Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

0

Chief Executive’s Review
Overview
We have made good progress in the initial implementation stages of our Horizon strategy whilst maintaining a
focus on the near term delivery.
We have continued our proactive approach to portfolio management, successfully completing the disposal of
the Industrial Analysis business in July. As a more focused nanotechnology Group, we have reorganised our
structure in line with our chosen customer segments and applications.
Our three new reporting sectors - Materials & Characterisation, Research & Discovery, and Service &Healthcare – include business units with the same end-markets, enabling us to deliver higher value to ourcustomers and drive synergies and efficiencies across the Group.
Reported orders for the Group were up 6.0% (1.8% at constant currency) to £148.5 million (2016: £140.1
million), with growth in both Materials & Characterisation and Research & Discovery, partially offset by lower
orders in our Service & Healthcare sector due to fewer orders in our US Healthcare business.
Reported revenue was broadly in line with last year at £132.1 million (2016: £132.4 million), down 4.5% atconstant currency. Adjusted operating profit was up 14.6% to £18.8 million (2016: £16.4 million), although
down 12.2% at constant currency, with a strong performance in Materials & Characterisation and growth inService & Healthcare offset by reduced volumes in Research & Discovery.
The order book, representing orders for future delivery, as at 30 September 2017 increased 11.8% at constantcurrency since the year end and is up 3.3% at constant currency on the prior half year.
Continuing adjusted basic earnings per share increased by 23.9% to 22.3p. The dividend is maintained at 3.7
pence, in line with last year.
The proceeds from the sale of Industrial Analysis have significantly strengthened the balance sheet with net
debt at the end of the period reduced to £45.5 million, down from £109.3 million at year end.

Horizon Strategy Progress
We introduced our Horizon Strategy in June, outlining how it will help us achieve sustainable revenue growthand margin improvement. Horizon focuses the Group on those markets where nanotechnology will provide
long-term growth drivers for our customers and where we have the opportunity to achieve or maintain market
leadership. We provide value for our customers by offering solutions that enable them to be successful,
tailoring our products and services to help them meet their current and future needs.
Our customers are at the centre of our focus, and I previously outlined the key capabilities that we areembedding across our organisation. These are market intimacy, innovation and product development,
customer support, and operational excellence.
While it is still early in our Horizon journey we have made good progress in a number of areas in support ofour new strategy. We have undertaken significant management of the portfolio, successfully completing thesale of Industrial Analysis in July, making us a more focused nanotechnology Group. We are building themanagement, leadership and core capabilities across the Group to enable us to deliver the Horizon strategy.
Of the 40 top level leaders in the Group, 37% have been appointed since September 2016; and we recently
recruited a US based Group Commercial Director to establish sales best practice globally. We continue totarget experienced leaders from a range of different markets and disciplines to help us build on ourcapabilities.
A core part of the Horizon strategy is the transition of the Group from a product and technique focus to being
customer application and market focused. Our new structure aligns our business operations, management
and reporting sectors with our chosen market and customers’ applications. It is also helping us build stronger
relationships with our customers and will drive future synergies across and within the businesses. The
Materials & Characterisation sector comprises our Asylum Research, NanoAnalysis and Plasma Technology
Oxford Instruments plc Half Year Results for the six months ended 30 September 20171

businesses. Research & Discovery includes Andor Technology, NanoScience (including Magnetic
Resonance), X-ray Technology and ScientaOmicron. Our Service & Healthcare sector remains OiService andOI Healthcare.
Our new market focus structure is aligned with serving our core end markets in Healthcare & Life Science;
Semiconductor & Communications; Quantum Technology; Environment; Energy; Advanced Materials; andResearch & Fundamental Science. Beneath this top tier we have identified and are actively focusing on anumber of specific niche segments that present particularly attractive growth opportunities.
We have also made good progress embedding our operating model, standardising a number of processes
against best practice, and ensuring that we are leveraging the expertise we have across the Group to
increased effect.
Our customers recognise us as key enablers of their strategies. As such, we are enjoying increasingly
collaborative commercial relationships, delivering solutions that enable them to succeed within fundamental
research, applied R&D and commercial applications. Our new reporting structure enhances our focus on thegrowth drivers of our markets and the evolving demands of our customers and will drive cross-businesssynergies.
Sector Performance
Turning to the performance of our individual sectors:
Materials & Characterisation focuses on applied R&D and commercial customers, enabling the fabricationand characterisation of materials and devices down to the atomic scale. This sector delivered a strong first
half, with positive contributions from the NanoAnalysis, Plasma Technology and Asylum Researchbusinesses. Reported revenue increased by 10.6% to £50.1 million (2016: £45.3 million), with reported
adjusted operating profit increasing to £7.2 million (2016: £4.2 million). Furthermore, strong reported order
growth of 25.8% to £61.9 million (2016: £49.2 million) provided positive order book growth for future deliveries.
The enhanced results were driven by strong demand for recently launched higher margin products, anincreased focus on end customer applications and operational efficiencies. In particular, we saw increased
demand for our semiconductor and advanced materials processing solutions and our portfolio of scanningprobe microscopes.
Research & Discovery provides advanced solutions that create unique environments and enablemeasurements down to the molecular and atomic level, used in fundamental and applied research. This
sector saw increased orders in the period of £57.8 million (2016: £54.3 million), up 6.4% on a reported basis
driven, in part, by growth in quantum related research applications and increased demand for our benchtop
NMR products. Revenues of £48.0 million were down 13.4% on the previous year (2016: £55.4 million). Thiswas due firstly to a softer financial performance from the optical microscopy products in Andor Technology as
we transition from third party systems to our own portfolio. In addition, the higher proportion of longer leadtime customised cryogenic and magnet system orders with lower margins in NanoScience is depressing
financial performance. We are at the early stages of addressing this by moving towards a greater proportion ofrevenue derived from standardised systems.
Service & Healthcare provides customer service and support for our own products and the service, sale andrental of third party healthcare imaging systems. This sector increased reported revenue by 7.6% to £34.1
million, up 2.5% at constant currency (2016: £31.7 million) driven by strong demand for services related to ourown products. Reported adjusted operating profit increased 42.3% to £7.4 million, representing an increase atconstant currency of 34.6%, supported by an increased contribution from services for our own products andhealthcare related services for third party equipment. Increased orders for services relating to our own
products were more than offset by reduced orders for refurbished equipment from our US Healthcare
business due to a combination of phasing and previously reported structural changes in the market. Our
strategy is to move the US Healthcare business towards a higher proportion of service revenue.

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

2

R&D
Innovation remains core to our Horizon strategy and we continue to invest in solutions and technology that
help our customers improve their productivity and develop new capabilities. We have maintained our level ofinvestment in R&D initiatives at £13.0 million (2016: £13.0 million), equivalent to 9.8% of revenue (2016:9.8%).
PeopleIt is our talented people that make us successful and our thanks go to all our employees for their support anddedication to helping Oxford Instruments support our customers.
Dividends
The Board has declared an interim dividend of 3.7 pence per share (2016: 3.7 pence), in line with last year.
Current Trading and Outlook
Our full year expectations remain unchanged, supported by growth in constant currency orders and order
book, the timing of new product introductions, our normal second half seasonal bias and favourable currency
effects.
We are encouraged by the early progress in the implementation of the Horizon strategy, providing confidence
in the longer term delivery of sustainable revenue growth and margin improvement.

Ian Barkshire
Chief Executive
14 November 2017

Oxford Instruments plc Half Year Results for the six months ended 30 September 20173

Operations Review
As outlined above, our Group now reports in the following three sectors:
Research & Discovery, and Service & Healthcare.

Materials & Characterisation,

Materials & Characterisation

Revenue
2
Adjusted operating profit
2
Adjusted operating margin
Profit before tax after adjusting items

2017
£m

2016
£m

Growth

50.1
7.2
14.4%
5.8

45.3
4.2
9.3%
2.1

10.6%

Constant
Currency
1
Growth6.6%

1

For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 2 of these Financial Statements

2

The Materials & Characterisation sector is comprised of Asylum Research, NanoAnalysis and Plasma
Technology. This sector focuses on applied R&D and commercial customers, enabling the fabrication andcharacterisation of materials and devices down to the atomic scale. Our products are used across a broad
range of applications, for example those undertaking work with semiconductors, photonic devices, metals andpolymers, exploring fundamental properties through to regulatory quality assurance (QA) and quality control(QC). We continue to aid fundamental understanding in these areas to facilitate the development of newdevices as well as the next generation of higher functioning, stronger and lighter materials. Revenue inMaterials & Characterisation comes from a broad range of end applications with about 74% from
Semiconductor & Communications and Advanced Materials related customer segments. Industrial andcommercial customers represent about 48% of revenue, with the balance from academic and government
funded customers.
In the first half Materials & Characterisation continued to show improvement with increased orders, revenue
and profitability driven by strong demand for recently launched products and an energised focus on customer
applications.
Asylum Research is the technology leader in scanning probe microscopy (SPM) for both materials andbioscience applications. Focusing on the challenges customers face has helped us develop a number of
products that have been well received in the market. The Origin+ offers a more affordable and easy to use
SPM to the broader market that still wants enhanced capability. We have seen a resurgence in first half orders
due to performance enhancements aligned to specific market needs. The recently launched Cypher VRS isproviding new insights to researchers exploring disease mechanisms and the efficacy of new medicines. It
achieves this by enabling the observation of biological interactions in real time and is the first and only fullfeatured video rate SPM. We are also seeing increased interest in our solutions for advanced materials,
energy production and storage applications.
NanoAnalysis delivers innovative solutions that enable materials characterisation and manipulation at thenanoscale within electron microscopes and ion-beam systems. Our products determine the material propertiesof plastics through to advanced aerospace components and quantum devices. A steady half year of growth inboth orders and revenue was supported by two major product launches. Symmetry, our super-fast material
structure analyser, is providing major productivity improvements for customers researching and manufacturing
semiconductors and advanced materials for example in the automotive, aerospace and high performancesteel markets. Symmetry overcomes the technological barriers of incumbent technology enabling significantly
higher quality of data at much higher speeds.
The newly launched Ultim detectors are providing increased capabilities and productivity for customers
developing advanced materials, semiconductors and batteries by delivering unparalleled analysis speed andsensitivity. Product innovations continue to drive new capabilities and productivity improvements across adiverse range of end customer applications.
Plasma Technology provides advanced material etch and deposition processes and solutions tosemiconductor research laboratories and advanced specialised production facilities that exploit
nanotechnology for a range of applications including laser devices, plastic electronics, high brightness laser
emitting diodes (LEDs) and microelectromechanical systems (MEMs) for sensors and life science

Oxford Instruments plc Half Year Results for the six months ended 30 September 20174

applications. A strong first half was supported by favourable general market conditions. We have seen
significantly increased interest in the optoelectronics device market, where our customers are developing laser
and photonic devices that are key to enabling the increased data communication rates resulting fromincreased device connectivity and usage through the development and ramp up for 5G networking. Our
expertise in the advanced processing of compound semiconductors provides the foundation for growth within,and expansion into, related specialised production markets.

