Final Results

RNS Number:9747I
MTL Instruments Group PLC
20 March 2003



20 March 2003



                           MTL Instruments Group plc

            Preliminary Results for the year ended 31 December 2002

MTL Instruments Group plc is recognised as a world leader in the development and
   supply of intrinsic safety explosion prevention devices and specialises in
  lightning, surge protection and gas analysis equipment.  Many of the world's
    safety-critical processes are monitored, controlled or protected by MTL
products; and MTL has recently developed solutions which enable process control
   systems to be devolved from the control room onto the process plant itself
        giving benefits of improved control integrity and cost savings.

Highlights

*   Operating profit before goodwill amortisation (#1.1m) and exceptional
    items (#1.0m), but after finance charges (#0.3m), increased by 5.7% to #3.7m
    (2001: #3.5m), on turnover of #60.1m (2001: #63.4m).

*   As a result of the restructuring charge of #1.0m, Profit before tax
    fell to #1.7m (2001: #2.4m).

*   Cash generation improved significantly in the second half of the year.
    At the year end, Group net debt had been reduced by #2.3m to #5.1m.

*   The Group's major restructuring programme, started in July 2002, has
    resulted in significant improvement in profitability and cash flow.

*   A balanced portfolio of operations has now been established around
    three core business units: Hazardous Area, Surge Technologies and MTL Open
    Systems Technologies (MOST). Major progress was made in 2002 in all three
    businesses:

    -  With the launch in May 2002 of the "Shark" project, MTL has made
       significant steps towards becoming the leading supplier of Open control 
       products to the process control industry;

    -  MTL is now established as the world's leading supplier of Fieldbus
       power supply and spur protection equipment;

    -  Surge Technologies launched Fieldbus products during the year and
       maintained its growth record in the protection of wireless infrastructure 
       and computer networks.

Malcolm Coster, Chairman of MTL Instruments Group plc, commented:

"The new year has begun solidly in Asia-Pacific and Europe but economic
conditions remain weak in the Americas.  Hazardous Area has had an encouraging
start in all markets although competition remains strong for the larger
projects, which are starting to return. It is pleasing to note that orders for
the new MOST products are coming in from across all our sales channels, despite
the launches in EMEA and Asia-Pacific being late in 2002.  In the Americas we
continue to penetrate the market although investment levels remain depressed.
Our Surge Technologies business is showing promising international sales in its
process control business and has also begun to sell its wireless products in a
few targeted regions outside of the US.....I look forward to reporting on our
progress when I present our interim results later in the year. "


For Further Information:


Graeme Philp                                                      01582 407250
Chief Executive, MTL Instruments Group plc
website: http://www.mtl-inst.com

Ben Padovan/Terry Garrett                                         020 7067 0700
Weber Shandwick Square Mile




Chairman's Statement

Performance

I am pleased to report that MTL's business continued to make progress in 2002
despite the difficult conditions in our main markets.  The Company successfully
completed key parts of its strategic programme and also concluded a major
restructuring of its workforce to reflect better the new mix of skills the
business requires in the future.  Despite slightly lower than expected sales for
the year, the lower cost base in the second half enabled the Company to meet its
profitability targets.

Group sales eased by 5.2% to #60.1m (2001: #63.4m).  Operating profit before
goodwill amortisation and exceptional items, but after finance charges (#0.3m),
increased by 5.7% to #3.7m (2001: #3.5m).  Profit before tax, after goodwill
amortisation of #1.1m (2001: #1.1m) and exceptional items of #1.0m (2001: #0m),
was #1.7m (2001: #2.4m). The directors are recommending a final dividend of 3.5p
per share taking the total for the year to 6.0p (2001: 6.0p).

Strategy and Improving Future Performance

The acquisition and development strategy, which the company has been following
in the last five years, has enabled us to build a balanced and enviable
portfolio of operations around four core business units:

Hazardous Area business unit is responsible worldwide for MTL's traditional
Intrinsic Safety activities and supplies our world leading isolators and
barriers to the process industry.  This business is in a maturing market but has
enduring profitability and good scope for future development.

Surge Technologies is our fastest growing business unit, supplying equipment to
protect plant from voltage surges caused by lightning.  It is an established
entity in North America and in the process control markets and can continue to
expand internationally using our existing sales channels.  It has reported an
improving gross profit margin in recent months.

MOST (MTL Open Systems Technologies) is responsible for the "Shark" development
and our new open control platforms for the process control markets.  A
recognised industry leader, it is now emerging from the "early adopter phase" in
this multi-billion pound market.  With the product launch completed on schedule
in May 2002, design and development costs are now reducing and an increasing
emphasis is being put on sales and marketing efforts.

