Oxford Instruments plc
Half Year Report September 2011

Oxford Instruments plc
Summary of Half Year Results

Orders
Revenue
Adjusted operating profit
Adjusted profit before tax
Net cash/(borrowing)
Shareholders’ equity

2011
£m
174.8
159.1
18.9
18.7
11.9
122.8

2010
£m
141.3
113.2
11.9
10.6
(3.9)
59.6

Adjusted basic earnings
Basic earnings
Proposed dividends
Net assets

2011
Pence
per share
28.2
15.6
2.77
222.3

2010
pence
per share
17.4
20.7
2.52
119.6

1,896

1,506

Employees at half year end

About Us
Oxford Instruments is a leading provider of high technology tools and systems for research and industry. It designs andmanufactures equipment that can fabricate, analyse and manipulate matter at the atomic level. Nanotechnology
applications are today being used to address some of the world’s most pressing problems across a broad range ofindustries and Oxford Instruments is equipping those industries, worldwide.
The global challenges we face today cannot be addressed without a partnership between the commercial and theacademic sectors. Companies like Oxford Instruments form the bridge between science and the consumer. Science iscapable of coming up with the solutions to many of society’s problems and Oxford Instruments turns that smart science
into commercially successful products.
• Oxford Instruments’ X-ray Fluorescence (XRF) and Optical Emissions Spectroscopy (OES) analysers are being
used for quality control and environmental monitoring applications across a wide range of industries. They
detect hazardous substances in materials, metals, soil, petrochemicals and consumer goods.
• Benchtop Nuclear Magnetic Resonance (NMR) and XRF analysers are being used to analyse fat in foods,
nutrients in rice and oil in seeds.
• The search for a sustainable, practical, renewable source of energy is one of the major global issues of the 21stCentury. The multinational ITER programme seeks to find a solution by harnessing fusion power. Oxford
Instruments supplies the high performance superconducting wire for the vast electromagnet that will lie at theheart of the ITER facility.
• Oxford Instruments is providing plasma etch and deposition tools to the developers of high brightness lightemitting diodes and photovoltaic devices. They are seeking to produce carbon efficient lighting and costeffective solutions for turning sunlight into electricity.
• Next generation systems for the analysis of materials on electron microscopes are being used in thedevelopment of new, stronger and safer materials and pharmaceuticals and forensic science.
• Oxford Instruments’ innovative range of liquid helium free cryogenic systems are used in fundamental physics
research into cutting edge applications, such as quantum information processing, which is widely predicted tobe the basis of a new generation of ultra fast computers required for applications such as financial security,
climate modelling and drug development.

© Oxford Instruments plc

Page 1

Half Year Statement
The Group delivered an excellent first half result driven by new product introductions, and a market environment which
has remained robust for our products. Revenue grew by 41% to £159 million (2010: £113 million); excluding acquisitions,organic growth was 30%. Adjusted profit before tax grew by 76% to £18.7 million (2010: £10.6 million). In the half year
our adjusted operating margin continued to increase, rising to 11.9% from 10.5% in the prior year in line with our 14
Cubed plan to achieve operating margins of 14% by 2014. In September 2011, the Group was admitted to the FTSE250
index.
Group order intake increased to £175 million, a rise of 24%, and the order pipeline and other forward looking indicators
remain strong. Orders in China grew particularly strongly, up 53%. In recognition of the potential of the India market wehave now appointed a senior executive as a Country Manager for that region.
Both our research and industrial markets continue to be strong. We were able to maintain pricing in the period,
supported by the strength of our brand and the quality of our innovative technology. Our strong organic growth continues
to be supported by our focused R&D programme. In the half year, we increased our R&D cash spend by 42% to £10.5
million, reflecting the opportunities we see to increase market share through the introduction of new technologies.
We completed two acquisitions in the first half of the year financed through a placing of ordinary shares. Omicron, basedin Frankfurt, which employs 206 people in Germany, the UK, USA, Japan and France, designs and produces advanced
microscopes and chemical analysis instruments for nanotechnology research. Omniprobe, a US company employing 22
people based in Dallas, designs and produces tools giving customers nano-scale laboratory capabilities within electron
microscopes. These businesses are integrating well into the Group and are performing to plan. After the end of theperiod we acquired Platinum Medical Imaging, a US company providing high quality parts and services for MRI and CT
medical imaging instruments. Further commentary is provided in our Service sector review below.
We are now 7 months into our 14 Cubed growth plan to deliver an average compound annual growth rate in sales of
14% and a net return on sales of 14% by 2014. Progress to date is in line with meeting these objectives.
The Directors declare an interim dividend of 2.772 pence, 10% higher than the previous year, payable on 10 April 2012
to shareholders who are on the register on 9 March 2012.

