Oxford Instruments plc
Report and Financial Statements 2013

Empowering thefuture of scienceand technology

Bringing the
nanoworld together
Oxford Instruments is a leading provider of hightechnology tools and services for researchand industry. We operate at the heart of therapidly expanding nanotechnology industry,
aiding those who are advancing its progressand capitalising on existing advancementswith our own commercial products.

In this report
Business Overview
What do we do at
Oxford Instruments?
Chairman’s Statement
What drives our success?
Business Review
Chief Executive’sStatement
Strategic Update
Key Performance
Indicators
Operational Review
Financial Review
Principal Risks andRisk Management

02
04
06

14
16
17
18
22
26

Corporate GovernanceCorporate and Social
Responsibility
Board of Directors
Report of the Directors
Corporate GovernanceDirectors’ Remuneration
Report

28
32
34
36
43

Financial Statements
Directors’ Responsibilities 54
Report of the
Independent Auditor
55
Accounting Policies
57
Consolidated Statementof Income64
Consolidated Statementof Comprehensive Income 66
Consolidated Statementof Financial Position
67

Consolidated Statementof Changes in Equity
Consolidated Statementof Cash Flows
Notes to the Financial
Statements
Parent Company
Balance Sheet
Notes to the
Parent Company
Financial Statements
Historical Financial
Summary
Company Information
Shareholder Information
Oxford Instruments
Directory
Advisers

68
70
71
98

99
104
105
107
109

Highlights
Adjusted profit before tax* (£m)

Revenue (£m)
337.3

350.8

£350.8m
+4.0%

2012

2012

2013

Adjusted earnings per share* (p)

61.6

68.3

42.0

68.3p

48.2

+14.8%
2013

Dividend per share (p)

7.23

8.15

2013

2012

8.15p

+12.8%+10.9%
2012£48.2m2013* Adjusted numbers are stated to give a better understanding of the underlying business performance.
Details of adjusting items can be found in Note 1.

DNA origami triangles, self-assembled in a single step from over 200 DNA strands.
Each is a single five megadalton molecular complex, incorporating 15,000 nucleotides.
~120nm per edge, 1µm scan. Imaged with the Oxford Instruments Asylum Research
MFP-3D-BIO™ Atomic Force Microscope. Sample courtesy of Paul W.K. Rothemund,California Institute of Technology.

02

Oxford Instruments plc / Report and Financial Statements 2013

What do we do at Oxford Instruments?

Our vision is to pursue responsible
development and a deeper
understanding of the world
through science and technology.
To achieve this, ourbusiness engages
with the growing
nanoscience industry

As the world develops
and populations
continue to increase,nanotechnology isseen as a key tocontinued economic
progress and growth.

By analysing andmanipulating atoms andmolecules individually,
nanotechnology enablespreviously unheard of
improvements in virtually
all sectors.
The number of atoms
on earth is fixed and will
never increase. If we are
to progress, we needto get value from eachprecious unit of materials.

We support progressin this rapidly
developing area by…

1
Developing
quality tools
needed byresearchers

2

3

Industrialisingcertain tools forcommercial use

Providingknowledgeablesupportservices

Business Overview

Business Review

03

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Our business is structured
around three segments
which reflect our expertiseand business objectives
Our sectors

1

2

3

Nanotechnology Tools

Industrial Products

Service

Scaling high technology
products for use in
the nanoworld

Serving the quality control,
environmental and compliancetesting sectors

Supplying service, support,
training, refurbishment,
consumables and accessories

NanoAnalysis
Leading-edge tools that enable materials
characterisation and sample manipulation
at the nanometre scale.

Industrial Analysis
High quality instruments for materials
identification and thickness gauging
analysis with quality control andquality assurance.

OiService
Third party servicing and support
to operators of Magnetic ResonanceImaging (MRI) and Computerised
Tomography (CT) scanners.

Industrial Components
High technology components
for industry and research.

 upply of refurbished MRI/CT systems,
S
X-ray tubes and other consumables forhealthcare customers in North America.

Omicron NanoScience
World’s leading supplier of systems fornanocharacterisation and measurement
at low temperatures, high magnetic fields
and ultra high vacuum.

Full range of spares, consumables andaccessories for all product ranges.

Plasma Technology
Tools and processes for the fabricationof nanostructures.

47%

Operating Review
page 18

Sector revenue£166.1m

Service elements of Nanotechnology
Tools and Industrial Products sectors.

36%

Operating Review
page 20

Sector revenue£125.1m

17%

Operating Review
page 21

Sector revenue£60.6m04

Oxford Instruments plc / Report and Financial Statements 2013

Chairman’s Statement

We have a broad spectrum of products
operating in high growth technology
markets, supported by the worldrenowned Oxford Instruments brand.
Oxford Instruments provides customers
with high technology tools for use inadvancing the frontiers of science,
improving and assessing the quality ofindustrial processes and demonstratingcompliance to environmental legislation.
We have a broad spectrum of products
operating in high growth technology
markets, supported by the world-renowned
Oxford Instruments brand. This enables
us to sell premium products to ourcustomers and recruit the most highly
skilled people on a global basis.

Nigel Keen
ChairmanIn summary
Oxford Instruments has a cultureof inclusivity which values therole of the individual andrewards commercial successand technical innovation.
Our work worldwide has brought
together skills and ideas fromacross the business to deliver
this strong set of results.
The Group is recommending a
final dividend of 8.15 pence, anincrease of 12.8% over the prioryear, bringing the total for theyear to 11.2 pence.

The Group continues to make good
progress. We have seen organic sales
growth supplemented by acquisitions
and further improvement in our margins
in line with our 14 Cubed objectives. In
today’s uncertain environment, customers
continue to invest in research at the cuttingedge of science and in making their
manufacturing processes more efficientthrough the use of innovative technologies.
Oxford Instruments has a culture ofinclusivity which values the role of theindividual and rewards commercial
success and technical innovation. Our
work worldwide has brought together
skills and ideas from across the businessto deliver this strong set of results. On
behalf of the Board, I thank all our staff
for their commitment and considerable
achievements this year.

During the year, Bernard Taylor stepped
down from the Board and we would liketo thank him for his contribution to thedevelopment of the Group. On 15 January
2013, we announced the appointment ofThomas Geitner as a new Non-Executive
Director. Thomas brings extensive
international experience in the technology
and engineering sectors, having spentover 30 years in businesses operating
across the globe. Thomas will assume
the chairmanship of the Remuneration
Committee at this year’s Annual General
Meeting (AGM). We are pleased to announce
that Jennifer Allerton has today joined
the Board as a Non‑Executive Director.
Jennifer has extensive international
business experience, having spent mostof her career in large companies operating
across the globe, particularly in emerging
markets. In addition, Charles Holroyd andMike Hughes will be stepping down fromthe Board at our forthcoming AGM. As aresult of these changes to the Board, theconstitution of the Board will be compliant
with provision B.1.2 of the UK Corporate
Governance Code.
The Group is recommending a final
dividend of 8.15 pence (2012: 7.23 pence),
an increase of 12.8% over the prior year,
bringing the total for the year to 11.2 pence(2012: 10.0 pence).
As we enter the final year of our threeyear 14 Cubed plan, we are focused ondelivering shareholder value in line withthe 14 Cubed objectives.

Nigel Keen
Chairman
11 June 2013

Business Overview

Business Review

Corporate Governance

Financial Statements

05

Oxford Instruments plc / Report and Financial Statements 2013

What makes ourbusiness successful
and sustainable?

We meet the needs of rapidly
growing markets…

The most
advancedscientifictools

Company Information

The most
valuable
services…differentiating our businesswith four success drivers…

Quality
pages 6-7

Value

Brand

pages 8-9

pages 10-11

Performance
pages 12-13…and securing our future
through a targeted strategy.

Our 14 Cubed plan
Described in full on pages 16-17

06

Oxford Instruments plc / Report and Financial Statements 2013

What drives our success?

A global
reputation for
quality andexcellence

A rich heritage ofinnovation and quality
sets us apart

One of the key reasons customers purchasefrom Oxford Instruments is the consistentquality of our products. This is underpinnedby continued investment in R&D, which
increased this year by 6% to £25.1 million(2012: £23.7 million). The percentageof revenue that is made up of products
launched or acquired in the last three
years is a key indicator of the vitality of
our new product development. This is
now 41%.

Our development process

We turn smart science into commerciallysuccessful products using a rigorous
five-stage development process that
requires checks for quality, commerciality,
serviceability and brand at every stage.

Business Overview

07

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Achieving quality

Investment in researchand development£25.1m

23.7

+6%

2012

25.1

2013

Vitality Index

The market leading X-Max large
area detector is used for Energy
Dispersive Spectrometry, a techniqueused to chemically analyse samples
no thicker than a human hair insidea Scanning Electron Microscope. It is
used, for example, to find defects in
products before manufacturing inthe semiconductor, solar panel andhard disk industries, by police forces
the world over to analyse gunshot
residue particles, and by materialscientists to develop and analyse
new materials for the automotive
and aerospace industries.

41%

Voice of the customer

Passionate and committed workforce

We listen, develop and test our new
technology and products in close
collaboration with our customers and
no R&D projects are initiated without
clear direction from our Voice of the
Customer research.

Over 1,900 people across the world sharea wholehearted passion for our business.
Their skills, expertise and years ofexperience are at the core of Oxford
Instruments and are the key to our success.

08

Oxford Instruments plc / Report and Financial Statements 2013

What drives our success?

Providingvalue inour products,
services andshareholder
returnOur approach meansthat our products
always meet ourcustomers’ needs

To optimise shareholder value, ourproducts and services must be of
the highest standards. We want ourcustomers to value our expertise,our care, the years of knowledge andpartnerships and our constant drivefor excellence. This manifests itself
in our people, our processes andour technology.

Acquisitions

Targeted acquisitions that add to the rangeof products we can offer our customers
bring highly skilled people into our
workforce. Successful integration of ouracquisitions adds value for our customers,
our employees and for our shareholders.

Business Overview

09

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

How we measure value

Value Add Index

1.55

1.49

(Adjusted Operating
Profit + Employment
costs)/Employment
costs

2012

+4%

1.55

2013

Adjusted return on sales

The X-MET range of hand-held X-ray
Fluorescence analysers provide ourcustomers with the right tool for theright application: scrap dealers cansort metals; foundries can analyse
steels; chemical plants can test alloy
pipes; brownfield sites can be tested
for hazardous materials; and toys
for lead in paint. Whatever therequirement, a simple pull of thetrigger will display the analysis
results in just one-two seconds.

14.2%+1.7pp

14.2
12.5

2012

2013

Focus on efficiency

Worldwide network

Innovation is not limited to our technology
and we recognise and reward ideas thatdrive organic growth by improving
efficiencies and increasing margin
performance through our annual
Chairman’s Awards for Innovation.

The diversity of our markets andapplications, supported by ourworldwide network of service engineers,
distributors and agents, has provided astable and highly valued platform fromwhich to grow the business.

10

Oxford Instruments plc / Report and Financial Statements 2013

What drives our success?

Before opening our wholly owned
subsidiary in India, we conducted
extensive research based on how
our brand is viewed locally, whatmessages would resonate and whatchannels are most effectively used.
This gave us unprecedented insightand information with which to build
our strategy for growing our businessin India. It is now a model we adopt
for all emerging markets.

The strength of the
Oxford Instruments
brand is the foundationof our success

The first commercial spin-out from
Oxford University in 1959, Oxford
Instruments has grown into a global
brand recognised for technologicalexcellence, quality and innovation.
The strength of our brand attracts new
and repeat customers, collaborations
with universities and industry, acquisitions,
new investors, and importantly, highly
skilled and motivated people. Whencustomers ask for the “Oxford”, theyknow they are buying more than a highperformance tool or system. They arebuying the Oxford Instruments brand.

Employee brandWe attract highly qualified people fromall over the world who recognise that thechallenges and opportunities provided
by Oxford Instruments will empower
them to reach their full potential. In return,our reputation as an employer of choice
is very high.

Business Overview

11

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

The strength of our brandAn
establishedbrand thatpeopletrust

2013 Employee Survey

73%
Benchmark: 40%
Engagement score: 73%*
* 73% of employees are rated ‘Champions’(those who fully understand, and are committed
to, the business strategy)

Our values
Inclusive
We listen and engage with customers,
colleagues, shareholders and partners
for mutual success.
TrustedWe build long term relationships basedon integrity, trust and respect.
Innovative and Progressive
We bring skill, experience and openness
to new ideas to address the needs of the
21st Century.
Wholehearted
We approach what we do with passion,
with care and with pace.
A mark of excellence

In partnership

Voted 2011 Company of the Year and twice
received Best Technology Award at the
UK PLC Awards. Winner of 13 Queens’Awards for Enterprise.

We believe that our reputation and ourability to develop the highest quality
products are strengthened by collaborations
with universities, industry, and research
institutes. We strive to be the bridge
between industry and academia, pushing
the boundaries of science for the benefitof mankind.

12

Oxford Instruments plc / Report and Financial Statements 2013

What drives our success?

Our productand businessperformanceare synonymouswith success

We measure our
performance atevery stage

From Quality ISO systems, to Customer
Surveys, to Employee Surveys andinternal audits, we are passionate aboutmeasuring our performance. We know
we have to deliver products that perform,
people that perform, and a business that
performs to a consistently high standard,
and most importantly we know that wehave to maintain those standards.

Monitoring satisfaction

Every service engineer is required toask his customer for an assessment of
his performance. We consistently achieve
feedback in the top percentage bracket,
and where we underperform, we reactwith speed and determination to resolve
any issues.

Business Overview

13

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

An outstanding
performance
Sales

£351m

14% CAGR

2009

2010

2011

2012

2013

2012

2013

Adjusted profit before tax

Triton® is the world’s leading dilution
refrigerator, used to create research
environments close to Absolute Zero.
Temperatures below 10 mK can beachieved without the need for cryogens
like liquid helium, which is safer, morecost effective and sustainable. Oxford
Instruments Cryofree® technology wasa world first and enables scientists tomanipulate and analyse matter at
the smallest scale. Triton® formed partof the new D-Wave 512-qubit quantum
computer bought by NASA and
Google for research into advanced
machine learning.

£48.2m
44% CAGR

2009

2010

2011

PeopleBusiness performance

The performance of all employees ismeasured against our values through anannual appraisal process and competencies
framework. The aim is to ensure that Oxford
Instruments is able to attract, develop andretain the mix of diverse talented people weneed to continue to grow our business andmaintain our position as a leading innovator.

The Group is now performing more strongly
than at any time in its history and wasadmitted in to the FTSE 250 index in
September 2011.

14

Oxford Instruments plc / Report and Financial Statements 2013

Chief Executive’s Statement

The Group delivered another strong
performance in the year with profits
rising 14.8% to £48.2 million.

Jonathan Flint
Chief Executive
In summary
Our strong performance ismade possible by our continued
investment in commerciallydriven R&D.
The percentage of revenues
generated from products launchedin the last three years, our Vitality
Index, remained healthy at 41%.
We are building on our strong
position in emerging and fast
growing economies and wecontinue to target growth.

The Group delivered another strong
performance in the year with revenues
rising 4.0% to £350.8 million (2012:£337.3 million). Organic revenue growth
on a constant currency basis was 4.8%.
Adjusted profits before tax grew 14.8%
to £48.2 million (2012: £42.0 million).
Adjusted operating profit marginincreased to 14.2% (2012: 12.5%).
Adjusted earnings per share rose to68.3 pence (2012: 61.6 pence) and theGroup ended the year with a cash balanceof £39.2 million (2012: £35.1 million), after
funding the acquisition of Asylum Research(Asylum) in December 2012.
Asylum, based in California, is a leading
provider of scanning probe microscopes
which are used to capture images andcharacterise the properties of surfaces
and structures down to the atomic scale.
Its products are used by academic andindustrial customers for a wide range ofmaterials and bioscience applications.
Asylum has been combined with
our NanoAnalysis business in our
Nanotechnology Tools sector. The businessis integrating well, performing according
to the acquisition assumptions andcontributing to the acquisition related partof the 14 Cubed revenue growth objectives.
The acquisitions made in 2011 are also
contributing to growth. Platinum Medical
Imaging (Platinum) has performed well,securing a number of multi-year service
contracts, and the integration of Omniprobe
into our NanoAnalysis business is now
complete. Omicron NanoTechnology(Omicron) saw poor market conditions in thefirst half of the year and underperformed
against expectations. Performance inthe second half improved significantly
as management changes took effect.
This part of the business now has astrong long term order book.
Sales in Europe grew 9.5% to £126.2 million(2012: £115.3 million) helped by sales to ITER,
an international collaboration project todevelop carbon free energy. The Group
has negligible exposure to expenditurefrom the Southern European economies.
Russia and Sweden delivered particularly
strong performances. Sales in North

America fell by 4.2% to £91.0 million(2012: £95.0 million). This reflects someweakness in US government-funded
research markets, partially offset by astrong performance in Canada. It is not
yet clear to what extent this was the resultof sequestration of government spend in
the US, which may call for a reduction instate-funded research of around 9%. We
currently have revenues of approximately$30 million from the US government. Sales
in Asia increased by 8.0% to £123.0 million(2012: £113.9 million), representing 35%
of total Group revenues (2012: 34%). The
performance of our new Indian subsidiary
was particularly pleasing, deliveringorders growth of 56%, albeit from a low
base. The high brightness LED market,
which provides a significant growth
opportunity in Asia, stabilised during theyear after a period of softening demand.
With some regional variations, our researchmarkets continue to be strong. Constantcurrency sales in our Nanotechnology
Tools sector grew by 9.4% organically inthe year. We believe that there is structural
growth in demand for nanotechnology
tools over the medium term. Operating
margins in Nanotechnology Tools improved
to 12.5% (2012: 11.2%) due to good progresson our Business Improvement Plan in
NanoAnalysis and Plasma Technology.
As previously reported, industrial markets
continue to be soft with reported sales
down 3.1%. On a constant currency organic
basis, sales in the Industrial Products
sector grew by 1.4%. This reflects general
uncertainty about the economic
environment which is causing customers
to delay investment in key technology
capital goods. During this period of market
retrenchment, we have concentrated on
further improving business efficiency
which has resulted in a 26% increase inprofit in the Industrial Products sector,
bringing the margin to 13.9% (2012: 10.7%).
Innovation remains at the core of theGroup’s culture. Our strong performance ismade possible by our continued investment
in commercially driven R&D. Our R&D cash
spend this year was £25.1 million (2012:£23.7 million), an increase of 5.9%.

