Oxford Instruments plc
Report and Financial Statements 2015

Empowering scienceand industry

Oxford Instruments plc is a leading providerof high technology tools and systems forindustry and research.

01

Chairman’s Statement

01

Strategic Report

Our Business

02

We discuss developments
and the global issues thathave had an impact on
our businessHighlights04
Chief Executive’s Review

05

Business Model

08

Key Performance Indicators

10Strategy Context

11

Our Strategy

12

Principal Risks and Uncertainties

14

Operations Review

16

Financial Review

20

Corporate Responsibility

24

Board of Directors

30

Governance

Report of the Directors

32

Read about how wemanage our company andmaintain high standards

Corporate Governance

35

Audit and Risk Committee Report

43

Remuneration Report

48

30

67

Directors’ Responsibilities

67

Financial statements

Independent Auditor’s Report

68

See how we are
performing in lightof developmentsin the past year

Accounting Policies

71

Consolidated Statement of Income

78

Consolidated Statementof Comprehensive Income80
Consolidated Statementof Financial Position

81

Consolidated Statementof Changes in Equity

82

Consolidated Statement of Cash Flows

84

Notes to the Financial Statements

85

Parent Company Balance Sheet

112

Notes to the Parent Company
Financial Statements113

119
Company information

Historical Financial Summary

118

Shareholder Information

119

Oxford Instruments Directory

122

Advisers125

Cover image: A transmission Kikuchi
diffraction orientation map of a deformed
aluminium alloy, collected using the
Oxford Instruments AZtec microanalysis
system by Morgan Tort (Melbourne University)and Pat Trimby (The University of Sydney).

Chairman’s Statement

Strategic Report“We have increased
our investment in R&D
to underpin futureorganic growth.”

The Group delivered revenues of £386 million(2014: £360 million) and an adjusted
profit before tax of £35.6 million(2014: £47.1 million). Whilst this wasconsistent with the guidance given in
our January trading statement, it fell
short of our expectations at the
beginning of the year.
The outcome reflects a testing year for
Oxford Instruments plc. In the first halfof the year, despite overall increases in orders
and revenues, progress was adversely
impacted by weaker demand in Japan andtough trading conditions for our Plasma
Technology business. We were therefore
cautious about the outlook. As reported in
our January trading update, in the second
half we encountered a combination ofheadwinds that unexpectedly put our shortterm performance projections off-course.
Three factors were primarily at play: thesudden tightening of trade sanctions forsales to Russia, a slower-than-expected
recovery in Japanese markets, and weakertrading in our Industrial Analysis business.
In response to the downturn in trading
conditions, we rapidly implemented
a wide-ranging programme to bringour cost base in line with our trading
environment and to secure efficiencies
that will deliver a fast turnaround in our
performance. I am pleased to report thatas a consequence of these actions, we areon track to deliver a higher level of costsavings in the current financial year than
we had previously anticipated.
Our team has rallied to the challenge andI want to thank all our staff for responding
so vigorously and for retaining their
enthusiasm and creativity despite thedifficult conditions.
In addition to our focus on restructuring
the Group, we have taken positive strategic
steps that will help drive future growth.

Report and Financial Statements 2015 | Oxford Instruments plc

We have increased our investment in R&D
to underpin future organic growth. Since
the year end, we have announced theacquisition of Medical Imaging Resources,
and the formation of a joint venture
between our Omicron business andScienta Scientific AB.
During the year, we added new talent
to our Board. Professor Sir Richard Friend
joined the Board of Oxford Instruments
on 1 September 2014. Richard brings
with him strong technical capability andvaluable contacts in the worldwide academic
community. Professor Sir Mike Brady
stood down from the Board on
9 September 2014 after serving asa Non-Executive Director since 1995.
I would like to thank Mike for his
immense contributions over many years
and we welcome Richard to the Group.
The Directors are proposing a final
dividend of 9.3 pence per share(2014: 9.04 pence), a 2.9% increase,bringing the total for the year to13.0 pence (2014: 12.4 pence). This
represents the fifth consecutive yearof dividend growth.
With these strategic moves made and thestreamlined cost base in place, the Group
looks forward to a period of solid growth.

Nigel Keen
Chairman

Our Chief Executive,

Flint, summarises
05 Jonathan
our year on page 501

Our BusinessAt the forefront oftechnological innovation
As one of the world’s first university spin-out companies,
we have been at the forefront of technological innovation
for more than fifty years. We use innovation to turn smart
science into world-class products that support research andindustry to address the great challenges of the 21st century.

Our business is structured around three segmentsthat reflect our expertise and business objectives:

Nanotechnology Tools

Industrial Products

Services

High technology tools to characterise,
analyse, manipulate and fabricate
at the nano scale

Developing and manufacturing tools
and components for industrial applications

Supplying knowledgeable support services,training and refurbishment

Our global market is comprised of six areas:
Research and academiaLife sciences

Metals/construction

Our target market sector includes research
into nanotechnology applications, newmaterials, Quantum Information Processing
and other developments.

A growing sector that includes the supportand service of magnetic resonance imaging(MRI) and computed tomography (CT) imaging
equipment as well as new opportunities driven
by the convergence of physics and biology.

We are supporting global industries including
metals, alloy manufacturing, steel foundries
and scrap recycling.

Semiconductors/IT
This includes semiconductor electronics,
Micro Electro Mechanical Systems (MEMS),
compound semiconductor materials,
thin film and particle analysis.

02

EnergyWe have been involved in the search forsustainable energy, solar technologies, oil andgas exploration and superconductor materials.

Environment
This includes greener production, recycling
and detection of hazardous substances insoil, agriculture and food.

Oxford Instruments plc | Report and Financial Statements 2015

Strategic Report

Revenue fromexternal customers
by destinationUK£37.0mJapan£31.8mUSA£126.6m

China£55.4mRest of World

Germany

Rest of Europe

Rest of Asia

£13.3m£25.8m£51.4m£44.2mReport and Financial Statements 2015 | Oxford Instruments plc

03

Highlights

The Group remains confident in theexecution of our Nanotechnology
strategy despite the challenges
we faced this year.
The integration of Andor Technology continues to progress well, and we met our targets in thefull first year of reporting. However, our Plasma Technology business suffered as a result of trade
sanctions placed on exports to Russia during the year and the decrease in demand for High Brightness
Light Emitting Diodes (HBLED). As a Group we have also been impacted by the slower-than-expected
recovery in our Japanese markets. We have therefore accelerated a cost reduction programme inresponse to a downturn in trading conditions. This has resulted in the loss of approximately 160 staff,
or 7% of our workforce, and the closure of 6 of our smaller sites. 2014/15 saw the completionof our service contract with Siemens that had run for 17 years. This contract will not be renewed.
Despite this, we had a strong performance in our service sector and post period end completed
the acquisition of service business Medical Imaging Resources (MIR), better placing us to capitaliseon the opportunities that arise from the Affordable Healthcare Act in the USA. Also since year end
we have formed an exciting joint venture between our Omicron business and Scienta Scientific AB
to create the world’s largest player in the highly specialised ultra high vacuum (UHV) surface
science field. We continue to focus on our evolution strategy to produce the tools that can
exploit the ongoing convergence of science.

Highlights include:• Orders grew by 13.0% to £386.6 million(2014: £342.2 million)• Adjusted profit before tax* of £35.6 million(2014: £47.1 million), reflecting macro headwinds
in Japan and Russia, and weaker trading
than expected in Industrial Analysis

A full discussion of our
financial performance
during the year canbe found in the
Financial Review.
Read more
page 20

Revenue (£m)

Adjusted profit before tax* (£m)

£385.5m£35.6m+7.1%-24.4%

2015

385.5

2015

2014

360.1

2014

35.6
47.1

• Andor Technology acquisition has integrated
well and is performing strongly

Adjusted earnings per share* (p)Dividend per share (p)• Cost reduction programme accelerated
and delivering greater than planned savings

48.2p

13.0p

• Investment in future organic growth: R&D spend
increased to £35.2 million (2014: £27.9 million)• Proactive portfolio management to deliver
long term shareholder value: acquisition of MIR,
joint venture to combine Oxford Instruments plc’s
Omicron business with Scienta Scientific AB-28.8%
2015

+4.8%
48.2

2014

67.7

2015

13.0

2014

12.4

* Adjusted numbers are stated togive a better understanding of theunderlying business performance.
Details of adjusting items are given in
Note 1 of these financial statements.

Orders (£m)

£386.6m
+13%
2015
2014

04

386.6
342.2

Oxford Instruments plc | Report and Financial Statements 2015

Chief Executive’s Review

Summary:• Group orders grew by 13.0%. Reported sales
grew by 7.1%
• We saw little revenue from Russia and in Japan,
our forecast of market recovery has proved
slower than expected• The Group accelerated a wide-reaching cost
reduction programme aimed at improving
our long term efficiencies and margins• On 1 May 2015 Oxford Instruments announced
the acquisition of Medical Imaging Resources(MIR); on 28 May 2015, we announced a joint
venture with Scienta Scientific AB

Strategic Report

We use innovation to turn our smart
science into commercial tools andsystems that analyse and manipulatematter at the nano scale.
In the year, Group orders grew by 13.0%. On a constantcurrency organic basis, order intake was flat. Market conditions
demonstrated a mixed picture around the world. In Europe,orders grew by 9.6%, supported by a strong contribution
from Andor Technology. On a constant currency organic
basis, European orders fell by 4.3%. In North America, where
demand for our Nanotechnology Tools is particularly strong,
we saw orders grow by 23.8%. On a constant currency
organic basis, growth was 2.6%. In Asia, we saw order
growth of 8.9% or 1.5% on a constant currency organic basis.
Reported sales grew by 7.1%. On a constant currency organic
basis, sales fell by 5.4%. Part of this decline was due tothe completion of the ITER contract in the previous year
and the decline in the Siemens MRI service business explainedin the Operations section. Excluding these one-off factors,
underlying sales were 4.1% lower, reflecting in particular
the issues in our Plasma Technology and Industrial Analysis
businesses as described below, and weaker trading in Japan.
Developments in the second half
In Russia, we had anticipated that we would see increased
revenues in the second half, as a number of large contracts
were due for delivery. However, the delicate political situationin Russia led to an unexpected tightening of European Union
export sanctions. This resulted in existing export licences
being withdrawn and, as a consequence, previously bookedorders had to be cancelled. It is currently unclear when further
export licences will be approved. We saw little revenue
from Russia during the second half and we have assumed
no resumption in sales to Russia in the current year. Thisissue particularly affected our Plasma Technology business.
In Japan, our forecast of market recovery has proved slower
than expected. While we have seen some pick up in theorder run rate, this came too late to generate the levelof sales forecast for the second half of the year.
In addition to these macroeconomic headwinds, andthe anticipated impact of adverse currency movements
throughout the year, we experienced weaker tradingin our Industrial Analysis business. This is a short lead-time
operation and sales in the second half fell short of expectations,partly due to a delay in introducing our new handheld
X-ray fluorescence analysers, which did not start shipping
until the end of the year.

Jonathan Flint, Chief Executive

05

Chief Executive’s Review continued“Our efficiency savings havebeen achieved whilst retaining
the key skills that we needto drive future innovationand growth.”
Developments in the second half continued
Recognising the weaker trading environment, the Group
accelerated a wide-reaching cost reduction programme
aimed at improving our long term efficiency and margins.
This programme originally targeted cost savings of £6 million
which were expected to flow through to operating profit
from financial year 2015/16 onwards. Through a rigorous
and targeted pursuit of efficiencies, the anticipated savings
are now estimated to be in the region of £8 million in
the current financial year. This has been achieved throughstructural changes which have been embedded in the costbase of our businesses. As a result, it should benefit our
performance in the current financial year and beyond.
The headcount reduction has resulted in a loss ofapproximately 160 staff, representing 7% of our workforce.
This has been achieved through a combination of voluntaryand involuntary redundancies. Importantly, despite thislevel of restructuring, our efficiency savings have beenachieved whilst retaining the key skills that we needto drive future innovation and growth.
The drive for efficiencies has also involved the closureof six of our smaller sites, to be completed by the half year:
Mannheim, Germany; Cowfold, UK; Dallas, USA; one of
our Tokyo sites; one of our sites in Taunusstein, Germany;and one of our sites in Beijing, China.
Strategic progress
Our focused efforts to restructure our cost base and drive
through efficiencies have not distracted us from pursuing
strategic actions that will deliver future growth and profitability.
The Group has increased its spend on R&D to further exploit
the opportunities that our technologies offer. Total cash
spend on R&D in the year was £35.2 million or 9.1%
of sales, up from 7.7% in the prior year.
In addition, since year end, the Group has announced
an acquisition and a joint venture.

On 1 May 2015, Oxford Instruments announced theacquisition of Medical Imaging Resources Inc. (MIR).
MIR specialises in the build, lease and service of mobile
medical imaging labs. These labs are built in MIR’s factory
incorporating MRI and CT systems from Siemens, GE,
Phillips and Toshiba. These mobile labs are leased tocustomers across the USA. Customers include hospitals
and clinics that need additional capacity or wish to trial
MRI or CT machines without committing to the infrastructureassociated with a permanent unit. MIR forms a part of OI
Healthcare, within the Group’s Service sector, our business
which already services GE MRI and CT machines in the USA.
On 28 May 2015, we announced a joint venture with
Scienta Scientific AB in the area of surface science. The joint
venture will see a combination of Oxford Instruments plc’s
Omicron business and Scienta’s surface science business.
The combined organisation will use the strength of each of
the partners to better address the specialist high technology
surface science market niche. The combination of key
technologies from Omicron and Scienta will create thedominant player in this growing market segment. Combining
the two businesses also creates a number of operational
synergies. Oxford Instruments plc owns 47% of the joint
organisation and has the right to appoint two of the five
Board members.
Strategic direction
Across the world, people are focused on addressing thegreat challenges of the 21st Century. Constant advances
are needed to keep pace with our rapidly evolving world.
With finite resources, we need to achieve more with adwindling supply of raw materials. Oxford Instruments plc
offers the means for customers to address these challenges
at the atomic and molecular level. We use innovation toturn our smart science into commercial tools and systems
that analyse and manipulate matter at the nano scale.

The Andor iXon Ultra
camera is a tool used inboth the life and physicalscience arenas. Application
areas include super-resolution
microscopy and astronomy.

06

Oxford Instruments plc | Report and Financial Statements 2015

Our staff deploy a high level of technical skill and deep
understanding of technology trends to convert our intellectual
property into new tools using the latest nanotechnology
techniques. We enjoy a high Vitality Index measured
by the proportion of revenues coming from products
introduced in the last three years. This stands at 41%.
Our Voice of the Customer programme constantly
calibrates emerging customer requirements against
available technology to ensure our R&D activities arefocused on the most commercially attractive areas.
We adopt a business model whereby the Group sells
tools to customers who wish to exploit the opportunities
offered by nanotechnology. This model enables us togenerate revenues from emerging industries which needto utilise nanotechnology without the Group incurring
undue exposure to any one application or market. The
Oxford Instruments plc brand is well recognised and valued,
particularly in the research and academic communities.
Advances in information technology, new materials, imaging
and quantum physics, have transformed physical science
in recent years. Oxford Instruments plc is a leading tool
provider for the advancement of physical science. These sameadvances are now beginning to transform the life sciences.
Last year we announced the evolution of our strategy to
exploit the current convergence of the sciences, especiallyat the nano scale, which is driving increased demand for
nanotechnology tools. “Convergence” is an increasingly
important aspect of scientific research where the merging
of previously distinct areas of research and technology intoa unified discipline creates new scientific and commercial
opportunities. Convergence gives the Group an opportunity
to take the technical tools and the disciplined design
approach traditional to engineering and physics, and apply
them to life science research. This provides the Group with
an opportunity to access a new set of customers who
are working at the molecular scale. Oxford Instruments’acquisitions of Asylum Research in 2012 and Andor
Technology in 2014 support this strategy of extending
our reach into analysis tools for nano-bio research.

Strategic Report

The continued expansion of our capabilities and expertise
allows us to address our customers’ needs in a wide variety
of markets that have an interest in working at the verysmall scale.

Current trading and outlook
It has been a slow start in the first two months of the year;
however we expect to see a return to organic growth in
the remainder of the year as recently launched products
and improved routes to market gain traction. This, together
with the benefit of announced cost savings, means that
our expectations for the current year are unchanged. The
benefit of our leaner structure, ongoing cost savings andmore favourable currency rates combined with our highgross margins offer the potential for a continuing improvementin our return on sales in the medium term.
Nanotechnology, applied to both the physical sciences andlife sciences, will continue to yield long term structural
growth in demand for high technology tools. Our strategy
is focused on growing the business in our core markets ofphysical and materials science, and exploiting convergenceto expand into life sciences.

Jonathan Flint
Chief Executive
9 June 2015

Our tools-based development model

Global markets
Research and academia — Life sciences — Semiconductor/IT
Energy — Metals and construction — Environment

Oxford Instruments
tools and systems areused by customers at
all levels– fundamental research– development of newtechnologies

Key growth technologies
Repeatable fabrication and analysis tools– commercialisation andmanufacture

New scientific discoveries

Report and Financial Statements 2015 | Oxford Instruments plc

07

Business ModelHigh technology tools and systems
that analyse and manipulatematter at the nano scale
The Group sells tools to customers who wish to
exploit the opportunities offered by nanotechnology
to perform groundbreaking research and makebetter, safer and greener products.

How it works:
New discoveries
To make better use of finite resources
researchers and manufacturers are working
at ever smaller scales and therefore require
advanced nanotechnology tools.
Innovation
We use our high level of technical skills
and understanding of technology trends
to create new tools using the latest
nanotechnology techniques.

ConvergenceThrough the convergence of the sciences,
the tools traditional to engineering and physics
can now be applied to life science research.
Global markets
We generate revenues from a broad range
of geographies and industries, thus the Group
does not incur undue exposure to any one
application or market.

Read more
Turn to page 11

08

Oxford Instruments plc | Report and Financial Statements 2015

Strategic Report

Tools for customers

Research: cutting‑edge
tools

Industry: industrial‑scale
tools

SupportIn the research field our hightechnology products are used
to advance the frontiers ofscience. We help ourcustomers break new ground,enabling them to makeadvancements previously
thought impossible.

Within industry our tools areused for quality control,
environmental monitoring
and compliance testing.
We produce reliable, robust,
accurate and efficient tools to
help others develop the mostefficient production processes
and innovative products.

We help our customers
remain operational and givethem peace of mind byoffering maintenance service
contracts, spare parts andrefurbished systems.

Innovation
approach

Product
application
insight

Customerbase

Return on R&D investment

Recurring revenue

Report and Financial Statements 2015 | Oxford Instruments plc

09

Key Performance Indicators

The Group uses a range ofmeasures to monitor progressagainst its strategic plans.
The key performance indicators are presented below:

Financial goal:
To deliver shareholder return through growth in turnover and margin.
Revenue growth (%)

Net return on sales1 (%)

7.1

2015

2015

2014 2.7
2013

11.1

2014

4.0

14.0

2013

2012

28.6

14.1

2012

12.5

Tracks our performance on our
profitability strategy

Tracks our performance on our
growth strategy

Strategic priorities:
Liberating cash

Inventing the future

Cash conversion from profit2 (%)

Proportion of revenue coming fromproducts launched in the previous
three years (%)

80.8

2015
2014

51.1

2013
2012

41

2015

85.4
110.5

Monitors our use of fixed assets,working capital and R&D

2014

42

2013

41

2012

44

Measures the effectiveness of our
R&D programmes

Realising the brand

Adding personal value

Net Promoter Score®3 (%)“Value Add” – (adjusted operating
profit + employment costs)/
employment costs (%)

2015

62

2014

66

2013

62

2012

64

Measures customer feedback

2015

1.36

2014

1.51

2013

1.54

2012

1.49

1	Calculated as adjusted operating profit
divided by revenue.
2	Cash conversion is defined as the ratioof cash generated to adjusted operating
profit (see Consolidated Statement of
Income). Cash generated is calculated as
adjusted operating profit plus depreciation
on property, plant and equipment, andamortisation on research and development,
minus capital expenditure on property,
plant and equipment, and research anddevelopment, and adjusted for movements
in working capital.
3	The Net Promoter Score is a metric whichis compiled by asking customers whether
they would recommend Oxford Instruments
to a friend or colleague. Customers givea score between zero and ten. Those
customers who score nine or ten arepromoters, those customers who scoreseven or eight are neutral and customers
who score six or less are detractors.
The Net Promoter Score is the difference
between the numbers of promoters andthe number of detractors (both expressed
as a percentage of the number of replies
received). The score can range between-100 (no customers are promoters) and+100 (all customers are promoters).
A positive score indicates that theCompany has fewer detractors
than promoters.

Measures efficiency

10

Oxford Instruments plc | Report and Financial Statements 2015

Strategy Context

Convergence is the merging of previously distinct areasof research and technology into a unified discipline thatcreates new scientific and commercial opportunities.
The tools that were once restricted to one discipline are
now being utilised across a number of areas, exposing us
to a larger addressable market and a new set of customers
needing to work at the atomic and molecular level.
We continue to build on our strategy to grow our businessin our core markets of physical and material science,
while exploiting scientific convergence to expand into life
sciences. The use of techniques previously associated withthe physical sciences, where the Group has great strength,
in the biological sciences produces an important area ofgrowth. Oxford Instruments plc’s acquisitions of Asylum
Research in 2012 and Andor Technology in 2014 support
this strategy of extending over reach into analysis tools
for nano-bio research.

Strategic Report

Convergence allows us to offer products
to an ever-widening pool of researchersand high tech manufacturers who want
to operate at the nano scale.
Nanotechnology has been our focus over the past five years
and, as demand in this area has not slowed, we continue
to look for exciting opportunities that will allow us tofurther strengthen our market presence. As a result offinite resources people are challenged to do more with lessand to generate more value from the same raw materials;
this is why nanotechnology continues to be so important.
As a result, researchers are operating at the smaller scale,using tools that are more advanced; our aim is to ensure
these are Oxford Instruments plc tools.

nm

Macro

100,000

SystemsanddevicesEngineering

10,000

Micro

1,000

Physics and material science

Biological principles
Physical laws
Chemical properties
Cognitive sciences

100

10
Nano

Integrated
exploitation

Biology

Accelerated
scientific discovery
and innovation1
Chemistry
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060

Report and Financial Statements 2015 | Oxford Instruments plc

11

Our Strategy

Oxford Instruments plc continues
to provide tools to those wishing to
explore new frontiers at the nano scale.
As well as seeking opportunities in growing markets, we also aim to increase our addressable markets as new customers
and new applications for our tools and services result from the ongoing convergence of the sciences. Four key themes
underpin our plan for delivering on this strategy while maximising customer and shareholder value.

12

Peopledevelopment

Product
development

Exploiting
the convergenceof sciences

34Marketdevelopment

Processdevelopment

Long-term demand
Increased addressable market
Maximised shareholder value
12

Oxford Instruments plc | Report and Financial Statements 2015

Strategic Report1

People development

Our employees are key to our continued growth and success,bringing high levels of technical skill and a deep understandingof technology trends. We build on the talents and skills inthe business through extensive training and development
programmes and look to enhance our skill base further
through concentrated recruitment.
We focus on the following areas:• Adaptability• Engagement• Calibre• Skill
We benchmark staff engagement externally and measure
our progress through regular employee surveys. Our mostrecent staff survey took place in January 2015. Our overall
engagement score is 78%.

3

Market development

We continue to focus on our strategy to grow organicallyand through strategic acquisition in both our existing
physical science markets and by exploiting the current
convergence of the sciences that is increasing the demand
for nanotechnology tools.

2

Product development

We are driven to provide customers with the latest high technology
tools, building on our customer relationships to understand thelong term market trends. We utilise our resources to retain ourhigh level of innovation and to push the boundaries of ourtechnology to develop tools for the future.
Our focus is on:• R&D that is strategic and market driven• The alignment of development with a long term vision• The creation of a delivery-enabled environment• The production of market-leading, high margin tools
We monitor our progress through the Vitality Index, a measureof the proportion of revenues coming from new products introducedin the last three years. Our 2015 Vitality Index is 41%.

4

Processes development• To target fast growing markets

Continual improvements in our operational excellence forms
an important part of our strategy. Through problem solving,
teamwork and effective leadership we continue to make progress
here. We work hard to ensure our processes deliver the benefitsof economies of scale as the business grows and we consider
operational excellence to be the cornerstone of overall excellence.
We build on the strong fundamentals of ISO standards to achieveorganisational excellence and set ourselves apart from others.

• To expand our portfolio of techniques

We aim to:• To expand into attractive adjacent markets• Promote a culture of continual improvement

One measure of our success is the growth in our addressable
markets and we continue to chart this throughout the year.

• Establish a vision of business excellence

Our goals are:

Report and Financial Statements 2015 | Oxford Instruments plc

We measure the value and success of operational excellence
through the Value Add Index. This shows the value each employee
adds to the business. Value Add = (adjusted operating profit+ employment costs)/employment costs. Our 2015 Value Add
Index is 1.36.

13

Principal Risks and Uncertainties

Specific risk

Context

Risk

Possible impact

Technical
risk

The Group provides high technology
equipment and systems to its customers.

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

Lower profitability
and financial returns.
Negative impact on
the Group’s reputation.

Economic
environment

Government spend on R&D
has been constrained.

Demand for the Group’s products
may be lower than anticipated.

Lower profitability
and financial returns.

Acquisitions

Part of the growth of Oxford Instruments
is planned to come from acquisitions
which provide the Group withcomplementary technologies.

Appropriate acquisition targets may
fail to provide the planned value.

Lower profitability
and financial returns.

Foreignexchangevolatility

A significant proportion of the Group’s
profit is made in foreign currencies.
Most costs are in Sterling.

The Group’s profit levels are exposed
to fluctuations in exchange rates.

Lower profitability
and financial returns.

Outsourcing

The Group’s strategic plan includes
the outsourcing of a significantly higher
proportion of the costs of its products
to benefit from economies of scaleand natural currency hedges.

Failures in the supply chain
impacting sales.

Disruption to customers.

The Group’s calculated pension
deficit is sensitive to changes
in the actuarial assumptions.

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

Additional cash requiredby the Group to fundthe deficit.

Pensions

Management focus
taken away fromthe core businessin order to manage
integration issues.

Negative impact on
the Group’s reputation.

Reduction in net assets.

14

PeopleA number of the Group’s employees
are business critical.

The employee leaves the Group.

Lower profitability
and financial returns.

Routesto market

In some instances the Group’s products
are components of higher level systems
and thus the Group does not control
its route to market.

The systems integrator switches supplierdenying the Group’s route to market.

Lower profitability
and financial returns.

Oxford Instruments plc | Report and Financial Statements 2015

Mitigation

Realising the brand: Using “Voice of the Customer”
to drive rapid new product development.

The Group has moved away from large scale, single
customer development programmes towards morecommercially orientated products.

Liberate cash: Supporting and developing our employees
to maximise their value add.

Realising the brand: Developing a strong brand in existingand developing markets.

Strategic Report

Associated strategic priorities

The New Product Introduction programme that any new R&D
projects must pass through provides a framework within which
the commercial viability of projects are scrutinised and assessed.
The Group has a broad spread of customers, applications
and geographical markets.

Delivering shareholder value: Focusing on balanced
and attractive global markets.
Realising the brand: Developing a strong brand in existingand developing markets.

Extensive financial and technical due diligence is undertakenby the Group during any acquisition programmes.

Inventing the future: Using “Voice of the Customer”
to drive rapid new product development.

Each transaction has a comprehensive post acquisition
integration plan which is reviewed at the highest level.

Adding personal value: Supporting and developing
our employees.
Delivering shareholder value: Focusing on balanced
and attractive global markets.

The Group seeks to mitigate the exposure to transactional riskby the use of natural hedges wherever possible.

Liberating cash: Developing a competitive global supply
base that supports our growth.

The remaining transactional foreign exchange risk in any year
is mitigated through the use of forward and non-premium
based option exchange contracts.

Liberating cash: Developing a competitive global supply basethat supports our growth.

Relationships with outsourcing businesses are monitored closely
and any potential issues are acted upon swiftly to avoid disruption.

Realising the brand: Developing a strong brand in existingand developing markets.

Where practical dual sources are used for key components and services.

Delivering shareholder value: Focus on balanced
and attractive global markets.

The Group has closed its defined benefit pension schemes in the UK
and US to future accrual.

Liberating cash: Developing a competitive global supply
base that supports our growth.

The Group has a funding plan in place to reduce the pension deficit
over the short to medium term.

Adding personal value: Supporting and developing
our employees.

The Group undertakes a regular employee survey and implements
and reviews resulting action plans.

Inventing the future: Providing an environment for inventing
and innovation.

A comprehensive succession planning process is in place, together witha talent network which identifies and manages contacts with people who
could provide external succession for critical current and future roles.
A management development programme provides exposure to key skills
needed for growth. Regular individual performance reviews take place.

Inventing the future: Developing products that offer the best
technical solution.

Use of the stage gate process and “Voice of the Customer” to makesure that the Group’s products are the best in the market.

Realising the brand: Ensuring that end customers appreciate
the benefits of Oxford Instruments’ technology.

Co-marketing with system integrators to promote the merits of theGroup’s products to end customers.
Seeking to increase the number of integrators supplied by the Group.

Report and Financial Statements 2015 | Oxford Instruments plc

15

Operations Review

Our Group reports in threesectors: Nanotechnology Tools,
Industrial Products and Service.
Highlights

at Plasma Technology as a result of the sanctions on exports
to Russia, and a decrease in orders from Japan.

• Nanotechnology Tools benefited from theinclusion of a full year of Andor Technology.
• Improvements in our Industrial products
portfolio and distribution network are now
in place and cause us to be optimistic about
future trading.
• Our Service sector continues to perform
well in all territories.

Nanotechnology Tools
The Nanotechnology Tools sector produces our highest
technology products primarily to research customers(85% of its revenues come from research and academia).
Our customers in this sector provide a unique insight into
emerging trends in public and privately funded research,thus informing our approach to innovation and productapplication. In the research field, our tools are used to advancethe frontiers of science. We count many Nobel laureates
amongst our customers.
This sector delivered a mixed performance in 2015, benefitingfrom the inclusion of a full year of Andor Technology, whichhas performed well, but suffering from trading difficulties

Our NanoAnalysis business produces leading-edge
tools that enable materials characterisation and sample
manipulation at the nano scale. Its products are usedon electron microscopes and ion-beam systems in academic
institutions and industrial applications including
semiconductors, renewable energy, mining, metallurgy
and forensics. We launched our new AZtec Feature tool
providing a solution for in-factory analysis including
cleanliness of high technology manufactured parts. Within
AZtec we introduced improvements, beyond our alreadyclass-leading performance, for the analysis of low energy
X-rays. This benefits research into biological and otherfragile sample types that are studied at low microscope
power to avoid sample damage. Record orders werereceived in America, while Europe also saw a performance
improvement on last year. However, there was a reductionin orders in Japan and this impacted the full year results.
Andor Technology is a global leader in the design andmanufacture of high performance scientific imaging cameras,
spectroscopy solutions and microscopy systems for researchand industrial markets. A number of key products werelaunched during the year that will continue to drive revenue.
The iXon Ultra 888 is the most flexible high performancecamera for those working in areas such as live cell imaging
and super resolution microscopy. The sensitivity of the camera
enables customers to image more detail in cell structures
than ever before. This allows them to better understandsuch biological processes as cancer cell behaviour and themolecular mechanisms that go wrong in conditions such

Nanotechnology Tools headline figures
Revenue1 (£m)

Operating profit (£m)

£211.2m£20.7m+16.9%
2015
2014

16

1 Underlying growth: -8.2%
excludes FX, acquisitions and completed contracts.

-2.4%
211.2

180.6

2015

20.7

2014

21.2

Oxford Instruments plc | Report and Financial Statements 2015

Strategic Report

as Parkinson’s or Alzheimer’s diseases. Our customers
continue to make scientific advancements using our products.
Our world class Imaris software has recently been usedby researchers to visualise how the Ebola virus infected cells,
allowing scientists to try different potential treatments.
In physical science, two iKon M cameras have made over
one billion measurements of the most luminous objects
in the universe, allowing scientists to identify previously
undiscovered objects including stars and galaxies.
Asylum Research is the technology leader in atomic force
and scanning probe microscopy for both materials andbioscience applications. Asylum Research saw good returns
from two of our high performance atomic force microscopes(AFM): the Cypher and the MFP-3D Infinity. An AFM uses
an ultra-fine stylus to mechanically image objects at thenano-scale. Orders for the Cypher are increasing as it offers
market leading resolution at the atomic scale. There is also
good traction for Infinity, which offers the most comprehensive
selection of accessories for materials and life science research,making it an ideal tool for customers who want to use it
for a variety of applications.
Plasma Technology provides processes and platforms
to customers in research laboratories and specialisedsemi-conductor fabrication facilities who are developing
new materials, nano-devices and products. The businessexperienced a challenging year, primarily due to thecancellation of orders to Russia. In addition there wascontinued weakness in the demand for High Brightness
Light Emitting Diodes (HBLED). As a result we have refocused
Plasma Technology on its core competence of designing
tools for research into advanced materials and we haveterminated certain product developments that were notin line with this strategy. This resulted in a restructuring
cost (including write-offs of inventory, development costs
and fixed assets) and enabled us to right-size the business.
We continue to develop market leading solutions in the
research markets. For example this year we introduced the
NanoFab 1200 for the growth of graphene and other 2D
materials. In the Specialised Production market, we introduced
an enhanced deposition process for Power Semiconductor
applications that will improve the performance of advanced
semi-conductor devices.

Report and Financial Statements 2015 | Oxford Instruments plc

NanoScience designs, manufactures and supports
market-leading research tools that enable quantum
technologies, new materials and device developmentin the physical sciences. Our latest product, the Optistat
Dry, was designed for low temperature optical
spectroscopy applications including device development
for telecommunications. As it does not use costly liquid
helium there has been particular interest in China and India,
where the availability of helium and budget constraints
can impact the extent of their research abilities. At a time
when quantum computing is evolving rapidly, the launchof the Triton XL offers higher cooling powers and more
sample space, allowing scientists to perform multiple
operations in parallel, increasing the processing powerof the devices. The recent advancements we have madewith superconducting magnet systems include thedevelopment of novel methods for coil design, stored
energy and quench management. With growing interestin graphene and other 2D material properties in ultra highmagnetic fields, we are well placed as a world leader insuch systems delivering significant reductions in runningcosts compared to traditional techniques which do not
use these high power superconducting magnets.
Omicron Nanotechnology is a world leader in thespecialised field of ultra-high vacuum (UHV) surface
science, combining thin film deposition techniques withleading edge surface analysis techniques such as scanningprobe microscopy and X-ray photoelectron spectroscopy(XPS). We have a strong position in the global academic
research market, selling to leading universities from China
to the USA. Customers are using our products to research
into the properties of materials using ultra high vacuum
to ensure extreme sample purity. The microscopes canimage and move individual atoms, allowing the observationand manufacture of nanostructures and this is used inapplications such as research into next generation
computer storage and processing devices.
Post period end, we announced a joint venture to merge
Omicron with Scienta Scientific AB, creating the largest
player in the growing UHV surface science market. The
joint venture provides excellent opportunities to enhance
product development, cut production costs and broaden
the product range, whilst extending market reach andstrengthening customer relationships.

17

Operations Review continued

Industrial Products
Our Industrial Products sector sells more mature, thoughstill technically advanced, products primarily to industrial
customers (59% of its revenues come from industrial
customers). The tools and systems produced by this sector
enable us to benefit from the economies of scale offeredby trading in the larger industrial markets, thereby maximising
the returns from our R&D programmes. In the industrial
field, our tools are used to improve production efficiency,
ensure high standards of quality control and demonstratecompliance with environmental legislation.
Revenues were lower than last year as a result of thesuccessful completion of the ITER order which produced
revenues of £3 million in the first quarter of 2014. In addition,
the launch of the new, premium priced X-MET8000 handheld
analyser came late in the year and could not therefore
compensate for falling sales of our preceding product,
which had encountered increased market competition.
Industrial Analysis designs and sells a range of spectrometers
for industrial markets. The recently launched X-MET8000
supports the regulatory compliance screening of consumer
goods. It will help our customers prevent costly rejects,
identifying hazardous elements before they enter the
manufacturing process. A new distribution network has
been established in North America to better reach andsupport the market and there has been additional focus onbuilding the distribution channels in China. The integrationof the two acquisitions made in the prior year, RMG andRoentgenanalytik, is near completion. Production of therevolutionary mPulse LIBS analyser, which uses a laser
to cost effectively identify materials, is now proceedingwell after an extensive period of production engineering.
The Maxxi 6, a new tool for coating thickness measurement
and materials analysis, was released in early 2015 andis the first fully developed product to result from our
Roentgenanalytik acquisition. Whilst these improvements
in product portfolio and distribution network are now inplace and cause us to be optimistic about future trading,their implementation happened late in the year and as aresult the Industrial Analysis business under-performed
against its objectives for the year as a whole.

Industrial Components comprises our Superconducting
Wire, Austin Scientific and X-ray Technology businesses.
The Industrial Components division experienced a mixed
year. In our Superconducting Wire business the demand
for wire for MRI scanners continued to be steady. The
successful completion of the ITER order in the first quarterof 2014 meant that revenues were lower than in theprevious year. There was continued success internationally,
with diversification in China to work with new customers
who have developed MRI capabilities. X-ray Technology
continues to be successful, but it was a difficult year for
our Austin Scientific business with a key customer, GTAT,
filing for protection from its creditors under Chapter 11
in the USA.

The X-MET8000
series of handheld
X-ray fluorescence(XRF) analysersdeliver the speed andperformance required in eventhe most demanding applications.
This includes mining and regulatorycompliance screening.

Industrial Products headline figures
Revenue1 (£m)

Operating profit (£m)

£107.1m

£6.3m

-6.6%

18

1 Underlying growth: -4.1%
excludes FX, acquisitions and completed contracts.

-59.6%

2015

107.1

2015

2014

114.7

2014

6.3
15.6

Oxford Instruments plc | Report and Financial Statements 2015

Strategic Report

Service

PeopleThe Service sector comprises the Group’s maintenanceservice contracts, spare part sales of Oxford Instruments plc
equipment and the servicing of third party MRI and CT
machines, under the Oxford Instruments Healthcare brand.
The complexity and uniqueness of our products mean
our customers increasingly purchase multi-year service
contracts. This sector performed well. A good performancein the USA was driven largely by the ongoing success of
our MRI and CT scanner servicing business. There was also
an increase in refurbished turnkey systems and spare parts.
However, this year saw the completion of our nationwide
maintenance contract with Siemens (c. £4 million revenue
in 2014/15) after 17 years and this will not be renewed.
While business remains strong in Japan, with an increasein billable servicing and spare part sales, the negative impactof the exchange rate is reflected in the revenue reported.
Our service business in China experienced a strong year.
Elsewhere, Andor Technology contributed to the ongoing
success of the sector in its first full year of reporting. Post
period end we successfully completed the acquisition of
Medical Imaging Resources (MIR), which specialises in thebuild, lease and service of mobile MRI, CT and PET-CT. MIR
will become part of Oxford Instruments Healthcare andpositions us well to maximise the opportunities madeavailable to us through the Affordable Healthcare Act,
which seeks to provide more cost effective healthcare
solutions in the USA.