Gas Analysis is our smallest business unit and, whilst it is a niche player,
recent investment has opened up new opportunities for growth.

Since I joined MTL in October 1998, we have steadily evolved the organisational
structure of the Group from one with many autonomous units around the world
towards one based on these four operational areas.  We are excited about the
improvements in focus and accountability that this repositioning has already
brought about early in the New Year and fully expect that this will be a major
contributor to improved performance in 2003 and beyond.

People

Over the past year we have been making some significant changes to the
constitution of our Board.  I would like to take this opportunity to explain
these changes in more detail.  With the transition from the founder-led
management to the new management team successfully completed, both Barrie Marson
and Jack Leonard, who had been instrumental in guiding the company through this
process, decided that the time was right to hand over the reins to new
Non-Executive Directors.  I would like to extend my warm thanks to Barrie, who
has held the positions of Chief Executive and Senior Non-Executive Director
during his ten years with MTL, and to Jack who joined us as a Non-Executive
director in 1996.  I wish them both a fulfilling and happy retirement.

We started the process of succession in 2001 by welcoming back Steve Cockrell,
who brings with him a wealth of corporate finance experience as well as an
intimate knowledge of the history, workings and culture of MTL.   As a next step
we then set out to find two process control industry professionals to balance
the Board team.

I was delighted to welcome Terry Lazenby onto our Board in March 2002.  Terry,
through his career in various senior engineering positions within BP, has a
lifetime of experience as an end-user of process control instrumentation and has
brought this valuable perspective to Board discussions.

In May we were equally delighted by Don Bogle's acceptance of a Non-Executive
position on our Board.  Don has been in high profile positions in the US process
control industry for many years, both as a senior executive at Honeywell and as
the CEO of Moore Products,  where he presided over its sale to Siemens in 2000.
Don has helped with the continuing development of our Open Control strategy at
Board level and has also given his expertise and knowledge to the MOST team as a
consultant.

I am grateful to my fellow Board members for their continued support, advice and
the time given to seeking the best outcomes for stakeholders in the business.

In dynamic and demanding markets, our competitive edge continues to come from
the quality of our people and their dedication to customers.  This past year has
been particularly challenging for employees; nonetheless, the Group's
performance in difficult trading conditions does them credit and I thank them
for their contribution and their achievements.

Finally, I am particularly sad to report the death, in March 2002, of our
previous Chairman and Founder, Ian Hutcheon at the age of 78.  Ian's strength of
character and clear vision played a vital part in laying the foundations for the
MTL of today and much of his personal ethos still remains within the company.
He will be greatly missed by all who knew him.

Pensions

The MTL Instruments Group Pension Scheme in the UK is a defined benefit scheme;
the funding of which has deteriorated in the last year due to falling stock
markets. Using the FRS17 valuation method, the funding deficit has increased
from #0.9 million at the end of 2001 to #4.1 million at the end of 2002. As a
result, the company has increased its funding from 1 January 2003 to 15% of
salary and is reviewing the options to reduce this deficit in the scheme over
time. We remain committed to providing an attractive pension benefit as a part
of our competitive remuneration policy to attract and retain high calibre
employees.

Summary and Outlook

I stated in my interim report that the main drivers of the year end performance
would be the market acceptance of the products resulting from the "Shark"
development project, the achievement of the expected cost savings from the
restructuring carried out in July and the overall worldwide business
environment.

The speed of customer acceptance of a new product, especially one as innovative
as that which resulted from the "Shark" development project, is always hard to
predict but is even more so in the difficult economic environment into which we
launched.  Nevertheless, we have been delighted with the response from customers
so far and we more than met our sales target for 2002.

When I reported our Interim results in September I was expecting that operating
expenses in the second half of the year would be around #1.0 million below those
in the first half. The actual cost reduction was #1.3 million, and I would like
to thank the management team for their speed and effectiveness in carrying out
this difficult but necessary action.  Despite the economic conditions not
improving in the second half, the company reported profitability in line with
expectations.

The new year has begun solidly in Asia-Pacific and Europe but economic
conditions remain weak in the Americas.  Hazardous Area has had an encouraging
start in all markets although competition remains strong for the larger
projects, which are starting to return. It is pleasing to note that orders for
the new MOST products are coming in from across all our sales channels, despite
the launches in EMEA and Asia-Pacific being in late 2002.  In the Americas we
continue to penetrate the market although investment levels remain depressed.
Our Surge Technologies business is showing promising international sales in its
process control business and has also begun to sell its wireless products in a
few targeted regions outside of the US.