Business Overview

Business Review

15

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

The diversity of our products andmarkets has continued to drive thegrowth of the business.

Our core markets
The percentage of revenues generated
from products launched in the last
three years, our Vitality Index,
remained healthy at 41%.
We are now in the final year of our
14 Cubed plan which sets a target forachieving an average compound annual
sales growth rate of 14% in the years
2011 to 2014 and a return on sales of 14%
by 2014. We remain focused on meeting
our three year objectives supportedby the strength and diversity of thebusiness and our exposure to
growing markets.
We operate in three sectors:
Nanotechnology Tools, Industrial
Products, and Service. Details ofthese can be found on pages 18 to 21.
PeopleOxford Instruments relies on the skills
and expertise of its people worldwide.
We recognise the importance of ensuring
a sustainable business through a strategy
of managing, developing and recruiting
people who support our Company values
and contribute to our growth. We seek
to ensure increased diversity amongst
our workforce to utilise fully the talentpool available to us. I am proud tolead such an innovative and talented
workforce and I thank them for theircontinued contribution to our success.
Outlook
We are now two months into the final
year of the three year period coveredby the 14 Cubed objectives. Although
the year has started slowly, we arefocused on completing our 14 Cubed
plan and delivering further progressin the years to come. Our R&D plan
continues to deliver new products tothe market which take market sharefrom our competitors. We are building
on our strong position in emerging andfast growing economies and we continue
to target growth, both organicallyand through bolt-on acquisitions.

Jonathan Flint
Chief Executive
11 June 2013Market revenue

Market revenue

43%

18%

Research and academiaLife sciences

Our largest market sector includes
research into nanotechnology
applications, new materials, dataprotection, pharmaceuticals, security,
renewable energies, and next
generation quantum computing.

A growing market sector includes
the support and service of MR and CT
imaging equipment and the supply ofsuperconducting wire for MRI scanners.

Market revenue

Market revenue

12%

11%

Metals/construction

Semiconductors/IT

Our customers span global industries
from metals, alloy manufacturing,steel foundries and scrap recycling toautomotive, aerospace, precious
metals and cement.

A market that is growing significantly in
Asia and includes semiconductor electronics,
Micro Electro Mechanical Systems (MEMS),
compound semiconductor materials,
thin film and particle analysis.

Market revenue

Market revenue

10%

6%

EnergyEnvironment

New forms of energy are attracting
significant investment from bothgovernment and the private sector.
We are involved in the search forsustainable energy (ITER), solar
technologies, oil and gas explorationand superconductor materials.

As one of the major challenges of the 21stCentury, preservation of our environmentis a key driver. Our markets include tools
for: high brightness LEDs; detection of
hazardous substances in soil; recycling;
and agriculture and food.

16

Oxford Instruments plc / Report and Financial Statements 2013

Strategic Update

Our strategy to grow the business exploits
the Oxford Instruments brand, our superior
technology and exposure to diverse
markets where demand is growing.
Our 14 Cubed plan reaches its final year
In 2011/12 we introduced the 14 Cubed plan.
This plan calls for annual compound
revenue growth of 14% and a returnon sales of 14% to be achieved by 2014.
The 14 Cubed plan is driven by threeelements: strong organic growth;
continuous efficiency improvements;
and targeted acquisitions. These will
each contribute to our targets for
growth and margin improvement.

This organic growth will be supplemented
by targeted acquisitions and the three madein 2011, together with the Asylum Researchacquisition made during the year, arealready contributing to our growth. The
organic and acquisition growth strands ofour strategy are supported by an internal
efficiency programme which seeks bothto increase revenues (by boosting ourcustomer satisfaction levels) and to
manage costs.

The 14% compound growth rate is planned
to be achieved primarily through organic
growth. We believe that this growth levelcan be obtained because of the valued
position of the Oxford Instruments brandin our high technology markets, ourexposure to emerging markets and ourcustomer targeted R&D programme.

Each of these goals is measured by Key
Performance Indicators against which
we calibrate our progress, enabling us
to monitor momentum at both divisional
and Group level on a regular basis.

Our strategic
priorities

4

3

the

ing
Add value
l
ona
pers

5

2

ca
sh

futu
re

Lib
er
at
in
g

r
fo
g rs
n
ri ldeive hol
De are
sh
1

Inve
ntin
g

As we enter thethird and final yearof our 14 Cubed plan
we remain focusedon achieving our
objectives

Realising the brand1	Cash conversion is defined as the ratio of cash generated to adjusted operating profit (see Income Statement).
Cash generated is calculated as adjusted operating profit plus depreciation on property, plant and equipment
and amortisation on research and development, minus capital expenditure on property, plant and equipment
and research and development, and adjusted for movements in working capital.
2	The Net Promoter Score® is a metric which is compiled by asking customers whether they would recommend
Oxford Instruments to a friend or colleague. Customers give a score between zero and ten. Those customers whoscore nine or ten are promoters, those customers who score seven or eight are neutral and customers who score
six or less are detractors. The Net Promoter Score® is the difference between the numbers of promoters and thenumber of detractors (both expressed as a percentage of the number of replies received). The score can range
between –100 (no customers are promoters) and +100 (all customers are promoters). A positive score indicatesthat the Company has fewer detractors than promoters. The 2011 score was obtained from a survey of ourcustomers at a single point in time. During 2012 we initiated a process of surveying customers (on a rolling basis)
immediately after the completion of a piece of work and we now use this data as the basis for our published KPI.

Business Overview

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17

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Key Performance Indicators

The Group uses a range of measures
to monitor progress against its strategicplans. The Key Performance Indicators
are presented below:
Priority
1

Delivering for shareholders
To deliver shareholder return
through growth in turnoverand margin

Measurement
Revenue growth (%)
Tracks our performance on our
growth strategy

Performance
24.0

4.0
2011
Net return on sales (%)
Tracks our performance on our
profitability strategy

10.7

2011

2

Liberating cash

Cash conversion from profit1 (%)
Monitors our use of fixed assets, working capitaland R&D

126.7

Inventing the future

Proportion of revenue coming fromproducts launched or acquired in theprevious three years (%)
Measures the effectiveness of our
R&D programmes

Realising the brand

12.5

2012

2013

14.2

2013

110.5

2012

2013

44

41

2012

2013

64

62

2011

2012

2013

1.42

1.49

1.55

2011

2012

2013

34

2011

4

2012

84.7

2011

3

28.6

Net Promoter Score®2
Measures customer feedback
95Adding personal value

Please see footnotes opposite.

‘Value Add’ – (Adjusted Operating Profit +Employment Costs)/Employment Costs
Measures efficiency

18

Oxford Instruments plc / Report and Financial Statements 2013

Operational Review

Nanotechnology
Tools
The Nanotechnology Tools sector produces ourhighest technology products and plays a key rolein the Group’s strategy for growth.

Revenue
£m
153.9

166.1

£166.1m
+7.9%

2012

2013

Profit
£m
20.8
17.3

£20.8m+20.2%

2012

2013

Margin
%
11.2

12.5

12.5%
+1.3pp

2012

2013

The Nanotechnology Tools sector produces
our highest technology products andserves research and industrial customers
in both the public and private sectors.
It comprises our NanoAnalysis business
which includes Omniprobe and Asylum,
Plasma Technology and Omicron
NanoScience. During 2013, we merged
our NanoScience and Omicron businesses
to create one organisation focused onserving the science and applied researchcommunity where both businesses shared
many customers. We are now able to offer
those customers significantly enhanced
opportunities for collaboration, enabling
technologies and innovative new productsby harnessing the capabilities of two highly
skilled and experienced teams and two
well-established brands.

semiconductors, renewable energy,
mining, metallurgy and forensics. Salesof the new X-Maxn range of large area
detectors have exceeded expectations
as our customers continue to find new
applications for this market leading product.
For example, Russian scientists fromthe NanoTech centre at the Ural Federal
University used the X-Max system toconfirm that fragments of rock foundaround an ice hole in Chebarkul Lake werefrom the meteorite that fell to earth inFebruary this year. This business continues
to deliver a strong performance across all
regions. In 2012 we opened a new sales
office in South Korea to develop newopportunities in this fast growing market.
The integration of Asylum is going well andthe business is performing to expectations.

The Nanotechnology Tools sector plays a
key role in the Group’s strategy for growth.
In 2012 we held a number of seminars
around the world jointly hosted by all
the businesses in this sector. A two day
conference in Bangalore, India withthe theme of “Bringing the NanoWorld
Together” was particularly successful
in attracting new customers and plans
are in place to repeat the format inother territories. A Sector Head for
Nanotechnology Tools has been
recruited and joined us in June 2013.

Our Omicron NanoScience business is themarket and technology leader for analyticalmeasurement techniques in high vacuum,
low temperature and high magnetic fields,
supplying the fundamental and appliedresearch communities. Its technologies
are used in a broad range of applicationspecific solutions in advanced materials,
advanced computing, sustainable energy,
life science and security. The Omicronpart of this business, acquired in June 2011,delivered a disappointing trading
performance in the first half of the year.
However, during the second half, thisbusiness was profitable and the orderbook has strengthened. The mergerof Omicron and NanoScience allows us
to introduce wide-reaching efficiency
measures and focus on building on ourcore competencies and multi-technology
platforms. In May 2013, we announced

Our NanoAnalysis business produces
leading-edge tools that enable materials
characterisation and sample manipulation
at the nanometre scale. Its products
are used on electron microscopes andion-beam systems in academic institutions
and industrial applications including

Business Overview

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19

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013that our Triton® dilution refrigerator waspart of a quantum computer purchasedby a research collaboration of NASA and
Google. Quantum computing is one of thefastest growing nanotechnology researchareas and the potential for ultra fast
super computers is attracting investment
from around the world.
Our Plasma Technology business provides
leading-edge tools and processes for the
fabrication of nanostructures. Our systems
provide process solutions for nanometre
layer growth of compound semiconductormaterial, etching of nanometre sizedfeatures and the controlled growth ofnanostructures, Micro Electro Mechanical
Systems (MEMS), High Brightness LEDs
(HBLED) and photovoltaic devices. Salesof the Estrelas range of systems launchedthis year exceeded expectations. Estrelasis used in key research areas including
nanotechnology and nanofabrication,
micro and nano-electronic devices andphotovoltaic devices. The businessdelivered a steady performance despite
the HBLED market remaining flat, supported
by growth in emerging markets, particularly
Russia, Egypt and India. An efficiency
programme was initiated in 2013 to improvemargins and deliver further growth.

Nurturing talent
We have a very successful apprenticeship scheme that supports school leavers
through college and with practical experience. Many apprentices go on to pursue
successful careers with Oxford Instruments.

20

Oxford Instruments plc / Report and Financial Statements 2013

Operational Review continued

Industrial Products
We now offer a product range which gives
our customers a choice of analysers for theiranalytical requirements.

Revenue
£m
129.1

125.1

£125.1m
–3.0%

2012

2013

Profit
£m
17.4
13.8

2012

+26.0%
2013

Margin
%
13.9
10.7

2012

£17.4m13.9%+3.2pp2013

This sector supplies analytical systems
for quality control, environmental andcompliance testing, and components
for industry and research. The Industrial
Products sector contains our Industrial
Analysis and Industrial Components
businesses. The Industrial Analysis
business comprises three groups; X-ray
Fluorescence (XRF), Optical Emission
Spectroscopy (OES) and Magnetic
Resonance (NMR). Industrial Components
comprises our Superconducting Wire, Austin
Scientific and X-Ray Technology businesses.
Our Industrial Analysis business supplies
high quality instruments for materials
identification, quality assurance, elemental
analysis, thickness gauging and essential
quality control applications. Our customers
span global industries including metals,
steel, scrap recycling, agriculture,
automotive, textiles, petrochemicals andconstruction. For example, our X-Strata
XRF instrument is used by banks to provide
real time evaluation of customers’ precious
metals which are commonly used ascollateral in some parts of the world. Sales
in the emerging markets grew, particularly
in Turkey, India and South Korea. This wasoffset by a downturn in demand from steelmarkets in Europe and China and a decline
in the printed circuit board industry in Asia.
During the year, three new analysers wereintroduced to our XRF hand-held rangeof products offering ultra fast metals
analysis, an optional integrated camera
and a dedicated scrap metal sorter.
This means we now offer a product range
which gives our customers a choice ofanalysers for their analytical requirements.

Our Superconducting Wire business isthe world leader in the provision of highperformance superconducting wire forindustry and research. Markets include
MRI scanners, physics research, proton
therapy and fusion energy. This businessdelivered a good performance in the year,
supported by record growth in China. The
final delivery of the ITER order was madeand the demand from OEM customers for
MRI superconductors remained strong.
Work to expand our wire factory wascompleted, bringing additional production
efficiencies for 2013/14.
Our Austin Scientific business specialises
in high vacuum products, helium gas
coolers and services for the semiconductor,
research, life science and energy industries.
Deliveries on a large contract for
semiconductor process equipment weresuccessfully completed during the year as
expected. Trading levels were consequently
reduced but our move to a new modern
facility has delivered efficiency savings.
Our X-Ray Technology business designs
and manufactures X-ray sources forindustry, research and medical applications.
Formerly part of the Industrial Analysis
business, it now sits within the Industrial
Components division. This businessdelivered a good performance driven
by organic growth and new applications
in medical markets. One of our X-ray
sources is part of the chemistry andmineralogy instrumentation on NASA’s
Mars Curiosity rover, analysing rocks andsoil to provide clues about the planet’s
climate and geology.

Business Overview

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21

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Service
The sector performed well across all territories
driven by successful initiatives such as a worldwide
system training course and online service training.

Revenue
£m
56.3

60.6

£60.6m
+7.6%

2012

2013

Profit
£m
11.0

11.5

£11.5m+4.5%

2012

Our CT and MRI business delivered a strong
performance helped by cost containmentpressure arising from the Affordable HealthCare Act. This legislation is being describedas the most significant overhaul of the
US healthcare system since Medicare andMedicaid and is aimed at increasing the rateof health insurance coverage whilst at thesame time reducing the overall costs ofhealthcare. These factors favour our costeffective business model for servicing
diagnostic imaging medical instrumentation.
Emerging markets are beginning tooffer opportunities for growth. Our
recently acquired regulatory approval
to provide refurbished MRI equipment
to companies in South Korea provides
a particular opportunity for growth in
the current year.

2013

Margin%19.5

This sector comprises our service, support,
training, refurbishment, consumables andaccessories elements of our business.
It consists of two elements: the servicingof CT and MRI medical scanners in North
America and Asia and the service elementsof the Nanotechnology Tools and Industrial
Products sectors. The sector performed wellacross all territories driven by successful
initiatives such as a worldwide systemtraining course for Plasma Technology
customers and online service training.
The range of preferred service options
varies across our global customer base.
In the US, 49% of customers opt for
multi-year service contracts. In Europe
and Asia, take up of service contracts is
slower and these territories offer significant
opportunity for further growth.

19.0

19%

–0.5pp2012

2013

Expert service and support
Our network of service offices and engineers extends across the globe.
Here, an engineer is testing an Oxford Instruments Austin Helium
Compressor before shipping back to the customer.

22

Oxford Instruments plc / Report and Financial Statements 2013

Financial Review

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

Kevin Boyd
Group Finance Director
Revenue£350.8m+4%

Adjusted return on sales

14.2%+1.7pp
Net cash£39.2m

Trading performance
Orders in the period were £334.0 million(2012: £337.8 million). Including inter-segment
trade, the split between segments was:
Nanotechnology Tools £166.6 million, up
5.1%; Industrial Products £102.2 million,
down 17.2%; and Service £66.9 million,
up 14.8%. At the end of the year the Grouporder book for future deliveries stood at£130.8 million (2012: £136.8 million). The
order book was reduced in the year by£15.6 million of sales made to the ITER
project which had been booked as orders
in 2009/10.
Revenues in the year grew by 4.0%
to £350.8 million. The net increase inrevenues due to acquisitions and disposals
was £5.0 million compared with the priorperiod while adverse foreign currency
exchange rate movements reduced salesby £6.0 million. Constant currency
organic revenue growth was 4.8%.
In Nanotechnology Tools, revenues
grew 7.9% aided by the acquisition of
Asylum in December 2012. While we saw
strong growth in both our NanoAnalysis
and Plasma Technology businesses,
revenues in the newly combined Omicron
Nanoscience business were flat. Constantcurrency organic growth was 9.4%.
Following an excellent growth year in
2011/12, revenues in Industrial Products
fell back by 3.1%. On a constant currency
organic basis, we saw growth of 1.4%
with the fall in sales in our Austin
Scientific business being compensatedfor by growth in superconducting wire
sales for MRI applications.
Service revenues increased by 7.6%, due
to the Platinum business we acquired in
November 2011. Excluding this, constantcurrency organic revenues were flat withgrowth in the service revenues within
Nanotechnology Tools and Industrial
Products being offset by a small reduction
in revenues from our non-Platinum MRI
service business in North America.