Nanotechnology Tools Sector
Revenue
Operating profit

2011
£m
70.4
7.3

2010
£m
49.2
5.8

Our Nanotechnology Tools sector represents 44% of Group revenue. It produces high performance instruments andsystems for customers working in scientific research and with advanced industrial processes. The sector comprises fourbusinesses; NanoAnalysis, Plasma Technology, NanoScience and the recently acquired Omicron NanoTechnology.
This business continues to show solid growth, despite a reduction in research demand in Japan following the earthquake
in March 2011. With the exception of Japan, which is expected to return to growth in research spending in 2012, wehave seen no evidence of a reduction in research funding from governments world-wide.
In April 2011, we launched a new material characterisation system, Aztec®, comprising latest generation Nanoanalysis
detector hardware and multi-tasking software. Aztec orders have shown strong growth and exceeded expectations.
Over-capacity in the high brightness LED (HBLED) market has led to a softening in demand for our HBLED fabrication
tools but this was more than offset by the growth in orders for other Plasma Technology products. In particular, we haveseen growth in the research market for next generation solar cells resulting in significant orders in the USA and Europe,and in the markets for our MEMS (Micro Electro Mechanical System) tools.
Omicron NanoTechnology was acquired in June this year and enables us to offer our customers in the Nanotechnology
Tools sector a broader range of tools and solutions. Omicron supplies sophisticated, multi-technique systems that
includes Scanning Probe Microscopy (SPM), Electron Spectroscopy and Ultra High Vacuum solutions for customers
working at the cutting-edge of physics research. This business is performing as expected.
The acquisition of Omniprobe has enhanced our product range by offering innovative nano-manipulation tools for sample
preparation on electron and ion beam microscopes. Omniprobe has contributed as expected to the Group.

© Oxford Instruments plc

Page 2

Half Year Statement (continued)
Industrial Products Sector
Revenue
Operating profit

2011
£m
64.7
6.6

2010
£m
44.3
2.0

The Industrial Products sector represents 40% of Group revenue. It comprises the Industrial Analysis, Magnetic
Resonance and Superconducting Wire businesses. With effect from this half year, we have reported our Austin
Scientific business in this sector rather than the Service sector due to the growth in orders for industrial products. This
sector showed good growth and a marked improvement in profitability.
We saw strong growth for handheld X-ray Fluorescence products and Optical Emission metal analysers. We launched a
new portable analyser which has generated considerable interest from both new and existing customers and demand for
our Industrial Analysis products in general remains strong. Emerging markets, particularly India, continue to offer an
important growth opportunity for this business. On 20 October 2011, we rationalised the Industrial Analysis productoffering by disposing of a non-core product line that we produced for a single customer, to that customer. The
increasing demand for next generation, higher magnetic field scanners continues to drive growth in our Superconducting
Wire business. Deliveries to the international ITER energy programme remain on track. In the period we received afurther order for wire from Fusion for Energy, the European procurement Agency for ITER. The Austin Scientificbusiness won a substantial order for cryogenic equipment used in advanced materials processing and shipments havecommenced.

Service Sector
Revenue
Operating profit

2011
£m
24.9
5.0

2010
£m
20.9
4.1

Our Service business represents 16% of Group revenue. It comprises activities in the United States and Japan servicing
MRI machines, together with the aftermarket revenues associated with our Nanotechnology Tools and Industrial
Products sectors.
The aftermarket revenues associated with our two manufacturing sectors are split into three main revenue streams:
service contracts (where customers purchase unlimited support for a fixed period); billable service (where customers arebilled for time and materials); and the sale of spare parts and consumables. All three revenue streams are performing
well with particular growth coming from contract sales, especially in the USA. We are also seeing increasing service
revenues from Asia which traditionally has been slow to accept fixed price, fixed term service contracts.
On 4 November 2011 we completed the acquisition of Platinum Medical Imaging, our first acquisition within the Service
sector. Platinum is an established US company with 33 staff across two sites in Florida and California providing highquality parts and services for MRI (Magnetic Resonance Imaging) and CT (Computed Tomography) medical imaging
instruments. There is a growing opportunity in this third party service market in the USA due to healthcare reforms
encouraging medical imaging facilities to move to more cost effective service providers. The combination of Platinum
with Oxford Instruments’ existing MRI Service business in North America significantly strengthens the Group’s Service
Sector by providing broader service offerings and the opportunity for the further development of global service. We
expect the acquisition to be earnings enhancing in the current year.
Financial Review
Orders of £174.8 million were £33.5 million ahead of the same period last year. Excluding the contribution from the two
acquisitions made in June, organic order growth was £21.4 million or 15.1%.
Revenues in the half year grew by 40.5% (£45.9 million) to £159.1 million. Revenues from acquisitions in the period
were £13.3 million, adverse foreign currency exchange rate movements reduced sales by £2.6 million while increasing
copper prices increased sales by £1.3 million (there was no impact on profits as movements in the price of copper are
passed on to our customers). Organic volume growth was 30.0%.
In our Nanotechnology Tools sector, sales grew by £21.2 million. Both of the acquisitions made in the half year are inthis sector and sales (excluding service) contributed £12.2 million of the growth. Underlying organic growth was 18.3%
with revenue growth in all businesses.
The Industrial Products sector grew by 46.0%, helped by a full half year of shipments of superconducting wire to the
ITER programme, which had only begun towards the end of the prior period, and also by the contract won by our Austin
Scientific business. Austin Scientific has previously been reported as part of our Service sector but due to its strong
growth in physical product sales, it is now included in the Industrial Products sector. In line with the other businesses, its
service revenues will continue to be reported in the Service sector.

