Oxford Instruments plc
Tubney Woods, Abingdon, Oxon OX13 5QX, UK
Tel: +44 (0) 1865 393200

Press Release

Email:info.plc@oxinst.com
www.oxford-instruments.com

Release Date: 7am Tuesday 12 June 2018
Oxford Instruments plc

Announcement of Preliminary Results for the year to 31 March 2018
Oxford Instruments plc, a leading provider of high technology products and systems for industry and research, today
announces its Preliminary Results for the year to 31 March 2018.
Year ended
31 March 2018£mYear ended
31 March 2017£m

Revenue1
Adjusted* operating profit1
Adjusted* profit before tax1
Profit/(loss) before tax1
Adjusted* basic earnings per share1
Dividend per share (full year)

296.9
46.5
42.3
34.2
56.3p
13.3p

300.2
38.0
31.5
(26.2)
41.5p
13.0p

Cash generated from operations1
Net debt

33.4
19.7

34.5
109.3

% change(1.1%)+22.4%+34.3%+35.7%+2.3%

Financial Highlights:
•
•
•
•
•
•
•
•

Reported orders up 5.0% to £313.0 million (2017: £298.0 million), an increase of 5.8% at constant currency.
Reported order book of £134.0 million as at 31 March 2018, up 5.0% (10.4% at constant currency). Excluding US
Healthcare, order book up 18.4% on a constant currency basis.
Reported revenue in line with previous year at constant currency.
Adjusted operating profit from continuing operations up 22.4% to £46.5 million (2017: £38.0 million), with a currency
benefit of £10.6 million – margin increase of 300 basis points to 15.7%.
Adjusted profit before tax from continuing operations up 34.3% to £42.3 million (2017: £31.5 million), an increase of
0.6% at constant currency.
Profit before tax from continuing operations of £34.2 million (2017: loss of £26.2 million).
Net debt down significantly to £19.7 million following good operating cash flow and disposals. Profit after tax fromsale of Industrial Analysis of £45.9 million and net proceeds of £71.2 million.
Full year dividend increased by 2.3% to 13.3 pence.

Operational Highlights:
•

•
•
•

Good progress in the early implementation of our Horizon Strategy, in particular:- Strong growth in orders and order book demonstrate early success from our market application focus;- Increased management and leadership capability across the Group;- Transitioned to a more commercially focused, market-driven Group to address a broad range of industrial
and academic markets; and- Continued investment in R&D with increased focus on customer solutions.
Strong financial performance across Materials & Characterisation driven by leading product portfolio and customer
applications focus in growing markets.
Good second half performance in Research & Discovery was offset by a weaker first half. Constant currency orderbook up 15.3%.
Profit and margin growth in Service & Healthcare driven by services relating to our own products. Reduction inrevenue from the anticipated decline in the sale of refurbished imaging systems.

Announcement of Preliminary Results for the year to 31 March 2018
Outlook:••

Our chosen end markets remain attractive, supported by commercial and government investment. Our growing
order book, customer application focus and drive for operational efficiencies provide confidence for the year ahead.
We expect to see an improvement in performance on a reported basis2 after allowing for the impact of an anticipatedcurrency headwind, based on current exchange rates.

Ian Barkshire, Chief Executive of Oxford Instruments plc, said:“We have made good progress in the year with the early implementation of the Horizon strategy, which was introducedin May 2017.
We have positioned the Group to become a leading provider of high technology products and services to the world’s
leading industrial companies and scientific research communities to image, analyse and manipulate materials down tothe atomic and molecular level. Our chosen end markets remain robust and, combined with our customer applications
focus and improved core capabilities, provide strong long-term drivers for future growth and margin improvement.”
1

Continuing operations
Before the adoption of IFRS 15 ‘Revenue for Contracts with Customers’ and IFRS 16 ‘Leases’

2

Enquiries:
Oxford Instruments plc
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director

Tel: 01865 393200

MHP Communications
Rachel Hirst / Luke Briggs

Tel: 020 3128 8100

Number of pages: 43*NOTE: Throughout this preliminary announcement we make reference to adjusted numbers. A full definition of adjusted
numbers can be found in note 1. Where we make reference to constant currency numbers these are prepared on amonth by month basis using the translational and transactional exchange rates which prevailed in the previous year
rather than the actual exchange rates which prevailed in the year. Transactional exchange rates include the effect of ourhedging programme.

Oxford Instruments plc
2Announcement of Preliminary Results for the year to 31 March 2018
Chairman’s Statement
It has been a positive year with the Group delivering a performance in line with our expectations and making good
progress with the Horizon strategy. Management has continued to steer our business towards a greater focus onmarket segments and applications, designed to help our customers advance their businesses through enhanced R&D
and productivity improvement. As a result, we are already starting to see improved trading in some of our businesses
and we expect progress to continue as the Horizon strategy gains momentum.
The Group has continued to focus on the core capabilities of its Horizon strategy: market intimacy, innovation andproduct development, customer support, and operational excellence as we embed best practice across the Group. We
have also strengthened our management with new senior leaders joining the business during the year and created
new leadership roles to sharpen our commercial focus. We also successfully completed the sale of Industrial Analysis
early in the second quarter of the financial year, marking a significant change to our portfolio.
Against this backdrop of activity and repositioning for long-term sustainable growth, the team maintained their focus on
near-term performance. Adjusted profit before tax was up 34.3% at £42.3 million (2017: £31.5 million) driven by astrong performance from our Materials & Characterisation sector and supported by favourable currency effects.
Adjusted profit before tax increased by 0.6% at constant currency. Profit before tax was £34.2 million (2017: loss of£26.2 million) and adjusted basic earnings per share on a continuing basis was up 35.7% to 56.3 pence (2017: 41.5
pence). Good operating cash flow and the proceeds from the sale of Industrial Analysis led to a significant reduction in
net debt to £19.7 million (2017: £109.3 million). Given the improvement in net debt and our confidence that the
Horizon strategy is beginning to deliver tangible benefits, the Board has proposed to raise the final dividend to 9.6
pence (2017: 9.3 pence), giving a full year dividend of 13.3 pence (2017: 13.0 pence), an increase of 2.3%.
As Ian Barkshire sets out in his Chief Executive’s Review, the management team is energised in changing the way weoperate, implementing the key tenets of the Horizon strategy. This will help position the Group as a leading provider ofhigh technology products and services to the world’s leading industrial companies and scientific researchcommunities.
I would like to thank the Board and all employees for their dedication and hard work during this time of change toreposition Oxford Instruments to deliver long-term profitable growth and sustainable value that benefits all our
stakeholders.
Alan Thomson
Chairman
12 June 2018

Oxford Instruments plc
3Announcement of Preliminary Results for the year to 31 March 2018
Chief Executive’s Review
Horizon Progress
We made good progress in the year with the early stages of the implementation of the Horizon strategy, launched in
May 2017, and we are starting to see tangible benefits. I am encouraged by how firmly embedded the understandingof our strategy is and how positive engagement has been across the Group.
Through Horizon, we have progressed a number of areas in support of our new strategy. We have transitioned to amore commercially focused, market driven Group through significant portfolio management and have implemented a
new sector structure to align our businesses with our chosen customer segments and applications. Our three newreporting sectors are Materials & Characterisation, Research & Discovery, and Service & Healthcare.
We are now positioned to address a broad range of markets and industrial sectors, with our key enabling technologies
underpinning the shift to a greener economy, increased digital connectivity, and advances in materials, life science andhealthcare. We do this by helping our customers to accelerate their applied R&D, increase their manufacturing
productivity and make new scientific discoveries. Today, nearly half of our customer base comprises commercialorganisations.
We have made good progress in migrating to a market and customer centric approach, offering solutions rather thantools. This allows us to provide more value to our existing customers, as well as creating growth opportunities in newmarket segments through application specific solutions with improved workflows, bespoke analytics, datainterpretation and associated support services. For example, customers developing higher efficiency, power andlonger life batteries need to understand and control the detailed chemical and electrical interactions at the nano andeven atomic scale. Because battery materials are very reactive and operate within an active solution this has been
extremely difficult to achieve. To solve this problem, we developed a sealed sample and imaging cell for our CypherESatomic force microscope that enables the direct measurement of these electrochemistry processes at the nano scale
for battery materials operating under their real-life conditions. Within the automotive industry, incoming parts areinspected to control and maintain suitable levels of cleanliness and when contamination is present, stopping its reoccurrence at source is critical to maintain production. Here we developed a bespoke workflow and data interpretation
package for our customer to measure the cleanliness of parts and importantly identify the source within the supply
chain of any contaminating particles. This solution was built as an upgrade to our generic particle analysis solution.
Importantly, these examples of a hardware and a software upgrade for existing product platforms can be delivered on
short time frames relative to new instrument platforms to both expand our addressable markets and increase the value
to our existing customers.
We have transformed the leadership team at an operational level, targeting individuals who have the specificcapabilities and experience needed to accelerate our progress with Horizon, largely through external recruitment.
Around 50% of our senior managers are new in their roles within the last two years; successful placements in the year
include new leaders for our NanoScience and X-ray Technology businesses and a new senior role, Group Commercial
Director, to lead a sharper commercial focus across our sales teams and global territories.
Through Horizon we are changing the way we operate and we are embedding clearly defined core capabilities acrossour businesses in market intimacy, innovation and product development, customer support, and operational
excellence.
In market intimacy we are changing the way we reach and communicate with our customers, more effectively bringing
to life the innovative and value adding solutions that we can provide for their specific applications. As part of our movefrom product to solution-selling, all our sales teams have undertaken bespoke training. We have also invested indeveloping our digital marketing capabilities and new Group and e-commerce websites.
Innovation and product development remain core to our growth strategy and as part of Horizon we have establishedcross-sector roadmaps, which are providing a broader range of high quality investment opportunities better alignedwith our chosen markets.
In customer support we have increased our breadth and range of products and services to support our customers
more effectively. We are investing in a range of technologies to improve customer productivity including remotediagnostics and predictive monitoring.

Oxford Instruments plc
4Announcement of Preliminary Results for the year to 31 March 2018
Operational excellence is delivering improved customer satisfaction and operational and logistical efficiencies. We are
implementing a lean approach to our operations and are in the process of training 50 ‘green belt’ lean leaders in
different roles and functions. We have added a Head of Strategic Sourcing to drive our Group procurement
programme to improve efficiencies and exploit synergies across our supply chain.
As part of our change programme we have been breaking down silos, establishing cross business and functional
working groups to extract best practice and better leverage our scale and deliver synergies. In the year we made £1.5
million of central and regional cost savings through back office and central overhead efficiencies, this partially
offsetting the previous contribution from and therefore stranded costs associated with the divested Industrial Analysis
business.
In the year we have positioned the Group to become a leading provider of high technology products and services tothe world’s leading industrial companies and scientific research communities to image, analyse and manipulatematerials down to the atomic and molecular level. Our chosen end markets remain robust and, combined with ourcustomer applications focus and improved core capabilities, provide strong long-term drivers for future growth andmargin improvement.