Adjusted gross margins increased from
44.2% to 44.7%. These improved margins
were predominantly due to new productintroductions and increased efficiencies
with our Value Add Index Key Performance
Indicator increasing from 1.49 to 1.55. Thismeasure is a reflection of the adjusted
operating profit generated from each unitof employment costs.
Adjusted operating expenses rose by£3.7 million, reflecting a £4.7 million spend
in newly acquired businesses and a£1.3 million benefit from foreign exchange
rate movements. On an underlying constantcurrency growth basis, adjusted operating
expenses increased by £0.3 million.
Adjusted operating profit increased by
18.1% to £49.7 million with the adjusted
operating profit margin rising from 12.5%
to 14.2%.
Financial income and expenditureWithin financial income and expenditure,
the cost of interest on loans andoverdrafts and the commitment fee forour revolving credit facility, offset bydeposit interest, amounted to £0.6 million(2012: £0.8 million). The interest charge
on pension scheme liabilities exceeded
the expected return on pension scheme
assets by £0.9 million, a movement of£1.6 million over the prior year. Due to theincreased pension liabilities at 31 March
2013, combined with the changes in the
IAS 19 accounting standard, the net
pension charge to the Income Statementin 2013/14 is expected to increase to£2.5 million of which £2.2 million will bereported in financial expenditure and£0.3 million in administration and sharedservice costs.
The Group uses derivative products tohedge its exposure to fluctuations inforeign exchange rates. It is Group policy
to have in place at the beginning of afinancial year hedging instruments tocover 80% of its forecast transactional
exposure for that period.

Business Overview

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23

Corporate Governance

Financial Statements

Oxford Instruments plc / Report and Financial Statements 2013

Adjusted gross margin

Adjusted operating profit

44.7%£49.7mTaxation
The underlying tax rate on the profit
before tax for the Group before adjusting
items was unchanged at 21%.

forward tax losses. In 2014/15 rates will
therefore rise and we currently expect
them to be in the region of 24%–28%.

+0.5pp
In common with a number of othercompanies, the Group has decided thatthe additional costs of meeting theextensive documentation requirementsof IAS 39 to apply hedge accounting tothese foreign exchange hedges cannot
be justified. Accordingly the Group does
not use hedge accounting for thesederivatives. Net movements on marking
to market such derivatives at the balance
sheet date are disclosed in the income
statement as Financial Expenditure andexcluded from our calculation of adjusted
profit before tax (Note 1).
The Group also uses derivative products
to hedge its exposure to fluctuations in
the price of copper, a major component
for the Superconducting Wire business.
Given the small number of contracts
involved, we apply hedge accounting forthese transactions and consequently the
results of marking to market are excluded
from the Income Statement.

Company Information

The Group has brought forward tax losses
in the UK to offset against future taxable
profits. In the year ended March 2011,
due to the improved performance of theGroup’s UK businesses, we recogniseda deferred tax asset of £11.3 million anda corresponding credit to the Income
Statement. We believe that this was
exceptional both in nature and quantum
and therefore excluded it from ourcalculation of adjusted earnings per share.
Of this asset value, £3.3 million reversedin the year ended March 2013 and to beconsistent we have excluded it from thecalculation of adjusted earnings per share(see Note 1). In the 2013/14 financial year
we expect tax rates to be similar to
2012/13 as we exhaust these brought+18.1%

Earnings
After a tax charge of £7.6 million (2012:£11.3 million), the reported net profit for
the financial year was £22.0 million (2012:£24.8 million). With a weighted average
number of shares of 56.2 million (2012:
54.0 million), the basic earnings per share
were 39.2 pence (2012: 46.0 pence).
Adjusted profit before tax (Note 1) grewby £6.2 million to £48.2 million which
equates to adjusted earnings per share of
68.3 pence (2012: 61.6 pence), an increaseof 10.9%.

Adjusting items
The Directors believe that adjusted profit before tax gives a clearer indication of the underlying performance of the business.
A reconciliation of reported profit before tax to adjusted profit before tax is given below:
2013
£m

2012
£m

Profit before income tax

29.6

36.1

Reversal of acquisition related fair value adjustments to inventory

0.5

1.7

—

(7.0)

Gain on disposal of product line
Acquisition related costs

2.1

1.5

Amortisation and impairment of acquired intangibles

13.8

11.2

Unwind of discount in respect of deferred consideration

0.2—

Mark to market loss/(gain) in respect of derivative financial instruments

2.0

(1.5)

Adjusted profit before income tax

48.2

42.0

Share of taxation

(9.9)

(8.8)

Adjusted profit for the year

38.3

33.2

24

Oxford Instruments plc / Report and Financial Statements 2013

Financial Review continued

The Directors have reviewed theGroup’s forecasts and believe that
the Group is well placed to manage
its business risks successfully.

Adjusted earnings per share

68.3p
+11%

Research and Development cash spend£25.1m+6%

Net assets£137.7m+8%

Dividends
In 2011 the Group moved to a progressive
dividend policy, whereby we would seek
to raise dividends as adjusted earnings
per share rise, although not necessarily
by the same proportion, depending on
the Directors’ perceived need for cash
to expand the business both organicallyand through acquisition. For the year justended the proposed final dividend of
8.15 pence per share (2012: 7.23 pence),payable on 24 October 2013 to shareholders
who are on the register on 27 September
2013, gives a total dividend for the yearof 11.2 pence per share (2012: 10.0 pence).
Dividend cover for the underlying businessbefore adjusting items was 6.1 times(2012: 6.2 times).
Balance sheet
Net assets rose from £127.1 million to£137.7 million in the year.
Net working capital (excluding derivative
financial instruments, contingent
consideration and tax payable/receivable)
increased by £2.9 million in the year to£18.8 million.
Inventory turns increased by 0.1 to 3.3
while debtor days reduced from 53 days
to 51 days.
Acquisitions and disposals
On 17 December 2012 the Group acquired
Asylum Research Corporation for an
initial consideration of $32 million. The
acquisition was funded from the Group’s
own cash resources.
Pensions
The Group has defined benefit pension
schemes in the UK and the US. Both havebeen closed to new entrants since 2001
and closed to future accrual from July
2010. The total deficit, before tax, under
IAS 19 on these pension schemes rose in
the year by £12.7 million to £47.9 million
with a corresponding deferred tax assetof £11.4 million.

Assets of the schemes at 31 March 2013
were £198.0 million (2012: £180.2 million),while liabilities increased from £215.4 million
to £245.9 million principally as a result of
the fall in the corporate bond yield used
to discount future cash flows from 4.9%
to 4.5%.
The latest triennial actuarial valuationof the UK scheme was carried out as at
31 March 2012 and resulted in an actuarial
deficit of £48.8 million. A long term plan
for recovering the deficit over eight years
has been agreed between the Company
and the Pension Trustee. Under the deficit
recovery plan, payments will increase
for the three years to March 2015 by thegreater of 10 percent or the percentage
increase in dividend per share. Thereafter,
the payment will increase by 3.05% perannum. The payment in 2012/13, the firstyear of the new plan, was £5.0 million.
Cash
Adjusted earnings before interest,
tax, depreciation and amortisation(EBITDA) increased by 11.7% to£58.2 million. Working capital increasedby £2.9 million. Trading working capital,
which we define as inventory plus tradedebtors less trade creditors and customer
deposits as a percentage of sales, was
16.6% (2012: 15.4%).
Cash generated from operations was£50.4 million, a reduction of £0.1 million
on the prior year. The ratio of operating
cash to operating profit, which is one of
our Key Performance Indicators, was
84.7% (2012: 110.5%).
Net cash at the year end was £39.2 million(2012: £35.1 million). The Group maintains
a committed Revolving Credit Facility
with a club of three banks. The facility,
which extends to December 2014, is for£50 million and is extendable to £70 million
by mutual consent. In addition, the Grouphas overdraft and other facilities totalling£14.1 million. In March 2013 the Group agreed

Business Overview

Business Review

Corporate Governance

Financial Statements

25

Oxford Instruments plc / Report and Financial Statements 2013

a committed facility with the European
Investment Bank to fund R&D in Europe.
The facility, which can be drawn downat any time before December 2013, isfor £25 million and can be either fixed
or floating rate with a duration of up
to seven years.

The diverse nature of the Group combinedwith its current financial strength provides
a solid foundation for a sustainablebusiness. The Directors have reviewed
the Group’s forecasts and flexed themto incorporate a number of potential
scenarios relating to changes in trading
performance. The Directors believe that
the Group will be able to operate within
its existing debt facilities. This review
also considered hedging arrangements
in place. As a consequence, the Directors
believe that the Group is well placed to
manage its business risks successfully.

Employees
The average number of people employedduring the year was 1,927, an increase of
93 over the prior year. As a result of theacquisition of Asylum, 74 employees
joined the Group.
Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position,
are set out in the Chief Executive’sStatement. The financial position of theGroup, its cash flows, liquidity position
and borrowing facilities are describedin this Financial Review.

The Financial Statements have been
prepared on a going concern basis, basedon the Directors’ opinion, after making
reasonable enquiries, that the Group
has adequate resources to continue
in operational existence for theforeseeable future.

Company Information

Forward-looking statements
This document contains certain forwardlooking statements. The forward-looking
statements reflect the knowledge andinformation available to the Company
during the preparation and up to the
publication of this document. By theirvery nature, these statements depend
upon circumstances and relate to events
that may occur in the future thereby
involving a degree of uncertainty.
Therefore, nothing in this document
should be construed as a profit forecastby the Company.

Kevin Boyd
Group Finance Director
11 June 2013

Investment in research and development (R&D)
Total cash spend on R&D in the year was £25.1 million or 7.2% of sales (2012: £23.7 million, 7.0%).
A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:
2013
£m

2012
£m

R&D expense charged to the consolidated statement of income

24.3

25.8

Less: depreciation of R&D related fixed assets

(0.7)

(0.2)

Add: amounts capitalised as fixed assets

0.8

0.9

Less: amortisation of R&D costs capitalised as intangibles

(3.9)

(5.2)

Add: amounts capitalised as intangible assets

4.6

2.4

Total cash spent on R&D during the year

25.1

23.7

The net book value of capitalised development costs at the end of the financial year was £12.3 million (2012: £11.7 million).

26

Oxford Instruments plc / Report and Financial Statements 2013

Principal Risks and Risk Management

The Group monitors a number of risksmaterial to its progress.

Description

Risk

Possible impact

Technical risk

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

• Lower profitability andfinancial returns.

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

The Group’s strategic plan includes theoutsourcing of a significantly higher
proportion of the costs of its products
to benefit from economies of scale andnatural currency hedges.

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

Operational risks

Outsourcing

PeopleFailures in the supply chain
impacting sales.

• Disruption to customers.

Appropriate acquisition targets will not
be available in the necessary timescale.

• Lower profitability andfinancial returns.

Alternatively, once acquired, targets
may fail to provide the planned value.

• Management focus taken away fromthe core business in order to manage
integration issues.

The employee leaves the Group.

• Lower profitability andfinancial returns.

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

• Lower profitability andfinancial returns.

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

• Additional cash required by the Groupto fund the deficit.

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

Economic environment
The recent global recession andprevailing economic downturn haveresulted in cuts to both government
and private sector spending.

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

Foreign exchange volatility
A significant proportion of the Group’s
profit is made in foreign currencies.

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

Financial risks

Pensions• Negative impact on theGroup’s reputation.

• Negative impact on theGroup’s reputation.

• Reduction in net assets.

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

• Lower profitability andfinancial returns.

The systems integrator switches
supplier, denying the Group’s routeto market.

• Lower profitability andfinancial returns.

Business Overview

27

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Associated strategic priorities key

Liberating cash

Adding personal value

Inventing the future

Delivering shareholder value

Realising the brand

Mitigating activities

Associated priorities• The Group has moved away from large scale, single customer development
programmes towards more commercially orientated products.

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

• The New Product Introduction programme that any new R&D projects must passthrough provides a framework within which the commercial viability of projects
are scrutinised and assessed.

Support and develop our employees
to maximise their value add.

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

Developing a competitive global supply
base that supports our growth.

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

Developing a strong brand in existingand developing markets.

• Extensive financial and technical due diligence is undertaken by the Group during
any acquisition programmes.

Developing a strong brand in existingand developing markets.

• Each transaction has a comprehensive post acquisition integration plan which isreviewed at the highest level.

Using “Voice of the Customer” to drive
rapid new product development.
Supporting and developing
our employees.

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

Supporting and developing
our employees.

• A comprehensive succession planning process is in place, together with a talent
network which identifies and manages contacts with people who could provide
external succession for critical current and future roles.

Providing career challenges.

• A management development programme provides exposure to key skills needed
for growth. Regular individual performance reviews take place.
• The Group has a broad spread of customers, applications and geographical markets.
• The Group is expanding in the so called BRIC nations, whose markets have been
more resilient during the economic downturn.

Developing a strong brand in existingand developing markets.
Focus on balanced and attractive
global markets.

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

Focus on balanced and attractive
global markets.

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

Developing a competitive global supply
base that supports our growth.

• The Group seeks to mitigate the exposure to transactional risk by the use of natural
hedges wherever possible.

Focus on balanced and attractive
global markets.

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

Developing a competitive global supply
base that supports our growth.

• Use of the stage gate process and “Voice of the Customer” to make sure that theGroup’s products are the best in the market.

Developing products that offer thebest technical solution.

• Co-marketing with system integrators to promote the merits of the Group’s products
to end customers.

Ensuring that end customers
appreciate the benefits of Oxford
Instruments technology.

28

Oxford Instruments plc / Report and Financial Statements 2013

Corporate and Social Responsibility

Our vision is to pursue responsible
development and deeper
understanding of the world
through science and technology.
The Oxford Instruments brand and Company values are at the heart of the Group’s
approach to Corporate Social Responsibility (CSR). These are:

Our CSR strategy is focused on
the following key themes:

We listen andengage withcustomers,
colleagues,
shareholders andpartners formutual success.

Diversity and inclusion•

Employees•

Health and safety

We approach
what we do with
passion, with careand with pace.

Our valuesare tive
ss
ive

•

ed
st

Customer focus and service

ea

h

•

ole

Business ethics

We build longterm relationships
based onintegrity, trust
and respect.

Tr
u

e
s iv

Wh

•

I nc
lu

CSR at Oxford
Instrumentsrted

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

ov g
I n nprodan•	Supplier and partner

engagement•

Sustainability

We believe
people makethe difference.

We meet ourcustomers’ needs
through advanced
technology
and service.

We use innovation
to turn smart
science into worldclass products.

We haveexperience to relyon and integrity
to trust.

The performance of all employees is measured against our values through an annual
appraisal process and competencies framework.
Business ethics
The Board is committed to maintaining
the ethical standards the Oxford
Instruments brand is known for andexpect the same commitment from ourpartners: employees, customers, suppliers
and representatives. We work ethically,
openly, responsibly and inclusively. We
strive for maximum transparency, do nottolerate any form of bribery, corruption or
fraud and do not make political donations.
We have in place a Business Conduct andEthics Code which all employees are madeaware of at the time of joining the Company
and through subsequent exposure on the
Company intranet and corporate website.
Our Code is supported by a range of policies
which are regularly monitored by the Boardand updated and added to whenevernecessary. Each policy gives detailed
information on how to manage sensitive
issues once an assessment of risk has
been identified.

• Anti-corruption and bribery• Business malpractice• Communications (including social
media and internet policy)• Diversity and inclusion• Environment• Health and safety• Human rights• Insider dealing• QA requirements for suppliers
Customer focus and service
The Group believes that customer
relationships are built on mutual trust,
respect and integrity, and that thisprinciple should govern all aspects ofthe business. Our customer is at theheart of everything we do and has led
to an improved and more professional
approach to supporting them on acontinuing basis after the original sale.

