Half Year Results Announcement for the six months ended 30 September 2018
Chief Executive’s Review
We were greatly saddened when Alan Thomson, our Chairman, passed away on 22 July 2018. Alan had led the Boardof the Company since September 2016 and brought a wealth of experience and wisdom to the role. His commitment
and passion in working with us to drive improvement, and his support, guidance and friendship have been greatly valued.
The process to appoint Alan’s successor is underway and, in the meantime, Steve Blair, our Senior Independent
Director, is operating as Interim Chairman.
Overview
We continue to make good progress with the implementation of our Horizon strategy whilst maintaining a focus on thenear-term delivery of improved performance. The strategy is now well embedded across the Group and we are starting
to see positive results from our increased focus on end market applications, with good underlying order and revenue
growth.
Our chosen end markets and their underlying growth drivers remain positive and robust, with reported orders for theGroup up 10.3% (12.0% at constant currency) to £162.9m (2017: £147.7m). Each of our three sectors – Materials &Characterisation, Research & Discovery, and Service & Healthcare – reported order growth.
Reported revenue rose to £147.0m (2017: £132.1m), an increase of 11.3% (12.6% at constant currency), with strong
growth in both the Materials & Characterisation and Research & Discovery sectors. Revenue was slightly down in
Service & Healthcare due primarily to lower orders from our US Healthcare business. Reported adjusted operating profit
increased 11.7% to £21.0m (2017: £18.8m), an increase of 16.0% at constant currency, with strong growth across both
the Materials & Characterisation and Research & Discovery sectors partially offset by a lower contribution from Service& Healthcare.
The order book, representing orders for future delivery, as at 30 September 2018 increased 16.3% on a reported basis(12.5% at constant currency) since 31 March 2018.
Continuing adjusted basic earnings per share increased by 22.4% to 27.3 pence (2017: 22.3 pence).
Good cash collection in the period further reduced net debt to £12.5m, down from £19.7m at the year end.
Revenue from commercial and industrial customers increased in the period driven by our enhanced customer applicationand market focus. The proportion of revenue in the period from commercial customers increased to 52.7%(2017: 45.3%), with revenue associated with academic or government funded customers remaining broadly in line withthe same period last year.
From an end-market perspective, we have seen strong order and revenue growth in Advanced Materials and Healthcare& Lifescience. Quantum Technologies revenue was up in the period, with orders slightly down due to the phasing oforder intake, but with a strong future-looking pipeline. Semiconductor & Communications revenue was broadly in linewith last year, with good order growth in the period and a healthy pipeline for both our measurement and semiconductor
processing solutions. Advanced Materials represented 24% of sales, Quantum Technologies 10%, and Healthcare &Lifescience and Semiconductor & Communications representing 28% and 21% respectively. Energy and Environment
each represented 5%, with Research & Fundamental Science at 7%.
From a geographical perspective, we had strong constant currency revenue growth across Asia and Europe of 18.9%
and 10.8% respectively, with growth of 5.3% in North America. Within Asia, we had strong growth across the region,
with China, Japan and the Rest of Asia each achieving double digit growth relative to the comparative period. Asia
represented 41% of Group revenue, Europe 25%, North America 32% and Rest of World 2%. China represented 21%of revenue, up from 17% in the previous half year.
This encouraging first half result has been achieved against a backdrop of increasing global political tensions that have
impacted the overall international trading environment. We have seen a slight tightening of the grant of export licences
to certain customers. In addition, the imposition of US sanctions and China tariffs has had a modest impact on orders
and revenues in the period. We are monitoring this situation closely to mitigate, where possible, any future impact.

Oxford Instruments plc

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Half Year Results Announcement for the six months ended 30 September 2018
Horizon Strategy Progress
We have maintained a sharp focus on our Horizon strategy to deliver sustainable revenue growth and improved margins.
In the period we have continued to embed an increased commercial focus and build capabilities across the Group,
including extensive training for all our customer facing teams. With our cohort of internal operational champions now inplace, we have increased our investment and focus on the Operational Excellence aspect of Horizon, with a specificfocus on strategic procurement, operational efficiencies and logistics. This will support our future growth ambitions andcontribute to margin improvement.
Sector Performance
Turning to the performance of our individual sectors:
Materials & Characterisation focuses on applied R&D and commercial customers, enabling the fabrication andcharacterisation of materials and devices down to the atomic scale. This sector delivered a strong first half, with positive
contributions from all the constituent businesses, namely NanoAnalysis, Asylum Research and Plasma Technology.
Reported revenue increased by 20.0% to £60.1m (2017: £50.1m), with reported adjusted operating profit increasing to£9.7m (2017: £7.2m). Reported order growth of 13.7% to £69.5m (2017: £61.1m) contributed to a positive order bookgrowth for future deliveries. The enhanced results were driven by strong demand for recently launched higher margin
products, an increased focus on end customer applications and operational efficiencies. These elements contributed toan improved reported operational margin of 170 basis points to 16.1% for the sector (2017: 14.4%).
Research & Discovery provides advanced solutions that create unique environments and enable measurements down
to the molecular and atomic level, used predominantly in fundamental and applied research. Reported revenue
increased by 13.4% to £54.3m (2017: £47.9m), with reported adjusted operating profit increasing to £4.8m (2017:£4.2m). This was driven by increased demand for our scientific cameras and optical microscopy systems, as well as
increased revenues from our cryogenic systems and superconducting magnets. Improved performance from Andor
Technology and NanoScience was partially offset by a softer first half performance from Magnetic Resonance, X-ray
Technology and Scienta Omicron in the period. Reported order growth of 3.8% to £60.0m (2017: £57.8m), contributed
to order book growth of 5.0%. Operational margin for the sector remained flat at 8.8% on a reported basis. The Group
has adopted IFRS 15 ‘Revenue from Contracts with Customers’. The primary impact is the recognition of revenue on
our complex cryogenic and magnet systems on installation, rather than shipment. The financial impact in the half year
is to increase revenue by £5.1m; we expect this difference to partially unwind in the second half. The improvement plan
within our NanoScience business is progressing well under a new leadership team, with greater commercial discipline
and investment in sales and service resources. Consequently we have seen an anticipated reduction in the backlog ofuninstalled complex systems.
Service & Healthcare provides customer service and support for our own products and the service, sale and rental of
third-party healthcare imaging systems. Reported revenue for the sector fell by 4.4% to £32.6m (2017: £34.1m) due tolower volumes from our US Healthcare business, with a decline in reported adjusted operating profit of 12.2% to £6.5m(2017: £7.4m). The sector saw an increase in reported orders to £33.4m (2017: £29.1m), up 14.8%. The sector’s
performance was impacted by the ongoing strategic movement of our US Healthcare business towards a higher
proportion of service revenue and a change in mix of upgrades and contract revenues associated with our own products.
R&D
Innovation remains core to our Horizon strategy and we continue to invest in products, solutions and technology that
help our customers improve their productivity and develop new capabilities. We have maintained our focus on strategic
investments in line with our short, medium and longer-term roadmaps to expand our market shares and provide growth
into new market areas. Investment in R&D initiatives was slightly lower in the period at £12.3m (2017: £13.0m) due tothe phasing of specific projects, timing of associated spend and the receipt of additional external grant funding.

Oxford Instruments plc

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Half Year Results Announcement for the six months ended 30 September 2018
PeopleAs we continue with the implementation of Horizon, it is our people that make the real difference. Our thanks go to all
our employees for their ongoing support of our strategy and for their willingness to help us deliver an exceptional
experience for our customers.
Dividends

The Board has declared an interim dividend increase of 2.7% to 3.8 pence (2017: 3.7 pence), reflecting improvement inunderlying earnings per share.

Current Trading and Outlook
We continue to make good progress with the implementation of our Horizon strategy whilst maintaining a focus on thenear-term delivery of improved performance. The strategy is now well embedded across the Group and we are starting
to see positive results with good underlying order and revenue growth.
Our commitment to provide leading product performance and commercial solutions in markets with long-term growth
drivers coupled with our increased investment in operating efficiencies will continue to drive progress
Our expectations for the current financial year remain unchanged, supported by growth in constant currency orders andorder book along with our anticipated second half seasonal bias.
Ian Barkshire
Chief Executive
13 November 2018

Oxford Instruments plc

4Half Year Results Announcement for the six months ended 30 September 2018
Operations Review
Our Group reports in the following three sectors: Materials & Characterisation, Research & Discovery, and Service &Healthcare.
Materials & Characterisation

Revenue
Adjusted2 operating profit
Adjusted2 operating margin
Profit before tax after adjusting items

2018
£m

2017
£m

Growth

60.1
9.7
16.1%
8.6

50.1
7.2
14.4%
5.8

+20.0%

Constant
Currency
Growth1+21.2%For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 2 of the condensed Financial Statements