Results
The following results exclude discontinued operations.
The Group delivered a performance in line with expectations, supported by a currency tailwind and strong second halftrading. This was underpinned by significant growth in the Materials & Characterisation sector and improved
performance from Service & Healthcare, offset by weaker trading in the Research & Discovery sector despite apositive uplift in the second half of the year.
Reported orders for the Group were up 5.0% (5.8% at constant currency) to £313.0 million (2017: £298.0 million).
Excluding orders from our US Healthcare business, constant currency orders were up 8.9% against the previous
period. We continue to see increased demand from commercial and academic customers engaged in applied R&D as
well as production and manufacturing of high technology products and devices. This has driven a strong performancewithin Materials & Characterisation, with double-digit growth across the US, Europe and Asia, as well as increased
demand for services relating to our own products. Research & Discovery orders were broadly in line with the previous
year, maintaining a similar geographical split.
Reported revenue was broadly in line with the previous year at £296.9 million (2017: £300.2 million), and level atconstant currency supported by a strong second half performance, with good growth in Materials & Characterisationand services related to our own products. This was offset by reduced volumes in Research & Discovery in line with thephasing of orders, the delivery of longer lead time items and lower revenues associated with the sale of third party
systems in OI Healthcare. On a geographical basis, underlying revenue growth in Europe and Asia was offset by
reduced sales in North America, with Materials & Characterisation having strong growth across all territories.
The order book, representing orders for future delivery, increased by 5.0% to £134.0 million (2017: £127.6 million),
growth of 10.4% at constant currency. Excluding our US Healthcare business, constant currency order book is up
18.4%, with strong growth across Materials & Characterisation, Research & Discovery, and the service of our own
products.
Currency effects drove adjusted operating profit up 22.4% to £46.5 million (2017: £38.0 million), a decline of 5.5% atconstant currency. Adjusted operating margin rose to 15.7% for the Group (2017: 12.7%), supported by the currency
tailwind.
Adjusted profit before tax increased by 34.3% to £42.3 million (2017: £31.5 million), with an increased contribution
from Materials & Characterisation and Service & Healthcare and a lower contribution from Research & Discovery.
Adjusted profit before tax was up 0.6% at constant currency. Profit before tax of £34.2 million compared favourably toa loss of £26.2 million last year.
Continuing adjusted basic earnings per share grew strongly by 35.7% to 56.3 pence (2017: 41.5 pence).

Oxford Instruments plc
5Announcement of Preliminary Results for the year to 31 March 2018
We delivered a significant reduction in net debt in the period to £19.7 million (2017: £109.3 million) due to ongoingstrengthening of the balance sheet throughout the year, resulting from good operating cash flow, proceeds from thesale of the Industrial Analysis business and the sale of two properties.
Sector Performance
Turning to the individual sector performance:
Materials & Characterisation products and solutions enable the fabrication and characterisation of materials anddevices down to the atomic scale, predominantly supporting customers across applied R&D as well as the production
and manufacture of high technology products and devices. Building on a positive first half year, the sector delivered
strong growth and overall performance with positive contributions from NanoAnalysis, Asylum Research and Plasma
Technology. Reported orders grew in the period by 22.7% to £129.5 million (2017: £105.8 million). Reported revenue
grew by 11.7% to £118.1 million (2017: £105.7 million), with reported adjusted operating profit increasing to £20.1
million (2017: £12.2 million) and reported adjusted margin up to 17.0%. The order book for future deliveries increased
by 36.8% to £34.2 million (2017: £25.0 million), providing positive momentum. The sector is already benefitting from anumber of key initiatives within the Horizon strategy, particularly the focus on customer-orientated solutions that are
tailored to provide application-specific workflows and process recipes, information and analytics.
Research & Discovery provides advanced solutions that create unique environments and enable imaging andanalytical measurements down to the molecular and sub-atomic level, predominantly used in scientific research andapplied R&D. Reported orders of £118.2 million (2017: £120.1 million) were broadly in line with the previous year, with
continued growth in quantum solutions, an increased demand for our benchtop NMR products and an increase inorder intake in the second half for our optical microscopy products, offset by lower orders for scientific X-ray tubes.
Reported revenue of £112.1 million was down 10.5% on the previous year (2017: £125.3 million), due to the softer firsthalf performance of our optical microscopy products and the higher proportion of longer lead time customised
cryogenic and magnet system orders. The stronger second half orders resulted in an increase in order book of 11.7%
to £59.0 million, (2017: £52.8 million). Reported adjusted operating profit was in line with previous year at £13.8 million(2017: £13.8 million) with an improved reported adjusted margin of 12.3% (2017: 11.0%).
Service & Healthcare provides customer service and support for our own products and the service, sale and rental of
third party healthcare imaging systems. Reported orders for the period of £65.6 million (2017: £72.2 million) were
down 9.1% as reported (7.8% at constant currency) due to reduced orders within our US Healthcare business.
Reported orders for services related to our own products grew 3.7% to £39.0 million (2017: £37.6 million). Reported
revenue of £66.8 million (2017: £69.3 million), down 3.6% on the previous year, was due to lower shipments ofrefurbished third-party medical imaging systems. This more than offset reported revenue growth of 6.9% for services
related to our own products to £38.8 million (2017: £36.3 million). Reported adjusted operating profit rose to £12.6
million (2017: £12.0 million), an increase of 5.0%, while reported adjusted operating margin increased to 18.9% (2017:17.3%).
R&D
One of the core elements of our Horizon strategy is innovation and product development. We invested £24.8 million(2017: £25.8 million), with an increased emphasis on the solutions and technology that will increase value for ourcustomers through new capabilities, ease of use, enhanced productivity and application-specific information. We
monitor the proportion of our revenue which originates from products launched in the last three years (our vitality
index). Our vitality index for the reported period increased to 37% (2017; 30%), reflecting the successful uptake ofrecently launched products.
PeopleOur staff are fundamental to our business success and I have been encouraged by how they have engaged with the
Horizon strategy to improve our business. We continue with our focus to enhance the capabilities of our teams throughthe development of existing employees and investment in new talent.
I would like to thank all our employees for their commitment to Oxford Instruments, and for their ongoing enthusiasm tohelp our customers.

Oxford Instruments plc
6

Announcement of Preliminary Results for the year to 31 March 2018
Summary
We have made good progress in the year with the early implementation of the Horizon strategy, which was introducedin May 2017. We have positioned the Group to become a leading provider of high technology products and services tothe world’s leading industrial companies and scientific research communities to image, analyse and manipulate materials
down to the atomic and molecular level.
Materials & Characterisation performed strongly in attractive markets. We continue to invest in new product development
within the sector to improve and expand our range of products and solutions.
Research & Discovery had an improved second half performance, with recovery in optical microscopy systems and likefor like order growth in Andor. An under performance in NanoScience and X-ray Technology depressed the sector’sresult, however we are addressing the challenges through structural change and business simplification. These selfhelp actions, combined with positive end markets, support improved financial performance.
In Service & Healthcare, OiService continues to focus on increasing after-market revenue by providing a broader rangeof support services, while OI Healthcare is making a strategic shift towards a higher proportion of service revenue, which
is driving greater visibility of revenue and improved returns.
Outlook
Our chosen end markets remain attractive, supported by commercial and government investment. Our growing order
book, customer application focus and drive for operational efficiencies provide confidence for the year ahead.
We expect to see an improvement in performance on a reported basis after allowing for the impact of an anticipatedcurrency headwind, based on current exchange rates.
Ian Barkshire
Chief Executive
12 June 2018

Oxford Instruments plc
7

Announcement of Preliminary Results for the year to 31 March 2018
Operations Review
The Group reports in the following three sectors: Materials & Characterisation, Research & Discovery, and Service &Healthcare. The numbers detailed in the Operations Review refer to continuing operations.
Materials & Characterisation

Revenue
Adjusted2 operating profit
Adjusted2 operating margin
Profit before tax

2018
£m

2017
£m

Growth

118.1
20.1
17.0%
17.3

105.7
12.2
11.5%
(14.0)

11.7%
64.8%

Constant
Currency
Growth1
13.2%
19.7%

1

For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 1 of these Financial Statements

2

The Materials & Characterisation sector is comprised of Asylum Research, NanoAnalysis and Plasma Technology. This
sector has a broad customer base across a wide range of applications for the imaging and analysis of materials down
to the atomic level and the fabrication of semiconductor devices and structures through our range of advanced etch anddeposition processes and systems. Our market leading product performance combined with customer focused solutions
is driving strong growth by providing increased value to existing customers and the identification of and reach into newmarkets and applications. We are providing new capabilities, ease of use and enhanced productivity through applicationspecific workflows, processes, analytics and information. Revenue in Materials & Characterisation comes from a broad
range of end applications with about three quarters from the Semiconductor & Communications and the Advanced
Materials related customer segments. Industrial and commercial customers represent 49% of revenue, with the balanceeither academic or government funded.
Materials & Characterisation delivered strong order, revenue and profit growth supported by the successful launch of
new products, our increased customer application focus, the tailoring of products to provide dedicated solutions andgeneral growth within our end markets. From a geographic perspective, strong growth was seen across Europe, US and
Asia.
Sales of our imaging and analysis products and solutions used in electron microscopy had strong growth, withplacements in the world’s leading academic, semiconductor and advanced manufacturing facilities, as well as top
forensic laboratories, where customers seek rapid, automated solutions to their analysis challenges. The launch of
Symmetry, our super-fast material structure analyser, was a key driver in both the advanced materials and environmental
markets, enabling productivity improvements for our customers in terms of the speed, high-resolution and accuracy ofanalysis.
The introduction of our UltimTM range of large area X-ray detectors has driven strong sales within the semiconductor
market by providing unprecedented resolution and analysis of semiconductor structures and devices. A range ofapplications are benefiting from the enhanced capabilities we offer, including fault finding and failure analysis within
devices for the leading semiconductor manufacturers and cleanliness control in precision manufacturing. Other
applications that are utilising our UltimTM product range include solar cells and batteries, where researchers are working
to improve performance and storage density by better understanding their structure at a nanoscale. The sensitivity of
the UltimTM Extreme is providing new market opportunities within the life science and pharmaceutical markets where itis providing further insight and understanding of disease processes and can aid the identification of counterfeit
prescription drugs.
We saw strong order, revenue and profit growth for our scanning probe microscopy products. This has been largely
supported by the strong uptake we have had for our market leading Cypher portfolio and increased orders for our
updated entry level platform, with advanced ease of use providing marketing leading performance at a value price point.
CypherVRS™, the first and only full-featured video-rate atomic force microscope (AFM), is generating strong interest
across a diverse range of biological and physical science applications, where the visualisation of dynamic processes at
a molecular or atomic level provides new insights and information for research and applied R&D. Examples include theimaging of viruses, molecular and cellular dynamics, and semiconductor etch processes.

Oxford Instruments plc
8

Announcement of Preliminary Results for the year to 31 March 2018
Our electrochemistry sample cell upgrade for our CypherES™ AFM provides high-resolution imaging in real device
operating conditions. The advanced environmental control enables those researching the development of lithium-ion
batteries and emerging solid-state energy storage systems to better understand and characterise performance in reallife conditions.
We have strengthened our customer application focus with the release of a photovoltaics package for our MFP™ AFM.
This offers a convenient, high-performance turnkey solution for materials scientists that are seeking to improve theefficiency, reduce manufacturing costs and lengthen solar cell lifetimes.
In addition to the many varied research applications for our advanced AFM systems, our entry level portfolio is ideally
positioned to provide the simpler, routine measurements such as thin film roughness and uniformity at nanometre andeven sub-nanometre length scales that are inaccessible to other metrology tools. Our updated MFP Origin+™ has seen
good growth across a broad range of application areas due to its high level of performance, ease of use and appropriate
price point.
We had good growth from our semiconductor processing systems that provide etch and deposition process solutions
used across a range of semiconductor, device and materials applications. We have leading expertise in the processingof compound semiconductors, which are critical for enabling more compact devices, higher speeds, larger capacity andhigher energy efficiencies required to deliver the functionality and demands for big data, IoT, AI, high speed
communications and autonomous vehicles.
Growth has been supported by the development of new process recipes aligned to these growing markets, including the
fabrication of sensors and MEMS, which are used across a broad range of optical devices and communications systems
to provide higher speeds; and the development of advanced lasers used across a broad range of photonics markets
including Vertical Cavity Surface Emitting lasers (VCSELs) for facial recognition applications.
Customers working in these markets value our expertise and development capabilities, large portfolio of processing
recipes and our applications support to help them manufacture new devices repeatedly, with the required quality for new
and demanding applications. We have seen growth in both applied R&D and the expanding specialist production markets
for the manufacture of commercial systems, with specialist production now representing almost half the sales in thismarket.