© Oxford Instruments plc

Page 3

Half Year Statement (continued)
Service sector revenues grew by 19.1% helped by the increase in the installed service base over recent years andinternal initiatives to grow sales of fixed price, fixed term service contracts. Excluding the service revenue from theacquisitions, organic growth was 13.9%.
The particularly strong performance of Superconducting Wire and Austin Scientific, two of our lower margins businesses,
led to an adverse mix variance resulting in a drop in average adjusted Group gross margins from 43.1% to 41.8%.
Constant currency operating expenses, excluding acquisitions, increased by £6.6 million, with the majority of theincrease relating to R&D costs. Foreign exchange effects added £0.4 million, while the operating costs of theacquisitions added £3.9 million, resulting in a net increase of £10.9 million in reported operating expenses.
Adjusted operating profit increased by £7.0 million to £18.9 million, giving an adjusted operating profit margin of 11.9%(2010: 10.5%). Net bank interest reduced by £0.3 million to £0.5 million, and net interest on the pension fund changed
from a charge of £0.5 million to a credit of £0.3 million due to the reduced deficit at the end of March. As a result
adjusted profit before tax rose £8.1 million to £18.7 million.
The ability to utilise brought forward tax losses in the UK has kept the adjusted tax rate at 20% (2010: 20%) which leads
to adjusted earnings per share (EPS) of 28.2 pence, an increase of 10.8 pence. Reported EPS fell by 5.1 pence to 15.6
pence due to the items detailed in note 2, primarily acquisition costs, amortisation of acquired intangible assets and theutilisation of the large deferred tax asset that was excluded from adjusted earnings in the prior year.
At the period end net cash was £11.9 million (31 March 2011: £13.1 million, 2010: £3.9 million debt). Cash outflow in the
period was £1.2 million (2010: £6.5 million inflow). Acquisitions in the period accounted for an outflow of £40.7 million
while an equity issue of 9.9% of the issued share capital of the Group in June 2011 raised £37.6 million net of fees. The
Group has a committed £50 million revolving credit facility with a club of banks, extendable to £70 million by mutual
consent, which expires in December 2014.
As calculated under IAS19, the defined benefit pension deficit has increased by £18.0 million to £29.7 million since 31
March 2011. Assets have fallen by 3% to £167.4 million while liabilities have increased by 7% to £197.1 million due
mainly to the reduction in corporate bond yields used to discount liabilities.
Acquisitions and Disposals
On 13 June 2011 the Group made two acquisitions; Omicron NanoTechnology GmbH for £28.3 million and Omniprobe
Inc. for £12.3 million. The acquisitions contributed revenues of £13.3 million and adjusted operating profit of £1.9 million
to the Group’s result for the half year.
After the period end, on 20 October the Group disposed of a product line for consideration of £8.1 million, £7.1 million
was paid on completion, with a further £1.0 million receivable on the completion of a Transitional Services Agreement.
On 3 November the Group acquired Platinum Medical Imaging LLC for an initial consideration of US$18 million with acontingent element of up to US$37 million payable over three years dependent on performance over that period.
PeopleWe are pleased to welcome further talented people to Oxford Instruments, who join us from newly acquired businesses
and as a result of our growth. Our wholehearted thanks go to all our people for their commitment, energy and hard work.
Outlook
We have delivered a strong result in the first half in line with our 14 Cubed objectives. Our broad spread of geographies
and technologies, and our strong pipeline of new products should help us to remain resilient in the event of a global
economic downturn. We are continuing our active pursuit of acquisitions that have the potential to enhance shareholder
value and add to our range of technical capabilities.
Trading since the period end has remained strong and the Board believes that performance in the second half of theyear is likely to exceed that of the first half.
The Board remains confident in the continued growth prospects of Oxford Instruments and the Group’s ability to deliver
sustained shareholder value.

Nigel Keen
Chairman
15 November 2011

© Oxford Instruments plc

Jonathan Flint
Chief Executive

Page 4

Condensed Consolidated Statement of Income
Half year ended 30 September 2011 – unaudited

Half Year to 30 Sept 2011
BeforeAdjustingTotal
adjustingitems*
items*
Revenue
Cost of sales
Gross profit
Research anddevelopment
Selling and marketing
Administration andshared services
Foreign exchange
Operating profit

Notes
3

159.1
(92.6)
66.5

(1.0)
(1.0)

159.1
(93.6)
65.5

113.2(64.4)
48.8

-

113.2
(64.4)
48.8(11.1)(22.3)-(11.1)(22.3)(6.9)(19.1)-(6.9)(19.1)(14.4)
0.2
18.9

(5.6)
(6.6)

(20.0)
0.2
12.3(10.9)
11.9

1.4
1.4

(9.5)
13.3

5.4
5.4

0.4
0.4

5.4
0.4
5.8

4.8
0.1
4.9

1.2
1.2

4.8
1.3
6.1

(5.1)

-

(5.1)

(5.3)

-

(5.3)

(0.5)
(5.6)

-

(0.5)
(5.6)

(0.9)
(6.2)

-

(0.9)
(6.2)

3

18.7

(6.2)

12.5

10.6

2.6

13.2

6

(3.8)

(0.4)

(4.2)

(2.1)

(0.9)

(3.0)

14.9

(6.6)

8.3

8.5

1.7

10.2

pence

pence

pence

pence

7

28.2

15.6

17.4

20.7

7

27.4

15.1

17.1

20.3

4

Expected return on
pension scheme assets
Other financial income
Financial income

Interest charge on
pension scheme
liabilities
Other financial
expenditure
Financial expenditure
Profit before income
tax
Income tax(expense)/credit
Profit for the period
attributable to equity
shareholders of theparentEarnings per share
Basic earnings per
share
Diluted earnings per
share
Dividends per share
Dividends paid
Dividends proposed

Half Year to 30 Sept 2010
Before Adjusting
Total
adjustingitems*
items*

8
8

2.52
2.77

2.40
2.52

* Adjusting items comprise pension scheme curtailment gains, shareholder earnout no longer required, impairments, amortisation of acquired intangibles, reversal of acquisition
related fair value adjustments to inventory, acquisition costs and mark to market gains or losses in respect of certain derivatives and the related amounts of taxation. They also
include the utilisation of the one-off recognition of a deferred tax asset in 2011. See note 2.