1
2

The Materials & Characterisation sector comprises NanoAnalysis, Asylum Research 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, as well as the fabrication of semiconductor devices and structures through our range of advanced
semiconductor etch and deposition processes and systems. Our market leading product performance, combined withcustomer focused solutions, continues to drive strong growth by providing increased value to existing customers andthe identification and reach into new markets and applications. The sector has a strong focus on supporting andaccelerating our customers’ applied R&D, enabling the development of new devices, next generation higher performancematerials and enhancing productivity in advanced manufacturing, quality assurance (QA) and quality control (QC).
Materials & Characterisation delivered strong growth in orders, revenue and profitability driven by our continued focus
on tailoring our product offering to specific end customer applications that increase both the product value and theaddressable market. The success of recently launched higher margin products and solutions strongly contributed to thesector’s performance in the period, which saw margins increase by 170 basis points to 16.1%. Growth from industrial
and commercial customers increased their proportion of sales in the period to 58% of revenue (2017: 48%), with thebalance from academic and government funded customers.
Looking at end-market segments, we saw strong growth in Advanced Materials, which accounted for 39% of sales inthe sector. Semiconductor & Communications also represented 39% of sales with Energy, Environment and Healthcare& Lifescience each broadly similar at 8%, 7% and 6% of revenue, respectively. From a geographic perspective, revenue
grew in each of Europe, North America and Asia.
Growth in the Advanced Materials market segment was strongly supported by the continued success of our recently
launched, Symmetry™, super-fast material structure analyser and the Ultim™ large area X-ray detectors as well as ourportfolio of atomic force microscopes. These products enable customers to undertake significantly more accurate andmuch faster analysis, driving both capability and productivity for customers in the automotive and aerospace industries,
as well as those analysing metals, ceramics, composites and polymers. We also saw good growth from customers
engaged in energy generation, storage and batteries.
We have continued to achieve success through our application specific solutions, in particular new solutions for QA and
QC in the high-end additive manufacturing and 3D printing markets. Our Symmetry™ material analyser enables thecritical qualification of the material properties, performance and quality of the additive manufactured metal components
and optimisation of the manufacturing processes. This is of increasing interest within the automotive and aerospaceindustries, which use additive manufacturing to produce much lighter materials and more complex components thanwould be possible using traditional methods. In addition, we have exploited our expertise in particle analysis to develop
a tailored solution to provide quality control for the raw material feedstock used in additive manufacturing, helping to
avoid contamination that can significantly impact the performance and properties of the manufactured component or
device.
Semiconductors remains a core market for the sector, where in addition to our imaging and analysis products weprovide etch and deposition process solutions used across a range of advanced compound semiconductor and silicon
device applications. We are entering what some call the ‘decade of materials’ – whereby performance materials will
enable applications and device performance that silicon cannot. We are focusing on the global trends in

Oxford Instruments plc

5Half Year Results Announcement for the six months ended 30 September 2018
optoelectronics, discrete devices, nanomaterials and research systems. Specifically, we are continuing to build on ourcore research market by targeting growth applications within the compound semiconductor device market with an
overarching strategy of tailoring our market leading research and applied R&D products for production customers. As
an example, we have developed leading capabilities in several key process steps required for the manufacture of
power devices, MEMs sensors and vertical-cavity surface-emitting lasers (VCSELs). VCSELs are increasingly being
used across a range of applications such as facial recognition on smart phones, and for higher-speed communications
within data centres. We also see compound semiconductors providing growth in discrete semiconductor devices,where the properties of compound semiconductors allow faster, more energy efficient and higher voltage powerelectronics. This enables enhanced wireless charging capabilities and increased energy storage, providing longer
range electric vehicles and higher data communication rates and capacity required for 5G networks.

Research & Discovery

Revenue
Adjusted2 operating profit
Adjusted2 operating margin
Profit before tax after adjusting items

2018
£m

2017
£m

Growth

54.3
4.8
8.8%
1.9

47.9
4.2
8.8%
0.1

+13.4%

Constant
Currency
Growth1+14.6%For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 2 of the condensed Financial Statements

1
2

The Research & Discovery sector includes Andor Technology, NanoScience and Magnetic Resonance, X-ray
Technology and our minority share in Scienta Omicron. This sector provides advanced solutions that create uniqueenvironments and enable imaging and analytical measurements down to the molecular and atomic level, usedpredominantly in fundamental and applied research. We can build on our relationships with customers working on
breakthrough applications in research to gain insights and support future commercial applications.
The sector had an improved first half, with growth in orders, revenue and profitability driven by a strong performancefrom our optical microscopy systems, scientific cameras, cryogenic systems and superconducting research magnets,
providing growth in the Healthcare & Lifescience and Quantum Technologies segments. This was partially offset by areduction in revenues from our scientific X-ray tubes and benchtop magnetic resonance systems. The sector has a highproportion of academic and government funded customers, representing 65% of revenues. From a market perspective,
the Healthcare & Lifescience and Quantum Technologies segments represented 40% and 25% of revenue respectively;
Research & Fundamental Science 18%, Advanced Materials 10%, with the balance from Environment, Semiconductor& Communications, and Energy customers.
Growth in Healthcare & Lifescience is supported by increased research within neuroscience and customers involved indevelopmental biology to image and analyse cells, tissues and organs for the development of advanced medicines andthe improved understanding of fundamental disease mechanisms. Within this segment, our DragonflyTM optical
microscopy portfolio continues to gain customer recognition and market share through the provision of improved image
quality across larger and thicker samples.
We continue to see growth from customers involved in Quantum Technologies with increased investment by large
corporates and the wider academic community across the EU, US and China in areas such as quantum computing,secure communications, sensors and imaging. We continue to work with leading companies and researchers worldwide
to provide the fundamental tools for research and the development of solutions for commercial applications. The market
remains attractive with strong global research funding due to the potential for significant market and technology
disruption. However, the nature of the sector means orders and revenue remain irregular in value and frequency andare attracting an increased scrutiny for export licenses. As previously mentioned, revenue benefitted from theintroduction of IFRS 15.
We have built on our market and technical leadership in scientific cameras with the launch of a new range of application
specific cameras focusing on key market drivers including cell biology, personalised medicine, astronomy and physicalscience & quantum technology. SonaTM is tailored for the lifescience market offering exceptional sensitivity to improve

Oxford Instruments plc

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Half Year Results Announcement for the six months ended 30 September 2018
long-term live cell analysis to help scientists gain a better understanding of cellular processes; and MaranaTM has been
optimised for high speed, high sensitivity imaging, supporting a broad range of physical sciences, including astronomy
applications involving the search for near earth objects and space debris.
Research & Fundamental Science remains an attractive segment for this sector with our range of optical components,
spectrographs, cryogenics and magnets providing customers with a broad range of platforms and solutions usedpredominately across the physical sciences. These included the BepiColumbo European Space Agency mission to
Mercury, which has incorporated our X-ray detectors. The mission, launched in October, is seeking a deeper
understanding of the planet’s origin and its impact on the solar system.
Despite a softer first half, our benchtop magnetic resonance analysers continue to see positive pipeline and we are
gaining further opportunities for our solutions across a range of food and industrial applications as well as within the oil
exploration market. The market for our scientific X-ray tubes remains buoyant with order growth in the period, although
delayed shipments and timing of orders has negatively impacted revenue and profitability in the first half of the year. We
expect to see some improvement in the second half from both business units.
The Scienta Omicron joint venture created the largest player in the ultra-high vacuum surface science field. The Group
has a 47% share in the joint venture. Following weak order intake last year, we recorded a loss of £0.6m for the halfyear. Assisted by the launch of new systems, orders are recovering, and we expect an improved trading performance inthe second half.

Service & Healthcare Sector

Revenue
Adjusted2 operating profit
Adjusted2 operating margin
Profit before tax after adjusting items

2018
£m

2017
£m

Growth

32.6
6.5
19.9%
6.1

34.1
7.4
21.7%
6.7

(4.4)%

Constant
Currency
Growth1(2.9)%For definition refer to note on page 2 of highlights
Details of adjusting items can be found in Note 2 of the condensed Financial Statements

1
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.
Reported orders grew 14.8% to £33.4m (2017: £29.1m) supported by increased demand for services related to our own
products under OiService as well as services within OI Healthcare, with the order book for future deliveries up 15.0% to£46.9m (2017: £40.8m).
Within OI Healthcare we have seen good progress in the growth of service contracts to new customers as well as an
improved utilisation of our leasing fleet. Sales in the refurbished imaging equipment market remained depressedcompared to previous years with weaker demand for new and used equipment, competitive market limiting opportunities
and depressing margins. In Japan, we have signed a service agreement to start servicing Hitachi Healthcare’s Mitsubishi
magnet-based MRI systems.
Within OiService we continue our drive to provide enhanced support services tailored to customers’ needs whilst
improving our efficiency and response time to customers through the utilisation of mobile technologies. We haveincreased the number of application specific seminars and completed a very successful second microscopy summer
school in collaboration with the Chinese Academy of Sciences.
Reported revenue declined in the period due primarily to a lower number of refurbished system sales within OI
Healthcare which, combined with a change in product mix from OiService, contributed to a lower profit and margin in
the period.