Oxford Instruments plc
9Announcement of Preliminary Results for the year to 31 March 2018
Research & Discovery
2018
£m

2017
£m

GrowthRevenue
112.1
125.3(10.5%)
Adjusted2 operating profit
13.8
13.8
Adjusted2 operating margin
12.3%
11.0%
Profit before tax
4.1
(3.0)
1
For definition refer to note on page 2 of highlights
2
Details of adjusting items can be found in Note 1 of these Financial Statements

Constant
Currency
Growth1(9.7%)(36.2%)The Research & Discovery sector includes Andor Technology, NanoScience & Magnetic Resonance, X-ray Technology
and our minority share in ScientaOmicron. This sector provides advanced solutions that create unique environments
and enable imaging and analytical measurements down to the molecular and sub-atomic level, used predominantly infundamental 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. We have strong brand recognitionand leading product performance with 73% of sales into research communities and 23% into industrial customers
predominately for use in applied R&D.
In this sector, 40% of revenue comes from customers working within Healthcare & Life Science applications. Customers
exploring new semiconductor materials and devices make a significant contribution, and an increasing share is comingfrom 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 for applications such as quantum information
processing and quantum sensors. Research & Fundamental Science contributes 4% of revenue.
Orders for the sector were broadly in line with the previous year, with like for like growth in Andor and Magnetic
Resonance offset by lower orders from X-ray Technology, with NanoScience broadly in line with last year. From ageographic perspective, orders from Europe and US were broadly in line with previous year, with increases from Restof the World offsetting slight declines in Asia.
Revenue and profitability in the sector were impacted by three particular product areas that more than offset growthacross the broad range of the portfolio. As previously reported, there was a softer financial performance from our Andor
optical microscopy systems in the first half of the year as we transitioned from third-party systems to our own portfolio;
lower revenues from NanoScience as they work through a high volume of complex specialised systems at lower margins;and lower volumes of our scientific X-ray tubes in X-ray Technology.
Our NanoScience business is underperforming relative to its potential and is in transition as part of our Horizon
programme. The quality and complexity of the order book negatively impacted performance in the year despite an
improved second half performance. The current year is expected to be impacted by the remaining tail of complex
systems within the orderbook. We have a new leadership team and self-help plan in place to increase the emphasis on
margin, drive a stronger commercial focus and deliver organisational efficiencies.
We had order growth for our customised high magnetic systems for national science facilities, building on our strong
reputation in this sector. We increased sales of our ultra-low temperature portfolio driven by the increasing demand forsystems and solutions to support quantum research and quantum information processing. We are moving towards more
standardised solutions designed specifically for this growing market. Our combined cryogenic and magnetic solutions
grew in the year with the launch of a new range of measurement probes, providing more complete solutions for themeasurement of 2D materials, such as graphene.
Andor had significantly higher order intake in the second half of the year, driven by new product launches and thebroadening of our optical microscopy portfolio. Lower revenue in the period, partly due to phasing of orders, has resulted
in a significant increase in the order book for future deliveries.
We continue to develop our range of market leading scientific research cameras and have seen growth from application
areas requiring higher performance, faster collection and increased sensitivity. Our specialised deep cooled, large area,
high sensitivity cameras have provided good growth in astronomy, as researchers look for more accurate and detailed
information with better spectral performance to enable deep space imaging, solar astronomy and near-earth object
observation. Our world’s first super—resolution microscopy camera, iXon-SRFFTM allows customers to observe

Oxford Instruments plc
10Announcement of Preliminary Results for the year to 31 March 2018
biological features at resolutions significantly smaller than the wavelength of light to reveal unprecedented details in
living cells, helping to build an understanding of the complex intracellular mechanisms that underlie a wide range of
disease states. This image enhancement, which is only available on Andor cameras, overcomes frustrations with thecomplexity of sample preparation and the added expense of current super-resolution microscopes enabling customers
to achieve super-resolution capability with a more affordable microscope and standard sample preparation techniques.
We continue to benefit from our connections to many Quantum Imaging centres of excellence that have been establishedin support of this rapidly growing and well-funded market. Our single photon sensitive cameras saw growing demand
from researchers investigating and developing quantum optics, which are required for communication systems andexotic imaging solutions, for example those that can look through smoke or around corners.
Our optical microscopy platform, DragonflyTM, saw strong growth in the second half of the year as we introduced acomplimentary lower price point model to the portfolio, enabling the product range to address a much broader end
market. DragonflyTM provides the capability to quickly image large samples and reveal detail previously not seen inapplications such as neuroscience, cancer research and regenerative science. The product received an R&D Top 100
award, recognising the revolutionary technology and superior performance. We also saw good growth from our ImarisTM
visualisation software due to its ability to capture, process and visualise the extremely large data sets captured bymodern instrumentation, with data analysis and interpretation becoming an increasing part and value of the overall
product solution. ImarisTM is sold for use on our own and other optical microscopy systems.
We saw increased demand for our benchtop Nuclear Magnetic Resonance solutions, which provide essential information
about the identification and quantification of foods and chemicals for academic and industrial researchers and for quality
assurance and control. Revenue and order growth has been driven by our enhanced PulsarTM and the recently launched
MQC+TM systems. In the second half of the year we saw growth in the energy generation and storage sector following
increasing oil prices, capitalising on developments made across our application specific Geospec range of products.
Our X-ray source business continued to grow in the medical and research market segments but experienced greaterthan expected head winds in the material characterisation and industrial applications leading to a drop in the year on
year revenue. This was in part driven by the delayed introduction of new products for these markets and pricing
pressures in China.
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 delivered an improved financial performance for the year, with ourshare of adjusted operating profit at £0.4 million against a loss of £0.8 million last year. After our year end, the businesssold its UK based ultra-high vacuum products division. This is in line with the strategy to focus on providing core surface
science products and solutions.

Oxford Instruments plc
11Announcement of Preliminary Results for the year to 31 March 2018
Service & Healthcare Sector
2018
£m

2017
£m

GrowthRevenue
66.8
69.3(3.6%)
Adjusted2 operating profit
12.6
12.0
5.0%
Adjusted2 operating margin
18.9%
17.3%
Profit before tax
10.6
(0.2)
1
For definition refer to note on page 2 of highlights
2
Details of adjusting items can be found in Note 1 of these Financial Statements

Constant
Currency
Growth1(2.9%)
4.2%

The Service & Healthcare sector comprises the Group’s maintenance service contracts, billable repairs, training andsupport services, and spare part sales related to Oxford Instruments’ own products under the OiService brand; and thesale, service and rental of refurbished third-party MRI and CT machines under the OI Healthcare brand.
The Service & Healthcare sector increased profitability and margin in the period, driven predominantly by increased
demand for the services related to our own products. Revenue and order growth from our service offerings relating toour own products were more than offset by a decline from US OI Healthcare business. This was due to a combinationof the timing of sales prospects and the previously reported structural changes in the market by OEM providers.
OI Healthcare made good progress, with increased orders in the second half of the year, in line with the implementationof our strategy to move to a higher proportion of service contracts relative to the sale of refurbished systems. Revenue
was down in the year but through structural changes in line with our strategy, profitability was in line with last year,
providing a solid platform for future growth.
Within OiService we continue to drive our enhanced customer support offerings, adapting to our customers’ needs, forexample with remote diagnostics and online self-help. We are designing product platforms to enable service upgrades
delivering either performance enhancements or application specific solutions. This increases value and builds versatility
for our customers as well as growth in aftermarket revenue. Our new e-commerce website makes it easier for customers
to find and purchase consumable items and accessories and we have seen a corresponding increase in associatedrevenue.
Growth in service contracts related to our optical imaging analysis software has been driven by the value customers
place on having annual updates and access to our inhouse analysis experts. Across the OI Group we provide extensive
customer training programmes designed to increase their capability and productivity. This year we also held many very
successful global application seminars with research and application scientists, most notably a new microscopy summer
school run in collaboration with the Chinese Academy of Sciences.

Oxford Instruments plc
12Announcement of Preliminary Results for the year to 31 March 2018
Finance Review
During the financial 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 tocontinuing operations and exclude the results of Industrial Analysis in both the current and prior periods.
Reported orders increased by 5.0% to £313.0 million (2017: £298.0 million), an increase of 5.8% at constant currency.
At the end of the period the Group’s order book for future deliveries stood at £134.0 million (2017: £127.6 million),
growth of 5.0% on a reported basis and 10.4% at constant currency.
Reported revenue declined by 1.1% to £296.9 million (2017: £300.2 million). Revenue, excluding currency effects, wasbroadly in line with last year, with the movement in average currency exchange rates over the last year reducing
reported revenue by £3.1 million.
Adjusted operating profit from continuing operations increased by 22.4% to £46.5 million (2017: £38.0 million).
Adjusted operating profit from continuing operations, excluding currency effects, declined by 5.5%. Adjusted operating
margin from continuing operations increased by 300 basis points to 15.7% (2017: 12.7%).
Adjusted profit before tax from continuing operations grew by 34.3% to £42.3 million (2017: £31.5 million). A pre-tax
adjusted profit of £0.5 million from the Industrial Analysis business for the three months of ownership, prior to its saleon 3 July 2017, is included in discontinued operations. For the twelve months to 31 March 2017 the Industrial Analysis
and Superconducting Wire businesses delivered an adjusted profit before tax of £5.6 million. Including discontinued
operations, the Group achieved reported adjusted profit before tax of £42.8 million (2017: £37.1 million).
Adjusting items include amortisation of acquired intangibles of £10.9 million and a net gain of £1.7 million for businessreorganisation items. Our share of an impairment in our equity accounted associate was £2.0 million and the
movement in the mark-to-market valuation of currency hedges for future years gave rise to a gain of £3.1 million.
Adjusted profit before tax from continuing operations of £42.3 million (2017: £31.5 million) represents a margin of
14.2% (2017: 10.5%). After adjusting items, the Group recorded a profit before tax of £34.2 million from continuing
operations (2017: loss of £26.2 million).
Continuing adjusted basic earnings per share grew by 35.7% to 56.3 pence (2017: 41.5 pence). Continuing basic
earnings per share was 34.3 pence (2017: loss of 44.7 pence).
Cash generated from operations fell by £1.1 million to £33.4 million (2017: £34.5 million), representing 68.8% (2017:90.3%) cash conversion. Cash conversion is defined as: cash generated from operations before businessreorganisation items and pension scheme payments, less, capitalised development expenditure and capital
expenditure / adjusted operating profit. Net debt decreased from £109.3 million to £19.7 million, representing a net
debt to EBITDA ratio (for banking covenant purposes) of 0.3 times; our banking covenant is set at 3.0 times.
Adjusted operating profit is stated before impairment and amortisation of goodwill and acquired intangibles, businessreorganisation items, the mark-to-market valuation of unexpired currency hedges, and other adjusting items, as set out
in Note 1 to the Financial Statements.
Income Statement
The Group’s Income Statement is summarised below.

Revenue
Gross profit
Administrative expenses
Share of profit/(loss) of associate
Foreign exchange
Adjusted operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquired intangibles
Impairment of goodwill and intangibles

Year ended
Year ended
31 March 2018 31 March 2017
£m
£m
296.9
300.2
150.9
157.3
(105.8)(106.5)
0.5
(0.8)
0.9
(12.0)
46.5
38.0
(4.2)
(6.5)
42.3
31.5
(10.9)(12.5)(36.7)

Change(1.1%)(4.1%)+22.4%+34.3%

Oxford Instruments plc
13

Announcement of Preliminary Results for the year to 31 March 2018
Impairment of investment of associate
Business reorganisation items
Share of impairment recognised by associateMark-to-market of currency hedges
Profit/(loss) before tax
Tax from continuing operations
Profit/(loss) for the period from continuing operations

1.7
(2.0)
3.1
34.2
(14.6)
19.6

(8.0)
(1.7)
1.2
(26.2)
0.7(25.5)

Adjusted effective tax rate1

23.9%

24.8%

Continuing adjusted earnings per share – basic
Earnings per share – basic

56.3p
114.5

41.5p
(35.6)p+35.7%

Continuing adjusted earnings per share – diluted
Earnings per share – diluted

56.1p
114.1p41.4p(35.6)p+35.5%

Dividend per share

13.3p

13.0p

+2.3%

1.

The adjusted effective tax rate is calculated excluding impairment of non-current assets, amortisation on acquired intangibles, business reorganisation items, themark-to-market of financial derivatives, and other adjusting items.