Business Overview

Business Review

29

The continued focus on the “Voice of the
Customer” in any new product introduction
or current product development ensuresthat the customer needs are at the coreof our business. The success of new
products introduced in 2012/13 supports
this focus. The percentage of revenue
that is made up of products launched or
acquired in the last three years is a key
indicator of the vitality of our new productdevelopment and continues at 41%.
Diversity and inclusion
Our business should reflect our
diverse customers and markets andthe environment in which we operate.
Our value of Inclusiveness reflects ourcommitment to developing this diversity.
The Board recognises that our employees
are fundamental to our success. As a hightechnology business, we have a highly
skilled workforce and it is they who deliver
our strategic objectives. The Group’s aim
is to ensure there are equal opportunities
for all employees and that we create
an inclusive culture where differences
are valued and people are given theenvironment in which they can do theirbest work. Decisions regarding recruitment,
selection, access to training and promotion
are based on merit.
We believe that decision making is more
effective when people from a range ofperspectives and backgrounds are involved.
Therefore encouraging diversity is important
to us. We believe that diversity, at Board
level, within management and amongst
staff is important to allow our businessto grow and maintain our position as aleading innovator.
Over the past 12 months we have madesignificant progress with our Diversity
and Inclusion (D&I) agenda. This includes:• appointment of a Diversity
Champion, Dawn Brooks, Group
Service Director, who is a memberof the Management Board;• delivery of D&I awareness andengagement sessions for the plc
Board and Directors to ensure a

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

shared understanding of our ambitions
in regard to developing our diverse
global talent pool;• development of policies that prevent
bias in relation to recruitment andpromotion including actively discussing
diversity during succession planning;• D&I were measured for the first time inour employee survey. This has given us a‘baseline’ from which we can build upon;• work with local universities andprofessional bodies to help raiseawareness of women in science; and• embedding diversity and crosscultural awareness in our Groupwide development programmes.
We have also taken steps to respondto the recommendations set out in theDavies Report and the related changes
in the Corporate Governance Code as
published by the FRC.
Employees
Employee engagement
In 2012 we conducted our third global
employee survey, with an overall response
rate of 72%. The survey focuses on five
key areas for measuring employee
engagement: Day-to-Day Working
Conditions; Training and Development;
My Manager; My Business; and Oxford
Instruments Overall. We were able tobenchmark the Oxford Instruments
Group against a control group, consistingof 230 organisations, representing
185,600 respondents.
We have made progress since our firstsurvey in 2009. A Key Performance
Indicator (KPI) is the fraction of our staff
rated as Champions. This reflects staff
understanding of our strategy and theircommitment to achieving it. The numberof Champions has increased from 45%(in 2009) to 73%. This exceeds both ourinternal Business Improvement Plan
target and the external benchmark of
40%. The overall Group results show
strong, positive responses in thefollowing areas:a. communication of strategy;b.	the leadership of the
management board;c. confidence in senior management;d. clarity of objectives;e.	sense that jobs are important
and worthwhile; andf.

desire for career progression.

Our results are a reflection of the stronglevels of motivation and commitment we
see across the Group. Our next survey isplanned for September 2014.
Internal communication
Oxford Instruments’ business strategy iscommunicated throughout the Group andis set out on our intranet for all employees
to refer to. This area of the intranet also
shows progress against this plan and thebusiness KPIs. All employees receive
regular updates on the performance of
their own business together with theperformance of the Group at regularbriefing meetings. Whenever appropriate,
video announcements or interviews withkey senior managers that offer more detailon our performance are posted on theintranet. Periodically, the Chief Executive
writes a blog which summarises, at a top
level, meetings with investors and analysts,
and business strategy sessions. This helps
to create understanding of interests andconcerns from an investor perspective.
We invite feedback and suggestions fromstaff at every point of communication.
Learning and development
Building the knowledge and skills of ourpeople is critical to the future of our businessso this year we appointed a Group Learningand Development Manager to deliver
leadership and management programmes
and strengthen the talent pipeline to ensure
robust succession planning throughout
the Company. The global graduate
programme introduced this year allows
participants to gain broad experience,developing their management skills andworking on a business critical project.

30

Oxford Instruments plc / Report and Financial Statements 2013

Corporate and Social Responsibility continued
Reportable accidents
per 1,000 employees

2.5

66.16MWh

The annual Chairman’s Awards forInnovation recognise and reward
innovation in its broadest sense.
The continued increase in the standard
and number of entries to these awards
is evidence of the engagement of ouremployees in this successful programme.

manufacturing site annually. All officesites will be audited every two years andwill complete a self assessment audit in
the intervening years.

–34%

Employees continued
Learning and development continued
We pride ourselves in offering employment
to apprentices at the beginning of theircareer and internships to people
considering a career in the engineeringand technology sector. By investingin our people we aim to create loyalty,
high employee engagement and highperforming teams and we will continue
to make sure that our people have theskills and knowledge to contribute to
the continuing success of the Company.
Incentives
The Group believes it is important that
our highly skilled and educated workforce
receive a share in the success of thebusiness. In addition to the regularmanagement and sales commission
schemes, we operate a Gain Sharepayment for all employees not in receipt
of an existing management bonus. This
plan is linked to achievement of ourstrategy and aligns employees’ interest
with that of our shareholders.
In addition, we offer employees extra
benefits such as discounts on certain
local activities, merchandise, insurance,and health and dental cover.

Overall energy consumption£million revenue

Health and safety
The Group is committed to providing
the highest standards of safety in theworkplace for our employees and to thecontinual improvement of our healthand safety performance.
Responsibility for Health and Safety (H&S)
lies with the Board. Charles Holroyd, an
Executive Director, is responsible forformulating the Group’s H&S strategy
and objectives, reviewing performanceagainst these objectives and for ensuringthat key H&S issues are effectively
identified and managed.
The Board reviews the H&S performanceof the Group’s operations at eachmeeting. All Group businesses regularly
report progress on H&S issues to theGroup Health, Safety and Environment
Manager who is responsible for keeping
Charles Holroyd, and consequently the
Board, informed of serious issues. The
Group Health, Safety and Environment
Manager is responsible for auditing each

+6.2%

Reportable accidents defined by the UK
standard of over seven days’ absence,
continued to reduce falling from 3.8 per
1,000 employees in 2011/12 to 2.5 per
1,000 employees in 2012/13.
Employees are kept informed of current
H&S issues through information provided
by their local H&S representative andtheir local H&S committees. Membersof the local committees include staff fromall areas of the business who meet on aregular basis.
In addition, information on H&S matters
is published on the Group intranet, noticeboards and in monthly cascades andquarterly business reports. Employees
are actively encouraged to suggest
improvements that can be made inworking conditions and practices.
Supplier and partner engagement
The Group works hard to establish
trust, respect and mutually beneficial
relations with its business partners,
including suppliers, banks andcollaborative associates.

Incentives
Now in its eighth year, our annual Chairman’s Awards for Innovation recognise andreward outstanding achievements across the Group (photo shows 2013 finalists).

Business Overview

Business Review

31

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

We will maintain a wholehearted commitment toour shareholders, customers, employees, partners,
and local communities to conduct our business inan ethical and sustainable manner.

Key CSR
achievements 2012/13•	Appointment of a Diversity

Champion, Dawn Brooks,
Group Service Director,
who is a member of theManagement Board.

•	Diversity and inclusion were

measured for the first timein our employee survey.

•	We have taken steps to respondto the recommendations set
out in the Davies Report andthe related changes in the
Corporate Governance Code.

•	We conducted our third global

employee survey, with an
overall response rate of 72%.

•	Reportable accidents

continued to reduce fallingfrom 3.8 per 1,000 employees
in 2011/12 to 2.5 per 1,000
employees in 2012/13.

There is a Group supplier management
process in place which promotes a common
supply chain strategy split by commodity,
driving the business towards fewer highlevel suppliers. Regular inspections andaudits are conducted and strategic reviews
are in place for key suppliers. In accordancewith ISO 9001 and ISO 14001, only quality
approved organisations are used.
Sustainability
Environment/energy
The Group complies with all European
directives aimed at benefiting theenvironment. Such directives include theWaste Electrical and Electronic Equipment(WEEE) Directive, the Restriction on use ofHazardous Substances (RoHS) Directive,
the Registration, Evaluation, Authorisation
and Restriction of chemicals (REACh)
Directive and the Energy use of Products(EuP) Directive.
Products
Many of the Group’s products and services
provide solutions which help address theglobal issues of environmental control
and protection, and energy conservation.
For example, our hand-held XRF analysers
are used in the analysis of hazardous
substances in soil and our microanalysis
systems are used in the detection ofasbestos fibres. We are continually looking
for new applications for existing technologies
to support the growing need to protect
the world and the people who live in it.

All corporate literature is printed on
environmentally friendly paper using Forest
Stewardship Council (FSC) accredited
printers. This, together with the vegetableoils used to coat the paper, means thatthe documents are bio-degradable
and recyclable.
There is a Sustainability area of theintranet which regularly updates all
employees on the progress we makeon all aspects of sustainability.
Communities
The Group is an active support of local,
national and international science
communities both on a corporate level,a business group level and an individuallevel. It also sponsors a number ofinternational and national awards
and events including the prestigious
Sir Martin Wood Prize through theMillennium Science Forum in Japan.
Business groups and employees aresupported in any activities that promote
good relations with the local communities
by contributing to, and supporting, local
charities and community activities. The
focus is on supporting science in business,and encouraging innovation and thepromotion of science in schools anduniversities. Local social clubs run annual
fundraising activities for a chosen charity
and the Group supports these efforts
with an additional donation.

Energy in the workplace
Every site has an Energy Champion who
is responsible for implementing plans to
reduce its carbon footprint. Each site reports
its monthly energy consumption andreduction activities. During the 2012/13
financial year, the mix of revenues
favoured the sites that consumed mostpower. Despite most sites reducing theirown energy usage, the overall energy
consumption increased slightly from
62.3MWh/£million revenue during 2011/12
to 66.16MWh/£million revenue in 2012/13.

Summary
In 2013 and beyond we will maintain thefocus on CSR in the strategic decision
making process and business performance.
We will continue to meet our customer
needs through advanced technology andpremium service and we will maintaina wholehearted commitment to ourshareholders, customers, employees,
partners, and local communities to
conduct our business in an ethical andsustainable manner.

Recycling in the workplace
All major sites have a responsibility torecycle waste materials including cardboard,paper, wood and metals. Employees areencouraged to recycle paper, packaging,bottles and cans.

Jonathan Flint
Chief Executive
11 June 2013

32

Oxford Instruments plc / Report and Financial Statements 2013

Board of Directors

The Board is collectively responsible
for promoting the success of
Oxford Instruments.
A full discussion of the roles and managementof the Board is on pages 36–42

Nigel Keen

Jonathan Flint CBE

Kevin BoydCharles Holroyd

Appointed to the Board
February 1999

Appointed to the Board
April 2005

Appointed to the Board
August 2006

Appointed to the Board
November 2005
(with the Group since 1999)

Committee membership
Remuneration, Chairman
Nomination, Chairman

Committee membership
None

Committee membership
None

Committee membership
None

BackgroundHolds an engineering degreefrom Cambridge University andhas been involved in the formationand development of high technology
businesses for more than 30 years.
He is a fellow of the Instituteof Chartered Accountants andthe Institution of Engineeringand Technology.

BackgroundHolds a BSc in Physics from
Imperial College and an MBA fromSouthampton University. He is afellow of the Institute of Physics,
the Royal Academy of Engineeringand the Institution of Engineeringand Technology. He was awarded
the CBE in the 2012 New Year’s
Honours for services to scienceand business.

BackgroundHolds a BEng in Electronic andInformation Engineering and is a
Chartered Engineer, Chartered
Accountant and a Fellow of theInstitute of Chartered Accountants
and the Institution of Engineeringand Technology.

BackgroundHe is responsible for Groupbusiness development. He holds
a BSc in Electrical and Electronics
Engineering from Bristol University
and an MBA from INSEAD. He isa Chartered Engineer and a Fellowof the Institution of Engineeringand Technology.

Non-Executive Chairman

External appointments
Chairman of:
Laird PLC
Bioquell PLC
Deltex Medical Group plc
Non-Executive Director of:
ISIS Innovation Ltd

Chief Executive

Previous experience
Senior management positions within:
Vislink plc
BAE Systems
GEC Marconi
Matra-Space Systems
External appointments
Non-Executive Director of:
Cobham plc

Group Finance Director

Previous experience
Group Finance Director of:
Radstone Technology plc
Finance Director of:
Siroyan Ltd
Senior finance positions within:
the TI Group (now Smiths Group plc)
External appointments
Non-Executive Director of:
Guidance Ltd
Member of:
London Stock Exchange’s
Primary Markets Group

Group Business
Development Director

Previous experience
Senior management positions within:
United Industries plc
B Elliott plc
Spirent plc(previously Bowthorpe plc)
Chloride Group plc

Business Overview

33

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Board balance
Chairman

1

Executive3

Non-Executive 4

Professor
Sir Mike Brady

Professor Mike
Hughes OBE

Jock Lennox

Thomas GeitnerAppointed to the Board
August 1995

Appointed to the Board
November 2004

Appointed to the Board
April 2009

Appointed to the Board
January 2013

Committee membership
Nomination

Committee membership
Audit
Remuneration
Nomination

Committee membership
Audit, Chairman
Remuneration
Nomination

Committee membership
Audit
Remuneration
Nomination

BackgroundHe is Professor in the Departmentof Oncology and Biology at the
University of Oxford, a Fellow of
the Royal Society, of the Royal
Academy of Engineering and of
the Academy of Medical Sciences
and a Commissioner of the Royal
Commission for the Exhibitionof 1851.

BackgroundPrevious experience
Technical Director and Managing
Director of:
GEC Measurements Ltd

BackgroundPrevious experience
Senior Audit Partner at:
Ernst & Young

Background
Extensive international experiencein the technology and engineering
sectors, having spent over 30 years
in businesses operating acrossthe globe.

Deputy Chairman
and Independent
Non-Executive Director

Previous experience
BP Professor of Information
Engineering at:
Oxford University
External appointments
Founding Director (and Chairman) of:
Guidance Ltd
Mirada Medical Ltd
Matakina Ltd (a New Zealandbased company)
Chairman of:
Acuitas Medical Ltd
colwiz Ltd
Perspectum Diagnostics Ltd
IRISS Medical Ltd

Senior Independent
Non-Executive Director

Deputy Managing Director of:
GEC Alsthom Power Transmission
and Distribution Ltd
CEO of:Midlands Electricity
Executive Vice President of:
GPU Inc International
Operations Group
External appointments
Chairman of:
EA Technology Ltd
Non-Executive Director of:South Staffordshire Water Ltd

Independent
Non-Executive Director

External appointments
Chairman of:
the Tall Ships Youth Trust
Non-Executive Director of:
Dixons Retail plc
Enquest PLC
Hill & Smith Holdings PLC
A&J Mucklow Group plc

Independent
Non-Executive Director

Previous experience
Executive Director of:Henkel AG & Co KGaA
Executive Director of:Vodafone Group plc
RWE-Group AG
Non-Executive Director at:
BBC Worldwide Ltd
External appointments
Chairman of:
Bibliotheca RFID Library Systems
AG Switzerland

34

Oxford Instruments plc / Report and Financial Statements 2013

Report of the Directors
The Directors present their Report
and the Financial Statements of
Oxford Instruments plc for the year
ended 31 March 2013.
Principal activity and business reviews
The Company is the ultimate holding
company of a group of subsidiary
undertakings (‘the Group’) engaged in the
research, development, manufacture andsale of high technology tools and systems.
The Company is required to set out in thisreport a true and fair view of the businessof the Group during the financial year ended
31 March 2013, the position of the Groupat the end of the financial year and a
description of the principal risks anduncertainties facing the Group. The
information which fulfils these requirements
includes a business and financial review
on pages 14 to 25 and corporate andsocial responsibilities on pages 28 to 31,
which are incorporated in this report byreference. The business, the strategy, theresearch and development activities andlikely future prospects of the Group are
reviewed in the Chairman’s Statement on
page 4, the Chief Executive’s Statementon pages 14 to 15, the Operational Review
on pages 18 to 21 and the Financial
Review on pages 22 to 25.
Results and dividends
The results for the year are shown in theConsolidated Statement of Income on
page 64. The Directors recommend a final
dividend of 8.15p per ordinary share, which
together with the interim dividend of 3.05p
per ordinary share makes a total of 11.2p
per ordinary share for the year (2012: 10.0p).
Subject to shareholder approval, the final
dividend will be paid on 24 October 2013
to shareholders registered at close ofbusiness on 27 September 2013.
Risks and uncertainties
The Board exercises proper and appropriate
corporate governance for the Group.
It ensures that there are effective systems
of internal controls in place to manage
shareholders’ interests and the Group’s
assets, including the assessment and the
management of the risks to which thebusinesses are exposed, and to monitor andmanage the compliance with all the legal
requirements that affect the Group’s
worldwide business activities. However,such systems are designed to manage
rather than eliminate the risk of failure
to achieve business objectives and canprovide only reasonable and not absoluteassurance against material misstatement
or loss.

The Executive Directors report to theBoard on changes in the business andin the external environment which may
affect the risks which the Group faces.
The Executive Directors also provide
the Board with monthly financial
information. Key Performance
Indicators are reviewed quarterly.
There are a number of risks anduncertainties which may have a material
effect on the Oxford Instruments Group.
These are described in Principal Risks
on page 26.
Directors
Biographies of all the Directors at thedate of this report, including theNon‑Executive Directors, appear on
pages 32 to 33. During the year, Bernard
Taylor retired as a Non-Executive Director
on 11 September 2012 and Thomas Geitnerand Jennifer Allerton were appointed as
Non-Executive Directors on 15 January 2013
and 10 June 2013 respectively.
Directors’ conflicts of interest
With effect from 1 October 2008, theCompanies Act 2006 allows directors of
public companies to authorise conflicts
and potential conflicts of interest, whereappropriate. Only directors with no interestin the matter under consideration may
participate in the relevant decision andin doing so they must act in a way which
they consider in good faith will be most
likely to promote the Company’s success.
A conflicts policy has been drawn up anda register of conflicts and potential
conflicts is maintained.
Insurance cover and Directors’ indemnities
For a number of years the Group has
purchased insurance to cover its Directors
and Officers against their costs in defending
themselves in legal proceedings taken
against them in that capacity and in respectof damages resulting from the unsuccessful
defence of any proceedings. To the extent
permitted by UK law, the Group indemnifies
its Directors and Officers.
Neither the insurance nor the indemnity
provides cover for situations where
the Director has acted fraudulently
or dishonestly.
Share capital
The Company only has one class of sharecapital which comprises ordinary sharesof 5p each. All shares forming part of theordinary share capital have the same rights
and carry one vote each. There are no
unusual restrictions on the transfer ofa share. The full rights and obligations
attaching to the Company’s ordinary
shares, as well as the powers of the
Directors, are set out in the Company’s

Directors’ interests
The beneficial interests of the Directors1 in the Company’s share capital, all in fully
paid up shares at 31 March 2013, are shown below. Details of share options for the
Executive Directors are shown in the Directors’ Remuneration Report on pages 43
to 52.
2013
Shares

2012
SharesKevin Boyd

78,761

66,747

Mike Brady

2,500

2,500

Jonathan Flint

194,236

159,105

Thomas Geitner——Charles Holroyd

78,76364,686

Mike Hughes

13,59813,598Nigel Keen

126,580

126,580

Jock Lennox

3,500

3,500

1 Jennifer Allerton joined the Board on 10 June 2013.

No Director was beneficially interested in the shares of any subsidiary company
at any time during the year. In the year to 31 March 2013 no Director had a materialinterest in any contract of significance with the Company or any of its subsidiaries
other than as described in the Directors’ Remuneration Report on page 43. Since theyear end, there have been no changes to the above shareholdings apart from for
Jonathan Flint, Kevin Boyd and Charles Holroyd who participate in the Company’s
Share Incentive Plan and since the year end have each increased their shareholdingby 22 shares.