Oxford Instruments plc

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Half Year Results Announcement for the six months ended 30 September 2018
Finance Review
The Group has adopted IFRS 15 ‘Revenue from Contracts with Customers’ using the modified retrospective approach.
Comparatives have not been restated. The main difference is within our NanoScience business, where the revenue
recognition on complex customised magnetic and cryogenic systems is deferred from being primarily on transfer ofrights and rewards of ownership to completion of installation. The Group has adopted IFRS 16 ‘Leases’ in the 2018/19
financial year. The net impact of adopting IFRS 15 and IFRS 16 is to increase profit before tax by £2.2m. Further detailon the impact of these new accounting standards is set out in note 1.
Reported orders increased by 10.3% to £162.9m (2017: £147.7m), an increase of 12.0% at constant currency. At theend of the period the Group’s order book for future deliveries stood at £177.9m (31 March 2018: £134.0m). The orderbook as at 31 March 2018 restated on an IFRS 15 basis is £153.0m, against £134.0m as previously reported. Against
this IFRS 15 adjusted comparative the order book grew 16.3% on a reported basis and 12.5% at constant currency.
Reported revenue increased by 11.3% to £147.0m (2017: £132.1m). Revenue, excluding currency effects, increasedby 12.6%, with the movement in average currency exchange rates over the half year reducing reported revenue by£1.7m.
Adjusted operating profit from continuing operations increased by 11.7% to £21.0m (2017: £18.8m). Adjusted
operating profit from continuing operations, excluding currency effects, increased by 16.0%. Adjusted operating margin
from continuing operations increased by 10 basis points to 14.3% (2017: 14.2%).
The effect of IFRS 15 is to increase revenue by £5.1m and adjusted operating profit by £2.3m for the half year. Thisdifference between revenue recognition on product installation compared to product shipment is expected to partiallyunwind in the second half of the year. Against the previous half year, the Group was unable to satisfy additionalcustomer orders to the value of £1.7m following the refusal of government export licences and compliance with US
sanction legislation. In the half year we have engaged consultants to accelerate the operational excellence element of
our Horizon strategy and incurred restructuring costs, primarily on the closure of a small facility in North America.
These costs totalled £1.0m and have been included within adjusted operating profit.
Adjusted profit before tax from continuing operations grew by 21.5% to £19.8m (2017: £16.3m). Recorded within thecomparative period under discontinued operations is a post-tax profit of £45.6m from the sale of Industrial Analysis,
which was completed on 3 July 2017.
Adjusting items include amortisation of acquired intangibles of £4.7m and a net charge of £0.6m relating to loan note
make-whole settlement payments and a net credit relating to our joint venture, Scienta Omicron. The movement in themark-to-market valuation of currency hedges for future years gave rise to a charge of £2.9m.
Adjusted profit before tax from continuing operations of £19.8m (2017: £16.3m) represents a margin of 13.5% (2017:12.3%). After adjusting items, the Group recorded a profit before tax of £11.6m (2017: £12.7m).
Continuing adjusted basic earnings per share grew by 22.4% to 27.3 pence (2017: 22.3 pence). Continuing basic
earnings per share was 15.6 pence (2017: 17.5 pence).
Cash generated from operations of £21.4m (2017: £3.7m), represents 91.0% (2017: 12.8%) cash conversion. Net debt
decreased from £19.7m on 31 March 2018 to £12.5m, representing a net debt to EBITDA ratio (for banking covenant
purposes) of 0.2 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 2 to the condensed Financial Statements.

Oxford Instruments plc

8

Half Year Results Announcement for the six months ended 30 September 2018
Income Statement
The Group’s Income Statement is summarised below.

Revenue
Gross profit
Administrative overheads
Share of (loss)/profit of associate
Foreign exchange
Adjusted operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquired intangibles
Non-recurring items
Mark-to-market of currency hedges
Profit before tax
Tax from continuing operations
Profit for the period from continuing operations

Half year toHalf year to
30 September 30 September
2018
2017
£m
£m
147.0
132.1
78.7
67.7
(56.8)(48.7)
(0.6)
(0.3)
(0.2)
21.0
18.8
(1.2)
(2.5)
19.8
16.3
(4.7)
(5.6)
(0.6)
(0.6)
(2.9)
2.6
11.6
12.7
(2.7)
(2.7)
8.9
10.0

Change+11.3%+16.2%+11.7%+21.5%

Adjusted effective tax rate1

21.2%

22.1%

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

27.3p
15.6p

22.3p
17.5p

+22.4%(10.9%)

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

27.0p
15.4p

22.1p
17.4p

+22.2%(11.5%)

Dividend per share

3.80p

3.70p

+2.7%

1.

The adjusted effective tax rate is calculated by excluding the tax effects of impairment of non-current assets, amortisation on acquired intangibles, non-recurring
items, the mark-to-market of financial derivatives, and other adjusting items.

Orders and Revenue
Total reported orders grew by 10.3% (12.0% at constant currency) to £162.9m. Orders, at constant currency, increased
by 15.2% for Materials & Characterisation, 5.5% for Research & Discovery and 16.8% for Service & Healthcare.
Reported revenue of £147.0m (2017: £132.1m) increased by 11.3% (12.6% at constant currency). Reported revenue
increased by 20.0% for Materials & Characterisation, 13.4% for Research & Discovery and declined by 4.4% forService & Healthcare.
The book-to-bill ratio (orders received to goods and services billed in the period) for the half year was 1.11.
Revenue, at constant currency, increased by 21.2% for Materials & Characterisation with good growth across all
constituent businesses. Growth of 14.6% in Research & Discovery was driven by a high level of installations in
NanoScience and good growth within Andor Technology. A decline of 2.9% for Service & Healthcare is a result of
selling fewer refurbished imaging systems.
On a geographical basis, at constant currency, revenue grew by 10.8% in Europe, 5.3% in North America, 18.9% in Asiaand 66.7% for the Rest of World.
After adjusting the comparative period for IFRS 15, total reported order book grew by 16.3% (12.5% at constantcurrency). The order book, at constant currency, compared to 31 March 2018, increased by 33.3% for Materials &Characterisation, 5.0% for Research & Discovery, and 9.4% for Service & Healthcare.

Oxford Instruments plc

9Half Year Results Announcement for the six months ended 30 September 2018£m
Revenue: Half year 2017/18
Underlying movement
Foreign exchange
Revenue: Half year 2018/19
Revenue growth: reported
Revenue growth: constant currency

Materials &Characterisation

Research &Discovery

Service &Healthcare

Total*

50.1
10.6
(0.6)
60.1

47.9
7.0
(0.6)
54.3

34.1
(1.0)
(0.5)
32.6

132.1
16.6
(1.7)
147.0

+20.0%+21.2%+13.4%+14.6%(4.4%)(2.9%)+11.3%+12.6%* Excluding inter-sector revenue
Gross profit
Gross profit increased by 16.2% to £78.7m (2017: £67.7m), representing a gross profit margin of 53.5%, an increaseof 230 basis points over last year.
Operating profit
Adjusted operating profit from continuing operations increased by 11.7% to £21.0m (2017: £18.8m), representing an
adjusted operating profit margin of 14.3%, an increase of 10 basis points against last year. Materials & Characterisation
margin rose by 170 basis points to 16.1% (2017: 14.4%). Research & Discovery’s adjusted operating margin was flat at
8.8% (2017: 8.8%). Service & Healthcare margin declined by 180 basis points to 19.9% (2017: 21.7%).
An increase in administrative overheads of 16.6% from £48.7m to £56.8m primarily reflects an investment in sales andservice resources and training, operations, a reduction in capitalised R&D and an increase in IT costs. In addition, theend of the transition agreement with Hitatchi High-Technologies following the sale of Industrial Analysis and the sale oftwo freehold properties last year has led to a rise in annual net administrative overheads of £1.6m. Commissions andlogistics costs are included within administrative overheads.
Our share of the Scienta Omicron joint venture showed an adjusted loss of £0.6m for the year, against a break-evenposition for the comparative period. After adjusting items, our share of the Scienta Omicron joint venture was a loss of£0.3m.
Currency effects (including the impact of transactional currency hedging) have reduced reported adjusted operating
profit by £0.8m when compared to blended hedged exchange rates for the comparative period.
At constant currency, the adjusted operating profit margin was 14.7%, an increase of 50 basis points.

Materials &Characterisation

Research &Discovery

Service &Healthcare

Total

Adjusted operating profit: Half year 2017/18

7.2

4.2

7.4

18.8

Underlying movement
Foreign exchange
Adjusted operating profit: Half year 2018/19

2.8
(0.3)
9.7

1.0
(0.4)
4.8

(0.8)
(0.1)
6.5

3.0
(0.8)
21.0

14.4%
16.1%

8.8%
8.8%

21.7%
19.9%

14.2%
14.3%

£m

Margin: Half year 2017/18
Margin: Half year 2018/19

Adjusting items
Amortisation of acquired intangibles of £4.7m relates to intangible assets recognised on acquisitions, being the valueof technology, customer relationships and brands.

Oxford Instruments plc

10Half Year Results Announcement for the six months ended 30 September 2018
Non-recurring items were a net charge of £0.6m. During the period we repaid £11.6m of the principal outstanding onloan notes as a condition of the sale of Industrial Analysis. The make-whole settlement cost due at the time of therepayment was £0.9m. In addition, we recognised a net gain of £0.3m on adjustments relating to our Scienta Omicron
joint venture.
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 IFRS 9 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 loss in respect of derivative financial instruments was £2.9m (2017: £2.6m gain). This reflects amovement from a net fair value asset to a small net liability position on currency derivatives that are hedging futuretransactional currency exposures for the Group compared to the previous year end. The un-crystallised balance sheet
liability is attributable to a fall in the value of Sterling at the balance sheet date against a blended rate achieved on US
Dollar, Euro and Japanese Yen forward contracts that will mature over the next eighteen months.
Net finance costs
The Group’s adjusted net finance costs fell by £1.3m to £1.2m (2017: £2.5m) with net finance charges falling by £1.2m
to £1.0m and pension financing charges falling by £0.1m to £0.2m.
Profit before tax
Continuing adjusted profit before tax increased by 21.5% to £19.8m (2017: £16.3m). The adjusted profit before tax
margin increased by 120 basis points to 13.5% (2017: 12.3%).
Profit before tax of £11.6m (2017: £12.7m) is after the mark-to-market movement on derivative financial instruments,
amortisation of acquired intangibles and other adjusting items.
Tax
The adjusted tax charge from continuing operations of £4.2m (2017: £3.6m) represents an effective tax rate of 21.2%(2017: 22.1%). The current tax liability includes a provision of £2.9m in respect of a historical financing structure. The
statutory effective tax rate is 23.3%.
Earnings per share
Continuing adjusted basic earnings per share increased by 22.4% to 27.3 pence (2017: 22.3 pence); continuing
adjusted diluted earnings per share were 27.0 pence (2017: 22.1 pence).
The number of undiluted weighted average shares have increased by 0.1m to 57.2m.
Foreign exchange
The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euro andJapanese Yen. For the half year, approximately 16% of Group revenue was denominated in Sterling, 54% in US
Dollars, 19% in Euros, 10% in Japanese Yen and 1% 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 30
September 2018 the Group had currency hedges in place extending up to eighteen months forward.
Dividend
The Group’s policy is to increase the dividend each year in line with the increase in underlying earnings, considering
movements in currency. The Board has proposed to increase the interim dividend by 2.7% to 3.8 pence. The interim
dividend will be paid on 8 April 2019 to Shareholders on the register as at 1 March 2019.