Research & Discovery

Revenue
2
Adjusted operating profit
2
Adjusted operating margin
Profit before tax after adjusting items

2017
£m

2016
£m

Growth

48.0
4.2
8.8%
0.1

55.4
7.0
12.6%
2.9

(13.4%)

Constant
Currency
1
Growth(17.5%)1

For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 2 of these Financial Statements

2

The Research & Discovery sector includes Andor Technology, Magnetic Resonance, NanoScience, X-ray
Technology and our minority share in ScientaOmicron. This sector provides advanced solutions that create
unique environments and enable measurements down to the molecular and atomic level, used in fundamental
and applied research. We are able to build on our relationships with customers working on breakthroughapplications in research to gain insights and support future commercial applications.
In this sector, 42% of revenue comes from customers working within Healthcare & Life Science applications.
Customers exploring new semiconductor materials and devices make a significant contribution, and anincreasing share is coming from customers working in quantum technology applications and research.
Quantum Technology is a strong growth area for the sector due to increased government and corporate
funding including applications such as quantum information processing and quantum sensors. Research &Fundamental Science contributes 4% of revenue. The sector has a higher proportion of revenue fromacademic and government funded customers at 72%, with 28% from commercial and industrial customers.
This sector saw an increase in orders in the period but with lower revenue and profitability due to softer
financial performance from our optical microscopy products in Andor Technology and a higher proportion of
longer production lead time specialist system orders from NanoScience.
Andor Technology is the global leader in the design and manufacture of high performance scientific imaging
cameras, spectroscopy solutions and microscopy systems for research and some commercial applications.
Revenue is predominately from life science applications with significant contributions from semiconductormaterials and astronomy applications. Improved performance from our scientific cameras for astronomy andour imaging analysis software, Imaris, was more than offset by lower sales of our optical microscopy systems,
leading to softer financial performance in the half year. The reduction in microscopy sales is due to thetransition from third party systems to our own portfolio; increased orders at the back end of the half year, andthe launch of the lower price positioned Dragonfly 200, provide positive momentum for the second half of theyear. Our Imaris software is enabling customers in cell biology and neuroscience to visualise and interpret thehuge data sets that are now being produced by modern microscopy systems. This has driven strong growthfor Imaris, which we sell for use with our own and other optical microscopy systems. Our high speed cameras
are being deployed in quantum imaging research and we continue to enhance our range of market leading
astronomy solutions. Over 25 of our deep cooled cameras were used around the world in the recent and firstever observation of the optical signature of the violent collision of two neutron stars, which were identified bygravitational wave ripples in space-time.
NanoScience designs, manufacturers and supports market-leading products that provide the uniqueenvironments critical in fundamental science, the exploitation of many quantum technology applications andnew materials and device development in the physical sciences. Strong order growth was driven by
government and commercial focus and associated funding into quantum technology, including quantum
information processing and sensors. An increase in the proportion of customised magnet and cryogenic

Oxford Instruments plc Half Year Results for the six months ended 30 September 20175

systems has depressed financial performance. We are addressing this by moving towards a greater
proportion of revenue from standardised systems. We have enhanced our Triton ultra-low temperaturecryogenic product range with the launch of “Io”, the most compact, affordable and easy to use Cryogenic
platform, making this technology available to a wider range of customers, for example those developing low
temperature sensor and optical devices.
Magnetic Resonance’s easy to operate benchtop NMR solutions provide essential information about theidentification and quantification of foods and chemicals for academic and industrial researchers and for QA
and QC applications. The business, which was previously within the Industrial Products sector, has been
merged into our NanoScience business providing operational efficiencies and broader capabilities to drive
future growth. Our enhanced Pulsar and MQC+ systems provide efficiencies compared to wet chemistry andhigher cost alternatives, driving strong order growth. In addition, our recently launched GeoSpec rock core
analyser is providing increased capabilities for the assessment of economic extraction of oil through its
increased sensitivity.
X-ray Technology supplies X-ray sources to leading OEM’s for industry, research and medical applications,
including material characterisation, real-time medical imaging and analysis of multi-layer printed circuit boards.
Growth in healthcare applications was more than offset by a decline from industrial segments.
The ScientaOmicron joint venture created the largest player in the Ultra-High Vacuum surface science field.
The Group has a 47% share in the joint venture. The business is showing year on year improvement in its
operational and financial performance. During the first half of the year the shareholders completed arefinancing of the business with a rights issue in order to strengthen the balance sheet and provide long-term
liquidity.

Service & Healthcare Sector

Revenue
2
Adjusted operating profit
2
Adjusted operating margin
Profit before tax after adjusting items

2017
£m

2016
£m

Growth

34.1
7.4
21.7%
6.7

31.7
5.2
16.4%
4.3

7.6%

Constant
Currency
1
Growth2.5%

1

For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 2 of these Financial Statements

2

The Service & Healthcare sector comprises the Group’s maintenance service contracts, billable repairs,
training and support services, and spare part sales related to Oxford Instruments’ own products under the
OiService brand; and the sale, service and rental of refurbished third party MRI and CT machines under the
OI Healthcare brand.
Reported revenue increased in the half year, driven predominantly by strong demand for our OiService
offerings. Increased orders from OiService were more than offset by reduced orders for refurbished equipment
sales within OI Healthcare due to a combination of the timing of sales prospects and previously reported
structural changes in the market by OEM providers. Within OiService we continue our drive for enhanced
customer support services tailored to their needs, including remote diagnosis and support, and online selfhelp. Training programmes are designed to maximise increased customer capability and productivity.
For OI Healthcare the first half has been largely focused on management restructuring, allowing us to recruit
expert talent from a range of market disciplines. We are currently introducing a new Field Aware project thatallows our engineers to provide our customers with real time service updates. We have also recently secured
a service contract for a later model GE 3 Tesla MRI scanner. Our strategy is to move the business towards ahigher proportion of service contracts and scale back sales of refurbished systems.

Oxford Instruments plc Half Year Results for the six months ended 30 September 20176

Finance Review
During the half year the Group disposed of its Industrial Analysis business and this has been treated as a
discontinued operation in the financial statements. Accordingly, the numbers detailed in the Finance Review
refer to continuing operations and exclude the results of Industrial Analysis in both the current and priorperiods.
Reported revenue was broadly in line with the same period last year at £132.1 million (2016: £132.4 million).
Revenue, excluding currency effects, declined by 4.5%, with the movement in average currency exchange
rates over the last year positively impacting reported revenue by £5.7 million.
Reported orders increased by 6.0% to £148.5 million (2016: £140.1 million), an increase of 1.8% at constantcurrency. At the end of the period the Group’s order book for future deliveries stood at £141.8 million (2016:£140.0 million), growth of 1.3% on a reported basis and 3.3% at constant currency.
Adjusted operating profit from continuing operations increased by 14.6% to £18.8 million (2016: £16.4 million).
Adjusted operating profit from continuing operations, excluding currency effects, declined by 12.2%. This wasprincipally due to two factors: first, the impact from lower first half microscopy revenue, some of which is
expected to unwind in the second half of the year; and second, the longer production lead times from ourcustomised magnet and cryogenic systems, compounded by their margins being lower than the businessaverage. As we move to a greater proportion of standardised systems and unwind the more complex orders,
we expect the financial performance to improve in the medium term.
Adjusted operating margin from continuing operations increased by 180 basis points to 14.2% (2016: 12.4%),
supported by currency benefits and portfolio changes.
Adjusted profit before tax from continuing operations grew by 24.4% to £16.3 million (2016: £13.1 million). A
pre-tax adjusted profit of £0.7 million from the Industrial Analysis business for the three months of ownership,prior to its sale on 3 July 2017, is included in discontinued operations. For the six months to 30 September
2016 the Industrial Analysis and Superconducting Wire businesses delivered an operating profit of £2.6
million. Including discontinued operations, the Group achieved reported adjusted profit before tax of £17.0
million (2016: £15.7 million).
Non-recurring items and acquisition related costs were £0.6 million, of which £0.3 million relates to our Scienta
Omicron joint venture. The movement in the mark-to-market valuation of currency hedges for future periods
gave rise to a gain of £2.6 million.
Adjusted profit before tax from continuing operations of £16.3 million (2016: £13.1 million) represents a marginof 12.3% (2016: 9.9%). After the amortisation of acquired intangibles, the mark-to-market of derivative
financial instruments and other adjusting items, the Group recorded a profit before tax of £12.7 million (2016:
loss of £0.6 million).
Continuing adjusted basic earnings per share grew by 23.9% to 22.3 pence (2016: 18.0 pence). Continuing
basic earnings per share was 17.5 pence (2016: loss of 0.9 pence).
Operating cash flow (as defined in section 3.0) increased by £2.1 million to £4.1 million. Adjusted operating
cash (defined as adjusted EBITDA, less movement in working capital, capitalised development expenditureand capital expenditure) represents 10.1% (2016: 3.7%) of adjusted operating profit. Proceeds from the saleof our Industrial Analysis business contributed to a fall in net debt from £109.3 million to £45.5 million,
representing a net debt to EBITDA ratio (for banking covenant purposes) of 0.9 times, well within our banking
covenant of 3.0 times.
Adjusted operating profit is stated before impairment and amortisation of goodwill and acquired intangibles,
non-recurring items and acquisition-related costs, and the mark-to-market valuation of unexpired currency
hedges, as set out in note 2 to the financial statements.
Following the sale of Industrial Analysis we have reorganised the management structure of the Group,
resulting in a change to our reporting sectors. NanoAnalysis, Asylum Research and Plasma Technology
constitute the Materials & Characterisation sector. Andor Technology, NanoScience and X-ray Technology areincluded within Research & Discovery, as well as our share of ScientaOmicron. Our Service & Healthcare
sector remains unchanged, incorporating the contribution from our Healthcare businesses along with the

Oxford Instruments plc Half Year Results for the six months ended 30 September 20177

service revenue and profits of businesses in the other two sectors. The previous NanoTechnology Tools
sector comprised the product based results of the businesses within Materials & Characterisation andResearch & Discovery with the addition of Magnetic Resonance (now part of NanoScience) and X-ray
Technology, both of which were previously part of our Industrial Products sector. Revenue from thesebusinesses for the half year to 30 September 2017 totalled £10.2 million (2016: £10.8 million) and was £22.7
million for the year to 31 March 2017.
The results under the new sectors, including the full year comparative (unaudited) are shown in tables 1 and2.
Table 1: Sector information: Revenue

Materials & Characterisation
Research & Discovery
Service & Healthcare
Total

Half year to
30 September
2017
£m
50.1
47.9
34.1
132.1

Half year to
30 September
2016
£m
45.3
55.4
31.7
132.4

Year to31 March
2017
£m
104.1
125.2
70.9
300.2

Half year to
30 September
2016
£m
4.2
7.0
5.2
16.4

Year to31 March
2017
£m
10.9
13.8
13.3
38.0

Table 2: Sector information: Adjusted operating profit

Materials & Characterisation
Research & Discovery
Service & Healthcare
Total

1.

