principal markets, 2013 was more challenging in terms of sales than
we had predicted. Many positives have however been achieved, which
give considerable grounds for optimism going forward. Foremost
among these is that our new sales structure has now bedded in,
delivering a steady growth in order intake as the year progressed,
culminating in a record order intake of GBP59.1m for the year. This
has come about in part through the superior performance and
determination of our sales team, and also from the new product
introductions that our R&D and engineering teams at Andor have
brought to fruition during the year.
We view the continuous development and introduction of new
leading-edge products that meet our research customers' needs as
being essential in retaining Andor's competitive advantage across
the global markets that we serve. In a world where technical
advantages can be quickly overturned, this was central in realising
the growth in order intake achieved during the year.
Notwithstanding the economic climate, we resisted the temptation to
reduce R&D expenditure, instead increasing it by 16% over the
prior year, which we believe will pay dividends in the future.
During the year we also widened our search for suitable
acquisitions that complement the growing range of cameras and
associated products that we offer to our research and OEM customers
globally. We are exacting in our acquisition selection standards,
choosing only best in class products that directly leverage our
existing offerings; which we can introduce into the broader markets
we serve; that possess a genuine cultural fit; and that meet our
financial criteria. Although many were considered, only two
acquisitions passed all of our tests. We are delighted that
Spectral Applied Research ("Spectral") of Canada and Apogee Imaging
Systems Inc. ("Apogee") of the US have become part of the Andor
family in recent weeks. These acquisitions, completed in October
2013, align with our strategic plan of utilising our cash to
deliver a combination of organic and acquisitive growth.
Our headcount grew to 359 at the year-end before the
acquisitions, which together have added a further 50 bringing the
total headcount to 409. Andor continues to recognise the importance
of investing in the training and development of our staff. During
the year we delivered a number of in-house programs within the
Andor Academy as well as leadership training delivered at the
management institute at Queen's University. As ever, I am indebted
to all our employees who worked tirelessly throughout the year to
deliver these results in very challenging economic conditions.
In February we saw the departure of two long serving
non-executive directors, Peter Smith and Susan Vogt and the arrival
of three new non-executives with considerable experience in areas
relevant to support our next phase of growth. We are delighted to
have secured the services of Bill Rhodes, Bill Parsons and Jim
Haynes into these roles. Bill Rhodes is an M&A and strategy
expert having served as Senior Vice President, Corporate Strategy
and Development at Becton, Dickinson and Co.; Bill Parsons brings a
heightened insight to our HR and training activities gained as
Executive Vice President of Human Resources at ARM Holdings plc;
and Jim Haynes adds a deeper understanding of the technologies we
are addressing and is currently President of Global Business at
Oclaro plc. I am grateful to Peter and Sue for their valuable
contributions and wish them well for the future.
For the year ended 30 September 2012 Andor became a dividend
payer for the first time, paying a final dividend of 2 pence per
share. Earlier this year an interim dividend of 1 pence per share
was paid and your Board is now recommending a final dividend of
2.15 pence per share for the year, up 7.5% on the previous final
dividend and which, if approved at the AGM, will be paid on 28
February 2014 to shareholders on the register on 7 February
2014.
I wrote to all shareholders on 12 November 2013 to advise that
the Board was in receipt of an indicative offer from Oxford
Instruments plc. of up to 500p per share for all of the issued and
to be issued share capital of Andor. At the time of writing, these
discussions remain ongoing, however shareholders should note that
there can be no certainty that an offer will be made, nor as to the
terms contained therein.
Andor therefore remains focused on its long term strategy of
delivering growth through continued investment in innovation and
your Board remains confident in the outlook for the business in the
year ahead.
Chief Executive Officer's Review
In the paragraphs that follow I will, as always, provide a
breakdown of the performance delivered across our business this
year. In many ways, however, much of the focus will inevitably be
on events that have occurred post year-end which change the shape
of Andor and inject new opportunities into 2014.
On 2 October 2013 we released a trading update to confirm that
order intake for Andor for the full year to 30 September 2013 was
at record levels. On 18 October, in line with our previously
communicated strategy, we announced the acquisition of Spectral
Applied Research Inc. ("Spectral"), a Toronto based market leader
in the design and manufacture of optical systems for the cell
biology research community. On 29 October we announced the
acquisition of Apogee Imaging Systems Inc. ("Apogee"), a California
based manufacturer of cooled CCD cameras serving the research and
OEM markets. Finally, on 12 November 2013 we were placed in an
offer period following the announcement by Oxford Instruments plc
("Oxford Instruments") of a possible offer for all of the issued
and to be issued share capital of Andor. Today, while we continue
to be in an offer period, the management team remains focused on
executing our long term growth strategy.
Order intake for the year ended 30 September 2013 was up 5% to
GBP59.1m and as a result our year end order book was up 33% on the
same period last year to GBP15.0m. At a macro level, while markets
are beginning to show some early signs of recovery, this improved
order intake is primarily the result of the restructure of our
sales team carried out during 2012 / 2013 which has brought
increased focus by segment. Order intake in the last three
six-month-periods has grown from GBP26.6m to GBP29.1m to GBP30.1m
and this is the first time since 2010 that the second half order
intake has exceeded the first half.
Revenue for the year ended 30 September 2013 was in line with
the Board's revised expectations, down GBP3.8m to GBP54.6m. As
indicated at the time of our interim results, the largest
contributor to this decline is OEM which is down GBP2.7m
year-on-year with the remainder of the shortfall coming from our
Research segment. Gross margins grew for the second year in a row,
up 0.5% to 56.2% however the negative impact of such strong margins
is that when sales are less than planned it has a material effect
on profitability. Adjusted profit before tax was GBP7.4m (FY12:
GBP10.0m). Our effective tax rate reduced from 15% to 10% largely
due to research and development tax credits, giving an adjusted EPS
of 21.2 pence (FY12: 27.5 pence). Our cash balance at the end of
the year was up 30% to GBP23.9m and net cash was up 34% to
GBP22.9m.
Review of operating performance by business segment
In prior years, we managed and reported business performance by
geographic segment. With effect from 1 October 2012, following a
strategic review, we changed reporting to focus on four market
segments, namely Research, Microscopy Systems ("Systems"), OEM and
Software.
Research is the sale of cameras and associated products to
academia and government-funded research institutes. Systems is
sales of complete confocal systems, currently focusing on live cell
applications, to the same customer groups as Research. OEM is the
sale of cameras and associated products to instrumentation
manufacturers and is a higher volume, repeat order business.
Software represents the sale of image analysis software typically
to research institutes. All business segments operate on a global
basis.
Research
Research sales in total were down 4% to GBP27.9m with much of
the sales decline being experienced in EMEA. It has been well
documented that across EMEA securing public funding for research
projects has been challenging. We have revisited each of our
European distributors to stimulate increased activity in relation
to customer facing time, number of demos per week and local
marketing and promotion. As a result, we are beginning to see an
improvement in their performance.
Encouragingly, following positive trends seen in other parts of
the business, research sales in the Americas increased by 3% in the
period, reversing a downward trend in the region over the preceding
three years. We also saw a 12% growth in research sales in China,
however this was offset by weaker sales in Japan and the Rest of
Asia resulting in a 3% decline in APAC in total.
As our portfolio continues to expand, we have taken a decision
to split our Research sales into Life Science and Physical Science.
Each geographic region now has a dedicated team for both Life and
Physical Sciences and this increased focus is enabling our teams to
find new opportunities they might not otherwise have seen. As
funding remains challenged and corresponding market growth rates
are low, this strategy is designed to increase the share gain we
will achieve against our competitors.
In addition, the acquisition of Apogee will contribute to our
Research sales in the future. Half of Apogee's current sales come
from research customers and the business has a strong brand in
Astronomy in the US. Using our network of distributors across the
world we plan to introduce the portfolio to EMEA and APAC, gaining
market share from other players who currently supply to these
markets.
Our organic mid-range strategy continues to gain momentum with
sales to research customers of sCMOS related products up 39% from
the same period last year. Key to achieving sales of our mid-range
products is being integrated into the market leading software
packages. Our sCMOS portfolio is now available in Andor iQ,
MetaMorph and a number of other generally available software
packages. In addition, we are fully integrated in Nikon Elements
and sales through this channel are very encouraging. We are also
working closely with the other microscope companies towards
integration of our sCMOS portfolio and progress is positive.
Systems
Systems revenue was GBP10.7m, down 1% on the previous year. Our
regional performance has continued to be impacted by funding
conditions particularly in the Americas which is reporting a
decline in revenue of GBP1m compared to the previous year although
this has been offset by growth in EMEA and APAC.
The introduction of the Revolution WD has been well received by
the market and when coupled with the Andor sCMOS, this gives the
user a twenty-two times increase in resolution, five times greater
field of view and three times the depth of sample analysis when
compared with existing technology. This performance allows us to
compete in the Laser Scanning Confocal market, which is
approximately three times the size of our current addressable
space.
The acquisition of Spectral is an important strategic purchase
for the Systems segment. Initially, it gives us access to the
Borealis, a patented method of achieving uniform illumination
across a sample which is a unique and valuable selling point. When
offered with our previously acquired and patented illumination
products from Photonic Instruments, we have created a system
offering full of innovation.
Spectral also bring a team of high calibre engineers,
experienced in system design, who will work alongside our own
engineering team to accelerate product introduction and deliver
critical mass to the revenue line that will improve profitability
from this segment. In addition, Spectral has a Laser Spinning Disk
product (Diskovery) which, over the coming year, we will launch
globally. Having the Diskovery gives us control over a key part of
the intellectual property at the heart of our systems, as well as
creating the potential to further enhance profitability.
The product portfolio that Andor now has in the spinning disk
market, our low cost white light DSD, the Yokogawa CSU-X and CSU-WD
range as well as our own Diskovery, is second to none and aligned
with our strategy to continue to grow market share by expanding our
product range, creating product differentiation and controlling
IP.
OEM
Order intake from our OEM customers was up 21% to GBP14.9m for
the full year to 30 September 2013. This increase was achieved as a
result of existing customers confirming new increased orders, new
customers coming to market and gaining significant traction,
customers being converted from competitors and finally, new
customers being added for our sCMOS portfolio. While this is
encouraging, as we have previously indicated, order call off has
been less than anticipated. As a result revenue is down 19% to
GBP11.4m. A positive trend is that OEM revenue increased 8% from
the first half of the year to the second half of the year and the
OEM order book as at 30 September 2013 is up 64% on the same period
last year.
The acquisition of Spectral adds a significant OEM account
which, based on forecasts, will become our largest OEM customer in
the coming financial year. This was an additional benefit from a
business that was primarily targeted for strategic gains in our
Systems segment.
The acquisition of Apogee also has significant potential with
our OEM customers. Apogee has an extensive range of CCD based
cameras in the mid-range price point, similar to products currently
being bought by many of our existing OEM customers. Our strategy is
to present these OEMs with a "one-stop-shop" whereby they can
purchase all of their camera needs, from the very high performance
custom designed products to everyday standard CCD based offerings.
The value proposition is a single source of supply from a
manufacturing facility capable of delivering high quality
repeatable performance, with engineering resource immediately
available to deal with any issues and the potential to leverage
pricing by consolidating procurement. These benefits are being
branded collectively as the Andor Customer Assurance Plan and are
already generating interest from our largest OEMs.
Software
Revenue from the sale of our image analysis software grew by 3%
to GBP4.6m in the period. The performance was consistent across all
of the regions, with the Americas, EMEA and APAC showing growth
over last year.
During the year we launched Imaris Open, giving developers who
write their own "apps" free access to the core software in return
for them publishing their extensions free to the Imaris user
community. This enables us to embrace the Open Source community,
which has a large number of users and is well-funded, while
retaining our commercial credentials. The launch has been
positively received and we were the only commercial business
invited to speak at the European BioImage Analysis Symposium in
Barcelona.
Imaris is by far the market leader in the niche that it
addresses and the future challenge is to expand into new
application areas. We must also be able to process increasingly
large data sets being produced by products such as the sCMOS and
this is currently an area of focus for our development team.
