Oxford Instruments plc
Half-year Report for the six months
ended 30 September 2019

CONTENTS

in this section

We discuss the progress wehave made over the first half
pages 1 to 20

Strategic Report
About Us

1

Performance Highlights

2

Chief Executive’s Review

4Operations Review

8

Finance Review

14

Financial Statementsin this section

See how we have performedin the first half
pages 21 to 40

Responsibility Statement of the Directors

21

Condensed Consolidated Income Statement22

Condensed Consolidated Statement ofComprehensive Income

24

Condensed Consolidated Statementof Changes in Equity

25

Condensed Consolidated Statementof Financial Position27

Condensed Consolidated Statementof Cash Flows28

Notes to the Half-year Financial Statements

29

Independent Review Report38

Principal Risks and Uncertainties

39

Directors and Advisers

IBC

Find out more about us

www.oxinst.com

Front cover image:
Biological tissue grown from patient cells capturedby an Andor Dragonfly microscopy system

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

ABOUT US

Oxford Instruments plc
is a leading provider of hightechnology products and services
to the world’s leading industrial
companies and scientific researchcommunities.
We help our customers to image, analyseand manipulate materials down to theatomic and molecular level, enabling themto accelerate their R&D, increase productivity
and make new scientific discoveries.

Our business is structured around three sectors to support our customer and application focus:

Materials & Characterisation
Products and solutions that enable the fabrication and characterisationof materials and devices down to the atomic scale, predominantly
supporting customers across applied R&D as well as the production andmanufacture of high technology products and devices.

Research & Discovery
Provides advanced solutions that create unique environments and enable
imaging and analytical measurements down to the molecular and atomic
level, predominantly used in scientific research and applied R&D.

Service & Healthcare
Provides customer service and support for our own products and theservice, sale and rental of third‑party healthcare imaging systems.

1

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

PERFORMANCE HIGHLIGHTSThe Group has delivered a strong first half performance,with revenue, profit and order growth against a backdrop of
uncertain macroeconomic conditions.
Revenue1

Adjusted2 operating profit1£166.3m +13.1% £25.8m(HY 2018: £147.0m)(HY 2018: £21.0m)

Adjusted2 profit before tax1

Profit before tax1

£25.4m+28.3% £18.0m+22.9%+55.2%(HY 2018: £19.8m)(HY 2018: £11.6m)

Adjusted2 basic earnings per share1

Dividend per share (interim)

35.5p+30.0% 4.1p

(HY 2018: 27.3p)(HY 2018: 3.8p)

Cash generated from operations1

Net cash/(debt)£16.4m
(HY 2018: £21.4m)+7.9%(23.4)% £14.2m(HY 2018: £(12.5)m)

1. Continuing operations.
2. Throughout this Half-year Report we make reference to adjusted numbers. A full definition of adjusted numbers can be found in Note 2. Where we make reference to constant currency
numbers, these are prepared on a month-by-month basis using the translational and transactional exchange rates which prevailed in the previous year rather than the actual exchange rates
which prevailed in the year. Transactional exchange rates include the effect of our hedging programme.

2

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

Financial highlights:

Operational highlights:• Orders up 6.4% to £173.3 million (2018:£162.9 million), an increase of 2.8% at constantcurrency; book‑to-bill ratio of 1.04

• Good progress with Horizon, delivering continued
growth and improved operating margin• Order book of £186.8 million (31 March 2019:£171.6 million), up 8.9% (+6.0% at constantcurrency)• Reported revenue increased by 13.1% to£166.3 million (+9.1% at constant currency)• Adjusted operating profit from continuing
operations up 22.9% at £25.8 million (+12.4%
at constant currency)• Adjusted operating margin of 15.5% (2018:
14.3%), 14.7% at constant currency• Reported profit before tax up 55.2% to£18.0 million after mark-to-mark movement oncurrency derivatives and other adjusting items• Net cash of £14.2 million following cash
conversion of 65% and one-off US pension
termination payment• Interim dividend increased by 7.9% to4.10 pence• Market intimacy enabled new growth
opportunities from academic and commercial
customers, which more than offset softening insilicon semiconductor, electronics and automotive
production markets• Materials & Characterisation delivered a strong
performance underpinned by increased sales
across Semiconductor & Communications,
Advanced Materials and Energy &Environment segments• Research & Discovery saw growth acrossHealthcare & Lifescience, Quantum Technology
and Fundamental Research segments• Increased focus on customer support services
related to our own products delivered an
improved performance in Service & Healthcare• Improved commercial practices and gains
from our operational excellence programme
contributed to increased profitability in the period• Focus on customer applications driving
success of recently launched products and thedevelopment of richer future product roadmaps
and IP portfolio; total cash spend on R&D
equivalent to 7.8% of sales• Underlying order growth impacted by some softerend markets and the phasing of OEM orders• Our access to all phases of the technology cycle– from academic research through to commercial
production – provided resilience against uncertain
macroeconomic backdrop3

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

CHIEF EXECUTIVE’S REVIEW

From an end market
perspective, we saw
constant currency growthacross each of our target
customer segments.
Introduction
Oxford Instruments provides high technology
products and services to the world’s leadingindustrial companies and scientific researchcommunities, exploiting our world-classability to image, analyse and manipulatematerials down to the atomic and molecularlevel. Our core purpose is to support ourcustomers in addressing some of the world’s
most pressing challenges, enabling a greener
economy, increased connectivity, improved
health, and leaps in scientific understanding.

4

We continue to make good progresswith the implementation of our Horizon
strategy whilst maintaining a focus on thenear‑term delivery of improved performance.
Our customer‑centric approach provides
valuable market insights that deliver growthwithin existing markets and allow us to
identify opportunities in new adjacentmarkets. These insights are driving increased
success for recently launched products andthe development of a richer future productroadmap. The implementation of improvedcommercial practices, combined with gains
from our operational excellence programme,
contributed to improved profitability inthe period, and provide the foundation
for further growth. We remain focused on
addressing a broad and diverse range ofattractive end markets with long-term growth
drivers. By addressing the academic, applied
R&D and high technology manufacturing
segments, we are engaged throughout thetechnology cycle and are well positioned tobenefit from each wave of commercialisationand market disruption.

Overview
The Group has delivered a strong first half
performance, with revenue, profit and order
growth against a backdrop of uncertain
macroeconomic conditions. Reported revenue
increased 13.1% (9.1% at constant currency)
to £166.3 million (2018: £147.0 million),with good growth across each of our sectors– Materials & Characterisation, Research &Discovery and Service & Healthcare. We hadstrong constant currency revenue growth fromboth academic and commercial customers,
increasing by 8% and 10% respectively.
The proportion of revenue from commercial
customers remained broadly unchanged
at 51%.
From an end market perspective, we saw
constant currency growth across each of ourtarget customer segments, with Healthcare &Lifescience up 6% (27% of Group revenue),
Semiconductor & Communications up 8%(22% of revenue), Quantum Technology up
6% (8% of revenue), Energy & Environment up
16% (10% of revenue), Advanced Materials
up 9% (23% of revenue) and Research& Fundamental Science up 14% (10% ofrevenue) resulting in a relatively unchanged end
market distribution from 31 March 2019. While
we saw further softening in specific markets
such as silicon semiconductor, electronics andautomotive production, our focus on customer
outcomes has enabled us to find growth
opportunities elsewhere.
From a geographical perspective,
constant currency revenue grew in Europe,
North America and Asia by 18%, 8%
and 4% respectively. In Asia we continue
to make good progress in China, withrevenue up 14% relative to the comparative
period. Asia represented 40% of Grouprevenue at constant currency, Europe 27%,
North America 32% and Rest of World 1%.
Within Asia, China represented an unchanged
proportion of Group revenue at 21%.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

We remain focused on addressing a broadand diverse range of attractive end markets
with long-term growth drivers.

Increased volumes and the benefit from ourimproved business processes and commercial
practices, combined with gains from ouroperational excellence programme, drove
reported adjusted operating profit up 22.9%
to £25.8 million (2018: £21.0 million),
an increase of 12.4% at constant currency.
The Materials & Characterisation and Research& Discovery sectors both delivered double‑digit
constant currency growth. In our Service &Healthcare sector, strong profit growth fromthe increased demand for the services related
to our own products was partially offset by
reduced contribution from OI Healthcare
in the period due to the phasing of systemsales. Reported operating margin increased to15.5% (2018: 14.3%) representing margin of
14.7% at constant currency.

Continuing adjusted basic earnings per
share increased by 30.0% to 35.5 pence(2018: 27.3 pence).
Reported orders for the Group increasedto £173.3 million (2018: £162.9 million)
up 6.4% (2.8% at constant currency). We
saw growth from academic and commercial
customers being partially offset by reduced
activity within the silicon semiconductor,
electronics and automotive markets.
The Materials & Characterisation and Service& Healthcare sectors increased orders on aconstant currency basis, with Research &Discovery marginally down in the period due
primarily to the phasing of larger customer
orders within our X-ray Technology business.
Continued order growth resulted in a
book-to-bill ratio for the period of 1.04.

The order book, representing orders for
future delivery, as at 30 September 2019
increased 8.9% on a reported basis (6.0% atconstant currency) since the year end, driven
predominately by growth in Materials &Characterisation and the servicing of ourown products.
Good cash collection in the period resulted
in an improved Group net cash position of£14.2 million, up from £6.7 million at theyear end.

Operational model

MarketIntimacy

Customer
SupportCustomerInnovation
and ProductDevelopment

Operational
Excellence5Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

CHIEF EXECUTIVE’S REVIEW CONTINUED

We continue to see opportunities forfurther revenue and margin improvement
delivered through the Horizon strategy.

Horizon strategy progress

Sector performance

We have maintained a sharp focus on our
Horizon strategy to deliver sustainable revenue
growth and improved margins. In the period
we have continued to increase our commercial
focus and build capabilities across the Group.
We continue to see opportunities for further
revenue and margin improvement delivered
through the Horizon strategy. With good
progress across our Market Intimacy,
Innovation and Product Development,
and Operational Excellence programmes,
we have now started the transformation of
our Customer Service approach, representing
the fourth point of the Oxford Instruments
operating model. As part of this programme
we will be reviewing the way in which we
provide support to our customers as well as
expanding the breadth of service offeringsand capabilities, including services to support
performance enhancements and yield
management packages.

Turning to the performance of ourindividual sectors:
Materials & Characterisation provides
products and solutions that enable thefabrication and characterisation of materials
down to the atomic scale, predominantly
supporting customers across applied R&D
as well as the production and manufactureof high technology products. The sector
delivered a strong and enhanced first half
performance underpinned by growthfrom both commercial and academic
customers across the Semiconductor& Communications, Advanced Materials,
and Energy & Environment customer
segments. Revenue of £69.8 million(2018: £60.1 million) represented an increaseof 12.3% at constant currency, with adjusted
operating profit increasing to £12.2 million(2018: £9.7 million), growth of 16.5% atconstant currency.