Half year to
30 September
2017
£m
7.2
4.2
7.4
18.8

Income statement

The Group’s income statement is summarised below.
Table 3: Income statement

Revenue
Adjusted gross profit
Administrative expenses
Adjusted operating profit from continuing
operations
Net finance costs
Adjusted profit before tax from continuing
operations
Amortisation of acquired intangibles
Impairment of capitalised development costs
Non-recurring items and acquisition-relatedcostsMark-to-market of currency hedges
Profit/(loss) before tax from continuing
operations
Tax from continuing operations

Half year to
30 September
2017
£m
132.1
67.7
(48.9)
18.8

Half year to
30 September
2016
£m
132.4
69.5
(53.1)
16.4

(2.5)
16.3

(3.3)
13.1

(5.6)
(0.6)

(6.0)
(0.7)
(0.6)

2.6
12.7

(6.4)
(0.6)

(2.7)

0.1

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

Change(0.2%)(2.6%)+14.6%+24.4%

8

10.0

(0.5)

22.1%

21.4%

Continuing adj. earnings per share – basic
Earnings per share – basic

22.3p
17.5p

18.0p
(0.9p)+23.9%

Continuing adj. earnings per share – diluted
Earnings per share – diluted

22.1p
17.4p

18.0p
(0.9p)+22.8%

Dividend per share

3.70p

3.70p

Profit/(loss) for the period from continuing
operations
Adjusted effective tax rate

1

1

The adjusted effective tax rate is calculated excluding impairment of non-current assets, amortisation on acquired
intangibles, non-recurring items and acquisition related costs and the mark-to-market of financial derivatives

1.1
Revenue
Reported revenue of £132.1 million (2016: £132.4 million) was broadly flat year-on-year. Materials &Characterisation grew by 10.6% and Service & Healthcare by 7.6%. Research & Discovery declined by
13.4%.
The depreciation of Sterling against the US Dollar, Euro and Japanese Yen has increased reported revenueby £5.7 million. Excluding currency effects, revenue grew by 6.6% for Materials & Characterisation with growthacross all constituent businesses. Lower optical microscopy sales and an increase in the proportion ofcustomised magnetic and cryogenic systems with longer production lead times, resulted in a constantcurrency decline of 17.5% in Research & Discovery revenue. Good growth in revenue from service of our own
products more than offset a decline in Healthcare revenue, leading to constant currency revenue growth of
2.5% in Service & Healthcare.
On a geographical basis, at constant currency, revenue grew by 4.6% in Europe. Revenue in North America,
Asia and Rest of World declined by 10.0%, 1.6% and 64.3% respectively. Orders, at constant currency,
increased by 5.5% in Europe, 9.0% in Asia and 333.3% for the Rest of World. Excluding the decline in orders
from used imaging systems in the US, orders in North America increased by 5.7%.
1.2
Gross profit
Gross profit fell by 2.6% to £67.7 million (2016: £69.5 million), representing an adjusted gross profit margin of
51.2%, a decline of 130 basis points over last year.
1.3
Operating profit
Adjusted operating profit increased by 14.6% to £18.8 million (2016: £16.4 million), representing an adjusted
operating profit margin of 14.2%, an increase of 180 basis points against last year. The Materials &Characterisation margin rose by 510 basis points to 14.4% (2016: 9.3%). The revenue decline within
Research & Discovery contributed to a fall in adjusted operating margin of 380 basis points to 8.8% (2016:
12.6%). Service & Healthcare margin rose by 530 basis points to 21.7% (2016: 16.4%).
Our share of the ScientaOmicron joint venture showed a breakeven result in the period, an improvement of£0.4 million against the comparative period. After restructuring costs, our share of the ScientaOmicron joint
venture was a loss of £0.3 million.
Currency effects (including the impact of transactional currency hedging) have increased reported adjusted
operating profit by £4.4 million when compared to blended hedged exchange rates for the comparative period.
Blended hedged exchange rates for the US Dollar, Euro and Japanese Yen against Sterling are all at stronger
rates than last year.
At constant currency the adjusted operating profit margin was 11.4%, a decline of 100 basis points.
1.4
Adjusting items
Amortisation of acquired intangibles of £5.6 million relates to intangible assets identified on acquisitions, being
the value of technology, customer relationships and brands.

Oxford Instruments plc Half Year Results for the six months ended 30 September 20179

Non-recurring costs during the period were £0.6 million. These comprise £0.3 million of restructuring costs
relating to our US Healthcare and Asylum businesses and £0.3 million of restructuring and charges relating to
the ScientaOmicron joint venture.
The Group uses derivative products to hedge its exposure to fluctuations in foreign exchange rates. It is
Group policy to have in place at the beginning of the financial year hedging instruments to cover 75% of its
forecast transactional exposure for that year. The Group has decided that the additional costs of meeting theextensive documentation requirements of IAS 39 to apply hedge accounting to these foreign exchange
hedges cannot be justified. Accordingly, the Group does not use hedge accounting for these derivatives.
Net movements on marking-to-market derivatives in respect of future periods are disclosed in the Income
Statement as financial expenditure and excluded from our calculation of adjusted profit before tax.
The mark-to-market gain in respect of derivative financial instruments was £2.6 million (2016: £6.4 million
loss). This reflects a movement from a net fair value liability to a small net asset position on currency
derivatives that are hedging future transactional currency exposures for the Group compared to the previous
year end. The un-crystallised balance sheet asset is attributable to a rise in the value of Sterling at thebalance sheet date against a blended rate achieved on US Dollar, Euro and Japanese Yen forward contracts
that will mature over the next eighteen months.
1.5

Net finance costs

The Group’s adjusted net finance costs fell by £0.8 million to £2.5 million (2016: £3.3 million) with net financecharges falling by £0.5 million to £2.2 million and pension financing charges falling by £0.3 million to £0.3
million.
1.6

Profit before tax

Continuing adjusted profit before tax increased by 24.4% to £16.3 million (2016: £13.1 million). The continuing
adjusted profit before tax margin increased by 240 basis points to 12.3% (2016: 9.9%).
Profit before tax of £12.7 million (2016: loss of £0.6 million) is after the mark-to-market movement onderivative financial instruments and amortisation of acquired intangibles and other adjusting items.
1.7

Tax

The adjusted tax charge from continuing operations of £3.6 million (2016: £2.8 million) represents an effective
tax rate of 22.1% (2016: 21.4%). The increase is due to a change in the geographical mix of profits. The
statutory effective tax rate from continuing operations is 21.3%.
1.8

Earnings per share

Continuing adjusted basic earnings per share increased by 23.9% to 22.3 pence (2016: 18.0 pence); adjusted
diluted earnings per share increased by 22.8% to 22.1 pence (2016: 18.0 pence). Continuing adjusted diluted
earnings per share were 17.5 pence (2016: loss of 0.9 pence); adjusted diluted earnings per share were 17.4
pence (2016: loss of 0.9 pence).
Undiluted weighted average shares have stayed flat at 57.1 million.
1.9

Foreign Exchange

The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euroand Japanese Yen. For the half year, approximately 16% of Group revenue was denominated in Sterling, 56%
in US Dollars, 17% in Euros, 10% in Japanese Yen and 1% in other currencies. Translational exposures ariseon the consolidation of overseas company results into Sterling. Transactional exposures arise where thecurrency of sale or purchase transactions differs from the functional currency in which each company
prepares its local accounts.
The Group maintains a hedging programme against its net transactional exposure using internal projections ofcurrency trading transactions expected to arise over a period extending from 12 to 24 months. As at 30
September 2017 the Group had currency hedges in place extending up to 18 months forward.

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

10

2.

Dividend

The Group’s policy is to increase the dividend each year in line with the increase in underlying earnings.
However, taking into account the impact on the Group of business disposals, currency effects and ourprogressive strengthening of the balance sheet, the Board has proposed to hold the dividend at last year’slevel. This results in an interim dividend of 3.7 pence. The dividend will be paid on 6 April 2018 toshareholders on the register as at 23 February 2018.
3.