© Oxford Instruments plc

Page 5

Condensed Consolidated Statement of Income
Half year ended 30 September 2011 – unaudited

Before adjusting
items*
Revenue
Cost of sales
Gross profit

Notes
3

Year to 31 March 2011
AdjustingTotal
items*

262.3(152.8)
109.5

-

262.3
(152.2)109.5(17.6)(39.9)-(17.6)(39.9)(23.3)
(0.6)
28.1

(0.6)
(0.6)

(23.9)
(0.6)
27.5

9.9
9.9

1.1
1.1

9.9
1.1
11.0

Interest charge on pension
scheme liabilities
Other financial expenditure
Financial expenditure(10.6)-(10.6)(1.2)(11.8)-(1.2)(11.8)

Profit before income tax

26.2

0.5

26.7

(5.7)

11.2

5.5

20.5

11.7

32.2

Research and development
Selling and marketing
Administration and sharedservices
Foreign exchange
Operating profit

4

Expected return on pension
scheme assets
Other financial income
Financial income

Income tax (expense)/credit
Profit for the period
attributable to equity
shareholders of theparent

6

pence

pence

Earnings per share
Basic earnings per share

7

41.5

65.3

Diluted earnings per share

7

40.4

63.6

Dividends per share
Dividends paid
Dividends proposed

8
8

8.40
9.00

* Adjusting items comprise pension scheme curtailment gains, shareholder earnout no longer required, impairments, amortisation of acquired intangibles, reversal of acquisition
related fair value adjustments to inventory, acquisition costs and mark to market gains or losses in respect of certain derivatives and the related amounts of taxation. They also
include the utilisation of the one-off recognition of a deferred tax asset in 2011. See note 2.

© Oxford Instruments plc

Page 6

Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2011 - unaudited

Profit for the period

Half year to
30 Sept
2011
£m
8.3

Half year to
30 Sept
2010
£m
10.2

Year to31 March
2011
£m
32.2

Other comprehensive (expense)/income
Foreign exchange translation differences
Actuarial (loss)/gain in respect of post retirement benefits
Net (loss)/gain on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled
Tax on items recognised directly in equity
Tax recognised in respect of share options
Total other comprehensive (expense)/income

0.5(20.4)

(1.1)
(1.6)

(0.9)
14.4

(1.2)
5.5
(15.6)

0.1
0.5
(2.1)

0.3
(4.6)
2.7
11.9

Total comprehensive (expense)/income for the period
attributable to equity shareholders of the parent

(7.3)

8.1

44.1

© Oxford Instruments plc

Page 7

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2011 - unaudited

Balance at 1 April 2011
Total comprehensive income/(expense)
attributable to equity shareholders of theparent-Profit-Other comprehensive income
Transactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options- Proceeds from shares issued- Dividends paid
Total contributions by and distributions toequity shareholders
Balance at 30 September 2011

Balance at 1 April 2010
Total comprehensive income/(expense)
attributable to equity shareholders of theparent-Profit for the period-Other comprehensive income
Transactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options- Proceeds from shares issued- Dividends paid
Total contributions by and distributions toequity shareholders
Balance at 30 September 2010

Balance at 1 April 2010
Total comprehensive income/(expense)
attributable to equity shareholders of theparent-Profit for the period-Other comprehensive income
Transactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options- Proceeds from shares issued- Dividends paid
Total contributions by and distributions toequity shareholders
Balance at 31 March 2011

© Oxford Instruments plc

Sharecapital
£m
2.5

Share
premium
account
£m
22.5

Other
reserves£m
0.4

Foreignexchangetranslation
reserve
£m
3.2

-

-

(0.8)

0.3
-

37.3
-

0.3
2.8

37.3
59.8

Share
capital
£m
2.5

Share
premium
account£m
21.6

Retainedearnings
£m
64.9

Total
£m
93.5

0.5

8.3
(15.3)

8.3(15.6)

-

-

0.3
(1.3)

0.3
37.6
(1.3)

(0.4)

3.7

(1.0)
56.9

36.6
122.8

Other
reserves£m
0.2

Foreignexchangetranslation
reserve£m
4.1

Retainedearnings
£m
23.8

Total
£m
52.2

-

-

-

0.1

(1.1)

10.2
(1.1)

10.2
(2.1)

-

0.3
-

-

-

0.2
(1.2)

0.2
0.3
(1.2)

2.5

0.3
21.9

0.3

3.0

(1.0)
31.9

(0.7)
59.6

Share
capital
£m
2.5

Share
premium
account
£m
21.6

Other
reserves£m
0.2

Foreignexchangetranslation
reserve£m
4.1

Retainedearnings
£m
23.8

Total
£m
52.2

-

-

0.2

(0.9)

32.2
12.6

32.2
11.9

-

0.9
-

-

-

0.4
(4.1)

0.4
0.9
(4.1)

2.5

0.9
22.5

0.4

3.2

(3.7)
64.9

(2.8)
93.5

Page 8

Condensed Consolidated Statement of Financial Position
As at 30 September 2011 - unaudited
As at
30 Sept
2011
£m