Revenue
Orders, at constant currency, increased by 22.8% for Materials & Characterisation with good growth across all business
units and was broadly flat for Research & Discovery. A decline of 7.8% in Service & Healthcare as we reduce the levelof sales of refurbished imaging systems in the US Healthcare business, offset order growth of 3.7% in service of ourown products. Total reported orders grew by 5.0% (5.8% at constant currency). Excluding orders from US Healthcare,reported and constant currency orders grew by 8.3% and 8.9% respectively.
Reported revenue of £296.9 million (2017: £300.2 million) decreased by 1.1%. Materials & Characterisation grew by
11.7%. Research & Discovery and Service & Healthcare declined by 10.5% and 3.6% respectively.
Excluding currency effects, revenue grew by 13.2% for Materials & Characterisation with growth across all constituent
businesses. Lower optical microscopy sales and an increase in the proportion of customised magnetic and cryogenic
systems with longer production lead times, resulted in a constant currency decline of 9.7% in Research & Discovery
revenue. Growth in revenue from service of our own products was offset by an anticipated decline in Healthcare
revenue from selling fewer refurbished imaging systems, leading to a constant currency revenue decline of 2.9% in
Service & Healthcare.
On a geographical basis, at constant currency, revenue grew by 4.3% in Europe, 1.2% in Asia and 8.3% for the Rest ofWorld. Constant currency revenue declined by 5.3% in North America but was in line with last year when excluding
revenue from OI Healthcare.
The order book, at constant currency, increased by 42.4% for Materials & Characterisation and 15.2% for Research &Discovery, with a decline of 10.8% in Service & Healthcare. Total reported order book grew by 5.0% (10.4% at constantcurrency). Excluding the order book from US Healthcare, reported and constant currency order book growth was 14.0%
and 18.4% respectively.

£ million
Revenue: 2016/17
Underlying movement
Foreign Exchange
Revenue: 2017/18
Revenue growth: reported
Revenue growth: constant currency

Materials &Characterisation

Research &Discovery

Service &Healthcare

Total*

105.7
13.9
(1.5)
118.1

125.3
(12.1)
(1.1)
112.1

69.3
(2.0)
(0.5)
66.8

300.2
(0.2)
(3.1)
296.9

+11.7%+13.2%(10.5%)(9.7%)(3.6%)(2.9%)(1.1%)(0.1%)* Excluding inter-sector revenue

Oxford Instruments plc
14

Announcement of Preliminary Results for the year to 31 March 2018
Gross profit
Gross profit fell by 4.1% to £150.9 million (2017: £157.3 million), representing a gross profit margin of 50.8%, adecrease of 160 basis points over last year.
Operating profit
Adjusted operating profit increased by 22.4% to £46.5 million (2017: £38.0 million), representing an adjusted operating
profit margin of 15.7%, an increase of 300 basis points against last year. Materials & Characterisation margin rose by
550 basis points to 17.0% (2017: 11.5%). Research & Discovery adjusted operating margin increased by 130 basis
points to 12.3% (2017: 11.0%). Service & Healthcare margin increased by 160 basis points to 18.9% (2017: 17.3%).
Our share of the Scienta Omicron joint venture showed a profit of £0.5 million for the year, an improvement of £1.3
million against the comparative period. After restructuring costs and impairments, our share of the Scienta Omicron joint
venture was a loss of £1.9 million.
Currency effects (including the impact of transactional currency hedging) have increased reported adjusted operating
profit by £10.6 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 12.0%, a decline of 70 basis points.

Materials &Characterisation

Research &Discovery

Service &Healthcare

Total

Adjusted operating profit: 2016/17

12.2

13.8

12.0

38.0

Underlying movement
Foreign Exchange
Adjusted operating profit: 2017/18

2.4
5.5
20.1

(5.0)
5.0
13.8

0.5
0.1
12.6

(2.1)
10.6
46.5

11.5%
17.0%

11.0%
12.3%

17.3%
18.9%

12.7%
15.7%

£ million

Margin: 2016/17
Margin: 2017/18

Adjusting items
Amortisation of acquired intangibles of £10.9 million relates to intangible assets recognised on acquisitions, being thevalue of technology, customer relationships and brands.
Business reorganisation items were a net gain of £1.7 million. This comprised three main items, the first being a net
gain of £3.3 million from the sale of the Superconducting Wire facility that we initially retained in New Jersey, US,following the sale of the business, and the disposal of a freehold property in Germany. Second, costs of £0.5 million
were incurred within our US Healthcare business to successfully defend a legal claim relating to a prior acquisition.
Lastly, we incurred restructuring costs of £1.1 million primarily relating to US Healthcare and our Scienta Omicron joint
venture.
During the year our Scienta Omicron associate recognised an impairment relating to the sale of one of its subsidiaries.
The Group’s share of this impairment was £2.0 million.
The Group uses derivative products to hedge its short-term 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 80% of its forecast
transactional exposure for that year. The Group has decided that the additional costs of meeting the extensive
documentation requirements of IAS 39 to apply hedge accounting to these foreign exchange hedges cannot bejustified. 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 foreign exchange and excluded from our calculation of adjusted profit before tax.
The mark-to-market gain in respect of derivative financial instruments was £3.1 million (2017: £1.2 million gain). This
reflects a movement from a net fair value liability to a small net asset position on currency derivatives that are hedging

Oxford Instruments plc
15

Announcement of Preliminary Results for the year to 31 March 2018
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 the balance sheet date against a blended rate achievedon US Dollar, Euro and Japanese Yen forward contracts that will mature over the next twelve months.
Net finance costs
The Group’s adjusted net finance costs fell by £2.3 million to £4.2 million (2017: £6.5 million) with net finance charges
falling by £1.8 million to £3.6 million and pension financing charges falling by £0.5 million to £0.6 million.
Profit before tax
Continuing adjusted profit before tax increased by 34.3% to £42.3 million (2017: £31.5 million), up 0.6% at constantcurrency. The continuing adjusted profit before tax margin increased by 370 basis points to 14.2% (2017: 10.5%).
Continuing profit before tax of £34.2 million (2017: loss of £26.2 million) is after the mark-to-market movement onderivative financial instruments, amortisation of acquired intangibles and other adjusting items.
Tax
The adjusted tax charge from continuing operations of £10.1 million (2017: £7.8 million) represents an effective tax
rate of 23.9% (2017: 24.8%). The current tax liability includes a provision of £2.9 million in respect of a historicalfinancing structure, of which £2.0 million was provided in this financial year. The statutory effective tax rate fromcontinuing operations is 42.7% owing to a reduction in deferred tax assets arising from a lowering of the US tax rate.
Earnings per share
Continuing adjusted basic earnings per share increased by 35.7% to 56.3 pence (2017: 41.5 pence); adjusted basic
earnings per share increased by 13.5% to 55.6 pence (2017: 49.0 pence). Continuing adjusted diluted earnings per
share were 56.1 pence (2017: 41.4 pence); adjusted diluted earnings per share were 55.4 pence (2017: 48.9 pence).
Undiluted weighted average shares have increased by 0.1 million to 57.2 million.
Foreign exchange
The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euro andJapanese Yen. For the full year, approximately 16% of Group revenue was denominated in Sterling, 52% in US
Dollars, 19% in Euros, 11% in Japanese Yen and 2% in other currencies. Translational exposures arise on the
consolidation of overseas company results into Sterling. Transactional exposures arise where the currency of sale orpurchase 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 of
expected currency trading transactions expected to arise over a period extending from 12 to 24 months. As at 31
March 2018 the Group had currency hedges in place extending up to twelve months forward.
For the 2018/19 financial year, we expect a currency headwind to operating profit of approximately £3 million, basedon current exchange rates.
Dividend
The Group’s policy is to increase the dividend each year in line with the increase in underlying earnings. Given thestrong reduction in net debt and the positive impact from the Horizon strategy, the Board has proposed to increase thefinal dividend to 9.6 pence (2017: 9.3 pence). This results in a total dividend of 13.3 pence (2017: 13.0 pence). The
final dividend will be paid, subject to Shareholder approval, on 19 October 2018 to Shareholders on the register as at
14 September 2018.
Cash flow
The Group cash flow is summarised below.

Adjusted operating profit
Depreciation and amortisation
Adjusted EBITDA
Working capital movement
Purchase of rental assets held for subsequent sale
Loss on disposal of property, plant and equipment

Year ended
Year ended
31 March 2018 31 March 2017
£m
£m
46.5
38.0
9.1
8.9
55.6
46.9
(13.2)
(4.4)
(0.7)
(1.0)
0.3
0.5

Oxford Instruments plc
16

Announcement of Preliminary Results for the year to 31 March 2018
Equity settled share schemes
Share of (profit)/loss from associate
Business reorganisation items
Pension scheme payments above charge to operating profit
Cash generated from operations
Interest
Tax
Capitalised development expenditure
Expenditure on tangible and intangible assets
Proceeds from sale of property, plant and equipment
Increase in investment in associate
Acquisition of subsidiaries, net of cash acquired
Proceeds from sale of subsidiary undertaking
Decrease in long-term receivables
Dividends paid
Proceeds from issue of share capital(Decrease) in borrowings
Net (decrease)/increase in cash and cash equivalents from continuing operations

1.1
(0.5)
(1.3)
(7.9)
33.4
(2.1)
(3.8)
(5.8)
(4.8)
9.3
(2.1)
71.2
0.9
(7.4)
0.2
(96.8)
(7.8)

0.5
0.8
(1.9)
(6.9)
34.5
(5.0)
(2.1)
(5.9)
(3.1)
(9.8)
12.2
(7.4)
(12.8)
0.6

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

Cash generated from operations
Cash generated from operations fell by £1.1 million to £33.4 million (2017: £34.5 million), representing 68.8% (2017:90.3%) cash conversion. Cash conversion is defined as: cash generated from operations before businessreorganisation items and pension scheme payments, less, capitalised development expenditure and capital
expenditure / adjusted operating profit.
The working capital outflow of £13.2 million reflects an increase in inventories of £4.5 million, an increase inreceivables of £14.4 million, a decrease in payables of £2.8 million and an increase in customer deposits of £2.9
million. The increase in inventories reflects an increase in work in progress and components to support our planned
production schedule in the first quarter of 2018/19 for our customised magnets and cryogenic systems, as well as anincrease in demonstration stock to support new launches of imaging and analysis products used in electron
microscopy. The movement in receivables consists of an increase of £8.6 million due to good sales growth across ourMaterials and Characterisation sector along with a higher proportion of sales made towards the end of the year
compared to the previous period. In addition, we also shipped a higher proportion of customised magnets andcryogenic systems that were invoiced but not paid at the end of the year. Furthermore, an increase of £2.3 million
relates to foreign currency forward contracts relating to the previous year but settled in this financial year, and £3.5
million relating to the settlement of foreign currency swaps that are hedging overseas cash balances.
Interest
Net interest paid was £2.1 million (2017: £5.0 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 proceedsfrom the sale of Industrial Analysis part way through the period, and the settlement of £1.0 million of interest payments
made just after the year end close.
Tax
Tax paid was £3.8 million (2017: £2.1 million), the comparative period benefiting from tax deductions on allowableadjusting items and utilisation of brought forward tax losses.
Investment in research and development (“R&D”)
Total cash spend on R&D in the year was £24.8 million, equivalent to 8.4% of sales, (2017: £25.8 million, 8.6% ofsales). A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:

R&D expense charged to the Income Statement
Depreciation of R&D related fixed assets
Amounts capitalised as fixed assets
Amortisation and impairment of R&D costs capitalised as intangibles

Year ended
Year ended
31 March 2018 31 March 2017
£m
£m
23.4
24.3
(0.1)
(0.1)
0.1
0.2
(4.4)
(4.5)

Oxford Instruments plc
17

Announcement of Preliminary Results for the year to 31 March 2018
Amounts capitalised as intangible assets
Total cash spent on R&D during the year