I look forward to reporting on our progress when I present our interim results
later in the year.



Malcolm Coster
Chairman




Operational and Financial Review

Overview

The last year has been an important one for MTL.  In the recent past the company
has been investing in the development of two major new business areas to
complement our successful Hazardous Area business.  Through a combination of
organic development and acquisition, our new Surge Technologies and MOST
businesses became successfully established in their home territories and have
begun the process of expanding internationally using our established sales
infrastructure around the world.

Having continued the investment in these growth initiatives through the
difficult market conditions of the last few years, 2002 saw us maintaining the
progress by completing major product releases in all four of our business units.
Equally significant was the task of re-structuring our international
organisation to maximise the opportunities available to the new businesses.

At the same time MTL concentrated on growing international market share within
its core Hazardous Area business, despite the widely reported reductions in
capital investment in many of its markets and weak performances from many of the
larger instrumentation and control companies around the world.

Despite an even weaker market than anticipated, I am delighted to report that
MTL made real progress against all of these objectives during 2002.

*   In the Hazardous Area business unit, the weakness in demand for traditional 
    Intrinsic Safety interfaces was partly offset by the growth in our Fieldbus 
    business and MTL established itself as the world's leading supplier of 
    Fieldbus power supply and spur protection equipment.

*   The widely anticipated launch of MTL's new control platforms, as the
    culmination of Project "Shark" in May, gave MOST the products that it had 
    been waiting for to begin its campaign to become the leading supplier of 
    Open Control products to the process control industry.

*   Surge Technologies also launched Fieldbus products during the year and
    further consolidated its recent year-on-year growth record in the protection 
    of wireless infrastructure and computer networks

*   Our Gas Analysis business completed two important product developments
    with key OEM customers and made its first sales of these products.

Restructuring

In July, a major restructuring programme was undertaken which transformed both
the balance of skills and the underlying cost base of the company.  It also
enabled us to bring to a close the period of premium investment in product
development and to bring our design and development expenditure as a percentage
of sales back to a more normal level for our industry.

These measures, coupled with a concerted and ongoing drive to improve
manufacturing costs, rationalise our product offerings and drive down inventory,
all helped contribute to significant improvements in profitability and cash in
the second half.  These put us in a strong position and will help our resilience
to the political and economic uncertainties of the coming year.

Geographically

Asia Pacific was our most resilient regional market in 2002, recording a modest
growth in sales of 1.6% over the previous year.  Within this market, Japan was
strong with 5.2% growth and China, with sales of #2.4 million, consolidated its
recent growth.  Europe, The Middle East and Africa were down by 7.3%, although
our new business in Italy showed pleasing growth (up by 45.5%).  Not
surprisingly, it is the Americas market that has the greatest impact on our
overall results, and sales in this market were down by 5.9% relative to 2001.

Strategy

The Group Strategy, as it relates to the four business units, is summarised
below:

*   Maintain world market leadership of the Hazardous Area business unit.
*   Develop the Hazardous Area business unit into the world-leading supplier of 
    Fieldbus hardware and Safety Critical Interfaces.
*   Maintain Surge Technologies' world leadership in surge protection for
    process instrumentation and control systems.
*   Extend the international sales and support network for Surge Technologies' 
    wireless infrastructure and computer network protection products.
*   Establish MOST as a top three supplier of open control system products for 
    the Process Control industry.

*   Develop MOST sales channels and support infrastructure targeted at OEMs and 
    System Integrators
*   Develop Gas Analysis business around niche solutions for OEM and target end 
    -user markets

Design and Development Investment

In the recent past MTL has invested extensively in design and development, at a
level equivalent to about 10% of sales.  This has been in order to fund an
aggressive development programme of new Intrinsic Safety interfaces, the MTL
8000 series of hazardous area and general purpose input/output ("I/O") devices
and the establishment of our Surge Technologies and MOST product ranges.

Now that the bulk of this work has been completed, it is our policy to hold
investment closer to industry norms.  The major action needed to make this
adjustment was taken in July 2002 as part of the restructuring programme.
Overall, investment in design and development, before exceptional costs, in 2002
equated to 8.9% of sales although the annualised exit rate at the end of the
year was approximately 7%.  Ongoing development effort will be focused on
Fieldbus interfaces and components, increasing our range of surge protection
products and the completion of our MOST product range.

Cash Flow

Cash generation improved significantly in the second half of the year and
enabled net debt in the group to be reduced over the year by #2.3 million to
#5.1 million, following the increase of #1.1 million that was reported in our
Interim Report in September.