During the year, some of our valued friends and colleagues
left the Group as part of the cost reduction programme.
In order to hear from our staff about how these changes
have affected them, our Management Board has been
taking part in a number of listening sessions with ourstaff around the world. These small group discussions have
proved beneficial for us all, allowing us to communicate
the Oxford Instruments strategy and discuss suggestions
for the future. This has resulted in a number of actions
that support the continued engagement of our people
and will further drive the business forward.
We are now focused on rebuilding the momentum inour business and taking advantage of the many exciting
opportunities in our markets. Our people remain the mostimportant part of our differentiation and innovation thatis so valued by our customers. The Board thanks everyone
for their hard work and effort during what has been achallenging year and recognises the valuable contribution
all our staff have made, and continue to make, to ourongoing success.

Service sector headline figures
Revenue1 (£m)

Operating profit (£m)

£68.6m£15.7m+3.3%

1 Underlying growth: 7.1%
excludes FX, acquisitions and completed contracts.

+16.3%

2015

68.6

2015

2014

66.4

2014

Report and Financial Statements 2015 | Oxford Instruments plc

15.7
13.5

19

Financial Review

Kevin Boyd, Group Finance Director

Trading performance
Orders in the period were up 13.0% to £386.6 million(2014: £342.2 million). Including inter‑segment trade, thesplit between sectors was: Nanotechnology Tools £213.1 million,
up 28.1%; Industrial Products £105.5 million, down 4.1%;
and Service £69.2 million, up 2.5%. At the end of the year
the Group order book for future deliveries stood at£125.9 million (2014: £126.1 million).
Revenues in the year grew by 7.1% to £385.5 million(2014: £360.1 million). The increase in revenues due
to acquisitions made in 2013/14 was £54.8 million.
Adverse foreign currency exchange rate movements
reduced reported sales by £10.7 million.
In Nanotechnology Tools, revenues grew 16.9% as a resultof a full year’s contribution from Andor Technology, an
acquisition made in January 2014. On a constant currency
organic basis revenues fell by 8.2% due primarily to a decline

in our NanoAnalysis business in Japan and a marked decline,
particularly in Russia, for our Plasma Technology business.
In Industrial Products, revenues reduced by 6.6%. Part ofthis decline was due to the completion of the ITER contract
in the first quarter of the previous year. Excluding ITER,
foreign exchange effects and the growth in sales from the
RMG and Roentgenanalytik acquisitions that were madein the third quarter of the previous year, sales fell by 4.1%.
This was due to increased competition in the hand held
XRF market where our outgoing X-MET7000 range struggled
against newer models from competitors and a steadymarket for superconducting wire for MRI applications.
Service revenues increased by 3.3%. This was despite a£2.0 million decline in our business that services Siemens
MRI machines in North America. We believe that this business,
which had sales of approximately £4.0 million in 2014/15,
will cease in 2015/16. Excluding the Siemens effect, foreign

Adjusting items
The Directors believe that adjusted profit before tax gives a clearer indication of the underlying performanceof the business. A reconciliation of reported profit before tax to adjusted profit before tax is given below:

20

2015
£m

2014
£m

(Loss)/profit before income tax
Reversal of acquisition-related fair value adjustments to inventory
Acquisition-related costs
Restructuring costs
Amortisation and impairment of acquired intangibles
Contingent consideration – further amount deemed payable
Contingent consideration deemed no longer payable
Unwind of discount in respect of contingent consideration
Mark to market loss/(gain) in respect of derivative financial instruments
Settlement loss on US pension scheme

(9.7)
0.2
2.2
9.9
21.7
6.8
(1.4)
1.1
4.8
—

24.0
3.7
7.8
—
14.7
—
—
0.9
(4.1)
0.1

Adjusted profit before income tax
Share of taxation

35.6
(8.1)

47.1
(8.7)

Adjusted profit for the year

27.5

38.4

Oxford Instruments plc | Report and Financial Statements 2015

Adjusted Group gross margins reduced from 45.4% to 44.4%
due to adverse currency movements and the operational
gearing effect of reduced sales in Plasma Technology
and Industrial Analysis.
Adjusted operating expenses rose by £16.3 million reflecting
an increase of £20.0 million spend due to the inclusion of
the acquired businesses, a £2.7 million benefit from foreignexchange rate movements and a saving of £1.0 million
in underlying costs.
Adjusted operating profit decreased from £50.3 million to£42.7 million which equates to an adjusted operating profit
margin of 11.1% (2014: 14.1%). The interest charge increased
to £7.1 million (2014: £3.2 million) primarily as a result of
the increased debt due to the Andor acquisition in the prioryear. As a result adjusted profit before tax fell from £47.1 million
to £35.6 million. This compares with a reported loss before
tax of £9.7 million (2014: profit of 24.0 million). The adjusting
items table on page 20 provides reconciliation.
Financial income and expenditureWithin financial income and expenditure, the cost ofinterest on loans and overdrafts and the commitment fee
for our revolving credit facility, offset by deposit interest,rose to £5.2 million (2014: £1.2 million) due to the increased
borrowing that financed the Andor Technology acquisition.
The interest charge on net pension scheme liabilities was£1.9 million, in line with the prior year.
The Group uses derivative products to hedge its exposure
to fluctuations in foreign exchange rates. It is Group policy
to have in place at the beginning of a financial year hedging
instruments to cover 80% of its forecast transactional exposurefor that year.
In common with a number of other companies, the Grouphas decided that the additional costs of meeting the extensive
documentation requirements of IAS 39 to apply hedge
accounting to these foreign exchange hedges cannot
be justified. Accordingly the Group does not use hedge
accounting for these derivatives.
Net movements on marking to market such derivatives
at the balance sheet date are disclosed in the Consolidated
Statement of Income as financial expenditure and excluded
from our calculation of adjusted profit before tax (Note 1).
The mark to market loss in respect of derivative financial
instruments was £4.8 million (2014: £4.1 million gain).

Report and Financial Statements 2015 | Oxford Instruments plc

The Group also uses derivative products to hedge its
exposure to fluctuations in the price of copper, a major
component for the Superconducting Wire business.
Given the small number of contracts involved, we apply
hedge accounting for these transactions and consequently
the results of marking to market are excluded from theConsolidated Statement of Income.

Strategic Reportexchange and acquisitions we saw underlying growthof 7.1%. This was due to good growth in the servicingof Oxford Instruments’ equipment in Asia and thecontinued growth of OIHealthcare.

Taxation
The Group’s weighted average statutory tax rate was 30%(2014: 29%). The underlying rate on the profit before tax
for the Group before adjusting items was 23% (2014: 18%).
This difference is due to prior year adjustments, tax incentives
relating to income earned from technology assets andmanufacturing activities and tax efficient financing.
In the year ended March 2011, due to the improved
performance of the Group’s UK businesses, we recogniseda deferred tax asset of £11.3 million in respect of brought
forward tax losses in the UK and a corresponding credit
to the Consolidated Statement of Income. We believethat this was exceptional both in nature and quantum
and therefore excluded it from our calculation of adjusted
earnings per share. In order to be consistent we have,over time, excluded the reversal of this asset from thecalculation of adjusted earnings per share. During thecurrent year as a result of the restructuring the Groupmade a loss in the UK before tax. Consequently no partof the deferred tax asset reversed during 2015. We now
expect the final £1.2 million to reverse in the year ending
31 March 2016.
Earnings
After a tax credit of £3.4 million (2014: charge of £5.8 million),
the reported net loss for the financial year was £6.3 million(2014: profit of £18.2 million). With a weighted average
number of shares of 57.1 million (2014: 56.8 million),
the reported basic earnings per share were (11.1) pence(2014: 32.1 pence).
Adjusted profit before tax (Note 1) fell by £11.5 million
to £35.6 million which equates to adjusted earnings
per share of 48.2 pence (2014: 67.7 pence).
Dividends
In 2011 the Group moved to a progressive dividend
policy, whereby we seek to raise dividends as adjusted
earnings per share rise, although not necessarily in thesame proportion. In recommending the dividend, theDirectors take account of the perceived need for cash
to expand the business both organically and throughacquisition. For the year just ended, the proposed final
dividend of 9.3 pence per share (2014: 9.04 pence),payable on 22 October 2015 to Shareholders who are on
the register on 25 September 2015, gives a total dividend
for the year of 13.0 pence per share (2014: 12.4 pence).
Dividend cover for the underlying business before adjusting
items was 3.7 times (2014: 5.5 times).

21

Financial Review continued

Investment in research and development (R&D)
Total cash spend on R&D in the year was £35.2 million or 9.1% of sales (2014: £27.9 million, 7.7%).
A reconciliation between the amounts charged to the Consolidated Statement of Income and the cash spentis given below:
2015
£m

2014
£m

R&D expense charged to the Consolidated Statement of Income
Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
Less: amortisation of R&D costs capitalised as intangibles
Add: amounts capitalised as intangible assets

30.8
(0.9)
2.0
(4.7)
8.0

25.1
(0.8)
2.1
(3.9)
5.4

Total cash spent on R&D during the year

35.2

27.9

The net book value of capitalised development costs at the end of the financial year was £16.1 million(2014: £14.1 million).
Balance sheet
Net assets fell from £140.2 million to £125.5 million
in the year.
Net working capital (excluding derivative financial instruments,
contingent consideration and tax payable/receivable) fell
from £41.0 million to £37.1 million.
Inventory turns increased by 0.1 to 3.0 while debtor days
increased from 45 days to 52 days.
Net debt at the year end was £118.9 million(2014:£124.3 million). During the year the Grouprenegotiated its committed revolving credit facility
to extend the tenor of the facility by just over a year to
February 2020. At the same time the Group increased
the amount of the facility to include a US Dollar tranche
totalling $37 million.
In addition to the revolving credit facility which totals£100 million plus US$37 million, the Group has a£44.5 million fixed rate loan from Pricoa Capital whichmatures in 2021 and a £25.0 million fixed rate loan
from the European Investment Bank that matures in 2020.
The Group has overdraft facilities totalling £16.3 million.
We continue to operate well within our banking covenants.
Debt covenants are net debt/EBITDA less than 3.5 (until andincluding 31 March 2016), 3.0 thereafter and EBITDA/debt
interest greater than 4.0 for the year under review, net
debt/EBITDA was 2.3 and EBITDA/debt interest was 10.0.
Acquisitions and disposals
Post year end, on 1 May 2015, the Group acquired
Medical Imaging Resources, Inc. (MIR), a US company
specialising in the build, lease and service of mobile medical
imaging labs. Consideration comprised an initial $10.4 million(c. £6.7 million) plus a further $10.1 million (c. £6.5 million)
earn-out payment, payable one year later. MIR had $3.0 million(c. £2.0 million) net debt at completion.

22

MIR will form a part of OIHealthcare, within the Group’s Service
sector. The acquisition was funded from existing facilities.
On 28 May 2015 the Group entered into a joint venturewith GD Intressenter AB of Sweden (GDI) to create theworld’s largest player in the highly specialised ultra highvacuum surface science field. The joint venture comprises
Oxford Instruments plc’s Omicron Nanotechnology GmbHand GDI’s Scienta Scientific AB.
In consideration for new shares in Scienta,
Oxford Instruments plc has transferred all of its sharesin the capital of Omicron to Scienta. Oxford Instruments
holds a 47% interest in the share capital of Scienta
and GDI holds 53%.
In the 12 months to 31 March 2014, Omicron generated
revenue of £28.5 million and a loss before tax of £0.6 million.
Scienta generated revenue of SEK279 million (approximately£24.6 million) and a profit before tax of SEK25 million(approximately £2.2 million). Oxford Instruments has provided
a term loan of SEK40 million (approximately £3.1 million)
to the joint venture. The transaction will result in no profit
or loss on the carrying value of Omicron for Oxford Instruments.
Pensions
The Group has defined benefit pension schemes in the UK
and the USA. Both have been closed to new entrants since2001 and closed to future accrual from July 2010. The total
deficit, before tax, under IAS 19 on these pension schemes
grew in the year by £7.2 million to £53.5 million. There isa corresponding deferred tax asset of £11.2 million.
Assets of the schemes at 31 March 2015 were £238.6 million(2014: £196.6 million), while liabilities increased from£242.9 million to £292.1 million.

Oxford Instruments plc | Report and Financial Statements 2015

Cash
Adjusted earnings before interest, tax, depreciation andamortisation (EBITDA) decreased by 10.5% to £53.0 million.
There was a working capital outflow of £5.1 million.
Cash generated from operations was £38.9 million(2014: £28.4 million). The ratio of operating cash tooperating profit, which is one of our key performanceindicators, was 80.8% (2014: 51.1%).
Employees
The average number of people employed during the year
was 2,420, an increase of 370 over the prior year, due
primarily to the inclusion of Andor Technology in theGroup for the full year.

The diverse nature of the Group, combined with its financial
strength, provides a solid foundation for a sustainable business.
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 believethat 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.

Strategic Report

The latest triennial actuarial valuation of the UK scheme
was carried out as at 31 March 2012 and resulted in an
actuarial deficit of £48.8 million. A long-term plan forrecovering the deficit over eight years has been agreed
between the Company and the Pension Trustee. Under
the deficit recovery plan, payments will increase for thethree years to March 2015 by the greater of 10% or thepercentage increase in dividend per share. Thereafter, thepayment will increase by 3.05% per annum. The payment
in 2014/15, the third year of the new plan, was £6.3 million.
An actuarial valuation as at 31 March 2015 will be carriedout in the current year.

The Financial Statements have been prepared on a going
concern basis, based on the Directors’ opinion, after making
reasonable enquiries, that the Group has adequate resources
to continue in operational existence for the foreseeable future.
Forward-looking statements
This document contains certain forward-looking statements.
The forward-looking statements reflect the knowledge andinformation available to the Company during the preparation
and up to the publication of this document. By their very
nature, these statements depend upon circumstancesand 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 forecastby the Company.

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 and Strategy andOperations sections. The financial position of the Group,
its cash flows, liquidity position and borrowing facilities
are described in this Financial Review.

Restructuring
In January 2015 the Group announced that it was embarking on a restructuring programme to reduce its costbase. The programme included a number of redundancies, the closure of six sites across the Group and the costsof Plasma Technology exiting the high volume production semiconductor market. The costs of the programme
are recognised as non-recurring adjusting items as summarised below:
2014/15£m

2015/16
£m

Total
£m

9.9
1.2

1.4
7.4

11.3
8.6

Consolidated Statement of Income
Cash
The savings as a result of the programme are expected to be £8.0 million in 2015/16.

Report and Financial Statements 2015 | Oxford Instruments plc

23

Corporate Responsibility

We are committed to thefollowing guiding principles
of corporate responsibility:• T o establish and maintain long term, effective
stakeholder relationships• T o offer all our people an excellent
employment experience• T o strengthen our business through diversity
and inclusion• T o operate in an ethical, sustainable
and environmentally responsible manner

Oxford Instruments’ brand and reputation are some of its key
assets. As a leading supplier of high technology tools andsystems we set ourselves the highest standards of integrity,
personal conduct and fairness.
We believe that it is important for a sustainable businessto focus on the needs of employees, customers and otherstakeholders through shared goals and trusted relationships.
While the Group is accountable to our Shareholders, we take
into account the interest of all our stakeholders, including our
employees, our customers and our suppliers, as well as the
local communities and environments in which we operate.
Our stakeholders
Investors
In line with stock exchange and other relevant requirements,
the Group ensures that investors receive regular andtransparent communications on all matters that are material
to an understanding of the performance and future prospectsof the organisation. It aims to protect investors’ funds,
and manage risks appropriately.

Our values

The Chief Executive and Group Finance Director allocate
a significant proportion of their time to investor meetings,
and host regular site visits for both analysts and investors.
In 2014/15, interaction with investors increased with site
visits, one to one meetings and telephone conferencing.
Of particular note was a site visit to newly acquiredAndor Technology in Belfast in September 2014.

Inclusive

Innovative and progressive

We listen and engage withcustomers, colleagues, Shareholders
and partners for mutual success

We bring skill, experience andopenness to new ideas to address
the needs of the 21st century

TrustedWholehearted

We build long term relationships
based on integrity, trust and respect

We approach what we do with
passion, with care and with pace24

The Investor pages of the Oxford Instruments plc website
provide a comprehensive overview of the Group(www.oxford-instruments.com/investors).
Customers
Oxford Instruments plc believes that effective customer
relationships are built on mutual trust, respect and integrity,and that this principle should govern all aspects of thebusiness. We seek to be honest and fair in our relationships
and provide the standards of product and service that are
expected. We also focus on the safety and quality of our
products and services.
The continued focus on the “Voice of the Customer” in any
new product introduction or current product development
helps put customer needs are at the core of our business.

Oxford Instruments plc | Report and Financial Statements 2015

Strategic Report

Claire Flint, Group HR Director
Dawn Brooks, Group Service Director

The success of new products introduced in 2014/15 supports
this focus. The percentage of revenue that is made up of
products launched or acquired in the last three years is a key
indicator of the vitality of our new product development
and was at 41% for the financial year 2014/15.
Externally, the Group makes extensive use of social media
platforms to keep all stakeholders, and the media, up todate and informed of news, product launches and events.
The Group websites are mobile responsive.
Employees

Management Development ProgrammeStrengthening the core skills of management
17 separate MDP groups up to 2014/15
8% of staff (190)11% promoted after completing course
Senior Leadership Programme
Encouraging collaborative and transformative
leadership to drive growth
Five courses since introduction in June 2013

Our highly skilled employees are vital to our continued growthand success. We aim to provide careers, opportunities andworking environments in which our people can achieve
their potential. We do this through safe, modern working
environments, recognition of the value of culture and diversity,
managing and developing talent, employee incentive
and engagement activities, and regular, informative,
two-way communication.

demonstrating the skills our managers have developed
throughout their training. We continue to focus on developing
high potential technical and people leaders at all levels inthe business.

Training and development

Diversity and inclusion

The Maximising Potential programme initiated in 2014
has been running very successfully, with a strong focus
on developing high potential people identified throughout
Oxford Instruments plc. Recognising the different training
needs of our staff internationally we have tailored our
global training to offer bespoke management development
programmes in the USA and China. Highlighting the positive
impact our focus on training has had, nearly three-quartersof our staff told us in our recent employee survey that they
are confident they will receive training if a need is identified.
We have also seen an increase in the number of employees who
felt their managers communicated difficult information well,Highest qualification achieved by employees (%)
PhD

9.28

Masters

13.98

Degree30.75

Diploma

20.30

Vocational

16.49

School9.20* Based on an employee population of 1,359.

Report and Financial Statements 2015 | Oxford Instruments plc

48 senior leads have completed the course

We believe diversity promotes innovation and effective
decision making. The Group’s aim is to ensure there are
equal opportunities for all employees and that we create
an inclusive culture where differences are valued andpeople are given the environment in which they can dotheir best work. Decisions regarding recruitment, selection
and access to training and promotion are based on merit.
Selection, promotion and succession planning processes
ensure that we recruit, train and promote the best candidates
based on suitability for the job. Our Code of Conduct
and Ethics requires that all employees are treated fairly
and no one suffers harassment or intimidation.
Our Diversity Champion is Dawn Brooks, Group Service
Director. Dawn has been responsible for leading a fullprogramme of diversity and inclusion awareness andengagement sessions to all parts of the business.
We have embedded diversity and cross cultural awarenessin our Group-wide development programmes, fosteringa shared understanding of our position and ambitions
in regard to developing our diverse global talent pool.
The Group has a proud track record of encouraging
flexible working. Our recent employee survey reflects
our efforts with the majority of our staff recognising
our commitment to treating employees equally.

25

Corporate Responsibility continued

Our stakeholders continued

Communication

Employees continued

We recognise that information about business strategy
and performance, and regular opportunities for a two
way dialogue with our employees are important and thisis reflected in the way we communicate with our people.
We have a regular communications programme that
informs all employees on strategy, divisional and Groupbusiness performance, operational changes and initiatives,
as well as examples of best practice and success stories.
Employees can access our intranet to obtain this and othergeneral information on the Group, and we make use ofvideo, blogs and Company meetings where appropriate.
We invite feedback and suggestions at every opportunity
and we listen and act on their feedback.

Diversity and inclusion continued
Our Management Board, which is responsible fordelivering the Group’s strategy, consists of six maledirectors and two female directors. Oxford Instruments is
actively engaged with the BIS Women on Boards initiative.
Claire Flint, Group HR and Brand Director, participates on
the National Nuclear Laboratory Board as part of theGovernment’s Women on Boards Future Directors programme.
Dawn Brooks is also supporting BIS as an inspirational
speaker at government events, for example a Ministerial
Recognition Event for Further Education and Sixth Form
College Chairs. Dawn has also contributed to a recent BIS
publication, Inspirational Women in Business. We wish tocontinue our focus on developing an organisation which
mirrors the diversity of our customers and employees
globally. Our aim over the next year will be that at the endof that time, each level of Executive Management continues
to reflect approximately the same gender balance as exists in
the Company overall.
Workforce gender diversity
Oxford Instruments
Board

21%

79%

14%

86%

Management Board

25%

75%

Managers

21%

79%

Employees

21.5%

78.5%

Female

The engagement of our employees is a leading indicatorof being a great place to work and we use an employee
engagement survey to measure our progress. Our mostrecent Group-wide survey was undertaken in January 2015,prior to the trading update of 22 January 2015 andsubsequent cost reduction programme. The survey
questions covered a wide spectrum of the work experienceat Oxford Instruments and therefore the majority of the
feedback is still relevant after this programme. We also
conducted a series of Group-wide listening sessions in
April 2015. All employees were given an opportunity to
put questions and ideas to a member of the Management
Board. This was used to update the views provided in
the employee survey. The final results of the survey andlistening sessions will be fed back to our employees.

Male

Voice of the Customer case study
At Oxford Instruments plc we recognise the importance of learning what ourcustomers need, want and expect from our products. During the developmentof our new Cryofree cryostat for optical spectroscopy applications, such asdevice development and the development of new semiconductor materials,
we used Voice of the Customer (VOC) throughout.
At the start of our project we undertook an online questionnaire to help identify
our target segments within the spectroscopy market. This also gave us some
initial guidance on what our product offerings might need to be.
We undertook more detailed VOC interviews with a large number of customers
to help develop the market requirement specification, which defined the key
features and benefits they required from these products. We also gathered
further feedback from a smaller number of customers during the beta testingstage and built this into the design of the final production version of our new
Optistat Dry product.
The Optistat Dry is the most user-friendly, easy to set up instrument available
on the market. It allows low temperature spectroscopy down to 3 Kelvin without
using inconvenient and expensive liquid cryogens. Since the launch of this productcustomer feedback has been extremely positive and we have already taken manyorders for the cryostats.

26

Introducing OptistatDry

Oxford Instruments plc | Report and Financial Statements 2015

• Oxford Instruments plc’s commitment to treating
employees equally;

Suppliers/partners
The Group works hard to establish trust, respect andmutually beneficial relations with its business partners,
including suppliers, banks and collaborative associates.

• employees’ desire for career progression within
Oxford Instruments.

There is a Group supplier management process in placethat promotes a common supply chain strategy split bycommodity, driving the business towards fewer high levelsuppliers. Regular inspections and audits are conducted
and strategic reviews are in place for key suppliers. In
accordance with ISO 9001 and ISO 14001, only quality
approved organisations are used.

However

Local communities• Understanding the business strategy was lower
than in the previous survey at 67%. The senior
management team will be focusing on providing
more clarity and accessibility to this for all staff.

We encourage our local businesses to support theircommunities through charity and community activities.

• employees’ feelings of accountability for what they
do and achieve;• employees’ sense that their jobs are important
and worthwhile; andFeedback groups met in May 2015 to put together actionplans and we will conduct pulse surveys over the coming
months to track our progress.
Reward and recognition
The Group believes it is important that our highly skilled
and educated workforce receive a share in the success ofthe business. In addition to the regular management bonus
and sales commission schemes, we operate a Gain Sharescheme for all non-management employees. This plan islinked to achievement of our strategy and aligns employees’interest with that of our Shareholders. In addition, throughour Extra Intranet site, we offer employees extra benefits
such as discounts on certain local activities, merchandise,insurance, and health and dental cover.
Generally, employees are encouraged to suggest ways
to improve performance and efficiency. Local reward
and recognition schemes exist to support this.

Strategic Report

The overall results show positive responses in thefollowing areas:

The Group also sponsors a number of internationaland national science based awards and events including
the prestigious Sir Martin Wood Prize through theMillennium Science Forum in Japan, which was presented
in 2014 to Dr Masamitsu Hayashi for his work in effective
field measurements and spin torque dynamics in magnetic
nanostructures. A new award recognising young
nanotechnology scientists was launched in India during
2014. The recipient was Prof Arindam Ghosh, who waspresented with his prize in April 2015 in recognitionof his outstanding contribution to nanoscience in India
and for his research on nano scale materials.
Ethics
We work ethically, openly, responsibly and inclusively.
We strive for maximum transparency; do not tolerate
any form of bribery, corruption or fraud and do not makepolitical donations. We have in place a Business Conduct
and Ethics Code, which all employees are made awareof at the time of joining the Company and throughsubsequent exposure on the Company intranet
and corporate website.

Graduate programme case study
Tuomas Pylkkänen started on the graduate programme not long after joining
Oxford Instruments plc as an XRF scientist in Finland. Initially only expecting
lectures about business fundamentals, he was pleasantly surprised by the strong
focus on people skills. The programme offered Tuomas exposure to different
functions in the business, building his understanding about how the Company
works and where his role fits in.
As part of the programme, Tuomas had the opportunity to come to the UK
on secondment to NanoAnalysis. This allowed him to gain practical project
management and communication skills, but he also felt it improved his
confidence and motivation, giving him an appreciation of the differencesin working cultures between the UK and Finland.
Towards the end of the graduate programme, Tuomas was promoted to atechnical team leader role. He feels the skills he learned on the programme
helped him achieve this promotion. Tuomas found the programme to bemuch more valuable than he first anticipated and has learned the people
across the businesses are ultimately motivated by the same things; to use
the best technology and processes to make great products for our customers.

Report and Financial Statements 2015 | Oxford Instruments plc

Tuomas Pylkkänen

27Corporate Responsibility continued

Ethics continued
We have a zero tolerance attitude towards bribery andcorruption and perform regular due diligence on our agents,
distributors and suppliers to minimise the risk of any
unethical behaviour.

Total accidents 2010/15

Suppliers are required to prove they do not employ workers
under the age of 15 or, in those countries subject to thedeveloping country exception of the ILO Convention
138, employ no children under the age of 14.

2012/13

Our Code is supported by a range of policies that are
regularly monitored by the Board and updated and added
to whenever necessary. Each policy gives detailed information
on how to manage sensitive issues once an assessmentof risk has been identified. This includes a global businessmalpractice policy.
Health, safety and environment
Health and Safety within Oxford Instruments plc is managed
at the Executive level by Charles Holroyd, Group Business
Development Director, who is assisted by the Group
Health, Safety and Environment Manager, Dave Wales.
Each site has a nominated Health, Safety and Environment
Manager or representative responsible for ensuring that
day‑to‑day activities are carried out safely. All large sites
are audited annually by the Group auditing team.
Accidents reduced for the fifth consecutive year
There has again been substantial progress on reducing
accidents within the Group. In 2014/15 we reduced
the total number of accidents to 71, a 35% reduction
on the previous year.
Globally there were two serious accidents reported during
the year. This marks a 50% reduction on the previous year.
For reporting purposes, global serious accidents werenormalised using the UK definition of over seven days’
absence from work.
As a result of our sustained focus on health and safetyissues, we have reduced accidents by 67% from 217 in2011 to 71 in 2015. We have been particularly successful
at our Oxford Superconducting Technology site, as detailed
in the case study below.

2010/11236

2011/12217
162

2013/142014/15

109
71

Environment
Our environmental priorities are the efficient useof energy and waste minimisation, and we seek tocontinuously improve these areas. Each business has an
Energy Champion responsible for the day-to-day issuesof environmental compliance and energy management.
This includes the monitoring of energy use, waste streams,
recycling and emissions to air, water and land.
• The total global consumption of energy during
the year fell to 58.34 MWh/£million of revenue from60.79 MWh/£million in the previous year, this is a reductionof 4.3% against a reduction target of 3.0%.
• In accordance with our Energy and Environmental Policies
the business is committed to improving its efficiency inrelation to energy use and we are investing in energy
reducing technologies such as upgrading some sites
to low energy LED lighting.
• Oxford Instruments plc is a full participant in the UK
Carbon Reduction Commitment Energy Efficiency Scheme(CRC) and purchases carbon allowances to cover its UKenergy use when necessary. We have forward purchasedcarbon allowances to cover our 2014/15 UK emissions,which totalled 4,066 tonnes of CO2. These will besurrendered in September 2015 to settle ourobligations to the CRC.

Oxford Superconducting Technology case study
Our Oxford Superconducting Technology (OST) site produces superconducting wire, which is used in MRI scanners;
the wire has also been supplied to the ITER project in Europe, which is researching into nuclear fusion.
Three years ago OST had a problem with the number of accidents that were occurring within the site. The Senior
Management team was reorganised and a Health and Safety Director appointed. This prompted the formationof a Health and Safety Management Team who were tasked with focusing on the safe working practices at thesite and they implemented a program of Job Safety Analysis for all hazardous tasks within the production process.
In addition to the Job Safety Analysis the team encouraged the employees to record every near miss that occurredin order to try and prevent them turning into accidents. They changed the “near miss” classification to “near hits”.
The results of the increased focus and extra work were dramatic. The total number of accidents reduced from80 in 2011/12 to just nine in 2014/15; this is a terrific performance by the team and all employees.
In addition to the above, the team was successful in gaining certification to the OHSAS18001 Health and Safety
Management System Standard.

28

Oxford Instruments plc Report and Financial Statements 2015• The Group complies with all legislation in countries
where we operate including European Directives suchas the Waste Electronic and Electrical Equipment (WEEE)
Directive, the Restriction on use of Hazardous Substances(RoHS) Directive and the Registration, Evaluation,
Authorisation of Chemicals (REACh) Directive.
Greenhouse gas reportingAs part of the UK Companies Act 2006 (Strategic Report andDirectors’ reports) Regulations 2013, Oxford Instruments plc
has a mandatory duty to report greenhouse gas emissions.

Summary

Strategic Report• Oxford Instruments plc also measures the energy
equivalent of employee air travel for the UK andUSA operations. During the 2014/15 financial year
UK and USA air travel equated to 2,302 tCO2e.

We will maintain the focus on corporate social responsibility
in the way we run Oxford Instruments plc. We will continue
to meet our customer needs through advanced technology
and premium service, and we will maintain a wholehearted
commitment to all our stakeholders to conduct our businessin an ethical and sustainable manner.

Jonathan Flint
Chief Executive
9 June 2015

In addition to the mandatory greenhouse gas reporting, theCompany will also make a voluntary report to the Carbon
Disclosure Project (CDP) on our emissions. The CDP is aninternational, not-for-profit organisation providing the only
global system for companies to measure, disclose, manage
and share environmental information. In addition to the
mandatory greenhouse gas reporting, the Company will
also make a voluntary report to the Carbon Disclosure
Project (CDP) on our emissions. The CDP is an international,
not-for-profit organisation providing the only global systemfor companies to measure, disclose, manage and shareenvironmental information.

Greenhouse Gas (GHG) emissions
Oxford Instruments plc is a global business with operations in many parts of the world and has been monitoringenergy use and carbon emissions since 2008. Emissions from 26 of the Company’s sites are monitored and arereported on below; some small sales offices where energy consumption is less than 0.01% of the Group’s totalenergy consumption are omitted. The amount of recorded hydro-fluorocarbons is below 5kg globally and has
therefore been omitted from the figures.
Emissions
Emissions from purchased electricity, emissions from fuel burned on site for heating or process purposes (gas and oil)and fugitive emissions from process gases are reported in tonnes of carbon dioxide equivalent (tCO2e).
RegionPurchased
electricity

Secondary
fuel

Fugitiveemissions

Total

UK

3,775

444

—

4,219

North America
Europe
Asia

3,673
388
240

445
70
—

—
—
—

4,118
458
240

Total

8,076

959

—

9,035

Intensity ratio
The Company’s declared intensity ratio for Greenhouse
Gas Reporting is tonnes of CO2 equivalent (tCO2e)per £million of revenue. With revenues for the year2
at £385.6 million and total declared carbon dioxide
equivalent of 9,035 tonnes, this gives an intensity
Revenueratio as follows:tCO eReport and Financial Statements 2015 | Oxford Instruments plc

2
 3.43 tCO2e= /£million revenue
29

Board of Directors

Nigel Keen

Jonathan Flint, CBE

Kevin Boyd

Professor Sir Richard Friend

Chief Executive

Group Finance Director

Independent
Non-Executive Director

Appointed to the Board

Appointed to the Board

Appointed to the Board

Appointed to the Board

Committee membership

Committee membership

Committee membership

Committee membership

Background

Background

Non-Executive Chairman

February 1999

Nomination, Chairman
Remuneration

Background

April 2005
None

August 2006
None

Nigel holds an engineering degreefrom Cambridge University and has
been involved in the formation anddevelopment of high technology
businesses for more than 30 years.
He is a fellow of the Institute ofChartered Accountants and theInstitution of Engineeringand Technology.

Jonathan holds a BSc in Physics
from Imperial College and an MBAfrom Southampton University. He isa fellow of the Institute of Physics,
the Royal Academy of Engineeringand the Institution of Engineeringand Technology. He was awarded
the CBE in the 2012 New Year’s
Honours for services to scienceand business.

External appointments

External appointments

Non-Executive Director of:
Guidance Ltd (to March 2014)
EMIS Group plc (from May 2014)

Previous experience

Member of:
London Stock Exchange’s PrimaryMarkets Group

Chairman of:
Bioquell Plc
Deltex Medical Group Plc
Syncona Partners LLP(a Wellcome Trust company)

Chairman/Trustee of:
The David Shepherd
Wildlife Foundation
ISIS Innovation Ltd (an Oxford
University company)
Oxford Academic Health
Science Network

Non-Executive Director of:
Cobham plc

Senior management positions within:
Vislink plc
BAE Systems
GEC Marconi
Matra-Space Systems

Kevin holds a BEng in Electronic
and Information Engineering andis a Chartered Engineer, Chartered
Accountant and a Fellow of theInstitute of Chartered Accountants
and the Institution of Engineeringand Technology.

External appointments

Previous experience

Group Finance Director of:
Radstone Technology plc

September 2014
Audit
Remuneration
Nomination

Background

Richard is Cavendish Professor of Physics
and a Fellow of St. John’s College at
the University of Cambridge, a Fellowof the Royal Society and of the Royal
Academy of Engineering and a Foreign
Member of the US National Academyof Engineering.

External appointments

Council member of:
The Engineering and PhysicalSciences Research Council
Non-Executive Director of:
Eight19 Limited
Azuri Technologies Limited

Finance Director of:
Siroyan Ltd
Senior finance positions within:
TI Group (now Smiths Group plc)

Previous experience
Chairman of:
Laird PLC
Axis-Shield Plc

30

Oxford Instruments plc Report and Financial Statements 2015

GovernanceThomas Geitner

Jennifer Allerton

Susan Johnson-BrettIndependent
Non-Executive Director

Independent
Non-Executive Director

Company Secretary

Appointed to the Board

Appointed to the Board

Appointed to the Board

Committee membership

Committee membership

Committee membership

Background

Background

Background

Jock Lennox
Senior Independent
Non-Executive Director

April 2009

Audit, Chairman
Remuneration
Nomination

Jock holds a law degree from
Edinburgh University and is qualified
as a Chartered Accountant with theInstitute of Chartered Accountantsof Scotland.

January 2013

Remuneration, Chairman
Audit
Nomination

Thomas has extensive international
experience in the technology andengineering sectors, having spentover 30 years in businesses operating
across the globe.

External appointments

External appointments

Non-Executive Director of:
Dixons Retail plc
EnQuest PLC
Hill & Smith Holdings PLC
A&J Mucklow Group PLC

Non-Executive Director of:Supervisory Board of Haniel&Cie
GmbH Duisburg

Chairman of:
Tall Ships Youth TrustPrevious experience

Senior Audit Partner at:
EY (formerly Ernst & Young)

Chairman of:
Bibliotheca RFID Library Systems
AG Switzerland

Previous experience

Non-Executive Director of:
BBC Worldwide Ltd
Singulus Technologies AG
Supervisory Board of Constantia
Flexibles GmbH Vienna
Executive Director of:Vodafone Group Plc
Henkel AG & Co. KGaA
RWE AG

June 2013

Audit
Remuneration
Nomination

Jennifer holds a BSc from Imperial
College and an MSc from the
University of Manitoba, Canada.
She is a Cost and Management
Accountant. She has extensive
international experience beginning her
career with Unilever and has worked
in the UK, Brazil, the US, Switzerland,
Canada, Italy and Asia.

Committee membership
Secretary to:
Audit
Remuneration
Nomination

BackgroundSusan holds a BA from the Universityof Keele and has previously worked
in the Secretariats of St Modwen
Properties plc and Hydro Agri
(UK) Limited.

External appointments
Non-Executive Director of:
AVEVA Group PLC
Iron Mountain Inc
Sandvik AB

Previous experience

Chief information Officer at:
F.Hoffmann-La Roche, Pharma
Division, Switzerland
Technology Director of:
Barclaycard
Chief Operating Officer of:ServiceNet, USA
Chief Information Officer of;
BOC (now Linde)

Report and Financial Statements 2015 Oxford Instruments plc

31

Report of the Directors

The Directors present their Report and the Financial
Statements of Oxford Instruments plc for the year
ended 31 March 2015.
Principal activity and business reviews
The Company is the ultimate holding company of a groupof subsidiary undertakings (“the Group”) engaged in the
research, development, manufacture, sale and service of hightechnology tools and systems. The Company is required to
set out in this report a true and fair view of the business of
the Group during the financial year ended 31 March 2015,
the position of the Group at the end of the financial year
and a description of the principal risks and uncertainties
facing the Group. The information which fulfils theserequirements includes a business and financial review
on pages 5 to 23 and Corporate Responsibility Review
on pages 24 to 29, which are incorporated in this reportby reference. The Business Review, the Strategic Review,the research and development activities and likely future
prospects of the Group are reviewed in the Strategic
Report on pages 1 to 23.
Results and dividends
The results for the year are shown in the Consolidated
Statement of Income on page 78. The Directors recommend
a final dividend of 9.3p per ordinary share, which together
with the interim dividend of 3.7p per ordinary share makes
a total of 13.0p per ordinary share for the year (2014: 12.4p).
Subject to Shareholder approval, the final dividend will
be paid on 22 October 2015 to Shareholders registeredat close of business on 25 September 2015.
Risks and uncertainties
The Board exercises proper and appropriate corporate
governance for the Group. It ensures that there are
effective systems of internal controls in place to manage
Shareholders’ interests and the Group’s assets, including
the assessment and the management of the risks to which
the businesses are exposed, and to monitor and manage
the compliance with all the legal requirements that affect
the Group’s worldwide business activities. However, such
systems are designed to manage rather than eliminate
the risk of failure to achieve business objectives and canprovide only reasonable and not absolute assurance
against material misstatement or loss.
The Executive Directors report to the Board on changes
in the business and in the external environment which
may affect the risks which the Group faces. The Executive
Directors also provide the Board with monthly financial
information. Key performance indicators are reviewed
by the Board quarterly.