5.8
24.8

5.9
25.8

During the year intangible assets of £1.8 million were impaired within our X-ray Technology Business on adevelopment project discontinued as a result of the sale of Industrial Analysis. In addition, we impaired £1.4 million in
respect of a development project which has experienced delays and cost overruns.
Investment in Associate
The shareholders of ScientaOmicron agreed to a capital injection to strengthen the balance sheet of the joint ventureand ensure future liquidity in support of the business strategy. Our share was £2.1 million and was paid in September
2017.
Disposals
The sale of Industrial Analysis was completed on 3 July 2017. A post-tax profit of £45.9 million has been recorded within
discontinued operations.
New Accounting Standards
Transition to IFRS 9 ‘Financial Instruments’ will take effect from 1 April 2018 with the half year results for September
2018 being IFRS 9 compliant and the first annual report published in accordance with IFRS 9 being for the year ended
31 March 2019. There is no requirement to restate comparatives. The main impact is likely to be in respect of mark-tomarket valuation of currency derivatives that are hedging future cash flows. The gain or loss on unrealised forward
foreign exchange contracts might qualify for hedge accounting and so be booked directly to reserves with the gain orloss recycled to the income statement on maturity. Currently, gains or losses are treated as adjusting items. Work is
on-going to assess the extent to which the group’s hedges will qualify for hedge accounting.
The Group will also be adopting IFRS 15 ‘Revenue from Contracts with Customers’ using the modified retrospective
approach, which means that the cumulative impact on adoption will be recognised in retained earnings on 1 April 2018with the half year results for September 2018 being IFRS 15 compliant, and the first annual report published inaccordance with IFRS 15 being for the year ended 31 March 2019. Comparatives will not be restated. We anticipate
that the main differences will be within our NanoScience business where the revenue recognition on complex
customised magnetic and cryogenic systems will be deferred from being primarily on transfer of legal title tocompletion of installation.
The Group will be adopting IFRS 16 ‘Leases’ in the 2018/19 financial year. The main impact will be in respect ofproperty and vehicle leases which are currently accounted for as operating leases. Further detail on the impact ofthese new accounting standards is set out in the accounting policies of the financial statements.
Net debt and funding
Net debt
Net debt decreased in the period from £109.3 million to £19.7 million. Cash generated from operations was £33.4 million.
Disposal proceeds of £71.2 million relate to the sale of Industrial Analysis. The Group invested in capitalised
development costs of £5.8 million and tangible and intangible assets of £4.8 million.
Movement in net debt
Net debt as at 31 March 2017
Cash generated from operations
Interest
Tax
Capitalised development expenditure
Capital expenditure on tangible and intangible assets
Proceeds from sale of property, plant and equipment
Proceeds from sale of subsidiary undertaking
Dividends paid
Other items
Net debt as at 31 March 2018

£m
109.3
(33.4)
2.1
3.8
5.8
4.8
(9.3)
(71.2)
7.4
0.4
19.7

Oxford Instruments plc
18

Announcement of Preliminary Results for the year to 31 March 2018
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 multicurrency facility of £100.0 million and a US Dollar denominated multi-currency facility of $37.0 million.
In this year the Group 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 fromthe 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 31
March 2018 net debt to EBITDA was at 0.3 times and EBITDA to interest was 14.3 times.
Pensions
The Group has defined benefit pension schemes in the UK and USA. Both have been closed to new entrants since2001 and closed to future accrual from 2010.
At 31 March 2018, the net liability arising from our defined benefit scheme obligations was £15.3 million (31 March
2017: £25.1 million), a fall of £9.8 million. The reduction in the deficit was primarily due to the contributions paid in the
period and the actuarial gains on the scheme’s liabilities arising from a change in the accounting assumptions at 31
March 2018. Total scheme assets at 31 March 2018 were £289.5 million (31 March 2017: £287.9 million) whileliabilities were £304.8 million (31 March 2017: £313.0 million).
Prior to the year end the Trustees of the UK defined benefit scheme, in consultation with the Company, reduced its
exposure to on-risk assets (a portfolio of market focused asset classes, the majority being equities) with acorresponding increase in its liability driven investments, with the objective of steering a more stable journey to being
fully funded. The pension fund’s gross exposure to on-risk assets has fallen from 85% to 45%; the majority oftransactions required to make this change were completed in February 2018. As a result, the level of risk inherent in
the investment strategy is now significantly lower than previously, in addition to a substantial reduction in funding level
volatility.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance andposition, are set out in the Performance, Strategy and Operations sections. The financial position of the Group, 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 a sustainablebusiness. The Directors have reviewed the Group’s forecasts and flexed them to incorporate a number of potential
scenarios relating to changes in trading performance. The Directors believe that the Group 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.
Forward-looking statements
This document contains certain forward-looking statements. The forward-looking statements reflect the knowledge
and information available to the Company during the preparation and up to the publication of this document. By theirvery 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 be construed as a profit forecast by theCompany.
Gavin Hill
Group Finance Director
12 June 2018

Oxford Instruments plc
19Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Income
year ended 31 March 2018

Adjusted*
Notes£m
Revenue3

Cost of sales
Gross profit

Adjustingitems*
£m

Total
£m

296.9

—

296.9

(146.0)—(146.0)

150.9

—

150.9

(23.4)—(23.4)

Selling and marketing(53.9)—(53.9)

Administration and shared services(28.5)(12.1)(40.6)

0.5

(2.4)

(1.9)

—

3.3

3.3

Research and development

Share of profit/(loss) of associate, net of tax

4

5

Other operating income
Foreign exchange

0.9

3.1

4.0

Operating profit/(loss)

46.5

(8.1)

38.4

Other financial income

0.3

—

0.3

Financial income

0.3

—

0.3

Interest charge on pension scheme net liabilities

(0.6)

—

(0.6)

Other financial expenditure

(3.9)

—

(3.9)

Financial expenditure

(4.5)

—

(4.5)

Profit/(loss) before income tax from continuing operations

42.3

(8.1)

34.2

7

(10.1)(4.5)(14.6)

32.2(12.6)

19.6

6

(0.4)

46.3

45.9

31.8

33.7

65.5

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

pence

pence

From continuing operations

56.3

34.3

From discontinued operations

(0.7)

80.2

From profit/(loss) for the year

55.6

114.5

From continuing operations

56.1

34.1

From discontinued operations

(0.7)

80.0

From profit/(loss) for the year

55.4

114.1

Earnings per share
Basic earnings per share

Diluted earnings per share

2

2

Dividends per share
Dividends paid

8

13.0

Dividends proposed

8

13.3

* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1 of thisPreliminary Statement.

The attached notes form part of the Financial Statements.

Oxford Instruments plc
20

Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Income
year ended 31 March 2017

Revenue

Notes

Adjusted*£m

Adjustingitems*
£m

Total
£m

3

300.2

—

300.2

(142.9)—(142.9)

Cost of sales
Gross profit

157.3

—

157.3

(23.6)(0.7)(24.3)

Selling and marketing(54.1)—(54.1)

Administration and shared services(28.8)(49.6)(78.4)

(0.8)

(8.4)

(9.2)

—

—

—

Research and development

Share of loss of associate, net of tax

4

5

Other operating income
Foreign exchange(12.0)

1.2(10.8)

Operating profit/(loss)

38.0(57.5)(19.5)

Other financial income

0.2

—

0.2

Financial income

0.2

—

0.2

Interest charge on pension scheme net liabilities

(1.1)

—

(1.1)

Other financial expenditure

(5.6)

(0.2)

(5.8)

Financial expenditure

(6.7)

(0.2)

(6.9)

Profit/(loss) before income tax

31.5(57.7)(26.2)

(7.8)

8.5

0.7

23.7

(49.2)(25.5)

4.3

0.9

5.2

28.0

(48.3)(20.3)

Income tax (expense)/credit

7

Profit/(loss) for the year from continuing operations
Profit from discontinued operations after tax

6

Profit/(loss) for the year attributable to equity Shareholders of the parent

pence

pence

From continuing operations

41.5(44.7)

From discontinued operations

7.5

9.1

From profit for the year

49.0

(35.6)

From continuing operations

41.4(44.7)

From discontinued operations

7.5

9.1

From profit for the year

48.9

(35.6)

Earnings per share
Basic earnings per share

Diluted earnings per share

2

2

Dividends per share
Dividends paid

8

13.0

Dividends proposed

8

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 1 of this Preliminary
Statement.
During the current year, the Group amended the presentation in the Income Statement to include the change in fair value derivatives in operating expenses rather thanfinancial income or expenditure. Prior year comparatives have been re-presented to be consistent with this change and, as a result, £1.2 million has now been included
on the foreign exchange line. There is no impact on profit after tax in either period.

Oxford Instruments plc
21

Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Comprehensive Income
year ended 31 March 2018

Notes
Profit/(loss) for the year

2018
£m

2017
£m

65.5

(20.3)

—

0.1

(8.8)

18.8

(4.8)

(5.7)

2.2

4.4

(0.9)

(0.9)

(12.3)

16.7

53.2

(3.6)

Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Gain 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
Items that will not be reclassified subsequently to profit or loss
Remeasurement gain in respect of post-retirement benefits
Tax on items that will not be reclassified to profit or loss
Total other comprehensive (expense)/income
Total comprehensive income/(expense) for the year attributable to equity Shareholders of theparent7

Oxford Instruments plc
22Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Financial Position
as at 31 March 2018

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 recoverable
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 and overdrafts
Retirement benefit obligations
Provisions
Deferred tax liabilities
Current liabilities
Bank loans and overdrafts
Trade and other payables
Current income tax payables
Derivative financial instruments
Provisions
Total liabilities
Total liabilities and equity

2018
£m

2017
£m

22.8
158.7
4.1
1.4
13.4
200.4

32.5
181.0
3.9
3.6
26.0
247.0

45.9
73.3
2.5
2.4
20.7
144.8
345.2

53.9
81.1
4.2
0.6
27.2
167.0
414.0

2.9
61.7
0.2
9.2
105.6
179.6

2.9
61.5
0.2
22.8
45.1
132.5

39.4
15.3
1.7
6.1
62.5

129.6
25.1
—
5.6
160.3

1.0
85.5
6.2
0.4
10.0
103.1
165.6
345.2

6.9
93.0
6.5
5.0
9.8
121.2
281.5
414.0

The Financial Statements were approved by the Board of Directors on 12 June 2018 and signed on its behalf by:
Ian Barkshire
Director

Gavin Hill
Director

Company Number: 775598

Oxford Instruments plc
23

Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Changes in Equity
year ended 31 March 2018

Balance at 1 April 2017
Total comprehensive income/(expense):
Loss for the year
Other comprehensive income:– Foreign exchange translation differences– Net foreign exchange gain on disposal ofsubsidiaries recycled to the Income Statement– Remeasurement gain in respect of post-retirement
benefits– Tax on items recognised directly in othercomprehensive income
Total comprehensive income/(expense)
attributable to equity Shareholders of the parent
Transactions with owners recorded directly inequity:– Proceeds from issue of shares– Charge in respect of employee service costs
settled by award of share options– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2018

Foreignexchange
Other translation
reserves
reserve
£m
£m
0.2
22.8

Share
capital
£m
2.9

Share
premium
account
£m
61.5

—

—

—

—

—

—

Retainedearnings
£m
45.1

Total
£m
132.5

—

65.5

65.5

—

(8.8)

—

(8.8)

—

—

(4.8)

—

(4.8)

—

—

—

—

2.2

2.2

—

—

—

—

(0.9)

(0.9)

—

—

—

(13.6)

66.8

53.2

—

0.2

—

—

—

0.2

—
—

—
—

—
—

—
—

1.1
(7.4)

1.1
(7.4)

—
2.9

0.2
61.7

—
0.2

—
9.2

(6.3)
105.6

(6.1)
179.6

Oxford Instruments plc
24

Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Changes in Equity
year ended 31 March 2017

Balance at 1 April 2016
Total comprehensive income/(expense):
Loss for the year
Other comprehensive income:– Foreign exchange translation differences– Net foreign exchange gain on disposal ofsubsidiaries recycled to the Income Statement– Gain on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled– Remeasurement gain in respect of post-retirement
benefits– Tax on items recognised directly in othercomprehensive income
Total comprehensive income/(expense)
attributable to equity Shareholders of the parent
Transactions with owners recorded directly inequity:– Charge in respect of employee service costs
settled by award of share options– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2017

Foreignexchange
Other translation
reserves
reserve
£m
£m
0.1
9.7

Share
capital
£m
2.9

Share
premium
account
£m
61.5

—

—

—

—

—

—

Retainedearnings
£m
68.8

Total
£m
143.0

—

(20.3)(20.3)

—

18.8

—

18.8

—

—

(5.7)

—

(5.7)

—

—

0.1

—

—

0.1

—

—

—

—

4.4

4.4

—

—

—

—

(0.9)

(0.9)

—

—

0.1

13.1

(16.8)

(3.6)

—
—

—
—

—
—

—
—

0.5
(7.4)

0.5
(7.4)

—
2.9

—
61.5

—
0.2

—
22.8

(6.9)
45.1

(6.9)
132.5

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased
and then cancelled during the year ended 31 March 1999, and the hedging reserve in respect of the effective portionof changes in value of commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 fromthe translation of the Group’s net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2017: 183,145) of its own shares in an employee benefit trust. The cost of these shares is
included within retained earnings. There was no movement in the shares held by the trust during the year.