Business Overview

Business Review

Corporate Governance

Financial Statements

35

Oxford Instruments plc / Report and Financial Statements 2013

Articles of Association, a copy of whichis available on the Company’s website.
These can also be obtained from
Companies House or by writing to theCompany Secretary.

Charitable donations
During the year, the Group made charitable
donations of £3,145 (2012: £1,845). There
have been no political donations during
the year.

During the year to 31 March 2013 the issued
share capital was increased by 1.3%
with the issue of 750,107 ordinary shares(2012: 5,991,810) following the exercise
of options under the Company’s shareoption schemes. At 31 March 2013, theissued share capital of the Company
was therefore 56,916,830 ordinary
shares of 5p each. In connection with
the Company’s equity incentive plans,a separately administered trust held
183,145 ordinary shares at 31 March 2013
(representing 0.3% of the total issued
share capital of the Company). No shareswere acquired by the Company during
the year (2012: 9,351). Details of the sharecapital and options outstanding as at
31 March 2013 are set out in Note 19of the Financial Statements.
At this year’s Annual General Meeting, theDirectors propose to: a) renew the authority
granted to them at last year’s AGM to allot
ordinary shares up to an aggregate nominal
value of one-third of the Company’s issued
share capital and, where full pre-emption
rights are applied, up to an aggregate
nominal value of two-thirds of theCompany’s issued share capital; b) allot
ordinary shares up to an aggregate nominal
value of 5% of the Company’s issued sharecapital without first offering them toexisting shareholders; and (c) to buy backup to 10% of the Company’s issued sharecapital. Shareholders will be requested torenew these authorities at the AGM anddetails of these resolutions are set out
in the notice of the meeting.
Payment of suppliers
The Group does not follow a standard
payment practice but agrees terms andconditions for its business transactions
with each of its suppliers. Payment isthen made in accordance with theseterms. At 31 March 2013 trade creditorsof the Company and the Group’s UK
subsidiaries were equivalent to 31 days’(2012: 31) and 70 days’ (2012: 75) ofpurchases respectively, based on theamounts invoiced by suppliers during
the year and the amounts owed to tradecreditors at the end of the year.

Fixed assets
Whilst the market value of some fixed
assets may differ from book value, theDirectors believe that the differences
are not material.
Disclosure of information to auditors
Pursuant to Section 418(2) Companies Act
2006 the Directors who held office at thedate of approval of this Directors’ Reportconfirm that, so far as they are each aware,
there is no relevant audit information ofwhich the Company’s Auditors are unaware;and each Director has taken all the steps
that he might reasonably have been
expected to have taken as a Director
to make himself aware of any relevant
audit information and to establish that
the Company’s Auditors are aware ofthat information.
Annual General Meeting
The Notice of the Annual General
Meeting to be held on 10 September 2013is set out in a letter to shareholders
together with explanatory notes relating
to the resolutions.
In light of organisational changes within
KPMG, the Directors have agreed that
KPMG Audit Plc, a wholly owned subsidiaryof KPMG LLP, step down as Auditor at theforthcoming Annual General Meeting andthat a resolution to appoint KPMG LLP as
Auditor and to authorise the Directors to
set their remuneration will be proposedat the Annual General Meeting.

Company Information

Change of control arrangements
There are a number of agreements thattake effect, alter or terminate upon achange of control of the Company
following a takeover, such as banking
agreements and company share plans.
None of these are deemed to be significant
in terms of their potential impact on thebusiness of the Group as a whole although,on a change of control, the Company’scommitted credit facilities may be cancelledby lenders by giving not less than threedays’ notice. It is also possible that Pension
Plan funding arrangements would need
to be changed following a change ofcontrol if that resulted in a weakeningof the employer covenant.
Corporate governance
The Board reviews its work on corporate
governance in the Corporate Governance
Review on pages 36 to 42.
Diversity and inclusion
The Board recognises that its employees
are fundamental to the Group’s success.
The Group’s aim is to ensure there are
equal opportunities for all employees andthat there is an inclusive culture where
differences are valued and people are
given the environment in which they cando their best work. The CSR Report on
pages 28 to 31 further describes how
diversity and inclusion is managed
within Oxford Instruments.
By Order of the Board

Susan Johnson-BrettCompany Secretary
11 June 2013

Substantial shareholdings
The following are beneficial interests of 3% or more (where the holding is direct) or of
5% or more (where the holding is indirect) of which the Directors have been notified inaccordance with Chapter 5 of the Disclosure and Transparency Rules, of the Company’s
issued ordinary share capital, the only class of voting capital, at 4 June 2013:
Direct/indirect

BlackRockAmeriprise Financial
Sir MF and Lady KA Wood

Shares
000

% of
total

Indirect

8,642,475*

15.2

Indirect/direct

4,983,663

8.8

Direct3,105,530

5.5

Indirect2,949,262

5.2

Kames CapitalIndirect/direct

2,821,014

5.0

Legal & General

Direct

1,741,585

3.1

The Capital Group Companies* O f which 879,463 shares (1.5%) are held in Contracts for Difference which are disclosable under the Disclosure
and Transparency Rules.

36

Oxford Instruments plc / Report and Financial Statements 2013

Corporate GovernanceIntroduction
The Board is committed to ensuring thathigh standards of corporate governanceare maintained by the Group.
The Board endorses the main andsupporting principles and the provisions
set out in the UK Corporate Governance
Code (“the Governance Code”) except
as detailed below.
The Board’s policies and procedures are
documented in the Board Reference Filethat sets out the roles and delegatedauthorities applying to the Directors,
the Board and the Board Committees.
The Board Reference File is reviewed
annually by the Board as part of theannual governance review undertakenby the Chairman.
Board constitution
In late 2010, prior to Oxford Instruments’promotion to the FTSE 250, the Nomination
Committee reviewed its Board Development
programme and put in place a multi-yearplan to allow for an orderly refreshingof its Non-Executive Directors over thisextended period. This programme is underannual review. The Board Development
programme ensures that the constitutionof the Board is compliant with theGovernance Code following the Company’s
admission to the FTSE 250.
In line with the programme, Bernard Taylor
stepped down from the Board at last year’s
AGM and Thomas Geitner has joined theBoard as an Independent Non-Executive
Director in January 2013. In June 2013
Jennifer Allerton was appointed to theBoard as an Independent Non-Executive
Director and, at this year’s AGM, Mike
Hughes will not seek re-election as a
Non-Executive Director having served
for nine years.
Since 2010, the Company has been througha strong period of growth and the executive
team has reorganised the business into adivisional structure. At this year’s annual
review, in light of the Group’s new divisional
structure, the Nomination Committee
recommended that the Executive
representation on the Board be the Chief
Executive and the Group Finance Director.
Accordingly, Charles Holroyd has agreed
to step down from the Board at theforthcoming AGM.
Resolutions for the election of Directors
will be put to shareholders at the Company’s
forthcoming AGM which, when passed,
will deliver a Board which meets therequirements of Provision B.1.2 of theGovernance Code.

Compliance
The Board considers that, throughout
the period under review, the Group hascomplied with the provisions recommended
in Section 1 of the Governance Code,other than in respect of:••Provision D.2.1 with the appointmentof Nigel Keen as Chairman of theRemuneration Committee. However,as more fully explained below,
Thomas Geitner will take over as
Remuneration Committee Chairman
at the close of the Company’s
forthcoming AGM; andProvision B.1.2 as during the year
less than half the Board, excluding
the Chairman, comprised independent
Non-Executive Directors. As explained
above, following the recent changes
the constitution of the Board is
now compliant.

Preservation of value
The basis on which the Group generates
and preserves value over the longer
term and the strategy for delivering theobjectives of the Group are to be found in
the Chairman’s Statement, Chief Executive’sStatement and Operational Review.
Board of Directors andmanagement structure
Board of Directors
The Board currently comprises the
Chairman, five Non-Executive Directors andthree Executive Directors. The Directors’
biographies and details of length ofservice are shown on pages 32 to 33.
All the Directors have written letters of
appointment that have been approvedby the Board and which are available
for inspection at the Company’s Annual
General Meeting.
The Chairman is responsible for leadershipof the Board and ensuring its effectivenesson all aspects of its role. The divisionof responsibilities between the role of
Chairman and the Chief Executive has
been set out in writing and agreed by
the Board.
The Board has delegated Group
responsibility for the management ofhealth, safety and the environment toCharles Holroyd and he reports to theBoard on these matters at each meeting.

Management Board
The Board delegates management of thebusiness to the Chief Executive. To assist
in this, the Chief Executive has created aManagement Board that consists of the
Executive Directors, the Group Operations
Director, the Group Technical Director and
the Group Human Resources & Brand
Director and the Divisional MDs.
The Management Board meets monthly
either physically or by video or telephone
conference and focuses on Group wide
performance and risk management
and strategy.
Operation of the Board
The Board is responsible to shareholders
for delivering sustainable incremental
shareholder value through entrepreneurial
leadership within a framework of controls
for managing risk. The Board sets theGroup’s strategy, maintains the policy
and decision making framework in which
this strategy is implemented, verifies
that the necessary financial and humanresources are in place to meet strategic
aims, monitors performance against key
financial and non-financial indicators,
oversees the system of risk management
and sets values and standards ingovernance matters.
The details of the way the Board operates,
including a schedule of matters reservedto the Board for decision, are set out inthe Board Reference File.
The Board retains control over strategy,
investments and capital expenditure, andlimits the decisions which can be taken
by management in the areas of strategic
and financial management and reporting,capital structure, corporate actions,mergers and acquisitions, major contracts
and other commitments, litigation andregulatory proceedings, remunerationand share incentive plans.
Where the Board delegates authority to
management it is on a structured basis,
which requires that proper management
oversight exists at the appropriate level.
The Board meets on a regular basis,
at least nine times a year, and otherwise
as required. Of the nine regular meetings,
typically six are held at Group locations,and the remaining three are held bytelephone conference.

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Oxford Instruments plc / Report and Financial Statements 2013

Board meetings involve reviews of financial
and business performance against the plan
approved by the Board. Risk management
review, both at Group level and also foreach of the business units, is embeddedin the reporting system. On a rotatingbasis, the Board receives presentations
from the business units and key functional
areas enabling it to explore specific issues
in more detail. Any matter requiring adecision by the Board will be supported
by a pre-circulated paper analysing all
relevant aspects of the proposal andrecommending a course of action.

independence criteria at the time of his
appointment as set out in the GovernanceCode. He is Chairman of the Nomination
Committee and is also currently Chairmanof the Remuneration Committee as theBoard considered that whilst the Company
was a SmallCap company it was appropriate
and necessary for the Chairman of
the Board to also be Chairman of theRemuneration Committee. The Board has
recruited a new Non-Executive Director,
Thomas Geitner, who has the appropriate
mix of skills to take over the Chair of theRemuneration Committee immediately
after the forthcoming AGM. Nigel Keenalso serves as Chairman of Oxford
Instruments Pension Trustee Limited,
the Trustee of the Company’s UK defined
benefit pension scheme. The Board of
the Company and the Board of the Trustee
to the Pension Scheme have eachindependently considered whether it isappropriate to have the Chairman of theCompany as Chairman to the Board of
the Trustee of the Pension Scheme,
notwithstanding the potential conflictsof interest inherent in the same person
holding both these positions, and theyeach have unanimously confirmed thatthey believe that it is in the interest of
all parties for this to continue.

Board papers are distributed in advanceof the relevant meeting in sufficient timeto allow the Directors to prepare formeetings. Minutes of Committee meetings
are circulated to the relevant Directors.
In the very few instances when a Director
has not been able to attend Board or
Committee meetings, his comments on thepapers to be considered at the meetingare communicated in advance to therelevant Chairman.
The Non-Executive Directors meet without
the Executive Directors at least annually,
with the Chairman leading these meetings.
The Non-Executive Directors also meet
annually without the Chairman inattendance. The Deputy Chairman
chairs these meetings.
The Company Secretary and the Company
Secretary’s Office are responsible for
implementing Board procedures andfor advising the Board on corporate
governance matters.
Board balance and independence
The Governance Code requires the Board
should be of sufficient size that the balanceof skills and experience is appropriate forthe requirements of the business andthat there is a balance of Executive and
Non-Executive Directors such that noindividual or small group of individuals
can dominate the Board’s decision making.
The composition of the Board and the
combination of diverse backgrounds andexpertise of the Non-Executive Directors
meet these principles.
Nigel Keen, Chairman, has been a memberof the Board since February 1999. He hasa degree in engineering from Cambridge
University, is a Fellow of the Institute ofChartered Accountants and of the Instituteof Engineering and Technology and has
been involved in the formation anddevelopment of high technology businesses
for more than 30 years. He fulfilled theMike Brady, Deputy Chairman and
Non-Executive Director, has been amember of the Board since June 1995.
He is Professor of Oncological Imaging
in the Department of Oncology at the
University of Oxford, having retired as
BP Professor of Information Engineering,and is one of the UK’s leading engineers.
He brings a depth of technical expertise
to Board discussions. His technical expertiseas the only Non-Executive Director froma scientific profession and the value ofthat expertise to Board discussions, thebreadth of his professional and businessinterests unrelated to the Group and thecomposition of the Board generally leads
the Board to conclude that it is appropriatethat he should continue in office. Although
the Board continues to value Mike’s input
and does not regard this input as being
less valuable as a result of his tenure asa Director of the Company, the Board has,in the light of guidance by the Governance
Code, determined that he should not be
considered independent. Mike is a memberof the Nomination Committee.

Company Information

Jennifer Allerton was appointed to theBoard as an Independent Non-Executive
Director on 11 June 2013. Jennifer is a
graduate of Imperial College, London andhas a masters degree in physics from the
University of Manitoba and is a charteredengineer. She has extensive international
business experience, having spent over
30 years in large companies operating
across the globe, particularly in emerging
markets. She has held senior positions
that include Chief Information Officer at
F. Hoffmann-La Roche in Switzerland, andTechnology Director at Barclaycard. Her
international experience will strengthen
the skills and expertise of the Board.
Jennifer is a member of the Audit,
Remuneration and Nomination Committees.
Thomas Geitner was appointed to theBoard as an Independent Non-Executive
Director on 15 January 2013. Thomas has
extensive international experience in thetechnology and engineering sectors, having
spent more than 30 years in businesses
operating across the globe. He was mostrecently President of the Adhesives Divisionof Henkel AG&Co KGaA. He was on theboard of BBC Worldwide, the BBC’s
main commercial subsidiary, as a
Non‑Executive Director between 2007
and 2010. Previously, he was the CEO
New Businesses & Innovation and mainboard director of Vodafone. Prior to
Vodafone, Thomas led a number ofengineering businesses including at
RWE Group where he was responsible
for telecommunications. He is a graduateof the Technische Universität Munchen
and holds an INSEAD MBA. Thomas is amember of the Audit, Remuneration and
Nomination Committees and is to beappointed Chairman of the Remuneration
Committee after the AGM.
Mike Hughes, Senior Independent
Non-Executive Director, has been amember of the Board since November
2004. He is currently the Chairman of
EA Technology Ltd and a Non-Executive
director of South Staffordshire Water Ltd.
Previously he held senior management
positions within GEC before becoming
CEO of Midlands Electricity plc and thenExecutive Vice President of GPU Inc
International Operations Group. Mike is amember of the Audit, Remuneration and
Nomination Committees. Mike will beretiring from the Board at the Company’s
forthcoming AGM.

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Oxford Instruments plc / Report and Financial Statements 2013

Corporate Governance continued
Board balance and independence
continued
Jock Lennox was appointed to the Board
as an Independent Non-Executive Director
on 1 April 2009. Prior to that he was a
Senior Audit Partner at Ernst & Young
where he gained extensive experienceadvising clients in a variety of industries on
financial reporting, financing, transactions
and international expansion. The Board
believes that Jock’s skills, experienceand knowledge enhance and maintainan effective Board and provide a wellqualified Chairman of the Audit Committee.
Jock is Chairman of the Audit Committee
and is a member of the Remuneration and
Nomination Committees. Jock has agreed
to take over as Senior Independent
Director at the close of the AGM.
Further information on each of the
Non-Executive Directors is to befound in the Directors’ biographies
on pages 32 to 33. Jennifer Allerton’s
biography can be found on the
Oxford Instruments website,www.oxford-instruments.com/investors.
Independence of Non-Executive Directors
In the opinion of the Board, Mike Hughes,
Jock Lennox, Thomas Geitner and Jennifer
Allerton are independent. Mike Brady
is no longer considered independent inaccordance with the guidelines set out
in the Governance Code. The Board
considers that they are each independentin character and judgement and do not haverelationships which are likely to affect theirjudgement. This opinion is based on current
participation and performance on both theBoard and Board Committees including
consideration of the length of service at
Oxford Instruments plc.
Term of appointment of
Non‑Executive Directors
Each Non-Executive Director was appointed
for an initial term of one year. In line with
provision B.7.1 of the Governance Code,the Board has determined that all Directorsof the Board are to be subject to annual
re-election by shareholders and accordingly
the appropriate resolutions will be put
to shareholders at the Company’s
forthcoming AGM.