Net cash inflow from operating activities was #4.5 million (2001: #4.7m) after
the #1.0 million (2001: #nil) spent on the July restructuring.  Control of
working capital improved in the year with the balance of stocks decreasing by
#1.2 million to #10.5 million and that of debtors decreasing by #0.8 million to
#14.7 million. The lower level of capital expenditure, down from #1.0 million in
2001 to #0.6 million, and the lower earn-out payment on the Standard Automation
acquisition in the year, down from #0.6 million to #0.1 million, enabled an
increase in cash during the year of #1.2 million after dividend payments to
shareholders of #1.1 million through the 6p dividend.

Foreign Currency

A significant proportion of the group's turnover is generated in foreign
currencies from product sourced from the UK. Our policy is to cover foreign
currency exposure on trading balances by the use of forward contracts and
currency overdrafts but not generally to hedge future trading exposure. We have
seen the currencies in several of our main markets weaken against sterling in
the last year, especially in the US and Asia-Pacific, and this has negatively
affected our sales and profit for the year.  We are currently reviewing our
policy in this area to consider whether we should be hedging the translation
risk of two of our businesses, Standard Automation and Atlantic Scientific, and
whether we should hedge future trading exposure.

Summary and Outlook

From a macro economic viewpoint, 2002 turned out to be more challenging than we
had anticipated.  With weakening foreign currencies and lower investment levels
in our main markets we nevertheless closed the year with operating profit above
2001, after excluding the effect of exceptional items in 2002 of #1.0m.  We also
made significant progress in the development and execution of our strategic
plan.

The coming year will be pivotal as we accelerate the development of our MOST and
Surge technologies and continue our Fieldbus and Safety Critical programmes in
the Hazardous Area business unit.

Hazardous Area

The Hazardous Area business unit (HABU) is MTL's largest and longest established
business.  It is built on the technology of Intrinsic Safety - a method of
protecting electrical control and instrumentation equipment against the
possibility of causing ignitions or explosions when it is used to handle
potentially flammable substances.  Intrinsic Safety is the world's widest used
explosion protection technique for instrumentation and control systems and is
utilised in industries as diverse as grain handling, mining and whisky
distillation, but its main markets are to be found in the oil and gas,
petrochemical, chemical and pharmaceutical industries.

MTL is a world leader in this technology and has played an important part in the
extension of Intrinsic Safety techniques into the new generation of Fieldbus
databuses which are gradually replacing the traditional "point to point" wiring
on process plants.

HABU products fall into five categories:

*  Intrinsic Safety Interfaces - our traditional Isolators and Zener
   Barriers
*  Interfaces for safety critical applications  - Shut-down and Fire and
   Gas systems
*  Hazardous Area I/O - the Intrinsically safe version of the MTL 8000
   series
*  Fieldbus components - for general purpose use and for hazardous areas
*  Field-mounted Intrinsically Safe Displays

Business Performance

Whilst 2002 was a tough year for our main end user industries, it marked
significant progress in the adoption of the new technologies of Fieldbus and
Open Control systems across the industry.  Green field process plant
developments were rare with the exception of rapidly developing territories such
as China, but these new technologies have found a place in efficiency
improvements in existing plants around the world.

Against a background of reduced capital investment in most of HABU's target
industries, sales were down by 1.5% relative to 2001 in Europe, the Middle East
and Africa (EMEA) which accounts for just under 50% of HABU's total sales. The
Americas were down by 17.1%, reflecting the significant slowdown in the economy
since the fourth quarter of 2001.  The Americas accounts for 22% of HABU's total
sales.  Sales in Asia-Pacific were down by 1% and the region represented 28% of
the total.

Product Development

Investment in product development during 2002 was #1.7m representing 4.9% of
sales and more in line with norms for the industry compared to the historic
premium levels of investment in the last few years.  The main focus of activity
was the completion of the new MTL 7700 range of Zener Barriers and the launch of
the FISCO Fieldbus Power Supply.  Work also began on the definition of a new
standard for non-incendive Fieldbus power supplies using a technique which MTL
has termed "FNICO'".

Outlook for 2003 and Beyond

The next twelve months will see a very significant change in the way that
instrumentation and control systems for process plants are implemented.  After
many years at the international standards committee stage, Fieldbus is rapidly
becoming adopted as the preferred method of communication between sensors and
actuators and the plant control system. Over the last year or so, MTL and its
partner, Relcom, have built a position as the leading supplier of Fieldbus power
supplies and spur protection and our products have already been adopted by many
of the leading system providers around the world.  After a period in which end
users have experimented with pilot plants and small implementations, there will
be a number of sizeable plants constructed during 2003 which are totally
controlled using Fieldbus technology.  MTL believes it is well positioned to
provide both the general purpose and the hazardous area power supply and spur
protection products for these projects.