Summary

6

Materials &Characterisation

Research &Discovery

Service &Healthcare

Delivered a strong
performance underpinned
by increased sales
across Semiconductor &Communications, Advanced
Materials, and Energy &Environment segments.

Saw growth acrossHealthcare & Lifescience,
Quantum Technology,
and Research &Fundamental Science
segments.

Increased focus on customer
support services related toour own products delivered
an improved performance inthe sector.

Orders grew to £74.5 million (2018:£69.5 million), up 3.9% at constant currency,
contributing to positive order book growthfor future deliveries. Reported operational
margin for the sector increased by 140 basis
points (+60 basis points at constant currency)
to 17.5% (2018: 16.1%).
Research & Discovery provides advanced
solutions that create unique environments
and enable imaging and analyticalmeasurements down to the molecularand atomic level, used predominantly inscientific research and applied R&D. Revenue
increased to £61.2 million, up 8.7% atconstant currency (2018: £54.3 million)
supported by growth from academic andcommercial customers across the Healthcare& Lifescience, Quantum Technology, andResearch & Fundamental Science segments.
Adjusted operating profit increased to£6.4 million (2018: £4.8 million), up 16.7%
at constant currency, supported by improved
operational efficiencies within the sector andmanufacturing yield improvements of ourscientific X-ray tubes.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

Orders of £61.9 million (2018: £60.0 million)
were broadly flat at constant currency, partiallyheld back in the period by the phasing of large
OEM customer orders in our X-ray Technology
business. Operational margin for the sector
grew 170 basis points (+70 basis points atconstant currency) to 10.5% (2018: 8.8%) on
a reported basis.
Service & Healthcare provides customer
service and support for our own products
and the service, sale and rental of third‑party
healthcare imaging systems. Revenue of£35.3 million (2018: £32.6 million) grew by
4% at constant currency, driven predominantly
by increased sales of services and support
related to our own products. Adjusted
operating profit increased to £7.2 million(2018: £6.5 million), up 3.1% at constantcurrency. Strong growth in orders related
to our own products were partially offset
by the timing of system orders in our US OI
Healthcare business, resulting in reported
orders of £36.9 million (2018: £33.4 million),
an increase of 6.3% at constant currency.
Operational margin for the sector grew
50 basis points (-10 basis points at constantcurrency) to 20.4% (2018: 19.9%) on areported basis.

R&D

Dividends

The development and delivery of highly
innovative and market-leading technologythat delivers ongoing, sustainable value
for our customers remains a central theme
within our Horizon strategy. Our enhanced
customer-centric, market-focused approach is
identifying increasingly attractive development
opportunities, enriching our IP portfolio anddriving our investment decisions across theGroup. Through Horizon we are exploiting
our technical capabilities and synergies bothwithin the Group and with external partners
to deliver key products faster. R&D spend
in the period rose to £13.0 million (2018:£12.0 million), representing 7.8% of sales,
reflecting both the increased opportunities
available and our commitment to delivering
sustainable growth.

The Board has declared an interim dividend
increase of 7.9% to 4.1 pence (2018:
3.8 pence), reflecting improvement inunderlying earnings per share.

PeopleOur employees are fundamental to ourbusiness progress and I remain delighted
by their continued engagement with our
Horizon strategy. We continue to invest in thedevelopment of our teams and the processes
and tools to help them be successful.
I would like to thank all our employees fortheir continued commitment to offering ourcustomers a world-class experience and theirpart in helping to address some of the world’s
most pressing challenges.

Current trading and outlook
The Group has delivered a strong first half
performance, with revenue, profit andorder growth against a backdrop of
uncertain macroeconomic conditions.
Our customer-centric approach has delivered
growth within existing markets and expansion
into new adjacent markets.
The breadth of our product portfolio and thediversity of our end markets, together with our
focus on understanding customer needs andresponding to market changes, underpin ourability to deliver further growth and margin
improvement. We expect the second half ofthe financial year to benefit from the normal
seasonal bias, with expectations for thecurrent financial year remaining unchanged
on a constant currency basis.

Ian Barkshire
Chief Executive
12 November 20197

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

OPERATIONS REVIEW

Materials &Characterisation
This sector includes:
NanoAnalysis, Asylum Research and Plasma Technology.

Semiconductor wafer

The sector delivered strong growth in both revenue and operating profit
with good order growth.
Revenue£69.8mAdjusted2 operating profit+16.1% £12.2m +25.8%(2018: £60.1m)+12.3%(2018: £9.7m)

constant currency growth1

8+16.5%

constant currency growth1

Adjusted2 operating margin

Profit before tax after adjusting items

17.5%£11.0m(2018: 16.1%)(2018: £8.6m)

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

The Materials & Characterisation sector
comprises Asylum Research, NanoAnalysis
and Plasma Technology. This sector has abroad customer base across a wide range
of applications for the imaging and analysis
of materials down to the atomic level aswell as the fabrication of semiconductor
devices and structures through our range ofadvanced semiconductor etch and deposition
process systems. Our portfolio of imaging
systems include our range of market-leading
X-ray and electron analysis systems used inconjunction with electron and ion microscopes
as well as our performance-leading atomic
force microscopes. The sector has a strong
focus on supporting and accelerating ourcustomers’ applied R&D, enabling thedevelopment of new devices and next
generation higher performance materials
as well as enhanced productivity in advanced
manufacturing, quality assurance (“QA”) andquality control (“QC”). Our products provide
market-leading performance, ease of use
and data analytics.
Materials & Characterisation delivered strong
growth in both revenue and operating profit
with good order growth. A core strengthof the sector is the market diversification
and reach across academic and corporate
R&D, and commercial production customers.
Improved performance in the period was
supported by the success of new and recently
launched products, and our increased focus
on tailoring our product offerings to specificend-customer applications, raising the
product value and expanding our addressable
markets. This led to strong revenue growthfrom both academic and commercial
customers in the period, with the latteraccounting for 55% of revenue. Increased
volumes, application‑tailored products andoperational efficiencies all contributed toreported adjusted operating margin increasing
140 basis points to 17.5% (2018: 16.1%).
Looking at end markets, increased revenue
was driven by growth in each of the threemain application segments of Advanced
Materials, Semiconductor & Communications,and Energy & Environment. Advanced
Materials represented 38% of sales in the
sector, Semiconductor & Communications
40%, with Energy & Environment 15%, andHealthcare & Lifescience 6%. Geographically,
we saw strong growth in Europe and good
growth in North America and Asia.

We had double-digit revenue growth inAdvanced Materials due to positive end
markets, despite the ongoing weakness
in orders from automotive manufacturing
customers. This growth was driven by thecontinued demand for lighter, stronger andhigher functioning materials, combinedwith our leading market performance. Our
measurement solutions are used to aid thedevelopment of next generation products
and components as well as in the quality
control and quality assurance of current
manufactured products. Applications include
the development of safer cars and planes withimproved fuel consumption, and advanced
new materials for wind turbine blades andmedical implants. We continue to see growth
in more routine applications including the
optimisation of razor blade coatings, thequality control of ceramics used in mobile
phone applications and increasing thestrength of thinner aluminium drink cans to
reduce their raw material consumption. These
applications have led to strong growth acrossour range of SymmetryTM material structural
analysers, X-ray detectors and atomic force
microscopes (“AFM”).
We continue to develop new products
and tailored applications to target specificend-customer applications and grow ouraddressable market. In the period we launched
JupiterTM, our first large sample AFM which
can accept objects the size of a semiconductor
wafer or tablet computer. This builds on ourmarket-leading AFM product performance andreputation in the research market. JupiterTM
provides high resolution, faster results andsimpler user experience to multi-user sites
and industrial manufacturers, significantly
expanding our addressable customer base.
This has already driven significant growth tocustomers needing to characterise thin films
and coatings. We have seen continued growthin sales into additive manufacturing throughthe launch of AZtecAMTM, a dedicated analysis
package for this market segment.
Semiconductor & Communications delivered
strong revenue growth and remains asignificant market segment. Here we provide
imaging and analysis products, as well as etchand deposition process solutions used across a
range of advanced compound semiconductor
and silicon device applications.

Whilst we have seen continued weakness andassociated reduced sales of our imaging andanalysis solutions into silicon semiconductor
and electronics customers, we have had
continued strong growth and demand across
our portfolio of etch and deposition solutions
underpinned by our leading performance andexpertise in compound semiconductors.
The compound semiconductor market remains
buoyant with strong, long-term market drivers,
due to the ability of compound semiconductor
devices to dramatically transform theperformance of power electronics, connectivity
and communications. In the period we haveseen growth in a number of key areas; ourgallium arsenide and indium phosphidesolutions support the increased speed andinfrastructure capacity required to deliver thedesired transformation and connectivity, forexample telecommunication data centres andthe rise in the data economy. Silicon carbide
and gallium nitride solutions are being used
to develop more efficient and faster powerdevices, enabling greater electric vehicle
range and faster charging times. Demand forincreased communications is driving growthacross sensors and optoelectronic devices suchas 3D sensors for facial recognition and heads
up displays.
Our growth has been further supported by
our ability to tailor our product offerings
to specifically meet the needs of academic,
corporate R&D and production customers.
For example, we are now offering dedicatedproduction-ready systems with key enablingprocesses, market-leading wafer throughput
and reduced time to service.
We have seen growth in the Energy &Environment segment driven by the increased
activities related to battery research and quality
control, and in the development of improved
efficiency and performance photovoltaic
materials. This has included increased salesof our AFM products, and our advanced
high resolution ultra‑sensitive ExtremeTM
X-ray analyser remains the market leader inimaging the internal chemistry and active
interfaces of batteries at the nanoscale. In
the period we launched AZtecMineralTM, atailored solution building on the benefitsof our existing products to optimise mining
and ore processing. In combination with thehigh sensitivity provided by ExtremeTM, thisis supporting the more efficient mining andrecovery of lithium-based materials.

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

9Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

OPERATIONS REVIEW CONTINUED

Research &Discovery
This sector includes:
Andor Technology, NanoScience, Magnetic Resonance,
X-ray Technology and our minority share in Scienta Omicron.