Board development and evaluation
Board development
On appointment, Directors undertake an
induction process which is designed todevelop knowledge and understandingof the Group’s businesses throughvisits to various Group operating sites,
discussion of relevant technology, as
well as product demonstrations, briefings
from management and familiarisation
with investor perceptions of the Group.
This induction is supported by briefing
papers prepared by the Company
Secretary. Major shareholders areprovided with an opportunity to meet
new Non-Executive Directors.

sought during the year. The appointment
and removal of the Company Secretary
are matters for the Board as a whole.
Board evaluation
In light of the provisions of Section B.6.2
of the Governance Code which expects
that an externally facilitated evaluationof the Board be carried out at leasttriennially, John Stopford, an emeritus
professor of the London Business School,
carried out a “light touch” external
evaluation of the governance review
process in 2011. He found that theprocess described below effectively
reviews the mechanics of the operationof the Board and he found the written
statement on governance each Director
completes a very helpful input. His
observation was that the Board wasfunctional and effective.

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

For the year ended 31 March 2013 the Board
has completed its annual effectivenessevaluation exercise, including a specificreview of the effectiveness of its principal
Committees and members. This was aninternal exercise under the control of the
Chairman using a detailed questionnairecompleted by all Directors in relation to
the key areas of Board accountability
and the arrangements in place to enableeffective focus on these areas. Topics
covered included Group strategy,
performance, delegation and accountability,
success, development and reward, Board
and Committee composition, Board

Attendance at meetings
No one other than the Committee Chairman and members is entitled to be present at
a meeting of the Nomination, Audit or Remuneration Committee, but others may attend
by invitation of the Committee. No Director votes on matters where he has a conflictof interest. Further details of the individual Committees’ activities are described on thenext page.
The following table sets out the frequency of, and attendance at, Board and principal
Board Committee meetings for the year to 31 March 2013 4:
Main
Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Number of meetings held

10

6

5

4

10

1

Nigel Keen
Jonathan Flint

6

5

4

10

61

11

21

Kevin Boyd

10

61

—

—

Charles Holroyd

10

61

—

—

Mike Brady

10

6

5

4

Mike Hughes

8

5

4

4

Jock Lennox

10

6

5

4

1

1

Thomas Geitner

2

1

1

—

Bernard Taylor3

4

3

3

3

2

Notes
1 Attended by invitation.
2 Appointed on 15 January 2013.
3 Resigned on 11 September 2012.
4 Jennifer Allerton was appointed to the Board after 31 March 2013.

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Oxford Instruments plc / Report and Financial Statements 2013

induction and training, internal control
and risk management. In addition, each
Director has prepared a written statement
concerning governance of the Company
and has discussed the statement with the
Chairman at the individual one-to-one
interviews which the Chairman holds witheach Director. The Chief Executive is also
involved in the process by giving his input
on the way the Board helps him in hisrole. The output from these evaluations
allows the Chairman to review objectively
the overall balance and effectivenessof the Board. The Non-Executive
Directors meet annually to appraise
the Chairman’s performance.

During the year, the Board and theNomination Committee have reviewed
the composition of the Board. The lengthof service of its Non-Executive Directors,
the promotion of the Company into the
FTSE 250 and the changing requirementsof the Governance Code for FTSE 350
companies, together with further reflection
on diversity within the Company, have
led it to conclude that changes to themembership of the Board and its
Committees need further consideration.
A sub-committee has been establishedwhose terms of reference are, with thehelp of executive search consultants
MWM Consulting and Korn/Ferry, toevaluate the balance of skills, knowledge
and experience on the Board and to
identify appropriate candidates for
Non-Executive Director positions on the
Board. Accordingly, using information
it has gathered, taking into accountdiversity within the Board and bearing in
mind the desire to find a successor to thecurrent Chairman of the Remuneration
Committee, descriptions of the role anddesired capabilities for candidates weredrawn up to help in the search of new
Non-Executive Directors. The Committee
developed shortlists of qualifying
candidates. Candidates met with the
Chairman and the Deputy Chairman anda final selection of potential appointees
met several Directors individually. Following
these meetings, the Nomination Committee
considered each Director’s feedback andmade a final recommendation to the Board
concerning any further appointment.

Board Committees
The Board has formed the following
Committees: Nomination, Remuneration,
Audit and Administration.
Membership of Board Committees, which
is set out on pages 32 to 33, is determinedby the Board and is reviewed regularly.
The written terms of reference of the Board
Committees are reviewed annually byeach Committee and the Board and areavailable on the Company’s website atwww.oxford-instruments.com/investors
and from the Company on request.
They will be on display at the Annual
General Meeting.
Nomination Committee
The Nomination Committee comprises
all the Non-Executive Directors, under
the chairmanship of the Chairman of
the Board. The Nomination Committee
is responsible for assisting the Boardin the formal selection and appointment
of Directors and considers succession
planning for the Board. It also considers
potential candidates and recommends
appointments of new Directors to theBoard. The appointments are based on
merit and against objective criteria includingtime available and the commitment thatwill be required of the potential Director.
There is a formal, rigorous and transparent
procedure for the appointment of new
Non-Executive Directors to the Board,the prime responsibility for which isdelegated to the Nomination Committee.
Each appointment process begins withan evaluation of the balance of skills,
knowledge and experience existing on
the Board that is effected through a seriesof one-on-one meetings between theCommittee Chairman and Directors.
The Nomination Committee takes external
advice when considered appropriate.

Following this process, the Committee
has during the year recommended theappointment of Thomas Geitner to theBoard as an Independent Non-Executive
Director and future Chairman of theRemuneration Committee. His appointment
to the Board commenced 15 January 2013
with his appointment as Chairman of
the Remuneration Committee to startat the close of this year’s AGM. Since theyear end, Jennifer Allerton was appointed
on 11 June 2013 as an Independent
Non-Executive Director.
The Nomination Committee recommends
to the Board whether a Non-Executive
Director’s appointment should be renewed
each year, taking into account theperformance of the individual.
The Nomination Committee also annuallyreviews the performance of the Chief
Executive and succession planning within
the business.

Company Information

Remuneration Committee
The Remuneration Committee comprises
all the Independent Non-Executive Directors
and the Chairman of the Board. The
Chairman of the Board, Nigel Keen, who
fulfilled the independence criteria at thetime of his appointment as set out in the
Governance Code, is Chairman of theRemuneration Committee because theBoard considers that in a SmallCap
company it is essential that the Chairman
be involved in setting remuneration policy.
The Company entered the FTSE 250 in
September 2011 and the Board recognisedthat it was now appropriate to appointa Remuneration Committee Chairman
who was not also Chairman of the Board.
Accordingly, the Nomination Committee
has followed due process to identify a
Non-Executive Director with an appropriate
blend of skills to make a credible successor
to Nigel Keen as Chairman of theRemuneration Committee. As noted above,in January 2013, the Board appointed asan Independent Non-Executive Director,
Thomas Geitner. He will take over as
Chairman of the Remuneration Committee
at the close of the AGM in September 2013.
In the meantime, Thomas Geitner andNigel Keen are working closely together
on remuneration matters. The membersof the Committee are appointed by
the Board.
The Remuneration Committee is responsible
for recommending to the Board the
remuneration packages for Executive
Directors and the bonus and shareoption strategy for the Group’s executive
management. Independent professional
advice is sought when considerednecessary. Under its terms of reference
the Chairman of the Board may be
Chairman of the Committee. The Board
as a whole is responsible for fixing the
remuneration of the Non-Executive
Directors, including the Chairman.
The Chief Executive is invited to attend
Remuneration Committee meetings as
deemed appropriate, for example when
consideration is being given to theperformance of other Executive Directors
and on significant Group wide changes insalary structure and terms and conditions
affecting other employees at Senior
Executive level. Further details of thework of the Remuneration Committee areincluded in the Directors’ Remuneration
Report set out on pages 43 to 52.

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Oxford Instruments plc / Report and Financial Statements 2013

Corporate Governance continued
Audit Committee
The Audit Committee comprises all the
Independent Non-Executive Directors andis chaired by Jock Lennox. The Chairman
and Deputy Chairman of the Board andmembers of senior management such as
the Chief Executive, Group Finance Director
and Group Audit and Risk Manager are
invited to attend all or part of any meetingsor to present such reports as are required
for the Committee to discharge its duties.
The external auditors are invited to attend
meetings of the Committee on a regularbasis, including at the half year, at theplanning stage before the audit and after
the audit at the reporting stage. At least
once a year the Committee meets withthe external auditors without the
Executive Directors present.
The primary objective of the Audit
Committee is to assist the Board of
Directors in fulfilling its responsibilities
relating to external financial reporting
and associated announcements, oversightof the external audit process including
consideration of the appointment, removal
and independence of the Group’s external
auditors, the resourcing and plans of theInternal Audit function and the adequacyand effectiveness of the financial control
environment. The Audit Committee hasrecommended to the Board that in lightof organisational changes within KPMG
that the contract for the external audit
process be switched from KPMG Audit Plc
to KPMG LLP and that a resolution tothis effect be put to this year’s Annual
General Meeting. The Audit Committee
has noted the Financial Reporting Council’s
recommendation that FTSE 350 companies
should put the audit services contract
out to tender periodically and will review
whether to tender at the next leadpartner rotation.
The Audit Committee’s terms of reference
include all matters indicated by theGovernance Code. The terms of reference
are considered annually by the Audit
Committee and are then referred to theBoard for approval. The Audit Committee
structure requires the inclusion of one
member with relevant recent financial
experience, currently the Committee
Chairman, and expects all Audit Committee
members to be financially literate.

The Audit Committee Chairman reports
the outcome of meetings to the Boardand the Board receives minutes of all
Audit Committee meetings. The Audit
Committee has unrestricted access toGroup documents and information, as
well as to employees of the Group andthe external auditor.
The Audit Committee reviews all publicstatements containing financial information,
including the half year and annual financial
statements and interim management
statements, together with the related
Stock Exchange announcements, having
received information on the accounting
principles, policies and practices adopted
in the Group’s accounts, changes proposedto those principles, policies and practices,significant accounting issues and contingent
liabilities affecting the Group, potential tax
contingencies and the Group’s compliancewith statutory tax obligations.
The Audit Committee is responsible forthe development, implementation andmonitoring of the Group’s policy on
external audit. During the external audit,
the key areas of judgement that weredebated with the auditors related toaccounting for acquisitions, impairment
considerations for intangible assets,patents, pensions and revenue recognition.
These matters were resolved satisfactorily.
The Audit Committee reserves oversight
responsibility for monitoring theindependence and objectivity of theexternal auditors.

arrangements to identify, report andmanage any conflicts of interest andthe overall extent of non-audit services
provided by the external auditors. In
addition, to safeguard auditor objectivity
and independence when the external
auditors provides non-audit services, theChairman of the Audit Committee reviews
the provision of non-audit services by theexternal auditors where the proposed fee
exceeds £20,000 and with formal Audit
Committee approval where fees are£50,000 or above. Competitor quotes are
obtained where the proposed fee is inexcess of £100,000.
Details of audit fees, together with fees
for non-audit services for the year, are
set out in Note 3 (page 74) to the
Financial Statements.
The Audit Committee is required to assist
the Group Board to fulfil its responsibilities
relating to the adequacy and effectivenessof the financial control environment. This
includes consideration of the adequacy ofboth the resourcing and the plans of theInternal Audit function.
To fulfil these duties the Committee reviews:•

the Group’s risk framework and risk
management policies;•

any internal control findings reportedby the external auditor;•

A review takes place annually of theperformance of the external auditors
following the completion of the annual audit.
To assess the effectiveness of the external
auditors, the Audit Committee reviews:

the Internal Audit function’s terms ofreference, reporting lines and access to
the Audit Committee and all membersof the Board, and its plans and theoutcomes of the planned activity;•

Internal Audit reports on key audit
areas and significant control
environment deficiencies; and•the external auditors’ fulfilment of theagreed audit plan and variations fromthe plan;•reports on the systems of financial
controls and financial risk management.

•

the robustness and perceptivenessof the auditors in their handling of key
accounting and audit judgements; and•the external auditors’ comments
in respect of financial controls.

To fulfil its responsibility regarding theindependence of the external auditors,
the Audit Committee reviews the changes
in key external audit staff in the external
auditors’ plan for the current year, thearrangements for day-to-day managementof the audit relationship, a report fromthe external auditors describing their

The Group’s Business Malpractice Policy
comprises an internal process that has beencommunicated directly to all employees
by which employees can raise a concern,
including concerns relating to fraud, damage
to the environment, criminal activity or
danger to health and safety, in theknowledge that it will be taken seriously,
treated as confidential and that no action
will be taken against them. There is also
provision within the Policy for employees
to raise concerns directly with the Senior
Independent Director. The Policy isreviewed annually by the Committee.

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Oxford Instruments plc / Report and Financial Statements 2013

Administration Committee
The Administration Committee consistsof a minimum of two Directors and deals
with items of a routine and administrative
nature. The Board receives a summary
outlining all matters decided by the
Administrative Committee since theprevious Board Meeting.

delegated by the Board to the Executive
Directors. This process has been in place
for the year under review and up to thedate of approval of the Annual Reportand Accounts. It is regularly reviewed by
the Board of Directors and accords with
the Turnbull principles.

Annual General Meeting (AGM)
The AGM is an opportunity for the Board
to meet shareholders. At its AGM, theGroup complies with the provisions of theGovernance Code relating to the disclosureof proxy votes, the separation of resolutions
and the attendance of Committee
Chairmen. The Group arranges for the
Annual Reports and Financial Statements
and related papers to be posted on its
website and, where shareholders haveelected to receive paper copies, posted
to shareholders so as to allow at least
20 working days for consideration prior
to the AGM. The next AGM will be heldon 10 September 2013 at the Group’s
offices in Tubney, Oxfordshire.
Investor relations
The Group places considerable
importance on regular communications
with its shareholders with whom it has
an ongoing programme of dialogue.
All shareholders are encouraged toparticipate in the AGM at which the
Chairman and Chief Executive present
an overview of the Group’s business andreview the results and make comments
on strategy and current business activity.
The Non-Executive Directors meetinformally with shareholders both before
and after the AGM and respond toshareholder queries and requests.
The Chairman and the Senior Independent
Director make themselves available tomeet shareholders, as required.
All Group announcements are posted on theGroup website, www.oxford-instruments.
com/investors, as soon as they are released.
The Investor Relations section of thewebsite provides financial and otherinformation on the Group and the website
itself carries additional information on theGroup’s products, services and markets.
Risk management
Within the Group there is an ongoingembedded process for identifying,evaluating and managing the significant
risks faced by the Group. Day-to-day
management of this process has been

Details of all major risks identified and themitigating actions in place are reported toand reviewed by the Board. The Principal
Risks (page 26) gives an overview of the
major risks and uncertainties faced by
the Group. A standard process is in placethroughout the Group that requires thesenior management of each business to
identify significant business risks and toclassify them both as to probability andpotential impact. Once identified, mitigating
action, where possible, is formulated andresponsibility within the management
team assigned. On a regular basis eachbusiness reviews and updates its risksummary which is then reported to theChief Executive. If a material risk changes
or arises, the Managing Director of thebusiness reports this in writing to theChief Executive at which time there isa discussion on the adequacy of the
mitigating actions taken.
In addition, the Board considers risks to theGroup’s strategic objectives which are notaddressed within the Group’s businesses
and develops appropriate actions tomanage and mitigate these risks.
Internal audit and assurance
The Group’s Assurance function has
responsibility for independently assessing
the adequacy and effectiveness of the
management of significant risk areas andacts as a third line of defence behind
operational management’s front line andown assurance activities. Group Assurancecomprises several teams and focuses on
the areas of finance, operations, health &safety, research & development, humanresources and IT. Group Internal Audit,
headed by the Group Audit & Risk
Manager, performs internal audits under
an audit programme approved by the
Audit Committee and focuses primarilyon the financial systems and processes
across the Group. The Group Audit & Risk
Manager has direct access and a reporting
line to the Chairman of the Audit Committee.
Audits in the non-financial areas are
performed by the Group’s functional
heads under programmes approved by
the Board. Coordination between the teams
ensures that the required risk coverage

Company Informationis achieved. A continuous process of risk
assessment allows audits to respond
expeditiously to changes in the Group’sbusiness and risk environment. Issues orcontrol deficiencies identified during aninternal audit engagement are addressedby management through the developmentof corrective action plans. The findings ofthe financial and non-financial internal
audits and the status of the corrective
action plans are reported to the Audit
Committee or Board bi-annually.
A review of the Group’s assurance
arrangements is performed at least
annually to determine whether it continues
to be fit for purpose. Last year’s review
determined that a risk manager was now
needed and accordingly a Group Audit &Risk Manager with specialist knowledgeof internal audit was appointed in July 2012.
He, together with the Chairman of the
Audit Committee, has put in place theprocess described above. This year’s
review determined that the structure
implemented during the year is effective
for the size and complexity of the Group.
Internal control
The Board has accountability forreviewing and approving the adequacyand effectiveness of internal controls
operated by the Group, including
financial, operational and compliance
controls and risk management. The
management of each business is
responsible for risk management andcontrol within their business and, throughthe Management Board, implementing
Board policies on risk and control.
The internal control framework includes
central direction, oversight and risk
management of the key activities within
the Group. As part of this framework
there is a financial planning process
which includes a three year planningmodel and the preparation of an annual
budget approved by the Board. The
results of the business units are reported
monthly and compared with the budget.
Forecasts are also prepared monthly.
Control activities include policies andpractices covering appropriate authorisation
and approval of transactions, the applicationof financial reporting standards and reviewsof significant judgements and financial
performance. Financial, regulatory andoperational controls, procedures and risk
activities across the Group are reviewed
by the Group’s Assurance function.