Surge Technologies

MTL Surge Technologies is a leader in the protection of control and
instrumentation systems, industrial networks and telecommunications
infrastructure from damage caused by voltage surges of the sort associated with
lightning strikes and the switching of heavy electrical equipment.  Modern
computer and electronics systems involve the use of high density electronic
chips which are highly sensitive to damage from over-voltage.  Increasingly the
intelligence in such systems is distributed around the system and is often
connected by long cables and buses making the associated electronics devices
highly susceptible to damage and subsequent costly system downtime.  MTL Surge
Technologies produces a range of protection products for mains electrical
supplies, analogue and digital signals and antennas which help to ensure that
system uptime is maximised, even in the harshest of environments.  Our equipment
is used by some of the biggest names in telecommunications, industrial
automation and industrial networks. The Surge business unit was formed following
the acquisition of Atlantic Scientific Corporation in January 2000.

In 2002, MTL Surge Technologies proved, yet again, to be resilient to the
economic slowdown, demonstrating a third year of sequential growth. Revenues
grew by 8% to #9.5m, in spite of difficult trading conditions in each of the
business unit's major markets.

Strategically, this business unit targets and operates in three business areas:

*     Industrial
*     Wireless Infrastructure
*     Computer Networking

Sales in the industrial sector are largely related to process instrumentation
projects. In wireless, surge protection solutions are applied to the base
station infrastructure and our success in computer networks comes from private
label computer OEMs and value added resellers.

The core strategy is to expand each business area internationally, adding new
markets, either organically or by acquisition, over the longer term.

Business Performance

The past two-year's economic climate was challenging for many of our customers
and few could avoid the downturn and subsequent drop in spending with IT and
communications being hardest hit. In contrast, MTL Surge Technologies grew sales
in both areas. Our networks business demonstrated the most robust growth, 24% on
2001, while the advance in wireless telecommunications was relatively modest at
5%. The significant expansion in networks was, in-part, fuelled by OEMs who
offered surge protection as an incremental value added product to their existing
portfolio. Revenues generated from our industrial business declined modestly
from 2001, due to difficult trading conditions in the Americas.

The surge protection business does, by nature, have a certain resilience to
slowdowns.  Although during downturns customers cut back on new infrastructure
(and hence the associated surge protection) they are also likely to protect
existing valuable equipment in an effort to make that equipment last longer. The
resulting retrofit sales are a useful boost to our revenues.  During 2002,
carefully targeted cost cutting reduced the overhead in the Surge business.
This, together with the revenue increase, pushed the business unit's
profitability to record levels.

Product Development

An aggressive programme of product development was undertaken in 2002, with the
goal to keep MTL at the leading edge and in tune with customers' requirements. A
focus on high potential growth areas like Foundation Fieldbus, lead to new
ranges of surge protection.

The trend toward smaller wireless base stations was addressed with a new range
of products along with more integrated solutions.

2003 and Beyond

The strategy for 2003 is for continued expansion  in our networks business, a
modest advance  in wireless and aggressive growth in our industrial business.
This aggressive growth will be fuelled by programmes designed to ensure that we
maximise the opportunities for surge products in our traditional process control
markets.

MOST

The MOST business unit was established in late 2001 to spearhead MTL's drive
into the newly emerging field of Open Systems Technologies for process control.
As internationally agreed standards for data transmission belatedly make
their way into industrial measurement and control, years behind the mainstream
computer industry, the major players in process control are being forced to
reconsider their business models.

In the past, value could be added by designing and manufacturing proprietary
hardware and software which was unique to that one supplier.  Recently
introduced international data standards have meant that, just like in the world
of personal computers, end users and system integrators are now able to build
their measurement and control systems using best of breed components, all of
which are fully interoperable.  There is little value left in major control
companies making their own components and they are beginning to outsource the
supply of these to specialists like MOST.  This enables them to concentrate on
where they add most value - the use of these components, together with their own
applicational domain knowledge, to supply and commission control and
instrumentation systems which solve the end users' production and efficiency
problems.

Business Performance

The most important event for MOST in 2002 was the launch of its Open Control
Platforms developed as part of the "Shark" project. This was completed to plan
in early May and has given MOST a full range of control products covering
discrete control, regulatory control and hybrid control (a combination of
discrete and regulatory control). These platforms also include tightly
integrated I/O and embedded control and configuration software. "Shark" products
were launched initially in the US and later in the year in Asia-Pacific and EMEA
and, despite the poor economic conditions, were able to achieve revenues in
excess of $1 million by the year-end, in line with our expectations.