Oxford Instruments plc
25

Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Cash Flows year ended 31 March 2018
Profit/(loss) for the year
Profit for the year from discontinued operations (note 6)
Profit/(loss) for the year from continuing operations
Adjustments for:
Income tax expense/(credit)
Net financial expense
Fair value movement on financial derivatives
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
One-off impairment of capitalised development costs
Loss on disposal of subsidiary
Net profit on disposal of buildings
Share of impairment recognised by associate
Impairment of investment in associate
Amortisation and impairment of acquired intangibles
Impairment of capitalised intangible software costs
Depreciation of property, plant and equipment
Amortisation and impairment of capitalised development costs
Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Share of (profit)/loss from associate
Restructuring costs paid
Foreign currency loss on intra-Group dividends
Cash payments to the pension scheme more than the charge to operating profit
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Increase/(decrease) in payables and provisions
Increase in customer deposits
Purchase of rental assets held for subsequent sale
Cash generated from continuing operations
Interest paid
Income taxes paid
Net cash from operating activities – continuing operations
Net cash from operating activities – discontinued operations
Net cash flow from operative activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash flow on disposal of businesses
Capitalised development expenditure
Increase in investment in associate
Decrease in long-term receivables
Net cash generated from/(used in) investing activities – continuing operations
Net cash used in investing activities – discontinued operations
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Decrease in borrowings
Dividends paid
Net cash used in financing activities

2018
£m
65.5
(45.9)
19.6

2017
£m
(20.3)(5.2)(25.5)

14.6
4.2
(3.1)
—
1.2
0.4
—
—
(3.3)
2.0
—
10.9
—
4.7
4.4
55.6
0.3
1.1
(0.5)
(1.3)
—
(7.9)
47.3
(4.5)
(14.4)
2.8
2.9
(0.7)
33.4
(2.1)
(3.8)
27.5
3.0
30.5

(0.7)
6.7
(1.2)
0.3
0.4
0.4
0.7
0.4
—
—
8.0
46.3
2.2
5.1
3.8
46.9
0.5
0.5
0.8
(1.1)
(0.8)
(6.9)
39.9
(1.7)
(1.1)
(2.5)
0.9
(1.0)
34.5
(5.0)
(2.1)
27.4
6.1
33.5

9.3
—
(4.3)
(0.5)
71.2
(5.8)
(2.1)
0.9
68.7
—
68.7

—
(9.8)
(3.0)
(0.1)
12.2
(5.9)
—
—
(6.6)
(2.5)
(9.1)

0.2
(96.8)(7.4)(104.0)—(12.8)(7.4)(20.2)

Oxford Instruments plc
26

Announcement of Preliminary Results for the year to 31 March 2018

Consolidated Statement of Cash Flows year ended 31 March 2018 (continued)
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year

(4.8)
26.5
(1.0)
20.7

4.2
20.4
1.9
26.5

2018
£m
(4.8)
(1.0)
(5.8)
96.8
(1.0)
(0.4)
89.6
(109.3)(19.7)

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

Reconciliation of changes in cash and cash equivalents to movement in net debt
(Decrease)/increase in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Cash outflow from decrease in debt
Accrued interest
Amortisation of prepaid issuance fees
Movement in net debt in the year
Net debt at start of the year
Net debt at the end of the year

Oxford Instruments plc
27

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements
year ended 31 March 2018

1 Non-GAAP measures
In the preparation of adjusted numbers the Directors exclude certain items in order to assist with comparability
between peers and to give what they consider to be a better indication of the underlying performance of the business.
These adjusting items are excluded in the calculation of adjusted operating profit, adjusted profit before income tax,
adjusted profit for the year from continuing operations, adjusted EBITDA, adjusted EPS, adjusted cash conversion,and adjusted effective tax rate. Details of adjusting items are given below.
Adjusted EBITDA is calculated by adding back depreciation of property, plant and equipment and amortisation of
intangible assets to adjusted operating profit and can be found in the Consolidated Statement of Cash Flows.
Calculation of Adjusted EPS can be found in note 2. Adjusted effective tax rate is calculated by dividing the share oftax attributable to adjusted profit before tax by adjusted profit before tax.
Reconciliation between profit before income tax and adjusted profit from continuing operations
2018

2017
Profit(Loss)/profit

Operating

beforeOperating

beforeprofitincome tax(loss)/profit

income tax

£m

£m

£m

£m

Statutory measure from continuing operations

38.4

34.2

(19.5)(26.2)

Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Net profit on disposal of buildings
Unwind of discount in respect of contingent consideration andacquisition related accruals
Business reorganisation items
Impairment of acquired intangibles
Impairment of investment in associate
Share of impairment recognised by associate
Impairment of capitalised development costs
Impairment of capitalised software costs
Amortisation of acquired intangibles
Mark-to-market gain in respect of derivative financial
instruments
Adjusted measure from continuing operations
Share of taxation
Adjusted profit for the year from continuing operations

—
1.2
0.4
—
(3.3)

—
1.2
0.4
—
(3.3)

0.3
0.4
0.4
0.4
—

0.3
0.4
0.4
0.4
—

—
(1.7)
—
—
2.0
—
—
10.9

—
(1.7)
—
—
2.0
—
—
10.9

—
1.5
33.8
8.0
—
0.7
2.2
12.5

0.2
1.7
33.8
8.0
—
0.7
2.2
12.5

(3.1)
46.5

(3.1)
42.3
(10.1)
32.2

(1.2)
38.0

(1.2)
31.5
(7.8)
23.7

Adjusted effective tax rate

23.9%

24.8%

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 of £1.2m primarily relate to our US Healthcare business and include £0.5m to successfully defend
a legal claim relating to a prior acquisition.
During the prior year the Group settled various claims totalling £0.4m relating to the disposal of its Omicron businessin 2016.
The Group recorded a net profit on disposal of £3.3m during the year, following the disposal of two buildings previously
held under property, plant and equipment.

Oxford Instruments plc
28

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

1 Non-GAAP measures (continued)
During the year the Group’s equity accounted associate recognised an impairment relating to the disposal of its
Vacgen subsidiary. The Group’s share of this impairment was £2.0m.
Adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets and goodwill and theunwind of discounts in respect of contingent consideration relating to business combinations. Impairments in respectof capitalised development costs would not normally be treated as adjusting items although in certain circumstances
they may be, for example, in the prior year a project was completely cancelled as part of a wider restructuring plan.
Adjusting items include the income tax on each of the items described above. In addition, during the year the tax ratein the United States reduced from 35% to 21%. As a result this has reduced the deferred tax asset by £5.4m. Thishas been excluded from the calculation of share of taxation attributable to adjusted profit before tax.
During the prior year the Group recognised the following impairments:• £8.0m relating to its equity accounted associate investment. See note 5 for further details• £0.7m concerning capitalised development costs that related to a specific internal systems project that was
stopped as the Group focused and directed resources so as to accelerate key projects.
• £2.2m relating to capitalised software costs, following a reassessment of the future value expected to be
derived from internally developed software.
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, areconsidered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts for thesederivative financial instruments at fair value through profit or loss. To the extent that instruments are hedges of futuretransactions, adjusted profit for the year is stated before changes in the valuation of these instruments so that theunderlying performance of the Group can be more clearly seen.

Oxford Instruments plc
29

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

2 Earnings per share
Basic and diluted EPS from continuing operations are based on the result for the year from continuing operations, asreported in the Group Income Statement. Basic and diluted EPS from total operations are based on the result for theyear attributable to equity shareholders of the parent. Adjusted and diluted adjusted EPS are based on adjusted profit
for the year from continuing operations. The profit measures noted above are divided by the weighted average numberof ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership Trust. The
table below reconciles these different profit measures.
ContinuingDiscontinued
operations operations£m£mProfit/(loss) for the year attributable toequity Shareholders of the parent
Adjusting items:
Non-recurring and acquisition related items
Impairment of acquired intangibles
Impairment of investment in associate
Share of impairment recognised byassociate
Impairment of capitalised development
costs
Impairment of capitalised software costs
Amortisation of acquired intangibles
Mark-to-market gain in respect ofderivative financial instruments
Income tax charge/(credit)
Adjusted profit for the year fromcontinuing operations

19.6

45.9

2018
total
£m

Continuing Discontinued
operations
operations
£m
£m

65.5

(1.7)
—
—
2.0

(25.5)

2017
total
£m

5.2

(20.3)

1.7
33.8
8.0
—

—
—
10.9

0.7
2.2
12.5

(3.1)
4.5

(1.2)
(8.5)

32.2

23.7

The weighted average number of shares used in the calculation excludes shares held by the Employee ShareOwnership Trust, as follows:

Weighted average number of shares outstanding
Less shares held by Employee Share Ownership Trust
Weighted average number of shares used in calculation of basic earnings per share

2018
Sharesmillion
57.4
(0.2)
57.2

2017
Sharesmillion
57.3
(0.2)
57.1

The following table shows the effect of share options on the calculation of diluted earnings per share:

Weighted average number of ordinary shares per basic earnings per share calculations
Effect of shares under option
Weighted average number of ordinary shares per diluted earnings per share calculations

2018
Sharesmillion
57.2
0.2
57.4

2017
Sharesmillion
57.1
0.1
57.2

For the purposes of calculating diluted and diluted adjusted EPS, the weighted average number of ordinary shares isadjusted to include the weighted average number of ordinary shares that would be issued on the conversion of all
potentially dilutive ordinary shares expected to vest, relating to the Company’s share-based payment plans. Potential
ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease EPS, or increase
loss per share.

Oxford Instruments plc
30

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

3 Segment information
The Group has ten operating segments. These operating segments have been combined into three aggregatedoperating segments to the extent that they have similar economic characteristics, with relevance to products andservices, type and class of customer, methods of sale and distribution and the regulatory environment in which they
operate. Each of these three aggregated operating segments is a reportable segment.
Following the disposal of the Industrial Analysis business and the introduction of the Horizon Strategy in 2017, theGroup now reports under a revised segment structure. The aggregated operating segments are as follows:•••

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; andthe 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.

The Group’s internal management structure and financial reporting systems have been amended to differentiate thethree aggregated operating segments on the basis of the economic characteristics discussed above. Prior year
comparatives have been re-presented due to the change in the Group’s segment structure.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated ona reasonable 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
allocation and to assess performance. No asset information is presented below as this information is not presented inreporting to the Group’s Board of Directors.
a) Analysis by businessResults from continuing operations
Year to 31 March 2018
External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit from continuing operations

Materials & Research &Characterisation Discovery
£m
£m
118.1
112.0
—
0.1
118.1
112.1
20.1
13.8

Service &Healthcare
£m
66.8
—
66.8
12.6

Results from continuing operations (re-presented)
Year to 31 March 2017
External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit from continuing operations

Materials &Characterisation
£m
105.7
—
105.7
12.2

Service &Healthcare
£m
69.3
—
69.3
12.0

Research &Discovery
£m
125.2
0.1
125.3
13.8

Total
£m
296.9

46.5

Total
£m
300.2

38.0

The adjusted profit after tax of £0.5m (2017: £0.8m) from the Group’s associate is reported within the Research &Discovery segment.
Revenue in the Materials & Characterisation and Research & Discovery segments represents the sale of products.
Revenue in the Service & Healthcare segment relates to service income, with the exception of leasing of mobile MRIsof £6.1m (2017: £9.0m) and equipment sales of £3.3m (2017: £5.6m).