Mould specimen captured by a Sona camera

Strong revenue and double-digit profit growth were driven from across
our product portfolio with continued growth from the main target
application segments.
Revenue£61.2mAdjusted2 operating profit+12.7% £6.4m(2018: £54.3m)+8.7%(2018: £4.8m)

constant currency growth1+33.3%+16.7%

constant currency growth1

Adjusted2 operating margin

Profit before tax after adjusting items

10.5%

£3.2m

(2018: 8.8%)(2018: £1.9m)

10Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

The Research & Discovery sector includes
Andor Technology, Magnetic Resonance,
NanoScience, X-ray Technology andour minority share in Scienta Omicron.
This sector provides advanced solutions
that create unique environments and enable
imaging and analytical measurements
down to the molecular and atomic level,
used predominantly in fundamental andapplied research. We build on our relationships
with customers working on breakthroughapplications in research to gain insights andsupport future commercial applications.
We have strong brand recognition and leading
product performance in our chosen market
segments. Our increased applications focus
has supported strong growth to commercial
customers in addition to good growthfrom academic and Government‑funded
research. Revenue from industrial andcommercial customers increased to 35%,
with 65% of sales from the academic andGovernment‑funded research community.
Strong revenue and double-digit profit growth
were driven from across our product portfoliowith continued growth from the main
target application segments of Healthcare &Lifescience (representing 41% of revenue),
Quantum Technology (19% of revenue), andResearch & Fundamental Science (24% ofrevenue). Revenue growth was supported
by an increased demand and improved
operational performance in NanoScience, withprofit growth supported by manufacturing
yield improvements of our scientific X-ray
tubes and an improved contribution from the
Scienta Omicron joint venture. Order growth
was offset by the phasing of framework OEMorders for our X-ray Technology business andof higher value rock core analysis systems.

Within Healthcare & Lifescience, demand
continued to be driven by researchers
seeking to uncover more about thepathology of disease states, helping toreveal more accurate cellular details at
better resolution and higher speeds. Thishas driven increased revenue across ourportfolio of microscopy systems, analysis andvisualisation software and scientific researchcameras. A significant proportion of sales
are being used to understand the origins
and progression of cancers and neurologicaldisorders, such as Alzheimer’s and Parkinson’s,
and to contribute to the development of newtreatment approaches. The attractive advanced
microscopy market has led to increased
competitor activity which has moderated order
growth in the period. We continue to focus on
adding value to our products, building on ourmarket-leading capabilities. For instance, thelatest release of ImarisTM utilises sophisticatedmanagement of large data sets to enable
the practical and efficient analysis andinterpretation over multiple length scales fromthe big picture down to the molecular detail.
Improved rendering and machine learningalgorithms lead to automation and statisticallymeaningful analysis of biological structuresand systems.
Our high sensitivity cameras, which offer
enhanced performance at low light levels,
are being used to measure and observe theinteraction with individual biomolecules inreal time. This continues to drive growth with
our strategic OEM partners for a range ofapplications including gene sequencing andclinical screening solutions, which are used for
drug feasibility studies and in the developmentof personalised medicines.

Quantum Technology continues to attract
funding from both Governments and private
industry, with increased long-term investment
being announced within Europe, China andJapan, targeting quantum computing,
cryptography and sensors. We continue to see
increased demand for our cryogenic platforms,
which are used for both fundamental research
into quantum effects and in the development
towards practical quantum computers. We
have had increased sales of our TeslatronTM
system, which provides low temperatures andhigh magnetic fields for the development andcharacterisation of quantum materials andsensors. We are also seeing increased demandfor our high sensitivity and high-speed
cameras in the growing area of quantum
optics for applications across fundamental
science through to secure communications
and quantum computing.
Within Research & Fundamental Science,
we continued to see growth in sales of ourhigh field magnets and research instruments.
In addition, astronomy remains an attractive
market for us, with demand for higher
performance cameras in order to meet theincreasing requirements of modern astronomy.
Through the successful collaboration with end
customers within the astronomy market,
we have launched BalorTM, our new large area
camera, whose unique features, including
large field of view, enable it to capture a muchlarger area of the sky with improved resolution
and stability. This enables the practical trackingof significantly smaller space junk, easier
tracking of near-earth asteroids and enhanced
solar studies, which are important due to thedramatic impact these can have on satellite
and earth-based communications.

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

11

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

OPERATIONS REVIEW CONTINUED

Service &Healthcare
This sector includes:
The Group’s maintenance service contracts, billable repairs,
training and support services, and spare part sales.

Engineer servicing a Triton dilution refrigerator

The Service & Healthcare sector is now a focal point within
the evolution of our Horizon strategy.
Revenue

Adjusted2 operating profit£35.3m

+8.3% £7.2m(2018: £32.6m)+4.0%(2018: £6.5m)

constant currency growth1+10.8%+3.1%

constant currency growth1

Adjusted2 operating margin

Profit before tax after adjusting items

20.4%

£6.8m

(2018: 19.9%)(2018: £6.1m)

12

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019The Service & Healthcare sector comprises
the Group’s maintenance service contracts,
billable repairs, training and support services,and spare part sales related to Oxford
Instruments’ own products under the
OiService brand; and the sale, service andrental of refurbished third-party MRI andCT machines under the OI Healthcare brand.
Good order, revenue and profit growth atconstant currency in the period through theincreased demand for services and support
related to our own products was partially
offset by the timing of system orders within
our US OI Healthcare business.
Revenue from our OI Healthcare businesses
was broadly flat, with adjusted operating
profit slightly down on last year owing to
the phasing of system orders. Utilisation of
our mobile MRI fleet remains strong and wecontinue our focus on building a healthy
service orderbook.

The Service & Healthcare sector is now a focal
point within the evolution of our Horizon
strategy. We have initiated the transformationof our customer service approach by reviewing
the way in which we provide support to ourcustomers as well as expanding the breadthof service product offerings and capabilities.
This includes the tailoring of service products
to end-market applications and customer
segments. For example, for industrial
customers, we are introducing services tosupport performance enhancements andyield management packages. Our launchof PlasmaviewTM process control software
supports this transition for our semiconductor
customers, allowing us to provide a broader
range of diagnostic and process optimisation
services both online and remotely. Whilst
still at the early stages, we have alreadybuilt a pipeline of opportunities and haveseen an uplift in service-related revenue andprofitability.

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

13

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

FINANCE REVIEWRevenue£166.3m +13.1%(HY 2018: £147.0m)

Adjusted operating profit
increased by 22.9% to£25.8m, up 12.4% atconstant currency.

Adjusting items consist of amortisation of
acquired intangibles of £4.8 million anda charge of £2.6 million relating to the
movement in the mark‑to-market valuation of
uncrystallised currency hedges for future years.
After adjusting items, the Group recorded
an operating profit of £18.4 million (2018:£13.7 million) and profit before tax of£18.0 million (2018: £11.6 million).
Adjusted basic earnings per share grew by
30.0% to 35.5 pence (2018: 27.3 pence).
Basic earnings per share grew by 59.0%
to 24.8 pence (2018: 15.6 pence).

Summary• Orders up 6.4% to £173.3 million,
2.8% at constant currency• Order book of £186.8 million, up
8.9%, 6.0% at constant currency• Net cash of £14.2 million• Interim dividend increased by 7.9%
to 4.10 pence

Reported orders increased by 6.4% to£173.3 million (2018: £162.9 million),
an increase of 2.8% at constant currency. At
the end of the period the Group’s order bookfor future deliveries stood at £186.8 million(31 March 2019: £171.6 million). The orderbook grew 8.9% on a reported basis and6.0% at constant currency.
Reported revenue increased by 13.1%
to £166.3 million (2018: £147.0 million).
Revenue, excluding currency effects,
increased by 9.1%, with the movement inaverage currency exchange rates against
the comparative period increasing reported
revenue by £5.9 million.
Adjusted operating profit increased by 22.9%
to £25.8 million (2018: £21.0 million) withthe movement in exchange rates against
the comparative period increasing adjusted
operating profit by £2.2 million. Adjusted
operating profit, excluding currency effects,
increased by 12.4%. Adjusted operating
margin increased by 120 basis points to
15.5% (2018: 14.3%), supported by acurrency tailwind. Excluding currency effects,
adjusted operating margin increased by 40
basis points to 14.7%.
Adjusted profit before tax grew by 28.3%
to £25.4 million (2018: £19.8 million),
representing a margin of 15.3% (2018:
13.5%).

14

Cash generated from operations of£16.4 million (2018: £21.4 million), represents
65% (2018: 91%) cash conversion. Net cash
increased from £6.7 million on 31 March 2019to £14.2 million.
Adjusted operating profit is stated before
impairment and amortisation of goodwill
and acquired intangibles, the mark-to-market
valuation of unexpired currency hedges, andother adjusting items, as set out in Note 2 to
the Half-year Financial Statements.
Under the rules for audit tendering androtation implemented in 2016, the Groupis required to replace our current auditors,
KPMG LLP, no later than 31 March 2021,
effective for the 31 March 2022 year end.
The Audit Committee has decided toundertake a comprehensive and thoroughcompetitive tender process for the audit in
the first quarter of 2020. The Committee
expects to invite at least one challenger firm
to participate in this process.
Depending on the outcome of the tender,
we expect to make an appointment prior toour 31 March 2020 year end, effective for the
31 March 2021 year end. This appointment
will be subject to Shareholder approval at thenext AGM to be held in September 2020.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

Gross profit£82.2mAdjusted operating profit+11.2% £25.8m(HY 2018: £73.9m)+22.9%(HY 2018: £21.0m)

Income Statement
The Group’s Income Statement is summarised below.
							Half year to								30 September								2019								£mHalf year to
30 September
2018£mChangeRevenue							
166.3

147.0

13.1%

Gross profit							
82.2

73.9

11.2%

Administrative expenses							(55.3)(52.0)—(0.6)

Share of profit of associate 						Foreign exchange							
(1.1)

(0.3)

Adjusted operating profit							
25.8

21.0

Net finance costs							
(0.4)

(1.2)

Adjusted profit before tax							
25.4

19.8

Amortisation of acquired intangibles						
(4.8)

(4.7)

Non-recurring items							
—

(0.6)

Mark-to-market of currency hedges						
(2.6)

(2.9)

Profit before tax							
18.0

11.6

Tax from continuing operations						
(3.8)

(2.7)

22.9%
28.3%

55.2%

14.2

8.9

Adjusted effective tax rate1							
20.1%

21.2%

Continuing adjusted earnings per share – basic					

35.5p

27.3p

30.0%

Continuing earnings per share – basic						

24.8p

15.6p

59.0%

Continuing adjusted earnings per share – diluted				

35.1p

27.0p

30.0%

Continuing earnings per share – diluted						

24.6p

15.4p

59.7%

Dividend per share							
4.10p

3.80p

7.9%

Profit for the period from continuing operations					1. The adjusted effective tax rate is calculated excluding amortisation of acquired intangibles, the mark-to-market of financial derivatives, and other adjusting items.

Orders and revenue
Total reported orders grew by 6.4% (2.8% at constant currency) to £173.3 million. Orders, at constant currency, increased by 3.9% for Materials &Characterisation, declined by 0.5% for Research & Discovery and increased by 6.3% for Service & Healthcare. The decline in Research & Discovery
was principally due to the phasing of OEM orders within X-Ray Technology.
Reported revenue of £166.3 million (2018: £147.0 million) increased by 13.1% (9.1% at constant currency). Reported revenue increased by 16.1%
for Materials & Characterisation, 12.7% for Research & Discovery and 8.3% for Service & Healthcare.
The book-to-bill ratio (orders received to goods and services billed in the period) for the half year was 1.04.
Revenue, at constant currency, increased by 12.3% for Materials & Characterisation, with a particularly strong performance from all constituent
businesses. Constant currency growth was 8.7% in Research & Discovery, with good progress from Andor Technology and an improvement in
NanoScience and X-Ray Technology. Service & Healthcare constant currency revenue grew by 4.0%, with good growth from the service of ourown products.