Cash flow

The Group cash flow is summarised below. Adjusted operating cash flow excludes rental assets held forresale and profits or losses on disposal of fixed assets, both of which are included within expenditure on
tangible and intangible assets.
Table 4: Cash flow from continuing operations

Adjusted operating profit
Depreciation and amortisation
Adjusted EBITDA
Working capital movement
Non-recurring items and acquisition related costs
Pension scheme payments above charge to op. profit
Equity settled share schemes
Share of loss of associate
Adjusted operating cash flow
Interest
Tax
Expenditure on tangible and intangible assets
Capitalised development expenditure
Increase in investment in associate
Acquisition of subsidiaries, net of cash acquired
Net cash flow from sale of subsidiary undertaking
Dividends paid
Proceeds from issue of share capital(Decrease)/increase in borrowings
Net decrease in cash and cash equivalents from continuing
operations

Half year to
30 September
2017
£m
18.8
4.0
22.8
(15.0)
(0.7)
(3.5)
0.5
4.1
(1.0)
(2.5)
(2.8)
(3.1)
(2.1)
73.0
(2.1)
0.2
(77.6)(13.9)

Half year to
30 September
2016
£m
16.4
4.0
20.4
(14.9)
(0.4)
(3.5)
0.4
2.0
(2.6)
(0.7)
(1.9)
(3.0)
(6.8)
(2.1)
11.6
(3.5)

Note: Adjusted EBITDA is earnings before interest, tax, depreciation, intangible amortisation, mark-to-market of financial
derivatives and other non-cash adjusting items

3.1
Adjusted operating cash flow
Adjusted operating cash flow in the year increased by £2.1 million to £4.1 million (2016: £2.0 million). Adjusted
operating cash (defined as adjusted EBITDA, less movement in working capital, capitalised development
expenditure and capital expenditure) represents 10.1% (2016: 3.7%) of adjusted operating profit due to an
outflow of working capital over the period.
The working capital outflow of £15.0 million reflects an increase in inventories of £6.6 million, an increase inreceivables of £1.3 million, a decrease in payables of £9.2 million and an increase in customer deposits of£2.1 million. The increase in inventories largely reflects an increase in work in progress and inventory ofcustomised magnets and cryogenic systems. The fall in payables is due to inventory building during the lastquarter of last year to support order growth of our Plasma Technology process tools, combined with the cash
settlement of currency hedging contracts.
3.2
Interest
Net interest paid was £1.0 million (2016: £2.6 million). The difference from last year is due to lower financing
costs arising from a lower level of average net debt compared to the comparative period following the receipt
of proceeds from the sale of Industrial Analysis part way through the period and the settlement of £1.0 millionof interest payments made just after the half year close.
Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

11

3.3
Tax
Tax paid was £2.5 million (2016: £0.7 million), the comparative period benefiting from tax deductions onallowable adjusting items and utilisation of brought forward tax losses.
3.4
Investment in research and development (R&D)
Total cash spend on R&D in the half year was £13.0 million, equivalent to 9.8% of sales, (2016: 13.0 million,
9.8% of sales). A reconciliation between the amounts charged to the Income Statement and the cash spent isgiven below:

Table 5: Investment in research and development (R&D) from continuing operations
Half year to
30 September
2017£mHalf year to
30 September
2016
£m

11.4
0.1

12.1
0.1

(1.6)
3.1
13.0

(2.2)
3.0
13.0

R&D expense charged to the Income Statement
Amounts capitalised as fixed assets
Amortisation and impairment of R&D costs capitalised as
intangibles
Amounts capitalised as intangible assets
Total cash spent on R&D during the year

3.5
Investment in Associate
The shareholders of ScientaOmicron agreed to a capital injection to strengthen the balance sheet of the joint
venture and ensure future liquidity in support of the business strategy. Our share was £2.1 million and was
paid in September 2017.
3.6
Disposals
The sale of Industrial Analysis was completed on 3 July 2017. A post-tax profit of £45.3 million has beenrecorded within discontinued adjusting items this includes an impairment of £1.8 million of capitalised
development costs.

4

Net debt and funding

4.1
Net debt
Net debt decreased in the period from £109.3 million to £45.5 million. Operating cash flow was £4.1 million.
Disposal proceeds of £73.0 million relate to the sale of Industrial Analysis. The Group invested in tangible andintangible assets of £2.8 million and capitalised development costs of £3.1 million.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201712

Table 6: Movement in net debt£m
Net debt as at 31 March 2017
Adjusted operating cash flow
Interest
Tax
Capital expenditure on tangible and intangible assets
Capitalised development expenditure
Increase in investment in associate
Net cash flow from sale of subsidiary undertaking
Dividends paid
Other items
Net debt as at 30 September 2017

109.3
(4.1)
2.0
2.5
2.8
3.1
2.1
(73.0)
2.1
(1.3)
45.5

4.2
Funding
The Group has in place an unsecured multi-currency revolving facility agreement which is committed until
February 2020. The facility has been entered into with a group of three banks and comprises a Sterling
denominated multi-currency facility of £100.0 million and a US Dollar denominated multi-currency facility of$37.0 million.
In this half year the Group has repaid £5.0 million of its bilateral private placement note, leaving an
outstanding note of £39.5 million, which matures in 2021. In September 2017, the Group repaid the balance of
its amortising fixed rate loan from the European Investment Bank. The Group has uncommitted facilities of£20.6 million.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As
at 30 September 2017 net debt to EBITDA was at 0.9 times and EBITDA to interest was 10.1 times, both wellwithin our banking covenants.
5

Pensions

The Group has defined benefit pension schemes in the UK and USA. Both have been closed to new entrants
since 2001 and closed to future accrual from July 2010.
At 30 September 2017, the net liability arising from our defined benefit scheme obligations was £22.5 million(31 March 2017: £25.1 million), a fall of £2.6 million. The reduction in the deficit was primarily due to thecontributions paid in the period. Total scheme assets at 30 September 2017 were £283.3 million (31 March
2017: £287.9 million) while liabilities were £305.8 million (2016: £313.0 million).

6

Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performanceand position, are set out in the Performance, Strategy and Operations sections. The financial position of theGroup, its cash flows, liquidity position and borrowing facilities are described in the Financial Review.
The diverse nature of the Group, combined with its financial strength, provides a solid foundation for asustainable business. The Directors have reviewed the Group’s forecasts and flexed them to incorporate anumber of potential scenarios relating to changes in trading performance. The Directors believe that theGroup will be able to operate within its existing debt facilities. This review also considered hedging
arrangements in place. The Directors believe that the Group is well placed to manage its business risks
successfully.
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion,
after making reasonable enquires, that the Group has adequate resources to continue in operational existence
for the foreseeable future.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201713

7

Forward-Looking Statements

This document contains certain forward-looking statements. The forward-looking statements reflect theknowledge and information available to the Company during the preparation and up to the publication of thisdocument. By their very nature, these statements depend upon circumstances and relate to events that may
occur in the future thereby involving a degree of uncertainty. Therefore, nothing in this document should beconstrued as a profit forecast by the Company.

Gavin Hill
Group Finance Director
14 November 2017

Oxford Instruments plc Half Year Results for the six months ended 30 September 201714

Condensed Consolidated Statement of Income
Half year ended 30 September 2017 – unaudited
Half Year to 30 Sept 2017
Adjusted
AdjustingTotal
items*

Half Year to 30 Sept 2016
Adjusted
AdjustingTotal
items*

Notes

£m

£m

£m

£m

£m

£m

3

132.1
(64.4)
67.7(11.4)(25.4)(11.9)

—
—
—
—
—
(5.9)

132.1
(64.4)
67.7(11.4)(25.4)(17.8)

132.4(62.9)
69.5(11.4)(25.3)(12.5)

—
—
—
(0.7)
—
(6.3)

132.4
(62.9)
69.5(12.1)(25.3)(18.8)

—
(0.2)
18.8

(0.3)
—
(6.2)

(0.3)
(0.2)
12.6

(0.4)
(3.5)
16.4

(0.1)
—
(7.1)

(0.5)
(3.5)
9.3

Other financial income
Financial income

0.1
0.1

2.6
2.6

2.7
2.7

0.1
0.1

—
—

0.1
0.1

Interest charge on pension
scheme net liabilities
Other financial expenditure
Financial expenditure

(0.3)

—

(0.3)

(0.6)

—

(0.6)

(2.3)
(2.6)

—
—

(2.3)
(2.6)

(2.8)
(3.4)

(6.6)
(6.6)

(9.4)
(10.0)

3

16.3

(3.6)

12.7

13.1

(13.7)

(0.6)

7

(3.6)

0.9

(2.7)

(2.8)

2.9

0.1

12.7

(2.7)

10.0

10.3

(10.8)

(0.5)

0.3

45.3

45.6

1.9

(2.1)

(0.2)

13.0

42.6

55.6

12.2

(12.9)

(0.7)

pence

pence

pence

pence

22.3
0.5
22.8

17.5
79.9
97.4

18.0
3.4
21.4

(0.9)
(0.4)
(1.3)

22.1
0.5
22.6

17.4
79.5
96.9

18.0
3.3
21.3

(0.9)
(0.4)
(1.3)

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Share of loss of associate, net oftax
Foreign exchange loss
Operating profit/(loss)

Profit/(loss) before income tax
from continuing operations
Income tax (expense)/credit
Profit/(loss) for the period fromcontinuing operations
Profit/(loss) from discontinued
operations after tax
Profit/(loss) for the period
attributable to equity holders of
the parent

4

6

Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
From profit/(loss) for the period

8

Diluted earnings per share
From continuing operations
From discontinued operations
From profit/(loss) for the period

8

Dividends per share
Dividends paid
Dividends proposed

6

6

9
9

3.70
3.70

3.70
3.70

* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in note 2 of this Half Year Report.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201715

Condensed Consolidated Statement of Income
Half year ended 30 September 2017 – unaudited

Notes

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Share of loss of associate, net of tax
Foreign exchange loss
Operating profit/(loss)
Other financial income
Financial income

3

Income tax (expense)/credit
Profit/(loss) for the year from continuing
operations
Profit from discontinued operations after tax
Profit/(loss) for the year attributable to equity
holders of the parent

Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
From profit/(loss) for the period
Diluted earnings per share
From continuing operations
From discontinued operations
From profit/(loss) for the period
Dividends per share
Dividends paid
Dividends proposed

Total
£m

300.2
(142.9)157.3(23.6)(54.1)(28.8)(0.8)(12.0)
38.0
0.2
0.2

—
—
—
(0.7)
—
(49.6)(8.4)—(58.7)
1.2
1.2

300.2
(142.9)157.3(24.3)(54.1)(78.4)(9.2)(12.0)(20.7)
1.4
1.4

(1.1)
(5.6)
(6.7)

—
(0.2)
(0.2)

(1.1)
(5.8)
(6.9)

3

31.5

(57.7)(26.2)

7

(7.8)

8.5

0.7

6

23.7
4.3

(49.2)
0.9(25.5)
5.2

28.0(48.3)(20.3)

4

Interest charge on pension scheme net liabilities
Other financial expenditure
Financial expenditure
Profit/(loss) before income tax from continuing
operations