Research and development
Despite a challenging year, we have remained resolute in our
determination to further invest in new product development to
deliver future growth. Gross research and development expenditure
grew by 18% to GBP6.5m, representing 12% of sales. This spend is
spread across all our segments and has resulted in the delivery of
multiple products including the Revolution WD (discussed above);
the Mosaic 3, the next generation of our patented illumination
product for applications such as optogenetics and uncaging; iDus
416, the most sensitive near infrared CCD platform on the market;
as well as multiple software releases across our five software
platforms. This sustained investment in our portfolio is helping to
maintain our market leading position in multiple segments. The
addition of experienced engineering resource from both Spectral and
Apogee will only help to further improve our rate of innovation and
team capability.
Outlook
As we look to the year ahead there are positive signs. We have
delivered three consecutive six month periods of order intake
growth and record levels of order intake in the past year. Our
opening order book for the coming financial year is up 33% on the
same period last year and gross margins remain strong and have
improved for a second year. The acquired businesses will add to our
revenue and profitability increasingly over time and allow us to
execute on the next stages of our strategic plan. Finally, after
acquiring these businesses, we still have significant cash
available for further strategic acquisitions and have appointed
Chris Calling, our former Global Sales Director, as a full time
business development manager targeted to deliver other investment
opportunities.
While research markets remain challenging, there are multiple
indicators that things are improving for Andor. The start to the
current financial year is encouraging and the Board is confident in
Andor's ability to meet our expectations in the year ahead.
Financial Review
For the year ended 20 September 2013
The group's trading performance has been in line with the
revised expectation in respect of both revenue and
profitability.
This financial review covers the main highlights of the group's
financial performance for the year ended 30 September 2013 and its
position as at 30 September 2013, together with the group's
financial risk management policies.
Following a strategic review of our sales and support function,
from 1 October 2012 we are reporting segment information by
Research, Systems, OEM and Software, which have enabled improved
focus in each of these areas and will ensure that the group
continues to maximise opportunities for growth in the coming
years.
Basis of preparation
The group presents its results for the year ended 30 September
2013, with comparative information for the year ended 30 September
2012. The results of the group are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU).
2013 Financial performance
Revenue
Overall group revenue reduced during the year by 6% to GBP54.6m
(2012: GBP58.3m).
Research
Research, our largest segment, which represents 51% (2012: 50%)
of group revenues, reported a revenue decline of 4% during the
period to GBP27.9m (2012: GBP29.0m).
The performance of this segment has continued to be impacted by
the difficult economic conditions and the government funding
controls experienced in many countries in which we operate. Some
improvement has been seen in the Americas which report a revenue
increase of 3% to GBP8.4m (2012: GBP8.2m) however the overall
segment decline of 4% has been consistent across the first and
second half of the year.
Systems
In recent years Systems has seen volatility however we are
reporting revenue of GBP10.7m in comparison to last year of
GBP10.8m. Regionally EMEA and APAC are ahead of last year by 10%
and 23% respectively but these gains are offset by a reduction in
the Americas of 21%.
OEM
Our OEM segment delivered revenue of GBP11.4m down from GBP14.1m
in the previous financial year. The vast majority of our customers
supply high value products to the research community which derive
their funding from government sources and the decline in revenue
experienced during the year is a consequence of these funding
difficulties.
The second half of the year has seen some improvement in revenue
and we have also experienced an increase in new orders being
placed. As such our order book for OEM business is approximately
GBP3m higher than the same time last year.
Software
The Software segment relates to sales of Imaris through Bitplane
which has again reported growth to GBP4.6m (2012: GBP4.4m) with
some growth seen in each of the geographic regions.
Gross margin
Gross margin is reported at 56.2% for the year ended 30
September 2013 (2012: 55.7%) representing an increase of 0.5%. The
small overall increase in margin has been generated across each
segment with the exception of Systems which reports a slight
reduction compared to last year.
Generally our products hold market-leading positions, therefore
despite the competitive nature of business globally we continue to
maintain pricing levels thereby generating consistently strong
gross margins across the product range.
Operating expenses
Operating expenses grew by 3% to GBP24.6m (2012: GBP23.8m).
As a group we continue to invest in our people with headcount at
year end increasing from 341 in 2012 to 359 as at 30 September
2013. The increase in base salary costs as a consequence of this
headcount growth has been offset by savings in certain variable pay
elements such as bonus and sales commission payments. Increases in
other costs such as travel, communication costs and amortisation of
intangibles have caused the growth over last year.
Expenditure on research and development activities, including
development expenditure capitalised in accordance with IAS 38, grew
to GBP6.4m (2012: GBP5.5m) representing 12% (2012: 9%) of turnover.
This investment continues to be strategically important and
necessary to retain our competitive advantage.
Operating profit
To provide investors and analysis with the required measurements
the group reports performance using "adjusted" operating profit and
profit before taxation which are calculated by adding back the
amortisation of intangibles arising on acquisitions (a
reconciliation of reported results to these adjusted measures is
provided in note 31 to the financial statements).
As a consequence of the decline in reported revenue to GBP54.6m
our adjusted operating profit is also down in comparison to last
year at GBP7.2m (2012: GBP9.8m) and our adjusted operating margin
reduced to 13.2% (2012: 16.7%). The strong gross margins across our
product portfolio result in a material impact on profitability when
volumes decline as seen during 2013.
Statutory operating profit has decreased from GBP8.7m to GBP6.1m
for the current year.
Profit before tax
Net interest receivable was GBP0.2m (2012: GBP0.3m) resulting in
adjusted profit before tax of GBP7.4m (2012: GBP10.0m). Interest
receivable declined during the year, despite growing cash balances,
as a consequence of lower interest rates available on cash
deposits.
Group statutory profit before tax decreased to GBP6.3m (2012:
GBP8.9m).
Taxation
The taxation charge for the year was GBP0.6m (2012: GBP1.4m).
The effective tax rate of 10% (2012: 15%) is lower than the
standard rate of corporation tax in the United Kingdom of 23.5%
(2012: 25%), as the group benefitted from enhanced tax credits on
research and development expenditure and the increased level of
spend in relation to profitability.
Earnings per share
Basic earnings per share have decreased from 24.48 pence per
share in 2012 to 18.09 pence per share in 2013, reflecting the
decrease in profit for the year. Adjusted basic earnings per share
decreased by 23% from 27.50 pence per share in 2012 to 21.19 pence
per share in 2013.
Property, plant and equipment
Tangible assets reduced from GBP6.4m to GBP5.9m, comprising
additions of GBP0.4m and depreciation of GBP0.9m.
Intangible assets
Intangible assets decreased from GBP15.7m to GBP15.3m,
reflecting additions of GBP1.8m, amortisation of GBP2.4m and
foreign exchange movements of GBP0.2m.
As at 30 September 2013 internally generated development
expenditure accounted for GBP5.8m (2012: GBP5.4m) of the total
intangible assets of GBP15.3m (2012: GBP15.7m), with the remainder
having arisen on the acquisitions of Bitplane and Photonic
Instruments, which were completed in the year ended 30 September
2010.
Cash position
At the end of the period, the group had cash balances of
GBP23.9m (2012: GBP18.4m) which net of long-term borrowings were
GBP22.9m (2012: GBP17.1m) an increase of GBP5.7m or 34% (2012:
GBP4.4m). In addition, overdraft facilities of GBP2.1m were
available to the group.
The group completed two acquisitions in October 2013 which were
funded from our cash balances. After allowing for the consideration
and costs involved in each of these transactions we continue to
hold sufficient cash reserves to enable the group to meet its
ongoing needs.
Working Capital
Working capital to sales ratio rose from 17% at 30 September
2012 to 19% as at 30 September 2013 with working capital totalling
GBP10.5m (2012: GBP9.5m)
The overall level of inventory held by the group remained at
GBP8.3m with an increase in raw materials of GBP0.6m being offset
by reductions within other categories.
Trade and other receivables showed a decrease over the same
position last year of GBP1.1m. Provisions for impairment of trade
and other receivables were in line with previous years, which
remain appropriate.
Trade, other payables and accrued expenses reduced during the
year by GBP1.7m from GBP8.0m to GBP6.3m. We continue to pay all
creditors in line with contractual payment terms.
Key performance indicators
The group's key performance indicators include revenue, gross
margin % adjusted operating profit, adjusted profit before tax,
adjusted basic earnings per share and headcount and were as
follows:
Increase /
2013 2012 (decrease)
GBP'000 GBP'000 GBP'000
------------------------------------------- -------- --------- ------------
Revenue 54,565 58,321 (3,756)
Gross margin % 56.2 55.7 0.5
Adjusted operating profit 7,183 9,759 (2,576)
Adjusted profit before tax 7,417 10,024 (2,607)
------------------------------------------- -------- --------- ------------
Adjusted basic earnings per share (pence) 21.19 27.50 (6.31)
Headcount at year end 359 341 18
------------------------------------------- -------- --------- ------------
Financial risk
Management policies
The group's operations expose it to a variety of financial risks
that include foreign currency risk, interest rate risk, credit risk
and liquidity risk. The group has in place a risk management
programme that seeks to limit the adverse effects of these risks on
the financial performance of the group. The board reviews and
agrees policies for managing each of these risks on an ongoing
basis and they are summarised below.
Foreign currency risk
The group is exposed to foreign exchange risk in the normal
course of business in its overseas operations, principally on
transactions denominated in US Dollars, Euros, Swiss Francs and
Japanese Yen. An element of this risk is mitigated due to the
existence of natural hedges. The group's treasury policies are
designed to manage financial risks that arise from operating in a
number of foreign currencies and to maximise interest income on
cash deposits. The group's policy is firstly to maximize the source
of product supplies in these currencies and then to hedge the
expected surplus of foreign currency inflows using forward
contracts.
All Sterling and foreign currency balances not immediately
required for group operations are placed on short-term deposit. No
other financial instruments are used to hedge foreign currency
assets and revenues, although the group's exposure will continue to
be monitored. The group currently has forward contracts in place
with settlement dates up to 31 December 2013.
Foreign exchange risk also exists in respect of the group's net
investment in its foreign subsidiaries.
Interest rate risk
The group finances its operations primarily through retained
profits. At the end of the current and prior years all of its
financial liabilities, which include bank borrowings, on which
interest is payable, were at variable rates, and the group has not
used interest rate swaps or other derivative financial instruments
to manage this risk.
Credit risk
The group is exposed to credit risk in respect of credit
exposures to its customers and also with its banking arrangements.
The group has implemented policies that require appropriate credit
checks on potential customers before sales are made and regularly
reviews the spread of its banking arrangements. The group's maximum
exposure to credit risk from customers is GBP8.8m (2012:
GBP9.9m).
Liquidity risk
The group regularly monitors cash forecasts to ensure that it
has sufficient cash available to meet operational needs. Cash
balances are placed on deposit with a variety of terms and maturity
dates throughout the calendar year to ensure funding is available
if required for operational reasons.
Post balance sheet events
Subsequent to the year end the company has acquired Spectral
Applied Research Inc. ("Spectral"), a Canadian based business and
Apogee Imaging Systems Inc. ("Apogee") a US company.
Spectral is a market leader in the design and manufacture of
optical systems for the cell biology research community holding a
number of patents in this field. The Spectral acquisition was
completed on 17 October 2013 with full details of the transaction
set out in note 28.
Apogee manufactures CCD cameras which it sells around the world
and will extend the range of cameras offered by the group to both
existing and new customers. The acquisition was completed on 28
October 2013 with full details provided in note 28.
On 8 November 2013 the Board of Andor received an indicative
offer from Oxford Instruments plc of up to 500p per share for all
of the issued and to be issued share capital of Andor.
Subsequently, on 27 November 2013 Oxford Instruments plc advised
the Board of Andor they had completed their due diligence and
confirmed their proposed offer at 500p per share for the Board to
consider, at the same time setting out the terms and remaining
pre-conditions of their proposed offer. Oxford Instruments plc has
reserved the right to waive any or all of its pre-conditions and
has also reserved the right to make an offer on less favourable
terms under certain circumstances.
Forward looking statements
The Chairman's statement, the Chief Executive Officer's review
and the financial review, together with the other reports, which
together comprise the enhanced business review, contain
forward-looking statements that are inevitably subject to risk
factors associated with, amongst other things, economic, political
and business developments, which may occur from time to time across
the countries in which the group operates. It is believed that the
expectations reflected in these statements are reasonable, but all
forward-looking statements and forecasts involve risk and
uncertainty, quite simply because they relate to events and depend
on circumstances that will occur in the future.