Oxford Instruments plc
31

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

3 Segment information (continued)
Reconciliation of reportable segment profit
Year to 31 March 2018
Adjusted profit for reportable segments fromcontinuing operations
Restructuring costs
Restructuring costs – relating to associate
Net profit on disposal of buildings
Share of impairment recognised by associate
Amortisation of acquired intangibles
Fair value movement on financial derivatives
Financial income
Financial expenditure
Profit before income tax on continuing operations

Year to 31 March 2017 (re-presented)
Adjusted profit for reportable segments fromcontinuing 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
Fair value movement on financial derivatives
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

20.1
(0.3)
—
—
—
(2.5)
—
—
—
17.3

13.8
—
(0.4)
—
(2.0)
(7.3)
—
—
—
4.1

12.6
(0.9)
—
—
—
(1.1)
—
—
—
10.6

—
—
—
3.3
—
—
3.1
0.3
(4.5)
2.2

46.5
(1.2)
(0.4)
3.3
(2.0)
(10.9)
3.1
0.3
(4.5)
34.2

Materials &Characterisation£mResearch &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

12.2
—
—
—
(0.7)
—
—
—
(2.9)
(22.6)
—
—
—

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

12.0
—
(0.4)
—
—
—
—
—
(1.9)
(11.2)
—
—
—

—
—
—
—
—
—
—
(2.2)
—
—
1.2
0.2
(6.9)

38.0
(0.3)
(0.4)
(0.4)
(0.7)
(0.4)
(8.0)
(2.2)
(12.5)(33.8)
1.2
0.2
(6.9)

(14.0)

(3.0)

(1.5)

(7.7)

(26.2)

Depreciation, capital expenditure, amortisation and impairment of intangibles and capitalised development costs arisein the following segments:
2018

Materials & Characterisation
Research & Discovery
Service & Healthcare
Unallocated Group items
Total2017 (re-presented)
CapitalCapitalDepreciation expenditure Depreciation expenditure
£m
£m
£m
£m
1.5
2.8
1.6
1.7
0.8
0.8
1.0
0.7
1.8
1.0
1.9
1.4
0.6
0.9
0.6
0.3
4.7
5.5
5.1
4.1

Oxford Instruments plc
32

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

3 Segment information (continued)

Materials & Characterisation
Research & Discovery
Service & Healthcare
Unallocated Group items
Total

2018
2017 (re-presented)
Amortisation Capitalised Amortisation Capitalised
and development
and development
impairment
costs impairment
costs
£m
£m
£m
£m
5.8
4.8
28.1
5.0
8.4
1.0
17.5
0.9
1.1
—
13.2
—
—
—
2.2
—
15.3
5.8
61.0
5.9

b) Geographical analysis
The Group’s reportable segments are located across a number of geographical locations and make sales tocustomers in countries across the world.
The analysis below shows revenue and non-current assets (excluding deferred tax) for individual countries or regionsthat represent more than 5% of revenue.
Revenue from continuing operations from external customers by destination
USA
Rest of Europe
Rest of Asia
UK
Japan
China
Germany
Rest of World
Total

2018
£m
89.5
35.9
35.8
18.1
34.9
49.6
24.8
8.3
296.9

2017
£m
97.1
35.4
32.6
15.3
33.9
53.6
23.7
8.6
300.2

2018
£m
160.4
3.3
11.3
0.5
0.2
9.6
—
1.7
187.0

2017
£m
181.2
10.4
10.3
0.6
0.5
15.4
0.1
2.5
221.0

Non-current assets (excluding deferred tax)
UK
Germany
USA
Japan
China
Rest of Europe
Rest of Asia
Rest of World
Total

Oxford Instruments plc
33

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

4 Research and Development (“R&D”)
The total R&D spend by the Group as part of continuing operations is as follows:
Materials &Characterisation£m
R&D expense charged to theConsolidated Statement of
Income12.3
Less: depreciation of R&D
related fixed assets(0.1)
Add: amounts capitalised as
fixed assets—
Less: amortisation andimpairment of R&D costs
previously capitalised as
intangibles(3.2)
Add: amounts capitalised as
intangible assets
4.8
Total cash spent on R&D
during the year
13.8

2018
Research &Discovery£m

Materials &TotalCharacterisation
£m
£m

2017
Research &Discovery
£m

Total
£m

11.1

23.4

11.3

13.0

24.3

—

(0.1)

(0.1)

—

(0.1)

0.1

0.1

0.1

0.1

0.2

(1.2)

(4.4)

(2.6)

(1.9)

(4.5)

1.0

5.8

5.0

0.9

5.9

11.0

24.8

13.7

12.1

25.8

5 Investment in associate
During the 2015/16 financial year the Group entered into a strategic alliance with GD Intressenter AB of Sweden(“GDI”) to create the world’s largest company in the highly specialised ultra high vacuum surface science field. The
alliance comprised Oxford Instruments’ Omicron Nanotechnology GmbH (“Omicron”) and associated subsidiaries and
GDI’s Scienta Scientific AB (“Scienta”) and associated subsidiaries. Scienta Scientific AB is registered and has its
principal place of business in Sweden.
In consideration for new shares in Scienta, Oxford Instruments transferred all of its shares in the capital of Omicron to
Scienta. Oxford Instruments holds a 47% interest in the ordinary share capital of Scienta and GDI holds 53%. The
investment has been accounted for as an associate taking into account the following factors:•••

the Group holds substantial, but minority, voting rights (47%). All other rights are controlled by a single
shareholder;
the Group has a minority number of Non-Executive Board seats (two of five), with the remaining seats held byrepresentatives of GDI; andwhilst the Group has certain veto rights in respect of certain decisions, it cannot unilaterally direct the activities of
the Scienta Group.

During the current year the Group invested a further £2.1m in its equity accounted associate. During the prior year theGroup recognised an impairment charge of £8.0m in respect of its investment in Scienta and settled various claims
totalling £0.4m relating to the disposal of its Omicron business in 2015/16.

Oxford Instruments plc
34

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

5 Investment in associate (continued)
The Group’s share of loss in its equity accounted associate for the year was £1.9m (2017: £1.2m). The Group did notreceive any dividends from the associate in either period.

Carrying value at 1 April 2017
Addition
Share of loss of associate (net of tax)
Impairment charge
Dividends received
Carrying value at 31 March 2018

2018
£m
3.9
2.1
(1.9)
—
—
4.1

2017
£m
13.1
—
(1.2)
(8.0)
—
3.9

During the prior year the Group recognised an impairment charge of £8.0m relating to its investment in
ScientaOmicron due to the associate’s financial performance for the year ended 31 December 2016 and lower
projected cash flows. This resulted in a reassessment of ScientaOmicron’s expected future business performance andthe actions and time required to improve profitability and operational efficiency.
The £8.0m impairment was reported in the results of the Research & Discovery segment. As at 31 March 2017, theestimate of the recoverable amount of the Group’s investment in ScientaOmicron, being its value in use, wascalculated as £3.9m. The pre-tax discount rate used to arrive at this estimate was 15.5%. No further impairment is
considered to be required as at 31 March 2018.
Summary financial information for the equity accounted associate is as follows:

Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets

2018
£m
2.3
23.7
26.0
(12.1)(9.2)(21.3)
4.7

2017
£m
3.5
25.0
28.5
(21.7)(3.6)(25.3)
3.2

IncomeExpenses
Loss for the year
Group’s share of net assets
Group’s share of loss

51.0
(55.0)
(4.0)
2.2
(1.9)

50.8
(53.3)
(2.5)
1.5
(1.2)

According to the terms of the transaction, no dividend could be paid by the associate until 27 May 2017. Following thatdate, any dividend paid must be agreed by both Oxford Instruments plc and GD Intressenter AB, up to a maximum of
50% of the previous year’s profit after tax. At the date of signing these Financial Statements no dividend has been
declared or paid.

Oxford Instruments plc
35

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

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 intangible assets
Other intangible assets
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
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
Recognition of provision 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

IndustrialSuperconducting
Analysis
Wire
2018
2017
£m
£m
(4.3)
—
(0.1)
—
(4.7)
—
(2.4)
(3.1)
(11.5)(12.6)
(9.8)
(6.5)
(6.0)
(0.3)
8.6
6.6
0.8
0.1
(0.4)
—
(29.8)(15.8)
82.8
—
82.8
(6.0)
(5.6)
71.2
(23.8)
—
(2.1)
4.8
50.1
(2.3)
47.8

14.0
(1.0)
13.0
(0.3)
(0.5)
12.2
(15.5)
1.0
(0.2)
5.7
3.2
0.9
4.1

The recognition of provisions on disposal primarily relate to onerous lease contracts. These have been recognised in
the Income Statement under discontinued operations.
Discontinued operations
In the year to 31 March 2018 the Group’s Industrial Analysis business was classified as a discontinued operation; andin 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 andreferred to in the Group Strategic Report.
The 2017 Financial Statements have been re-presented to reflect the classification of the Group’s Industrial Analysis
business as a discontinued operation.

Oxford Instruments plc
36

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

6 Disposal of subsidiary and discontinued operations (continued)
Results of discontinued operations – year to 31 March 2018
Industrial
Analysis£m
16.8(16.3)
0.5
(0.9)
(0.4)

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

(0.1)
(2.2)
0.8
(1.9)
50.1
(2.3)
45.9

Results of discontinued operations – year to 31 March 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

2018
pence
(0.7)
(0.7)
80.2
80.0

2017
pence
7.5
7.5
9.1
9.1

2018
£m
3.0
71.2
—

2017
£m
6.1
(9.7)
—

Total

Earnings per share from discontinued operations

Adjusted basic (loss)/earnings per share
Adjusted diluted (loss)/earnings per share
Total basic earnings per share
Total diluted earnings per share

Cash flows from discontinued operations
Net cash generated from operating activities
Net cash generated from/(used in) investing activities
Net cash used in financing activities

Oxford Instruments plc
37

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

7 Income tax expense
Recognised in the Consolidated Statement of Income
Current tax expense
Current year
Adjustment in respect of prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustment in respect of prior years
Total tax expense/(credit)
Reconciliation of effective tax rate
Profit/(loss) before income tax
Income tax using the weighted average statutory tax rate of 22% (2017: 22%)
Effect of:Tax rates other than the weighted average statutory rate
Change in rate at which deferred tax recognised
Transaction costs, deferred consideration and impairments not deductible for tax
Non-taxable income and expenses
Tax incentives not recognised in the Consolidated Statement of Income
Current period losses not available for carry forward
Movement in unrecognised deferred tax
Adjustment in respect of prior years
Total tax expense/(credit)
Taxation charge recognised in other comprehensive income
Deferred tax – relating to employee benefits
Taxation charge recognised directly in equity
Deferred tax – relating to share options

2018
£m

2017
£m

7.3
(1.7)
5.6

6.2
(2.2)
4.0

7.3
1.7
9.0
14.6

(5.6)
0.9
(4.7)
(0.7)

34.2
7.5

(26.2)
(5.8)

0.3
5.3

(0.5)
(0.2)

1.2
—
(0.7)
0.4
0.6
—
14.6

5.6
1.4
(0.4)
—
0.6
(1.4)
(0.7)