Directors
Biographies of all the Directors at the date of this report,
including the Non-Executive Directors, appear on pages 30 and
31. During the year, Professor Richard Friend was appointed
as Non-Executive Director on 1 September 2014 and at theconclusion of the AGM held on 9 September 2014 Professor
Mike Brady retired as a Non-Executive Director.
Directors’ conflicts of interest
With effect from 1 October 2008, the Companies Act 2006
allows Directors of public companies to authorise conflicts
and potential conflicts of interest, where appropriate. Only
Directors with no interest in the matter under consideration
may participate in the relevant decision and in doing sothey must act in a way which they consider in good faithwill be most likely to promote the Company’s success.
A conflicts policy has been drawn up and a registerof conflicts and potential conflicts is maintained.
Directors’ interests
The beneficial interests of the Directors in the Company’s
share capital, all in fully paid up shares at 31 March 2015,
are shown below.
Details of share options for the Executive Directors are shownin the Directors’ Remuneration Report on pages 48 to 66.

Jennifer Allerton
Kevin Boyd
Jonathan Flint
Richard Friend
Thomas Geitner
Nigel Keen
Jock Lennox

2015
Shares

2014
Shares1,000
93,975
206,167——
126,580
3,500

1,000
91,611205,803——
126,580
3,500

No Director was beneficially interested in the sharesof any subsidiary company at any time during the year.
In the year to 31 March 2015 no Director had a materialinterest in any contract of significance with the Company
or any of its subsidiaries other than as described in the
Directors’ Remuneration Report on page 48. Since theyear end, there have been no changes to the above
shareholdings apart from for Jonathan Flint, together
with his wife, and Kevin Boyd, who participate in the
Oxford Instruments Share Incentive Plan and since
the year end have each increased their beneficial
shareholding by 61 and 46 shares respectively.

There are a number of risks and uncertainties which may
have a material effect on the Oxford Instruments Group.
These are described in Principal Risks and Uncertainties
on pages 14 and 15.

32

Oxford Instruments plc | Report and Financial Statements 2015

Insurance cover and Directors’ indemnities
For a number of years the Group has purchased insurance
to cover its Directors and Officers against their costs indefending themselves in legal proceedings taken againstthem in that capacity and in respect of damages resulting
from the unsuccessful defence of any proceedings. In
addition, to the extent permitted by UK law, the Group
indemnifies its Directors and Officers for liabilities arisingfrom such proceedings.

Share capital
The Company only has one class of share capital which
comprises ordinary shares of 5p each. All shares forming
part of the ordinary share capital have the same rights
and carry one vote each. There are no unusual restrictions
on the transfer of a share. The full rights and obligations
attaching to the Company’s ordinary shares, as well as
the powers of the Directors, are set out in the Company’s
Articles of Association, a copy of which is available on
the Company’s website. These can also be obtained from
Companies House or by writing to the Company Secretary.
During the year to 31 March 2015 the issued sharecapital was increased by 0.1% with the issue of 40,501
ordinary shares (2014: 334,005) following the exercise
of options under the Company’s share option schemes.

At this year’s Annual General Meeting (AGM), the Directors
propose to:Governance

Neither the insurance nor the indemnity provides coverfor situations where the Director has acted fraudulently
or dishonestly.

At 31 March 2015, the issued share capital of the Company
was therefore 57,291,336 ordinary shares of 5p each.
In connection with the Company’s equity incentive plans,a separately administered trust held 183,145 ordinary sharesat 31 March 2015 (representing 0.3% of the total issued
share capital of the Company). No shares in the Company
were acquired by the Company during the year (2014: nil).
Details of the share capital and options outstanding as at
31 March 2015 are set out in Notes 11 and 21 respectivelyof the Financial Statements.

a)	renew the authority granted to them at last year’s AGM
to allot ordinary shares up to an aggregate nominal
value of one-third of the Company’s issued sharecapital and, where full pre-emption rights are applied,
up to an aggregate nominal value of two-thirds of theCompany’s issued share capital;b)	allot ordinary shares up to an aggregate nominal value
of 5% of the Company’s issued share capital without
first offering them to existing Shareholders; andc)	buy back up to 10% of the Company’s issued
share capital.
Shareholders will be requested to renew these authorities
at the AGM and details of these resolutions are set out inthe notice of the meeting.

Substantial shareholdings
The following are beneficial interests of 3% or more (where the holding is direct) or of 5% or more (where theholding is indirect) of which the Directors have been notified in accordance with Chapter 5 of the Disclosure andTransparency Rules, of the Company’s issued ordinary share capital, the only class of voting capital, at 2 June 2015:

Aberdeen Asset Managers Limited
Ameriprise Financial
Sir MF and Lady KA Wood
Mondrian Investment Partners Limited
Allianz Global Investors GmbH
Baillie Gifford & Co

Report and Financial Statements 2015 | Oxford Instruments plc

Direct/indirect

Shares
000

% of
total

Indirect
Indirect/direct
DirectIndirect
DirectIndirect5,902,349
4,983,663
3,105,530
3,068,362
2,923,663
2,917,516

10.3
8.7
5.4
5.4
5.1
5.1

33

Report of the Directors continued

Payment of suppliers

Change of control arrangements

The Group does not follow a standard payment practice
but agrees terms and conditions for its business transactions
with each of its suppliers. Payment is then made in accordancewith these terms. At 31 March 2015 trade creditors of theCompany and the Group’s UK subsidiaries were equivalent
to 22 days (2014: 32) and 66 days (2014: 72) of purchases
respectively, based on the amounts invoiced by suppliers
during the year and the amounts owed to trade creditors
at the end of the year.

There are a number of agreements that take effect, alteror terminate upon a change of control of the Company
following a takeover, such as banking agreements andcompany share plans. On a change of control, the Company’scommitted credit facilities may be cancelled by lenders bygiving not less than three days’ notice. It is also possiblethat pension plan funding arrangements would need
to be changed following a change of control if that
resulted in a weakening of the employer covenant.

Charitable donations

Corporate governanceDuring the year, the Group made charitable donationsof £1,575 (2014: £2,596). There have been no political
donations during the year.

The Board reviews its work on corporate governancein the Corporate Governance section on pages 35 to 42.
Financial risk management

Fixed assets
Whilst the market value of some fixed assets may differ
from book value, the Directors believe that the differences
are not material.

Details of the Group’s financial risk management objectives
and policies, including the exposure to price, credit and liquidity
risk are set out in Note 19 to the Financial Statements.
Diversity and inclusion

Disclosure of information to auditor
Pursuant to Section 418(2) of the Companies Act 2006
the Directors who held office at the date of approvalof this Directors’ Report confirm that, so far as they areeach aware, there is no relevant audit information of which
the Company’s auditor is unaware; and each Director hastaken all the steps that he or she might reasonably havebeen expected to have taken as a Director to makehimself or herself aware of any relevant audit informationand to establish that the Company’s auditor is awareof that information.
Annual General Meeting
The Notice of the AGM to be held on 8 September 2015is set out in a letter to Shareholders together with explanatory
notes relating to the resolutions.
A resolution to re-appoint KPMG LLP as auditor andto authorise the Directors to set its remuneration will
be proposed at the AGM.

The Board recognises that its employees are fundamental
to the Group’s success. The Group’s aim is to ensure there
are equal opportunities for all employees and that there
is an inclusive culture where differences are valued andpeople are given the environment in which they can dotheir best work. The Corporate Responsibility Review on
page 24 further describes how diversity and inclusion
is managed within Oxford Instruments.
Greenhouse gas emissions
To meet the requirements of the Companies Act 2006
(strategic and Directors’ Report) Regulations 2013 CO2emissions are reported on as part of our reporting on
greenhouse gas emissions in the Corporate Responsibility
Review on page 24.
Material events
There were no material events since 31 March 2015
to report other than the acquisition of Medical Imaging
Resources Inc and the joint venture with GD Intressenter
AB involving Omicron NanoTechnology GmbH as reported
in Note 31.
By order of the Board

Susan Johnson-BrettCompany Secretary
9 June 2015

34

Oxford Instruments plc | Report and Financial Statements 2015

Corporate Governance

Board of Directors and management structure
The Board is committed to ensuring thathigh standards of corporate governanceare maintained by the Group.
The Board endorses the main and supporting principles
and the provisions set out in the UK Corporate
Governance Code (“the Governance Code”).

Board constitution
In late 2010 the Nomination Committee reviewed its Board
Development programme and put in place a multi-yearplan to allow for an orderly refreshing of its Non-Executive
Directors over this extended period. This programme isunder annual review. The Board Development programme
ensures that the constitution of the Board is compliant
with the Governance Code.
In line with the programme, Professor Sir Richard Friend
joined the Board as an Independent Non-Executive Director
in September 2014 and Professor Mike Brady stepped
down from the Board at last year’s AGM.
Resolutions for the election of Directors will be put toShareholders at the Company’s forthcoming AGM. This willcontinue to deliver a Board that meets the requirementsof Provision B.1.2 of the Governance Code.
Compliance
The Board considers that, throughout the period underreview, the Group has complied with the provisions
recommended in the UK Corporate Governance Code.
Preservation of value
The basis on which the Group generates and preserves
value over the longer term and the strategy for delivering
the objectives of the Group are to be found in theStrategic Report.

The Board currently comprises the Chairman, four
Non-Executive Directors and two Executive Directors.
The Directors’ biographies and details of length of service
are shown on pages 30 and 31. All the Directors have written
letters of appointment that have been approved by the
Board and which are available for inspection at theCompany’s AGM.

 ead more in theR
Strategic Report
Turn to pages
11 to 13

The Chairman is responsible for leadership of the Boardand ensuring its effectiveness on all aspects of its role.
The division of responsibilities between the role of
Chairman and the Chief Executive has been set out
in writing and agreed by the Board.

Governance

The Board’s policies and procedures are documented
in the Board Reference File that sets out the rolesand delegated authorities applying to the Directors,
the Board and the Board Committees. The Board
Reference File is reviewed annually by the Board aspart of the annual governance review undertakenby the Chairman.

Board of Directors

The Board has delegated Group responsibility for the
management of health, safety and the environment
to Jonathan Flint and he reports to the Board on thesematters at each meeting.
Board members’ length of service
Nigel Keen

16 years

Jonathan Flint

10 years

Kevin Boyd

9 years

Jock Lennox

6 years

Thomas Geitner

2 years

Jennifer Allerton

2 years

Richard Friend

1 yearManagement Board
The Board delegates management of the business to
the Chief Executive. To assist in this, the Chief Executive
has created a Management Board that consists of the
Executive Directors, senior managers with Group-wide
functional responsibilities, and the heads of the principal
businesses of the Group’s activities.
The Management Board meets monthly either physicallyor by video or telephone conference and focuses onGroup-wide performance, strategy and risk management.

Changes in the Board
Joined the Board
Richard Friend	Independent Non-Executive Director
Joined: 1 September 2014

Report and Financial Statements 2015 | Oxford Instruments plc

Retired from the Board
Mike Brady
Non-Executive Director
Retired: 9 September 201435

Corporate Governance continued

Board of Directors and management structure
continued
Operation of the Board
The Board is responsible to Shareholders for delivering
sustainable incremental Shareholder value throughentrepreneurial leadership within a framework of controls
for managing risk. The Board sets the Group’s strategy,
maintains the policy and decision making frameworkin which this strategy is implemented, verifies that thenecessary financial and human resources are in place
to meet strategic aims, monitors performance against
key financial and non-financial indicators, oversees thesystem of risk management and sets values and standards
in governance matters.
The details of the way the Board operates, including
a schedule of matters reserved to the Board for decision,
are set out in the Board Reference File.
The Board retains control over strategy, investments
and capital expenditure, and limits the decisions which
can be taken by management in the areas of strategic
and financial management and reporting, capital structure,corporate actions, mergers and acquisitions, major contracts
and other commitments, litigation and regulatory proceedings,
remuneration and share incentive plans.
Where the Board delegates authority to management
it is on a structured basis, which requires that proper
management oversight exists at the appropriate level.

Board meetings involve reviews of financial and businessperformance against the plan approved by the Board.
Risk management review, both at Group level andalso for each of the business units, is embedded in thereporting system. On a rotating basis, the Board receives
presentations from the business units and key functional
areas enabling it to explore specific issues in more detail.
Any matter requiring a decision by the Board will be supported
by a pre-circulated paper analysing all relevant aspectsof the proposal and recommending a course of action.
Board papers are distributed in advance of the relevant
meeting in sufficient time to allow the Directors to prepare
for meetings. Minutes of Committee meetings are circulated
to the relevant Directors. In the very few instances whena Director has not been able to attend Board or Committee
meetings, his comments on the papers to be consideredat the meeting are communicated in advance to therelevant Chairman.
The Non-Executive Directors meet without the Executive
Directors at least annually, with the Chairman leadingthese meetings. The Non-Executive Directors also meet
annually without the Chairman in attendance. The Senior
Independent Director chairs these meetings.
The Company Secretary and the Company Secretary’s Office
are responsible for implementing Board procedures and foradvising the Board on corporate governance matters.

The Board meets on a regular basis, at least nine times
a year, and otherwise as required. Of the nine regularmeetings, typically six are held at Group locations andthe remaining three are held by telephone conference.
Other Board meetings are held on an as needed basis.
The Board also held two off-site meetings specifically to
discuss the Company’s strategic direction during the year.

36

Oxford Instruments plc | Report and Financial Statements 2015

Board balance and independence
The Governance Code requires the Board should
be of sufficient size that the balance of skills andexperience is appropriate for the requirementsof the business and that there is a balance of
Executive and Non-Executive Directors such thatno individual or small group of individuals candominate the Board’s decision making. The
composition of the Board and the combinationof diverse backgrounds and expertise of the
Non-Executive Directors meet these principles.

Jennifer Allerton was appointed to the Board as an
Independent Non-Executive Director on 11 June 2013.
Jennifer is a graduate of Imperial College, London andhas a masters degree in physics from the Universityof Manitoba and is a chartered engineer.

Nigel Keen, Chairman, has been a member ofthe Board since February 1999. He has a degree inengineering from Cambridge University, is a Fellowof the Institute of Chartered Accountants and of theInstitute of Engineering and Technology and has been
involved in the formation and development of hightechnology businesses for more than 30 years. He
fulfilled the independence criteria at the time of his
appointment as set out in the Governance Code.
Nigel Keen also serves as Chairman of Oxford Instruments
Pension Trustee Limited, the Trustee of the Company’s
UK defined benefit pension scheme.

Thomas Geitner was appointed to the Board as an
Independent Non-Executive Director on 15 January 2013.
He is a graduate of the Technische Universität München
and holds an INSEAD MBA.

He is Chairman of the Nomination Committee
and a member of the Remuneration Committee.
Richard Friend was appointed to the Board as an
Independent Non-Executive Director on 1 September 2014.
Richard is a Fellow of the Royal Society and Fellow of
the Royal Academy of Engineering and he is Cavendish
Professor of Physics and a Fellow of St. John’s College
at the University of Cambridge.
His research encompasses the physics, materials scienceand engineering of semiconductor devices made withcarbon-based semiconductors. His research advances
have shown that these materials have significant
applications in LEDs, solar cells, lasers, and electronics.
He was knighted for “services to physics” in the
Queen’s Birthday Honours List in 2003. He has also
been directly involved in the commercialisation oftechnology through several spin-out companies
from the University of Cambridge.

Jennifer is a member of the Audit and Risk,
Remuneration and Nomination Committees.
Governance

The Board of the Company and the Board of the Trustee
to the Pension Scheme have each independently
considered whether it is appropriate to have the
Chairman of the Company as Chairman to the Boardof the Trustee of the Pension Scheme, notwithstanding
the potential conflicts of interest inherent in the same
person holding both these positions, and they eachhave unanimously confirmed that they believe that
it is in the interest of all parties for this to continue.

She has extensive international business experience
which strengthens the skills and expertise of the Board.

Thomas has extensive international experience inthe technology and engineering sectors, having spent
more than 30 years in businesses operating across theglobe. Having worked in a number of global companies
he understands the importance of remuneration
connecting with strategy to appropriately incentivise
the Executive team.
The Board believes that his skills, experience andknowledge make Thomas well suited to chair theRemuneration Committee. Thomas is also a memberof the Audit and Risk and Nomination Committees.
Jock Lennox was appointed to the Board as an
Independent Non-Executive Director on 1 April 2009and has been Senior Independent Director since 2013.
Prior to that he was a Senior Audit Partner at EY where
he gained extensive experience advising clients in avariety of industries on financial reporting, financing,transactions and international expansion.
The Board believes that Jock’s skills, experience andknowledge enhance and maintain an effective Boardand provide a well qualified Chairman of the Audit andRisk Committee. Jock is Chairman of the Audit and Risk
Committee and is a member of the Remuneration and
Nomination Committees.
Independence of Non-Executive Directors
In the opinion of the Board, Jock Lennox, Thomas Geitner,
Jennifer Allerton and Richard Friend are independent.
The Board considers that they are each independent incharacter and judgement and do not have relationships
which are likely to affect their judgement. This opinion
is based on current participation and performanceon both the Board and Board Committees including
consideration of the length of service at
Oxford Instruments plc.

Richard is a member of the Audit and Risk,
Remuneration and Nomination Committees.

Report and Financial Statements 2015 | Oxford Instruments plc

37Corporate Governance continued

Board balance and independence continued
Term of appointment of Non-Executive Directors
Each Non-Executive Director was appointed for an
initial term of three years. In line with provision B.7.1
of the Governance Code, the Board has determinedthat all Directors of the Board are to be subject toannual re-election by Shareholders and accordingly
the appropriate resolutions will be put to Shareholders
at the Company’s forthcoming AGM.

Composition of the Board:
Independent vs. non-independent

67%*

Independent membersof the Board
Independent (4)Non-independent (2)* In line with the Governance Codethe Chairman is excluded from these numbers.

Board development and evaluation
Board development

Board evaluation

On appointment, Directors undertake an induction process
which is designed to develop knowledge and understandingof the Group’s businesses through visits to various Group
operating sites, discussion of relevant technology, as wellas product demonstrations, briefings from management
and familiarisation with investor perceptions of the Group.
This induction is supported by briefing papers prepared by
the Company Secretary.

In light of the provisions of Section B.6.2 of the Governance
Code which expects that an externally facilitated evaluationof the Board be carried out at least triennially, Colin Mayer,
the Peter Moores Professor of Management Studies at
Said Business School, University of Oxford, and a Board
Member of the European Corporate Governance Institute,carried out a thorough review of the way the Board operates.
In particular, he considered the barriers inherent within
the Company to it meeting its aspirations for growth.
To facilitate his work, Professor Mayer reviewed Board
and Company papers, attended Board and committee
meetings, consulted with the Board and other membersof senior management, employees and external stakeholders
including institutional investors, legal counsel and bankers.
He formally presented the result of his review to the Board.
Professor Mayer determined that Oxford Instruments iswell governed, well run and a successful company that
comfortably fulfils the requirements of the Governance Codein terms of the structure and conduct of its governance.
The formal governance and procedures are significantly better
than in most companies of a similar size. Professor Mayersuggested a number of areas in which the Company’s
governance could be strengthened with a view to promoting
its development from a successful medium-sized firm
to a truly global company of international significance.

The operating business units’ senior management teams
present to the Board on a regular basis. Non-Executive
Directors are encouraged to meet individual membersof the senior management team and have done soduring the year under review.
Throughout the year, Non-Executive Directors attend Oxford
Instruments’ events, exhibitions and award presentations.
The Company Secretary and her office act as advisers to
the Board on matters concerning governance and ensurecompliance with Board procedures. All Directors have accessto this advice and a procedure also exists for Directors totake independent professional advice at the Group’s expense.
No such advice was sought during the year. The appointment
and removal of the Company Secretary are matters for the
Board as a whole.

38

Oxford Instruments plc | Report and Financial Statements 2015

Attendance at meetings
No one other than the Committee Chairman and members is entitled to be present at a meeting of the Audit and Risk,
Nomination or Remuneration Committee, but others may attend by invitation of the Committee. No Director votes onmatters where he has a conflict of interest. Further details of the individual Committees’ activities are described below.
The following table sets out the frequency of, and attendance at, Board and principal Board Committee meetings
for the year to 31 March 2015:
Audit and Risk
Committee

Remuneration
Committee

Nomination
Committee

Number of meetings held

11

7

7

3

Nigel Keen
Jonathan Flint
Kevin Boyd
Mike Brady²
Jock Lennox

11
11
11
4
11

7¹
7¹
7¹
4¹
7

7
4¹
1¹
4¹
7

3
3¹
3¹
3

Thomas Geitner
Jennifer Allerton
Richard Friend³

11
11
8

7
7
4

7
7
3

Governance

Main
Board

3
3
3
—

Note:
1 Attended by invitation.
2 Mike Brady resigned on 9 September 2014.
3 Richard Friend was appointed to the Board on 1 September 2014.

Board committees
The Board has formed the following Committees: Audit
and Risk, Nomination, Remuneration, and Administration.
Membership of Board Committees, which is set out on
pages 30 and 31, is determined by the Board and is reviewed
regularly. The written terms of reference of the Board
Committees are reviewed annually by each Committee
and the Board and are available on the Company’s website
at www.oxford-instruments.com/investors and from theCompany on request. They will be on display at the AGM.
Nomination Committee
The Nomination Committee comprises all the
Non-Executive Directors, under the chairmanship of
the Chairman of the Board. The Nomination Committee
is responsible for assisting the Board in the formal selection
and appointment of Directors and considers succession
planning for the Board. It considers potential candidates
and recommends appointments of new Directors to theBoard. The appointments are based on merit and against
objective criteria including time available and the commitmentthat will be required of the potential Director.
There is a formal, rigorous and transparent procedure forthe appointment of new Non-Executive Directors to theBoard, the prime responsibility for which is delegated to
the Nomination Committee. Each appointment process
begins with an evaluation of the balance of skills, knowledge
and experience existing on the Board that is effected througha series of one-on-one meetings between the Committee
Chairman and Directors. The Nomination Committee takes
external advice when considered appropriate.

Report and Financial Statements 2015 | Oxford Instruments plc

During the year, a sub-committee, established by the
Nomination Committee to evaluate the balance of skills,
knowledge and experience on the Board and to identify
appropriate candidates for Non-Executive Director positions
on the Board, has continued its work. Accordingly, using
information it has gathered, taking into account bothdiversity within the Board and the balance of skills on the
Board, it has drawn up descriptions of the role and desired
capabilities for candidates to help in the search of new
Non-Executive Directors. With the help of executive search
consultants Korn/Ferry, the Committee developed shortlistsof qualifying candidates. Candidates met with the Chairman
and the Deputy Chairman and a final selection of potential
appointees met several Directors individually. Following thesemeetings, the Nomination Committee considered each
Director’s feedback and made a final recommendation
to the Board concerning any further appointment.
Following this process, the Committee has during the year
recommended the appointment of Professor Sir Richard Friend
to the Board as an Independent Non-Executive Director witha strong scientific background. His appointment to theBoard commenced 1 September 2014.
The Nomination Committee, taking into account theperformance of each individual, has considered whether
each of the Non-Executive Director’s appointments should
be renewed and has confirmed that they should.
The Nomination Committee has also carried out its annual
review of the performance of the Chief Executive andsuccession planning within the business.

39

Corporate Governance continued

Board committees continued
Remuneration Committee
The Remuneration Committee comprises all the Independent
Non-Executive Directors and the Chairman of the Board.
Thomas Geitner is the Chairman of the Committee.
The Board considers that Thomas, with his experienceof working at senior levels in global companies, including
high technology companies, has an appropriate blend ofskills to make a successful Chairman of the Remuneration
Committee. The members of the Committee areappointed by the Board.
The Remuneration Committee is responsible forrecommending to the Board the remuneration packages
for Executive Directors and the bonus and share option
strategy for the Group’s executive management.
Independent professional advice is sought when considerednecessary. The Chairman and the Executive Directors are
responsible for fixing the remuneration of the Non-Executive
Directors and the Remuneration Committee is responsible
for fixing the remuneration of the Chairman. No Director isinvolved in the process that sets his/her own remuneration.
The Chief Executive is invited to attend Remuneration
Committee meetings as deemed appropriate, for example
when consideration is being given to the performance ofother Executive Directors and on significant Group-widechanges in salary structure and terms and conditions
affecting other employees at senior executive level.
Audit and Risk Committee
During the year the Audit Committee was re-designatedas the Audit and Risk Committee and the remit of theCommittee was enlarged to include review of certainof the non-financial risks to which the Group is exposed
which had previously been monitored by the Board itself.
The objective of this change is to allow the Board to havemore time to focus on strategic matters important to theGroup. The Audit and Risk Committee comprises all the
Independent Non-Executive Directors and its Chairman
is Jock Lennox. Other members of the Board, senior
management and the external auditor are invited to attend
all or part of any meetings. The Board has determined that,as a Chartered Accountant and former senior audit partner
at EY, Jock Lennox is the designated financial expert.

40

The Audit and Risk Committee’s main responsibilities arefocused on financial reporting, external audit, internal
audit, internal controls and risk management.
Full details of the operation and the work of the Audit
and Risk Committee are included in the Audit and Risk
Committee Report set out on pages 43 to 47.
Administration Committee
The Administration Committee consists of a minimumof two Directors and deals with items of a routine andadministrative nature. The Board receives a summary
outlining all matters decided by the Administrative
Committee since the previous Board meeting.
Annual General Meeting
The AGM is an opportunity for the Board to meet
Shareholders. At its AGM, the Group complies withthe provisions of the Governance Code relating to thedisclosure of proxy votes, the separation of resolutions
and the attendance of Committee Chairmen. The Grouparranges for the Annual Reports and Financial Statements
and related papers to be posted on its website and, where
Shareholders have elected to receive paper copies, posted
to Shareholders so as to allow at least 20 working days
for consideration prior to the AGM. The next AGM will
be held on 8 September 2015 at the Group’s offices
in Tubney Woods, Oxfordshire.
Investor relations
The Group places considerable importance on regularcommunications with its Shareholders with whom it has
an ongoing programme of dialogue. All Shareholders
are encouraged to participate in the AGM at which the
Chairman and Chief Executive present an overview of
the Group’s business and review the results and makecomments on strategy and current business activity.
The Non-Executive Directors meet informally with Shareholders
both before and after the AGM and respond to Shareholder
queries and requests. The Chairman and the Senior
Independent Director make themselves available tomeet Shareholders, as required.
All Group announcements are posted on the Group website,www.oxford-instruments.com/investors, as soon as they
are released. The Investor Relations section of the website
provides financial and other information on the Groupand the website itself carries additional information on
the Group’s products, services and markets.

Oxford Instruments plc | Report and Financial Statements 2015

Risk management
Within the Group there is an ongoing embedded process
for identifying, evaluating and managing the significant
risks faced by the Group. Day-to-day management of thisprocess has been delegated by the Board to the Executive
Directors. Detail of the process is set out in the Audit andRisk Committee Report on pages 43 to 47. This process
has been in place for the year under review and up to
the date of approval of the Annual Report and Financial
Statements. It is regularly reviewed by the Board of
Directors and accords with the Turnbull principles.

In addition, the Board considers risks to the Group’s
strategic objectives which are not addressed within theGroup’s businesses and develops appropriate actions
to manage and mitigate these risks.
Internal audit and assurance
The Group’s Internal Audit function has responsibility forindependently assessing the adequacy and effectivenessof the management of significant risk areas and acts asa third line of defence behind operational management’s
front line and own assurance activities. Further detailsof this are set out in the Audit and Risk Committee
Report on pages 43 to 47.
Internal control
The Board has accountability for reviewing and approving
the adequacy and effectiveness of internal controls operated
by the Group, including financial, operational and compliance
controls and risk management. The management of eachbusiness is responsible for risk management and control
within their business and, through the Management
Board, implementing Board policies on risk and control.

Report and Financial Statements 2015 | Oxford Instruments plc

Read more aboutprincipal risks
and uncertainties
Turn to pages
14 and 15

Control activities include policies and practices covering
appropriate authorisation and approval of transactions,the application of financial reporting standards and reviewsof significant judgements and financial performance.
Financial, regulatory and operational controls, procedures
and risk activities across the Group are reviewed by theGroup’s assurance function.

Governance

Details of all major risks identified and the mitigating
actions in place are reported to and reviewed by the Board.
The Principal Risks and Uncertainties section (pages 14 and15) gives an overview of the major risks and uncertainties
faced by the Group. A standard process is in place throughout
the Group that requires the senior management of eachbusiness to identify significant business risks and to classify
them both as to probability and potential impact. Once
identified, mitigating action, where possible, is formulated
and responsibility within the management team assigned.
On a regular basis each business reviews and updates its
risk summary which is then reported to the Chief Executive.
If a material risk changes or arises, the Managing Directorof the business reports this in writing to the Chief Executive
at which time there is a discussion on the adequacy of the
mitigating actions taken.

The internal control framework includes central direction,
oversight and risk management of the key activities within
the Group. As part of this framework there is a financial
planning process which includes a three year planningmodel and the preparation of an annual budget approvedby the Board. The results of the business units are reported
monthly and compared with the budget. Forecasts arealso prepared monthly.

The internal control framework complies with the Turnbull
guidance and has been designed to manage rather thaneliminate material risks to the achievement of strategic andbusiness objectives and can provide only reasonable, andnot absolute, assurance against material misstatement orloss. Because of inherent limitations, internal controls overfinancial reporting may not prevent or detect all misstatements.
There has been no material change to the Group’s internal
control framework during the period covered by thisAnnual Report.
The key components designed to provide effective internal
control within the Group are as follows:• there is a formal schedule of matters reserved to theBoard for decision; other than these matters, the Board
delegates to the Chief Executive and reviews the delegationof authorities throughout the management structure;• the Group’s management structure is headed upby the Management Board. Its membership comprises
the Executive Directors, senior managers with Group-wide
functional responsibilities and the heads of the principal
businesses of the Group’s activities. Day-to-day responsibility
for the management of the Group is delegated to theManagement Board. The responsibility is based on theidentification of separate businesses for each of the Group’s
activities for which there are clearly defined lines ofmanagement responsibilities at all levels up to andincluding the Group Board and the Group’s accounting
and reporting functions reflect this organisation;

41

Corporate Governance continued

Internal control continued• financial executives within Group businesses reportto their own operational head but there is also a wellestablished and acknowledged functional reporting
relationship through to the Group Finance Director;• the Board reviews strategic issues and options formallyonce a year during the annual strategic planning process
and during the year as appropriate. In addition the
Executive Directors maintain a five year planningmodel of the Group and its individual businesses;• annual budgets are prepared for each of the Group’sbusinesses which include monthly figures for turnover,profit, capital expenditure, cash flow and borrowings.
The budgets are reviewed through the Group management
structure and result in a Group financial budget whichis considered and approved by the Board;• the businesses prepare monthly management accounts
which compare the actual operating result with boththe budget and the prior year. The businesses also
prepare rolling reforecasts for orders, turnover, operating
profit and cash. Both are reviewed by the Board monthly;• the Board approves all acquisition and divestment
proposals and there are established procedures for theplanning, approval and monitoring of capital expenditure;• for all major investments the performance of at least
the first 12 months against the original proposal
is reviewed by the Board;• each Group site, except for representative sales offices,
is required to submit a self-assessment internal control
questionnaire annually;• internal audit is carried out through a system of regularreviews of the financial and non-financial internal
controls at each site and this is further reported on in
the Audit and Risk Committee Report on pages 43 to
47. These reviews are coordinated by the Group Audit
and Risk Manager;42• the Board receives regular updates on pensions,
corporate social responsibility, business ethics andhealth and safety and the Audit and Risk Committee
regular updates on treasury, tax, insurance and litigation;• authorisation limits are set at appropriate levels throughout
the Group; compliance with these limits is monitoredby the Group Finance Director and the Group Audit
and Risk Manager;• all requests to quote for substantial fixed price contracts
are reviewed by the Chief Executive and/or the Group
Finance Director to assess both technical and financial
risk and to fix an appropriate balance between risk
and reward. However, no procedure can guarantee
the avoidance of losses on fixed price contracts
of a technical nature; and• with respect to the UK pension scheme, the Groupnominates half of the trustee directors of the corporate
trustee to the pension scheme, involves as necessary
its own independent actuary with whom actuarial
assumptions are reviewed, agrees the investment policy
with the trustee, works with the trustee on its investment
sub-committee to deal with day-to-day investment
matters and to act as a co-ordinator between theinvestment advisers, investment managers and thetrustee, ensures there is an independent actuarial
valuation every three years and agrees funding levels
to provide adequate funding to meet the benefit
payments of the members as they fall due.

Susan Johnson-BrettCompany Secretary
9 June 2015

Oxford Instruments plc | Report and Financial Statements 2015

Audit and Risk Committee Report

Jock Lennox, Audit and Risk Committee Chairman

Governance

Composition of the Audit and Risk Committee
ChairmanMembers

Jock Lennox

Jennifer Allerton
Richard Friend
Thomas Geitner

Dear Shareholder,
During the year, as discussed further on page 38,
Professor Colin Mayer undertook an external reviewof the workings of the Board and its Committees.
One of his recommendations was to extend the briefof this Committee to include non-financial assurance
thereby reducing the governance burden on the Board.
The recommendation has been adopted and accordingly thisCommittee has been renamed the Audit and Risk Committee.
The scope of the Committee has also been extended toinclude, inter alia, the approval and oversight of Group policies
for insurance, litigation, tax and treasury and the non-financial
assurance audits of human resources, information technology,
operations and new product innovation.
In addition to these internal changes, the Committee has
been mindful of the risk management and other governancechanges which will impact our responsibilities going forward.
Based on these changes and the more significant eventsin the year, the Committee has given particular focus to:• revising the terms of reference to embrace
appropriately the new responsibilities; the updated
terms of reference are on the website;• reviewing the method of oversight of the risk management
process with an eye on the prospective requirementof “monitoring”;• considering the implications of the reduced profit
expectations announced in January 2015 on asset
values, restructuring plans and compliance withdebt covenants;

Report and Financial Statements 2015 | Oxford Instruments plc• receiving presentations from management on
implementation progress on the new ERP system
and IT and cyber security risks; particular attention
being paid to risk mitigation plans; and• visiting Andor Technology as part of the Board visit in
the summer of 2014 where we received a presentationon the control environment, the progress on financial
integration with Oxford Instruments and the plansof the financial management team.
I present our report, which describes the role of the Committee
and the way in which our structured programme of activities
enables us to discharge our responsibilities. The programme
not only supports the key events in the Group’s financial
reporting cycle, but also enables us to monitor theeffectiveness of the internal financial control and risk
management systems and to monitor the activities andperformance of both our internal and external auditors.
Our report also highlights the significant matters that
we dealt with in 2014/15 and how we satisfied ourselvesthat they had been dealt with appropriately.
As the size and complexity of Oxford Instruments continues
to grow we will continue to direct our activities to ensure
the Group’s governance and control mechanisms keep step.
I look forward to seeing you at the AGM. In the meantime
if you have any questions or comments I should be delighted
to be of assistance.

Jock Lennox
Audit and Risk Committee Chairman
9 June 2015

43

Audit and Risk Committee Report continued

Composition

External audit

The members of the Audit and Risk Committee are
Jock Lennox (Chair), Jennifer Allerton, Richard Friend
and Thomas Geitner. The composition of the Committeechanged during the year with the appointment of
Richard Friend to the Board and the Committee in
September 2014. The Chairman of the Board, Chief
Executive, Group Finance Director, Group Audit andRisk Manager and the external auditor, KPMG, are invited
to attend all or part of any meetings at the discretionof the Audit Committee. The Company Secretary acts as
secretary to the Committee. Other relevant people fromthe business are also invited to attend certain meetingsin order to provide a deeper level of insight into key issues
and developments. Each meeting attended by the external
auditor, KPMG, allows time for the Committee to speakwith the external auditor without the presence of theexecutive management.

• Overseeing the relationship with the external auditor.

The Board has determined that, as a Chartered Accountant,
Audit Committee Chairman of certain other public companies
and former senior audit partner of EY, Jock Lennox isdeemed to be independent and have recent and relevant
financial experience.

• Approving an annual programme of internal audit
work (covering financial and non-financial areasof activity) and reviewing the results of such work.

Role
The remit of the Committee is summarised below and isdetailed in full in the terms of reference, a copy of which
can be found on our website at www.oxford-instruments.
com/investors. The main responsibilities of the Committee
are focused on the following five areas:
Financial reporting• Reviewing our financial results announcements
and Financial Statements and monitoring compliancewith relevant statutory and listing requirements.
• Advising the Board on whether the Annual Report and
Financial Statements, taken as a whole, are fair, balanced
and understandable and provide the informationnecessary for Shareholders to assess the Company’s
performance, business model, strategy and risks.

• Monitoring and reviewing auditor independence andobjectivity and evaluating the effectiveness of theaudit process.
• Reviewing and approving the annual audit plan
and audit findings.
• Making recommendations to the Board for theappointment or re-appointment of the external auditor.
• Reviewing and monitoring the non-audit services policy
and the level of non-audit services provided by theexternal auditor.
Internal audit• Monitoring the role, resources and effectivenessof the Group Internal Audit function.

Internal controls and risk management• Monitoring the adequacy and effectivenessof the internal financial control environment.
• Reviewing the operation of the Group’s internal
control and risk management processes.
Business malpractice• Reviewing the Group’s procedures for detecting
fraud and for the prevention of bribery.
• Reviewing the adequacy and security of the Group’s
whistle-blowing arrangements and matters reported
to the whistle-blowing hotline.
The Committee periodically reviews its terms of reference
and its effectiveness and recommends to the Board anychanges required as a result of such review.

• Reviewing and challenging significant financial
reporting judgements and accounting policies
and compliance with accounting standards.