The Chairman's statement, the Chief Executive's statement and
the financial review, taken together, form the "Strategic Business
Review" and is signed on behalf of the Board of directors by:
Alan Lilley
Finance Director
29 November 2013
Consolidated income statement
for the year ended 30 September 2013
2013 2012
Note GBP'000 GBP'000
---------------------------- ----- --------- ---------
Revenue 6 54,565 58,321
Cost of sales 8 (23,875) (25,844)
---------------------------- ----- --------- ---------
Gross profit 30,690 32,477
Net operating expenses 8 (24,592) (23,810)
---------------------------- ----- --------- ---------
Operating profit 6,098 8,667
Finance income 10 252 297
Finance costs 10 (18) (32)
---------------------------- ----- --------- ---------
Finance income - net 234 265
---------------------------- ----- --------- ---------
Profit before income tax 6,332 8,932
Income tax expense 11 (610) (1,367)
---------------------------- ----- --------- ---------
Profit for the year 5,722 7,565
---------------------------- ----- --------- ---------
Earnings per share (pence) 12
- Basic 18.09 24.48
- Diluted 17.47 22.96
---------------------------- ----- --------- ---------
All profits are attributable to owners of the parent and relate
to continuing operations.
Consolidated statement of comprehensive income
for the year ended 30 September 2013
2013 2012
GBP'000 GBP'000
--------------------------------------------- -------- --------
Profit for the year 5,722 7,565
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss:
Exchange gains/(losses) on translation of
foreign operations 333 (769)
--------------------------------------------- -------- --------
Total comprehensive income for the year 6,055 6,796
--------------------------------------------- -------- --------
All comprehensive income is attributable to owners of the
parent.
There is no income tax attributable to other comprehensive
income.
The notes form an integral part of these consolidated financial
statements.
Registered number: NI 22466.
Consolidated statement of financial position
as at year ended 30 September 2013
Group Company
---------------- ----------------
2013 2012 2013 2012
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ---- ------- ------- ------- -------
Assets
Non-current assets
Property, plant and equipment 13 5,914 6,414 5,889 6,379
Intangible assets 14 15,297 15,732 9,171 9,082
Investments in subsidiary 15 - - 8,371 8,371
Deferred income tax assets 22 1,222 1,699 1,222 1,699
---------------------------------------------------------- ---- ------- ------- ------- -------
22,433 23,845 24,653 25,531
---------------------------------------------------------- ---- ------- ------- ------- -------
Current assets
Inventories 17 8,330 8,265 8,330 8,265
Trade and other receivables 18 9,324 10,471 8,594 9,721
Corporation tax recoverable 788 - 783 -
Derivative financial instruments 16 182 71 182 71
Cash and cash equivalents 19 23,853 18,386 18,095 13,943
---------------------------------------------------------- ---- ------- ------- ------- -------
42,477 37,193 35,984 32,000
---------------------------------------------------------- ---- ------- ------- ------- -------
Total assets 64,910 61,038 60,637 57,531
---------------------------------------------------------- ---- ------- ------- ------- -------
Capital and reserves attributable to owners of the parent
Called up share capital 24 640 622 640 622
Share premium account 9,773 9,146 9,773 9,146
Other reserves 3,426 3,093 2,240 2,240
Retained earnings 37,099 32,418 37,097 32,522
---------------------------------------------------------- ---- ------- ------- ------- -------
Total equity 50,938 45,279 49,750 44,530
---------------------------------------------------------- ---- ------- ------- ------- -------
Liabilities
Non-current liabilities
Borrowings 20 733 1,003 733 1,003
Deferred income tax liabilities 22 3,456 3,324 1,723 1,708
Government grants and deferred income 23 1,760 1,894 1,494 1,695
---------------------------------------------------------- ---- ------- ------- ------- -------
5,949 6,221 3,950 4,406
---------------------------------------------------------- ---- ------- ------- ------- -------
Current liabilities
Borrowings 20 264 264 264 264
Trade and other payables 21 3,487 3,763 3,428 3,727
Current income tax liabilities 309 410 - 222
Accrued expenses 2,821 4,206 2,685 3,993
Government grants and deferred income 23 1,142 895 560 389
---------------------------------------------------------- ---- ------- ------- ------- -------
8,023 9,538 6,937 8,595
---------------------------------------------------------- ---- ------- ------- ------- -------
Total liabilities 13,972 15,759 10,887 13,001
---------------------------------------------------------- ---- ------- ------- ------- -------
Total equity and liabilities 64,910 61,038 60,637 57,531
---------------------------------------------------------- ---- ------- ------- ------- -------
The notes form an integral part of these consolidated financial
statements.
The consolidated financial statements were authorised for issue
by the board of directors on 29 November 2013 and were signed on
its behalf by:
Conor Walsh
Chief Executive Officer
Consolidated statement of changes in equity
for the year ended 30 September 2013
Attributable to owners of the parent
---------------------------------------------------------------------
Share Currency Capital
Share premium translation redemption Merger Retained
capital account differences reserve reserve earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Balance at 1 October
2011 614 8,910 1,622 1,843 397 25,969 39,355
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Comprehensive income
Profit for the year - - - - - 7,565 7,565
Other comprehensive
income
Currency translation
differences - - (769) - - - (769)
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Total comprehensive
income - - (769) - - 7,565 6,796
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Transactions with owners
Adjustment in respect
of
employee share schemes - - - - - 69 69
Tax debit in respect
of
employee share schemes - - - - - (1,185) (1,185)
Issue of ordinary shares 8 236 - - - - 244
Total transactions with
owners 8 236 - - - (1,116) (872)
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Balance at 30 September
2012 622 9,146 853 1,843 397 32,418 45,279
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Comprehensive income
Profit for the year - - - - - 5,722 5,722
Other comprehensive
income
Currency translation
differences - - 333 - - - 333
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Total comprehensive
income - - 333 - - 5,722 6,055
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Transactions with owners
Dividend paid - - - - - (948) (948)
Tax debit in respect
of
employee share schemes - - - - - (93) (93)
Issue of ordinary shares 18 627 - - - - 645
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Total transactions with
owners 18 627 - - - (1,041) (396)
------------------------- ------- ------- ----------- ---------- ------- -------- -------
Balance at 30 September
2013 640 9,773 1,186 1,843 397 37,099 50,938
------------------------- ------- ------- ----------- ---------- ------- -------- -------
The notes form an integral part of these consolidated financial
statements.
Company statement of changes in equity
for the year ended 30 September 2013
Attributable to owners of the parent
--------------------------------------------------------
Share Capital
Share premium redemption Merger Retained
capital account reserve reserve earnings Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- ------- ---------- ------- -------- -------
Balance at 1 October 2011 614 8,910 1,843 397 26,391 38,155
------------------------------- ------- ------- ---------- ------- -------- -------
Comprehensive income
Profit for the year - - - - 7,247 7,247
------------------------------- ------- ------- ---------- ------- -------- -------
Total comprehensive income - - - - 7,247 7,247
------------------------------- ------- ------- ---------- ------- -------- -------
Transactions with owners
Adjustment in respect of
employee share schemes - - - - 69 69
Tax debit in respect of
employee share schemes - - - - (1,185) (1,185)
Issue of ordinary shares 8 236 - - - 244
Total transactions with owners 8 236 - - (1,116) (872)
------------------------------- ------- ------- ---------- ------- -------- -------
Balance at 30 September 2012 622 9,146 1,843 397 32,522 44,530
------------------------------- ------- ------- ---------- ------- -------- -------
Comprehensive income
Profit for the year - - - - 5,616 5,616
------------------------------- ------- ------- ---------- ------- -------- -------
Total comprehensive income - - - - 5,616 5,616
------------------------------- ------- ------- ---------- ------- -------- -------
Transactions with owners
Dividend paid - - - - (948) (948)
Tax debit in respect of
employee share schemes - - - - (93) (93)
Issue of ordinary shares 18 627 - - - 645
------------------------------- ------- ------- ---------- ------- -------- -------
Total transactions with owners 18 627 - - (1,041) (396)
------------------------------- ------- ------- ---------- ------- -------- -------
Balance at 30 September 2013 640 9,773 1,843 397 37,097 49,750
------------------------------- ------- ------- ---------- ------- -------- -------
The notes form an integral part of these consolidated financial
statements.
Consolidated cash flow statement
for the year ended 30 September 2013
Group Company
-------------------- --------------------
2013 2012 2013 2012
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Cash flows from operating activities
Cash generated from operations 26 8,744 8,363 7,638 7,110
Dividend paid (948) - (948) -
Interest paid (18) (32) (18) (32)
Income tax paid (926) (944) (951) (648)
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Net cash generated from operating activities 6,852 7,387 5,721 6,430
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Cash flows from investing activities
Acquisition of subsidiary (net of cash acquired) - (120) - (120)
Payments in respect of capitalised development expenditure (1,756) (1,880) (1,756) (1,880)
Purchase of property, plant and equipment (430) (1,206) (421) (1,192)
Interest received 252 297 233 215
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Net cash used in investing activities (1,934) (2,909) (1,944) (2,977)
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Cash flows from financing activities
Proceeds from issue of share capital 645 244 645 244
Repayments of borrowings (270) (329) (270) (329)
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Net cash generated/ (used in) from financing activities 375 (85) 375 (85)
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Net increase in cash and cash equivalents 5,293 4,393 4,152 3,368
Effect of exchange differences on cash and cash equivalents 174 (278) - -
Cash and cash equivalents at start of year 18,386 14,271 13,943 10,575
------------------------------------------------------------- ----- ---------- -------- ---------- --------
Cash and cash equivalents at end of year 23,853 18,386 18,095 13,943
------------------------------------------------------------- ----- ---------- -------- ---------- --------
The notes form an integral part of these consolidated financial
statements.
Notes to the consolidated financial statements
for the year ended 30 September 2013
1 General information
Andor Technology plc (the "company") and its subsidiaries
(together the "group") is a public limited company incorporated and
domiciled in the United Kingdom, registered number NI 22466.
The company has its primary listing on the Alternative
Investment Market of the London Stock Exchange. The principal
activities of the group are the development and manufacture of
high-performance, specialist digital cameras.
The company's registered office is at 7 Millennium Way,
Springvale Business Park, Belfast BT12 7AL, United Kingdom.
These consolidated financial statements were approved for issue
on 29th November 2013.
The company has taken advantage of the exemption in section 408
of the Companies Act 2006 not to publish its individual income
statement, statement of comprehensive income and related notes.
Profit for the year dealt with in the income statement of Andor
Technology plc amounted to GBP5.6m (2012: GBP7.2m).
2 Basis of preparation and going concern
The group financial statements for the year ended 30 September
2013 have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union and
the Companies Act 2006 that applies to the companies reporting
under IFRS and IFRIC interpretation.
The financial statements are presented in Sterling and all
values are rounded to the nearest thousand (GBP'000) except where
otherwise indicated.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by financial assets and
financial liabilities (including derivative instruments) at fair
value through the profit and loss account.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 5.
The financial information included in this preliminary
announcement does not constitute statutory accounts of the Group
for the years ended 30 September 2013 and 30 September 2012 but is
derived from those accounts. Statutory accounts for 2012 have been
delivered to the Registrar of Companies and those for 2013 will be
delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
At the end of the period, the group had cash balances of
GBP22.9m (2012: GBP17.1m), net of borrowings of GBP1.0m (2012:
GBP1.3m). In addition overdraft facilities of GBP2.1m were
available. The group's internal budgets and forecasts, which
incorporate all reasonably foreseeable changes in trading
performance, show that it will be able to operate within its
current banking facilities, taking into account available cash
balances, for the foreseeable future. The going concern basis is,
accordingly, adopted by the board in preparing the financial
statements.
3 Accounting policies
The accounting policies set out below are those that the group
has adopted under International Financial Reporting Standards as
adopted by the European Union for the year ended
30 September 2013.
The following standards have been adopted by the group for the
first time for the financial year beginning on or after 1 October
2012 and have a material impact on the group:
Amendment to IAS 1, 'Financial statement presentation' regarding
other comprehensive income. The main change resulting from these
amendments is a requirement for entities to group items presented
in 'other comprehensive income' (OCI) on the basis of whether they
are potentially reclassifiable to profit or loss subsequently
(reclassification adjustments).