15

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

FINANCE REVIEW CONTINUED

Income Statement continued
Orders and revenue continued
On a geographical basis, at constant currency, revenue grew by 18.4% in Europe, 7.8% in North America, 4.3% in Asia and 15.0% in Restof World.
The total reported order book grew by 8.9% (6.0% at constant currency) to £186.8 million compared to 31 March 2019. The order book,at constant currency, increased by 10.4% for Materials & Characterisation, 0.7% for Research & Discovery and 13.6% in Service & Healthcare.
All constituent businesses grew their order book over the half year, with the exception of X-Ray Technology as previously explained.
							Materials &£m 							Characterisation

Revenue: Half year 2018/19				Research &Discovery

Service &Healthcare

Total

60.1

54.3

32.6

147.0

Underlying movement						
7.4

4.7

1.3

13.4

Foreign exchange						2.3

2.2

1.4

5.9

Revenue: Half year 2019/20					
69.8

61.2

35.3

166.3

Revenue growth: reported						
16.1%

12.7%

8.3%

13.1%

Revenue growth: constant currency					

8.7%

4.0%

9.1%

12.3%

Reclassification of costs
During the year we have reviewed the classification of costs within the Income Statement, with a focus on whether items are reported withincost of sales or operating expenses. As a result, certain reclassifications were made, the most significant being that outward freight costs andsales commissions paid to employees and external agents are reported within cost of sales rather than within selling and marketing expenses.
This is considered to be a better presentation since gross margin is now a clearer indicator of commercial performance and overheads a clearer
indicator of cost control.

Gross profit
Gross profit increased by 11.2% to £82.2 million (2018: £73.9 million), representing a gross profit margin of 49.4%.

Adjusted operating profit
Adjusted operating profit increased by 22.9% to £25.8m (2018: £21.0m), representing an adjusted operating profit margin of 15.5%, an increaseof 120 basis points against last year. At constant currency, the adjusted operating profit margin was 14.7%, an increase of 40 basis points.
Materials & Characterisation’s margin increased by 140 basis points to 17.5% (2018: 16.1%). At constant currency, the margin was 16.7%,
an increase of 60 basis points.
Research & Discovery’s adjusted operating margin increased to 10.5% (2018: 8.8%), an increase of 170 basis points. At constant currency,
the margin was 9.5%, an increase of 70 basis points.
Service & Healthcare’s margin increased by 50 basis points to 20.4% (2018: 19.9%). At constant currency, the margin was 19.8%, a reduction of
10 basis points.
Our share of the Scienta Omicron joint venture showed an adjusted result after tax of zero for the period, against an adjusted loss of £0.6 million
for the comparative period.
							Materials &£m 							Characterisation

Research &Discovery

Service &Healthcare

Total

Adjusted operating profit: Half year 2018/19				9.7

4.8

6.5

21.0

Underlying movement						
1.6

0.8

0.2

2.6

Foreign exchange						0.9

0.8

0.5

2.2

Adjusted operating profit: Half year 2019/20				
12.2

6.4

7.2

25.8

Margin: 2018/19						
16.1%

8.8%

19.9%

14.3%

Margin: 2019/20						17.5%

10.5%

20.4%

15.5%

16

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

Adjusting items

Profit before tax

Amortisation of acquired intangibles of£4.8 million relates to intangible assets
recognised on acquisitions, being the valueof technology, customer relationships
and brands.

Adjusted profit before tax increased by
28.3% to £25.4 million (2018: £19.8 million).
The adjusted profit before tax marginrose to 15.3% (2018: 13.5%).

The Group uses derivative products to hedge
its short-term exposure to fluctuations inforeign exchange rates. It is Group policy
to have in place at the beginning of thefinancial year hedging instruments tocover approximately 80% of its forecast
transactional exposure for that year.
The Group has decided that the additionalcosts of meeting the extensive documentation
requirements of IFRS 9 to apply hedge
accounting to these foreign exchange
hedges cannot be justified. Accordingly,
the Group does not use hedge accounting
for these derivatives.
Net movements on marking-to-market
derivatives in respect of future periods aredisclosed in the Income Statement as foreignexchange and excluded from our calculationof adjusted profit before tax.
The mark-to-market loss in respect ofderivative financial instruments was£2.6 million (2018: £2.9 million loss). This
reflects the movement on currency derivatives
that are hedging future transactional currency
exposures for the Group. The half-year
position reflects an uncrystallised loss arisingfrom a fall in the value of Sterling at thebalance sheet date against a blended rateachieved on the US Dollar, Euro and Japanese
Yen forward contracts that will mature overthe next 18 months.

Net finance costs
The Group’s adjusted net finance costs
fell by £0.8 million to £0.4 million (2018:£1.2 million) with net finance charges fallingby £0.6 million to £0.4 million, supported by arefund of overpaid interest for previous yearsof £0.2 million, and pension financing charges
falling by £0.2 million to zero, reflecting the
movement from a net pension deficit as at
31 March 2019 to a small net pension asset
as at 30 September 2019.

Profit before tax of £18.0 million (2018:£11.6 million) is after the mark-to-market
movement on derivative financial instruments
and amortisation of acquired intangibles.

Tax
The adjusted tax charge of £5.1 million(2018: £4.2 million) represents an effective
tax rate of 20.1% (2018: 21.2%).
The reduction reflects a change in thegeographical mix of profits.

Earnings per share
Adjusted basic earnings per share increasedby 30.0% to 35.5 pence (2018: 27.3 pence);
adjusted diluted earnings per share grew by
30.0% to 35.1 pence (2018: 27.0 pence).
Basic earnings per share increased by 59.0%
to 24.8 pence (2018: 15.6 pence); diluted
earnings per share grew by 59.7% to24.6 pence (2018: 15.4 pence).
The number of undiluted weighted average
shares remained constant at 57.2 million.

Foreign exchange
The Group faces transactional andtranslational currency exposure, most notably
against the US Dollar, Euro and Japanese Yen.
For the year, approximately 13% of Grouprevenue was denominated in Sterling, 57% in
US Dollars, 19% in Euros, 10% in Japanese
Yen and 1% in other currencies. Our adjusted
operating profit currency exposure for thehalf year in Sterling equivalent is short Sterling£35.2 million, long US Dollar £38.1 million,
long Euro £19.3 million, long JapaneseYen £9.4 million, short Chinese Renminbi£4.5 million and short other currencies£1.3 million. Translational exposures ariseon the consolidation of overseas company
results into Sterling. Transactional exposuresarise where the currency of sale or purchasetransactions differs from the functional
currency in which each company preparesits local accounts.

The Group maintains a hedging programme
against its net transactional exposure using
internal projections of expected currency
trading transactions expected to arise overa period extending from 12 to 24 months.
As at 30 September 2019, the Group had
currency hedges in place extending up to
18 months forward.
Currency effects (including the impactof transactional currency hedging) haveincreased half-year reported adjusted
operating profit by £2.2 million, whencompared to blended hedged exchange
rates for the comparative period. We
estimate that the full-year currency
effect, based on currency rates prevailingat the end of October 2019, will beapproximately a benefit of £3.0 million toadjusted operating profit.
For the full year 2020/21, our assessmentof the currency impact is, based onhedges currently in place and spot rates
prevailing as at 31 October 2019, abenefit to adjusted operating profit of£1.0 million. As an example sensitivity, if
we assume a 5% appreciation of Sterling
against our major trading currencies,
then the impact is a reduction in adjusted
operating profit of £2.7 million.
The actual currency impact will bedependent on currency rates at the timeof shipments and customer acceptances,
as well as the currency mix, and is thus
subject to a high degree of uncertainty.

Dividend
The Group’s policy is to increase the dividend
each year in line with the increase inunderlying earnings, considering movements
in currency. The Board has proposed toincrease the interim dividend by 7.9% to4.10 pence (2018: 3.80 pence). The interim
dividend will be paid on 14 April 2020
to Shareholders on the register as at
6 March 2020.

17

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

FINANCE REVIEW CONTINUED

Cash flow
The Group’s cash flow is summarised below.
								Half year to									30 September									2019									
£mAdjusted operating profit						
25.8

Half year to
30 September
2018
£m

21.0

Depreciation and amortisation							
5.2

5.4

Adjusted EBITDA

							31.026.4Working capital movement								(10.4)

(1.2)

(0.1)

(0.6)

Equity settled share schemes							
2.0

0.4

Purchase of rental assets held for subsequent sale						Share of loss from associate							—

0.6Business reorganisation items							
—

(0.7)

(6.1)

(3.5)

Cash generated from operations							
16.4

21.4

Interest								
(1.1)

(2.3)

Tax									
(3.5)

(4.7)

Capitalised development expenditure							
(2.2)

(1.5)

(2.0)

(3.4)

Pension scheme payments above charge to operating profit					Expenditure on tangible and intangible assets						Decrease in long-term receivables							
0.5

0.6

Dividends paid								
(2.2)

(2.1)

Proceeds from issue of share capital and exercise of share options				

0.2—

Payments made in respect of lease liabilities						

(1.6)

(1.6)

Decrease in borrowings								
—

(8.6)

Net increase/(decrease) in cash and cash equivalents from continuing operations			
4.5

(2.2)

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

Cash generated from operations
Cash generated from operations of £16.4 million (2018: £21.4 million), represents 65% (2018: 91%) cash conversion. Cash conversion is definedas cash generated from operations before pension scheme payments, less capitalised development expenditure, capital expenditure and payments
made in respect of finance leases/adjusted operating profit. Payments made in respect of finance leases are now included within our definition of
cash conversion to retain a like-for-like comparison following the introduction of IFRS 16.
Working capital rose by £10.4 million, reflecting an increase in inventories of £3.8 million, a decrease in receivables of £3.6 million and a reduction
in payables and customer deposits of £10.2 million. The increase in inventories is primarily to support shipments in the second half of the year.
Receivables fell by less than expected owing to a higher number of shipments occurring closer to the half year end compared to the previous year,with the effect that issued invoices are not due by the half year end and are thus not payable. The reduction in payables and customer deposits
is primarily due to a reduction in deferred revenue due to a change in timing of invoicing of service contracts, a fall in customer deposits due torevenue recognised on acceptance close to the half year end, and the timing of payments made on the operational excellence consultancy support.
We expect the cash conversion ratio to improve for the full year.
The increase in the cost of equity settled share schemes is due to a catch-up charge relating to a correction in the valuation of management shareoption incentive schemes.

PensionPension costs included a payment of $2.9 million (£2.3 million) to the US pension scheme as part settlement of termination liabilities. We expect asecond and final payment of approximately $1.6 million will be made prior to the year end.