Oxford Instruments plc

11Half Year Results Announcement for the six months ended 30 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
Equity settled share schemes
Share of loss/(profit) 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
Increase in investment in associate
Proceeds from sale of subsidiary undertaking
Decrease in long-term receivables
Dividends paid
Proceeds from issue of share capital
Payments made in respect of lease liabilities
Decrease in borrowings
Net decrease in cash and cash equivalents from continuing operations

Half year toHalf year to
30 September 30 September
2018
2017
£m
£m
21.0
18.8
5.4
4.0
26.4
22.8
(1.2)
(15.0)
(0.6)
(0.6)
0.2
0.4
0.5
0.6
(0.7)
(0.7)
(3.5)
(3.5)
21.4
3.7
(2.3)
(1.0)
(4.7)
(2.5)
(1.5)
(3.1)
(3.4)
(2.4)
(2.1)
73.0
0.6
(2.1)
(2.1)
0.2
(1.6)
(8.6)
(77.6)(2.2)(13.9)

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 of £21.4m (2017: £3.7m), represents 91.0% (2017: 12.8%) cash conversion. The
impact of IFRS 16 is to recognise a lease liability and corresponding asset for leases previously classified as operatingleases. As a result, the depreciation charge for the half year includes an additional £1.7m reflecting the increase in
asset base. Compared to the comparative period, cash generated from operations is also higher by £1.7m. Cashconversion is defined as cash generated from operations before non-recurring items and pension scheme payments,
less, capitalised development expenditure, capital expenditure and payments made in respect of lease liabilities /adjusted operating profit. Payments made in respect of lease liabilities are now included within our definition of cash
conversion to retain a like-for-like comparison following the introduction of IFRS 16.
The working capital outflow of £1.2m reflects an increase in inventories of £7.9m, a decrease in receivables of £12.6m,
a decrease in payables of £7.7m and an increase in customer deposits of £1.8m. The increase in inventories primarilyreflects an increase in work in progress and components to support our planned production schedule in the second
half of the year, particularly for our deposition and etch process solutions and optical imaging systems.
Interest
Net interest paid was £2.3m (2017: £1.0m). This includes loan note make-whole payments of £0.9m as aconsequence of repaying loan note principal following the sale of Industrial Analysis. Net interest paid in thecomparative period was low due to payment timing differences.
Tax
Tax paid was £4.7m (2017: £2.5m), the comparative period benefiting from tax deductions on allowable adjusting items
and utilisation of brought forward tax losses.
Investment in research and development (‘R&D’)
Total cash spend on R&D in the half year was £12.3m, equivalent to 8.4% of sales, (2017: £13.0m, 9.8% of sales).
The small decrease reflects lower material costs incurred this year and a change in timing of receipt of government
grants. A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:

Oxford Instruments plc

12Half Year Results Announcement for the six months ended 30 September 2018

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

Half year toHalf year to
30 September 30 September
2018
2017
£m
£m
12.3
11.4
0.1
(1.5)
(1.6)
1.5
3.1
12.3
13.0

Investment in Associate
In the comparative period, the shareholders of Scienta Omicron agreed to a capital injection to strengthen the balance
sheet of the joint venture and ensure future liquidity in support of the business strategy. Our share was £2.1m and was
paid in September 2017.
Disposals
The sale of Industrial Analysis was completed on 3 July 2017. A post-tax profit of £45.6m is recorded within discontinued
operations for the comparative period.
Net debt and funding
Net debt
Net debt decreased in the period from £19.7m to £12.5m. Cash generated from operations was £21.4m. The Groupinvested in capitalised development costs of £1.5m and tangible and intangible assets of £3.4m.
Movement in net debt
Net debt as at 31 March 2018
Cash generated from operations
Interest
Tax
Capitalised development expenditure
Capital expenditure on tangible and intangible assets
Dividends paid
Other items
Net debt as at 30 September 2018£m
19.7
(21.4)
2.3
4.7
1.5
3.4
2.1
0.2
12.5

Funding
On 2 July 2018 the Group entered into a new unsecured multi-currency revolving facility agreement which iscommitted until June 2023 with one-year extension options at the end of the first and second years. The facility has
been entered into with two banks and comprises a Euro denominated multi-currency facility of €50.0m and a US Dollar
denominated multi-currency facility of $80.0m.
In this half year the Group repaid, as a pre-condition relating to the sale of Industrial Analysis, £11.6m of its bilateral
private placement note, leaving an outstanding note of £27.9m, which matures in March 2021. Associated make-whole
settlement costs of £0.9m have been included within non-recurring items.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 30
September 2018 net debt to EBITDA was at 0.2 times and EBITDA to interest was 21.3 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 30 September 2018, the net liability arising from our defined benefit scheme obligations was £9.9m (31 March
2018: £15.3m), a fall of £5.4m. The reduction in the deficit was primarily due to the contributions paid in the period anda rise in the discount rate. Total scheme assets at 30 September 2018 were £285.7m (31 March 2018: £289.5m) whileliabilities were £295.6m (31 March 2018: £304.8m).

Oxford Instruments plc

13

Half Year Results Announcement for the six months ended 30 September 2018
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
13 November 2018

Oxford Instruments plc

14

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Income
Half year ended 30 September 2018 – unaudited

Half Year to 30 Sept 2018
Adjusted
AdjustingTotal
items*
Notes

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

£m

£m

£m

Half Year to 30 Sept 2017
Adjusted
AdjustingTotal
items*
£m

£m

£m

147.0
(68.3)
78.7(12.3)(28.9)(15.6)

—
—
—
—
—
(4.7)

147.0
(68.3)
78.7(12.3)(28.9)(20.3)

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

—
—
—
—
—
(5.9)

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

(0.6)
(0.3)
21.0

0.3
(2.9)
(7.3)

(0.3)
(3.2)
13.7

—
(0.2)
18.8

(0.3)
2.6
(3.6)

(0.3)
2.4
15.2

Other financial income
Financial income

0.1
0.1

—
—

0.1
0.1

0.1
0.1

—
—

0.1
0.1

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

(0.2)

—

(0.2)

(0.3)

—

(0.3)

(1.1)
(1.3)

(0.9)
(0.9)

(2.0)
(2.2)

(2.3)
(2.6)

—
—

(2.3)
(2.6)

3

19.8

(8.2)

11.6

16.3

(3.6)

12.7

7

(4.2)

1.5

(2.7)

(3.6)

0.9

(2.7)

15.6

(6.7)

8.9

12.7

(2.7)

10.0

—

—

—

0.3

45.3

45.6

15.6

(6.7)

8.9

13.0

42.6

55.6

pence

pence

pence

pence

27.3

15.6

27.3

15.6

22.3
0.5
22.8

17.5
79.9
97.4

27.0

15.4

27.0

15.4

22.1
0.5
22.6

17.4
79.5
96.9

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

3
4

6

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

8

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

8

Dividends per share
Dividends paid
Dividends proposed

6

6

9
9

—

—

—

—

3.70
3.80

3.70
3.70

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

Oxford Instruments plc

15

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Income
Half year ended 30 September 2018 – unaudited

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

Notes

Income tax expense
Profit/(loss) for the year from continuing
operations(Loss)/profit from discontinued operations after tax
Profit for the year attributable to equity holdersof the parent
Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
From profit for the year
Diluted earnings per share
From continuing operations
From discontinued operations
From profit for the year
Dividends per share
Dividends paid
Dividends proposed

Total
£m

296.9
(146.0)150.9(23.4)(53.9)(28.5)
0.5
—
0.9
46.5
0.3
0.3

—
—
—
—
—
(12.1)
(2.4)
3.3
3.1
(8.1)
—
—

296.9
(146.0)150.9(23.4)(53.9)(40.6)
(1.9)
3.3
4.0
38.4
0.3
0.3

(0.6)
(3.9)
(4.5)

—
—
—

(0.6)
(3.9)
(4.5)

3

42.3

(8.1)

34.2

7

(10.1)(4.5)(14.6)

6

32.2
(0.4)

(12.6)
46.3

19.6
45.9

31.8

33.7

65.5

3
4

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

Year to 31 March 2018
Adjusted
Adjustingitems*
£m
£m

8

8

9
9

56.3
(0.7)
55.6

34.3
80.2
114.5

56.1
(0.7)
55.4

34.1
80.0
114.1
13.0
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 2 of this Half Year Report.