The following new standards, new interpretations, and amendments
to standards and interpretations that are not yet effective and
have not been adopted early by the group:
-- IAS 19 (revised 2011) 'Employee benefits' ;
-- IAS 28 (revised 2011) 'Associates and joint ventures';
-- IFRS 9, 'Financial instruments';
-- IFRS 10, 'Consolidated financial statements';
-- IFRS 11, 'Joint arrangements';
-- IFRS 12, 'Disclosures of interests in other entities';
-- IFRS 13, 'Fair value measurement';
-- IFRIC 20, 'Stripping costs in the production phase of a surface mine'
-- Amendment to IAS 12,'Income taxes' on deferred tax';
-- Amendment to IAS 32 Financial instruments: Presentation on
offsetting financial assets and financial liabilities; and
-- Amendment to IFRS 1 on hyperinflation and fixed dates;
The introduction of these new standards, interpretations and
amendments is not expected to have a material impact on the group
or company.
Basis of consolidation
The group financial statements consolidate the financial
statements of the company and its subsidiaries for the year ended
30 September 2013. Subsidiaries are entities that are directly or
indirectly controlled by the group. Control exists where the group
has the power to govern the financial and operating policies of the
entity so as to obtain benefits from its activities. In assessing
control, potential voting rights that are currently exercisable or
convertible are taken into account.
The group uses the acquisition method of accounting to account
for business combinations.
The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the group.
The consideration transferred includes the fair value of any asset
or liability resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair
values at the acquisition date.
The excess of the consideration transferred over the fair value
of the group's share of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of the
net assets of the subsidiary acquired in the case of a bargain
purchase, the difference is recognised directly in the statement of
comprehensive income.
Any contingent consideration to be transferred by the group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified
as equity is not remeasured, and its subsequent settlement is
accounted for within equity.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the
policies adopted by the group.
Investments in subsidiaries are accounted for at cost less
impairment. Cost is adjusted to reflect changes in consideration
arising from contingent consideration amendments.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, comprises executive and departmental directors
(hereafter, the "management board").
Foreign currency translation
Items included in the financial statements of each of the
group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency"). The consolidated financial statements are presented in
Sterling, which is the company's functional and the group's
presentation currency.
Transactions and balances
Transactions in overseas currencies are translated at the
exchange rate ruling at the date of the transaction. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement except when deferred in
equity as qualifying cash flow hedges and qualifying net investment
hedges.
Where Intra group loans are determined to be quasi equity,
foreign exchange gains and losses arising on the re translation of
those loans are taken to equity and include within currency
translation differences arising on the re- translation of overseas
subsidiaries.
Group companies
The results and financial position of subsidiaries that have a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
a) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
and
b) income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions).
All resulting exchange differences are recognised in other
comprehensive income. Goodwill and fair value adjustments arising
on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing
rate.
Revenue
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and services in the ordinary
course of the group's activities. Revenue is shown net of value
added tax, returns, rebates and discounts and after eliminating
sales within the group. The group recognises revenue when the
amount of revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity and when specific
criteria have been met for each of the group's activities. The
group bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the
specifics of each arrangement.
(a) Sale of goods
Revenue in respect of the sale of goods is recognised upon
customer receipt of those goods.
(b) Sales of software products
Revenue in respect of the sale of software products is
recognised at the point at which the customer has received the
software activation codes.
(c) Sales of maintenance contracts
Revenue from maintenance contracts is generally recognised in
the period the services are provided, using a straight-line basis
over the term of the contract.
(d) Sales of extended warranties
Revenue from the sale of extended warranties is credited to
deferred income and released to the income statement using a
straight-line basis over the extended warranty period.
(e) Interest income
Interest income is recognised using the effective interest
method. When a loan and receivable is impaired, the group reduces
the carrying amount to its recoverable amount, being the estimated
future cash flow discounted at the original effective interest rate
of the instrument, and continues unwinding the discount as interest
income. Interest income on impaired loan and receivables is
recognised using the original effective interest rate.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less
accumulated depreciation and any impairment in value.
The cost of property, plant and equipment is equal to its
purchase cost, together with any incidental costs of acquisition.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Depreciation is calculated so as to write off the cost of property,
plant and equipment, less their estimated residual values, on a
straight-line basis over the expected useful economic lives of
the assets concerned. The principal annual rates used are as
follows:
%
--------------------- ---------
Freehold buildings 4
Plant and machinery 10 to 33
--------------------- ---------
Land is not depreciated.
The assets' residual values and useful economic lives are
reviewed, and adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount. An asset is derecognised upon
disposal or when no future economic benefit is expected to arise
from the asset.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill on the acquisition of subsidiaries is included in
"intangible assets". Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed. Gains and losses on the
disposal of an entity include the carrying amount of goodwill
relating to the entity sold. Goodwill is allocated to
cash--generating units for the purpose of impairment testing. The
allocation is made to those cash generating units or groups of
cash-generating units that are expected to benefit from the
business combination in which the goodwill arose identified
according to operating segment.
(b) Research and development
Costs associated with research activities are expensed as
incurred. Development costs that are directly attributable to the
design and testing of identifiable products controlled by the group
are recognised as intangible assets in accordance with the
recognition criteria set out in IAS 38, 'Intangible assets'.
Directly attributable costs that are capitalised as part of
products include employee costs incurred. Other development
expenditures that do not meet these criteria are recognised as an
expense as incurred. Development costs recognised as assets are
amortised over their estimated useful economic lives.
(c) Acquired development expenditure
Development expenditure acquired in a business combination is
recognised at fair value at the acquisition date. The development
expenditure has a finite useful life and is carried at fair value
less accumulated amortisation. Amortisation is calculated using the
straight-line method over the expected useful economic lives of the
products to which the development expenditure relates.
(d) Acquired customer-related intangibles
Customer-related intangible assets acquired in a business
combination comprise non contractual relationships with customers
and order or production backlogs. The assets are recognised at
their fair value at the acquisition date. Acquired customer-related
intangibles have a finite useful life and are carried at fair value
less accumulated amortisation. Amortisation is calculated using the
straight-line method over the expected useful economic lives of the
customer relationships, or the period over which the production
backlog is expected to be fulfilled. The expected useful economic
lives over which each category of intangible assets is amortised
are as follows:
Years
---------------------------------- --------
Research and development 4 to 10
Acquired development intangibles 9 to 16
Acquired customer-related
intangibles 10
---------------------------------- --------
Impairment of non-financial assets
Assets that have an indefinite useful economic life, for example
goodwill, are not subject to amortisation and are tested annually
for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs to sell
and value-in-use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash generating units). Non-financial
assets other than goodwill that suffered impairment are reviewed
for possible reversal of the impairment at each reporting date.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost for raw materials is calculated on a first-in first-out
basis. Net realisable value for work in progress and finished goods
is based on estimated selling prices less further costs expected to
be incurred in bringing the inventories to completion and disposal.
Cost comprises materials, direct wages and other direct production
costs together with a proportion of production overheads relevant
to the stage of completion of work in progress and finished goods.
Provisions are made against the value of inventories to take
account of slow moving stock, obsolescence and non-conforming
products.
Inventories that are provided to customers for demonstration
purposes are classified as demonstration stock and are stated at
the lower of cost and net realisable value. Demonstration stocks
are maintained to a condition that allows them to be sold to
customers, without further modification, once the demonstration
period has ended and are expected to be sold within 18 months of
manufacture.
Government grants
Grants from the government are recognised at their fair value
where there is a reasonable assurance that the grant will be
received and the group will comply with all attached
conditions.
Government grants relating to costs are deferred and recognised
in the income statement over the period necessary to match them
with the costs they are intended to compensate. Government grants
relating to property, plant and equipment are included in
non-current liabilities as deferred government grants and are
credited to the income statement on a straight-line basis over the
expected useful economic lives of the related assets.
Financial instruments
Classification
The group's and company's financial instruments are classified
as follows:
Assets and liabilities Category of financial instrument
-------------------------------- ----------------------------------
Trade and other receivables Loans and receivables
Cash and cash equivalents Loans and receivables
Borrowings Financial liabilities at amortised
cost
Derivative financial instruments Fair value through the profit
and loss account
Trade payables, other payables Financial liabilities at amortised
and accrued expenses cost
-------------------------------- ----------------------------------
Management determines the classification of its financial assets
and liabilities at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with
maturities greater than twelve months after the end of the
reporting period. These are classified as non-current assets. The
group's loans and receivables comprise "trade and other
receivables" and "cash and cash equivalents" on the balance
sheet.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A
provision for impairment of trade and other receivables is
established when there is objective evidence that the group will
not be able to collect all amounts due according to the original
terms of the receivables.
The carrying amount of the asset is reduced through the use of
an allowance account, and the amount of the loss is recognised in
the income statement within net operating expenses. When a trade
and other receivable is uncollectible, it is written off against
the allowance account for trade receivables. Subsequent recoveries
of amounts previously written off are credited against net
operating expenses in the income statement.
Trade and other receivables with a maturity of more than twelve
months from the balance sheet date are shown as non-current trade
and other receivables.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and other short-term highly-liquid investments with
original maturities of three months or less.
Financial liabilities at amortised cost
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Borrowings are classified as current liabilities
unless the group has an unconditional right to defer settlement of
the liability for at least twelve months after the balance sheet
date.
Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Trade payables are classified as current liabilities if
payment is due within twelve months or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method.
Derivative financial instruments
Derivative financial instruments comprise forward foreign
currency contracts. Derivatives are initially recognised at fair
value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value, with the gain or loss
being recognised in the income statement.
The forward contracts are not designated as hedging instruments
as defined by IAS 39, 'Financial instruments: Recognition and
measurement'.
Impairment of financial assets
The group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of
financial assets is impaired and its losses are incurred only if
there is objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the
asset (a "loss event") and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
The criteria that the group uses to determine that there is
objective evidence of an impairment loss include:
-- significant financial difficulty of the issuer or obligor;
-- a breach of contract, such as a default or delinquency in interest or principal payments;
-- the group, for economic or legal reasons relating to the
borrower's financial difficulty, granting to the borrower a
concession that the lender would not otherwise consider;
-- it becomes probable that the borrower will enter bankruptcy
or other financial reorganisation;
-- the disappearance of an active market for that financial
asset because of financial difficulties; or
-- observable data indicating that there is a measurable
decrease in the estimated future cash flows from a portfolio of
financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual
financial assets in the portfolio, including:
o adverse changes in the payment status of borrowers in the
portfolio; or
o national or local economic conditions that correlate with
defaults on the assets in the portfolio
The group first assesses whether objective evidence of
impairment exists.
For loans and receivables, the amount of the loss is measured as
the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial
asset's original effective interest rate.
The carrying amount of the asset is reduced and the amount of
the loss is recognised in the income statement. If a loan has a
variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, the group may measure
impairment on the basis of an instrument's fair value using an
observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognized impairment loss is recognised in the income
statement.
Share capital
Ordinary shares are classified as equity.
Share premium
The premium arising on the issue of ordinary shares is included
within the share premium account, apart from where shares are
issued as part of an acquisition and the issue of those shares
qualifies for merger relief.
Other reserves
(a) Merger reserve
Where the company has issued shares as part of an acquisition
and the issue of those shares qualifies for merger relief, the
excess of the fair value of the shares issued above their nominal
value is taken to a merger reserve.
(b) Foreign currency translation differences reserve
Foreign exchange differences arising on the translation of the
group's subsidiary undertakings are taken to foreign currency
translation differences reserve.
(c) Capital redemption reserve
The nominal value of preference shares previously redeemed by
the company is held within the capital redemption reserve.
Dividend distribution
Dividend distribution to the group's shareholders is recognised
as a liability in the group's financial statements in the period in
which the dividends are approved by the company's shareholders.
Income tax and deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity, in which case, the tax is recognised
in other comprehensive income or directly
in equity.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the balance sheet date
in the countries where the company and its subsidiaries operate and
generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions, where appropriate, on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill;
deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax
is determined using tax rates (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except for deferred
income tax liability where the timing of the reversal of the
temporary difference is controlled by the group and it is probable
that the temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Operating lease commitments
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight--line basis over the period of the lease.