Year to 31 March 2017
Adjusted
Adjustingitems*
£m
£m

8
41.5
7.5
49.0

(44.7)
9.1(35.6)

41.4
7.5
48.9

(44.7)
9.1(35.6)

8

9
9

13.0
13.0

*Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in note 2 of this Half Year Report.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201716

Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2017 - unaudited
Half year to
30 Sept2017£m

Half year to
30 Sept
2016£mYear to31 March2017£mProfit/(loss) for the period

55.6

(0.7)

(20.3)

Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Gain/(loss) on effective portion of changes in fair value of cash flow
hedges, net of amounts recycled
Foreign exchange translation differences
Net cumulative foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement
Tax on items that may be reclassified to profit or loss

—
(5.4)

0.1
14.7

0.1
18.8

(4.8)
—

—
—

(5.7)
—

Items that will not be reclassified subsequently to profit or loss
Remeasurement (loss)/gain in respect of post retirement benefits
Tax on items that will not be reclassified to profit or loss
Total other comprehensive income

(0.8)
0.2
(10.8)(15.1)
2.7
2.4

4.4
(0.9)
16.7

Total comprehensive income for the period attributable to equity
shareholders of the parent

44.8

1.7

(3.6)

Oxford Instruments plc Half Year Results for the six months ended 30 September 201717

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2017 – unaudited
Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

61.5

0.2

22.8

45.1

132.5

—

—

—

—

55.6

55.6

– Foreign exchange translation differences

—

—

—

(5.4)

—

(5.4)

– Net foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement

—

—

—

(4.8)

—

(4.8)

– Remeasurement loss in respect of post-retirement benefits

—

—

—

—

(0.8)

(0.8)

– Tax on items recognised directly in other comprehensive
income

—

—

—

—

0.2

0.2

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

—

—

—

(10.2)

55.0

44.8– Proceeds from issue of shares

—

0.2

—

—

—

0.2

– Credit in respect of employee service costs settled byaward of share options

—

—

—

—

0.5

0.5

– Dividends payable

—

—

—

—

(7.4)

(7.4)

Total transactions with owners recorded directly in equity:

—

0.2

—

—

(6.9)

(6.7)

Balance at 30 September 2017

2.9

61.7

0.2

12.6

93.2

170.6

Retainedearnings
£m

Total
£m

Balance at 1 April 2017

Sharecapital£mSharepremium
account£m

2.9

Total comprehensive income:
Profit for the period
Other comprehensive income:Transactions with owners recorded directly in equity:

Share
capital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve
£m

2.9

61.5

0.1

9.7

68.8

143.0

—

—

—

—

(0.7)

(0.7)

– Foreign exchange translation differences

—

—

—

14.7

—

14.7

– Gain on effective portion of changes in fair value of cash
flow hedges, net of amounts recycled

—

—

0.1

—

—

0.1

– Remeasurement loss in respect of post-retirement benefits

—

—

—

—

(15.1)(15.1)– Tax on items recognised directly in other comprehensive
income

—

—

—

—

2.7

2.7

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

—

—

0.1

14.7

(13.1)

1.7

—

—

—

—

(7.4)

(7.4)

Balance at 1 April 2016
Total comprehensive income:Loss for the period
Other comprehensive income:Transactions with owners recorded directly in equity:– Dividends payable
Total transactions with owners recorded directly in equity:

—

—

—

—

(7.4)

(7.4)

Balance at 30 September 2016

2.9

61.5

0.2

24.4

48.3

137.3

Oxford Instruments plc Half Year Results for the six months ended 30 September 201718

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2017 – unaudited continued
Foreignexchange
Other translation
reserve
reserves
£m
£m

Share
capital£mSharepremium
account
£m

2.9

61.5

0.1

—

—

– Foreign exchange translation differences—– Net foreign exchange gain on disposal of subsidiaries
taken to the Income Statement

Retainedearnings
£m

Total
£m

9.7

68.8

143.0

—

—

(20.3)(20.3)

—

—

18.8

—

18.8

—

—

—

(5.7)

—

(5.7)

– Gain on effective portion of changes in fair value of cash
flow hedges, net of amounts recycled

—

—

0.1

—

—

0.1

– Remeasurement gain in respect of post-retirement
benefits

—

—

—

—

4.4

4.4

– Tax on items recognised directly in othercomprehensive income

—

—

—

—

(0.9)

(0.9)

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

—

—

0.1

13.1

(16.8)(3.6)– Charge in respect of employee service costs settled byaward of share options

—

—

—

—

0.5

0.5

– Dividends payable

—

—

—

—

(7.4)

(7.4)

Total transactions with owners recorded directly in equity:

—

—

—

—

(6.9)

(6.9)

Balance at 31 March 2017

2.9

61.5

0.2

22.8

45.1

132.5

Balance at 1 April 2016
Total comprehensive income:Loss for the year
Other comprehensive income:Transactions with owners recorded directly in equity:

Oxford Instruments plc Half Year Results for the six months ended 30 September 201719

Condensed Consolidated Statement of Financial Position
As at 30 September 2017 - unaudited
As at
30 Sept
2017
£m

As at
30 Sept
2016
£m

As at
31 March
2017
£m

29.3
164.9
5.7
2.1
28.8
230.8

36.0
220.7
12.6
3.6
21.5
294.4

32.5
181.0
3.9
3.6
26.0
247.0

48.6
67.8
3.9
2.3
14.3
136.9

69.8
79.2
2.4
—
20.9
172.3

53.9
81.1
4.2
0.6
27.2
167.0

367.7

466.7

414.0

2.9
61.7
0.2
12.6
93.2
170.6

2.9
61.5
0.2
24.4
48.3
137.3

2.9
61.5
0.2
22.8
45.1
132.5

59.2
22.5
10.3
92.0

154.0
47.5
1.8
203.3

129.6
25.1
5.6
160.3

0.6
79.0
9.3
5.3
1.0
9.9
105.1

8.0
87.3
3.5
5.3
10.9
11.1
126.1

6.9
93.0
6.5
—
5.0
9.8
121.2

Total liabilities

197.1

329.4

281.5

Total liabilities and equity

367.7

466.7

414.0

AssetsNon-current assets
Property, plant and equipment
Intangible assets
Investment in associateLong-term receivables
Deferred tax assets

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

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

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

Current liabilities
Bank loans and overdrafts
Trade and other payables
Current income tax payables
Accrued dividend
Derivative financial instruments
Provisions

Oxford Instruments plc Half Year Results for the six months ended 30 September 201720

Condensed Consolidated Statement of Cash Flows half year ended 30 September 2017 - unaudited
Half year to
30 Sept
2017
£m
10.0

Half year to
30 Sept
2016
£m
(0.5)

Year to31 March2017£m(25.5)

2.7
(0.1)
—
0.3
0.3
—
—
—
5.6
—
2.4
1.6

(0.1)
9.9
0.3
—
0.1
0.7
—
—
6.0
—
2.5
1.5

(0.7)
5.5
0.3
0.4
0.4
0.7
0.4
8.0
46.3
2.2
5.1
3.8

Adjusted earnings before interest, tax, depreciation and amortisation
22.8
0.2
Loss on disposal of plant, property and equipment
0.5
Cost of equity settled employee share schemes
Share of loss from associate—
Acquisition related costs paid—
(0.7)
Restructuring costs paid
Foreign currency loss on intra-Group Dividends—
Cash payments to the pension scheme more than the charge to operating(3.5)
profitOperating cash flows before movements in working capital
19.3
(6.6)
Increase in inventories(1.3)(Increase)/decrease in receivables(9.2)
Decrease in payables and provisions
2.1
Increase in customer deposits(0.6)
Purchase of rental assets held for later resale
Cash generated by operations
3.7
(1.0)
Interest paid
(2.5)
Income taxes paid
Net cash from operating activities
0.2
Cash flows from investing activities
Acquisition of subsidiaries – net of cash acquired—(2.2)
Acquisition of property, plant and equipment(0.2)
Acquisition of intangible assets
73.0
Net cash flow on disposal of businesses(3.1)
Capitalised development expenditure(2.1)
Increase in investment in associate
Net cash generated from/(used in) investing activities
65.4
Cash flows from financing activities
0.2
Proceeds from issue of share capital(77.6)(Decrease)/increase in borrowings(2.1)
Dividends paid
Net cash (used in)/generated from financing activities(79.5)(13.9)Net decrease in cash and cash equivalents from continuing operations
1.9
Increase in cash from discontinued operations
26.5
Cash and cash equivalents at beginning of the period(0.8)
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the period
13.7
Reconciliation of changes in cash and cash equivalents to movement in net debt
Half year to
30 Sept2017£m(12.0)(Decrease)/increase in cash and cash equivalents(0.8)
Effect of foreign exchange rate changes on cash and cash equivalents(12.8)
77.6
Cash outflow/(inflow) from decrease/increase in debt
(1.0)
Accrued interest
63.8
Movement in net debt in the period(109.3)Net debt at start of the period
Net debt at the end of the period(45.5)

20.4
0.3
—
0.4
—
(0.4)
—

46.9
0.5
0.5
0.8
—
(1.1)
(0.8)

(3.5)
17.2
(3.7)
2.9
(14.3)
0.2
(0.5)
1.8
(2.6)
(0.7)
(1.5)

(6.9)
39.9
(1.7)
(1.1)
(2.5)
0.9
(1.0)
34.5
(5.0)
(2.1)
27.4

(6.8)
(1.6)
(0.1)
—
(3.0)
—
(11.5)

(9.8)
(3.0)
(0.1)
12.2
(5.9)
—
(6.6)

—
11.6
(2.1)
9.5
(3.5)
0.6
20.4
1.6
19.1

—
(12.8)(7.4)(20.2)
0.6
3.6
20.4
1.9
26.5

Half year to
30 Sept
2016
£m
(2.9)
1.6
(1.3)
(11.6)—(12.9)(128.2)(141.1)

Year to31 March
2017
£m
4.2
1.9
6.1
12.8
—
18.9
(128.2)(109.3)

Profit/(loss) for the period from continuing operations
Adjustments for:
Income tax expense/(credit)
Net financial (income)/expense
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Impairment of capitalised development costs
Loss on disposal of subsidiary
Impairment of investment in associate
Amortisation and impairment of acquired intangibles
Impairment of capitalised intangible software costs
Depreciation of property, plant and equipment
Amortisation of capitalised development costs