Oxford Instruments plc

16

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2018 - unaudited
Half year to
30 Sept2018£m

Half year to
30 Sept
2017£mYear to31 March
2018
£m

4.6

(5.4)

(8.8)

—

(4.8)

(4.8)

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

2.1
(0.4)
6.3

(0.8)
0.2
(10.8)

2.2(0.9)(12.3)

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

15.2

44.8

53.2

Profit for the period
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences
Net cumulative foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement

Oxford Instruments plc

8.9

55.6

65.5

17

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2018 – unaudited

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

61.7

0.2

9.2

105.6

179.6

—

—

—

—

(7.0)

(7.0)

—

—

—

—

8.9

8.9

– Foreign exchange translation differences

—

—

—

4.6

—

4.6

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

2.1

2.1

– Tax on items recognised directly in other comprehensive
income

—

—

—

—

(0.4)

(0.4)

Total comprehensive income attributable to equity
shareholders of the parent

—

—

—

4.6

10.6

15.2

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

—

—

—

—

0.4

0.4

– Dividends payable

—

—

—

—

(7.6)

(7.6)

Total transactions with owners recorded directly in equity:

—

—

—

—

(7.2)

(7.2)

Balance at 30 September 2018

2.9

61.7

0.2

13.8

102.0

180.6

Retainedearnings
£m

Total
£m

Share
capital£mSharepremium
account£m

Balance at 1 April 2018

2.9

Impact of adoption of IFRS 15
Total comprehensive income:
Profit for the period
Other comprehensive income:Transactions with owners recorded directly in equity:

Share
capital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve
£m

2.9

61.5

0.2

22.8

45.1

132.5

—

—

—

—

55.6

55.6

– Foreign exchange translation differences

—

—

—

(5.4)

—

(5.4)

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

—

—

—

(4.8)

—

(4.8)

– Remeasurement loss in respect of post-retirement benefits

—

—

—

—

(0.8)

(0.8)

– Tax on items recognised directly in other comprehensive
income

—

—

—

—

0.2

0.2

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

—

—

—

(10.2)

55.0

44.8– Proceeds from issue of shares

—

0.2

—

—

—

0.2

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

—

—

—

—

0.5

0.5

– Dividends payable

—

—

—

—

(7.4)

(7.4)

Total transactions with owners recorded directly in equity:

—

0.2

—

—

(6.9)

(6.7)

Balance at 30 September 2017

2.9

61.7

0.2

12.6

93.2

170.6

Balance at 1 April 2017
Total comprehensive income:
Profit for the period
Other comprehensive income:Transactions with owners recorded directly in equity:

Oxford Instruments plc

18

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Changes in Equity continued

Half year ended 30 September 2018 – unaudited

Foreignexchange
Other translation
reserve
reserves
£m
£m

Share
capital£mSharepremium
account
£m

2.9

61.5

0.2

—

—

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

Retainedearnings
£m

Total
£m

22.8

45.1

132.5

—

—

65.5

65.5

—

—

(8.8)

—

(8.8)

—

—

—

(4.8)

—

(4.8)

– Remeasurement gain in respect of post-retirement
benefits

—

—

—

—

2.2

2.2

– Tax on items recognised directly in othercomprehensive income

—

—

—

—

(0.9)

(0.9)

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

—

—

—

(13.6)

66.8

53.2– Proceeds from issue of shares

—

0.2

—

—

—

0.2

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

—

—

—

—

1.1

1.1

– Dividends paid

—

—

—

—

(7.4)

(7.4)

Balance at 1 April 2017
Total comprehensive income:
Profit for the year
Other comprehensive income:Transactions with owners recorded directly in equity:

Total transactions with owners recorded directly in equity:

—

0.2

—

—

(6.3)

(6.1)

Balance at 31 March 2018

2.9

61.7

0.2

9.2

105.6

179.6

Oxford Instruments plc

19Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Financial Position

As at 30 September 2018 - unaudited

As at
30 Sept
2018
£m

As at
30 Sept
2017
£m

As at
31 March
2018
£m

23.9
9.7
156.8
3.8
0.9
15.4
210.5

29.3
—
164.9
5.7
2.1
28.8
230.8

22.8
—
158.7
4.1
1.4
13.4
200.4

64.6
61.9
2.1
1.0
18.9
148.5

48.6
67.8
3.9
2.3
14.3
136.9

45.9
73.3
2.5
2.4
20.7
144.8

359.0

367.7

345.2

2.9
61.7
0.2
13.8
102.0
180.6

2.9
61.7
0.2
12.6
93.2
170.6

2.9
61.7
0.2
9.2
105.6
179.6

27.3
7.5
9.9
1.3
5.2
51.2

59.2
—
22.5
—
10.3
92.0

39.4
—
15.3
1.7
6.1
62.5

4.1
99.9
2.3
4.7
5.5
1.6
9.1
127.2

0.6
79.0
—
9.3
5.3
1.0
9.9
105.1

1.0
85.5
—
6.2
—
0.4
10.0
103.1

Total liabilities

178.4

197.1

165.6

Total liabilities and equity

359.0

367.7

345.2

AssetsNon-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Investment in associateLong-term receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current income tax receivable
Derivative financial instruments
Cash and cash equivalents
Total assets
EquityCapital and reserves attributable to the Company’s
equity shareholders
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings
Liabilities
Non-current liabilities
Bank loans
Lease payables
Retirement benefit obligations
Provisions
Deferred tax liabilities
Current liabilities
Bank loans and overdrafts
Trade and other payables
Lease payables
Current income tax payables
Accrued dividend
Derivative financial instruments
Provisions

Oxford Instruments plc

20

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Cash Flows
Half year ended 30 September 2018 – unaudited

Profit for the period
Profit for the year from discontinued operations
Profit for the year from continuing operations
Adjustments for:
Income tax expense
Net financial expense
Fair value movement on financial derivatives
Restructuring costs
Restructuring costs – relating to associate
Net profit on disposal of buildings
Share of impairment recognised by associate
Amortisation and impairment of acquired intangibles
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of capitalised development costs
Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of plant, property and equipment
Cost of equity settled employee share schemes
Share of loss/(profit) from associate
Restructuring costs paid
Cash payments to the pension scheme more than the charge to operating
profitOperating cash flows before movements in working capital
Increase in inventories
Decrease/(increase) in receivables(Decrease)/increase in payables and provisions
Increase in customer deposits
Purchase of rental assets held for later resale
Cash generated by operations
Interest paid
Income taxes paid
Net cash from operating activities – continuing operations
Net cash from operating activities – discontinued operations
Net cash flow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
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 (used in)/generated from investing activities – continuing
operations
Cash flows from financing activities
Proceeds from issue of share capital
Payments made in respect of lease liabilities
Decrease in borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the period

Oxford Instruments plc

Half year to
30 Sept
2018
£m
8.9
—
8.9

Half year to
30 Sept
2017
£m
55.6
(45.6)
10.0

Year to31 March
2018
£m
65.5
(45.9)
19.6

2.7
2.1
2.9
—
0.3
—
(0.6)
4.7
2.2
1.7
1.5

2.7
2.5
(2.6)
0.3
0.3
—
—
5.6
2.4
—
1.6

14.6
4.2
(3.1)
1.2
0.4
(3.3)
2.0
10.9
4.7
—
4.4

26.4
—
0.4
0.6
(0.7)

22.8
0.2
0.5
—
(0.7)

55.6
0.3
1.1
(0.5)
(1.3)

(3.5)
23.2
(7.9)
12.6
(7.7)
1.8
(0.6)
21.4
(2.3)
(4.7)
14.4
—
14.4

(3.5)
19.3
(6.6)
(1.3)
(9.2)
2.1
(0.6)
3.7
(1.0)
(2.5)
0.2
1.9
2.1

(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

—
(2.4)
(1.0)
—
(1.5)
—
0.6

—
(2.2)
(0.2)
73.0
(3.1)
(2.1)
—

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

(4.3)

65.4

68.7

—
(1.6)
(8.6)
(2.1)
(12.3)
(2.2)
20.7
0.4
18.9

0.2
—
(77.6)(2.1)(79.5)(12.0)
26.5
(0.8)
13.7

0.2
—
(96.8)(7.4)(104.0)
(4.8)
26.5
(1.0)
20.7

21

Half Year Results Announcement for the six months ended 30 September 2018

Condensed Consolidated Statement of Cash Flows continued

Half year ended 30 September 2018 – unaudited

Reconciliation of changes in cash and cash equivalents to movement in net debt
Half year to
30 Sept
2018£m
Decrease in cash and cash equivalents(2.2)
Effect of foreign exchange rate changes on cash and cash equivalents
0.4
(1.8)
Cash outflow from decrease in borrowings
8.6
Movement in accrued interest
0.4
Amortisation of prepaid issuance fees—
Movement in net debt in the period
7.2
Net debt at start of the period(19.7)Net debt at the end of the period(12.5)

Oxford Instruments plc

Half year to
30 Sept2017£m(12.0)(0.8)(12.8)
77.6
(1.0)
—
63.8
(109.3)(45.5)

Year to31 March
2018
£m
(4.8)
(1.0)
(5.8)
96.8
(1.0)
(0.4)
89.6
(109.3)(19.7)

22

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements
Half year ended 30 September 2018 – unaudited
1

BASIS OF PREPARATION OF ACCOUNTS

Reporting entity
Oxford Instruments plc is a company incorporated in England and Wales. The condensed consolidated half year financial statements
consolidate the results of the Company and its subsidiaries (together referred to as the Group). They have been prepared andapproved by the Directors in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting
as adopted by the EU. They do not include all of the information required for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group for the year ended 31 March 2018.
The financial information contained herein is unaudited and does not constitute statutory accounts as defined by Section 435 of theCompanies Act 2006. The comparative figures for the financial year ended 31 March 2018 are not the company’s statutory accounts
for that financial year. Those accounts have been reported on by the Company’s auditors and delivered to the registrar of companies.
The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act
2006.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements
has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company’s publishedconsolidated financial statements for the year ended 31 March 2018, except as explained below.
Adoption of new and revised standards
i.