Pension costs
The group operates a defined contribution pension plan for
certain directors and employees. Contributions are charged to the
income statement in the period to which they relate.
Share-based payments
The group operates a number of equity-settled, share-based
compensation plans, under which the entity receives services from
employees as consideration for equity instruments (options) of the
group. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The total
amount to be expensed is determined by reference to the fair value
of the options granted:
-- including any market performance conditions (for example, an entity's share price);
-- excluding the impact of any service and non-market performance vesting conditions
(for example, profitability, sales growth targets and remaining
an employee of the entity over a specified time period); and
-- including the impact of any non-vesting conditions (for
example, the requirement for employees to save).
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
is recognised over the vesting period, which is the period over
which all of the specified vesting conditions are to be satisfied.
At the end of each reporting period, the entity revises its
estimates of the number of options that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the income
statement, with a corresponding adjustment to equity. When the
options are exercised, the company issues new shares. The proceeds
received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when
the options are exercised.
Under UK tax legislation a tax deduction is available on
exercise of share options. This deduction is based on the option's
intrinsic value at that date (being the difference between the
share's market price at the date of exercise and the option's
exercise price). The group recognises a deferred tax asset in
respect of the available tax deductions on share options that are
expected to be exercised in future periods, calculated on the basis
of the intrinsic value of those options as at the balance sheet
date. Where the amount of the future tax deduction expected exceeds
the share-based payments expense recognised in the income
statement, the excess is recognised directly in equity. Similarly
where the amount of the tax deduction on options exercised during
the period exceeds the share-based payments expense recognised in
the income statement, the excess is recognised directly in
equity.
Fair value estimation
The different levels of the fair value hierarchy have been
defined as follows:
-- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2); and
-- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The group's financial instruments fair valued (for recognition
purposes only) under level 2 are the group's forward foreign
exchange contracts. The fair value of these financial instruments
is obtained from banking institutions and is based on observable
market data.
4 Financial risk management
Financial risk factors
The group's activities expose it to a variety of financial
risks: market risk (including price risk, foreign exchange risk,
cash flow and interest rate risk), credit risk and liquidity risk.
The group has in place a risk management programme that seeks to
limit the adverse effects on the financial performance of the group
by monitoring the foregoing risks.
Market risk
Price risk
The group is not exposed to equity securities price risk as it
holds no listed or other equity investments.
Foreign exchange risk
The group is exposed to foreign exchange risk in the normal
course of business in its overseas operations, principally on
transactions denominated in US Dollars, Euros, Swiss Francs and
Japanese Yen. An element of this risk is mitigated due to the
existence of natural hedges. The group's treasury policies are
designed to manage financial risks that arise from operating in a
number of foreign currencies and to maximise interest income on
cash deposits. The group's policy is firstly to maximise the source
of product supplies in these currencies and then to hedge the
balance of foreign currency inflows using forward contracts. All
Sterling and foreign currency balances not immediately required for
group operations are placed on short-term deposit. No other
financial instruments are used to hedge foreign currency assets and
revenues, although the group's exposure will continue to
be monitored.
Foreign exchange risk also exists in respect of the group's net
investment in its foreign subsidiary.
The table below shows the extent to which the group has net
monetary assets in currencies other than Sterling. Foreign exchange
differences on retranslation of these assets and liabilities are
taken to the income statement.
Canadian
US Dollar Euro Japanese Yen Swiss Franc Chinese RMB $ Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- -------- ------------- ------------ ------------ --------- --------
Total assets 2013 7,968 2,449 1,400 4,793 76 5,320 22,006
------------------- ---------- -------- ------------- ------------ ------------ --------- --------
Total assets 2012 7,981 2,886 1,268 3,641 87 - 15,863
------------------- ---------- -------- ------------- ------------ ------------ --------- --------
Interest rate risk
The group finances its operations through retained profits and
bank borrowings. At the end of the current and prior years all of
its financial liabilities on which interest is payable were at
variable rates, and the group has not used interest rate swaps or
other derivative financial instruments to manage this risk.
Sensitivity analysis
The estimated effect of movements in interest rates or exchange
rates on the results of the
group is as follows:
2013 2012
-------------------- --------------------
Income Income
statement Equity statement Equity
Group GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- ---------- -------- ---------- --------
Annual effect of an increase in group-wide interest rates by 0.5% 114 114 86 86
Annual effect of an increase in exchange rates to Sterling by 10% 445 924 1,285 1,561
------------------------------------------------------------------- ---------- -------- ---------- --------
Credit risk
The group is exposed to credit risk in respect of credit
exposures to its customers or distribution partners and banking
arrangements. The group has implemented policies that require
appropriate credit checks on potential customers before sales are
made and in relation to its banking partners. The group's maximum
exposure to credit risk from customers is GBP8.8m (2012: GBP9.9m)
as stated in note 18.
Liquidity risk
The group monitors regular cash forecasts to ensure that it has
sufficient cash to meet operational needs whilst maintaining
sufficient headroom on its undrawn committed borrowing facilities
and without breaching its banking covenants. The group's policy is
to maintain an appropriate spread of maturity to ensure continuity
of funding.
The group's financial liabilities, measured as the contractual
undiscounted cash flows, mature as follows:
Trade,
other payables Derivative
and accrued financial
Borrowings expenses liabilities Total
Group 2013 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------- --------------- ------------ --------
Less than one year 285 5,966 - 6,251
Between one and two years 285 - - 285
Between two and five years 640 - - 640
Over five years - - - -
---------------------------- ----------- --------------- ------------ --------
Trade,
other payables Derivative
and accrued financial
Borrowings expenses liabilities Total
Group 2012 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------- --------------- ------------ --------
Less than one year 285 7,652 - 7,937
Between one and two years 285 - - 285
Between two and five years 856 - - 856
Over five years 69 - - 69
---------------------------- ----------- --------------- ------------ --------
Capital risk management
The group's objective when managing capital is to safeguard the
group's ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders.
The group monitors capital based on the level of shareholders'
equity and the funds available for future investment. At the end of
the period, the group had shareholders' equity of GBP50.9m
(2012: GBP45.3m) and net cash balances of GBP22.9m (2012:
GBP17.1m). The group has sufficient resources available for its
continued investment in facilities, research and development
activities and the new dividend policy.
5 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. The group makes estimates and assumptions concerning
the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimate that has a
significant risk of causing a material adjustment to the carrying
value of assets and liabilities within the next financial year is
discussed below:
Deferred tax
The group has recognised within deferred tax an estimate of
Swiss withholding tax which may arise on the payment of dividends
by Bitplane AG to Andor Technology plc. This estimate has been
calculated based on the non-operational reserves of Bitplane AG at
the point of acquisition by Andor and has been provided in the
accounts as the Swiss Federal Tax authority have indicated
withholding tax must be paid on dividends to the value of these
reserves.
Estimate of useful economic life of intangible assets
The group assesses the useful economic life of intangible assets
on an annual basis. The useful economic life of intangible assets
ranges from four years to 16 years. If the remaining useful
economic lives had been shortened by one year, amortisation charged
to the income statement during the year would have increased by
GBP244,000 and if the remaining useful economic lives had been
extended by one year, amortisation charged to the income statement
during the year would have decreased by GBP395,000.
6 Segment information
Management has determined the operating segments based on the
reports reviewed by the chief operating decision maker, which is
considered to be the management board. Following a strategic
review, as from 1 October 2012, the board of directors now
considers the business from a customer basis and has identified
four reportable segments.
The board of directors assesses the performance of the operating
segments based on gross material margin, before the allocation of
overheads, and research and development expenses.
The segment information provided to the management board for the
reportable segments for the years ended 30 September 2013 and 30
September 2012 was as follows:
2013 2012
Segment revenues GBP'000 GBP'000
(As restated)
--------------------------------- -------------------- --------------
Research 27,930 28,988
Systems 10,701 10,843
OEM 11,431 14,144
Software 4,566 4,433
--------------------------------- -------------------- --------------
Total segment revenue 54,628 58,408
--------------------------------- -------------------- --------------
Inter segment revenue (63) (87)
--------------------------------- -------------------- --------------
Revenue from external customers 54,565 58,321
--------------------------------- -------------------- --------------
2013 2012
Segment results GBP'000 GBP'000
(As restated)
------------------------------------------- -------------------- --------------
Research 18,799 19,176
Systems 5,263 5,572
OEM 7,549 9,190
Software 4,477 4,218
------------------------------------------- -------------------- --------------
Total segment results 36,088 38,156
Production costs (5,398) (5,679)
------------------------------------------- -------------------- --------------
Gross profit per financial statements 30,690 32,477
Operating expenses (24,592) (23,810)
------------------------------------------- -------------------- --------------
Operating profit per financial statements 6,098 8,667
Finance income 252 297
------------------------------------------- -------------------- --------------
Finance costs (18) (32)
------------------------------------------- -------------------- --------------
Profit before income tax 6,332 8,932
Income tax expense (610) (1,367)
------------------------------------------- -------------------- --------------
Profit for the year 5,722 7,565
------------------------------------------- -------------------- --------------
Sales between segments are carried out at arm's length. Revenue
from external customers reported to the management board is
measured in a manner consistent with that in the income statement.
There are no significant seasonal fluctuations. The management
board assesses the performance of each operating segment based on
its material margin. Material margin is measured in a manner
consistent with that in the income statement.
The group's customers are located globally. There are no
individual customers that account for more than 10% of total
revenue.
Analysis of revenues from external customers is as follows:
2013 2012
GBP'000 GBP'000
-------------------------------------- -------- --------
Analysis by geographical area
United Kingdom (country of domicile) 4,494 3,970
Americas 18,495 20,342
APAC 14,810 16,134
EMEA (excluding UK) 16,766 17,875
-------------------------------------- -------- --------
Revenue from external customers 54,565 58,321
-------------------------------------- -------- --------
7 Auditors' remuneration
During the year the group (including its overseas subsidiaries)
obtained the following services from the company's auditors and its
associates:
2013 2012
Group GBP'000 GBP'000
----------------------------------------------------------------------------------------------- -------- --------
Fees payable to the company's auditors for the audit of the parent company 31 31
Fees payable to the company's auditors for the audit of the consolidated financial statements 11 11
Fees payable to the company's auditors and its associates for other services:
- Taxation 55 60
- All other services 45 22
----------------------------------------------------------------------------------------------- -------- --------
Total fees payable to the company's auditors and their associates 142 124
----------------------------------------------------------------------------------------------- -------- --------
8 Expenses by nature
2013 2012
Group Note GBP'000 GBP'000
---------------------------------------------------------------------- ----- -------- --------
Changes in inventories of finished goods and work in progress (485) 1,146
Raw materials and consumables used 18,963 19,019
Employee benefit expense 9 15,624 16,023
Depreciation, amortisation and impairment charges - owned assets 3,387 3,150
Operating lease expenses 170 178
Impairment of trade receivables 2 5
Release of deferred income in respect of government grants (139) (120)
Repairs and maintenance expenditure on property, plant and equipment 83 92
Research and development expenditure* 977 915
Government revenue grants receivable (211) (207)
Foreign exchange losses 155 171
Other expenses 9,941 9,282
---------------------------------------------------------------------- ----- -------- --------
Total cost of sales and net operating expenses 48,467 49,654
---------------------------------------------------------------------- ----- -------- --------
* Excludes employee benefit expenses and amortisation of
capitalised development expenditure. The total amount of research
and development expenditure (including employee benefit expenses)
during the year was GBP6,437,000 (2012: GBP5,532,000) of which
GBP1,400,000 (2012: GBP1,579,000) was capitalised as an intangible
asset.
9 Employee benefit expense
2013 2012
Group GBP'000 GBP'000
-------------------------------------------------- -------- --------
Wages and salaries 13,363 13,790
Social security costs 1,410 1,386
Share options granted to directors and employees - 69
Pension costs - defined contribution plans 851 778
-------------------------------------------------- -------- --------
15,624 16,023
-------------------------------------------------- -------- --------
2013 2012
Number Number
---------------------------------------------------------------------------------------------- ------- -------
Average monthly number of persons employed (including directors) during the year by activity
Production, engineering, and research and development 218 214
Finance and administration 24 24
Sales and marketing 102 95
---------------------------------------------------------------------------------------------- ------- -------
344 333
---------------------------------------------------------------------------------------------- ------- -------
The group pension plan is a defined contribution plan. The
contributions made to the plan were GBP851,000 (2012: GBP778,000).