As at
30 Sept
2010
£m

As at
31 March
2011
£m

28.2
75.1
21.0
124.3

22.2
46.1
12.3
80.6

23.6
41.6
17.4
82.6

65.3
68.6
1.4
2.1
19.5
156.9

48.1
48.9
1.1
1.3
17.2
116.6

46.6
52.5
1.3
1.0
24.5
125.9

281.2

197.2

208.5

2.8
59.8
(0.4)
3.7
56.9
122.8

2.5
21.9
0.3
3.0
31.9
59.6

2.5
22.5
0.4
3.2
64.9
93.5

7.0
0.7
29.7
10.7
48.1

19.6
0.8
29.9
6.1
56.4

10.5
0.1
11.7
4.1
26.4

0.1
0.5
96.5
3.4
2.6
7.2
110.3

0.1
1.4
68.9
4.3
1.7
4.8
81.2

0.1
0.8
76.5
3.4
1.1
6.7
88.6

Total liabilities

158.4

137.6

115.0

Total liabilities and equity

281.2

197.2

208.5

AssetsNon-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents

Total assets
EquityCapital and reserves attributable to theCompany’s equity shareholders
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings

Liabilities
Non-current liabilities
Bank loans
Other payables
Retirement benefit obligations
Deferred tax liabilities

Current liabilities
Bank loans
Bank overdrafts
Trade and other payables
Current income tax payables
Derivative financial instruments
Provisions© Oxford Instruments plc

Page 9

Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2011 - unaudited

Profit for the period
Adjustments for:
Income tax expense/(credit)
Net financial (income)/expense
Curtailment gains
Shareholder earnout no longer required
Impairment
Reversal of acquisition related fair value adjustments
Acquisition related costs
Amortisation of acquired intangibles
Depreciation of property, plant and equipment
Amortisation and impairment of capitalised development costs
Earnings before interest, tax, depreciation andamortisation
Cost of equity settled employee share schemes
Acquisition related costs paid
Cash payments to the pension scheme more than the charge
to operating profit
Operating cash flows before movements in working
capitalIncrease in inventories(Increase)/decrease in receivables(Decrease)/increase in payables and provisions
Increase/(decrease) in customer deposits
Cash generated by operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Repayment of borrowings
Increase in borrowings
Dividends paid
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the period

Half year to
30 Sept
2011
£m
8.3

Half year to
30 Sept
2010
£m
10.2

Year to31 March
2011
£m
32.2

4.2
(0.2)
1.0
0.7
4.9
2.3
2.4

3.0
0.1
(3.8)
0.6
1.8
1.7
2.0

(5.5)
0.8
(4.1)
(0.6)
0.6
4.7
4.0
5.4

23.6
0.3
(0.5)

15.6
0.2
-

37.5
0.4
-

(2.1)

(3.5)

(5.6)

21.3
(4.8)
(7.9)
(2.8)
4.9
10.7
(1.2)
(3.4)
6.1

12.3
(9.7)
11.3
(4.7)
2.9
12.1
(0.4)
(0.7)
11.0

32.3
(8.2)
7.4
8.8
(1.1)
39.2
(0.8)
(3.1)
35.3

(40.7)(2.1)(0.9)(43.7)

0.1
(0.1)
(2.1)
(1.6)
(3.7)

0.1
(0.1)
(5.8)
(3.0)
(8.8)

37.6
(6.0)
2.5
(1.3)
32.8
(4.8)
23.7
0.1
19.0

0.3
(1.2)
(0.9)
6.4
9.3
0.1
15.8

0.9
(19.1)
10.0(4.1)(12.3)
14.2
9.3
0.2
23.7

Reconciliation of changes in cash and cash equivalents to movement in net cash/(borrowing)(Decrease)/Increase in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash
equivalents
Cash outflow from decrease in debt
Cash inflow from increase in debt
Movement in net cash/borrowing in the period
Net cash/(borrowing) at start of the period
Net cash/(borrowing) at the end of the period© Oxford Instruments plc

(4.8)

6.4

14.2

0.1
(4.7)
6.0
(2.5)
(1.2)
13.1
11.9

0.1
6.5
6.5
(10.4)
(3.9)

0.2
14.4
19.1
(10.0)
23.5(10.4)
13.1

Page 10

Notes on the Half Year Financial Statements
Half year ended 30 September 2011 – unaudited

1

BASIS OF PRESENTATION OF ACCOUNTS

Oxford Instruments plc (the Company) is a company incorporated in England and Wales. The condensed consolidated
half year financial statements consolidate the results of the Company and its subsidiaries (together referred to as theGroup). They have been prepared and approved by the Directors in accordance with International Financial ReportingStandard (IFRS) IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information
required for full annual financial statements, and should be read in conjunction with the consolidated financial statementsof the Group for the year ended 31 March 2011.
As required by the Disclosure and Transparency Rules of the Financial Services Authority, the half year financial
information has been prepared applying the accounting policies and presentation that were applied in the preparation of
the Group’s consolidated financial statements for the year ended 31 March 2011, except as noted below. Additional
information has been included in the Condensed Consolidated Statement of Income in the form of an adjusting items
column which in the opinion of the Directors enables the performance of the business to be more clearly seen. The
Austin Scientific business has been moved to the Industrial Products segment (see note 3).
The financial information contained herein is unaudited and does not constitute statutory accounts as defined by Section
435 of the Companies Act 2006. The comparative figures for the financial year ended 31 March 2011 are not thecompany’s statutory accounts for that financial year. Those accounts have been reported on by the company’s auditorsand delivered to the registrar of companies. The report of the auditors was (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 notcontain a statement under section 498 (2) or (3) of the Companies Act 2006.
The condensed consolidated half year financial statements have been prepared on a going concern basis, based on the
Directors’ opinion, after making reasonable enquiries, that the Group has adequate resources to continue in operational
existence for the foreseeable future.
The principal exchange rates used to translate the Group’s overseas results were as follows:
Period end rates