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Oxford Instruments plc / Report and Financial Statements 2013

Corporate Governance continued
Internal control continued
The internal control framework complies
with the Turnbull guidance and has been
designed to manage rather than eliminate
material risks to the achievement ofstrategic and business objectives andcan provide only reasonable, and not
absolute, assurance against material
misstatement or loss. Because of inherent
limitations, internal controls over financial
reporting may not prevent or detect all
misstatements. There has been nomaterial change to the Group’s internal
control framework during the period
covered by this Annual Report.
The key components designed to provide
effective internal control within the Groupare as follows:•••

there is a formal schedule of mattersreserved to the Board for decision;other than these matters, the Board
delegates to the Chief Executive andreviews the delegation of authorities
throughout the management structure;
the Group’s management structure isheaded up by the Management Board.
Its membership comprises the Executive
Directors, senior managers with Groupwide functional responsibilities andthe heads of the principal businessesof the Group’s activities. Day-to-day
responsibility for the managementof the Group is delegated to theManagement Board. The responsibility
is based on the identification of
separate businesses for each of theGroup’s activities for which there areclearly defined lines of management
responsibilities at all levels up to andincluding the Group Board and theGroup’s accounting and reporting
functions reflect this organisation;
financial executives within Groupbusinesses report to their own
operational head but there is also awell established and acknowledged
functional reporting relationshipthrough to the Group Finance Director;•

the Board reviews strategic issues andoptions formally once a year during
the annual strategic planning process
and during the year as appropriate.
In addition the Executive Directors
maintain a three year planning model ofthe Group and its individual businesses;•

annual budgets are prepared for eachof the Group’s businesses which include
monthly figures for turnover, profit,
capital expenditure, cash flow andborrowings. The budgets are reviewed
through the Group management

structure and result in a Groupfinancial budget which is considered
and approved by the Board;•the businesses prepare monthly
management accounts which
compare the actual operating resultwith both the budget and the prioryear. The businesses also prepare
rolling reforecasts for orders, turnover,
operating profit and cash. Both arereviewed by the Board monthly;•

the Board approves all acquisitionand divestment proposals and there
are established procedures for theplanning, approval and monitoringof capital expenditure;•

for all major investments theperformance of at least the first
12 months against the original
proposal is reviewed by the Board;•

each Group site, except for
representative sales offices, is required
to submit a self assessment internal
control questionnaire annually;•

internal audit is carried out through asystem of regular reviews of thefinancial and non-financial internal
controls at each site. These reviews
are coordinated by the Group Audit& Risk Manager:• financial internal audit visits are
conducted by the Group Audit &Risk Manager or accountants fromother parts of the Group and inJapan, due to language difficulties,
by local external auditors;• non-financial internal audit visits
are conducted by the Group’sfunctional heads or their delegates;• work performed is based on astandardised Group format but
involves random testing, together
with a review of the internal
control questionnaire; and• as required, action plans are drawn
up by the businesses in conjunction
with the Group Finance Director or,
for non-financial audits, with therelevant functional head to remedy
any significant control weaknesses
that are identified from completionof the internal control questionnaire
or as a result of the internal audit.
The results of audit reviews arereported to local management, theGroup Finance Director and the
Audit Committee or Board andchecks on the progress of theaction items arising are made;•the Board receives regular updates
on treasury, tax, property, pensions,insurance, litigation, human resources,
corporate social responsibility, businessethics and health and safety matters;•

authorisation limits are set atappropriate levels throughout theGroup; compliance with these limits
is monitored by the Group FinanceDirector and the Group Audit &Risk Manager;•

all requests to quote for substantial
fixed price contracts are reviewed by
the Chief Executive and/or the Group
Finance Director to assess bothtechnical and financial risk and to fix
an appropriate balance between risk
and reward. However, no procedure
can guarantee the avoidance of losses
on fixed price contracts of a technicalnature; and•with respect to the UK pension scheme,
the Group nominates half of the Trustee
Directors of the corporate Trustee tothe pension scheme, involves its own
independent actuary with whom
actuarial assumptions are reviewed,
agrees the investment policy with theTrustee, works with the Trustee on its
investment sub-committee to deal
with day-to-day investment mattersand to act as a coordinator between
the Investment Advisors, Investment
Managers and the Trustee, ensures
there is an independent actuarial
valuation every three years and agrees
funding levels to provide adequate
funding to meet the benefit paymentsof the members as they fall due.

Susan Johnson-BrettCompany Secretary
11 June 2013

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Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Remuneration Report
Dear Shareholder
In my capacity as Chairman of theRemuneration Committee I present
our Directors’ Remuneration Report for
2012/13. I summarise below the aim ofour remuneration policy and the workthat has been carried out by the
Remuneration Committee during
the year.

•established and awarded bonuses
under the Directors’ annual bonus plan;•

took advice from New Bridge Street
on remuneration strategies for FTSE
250 companies;•

reviewed with the CEO the overall
remuneration structures for theGroup as a whole;

The Report sets out the remuneration
paid to the Directors in the year to
31 March 2013 and the policy for theforthcoming year. In line with thecontinuing focus on Executive pay andthe introduction of the new Directors’
reporting regulations applicable to Oxford
Instruments for 2014, the Committee
intends to adopt a number of the key
reporting requirements early in advanceof the formal regulations coming into
force. The Report therefore follows a new
structure this year which the Committee
hopes you will find helpful and informative.

•

made awards and set the Performance
Conditions under the Company’s
Executive Share Option Scheme
and Senior Executive Long Term
Incentive Scheme;•

determined whether Performance
Conditions had been met for options
vesting under the Company’s longterm incentive schemes; and•introduced Clawback arrangements
under the annual bonus plan andshare incentive plans for the 2013/14
year and beyond.

Oxford Instruments has produced a goodresult for the year, delivering increased
profit and improving performance against
our strategic targets with good margin
progression. Our continued focus will beon driving growth in profit and long term
sustainable shareholder value and we
consider that our remuneration policy
will play a vital role in helping us toachieve this.

In 2011 the Company successfully completed
its five year plan to double the size ofits business and improve net margins toabove 10% through organic growth. The
Company is now two years into its threeyear plan, the 14 Cubed Plan. This is anambitious plan, the objective of which is
to target an average compound annual
revenue growth rate of 14% per year andto have a net return on sales of at least
14% by 2014. Progress to date is in linewith meeting these objectives and the
14 Cubed target. Our share price has risen
from £1.10 (market cap of £54.5m) on
31 March 2009 to £16.55 (market cap of£942.0m) on 31 March 2013. The strategic
momentum for the medium and long termis driven by successive technology wavesof which Nanotechnology is a current key
driver. Oxford Instruments’ business isbuilt around providing the tools requiredfor its customers to exploit novel scientificmodalities where the ability to investigate
and manipulate structures is the key tocreating value in the area of interest. With
this in mind a new strategic plan is being
developed to be announced next year.

The main aim of our remuneration policy
is to attract and retain Executives of theappropriate calibre and experienceneeded to manage the international
complexity of our operations and to
incentivise and reward the deliveryof outstanding business results.
The Committee believes that it hasdeveloped a remuneration structure thatwill continue to support and motivate oursenior team, whilst aligning them both to
the Company’s strategic objectives andthe interests of our shareholders. It has
consulted with key shareholders on
Executive remuneration.
During the year theRemuneration Committee:•

reviewed the base salary of the Chief
Executive (CEO) and the Group FinanceDirector (GFD) and determined that
it would be increased in line withthe proposals which we consulted
shareholders about prior to lastyear’s AGM;

The CEO and the GFD have presided
over significant growth and businessperformance for a number of years.
This management team continues todeliver outstanding returns to shareholders.
The Committee considers that it is essentialthat the CEO and GFD are not only rewarded
for this growth and the increased
responsibility of their roles but are also
incentivised to drive future performance.

The Committee appreciates that
remuneration-related solutions represent
only part of any proposition to retain
and motivate talented Executives.
The Committee is most interested in
attracting and retaining Executives who
are motivated by the opportunity andchallenges to build a global champion in
the sectors in which Oxford Instruments
operates. Management has shown it candeliver an outstanding strategic successand we would like to incentivise them todo so again.
As part of the development of the newstrategic business plan, the Committee
is carrying out a review of Executive
remuneration to ensure it is appropriately
structured to build on the exceptional
performance to date and to drive thenext period of growth. Following thisreview details of any changes that require
shareholder approval will be provided toshareholders with the Notice to the AGM
which will be posted in August.
The Board recognised that when Oxford
Instruments joined the FTSE 250 towards
the end of 2011 it was time to recruit a new
Non-Executive Director who would makea credible successor to me as Chairmanof the Committee. I am therefore pleased
to report that Thomas Geitner, who has
substantial corporate experience incompanies larger than Oxford Instruments,
was appointed to the Board in January 2013.
Thomas will become Chairman of theRemuneration Committee after this year’s
Annual General Meeting (AGM). He brings
to the role a wealth of experience inremuneration matters and since his
appointment has worked closely with me
and the Committee’s advisors and incommunicating with our principal
shareholders. I am also pleased toconfirm that Jennifer Allerton is joining
the Remuneration Committee on 11 June.
Her broad international experience willfurther strengthen the knowledge baseof the Committee.
A resolution to approve the Directors’
Remuneration Report will be put forward
at this year’s AGM, which I hope that you
will be able to support. Details of thevoting at last year’s AGM are given on
page 52.

Nigel Keen
Chairman of theRemuneration Committee
11 June 2013

44

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Remuneration Report continued
The report is divided into two parts:
Part A: A Policy Report, which explains
the Company’s current remuneration
policy for Executive Directors; andRemuneration policy table
Element of pay

Purpose and link to strategy

Operation

Base salary• To provide a competitive
and appropriate level ofbasic fixed pay to recruitand retain superior talent
and avoid excessive risktaking from an overreliance on variable
remuneration.
• Reflects the experience,
performance andresponsibilities of theindividual.

• Reviewed annually with any increaseusually effective 1 July.
• Takes account of the Directors’
experience, performance andresponsibilities as well as theperformance of the Company, thecomplexity of the role within the Groupfor which the Executive Directors are
responsible and salary increases for
employees generally.
• Regard to market data for comparable
positions in similar companies including
within the industry.

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

• Benefits currently include:• life assurance cover;• private medical cover;• car benefit; and• all-employee Share Incentive Plan.
• Benefits are not part ofpensionable earnings.

Pension• The aim is to provide
a market-competitive
benefit for retirement.

• Company contributions of 14%
of base salary.
• Salary supplement where annual
or life time allowances exceeded.

Annualbonus• Relates to the successfulachievement by therecipients of targets set
at the start of the year.

• Paid annually in June.
• The Committee sets performancetargets based on the Key Performance
Indicators for the business as well as
personal goals aimed at driving thestrategic objectives of the business.
• Clawback may be applied for financial
years commencing 2013/14 formisstatement, error or misconduct.

Long term
incentives• To incentivise the•
Executives and reward
them for meeting stretchingtargets in the medium term
which accrue substantial
value to and align the
Directors’ interests
with shareholders.
•• Facilitates share ownershipto provide further alignment
with shareholders.
•• Making of annual awards
aid retention.
•

Part B: An Implementation Report, which
is audited and shows how the remuneration
policy has been applied to Executive
Directors for the year under review andcontains tables detailing the Executive
Directors’ emoluments for the year ended
31 March 2013, their accrued pensions
and their interests under the Company’slong term incentive arrangements.
Part A: Remuneration policy
The Company has an incentive-driven
remuneration policy that seeks to reward
Executives fairly and responsibly basedon Group performance and theirindividual contribution. Overall the
remuneration package aims to beappropriate to attract, motivate andretain high calibre Executives.
The remuneration policy promotes thedelivery of the Group’s strategy andseeks to align the interests of Directors
and shareholders. The Committee
regularly reviews the link between
performance and strategy and believes
that measuring the success of thestrategy through sustained andsignificant earnings growth and thedelivery of superior long termshareholder returns ensures a strong
performance culture.
The Committee considers carefully the
motivational effects of the incentive
structure in order to ensure that it iseffective and does not have any
unintentionally negative impact onmatters such as governance,
environmental or social issues. Moregenerally, the Committee ensures thatthe overall remuneration policy does notencourage inappropriate operational risk.
Other matters taken into considerationin determining policy
The Committee reviews the Executive
Directors’ packages annually taking
account of the level of remuneration
paid to comparable positions in similar
companies, as well as pay and conditions
throughout the remainder of the Group.
Comparative pay data is used carefullyrecognising the potential for an upward
ratchet in remuneration caused by overreliance on such data.
When appropriate, the Chairman has
contact with principal shareholders
regarding remuneration policy.

Non• To remunerate
Executive
Non‑Executive Directors.
Director fees

Executives currently receive annual
awards under two plans:• the Executive Share Option Scheme(ESOS); and• the Senior Executive Long Term
Incentive Scheme (SELTIS).
Awards under the ESOS comprise market
price options and under the SELTIS
consist of nil-cost options.
Awards vest subject to performance
conditions measured over a threeyear period.
Clawback may be applied for financial
years commencing 2013/14 formisstatement, error or misconduct.

• Agreed by the Executive Directors
after reference to similar roles in
an appropriate comparator groupof companies.
• Reflects time commitment andresponsibilities of the role and sufficient
to attract individuals with appropriate
knowledge and experience.

Notes to the table(1)	The Committee has chosen sales, profit and cash generation as measures for the annual bonus because they
are Key Performance Indicators for the business over the short term. The Committee has chosen a combinationof EPS growth targets and relative TSR for the long term incentive plans as they provide a good focus on theoutcomes of the Company strategy together with sustainable improvements in long term profitability.

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45

Corporate Governance

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Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Maximum opportunity

Performance metrics

Changes for 2013/14• The Committee’s policy is to set
Executive salaries at a level which
provides a fair reward for the role andwhich are broadly competitive withsalaries for companies of a similar sizeand profile as Oxford Instruments interms of internationality, businessmodel, structure and complexity.
• As the Company grows in size,
complexity and performance andto recognise the returns delivered
to shareholders and implicit in the
Company’s growth, the Committee
will review the market
competitiveness of salaries.

• Not applicable.

• After consultation with the Group’s
major shareholders in 2012, thefollowing salaries have been agreed
effective 1 July 2013:• Jonathan Flint’s salary will
be increased from £420,000
to £450,000; and• Kevin Boyd’s salary will be
increased from £283,000 to£300,000; Charles Holroyd’ssalary will be increased from
£210,000 to £217,000.

• Not applicable.

• Not applicable.

• No change.

• Not applicable.

• Not applicable.

• No change.

• Opportunities under the annual bonus• For 2013/14 targets primarily based onplan for the CEO and GFD are:achievement of challenging corporate
financial targets around organic sales,• 75% of salary at target; andprofit and cash generation with the• 100% of salary at maximum.
balance for achieving specificstrategic objectives.
• For the Business Development Director
the opportunities are:
• 85% of total bonus determined byfinancial measures and 15% personal• 55% of salary at target; andstrategic measures.
• 75% of salary at maximum for 2012/13
and 100% of salary thereafter.

• Maximum opportunity under annual
bonus plan for Business Development
Director increasing from 75% of salary
to 100% of salary.

• For 2013/14 the levels of award are
expected to be as follows (based on facevalue at date of grant):• ESOS:• J Flint 200% of salary;• K Boyd 200% of salary; and• C Holroyd 100% of salary.
• SELTIS:• J Flint 50% of salary;• K Boyd 50% of salary; and• C Holroyd 50% of salary.

• No increases in levels of award from2012/13.
• The EPS growth targets for the awards
to be made in 2013/14 will be determinedby the Committee immediately prior to
the date of grant.
• The relative TSR targets
remain unchanged.

• ESOS awards are subject to EPS growthtargets measured over three financial years.
• In 2012/13, EPS growth targets from CPI +5% p.a. (for which 33.3% of the options vest)
to CPI + 10% p.a. (for which 100% of theoptions vest).
• SELTIS awards are subject to a relative
TSR performance condition.
• In 2012/13, TSR vs. FTSE 250 (excluding
financials) from median (33.3% vests) toupper quartile (100% vests).

• The current fee levels for the• Not applicable.
Non‑Executive Chairman and
Directors is as follows:• Chairman – £161,000;• Base Board fee – £40,000;• Deputy Chairman – £5,000;• Senior Independent Director – £5,000; and• Chair of the Audit Committee – £5,000.

• No change.