Interest
Net interest paid was £1.1 million (2018: £2.3 million). Cash interest is higher than the charge in the Income Statement due to timing differenceson the payment of interest on private placement loan notes.

Tax
Tax paid was £3.5 million (2018: £4.7 million); the current period includes a cash settlement to HMRC of £4.0 million in April 2019, partially offset
by a tax refund in the US following the closure of prior period submissions.

18

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

Investment in Research and Development (“R&D”)
Total cash spend on R&D in the half year was £13.0 million, equivalent to 7.8% of sales (2018: £12.0 million, 8.2% of sales). During the half year
we have invested in additional systems to support projects and sample production for new processes within our semiconductor solutions business.
Development costs for a new analyser for electron microscopy have been capitalised in the first half of the year. A reconciliation between theamounts charged to the Income Statement and the cash spent is given below:								Half year to									30 September									2019									
£mHalf year to
30 September
2018
£m

11.9

12.0

R&D expense charged to the Income Statement						Amounts capitalised as fixed assets							
0.1

—

(1.2)

(1.5)

Amortisation of R&D costs previously capitalised as intangibles				Amounts capitalised as intangible assets							
2.2

1.5

Total cash spent on R&D during the year

12.0

					
13.0

Net cash and funding
Net cashCash generation in the half year increased the Group’s net cash from £6.7 million at the start of the year to £14.2 million on 30 September 2019.
Cash generated from operations was £16.4 million. The Group invested £2.2 million in capitalised development costs and £2.0 million in tangible
and intangible assets.
Movement in net cash									
£mNet cash as at 31 March 2019								
6.7Cash generated from operations								
16.4Interest									(1.1)
Tax										(3.5)
Capitalised development expenditure								(2.2)
Capital expenditure on tangible and intangible assets							(2.0)
Dividends paid									(2.2)
Foreign exchange and other items								
2.1Net cash as at 30 September 2019								14.2Funding
On 2 July 2018 the Group entered into an unsecured multi-currency revolving facility agreement, which is committed until June 2023 with
one-year extension options at the end of the first and second years. The facility has been entered into with two banks and comprises a Euro
denominated multi-currency facility of €€50.0 million and a US Dollar denominated multi-currency facility of $80.0 million.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 30 September 2019, the businesshad net cash.

Pensions
The Group has defined benefit pension schemes in the UK and USA. Both have been closed to new entrants since 2001 and closed to future
accrual from 2010.
At 30 September 2019, we recorded a net asset of £2.6 million from defined benefit scheme obligations (31 March 2019: net liability of £6.5 million).
The movement of £9.1 million from a net liability to net asset position was primarily due to the contributions paid in the period. Total scheme assets
at 30 September 2019 were £353.1 million (31 March 2019: £311.4 million) while liabilities were £350.5 million (31 March 2019: £317.9 million).
We are progressing with the process to terminate the US defined benefit pension scheme. This will extinguish all liabilities of the scheme.
We expect to complete the project by the end of the financial year.

19

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

FINANCE REVIEW CONTINUED

Going concern

Forward-looking 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, Strategy andOperations sections of the 2019 Annual
Report. The financial position of the Group,
its cash flows, liquidity position and borrowing
facilities are described in the Finance Review.

This document contains certain
forward‑looking statements.
The forward‑looking statements reflect theknowledge and information available to theCompany during the preparation and up to
the publication of this document. By theirvery nature, these statements depend uponcircumstances and relate to events that may
occur in the future, thereby involving a degreeof uncertainty. Therefore, nothing in thisdocument should be construed as a profit
forecast by the Company.

The diverse nature of the Group, combinedwith its financial strength, provides a solid
foundation for a sustainable business.
The Directors have reviewed the Group’s
forecasts and flexed them to incorporate anumber of potential scenarios relating tochanges in trading performance. The Directors
believe that the Group will be able to operate
within its existing debt facilities. This review
also considered hedging arrangements
in place. The Directors believe that theGroup is well placed to manage its businessrisks successfully.
The Financial Statements have been preparedon a going concern basis, based on the
Directors’ opinion, after making reasonableenquiries, that the Group has adequate
resources to continue in operational
existence for the foreseeable future.

20

Gavin Hill
Group Finance Director
12 November 2019

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019RESPONSIBILITY STATEMENT OF THE DIRECTORSIN RESPECT OF THE HALF-YEAR FINANCIAL STATEMENTS
We confirm that to the best of our knowledge:• the condensed set of Financial Statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and• the interim management report includes a fair review of the information required by:(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the firstsix months of the financial year and their impact on the condensed set of Financial Statements; and a description of the principal risks anduncertainties for the remaining six months of the year; and(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six monthsof the current financial year and that have materially affected the financial position or performance of the entity during that period; and anychanges in the related party transactions described in the last Annual Report that could do so.

Ian Barkshire

Gavin Hill

Chief Executive

Group Finance Director

12 November 201921

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019CONDENSED CONSOLIDATED INCOME STATEMENTHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
Half year to 30 September 2019
Half year to 30 September 2018 as restated2
							
Adjusting		Adjusting				
Adjusted
items1
Total
Adjusted
items1
Total
				
Note
£m
£m
£m
£m
£m
£m

Revenue			4

166.3

—

166.3

147.0

—

147.0

Cost of sales				(84.1)—(84.1)(73.1)—(73.1)

Gross profit				
82.2

—

82.2

73.9

—

73.9

5

(11.9)—(11.9)(12.0)—(12.0)

Selling and marketing				(25.1)—(25.1)(24.6)—(24.6)

Administration and shared services			(18.3)(4.8)(23.1)(15.4)(4.7)(20.1)

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

—

—

—

(0.6)

0.3

(0.3)

Foreign exchange loss				Research and development			

(1.1)

(2.6)

(3.7)

(0.3)

(2.9)

(3.2)

Operating profit				
25.8

(7.4)

18.4

21.0

(7.3)

13.7

Financial income				
0.5

—

0.5

0.1

—

0.1

Interest charge on pension scheme net liabilities		

—

—

—

(0.2)

—

(0.2)

Other financial expenditure				

(0.9)

—

(0.9)

(1.1)

(0.9)

(2.0)

Financial expenditure				
(0.9)

—

(0.9)

(1.3)

(0.9)

(2.2)

Profit/(loss) before income tax		

4

25.4

(7.4)

18.0

19.8

(8.2)

11.6

Income tax (expense)/credit				

(5.1)

1.3

(3.8)

(4.2)

1.5

(2.7)

Profit/(loss) for the period fromcontinuing operations				
20.3

(6.1)

14.2

15.6

(6.7)

8.9

—

—

—

—

—

—

Profit/(loss) for the period attributable toequity holders of the parent			20.3

(6.1)

14.2

15.6

(6.7)

8.9

Profit from discontinued operations after tax

7

					
pence		pence

pence		pence

Earnings per share

Basic earnings per share			3							From continuing operations		

35.5		24.8

From discontinued operations		—		—

From profit for the period			
Diluted earnings per share

35.5		

27.3		15.6
—		—

24.8

27.3		15.6

35.1		24.6

27.0		15.4

3

From continuing operations		
From discontinued operations			
From profit for the period			—		—
35.1		

24.6

—		—
27.0		15.4

Dividends per share			9							Dividends paid						3.8			
3.7
Dividends proposed						4.1			
3.8
1. Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 2.
2. Details of restatement of prior period numbers can be found in Note 1.

22

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019		Year to 31 March 2019 as restated2																Adjusted							Note£m

Adjustingitems1
£m

Total
£m

333.6

—

333.6

Cost of sales							(166.6)—(166.6)Gross profit							
167.0

—

167.0

(24.8)—(24.8)

Selling and marketing							(52.1)—(52.1)

Administration and shared services						(39.4)(9.9)(49.3)

Revenue						4Research and development						
5

0.2

0.3

0.5

Foreign exchange loss							
(1.2)

(1.5)

(2.7)

Operating profit						49.7(11.1)

38.6

Financial income						

0.3

—

0.3

Interest charge on pension scheme net liabilities					

(0.3)

—

(0.3)

Other financial expenditure							
(2.2)

(0.9)

(3.1)

Share of profit of associate, net of tax						Financial expenditure							
(2.5)

(0.9)

(3.4)

Profit/(loss) before income tax					
4(12.0)

35.5

47.5

Income tax (expense)/credit							(10.4)

3.6(6.8)

Profit/(loss) for the period from continuing operations				
37.1

(8.4)

28.7

—

1.3

1.3

Profit/(loss) for the period attributable to equity holders of the parent			 37.1

(7.1)

30.0

Profit from discontinued operations after tax				7								pence		pence

Earnings per share
Basic earnings per share						
3			From continuing operations						64.9		50.1
From discontinued operations						—		2.3
From profit for the period						64.9		52.4

Diluted earnings per share				3			

From continuing operations						64.3		49.7
From discontinued operations						—		2.3
From profit for the period						64.3		
52.0
Dividends per share						
9			Dividends paid									
13.3Dividends proposed									
14.41. Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 2.
2. Details of restatement of prior period numbers can be found in Note 1.

23

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
HALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
								Half year to								30 September							2019							£m

Half year to
30 September
2018£mYear to31 March
2019
£m

14.2

8.9

30.0

Foreign exchange translation differences						
2.7

4.6

4.2

Profit for the period						Other comprehensive income/(expense):			
Items that may be reclassified subsequently to profit or loss			
Items that will not be reclassified to profit or loss			Remeasurement gain in respect of post-retirement benefits				

3.3

2.1

2.5

Tax charge on items that will not be reclassified to profit or loss				

(0.6)

(0.4)

(0.5)

Total other comprehensive income

					
5.4

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

24

19.6

6.3

6.2

15.2

36.2

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
HALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
								Foreign								exchange
					
Share
Share premium
Othertranslation					
capitalaccount
reserves
reserve					£m£m£m£m

As at 1 April 2019				

2.9

61.7

0.2

13.4

Retainedearnings
£m

Total
£m

124.0

202.2

Total comprehensive income/(expense):						Profit for the period				

—

—

—

—

14.2

14.2

Other comprehensive income/(expense):						– Foreign exchange translation differences			

—

—

—

2.7

—

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

3.3

2.7
3.3

– Tax on items recognised directly in other comprehensive income

—

—

—

—

(0.6)

(0.6)

Total comprehensive income attributable to equity
Shareholders of the parent			—

—

—

2.7

16.9

19.6

Transactions with owners recorded directly in equity:						– Proceeds from exercise of share options			

—

—

—

—

0.2

0.2

– Credit in respect of employee service costs
settled by award of share options			

—

—

—

—

2.0

2.0

– Tax credit in respect of share options			

—

—

—

—

—

—

– Dividends paid or accrued			

—

—

—

—

(8.3)

(8.3)

Total transactions with owners recorded directly in equity

—

—

—

—

(6.1)

(6.1)

As at 30 September 2019				

2.9

61.7

0.2

16.1

134.8

215.7

As at 1 April 2018				

2.9

61.7

0.2

9.2

105.6

179.6

Impact of adoption of IFRS 15			

—

—

—

—

(7.0)