US Dollar
Euro
Yen
Average translation rates
Half year to 30 September 2011
Quarter 1
Quarter 2
Year to 31 March 2011
Quarter 1
Quarter 2
Quarter 3
Quarter 4© Oxford Instruments plc

Half year to
30 Sept
2011
1.56
1.16
120

Half year to
30 Sept
2010
1.58
1.15
131

Year to31 March
2011
1.60
1.13
133

US Dollar

Euro

Yen

1.63
1.60

1.13
1.14

132
125

1.50
1.55
1.57
1.58

1.17
1.20
1.17
1.16

138
133
130
131

Page 11

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2011 – unaudited

2

NON-GAAP MEASURESThe Directors present the following non-GAAP measure as they believe it gives a better indication of the underlying
performance of the business.
RECONCILIATION BETWEEN PROFIT BEFORE INCOME TAX AND ADJUSTED PROFIT

Profit before income tax
Pension scheme curtailment gain
Shareholder earnout no longer required
Reversal of acquisition related fair value adjustments toinventory
Acquisition related costs
Impairment
Amortisation of acquired intangibles
Mark to market gain in respect of derivative financial
instruments
Adjusted profit before income tax
Share of taxation
Adjusted profit

Half year to
30 Sept
2011
£m
12.5
-

Half year to
30 Sept
2010
£m
13.2
(3.8)
-

Year to31 March
2011
£m
26.7
(4.1)
(0.6)

1.0
0.7
4.9

0.6
1.8

0.6
4.7

(0.4)
18.7
(3.8)
14.9

(1.2)
10.6
(2.1)
8.5

(1.1)
26.2
(5.7)
20.5

Further to the acquisitions of Omicron Nanotechnology and Omniprobe announced in June 2011 (see Note 5), the Board
has decided to modify the definition of adjusted profit before tax to exclude the reversal of acquisition-related fair value
adjustments to inventory to provide an adjusted profit measure that will include results from acquired businesses on aconsistent basis over time to assist comparison of performance. Acquisition related costs comprise professional fees
incurred in relation to mergers and acquisitions activity.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition,
they are also measured at fair value. In respect of instruments used to hedge foreign exchange risk and interest raterisk the Group does not take advantage of the hedge accounting rules provided for in IAS 39 since that standard
requires certain stringent criteria to be met in order to hedge account, which, in the particular circumstances of theGroup, are considered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts forthese derivative financial instruments at fair value through profit or loss. Adjusted profit for the year is stated beforechanges in the valuation of these instruments so that the underlying performance of the Group can more clearly be seen.
In calculating the share of tax attributable to adjusted profit before tax in the prior year a one-off recognition of deferred
tax assets relating to the Group’s UK businesses of £11.3m was excluded. At that time the Group announced its
intention to exclude the reversal of this deferred tax from the calculation of the share of tax attributable to adjusted profit
before tax in the years in which it reverses. In the current period deferred tax of £1.8m has reversed and consequently
been excluded from the tax attributable to adjusted profit before tax.
During the prior year, the Group’s defined benefit pension schemes in the UK and US were closed to future accrual. This
gave rise to a curtailment gain under IAS 19 as the majority of active members’ accrued benefits are no longer linked tofuture salary growth.
During the prior year, the Group recognised other operating income of £0.6m in relation to a shareholder earnout
provided at the time of the acquisition of Technologies and Devices Inc. and which is no longer required.
During the prior year, the Group recognised an impairment charge of £0.6m against costs capitalised in relation to theplanned site move of the Plasma Technology business in the UK. This move will now not take place in the form
originally planned.

© Oxford Instruments plc

Page 12

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2011 – unaudited

3

SEGMENT INFORMATIONThe Group has nine operating segments. The operating results of each are regularly reviewed by the Chief Operating
Decision Maker, which is deemed to be the Board of Directors. Discrete financial information is available for eachsegment and used by the Board of Directors for decisions on resource allocation and to assess performance.
These operating segments have been aggregated to the extent that they have similar economic characteristics, with
relevance to products and services, type and class of customer, methods of sale and distribution and the regulatoryenvironment in which they operate. The Group’s internal management structure and financial reporting systems
differentiate the operating segments on the basis of these economic characteristics and accordingly present these as
three separate reportable segments as discussed below.
- The Nanotechnology Tools segment contains a group of businesses supplying similar high performance instruments
and systems, characterised by a high degree of customisation and high unit prices. These are the Group’s highest
technology products and are sold to customers working in scientific research and with advanced industrial processes.
- The Industrial Products segment contains a group of businesses supplying high technology tools and systems, andcomponents manufactured in medium volume for industrial customers.
- The Service segment contains the Group’s service business as well as service revenues from other parts of the Group.
Segment results include items directly attributable to a segment as well as those which can be allocated on a reasonablebasis. Inter-segment pricing is determined on an arm’s length basis.
No asset information is presented below as this information is not allocated to operating segments in reporting to theGroup’s Board of Directors.
Due to strong growth in its physical product sales, the Directors decided during the period that it was no longer
appropriate to regard the Austin Scientific business as a service business. Consequently, it is now included within the
Industrial Products segment and the comparatives have been restated accordingly. In line with the other businesses, its
service revenues will continue to be reported in the Service segment.
Half year to 30 September 2011