Standard Automation's traditional software reselling business is focused on the
US and was affected by the downturn in the domestic US economy. Software related
sales were 5.7% below 2001 at #13.2 million.

MOST's oldest I/O product, Transport I/O, acquired as part of the Transition
Technology acquisition in 1994, has been experiencing declining sales for some
time due to the age of the technology but it had a boost in 2001 due to one
particularly large contract. Unsurprisingly, it fell back in 2002 to #0.9
million (down by 49% on 2001).

Overall MOST sales were #15.6m in 2002 compared with #16.9m in 2001.
Geographically, the Americas still dominate MOST's sales, accounting for 94% of
the total, but since the launch of the "Shark" project we have seen pleasing
early sales in both EMEA and Asia-Pacific.

Product Development

The development programme was dominated by the completion of the "Shark" project
in May.  Investment in design and development during the year was #3.3million,
representing 20% of sales.  At the end of the year, and as a result of the "
Shark" completion and the July restructuring, the annualised exit rate of
investment was down to #2.7 million.  Ongoing development will concentrate on
completing the range of I/O interfaces and undertaking the engineering work
associated with the integration of our I/O and control platforms into the
products and systems of our OEM partners. The major investment in product
development at Standard Automation has been the complete rewrite of their EFM
Manager, SCADA management software, to take advantage of recent advances in
Microsoft Windows technology. This is expected to be launched before the half
year.

Outlook for 2003

The main areas of focus for the control and I/O platforms in 2003 are as
follows:

*   Continue to attract OEM partners from the DCS and PLC community
*   Work with HMI software companies to integrate our Control and I/O platforms
*   Identify and accredit System Integrators in our targeted international 
    markets
*   Train sales teams and build support infrastructure in targeted international 
    markets

Early indications suggest a good level of acceptance by OEM customers as well as
enthusiasm from the system integrator community. We believe that this bodes well
for the MOST business in 2003.  It should, however, be remembered that new OEM
business takes some time to manifest itself in sales revenue due to the
necessary period of engineering integration and the fact that newly trained
sales teams also take a while to develop a productive sales network in their
territories.

After the sharp decline in Transport and I/O 95 there is some evidence that 2003
may see a small respite in the decline due to some specific project activities.
It should be remembered, however, that these are mature products and will be
expected to decline further over the medium term.

Standard Automation's software reselling business in the US is affected by the
general economic conditions and investment levels in its major markets.  In the
early part of 2003 the US economy has continued to be weak and we have not yet
seen any material improvement in the level of investment in our target markets.
However, Standard Automation's Wonderware reseller team has fared better than
most similar resellers in this market over the last year and we are confident
that this will still be the case in 2003, irrespective of economic and
investment conditions.

We remain confident that our strategy across all of our business units is the
right one for the future in response to the changing technologies in our core
markets.  We remain cautious in the current year in the light of current
political and economic uncertainties but we are nonetheless excited by the
opportunities for growth that are already evident.

Glossary of terms

MOST  MTL's new business unit focussed on the new Open Control and I/O business.
The name MOST is an acronym from MTL Open System Technologies.  MOST products
include the MTL 8000 I/O system (with the exception of the hazardous area
variant which is a product of our Hazardous Area business unit), the control and
workbench software from Standard Automation (acquired in November 2000) and the
sales associated with Standard Automation's third party software reselling
activities (predominantly Wonderware - see below)

Point to Point wiring.  The traditional method of wiring up electrical
instrumentation and control equipment on process plant. The measurement and
control information is carried by an analogue electrical current signal and most
equipment is connected by two wires which carry both the 24 volt power supply to
the equipment and the signal itself.  These cables can be quite long (several
hundred metres).

I/O.  Literally "Input/Output".  These are the electronics devices which convert
the analogue signal to and from the actuators and sensors on a process plant
into the digital form which can be handled by the computers needed to control
the plant.  They have traditionally been located in the centralised control room
and wired out to the sensors and actuators by "point-to point" wiring.

DCS  Distributed Control Systems.  Sophisticated computer based control systems
used uniquely in the process industries. Very robust and designed for ultra
safe, ultra reliable 24/7 operation in applications where the consequences of
failure can be severe.  Control of the type which uses DCS is sometimes referred
to as Regulatory Control.

PLC Programmable Logic Controllers.  Less sophisticated control systems aimed at
the factory automation industry.  Less expensive than DCS systems but also less
high integrity.  Control of the type that uses PLCs is sometimes referred to as
Discrete Control.