(7.0)

					2.9

61.7

0.2

9.2

98.6

172.6

—

—

—

8.9

8.9

Total comprehensive income/(expense):		
Profit for the period				—Other comprehensive income/(expense):						– Foreign exchange translation differences			

—

—

—

4.6

—

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

2.1

4.6
2.1

– Tax on items recognised directly in other comprehensive income

—

—

—

—

(0.4)

(0.4)

Total comprehensive income attributable to equity
Shareholders of the parent			—

—

—

4.6

10.6

15.2

Transactions with owners recorded directly in equity:						– Proceeds from exercise of share options			

—

—

—

—

—

—

– Credit in respect of employee service costs
settled by award of share options			

—

—

—

—

0.4

0.4

– Tax credit in respect of share options			

—

—

—

—

—

—

– Dividends paid or accrued			

—

—

—

—

(7.6)

(7.6)

Total transactions with owners recorded directly in equity

—

—

—

—

(7.2)

(7.2)

As at 30 September 2018				

2.9

61.7

0.2

13.8

102.0

180.6

25

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONTINUEDHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
								Foreign								exchange					
Share Share premium
Othertranslation					
capitalaccount
reserves
reserve					£m£m£m£m

Retainedearnings
£m

Total
£m

179.6

As at 1 April 2018				

2.9

61.7

0.2

9.2

105.6

Impact of adoption of IFRS 15			

—

—

—

—

(7.2)

(7.2)

					
2.9

61.7

0.2

9.2

98.4

172.4

Total comprehensive income/(expense):					Profit for the period				
Other comprehensive income/(expense):

—

—

—

—

30.0

30.0

					

– Foreign exchange translation differences			

—

—

—

4.2

—

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

2.5

4.2
2.5

– Tax on items recognised directly in other comprehensive income

—

—

—

—

(0.5)

(0.5)

Total comprehensive income attributable to equity
Shareholders of the parent
		
—

—

—

4.2

32.0

36.2

Transactions with owners recorded directly in equity:						– Proceeds from exercise of share options			

—

—

—

—

0.2

0.2

– Credit in respect of employee service costs
settled by award of share options			

—

—

—

—

0.8

0.8

– Tax credit in respect of share options			

—

—

—

—

0.2

0.2

– Dividends paid or accrued			

—

—

—

—

(7.6)

(7.6)

Total transactions with owners recorded directly in equity

—

—

—

—

(6.4)

(6.4)

As at 31 March 2019				
2.9

61.7

0.2

13.4

124.0

202.2

26

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2019 – UNAUDITED
As at
30 September
2019
£m

As at
30 September
2018
£m

As at
31 March
2019£m

Property, plant and equipment						
24.5

23.9

24.2

Right of use assets							
8.8

9.7

8.8

Intangible assets							
149.8

156.8

152.5

4.6

3.8

4.6

Long-term receivables							
—

0.9

0.3

																												Note

AssetsNon-current assets				Investment in associate						6Retirement benefit asset							
3.4

—

—

Deferred tax assets							
16.0

15.4

15.3

								
207.1

210.5

205.7

Current assets				Inventories							
65.5

64.6

60.8

Trade and other receivables							
75.1

61.9

78.3

Current income tax receivable						
0.8

2.1

2.4

0.9

1.0

1.1

Cash and cash equivalents							
42.1

18.9

35.2

								
184.4

148.5

177.8

Total assets

359.0

383.5

Derivative financial instruments					10						
391.5

Equity				Capital and reserves attributable to the Company’s equity Shareholders				
Share capital							
2.9

2.9

2.9

Share premium							
61.7

61.7

61.7

Other reserves							
0.2

0.2

0.2

Translation reserve							
16.1

13.8

13.4

Retained earnings							
134.8

102.0

124.0

								
215.7

180.6

202.2

Bank loans							
27.9

27.3

27.9

Lease payables							
5.8

7.5

6.0

Retirement benefit obligations						
—

9.9

6.5

Liabilities
Non-current liabilities

Provisions							
1.0

1.3

1.1

Deferred tax liabilities							
6.6

5.2

6.3

								
41.3

51.2

47.8

Current liabilities				Bank loans and overdrafts							
—

4.1

0.6

Trade and other payables							
109.1

99.9

116.9

Lease payables							
3.4

2.3

3.0

Retirement benefit obligations						
0.8

—

—

Current income tax payables						
3.5

4.7

4.3

Accrued dividend							
6.1

5.5

—

4.2

1.6

1.1

Derivative financial instruments					
10Provisions 							
7.4

9.1

7.6

								
134.5

127.2

133.5

Total liabilities							
175.8

178.4

181.3

Total liabilities and equity						
391.5

359.0

383.5

27

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
								Half year to								30 September							2019							Note£m

Half year to
30 September
2018£mYear to31 March
2019
£m

14.2

8.9

30.0

—

—

(1.3)

			
14.2

8.9

28.7

Profit for the period from continuing operations			
Profit for the period from discontinued operations				
Profit for the period from continuing operations		

7

Adjustments for:				
Income tax expense							
3.8

2.7

6.8

Net financial expense							
0.4

2.1

3.1

Fair value movement on financial derivatives					

2.6

2.9

1.5

Restructuring costs – relating to associate						

—

0.3

0.3

Past service cost on defined benefit pension scheme					

—

—

0.3

Share of impairment recognised by associate					

—

(0.6)

(0.6)

Amortisation of acquired intangibles						
4.8

4.7

9.6

Depreciation of right of use assets						

1.8

1.7

3.3

Depreciation of property, plant and equipment					

2.2

2.2

3.9

Amortisation and impairment of capitalised development costs				

1.2

1.5

3.5

Amortisation and impairment of capitalised software costs				

—

—

0.3

Adjusted earnings before interest, tax, depreciation and amortisation			31.0

26.4

60.7

Loss on disposal of plant, property and equipment					

—

—

0.2

Charge in respect of equity settled employee share schemes				

2.0

0.4

0.8

Share of loss/(profit) of associate						

—

0.6

(0.2)

Restructuring costs paid							
—

(0.7)

(0.7)

(6.1)

(3.5)

(7.1)

			
26.9

23.2

53.7

Cash payments to the pension scheme more than the charge to operating profit			
Operating cash flows before movements in working capital

Increase in inventories							
(3.8)

(7.9)

(4.0)

Decrease/(increase) in receivables						
3.6

12.6

(3.5)

(9.7)

(7.7)

4.1

(Decrease)/increase in customer deposits						
(0.5)

1.8

7.1

(0.1)

(0.6)

(1.1)

Cash generated from operations						
16.4

21.4

56.3

Interest paid							
(1.6)

(2.3)

(3.5)

Income taxes paid							
(3.5)

(4.7)

(8.7)

Net cash from operating activities – continuing operations				
11.3

14.4

44.1

1.6

—

—

Net cash from operating activities		

				
12.9

14.4

44.1

Cash flows from investing activities				(Decrease)/increase in payables and provisions					Purchase of rental assets held for subsequent sale					Net cash from operating activities – discontinued operations				

(2.0)

(2.4)

(4.1)

Acquisition of intangible assets						
—

(1.0)

(2.2)

Capitalised development expenditure						
(2.2)

(1.5)

(3.5)

Decrease in long-term receivables						
0.5

0.6

1.1

Interest received							
0.5

—

0.3

Net cash used in investing activities		

				
(3.2)

(4.3)

(8.4)

Cash flows from financing activities				Acquisition of property, plant and equipment					Proceeds from exercise of share options						

0.2

—

0.2

Payments made in respect of lease liabilities					

(1.6)

(1.6)

(3.2)

Repayment of borrowings							
—

(8.6)

(11.5)

Dividends paid							
(2.2)

(2.1)

(7.6)

Net cash used in financing activities		(12.3)(22.1)

				(3.6)

Net increase/(decrease) in cash and cash equivalents					

6.1

(2.2)

13.6

Cash and cash equivalents at beginning of the period					

35.2

20.7

20.7

Effect of exchange rate fluctuations on cash held					

0.8

0.4

0.9

				
42.1

18.9

35.2

Cash and cash equivalents at end of the period28

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS
HALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
1 Basis of preparation
Reporting entity
Oxford Instruments plc is a company incorporated in England and Wales. The condensed consolidated half-year Financial Statements consolidate
the results of the Company and its subsidiaries (together referred to as the “Group”). They have been prepared and approved by the Directors inaccordance with International Financial Reporting Standard (“IFRS”) IAS 34 Interim Financial Reporting as adopted by the EU. They do not include
all of the information required for full annual financial statements, and should be read in conjunction with the consolidated Financial Statements of
the Group for the year ended 31 March 2019.
The financial information contained herein is unaudited and does not constitute statutory accounts as defined by Section 435 of the Companies
Act 2006. The comparative figures for the financial year ended 31 March 2019 are not the Company’s statutory accounts for that financial year.
Those accounts have been reported on by the Company’s auditors and delivered to the registrar of companies. The report of the auditors was (i)unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report,and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of Financial Statements has been
prepared applying the accounting policies and presentation that were applied in the preparation of the Company’s published consolidated Financial
Statements for the year ended 31 March 2019 except as noted below.

Prior period adjustment
During the year, the Directors reviewed the classification of costs in the Income Statement with a particular focus on whether items are reported
within cost of sales or operating expenses. As a result of this review a number of reclassifications were made, the most significant being that
outward freight costs and commissions paid to employees and external agents are better presented within cost of sales rather than within sellingand marketing expenses. The Directors consider this to be a better presentation since gross margin is now a clearer indicator of commercial
performance and overheads a clearer indicator of cost control. Consequently, the previously published figures for the half year to 30 September
2018 and the year to 31 March 2019 have been restated. The effect on the half year to 30 September 2018 has been to increase cost of sales by£4.8 million and reduce research and development costs by £0.3 million, selling and marketing costs by £4.3 million and administration and sharedservices by £0.2 million. The effect on the year to 31 March 2019 has been to increase cost of sales by £10.0 million and reduce research anddevelopment costs by £0.6 million, selling and marketing costs by £9.2 million and administration and shared services by £0.2 million. There is no
impact on any other primary statement at any reporting date.

Estimates
The preparation of half-year Financial Statements requires management to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these half-year Financial Statements, the significant judgements made by management in applying the Group’s accounting policies
and key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year
ended 31 March 2019.

Going concern
The condensed consolidated half-year Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after
making reasonable enquiries, that the Group has adequate resources to continue in operational existence for the foreseeable future.