IFRS 9 Financial Instruments
The Group adopted IFRS 9 on 1 April 2018. IFRS 9 addresses the classification, measurement and derecognition of financial
instruments, introduces a new impairment model for financial assets and new rules for hedge accounting. It replaces IAS 39
Financial Instruments guidance and comprehensive updates have been made to IFRS 7 Financial Instruments: Disclosureand IAS 32 Financial Instruments: Presentation. The adoption of IFRS 9 has had no material impact on the Group’s results.

ii.

IFRS 15 Revenue from Contracts with Customers
The Group adopted IFRS 15 using the modified retrospective approach on 1 April 2018, which means that the cumulative
impact on adoption has been recognised in retained earnings as of 1 April 2018. Comparative information has not been
restated. IFRS 15 provides a single, principles-based, five-step model to be applied to all sales contracts, based on thetransfer of control of goods and services to customers, and it replaces the separate model for goods and services of IAS 18
Revenue. The impact on adoption of IFRS 15 was a decrease in retained earnings of £7.0m, net of tax; an increase ininventory of £11.0m; an increase in customer deposits of £19.0m; an increase in deferred income of £1.0m; and an increasein deferred tax assets of £2.0m.

iii.

IFRS 16 Leases
The Group adopted IFRS 16 using the modified retrospective approach on 1 April 2018. IFRS 16 provides a single model
for lessees which recognises a right of use asset and lease liability for all leases that are longer than one year or that are
not classified as low value. The impact on adoption of IFRS 16 was the recognition of right of use assets totalling £10.7m on
the balance sheet and corresponding lease liabilities of £10.7m.

The table below summarises the effect that IFRS 15 and IFRS 16 have had on the Group Income Statement during the period to 30
September 2018.

Continuing operations - adjusted
Revenue
Operating profit
Net finance expense
Profit before tax
Tax charge
Profit after tax

Pre IFRS 15& IFRS 16
£m
141.9
18.7
(1.1)
17.6
(3.7)
13.9

IFRS 15
Adjustment
£m
5.1
2.3
—

2.3
(0.5)
1.8

IFRS 16
Adjustment
£m
—
—

(0.1)
(0.1)
—

(0.1)

As reported
£m
147.0
21.0
(1.2)
19.8
(4.2)
15.6

The impact of the adoption of IFRS 15 on the Group Income Statement shown above relates solely to the Research & Discovery
segment.

Oxford Instruments plc

23

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
1

BASIS OF PREPARATION OF ACCOUNTS continued

Estimates
The preparation of half year financial statements requires management to make judgements, estimates and assumptions that affectthe application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may
differ from these estimates.
In preparing these half year financial statements, the significant judgements made by management in applying the group’s accounting
policies and key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as
at and for the year ended 31 March 2018.
Going concern
The condensed consolidated half year financial statements have been prepared on a going concern basis, based on the Directors’
opinion, after making reasonable enquiries, that the Group has adequate resources to continue in operational existence for theforeseeable future.
Exchange rates
The principal exchange rates used to translate the Group’s overseas results were as follows:
Period end rates

Half year to
30 Sept
2018
1.30
1.12
148

Half year to
30 Sept
2017
1.34
1.13
151

Year to31 March
2018
1.40
1.14
149

Average translation rates
Half year to 30 September 2018
April
May
June
July
AugustSeptember

US Dollar

Euro

Yen

1.39
1.36
1.33
1.32
1.30
1.29

1.14
1.14
1.14
1.13
1.12
1.11

150
148
146
146
144
146

Average translation rates year ended 31 March 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

US DollarEuro
Yen

Oxford Instruments plc

24Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
2

NON-GAAP MEASURESIn the preparation of adjusted numbers, the Directors exclude certain items in order to assist with comparability between peers andto give what they consider to be a better indication of the underlying performance of the business. These adjusting items are excludedin the calculation of adjusted operating profit, adjusted profit before 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, depreciation of right of use assets andamortisation of intangible assets to adjusted operating profit; and can be found in the Consolidated Statement of Cash Flows. The
calculation of adjusted EPS can be found in note 8. Adjusted effective tax rate is calculated by dividing the share of tax attributable toadjusted profit before tax by adjusted profit before tax. The definition of cash conversion is set out in the Finance Review.

Reconciliation between operating profit and profit before income tax and adjusted profit from continuing
operations
Operating profit/(loss)
Half
Half
year toyear toYear to30 Sep30 Sep31 Mar
2018
2017
2018

Statutory measure from continuing operations
Restructuring costs
Restructuring costs – relating to associate
Net profit on disposal of buildings
Business reorganisation items
Share of impairment recognised by associate
Amortisation of acquired intangibles
Mark-to-market loss/(gain) in respect of derivative financial
instruments
Loan note make-whole payable
Adjusted measure from continuing operations
Share of taxation
Adjusted profit for the period from continuing operations
Adjusted effective tax rate

Profit/(loss) before income
tax
Half
Half
year toyear toYear to30 Sep30 Sep31 Mar
2018
2017
2018

£m

£m

£m

£m

£m

£m

13.7
—
0.3
—
0.3
(0.6)
4.7

15.2
0.3
0.3
—
0.6
—
5.6

38.4
1.2
0.4
(3.3)
(1.7)
2.0
10.9

11.6
—
0.3
—
0.3
(0.6)
4.7

12.7
0.3
0.3
—
0.6
—
5.6

34.2
1.2
0.4
(3.3)
(1.7)
2.0
10.9

2.9
—
21.0

(2.6)
—
18.8

(3.1)
—
46.5

2.9
0.9
19.8
(4.2)
15.6

(2.6)
—
16.3
(3.6)
12.7

(3.1)
—
42.3
(10.1)
32.2

21.2%

22.1%

23.9%

Restructuring costs
Prior year restructuring costs of £1.2m primarily relate to the Group’s US Healthcare business and include £0.5m to successfully
defend a legal claim relating to a prior acquisition.
Restructuring costs – relating to associate
Restructuring costs relating to the Group’s associate comprise costs incurred during the disposal of its Vacgen subsidiary. Prior year
restructuring costs relating to the Group’s associate relate to exceptional costs incurred by the associate arising from the merger of
the Scienta and Omicron businesses.
Net profit on disposal of buildings
The Group recorded a net profit on disposal of £3.3m during the prior year following the disposal of two buildings previously held
under property, plant and equipment.
Share of impairment recognised by associate
During the prior year the Group’s equity accounted associate recognised an impairment relating to the disposal of its Vacgensubsidiary. The Group’s preliminary share of this impairment was £2.0m. Following the completion and finalisation of the transaction,£0.6m of the initial impairment provision has been reversed.
Amortisation of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets and goodwill.

Oxford Instruments plc

25

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
2

NON-GAAP MEASURES continued

Mark-to-market movements in respect of derivative financial instruments
Under IFRS 9, all derivative 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 takeadvantage of the hedge accounting rules provided for in IFRS 9 since that standard requires certain stringent criteria to be met inorder to hedge account, which, in the particular circumstances of the Group, are considered by the Board not to bring any significant
economic benefit. Accordingly, the Group accounts for these derivative financial instruments at fair value through profit or loss. To theextent that instruments are hedges of future transactions, adjusted profit for the year is stated before changes in the valuation of these
instruments so that the underlying performance of the Group can be more clearly seen.
Loan note make-whole payable
During the period to 30 September 2018 the Group repaid £11.6m of the principal outstanding on its loan notes. This payment wasnecessary due to material changes to the Group’s structure following the disposal of its Industrial Analysis business during July 2017.
The costs of £0.9m relate to the make-whole balance payable upon settlement of the £11.6m principal.
Share of taxation
Adjusting items include the income tax on each of the items described above. In addition, during the prior year the tax rate in the
United States reduced from 35% to 21%. As a result, this reduced the Group’s deferred tax asset by £5.4m. This was excluded fromthe calculation of share of taxation attributable to adjusted profit before tax.

3

SEGMENT INFORMATIONThe Group has ten operating segments. These operating segments have been combined into three aggregated operating segments
to the extent that they have similar economic characteristics, with relevance to products and services, type 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.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating segmentson the basis of the economic characteristics discussed below:•
the Materials & Characterisation segment comprises a group of businesses focusing on applied R&D and commercial
customers, enabling the fabrication and characterisation of materials and devices down to the atomic scale;•the Research & Discovery segment comprises a group of businesses providing advanced solutions that create uniqueenvironments and enable measurements down to the molecular and atomic level which are used in fundamental research;and•the Service & Healthcare segment provides customer service and support for the Group’s products and the service, saleand rental of third party healthcare imaging systems.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a reasonablebasis. 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 eachsegment 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 in this format when reporting to the Group’s Board of Directors.
Results from continuing operations
Half year to 30 September 2018

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

Oxford Instruments plc

Materials &Characterisation
£m
60.1
—
60.1

Research &Discovery
£m
54.3
—
54.3

Service &Healthcare
£m
32.6
—
32.6

9.7

4.8

6.5

Total
£m
147.0

21.0

26

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
3

SEGMENT INFORMATION continued

Results from continuing operations
Half year to 30 September 2017

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit from continuing
operations
Results from continuing operations
Year to 31 March 2018

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

Materials &Characterisation
£m
50.1
—
50.1

Research &Discovery
£m
47.9
0.1
48.0

Service &Healthcare
£m
34.1
—
34.1

7.2

4.2

7.4

Materials &Characterisation
£m
118.1
—
118.1

Research &Discovery
£m
112.0
0.1
112.1

Service &Healthcare
£m
66.8
—
66.8

20.1

13.8

12.6

Total
£m
132.1

18.8

Total
£m
296.9

46.5

The adjusted loss after tax of £0.6m (prior half year: £nil; prior full year: £0.5m profit) from the Group’s associate is reported within
the Research & Discovery segment.