44

Oxford Instruments plc | Report and Financial Statements 2015

Activities of the Audit and Risk Committee in respect of the financial year ended 31 March 2015
The Committee has worked largely to a recurring and structured programme of activities developed from its termsof reference and agreed with the Committee Chair at the start of the financial year. A summary of the items discussed
in each meeting is set out in the table below:
Agenda item

April
2014

June
2014



Review and recommend for approval the half-year
and year end announcements, interim management
and AGM statements and the Annual ReportExternal audit tender process

November
2014










Review and approve the non-audit services policy
Consider the independence and objectivityof external auditor

Agree the internal audit planRe-evaluate the effectiveness of the internal
audit function

Review the risk management process

Discuss the Audit Committee effectiveness survey
and review the Committee composition and termsof reference











Review the internal control framework

Annual review of the whistle-blowing
arrangements

Approve the external audit plan and fee proposal

Review the output of the internal audit work

March
2015



Assess the effectiveness of the external audit process

Review internal management representation letters

January
2015

Governance

Review the integrity of the draft Financial
Statements, appropriateness of accounting policies
and going concern assumption (reports received
from management and KPMG)

July September
2014
2014




In addition to its usual business as described above the Committee met individual business managers in order to gaina deeper insight into areas relevant to the Committee’s work and to provide an opportunity to discuss specific areas ofinterest. These included progress updates on the Group-wide Enterprise Resource Planning (ERP) project, Project Connect,and a presentation on IT security including an overview of the cyber security threat posed to the Group. In addition, as
part of the Group’s regular programme of visiting the businesses, in July 2014 the Committee received a presentationfrom the financial management at Andor on the status of the financial integration with Oxford Instruments and thecontrol environment. These visits afford the opportunity for the Committee to meet the key members of the financial
community beyond the Group team.
Following the publication of the revised version of the UK Corporate Governance Code, the Board requested that theCommittee advise it on whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides
the information necessary for Shareholders to assess the Company’s performance, business model and strategy.

Report and Financial Statements 2015 | Oxford Instruments plc

45

Audit and Risk Committee Report continued

Significant matters related to the Financial Statements
The Committee reviews all significant issues concerning
the Financial Statements. The principal matters considered
concerning the 2015 Financial Statements were:Impairment of intangible assets
The Group balance sheet contains acquired intangible
assets amounting to £212.3m. These have arisen throughthe acquisitions made by the Group in pursuit of its strategy.
The most significant element relates to Andor at £128.4m.
As explained in Note 15 to the financial statements, thecarrying amounts have been assessed for impairment
and the sensitivity to change in the assumptions has been
considered. The Committee received an analysis frommanagement that considered the need for impairment
and concluded that no impairment is required. The external
auditors have agreed with this conclusion in their report to
the Committee. The Committee is satisfied that the analysis
has been rigorously prepared and that the conclusions areappropriately supported.
Provisions for product warranty and related matters
While the level of provision is relatively small, theCommittee is conscious that as a growing technology
company it is likely that the potential for product claims(for example, relating to product quality or intellectual
property infringement) of various amounts can arise.
Accordingly the Committee has received an analysis frommanagement that considers this area and has received
commentary from the auditor as part of its report.
The Committee recognises that this area does require
judgement and believes the conclusions presented
by management are appropriate.
Revenue recognition
The nature of the commercial relationship with customers
together with the capital nature of certain of the Group’s
sales means that judgement can be required in assessing thetiming of recognition of revenue. This is particularly relevantin the Nanotechnology Tools segment. The Committee
receives commentary from management on the cut-offof revenue and an explanation of any particular sales where
judgement has been required. Whilst there is always anelement of judgement required in determining revenue
to be recognised around the year end, this year theauditor did not report any material audit differencesthat required adjustment.
Adjusted profit and EPS
As explained in Note 2 to the financial statements, theGroup applies adjustments to the statutory definition of
profit and EPS to present adjusted profitability and earnings
as the Board believes they present a clearer picture of thefinancial performance of the Group. In the current year
as a result of the first full year of the amortisation of theacquisition intangible assets connected with Andor andthe impact of the restructuring announced in January at
the time of the announced reduction in profit expectations,the adjustments are significant at £33.8m after tax.

46

The Committee has received a detailed analysis frommanagement to demonstrate that the Group’s definitions
have been consistently applied and that the impact of therestructuring has been reported fairly. The auditor hascommented on these aspects to the Committee. These
items involve careful judgement and the Committee issatisfied that they have been rigorously considered bymanagement and reasonably presented.
Misstatements
Management reported to the Committee that they were
not aware of any material misstatements or immaterial
misstatements made intentionally to achieve a particularpresentation. The auditor reported a schedule of unadjusted
audit differences to the Committee. Following discussion
with management and the auditor, the Committee weresatisfied that the adjustments were not material to thefinancial statements and therefore remained unadjusted.
The Committee concluded that it was satisfied that theauditor had fulfilled its responsibilities with diligence andprofessional scepticism.
After reviewing the presentations and reports frommanagement, and after consulting, where necessary,with the external auditor the Committee was satisfied
that the Financial Statements appropriately addressed thecritical judgements and key estimates (both in respect tothe amounts reported and the disclosures). The Committee
was also satisfied that the significant assumptions used
for determining the value of assets and liabilities, including
the pension commitments of the Group, had been
appropriately scrutinised and challenged.
External auditor
The Committee is responsible for monitoring theperformance, objectivity and independence of the external
auditor, recommending the appointment of the external
auditor to the Board and approval of its fees. At the Committee
meeting in January 2015 the external auditor, KPMG, provided
the Committee with its plan for undertaking the external
audit. This highlighted the proposed approach, scope andplanned materiality of the audit for the coming year andidentified the key risks and areas of audit focus, including
the approach for these areas in detail. The Committee
reviewed and, as appropriate, challenged the basis forthese before agreeing the plan.
The Committee assesses the effectiveness of the audit
process in addressing these matters through the reporting
received from KPMG at the half year and year end andthrough feedback from key stakeholders at all levels
across Oxford Instruments.
As reported last year the external audit was tendered and
KPMG were re-appointed. The new rules for audit tenderingand rotation come into force in June 2016. The Group’s policy
is to conform to these new rules. Under the transitionalarrangements that means KPMG will be replaced as auditor
not later than 31 March 2021. A tender process will bearranged to meet this requirement when appropriate.

Oxford Instruments plc | Report and Financial Statements 2015

Auditor independence
In its assessment of the independence of the auditor theCommittee receives confirmation of any relationships
between the Group and KPMG that may have a bearing
on its independence and receives confirmation that it isindependent of the Group.

Internal audit
Internal Audit plays an important role in assessing theeffectiveness of internal controls. This is achieved throughan audit programme that includes rotational site visits providing
core assurance over the Group’s financial processes andrisk-based reviews to provide assurance that controls overcertain key risks are operating effectively. During the year,
the Group Audit and Risk Manager carried out internal
audit visits at a number of the Group’s sites including visits
to the Group’s federal offices in the US, China and India
and to some of the operating sites at Plasma Technology,
Nanoscience, NanoAnalysis and Industrial Analysis. In addition
time has been spent, together with management, developing
the risk management process and extending the scope of
the Committee’s work to embrace the non-financial areasof assurance.
The Committee has assessed the internal audit plan so thatit provides appropriate coverage over the internal control
environment and provides a balanced overview across theGroup, taking into account the level of risk, other assurance
activities and previous coverage. Reports from the Group
Audit and Risk Manager include updates on audit activities,
progress against the audit plan, and the results of theaudit work and status of any control remediation plans.
The Group Audit and Risk Manager has direct access anda reporting line to the Chairman of the Audit Committee
and meets independently with him during the year. The
Committee monitors the resources and scope of work of
the Internal Audit function to ensure that its development
is commensurate with the increasing scale and complexityof the business.
Internal control and risk management
As we continue to expand and increase our global footprint
it is recognised that the management of risk continues tobe ever more important to the Group achieving its key

Report and Financial Statements 2015 | Oxford Instruments plc

Read more aboutprincipal risks
and uncertainties
Turn to pages
14 and 15

GovernanceTo further safeguard the objectivity and independenceof the external auditor firm becoming compromised, theCommittee has a formal policy governing the engagementof the external auditor to provide non-audit services.
No change to this policy has been made during the year.
All non-audit related engagements over £50,000 require
formal advance approval by the Committee. The detailsof the audit fees for the year, together with fees for
non-audit services, are set out in Note 4 (page 88) to the
Financial Statements. In the year ended 31 March 2015,
audit fees paid to KPMG were £407,000 and non-audit
fees were £60,000. This represents a non-audit to audit
fee ratio of 15%.

strategic plans and objectives. This year the Group has
continued to develop its risk management process to ensurethat the Group continues to effectively identify and respondto the risks it faces. The Group’s risk management process
is underpinned by business risk reports and a reporting
framework that escalates risks to the appropriate stakeholders.
Annually the business risk reports are consolidated into theGroup Risk Register and reviewed by executive management
before being reported to the Board. Towards the end of
the year, the Committee and the Board have considered
what reporting is best addressed by the Committee aspart of its new extended remit of risk.
Internal Audit provides assurance on the risk management
processes as part of its audit work and utilises the outputof the business risk reporting to identify the risk-based
reviews to be included within its audit plan.
The Committee reviewed the system of internal financial
control on behalf of the Board and satisfied itself that theGroup is meeting the required standards both for the year
ended 31 March 2015 and up to the date of approvalof this Annual Report. No concerns were raised with theCommittee in the year about possible improprieties
in matters of financial reporting.
In coming to these conclusions the Committee reviewed
reports from internal audit and external audit on internal
control findings, received in-depth reviews into the control
environment and risk management process, and had regard
for the other assurance activity performed by the Groupfunctional heads over operations, health and safety, researchand development, human resources and IT. The Committee
noted the Group’s move to more detailed policies, theimplementation of minimum financial control standards
and a related programme of self-assessment.
Whistle-blowing
The Group’s Business Malpractice Policy comprises an internal
process that has been communicated directly to all employees
by which employees can raise a concern, including concerns
relating to fraud, bribery and/or corruption, damage to theenvironment, criminal activity or danger to health and safety,
in the knowledge that it will be taken seriously, treatedas confidential and that no action will be taken against
the employee raising the concern. There is also provision
within the policy for employees to raise concerns directlywith the Senior Independent Director. This policy is reviewed
annually by the Committee. No serious matters werereported during the year.
Summary
The Committee has concluded that, as a result of its work
during the year, it has acted in accordance with its termsof reference and fulfilled its responsibilities. The Chairmanof the Committee will be available at the AGM to answer
any questions on the work of the Committee.

47

Remuneration ReportThomas Geitner, Chairman of the Remuneration Committee

Composition of the Remuneration Committee
ChairmanMembers

Thomas Geitner

Jennifer Allerton
Richard Friend
Nigel Keen
Jock Lennox

Dear Shareholder,
On behalf of the Board, I am pleased to present
the Directors’ Remuneration Report for 2014/15.
In accordance with the Directors’ remuneration
reporting regulations our Remuneration Report has
been split into two parts. The Directors’ Remuneration
Policy, which was approved by Shareholders at lastyear’s AGM, sets out our remuneration policy for2014/15 and beyond and, for ease of reference, is
included again in this year’s report. The Annual Report
on Remuneration, which sets out the remuneration
paid to the Executive and Non-Executive Directors
in respect of 2014/15 and how our policy will be
implemented in 2015/16, will be put to an advisory
Shareholder resolution.
Summary of main remuneration policy
decisions during the year
The Remuneration Committee carried out a full remuneration
review in 2013/14 prior to seeking shareholder approval
for its remuneration policy at September 2014’s AGM.
Over 98% of votes cast supported the binding resolution
approving the policy. During the year, the Committee
considered whether the current policy remains appropriate
for 2015/16. It concluded that the policy remains appropriate
and provides a competitive level of pay whilst ensuringthat variable pay remains aligned to shareholder returns.
One of the Committee’s objectives in designing the current
policy was to arrive at a policy that would endure for thethree year policy period and I am pleased to confirm that
we are not proposing changes to the remuneration policy
for 2015/16.

48

Corporate performance and remuneration for 2014/15
As explained in our Operations Review on pages 16 to 19
it has been a testing year for Oxford Instruments. In thefirst half we saw increases in orders and revenues. In thesecond half we encountered a combination of headwindsthat unexpectedly put our short term performanceprojections off course. Three factors were primarily atplay: the sudden tightening of trade sanctions for sales
to Russia; a slower-than-expected recovery in Japanesemarkets; and weaker trading in our Industrial Analysis
business. As a consequence, we reported in January thatthe outcome for the year would fall short of expectations.
As in previous years the Committee set stretching
performance targets for the annual bonus which areclearly linked to the strategy and financial performanceof the Group. The financial targets were not met and thepart of the bonus determined by those targets has not
paid out. In addition the Committee carefully reviewed
performance against the strategic objectives set for theannual bonus which are critical to laying the foundations for
future growth. The Committee determined that performanceagainst the strategic targets was strong but also noted
the disappointing financial performance of the Group in
determining the level of vesting of the strategic elementof the bonus resulting in 50% out of the maximum 15%
of salary available being paid in respect of Jonathan Flint
and 45% of the maximum being paid in respect of
Kevin Boyd. This results in a payout of 7.5% of salaryas bonus for Jonathan Flint and 6.75% for Kevin Boyd.

Oxford Instruments plc | Report and Financial Statements 2015

The performance conditions for the share awards madeto the Executive Directors under the Executive Share Option
Scheme (ESOS) in December 2012 and Senior Executive
Long Term Incentive Scheme (SELTIS) in December 2011
and for which the performance periods ended during theyear were not met and these awards have now lapsed.
Further details about the targets set for the variable pay
awards referred to above and performance against themis set out in the Annual Report on Remuneration.
Implementation of policy in 2015/16• The maximum annual bonus each Executive Director
may earn is 100% of salary. This is at the same levelas 2014/15. Targets for the 2015/16 annual bonus
are considered by the Committee to be commerciallysensitive and will be disclosed retrospectively in next
year’s Annual Report (to the extent they are notcommercially sensitive at that time).

Summary
I hope that you will be supportive of the resolution
to be proposed at our AGM. If you have any queries
in the meantime I will be pleased to engage with you
either at the AGM or beforehand.

Governance• The Executive Directors will receive a base salary increaseof 3% effective from 1 July 2015 which is in line withaverage workforce increases in the UK of 3%.

• PSP awards will be made to a value of 150% of salaryfor each Executive Director. Vesting of the awards
occurs after three years. The criteria for vesting will
be determined 50% by EPS performance and 50%
by relative total shareholder return performance against
the FTSE 250 Index (excluding financial companies).

Yours sincerely

Thomas Geitner
Chairman of the Remuneration Committee
9 June 2015

Part A: Directors’ Remuneration Policy
This part of the Remuneration Report sets out the Group’s remuneration policy for its Directors. The policy
was put to a binding Shareholder vote at the AGM in September 2014 and took effect from that date and,
unless changed with Shareholders’ prior agreement, will stay in place until September 2017.
Policy overview
The remuneration policy promotes the delivery of the Group’s
strategy and seeks to align the interests of Directors andShareholders. The Committee regularly reviews the link
between incentive structure and strategy to ensure that
remuneration packages are appropriate to attract, motivate
and retain the high calibre Executives who are needed
to deliver the Group’s strategy.
The Company has an incentive driven policy that seeks
to reward Executives fairly and responsibly based onGroup performance and their individual contribution.
The Company has a strategy aimed at delivering significant
growth and it is important for motivation and retention
that the remuneration of the Executives reflects its
sustainable, profitable growth and the increasing
complexity of the business.
The Committee considers carefully the motivational
effects of the incentive structure in order to ensure that
it is effective and does not have any unintentionallynegative impact on matters such as governance,
environmental or social issues. More generally, theCommittee ensures that the overall remuneration policy
does not encourage inappropriate risk taking.

Report and Financial Statements 2015 | Oxford Instruments plc

Other matters taken into considerationin determining policy
The Committee reviews the Executive Directors’ packages
annually taking account of the level of remuneration paid
for comparable positions in similar companies. Comparative
pay data is used carefully, recognising the potential for an
upward ratchet in remuneration caused by over relianceon such data.
In determining the remuneration of the Group’s Directors,
the Committee also takes into account the general trends
in pay and conditions across the Group as a whole. The
Committee seeks to ensure that the underlying principles
that form the basis for decisions on Directors’ pay are
consistent with those on which pay decisions for the restof the workforce are taken. Employees are not currently
consulted on Executive pay. However, the Committee willkeep this under review.
The Remuneration Committee considers feedback from
Shareholders received at each AGM and any feedback fromadditional meetings, as part of any review of Executive
remuneration. In addition, the Remuneration Committee
engages proactively with Shareholders and will ensure that
Shareholders are consulted in advance, where any materialchanges to the remuneration policy are proposed.

49Remuneration Report continued

Part A: Directors’ Remuneration Policy continued
Remuneration policy table
Element of pay

Purpose and link to strategy

Operation

Maximum opportunity

Base salary• To provide a competitive andappropriate level of basic fixed pay
to recruit and retain superior talent
and avoid excessive risk taking thatmight otherwise result from an
over-reliance on variable remuneration.

• Reviewed annually with any increaseusually effective 1 July.

• There is no maximum or maximum
annual increase.

• Takes account of experience,
performance and responsibilities
as well as the performance of theCompany, the complexity of the role
within the Group and salary increases
for employees generally.

• Higher increases than the average
percentage for the workforce may beappropriate, for example, where an
individual changes role, where thecomplexity of the Group changes, where
an individual is materially below market
comparators or is appointed on a below
market salary with the expectation that
his/her salary will increase withexperience and performance.

• Reflects the experience, performanceand responsibilities of the individual.

• Set with regard to market data forcomparable positions in similar companies
in terms of size, internationality, businessmodel, structure and complexity,
including within the industry.

Benefits• Provided on a market-competitive
basis, aids retention and follows
reward structure for all employees.

• Currently include but are not limited to:• life assurance;• private medical; and• company car benefit.
• The benefits provided may be subject
to amendment from time to time by
the Committee within this policy.

• Current salary levels are disclosed
on pages 56 and 57.
• The value of benefits varies from year
to year depending on the cost to theCompany and is not subject to a specificcap. Benefit costs are monitored andcontrolled and represent a small elementof total remuneration costs.

• Relocation costs may be provided
as necessary and reasonable.
• Benefits are not part ofpensionable earnings.

Pension• To provide a market-competitive
benefit for retirement.

• Company contributions to a money
purchase pension scheme; or• 14% of base salary.

• Salary supplement where HMRC annual
or lifetime allowances are exceeded.

Annual bonus• Drives and rewards the successfulachievement of short term targets
set at the start of the year.

• Paid annually in June.
• Performance targets based on the key
performance indicators and strategic
objectives of the business.
• At least 70% of the bonus based on
financial metrics and the balance on
non-financial strategic metrics.

• 75% of salary at year end payableat target performance.
• 100% of salary at year end payable
for maximum performance.
• Bonuses start to be earned from
0% of salary for achieving
threshold performance.

• Clawback applies for financial years
commencing 2013/14 for misstatement,
error or misconduct.

50

Oxford Instruments plc | Report and Financial Statements 2015

Purpose and link to strategy

Operation

Maximum opportunity

Long term
incentives• To incentivise the Executives and reward
them for meeting stretching targets
in the long term which accrue
substantial value to and align the
Directors’ interests with Shareholders.

• Annual awards under the 2014
Performance Share Plan (PSP) of
performance shares (or nil cost options)with vesting subject to achievement of
performance targets. Both the vestingand performance period will be overa minimum of three years but may
be up to five years at the discretionof the Committee.

• The maximum limit under the planrules is 250% of salary (value of sharesat date of grant). The Committee will
not increase the amount of the award
above the 2014 award levels of 150%of salary without prior consultation
with major Shareholders.

• Facilitates share ownership to provide
further alignment with Shareholders.
• Annual awards aid retention.

• It is the Committee’s intention to set relative
TSR targets for 50% of the award andfor the other 50% absolute EPS growthtargets although the Committee will
review the performance conditions eachyear prior to awards being made.

Governance

Element of pay• Dividend equivalents may accrue on the
PSP awards over the vesting period andbe paid out either as cash or as shareson vesting and in respect of the numberof shares that have vested.

• 25% of the awards will vest at
threshold performance under eachperformance condition.
• Clawback may be applied for
misstatement, error or misconduct.

All-employee
share
schemes• To encourage employee
share participation.

• The Company may from time to time
operate tax-approved share schemes(such as the HMRC-approved Share
Incentive Plan) for which Executive
Directors could be eligible.

• The schemes are subject to the limits
set by tax authorities.

• The SIP is open to all UK permanent
staff employed for at least six months.

Shareholding
guideline• To further align Executive Directors’interests with Shareholders.

• The Committee has establishedshareholding guidelines which encourage
the Executive Directors to build and retain
a holding of Company shares equivalent
to a multiple of base salary, as determinedby the Committee. The guideline
and current shareholdings of the
Directors are set out in the Annual
Report on Remuneration.

• Not applicable.

• Until the guideline is met in full, Executive
Directors are expected to retain or acquire
shares equivalent to the value of 50% of
the net amount realised from exercise/vesting of share awards as appropriate
after allowing for tax payable.

NonExecutive
Director fees

• To remunerate the Chairman
and Non-Executive Directors.

• Reviewed annually.
• For the Non-Executive Directors agreed
by the Executive Directors and Chairman.

• There is no prescribed maximum
or maximum annual increase.

• For the Chairman agreed by the
Remuneration Committee.
• Determined and reviewed taking into
account time commitment, experience,
knowledge and responsibilities of the role
as well as market data for similar roles inother companies of a similar size and/or
business to Oxford Instruments.

Report and Financial Statements 2015 | Oxford Instruments plc

51

Remuneration Report continued

Part A: Directors’ Remuneration Policy continued
Differences in the remuneration policy of the
Executive Directors and the general employees
There are no material differences in the structure of
remuneration arrangements for the Executive Directors andsenior management population, aside from quantum andparticipation levels in incentive schemes, which reflect thefact that a greater emphasis is placed on performance-related
pay for Executive Directors and the most senior individuals
in the management team. Outside the senior management
team, the Company aims to provide remuneration structures
for employees which reflect market norms.
Choice of performance measures and approachto setting targets
The Committee selects financial and strategic measures(such as sales, profit, cash generation) for the annual bonusthat are key performance indicators for the business overthe short term. For the long term incentives the Committee
will select a combination of measures that provide a good
focus on the outcomes of the Company strategy together
with sustainable improvements in long term profitability.
The Committee sets appropriate and demanding targets
for variable pay in the context of the Company’s trading
environment and strategic objectives. The targets for theannual bonus plan will be set each year with reference
to the Company’s budget and business and strategic plan.
The Committee will review the performance conditions
and targets for awards under the PSP each year prior
to awards being made taking account of the Company’s
internal financial planning, market forecasts and the businessenvironment (e.g. to determine whether the TSR peergroup continues to remain appropriate, whether the rangeof EPS performance targets remains appropriate and, moregenerally, in light of the Company’s long term strategy
and growth aspirations). Should there be a material change
in the Company’s performance conditions (e.g. introducing
an additional performance metric) appropriate dialogue
with the Company’s major Shareholders would take place
along with a full explanation in the Annual Report on
Remuneration to support any such change.
The metrics for awards granted under this policy are set
out in the Annual Report on Remuneration.
Discretions retained by the Committee in operating
its incentive plans
The Committee operates the Group’s various incentive
plans according to their respective rules and in accordance52with HMRC rules where relevant. To ensure the efficientadministration of these plans, the Committee may apply
certain operational discretions. These include the following:• select the participants in the plans;• determine the timing of grants and/or payments;• determine the quantum of grants and/or payments(within the limits set out in the policy table above);• determine the extent of vesting based on theassessment of performance;• determine “good leaver” status and where relevant
extent of vesting in the case of the share-based plans;• where relevant determine the extent of vesting in thecase of share-based plans in the event of a changeof control;• make the appropriate adjustments required in certain
circumstances (e.g. rights issues, corporate restructuring
events, variation of capital and special dividends); and• the annual review of weighting of performance measures,and set targets for annual bonus plan and discretionary
share plans from year to year.
The Committee may adjust the targets and/or set different
measures and alter weightings for the annual bonus planand share-based awards only if an event occurs whichcauses the Committee to reasonably consider that theperformance conditions would not without alterationachieve its original purpose and the varied conditions
are no less difficult to satisfy than the original conditions.
Any changes and the rationale for those changes will
be set out clearly in the Annual Report on Remunerationin respect of the year in which they are made.
Legacy arrangements
In approving this Directors’ Remuneration Policy, authority
is given to the Company to honour any commitments enteredinto with current or former Directors (such as the paymentof a pension or the vesting or exercise of past share awards)
that have been disclosed to and approved by Shareholders
in previous remuneration reports. Details of any payments
to former Directors will be set out in the Annual Report on
Remuneration as they arise. This will include all subsisting
awards granted under the Executive Share Option Scheme(ESOS) and the Senior Executive Long Term Incentive
Scheme (SELTIS) details of which are disclosed in the
Annual Report on Remuneration.

Oxford Instruments plc | Report and Financial Statements 2015

Remuneration scenarios for Executive Directors
The charts below show the level of remuneration potentially payable to Executive Directors under different performance
scenarios for the financial year 2015/16 (see notes for assumptions):£2,000,000
PSP
Annual bonus
Fixed pay

£1,755,736£1,750,000£1,500,000£1,278,336£1,250,000

41%£1,174,503

28%£1,000,000£750,000£856,233£562,236

28%

27%

0

100%
Minimum

44%

32%

On-target

Maximum£378,828

28%

27%

100%

44%

32%

On-target

Maximum

Minimum

Chief Executive

Governance£500,000£250,00041%

28%

Finance Director

Assumptions for the charts above:
1.	Fixed pay comprises salary levels as at 1 July 2015, pension contribution of 14% and the value of benefits received
in 2014/15.
2. The on-target level of bonus is 75% of the maximum opportunity, i.e. 75% of salary.
3.	The on-target level of vesting under the annual PSP is taken to be 50% of the face value of the award at grant,
i.e. 75% of salary.
4.	The maximum level of bonus and vesting under the PSP is 100% of the bonus opportunity and 100% of the facevalue of the PSP award at grant, i.e. 100% and 150% of salary respectively.
5. No share price appreciation has been assumed for the PSP awards and for simplicity SIP awards are excluded.
Recruitment and promotion policy for Executive Directors
In setting total remuneration levels and in considering quantum
for each element of the package for a new Executive Director,
the Committee would take into account the skills andexperience of the individual, the market rate for a candidateof that experience and the importance of securing therelevant individual.
The Company would seek to align the remuneration packagewith the remuneration policy approved by Shareholders,
including the maximum plan limit for the long term incentives
and an annual bonus entitlement in line with that of the other
Executive Directors. Currently, this would facilitate annual
bonus and PSP awards of no more than 100% and 250%of base salary respectively (not including any arrangements
to replace forfeited deferred pay). Salary would be provided
at such a level as required to attract the most appropriate
candidate. For new appointments base salary and total
remuneration may be set initially at below normal market
rates on the basis that it may be increased once expertiseand performance has been proven and sustained.
Specific variable remuneration performance targets could
be introduced for an individual where necessary for the
first year of appointment if it is appropriate to do so toReport and Financial Statements 2015 | Oxford Instruments plc

reflect the individual’s responsibilities and the pointin the year in which he or she joined the Board.
Flexibility is retained to offer additional cash and/or
share-based payments on appointment in respect ofdeferred remuneration or benefit arrangements forfeitedon leaving a previous employer. The Committee would
look to replicate the arrangements being forfeited as
closely as possible and, in doing so, will take accountof relevant factors including the nature of the deferredremuneration, performance conditions, attributed expectedvalue and the time over which they would have vested
or been paid. Such awards may be made under the termsof the PSP or as permitted under the Listing Rules.
For an internal Executive Director appointment, any variable
pay element awarded in respect of the prior role may beallowed to pay out according to its terms, adjusted as
relevant to take into account the appointment. In addition,
any other ongoing remuneration obligations existing prior
to appointment may continue.
For external and internal appointments, the Committee
may agree that the Company will meet certain relocation,legal and any other incidental expenses as appropriate.

53

Remuneration Report continued

Part A: Directors’ Remuneration Policy continued
Executive Directors’ service contracts and policy on cessation
Details of the service contracts of the Executive Directors, available for inspection at the Company’s registered office
and at the Company’s AGM, are as follows:
Jonathan Flint
Kevin Boyd

Contract dateUnexpired term of contract

21 February 2005
9 May 2006

Rolling contract
Rolling contract

Details of contractual terms and the policy on cessation of employment are summarised in the table below.
Contractual provision

Detailed terms

Notice period

12 months by the Company or by the Director.

Termination
payment

A Director’s service contract may be terminated without notice and without any further
payment or compensation, except for sums accrued up to the date of termination, in the eventof gross misconduct. If the Company terminates the employment of an Executive Director inother circumstances, compensation is limited to base salary due for any unexpired notice period.
The Company has a right to pay 12 months’ salary in lieu of notice if it so determines.
In addition, any statutory entitlements in connection with the termination would be paid
as necessary.

Remuneration
entitlements

Pro-rata bonus may also become payable for the period of active service along with vestingfor outstanding share awards (in certain circumstances – see below).

Change of control

No Executive Director’s contract contains additional provisions in respect of a change of control.

Any share-based entitlements granted to an Executive Director under the Company’s share plans will be determined basedon the relevant plan rules. The default treatment for existing awards is that any unvested awards lapse on cessation of
employment. However, in certain prescribed circumstances, such as death, injury, ill health, disability, retirement or othercircumstances at the discretion of the Committee, “good leaver” status may be applied. For good leavers, under the
ESOS awards will vest at cessation to the extent the performance condition is satisfied, but with the Committee having
discretion to vest on the normal vesting date if appropriate and to waive the performance condition. In the case of the
SELTIS, awards continue on their normal terms. Under the 2014 PSP, awards to good leavers will vest on the normal
vesting date, subject to the satisfaction of the relevant performance conditions at that time and be scaled back to reflect
the proportion of the performance period actually served. The Committee has discretion in exceptional circumstances todisapply time pro-rating and/or to measure performance to and vest awards at the date of cessation. Vesting at cessation
would be the default position where a participant dies.
In the event of a takeover:• under the ESOS awards vest at that time to the extent the performance condition is satisfied (with no scaling back);• under the SELTIS awards continue on their normal terms; and• under the 2014 PSP, awards vest to the extent the performance condition is satisfied and are scaled back to reflect
the actual period of service with the Committee having the discretion in exceptional circumstances not to scale back.

54

Oxford Instruments plc | Report and Financial Statements 2015

External appointments

Chairman

The Board encourages Executive Directors to accept
appropriate external non-executive appointments provided
the aggregate commitment is compatible with their duties
as Executive Directors. The Executive Director concerned
may retain fees paid for these services, which will be
subject to approval by the Board.

Under an arrangement between the Company andImperialise Limited, Nigel Keen is retained to act as
Chairman of the Company and Chairman of the Trustee
to the Oxford Instruments Pension Scheme via Imperialise
Limited. His current term of appointment commenced on
25 February 2015 and is for one year. This arrangement
can be terminated by either party at any time by the givingof six months’ notice.

Non-Executive Directors

Non-Executive Directors do not have service contracts but
are appointed under letters of appointment for an initialperiod of three years with subsequent reviews. With theintroduction in the UK Corporate Governance Code ofannual re-election of all Directors, Non-Executive Director
appointments are now renewed for periods of one year.
Their appointment can be terminated without notice andwith no compensation payable on termination, other than
accrued fees and expenses.

Nigel Keen
Jennifer Allerton
Richard Friend
Thomas Geitner
Jock Lennox

Date of last appointment

Notice period

25 February 2015
11 June 2013
1 September 201415 January 2013
1 April 2015

Six months
None
None
None
None

GovernanceFor the appointment of a new Chairman or Non-Executive
Director, the fee arrangement would be in accordance withthe approved remuneration policy in place at the time.

Mike Brady retired from the Board on 10 September 2014.

PART B: Annual Report on Remuneration
The financial information in this part of the report has been audited where indicated.
The Remuneration Committee (unaudited)
The Remuneration Committee (the “Committee”) is
responsible for recommending to the Board the remuneration
packages for Executive Directors and has oversight of thebonus and share incentive strategy for the Group’s executive
management. The Chairman and the Executive Directors
are responsible for determining the remuneration of the
Non-Executive Directors, and the Remuneration Committee
is responsible for determining the remunerationof the Chairman.
The role of the Committee includes:• considering and determining the remuneration policy
for the Executive Directors;• within this agreed policy, considering and determining
the total remuneration packages of each Executive
Director of the Company;• approving the design and performance targets for all
performance-related plans for Executives as well as theoverall total annual payments made under such plans;• reviewing and noting remuneration trends acrossthe Group; and• determining the policy for pension arrangements,
service agreements and termination payments
to Executive Directors.

Report and Financial Statements 2015 | Oxford Instruments plc

The members of the Committee are appointed by the
Board and during the year comprised all the Independent
Non-Executive Directors: Thomas Geitner, Jennifer Allerton,
Jock Lennox, Richard Friend; and the Chairman of the Board,
Nigel Keen. Thomas Geitner is the Chairman of the Committee.
Richard Friend joined the Board and the Committee
on 1 September 2014.
The Chief Executive, the Group HR Director and otherexecutives are invited to attend Committee meetings
as deemed appropriate. For example the Chief Executive
is able to make a significant contribution when considering
the performance of other Executive Directors and to discuss
the wider Group remuneration policy and structure andterms and conditions affecting other employees. However,no Executive Director is present when the Committee
is determining his or her remuneration.
The Committee acts within its agreed written terms ofreference (which are published on the company’s website:www.oxford-instruments.com/investors) and complies
with the provisions of the Corporate Governance Coderegarding remuneration.
The performance of the Committee is reviewed at least
once a year as part of the wider Board evaluation process.
During the year the Committee fulfilled its duties,
as laid down in the Committee’s terms of reference.

55

Remuneration Report continued

PART B: Annual Report on Remuneration continued
The Remuneration Committee (unaudited) continued
New Bridge Street (a trading name of Aon Hewitt Limited
and part of Aon plc) (NBS) is the Committee’s independent
remuneration consultants. NBS was appointed by theCommittee to provide advice on all aspects of Executive
remuneration as required by the Committee.
NBS is a signatory to the Remuneration Consultants’ Code of
Conduct and has confirmed to the Committee that it adheresto the Code. During the year NBS met with the Committee
Chairman to discuss remuneration matters which are ofparticular relevance to the Company and how best it canwork with the Company to meet the Committee’s needs.

Fees are charged predominately on a “time spent” basis.
The total fee paid to NBS for the advice provided to theCommittee during the year was £54,455.
During the year in question no other services were provided
to the Company by the Aon plc group however a subsidiaryof Aon plc was appointed to act as both Scheme Actuaryand Scheme Administrator to the Company’s UK defined
benefit pension scheme. The Scheme Actuary also provided
the Company with its IAS 19 pension calculations. The
Committee is satisfied that the advice it has received from
NBS is objective and independent.

Directors’ remuneration (audited)
The remuneration paid to the Directors during the year under review and the previous year is summarised in the tables below:
Annualbonus 4

Long term
incentive
awards 5

Other 6

Total

65
59

35
68

—
605

1
1

579
1,174

16
16

43
40

21
45

—
418

1
1

388
804

34
34

108
99

56
113

—
1,023

2
2

967
1,978

Salaryand fees

Benefits

2015
2014

460
423

18
18

Kevin Boyd

2015
2014

307
284

Total

2015
2014

767
707

£000

Executive
Jonathan Flint1

2

Pension3

1	In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £300,000. Jonathan Flint bought a further proportionof the house owned by the Company and Jonathan Flint by paying £99,900 to the Company in each of the years to 31 March 2012, 31 March 2013 and
31 March 2014 and a further £300 in April 2014. These proportions were recalculated based on the original purchase price. Independent valuations haveestablished that the price paid by Jonathan Flint was in excess of the market value of the house at the time of each payment. The Company is no longera co-owner of the house. Jonathan Flint lives in the house and during the period where it was co-owned with the Company paid a full commercial rent
amounting to £60 (2014: £757) for the month of April 2014 for use of the Company asset.
2 “Benefits” comprise provision of a car or car allowance, health insurance and life assurance.
3	Contractually, each Executive Director receives a contribution to a money purchase pension scheme worth 14% of salary. Where the contractual pension
contribution exceeds the annual allowance, any balancing payment is made by the Company in a cash allowance.
4 “Annual bonus” represents cash bonus payments.
5	“Long term incentive awards” are those awards where the vesting is determined by performance periods ending in the year under report under both the SELTIS
and ESOS and therefore reports the value of the SELTIS option granted in December 2011 and the ESOS option granted in December 2012. Further details of
how these sums are arrived at are set out below. The prior year has been restated using the share price on the date of vesting for the ESOS options being£11.42 per share rather than the three month average ending 31 March 2014 of £15.45 used last year.
6	The Company operates a Share Incentive Plan (SIP) which is open to all UK permanent staff employed for at least six months. “Other” includes the valueof matching SIP shares attributable to the year. The Executive Directors all participate in the SIP to the maximum extent permitted by HMRC. The Company
offers a 1:5 match for partnership shares purchased by employees.

56

Oxford Instruments plc | Report and Financial Statements 2015

Long term
incentive
awards

Total

—
—

—
—

—
—

—
—

183
183

50
45

—
—

—
—

—
—

—
—

50
45

2015
2014

50
43

—
—

—
—

—
—

—
—

50
43

Jennifer Allerton

2015
2014

43
32

—
—

—
—

—
—

—
—

43
32

Richard Friend2

2015
2014

26
—

—
—

—
—

—
—

—
—

26
—

Mike Brady3

2015
2014

23
45

—
—

—
—

—
—

—
—

23
45

Total

2015
2014

375
348

—
—

—
—

—
—

—
—

375
348

Benefits

2015
2014

183
183

Jock Lennox

2015
2014

Thomas Geitner£000

Non-Executive
Nigel Keen1

GovernancePensionAnnualbonus

Salaryand fees1 	Under an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Company and Chairman of the Trustee
to the Oxford Instruments Pension Scheme and he must account to Imperialise Limited for his services. Imperialise Limited is paid fees for Nigel Keen’s services
together with a sum equivalent to the employer’s national insurance contributions on these fees as it is responsible for the cost of national insurance on payments
to Nigel Keen, whereas national insurance contributions in respect of the other Non-Executive Directors are made direct to the UK Inland Revenue. For the year
to 31 March 2015, Nigel Keen’s fees as Chairman were £161,000 (2014: £161,000) and as Chairman to the Trustee were £25,000 (2014: £25,000) for his
services for which he must account to Imperialise Limited. In addition, Imperialise Limited has been paid a sum equivalent to the national insurance on boththese fees of £25,668.
2 Richard Friend was appointed as a Non-Executive Director on 1 September 2014.
3 Mike Brady retired from the Board on 9 September 2014.