Hybrid Control.  A combination of DCS and PLC features in a control system.
Often employed in industries such as Pharmaceuticals, Food and Beverage, Cement,
Water and Waste etc.

Wonderware  The registered trademark of the Wonderware Corporation, part of the
Invensys Group. Makers of the one of the world's leading Human Machine Interface
(HMI) software packages - the software package which provides the plant operator
with a graphical indication of the status of the process being controlled.

SCADA.  Supervisory Control and Data Acquisition.  Control and monitoring
systems often associated with the use of Human Machine interfaces and the use of
data transmitted from sensors and actuators over medium to long distances using
remote telemetry.




GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2002
                                                                  Non-    Exceptional
                                                            Exceptional       (note 2)
                                                                  2002           2002       2002           2001
                                                 Notes           #'000          #'000      #'000          #'000

   Turnover                                                     60,129              -     60,129         63,406
   Cost of sales                                               (31,662)          (259)   (31,921)       (31,630)
   
                                                                ---------------------   --------         -------
   Gross profit                                                 28,467           (259)    28,208         31,776

   Selling and marketing costs                                 (13,815)          (275)   (14,090)       (16,038)
   Administration expenses                                      (6,396)           (77)    (6,473)        (6,620)
   Design and development costs                                 (5,332)          (355)    (5,687)        (6,178)
   
                                                               -----------------------   --------       -------
   Profit on ordinary activities before finance
   charges, being operating profit                              2,924           (966)     1,958          2,940

                                                               ---------------------
   Finance charges (net)                                                                   (300)          (535)
                                                                                         --------       -------
   Profit on ordinary activities before taxation                                          1,658          2,405

   Tax on profit on ordinary activities                                                    (615)          (893)
   
                                                                                        --------        -------
   Profit on ordinary activities after taxation                                           1,043          1,512
   Dividends paid and proposed                         3                                 (1,130)        (1,132)
   
                                                                                        --------        -------
   Retained (loss)/ profit for the financial year                                           (87)           380
                                                                                        --------        -------
   

   Earnings per
   share
   Basic                                                4                                   5.5p        8.0   p
   Diluted                                              4                                   5.5p        8.0   p
                                                                                         --------       -------
   All activities derive from continuing operations.


GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2002
                                                            2002         2001
                                                           #'000        #'000

Profit for the financial year                              1,043        1,512

Gain/(loss) on foreign currency translation                  127         (352)

Unrealised loss on revaluation of investment property        (89)           -
                                                           -------       ------
Total recognised gains and losses relating to the year     1,081        1,160
                                                           -------       ------

The accompanying notes are an integral part of the Group profit and loss account
and the Group statement of total recognised gains and losses




BALANCE SHEETS
as at 31 December 2002
                                            Group                 Company
                                         2002         2001      2002      2001
                                        #'000        #'000     #'000     #'000

    Fixed assets
    Goodwill                           14,276       15,371         -         -
    Tangible assets                     7,903        8,931     3,617     3,737
    Investments                             -            -     4,378     4,386
                                      ---------    ---------  --------  --------
                                       22,179       24,302     7,995     8,123
                                      ---------    ---------  --------  --------

    Current assets
    Stocks                             10,511       11,670         -         -
    Debtors                            14,746       15,523     9,684    11,925
    Cash at bank and in hand            2,690        1,567         -         -
                                      ---------    ---------  --------  --------
                                       27,947       28,760     9,684    11,925

    Creditors : amounts falling
    due within one year               (10,316)     (11,542)   (3,499)   (4,423)
                                      ---------    ---------  --------  --------
    Net current assets                 17,631       17,218     6,185     7,502
                                      ---------    ---------  --------  --------

    Total assets less
    current liabilities                39,810       41,520    14,180    15,625

    Creditors : amounts falling
    due after one year                 (7,026)      (8,269)   (5,625)   (6,849)

    Provision for liabilities          (2,756)      (3,184)      (33)        -
    and charges
                                      ---------    ---------  --------  --------
    Net assets                         30,028       30,067     8,522     8,776
                                      ---------    ---------  --------  --------

    Capital and reserves
    Called up share capital             1,884        1,883     1,884     1,883
    Share premium                       2,559        2,550     2,559     2,550
    Revaluation reserve                    81          170        81       170
    Foreign currency investment
    translation reserve                   (60)        (187)        -         -
    Profit and loss account            25,564       25,651     3,998     4,173
                                      ---------    ---------  --------  --------
    Equity shareholders' funds         30,028       30,067     8,522     8,776
                                      ---------    ---------  --------  --------