External revenue
Inter-segment revenue
Total segment revenue

Nanotechnology
Tools
£m
70.0
0.4
70.4

Industrial
Products
£m
64.2
0.5
64.7

Service
£m
24.9
24.9

Total
£m
159.1

7.3

6.6

5.0

18.9

Nanotechnology
Tools
£m
49.0
0.2
49.2

Industrial
Products
£m
43.3
1.0
44.3

Service
£m
20.9
20.9

Total
£m
113.2

5.8

2.0

4.1

11.9

Segment operating profit
Half year to 30 September 2010 (As restated)

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit© Oxford Instruments plc

Page 13

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2011 – unauditedYear to 31 March 2011 (As restated)

External revenue
Inter-segment revenue
Total segment revenue

Nanotechnology
Tools
£m
121.4
0.4
121.8

Industrial
Products
£m
98.5
2.0
100.5

Service
£m
42.4
0.1
42.5

Total
£m
262.3

14.6

6.1

7.4

28.1

Half year to
30 Sept
2011
£m
18.9
-

Half year to
30 Sept
2010
£m
11.9
3.8
(0.6)

Year to31 March
2011
£m
28.1
0.6
4.1
(0.6)

(1.0)
(0.7)
(4.9)
5.8
(5.6)
12.5

(1.8)
6.1
(6.2)
13.2

(4.7)
11.0
(11.8)
26.7

Half year to
30 Sept
2011£m

Half year to
30 Sept
2010£mYear to31 March
2011
£m

11.1
(0.4)
0.3

6.9
(0.2)
0.5

17.6
(0.6)
2.3

(2.4)
0.9
1.0

(2.0)
1.6
0.6

(5.4)
3.0
1.1

10.5

7.4

18.0

Segment operating profit
Reconciliation of reportable segment profit

Operating profit for reportable segments
Shareholder earn-out no longer required
Curtailment gain
Reorganisation costs and impairment
Unwinding of acquisition related fair value adjustments toinventory
Acquisition related costs
Amortisation of acquired intangibles
Financial income
Financial expenditure
Profit before income tax

4

RESEARCH AND DEVELOPMENT

Total research and development spend by the Group is as follows:

Research and development expense charged to theconsolidated statement of income
Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
Less: amortisation and impairment of R&D costs previously
capitalised as intangibles
Add: amounts capitalised as intangible assets
Add: amounts expensed within cost of sales
Total cash spent on research and development during theperiod© Oxford Instruments plc

Page 14

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2011 – unaudited

5

ACQUISITIONS

Omicron NanoTechnology GmbHOn 13 June 2011 the Group acquired 100% of the share capital of Omicron NanoTechnology GmbH. Omicron
NanoTechnology GmbH specialises in the manufacture of very high end microscopes for nanotechnology research andis headquartered in Taunusstein, Germany. It has a manufacturing facility in East Grinstead, UK and sales offices in the
US, France and Japan. The book and provisional fair value of the assets and liabilities acquired is given in the tablebelow. Provisional values have been used because the initial accounting is incomplete at the date of this report. The
business has been integrated into the Nanotechnology Tools segment.

Book value

Intangible Fixed Assets
Tangible Fixed Assets
Inventories
Trade and other receivables
Trade and other payables
Customer deposits
Deferred tax liabilities
Cash
Net assets acquired
Goodwill
Total consideration
Cash acquired
Net cash outflow relating to the acquisition

£m
6.2
14.1
7.2
(6.8)
(10.5)
1.4
11.6

Provisional
adjustments
£m
27.8
(1.7)
(0.5)
(0.5)
(8.0)
17.1

Provisional
fair value
£m
27.8
4.5
13.6
6.7
(6.8)
(10.5)
(8.0)
1.4
28.7
1.0
29.7
(1.4)
28.3

The goodwill arising is considered to represent the value of the acquired workforce.
Omniprobe, Inc.
On 13 June 2011 the Group acquired 100% of the share capital of Omniprobe, Inc. Omniprobe, Inc. designs andmanufactures nano-manipulators for use within scanning electron microscopes and is headquartered in Dallas, USA.
The book and provisional fair value of the assets and liabilities acquired is given in the table below. . Provisional values
have been used because the initial accounting is incomplete at the date of this report. The business has been integrated
into the Nanotechnology Tools segment.
Book value

Intangible Fixed Assets
Tangible Fixed Assets
Inventories
Trade and other receivables
Trade and other payables
Cash
Net assets acquired
Goodwill
Total consideration
Cash acquired
Deferred consideration
Net cash outflow relating to the acquisition

£m
0.2
0.6
0.5
0.6
(0.3)
0.3
1.9

Provisional
adjustments
£m
11.4
(0.3)
(0.1)
11.0

Provisional
fair value
£m
11.6
0.3
0.5
0.6
(0.4)
0.3
12.9
0.2
13.1
(0.3)
(0.5)
12.3

The goodwill arising is considered to represent the value of the acquired workforce and the value of patents which it has
not been possible to separately identify.
Together, both acquisitions contributed revenue of £13.3m, an operating loss of £1.9m and adjusted operating profit of£1.9m to the Group’s result for the period. Had the acquisitions taken place on 1 April these amounts would have been
£22.8m, £2.7m and £3.2m respectively.