At the end of the year, contributions of GBP73,000 (2012:
GBP57,000) representing unpaid contributions for the year ended 30
September 2013, were outstanding.
Key management includes directors (executive and non-executive),
and certain other management considered to be key to the
organisation's development. The compensation paid or payable to key
management for employee services is shown below:
2013 2012
GBP'000 GBP'000
------------------------------------------- -------- --------
Key management compensation
Salaries and short-term employee benefits 1,004 1,552
Post-employment benefits 99 116
Share-based payments - 69
------------------------------------------- -------- --------
Total 1,103 1,737
------------------------------------------- -------- --------
2013 2012
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Directors' emoluments
Aggregate emoluments 631 825
Gains on exercise of share options 315 1,219
Company pension contributions to money purchase schemes 54 64
--------------------------------------------------------- -------- --------
Aggregate emoluments paid to the highest paid director during
the year totalled GBP201,480 (2012: GBP282,803). Company pension
contributions totalling GBP2,207 (2012: GBP24,379) were made on the
highest paid director's behalf.
10 Finance income and costs
2013 2012
Group GBP'000 GBP'000
--------------------------------------------- -------- --------
Finance income
Interest income on short-term bank deposits 252 297
--------------------------------------------- -------- --------
Finance income 252 297
--------------------------------------------- -------- --------
Finance costs
Bank borrowings 18 32
Finance costs 18 32
--------------------------------------------- -------- --------
Finance income - net 234 265
--------------------------------------------- -------- --------
11 Income tax expense
2013 2012
Group GBP'000 GBP'000
--------------------------------------------------- -------- --------
Current income tax
Current tax on profits for the year 1,212 1,944
Adjustments to tax in respect of previous periods (385) (496)
--------------------------------------------------- -------- --------
Total current tax 827 1,448
--------------------------------------------------- -------- --------
Deferred income tax
Origination and reversal of temporary differences (217) (81)
--------------------------------------------------- -------- --------
Total deferred tax (217) (81)
--------------------------------------------------- -------- --------
Income tax expense 610 1,367
--------------------------------------------------- -------- --------
The tax on the group's profit before income tax differs from the
amount that would arise using the standard rate of UK corporation
tax of 23.5% (2012: 25%) applied to profits of the consolidated
entities as follows:
2013 2012
Group GBP'000 GBP'000
----------------------------------------------------------------------------- -------- --------
Profit before income tax 6,332 8,932
----------------------------------------------------------------------------- -------- --------
Tax calculated at the standard rate of UK corporation tax 23.5% (2012: 25%) 1,488 2,233
Tax effects of:
Adjustments to tax in respect of previous periods (385) (496)
Profits taxed at rates other than 23.5% (2012: 25%) 245 201
Research and development tax credits (1,006) (898)
Tax rate change on deferred tax (180) (12)
Swiss withholding tax on dividend 354 -
Other 94 339
----------------------------------------------------------------------------- -------- --------
Income tax expense 610 1,367
----------------------------------------------------------------------------- -------- --------
The standard rate of corporation tax in the UK changed from 26%
to 24% with effect from 1 April 2012 and from 24% to 23% on 1 April
2012. Accordingly, the group's profits for this accounting period
are taxed at an effective rate of 23.5% (2012: 25%) and will be
taxed at 21% in the future.
The income tax credited directly to equity during the year is as
follows:
2013 2012
Group GBP'000 GBP'000
-------------------------------------- -------- --------
Current tax on share-based payments 707 451
Deferred tax on share-based payments (800) (1,636)
-------------------------------------- -------- --------
(93) (1,185)
-------------------------------------- -------- --------
12 Earnings per share
Basic earnings per ordinary share is based on retained profit
for the financial period and on the weighted average number of
ordinary shares in issue during the period. Diluted earnings per
ordinary share is calculated using an adjusted number of shares
reflecting the number of dilutive shares under option and the
number of dilutive shares forming part of contingent consideration
payable on acquisitions.
Earnings Number of EPS
2013 group GBP'000 shares pence
----------------------------------------------- --------- ----------- ------
Basic EPS 5,722 31,634,051 18.09
Effect of dilutive securities - share options 1,120,934
----------------------------------------------- --------- ----------- ------
Diluted EPS 5,722 32,754,985 17.47
----------------------------------------------- --------- ----------- ------
Earnings Number of EPS
2012 group GBP'000 shares pence
----------------------------------------------- --------- ----------- ------
Basic EPS 7,565 30,890,719 24.48
Effect of dilutive securities - share options 2,046,002
Diluted EPS 7,565 32,936,721 22.96
----------------------------------------------- --------- ----------- ------
13 Property, plant and equipment
Freehold land Plant and
and buildings machinery Total
Group GBP'000 GBP'000 GBP'000
-------------------------- -------------- ---------- --------
Cost
At 1 October 2012 6,639 5,806 12,445
Additions 50 380 430
Exchange adjustments - 10 10
-------------------------- -------------- ---------- --------
At 30 September 2013 6,689 6,196 12,885
-------------------------- -------------- ---------- --------
Accumulated depreciation
At 1 October 2012 1,593 4,438 6,031
Charge for the year 256 684 940
-------------------------- -------------- ---------- --------
At 30 September 2013 1,849 5,122 6,971
-------------------------- -------------- ---------- --------
Net book amount
At 30 September 2013 4,840 1,074 5,914
-------------------------- -------------- ---------- --------
Freehold land Plant and
and buildings machinery Total
Group GBP'000 GBP'000 GBP'000
-------------------------- -------------- ---------- --------
Cost
At 1 October 2011 6,208 5,046 11,254
Additions 431 775 1,206
Exchange adjustments - (15) (15)
-------------------------- -------------- ---------- --------
At 30 September 2012 6,639 5,806 12,445
-------------------------- -------------- ---------- --------
Accumulated depreciation
At 1 October 2011 1,344 3,715 5,059
Charge for the year 249 723 972
-------------------------- -------------- ---------- --------
At 30 September 2012 1,593 4,438 6,031
-------------------------- -------------- ---------- --------
Net book amount
At 30 September 2011 4,864 1,331 6,195
-------------------------- -------------- ---------- --------
At 30 September 2012 5,046 1,368 6,414
-------------------------- -------------- ---------- --------
Depreciation expense of GBP940,000 (2012: GBP972,000) has been
charged to net operating expenses.
Freehold land Plant and
and buildings machinery Total
Company GBP'000 GBP'000 GBP'000
-------------------------- -------------- ---------- --------
Cost
At 1 October 2012 6,639 5,709 12,348
Additions 50 371 421
-------------------------- -------------- ---------- --------
At 30 September 2013 6,689 6,080 12,769
-------------------------- -------------- ---------- --------
Accumulated depreciation
At 1 October 2012 1,593 4,376 5,969
Charge for the year 256 655 911
-------------------------- -------------- ---------- --------
At 30 September 2013 1,849 5,031 6,880
-------------------------- -------------- ---------- --------
Net book amount
At 30 September 2013 4,840 1,049 5,889
-------------------------- -------------- ---------- --------
Freehold land Plant and
and buildings machinery Total
Company GBP'000 GBP'000 GBP'000
-------------------------- -------------- ---------- --------
Cost
At 1 October 2011 6,208 4,948 11,156
Additions 431 761 1,192
-------------------------- -------------- ---------- --------
At 30 September 2012 6,639 5,709 12,348
-------------------------- -------------- ---------- --------
Accumulated depreciation
At 1 October 2011 1,344 3,666 5,010
Charge for the year 249 710 959
-------------------------- -------------- ---------- --------
At 30 September 2012 1,593 4,376 5,969
-------------------------- -------------- ---------- --------
Net book amount
At 30 September 2011 4,864 1,282 6,146
-------------------------- -------------- ---------- --------
At 30 September 2012 5,046 1,333 6,379
-------------------------- -------------- ---------- --------
Depreciation expense of GBP911,000 (2012: GBP959,000) has been
charged to net operating expenses.
Bank borrowings are secured by way of a fixed and floating
charge over the assets of the company, including a first fixed
charge over the company's freehold land and buildings.
14 Intangible assets
Internally
Patents and generated Acquired Customer
intellectual development development related
Goodwill property expenditure expenditure intangibles Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Cost
At 1 October 2012 1,940 248 7,999 10,129 1,269 21,585
Additions - - 1,756 - - 1,756
Exchange adjustments 50 - - 210 - 260
-------------------------- --------- ------------- ------------ ------------ ------------ --------
At 30 September 2013 1,990 248 9,755 10,339 1,269 23,601
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Accumulated amortisation
At 1 October 2012 - 248 2,587 2,699 319 5,853
Exchange adjustments - - - 4 - 4
Charge for the year - - 1,362 990 95 2,447
-------------------------- --------- ------------- ------------ ------------ ------------ --------
At 30 September 2013 - 248 3,949 3,693 414 8,304
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Net book amount
At 30 September 2013 1,990 - 5,806 6,646 855 15,297
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Internally
Patents and generated Acquired Customer
intellectual development development related
Goodwill property expenditure expenditure intangibles Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Cost
At 1 October 2011 2,047 248 6,119 10,606 1,269 20,289
Additions - - 1,880 - - 1,880
Exchange adjustments (107) - - (477) - (584)
-------------------------- --------- ------------- ------------ ------------ ------------ --------
At 30 September 2012 1,940 248 7,999 10,129 1,269 21,585
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Accumulated amortisation
At 1 October 2011 - 237 1,501 1,700 224 3,662
Exchange adjustments - - - 13 - 13
Charge for the year - 11 1,086 986 95 2,178
-------------------------- --------- ------------- ------------ ------------ ------------ --------
At 30 September 2012 - 248 2,587 2,699 319 5,853
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Net book amount
At 30 September 2011 2,047 11 4,618 8,906 1,045 16,627
-------------------------- --------- ------------- ------------ ------------ ------------ --------
At 30 September 2012 1,940 - 5,412 7,430 950 15,732
-------------------------- --------- ------------- ------------ ------------ ------------ --------
Amortisation of GBP2,447,000 (2012: GBP2,178,000) is included in
net operating expenses.
Internally
Patents and generated Acquired Customer
intellectual development development related
Goodwill property expenditure expenditure intangibles Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------------- ------------- ------------ ------------ --------
Cost
At 1 October 2012 777 248 7,999 2,431 1,269 12,724
Additions - - 1,756 - - 1,756
-------------------------- --------- -------------- ------------- ------------ ------------ --------
At 30 September 2013 777 248 9,755 2,431 1,269 14,480
-------------------------- --------- -------------- ------------- ------------ ------------ --------
Accumulated amortisation
At 1 October 2012 - 248 2,580 495 319 3,642
Charge for the year - - 1,362 210 95 1,667
-------------------------- --------- -------------- ------------- ------------ ------------ --------
At 30 September 2013 - 248 3,942 705 414 5,309
-------------------------- --------- -------------- ------------- ------------ ------------ --------
Net book amount
At 30 September 2013 777 - 5,813 1,726 855 9,171
-------------------------- --------- -------------- ------------- ------------ ------------ --------
Internally
Patents and generated Acquired Customer
intellectual development development related
Goodwill property expenditure expenditure intangibles Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------------- ------------ ------------ ------------ --------
Cost
At 1 October 2011 777 248 6,119 2,431 1,269 10,844
Additions - - 1,880 - - 1,880
At 30 September 2012 777 248 7,999 2,431 1,269 12,724
-------------------------- --------- -------------- ------------ ------------ ------------ --------
Accumulated amortisation
At 1 October 2011 - 237 1,494 285 224 2,240
Charge for the year - 11 1,086 210 95 1,402
-------------------------- --------- -------------- ------------ ------------ ------------ --------
At 30 September 2012 - 248 2,580 495 319 3,642
-------------------------- --------- -------------- ------------ ------------ ------------ --------
Net book amount
At 30 September 2011 777 11 4,625 2,146 1,045 8,604
-------------------------- --------- -------------- ------------ ------------ ------------ --------
At 30 September 2012 777 - 5,419 1,936 950 9,082
-------------------------- --------- -------------- ------------ ------------ ------------ --------
Amortisation of GBP1,667,000 (2012: GBP1,402,000) is included in
net operating expenses.