GROUP CASH FLOW STATEMENT
for the year ended 31 December 2002
                                                             2002         2001
                                                 Notes      #'000        #'000

Net cash inflow from operating activities             5     4,529        4,703

Returns on investments and servicing of
finance
                                                            -------       ------
Interest received                                             107          154
Interest paid                                                (413)        (749)
Interest element of finance lease rental                       (4)         (11)
payments                                                    -------       ------
Net cash outflow from returns on
investments and servicing of finance                         (310)        (606)

Taxation
                                                            -------       ------
UK corporation tax paid                                      (305)        (541)
Overseas tax paid                                            (547)        (315)
                                                            -------       ------

Tax paid                                                     (852)        (856)

Capital expenditure and financial investment
                                                            -------       ------
Purchase of tangible fixed assets                            (648)        (992)
Sale of tangible fixed assets                                 165          207
                                                            -------       ------

Net cash outflow from capital expenditure
and financial investment                                     (483)        (785)

Acquisitions                                                  (65)        (639)

Equity dividends paid                                      (1,130)      (1,129)
                                                            -------       ------

Cash inflow before financing                                1,689          688

Financing
                                                            -------       ------
Issue of shares                                                10          226
Loan repayment                                               (512)        (697)
Net payments in respect of finance leases                     (37)         (97)
                                                            -------       ------

Net cash outflow from financing                              (539)        (568)
                                                            -------       ------
Increase in cash in year                                    1,150          120
                                                            -------       ------







RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

for the year ended 31 December 2002
                                                        2002              2001
                                                       #'000             #'000

Increase in cash in year                               1,150               120
Cash outflow from movement in debt                       512               697
Net payments in respect of finance leases                 37                97
Translation difference                                   587              (136)
                                                       -------           ------
Movement in debt in year                               2,286               778
Net debt at beginning of year                         (7,424)           (8,202)
                                                       -------           ------
Net debt at end of year                               (5,138)           (7,424)
                                                       -------           ------




Notes

  1      The financial information set out in the announcement for the year
         ended 31 December 2002 is unaudited and does not constitute the
         statutory accounts.
         The auditors have not reported on the statutory accounts for the year
         ended 31 December 2002, nor have any such statutory accounts been
         delivered to the Registrar of Companies.
         The financial information for the year ended 31 December 2001 has
         been extracted from the full report and statutory accounts for that
         year which have been filed with the Registrar of Companies. The
         report of the auditors on these statutory accounts was unqualified.
         The preliminary results have been prepared using accounting policies
         consistent with those adopted in the statutory accounts for the year
         ended 31 December 2001 except that the Group has implemented
         Financial Reporting Standard 19
         Deferred Tax, which requires deferred tax to be provided on a full
         provision basis rather than on the liability method basis required by
         SSAP 15. No prior year adjustment has resulted from the adoption of
         Financial Reporting Standard
         19 Deferred Tax.

  2      The exceptional item relates to a reorganisation of the Group's
         businesses which resulted in staff reductions in the UK, US, Europe
         and Asia.

  3      The directors recommend the payment of a final dividend of 3.5p net
         per share payable on 14 May 2003 to shareholders registered on 11
         April 2003. When added to the interim dividend of 2.5p already paid,
         this makes a total dividend for the year of 6.0p per share (2001 :
         6.0p per share).

  4      The calculation of basic earnings per share is based on Group profit
         for the financial year of #1,043,000 (2001 - #1,512,000) and on the
         weighted average number of ordinary shares outstanding during the
         year of 18,836,868 (2001 - 18,804,055). The calculation of the
         diluted earnings per share is based on the same group profit but the
         weighted average number of ordinary shares is increased by the
         relevant number of outstanding options to give a total diluted share
         base for 2002 of 18,854,095 (2001 - 18,932,544).

   5     Net cash inflow from operating activities           2002       2001
                                                            #'000      #'000

         Operating profit                                   1,958      2,940
         Depreciation and amortisation                      2,453      2,495
         Profit on sale of fixed assets                       (17)       (10)
         Decrease/(increase) in stocks                        902     (1,451)
         Decrease/(increase) in debtors                     1,276     (1,922)
         (Decrease)/increase in creditors and              (2,043)     2,651
         provisions
                                                         ---------   --------
         Net cash inflow from continuing operating          4,529      4,703
         activities                                      ---------   --------

  6      These preliminary results were approved by the board on 14 March
         2003. The audit report for 2002 is yet to be signed.

  7      A copy of the full annual report and accounts will be sent to
         shareholders in April, and will also be available from the company's
         registered office.




END







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