© Oxford Instruments plc

Page 15

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2011 – unaudited

6

TAXATION

The total effective tax rate on profits for the half year is 34% (2010: 23%). The weighted average tax rate in respect ofadjusted profit before tax (see note 2) for the half year is 20% (2010: 20%).
The Group estimates that its full year weighted average tax rate in respect of adjusted profit before tax will be 20%(2010: 20%)).

7

EARNINGS PER SHAREa) Basic
The calculation of basic earnings per share is based on the profit or loss for the period after taxation and a weighted
average number of ordinary shares outstanding during the period, excluding shares held by the Employee ShareOwnership Trust, as follows:

Weighted average number of shares outstanding
Less: weighted average number of shares held by Employee
Share Ownership Trust
Weighted average number of shares used in calculationof earnings per share

Half year to
30 Sept
2011
Sharesmillion
53.0

Half year to
30 Sept
2010
Sharesmillion
49.4

Year to31 March
2011
Sharesmillion
49.7

(0.4)

(0.5)

(0.4)

52.6

48.9

49.3

b) Diluted
The following table shows the effect of share options on the calculation of both adjusted and unadjusted diluted basic
earnings per share.

Number of ordinary shares per basic earnings per sharecalculations
Effect of shares under option
Number of ordinary shares per diluted earnings per
share calculations© Oxford Instruments plc

Half year to
30 Sept
2011
SharesmillionHalf year to
30 Sept
2010
SharesmillionYear to31 March
2011
Sharesmillion

52.6
1.6

48.9
1.1

49.3
1.4

54.2

50.0

50.7

Page 16

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2011 – unaudited

8

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:

Previous period interim dividend
Previous period final dividend

Half year to
30 Sept
2011
pence
2.52
2.52

Half year to
30 Sept
2010
pence
2.40
2.40

Year to31 March
2011
pence
2.40
6.00
8.40

The following dividends per share were proposed by the Group in respect of each accounting period presented:

Interim dividend
Final dividend

Half year to
30 Sept
2011
Pence
2.77
2.77

Half year to
30 Sept
2010
pence
2.52
2.52

Year to31 March
2011
Pence
2.52
6.48
9.00

The interim dividend for the year to 31 March 2012 of 2.772 pence was approved by the Board on 15 November 2011and has not been included as a liability as at 30 September 2011. The interim dividend will be paid on 10 April 2012 toshareholders on the register at the close of business on 9 March 2012.

9

POST BALANCE SHEET EVENTSOn 20 October 2011 the Group disposed of a product line for a consideration of £8.1m. The product line was part of theIndustrial Products segment. The profit on disposal is expected to be approximately £7m.
On 3 November the Group acquired 100% of the capital of Platinum Medical Imaging LLC for an initial cash
consideration of $18m with a deferred element of up to $37m payable over three years dependent on its performanceover that period. Platinum Medical Imaging LLC is an established US company providing high quality parts and services
for MRI and CT medical imaging instruments in US markets. It is based in Florida and California. Some of thedisclosure required by IFRS3 has been omitted since due to the timing of the acquisition the initial accounting is
incomplete at the date of this publication.

© Oxford Instruments plc

Page 17

Responsibility Statement of the Directors in respect of the Half Year Financial Statements
We confirm that to the best of our knowledge:•
the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU;•
the interim management report includes a fair review of the information required by:(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that haveoccurred during the first six months of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the remaining six months of the year;
and(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken placein the first six months of the current financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related party transactions described in
the last annual report that could do so.
Jonathan Flint Chief Executive
15 November 2011

Kevin Boyd Group Finance Director

Principal Risks and Uncertainties
The Group has in place a risk management structure and internal controls which are designed to identify, manage andmitigate risk.
In common with all businesses, Oxford Instruments faces a number of risks and uncertainties which could have amaterial impact on the Group's long term performance.
On page 13 of its 2011 Annual Report and Accounts (a copy of which is available at www.oxford-instruments.com), theCompany set out what the Directors regarded as being the principal risks and uncertainties facing the Group's long term
performance. These include technical risks associated with developing advanced technologies, foreign exchange andcommodity risks, risks in relation to the availability of and integration of acquisition targets, the risk of supply chain
failures through outsourcing and the risk of fluctuations in the reported pension deficit due to changes in actuarial
assumptions. Many of these risks are inherent to Oxford Instruments as a global business and they remain valid as
regards their potential impact during the remainder of the second half of the year.
The impact of the economic and end market environments in which the Group's businesses operate are considered in
the Half Year Statement of this Half Year Report, together with an indication if management is aware of any likely
change in this situation.

© Oxford Instruments plc

Page 18

Independent Review Report by KPMG Audit Plc to Oxford Instruments plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2011 which comprises the Condensed Consolidated Statement of
Income, the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of
Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of
Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist the company inmeeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required
to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this report, or for the conclusions we havereached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted
by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared inaccordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the halfyearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410
Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review
is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant mattersthat might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 September 2011 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

S Haydn-Jonesfor and on behalf of KPMG Audit Plc
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
15 November 2011

© Oxford Instruments plc

Page 19

Oxford Instruments plc
Tubney Woods, Abingdon
Oxon OX13 5QX, UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393442
email info.oiplc@oxinst.com