29

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS CONTINUEDHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
1 Basis of preparation continued
Exchange rates
The principal exchange rates used to translate the Group’s overseas results were as follows:								Half year to								30 September
Period-end rates						2019Half year to
30 September
2018Year to31 March
2019

US Dollar							
1.23

1.30

1.30

Euro							
1.13

1.12

1.16

Japanese Yen							
133

148

144

Average translation rates							US Dollar

Euro

Japanese Yen

Half year to 30 September 2019			
April							
1.30

1.16

144

May							
1.28

1.15

142

June							
1.27

1.13

138

July							
1.26

1.12

136

August							
1.23

1.11

132

September							
1.23

1.12

132

Average translation rates							US Dollar

Euro

Japanese Yen

Year to 31 March 2019			
April							
1.39

1.14

150

May							
1.36

1.14

148

June							
1.33

1.14

146

July							
1.32

1.13

146

August							
1.30

1.12

144

September							
1.29

1.11

146

October							
1.29

1.13

145

November							
1.28

1.13

144

December							
1.28

1.12

142

January							
1.30

1.13

142

February							
1.31

1.15

145

March							
1.30

1.16

144

2 Non-GAAP measures
In the preparation of adjusted numbers, the Directors exclude certain items in order to assist with comparability between peers and to give what
they consider to be a better indication of the underlying performance of the business. These adjusting items are excluded in the calculation ofadjusted operating profit, adjusted profit before tax, adjusted profit for the year from continuing operations, adjusted EBITDA, adjusted EPS,
adjusted cash conversion and adjusted effective tax rate. Details of adjusting items are given below.
Adjusted EBITDA is calculated by adding back depreciation of property, plant and equipment, depreciation of right of use assets and amortisationof intangible assets to adjusted operating profit, and can be found in the Consolidated Statement of Cash Flows. The calculation of adjusted EPS
can be found in Note 3. Adjusted effective tax rate is calculated by dividing the share of tax attributable to adjusted profit before tax by adjusted
profit before tax. The definition of cash conversion is set out in the Finance Review.

30

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

Reconciliation between operating profit and profit before income tax and adjusted profit from continuing operations
Half year to 30 September 2019
Half year to 30 September 2018
		
		
				
Operating
Profit before
Operating
Profit before					
profitincome tax
profitincome tax
					
£m
£m
£m
£m
		

Year to 31 March 2019
Operatingprofit£m

Profit before
income tax£mStatutory measure from continuing operations		

18.4

18.0

13.7

11.6

38.6

35.5

Restructuring costs – relating to associate			

—

—

0.3

0.3

0.3

0.3

Business reorganisation items			

—

—

0.3

0.3

0.3

0.3

Past service cost on defined benefit pension scheme		

—

—

—

—

0.3

0.3

Share of impairment recognised by associate		

—

—

(0.6)

(0.6)

(0.6)

(0.6)

Amortisation and impairment of acquired intangibles		

4.8

4.8

4.7

4.7

9.6

9.6

Mark-to-market loss in respect of derivative financial instruments

2.6

2.6

2.9

2.9

1.5

1.5

—		
0.9		
0.9

Loan note make-whole payable			Total non-GAAP adjustments			

7.4

7.4

7.3

8.2

11.1

12.0

Adjusted measure from continuing operations		

25.8

25.4

21.0

19.8

49.7

47.5

Share of taxation				(5.1)		(4.2)		
(10.4)

Adjusted profit for the year from continuing operations 		20.3		15.6
Adjusted effective tax rates			

37.1

		20.1%		
21.2%		21.9%Restructuring costs – relating to associate
These represent the Group’s share of mergers and acquisition costs and other one-off items incurred by the associate.

Past service cost on defined benefit pension scheme
As at 31 March 2019, the IAS 19 defined benefit pension balance sheet liability included an allowance of £0.3 million for the expected cost ofequalising Guaranteed Minimum Pension (“GMP”) between males and females.
GMP is a portion of pension that was accrued by individuals who were contracted out of the UK State Second Pension prior to 6 April 1997.
Historically, there was an inequality of benefits between male and female members who have GMP. A High Court case concluded on
26 October 2018 and confirmed that GMPs need to be equalised.

Share of impairment recognised by associate
During the year to 31 March 2018 the Group’s equity accounted associate recognised an impairment relating to the disposal of its Vacgensubsidiary. The Group’s share of this impairment was £2.0 million. Following the completion and finalisation of the transaction, £0.6 million of theimpairment was reversed in the year to 31 March 2019.

Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets and goodwill.

Mark-to-market loss in respect of derivative financial instruments
Under IFRS 9, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured atfair 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 IFRS 9 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 Group canbe more clearly seen.

Loan note make-whole payable
During the year to 31 March 2019 the Group repaid £11.6 million of the principal outstanding on its loan notes. This payment was necessary due
to material changes to the Group’s structure following the disposal of its Industrial Analysis business during July 2017. The costs of £0.9 million
relate to the make-whole balance payable upon settlement of the £11.6 million principal.

Share of taxation
Adjusting items include the income tax on each of the items described above.

31

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS CONTINUEDHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
2 Non-GAAP measures continued
Reconciliation of changes in cash and cash equivalents to movement in net cash							Half year to								30 September								2019								£mHalf year to
30 September
2018£mYear to31 March
2019£m

Net increase/(decrease) in cash and cash equivalents					

6.1

(2.2)

13.6

Effect of foreign exchange rate changes on cash and cash equivalents				

0.8

0.4

0.9

								
6.9

(1.8)

14.5

Repayment of borrowings							
—

8.6

11.5

Movement in accrued interest						
0.6

0.4

0.4

Movement in net cash in the period						

7.5

7.2

26.4

Net cash/(debt) at start of the period						6.7(19.7)(19.7)Net cash/(debt) at the end of the period					14.2(12.5)

6.7

Reconciliation of net cash/(debt) to Statement of Financial Position																												

Half year to
30 September
2019£mHalf year to
30 September
2018£mYear to31 March2019£mLoan notes – unsecured						(27.9)(28.5)(28.5)

Bank loans – unsecured						

—

(2.9)

—

Cash and cash equivalents (per Balance Sheet)				

42.1

18.9

35.2

Net cash/(debt) at the end of the period				14.2(12.5)

6.7

3 Earnings per share
Basic and diluted EPS from continuing operations are based on the result for the period from continuing operations, as reported in the Group
Income Statement. Basic and diluted EPS from total operations are based on the result for the period attributable to equity Shareholders of theparent. Adjusted and diluted adjusted EPS are based on adjusted profit for the period from continuing operations. The profit measures noted
above are divided by the weighted average number of ordinary shares outstanding during the year, excluding shares held by the Employee ShareOwnership Trust. The table below reconciles these different profit measures.
Half year to
30 September
2019£mHalf year to
30 September
2018£mYear to31 March
2019
£m

14.2

8.9

30.0

Discontinued operations							
—

—

(1.3)

Business reorganisation items						
—

0.3

0.3

Past service cost on defined benefit pension scheme					

—

—

0.3

Share of impairment recognised by associate					

—

(0.6)

(0.6)

Amortisation and impairment of acquired intangibles					

4.8

4.7

9.6

Mark-to-market gain in respect of derivative financial instruments				

2.6

2.9

1.5

Loan note make-whole payable						
—

0.9

0.9

																												

Profit for the year attributable to equity Shareholders of the parent			
Adjusting items:			Income tax credit							
(1.3)

(1.5)

(3.6)

Adjusted profit for the year from continuing operations				
20.3

15.6

37.1

32

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

The weighted average number of shares used in the calculation excludes shares held by the Employee Share Ownership Trust, and is as follows:							Half year to								30 September							2019								Shares								millionHalf year to
30 September
2018
SharesmillionWeighted average number of shares outstanding					

57.4

57.4

57.4

Less: weighted average number of shares held by Employee Share Ownership Trust			

(0.2)

(0.2)

(0.2)

Weighted average number of shares used in calculation of basic earnings per share		57.2

57.2

57.2

Half year to
30 September
2019
SharesmillionHalf year to
30 September
2018
SharesmillionYear to31 March
2019
Sharesmillion

57.2

57.2

57.2

Year to31 March
2019
SharesmillionThe following table shows the effect of share options on the calculation of diluted earnings per share:																																			

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

0.6

0.5

0.5

Number of ordinary shares per diluted earnings per share calculations

57.8

57.7

57.7

4 Segment information
The Group has ten operating segments. These operating segments have been combined into three aggregated operating segments to theextent that they have similar economic characteristics, with relevance to products and services, type and class of customer, methods of sale anddistribution and the regulatory environment in which they operate. Each of these three aggregated operating segments is a reportable segment.
The aggregated operating segments are as follows:• the Materials & Characterisation segment comprises a group of businesses focusing on applied R&D and commercial customers, enabling the
fabrication and characterisation of materials and devices down to the atomic scale;• the Research & Discovery segment comprises a group of businesses providing advanced solutions that create unique environments and enablemeasurements down to the molecular and atomic level which are used in fundamental research; and• the Service & Healthcare segment provides customer service and support for the Group’s products and the service, sale and rental of third-party
healthcare imaging systems.
The Group’s internal management structure and financial reporting systems have been amended to differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed above.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a reasonable basis. Intersegment 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 notpresented in reporting to the Group’s Board of Directors.

Results from continuing operations						
Materials &							Characterisation
Half year to 30 September 2019						
£mResearch &Discovery£mService &Healthcare
£m

Total
£m

External revenue						69.8

61.2

35.3

166.3

Inter-segment revenue		

				—

—

—

Total segment revenue						69.8

61.2

35.3

Segment adjusted operating profit from continuing operations			12.2

6.4

7.2

25.8

							Materials &							Characterisation
Half year to 30 September 2018						
£mResearch &Discovery£mService &Healthcare
£m

Total
£m

147.0

External revenue						
60.1

54.3

32.6

Inter-segment revenue						——

—Total segment revenue						
60.1

54.3

32.6

Segment adjusted operating profit from continuing operations			

4.8

6.5

9.7

21.0

33

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS CONTINUEDHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
4 Segment information continued							Materials &							Characterisation
Year to 31 March 2019						
£mResearch &Discovery£mService &Healthcare
£m

Total
£m

External revenue						
137.9

125.2

70.5

333.6

—

—

—

Total segment revenue						
137.9

125.2

70.5

22.1

12.7

14.9

49.7

Research &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

Inter-segment revenue					Segment adjusted operating profit from continuing operations			

Reconciliation of reportable segment profit from continuing operations						
Materials &						
Characterisation
Half year to 30 September 2019					
£mSegment adjusted operating profit from continuing operations		
12.2

6.4

7.2

—

25.8

Amortisation and impairment of acquired intangibles			 (1.2)

(3.2)

(0.4)

—

(4.8)

Fair value movement on financial derivatives		

—

—

—

(2.6)

(2.6)

Financial income				

—

—

—

0.5

0.5

Financial expenditure				

—

—

—

(0.9)

(0.9)

11.0

3.2

6.8

(3.0)

18.0

						
Materials &						
Characterisation
Half year to 30 September 2018					
£mResearch &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

Profit/(loss) before income tax from continuing operations

Segment adjusted operating profit from continuing operations		

9.7

4.8

6.5

—

21.0

Restructuring costs – relating to associates				

—

(0.3)