0.9
0.9

0.9
0.9

—

—

Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective from 1
April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from 1 April2020) was substantively enacted on 6 September 2016. This will reduce the Company’s future current tax charge
accordingly. The UK deferred tax liability at 31 March 2018 has been calculated based on those rates. The Group
carries tax provisions in relation to uncertain tax positions arising from the possible outcome of negotiations with tax
authorities. Such provisions are a reflection of the geographical spread of the Group’s operations and the variety ofjurisdictions in which it carries out its activities.
Effective 1 January 2018 the rate of federal tax in the US was reduced from 35% to 21% and, as a result, deferred tax
assets were reduced by £5.4m. The Group currently expects that on an on-going basis the effective tax rate will be
reduced by between 1% and 2% because of this rate reduction.
The current tax liability payable includes a provision of £3.4m for uncertain tax positions. The liability includes anamount of £2.9m in respect of the Group’s financing structure. The range of possible outcomes is between £nil and£5.1m. It is possible that if the outcome is different to that estimated by management there could be a material effecton the financial statements in the next 12 months.
In October 2017 the EU Commission opened a formal State Aid investigation into an exemption within the UK’s current
Controlled Foreign Company (‘CFC’) regime (introduced in 2013) for certain finance income. The investigation is
ongoing, but if the Commission ultimately concludes that the provisions do constitute State Aid then they would require
the UK to recover any such aid from affected parties. The Group has claimed the benefit of this exemption, andtherefore may be adversely affected by the outcome of the investigation. If the Commission were to conclude that thefinance exemption with the UK’s CFC regime constitutes State Aid and no other exemptions were available to the

Oxford Instruments plc
38

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

7 Income tax expense (continued)
Group then, as at 31 March 2018, an additional liability of £1.7m in respect of tax and £0.1m in respect of interest
would arise unless such a decision could be successfully challenged in the EU Courts. However, no provision has
been made in respect of this investigation since we believe that it is more likely than not that no additional tax will
ultimately be due.
8 Dividends per share
The following dividends per share were paid by the Group:

Previous year interim dividend
Previous year final dividend

2018
pence
3.7
9.3
13.0

2017
pence
3.7
9.3
13.0

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

Interim dividend
Final dividend

2018
pence
3.7
9.6
13.3

2017
pence
3.7
9.3
13.0

The interim dividend was not provided for at the year end and was paid on 6 April 2018. The final proposed dividend of
9.6 pence per share (2017: 9.3 pence) was not provided at the year end and will be paid on 19 October 2018 subject
to authorisation by the Shareholders at the forthcoming Annual General Meeting.
9 Basis of preparation
This preliminary announcement does not constitute the Company’s statutory accounts for the years ended 31 March2018 or 2017. Statutory accounts for 2017 have been delivered to the registrar of companies and those for 2018 will
be delivered in due course. The auditor has reported on those accounts: their reports were (i) unqualified, (ii) did notinclude a reference to any matters to which the auditor drew attention by way of emphasis without qualifying theirreport and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial information presented in this preliminary announcement for the year ended 31 March 2018 is based on,
and is consistent with, that in the Group’s audited Financial Statements for the year ended 31 March 2018. No
revisions to adopted IFRS that became applicable in 2018 had a significant impact on the Group’s Financial
Statements for the year ended 31 March 2018.
The Company is registered in England, Registration Number 775598.

Oxford Instruments plc
39

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 2018

9 Basis of preparation (continued)
The principal exchange rates to Sterling used were:Year‑ end rates
US Dollar
Euro
Yen

2018
1.40
1.14
149

2017
1.25
1.17
139

Average translation rates 2018
April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
FebruaryMarch

US Dollar
1.27
1.29
1.29
1.31
1.30
1.31
1.33
1.32
1.34
1.39
1.41
1.40

Euro
1.18
1.17
1.14
1.13
1.10
1.11
1.13
1.13
1.12
1.13
1.14
1.14

Yen
142
143
144
146
143
146
150
149
151
153
151
149

Average translation rates 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

10 The Annual General Meeting
The Annual General Meeting will be held on 11 September 2018 at Group Head Office, Tubney Woods, Abingdon,
Oxfordshire, OX13 5QX.

Oxford Instruments plc
40

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 201811 Principal Risks and Uncertainties
Specific risk 1: Technical risk
Context: The Group provides high technology equipment, systems and services to its
customers.
Risk
Possible impact
Control mechanisms
Mitigation•
Failure of the advanced •Loss of market share or •“Voice of the Customer” •Understanding customer
technologies applied bynegative pricing pressure
approach and market
needs/expectations andthe Group to produce
resulting in lower turnover
intimacy to direct producttargeted new productcommercially viable
and reduced profitability.
development activities.
development programme to
products.
•
Additional NPI•
Formal NPI processes tomaintain and strengthen
expenditure.
prioritise investment andproduct positioning.
•
Adverse impact on theto manage R&D•
Stage gate process inGroup’s brand andexpenditure.
product development to
reputation.
•
Product lifecycle
challenge commercial
management.
business case and mitigate
technical risks.
•
Operational practices
around sales-production
matching and inventory
management to mitigate
stock obsolescence risks.
Specific risk 2: Routes to market
Context: In some instances the Group’s products are components of higher‑level systems sold by OEMs, and thus the Group
does not control its route to market.
Risk
Possible impact
Control mechanisms
Mitigation•
Consolidation by OEMs in •Loss of key customers / •Customer intimacy to•
Product differentiation to
key markets.
route to market.
match productpromote advantages of•
New competitors.
performance to customer
Oxford Instruments•
Reduction in sales
needs.
equipment and solutions.
volumes or pricing and•Positioning of Oxford•
Strategic marketing withlower profitability.
Instruments brand andOEMs to sell performancemarketing directly to endof the combined system.
users.
•
Broadening the OEM
customer base.
•Direct marketing to end
users.
Specific risk 3: Economic environment
Context: Government expenditure may become constrained in key markets.
Risk
Possible impact
Control mechanisms
Mitigation•
Reduction in•
Lower sales and•Market intimacy and•Increased focus on
research funding in key
profitability.
diversification strategy.
customers that are notmarkets such as the US,
reliant on government
China and the EU
funding.
(including the UK).
Specific risk 4: Political risk
Context: The Group operates in global markets and can be required to secure export licences from governments.
Risk
Possible impact
Control mechanisms
Mitigation•
Changes in the•Lower exports adversely •Contract review and•Broad global customer
geopolitical landscape oraffecting turnover.
protection against breachbase; contractuala global trade war•
Increases to input costsin the event that export
protection.
resulting in a complete
and lower gross margins.
licence is withheld.
embargo on trade withspecific nations or
punitive tariffs.

Oxford Instruments plc
41

Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 201811 Principal Risks and Uncertainties (continued)
Specific risk 5: Brexit related risks
Context: The UK will leave the EU.
Risk
Possible impact
Control mechanisms•
Lower participation in EU- •Lower sales and profitability. •Customer intimacy andfunded research projects•
Salary inflation.
monitoring of fundedpost Brexit.
•
Loss of key skills, and/or
projects.
•
Potential short-term hiatus inincreased recruitment,•
Strategic supply chain
UK research funding.
and/or salary costs.
review;•
Barriers to existing free•Supply chain disruption•
Product pricing reviews.
movement of goods and•Lower net pricing on UK•
Skills and capabilities
services in the EU.
exports to EU and increased
reviews.
•
Tariffs on exports to EU
input costs on products•
Brexit Committee.
countries from the UK andsourced from the EU.
vice versa•
UK becomes less attractive
to EU nationals as a place towork

Mitigation•
Market diversification•
Long‑term pricing
agreements for key
suppliers and strategic
sourcing review.
•
Pricing strategy.
•
Renewal of UK work permit
scheme to facilitate
employment of non‑UK/EU
nationals.
•
Application for Authorised
Economic Operator status tofacilitate movement of goods
with EU 27.

Specific risk 6: Supply chain risk
Context: The Group operates a strategic make or buy policy which places reliance on key partners, notably single source suppliers interms of pricing and on time delivery.
Risk
Possible impact
Control mechanisms
Mitigation•
Supply chain disruption in•
Disruption to customers.
•
Procurement strategy to•
Buffer stocks of key
particular for single source •Lower sales and profitability.
manage stock availability.
components.
components leading to•Higher input costs.
•
Where possible, dual source
production delays and•
Negative impact on the
supply is sought.
potentially lost revenue.
Group’s reputation.
Specific risk 7: People
Context: A number of the Group’s employees have business critical skills.
Risk
Possible impact
Control mechanisms
Mitigation•
Key employees leave and •Adverse impact on NPI.
•HR people strategy for•
Succession management
effective replacements are •Operational disruption.
retention and recruitment ofplans.
not recruited on a timely•
Lower sales and profitability.
staff with key skills.
•
Technical career paths.
basis.
•
UK work permit scheme tofacilitate employment of
non‑UK/EU nationals inplace.
Specific risk 8: IT risk
Context: Elements of production, financial and other systems rely on IT availability.
Risk
Possible impact
Control mechanisms
Mitigation•
Cyber attack on the Group’s •Disruption to business as•
IT security policy and•Regular review, monitoring
IT infrastructure.
usual operations.
associated standards andand testing of key security•
Spread of viruses or•
Loss of business criticalprotection systems.
measures to assess
malware through “Zero-day”
data.
•Internal IT governance toadequacy of protection
incidents or phishing attacks.•
Financial and reputational
maintain those protection
against known threats.
•
Insider threat.
damage.
systems and•Citadel approach to protect
our incident response.
key data.
•
Employee awareness•User education.
training.

Oxford Instruments plc
42Announcement of Preliminary Results for the year to 31 March 2018

Notes to the Financial Statements (continued)
year ended 31 March 201811 Principal Risks and Uncertainties (continued)
Specific risk 9: Operational risk
Context: Business units’ production facilities are typically located at a single site.
Risk
Possible impact
Control mechanisms
Mitigation•
Sustained disruption to•Inability to fulfil orders in the •Business Continuity Plans •Detailed response plans in
production arising from ashort term, resulting in a(“BCPs”) exist for all
BCPs can reduce downtime
major incident at a site.
reduction in sales andmanufacturing sites.
arising from incidents andprofitability.
•
Contractual clauses to limit
facilitate the restoration or•
Additional, non-recurring
financial consequences ofrelocation of production.
overhead costs.
delayed delivery.
•
Standard sales contracts
include clauses for limitationof liability, liquidated
damages and the exclusionof consequential losses.
Specific risk 10: Pensions
Context: The Group’s calculated pension deficit is sensitive to changes in the actuarial assumptions.
Risk
Possible impact
Control mechanisms
Mitigation•
The reported pension deficit •Increase in net debt as•Regular review of pension •The Group has closed its
is sensitive to movements inadditional Groupstrategy
defined benefit pension
actuarial assumptions andcontributions become•
Liability hedging programme
schemes in the UK and US
returns on investments.
payable to fund the deficit.
to mitigate exposure toto future accrual.
•
Increase in the annual levy
movements in interest rates •The Group has a funding
paid to the Pension
and inflation
plan in place to reduce theProtection Fundpension deficit over the•
Reduction in net assets.
short to medium term.
Specific risk 11: Adverse movements in long-term foreign currency rates
Context: A high proportion of the Group’s revenue is in foreign currencies, notably US dollars while the majority of the cost base isdenominated in sterling.
Risk
Possible impact
Control mechanisms
Mitigation•
Long-term strengthening of •Reduced profitability.
•
Procurement “make or buy” •Strategic procurement in
Sterling against key
strategy.
USD, Euros and Yen.
currencies such as the US•
Review of revenue anddollar, Japanese Yen and thecosts by currency.
Euro. (Short-term exposure
to volatility is managed byhedging programme).

Specific risk 12: Legal/compliance risk
Context: The Group operates in a complex technological environment and competitors may seek to protect their position throughintellectual property rights.
Risk
Possible impact
Control mechanisms
Mitigation•
Infringement of a third•
Potential loss of future•
Formal ‘Freedom to•
Confirmation of ‘Freedom toparty’s intellectual property.
revenue.
Operate’ assessment toOperate’ during new product•Future royalty payments.
identify potential IP issues
development stage•
Payment of damages.
during product development.
gate process.

Oxford Instruments plc
43