In accordance with IAS 36 an impairment review has been carried
out for goodwill arising on acquisitions.
Cash generating units ("CGUs")
At 30 September 2013 the group had two CGUs: i) Andor and ii)
Bitplane.
Allocation of goodwill to cash generating units
Goodwill is allocated to the group's cash generating units
(CGUs) as follows:
2013 2012
GBP'000 GBP'000
---------- -------- --------
Andor 777 777
Bitplane 1,213 1,163
Total 1,990 1,940
---------- -------- --------
Impairment review calculations
The recoverable amount of all CGUs has been determined based on
value-in-use calculations.
These calculations use pre-tax cash flow projections based on
financial budgets approved by management covering a five-year
period. Cash flows beyond this period are extrapolated using the
estimated growth rates stated below. The growth rate does not
exceed the long-term average growth rate for the business in which
the CGU operates.
The key assumptions used for value-in-use calculations in 2013
were as follows:
Bitplane AG Andor
----------------------------------------- ------------ ------
Annualised growth rate in budget period 10% 4%
Growth rate beyond budget period 5% 3%
Discount rate (pre- tax) 12% 12%
----------------------------------------- ------------ ------
The key assumptions used for value-in-use calculations in 2012
were as follows:
Bitplane AG Andor
----------------------------------------- ------------ ------
Annualised growth rate in budget period 5% 2.25%
Growth rate beyond budget period 2.25% 2.25%
Discount rate (pre- tax) 12% 12%
----------------------------------------- ------------ ------
Management determined budgeted operating margin based on past
performance and its expectations of market development. The growth
rates used are consistent with the forecasts included in industry
reports. The discount rates used are pre-tax and reflect specific
risks relating to the relevant acquisitions.
Based on these value-in-use calculations, goodwill is not
impaired.
15 Investments in subsidiaries
2013 2012
Company GBP'000 GBP'000
-------------------------------------- -------- --------
At the beginning and end of the year 8,371 8,371
-------------------------------------- -------- --------
Details of subsidiaries are shown in note 29. Investments in
subsidiaries are recorded at cost, which is the fair value of
consideration paid.
16 Derivative financial instruments
The group and company uses forward foreign exchange contracts to
mitigate the foreign exchange risk of future sales in currencies
other than Sterling. As at 30 September the fair value of these
forward foreign exchange contracts were as follows:
2013 2012
---------------------- ----------------------
Assets Liabilities Assets Liabilities
Group GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- ------------ -------- ------------
Forward foreign exchange contracts 182 - 71 -
------------------------------------ -------- ------------ -------- ------------
The notional principal amounts of the outstanding forward
foreign exchange contracts at
30 September 2013 were GBP6.0m (2012: GBP3.0m). The settlement
dates of the contracts fall in the period from 31 October 2013 to
31 December 2013.
17 Inventories
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- -------- --------
Raw materials 2,201 1,651 2,201 1,651
Work in progress 667 795 667 795
Finished goods 2,560 2,614 2,560 2,614
Demonstration stock 2,902 3,205 2,902 3,205
--------------------- -------- -------- -------- --------
8,330 8,265 8,330 8,265
--------------------- -------- -------- -------- --------
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP18,464,000 (2012: GBP21,488,000). The
group charged GBP432,000 in respect of inventory write-downs (2012:
GBP333,000). The amount charged has been included in cost of sales
in the income statement.
18 Trade and other receivables
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- -------- -------- -------- --------
Trade receivables 9,013 10,179 8,329 9,494
Less: provision for impairment of trade receivables (238) (240) (238) (240)
----------------------------------------------------- -------- -------- -------- --------
Trade receivables - net 8,775 9,939 8,091 9,254
Other receivables 170 251 195 251
Prepayments 379 281 308 216
----------------------------------------------------- -------- -------- -------- --------
9,324 10,471 8,594 9,721
----------------------------------------------------- -------- -------- -------- --------
The fair values of trade and other receivables are the same as
their carrying value. The maximum exposure to credit risk is the
fair value of each class of receivable mentioned above.
Trade receivables impaired and the amount of the impairment
provision was GBP238,000 (2012: GBP240,000). The individually
impaired receivables mainly relate to invoices which are in
dispute. The other classes within trade and other receivables do
not contain impaired assets.
As at 30 September 2013, trade receivables of GBP590,000 (2012:
GBP712,000) were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history
of default.
The ageing analysis of these trade receivables that were past
due but not impaired was as follows:
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- --------
Up to 30 days overdue 135 282 109 213
Over 30 days overdue 455 430 390 362
----------------------- -------- -------- -------- --------
590 712 499 575
----------------------- -------- -------- -------- --------
The group is exposed to credit risk in respect of credit
exposures to its customers, distribution partners and banking
arrangements. The group has implemented policies that require
appropriate credit checks on potential customers before sales are
made and in relation to its banking partners. Movements on the
provision for impairment of trade receivables are as follows:
2013 2012
Group and company GBP'000 GBP'000
---------------------------------------------------------- -------- --------
At 1 October 240 245
Provision for receivables impairment 204 214
Receivables written off during the year as uncollectible (76) (27)
Unused provisions reversed (130) (192)
---------------------------------------------------------- -------- --------
At 30 September 238 240
---------------------------------------------------------- -------- --------
The creation and release of the provision for impaired
receivables has been included in net operating expenses in the
income statement. Amounts charged to the allowance account are
generally written off, when there is no expectation of recovering
additional cash.
The carrying amount of trade and other receivables are
denominated in the following currencies:
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- -------- -------- --------
UK Pound 1,889 1,382 1,826 1,305
Euro 1,948 2,608 1,711 2,419
US Dollar 4,379 5,110 4,074 4,797
Japanese Yen 1,037 1,334 983 1,200
Swiss Franc 71 37 - -
-------------- -------- -------- -------- --------
9,324 10,471 8,594 9,721
-------------- -------- -------- -------- --------
19 Cash and cash equivalents
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Cash at bank and in hand 10,058 5,913 9,009 5,043
Short-term bank deposits 13,795 12,473 9,086 8,900
--------------------------- -------- -------- -------- --------
Cash and cash equivalents 23,853 18,386 18,095 13,943
--------------------------- -------- -------- -------- --------
20 Borrowings
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- --------
Non-current
Bank borrowings 733 1,003 733 1,003
Current
Bank borrowings 264 264 264 264
------------------ -------- -------- -------- --------
Total borrowings 997 1,267 997 1,267
------------------ -------- -------- -------- --------
The group's borrowings are denominated in Sterling and are
repayable in instalments at the Bank of England base rate plus 0.9%
(2012: base rate plus 0.9%). The borrowings are secured by fixed
and floating charges over the assets of the company.
The fair value of the group's borrowings is not materially
different to the carrying value, as interest is charged at a
variable rate. The maturity of the group and company's bank
borrowings are as follows:
Less than One to Two to Three to Four to
one year two years three years four years five years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- ---------- ------------ ----------- ------------ --------
30 September 2013 264 264 264 205 - 997
30 September 2012 264 264 264 264 211 1,267
------------------- ---------- ---------- ------------ ----------- ------------ --------
The facilities available, but undrawn, at 30 September 2013 in
respect of which all conditions precedent had been met totaled
GBP2,100,000 (2012: GBP2,100,000).
21 Trade and other payables
Group Company
------------------ ------------------
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- --------
Trade payables 3,145 3,446 3,130 3,402
Social security and other taxes 342 317 298 325
--------------------------------- -------- -------- -------- --------
3,487 3,763 3,428 3,727
--------------------------------- -------- -------- -------- --------
22 Deferred income tax
The movement in deferred income tax assets and liabilities
during the year is as follows:
Deferred Deferred
income income
tax tax
Tax Accelerated
Losses capital Share-based assets liabilities
Trade allowances payments Intangibles Other total total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- ------------ ------------ ------------ -------- --------- ------------
At 1 October
2011 - (590) 3,334 (2,617) (277) 3,334 (3,484)
Income statement
(charge)/credit - (6) 17 130 (60) 17 64
Exchange differences - (1) - 101 (4) - 96
Tax credited
directly to
equity - - (1,652) - - (1,652) -
---------------------- -------- ------------ ------------ ------------ -------- --------- ------------
At 30 September
2012 - (597) 1,699 (2,386) (341) 1,699 (3,324)
Income statement
(charge)/credit 323 70 - 212 (388) 323 (106)
Exchange differences - - - (45) 19 - (26)
Tax charged
directly to
equity - - (800) - - (800) -
---------------------- -------- ------------ ------------ ------------ -------- --------- ------------
At 30 September
2013 323 (527) 899 (2,219) (710) 1,222 (3,456)
---------------------- -------- ------------ ------------ ------------ -------- --------- ------------
The deferred tax asset that is expected to reverse within 12
months is GBP323,000 and the deferred tax liability that is
expected to reverse within 12 months is GBP450,000.
Accelerated Deferred Deferred
Trade Losses capital Share-based income tax income tax
trade allowances Payments Intangibles Other assets total liabilities
total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------- ------------ ------------ ------------ -------- ------------- -----------------
At 1 October
2011 - (582) 3,334 (1,202) 19 3,334 (1,765)
Income statement
(charge)/credit - 95 17 (33) (5) 17 57
Tax credited
directly to
equity - - (1,652) - - (1,652) -
----------------- ------------- ------------ ------------ ------------ -------- ------------- -----------------
At 30 September
2012 - (487) 1,699 (1,235) 14 1,699 (1,708)
Income statement
credit/(charge) 323 (35) - 51 (31) 323 (15)
Tax charged
directly to
equity - - (800) - - (800) -
----------------- ------------- ------------ ------------ ------------ -------- ------------- -----------------
At 30 September
2013 323 (522) 899 (1,184) (17) 1,222 (1,723)
----------------- ------------- ------------ ------------ ------------ -------- ------------- -----------------
The deferred tax asset that is expected to reverse within 12
months is GBP323,000 and the deferred tax liability that is
expected to reverse within 12 months is GBP286,000.
23 Government grants and deferred income
Government Deferred Total
grant income
Group GBP'000 GBP'000 GBP'000
At 1 October 2012 1,334 1,455 2,789
Extended warranty/maintenance revenue deferred during the year - 1,888 1,888
Amortisation in the year (139) (1,652) (1,791)
Exchange adjustments - 16 16
---------------------------------------------------------------- ----------- --------- --------
At 30 September 2013 1,195 1,707 2,902
---------------------------------------------------------------- ----------- --------- --------
The current portion of government grants and deferred income was
GBP1,142,000 (2012: GBP895,000) and the non-current portion is
GBP1,760,000 (2012: GBP1,894,000).
Government Deferred
grant income Total
Company GBP'000 GBP'000 GBP'000
At 1 October 2012 1,334 750 2,084
Extended warranty/maintenance revenue deferred during the year - 503 503
Amortisation in the year (139) (394) (533)
---------------------------------------------------------------- ------------ --------- --------
At 30 September 2013 1,195 859 2,054
---------------------------------------------------------------- ------------ --------- --------
The current portion of government grants and deferred income was
GBP560,000 (2012: GBP389,000) and the non-current portion is
GBP1,494,000 (2012: GBP1,695,000).
Government Deferred
grant income Total
Group GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ----------- --------- --------
At 1 October 2011 1,348 1,090 2,438
Capital grant received in the year 106 - 106
Extended warranty/maintenance revenue deferred during the year - 1,562 1,562
Amortisation in the year (120) (1,178) (1,298)
Exchange adjustments - (19) (19)
---------------------------------------------------------------- ----------- --------- --------
At 30 September 2012 1,334 1,455 2,789
---------------------------------------------------------------- ----------- --------- --------
Government Deferred
grant income Total
Company GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ----------- --------- --------
At 1 October 2011 1,348 484 1,832
Capital grant received in the year 106 - 106
Extended warranty/maintenance revenue deferred during the year 470 470
Amortisation in the year (120) (204) (324)
---------------------------------------------------------------- ----------- --------- --------
At 30 September 2012 1,334 750 2,084
---------------------------------------------------------------- ----------- --------- --------
Grants were receivable from government departments in respect of
the purchase of buildings and machinery, and the development of
software.