—

—

(0.3)

Share of impairment recognised by associate			

—

0.6

—

—

0.6

Amortisation and impairment of acquired intangibles			

(1.1)

(3.2)

(0.4)

—

(4.7)

Fair value movement on financial derivatives			

(2.9)

—

—

—

(2.9)

Financial income					—

—

—

0.1

0.1

Financial expenditure					—

—

—

(2.2)

(2.2)

Profit/(loss) before income tax from continuing operations		

8.6

1.9

6.1

(5.0)

11.6

						
Materials &						
Characterisation
Year to 31 March 2019					£mResearch &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

22.1

12.7

14.9

—

49.7

Restructuring costs – relating to associates				—

(0.3)

—

—

(0.3)

Past service cost on defined benefit pension scheme			—

—

—

(0.3)

(0.3)

Share of impairment recognised by associate			—

0.6

—

—

0.6

Amortisation and impairment of acquired intangibles			 (2.4)

(6.4)

(0.8)

—

(9.6)

Fair value movement on financial derivatives			—

—

—

(1.5)

(1.5)

Financial income					—

—

—

0.3

0.3

				—

—

—

(3.4)

(3.4)

Profit/(loss) before income tax from continuing operations		19.7

6.6

14.1

(4.9)

35.5

Segment adjusted operating profit from continuing operations

Financial expenditure34

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

5 Research and development (“R&D”)
The total research and development spend by the Group is as follows:								Half year to								30 September								2019								£mR&D expense charged to the Consolidated Statement of Income			
Less: depreciation of R&D-related fixed assets					Half year toYear to30 September
31 March
1
2018 as restated 2019 as restated1
£m
£m

11.9

12.0

24.8

—

—

(0.1)

Add: amounts capitalised as fixed assets						

0.1

—

0.1

Less: amortisation of R&D costs previously capitalised as intangibles				

(1.2)

(1.5)

(3.5)

Add: amounts capitalised as intangible assets					

2.2

1.5

3.5

				
13.0

12.0

24.8

Total cash spent on R&D during the year
1. Details of restatement of prior period numbers can be found in Note 1.

6 Investment in associate
The Group’s share of profit in its equity accounted associate, Scienta Scientific AB (“Scienta”), for the period was £nil (prior half year: £0.3 million
loss; prior full year: £0.5 million profit). The Group did not receive any dividends from the associate in the current or prior periods.

7 Discontinued operations
During the period the Group received £1.6 million, being a receipt of additional proceeds in respect of the sale of the Industrial Analysis business inJuly 2017.
During the prior year the Group recognised £1.6 million of income representing additional proceeds due in respect of the sale of the Industrial
Analysis business in July 2017 and an associated tax charge of £0.3 million.

8 Taxation
The total effective tax rate on profits for the half year is 21.1% (prior half year: 23.3%). The weighted average tax rate in respect of adjusted profit
before tax (see Note 2) for the half year is 20.1% (prior half year: 21.2%).
For the full year the Group expects the tax rate in respect of adjusted profit before tax to be 20.0%.

9 Dividends per share
The following dividends per share were paid by the Group:							Half year to								30 September								2019								penceHalf year to
30 September
2018
pence

Year to31 March
2019
pence

Previous period interim dividend						
3.8

3.7

3.7

Previous period final dividend						
—

—

9.6

								
3.8

3.7

13.3

								Half year to								30 September								2019								penceHalf year to
30 September
2018
pence

Year to31 March
2019
pence

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

Interim dividend							
4.1

3.8

3.8

Final dividend							
—

—

10.6

								
4.1

3.8

14.4

The final dividend for the year to 31 March 2019 was approved by Shareholders at the Annual General Meeting held on 10 September 2019.
Accordingly, it is no longer at the discretion of the Company and has been included as a liability as at 30 September 2019. It was paid on
18 October 2019.
The interim dividend for the year to 31 March 2020 of 4.1 pence was approved by the Board on 12 November 2019 and has not been included as
a liability as at 30 September 2019. The interim dividend will be paid on 14 April 2020 to Shareholders on the register at the close of business on
6 March 2020.

35

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS CONTINUEDHALF YEAR ENDED 30 SEPTEMBER 2019 – UNAUDITED
10 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount isa reasonable approximation of fair value.
Half year to 30 September 2019
Half year to 30 September 2018Year to 31 March 2019
		
		
				
Carrying
Carrying		Carrying				
Fair value
amountFair value
amountFair value
amountFair value				hierarchy
£m
£m
£m
£m
£m
£m
		

Assets carried at amortised cost							Long-term receivables				
—		
0.9		
0.3
Trade receivables				63.4		
49.9		
64.7
Other receivables				
7.0		
8.3		
10.0
Cash and cash equivalents				
Assets carried at fair value

42.1		
18.9		
35.2

						

Derivative financial instruments:							– Foreign currency contracts		
Liabilities carried at fair value

2

0.9

0.9

1.0

1.0

1.1

1.1

						

Derivative financial instruments:							– Foreign currency contracts		

2

(4.2)

(4.2)

(1.6)

(1.6)

(1.1)

(1.1)

Liabilities carried at amortised cost							Trade and other payables				(56.6)		(58.6)		(65.7)

Borrowings				(27.9)		(31.4)		(28.5)
Lease payables				(9.2)		(9.8)		(9.0)
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in theabove 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 themarket 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 other receivables/
payables are discounted to determine their fair value. Advances received are excluded from other payables above as these are not considered to befinancial liabilities.

Lease payables
The lease liability is measured at amortised cost using the effective interest method.

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) orindirectly (i.e. derived from prices); and• Level 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.

36

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

11 Related parties
All transactions with related parties are conducted on an arm’s length basis and in accordance with normal business terms. Transactions between
the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
During the period, the Group supplied services and materials to, and purchased services and materials from, a subsidiary of its associate on anarm’s length basis. It had the following transactions during the period:
Half year to
30 September
2019£mHalf year to
30 September
2018£mYear to31 March
2019£m

Purchases							
—

0.7

0.7

Receivables at period end							
—

2.1

1.4

																					Transactions with Scienta Omicron GmbH					Included on the Balance Sheet is a long-term loan receivable of £nil (September 2018: £0.9 million, March 2019: £0.3 million) and a current loan
receivable of £0.8 million (September 2018: £1.1 million, March 2019: £1.1 million) due from Scienta Scientific AB. The loan is repayable by theend of May 2020. During the period the Group received interest charged on the loan of £0.1 million (six months to September 2018: £0.1 million,
year to March 2019: £0.2 million).

37

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

INDEPENDENT REVIEW REPORTTO OXFORD INSTRUMENTS PLC
Conclusion

Our responsibility

We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the six
months ended 30 September 2019 which comprises the Condensed
Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, Condensed Consolidated
Statement of Financial Position, Condensed Consolidated Statement of
Changes in Equity, Condensed Consolidated Statement of Cash Flowsand the related explanatory notes.

Our responsibility is to express to the Company a conclusion on thecondensed set of financial statements in the half-yearly financial reportbased on our review.

Based on our review, nothing has come to our attention that causes
us to believe that the condensed set of financial statements in thehalf‑yearly financial report for the six months ended 30 September
2019 is not prepared, in all material respects, in accordance with IAS
34 Interim Financial Reporting as adopted by the EU and the Disclosure
Guidance and Transparency Rules (“the DTR”) of the UK’s Financial
Conduct Authority (“the UK FCA”).

Scope of review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity
issued by the Auditing Practices Board for use in the UK. A review ofinterim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying
analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it
contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK) andconsequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in anaudit. Accordingly, we do not express an audit opinion.

The impact of uncertainties due to the UK exiting theEuropean Union on our review
Uncertainties related to the effects of Brexit are relevant tounderstanding our review of the condensed financial statements.
Brexit is one of the most significant economic events for the UK, andat the date of this report its effects are subject to unprecedented
levels of uncertainty of outcomes, with the full range of possible
effects unknown. An interim review cannot be expected to predict theunknowable factors or all possible future implications for a company
and this is particularly the case in relation to Brexit.

Directors’ responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing
the half-yearly financial report in accordance with the DTR of the
UK FCA.
The annual financial statements of the Group are prepared inaccordance with International Financial Reporting Standards as adopted
by the EU. The Directors are responsible for preparing the condensed
set of financial statements included in the half-yearly financial report inaccordance with IAS 34 as adopted by the EU.

38

The purpose of our review work and to whom we
owe our responsibilities
This report is made solely to the Company in accordance with the termsof our engagement to assist the Company in meeting the requirementsof the DTR of the UK FCA. Our review has been undertaken so that
we might state to the Company those matters we are required tostate to it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company for our review work, for this report, or for theconclusions we have reached.

Mike Barradellfor and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
12 November 2019

Oxford Instruments plc Half-year Report for the six months ended 30 September 2019

PRINCIPAL RISKS AND UNCERTAINTIESInformation regarding the risk management process in place at the Group is set out on page 43 of the 2019 Annual Report. The principal risks anduncertainties identified through that process are set out on pages 44 to 47 of the 2019 Annual Report and can be found on the Group’s website atwww.oxinst.com.
In keeping with the risk management process, the Group has performed a quarterly update of its risk register as at 30 September 2019. It has
evaluated the disclosures made on pages 44 to 47 of the 2019 Annual Report and has concluded that the risks identified remain relevant for theremainder of the year ending 31 March 2020 and that there are no other significant risks to be disclosed. A summary of the risks identified is set
out below:• routes to market;• technical risk;• economic environment;• political risk;• legal/compliance risk;• Brexit-related risks;• adverse movements in long-term foreign currency rates;• supply chain risk;• people;• IT risk;• operational risk; and• pensions.
The continuing lack of clarity relating to Brexit means that uncertainty over the potential impact of Brexit remains. The Group has assessed the key
risks arising from Brexit and concluded that the most significant short-term risks arise from a possible no-deal Brexit, due to the potential disruption
to the supply chain that could arise as a result.

39

DIRECTORS AND ADVISERS

Honorary President

Auditor

Sir Martin Wood OBE FRS Hon FREng DL

KPMG LLP

Company Secretary

Principal bankers

Susan Johnson-Brett ACISHSBC Bank plc
Santander plc

Company number
Registered in England and Wales
number 775598

Stockbroker

Board Committees

UK solicitors

Audit and Risk

Ashurst LLPMary Waldner, Chairman
Steve Blair
Richard Friend
Thomas Geitner

Nomination
Neil Carson, Chairman
Steve Blair
Richard Friend
Thomas GeitnerMary Waldner

Remuneration
Thomas Geitner, Chairman
Steve Blair
Neil Carson
Richard Friend
Mary Waldner

Administration
Any two Directors

Designed and produced bywww.lyonsbennett.com

JPMorgan Cazenove

US counsel
Wilmer Hale LLPPAGE TITLE

Find out more online
www.oxinst.com/investors

For more information please email: investors@oxinst.com
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, 2019.
All rights reserved.