Reconciliation of reportable segment profit
Half year to 30 September 2018
Operating profit for reportable segments from continuing
operations
Restructuring costs – relating to associate
Share of impairment recognised by associate
Amortisation of acquired intangibles
Fair value movement on financial derivatives
Financial income
Financial expenditure
Profit/(loss) before income tax from continuing
operations

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

Oxford Instruments plc

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

£m

£m

£m

£m

£m

9.7
—
—
(1.1)
—
—
—

4.8
(0.3)
0.6
(3.2)
—
—
—

6.5
—
—
(0.4)
—
—
—

—
—
—
—
(2.9)
0.1
(2.2)

21.0
(0.3)
0.6
(4.7)
(2.9)
0.1
(2.2)

8.6

1.9

6.1

(5.0)

11.6

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

£m

£m

£m

£m

£m

7.2
(0.1)
—
(1.3)
—
—
—
5.8

4.2
—
(0.3)
(3.8)
—
—
—
0.1

7.4
(0.2)
—
(0.5)
—
—
—
6.7

—
—
—
—
2.6
0.1
(2.6)
0.1

18.8
(0.3)
(0.3)
(5.6)
2.6
0.1
(2.6)
12.7

27

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
3

SEGMENT INFORMATION continued
Year to 31 March 2018
Operating profit for reportable segments from continuing
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 from continuing operations

4

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

RESEARCH AND DEVELOPMENT

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

Research and development expense charged to the consolidated
statement of income
Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
Less: amortisation and impairment of R&D costs previously
capitalised as intangibles
Add: amounts capitalised as intangible assets
Total cash spent on research and development during the period

5

Half year to
30 Sept2018£m

Half year to
30 Sept
2017£mYear to31 March
2018
£m

12.3
—
—

11.4

—

0.1

23.4
(0.1)
0.1

(1.5)
1.5
12.3

(1.6)
3.1
13.0

(4.4)
5.8
24.8

INVESTMENT IN ASSOCIATEThe Group’s share of loss in its equity accounted associate, Scienta Scientific AB (“Scienta”), for the period was £0.3m (prior half
year: £0.3m loss; prior full year: £1.9m loss). The Group did not receive any dividends from the associate in the current or priorperiods.
During the 6 months to 30 September 2017 the Group invested a further £2.1m in its equity accounted associate.

Oxford Instruments plc

28

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
6

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS

On 3 July 2017 the Group disposed of its Industrial Analysis business for a final consideration of £82.8m.

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

Industrial
Analysis

2017/18
£m
(4.3)
(0.1)
(4.7)
(2.4)
(11.5)
(9.8)
(6.0)
8.6
0.8
(0.4)
(29.8)
82.8
(6.0)
(5.6)
71.2
(23.8)
(2.1)
4.8
50.1
(2.3)
47.8

Discontinued operations

In the period to 30 September 2017 the Group’s Industrial Analysis business was classified as a discontinued operation. It wasconsidered a major class of business on the basis that it was previously an operating segment and referred to in the Group Strategic
Report.
The Group results were re-presented to reflect the classification of the Group’s Industrial Analysis business as a discontinued
operation.

Oxford Instruments plc

29

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
6

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS continued

During the period to 30 September 2018 there were no transactions relating to discontinued operations.
Note that figures included in the results of discontinued operations for the half year to 30 September 2017 were preliminary andsubject to revision during the finalisation of the financial statements for the year to 31 March 2018.
Results of discontinued operations – half year to 30 Sep 2017
Revenue
Expenses
Adjusted profit before tax
Income tax charge
Adjusted profit after tax
Adjusting items:
Amortisation and impairment of acquired intangibles
One off costs arising as a result of disposal
Property sale costs
Income tax on adjusting items
Loss after tax
Gain on disposal
Tax on gain on disposal
Profit/(loss) from discontinued operations after tax

Industrial
Analysis£m

Superconducting
Wire
£m

—
—
—
—
—

16.8
(16.1)
0.7
(0.4)
0.3

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

—
—
(0.2)
—
(0.2)
—
—
(0.2)

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

16.8
(16.1)
0.7
(0.4)
0.3

Total
£m

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

Results of discontinued operations – full year to 31 Mar 2018
Revenue
Expenses
Adjusted profit before tax
Income tax charge
Adjusted loss 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

Oxford Instruments plc

Industrial
Analysis£m
16.8(16.3)
0.5
(0.9)
(0.4)
(0.1)
(2.2)
0.8
(1.9)
50.1
(2.3)
45.9

30

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 september 2018 – unaudited
6

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS continued

Earnings per share from discontinued operations

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

Half year to
30 Sept
2018
£m
—
—
—
—

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

Year to31 March
2018
£m
(0.7)
(0.7)
80.2
80.0

Half year to
30 Sept
2018
£m
—
—
—

Half year to
30 Sept
2017
£m
1.9
73.0
—

Year to31 March
2018
£m
3.0
71.2
—

Cash flows from discontinued operations

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

7

TAXATION

The total effective tax rate on profits for the half year is 23.3% (prior half year: 21.3%). The weighted average tax rate in respect ofadjusted profit before tax (see note 2) for the half year is 21.2% (prior half year: 22.1%). For the full year the Group expects the tax
rate in respect of adjusted profit before tax to be 22.0%.

8
a)

EARNINGS PER SHAREBasic

The calculation of basic earnings per share is based on the profit or loss for the period after taxation and a weighted average numberof ordinary shares outstanding during the period, excluding shares held by the Employee Share Ownership Trust, as follows:

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

Oxford Instruments plc

Half year to
30 Sept
2018
Sharesmillion
57.4

Half year to
30 Sept
2017
Sharesmillion57.3

Year to31 March
2018
Sharesmillion
57.4

(0.2)

(0.2)

(0.2)

57.2

57.1

57.2

31

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 september 2018 – unaudited
8b)

EARNINGS PER SHARE continued
DilutedThe following table shows the effect of share options on the calculation of both adjusted and unadjusted diluted basic earnings per
share.

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

9

Half year to
30 Sept
2018
SharesmillionHalf year to
30 Sept
2017
SharesmillionYear to31 March
2018
Sharesmillion

57.2
0.5

57.1
0.3

57.2
0.2

57.7

57.4

57.4

Half year to
30 Sept
2018
pence
3.70
—
3.70

Half year to
30 Sept
2017
pence
3.70
—
3.70

Year to31 March
2018
pence
3.70
9.30
13.00

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:

Previous period interim dividend
Previous period final dividend

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

Interim dividend
Final dividend

Half year to
30 Sept
2018
pence
3.80
—
3.80

Half year to
30 Sept
2017
pence
3.70
—
3.70

Year to31 March
2018
pence
3.70
9.60
13.30

The final dividend for the year to 31 March 2018 was approved by shareholders at the Annual General Meeting held on 11 September
2018. Accordingly it is no longer at the discretion of the company and has been included as a liability as at 30 September 2018. It
was paid on 19 October 2018.
The interim dividend for the year to 31 March 2019 of 3.80 pence was approved by the Board on 13 November 2018 and has notbeen included as a liability as at 30 September 2018. The interim dividend will be paid on 8 April 2019 to shareholders on the registerat the close of business on 1 March 2019.

Oxford Instruments plc

32

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 september 2018 – unaudited
10

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statement of Financial
Position are as follows:
Carrying
amount30 Sept
2018
£m

Fair
value
30 Sept
2018£m

Carrying
amount30 Sept
2017
£m

Fair
value
30 Sept
2017£m

Carrying
amount31 March
2018
£m

Fair
value
31 March
2018
£m

0.9
49.9
8.3
18.9

0.9
49.9
8.3
18.9

2.1
53.4
11.1
14.3

2.1
51.6
11.1
14.3

1.4
61.4
8.2
20.7

1.4
61.4
8.2
20.7

2

1.0

1.0

2.3

2.3

2.4

2.4

2

(1.6)

(1.6)

(1.0)

(1.0)

(0.4)

(0.4)

(58.6)(9.8)—(31.4)(58.6)(9.8)—(31.4)(54.1)—(0.6)(59.2)(54.1)—(0.6)(59.2)(58.1)——(40.4)(58.1)——(40.4)

Fair
value
hierarchy

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

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

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in
the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal and interest cash flows
using the market rate of interest at the reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the carrying amount is deemed to reflect the fair value. All otherreceivables/payables are discounted to determine their fair value. Advances received are excluded from other payables above as
these are not considered to be financial liabilities.