External appointments (unaudited)
The Board encourages Executive Directors to accept
appropriate external commercial non-executive appointments
provided the aggregate commitment is compatible with
their duties as Executive Directors. The Executive Director
concerned may retain fees paid for these services, which
will be subject to approval by the Board.
Jonathan Flint is a Non-Executive Director of Cobham plc
and received fees of £57,500 during the year. He also
received fees of £510 from the Science and Technology
Funding Council.

External appointments
Jonathan Flint

Kevin Boyd

Cobham plc

Emis Group plc
London Stock Exchange
Primary Markets Group

Kevin Boyd was a Non-Executive Director of Guidance Limited
until 26 March 2014 and in the year to 31 March 2015
received deferred fees in the form of 26,660 shares in thecompany with value at date of transfer of £11,197. He is amember of the London Stock Exchange’s Primary Markets
Group and was appointed a Non-Executive Director of
EMIS Group plc on 9 May 2014 for which he received
fees of £32,083 during the year.

Report and Financial Statements 2015 | Oxford Instruments plc

57

Remuneration Report continued

PART B: Annual Report on Remuneration continued
Details of variable pay earned in year (audited)Bonus
As explained in our Operations Review on pages 16 to 19, it has been a testing year for Oxford Instruments.
As in previous years the Committee set stretching performance targets for the annual bonus which are clearly linked to thestrategy and financial performance of the Group. The financial targets were not met and the part of the bonus determinedby those targets has not paid out. The Committee carefully reviewed performance against the strategic objectives set for
the annual bonus which are critical to laying the foundations for future growth. The Committee determined that performanceagainst the strategic targets was strong but also noted the disappointing financial performance of the Group in determining
the level of vesting of the strategic element of the bonus.
% of salary

MeasureAdjusted PBTOrganic sales
Cash generation
Strategic objectives

ThresholdOn-target

Maximum

CEO/GFD

CEO/GFD

CEO/GFD

12%
12%
0%
0%

20%
20%
20%
15%

45%
20%
20%
15%

Performance required
Threshold£m

On-target£m

Maximum£mActual£m

Payout %of maximum

50.0
420.0
34.0

52.9
438.1
—

55.5
—
—

35.6
385.5
13.3
See below0%0%0%See below

The strategic objectives set by the Committee for each of the Executive Directors at the beginning of the year included
objectives in the areas of succession planning, integration of acquisitions and the development of the Company’s
strategic plan.
The on-target and maximum bonus potentials for the Executive Directors as well as the amount actually payablefor the year ended 31 March 2015 are set out below.
On-targetbonus(% of salary)

Maximum
bonus(% of salary)

Actual bonus
payable for2014/15(% of salary1)

Actual bonus
payable for2014/15(£000)

Jonathan Flint

75%

100%

7.50%

£34,762

Kevin Boyd

75%

100%

6.75%

£20,857

1 Bonus is calculated on salary as at 31 March 2015.

Long Term Incentive Plans (audited)
The performance conditions and the resulting payout in respect of the long term incentive awards where vesting is determinedby a performance period ending in the year under report were as follows:
Executive Share Option Scheme (ESOS)
The performance conditions which applied to the 19 December 2012 award (vesting date 19 December 2015), for the
performance period which came to end in the year under review (ending 31 March 2015) and actual performance achieved
against these were as follows:
Performance level

EPS growth over CPI performance required% of award that will vest

Below threshold
Threshold
Between threshold and maximum
Maximum

Less than 5% per annum over three years
5% per annum over three years
5% to 10% per annum over three years
10% per annum and above over three years

0%
33.3%
33.3%–100%
100%

Actual achieved over the period

No EPS growth

0%58

Oxford Instruments plc | Report and Financial Statements 2015

The performance condition was not met and thus no shares vested for the Directors.
Total number
shares subject
to option

Percentage
of award
vesting

Number ofshares thatwill vest

Exercise
price

Value ofshares thatwill vest(£000)

Jonathan Flint

60,5000%—£13.88Nil

Kevin Boyd

40,7500%—£13.88Nil

Senior Executive Long Term Incentive Scheme (SELTIS)

Governance

The performance conditions which applied to the 14 December 2011 award (vesting date 14 December 2014), for the
performance period which came to an end in the year under review and actual performance achieved against these wereas follows:
TSR relative to FTSE 250 (excluding certain sectors)1
Performance level

Performance required% of total award vesting

Below threshold
Threshold
Between threshold and stretch
Stretch or above

Below medianMedianBetween median and upper quartile
Upper quartile

0%
33.3%
33.3%–100%
100%

Actual achieved

Upper quartile TSR = 66.5%
Oxford Instruments’ TSR = 23.5%

0%1	Sectors excluded within the FTSE Industry classification of “Financials” (namely, banks, equity investment instruments, finance services, life insurance,
non-life insurance, real estate investment trusts and real estate investment and services sectors).

The performance condition was not met and thus no shares vested for the Directors.
Total
number shares
granted

Percentage
of award
vesting

Number ofshares vesting

Value ofshares vesting(£000)

Jonathan Flint

17,6000%—

Nil

Kevin Boyd

12,1000%—

NilAwards made in the year and outstanding share incentive awards (audited)
Annual awards under the ESOS and SELTIS were in the past made around early December following the Company’s half yearly
announcement. The 2013/14 awards were not made at the usual time because the Company was in a close period dueto the acquisition of Andor Technology. No awards were therefore made within the year 2013/14. The Board determinedthat these awards should therefore be made in the next 42 day grant window following the announcement of preliminary
results in June 2014.

Report and Financial Statements 2015 | Oxford Instruments plc

59Remuneration Report continued

PART B: Annual Report on Remuneration continued
Long Term Incentive Plans (audited) continued
Awards made in the year and outstanding share incentive awards (audited) continued
Executive Share Option Scheme (ESOS)
Awards made under the ESOS on 13 June 2014 were as follows:
Total number
shares subject
to option

Percentage
of salary1

Exercise
price

Initialvesting date

Jonathan Flint

51,250200%£14.15

13/06/2017

Kevin Boyd

34,500200%£14.15

13/06/2017

1	Value determined using the annual basic salaries of Jonathan Flint and Kevin Boyd in December 2013 and the average share price for the month of December 2013,
this being the time at which the awards would have been made. As at December 2013, the basic salaries of Jonathan Flint and Kevin Boyd were £420,000
and £283,000 respectively and the average share price of Oxford Instruments shares during December 2013 was £16.39.

These awards are subject to an earnings per share (EPS) growth target over three financial years commencing 1 April 2013
as set out below.
Performance level

Below threshold
Threshold
Between threshold and maximum
Maximum

EPS annualised compound growth over CPI performance required% of award that will vest

Less than 5% per annum over three years
5% per annum over three years
5% to 10% per annum over three years
10% per annum and above over three years

0%
33.3%
33.3%–100%
100%

1	The performance period for these awards is measured over the three years commencing 1 April 2013 being the performance period which would have applied
had the awards been made in December 2013.

Senior Executive Long Term Incentive Scheme (SELTIS)
Awards made under the SELTIS on 13 June 2014 were as follows:
Total number
shares granted

Percentage
of salary1

Initialvesting date

Jonathan Flint

12,80050%

13/06/2017

Kevin Boyd

8,600

50%

13/06/2017

1	Value determined using the annual basic salaries of Jonathan Flint and Kevin Boyd in December 2013 and the average share price for the month of December 2013,
this being the time at which the awards would have been made. As at December 2013, the basic salaries of Jonathan Flint and Kevin Boyd were £420,000
and £283,000 respectively and the average share price of Oxford Instruments shares during December 2013 was £16.39.

These awards are subject to a total shareholder return (TSR) performance condition measured over a three year performance
period commencing 1 April 2013 as set out below.
TSR relative to FTSE 250 (excluding certain sectors)1
Performance level

Below threshold
Threshold
Between threshold and stretch
Stretch or above

Performance required% of total award vesting

Below medianMedianBetween median and upper quartile
Upper quartile

0%
33.3%
33.3%–100%
100%

1	Sectors excluded within the FTSE Industry classification of “Financials” (namely, banks, equity investment instruments, finance services, life insurance,
non-life insurance, real estate investment trusts and real estate investment and services sectors).
2	The performance period for these awards is measured over the three years commencing 1 April 2013 as this is the performance period which would havebeen measured had it been possible to grant the award in December 2013.

In line with the resolution passed by Shareholders at the 2014 AGM, awards were made to the Executive Directors
for the 2014/15 year under the 2014 Performance Share Plan.

60

Oxford Instruments plc | Report and Financial Statements 2015

2014 Performance Share Plan (PSP)Awards made under the PSP on 8 October 2014 were as follows:
Total number ofshares granted

Percentage
of salary1

Share priceon day before
award date

Initialvesting date

Jonathan Flint

72,195

150%

£9.63

08/10/2017

Kevin Boyd48,130

150%

£9.63

08/10/2017

Governance

The awards are subject to two performance conditions. One half of each award is subject to a performance condition
based on the Company’s compound annualised earnings per share (EPS) growth. The other half of each award is subject
to a performance condition based on the Company’s total shareholder return (TSR) relative to the TSR of the membersof a comparator group of companies.
50% of the award will vest as follows provided EPS measured over a three year performance period starting 1 April 2014is at least:
Performance level

Below threshold
Threshold
Between threshold and maximum
Maximum

EPS growth required% of award that will vest

Less than 7% per annum over three years
7% per annum over three years
7% to 12% per annum over three years
12% per annum and above over three years

0%25%
25%–100%
100%

50% of the award will vest as set out below with TSR being measured over a three year performance period starting
1 April 2014:
TSR relative to FTSE 250 (excluding certain sectors)1
Performance level

Below threshold
Threshold
Between threshold and stretch
Stretch or above

Performance required% of total award vesting

Below medianMedianBetween median and upper quartile
Upper quartile

0%25%
25%–100%
100%

1	Sectors excluded within the FTSE Industry classification of “Financials” (namely, banks, equity investment instruments, finance services, life insurance,
non-life insurance, real estate investment trusts and real estate investment and services sectors).

Report and Financial Statements 2015 | Oxford Instruments plc

61Remuneration Report continued

PART B: Annual Report on Remuneration continued
Long Term Incentive Plans (audited) continued
Adjustment to EPS performance targets for change in accounting rules for pensions
During the year the Committee reviewed the potential impact on the earnings per share (EPS) performance targets set for the Group’s long term
incentive awards caused by changes to the accounting rules for pensions. The Committee agreed that management should not be advantaged
or disadvantaged by the changes in pensions accounting rules which are not reflective of business performance and therefore agreed that the
EPS performance measure will be adjusted as disclosed in the Company’s Reports and Financial Statements for all relevant awards.
As at the 31 March 2015, the outstanding options for Jonathan Flint and Kevin Boyd under the ESOS and SELTIS schemes and the 2014 PSP wereas follows:
Movements during the year
Name

Jonathan Flint

2

Kevin Boyd

LapsedMarch
2014

Exercise
price

Share priceon dateof grant

Date of
grant

Date forearliest
exercise

Date forlatestexercise

—
—
—
—
—
—
—

—
—
—
—
—
17,600——60,50070,700—15,10017,600—£14.55£13.88
£9.90
Nil
Nil
Nil
Nil

£13.95£14.08£9.87£13.95£14.08£9.87£10.12

13/06/14
19/12/12
14/12/11
13/06/14
19/12/12
14/12/11
08/10/14

13/06/17
19/12/15
14/12/14
13/06/17
19/12/15
14/12/14
08/10/17

12/06/24
18/12/22
13/12/21
12/06/21
18/12/19
13/12/18
07/10/24

—
—
—
2,127
—
—
—
—

—
—
—
—
—
—
12,100——40,75048,7002,127—
10,15012,100—£14.55£13.88
£9.90
£7.05
Nil
Nil
Nil
Nil

£13.95£14.08£9.87£7.02£13.95£14.08£9.87£10.2713/06/14
19/12/12
14/12/11
07/01/11
13/06/14
19/12/12
14/12/11
08/10/14

13/06/17
19/12/15
14/12/14
07/01/14
13/06/17
19/12/15
14/12/14
08/10/17

12/06/24
18/12/22
13/12/21
06/01/21
12/06/21
18/12/19
13/12/18
07/10/24

SchemeMarch
2015

GrantedExercised

ESOS
ESOS
ESOS
SELTISSELTISSELTISPSP

51,25060,50070,70012,80015,100—72,19551,250——12,800——72,195

ESOS
ESOS
ESOS
ESOS
SELTISSELTISSELTISPSP

34,50040,75048,700—8,600
10,150—48,13034,500
—
—
—
8,600
—
—
48,1301

1	During the year Kevin Boyd exercised ESOS options on 1 July 2014 when the mid-market closing price on the date of exercise was £13.08. The gain yielded on the exercise of options during
the year for Jonathan Flint and Kevin Boyd was Nil and £12,825 respectively.
2	Jonathan Flint’s wife, an employee of the Company, holds as at 31 March 2015 ESOS options over 47,500 shares with exercise prices ranging from £9.90 to £14.55.

The market price of the shares at 31 March 2015 was £8.36 (2014: £12.67) and the range during the year was £6.87–£14.41 (2014: £12.09–£18.14).
Performance conditions outstanding for awards are described below:
Date of award

ESOS

SELTIS

14 December 2011

EPS growth – CPI + 5% p.a. (33.3% vesting) to 10% p.a. TSR v FTSE Small Cap Index (excluding certain sectors²) –(100% vesting)¹
median (33.3% vesting) to upper quartile (100% vesting)

19 December 2012

EPS growth – CPI + 5% p.a. (33.3% vesting to 10% p.a. TSR v FTSE 250 Index (excluding financial companies2)(100% vesting)¹– median (33.3% vesting) to upper quartile(100% vesting)

13 June 2014

EPS growth – CPI + 5% p.a. (33.3% vesting to 10% p.a. TSR v FTSE 250 Index (excluding financial companies2)(100% vesting)¹– median (33.3% vesting) to upper quartile(100% vesting)PSP

50% of award

50% of award

08 October 2014

EPS growth – 7% p.a. (25% vesting to 12% p.a.
(100% vesting)

TSR v FTSE 250 Index (excluding financial companies2)– median (25% vesting) to upper quartile (100% vesting)

1 For employees who are not Executive Directors, ESOS options become exercisable in full for achieving the threshold level.
2 	Sectors excluded – banks, equity investment instruments, finance services, life insurance, non-life insurance, real estate investment trusts and real estate investment services.

62

Oxford Instruments plc | Report and Financial Statements 2015

Achievement of performance conditions (unaudited)
The calculation of the TSR performance conditions are independently measured. EPS performance conditions are measured
using the audited accounts of the Company. All performance conditions are then verified by the Remuneration Committee.
Dilution limits (unaudited)
The ESOS, SELTIS and PSP provide that overall dilution through the issuance of new shares for employee share schemes
should not exceed an amount equivalent to 10% of the Company’s issued share capital over a ten year period. Awards
made under the SELTIS scheme prior to 2009 and shares required by the SIP are satisfied by market purchased shares.
The SIP scheme only uses market purchased shares.

Governance

The Committee monitors the position prior to the making of any award under these share option schemes to ensure that
the Company remains within this limit. As at the date of this Report, the Company’s headroom position remains within
the 10% limit.
Shareholding requirements (audited)
The Executive Directors are required to build and retain a shareholding in the Company equivalent in value to 100% of
basic salary. Until the requirement is met, whenever ESOS or SELTIS options are exercised Executive Directors are expected
to retain or purchase shares equivalent to the value of 50% of the net amount realised from exercise of the options after
allowing for tax payable.
Executive Directors’ shareholdings as at 31 March 2015 are shown in the table below.

Jonathan Flint

2

Kevin Boyd

Legally owned

Percentage ofsalary held inshares under shareholding guideline1

Guideline
met as at
31 March 2015

Subject to
LTIP options
performancevested but conditions under
unexercised the LTIP unvested

201,337363%

Yes

70,700211,845

93,975

254%

Yes

48,700142,130

1 Shares valued using the market price of the shares on 31 March 2015: £8.36.
2 In addition, Jonathan Flint’s wife holds 4,831 Oxford Instruments shares.

Executive Director Pension Arrangements (audited)
Under the terms of their service contracts Executive Directors can ask the Company to contribute to a pension plan of theirchoice. The Company contributes a maximum of 14% of base salary if matched by a contribution of 10% by the Director
or, if lower, a contribution by the Director which brings the total pension contribution to the annual allowance (the maximum
tax relieved pension contribution allowable per tax year). Only base salary is pensionable and contributions are not includedin the calculation of bonus and share award entitlements. Where the Company’s pension contribution exceeds the annual
allowance a balancing payment is paid by the Company to the Director which is taxed as income.
During the year the Company contributed £40,000 (2014: £39,999) into a personal defined contribution pension planin respect of Jonathan Flint and £40,000 (2014: £39,818) into a personal defined contribution plan in respect of Kevin Boyd.
Balancing payments to 14% of base salary were paid as cash.
Payments for loss of office (audited)
On 9 September 2014, having served 19 years on the Board, Professor Mike Brady stepped down from the Board.
Professor Brady received fees to 9 September 2014 and no payment was made for loss of office.

Report and Financial Statements 2015 | Oxford Instruments plc

63Remuneration Report continued

PART B: Annual Report on Remuneration continued
Performance graph and CEO’s remuneration (unaudited)
The graph below shows for the six years ended 31 March 2015 the Total Shareholder Return (TSR) on a holding of theCompany’s ordinary shares compared with a hypothetical holding of shares made up of shares of the same kind and number
as those by reference to which the FTSE 250, FTSE Techmark and FTSE Electronic and Electrical Equipment indices arecalculated. These indices have been chosen as they are considered to be the most appropriate comparator groups for
the Company. TSR has been calculated by reference to the relevant share price for each constituent company assuming
dividends are reinvested.
This graph shows the value, by 31 March 2015, of £100 invested in Oxford Instruments plc on 31 March 2009 comparedwith the value of £100 invested in the FTSE 250, FTSE Techmark and FTSE Electronic and Electrical Equipment indices.
The other points plotted are the values at intervening financial year ends.
1,700
1,600

Oxford Instruments plc
FTSE Techmark
FTSE E&EE
FTSE 250

1,500
1,400
1,300
1,200

Source: Thomson Reuters

1,100
Value (£)

1,000
900
800
700
600
500
400
300
200
100
0
31 March 2009

31 March 2010

31 March 2011

31 March 2012

31 March 2013

31 March 2014

31 March 2015

The total remuneration of the CEO over the last six years is shown in the table below. The annual bonus pay-out and LTIP
vesting level as a percentage of the maximum opportunity is also shown.
Year ending 31 March

Total remuneration (£000)
Annual bonus outcome (%)
ESOS vesting (%)
SELTIS vesting (%)

2010

2011

2012

2013

2014

2015

939
100%
100%
50%

2,596
100%
100%
50%

3,464
100%
100%
100%

2,348
69.1%
100%
100%

1,179
15%
100%
100%

579
7.5%
0%
0%

Percentage change in the remuneration of the Chief Executive Officer (unaudited)
The table below shows the percentage change in each of the CEO’s salary, taxable benefits and annual bonus earned
between 2013/14 and 2014/15, compared to that for the average UK based employee of the Group (on a per capita basis).
Jonathan Flint, CEO£000

SalaryBenefits
Bonus2
3

Average employee1

2014/15

2013/14% change

2014/15

2013/14% change

460.0
18.3
34.8

422.5
18.3
67.5

8.9%
0%
(48.4)%

39.0
1.6
0.7

37.8
1.7
1.0

3.2%
(5.9)%(30)%

1	Average employee includes all UK employees in service on 1 April 2013 and 31 March 2015 but excludes those who were on maternity or long term sick leave.
2	The value of the average employee bonus for the year ended 31 March 2015 (to be paid at the end of June 2015) was not known at the time the Report
and Financial Statements were approved and has been subsequently included.
3	In 2012 investors agreed a two stage salary increase for the Executive Directors, the second part of which was to have been made on 1 July 2013. In 2013
the Executive Directors asked for this increase to be deferred until 1 March 2014. This deferred increase is included in 8.9% change in salary disclosed above.
The actual annual increase awarded and made on 1 July 2014 for the CEO was 3%.

64

Oxford Instruments plc | Report and Financial Statements 2015

Relative importance of the spend on pay
The following table shows the Group’s employee costs relative to dividends and share buybacks:

Employee costs (£m)
Dividends (£m)
Share buybacks (£m)

Year ended
31 March
2015

Year ended
31 March
2014

117.5
7.1
—

98.5
6.4
—

% change

19.3%
10.9%
—

Statement of Shareholder voting (unaudited)

Shares for

Sharesdiscretionary

Sharesagainst%for%againstShares marked
as abstain

To approve the Directors’
Remuneration Policy

37,933,491

3,201,930

493,80298.8

1.2

861,498

To approve the Annual Report
on Remuneration

38,328,863

3,201,930

153,805

99.6

0.4

866,123

Resolution

GovernanceAt last year’s AGM, the Directors’ Remuneration Policy Report and Annual Report on Remuneration received the following
votes from Shareholders:

How the policy will be applied in 2015/16 (unaudited)
Base salaries
In line with the general workforce, the Executive Directors will receive salary increases of 3% for 2015/16 effectivefrom 1 July 2015. The Chief Executive Officer’s salary as a result of the increase will be £477,400 and the Group
Finance Director’s will be £318,270.
Benefits and pension
These will be made in accordance with the approved policy.
Annual bonus
The maximum opportunity under the annual bonus plan for 2015/16 will be 100% of base salary for both
the Chief Executive Officer and Group Finance Director.
A combination of financial (85%) and non-financial strategic (15%) metrics will be used to determine the level of payment
under the annual bonus and as detailed in the table below:
Weighting as a % of opportunity
MeasureOrganic sales (£m)
Profit (£m)
Cash generation (£m)
Strategic objectives

CEO

GFD

20%
45%
20%
15%

20%
45%
20%
15%

The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include
items which the Committee considers commercially sensitive. Retrospective disclosure of the performance against themwill be made in next year’s Annual Report on Remuneration to the extent the targets are not commercially sensitiveat that time.

Report and Financial Statements 2015 | Oxford Instruments plc

65Remuneration Report continued

PART B: Annual Report on Remuneration continued
How the policy will be applied in 2015/16 (unaudited) continued
Long term incentives in respect of the 2015/16 financial year
The 2015/16 PSP awards will be over shares with a market value at grant of 150% of salary for the Chief Executive Officer
and Group Finance Director. Vesting will be subject to the performance condition as set out below, to be achieved overthree financial years commencing with the 2015/16 financial year:
Half of the award

Half of the award

EPS growth – 7% p.a. (25% vesting) to 12% p.a.
(100% vesting)

TSR v FTSE 250 Index (excluding financial companies) –median (25% vesting) to upper quartile (100% vesting)

Non-Executive Directors’ fees1
Board Chairman
Additional fee for Deputy Chairman3
Basic fee
Additional fee for Senior Independent Director3
Additional fee for Committee Chairman3

2015/16

2014/15% increase2£161,000£161,000

0%£5,000£44,000£5,000£7,500£5,000£44,000£5,000£7,500

0%
0%
0%
0%

1 The fees shown for 2014/15 and 2015/16 are the annualised rates as at 1 July 2014 and 1 July 2015 respectively.
2 Fees for Non-Executive Directors were last increased on 1 July 2014.
3 Only one additional fee is paid to any Non-Executive Director.

ApprovalThis report was adopted by the Committee on 9 June 2015 and has been approved subsequently by the Boardfor submission to Shareholders at the Annual General Meeting to be held on 8 September 2015.

Thomas Geitner
Chairman of the Remuneration Committee
9 June 2015

66

Oxford Instruments plc | Report and Financial Statements 2015

Directors’ Responsibilities
in relation to the Report and Financial Statements
The Directors are responsible for preparing the Report and the Group and Parent Company Financial Statements in accordance with applicablelaw and regulations.
Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law they are
required to prepare the Group Financial Statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare
the Parent Company Financial Statements in accordance with UK Accounting Standards.
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of thestate of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company
Financial Statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;• for the Parent Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Parent Company Financial Statements; and• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its Financial Statementscomply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard theassets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a strategic report, directors’ report, directors’ remuneration
report and corporate governance statement that complies with that law and those regulations.
Financial statements

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:• the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and• the Strategic Report, included in this annual financial report, includes a fair review of the development and performance of the business andthe position of the Company and Group taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and provides the informationnecessary for Shareholders to assess the company’s performance, business model and strategy.
Signed on behalf of the Board

Jonathan Flint
Chief Executive
9 June 2015

Kevin Boyd
Group Finance Director

Report and Financial Statements 2015 | Oxford Instruments plc

67Independent Auditor’s Reportto the Members of Oxford Instruments plc only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Oxford Instruments plc for the year ended 31 March 2015 set out on pages 71 to 117. In our opinion:• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March 2015
and of the Group’s loss for the year then ended;• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted
by the European Union;• the parent company financial statements have been properly prepared in accordance with UK Accounting Standards; and• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the groupfinancial statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks of material misstatement that had the greatest effect on our audit
were as follows:
Revenue recognition in the Nanotechnology Tools segment (Revenue: £210.9 million, Adjusted operating profit: £20.7 million)
Refer to page 43 (Audit committee report), page 71 (accounting policy) and pages 85 to 111 (financial disclosures)
Risk – There is a risk that revenue is recognised on sales of individual products produced by the Group’s Nanotechnology Tools segment before
the significant risks and rewards of ownership have passed. This is because these products require considerable technical expertise to manufacture,they can be of individually high value, and customer specifications vary. As such there is a risk that particular terms of sale (for example, the shipping
term and product specification) may not be met and, as a result, revenue may be recognised in the incorrect period. Consequently this is oneof the key areas our audit is focused on.
Our response – Our procedures in this area included assessing the effectiveness of internal controls regarding the recognition of revenue suchas matching a sample of sales invoices recognised to sales orders and dispatch notes. We also tested, on a sample basis, whether specific revenue
transactions around the year end had been recognised in the appropriate period on the basis of the terms of sale within the associated contracts,
such as whether shipping terms had been met, goods received notes completed and, or, customer acceptance of the product received. We considered
whether a sample of credit notes issued after the year end should reduce revenue in the period and challenged those that were not recordedby obtaining evidence and rationale for significant reversals.
We also assessed the ageing and post year end realisation of accrued income, customer deposits and installation balances with respect to theagreed terms of sale, any of which may indicate the associated revenue has been recognised in the incorrect period. In addition we assessed
whether there was any evidence of management bias by forming an expectation of the current year revenue profile, with reference to historical
trends, and comparing to actual. We also considered the adequacy of the Group’s disclosures in respect of revenue and the related estimatesand judgements in the financial statements (see section (r) of Accounting Policies).
Recoverability of acquired intangible assets (£213.3 million)
Refer to page 43 (Audit committee report), page 71 (accounting policy) and pages 85 to 111 (financial disclosures)
Risk – The Group balance sheet includes a significant amount of goodwill and other acquired intangible assets that have arisen as a result of
acquisitions, particularly in respect of the Andor cash generating unit. There is a risk that below forecast performance of the business, or the cash
generating unit to which the assets are allocated will result in impairment. This is particularly the case this year as the Group’s operating profit has
significantly reduced. This could be due to weaker than forecast demand, product obsolescence, or other factors. Furthermore, there is inherent
uncertainty and complexity involved in estimating future cash flows, growth rates and discount rates that are the basis for the assessmentof recoverability and, as such, this is one of the key judgement areas our audit is focused on.
Our response – In this area our audit procedures included performing our own assessments of the key estimates and assumptions used to estimate
recoverable amount such as forecast cash flows, long-term growth rates and the discount rate applied with reference to externally and internally derived
data including, but not limited to, industry growth rates, historical performance of similar lines of business and market interest rates. We compared
the sum of the discounted cash flows to the value derived from the group’s market capitalisation to assess the reasonableness of those cash flows.
We also performed sensitivity analysis in relation to the key assumptions and considered whether the Group’s disclosures regarding the valuationof goodwill and intangible assets appropriately reflected the sensitivity, headroom and assumptions made in preparing the valuations.

68

Oxford Instruments plc | Report and Financial Statements 2015

Opinions and conclusions arising from our audit continued
2 Our assessment of risks of material misstatement continued
Completeness of provisions in respect of product related claims
Refer to page 43 (Audit committee report), page 71 (accounting policy) and pages 85 to 111 (financial disclosures)
Risk – The Group designs and builds customised, high technology products, notably in the NanoTechnology Tools segment, and as such there
is a risk that products are subject to customer claims in respect of deficiencies in design or performance. In addition, since the Group’s products
incorporate specific design features and intellectual property that are critical to ensuring the product meets its marketed, or customer specific,
performance specifications, there is a risk that the Group inadvertently infringes the intellectual property belonging to third parties. This could
result in a material unrecorded, or understated, provision for compensation required to be paid to customers or third parties respectively,or alternatively for the cost of rectification, should the Group be required to recall or rework previously supplied products.
Our response – Our procedures in this area included making enquiries of the Group regarding the existence of any previously unidentified productrelated claims and inspecting the Group’s litigation register for any ongoing or potential patent litigation. Where product related claims arise, orare brought forward from previous periods, we consider the specific circumstances by inspecting correspondence between the Group and otherparties, such as legal advisors, and challenge the reasonableness of the key assumptions made by the Group to our own expectations basedon our historical knowledge, experience, and understanding. We also considered the adequacy of the Group’s disclosures about the degreeof estimation involved in arriving at any provision.
In our audit report for the year ended 31 March 2014 we included Valuation of acquired intangible assets as one of the risks of material
misstatement that had the greatest effect on our audit. We considered this risk to be less significant in the current year as there have beenno acquisitions during the year.
3 Our application of materiality and an overview of the scope of our audit

We report to the audit committee any corrected or uncorrected misstatements exceeding £50,000, in addition to other identified misstatementsthat warranted reporting on qualitative grounds.
Of the Group’s 39 reporting components, we subjected 21 to audits for Group reporting purposes and 18 to reviews to component materiality.
These procedures covered 95% of Group revenue, 88% of Group loss before taxation and 96% of Group total assets. For the remaining components,
we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement
within these. The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed
above and the information to be reported back. The Group audit team approved the component materialities, which ranged from £0.01 million
to £0.8 million, having regard to the size and risk profile of the Group across the components.
The Group audit team visited 24 component locations in the UK, United States and China. Telephone conference meetings were also heldwith the component auditors in Germany, Japan and Finland. At these visits and meetings, the findings reported to the Group audit team
were discussed in more detail, and any further work required by the Group audit team was then performed by the component auditor.
4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are preparedis consistent with the financial statements; and• the information given in the Corporate Governance Statement set out on pages 35 to 42 with respect to internal control and risk management
systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.

Report and Financial Statements 2015 | Oxford Instruments plc

69

Financial statements

The materiality for the financial statements as a whole was set at £1.3 million (2014: £2.1 million). This has been determined with reference to abenchmark of group loss before tax adjusted for the items disclosed in Note 1 to the financial statements, excluding amortisation and impairmentof acquired intangibles, and normalised by averaging over the last five years due to fluctuations in the business cycle, of £25.7 million, of which it
represents 5.0% (2014: group profit before tax, adjusted for the items in Note 1, excluding amortisation and impairment of acquired intangibles,6.5%). Materiality represents 6.2% of the group loss before tax, normalised over the same period (2014: group profit before tax, 8.8%).

Independent Auditor’s Report continued
to the Members of Oxford Instruments plc only
Opinions and conclusions arising from our audit continued
5 We have nothing to report in respect of matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified otherinformation in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatementof fact, or that is otherwise misleading.
In particular, we are required to report to you if:• we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement that they
consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the informationnecessary for Shareholders to assess the Group’s performance, business model and strategy; or• the Audit and Risk Committee report does not appropriately address matters communicated by us to the audit committee.
Under the Companies Act 2006 we are required to report to you if, in our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreementwith the accounting records and returns; or• certain disclosures of Directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit; or• a Corporate Governance Statement has not been prepared by the company.
Under the Listing Rules we are required to review:• the Directors’ statement, set out on page 23, in relation to going concern;• the part of the Corporate Governance Statement on pages 35 to 42 relating to the company’s compliance with the ten provisions of the 2012
UK Corporate Governance Code specified for our review; and• certain elements of the report to Shareholders by the Board on Directors’ remuneration.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 67, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities,
published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should
be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.

Greg Watts (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
9 June 2015

70

Oxford Instruments plc | Report and Financial Statements 2015

Accounting Policies

Oxford Instruments plc (the “Company”) is a company incorporated and domiciled in the UK.
The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards
as adopted by the EU (“Adopted IFRSs”). The Company has elected to prepare its Parent Company Financial Statements in accordance with UK GAAP;
these are presented on pages 112 to 117.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Group Financial Statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in
the Performance and Strategy section on pages 1 to 19. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Financial Review on pages 20 to 23.
The relatively diverse nature of the Group together with its current financial strength provides a solid foundation. The Directors have reviewed theGroup’s forecasts and flexed them to incorporate a number of potential scenarios relating to changes in trading performance and believe that theGroup will be able to operate within its existing debt facilities which expire between February 2020 and March 2021. This review also consideredhedging arrangements in place. As a consequence, 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 enquiries,that the Group has adequate resources to continue in operational existence for the foreseeable future.
The Financial Statements were authorised for issuance on 9 June 2015.
(a) New accounting standards
The following standards and interpretations are applicable to the Group and have been adopted as they are mandatory for the year ended
31 March 2015.
IFRS 10 Consolidated Financial Statements: This new standard provides a single model to be applied in the control analysis for all investees,
including entities that currently are SPEs in the scope of SIC-12. The adoption of this standard has had no impact on the Financial Statements.

Amendments to IAS 36 Impairment of Assets and Recoverable Amount Disclosures for Non-financial Assets: The amendments reverse the unintended
requirement in IFRS 13 Fair Value Measurement to disclose the recoverable amount of every cash-generating unit to which significant goodwill
or indefinite-lived intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when
an impairment loss has been recognised or reversed. The adoption of this standard has had no significant impact.
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities: The amendments clarify the offsetting criteria, specifically whenan entity currently has a legal right of set off and when gross settlement is equivalent to net settlement. The adoption of this standard has
had no significant impact.
There are no other new standards, amendments to standards or interpretations mandatory for the first time for the year ending 31 March 2015.
(b) Basis of preparation
The Financial Statements are presented in Pounds Sterling, rounded to the nearest £0.1m and are prepared on the historical cost basis except
as described on page 73 under the heading “Financial Instruments”.
The preparation of Financial Statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The most significant judgements and estimates made in applying
the Group accounting policies relate to:Fair value measurements on business combinations
The measurement of fair values on a business combination requires the recognition and measurement of the identifiable assets, liabilities andcontingent liabilities. The key judgements involved are the identification and valuation of intangible assets which require the estimation of future
cash flows and the selection of a suitable discount rate (see Note 15).
Impairment of intangible assets (including goodwill) and tangible assets
Goodwill is held at cost and tested annually for impairment and amortised intangibles and tangible assets are tested for impairment where there
are indications of impairment. These impairment tests require the Group to make an estimate of the expected cash flows and to select suitablediscount rates. These require an estimation of the value in use of these assets (see Note 15).

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Financial statements

IFRS 12 Disclosure of Interests in Other Entities: This new standard contains the disclosure requirements for entities that have interestsin subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities.

Accounting Policies continued(b) Basis of preparation continued
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past expectations
or events which can be reasonably estimated. The timing of recognition requires the application of judgement to existing facts and circumstances
which can be subject to change. Amounts provided represent the Group’s best estimate of exposure based on currently available information.
Revenue recognition
Revenue is recognised when, in the opinion of the Group, the significant risks and rewards of ownership have transferred to the buyer. The complex
technical nature of the Group’s products means that the application of judgement is required in determining whether those risks and rewards
have passed, notably in determining whether shipping terms have been met or customer acceptance of the product received.
The following other significant judgements and estimates were made in applying the Group accounting policies:
Measurement of defined benefit scheme liabilities
The Group recognises and measures costs relating to defined benefit pension schemes in accordance with IAS 19 Employee Benefits. In applying
IAS 19 the costs are assessed in accordance with the advice of independent qualified actuaries. This requires the exercise of judgement in relation
to the estimation of future changes in salaries and inflation, as well as mortality rates, expected returns on plan assets and the selection of suitablediscount rates. Further detail is provided in Note 23.
Contingent purchase consideration
Contingent purchase consideration is measured at fair value at the date of acquisition and tested annually against the criteria for payment, withmovements in fair value being recorded in the Consolidated Statement of Income. The key judgements involved are the estimation of future cash flows
and profitability of the acquired business and the selection of a suitable discount rate.
Capitalised development costs
Capitalised development costs involve judgements around the future economic benefits that will flow from the associated development activity
and in particular the Group’s assessment of the technical and commercial feasibility of the product to be developed.
Deferred tax assets
A deferred tax asset is recognised in the period if it is probable that future taxable profits will be available against which the asset can be utilised.
This requires the exercise of judgement in relation to the estimation of future taxable profit.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods. The key areas where estimates have been used
and assumptions applied are in the calculation of provisions, the valuation of acquired intangible assets, the impairment testing of goodwill
and the estimation of defined benefit pension plan liabilities.
(c) Basis of consolidation
The Group Financial Statements include the accounts of Oxford Instruments plc and its subsidiary companies adjusted to eliminate intra-groupbalances and any unrealised gains and losses or income and expenses arising from intra-group transactions.
Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed to or has rights to variable returns from its investment
with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights thatare currently exercisable or convertible are taken into account. The results of subsidiary companies are included in the consolidated financial
statements from the date that control commences until the date that control ceases.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterlingat exchange rates ruling at the end of the reporting period. Income statements and cash flows of foreign operations are translated into Sterlingat average quarterly exchange rates which approximate foreign exchange rates at the date of the transaction. Foreign exchange differences
arising on retranslation are recognised directly in a separate translation reserve.
The acquisition method is used to account for the acquisition of subsidiaries.
(d) Foreign currency
An individual entity’s transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rate ruling at that date. Foreignexchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historicalcost in a foreign currency are translated using the exchange rate at the date of the transaction.