Oxford Instruments plc Half Year Results for the six months ended 30 September 201721

Notes on the Half Year Financial Statements
Half year ended 30 September 2017 – unaudited
1

BASIS OF PREPARATION OF ACCOUNTS

Reporting entity
Oxford Instruments plc 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 the Group). They havebeen prepared and approved by the Directors in accordance with International Financial Reporting Standard (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 statements of the Group for theyear ended 31 March 2017.
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 2017 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 not containa statement under section 498 (2) or (3) of the Companies Act 2006.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and presentation that were applied in the preparation of
the Company’s published consolidated financial statements for the year ended 31 March 2017, except as explained below.
Adoption of new and revised standards
At present, there are no other new standards, amendments to standards or interpretations mandatory for the first time forthe year ending 31 March 2018.
Estimates
The preparation of half year financial statements requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing these half year financial statements, the significant judgements made by management in applying the group’s
accounting policies and key sources of estimation uncertainty were the same as those that applied to the Consolidated
Financial Statements as at and for the year ended 31 March 2017.
Going concern
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.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201722

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
1

BASIS OF PREPARATION OF ACCOUNTS continued

Exchange rates
The principal exchange rates used to translate the Group’s overseas results were as follows:
Period end rates

Half year to
30 Sept
2017
1.34
1.13
151

Half year to
30 Sept
2016
1.30
1.16
132

Year to31 March
2017
1.25
1.17
139

Average translation rates
Half year to 30 September 2017
April
May
June
July
AugustSeptember

US Dollar

Euro

Yen

1.27
1.29
1.29
1.31
1.30
1.31

1.18
1.17
1.14
1.13
1.10
1.11

142
143
144
146
143
146

Average translation rates year ended 31 March 2017
April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
FebruaryMarch

US Dollar
1.45
1.46
1.41
1.35
1.32
1.31
1.26
1.23
1.24
1.25
1.25
1.25

Euro
1.27
1.30
1.27
1.21
1.18
1.16
1.13
1.14
1.17
1.17
1.18
1.18

Yen
159
159
150
138
134
132
130
134
142
144
142
140

US DollarEuro
Yen

Oxford Instruments plc Half Year Results for the six months ended 30 September 201723

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
2

NON-GAAP MEASURESThe Directors present the following non-GAAP measures as they believe it gives a better indication of the underlying
performance of the business.

Reconciliation between operating profit and profit before income tax and adjusted profit fromcontinuing operations
Operating profit/(loss)
Half year Half year Year toto 30 Sep to 30 Sep 31 Mar
2017
2016
2017
£m

Statutory measure from continuing operations
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Unwind of discount in respect of contingent consideration andacquisition related accruals
Non-recurring and acquisition related items
Impairment of acquired intangibles
Impairment of investment in associate
Impairment of capitalised development costs
Impairment of capitalised software costs
Amortisation of acquired intangibles
Mark-to-market (gain)/loss in respect of derivative financial
instruments
Adjusted measure from continuing operations
Share of taxation
Adjusted profit for the period from continuing operations£m

Profit/(loss) before income
tax
Half year Half year Year toto 30 Sep to 30 Sep 31 Mar
2017
2016
2017
£m

£m

£m

£m

12.6
—
0.3
0.3
—

9.3
0.3
—
0.1
—

(20.7)
0.3
0.4
0.4
0.4

12.7
—
0.3
0.3
—

(0.6)
0.3
—
0.1
—

(26.2)
0.3
0.4
0.4
0.4

—
0.6
—
—
—
—
5.6

—
0.4
—
—
0.7
—
6.0

—
1.5
33.8
8.0
0.7
2.2
12.5

—
0.6
—
—
—
—
5.6

0.2
0.6
—
—
0.7
—
6.0

0.2
1.7
33.8
8.0
0.7
2.2
12.5

—
18.8
—
18.8

—
16.4
—
16.4

—
38.0
—
38.0

(2.6)
16.3
(3.6)
12.7

6.4
13.1
(2.8)
10.3

(1.2)
31.5
(7.8)
23.7

Acquisition related costs comprise professional fees incurred in relation to mergers and acquisitions activity and any
consideration which, under IFRS 3 (revised), falls to be treated as a post-acquisition employment expense.
Restructuring costs comprise one-off costs in respect of cost reduction programmes in the US Healthcare and Asylum
businesses. Restructuring costs relating to the Group’s associate relate to exceptional costs incurred by the associatearising from the merger of the Scienta and Omicron businesses.
In order to assist with comparability between peers, adjusted profit excludes the non-cash amortisation and impairment ofacquired intangible assets and goodwill and the unwind of discounts in respect of contingent consideration relating tobusiness combinations.
The Group reports ineffectiveness of its hedging as an adjusting item. In the prior year, this included losses on certain
contracts relating to the hedging of the Japanese Yen which were not required for ordinary trading and which were reallocated for use against the remittance of net income of the Group’s Japan operations. Additionally, under IAS 39, allderivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are alsomeasured at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group
does not take advantage of the hedge accounting rules provided for in IAS 39 since that standard requires certain
stringent criteria to be met in order to hedge account, which, in the particular circumstances of the Group, are consideredby the Board not to bring any significant economic benefit. Accordingly, the Group accounts for these derivative financial
instruments at fair value through profit or loss. To the extent that instruments are hedges of future transactions, adjusted
profit for the year is stated before changes in the valuation of these instruments so that the underlying performance of theGroup can be more clearly seen.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201724

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
2

NON-GAAP MEASURES continued

In the prior year:
•
•
•

•
3

the Group settled various claims totalling £0.4m relating to the disposal of its Omicron business in 2015;
the Group recognised an impairment of £8.0m relating to its equity accounted associate investment;
the one off impairment of capitalised development costs related to a specific internal systems project that was
stopped as the Group focused and directed resources so as to accelerate projects; andthe one off impairment of capitalised software costs was carried out following a reassessment of the future value
expected to be derived from internally developed software.

SEGMENT INFORMATIONThe Group has ten operating segments. These operating segments have been combined into three aggregated operating
segments to the extent that they have similar economic characteristics, with relevance to products and services, type andclass of customer, methods of sale and distribution and the regulatory environment in which they operate. Each of thesethree aggregated operating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed below:•
the Materials and Characterisation segment comprises a group of businesses focusing on applied R&D andcommercial customers, enabling the fabrication and characterisation of materials and devices down to the atomic
scale;•
the Research and Discovery segment comprises a group of businesses providing advanced solutions that create
unique environments and enable measurements down to the molecular and atomic level which are used infundamental research; and•the Service and Healthcare segment provides customer service and support for the Group’s products and theservice, sale and rental of third party healthcare imaging systems.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on areasonable basis. Inter-segment pricing is determined on an arm’s length basis. 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 each segment and used by the Board of Directors for decisions on resource allocationand to assess performance. No asset information is presented below as this information is not presented in reporting to
the Group’s Board of Directors.
Results from continuing operations
Half year to 30 September 2017
Materials &Characterisation£mResearch &Discovery£mService &Healthcare£mExternal revenue
Inter-segment revenue
Total segment revenue

50.1
—
50.1

47.9
0.1
48.0

34.1
—
34.1

132.1

Segment operating profit from continuing
operations

7.2

4.2

7.4

18.8

Materials &Characterisation
£m
45.3
—
45.3

Research &Discovery
£m
55.4
—
55.4

Service &Healthcare
£m
31.7
—
31.7

4.2

7.0

5.2

Total
£m

Results from continuing operations
Half year to 30 September 2016

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit from continuing
operations

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

Total
£m
132.4

16.4

25

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
3

SEGMENT Information continued

Results from continuing operations
Year to 31 March 2017

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit from continuing
operations

Materials &Characterisation
£m
104.1
—
104.1

Research &Discovery
£m
125.2
0.1
125.3

Service &Healthcare
£m
70.9
—
70.9

10.9

13.8

13.3

Total
£m
300.2

38.0

The adjusted result after tax of £nil (2016/17 half year: £0.4m loss; full year: £0.8m loss) from the Group’s associate isreported within the Research & Discovery segment.

Reconciliation of reportable segment profit

Half year to 30 September 2017
Operating profit for reportable segments from continuing
operations
Restructuring costs
Restructuring costs – relating to associate
Amortisation of acquired intangibles
Financial income
Financial expenditure
Profit before income tax from continuing operations

Half year to 30 September 2016
Operating profit for reportable segments from continuing
operations
Acquisition related costs
Restructuring costs – relating to associate
Impairment of capitalised development costs
Amortisation of acquired intangibles
Financial income
Financial expenditure
Loss before income tax from continuing operations

Year to 31 March 2017
Operating profit for reportable segments from continuing
operations
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Impairment of capitalised development costs
Loss on disposal of subsidiary
Impairment of investment in associate
Impairment of capitalised software costs
Amortisation of acquired intangibles
Impairment of acquired intangibles
Financial income
Financial expenditure
Loss before income tax from continuing operations

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

£m

£m

£m

£m

£m

7.2
(0.1)
—
(1.3)
—
—
5.8

4.2
—
(0.3)
(3.8)
—
—
0.1

7.4
(0.2)
—
(0.5)
—
—
6.7

—
—
—
—
2.7
(2.6)
0.1

18.8
(0.3)
(0.3)
(5.6)
2.7
(2.6)
12.7

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

£m

£m

£m

£m

£m

4.2
—
—
(0.7)
(1.4)
—
—
2.1

7.0
(0.3)
(0.1)
—
(3.7)
—
—
2.9

5.2
—
—
—
(0.9)
—
—
4.3

—
—
—
—
—
0.1
(10.0)
(9.9)

16.4
(0.3)
(0.1)
(0.7)
(6.0)
0.1
(10.0)(0.6)

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

£m

£m

£m

£m

£m

10.9
—
—
—
(0.7)
—
—
—
(2.9)
(22.6)——(15.3)

13.8
(0.3)
—
(0.4)
—
(0.4)
(8.0)
—
(7.7)
—
—
—
(3.0)

13.3
—
(0.4)
—
—
—
—
—
(1.9)
(11.2)
—
—
(0.2)

—
—
—
—
—
—
—
(2.2)
—
—
1.4
(6.9)
(7.7)

38.0
(0.3)
(0.4)
(0.4)
(0.7)
(0.4)
(8.0)
(2.2)
(12.5)(33.8)
1.4(6.9)(26.2)

Oxford Instruments plc Half Year Results for the six months ended 30 September 201726

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
4

RESEARCH AND DEVELOPMENT

The total research and development spend by the Group is as follows:

Research and development expense charged to the consolidated
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
Total cash spent on research and development during the period

5

Half year to
30 Sept2017£m

Half year to
30 Sept
2016£mYear to31 March
2017
£m

11.4

12.1

—

—

0.1

0.1

24.3
(0.1)
0.2

(1.6)
3.1
13.0

(2.2)
3.0
13.0

(4.5)
5.9
25.8

INVESTMENT IN ASSOCIATEThe Group’s share of loss in its equity accounted associate, Scienta Scientific AB (“Scienta”), for the period was £0.3m(2016/17 half year: £0.5m loss; full year: £1.2m loss). The Group did not receive any dividends from the associate in thecurrent or prior periods.
During the 6 months to 30 September 2017 the Group invested a further £2.1m in its equity accounted associate.
During the prior year the Group settled various claims totalling £0.4m relating to the disposal of its Omicron businessduring 2015/16 and recognised an impairment charge of £8.0m in respect of its investment in Scienta.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201727

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
6

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS

On 3 July 2017 the Group disposed of its Industrial Analysis business for a final consideration of £82.8m. On 17 November
2016 the Group disposed of its Superconducting Wire business for a final consideration of £14.0m.