Oxford Instruments plc

33

Half Year Results Announcement for the six months ended 30 September 2018

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2018 – unaudited
10

FAIR VALUE OF FINANCIAL INSTRUMENTS continued

Fair value hierarchy

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

11

RELATED PARTIESAll transactions with related parties are conducted on an arm’s length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
During the period, the Group supplied services and materials to its associate, Scienta Omicron Gmbh, on an arm’s length basis. The
following transactions occurred during the period:
Half year to 30 September 2018
Scienta Omicron GmbH

Revenue£m—

Purchases£m
0.7

Receivables£m
2.1

Half year to 30 September 2017
Scienta Omicron GmbH

Revenue£m—

Purchases£m—

Receivables£m
3.6

Full year to 31 March 2018
Scienta Omicron GmbH

Revenue£m
0.6

Purchases£m—

Receivables£m
3.0

Included on the balance sheet is a long-term loan receivable of £0.9m (Septemper 2017: £2.1m, March 2018: £1.4m) and a current
loan receivable of £1.1m (September 2017: £1.5m, March 2018: £1.1m) due from the Scienta. The loan is repayable at the end of
May 2020. During the period the Group received interest charged on the loan of £0.1m (Six months to September 2017: £0.1m, Year
to March 2018: £0.2m).

Oxford Instruments plc

34

Half Year Results Announcement for the six months ended 30 September 2018

Principal Risks and Uncertainties
The Group has in place a risk management structure and internal controls which are designed to identify, manage andmitigate risk.
In common with all businesses, Oxford Instruments faces a number of risks and uncertainties which could have amaterial impact on the Group's long term performance.
On pages 35 to 38 of its 2018 Annual Report and Accounts (a copy of which is available at www.oxfordinstruments.com), the Company set out what the Directors regarded as being the principal risks and uncertainties
facing the Group's long term performance and these are largely reproduced in the table below, with someamendments to reflect recent changes in the assessment of certain risks. Many of these risks are inherent to Oxford
Instruments as a global business and they remain valid as regards their potential impact during the remainder of thesecond half of the year.
The impact of the economic and end market environments in which the Group's businesses operate are considered in
the Half Year Statement of this Half Year Report, together with an indication if management is aware of any likely
change in this situation.
ID
1

Specific Risk

Context

Technical Risk

The Group
provides hightechnology
equipment andsystems to its
customers.

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

Possible
ImpactLower returns
through lossof market
share &
reducedprofitability.

Control
Mechanisms‘Voice of the
Customer’approach to drive
the productdevelopment
road map;

Negative
impact on theGroup’s
reputation.

Formal new
product
development
stage gate
process tomanage R&D
Product lifecycle
management

2

Routes tomarketIn some instances
the Group’s
products arecomponents ofhigher levelsystems, sold byOEMs and thus
the Group does
not control its
route to market.

Backward vertical
integration by OEMs

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

Customer
intimacy to matchproduct
performance tocustomer needs;
Positioning of OI
brand andmarketing directly
to end users

Mitigation
Understanding
customer needs /expectations andtargeted new productdevelopment
programme to maintainand strengthen productpositioning.
Stage gate process in
product development tochallenge commercial
business case andmitigate technical risks.
Operational practices
around salesproduction matching
and inventory
management to
mitigate stock
obsolescence risks.
Product differentiation
to promote advantagesof OI equipment &solutions;
Strategic marketingwith OEMs to sell
performance of the
combined system;
Broadening the OEM
customer base;Direct marketing to end
users

Oxford Instruments plc

35

Half Year Results Announcement for the six months ended 30 September 2018
ID

Specific Risk

Context

Risk

Possible
ImpactControl
Mechanisms

Mitigation

3

Economic
environment

Government
expenditure may
becomeconstrained in key
markets

Reduction in global
research funding

Lower sales
andprofitability

Market intimacy
and identificationof alternative
markets

Market diversification –increasing penetration
into corporate
customers notdependent on externalfunding

4International
trade risks

The Group
operates in global
markets and canbe required tosecure export
licences fromgovernments.

Changes in the geopoliticallandscape resulting in acompleteembargo (sanctions) on
trade with specific nations /challenges to selling to
specific end users.

Loss ofspecific
exportcustomers
and markets,adversely
affectingturnoverContract review
and protection
against breach in
the event thatexport licence iswithheld

Broad global customer
base; contractual
protection

National trade disputes may
result in the introductionof tariffs on both imported
goods and exports.

Reduction in
net selling
price tocustomers inmarkets
adversely
affected bytariffs andpotential
increases to
input costs,
resulting inlower grossmargins
Delays inproduction
and shipping
finished
goods.

Regional pricing
strategies.

Preferential tariff rates
on certain products
sold

Lower participation in EUfunded research projects
post Brexit.

Lower sales
andprofitability.

Tariffs on imports from EU
countries to the UK;

Increased
cost ofproduction forpurchases
with EU
content.

Customer
intimacy andmonitoring offunded projects.

5

Brexit relatedrisks

The UK will leave
the EU

Supply chain disruption in
the event of a no deal
Brexit and disruption toshipping products.

UK becomes less attractive
to EU nationals as a place
to work

Oxford Instruments plc

Salaryinflation.
Loss of key
skills, and/or
increasedrecruitment,
and/or salarycosts.

Contractual
terms andconditions

Strategic supply
chain review;

Product pricing &strategic sourcing
reviews.

Limited stock-piling of
key components;
Preparing application
for Authorised
Economic Operator
status to facilitate
movement of goods.

Market diversification

Long-term pricing
agreements for key
suppliers and strategic
sourcing review.

Skills andcapabilities
reviews.

Pricing strategy.

International
Trade committee.

Renewal of UK
work permit scheme tofacilitate employmentof non-UK/EU
nationals.

36

Half Year Results Announcement for the six months ended 30 September 2018
ID

Specific Risk

Context

Risk

Possible
ImpactControl
Mechanisms

Mitigation

6

Supply chainrisk

The Group
operates a
strategic make or
buy policy andoutsources asignificant
proportion of thecosts ofproduction tobenefit from
economies ofscale and natural
currency hedges.

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

Disruption tocustomers.

Procurement
strategy tomanage stock
availability

Buffer stocks of key
components;

Lower sales
andprofitability

Where possible, dual
source supply is sought

Negative
impact on theGroup’s
reputation.

7

PeopleA number of theGroup’s
employees havebusiness criticalskills.

Key employees leave andeffective replacements are
not recruited on a timely
basis

Lower sales
andprofitability

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

8

IT risk

Elements ofproduction,
financial andother systems relyon IT availability

Increasing risk of data loss /breach through cyberattack, viruses or malware.

Loss ofbusiness
critical data
and / orfinancial loss

IT security policy& associatedstandards andprotection
systems.

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

9

10

Operationalrisk

Pensions

Oxford Instruments plc

Business units’
production
facilities are
typically locatedat a single site

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

“Zero-day” incidents, where
new viruses or malware canspread before security
vendors can respond
represent a particularly highrisk

Loss of all or part of a major
production facility

Movements in the actuarial
assumptions may have anappreciable effect on thereported pension deficit.

Internal IT
governance tomaintain those
protection
systems and ourincident response

Delayedshipments
leading tolower sales
andprofitability

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

Business
Continuity Plans
in place

Use ofcontractual
protection to
mitigate financial
consequences ofdelayed delivery
Regular review ofinvestment
strategy.
Liability hedging
programme tomitigate
exposure to
movements ininterest rates andinflation

Inter alia, we deliveruser education,
improved configuration,internal testing andnew tools whereappropriate.
Principal sites havedetailed BCPs which
include plans to restore
or relocate productionin the event of a major
incident.
Mechanisms such as
clauses for limitation of
liability / liability caps /exclusion ofconsequential losses insales contracts
The Group has closed
its defined benefit
pension schemes in
the UK and US tofuture accrual.
The Group has afunding plan in place toreduce the pension
deficit over the short tomedium term.

37

Half Year Results Announcement for the six months ended 30 September 2018
ID

Specific Risk

Context

Risk

11

Foreignexchangevolatility

The Group’s
sterling cost basis
is higher than its
sterling revenue
sources meaningthat a significant
proportion of theGroup’s profit ismade in foreign
currencies.

Adverse foreign currency
movements

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

Infringement of a third
party’s intellectual property

12

Legal /
compliancerisk

Oxford Instruments plc

Possible
ImpactReducedprofitability

Potential lossof future
revenue;financialcompensation

Control
Mechanisms
Natural hedging
to offset foreign
currency sales
throughprocurement inforeigncurrencies;

Mitigation

Hedging
programme

Short-term exposure tovolatility is managed byhedging programme(forward contracts)

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

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

Strategic procurement
in USD, Euros & Yen.

38

Half Year Results Announcement for the six months ended 30 September 2018

Responsibility Statement of the Directors in respect of the Half Year Financial Statements
We confirm that to the best of our knowledge:•

the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU;•

the interim management report includes a fair review of the information required by:(a)DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important
events that have occurred during the first six months of the financial year and their impact on thecondensed set of financial statements; and a description of the principal risks and uncertainties for theremaining six months of the year; and(b)

DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions thathave taken place in the first six months of the current financial year and that have materially affected
the financial position or performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.

Ian Barkshire, Chief Executive
13 November 2018

Oxford Instruments plc

Gavin Hill, Group Finance Director

39Half Year Results Announcement for the six months ended 30 September 2018

Independent review report to Oxford Instruments plc
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30 September 2018 which comprises the Condensed Consolidated
Statement of Income, the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated
Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated
Statement of Cash Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 September 2018 is not prepared, in allmaterial respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure
Guidance and Transparency Rules (“the DTR”) of the UK’s Financial Conduct Authority (“the UK FCA”).
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410
Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial report and consider whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing(UK) and consequently does not enable us to obtain assurance that we would become aware of all significant mattersthat might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with International Financial ReportingStandards as adopted by the EU. The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the halfyearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company inmeeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to thecompany those matters we are required to state to it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, forthis report, or for the conclusions we have reached.

Greg Watts
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
13 November 2018

Oxford Instruments plc

40