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(e) Financial instruments
Financial assets and liabilities are recognised in the Group’s Consolidated Statement of Financial Position when the Group becomes a party
to the contractual provisions of the instrument.
(i)	Derivative financial instruments of the Group are used to hedge its exposure to interest rate, foreign currency and commodity pricing risks arisingfrom operational, financing and investment activities. The Group does not hold or issue derivative financial instruments for trading purposes.
All derivatives are initially recognised at fair value; attributable transaction costs are recognised in profit or loss as incurred. Derivatives comprisinginterest rate swaps, foreign exchange contracts and options and metal futures contracts are classified as “fair value through profit and loss”
under IAS 39, unless designated as hedges. Subsequent to initial recognition, derivatives are measured at fair value and gains or losses on thesettlement of such derivatives are recognised in operating expenses. Where such derivatives relate to the following year’s exposure, any gains
or losses resulting from the change in fair value are taken to the mark to market gains/losses line within financial income or expense.
(ii)	Changes in the fair value of the derivative hedging instruments designated as cash flow hedges are recognised in equity to the extent that thehedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the Consolidated Statement of Income.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting
is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs.
When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when
it is recognised. In other cases the amount recognised in equity is transferred to the Consolidated Statement of Income in the same periodthat the hedged item affects profit or loss.
(iii)	The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future
cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.
(iv)	The fair value of forward exchange contracts is their market price at the Consolidated Statement of Financial Position date, being the present
value of the forward price. The gain or loss on remeasurement to fair value of forward exchange contracts is recognised immediately in theConsolidated Statement of Income.

(vi)	Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing
borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over theperiod of the borrowing on an effective interest basis.
(f) Property, plant and equipment
Property, plant and equipment is stated at historical cost less provisions for impairment (see accounting policy l) and depreciation which,with the exception of freehold land which is not depreciated, is provided on a straight-line basis over each asset’s estimated economic life.
Depreciation is provided based on historical cost less estimated residual value. The principal estimated economic lives used for this purpose are:Freehold buildings, long leasehold land and buildings
Leasehold improvements (less than 50 years’ duration)
Furniture and fittings
Machinery and other equipment
Computer equipment
Vehicles50 years
Period of lease
10 years
5 to 10 years
4 years
4 years

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal withthe carrying amount of property, plant and equipment and are recognised in the Consolidated Statement of Income.
(g) Intangible assets(i) Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents amounts arising on acquisition of subsidiaries.
In respect of business acquisitions that have occurred since 31 March 2004, goodwill represents the difference between the cost of the acquisition
and the fair value of the assets, liabilities and contingent liabilities acquired. In respect of acquisitions prior to this date, goodwill is included on thebasis of its deemed cost, which represents the amount recorded under previous GAAP.
The Group now expenses transaction costs associated with its acquisitions and movements in liabilities relating to contingent consideration within
the Consolidated Statement of Income in conformity with the revised IFRS 3. The carrying value of contingent consideration is reassessed annually.
Goodwill arising on acquisitions is stated at cost less any accumulated impairment losses and allocated to cash generating units that are anticipatedto benefit from the combination. It is not amortised but is tested annually for impairment (see accounting policy l), or more frequently when there
is an indicator that the unit may be impaired.

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73

Financial statements(v)	Contingent purchase consideration is measured at fair value at the date of acquisition and subsequently carried at fair value, with movements
recognised in the Consolidated Statement of Income.

Accounting Policies continued(g) Intangible assets continued(ii) Development costs
Research and development costs are charged to the Consolidated Statement of Income in the year in which they are incurred unless development
expenditure is applied to a plan or design for the production of new or substantially improved products, in which case they are capitalised.
The criteria for capitalisation include demonstration of the technical feasibility of completing a new intangible asset that will be available
for sale and that the asset will generate probable future economic benefits. Where expenditure meets the criteria, development costs
are capitalised and amortised through the Consolidated Statement of Income over their useful economic lives.
(iii) Acquired intangible assets
An intangible asset acquired with a subsidiary undertaking is recognised as an intangible asset if it is separable from the acquired business orarises from contractual or legal rights, is expected to generate future economic benefits and its fair value can be reliably measured. The asset
is amortised through the Consolidated Statement of Income over it useful economic life.
(iv) Amortisation
Amortisation of intangible assets is charged to the Consolidated Statement of Income on a systematic basis in proportion to the use of the assets
over their estimated useful economic lives as follows:
Capitalised development costs
Technology related acquired intangibles
Customer related acquired intangibles
Software3 to 5 years
5 to 12 years
6 months to 15 years
10 years(h) Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently stated at their amortised cost less appropriate allowances
for amounts which are expected to be non-recoverable.
(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour, an attributable proportion of production
overheads based on normal operating capacity and all other expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completionand selling expenses.
Provision is made for obsolete, slow-moving and defective stock where appropriate in light of recent usage, expected future requirements,
new product introduction plans and likely realisable values.
(j) Cash and cash equivalents
Cash and cash equivalents are carried in the Consolidated Statement of Financial Position at amortised cost.
Cash and cash equivalents comprise cash balances and call deposits and are carried at amortised cost. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purposeof the Consolidated Statement of Cash Flows.
(k) Non-current assets held for sale
A non-current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuinguse, it is available for immediate sale and sale is highly probable within one year.
Immediately before classification as held for sale, the measurement of the assets is brought up-to-date in accordance with applicable IFRSs.
Then, on initial classification as held for sale, non-current assets are recognised at the lower of their carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale are included in the Consolidated Statement of Income, even when the asset
has previously been revalued. The same applies to gains and losses on subsequent remeasurement.

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(l) Impairment of non-current assets
All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying value may be impaired.
Additionally, goodwill is subject to an annual impairment review.
For the purposes of impairment testing assets are grouped together into the smallest group of assets that generates cash flows from continuing
use that are largely independent of the cash inflows from other groups of assets.
An impairment loss is recognised in the Consolidated Statement of Income as under the administration and shared services heading, to the extent
that an asset’s carrying value, or a cash generating unit’s carrying value, exceeds its recoverable amount, which represents the higher of its net realisablevalue and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset or from the cash generating
unit to which it relates. The present value is calculated using a discount rate that reflects the current market assessment of the time value of money
and the risks specific to the asset concerned.
Impairment losses recognised in previous periods for an asset other than goodwill are reversed if there has been a change in estimates used
to determine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does not exceed its carrying amount
had the impairment loss not been recognised in previous periods. Impairment losses in respect of goodwill are not reversed.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocatedto cash generating units and then to reduce the carrying amount of the other assets in the unit.
(m) Employee benefits
The Group operates a number of defined benefit and defined contribution plans which require contributions to be made to independent trustee
administered funds.
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Statement of Income as incurred.
(ii) Defined benefit plans

All actuarial gains and losses in calculating the Group’s net obligation are recognised in the Consolidated Statement of Comprehensive Incomein the year.
The charge to the Consolidated Statement of Income reflects the current service cost. The interest expense or income is calculated on the net
defined benefit liability by applying the discount rate to the net defined benefit liability, and is included within financial expenditure or financial
income in the Consolidated Statement of Income respectively.
(iii) Share-based payment transactions
The fair value of equity settled share option programmes is measured at grant date and charged to the Consolidated Statement of Income,with a corresponding increase in equity, on a straight-line basis over the period during which the employees become unconditionally entitledto the options. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions
upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due
to market performance conditions not being met.
(n) Provisions
A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive obligation asa result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for warranty
and product related liability is recognised when the underlying products are sold. A provision for restructuring is recognised when the Group has
approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced publicly. A provision for
onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract. A provision for a claim or dispute is made when it is considered probable that an adverse outcome
will occur and the amount of the loss can be reasonably estimated.
Contractual and other provisions represent the Directors’ best estimate of the cost of settling future obligations where the Directors, taking
into account professional advice received, assess that it is more likely than not that such proceedings may be successful.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liabilities.

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75

Financial statements

The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future
benefit that current and past employees have earned in return for their service in prior periods. That benefit is discounted to determine its present
value and the fair value of any plan assets is deducted. The calculation is performed by a qualified actuary using the projected unit credit method.

Accounting Policies continued(o) Trade and other payables
Trade and other payables are initially recognised at their fair value and subsequently stated at amortised cost.
(p) Government grants
Grants from Governments are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Groupwill comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the Consolidated Statement of Income over the period necessary to match themwith the costs they are intended to compensate. Government grants relating to property, plant and equipment are included in other current liabilities
and are credited to the Consolidated Statement of Income on a straight-line basis over the expected useful economic lives of the related assets.
(q) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing
borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the Consolidated Statementof Income over the period of the borrowings on an effective interest basis.
(r) Revenue
Revenue is recognised in the Consolidated Statement of Income when the significant risks and rewards of ownership have transferred to thebuyer. In the Industrial Products segment this is generally considered to be on dispatch, as products have a low level of customisation and are
manufactured on a routine basis. In the Nanotechnology Tools segment products are generally bespoke and customer contracts more complex.
As such, there are a number of conditions which must be satisfied before revenue can be recognised. These can include: legal, contractual ownership;passing internal quality control testing; dispatch from manufacturing sites; installation at customer sites; customer inspection both before andafter installation; and/or, ultimately, customer acceptance. Given these conditions, a greater degree of consideration is given as to whether theterms of sale have been met and whether revenue can be recognised for each product. In the Services segment, revenue for maintenance andsupport is recognised on a pro-rata basis over the length of the contract period. Revenue excludes value added tax and similar sales-based taxes
and is stated before commissions payable to agents.
(s) Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; theinitial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the Consolidated Statement of Financial Position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
(t) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received
are recognised in the Consolidated Statement of Income as an integral part of the total lease expense.

76

Oxford Instruments plc | Report and Financial Statements 2015

(u) Segment reporting
An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including any revenues and expenses that relate to transactions with any of the Group’s other components. Operating components are
combined into aggregated operating segments to the extent that they have similar economic characteristics. Aggregated operating segments’operating results are reviewed regularly by the Group’s Board of Directors to make decisions about resources to be allocated to the segment andto assess its performance, for which discrete financial information is available. Segment results that are reported to the Board include items directly
attributable to a segment as well as those that can be allocated on a reasonable basis.
A reportable segment is an aggregated operating segment in respect of which revenue or profit exceeds 10% of the Group total. Discrete
financial information is disclosed for each reportable segment.
(v) Dividends
Interim and final dividends are recognised as a liability when they are no longer at the discretion of the Company.
(w) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been issued by the IASB and endorsed by the EU and are effective
for annual periods beginning after 1 April 2015. They have not been applied in preparing these consolidated Financial Statements. Those which
may be relevant to the Group are set out below:• Amendments to IAS 19 Defined Benefit Plans – Employee contributions: The amendments introduce a relief that will reduce the complexity
and burden of accounting for certain contributions from employees or third parties. The Group has considered the impact of this amendmentin future periods on profit, earnings per share and net assets. It is not expected to have a material impact.
A number of other new standards, amendments to standards and interpretations have been issued by the IASB, although they are not yet endorsedby the EU, and are effective for annual periods beginning after 1 April 2015. They have not been applied in preparing these consolidated Financial
Statements. The two standards that may be relevant to the Group are set out below:• IFRS 15 Revenue from Contracts with Customers, which becomes mandatory for the Group’s consolidated Financial Statements for the annual
period beginning 1 April 2017. The potential impact on the Group of the new standard is still being assessed.

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77

Financial statements• IFRS 9 Financial Instruments, which becomes mandatory for the Group’s consolidated Financial Statements for the annual period beginningon 1 April 2015 and could change the classification and measurement of financial assets.

Consolidated Statement of Income
year ended 31 March 2015

Adjusted*£m

Adjustingitems*
£m

Total
£m

385.5
(214.3)

—
(0.2)

385.5
(214.5)171.2(30.8)(65.6)(34.8)
2.7

(0.2)
—
—
(39.2)—

171.0(30.8)(65.6)(74.0)
2.7

42.7(39.4)

3.3

0.1

—

0.1

0.1

—

0.1

23
8

(1.9)
(5.3)

—
(5.9)

(11.2)

Financial expenditure

(7.2)

(5.9)

(13.1)

Profit/(loss) before income tax
Income tax (expense)/credit

12

35.6
(8.1)

(45.3)
11.5

(9.7)
3.4

27.5

(33.8)

(6.3)

Notes

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Foreign exchange

35Operating profit
Other financial income

7

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

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

Earnings per share
Basic earnings per share
Diluted earnings per share
Dividends per share
Dividends paid
Dividends proposed

2
2

(1.9)

pence

pence

48.2
48.0

(11.1)(11.1)

13
13

12.4
13.0

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

The attached notes form part of the Financial Statements.

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Oxford Instruments plc | Report and Financial Statements 2015

Consolidated Statement of Income
year ended 31 March 2014

Adjusted*£m

Adjustingitems*
£m

Total
£m

360.1
(196.6)

—
(3.7)

360.1
(200.3)163.5(25.1)(56.7)(33.1)
1.7

(3.7)
—
—
(22.6)—

159.8(25.1)(56.7)(55.7)
1.7

50.3(26.3)

24.0

0.3

4.1

4.4

0.3

4.1

4.4

23
8

(2.0)
(1.5)

—
(0.9)

(2.4)

Financial expenditure

(3.5)

(0.9)

(4.4)

Profit/(loss) before income tax
Income tax (expense)/credit

12

47.1
(8.7)

(23.1)
2.9

24.0
(5.8)

38.4

(20.2)

18.2

Notes

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Foreign exchange

35Operating profit
Other financial income

7

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

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

2
2

pence

pence

67.7
67.3

32.1
31.9

13
13

11.2
12.4

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

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79

Financial statements

Earnings per share
Basic earnings per share
Diluted earnings per share
Dividends per share
Dividends paid
Dividends proposed(2.0)

Consolidated Statement of Comprehensive Income
year ended 31 March 2015
2015
£m

2014
£m

(6.3)

18.2

0.1
7.3
—

—
(8.4)
—

(10.8)
2.3

(1.9)
(1.0)

Total other comprehensive expense(1.1)(11.3)

Total comprehensive (expense)/income for the year attributable to equity Shareholders of the parent

(7.4)

6.9

Notes

(Loss)/profit for the year
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Gain on effective portion of changes in fair value of cash flow hedges, net of amounts recycled
Foreign exchange translation differences
Tax on items that may be reclassified to profit or loss
Items that will not be reclassified subsequently to profit or loss
Remeasurement loss in respect of post-retirement benefits
Tax on items that will not be reclassified to profit or loss

80

23
12

Oxford Instruments plc | Report and Financial Statements 2015

Consolidated Statement of Financial Position
as at 31 March 2015

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

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

2015
£m

2014
£m

14
15
16

33.1
231.3
20.1

34.4
247.9
11.2

284.5

293.5

70.8
87.3
3.3
3.4
25.1

68.3
80.9
1.0
5.3
32.6

189.9

188.1

474.4

481.6

2.9
61.5
0.2
2.9
58.0

2.9
61.3
0.1
(4.4)
80.3

125.5

140.2

144.0
0.8
53.5
6.2

141.4
13.1
46.3
12.0

204.5

212.8

—
121.6
2.6
4.1
16.1

15.5
99.2
3.7
0.5
9.7

17
18
20

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
Other payables
Retirement benefit obligations
Deferred tax liabilities

21

22
24
23
16

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

22
24
20
25

144.4

128.6

Total liabilities

348.9

341.4

Total liabilities and equity

474.4

481.6

The Financial Statements were approved by the Board of Directors on 9 June 2015 and signed on its behalf by:

Jonathan Flint
Director
Company Number: 775598

Kevin Boyd
Director

Report and Financial Statements 2015 | Oxford Instruments plc

81

Financial statements

Notes

Consolidated Statement of Changes in Equity
year ended 31 March 2015

Balance at 1 April 2014
Total comprehensive income:Loss for the year
Other comprehensive income:– Foreign exchange translation differences–G ain on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

Sharecapital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

2.9

61.3

0.1

(4.4)

80.3

140.2

—

—

—

—

(6.3)

(6.3)

—

—

—

7.3

—

7.3

—

—

0.1

—

—

– Remeasurement loss in respect of post-retirement benefits– T ax on items recognised directly in other comprehensive income

—
—

—
—

—
—

—
—

(10.8)
2.3

0.1(10.8)
2.3

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

—

—

0.1

7.3

(14.8)(7.4)

Transactions with owners recorded directly in equity:–C harge/(credit) in respect of employee service costs settled
by award of share options

—

—

—

—

(0.2)

– Tax charge in respect of share options– Proceeds from shares issued– Dividends paid

—
—
—

—
0.2
—

—
—
—

—
—
—

(0.2)
—
(7.1)

(0.2)
(0.2)
0.2
(7.1)

Total transactions with owners recorded directly in equity

—

0.2

—

—

(7.5)

(7.3)

Balance at 31 March 2015

2.9

61.5

0.2

2.9

58.0

125.5

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased and then cancelled during
the year ended 31 March 1999, and the hedging reserve in respect of the effective portion of changes in value of commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 from the translation of the Group’s
net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2014: 183,145) of its own shares in an employee benefit trust. The cost of these shares is included within retained
earnings. There was no movement in the shares held by the trust during the year.

82

Oxford Instruments plc | Report and Financial Statements 2015

Consolidated Statement of Changes in Equity
year ended 31 March 2014

Balance at 1 April 2013
Total comprehensive income:
Profit for the year
Other comprehensive income:– Foreign exchange translation differences–G ain on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

Sharecapital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

2.8

60.6

0.1

4.0

70.2

137.7

—

—

—

—

18.2

18.2

—

—

—

(8.4)

—

(8.4)

—

—

—

—

—

– Remeasurement loss in respect of post-retirement benefits– Tax on items recognised directly in other comprehensive income

—
—

—
—

—
—

—
—

(1.9)
(1.0)

—
(1.9)
(1.0)

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

—

—

—

(8.4)

15.3

6.9

—

—

—

—

1.6

– Tax charge in respect of share options– Proceeds from shares issued– Dividends paid

—
0.1
—

—
0.7
—

—
—
—

—
—
—

(0.4)
—
(6.4)

1.6
(0.4)
0.8
(6.4)

Total transactions with owners recorded directly in equity

0.1

0.7

—

—

(5.2)

(4.4)

Balance at 31 March 2014

2.9

61.3

0.1

(4.4)

80.3

140.2

Report and Financial Statements 2015 | Oxford Instruments plc

83

Financial statements

Transactions with owners recorded directly in equity:–C harge/(credit) in respect of employee service costs settled
by award of share options

Consolidated Statement of Cash Flows
year ended 31 March 2015
2015
£m

2014
£m

(Loss)/profit for the year
Adjustments for:
Income tax expense
Net financial expense
Acquisition related fair value adjustments to inventory
Acquisition related costs
Restructuring costs
Contingent consideration – further amount deemed payable
Contingent consideration deemed no longer payable
Settlement loss on US pension scheme
Amortisation and impairment of acquired intangibles
Depreciation of property, plant and equipment
Amortisation and impairment of capitalised development costs

(6.3)

18.2

(3.4)
13.0
0.2
2.2
9.9
6.8
(1.4)
—
21.7
5.6
4.7

5.8
—
3.7
7.8
—
—
—
0.1
14.7
5.0
3.9

Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Acquisition related costs paid
Restructuring costs paid
Cash payments to the pension scheme more than the charge to operating profit

53.0
0.2
(0.2)
(1.9)
(1.2)
(5.9)

59.2
0.3
1.6
(6.4)
—
(5.4)

Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Decrease/(increase) in payables and provisions
Increase/(decrease) in customer deposits

44.0
(3.0)
(4.4)
0.5
1.8

49.3
(2.9)
(3.8)
(3.3)
(10.9)Cash generated from operations
Interest paid
Income taxes paid

38.9
(5.0)
(9.1)

28.4
(1.0)
(6.2)

Net cash from operating activities

24.8

21.2

Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Capitalised development expenditure

(0.8)
(4.4)
(1.0)
(8.0)

(165.7)
(6.8)
—
(5.4)

Net cash used in investing activities(14.2)(177.9)Cash flows from financing activities
Proceeds from issue of share capital(Decrease)/increase in borrowings
Dividends paid

0.2
(12.9)
(7.1)

0.8
156.9
(6.4)

Net cash from financing activities(19.8)

151.3

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held

(9.2)
32.6
1.7

(5.4)
39.2
(1.2)

Cash and cash equivalents at end of the year

25.1

32.6

Reconciliation of changes in cash and cash equivalents to movement in net debt
Decrease in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents

(9.2)
1.7

(5.4)
(1.2)

Cash outflow/(inflow) from decrease/increase in debt

(7.5)
12.9

(6.6)
(156.9)Movement in net cash in the year
Net (debt)/cash at start of the year

5.4
(124.3)(163.5)39.2

Net debt at the end of the year

(118.9)(124.3)84

Oxford Instruments plc | Report and Financial Statements 2015

Notes to the Financial Statements
year ended 31 March 2015
1 Non-GAAP measures
The Directors present the following non-GAAP measures as they consider that they give a better indication of the underlying performanceof the business.
Reconciliation between profit before income tax and adjusted profit
2015
£m

2014
£m

(Loss)/profit before income tax
Reversal of acquisition related fair value adjustments to inventory
Acquisition related costs
Restructuring costs
Amortisation and impairment of acquired intangibles
Contingent consideration – further amount deemed payable
Contingent consideration deemed no longer payable
Unwind of discount in respect of contingent consideration
Mark to market loss/(gain) in respect of derivative financial instruments
Settlement loss on US pension scheme

(9.7)
0.2
2.2
9.9
21.7
6.8
(1.4)
1.1
4.8
—

24.0
3.7
7.8
—
14.7
—
—
0.9
(4.1)

Adjusted profit before income tax
Share of taxation

35.6
(8.1)

47.1
(8.7)

Adjusted profit for the year

27.5

38.4

0.1

The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide a measure that includes
results from acquired businesses on a consistent basis over time to assist comparison of performance.
Financial statements

Acquisition related costs comprise professional fees incurred in relation to mergers and acquisitions activity and any consideration which,under IFRS 3 (revised), falls to be treated as a post acquisition employment expense.
In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment of acquired intangible
assets and goodwill and the unwind of discounts in respect of contingent consideration relating to business combinations.
In the current period, a further £6.8m has been provided in respect of additional contingent consideration expected to be due in respectof the acquisition of Platinum Medical Imaging in November 2011.
In the current period, £1.4m relating to contingent consideration on the acquisition of RMG Technology Limited, which the Directors
no longer consider will be payable has been released.
Restructuring costs comprise the one-off costs in respect of the cost reduction programme referred to in the Review of the Year and the
refocusing of the Plasma Technology business as also described in the Review of the Year.
During the prior year the Group purchased annuities for 27 members of the US defined benefit pension scheme. A settlement loss of £0.1m
crystallised on purchase.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured
at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does not take advantage of the hedge
accounting rules provided for in IAS 39 since that standard requires certain stringent criteria to be met in order to hedge account, which, in theparticular 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 the extent that instruments are hedges of future transactions,adjusted profit for the year is stated before changes in the valuation of these instruments so that the underlying performance of the Groupcan be more clearly seen.
In calculating the share of tax attributable to adjusted profit before tax in 2011 a one-off recognition of deferred tax assets relating to the Group’s
UK businesses of £11.3m was excluded. At that time the Group announced its intention to exclude the reversal of this deferred tax from thecalculation of the share of tax attributable to adjusted profit before tax in the years in which it reverses. In the current period tax losses arosein the UK and consequently no deferred tax reversed. In the prior period £2.2m reversed and was excluded from the tax attributable to adjusted
profit before tax.

Report and Financial Statements 2015 | Oxford Instruments plc

85

Notes to the Financial Statements continued
year ended 31 March 2015
2 Earnings per share
The calculation of basic and adjusted earnings per share is based on the profit for the year as shown in the Consolidated Statement of Income
and the adjusted profit for the year as shown in Note 1 respectively. Basic and adjusted earnings are divided by the weighted average numberof ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership Trust.
2015
£m

2014
£m

Basic earnings
Adjusted earnings (Note 1)

(6.3)
27.5

18.2
38.4

Weighted average number of shares

57.1

56.8

pence

pence

(11.1)
48.2

32.1
67.7

Basic earnings per share
Adjusted earnings per share

The weighted average number of shares used in the calculation excludes shares held by the Employee Share Ownership Trust, as follows:
2015
Sharesmillion2014
SharesmillionWeighted average number of shares outstanding
Less shares held by Employee Share Ownership Trust

57.3
(0.2)

57.0
(0.2)

Weighted average number of shares used in calculation of basic earnings per share

57.1

56.8

2015
Sharesmillion2014
SharesmillionWeighted average number of ordinary shares per basic earnings per share calculations
Effect of shares under option

57.1
0.2

56.8
0.4

Weighted average number of ordinary shares per diluted earnings per share calculations

57.3

57.2

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

In the current year the Group reported a loss, and as such basic earnings per share was equal to reported diluted earnings per share. This is dueto the fact that the shares under option above would have an anti-dilutive effect. Adjusted diluted earnings per share has been calculated in a mannerconsistent with previous periods.
3 Segment information
The Group has nine 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 segments on the basisof the economic characteristics discussed below:• the Nanotechnology Tools segment contains a group of businesses, supplying similar products, characterised by a high degree of customisationand high unit prices. These are the Group’s highest technology products serving research customers in both the public and private sectors;• the Industrial Products segment contains a group of businesses supplying high technology products and components manufactured in medium
volume for industrial customers; and• the Service segment contains the Group’s service business as well as service revenues from other parts of the Group.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a reasonable basis. Inter-segment
pricing is determined on an arm’s length basis. The operating results of each are regularly reviewed by the Chief Operating Decision Maker, which
is deemed to be the Board of Directors. Discrete financial information is available for each segment and used by the Board of Directors for decisions
on resource allocation and to assess performance. No asset information is presented below as this information is not presented in reportingto the Group’s Board of Directors.

86

Oxford Instruments plc | Report and Financial Statements 2015

3 Segment information continueda) Analysis by business
Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

External revenue
Inter-segment revenue

210.9
0.3

106.0
1.1

68.6
—

385.5

Total segment revenue

211.2

107.1

68.6

Segment adjusted operating profit

20.7

6.3

15.7

42.7

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

External revenue
Inter-segment revenue

180.5
0.1

113.3
1.4

66.3
0.1

360.1

Total segment revenue

180.6

114.7

66.4

Segment adjusted operating profit

21.2

15.6

13.5

50.3

2015
£m

2014
£m

Adjusted profit for reportable segments
Acquisition related costs
Restructuring costs
Settlement loss on US pension scheme
Reversal of acquisition related fair value adjustments to inventory
Contingent consideration – further amount deemed payable
Contingent consideration deemed no longer payable
Amortisation and impairment of acquired intangibles
Financial income
Financial expenditure

42.7
(2.2)
(9.9)
—
(0.2)
(6.8)
1.4
(21.7)
0.1(13.1)

50.3
(7.8)
—
(0.1)
(3.7)
—
—
(14.7)
4.4(4.4)(Loss)/profit before income tax

(9.7)

24.0

Year to 31 March 2015

Year to 31 March 2014

Reconciliation of reportable segment profit

2015

2014

Depreciation£m

Capitalexpenditure£m

Depreciation£m

Capitalexpenditure£mNanotechnology Tools
Industrial Products
Service
Unallocated Group items

3.0
1.9
0.3
0.4

2.6
1.4
0.1
1.3

2.6
1.8
0.2
0.4

3.0
1.6
0.7
1.5

Total

5.6

5.4

5.0

6.8

Report and Financial Statements 2015 | Oxford Instruments plc

87

Financial statements

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

Notes to the Financial Statements continued
year ended 31 March 2015
3 Segment information continueda) Analysis by business continued
Reconciliation of reportable segment profit continued
2015

2014

Amortisation
andimpairment£m

Capitalised
development
costs
£m

Amortisation
andimpairment£m

Capitalised
development
costs
£m

Nanotechnology Tools
Industrial Products
Service
Unallocated Group items

3.8
1.6
—
21.7

6.1
1.9
—
—

3.0
0.9
—
14.7

3.8
1.6
—
—

Total

27.1

8.0

18.6

5.4

Amortisation of development costs is included in arriving at segment operating profit. Amortisation and impairment of acquired intangibles
is included below segment operating profit and excluded from the measure of operating profit reported to the Chief Operating Decision Maker
and so has been included within unallocated Group items.
b) Geographical analysis
The Group’s reportable segments are located across a number of geographical locations and make sales to customers in countries across the world.
The analysis below shows revenue and non-current assets (excluding deferred tax) for individual countries or regions that represent more than
5% of revenue.
Revenue from external customers by destination
2015
£m

2014
£m

UK
China
Japan
USA
Germany
Rest of Europe
Rest of Asia
Rest of World

37.0
55.4
31.8
126.6
25.8
51.4
44.2
13.3

33.6
50.4
37.4
95.9
30.3
59.7
34.9
17.9

Total

385.5

360.1

2015
£m

2014
£m

UK
China
Japan
USA
Germany
Rest of World

206.6
0.7
0.5
29.0
17.7
9.9

212.4
0.4
0.7
30.0
27.3
11.5

Total

264.4

282.3

2015
£000

2014
£000

Non-current assets (excluding deferred tax)

4 Auditor’s remuneration

Audit of these Financial Statements
Amounts received by the auditor and its associates in respect of:– Audit of Financial Statements of subsidiaries pursuant to legislation– Taxation compliance services– Audit related services

125

136

282
31
29

283
21
1

Total fees paid to the auditor and its associates

467

441

88

Oxford Instruments plc | Report and Financial Statements 2015

5 Research and development (R&D)
The total R&D spend by the Group is as follows:
2015
Nanotechnology
Tools
£m

R&D expense charged to theConsolidated Statement of Income

2014

Industrial
Products
£m

Total
£m

Nanotechnology
Tools
£m

22.5

Industrial
Products
£m

Total
£m

8.3

30.8

17.6

7.5

Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
Less: amortisation of R&D costs previously
capitalised as intangibles

(0.2)
0.9

(0.7)
1.1

(0.9)
2.0

(0.2)
0.6

(0.6)
1.5

(3.2)

(1.5)

(4.7)

(3.0)

(0.9)

Add: amounts capitalised as intangible assets

6.1

1.9

8.0

3.8

1.6

(3.9)
5.4

Total cash spent on R&D during the year

26.1

9.1

35.2

18.8

9.1

27.9

25.1
(0.8)
2.1

An additional £0.7m impairment of capitalised development is included within administration and shared services in the Consolidated Statementof Income relating to the refocusing of the Plasma Technology business.
6 Acquisitions
Andor Technology plc
On 21 January 2014 the Group acquired 100% of the issued listed share capital of Andor Technology plc for a net cash consideration of £158.1m.
Andor is a market leading supplier of high performance optical cameras, microscope systems and software.

Book value£m

Adjustments£m

Fair value£mIntangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Cash

9.4
6.0
11.1
10.3
(13.5)
(0.5)
17.2

70.2
(4.0)
2.5
0.5
(2.0)
(14.2)
—

79.6
2.0
13.6
10.8
(15.5)(14.7)
17.2

Net assets acquired
Goodwill

40.0

53.0

93.0
82.3

Total consideration
Cash acquired

175.3(17.2)Net cash outflow relating to the acquisition

158.1

During the year ended 31 March 2015, as a result of access to further information, management made some amendments to the provisional fairvalue adjustments presented in the prior year. As this was within the hindsight period, as allowed by IFRS 3, the difference has been included within
goodwill. As the difference is not material, the prior year balance sheet has not been restated.
The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce and synergistic benefits expected
to arise from the acquisition.

Report and Financial Statements 2015 | Oxford Instruments plc

89

Financial statements

The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made to better alignthe accounting policies of the acquired business with the Group accounting policies and to reflect the fair value of assets and liabilities acquired.
The business has been acquired for the purpose of integrating into the Nanotechnology Tools segment where it is believed that synergies can beobtained particularly in respect of routes to market.

Notes to the Financial Statements continued
year ended 31 March 2015
6 Acquisitions continued
Roentgenanalytik Systeme GmbHOn 31 December 2013 the Group acquired 100% of the issued share capital of Roentgenanalytik Systeme GmbH for a net cash considerationof £1.6m. The company specialises in designing and supplying instruments for coating thickness measurement and material analysis,using X-ray fluorescence (XRF).
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made to better alignthe accounting policies of the acquired business with the Group accounting policies and to reflect the fair value of assets and liabilities acquired.
The business has been acquired to strengthen Oxford Instruments’ range of XRF materials and coating thickness analysers.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Cash

—
0.2
0.1
(0.3)
0.1

1.2
—
—
0.2
—

1.2
0.2
0.1
(0.1)
0.1

Net assets acquired

0.1

1.4

Goodwill

1.5
0.2

Total consideration
Cash acquired

1.7
(0.1)

Net cash outflow relating to the acquisition

1.6

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce and synergistic benefits expected
to arise from the acquisition.
RMG Technology Ltd
On 8 November 2013 the Group acquired 100% of the issued share capital of RMG Technology Limited for an initial net cash considerationof £5.7m. RMG is a UK business specialising in Laser Induced Breakdown Spectrography.
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made to better alignthe accounting policies of the acquired business with the Group accounting policies. The business has been acquired for the purpose of integrating
into the Industrial Analysis segment where it will add a unique hand-held analyser to the Group’s product portfolio.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Cash

—
0.1
0.2
(0.3)
—
0.4

8.2
—
—
—
(1.6)
—

8.2
0.1
0.2
(0.3)
(1.6)
0.4

Net assets acquired
Goodwill

0.4

6.6

7.0
0.5

Total consideration
Cash acquired
Contingent consideration at acquisition

7.5
(0.4)
(1.4)

Net cash outflow relating to the acquisition

5.7

In the current period, it is no longer considered that the £1.4m relating to contingent consideration on the acquisition of RMG Technology Limited
will be payable, and it has been released to other operating income (see Note 1).
The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce and synergistic benefits expected
to arise from the acquisition.

90

Oxford Instruments plc | Report and Financial Statements 2015

7 Financial income

Interest receivable
Fair value movement on derivative financial instruments

2015
£m

2014
£m

0.1
—

0.3
4.1

0.1

4.4

2015
£m

2014
£m

5.3
1.9
1.1
4.8

1.5
2.0
0.9
—

13.1

4.4

2015
£m

2014
£m

101.6
11.7
4.4
(0.2)

83.8
9.4
3.7
1.6

117.5

98.5

8 Financial expenditure

Interest payable
Interest charge on pension scheme net liabilities
Unwind of discount on contingent consideration
Fair value movement on derivative financial instruments

9 Personnel costs

Wages and salaries
Social security costs
Contributions to defined contribution pension plans(Credit)/charge in respect of employee share options

10 Employees
The average number of people employed by the Group (including Directors and temporary employees) during the year was as follows:
2015
Number2014
NumberProduction
Sales and marketing
Research and development
Administration and shared services

1,047
581
462
330

958
478
337
277

Total average number of employees

2,420

2,050

Report and Financial Statements 2015 | Oxford Instruments plc

91

Financial statements

Directors’ emoluments are disclosed in the Directors’ Remuneration Report on pages 48 to 66 of this Annual Report.

Notes to the Financial Statements continued
year ended 31 March 2015
11 Share option schemes
The Group operates three share option schemes:
All employee Share Incentive Plan (SIP)All UK employees are eligible to participate in the Group’s HM Revenue and Customs approved SIP. Participating employees make a cash contribution
to the plan each month. The Group contributes a further amount equal to 20% of the employee’s contribution. Independent trustees then purchasematching shares in the market on behalf of the employees. The matching shares vest on the completion by the participating employee of a further
three years’ service and can be withdrawn from the plan tax-free after five years’ service.
Executive Share Option Scheme (ESO)
Options awarded under the Executive Share Option Scheme are made annually to certain senior managers. The exercise prices are determined according
to the mid-market closing share price on the day before the date of grant. Options have a life of ten years and a vesting period of three years.
Senior Executive Long Term Incentive Scheme (SELTIS)
Options awarded under the Senior Executive Long Term Incentive Scheme are made annually to certain senior managers. The exercise prices are nil.
Options have a life of seven years and a vesting period of three years.
Both the Executive Share Option Scheme and Senior Executive Long Term Incentive Scheme are subject to performance conditions which canbe found in the Directors’ Remuneration Report on pages 48 to 66.
Performance Share Plan Scheme (PSP)
Under the 2014 Performance Share Plan awards of performance shares (or nil cost options) are made annually to certain senior managers. Awards
have a life of ten years with vesting subject to achievement of performance targets and a vesting period of a minimum of three years (but may be
up to five years).
Administrative expenses include a credit of £0.2m (2014: charge of £1.6m) in respect of the cost of providing share options. The credit in the current
year arose as a result of options granted in 2012 under the Executive Share Option Scheme failing to meet their vesting conditions. The cost of shareoptions is calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period after adjusting
for an expectation of non-vesting.
Fair values are determined using an internal valuation model based on a modified Black-Scholes model. Expected volatility has been based on historicalvolatility over a period of time of the same length as the expected option life and ending on the grant date. Half of the ESO options issued before
2009, half of the PSP options and all SELTIS options use Total Shareholder Return (TSR) as a performance condition. As TSR is a market-based performance
condition, the accounting treatment differs from that for options subject to non-market performance conditions. This means that the TSR performance
conditions have been incorporated into the calculation of the fair value as a discount in calculating the fair value.
For options granted in the years ended 31 March 2015 and 2014, the fair value per option granted and the assumptions used in the calculation
are as follows:

Fair value at measurement date
Share price at grant date
Exercise price
Expected volatility
Expected option life (expressed as weighted average
life used in the modelling)
Expected dividend yield
Risk free interest rate

92

Senior Executive
Long Term
Incentive
SchemePerformance
Share
Plan Scheme

June
2014

October
2014

June
2014

July
2014

June
2013

March
2014

£9.62
£13.95
£nil
35.8%

£6.58
£9.72
£nil
34.6%

£5.50
£13.95£14.1541.9%£4.77£12.37£12.61
41.6%£5.49£14.55£14.5540.7%£4.99£12.72£12.8941.8%

3 years

3 years

6 years

6 years

6 years

0.9%
1.3%

1.3%
1.0%

0.9%
2.2%

1.0%
2.1%

0.8%
1.5%

6 years
0.9%
2.1%

Executive
Share Option Scheme

Executive
Share Option Scheme

Oxford Instruments plc | Report and Financial Statements 2015

11 Share option schemes continued
Performance Share Plan Scheme (PSP) continued
The options existing at the year end were as follows:

Options subsisting at the year end on unissued ordinary shares
Executive Share Option Schemes
July 2004
July 2005
July 2006
September 2007
December 2008
December 2009
January 2011
December 2011
December 2012
June 2013
March 2014
June 2014
July 2014
Total options subsisting on existing ordinary shares
Percentage of issued share capital

2015
Numberof shares

Exercise
price

Period when exercisable

2014
Numberof shares

—
980
9,500
6,000
12,83924,646
111,075
369,470
320,750
10,67094,000388,600
19,813

£2.18
£2.19
£2.10
£2.32
£1.35
£2.04
£7.05
£9.90
£13.88£14.55£12.89£14.15£12.61

15/07/07–14/07/14
15/07/08–14/07/15
15/07/09–14/07/16
28/08/10–27/09/17
16/12/11–15/12/18
17/12/12–16/12/19
07/01/14–06/01/21
14/12/14–13/12/21
19/12/15–18/12/22
12/06/16–11/06/23
20/03/17–19/03/24
13/06/17–12/06/24
08/07/17–07/07/24

1,500
1,715
10,2506,000
14,83935,051
136,987
433,050
373,775
10,670110,000——

1,368,343

1,133,837

2.4%

2.0%

120,325

Total options subsisting on existing ordinary shares

120,325

—

0.2%

—

Percentage of issued share capitalnil

10/10/17–09/10/21—

Options subsisting at the year end on existing ordinary shares held in trust
Senior Executive Long Term Incentive Scheme
January 2011
December 2011
December 2012
June 2014

15,500—32,80021,400Total options subsisting on existing ordinary shares held in trust

69,70088,1000.1%

0.2%

Percentage of issued share capital

nil
nil
nil
nil

07/01/14–06/01/18
14/12/14–13/12/18
19/12/15–18/12/19
19/12/15–18/12/19

15,50039,80032,800—The number and weighted average exercise prices of those options were as follows:
Weighted
average
exercise price2015

Numberofoptions
2015

Weighted
average
exercise price2014

Numberofoptions
2014

Outstanding at the beginning of the period
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year

£9.94
£10.58£12.42£5.68£9.74

1,221,937
570,238(137,945)(40,501)(55,361)£8.47£13.04£10.37£4.85£7.10

1,561,215
120,670(42,270)(334,005)(83,673)

Outstanding at the year end£10.46

1,558,368£9.94

1,221,937

Exercisable at the year end£8.26

550,010£4.96

221,842

The weighted average share price at the time of exercise of the options was £12.06 (2014: £16.98).