Effect of disposal on the financial position of the Group
Goodwill
Acquired intangibles
Other intangibles
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Provisions
Tax balances
Net assets divested
Consideration receivable
Deferred consideration
Refund due in respect of finalisation of working capital adjustment
Consideration received, satisfied in cash
Cash disposed ofTransaction expenses
Net cash inflow
Carrying value of net assets disposed of (excluding cash and cash equivalents)
Deferred consideration
Refund due in respect of finalisation of working capital adjustment
Recognition of provisions on disposal
Currency translation differences transferred from translation reserve
Gain on disposal
Tax (charge)/credit on gain on disposal
Gain on disposal net of tax

Industrial
AnalysisSuperconducting
Wire

2017/18
£m
(4.3)
(0.1)
(4.7)
(2.4)
(11.3)(16.4)
(6.0)
14.9
0.8
(0.1)
(29.6)
82.8

2016/17
£m

—
—
—
(3.1)
(12.6)
(6.5)
(0.3)
6.6
0.1

—
(15.8)
14.0
(1.0)

—

—

0.6
83.4
(6.0)
(4.4)
73.0
(23.6)

—

13.0
(0.3)
(0.5)
12.2
(15.5)
1.0

(0.6)
(2.8)
4.8
50.8
(3.8)
47.0

(0.2)
5.7
3.2
0.9
4.1

—

Discontinued operations
In the period to 30 September 2017 the Group’s Industrial Analysis business was classified as a discontinued operation;and in the year to 31 March 2017 the Group’s Superconducting Wire business was classified as a discontinued operation.
They were considered major classes of business on the basis that they were previously operating segments and referred
to in the Group Strategic Report.
The Group results have been re-presented to reflect the classification of the Group’s Industrial Analysis andSuperconducting Wire businesses as discontinued operations.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201728

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
6

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS continued

Results of discontinued operations – half year to 30 Sep 2017

Industrial
Analysis£m

Superconducting
Wire
£m

Total
£m

16.8
(16.1)
0.7
(0.4)
0.3

—
—
—
—
—

16.8
(16.1)
0.7
(0.4)
0.3

(0.1)
(2.2)
—
0.8
(1.2)
50.8
(3.8)
45.8

—
—
(0.2)
—
(0.2)
—
—
(0.2)

(0.1)
(2.2)
(0.2)
0.8
(1.4)
50.8
(3.8)
45.6

Revenue
Expenses
Adjusted profit before tax
Income tax charge
Adjusted profit after tax
Adjusting items:
Amortisation and impairment of acquired intangibles
One off costs arising as a result of disposal
Property sale costs
Income tax on adjusting items
Loss after tax
Gain on disposal
Tax on gain on disposal
Profit/(loss) from discontinued operations after tax

The one off costs arising as a result of the disposal comprise a £1.8 million impairment of capitalised development costs in
respect of a project which was discontinued as a result of the sale of the Industrial Analysis division along with related ongoing costs incurred in the current year.
The property sale costs relate to the ongoing sale of a surplus freehold property.

Results of discontinued operations – half year to 30 Sep 2016

Industrial
Analysis£m

Superconducting
Wire
£m

Total
£m

20.8
(19.3)
1.5
(0.3)
1.2

18.3
(17.2)
1.1
(0.4)
0.7

39.1
(36.5)
2.6
(0.7)
1.9

(2.1)
(0.4)
0.4
(0.9)

—
—
—
0.7

(2.1)
(0.4)
0.4
(0.2)

Revenue
Expenses
Adjusted profit before tax
Income tax charge
Adjusted profit after tax
Adjusting items:
Amortisation and impairment of acquired intangibles
Acquisition related costs
Income tax on adjusting items(Loss)/profit from discontinued operations after tax

Results of discontinued operations – full year to 31 Mar 2017
Revenue
Expenses
Adjusted profit/(loss) before tax
Income tax charge
Adjusted profit/(loss) after tax
Adjusting items:
Amortisation and impairment of acquired intangibles
Acquisition related costs
Restructuring costs
Income tax on adjusting items
Profit/(loss) after tax
Gain on disposal
Tax on gain on disposal
Profit/(loss) from discontinued operations after tax

Industrial

Superconducting

AustinAnalysis

Wire

Scientific

£m

£m

£m

£m

48.3
(43.8)
4.5
(0.9)
3.6

22.2
(20.9)
1.3
(0.4)
0.9

—
(0.2)
(0.2)
—
(0.2)

70.5
(64.9)
5.6
(1.3)
4.3

(2.4)
(1.2)
(0.2)
0.6
0.4
—
—
0.4

—
—
—
—
0.9
3.2
0.9
5.0

—
—
—
—
(0.2)
—
—
(0.2)

(2.4)
(1.2)
(0.2)
0.6
1.1
3.2
0.9
5.2

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

Total

29

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
6

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS continued

Earnings per share from discontinued operations

Adjusted basic earnings per share
Adjusted diluted earnings per share
Total basic earnings per share
Total diluted earnings per share

Half year to
30 Sept
2017
£m
0.5
0.5
79.9
79.5

Half year to
30 Sept
2016
£m
3.4
3.3
(0.4)
(0.4)

Year to31 March
2017
£m
7.5
7.5
9.1
9.1

Half year to
30 Sept
2017
£m
2.4
(0.5)
—
1.9

Half year to
30 Sept
2016
£m
1.9
(1.3)
—
0.6

Year to31 March
2017
£m
6.1
(2.5)
—
3.6

Cash flows from discontinued operations

Net cash generated from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash flows

7

TAXATION

The total effective tax rate on profits for the half year is 21.3% (2016/17: 16.7%). The weighted average tax rate in respectof adjusted profit before tax (see note 2) for the half year is 22.1% (2016/17: 21.4%). For the full year the Group expects
the tax rate in respect of adjusted profit before tax to be 23.0%.

8
a)

EARNINGS PER SHAREBasic

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
2017
Sharesmillion
57.3

Half year to
30 Sept
2016
Sharesmillion57.3

Year to31 March
2017
Sharesmillion
57.3

(0.2)

(0.2)

(0.2)

57.1

57.1

57.1

Oxford Instruments plc Half Year Results for the six months ended 30 September 201730

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
8b)

EARNINGS PER SHARE continued
DilutedThe following table shows the effect of share options on the calculation of both adjusted and unadjusted diluted basic
earnings per share.
Half year to
30 Sept
2017
SharesmillionHalf year to
30 Sept
2016
SharesmillionYear to31 March
2017
Sharesmillion

57.1
0.3

57.1
0.1

57.1
0.1

57.4

57.2

57.2

Half year to
30 Sept
2017
pence
3.70
—
3.70

Half year to
30 Sept
2016
pence
3.70
—
3.70

Year to31 March
2017
pence
3.70
9.30
13.00

Number of ordinary shares per basic earnings per sharecalculations
Effect of shares under option
Number of ordinary shares per diluted earnings per
share calculations

9

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:

Previous period interim dividend
Previous period final dividend

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
2017
pence
3.70
—
3.70

Half year to
30 Sept
2016
pence
3.70
—
3.70

Year to31 March
2017
pence
3.70
9.30
13.00

The final dividend for the year to 31 March 2017 was approved by shareholders at the Annual General Meeting held on 12
September 2017. Accordingly it is no longer at the discretion of the company and has been included as a liability as at 30
September 2017. It was paid on 19 October 2017.
The interim dividend for the year to 31 March 2017 of 3.70 pence was approved by the Board on 14 November 2017 andhas not been included as a liability as at 30 September 2017. The interim dividend will be paid on 6 April 2018 toshareholders on the register at the close of business on 23 February 2018.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201731

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
10

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statementof Financial Position are as follows:
Carrying
amount30 Sept
2017
£m

Fair
value
30 Sept
2017£m

Carrying
amount30 Sept
2016
£m

Fair
value
30 Sept
2016£m

Carrying
amount31 March
2017
£m

Fair
value
31 March
2017
£m

53.4
11.1
14.3

51.6
11.1
14.3

69.2
6.4
20.9

69.2
6.4
20.9

70.6
7.6
27.2

70.6
7.6
27.2

2

2.3

2.3

—

—

0.6

0.6

2

(1.0)

(1.0)

(10.9)(10.9)

(5.0)

(5.0)

(54.1)(0.6)(59.2)(54.1)(0.6)(59.2)(55.9)(1.8)(160.2)(55.9)(1.8)(160.2)(82.4)(1.4)(148.6)(82.4)(1.4)(148.6)Fair
value
hierarchy

Assets carried at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Assets carried at fair value
Derivative financial instruments:– Foreign currency contracts

Liabilities carried at fair value
Derivative financial instruments:– Foreign currency contracts
Liabilities carried at amortised cost
Trade and other payables
Bank overdraft
Borrowings

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments
reflected in the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal and interest
cash flows using the market rate of interest at the reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the carrying amount is deemed to reflect the fairvalue. All other receivables/payables are discounted to determine their fair value. Advances received are excluded fromother payables above as these are not considered to be financial liabilities.
Contingent consideration
The fair value of contingent consideration is estimated based on the forecast future performance of the acquired businessover a timeframe determined as part of the acquisition agreement, discounted as appropriate. Key assumptions include
growth rates, expected selling volumes and prices and direct costs during the period.