24 Called up share capital
Group and company Number GBP'000
---------------------------------------------------------------------- ----------- --------
Allotted, called up and fully paid (ordinary shares of GBP0.02 each)
At 1 October 2012 31,093,005 622
Issued during the year 927,491 18
---------------------------------------------------------------------- ----------- --------
At 30 September 2013 32,020,496 640
---------------------------------------------------------------------- ----------- --------
Group and company Number GBP'000
---------------------------------------------------------------------- ----------- --------
Allotted, called up and fully paid (ordinary shares of GBP0.02 each)
At 1 October 2011 30,693,960 614
Issued during the year 399,045 8
---------------------------------------------------------------------- ----------- --------
At 30 September 2012 31,093,005 622
---------------------------------------------------------------------- ----------- --------
All ordinary shares of GBP0.02 each have equal rights in respect
of voting, receipt of dividends and repayment of capital.
During the year the company issued an additional 927,491 (2012:
399,045) ordinary shares with a value of GBP0.02 each. The premium
on issue amounted to GBP627,093 (2012: GBP236,174)
25 Share-based payments
The group and company operate three share option schemes that
grant options over its ordinary shares on a discretionary basis to
its directors and employees:
a) the Inland Revenue Approved Company Share Option Plan may
grant options to employees other than directors. The total number
of options in issue under the scheme may not exceed 20% of the
issued ordinary share capital of the company, the options are
exercisable at any time between three and ten years from the date
of their grant and the exercise price is the market value of an
ordinary share on the date of grant;
b) the Enterprise Management Incentive Scheme may grant options
to both employees and directors. The total number of options
granted, taken together with the options granted in the preceding
ten years under this and other employee option schemes, may not
exceed 10% of the company's ordinary share capital. The options are
exercisable between two and ten years from the date of their grant
and the exercise price shall not be less than the market value of
an ordinary share. Whilst the exercise of an option may be
conditional upon the satisfaction of performance conditions, to
date no conditions have been attached; and
c) the Long Term Incentive Plan Scheme may grant options to both
employees and directors. The total number of options granted, taken
together with the options granted in the preceding ten years under
this and other employee option schemes, may not exceed 10% of the
company's ordinary share capital. The options are exercisable
between three and ten years from the date of their grant. The
exercise of an option is conditional upon the satisfaction of
performance conditions. For each period where cumulative profit is
equal to or exceeds the cumulative profit target, the performance
target is achieved in full for the cumulative proportion of the
option capable of vesting for that year with 80% vesting at 80%
profit target, and straight-line vesting between 80% profit target
and the cumulative profit target.
Details of the movements in the year in share options granted by
the group and company are set out below:
1 October 30 September Exercise Exercise
2012 Granted Lapsed Exercised 2013 price (GBP) Period
----------------------------- ---------- -------- --------- ---------- ------------- ------------ -------------
Approved Company Share
Option Plan
15,000 - - (15,000) - 0.464 2004 to 2012
24,500 - - (500) 24,000 0.480 2007 to 2014
----------------------------- ---------- -------- --------- ---------- ------------- ------------ -------------
Enterprise Management
Incentive Scheme
135,300 - - (97,800) 37,500 GBP0.480 2006 to 2014
188,700 - - (11,700) 177,000 GBP0.975 2009 to 2016
1,000,000 - - (310,000) 690,000 GBP0.925 2010 to 2016
5,000 - - - 5,000 GBP1.125 2010 to 2017
----------------------------- ---------- -------- --------- ---------- ------------- ------------ -------------
Long Term Incentive Plan
680,000 - (50,000) (209,000) 421,000 GBP0.02 2012 to 2020
----------------------------- ---------- -------- --------- ---------- ------------- ------------ -------------
Total 2,048,500 - (50,000) (644,000) 1,354,500
----------------------------- ---------- -------- --------- ---------- ------------- ------------ -------------
Out of the 1,354,500 outstanding options (2012: 2,048,500
options), 1,354,500 options (2012: 2,048,500) were exercisable.
Options exercised in 2013 resulted in 927,491 shares including
GBP283,491 save as you earn shares (2012: 390,100) being issued at
a weighted average price of GBP0.70 each (2012: GBP0.59 each).
The related weighted average share price at the time of exercise
was GBP3.94 (2012: GBP5.31) per share.
There were no share options granted during the current or
previous period.
26 Cash generated from operations
Group Company
------------------ ------------------
2013 2012 2013 2012
Group GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------- -------- -------- -------- --------
Profit before interest income and income tax 6,098 8,667 5,746 8,073
Adjustments for:
Depreciation 940 972 911 959
Amortisation of intangible fixed assets 2,447 2,178 1,667 1,402
Movement of capital grant and deferred income 145 319 (30) 252
Changes in working capital (excluding the effects of
acquisition and exchange differences on consolidation)
Movement in inventories (65) (1,323) (65) (1,323)
Movement in trade and other receivables 829 (1,443) 1,016 (1,267)
Movement in trade and other payables (1,650) (1,076) (1,607) (1,055)
Adjustment in respect of employee share option schemes - 69 - 69
--------------------------------------------------------- -------- -------- -------- --------
Cash generated from operations 8,744 8,363 7,638 7,110
--------------------------------------------------------- -------- -------- -------- --------
27 Commitments
As at 30 September 2013 the group and company had capital
commitments in respect of contracted expenditure of GBPnil (2012:
GBPnil).
The group leases various properties and equipment under
non-cancellable operating lease arrangements. The future aggregate
minimum lease payments under non-cancellable operating leases are
as follows:
Land and buildings Equipment
--------------------- ------------------
2013 2012 2013 2012
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- -------- --------
No later than one year 348 275 4 5
Later than one year and no later than five years 295 476 15 17
Later than five years - - 1 5
-------------------------------------------------- ---------- --------- -------- --------
643 751 20 27
-------------------------------------------------- ---------- --------- -------- --------
Land and buildings Equipment
--------------------- ------------------
2013 2012 2013 2012
Company GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- -------- --------
No later than one year 222 161 4 5
Later than one year and no later than five years 108 192 15 17
Later than five years - - 1 5
-------------------------------------------------- ---------- --------- -------- --------
330 353 20 27
-------------------------------------------------- ---------- --------- -------- --------
28 Business combinations
Spectral Applied Research Inc. ("Spectral")
On the 18th October 2013, the company acquired 100% share
capital of Spectral Applied Research Inc. ("Spectral") a market
leader in the design and manufacture of optical systems for the
cell biology research community for consideration of GBP6.8million
(C$:GBP exchange rate of 1.66) in cash. Spectral has a strong fit
with Andor and its innovative product portfolio strengthens Andor's
systems and OEM offering by increasing differentiation against the
competition as well as providing access to key intellectual
property.
Further consideration in the form of cash may be payable by the
company under an earn-out provision in the event that Spectral
generates increased profitability in the three years ending 17
October 2016. The potential undiscounted amount of all payments the
company could be required to make under this arrangement is between
GBP0 - GBP3.0m.
The potential further consideration payable under the earn-out
provision to the former shareholders has been classified as post-
combination remuneration as payment to individual shareholders is
conditional upon continuing employment with the business.
Effective consideration on acquisition has been calculated as
follows:
GBP'000
--------------------------------- -----------------------------
Effective consideration
Consideration transferred on acquisition 6,801
Discounted - Post- combination remuneration 2,637
----------------------------------------------- ---------------
Total purchase consideration 9,438
----------------------------------------------- ---------------
Acquiree's carrying
amount Fair Value
GBP'000 GBP'000
--------------------------------- ------------------- ----------
Cash and cash equivalents
Property, plant & Equipment 182 182
Intangible Assets 111 *
Receivables 1,128 1,128
Inventories 1,839 1,839
Payables (1,151) (1,430)
Net deferred tax liabilities - *
--------------------------------- ------------------- ----------
Net identifiable assets acquired 2,109 *
--------------------------------- ------------------- ----------
* Due to the limited time period from the date of completion to
approval of these financial statements, the fair value of
intangible assets and associated deferred tax liabilities has not
been disclosed as the valuation exercise has not been completed.
The Group is currently in the process of obtaining the required
information to enable the valuation exercise to be completed.
Outflow of cash to acquire the business, net of cash
acquired:
GBP'000
----------------------------------------- -------
Cash consideration on acquisition (6,801)
Direct costs relating to the acquisition (180)
Cash outflow on acquisition (6,981)
----------------------------------------- -------
Apogee Imaging Systems Inc. ("Apogee")
On the 29th October the company acquired 100% share capital of
Apogee Imaging Systems Inc. ("Apogee")they have been manufacturing
and supplying cooled CCD cameras around the world since it was
founded in 1993 for consideration of GBP2.3million (USD$:GBP
exchange rate of 1.616) in cash. The product portfolio offered by
Apogee will significantly enlarge Andor's current mid-range camera
offering.
Further additional consideration of GBP0.2m cash will be payable
by the company under the terms of the Sale and Purchase
Agreement.
Under IFRS 3 (Revised) the earn-out has been treated as cost of
acquisition.
Effective consideration on acquisition has been calculated as
follows:
GBP'000
------------------------------------------ -------
Effective consideration
Consideration transferred on acquisition 2,320
Deferred consideration payable 210
------------------------------------------ -------
Total purchase consideration 2,530
------------------------------------------ -------
Acquiree's carrying
amount Fair Value
GBP'000 GBP'000
--------------------------------- ------------------- ----------
Property, plant & equipment 137 137
Cash and cash equivalents 94 94
Intangible assets 73 *
Receivables 418 418
Inventories 523 470
Payables (609) (720)
Debt (81) (81)
Net deferred tax liabilities - *
--------------------------------- ------------------- ----------
Net identifiable assets acquired 555 *
--------------------------------- ------------------- ----------
* Due to the limited time period from the date of completion to
approval of these financial statements, the fair value of
intangible assets and associated deferred tax liabilities has not
been disclosed as the valuation exercise has not been completed.
The Group is currently in the process of obtaining the required
information to enable the valuation exercise to be completed.
Outflow of cash to acquire the business, net of cash
acquired:
GBP'000
----------------------------------------------------- ---------
Cash consideration on acquisition (2,320)
Direct costs relating to the acquisition (114)
Cash and cash equivalents in the subsidiary acquired 94
Cash outflow on acquisition (2,340)
----------------------------------------------------- ---------
29 Subsidiaries
The principal subsidiaries of the group and company are:
Proportion of ordinary
shares held by
------------------------
Subsidiaries Country of incorporation or registration Nature of business Parent Group
------------- ----------------------------------------- ------------------------ ------------ ----------
Bitplane AG Switzerland Image analysis software 100% -
Bitplane Inc United States of America Image analysis software - 100%
------------- ----------------------------------------- ------------------------ ------------ ----------
All subsidiaries are included in the consolidation. The
company's voting rights in its subsidiaries are the same as its
effective interest in its subsidiaries.
30 Related party transactions and ultimate controlling party
The directors do not consider there to be one ultimate
controlling party. The shareholdings of the directors are shown in
the directors' report.
The only transactions with related parties in the year relate to
directors' shareholdings and these have been disclosed in the
directors' report.
31 Reconciliation of adjusted results
The review of the business, which can be found in the directors'
report, the Chairman's statement, the Chief Executive Officer's
review, the financial review and the corporate governance report,
contains reference to adjusted measures of performance. A
reconciliation of reported performance measures to those adjusted
measures is given below:
Operating Profit Profit
profit before tax after tax
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------- ----------- ----------
As reported at 30 September 2013 6,098 6,332 5,722
Add back:
Amortisation of acquired intangible assets 1,085 1,085 980
-------------------------------------------- ---------- ----------- ----------
Adjusted results at 30 September 2013 7,183 7,417 6,702
-------------------------------------------- ---------- ----------- ----------
Operating Profit Profit
profit before tax after tax
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------- ----------- ----------
As reported at 30 September 2012 8,667 8,932 7,565
Add back:
Amortisation of acquired intangible assets 1,092 1,092 929
Adjusted results at 30 September 2012 9,759 10,024 8,494
-------------------------------------------- ---------- ----------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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