Report and Financial Statements 2015 | Oxford Instruments plc

93

Financial statements

Performance Share Plan
October 2014

Notes to the Financial Statements continued
year ended 31 March 2015
12 Income tax expense
Recognised in the Consolidated Statement of Income
2015
£m

2014
£m

6.5
(0.3)

6.5
(0.1)

6.2

6.4

Deferred tax expense
Origination and reversal of temporary differences
Recognition of deferred tax not previously recognised
Adjustment in respect of prior years

(9.0)
—
(0.6)

0.2
—
(0.8)

(9.6)

(0.6)

Total tax (credit)/expense

(3.4)

5.8

(9.7)

Current tax expense
Current year
Adjustment in respect of prior years

Reconciliation of effective tax rate
(Loss)/profit before income tax
Income tax using the UK corporation tax rate of 21% (2014: 23%)
Effect of:Tax rates other than the UK standard rate
Change in rate at which deferred tax recognised
Non-taxable income and expenses
Tax incentives not recognised in the Consolidated Statement of Income
Recognition of deferred tax not previously recognised
Movement in unrecognised deferred tax
Adjustment in respect of prior years

(2.0)

24.0
5.5

1.2
—
(1.5)
—
—
(0.2)
(0.9)

1.7
(0.2)
(0.1)
(0.4)
—
0.2
(0.9)

Total tax (credit)/expense

(3.4)

5.8

Taxation (credit)/charge recognised in other comprehensive income
Deferred tax – relating to employee benefits

Taxation charge recognised directly in equity
Deferred tax – relating to share options

(2.3)

1.0

(2.3)

1.0

0.2

0.4

On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were substantively
enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015)
were substantively enacted on 2 July 2013. The UK deferred tax balances at 31 March 2015 have been calculated based on the rate of 20% which
was substantively enacted at the balance sheet date.
13 Dividends per share
The following dividends per share were paid by the Group:

Previous year interim dividend
Previous year final dividend

94

2015
pence

2014
pence

3.36
9.04

3.05
8.15

12.40

11.20

Oxford Instruments plc | Report and Financial Statements 2015

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

Interim dividend
Final dividend

2015
pence

2014
pence

3.70
9.30

3.36
9.04

13.00

12.40

The interim dividend was not provided for at the year end and was paid on 9 April 2015. The payment of the interim dividend remains discretionary
until it is paid. The final proposed dividend of 9.30p per share (2014: 9.04p) was not provided at the year end and will be paid on 22 October
2015 subject to authorisation by the Shareholders at the forthcoming AGM.
14 Property, plant and equipment
Land andbuildings£mPlant andequipment£mFixtures andfittings£m

Cost
Balance at 1 April 2013

23.8

47.3

9.4

Additions – business combinations
Additions – other
Disposals
Transfer to intangible assets
Effect of movements in foreign exchange rates

0.9
1.2
(0.8)
—
(0.8)

0.9
5.0
(3.5)
(0.9)
(1.4)

0.2
0.6
(0.1)
—
(0.2)

80.5
2.0
6.8
(4.4)
(0.9)
(2.4)

Balance at 31 March 2014

24.3

47.4

9.9

81.6

Balance at 1 April 2014
Additions – other
Disposals
Effect of movements in foreign exchange rates

24.3
0.2
—
0.1

47.4
3.6
(1.9)
1.0

9.9
0.6
—
—

81.6
4.4
(1.9)
1.1

Balance at 31 March 2015

24.6

50.1

10.5

85.2

Depreciation and impairment losses
Balance at 1 April 2013
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates

6.3
0.9
(0.7)
(0.3)

34.8
3.3
(3.2)
(1.0)

6.5
0.8
(0.1)
(0.1)

47.6
5.0
(4.0)
(1.4)

Balance at 31 March 2014

6.2

33.9

7.1

47.2

Balance at 1 April 2014
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates

6.2
1.0
—
0.3

33.9
4.1
(1.7)
0.7

7.1
0.5
—
—

47.2
5.6
(1.7)
1.0

Balance at 31 March 2015

7.5

37.0

7.6

52.1

Carrying amounts
At 1 April 2013
At 31 March 2014 and 1 April 2014

17.5
18.1

12.5
13.5

2.9
2.8

32.9
34.4

At 31 March 2015

17.1

13.1

2.9

33.1

Total
£m

Report and Financial Statements 2015 | Oxford Instruments plc

95

Financial statements

At 31 March 2015, the net book value of plant and equipment included £1.2m (2014: £1.0m) of assets under construction.

Notes to the Financial Statements continued
year ended 31 March 2015
15 Intangible assets

Cost
Balance at 1 April 2013
Additions – business combinations
Additions – internally generated
Transfers from property, plant and equipment
Effect of movements in foreign exchange rates

Goodwill£m

Customer
relatedacquiredintangibles£mTechnology
relatedacquiredintangibles£m

Development
costs
acquiredintangibles£m

Development
costsinternallygenerated£m

Software
£m

Total
£m

25.8
83.6
—
—
(1.4)

28.8
19.6
—
—
(2.0)

60.4
67.6
—
—
(2.8)

4.9
1.8
—
—
(0.2)

38.2
—
5.4
—
(0.5)

—
—
—
0.9
—

158.1
172.6
5.4
0.9
(6.9)

Balance at 31 March 2014

108.0

46.4

125.2

6.5

43.1

0.9

330.1

Balance at 1 April 2014
Additions – internally generated
Effect of movements in foreignexchange rates

108.0
—

46.4
—

125.2
—

6.5
—

43.1
8.0

0.9
1.0

330.1
9.0

(0.4)

1.7

(1.5)

(0.6)

(0.8)

—

(1.6)

Balance at 31 March 2015

107.6

48.1

123.7

5.9

50.3

1.9

337.5

Amortisation and impairment losses
Balance at 1 April 2013
Amortisation and impairment charge for the year
Effect of movements in foreign exchange rates

1.3
0.4
(0.1)

17.3
5.1
(1.2)

19.7
6.6
(0.4)

2.0
2.6
(0.1)

25.9
3.9
(0.8)

—
—
—

66.2
18.6
(2.6)

Balance at 31 March 2014

1.6

21.2

25.9

4.5

29.0

—

82.2

Balance at 1 April 2014
Amortisation and impairment charge
for the year

1.6

21.2

25.9

4.5

29.0

—

82.2

—

7.3

14.2

0.2

5.4

—

27.1

Effect of movements in foreignexchange rates

(0.2)

0.6

(2.7)

(0.6)

(0.2)

—

(3.1)

Balance at 31 March 2015

1.4

29.1

37.4

4.1

34.2

—

106.2

Carrying amounts
At 1 April 2013

24.5

11.5

40.7

2.9

12.3

—

91.9

At 31 March 2014 and 1 April 2014

106.4

25.2

99.3

2.0

14.1

0.9

247.9

At 31 March 2015

106.2

19.0

86.3

1.8

16.1

1.9

231.3

The transfers from property, plant and equipment in the prior year relate to identifiable software assets.
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit
from that business combination. The carrying amount of goodwill was allocated to individual CGUs as follows:

Nanotechnology Tools
NanoScience
NanoAnalysis
AsylumAndor
UnallocatedIndustrial Products
Industrial Analysis
Magnetic Resonance
Austin Scientific
ServiceOI Service

96

2015
£m

2014
£m

6.3
9.3
20.8
61.4
—

2.2
3.9
8.8
—
83.0

3.6
2.3
1.8

4.0
2.3
1.6

0.7

0.6

106.2

106.4

Oxford Instruments plc | Report and Financial Statements 2015

15 Intangible assets continued
The unallocated goodwill in the prior year related to the acquisition of Andor Technology plc (see Note 6). In the current year this has been
allocated to the Andor, Nanoscience, Nanoanalysis and Asylum CGUs.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
Accounting standards require an impairment test to be carried out by determining the recoverable amount of each cash generating unit whichcontains goodwill. The recoverable amount is calculated as the higher of the fair value less costs to sell or the value in use of the CGU. In the Group’s
case the recoverable amount is based on value in use calculations. Value in use is calculated by discounting expected future cash flows and in particular
Board-approved five year cash flow forecasts, prepared by the management of each CGU, are used together with 3% (2014: 2.5%) per annum
revenue growth and 1% growth in overheads for each CGU for the subsequent 20 years. These assumptions, combined with the operational
leverage of the CGUs, result in cash flow growth for the subsequent 20 years ranging from 4.9% to 9.4%. These rates are considered
to be at or below long term market trends for the Group’s businesses.
Key assumptions
The key assumptions are those regarding discount rates, growth rates, expected selling volumes and prices and direct costs during the period.
The growth rates are based on industry growth factors. Changes in selling prices and direct costs are based on past practices and expectationsof future changes in the market.
The pre-tax weighted average costs of capital used for Nanotechnology Tools, Industrial Products and Service in impairment testing are 13.6%–14.2%(2014: 13.2%–15.3%), 13.8%–14.3% (2014: 12.3%–14.1%) and 14.8% (2014: 14.7%) respectively in line with the risk associated with eachof the business segments. Management have estimated these discount rates by reference to past experience and an industry average weighted
cost of capital as adjusted for appropriate risk factors reflecting current economic circumstances and the risk profiles of each CGU.
Sensitivity analysis

16 Deferred tax
Movements in deferred tax assets and liabilities were as follows:
Property,plant andequipment£m

Inventory£m

Employeebenefits£mIntangible
assets£m

Tax losses
£m

Other
£m

Total
£m

Balance 31 March 2013
Reclassification
Recognised in income
Recognised in other comprehensive income
Recognised directly in equity
Acquisitions
Foreign exchange

1.4
—
(1.4)
—
—
0.3
0.1

2.5
—
0.7
—
—
(0.7)
(0.3)

15.0
(0.7)
(1.5)
(1.0)
(0.4)
—
(0.3)

(5.7)
0.7
4.2
—
—
(18.6)
(0.3)

3.4
—
(2.3)
—
—
1.3
—

2.2
—
0.9
—
—
—
(0.3)

18.8
—
0.6
(1.0)
(0.4)
(17.7)(1.1)

Balance 31 March 2014
Reclassification
Recognised in income
Recognised in other comprehensive income
Recognised directly in equity
Acquisitions
Foreign exchange

0.4
—
(1.1)
—
—
—
(0.1)

2.2
—
0.7
—
—
—
—

11.1
—
(0.9)
2.3
(0.2)
—
0.2

(19.7)
—
6.7
—
—
0.9
1.0

2.4
—
2.0
—
—
0.8
(0.3)

2.8
—
2.2
—
—
(0.2)
0.7

(0.8)
—
9.6
2.3
(0.2)
1.5
1.5

Balance 31 March 2015

(0.8)

2.9

12.5

(11.1)

4.9

5.5

13.9

Report and Financial Statements 2015 | Oxford Instruments plc

97

Financial statements

The Group’s estimate of impairments is most sensitive to changes in the discount rate and forecast cash flows. Sensitivity analysis has been carriedout by reference to both of these assumptions. This demonstrated that a 170 basis point increase in the discount rate would be required in order toresult in an impairment in the Andor business, with no impairment arising in any other business. Similarly a 285 basis point reduction in the growthrate would be required in order to result in an impairment in the Andor business, with no impairment arising in any other business. The Andorbusiness is recently acquired and consequently it is to be expected that its carrying value and fair value are very similar. Accordingly, it is not
surprising that an adverse change in assumptions would lead to an impairment charge.

Notes to the Financial Statements continued
year ended 31 March 201516 Deferred tax continued
Certain deferred tax assets and liabilities have been offset as follows:
AssetsLiabilities

Net

2015
£m

2014
£m

2015
£m

2014
£m

2015
£m

2014
£m

Gross assets/(liabilities)
Offset38.9(18.8)

25.0(13.8)(25.0)
18.8(25.8)
13.8

13.9
—

(0.8)
—

Net assets/(liabilities)

20.1

11.2

(6.2)

(12.0)

13.9

(0.8)

2015
£m

2014
£m

1.1
4.9

1.2
10.7

6.0

11.9

Deferred tax assets have not been recognised in respect of the following items:

Deductible temporary differences
Tax losses

The tax losses and the deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised
in respect of these items as it is not probable that future taxable profits will be available in the subsidiaries concerned against which the Groupcan utilise the brought forward tax losses.
No deferred tax liability has been recognised in respect of £56.4m (2014: £37.4m) of undistributed earnings of overseas subsidiaries since
the majority of such distributions would not be taxable. In other cases the Group considers that it is able to control the timing of remittances
so that any tax is not expected to arise in the foreseeable future.
17 Inventories

Raw materials and consumables
Work in progress
Finished goods

2015
£m

2014
£m

21.2
28.0
21.6

23.0
26.2
19.1

70.8

68.3

The amount of inventory recognised as an expense was £190.3m (2014: £172.0m). In the ordinary course of business, the Group makes impairment
provisions for slow-moving, excess and obsolete inventory as appropriate. Inventory is stated after charging impairments of £2.9m in the current
period (2014: £0.5m). There were no credits reversing previous impairments in either the current or prior period. Impairments are included withingross profit.
Inventory carried at fair value less costs to sell is £nil (2014: £0.7m).

98

Oxford Instruments plc | Report and Financial Statements 2015

18 Trade and other receivables
2015
£m

2014
£m

Trade receivables
Less provision for impairment of receivables

78.1
(2.3)

75.3
(1.6)

Net trade receivables
Prepayments and accrued income
Other receivables

75.8
6.5
5.0

73.7
4.4
2.8

87.3

80.9

Trade receivables are non-interest-bearing. Standard credit terms provided to customers differ according to business and country and are typicallybetween 30 and 60 days.
The maximum exposure to credit risk for trade and other receivables by geographic region was:
2014
£m

UK
China
Japan
USA
Germany
Rest of Europe
Rest of Asia
Rest of the World

6.7
12.3
10.6
26.7
4.2
10.1
8.0
3.7

5.7
12.3
11.5
20.1
4.6
12.2
5.7
4.4

Total

82.3

76.5

2015
£m

2014
£m

50.7
18.0
8.5
5.1

44.8
18.6
9.4
3.7

82.3

76.5

2015
£m

2014
£m

Balance at start of year
Acquired on acquisition
Increase/(decrease) in allowance

1.6
—
0.7

1.5
0.3
(0.2)

Balance at end of year

2.3

1.6

The ageing of financial assets comprising net trade receivables and other receivables at the reporting date was:Current (not overdue)
Less than 31 days overdue
More than 30 days but less than 91 days overdue
More than 90 days overdue

In both periods presented the entire provision against trade receivables relates to balances more than 90 days overdue.
The movement in the allowance for impairment of trade receivables during the year was as follows:

Valuation allowances are used to record provisions for credit losses. The valuation allowance is reduced and the asset impaired when the customer
is in liquidation.

Report and Financial Statements 2015 | Oxford Instruments plc

99

Financial statements

2015
£m

Notes to the Financial Statements continued
year ended 31 March 2015
19 Financial risk management
The Group’s multinational operations and debt financing expose it to a variety of financial risks. In the course of its business, the Group is exposed
to foreign currency risk, interest rate risk, liquidity risk, commodity risk and credit risk. Financial risk management policies are set by the Board of
Directors. These policies are implemented by a central treasury function that has formal procedures to manage foreign exchange risk, interest raterisk and liquidity risk, including, where appropriate, the use of derivative financial instruments. Commodity risk is managed locally by the operating
businesses. The Group has clearly defined authority and approval limits.
In accordance with its treasury policy, the Group does not hold or use derivative financial instruments for trading or speculative purposes.
Such instruments are only used to manage the risks arising from operating or financial assets or liabilities or highly probable future transactions.
The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates, interest rates and certain
commodity prices.
The Group has adopted hedge accounting for a limited number of related commodity contracts as outlined below. However, in common witha number of other companies, the Group has decided that the additional costs of meeting the extensive documentation requirements of IAS 39
to apply hedge accounting to derivative financial instruments used for hedging exposure to foreign currency and interest rate volatility cannot
be justified. Accordingly the Group does not use hedge accounting for such derivatives.
Foreign currency risk
Foreign currency risk arises both where sale or purchase transactions are undertaken in currencies other than the respective functional currenciesof Group companies (transactional exposures) and where the results of overseas companies are consolidated into the Group’s reporting currencyof Sterling (translational exposures). The Group has operations around the world which record their results in a variety of different local functional
currencies. In countries where the Group does not have operations, it invariably has some customers or suppliers that transact in a foreign currency.
The Group is therefore exposed to the changes in foreign currency exchange rates between a number of different currencies but the Group’s primary
exposures relate to the US Dollar, the Euro and the Japanese Yen. To reduce uncertainty the Group maintains a rolling hedge equivalent to 80%of the exposure expected to arise over the following 12 months. The hedge comprises a mixture of fixed forward contracts and option based
products. The remaining 20% is sold on the spot market as it arises. The fair value of outstanding currency contracts recognised as a liability
as at 31 March 2015 amount to £4.1m (2014: £0.4m) and those recognised as an asset amount to £3.4m (2014: £5.3m).
Movements in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Income immediately.
However, in order to facilitate a more meaningful comparison of the Group’s performance year on year the element of these movementsthat relate to hedges in respect of future sales are treated as an adjusting item in the calculation of adjusted earnings (see Note 1).
The Group’s translational exposures to foreign currency risks can relate both to the Consolidated Statement of Income and net assets of overseas
subsidiaries. The Group’s policy is not to hedge the translational exposure that arises on consolidation of the consolidated statements of incomeof overseas subsidiaries.
Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of interest and also the interest cash flowrisk that results from borrowing at variable rates. The Group’s policy is to use a mixture of revolving short and medium term floating rate debt
under pinned by longer term fixed rate debt. The short and medium term floating rate debt provides flexibility to reduce debt levels as appropriate.
The longer term fixed rate debt provides stability and cost certainty to the Group’s financing structure.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages this risk by maintaining adequate
committed lines of funding from high quality lenders. The facilities committed to the Group as at 31 March 2015 are set out in Note 22.
Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets such as cash
balances, derivative financial instruments, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables andcash balances. The amounts recognised in the Consolidated Statement of Financial Position are net of appropriate allowances for doubtful receivables,
estimated by the Group’s management based on prior experience and their assessment of the current economic environment. Trade receivables
are subject to credit limits and control and approval procedures in the operating companies.
Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its tradereceivables. Credit risk associated with cash balances and derivative financial instruments is managed by transacting with financial institutions
with high quality credit ratings. In particular a Board-approved policy sets out guidelines for which categories of institutions may be used andthe maximum amount which may be invested with each institution within a particular category. Accordingly the Group’s associated credit risk
is limited. The Group has no significant concentration of credit risk. The Group’s maximum exposure to credit risk is represented by the carrying
amount of each financial asset, including derivative financial instruments, in the Consolidated Statement of Financial Position.

100

Oxford Instruments plc | Report and Financial Statements 2015

19 Financial risk management continued
Credit risk continued
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2015was £109.3m (2014: £114.4m).

Trade receivables
Other receivables
Cash and cash equivalents
Forward exchange contracts

2015
£m

2014
£m

75.8
5.0
25.1
3.4

73.7
2.8
32.6
5.3

109.3

114.4

The maximum exposure to credit risk for trade receivables is discussed in Note 18.
Other receivables include £0.9m (2014: £1.5m) in respect of VAT and similar taxes which are not past due date.
Commodity risk
The Group is exposed to changes in commodity prices, particularly in respect of copper used as a major component in one of the Group’s USA
operations. It manages this exposure using derivative commodity hedging instruments.
At 31 March 2015, the Group had outstanding commodity hedge contracts with a fair value asset of £0.1m (2014: £0.1m liability) that were
designated and effective as cash flow hedges of committed and highly probable forecast transactions. Fair value movements of these contracts
have been deferred in equity until the hedged transaction takes place. These contracts all mature within one year of the Consolidated Statementof Financial Position date.
Financial statements

A £0.2m gain net of tax (2014: £0.1m loss) has been deferred in equity as at 31 March 2015 in respect of these contracts. A loss of £0.1m(2014: £0.2m loss) has been recycled to current assets (inventory) in respect of contracts designated as cash flow hedges that have matured
during the year to 31 March 2015.
Capital management
The Board considers capital to comprise share capital, reserves and the net cash or net debt position of the Company. The Company
was in a net debt position at the year end. Total capital at the end of the current year totalled £243.4m (2014: £264.5m).
The Board’s long term objective is to have an efficient capital structure by maintaining a balance between the higher returns that might be possible
with higher levels of borrowings and the advantages and security afforded by a sound capital position. This is monitored by reference to the ratioof net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) and the Board has set itself internal limits, which are well inside
any covenants the Group has with lenders. The Group maintains the right to purchase its own shares in the market; the timing of these purchases
would depend on market prices. Buy and sell decisions are made on a specific transaction basis by the Board.
The Board carefully considers dividend payments and the Company moved from a fixed dividend policy to a progressive one in the year ended
March 2011. In doing this the Board will look to increase dividends as adjusted earnings per share increase although there will not be a direct
correlation. The Board does not have a policy to pay a fixed dividend yield or to maintain a fixed rate of dividend cover, but assesses bothof these metrics together with dividends paid by peers when assessing what dividend to recommend.
As set out in the Chief Executive’s Statement the Group’s strategy is to grow its business in its core markets of physical and materials science andto exploit convergence to expand into life sciences. An essential part of this will be to make acquisitions. In line with the objective of maintaining
a balance between borrowings and equity the Group would seek to finance smaller “bolt-on” acquisitions from operating cash flow thus maintainingbalance sheet efficiency. Larger acquisitions would be financed either by equity or a mixture of equity and debt so as to ensure the Group hasa manageable ratio of net debt to EBITDA.
The Board encourages employees to hold shares in the Company. As well as various share option plans (full details of which are given in Note 11),from April 2008 all UK employees have been offered the opportunity to take part in a Share Incentive Plan (SIP). Under this plan, employees areable to invest up to £1,500 each tax year in shares in the Company. The Company awards one additional free share (a matching share) for every
five shares bought by each employee.
There were no changes to the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries
are subject to externally imposed capital requirements.

Report and Financial Statements 2015 | Oxford Instruments plc

101

Notes to the Financial Statements continued
year ended 31 March 2015
20 Financial instruments
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statement of Financial Position
are as follows:
Fair
value
hierarchy

Assets carried at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Assets carried at fair value
Derivative financial instruments:– Copper hedging contracts (designated as an IAS 39 hedge)– Foreign currency contracts

Liabilities carried at fair value
Derivative financial instruments:– Foreign currency contracts– Copper hedging contracts (designated as an IAS 39 hedge)
Contingent consideration

2
2

2
2
3

Liabilities carried at amortised cost
Trade and other payables
Borrowings

Carrying
amount
2015
£m

Fair
value
2015
£m

Carrying
amount
2014
£m

Fair
value
2014
£m

75.8
5.0
25.1

75.8
5.0
25.1

73.7
2.8
32.6

73.7
2.8
32.6

0.1
3.3

0.1
3.3

—
5.3

—
5.3

3.4

3.4

5.3

5.3

(4.1)
—
(17.5)(4.1)—(17.5)(0.4)(0.1)(10.7)(0.4)(0.1)(10.7)(21.6)(21.6)(11.2)(11.2)(86.9)(144.0)(86.9)(144.0)(84.9)(156.9)(84.9)(156.9)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.
Contingent consideration
The fair value of contingent consideration is estimated based on the forecast future performance of the acquired business over a timeframe
determined as part of the acquisition agreement, discounted as appropriate. Key assumptions include growth rates, expected selling volumes
and prices and direct costs during the period.
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.

102

Oxford Instruments plc | Report and Financial Statements 2015

20 Financial instruments continued
Maturity of financial liabilities
Carrying
amount£m

Contractual
cash flows£mDuewithinone year£mDue
1–5 years
£m

86.9
17.5
4.1
144.0

86.9
18.8
4.1
144.0

86.1
18.8
4.1
—

0.8
—
—
144.0

252.5

253.8

109.0

144.8

Carrying
amount£m

Contractual
cash flows£mDuewithinone year£mDue
1–5 years£m

Trade and other payables
Contingent consideration

84.9
10.7

84.9
12.9

81.8
1.4

Foreign exchange contracts
Copper hedging contracts
Borrowings

0.4
0.1
156.9

0.4
0.1
156.9

0.4
0.1
15.5

11.5
—
—
141.4

253.0

255.2

99.2

156.0

Carrying
amount2015£m

Carrying
amount2014£m

Variable rate instruments
Financial assets
Financial liabilities

25.1(74.8)

32.6(87.8)

Fixed rate instruments
Financial liabilities(69.2)(69.1)

31 March 2015

Trade and other payables
Contingent consideration
Foreign exchange contracts
Borrowings

31 March 2014

3.1

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:The Group has estimated the impact on the Consolidated Statement of Income and on Equity of the following changes in market conditions
at the balance sheet date:• one percentage point increase in interest rates;• ten percentage point weakening in the value of Sterling against all currencies;• ten percentage point strengthening in the value of Sterling against all currencies;• five percentage point increase in the cost of copper; and• five percentage point decrease in the cost of copper.
The sensitivities above represent the Directors’ view of reasonably possible changes in each risk variable, not worst case scenarios or stress tests.
The outputs from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur at the year end andare applied to the risk exposures at that date. Accordingly they show the impact on the balance sheet of an instantaneous shock. The calculations
include all hedges in place at the year end.

Report and Financial Statements 2015 | Oxford Instruments plc

103

Financial statements

Sensitivity analysis

Notes to the Financial Statements continued
year ended 31 March 2015
20 Financial instruments continued
Sensitivity analysis continued
Actual results in the future may differ materially from these estimates due to commercial actions taken to mitigate any potential losses from suchrate movements, to the interaction of more than one sensitivity occurring and to further developments in global financial markets. As such thistable should not be considered as a projection of likely future gains and losses.
1% increase
in interest
rates
£m

10%
weakeningin Sterling1£m10%
strengthening
in Sterling2£m

5% increasein copper
prices£m

5% decreasein copper
prices£m

At 31 March 2015
Impact on Consolidated Statement of Income
Impact on equity

—
—

5.5
5.5

(4.5)
(4.5)

—
—

—
—

At 31 March 2014
Impact on Consolidated Statement of Income
Impact on equity

—
—

4.5
4.5

(3.7)
(3.7)

—
0.1

—
(0.1)

2015
Numberof shares

2014
Numberof shares

At the beginning of the year
Issued for cash

57,250,835
40,501

56,916,830
334,005

At the end of the year

57,291,336

57,250,835

1 Of the effect on the Consolidated Statement of Income, £6.3m (2014: £6.7m) would have been recognised on the “mark to market” line (see Note 1).
2 Of the effect on the Consolidated Statement of Income, £(5.1)m (2014: £(5.5)m) would have been recognised on the “mark to market” line (see Note 1).

21 Called up share capital
Issued and fully paid ordinary shares:

2015

Allotted, called up and fully paid
Ordinary shares of 5p each

Number ofshares57,291,336

New issues of ordinary shares of 5p each during the year
Exercise of executive share options
Exercise of executive share options – share appreciation rights

2014
£m

Number ofshares£m

2.9

57,250,835

2.9

Numberof shares

Aggregate
nominal value

Consideration
per share

31,4109,091£1,570£455£nil–£9.90£0.05

The total consideration received from exercise of share options in the year was £0.2m (2014: £0.7m).
The holders of the ordinary shares are entitled to receive dividends as declared, a proportionate amount of capital on a winding up of the Company
and one vote per share at meetings of the Company.
22 Borrowings
Current

Term loans – unsecured

104

Effective
interest rate

Earlier of re-pricing
date or maturity date

2015
£m

2014
£m

N/A

N/A

—

15.5

—

15.5

Oxford Instruments plc | Report and Financial Statements 2015

22 Borrowings continued
Non-current

Revolving credit facility – unsecured
European Investment Bank loan – unsecured
Loan notes – unsecured

Effective
interest rate

Earlier of re-pricing
date or maturity date

2015
£m

2014
£m

2.27%
3.30%
5.10%

April 2015
August 2020
March 2021

74.8
24.8
44.4

72.3
24.8
44.3

144.0

141.4

The Group’s undrawn committed facilities available at 31 March 2015 were £49.1m comprising the undrawn portion of the Group’s £124.9m
revolving credit facility. This facility expires on 28 February 2020.
The European Investment Bank loan is repayable in equal quarterly instalments commencing November 2016 with the final maturity in August 2019.
23 Retirement benefit obligations
The Group operates defined benefit plans in the UK and USA; both offer pensions in retirement and death in service benefit to members. Pension
benefits are related to members’ final salary at retirement and their length of service. Both schemes have been closed to new members since 2001
and closed to future accrual since 2010.
The amounts recognised in the Consolidated Statement of Financial Position are:Present value of funded obligations
Fair value of plan assets
Recognised liability for defined benefit obligations

UK
2015
£m

USA
2015
£m

Total
2015
£m

UK
2014
£m

USA
2014
£m

Total
2014
£m

283.8
(233.9)

8.3
(4.7)

292.1
(238.6)235.7(191.9)

7.2
(4.7)

242.9
(196.6)

49.9

3.6

53.5

43.8

2.5

46.3

UK
2015
£m

USA
2015
£m

Total
2015
£m

UK
2014
£m

USA
2014
£m

Total
2014
£m

Benefit obligation at the beginning of the year
Interest on defined benefit obligation
Settlement loss
Benefits paid
Settlement payments
Remeasurement loss/(gain) on obligation
Exchange rate adjustment

235.7
10.5
—
(4.8)
—
42.4
—

7.2
0.2
—
(1.0)
—
0.8
1.1

242.9
10.7
—
(5.8)
—
43.2
1.1

235.5
10.5
—
(5.0)
—
(5.3)
—

10.4
0.4
0.1
(0.3)
(2.8)
0.1
(0.7)

245.9
10.9
0.1
(5.3)
(2.8)
(5.2)
(0.7)

Benefit obligation at the end of the year

283.8

8.3

292.1

235.7

7.2

242.9

Reconciliation of the opening and closing balances of the fair value of plan assets
UK
2015
£m

USA
2015
£m

Total
2015
£m

UK
2014
£m

USA
2014
£m

Total
2014
£m

Fair value of plan assets at the beginning of the year
Interest on plan assets
Contributions by employers
Benefits paid
Settlement payments
Administrative expenses
Actual return on assets excluding interest income
Exchange rate adjustment

191.9
8.6
6.3
(4.8)
—
(0.4)
32.3
—

4.7
0.2
0.2
(1.0)
—
(0.1)
0.1
0.6

196.6
8.8
6.5
(5.8)
—
(0.5)
32.4
0.6

190.6
8.6
5.6
(5.0)
—
(0.4)
(7.5)
—

7.4
0.3
0.3
(0.3)
(2.8)
—
0.4
(0.6)

198.0
8.9
5.9
(5.3)
(2.8)
(0.4)
(7.1)
(0.6)

Fair value of plan assets at the end of the year

233.9

4.7

238.6

191.9

4.7

196.6

Report and Financial Statements 2015 | Oxford Instruments plc

105

Financial statements

Reconciliation of the opening and closing balances of the present value of the defined benefit obligation

Notes to the Financial Statements continued
year ended 31 March 2015
23 Retirement benefit obligations continued
Expense recognised in the Consolidated Statement of Income

Total – defined benefit expense
Contributions to defined contribution schemes

2015
£m

2014
£m

1.9
4.4

2.0
3.7

6.3

5.7

2015
£m

2014
£m

1.4
1.0
0.7
1.3
1.9

1.1
0.7
1.3
0.6

6.3

5.7

2015
£m

2014
£m

32.4
2.2

(7.1)
(0.9)

(45.9)
0.5

2.2
3.9

The Group expects to contribute approximately £7.0m to defined benefit plans in the next financial year.
The pension costs are recorded in the following lines of the Consolidated Statement of Income:

Cost of sales
Selling and marketing costs
Administration and shared services
Research and development
Financial expenditure

2.0

Remeasurement gains and losses shown in the Consolidated Statement of Comprehensive Income

Actual return on assets excluding interest income
Experience gain/(loss) on scheme obligations
Changes in assumptions underlying the present value of scheme obligations– Financial– Demographic

Cumulative actuarial losses reported in the Consolidated Statement of Comprehensive Income since 1 April 2004, the transition date to IFRS, are£49.5m (2014: £39.6m).
History of experience gains and losses are as follows:

Present value of benefit obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
Difference between the expected and actual return:
Amount £m% of scheme assets
Experience gains/(losses) on scheme liabilities:
Amount £m% of the present value of the scheme liabilities

2015
£m

2014
£m

2013
£m

2012
£m

2011
£m

292.1
(238.6)242.9(196.6)245.9(198.0)215.4(180.2)184.8(173.1)

53.5

46.3

47.9

35.2

11.7

32.4
13.6%

(7.1)
(4%)

8.7
4%

(3.0)
(2%)

4.8
3%

2.2
1%

(0.9)
—%

0.4
—%

(4.7)
2%

10.9
(6%)

The table below shows the sensitivity of the Consolidated Statement of Financial Position to changes in the significant pension assumptions:

Value of funded obligations
Fair value of plan assets
Deficit106

Balance at
31 March 2015£m

Discount rate(-0.1% p.a.)£m

Inflation rate(+0.1% p.a.)£mLife expectancy(+1 year)£m

292.1(238.6)297.9(238.6)297.4(238.6)300.3(238.6)

53.5

59.3

58.8

61.7

Oxford Instruments plc | Report and Financial Statements 2015

23 Retirement benefit obligations continued
Defined benefit scheme – United Kingdom
A full actuarial valuation of the UK plan was carried out as at 31 March 2012 and has been updated to 31 March 2015 by a qualified independentactuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):

Discount rate
Rate of increase in pensions in payment (3LPI)
Rate of increase in pensions in payment (5LPI)
Rate of inflation (CPI)
Mortality – pre and post-retirement – males and females

As at
31 March
2015
%

As at
31 March
2014
%

3.4
2.4
2.9
1.9
94% of S1PA tables(97% for females) future
improvement in line with CMI
2013 with 1% long term trend

4.5
2.5
3.1
2.3
94% of S1PA tables(97% for females) future
improvement in line with CMI
2013 with 1% long term trend

The mortality assumptions imply the following expected future lifetime from age 65:

Pre-retirement – males
Pre-retirement – females
Post-retirement – males
Post-retirement – females

2015
years

2014
years

22.4
24.5
23.7
26.0

23.8
25.9
22.4
24.4

The assets in the plan were:

Equities
Corporate bonds
Gilts
Cash
Alternative

Value at
31 March
2015£mValue at
31 March
2014
£m

97.8
55.6
34.2
24.8
21.5

84.1
40.4
36.6
13.8
17.0

233.9

191.9

Defined benefit scheme – United States
A full actuarial valuation of the USA plan was carried out as at 1 January 2012, which for reporting purposes has been updated to 31 March 2015
by a qualified independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):

Discount rate
Rate of increase to pensions in payment
Rate of inflation
Mortality – pre and post-retirement

Report and Financial Statements 2015 | Oxford Instruments plc

As at
31 March
2015
%

As at
31 March
2014
%

3.75
0.00
2.25
RP-2000CH with Projection
Scale BB (fully generational),
male and female

4.50
0.00
2.25
RP-2000CH with Projection
Scale BB (fully generational),
male and female

107

Financial statements

The assumptions have been chosen by the Directors from a range of possible actuarial assumptions, which, due to the timescales covered, may
not be borne out in practice.

Notes to the Financial Statements continued
year ended 31 March 2015
23 Retirement benefit obligations continued
Defined benefit scheme – United States continued
The assets in the plan were:

Equities
Bonds
Property and other

Value at
31 March
2015£mValue at
31 March
2014
£m

1.9
2.8
—

3.0
1.0
0.7

4.7

4.7

Defined contribution schemes
In the UK employees are offered participation in the defined contribution Oxford Instruments Stakeholder Plan. The Company contribution rateand employee contribution rate varies between grades and whether the individual had previously been in the defined benefit scheme. The Company
contribution ranges between 4% and 14% of base salary. The Group also operates a 401k defined distribution plan in the USA. Details of pension
schemes contributions made in respect of Directors can be found in the Directors’ Remuneration Report.
24 Trade and other payables
2015
£m

2014
£m

Trade payables
Customer deposits
Social security and other taxes
Accrued expenses and deferred income
Contingent consideration due within one year
Other creditors

36.4
18.0
3.1
42.1
17.5
4.5

37.8
16.7
3.1
37.2
0.7
3.7

Current trade and other payables
Amounts due after more than one year – contingent consideration
Amounts due after more than one year – accrued expenses

121.6
—
0.8

99.2
10.0
3.1

Total trade and other payables

122.4

112.3

Contingent consideration relates to amounts payable in respect of acquisitions. It is reassessed at the end of each year to its fair value.
Contingent
consideration£m

Balance at 1 April 2014
Fair value of contingent consideration on acquisitions in the year
Unwind of discount in respect of contingent consideration
Contingent consideration paid
Increase in contingent consideration
Contingent consideration released to the Consolidated Statement of Income
Effect of movement in foreign exchange

10.7
—
1.1
(0.8)
6.8
(1.4)
1.1

Balance at 31 March 2015

17.5

108

Oxford Instruments plc | Report and Financial Statements 2015

25 Provisions for other liabilities and charges
Warranties£m

Restructuring
£m

Other
£m

Total
£m

Balance at 1 April 2014
Provisions made during the year
Provisions used during the year
Provisions released during the year
Effect of movement in foreign exchange

5.2
4.7
(2.1)
(0.9)
0.2

—
5.8
—
—
—

4.5
0.2
(0.1)
(1.4)
—

9.7
10.7
(2.2)
(2.3)
0.2

Balance at 31 March 2015

7.1

5.8

3.2

16.1

Warranty provisions
Product warranty provisions reflect commitments made to customers on the sale of goods in the ordinary course of business and included within
the Group companies’ standard terms and conditions. Warranty commitments typically apply for a 12 month period. The provision represents the
Directors’ best estimate of the Group’s liability based on past experience.
Restructuring provision
The restructuring provision relates to amounts provided as a result of the cost reduction programme initiated during the year. The provision
represents the Directors’ best estimate of the liability arising. The Directors expect these amounts to be settled within the next 12 months.
Other provisions
Other provisions relate to various obligations including obligations in respect of onerous leases, obligations to employees in Japan on terminationof their employment and claims and disputes such as intellectual property claims arising against the Group in the ordinary course of business.