Oxford Instruments plc Half Year Results for the six months ended 30 September 201732

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2017 – unaudited
10

FAIR VALUE OF FINANCIAL INSTRUMENTS continued

Fair value hierarchy
The table above gives details of the valuation method used in arriving at the fair value of financial instruments. The
different levels have been identified as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices); andLevel 3: inputs for the asset or liability that are not based on observable market data.
There have been no transfers between levels during the year.
Contingent consideration relates to amounts payable in respect of acquisitions. It is reassessed at the end of each year toits fair value.

Contingent consideration
Balance brought forward at beginning of period
Fair value of contingent consideration on acquisitions in the year
Unwind of discount in respect of contingent consideration
Contingent consideration paid
Increase in contingent consideration
Contingent consideration released to the consolidated statement of income
Effect of movement in foreign exchange
Balance carried forward at end of period

11

30 Sep 2017 30 Sep 2016
£m
£m
—
6.6
—
—
—
—
—
(6.5)
—
—
—
—
—
(0.1)
—
—

31 Mar 2017
£m
6.6
—
—
(6.5)
—
—
(0.1)
—

RELATED PARTIESAll transactions with related parties are conducted on an arm’s length basis and in accordance with normal businessterms. Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
During the period, the Group supplied services and materials to its associate, Scienta Omicron Gmbh, on an arm’s length
basis. The following transactions occurred during the period:

Half year to 30 September 2017
Scienta Omicron GmbH

Revenue£m—

Receivables£m
3.6

Half year to 30 September 2016
Scienta Omicron GmbH

Revenue£m
0.1

Receivables£m
3.6

Included in receivables is a non-current loan receivable of £2.1m (2016: £3.6m) and a current loan receivable of £1.5m(2016: £nil). The loan is repayable at the end of May 2020. During the period the Group received interest charged on theloan of £0.1m (2016: £0.1m).

Oxford Instruments plc Half Year Results for the six months ended 30 September 201733

Principal Risks and Uncertainties
The Group has in place a risk management structure and internal controls which are designed to identify,
manage and mitigate risk.
In common with all businesses, Oxford Instruments faces a number of risks and uncertainties which could
have a material impact on the Group's long term performance.
On pages 23 to 25 of its 2017 Annual Report and Accounts (a copy of which is available at www.oxfordinstruments.com), the Company set out what the Directors regarded as being the principal risks anduncertainties facing the Group's long term performance and these are reproduced in the table below. Many ofthese risks are inherent to Oxford Instruments as a global business and they remain valid as regards theirpotential 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 areconsidered in the Half Year Statement of this Half Year Report, together with an indication if management isaware of any likely change in this situation.
ID

1

Specific Risk

Technical
Risk

Context

Risk

Possible
Impact

The Group
provides hightechnology
equipment andsystems to its
customers.

Failure of the advanced
technologies applied by
the Group to produce
commercial products,
capable of being
manufactured and soldprofitably.

Lower returns
through lossof market
share &
reducedprofitability.
Negative
impact on theGroup’s
reputation.

Control
Mechanisms‘Voice of the
Customer’approach todrive theproduct
development
road map;
Formal new
product
development
stage gate
process tomanage R&D
Product lifecycle
management

Mitigation

Understanding
customer needs /expectations andtargeted new productdevelopment
programme tomaintain andstrengthen productpositioning.
Stage gate process in
product development
to challengecommercial businesscase and mitigate
technical risks.
Operational practices
around salesproduction matching
and inventory
management to
mitigate stock
obsolescence risks.

2

Routes tomarketIn someinstances theGroup’s products
are components
of higher levelsystems, sold byOEMs and thus
the Group does
not control its
route to market.

Backward vertical
integration by OEMs

Loss of a key
route tomarket; newcompetitors;
lower sales
andprofitability.

Customer
intimacy tomatch productperformance tocustomerneeds;

Positioning of OI
brand andmarketingdirectly to end
users

Product differentiation
to promoteadvantages of OI
equipment &solutions;
Strategic marketingwith OEMs to sell
performance of the
combined system;
Broadening the OEM
customer base;Direct marketing to
end users

Oxford Instruments plc Half Year Results for the six months ended 30 September 201734

3

Economic
environment

Government
expenditure may
becomeconstrained in
key markets

Reduction in global
research funding

Lower sales
andprofitability

Market intimacy
andidentification ofalternative
markets

Market diversification– increasing
penetration into
corporate customers
not dependent on
external funding

4

Political risk

Geopolitical changes
resulting in sanctions andbar on exports to specificcountries or unfavourable
changes in tariffs / othercontrols on exports

Lower sales
andprofitability

Contract review
and protection
against breachin the event thatexport licence iswithheld

Broad global
customer base;contractual protection

5

Brexit related
risks

The Group
operates in
global markets
and can berequired tosecure export
licences fromgovernments.
The UK will
leave the EU

Short-term decline inEuropean researchfunding;

Lower sales
andprofitability

Market intimacy
andidentification ofalternative
markets

Inflationary pressure onpurchases and salaries;

Salaryinflation;
Increased
input costs;

Market diversification– increasing
penetration into
corporate customers
not dependent on
external funding

Possible changes to EU
citizens’ rights to work in
UK impacting retention &recruitment.

6

Supply chainrisk

The Group
operates a
strategic makeor buy policy andoutsources asignificant
proportion of thecosts ofproduction tobenefit from
economies ofscale andnatural currency
hedges.

Supply chain disruption inparticular for single
source components
leading to production
delays and potentially lost
revenue.

Loss of key
skills /increasedrecruitment /salary costs

Disruption tocustomers.
Lower sales
andprofitability

Procurement
strategy to
reduce pricevolatility
Product pricing
strategy
HR people
strategy tofacilitate
recruitment &retention of staff
with key skills
Procurement
strategy tomanage stock
availability

Long term pricing
agreements for key
suppliers
Margin focused sales
targets to mitigate
potential increases incosts
Renewal of UK work
permit scheme tofacilitate employmentof non UK / EUnationals
Buffer stocks of key
components;
Where possible, dual
source supply issoughtNegative
impact on theGroup’s
reputation.

7

PeopleA number of theGroup’s
employees havebusiness criticalskills.

Key employees leave andeffective replacements
are not recruited on atimely basis

Lower sales
andprofitability

HR people
strategy for
retention &recruitment ofstaff with key
skillsSuccession
management plans;Technical career
paths;
Renewal of UK work
permit scheme tofacilitate employmentof non UK / EUnationals

8

IT risk

Elements ofproduction,
financial andother systems
rely on IT
availability

Increasing risk of data
loss / breach throughcyber-attack, viruses ormalware.

Loss ofbusiness
critical data
and / orfinancial loss

IT security
policy &associatedstandards andprotection
systems.

On-going evolution of
security levels in
consultation with IT
security partners toensure changes are
in-line with current
threats.

“Zero-day” incidents,
where new viruses ormalware can spread
before security vendors
can respond represent a
particularly high risk

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

Internal IT
governance tomaintain those
protection

Inter alia, we deliveruser education,
improved

35

9Operationalrisk

Business units’
production
facilities are
typically locatedat a single site

Loss of all or part of amajor production facility

Delayedshipments
leading tolower sales
andprofitability

systems and ourincident
response

configuration, internal
testing and new tools
where appropriate.

Business
Continuity Plans
in place

Principal sites havedetailed BCPs which
include plans to
restore or relocate
production in theevent of a major
incident.

Use ofcontractual
protection to
mitigatefinancialconsequencesof delayeddelivery

10

11

12

Pensions

Foreignexchangevolatility

Legal /
compliancerisk

The Group’s
calculated
pension deficit issensitive tochanges in theactuarialassumptions.

Movements in theactuarial assumptions
may have an appreciable
effect on the reported
pension deficit.

The Group’s
sterling costbasis is higher
than its sterling
revenue sources
meaning that asignificant
proportion of theGroup’s profit ismade in foreign
currencies.

Adverse foreign currency
movements

The Group
operates in acomplextechnologicalenvironment andcompetitors may
seek to protect
their position
through
intellectual
property rights

Infringement of a third
party’s intellectual
property

Mechanisms such as
clauses for limitationof liability / liability
caps / exclusion ofconsequential losses
in sales contracts

Additional
cash requiredby the Groupto fund the
deficit.
Reduction in
net assets.

Regular review
of investment
strategy.

Reducedprofitability

Natural hedging
to offset foreign
currency sales
throughprocurement inforeigncurrencies;

Strategic procurement
in USD, Euros & Yen.

Hedging
programme

Short-term exposure
to volatility is
managed by hedging
programme (forward
contracts)

Formal‘Freedom toOperate’assessment to
identify potential
IP issues during
product
development;

Confirmation of‘Freedom to Operate’
during new productdevelopment stagegate process

Potential lossof future
revenue;financialcompensation

Oxford Instruments plc Half Year Results for the six months ended 30 September 2017

Liability hedging
programme tomitigate
exposure to
movements ininterest rates
and inflation

The Group has closed
its defined benefit
pension schemes in
the UK and US tofuture accrual.
The Group has afunding plan in place
to reduce the pension
deficit over the short
to medium term.

36

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 Guidance and Transparency Rules, being an indication ofimportant events that have occurred during the first six months of the financial year and theirimpact 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 Guidance and Transparency Rules, being related party
transactions that have taken place in the first six months of the current financial year and thathave 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.

Ian Barkshire, Chief Executive
14 November 2017

Gavin Hill, Group Finance Director

Oxford Instruments plc Half Year Results for the six months ended 30 September 201737

Independent review report to Oxford Instruments plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30 September 2017 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 offinancial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist thecompany in meeting the requirements of the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA"). 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 have reached.
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 FCA.
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 half-yearly 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 ofmaking 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 inaccordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us toobtain assurance that we would become aware of all significant matters that 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 offinancial statements in the half-yearly financial report for the six months ended 30 September 2017 is notprepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Greg Watts
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
14 November 2017

Oxford Instruments plc Half Year Results for the six months ended 30 September 201738

Oxford Instruments plc Half Year Results for the six months ended 30 September 201739