26 Operating leases
LeasesNon-cancellable future total minimum operating lease rentals are payable as follows:

Within one year
Between one and five years
Over five years

2015
£m

2014
£m

3.6
6.4
2.0

2.6
7.1
2.7

12.0

12.4

During the year ended 31 March 2015 £2.4m was recognised as an expense in the Consolidated Statement of Income in respect of operatingleases (2014: £2.6m).
The majority of operating leases relate to properties occupied by the Group in the course of its business. There are no material contingent rent
payment arrangements, purchase options or escalation clauses. It is expected that most leases could be renewed on the existing or similar terms.
The leases do not impose any material restrictions in respect of dividends, additional debt requirements or further leasing.
27 Capital commitments
During the year ended 31 March 2015, the Group entered into contracts to purchase property, plant and equipment which are expected
to be settled in the following financial year for £nil (2014: £0.2m).
28 Contingencies
In an international group of companies a variety of legal claims arise from time to time. The Board, having taken legal advice, are of the opinion
that any ongoing actions and investigations will not have a material impact on the Group’s financial position.

Report and Financial Statements 2015 | Oxford Instruments plc

109

Financial statements

The Company has on occasion been required to take legal or other actions to defend itself against proceedings brought by other parties. Provisions
are made for the expected costs associated with such matters, based on past experience of similar items and other known factors, taking into
account professional advice received, and represent the Directors’ best estimate of the likely outcome. The timing of utilisation of these provisions
is frequently uncertain reflecting the complexity of issues and the outcome of various court proceedings and negotiations. Contractual and otherprovisions represent the Directors’ best estimate of the cost of settling future obligations and reflect the Directors’ assessment of the likely settlement
method, which may change over time. However, no provision is made for proceedings which have been or might be brought by other parties
against Group companies unless the Directors, taking into account professional advice received, assesses that it is more likely than not thatsuch proceedings may be successful. The Group’s expectation is that the other provisions are likely to be utilised within a 12 month period.

Notes to the Financial Statements continued
year ended 31 March 2015
29 Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note.
The remuneration of key management personnel is as follows:
2015
£m

2014
£m

Short term employee benefits
Post employment benefits
Share-based payment

1.2
0.1
0.1

1.2
0.1
0.6

Total

1.4

1.9

Short term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
During the year the Company paid £0.2m (2014: £0.2m) to Imperialise Ltd, a company for whom Nigel Keen is a Director. The payment
was for his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2014: £nil).
30 Principal Group entities

Oxford Instruments Overseas Marketing Ltd
Oxford Instruments Industrial Products Ltd
Oxford Instruments Nanotechnology Tools Ltd
Omicron UHV Technik Ltd**
Oxford Instruments AFM Ltd
Andor Technology Ltd
Oxford Instruments America Inc.
Oxford Instruments Service LLC
Oxford Instruments Superconductivity Wire LLC
Oxford Instruments Austin, Inc.
Oxford Instruments X-Ray Technology Inc.
Oxford Superconducting Technology LP
Omniprobe, Inc.
Oxford Instruments AFM Inc.
Bitplane Inc.
Spectral Applied Research Inc.
Oxford Instruments KK
Oxford Instruments (Shanghai) Company Ltd**
Oxford Instruments India Private Ltd
Oxford Instruments Analytical Oy
Oxford Instruments SAS
Omicron Nanotechnology GmbH**
Oxford Instruments GmbH
Oxford Instruments Analytical GmbH
Roentgenanalytik Systeme GmbH
Bitplane AG
Oxford Instruments Pte Ltd

Equity owned by
the Company%

Country ofincorporation

Principal
activity

*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100

UK
UK
UK
UK
UK
UK
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
Japan
China
India
FinlandFranceGermany
Germany
Germany
Germany
Switzerland
SingaporeMarketingTrading
Trading
Trading
Trading
Trading
Distribution
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Distribution
Trading
Distribution
Trading
Distribution
Trading
Distribution
Trading
Trading
Trading
Marketing** Year end is 31 December.

Equity owned by the Company represents issued ordinary share capital.
The information given above reflects only the undertakings whose results or financial position principally affect the figures in the Group
consolidated financial statements. A full list of the Group companies as at 31 March 2015 is available for inspection at the Company’s
registered office and will be included in the company’s next annual return.
All the above companies are engaged in the research, development, manufacture, service or sale of high technology tools and systems.
Equity owned by subsidiary companies is indicated by an asterisk (*). All the above companies are consolidated in the Group accounts.

110

Oxford Instruments plc | Report and Financial Statements 2015

31 Subsequent events
The interim dividend of 3.7p per share (total cost £2.1m) was paid after the year end. In addition on 9 June 2015 the Directors proposed a final
dividend of 9.3p per ordinary share (total cost £5.3m). The total amount of £7.4m has not been provided for and there are no income tax consequences.
On 30 April 2015 the Group acquired Medical Imaging Resources Inc (MIR) for an initial net cash consideration of $13.4m. Further considerationof up to $10.1m is payable based on revenue performance in the first year after acquisition. MIR is based in Ann Arbor, Michigan and specialises
in the build, lease and service of mobile medical imaging labs and has been acquired for integration into OI Healthcare. Some of the disclosure
required by IFRS 3 has been omitted since, due to the timing of the acquisition, the initial accounting is incomplete at the date of this publication.
On 27 May 2015 the Group entered into a strategic alliance with GD Intressenter AB of Sweden (GDI) to create the world’s largest player inthe highly specialised Ultra High Vacuum Surface Science field. The alliance will comprise Oxford Instruments’ Omicron Nanotechnology GmbH(“Omicron”) and associated subsidiaries and GDI’s Scienta Scientific AB (“Scienta”) and associated subsidiaries.
In consideration for new shares in Scienta, Oxford Instruments has transferred all of its shares in the capital of Omicron to Scienta. Oxford Instruments
holds a 47% interest in the share capital of Scienta and GDI holds 53%.
32 Exchange rates
The principal exchange rates to Sterling used were:Year end rates

2015

2014

US Dollar
Euro
Yen

1.48
1.38
178

1.67
1.21
172

Average translation rates 2015

Average translation rates 2014

April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
February
March

Report and Financial Statements 2015 | Oxford Instruments plc

US Dollar

Euro

Yen

1.68
1.68
1.69
1.69
1.67
1.64
1.61
1.58
1.56
1.53
1.52
1.51

1.21
1.22
1.24
1.25
1.26
1.27
1.28
1.27
1.27
1.31
1.35
1.38

172
172
172
173
173
175
179
183
186
182
181
181

US Dollar

Euro

Yen

1.53
1.53
1.52
1.53
1.54
1.58
1.62
1.63
1.65
1.65
1.66
1.67

1.19
1.18
1.17
1.16
1.17
1.18
1.18
1.19
1.20
1.21
1.22
1.21

147
152
152
151
151
155
158
163
171
171
169
171

111

Financial statements

April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
February
MarchParent Company Balance Sheetas at 31 March 2015

Notes

2015
£m

2014
£m

c
d

3.4
320.0

2.5
320.2

323.4

322.7

99.0
5.1

94.3
1.5

104.1

95.8

(36.1)(30.5)(31.7)(13.1)(66.6)
37.5(44.8)Net current assets
Total assets less current liabilities
Long term loans
Provisions for liabilities

360.9(144.0)
(0.4)

373.7
(141.4)
—

216.5

232.3

2.9
61.5
0.1
7.6
144.4

2.9
61.3
0.1
7.6
160.4

216.5

232.3

Fixed assets
Tangible assets
Investments in subsidiary undertakings
Current assets
Debtors (including £83.9m (2014: £84.5m) due after more than one year)
Cash at bank and in handeCreditors: amounts falling due within one year
Bank loans and overdrafts
Other creditorsfg

Net assets
Share capital
Share premium account
Capital redemption reserve
Other reserves
Profit and loss account

h
h
h
h
h

Equity Shareholders’ funds

51.0

The Financial Statements were approved by the Board of Directors on 9 June 2015 and signed on its behalf by:

Jonathan Flint
Director
Company Number: 775598

112

Kevin Boyd
Director

Oxford Instruments plc | Report and Financial Statements 2015

Notes to the Parent Company Financial Statementsa) Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s
Financial Statements, except as noted below.
Basis of preparation
The Financial Statements have been prepared in accordance with applicable UK GAAP accounting standards and under the historical cost accounting
rules. In accordance with Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit
and loss account.
Going concern
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after making reasonable enquiries,that the Company has adequate resources to continue in operational existence for the foreseeable future.
Taxation
The charge for taxation is based on the result for the year and takes into account taxation deferred because of timing differences between
the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing
differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the Balance
Sheet date, except as otherwise required by FRS 19 Deferred Tax.
LeasesOperating lease rentals are charged to the profit and loss account on a straight-line basis over the life of the lease.
Fixed assets and depreciation
Depreciation is provided to write off the valuation or the cost less estimated residual value of tangible fixed assets by equal instalments over theirestimated useful economic lives as follows:
50 years
4 years
4 years
10 yearsFinancial instruments
The Company’s accounting policies for financial instruments under UK GAAP, namely FRS 25 Financial Instruments: Presentation, FRS 26 Financial
Instruments: Measurement and FRS 29 Financial Instruments: Disclosures, are the same as the Group’s accounting policies under IFRS, namely
IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures.
These policies are set out in accounting policy “(e) Financial instruments” in the Group accounting policies. As consolidated financial information
has been disclosed under IFRS 7 in Notes 18, 19 and 20 to the Group Financial Statements, the Parent Company is exempt from the disclosure
requirements of FRS 29.
Post-retirement benefits
The Company participates in a Group wide pension scheme providing benefits based on final pensionable pay. The assets of the scheme areheld separately from those of the Company. The Company is unable to identify its share of the underlying assets and liabilities of the scheme
on a consistent and reasonable basis and therefore, as required by FRS 17 Retirement Benefits, accounts for the scheme as if it were a defined
contribution scheme. As a result, the amount charged to the profit and loss account represents the contributions payable to the scheme
in respect of the accounting period. Refer to Note j for the additional disclosures required by FRS 17.
Foreign currencies
The Company enters into forward exchange contracts and options to mitigate the currency exposures that arise on sales and purchases denominatedin foreign currencies. Transactions in foreign currencies are converted into Sterling at the rate ruling on the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated at the rates ruling at the Balance Sheet date or at the appropriate forward
contract rates. Exchange profits and losses arising from the above are dealt with in the profit and loss account.
Own shares held by Employee Benefit Trust (EBT)Transactions of the Group-sponsored EBT are included in the Group Financial Statements. In particular, the trust’s purchase of sharesin the Company are debited directly to equity.

Report and Financial Statements 2015 | Oxford Instruments plc

113

Financial statements

Freehold buildings
Computer equipment
Motor vehicles
Computer software

Notes to the Parent Company Financial Statements continueda) Accounting policies continued
Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.
Share-based payments
The share option programme allows employees to acquire shares of the Company. The fair value of options granted after 7 November 2002 andthose not yet vested as at 1 April 2005 is recognised as an employee expense with a corresponding increase in equity. The fair value is measured
at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options
granted is measured using an option pricing model, taking into account the terms and conditions upon which the options were granted. The amountrecognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market conditions.
When options are granted to employees of subsidiaries of the Company, the fair value of options granted is recognised as an employee expensein the Financial Statements of the subsidiary undertaking together with the capital contribution received. In the Financial Statements of the Company,
the options granted are recognised as an investment in subsidiary undertakings with a corresponding increase in equity.
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past expectations
or events which can be reasonably estimated. The timing of recognition requires the application of judgement to existing facts and circumstances
which can be subject to change. Amounts provided represent the Group’s best estimate of exposure based on currently available information.
Dividends on shares presented within Shareholders’ funds
Dividends unpaid at the Balance Sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised andare no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the Financial Statements.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company
considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent
liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
b) Loss for the year
The Company’s loss for the financial year was £8.7m (2014: profit of £27.2m).
The auditor’s remuneration comprised £125,000 (2014: £136,000) for statutory audit.
The average number of people employed by the Company (including Directors) during the year was 62 (2014: 57). All of these individuals
were involved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:

Wages and salaries
Social security costs
Other pension costs

2015
£m

2014
£m

5.2
0.6
0.2

4.0
0.6
0.3

6.0

4.9

The share-based payment income was £0.2m (2014: expense of £0.8m). Details of the Group’s share option schemes are included in Note 11of the Group Financial Statements.
Full details of the emoluments paid to Directors can be found in the Directors’ Remuneration Report on pages 48 to 66.

114

Oxford Instruments plc | Report and Financial Statements 2015

c) Tangible fixed assets
Software£m

Land andbuildings£m

Motorvehicles£mComputerequipment
£m

Total
£m

Cost
Balance at 1 April 2014
Additions

0.9
0.9

—
—

0.1
—

5.2
0.3

6.2
1.2

Balance at 31 March 2015

1.8

—

0.1

5.5

7.4

Depreciation
Balance at 1 April 2014
Charge for year

—
—

—
—

—
—

3.7
0.3

3.7
0.3

Balance at 31 March 2015

—

—

—

4.0

4.0

Net book value
At 31 March 2014

0.9

—

0.1

1.5

2.5

At 31 March 2015

1.8

—

0.1

1.5

3.4

d) Investments
Investments
in subsidiary
undertakings
£m

338.9
(0.2)

Balance at 31 March 2015

338.7

Impairment
Balance at 1 April 2014 and 31 March 2015

18.7

Net book value
At 31 March 2014

320.2

At 31 March 2015

320.0e) Debtors

Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Deferred tax asset

2015
£m

2014
£m

91.3
6.6
0.3
0.8

88.4
5.3
0.1
0.5

99.0

94.3

Amounts owed by subsidiary undertakings include £83.9m (2014: £84.5m) due after more than one year.

Report and Financial Statements 2015 | Oxford Instruments plc

115

Financial statements

Cost or valuation
Balance at 1 April 2014
Credit in respect of share options transferred to subsidiary undertakings

Notes to the Parent Company Financial Statements continuedf) Other creditors

Trade creditors
Amounts owed to subsidiary undertakings
Tax, social security and sales related taxes
Other financial liabilities
Accruals and deferred income

2015
£m

2014
£m

0.5
23.3
0.9
4.2
1.6

0.8
7.6
0.9
1.4
2.4

30.5

13.1

g) Provisions for liabilities
Restructuringprovision£mBalance at 1 April 2014
Provisions made during the year—
0.4

Balance at 31 March 2015

0.4

Deferred tax asset
2015
£m

2014
£m

Balance at 1 April
Profit and loss credit

0.5
0.3

0.5
—

Balance at 31 March

0.8

0.5

The amounts of deferred tax assets are as follows:
Recognised

Excess of depreciation over corresponding capital allowances
Tax losses

2015
£m

2014
£m

0.3
0.5

0.5
—

0.8

0.5

The Company recognises deferred tax assets only to the extent that there will be suitable taxable profits from which the future reversal of the underlying
timing differences can be deducted.
On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were substantively
enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015)
were substantively enacted on 2 July 2013. The deferred tax balance at 31 March 2015 has been calculated based on the rate of 20% which
was substantively enacted at the balance sheet date.

116

Oxford Instruments plc | Report and Financial Statements 2015h) Reserves
Sharecapital£mSharepremium
account£m

Capitalredemption
reserve£m

Otherreserves£m

Profit andlossaccount
£m

Total
£m

Balance at 1 April 2014
Loss for the year
Proceeds from shares issued
Share options awarded to employees
Share options awarded to employees of subsidiaries
Dividends paid

2.9
—
—
—
—
—

61.3
—
0.2
—
—
—

0.1
—
—
—
—
—

7.6
—
—
—
—
—

160.4
(8.7)
—
—
(0.2)
(7.1)

232.3
(8.7)
0.2
—
(0.2)
(7.1)

Balance at 31 March 2015

2.9

61.5

0.1

7.6

144.4

216.5

Details of issued, authorised and allotted share capital are included in Note 21 of the Group Financial Statements.
Details of treasury shares held by the Company are included as a note to the Consolidated Statement of Changes in Equity.
Details of the Group’s share option schemes are included in Note 11 of the Group Financial Statements.
Details of dividends paid are included in Note 13 of the Group Financial Statements.
Other reserves relates to premium on shares issued as part of acquisitions made in the year to 31 March 1987.
i) Pension commitments
Defined benefit scheme

The Directors do not believe it is possible to allocate the assets and liabilities of the Scheme to individual Group members on a consistent and reasonablebasis. Accordingly, under FRS 17 the Company is exempt from recognising its share of the net pension deficit and accounts for the scheme as though
it were a defined contribution scheme. Details of the scheme and most recent actuarial valuation can be found in Note 23 of the Group Financial
Statements. The contributions paid by the Company to the Oxford Instruments Pension Scheme were £0.4m (2014: £0.4m).
Stakeholder pension scheme
The Company makes contributions to a stakeholder pension scheme. The pension costs charge for the year represents contributions payable
by the Company to the scheme. These amounted to £0.2m (2014: £0.3m). There were no outstanding contributions at the end of the financial
year (2014: £nil).
j) Guarantees
The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to the pension scheme. The guarantee
is for the excess of 105% of the liabilities of the scheme, calculated on the basis of Section 179 of the Pensions Act 2004, over the assets of the scheme.
The Company and its UK subsidiaries have entered into a cross-guarantee for £10.0m (2014: £10.0m) in respect of overdraft facilities of which£nil (2014: £nil) was drawn at the year end.
k) Commitments
At 31 March 2015, capital commitments contracted were £nil (2014: £nil) and authorised were £nil (2014: £nil).
l) Subsequent events
See Note 31 to the Group Financial Statements for details of dividends paid or declared after the Balance Sheet date.
m) Related party transactions
The Company has a related party relationship with its Directors and Executive Officers and with its wholly owned subsidiary companies.
Transactions with key management personnel are disclosed in the Directors’ Remuneration Report on pages 48 to 66. There were no othersignificant transactions with key management personnel in either the current or preceding year other than the following.
During the year the Company paid £0.2m (2014: £0.2m) to Imperialise Ltd, a company for whom Nigel Keen is a director. The payment
was for his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2014: £nil).

Report and Financial Statements 2015 | Oxford Instruments plc

117

Financial statements

The Oxford Instruments Pension Scheme, a defined benefit scheme, was closed to new members from 1 April 2001 and to future accrual from theyear to 31 March 2011. The Company continues to make deficit recovery contributions to this Scheme. Contributions are based on the pension deficitof the Group as a whole. The assets of the Scheme are held in a separate trustee administered fund.

Historical Financial Summary

2011(Restated)**£m

2012(Restated)**£m2013(Restated)**
£m

2014
£m

2015
£m

Consolidated Statement of Income
Revenue

262.3

337.3

350.8

360.1

385.5

Adjusted operating profit
Other operating income
Contingent consideration deemed no longer payable
Reversal of acquisition related fair value adjustments
Acquisition related costs
Contingent consideration – further amount deemed payable
Restructuring costs
Settlement loss on US pension scheme
Reorganisation costs and impairment
Amortisation of acquired intangibles

27.7
4.1
0.6
—
—
—
—
—
(0.6)
(4.7)

41.7
7.0
—
(1.7)
(1.5)
—
—
—
—
(11.2)

49.3
—
—
(0.5)
(2.1)
—
—
—
—
(13.8)

50.3
—
—
(3.7)
(7.8)
—
—
(0.1)
—
(14.7)

42.7
—
1.4
(0.2)
(2.2)
(6.8)
(9.9)
—
—
(21.7)

Operating profit

27.1

34.3

32.9

24.0

Net financing costs

(2.1)

—

(4.5)

—

3.3
(13.0)

Profit/(loss) before taxation
Income tax credit/(expense)

25.0
5.9

34.3
(10.9)

28.4
(7.4)

24.0
(5.8)

(9.7)
3.4

Profit/(loss) for the year

30.9

23.4

21.0

18.2

(6.3)

Adjusted profit before tax*

24.5

40.2

47.0

47.1

35.6

Consolidated Statement of Financial Position
Property, plant and equipment
Intangible assets
Deferred and current tax
Inventories
Trade and other receivables
Trade and other payables

23.6
41.6
11.2
46.6
52.5
(76.6)

28.2
78.1
7.6
59.3
61.0
(99.2)

32.9
91.9
14.9
58.1
71.8
(112.5)

34.4
247.9
(3.5)
68.3
86.2
(112.8)

33.1
231.3
14.6
70.8
90.7
(126.5)

Net assets excluding net cash

98.9

135.0

157.1

320.5

314.0

Cash and cash equivalents
Bank borrowings

23.7(10.6)

35.1
—

39.2
—

32.6
(156.9)25.1(144.0)Net cash

13.1

35.1

39.2

(124.3)(118.9)Provisions and other items
Retirement benefit obligations(6.8)(11.7)(7.8)(35.2)(10.7)(47.9)(9.7)(46.3)(16.1)(53.5)Net assets employed/capital and reserves attributable
to the Company’s equity holders

93.5

127.1

137.7

140.2

125.5

Cash flow
Net cash from operating activities
Net cash used in investing activities
Net cash from financing activities

35.3
(8.8)
(12.3)

41.6(52.2)
22.6

41.5(32.3)(5.2)

21.2(177.9)151.3

24.8(14.2)(19.8)Net increase/(decrease) in cash equivalents

14.2

12.0

4.0

(5.4)

(9.2)

pence

pence

pence

pence

pence

Per ordinary share
Earnings – continuing
Adjusted earnings*
Dividends

62.7
38.9
9.0

43.5
59.1
10.0

37.4
66.5
11.2

32.1
67.7
12.4

(11.1)
48.2
13.0

Employees
Average number of employees

1,498

1,834

1,927

2,050

2,420

* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1 to the Group Financial Statements.
** Years 2011 to 2013 were restated as a result of changes to IAS 19 (Revised) Employee Benefits.

118

Oxford Instruments plc | Report and Financial Statements 2015

Shareholder Information

Financial calendar
5 March 2015

Ordinary shares quoted ex-dividend

6 March 2015

Record date for interim dividend

15 March 2015

Dividend reinvestment (DRIP) last date for election

31 March 2015

Financial year end

9 April 2015

Payment of interim dividend

9 June 2015

Announcement of preliminary results

9 June 2015

Announcement of final dividend

Late July 2015

Publication of Annual Report

8 September 2015

Annual General Meeting

24 September 2015

Ordinary shares quoted ex-dividend

25 September 2015

Record date for final dividend

28 September 2015

DRIP date23 October 2015
10 November 2015

Payment of final dividend
Announcement of interim results

March 2016

Ordinary shares quoted ex-dividend

March 2016

Dividend reinvestment (DRIP) last date for election

March 2016

Record date for interim dividend

31 March 2016

Financial year end

Administrative enquiries concerning shareholdings
You may view your shareholding and dividend history, register to receive your dividends direct to your bank account or elect to re-invest yourdividends and register a change of address online at www.capitashareportal.com. To register to use this facility you will need your Investor code
(IVC), which can be found on your share certificate, dividend tax voucher or proxy card.
Administrative enquiries concerning shareholdings in Oxford Instruments plc, such as the loss of a share certificate, dividend payments,
or a change of address should be directed, in the first instance, to the Registrar, Capita Asset Services.
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 4TU
Tel: 0871 664 0300 (calls cost 10p per minute plus network extras; lines are open 8.30am to 5.30pm, Monday to Friday)
Company information

Overseas callers: +44 20 8639 3399
Email: shareholderenquiries@capita.co.uk
Website: www.capitaassetservices.com
Correspondence should refer to Oxford Instruments plc and state clearly the registered name and address of the Shareholder. Please notify
the Registrar promptly of any change of address.

Report and Financial Statements 2015 | Oxford Instruments plc

119Shareholder Information continued

Dividend bank mandates
If you wish dividends to be paid directly into a bank or building society account and notification to be sent to your Shareholder register address,
please contact the Company’s Registrar at the address given above for a dividend mandate form. Overseas holders can also choose to receive
payment directly into their bank account, or can be sent a draft in local currency. Further details are available from Capita Asset Services.
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 9ZA
Tel: 0871 664 0385 (calls cost 10p per minute plus network extras; lines are open to 9.00am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3405
Website: international.capitaregistrars.com
Duplicate share register accounts
If you are receiving more than one copy of our report, it may be that your shares are registered in two or more accounts on our register of members.
If that was not your intention you might consider merging them into one single entry. Please contact Capita Asset Services, which will be pleased
to carry out your instructions.
Shareholder communications
Unless you have elected to continue to receive Shareholder communications by post, you will be notified by post or, where you have given us
an email address for electronic notification, by email that Shareholder communications are available for viewing on the Company’s website atwww.oxford-instruments.com/investors. The Company reserves the right to distribute any communication in hard copy if it deems this necessary.
Shareholder enquiries
Shareholders who have questions relating to the Group’s business or who wish to have additional copies of the Report and Accounts should apply to:Company Secretary
Oxford Instruments plc
Tubney Woods, Abingdon, Oxfordshire OX13 5QX
Tel: 01865 393200
Fax: 01865 393442
Email: info.oiplc@oxinst.com
Website: www.oxford-instruments.com
Company registration
Registered office: Tubney Woods, Abingdon, Oxfordshire OX13 5QXRegistered in England number: 775598
Website: www.oxford-instruments.com
Oxford Instruments has an extensive website which gives details of all its products and services, contact information, vacancies and latest news
announcements. An interactive investor relations section gives information on recent trading reports, share price data and forthcoming events.

120

Oxford Instruments plc | Report and Financial Statements 2015

Capita Share Dealing Services
A quick and easy share dealing service to either sell or buy shares in many leading UK companies is provided by Capita Share Dealing Services.
An online and telephone facility is available, providing our Shareholders with an easy to access and simple to use service. There’s no need to pre-registerand there are no complicated forms to fill in. The online and telephone dealing service allows you to trade “real time” at a known price which will
be given to you at the time you give your instruction. To deal online or by telephone all you need is your surname, Investor Code (IVC) reference
number, full postcode and your date of birth. Your Investor Code can be found on a recent share certificate, statement or tax voucher. Should you
not be able to locate your IVC number, please contact Capita Asset Services on 0871 664 0300 (calls cost 10p per minute plus network extras;
lines are open 8.30am to 5.30pm, Monday–Friday). Please have the appropriate documents to hand when you log on or call, as this information
will be needed before you can buy or sell shares.
For further information on this service, or to buy and sell shares, please contact www.capitadeal.com (online dealing) or 0871 664 0446
(telephone dealing – calls cost 10p per minute plus network extras; lines are open 8.00am to 4.30pm, Monday–Friday excluding public holidays).
Full terms, conditions and risks apply and are available on request or by visiting www.capitadeal.com.
This is not a recommendation to buy or sell shares. Remember the price of shares can go down as well as up, and you are not guaranteed
to get back the amount that you originally invested.
Analysis of Shareholders as at 31 March 2015
Number ofholders% of total

Total holding% of total

Up to 5,000 shares
5,001 to 50,000 shares
50,001 to 200,000 sharesOver 200,000 shares

2,325
191
88
52

87.54
7.19
3.31
1.96

1,478,015
3,355,052
7,755
52,450,514

2.58
5.86
0.01
91.55

Total

2,656

100

57,291,336

100

Size of shareholding

Company information

Report and Financial Statements 2015 | Oxford Instruments plc

121

Oxford Instruments Directory

Company/address

Descriptor

Country

Telephone

Fax

Email

UK

+44 (0)1865 393200+44 (0)1865 393333

info.oiplc@oxinst.com

UK+44 (0)1494 442255+44 (0)1494 524129

nanoanalysis@oxinst.com

Sweden+46 8 5448 1550

+46 8 5448 1558

nordiska@oxinst.com

USA+1 (805) 696 6466

+1 (805) 696 6444

sba.sales@oxinst.com

Hauptstrasse 161,
DE-68259 Mannheim, Germany

Germany+49 621 762117 0+49 621 762117 11

sba.de.sales@oxinst.com

3–4 Shaochuan Street,
Kaohsiung City, 80441,
Taiwan, R.O.C.

Taiwan+886 9 3837 4589

+886 2 2794 2757

sba.tw.sales@oxinst.com

Halifax Road, High Wycombe,
Buckinghamshire
HP12 3SE, UK

UK+44 (0)1494 442255+44 (0)1494 524129

sba.uk.sales@oxinst.com

UK+44 (0)28 9023 7126

+44 (0)28 9031 0792

info@andor.com

Badenerstrasse 682,
CH-8048 Zürich

Switzerland+41 44 430 11 00+41 44 430 11 01

info@bitplane.com

9078 Leslie St., Unit 11,
Richmond Hill, Ontario,
Canada L4B 3L8

Canada+1 (905) 326 5040

+1 (905) 326 5041

info@spectral.ca

Oxford Instruments Plasma Technology
North End, Yatton,
Tools for nanotechnology
Bristol BS49 4AP, UKfabricationUK+44 (0)1934 837000+44 (0)1934 837001

plasma@oxinst.com

Oxford Instruments NanoScience
Tubney Woods, Abingdon,
Oxfordshire OX13 5QX, UK

UK+44 (0)1865 393200+44 (0)1865 393333

omicron.nanoscience@oxinst.com

Le plan d’Aigues, RN 7,13760 St.-Cannat, France

France+33 442 50 68 64+33 442 50 68 65

omicron.nanoscience@oxinst.com

14850 Scenic Heights Road,
Suite 140, Eden Prairie,
MN 55344, USAUSA+1 (952) 345 5240

+1 (952) 294 8043

omicron.nanoscience@oxinst.com

Oxford Instruments Head OfficeTubney Woods, Abingdon,
Oxfordshire OX13 5QX, UK

NanoTechnology Tools
NanoCharacterisation
Oxford Instruments NanoAnalysis
Halifax Road, High Wycombe,
Buckinghamshire
HP12 3SE, UK

Systems for materials
analysis at the nano scale

Arenavägen 41, 10th floor,
121 77 Johanneshov, Sweden
Asylum Research6310 Hollister Ave,
Santa Barbara, CA 93117 USA

Andor Technology/Bitplane/Spectral
7 Millennium Way,
Springvale Business Park,
Belfast, BT12 7AL UK

Systems for materials
analysis at the nano scale

Scientific imaging cameras,
spectroscopy solutions andmicroscopy systems

NanoSolutions

122

Advanced tools forapplied research

Oxford Instruments plc | Report and Financial Statements 2015

Company/address

Descriptor

Country

Telephone

Fax

Email

UK

+44 (0)1865 393200+44 (0)1865 393333

industrial@oxinst.com

Derby Business Park, Tarvonsalmenkatu 17,
FI-02600 Espoo, Finland

Finland+358 932 9411

+358 932 9413

industrial@oxinst.com

Georg-Ohm-Str. 6,65232 Taunusstein, Germany

Germany+61 28 95 35 0

+61 28 73 601

industrial@oxinst.com

Wellesweg 31, 47589 Uedem,
Germany

Germany+49 2825 93830+49 2825 9383100

industrial@oxinst.com

8403 Cross Park Drive, Suite 3F, Austin,
TX 78754, USAUSA+1 (512) 339 0640

+1 (512) 339 0620

industrial@oxinst.com

Industrial Products
Industrial Analysis
Oxford Instruments Industrial Analysis
Tubney Woods, Abingdon,
Tools for QC/QA,
Oxfordshire OX13 5QX, UK
environmental andcompliance testing

Industrial Components
Oxford Instruments Austin
1340 Airport Commerce Dr
Bldg 1, Suite 175,
Austin, TX 78741, USA

Cryogenic pumps
and compressors

USA+1 (512) 441 6893

+1 (512) 441 6665

cryo-sales@oxinst.com

Oxford Superconducting Technology
600 Milik Street, PO Box 429,
Carteret, NJ 07008, USA

Superconducting wireUSA

+1 (732) 541 1300

+1 (732) 541 7769

sales@ost.oxinst.com

Oxford X-Ray Technology
360 El Pueblo Road, Scotts Valley,
CA 95066, USA

X-ray tubes
and detectors

USA+1 (831) 439 9729

+1 (831) 439 6051

industrial@oxinst.com

Company/address

Descriptor

Country

Telephone

Fax

Email

1027 SW 30th Avenue,
Deerfield Beach,FL 33442, USAUSA+1 (954) 596 4945

+1 (954) 596 4946

oiservice@oxinst.com

64 Union Way, Vacaville,
CA 95687, USAUSA+1 (707) 469 1320

+1 (707) 469 1318

oiservice@oxinst.com

120 Enterprise Drive, Ann Arbor,
MI, 48103, USAUSA+1 (888) 323 1316

+1 (734) 822 1011

info@mobileleasing.com
info@medimagingsales.com

ServiceOiService CT & MR

Company information

Report and Financial Statements 2015 | Oxford Instruments plc

123Oxford Instruments Directory continued

Company/addressCountry

Telephone

Fax

Email

Oxford Instruments/Canada/Latin America
300 Baker Avenue, Suite 150,
Concord, MA 01742, USAUSA+1 (978) 369 9933

+1 (978) 369 8287

info@ma.oxinst.com

Oxford Instruments China
Unit 1, Building A, No. 66 Zhufang Road,
Haidian District, Beijing, 100085, China

China+86 (0)40 0621 5191

+86 (0)10 8271 9055

china.info@oxinst.com

Floor 1, Building 60, No.461, Hongcao Road,
Shanghai, 200233, China

China+86 21 6127 3858

+86 21 6127 3828

china.info@oxinst.com

No. 129, Lane 150, Pingbei Road,
Xinzhuang Industrial Area,
Minhang District, 201102 Shanghai, China

China+86 (0)21 6490 8580

+86 (0)21 6490 4042

china.info@oxinst.com

Room 2112, Bai Hui Plaza, 193 Zhong Shan Wu Road,
Guangzhou 510030, China

China+86 (0)20 8364 9990

+86 (0)20 8364 9996

china.info@oxinst.com

Room 1909, Huamin Empire Plaza,No.1, Fu Xing Street, Chengdu, China

China+86 (0)28 8670 3596

+86 (0)28 8670 3595

china.info@oxinst.com

Czech Republic+420 233 343 264+420 234 311 724

office@oxinst.cz

Oxford Instruments France
77 ZA de Montvoisin, 91400 Gometz la Ville, France

France+33 1 69 85 25 25+33 1 69 41 46 80

infofrance@oxinst.com

Oxford Instruments Germany
Otto-von-Guericke-Ring 10, 65205 Wiesbaden, Germany

Regional Sales and Service Offices

Oxford Instruments Czech Republic
Velvarska 13, CZ-160 00 Praha,
Czech Republic

Germany+49 6122 9370

+49 6122 937100

info-oiplc@oxinst.com

Oxford Instruments India
11, Marwah’s Complex, Krishanlal Marwah Marg,
Andheri East, Mumbai 400072, India

India+91 224 4253 5100

+91 224 4253 5110

india@oxinst.com

Oxford Instruments JapanIS Building 3-32-42, Higashi-Shinagawa, Shinagawa-ku
Tokyo 140-0002, JapanJapan+81 (0)3 6732 8961

+81 (0)3 6732 8937

info.jp@oxinst.com

Oxford Instruments Korea
No. 8-S 26, 8F., 10 Chungmin-ro, Songpa-gu,
Seoul 138-962 Korea (Republic of)

Republic of Korea+82 2 2008 4500

+82 2 2008 4555

nanoanalysis@oxinst.com

Oxford Instruments Russia
Denisovskiy per. 26, Moscow 105005,
Russian Federation

Russia+7 (095) 933 51 23+7 (095) 933 51 24

info@oxford.de

Oxford Instruments Singapore
10 Ubi Crescent, #04-81 Ubi TechPark Lobby E,
Singapore 408564, Republic of Singapore

Singapore+65 6337 6848

+65 6337 6286

oi.admin@oxfordinstruments.com.sg

Oxford Instruments Taiwan
1F, No. 23, Jing-Shang 19th Street, Hsinchu,
Taiwan 300, Taiwan, R.O.C.

Taiwan+886 3 5788696+886 3 5789993

oi.admin@oxfordinstruments.com.tw

124

Oxford Instruments plc | Report and Financial Statements 2015

Advisers

Honorary President
Sir Martin Wood OBE FRS Hon FREng DL
Company Secretary
Susan Johnson-Brett ACIS
Board Committees
Audit
JF Lennox, Chairman; J Allerton; RH Friend*; TO Geitner
Nomination
NJ Keen, Chairman; J Allerton; JM Brady*; RH Friend*; TO Geitner; JF Lennox
Remuneration
TO Geitner, Chairman; J Allerton; RH Friend*; NJ Keen; JF Lennox
Administration
Any two Directors
Advisers
Auditors
KPMG LLP
Principal Bankers
HSBC Bank plc; Santander plc; and The Royal Bank of Scotland plc
Stockbrokers
JPMorgan Cazenove
UK Solicitors
Laytons Solicitors LLP, Ashurst LLPUS Counsel
Wilmer Hale LLP* Professor Sir Richard Friend’s term commenced on 1 September 2014 and Mike Brady served until 9 September 2014.

Company information

Printed by Park Communications on FSC® certified paper.
Park is an EMAS certified company and its Environmental Management System is certified to ISO 14001.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and,on average 99% of any waste associated with this production will be recycled.
This document is printed on Arcoprint E.W., a paper sourced from well-managed, responsible, FSC®
certified forests. The pulp used in this product is bleached using an Elemental Chlorine Free (ECF) process.

Report and Financial Statements 2015 Oxford Instruments plc

Design Portfolio plants trees foreach of its corporate report projects,
in association with Trees for Cities.

125

For more information please email: info.oiplc@oxinst.com

www.oxford-instruments.com
As part of Oxford Instruments’ environmental policy
this report has been printed on FSC paper.
This publication is the copyright of Oxford Instruments plc and provides outline information only, which (unless agreed
by the Company in writing) may not be used, applied or reproduced for any purpose or form part of any order or contract
or regarded as the representation relating to the products or services concerned. Oxford Instruments’ policy is one of continued
improvement. The Company reserves the right to alter, without notice the specification, design or conditions of supply of
any product or service. Oxford Instruments acknowledges all trademarks and registrations. © Oxford Instruments plc, 2015.
All rights reserved.