(2)	T he salary increases for the CEO and GFD for 2013 were disclosed in the 2012 remuneration report and were subject to shareholder consultation in 2012. The salaryof the Business Development Director is to increase by 3.3% in July 2013. This increase falls within the expected range of 2013 salary increases for UK employees.
(3)	T he Committee sets appropriate and demanding targets for variable pay in the context of the Company’s trading environment and strategic objectives. The targets
for the annual bonus plan will be set each year with reference to the Company’s budget and business and strategic plan. The Committee will set the performance
conditions for the 2013 awards under the SELTIS and ESOS, which are expected to be granted in November, at that time taking account of the Company’s internalfinancial planning, market forecasts and the business environment.

46

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Remuneration Report continued
Part A: Remuneration policy continued
Contracts
Details of the service contracts of the Executive Directors are as follows:

Jonathan Flint
Kevin BoydCharles Holroyd

Contract date

Notice period by Company andExecutive Director

Unexpired term of contract

21 February 2005

12 months

Rolling contract

9 May 2006

12 months

Rolling contract

22 November 2005

12 months

Rolling contract

The Company has a right to pay 12 months’ salary in lieu of notice if it so determines. The Committee’s policy on early termination is toprovide compensation which reflects the Company’s contractual obligations (which does not include entitlement to bonus after
the date of notification of termination), whilst recognising the principle of mitigation of losses.
Non-Executive Directors
Non-Executive Directors do not have service contracts but are appointed under letters of appointment for an initial period of
three years with subsequent reviews. With the introduction in the UK Corporate Governance Code of annual re-election of all
Directors, Non-Executive Director appointments are now renewed for periods of one year. Their appointment can be terminatedwithout notice.
ChairmanUnder an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Company
and Chairman of the Trustee to the Oxford Instruments Pension Scheme and he must account to Imperialise Limited for his
services. His current term of appointment commenced on 25 February 2011 and is for three years. This arrangement can beterminated by either party at any time by the giving of six months’ notice.
Nigel Keen
Jennifer Allerton
Mike Brady

Date of last appointment

Notice period

25 February 2011

6 months

10 June 2013

None

6 March 2013

None

15 January 2013

None

Mike Hughes

6 March 2013

None

Jock Lennox

6 March 2013

None

Thomas GeitnerAll-employee share schemes
The Company operates a Share Incentive Plan (SIP) which is open to all UK permanent staff employed for at least six months.
The Executive Directors all participate in the SIP to the maximum extent permitted by HMRC. The Company offers a 1:5 match forpartnership shares purchased by employees. During the year, each of the Executive Directors were awarded 22 matching shares.
PART B: Implementation Report –The financial information in this part of the report has been audited where indicatedRemuneration Committee
The Remuneration Committee (the “Committee”) is responsible for recommending to the Board the remuneration packages for
Executive Directors and the bonus and share incentive strategy for the Group’s executive management. The Board as a whole is
responsible for determining the remuneration of the Non-Executive Directors, including the Chairman.
The role of the Committee includes:•considering and determining the remuneration policy for the Executive Directors and executive management;•

within this agreed policy, considering and determining the total remuneration packages of each Executive Director of the Company;•

approving the design and performance targets for all performance-related plans as well as the overall total annual payments
made under such plans;•reviewing and noting remuneration trends across the Group; and•determining the policy for pension arrangements, service agreements and termination payments to Executive Directors andthe executive management.

The Committee comprises all the Independent Non-Executive Directors and the Chairman of the Board. The Chairman of the Board,
Nigel Keen, who fulfilled the independence criteria at the time of his appointment as set out in the UK Corporate Governance Code(the Governance Code), is currently the Chairman of the Committee. Nigel Keen was Chairman of the Committee at the time theCompany listed on the FTSE SmallCap index. As a SmallCap company this appointment recognised his significant experience of therole at the Company and elsewhere. It has been agreed that Thomas Geitner, appointed a Non-Executive Director on 15 January 2013,
is to succeed Nigel Keen as Chairman of the Committee at the end of this year’s AGM. He has an appropriate mix of skills to carryout this role. Thomas has met with the Committee’s advisors and has been closely involved in the Committee’s most recent review
of Executive Director remuneration.

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47

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

PART B: Implementation Report –The financial information in this part of the report has been audited where indicated continued
Remuneration Committee continued
The Committee normally meets at least four times a year and the members of the Committee are appointed by the Board.
The Chief Executive, the HR Director and other Executives are invited to attend Committee meetings as deemed appropriate.
For example the Chief Executive is able to make a significant contribution when considering the performance of other Executive
Directors and on significant Group-wide changes in salary structure and terms and conditions affecting other employees at
Senior Executive level. However, no Executive Director is present when the Committee is determining his or her remuneration.
The Committee acts within its agreed written terms of reference (which are published on the Company’s website –www.oxford-instruments.com/investors) and complies with the provisions of the Governance Code regarding bestpractice on the design of performance-related remuneration.
The performance of the Committee is reviewed at least once a year as part of the wider Board evaluation process.
During the year the Committee fulfilled its duties, as laid down in the Committee’s terms of reference and, as described above,
considered the future remuneration requirements of the Executive Directors to carry Oxford Instruments through its next periodof growth.
New Bridge Street (a trading name of Aon Hewitt Limited and part of Aon plc) (NBS) is the Committee’s independent remuneration
consultants. NBS provides remuneration advice to the Committee on all aspects of Executive remuneration as required by theCommittee. During the year advice was provided in relation to the Committee’s review of the Executive Directors’ remuneration
packages including market data, remuneration reporting including the Department for Business Innovation and Skills draft
remuneration reporting regulations, monitoring and testing of performance conditions. NBS also meets with the Remuneration
Committee Chairman at least once a year to discuss remuneration matters which are of particular relevance to the Company andhow best it can work with the Company to meet the Committee’s needs. NBS is a signatory to the Remuneration Consultants’
Code of Conduct and has confirmed to the Committee that it adheres to the Code. Fees are charged predominately on a ‘time
spent’ basis and the total fees paid to NBS for the advice provided to the Committee during the year was £34,442.
No other services are provided to the Company by the Aon plc group.
Executive Directors’ Emoluments (audited)
The remuneration paid to the Executive Directors during the year under review is summarised in the table below:

Salary£000

Benefits
£000

403

25

3

Jonathan Flint 2

1

Annual
bonus
£000

Total
remuneration
2013
£000

Total
remuneration
2012
£000

Pensioncontribution
2013
£000

Long-term
incentive
awards
2013
£000

290

718

713

50

1,488

Total
includingpensionand LTI
2013
£000

2,256

Kevin Boyd

273

16

196

485

495

38

1,016

1,539

Charles Holroyd

208

15

109

332

358

29

881

1,242

Total

884

56

595

1,535

1,566

117

3,385

5,037

1	Benefits comprise provision of a car or car allowance, health insurance and any balancing payment made by the Company where the contractual pension contribution
exceeds the Annual Allowance.
2	In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £300,000. Jonathan Flint bought further proportions of thehouse by paying £99,900 to the Company in each of the years to 31 March 2012 and 31 March 2013. These proportions were recalculated based on the original purchaseprice. Independent valuations have established that the price paid by Jonathan Flint was in excess of the market value of the house at the time of each payment.
Jonathan Flint lives in the house and paid a full commercial rent amounting to £4,640 during the financial year for use of the Company asset.
3	Under the terms of a salary sacrifice arrangement, UK employees are able to elect to cease making personal contributions into relevant pension schemes. Each employee’ssalary is reduced by the amount of their pension contributions and the Company pays the same amount directly to the pension schemes. Accordingly, the annual salaries
of Jonathan Flint, Kevin Boyd and Charles Holroyd were reduced to £402,242, £260,793 and £187,238 respectively (2012: £344,297, £222,033 and £181,480 respectively).
For reasons of clarity, the salaries shown in the table above for these Directors are the amount they would have been paid had they not made such salary sacrifices.
These ‘notional’ base salaries are used to calculate salary linked remuneration such as bonus and some benefits.
4	Long term incentive awards are those awards where the vesting is determined by performance periods ending in the year under report under both the SELTIS and ESOS
and therefore calculates the value of the SELTIS option granted in December 2009 and the ESOS option granted in January 2011. Further details of how these sums arearrived at are set out below.

Outside appointments (unaudited)
The Board allows Executive Directors to accept appropriate outside commercial non-executive appointments provided the aggregate
commitment is compatible with their duties as Executive Directors. The Executive Director concerned may retain fees paid forthese services, which will be subject to approval by the Board.
Jonathan Flint held positions as a member of the Council of the Institute of Physics (resigned July 2012) and as a member of theadvisory board of the ISIS neutron spallation instrument (resigned December 2012). During the year he received fees of £340
from ISIS (2012: £510). Since the year end, he has been appointed a Non-Executive Director of Cobham Plc.
Kevin Boyd is a Non-Executive Director of Guidance Ltd. During the year he received fees of £15,567 (2012: £18,300).

48

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Remuneration Report continued
PART B: Implementation Report –The financial information in this part of the report has been audited where indicated continued
Details of variable pay earned in year (unaudited)Bonus
For the year ended 31 March 2013, the bonus awarded was based against the following metrics: organic sales, profit, cash
generation and other strategic objectives. The level of payment for the year took account of the Company’s very strong
performance with organic sales up 4.5%, adjusted profit before income tax up 15% and net cash position of £39.2m.
The on-target and maximum bonus potentials for the Executive Directors as well as the amount actually payable for the year
ended 31 March 2013 are set out below:
On-targetbonus(% of salary)

Maximum
bonus(% of salary)

Actualbonus payablefor 2012/13(% of salary1)

Jonathan Flint

75%

100%

69.1%

Kevin Boyd

75%

100%

69.1%

Charles Holroyd

55%

75%

52.0%

1 Bonus is calculated on salary as at 31 March 2013.

Long Term Incentive Plans
The performance conditions and the resulting payout in respect of the long term incentive awards that will vest basedon a performance period ending in the year under report were as follows:
Executive Share Option Scheme (ESOS) (audited)
The performance conditions which applied to the 7/1/2011 award (vesting on 7/1/2014) for the performance period which cameto end in the year under review and actual performance achieved against these were as follows:
Performance level

EPS growth over CPI Performance required

Below threshold

Less than 15% over three years

0%15% over three years

33.3%

Threshold
Between threshold and maximum
Maximum% of award that will vest

15% to 30% over three years

33.3%–100%

30% and above over three years

100%

284%

100%

Actual achieved

The total percentage of each Executive’s option vesting (subject to continued service to 7/1/2014) is set out below:
Total
numbersharessubject
to option

Percentage
of award
vesting

Numberof sharesthat will vest

Exercise
price

Value ofsharesthat will vest 1

Jonathan Flint

55,000100%

55,000£7.05£518,650

Kevin Boyd

38,000100%

38,000£7.05£358,340

Charles Holroyd

31,000100%

31,000£7.05£292,330

1 Value determined using a share price of £16.48 being the average for the three months ended on 31 March 2013 less the exercise price.

Senior Executive Long Term Incentive Scheme (SELTIS) (audited)
The performance conditions which applied to the 17/12/2009 award (vesting on 17/12/2012) for the performance period whichcame to an end in the year under review and actual performance achieved against these were as follows:
TSR relative to FTSE SmallCap (excluding certain sectors)1
Performance level

Below threshold
Threshold

Performance required% of total award vesting

Below median0%Median33%

Between median and upper quartile

33%–100%

Stretch or above

Upper quartile

100%

Actual achieved

Upper quartile

100%

Between threshold and stretch

1	Sectors excluded are Food & Drug Retailers, General Retailers, Banks, Nonlife Insurance, Life Insurance, Real Estate, General Financial, Equity Investment Instruments
and Non-equity Investment Instruments.

Business Overview

49

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Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

PART B: Implementation Report –The financial information in this part of the report has been audited where indicated continued
Details of variable pay earned in year (unaudited) continued
Long Term Incentive Plans continued
Senior Executive Long Term Incentive Scheme (SELTIS) (audited) continued
The total percentage of shares that vested is 100%. This resulted in the following awards vesting to the Executive Directors:
Total
numberof shares
granted

Percentage
of award
vesting

Numberof shares
vesting

Value ofsharesvesting1

Jonathan Flint

70,000100%

70,000£969,500

Kevin Boyd

47,500100%

47,500£657,875

Charles Holroyd

42,500100%

42,500£588,625

1 Value determined using a share price of £13.85 being the mid-market closing price on the day of vesting.

Remuneration of the Chairman and Non-Executive Directors (audited)
Remuneration paid to the Chairman and Non-Executive Directors 4 during the year under review are set out below. They receive
no other benefits.
Under an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Company
and Chairman of the Trustee to the Oxford Instruments Pension Scheme and he must account to Imperialise Limited for his services.
Imperialise Limited is paid fees for Nigel Keen’s services together with a sum equivalent to the employer’s national insurance
contributions on these fees as it is responsible for the cost of national insurance on payments to Nigel Keen, whereas national
insurance contributions in respect of the other Non-Executive Directors are made direct to the UK Inland Revenue. For the year
to 31 March 2013, Nigel Keen’s fees as Chairman were £161,000 (2012: £145,000) and as Chairman to the Trustee were £25,000(2012: £25,000) for his services for which he must account to Imperialise Limited. In addition, Imperialise Limited has been paid
a sum equivalent to the national insurance on both these fees of £25,668.
2013
£000

2012
£000

Nigel Keen, Chairman1

183

145

Mike Brady

45

35

Mike Hughes

45

35

Jock Lennox

45

35

Thomas Geitner

8—

Bernard Taylor3

20

30

Total

346

280

2

1	Nigel Keen’s fees above include a payment equivalent to employers’ national insurance contributions of £22,218 and are paid to Imperialise Limited. In addition to thesum in the table above, Imperialise Limited received fees for his services as Chairman to the Trustee of the Oxford Instruments Pension Scheme.
2	A ppointed 15 January 2013.
3 Resigned 11 September 2012.
4 Jennifer Allerton was appointed after 31 March 2013.

Former Non-Executive Directors (audited)
In November 2012, the Company entered into a consultancy arrangement with Rycote Services Limited whereby Bernard Taylor, whoceased to be a Director on 11 September 2012, provides advice on strategic, merger and acquisition issues to the Chief Executive
and the Company’s Management Board. In the year to 31 March 2013, fees of £20,000 were paid to Rycote Services Limited.

50

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Remuneration Report continued
PART B: Implementation Report –The financial information in this part of the report has been audited where indicated continued
Outstanding Share Incentive Awards (audited)
As at 31 March 2013, the outstanding options for Jonathan Flint, Kevin Boyd and Charles Holroyd under the ESOS and SELTIS
schemes were as follows:
Movements during the year
Name

Jonathan Flint

SchemeMarch
2013

Granted

60,5002

Exercise
price

Share priceon dateof grant

Date of
grant

Date forearliest
exercise

Date forlatestexercise

ESOS

60,500—£13.88£14.08 19/12/12 19/12/15 18/12/22

70,70070,700£9.90£9.87 14/12/11 14/12/14 13/12/21

ESOS

55,00055,000£7.05£7.02 07/01/11 07/01/14 06/01/21

140,000£2.035£2.03 17/12/09 17/12/12 16/12/19—

Nil£14.08 19/12/12 19/12/15 18/12/19

17,600Nil£9.87 14/12/11 14/12/14 13/12/18

ESOS—
15,100SELTIS

17,600SELTIS

27,500SELTIS—

ESOS

40,750140,000
15,10070,00027,500Nil£7.02 07/01/11 07/01/14 06/01/18

70,000Nil£2.03 17/12/09 17/12/12 16/12/16—£13.88£14.08 19/12/12 19/12/15 18/12/22

40,750ESOS

48,70048,700£9.90£9.87 14/12/11 14/12/14 13/12/21

ESOS

38,00038,000£7.05£7.02 07/01/11 07/01/14 06/01/21

95,000£2.035£2.03 17/12/09 17/12/12 16/12/19—

Nil£14.08 19/12/12 19/12/15 18/12/19

12,100Nil£9.87 14/12/11 14/12/14 13/12/18

19,000Nil£7.02 07/01/11 07/01/14 06/01/18

47,500Nil£2.03 17/12/09 17/12/12 16/12/16—£13.88£14.08 19/12/12 19/12/15 18/12/22£9.87 14/12/11 14/12/14 13/12/21

ESOS

7,371

SELTIS

10,150SELTIS

12,100SELTIS

19,000SELTIS—

ESOS

15,100Charles Holroyd

Lapsed

March
2012

ESOS

SELTIS

Kevin Boyd

Exercised

1

87,62910,15047,50015,100ESOS

20,20020,200

£9.90

ESOS

31,00031,000£7.05£7.02 07/01/11 07/01/14 06/01/21

ESOS

—

85,000£2.035£2.03 17/12/09 17/12/12 16/12/19

85,000SELTIS

7,550

—

Nil

£14.08 19/12/12 19/12/15 18/12/19

SELTIS

10,10010,100Nil£9.87 14/12/11 14/12/14 13/12/18

SELTIS

15,50015,500Nil£7.02 07/01/11 07/01/14 06/01/18

SELTIS

—

42,500Nil£2.03 17/12/09 17/12/12 16/12/16

7,550

42,5001	During the year Jonathan Flint, Kevin Boyd and Charles Holroyd exercised SELTIS and ESOS options on 17 December 2012 when the mid-market closing price on the dateof exercise was £13.85. The gain yielded on the exercise of options during the year for Jonathan Flint, Kevin Boyd and Charles Holroyd was £2,623,600, £1,692,567 and£1,592,900 respectively (2012: £4,138,556, £1,946,642 and £1,946,642 respectively).
2	Jonathan Flint’s wife, an employee of the Company, exercised ESOS options on 17 December 2012 when the mid-market closing price on the date of exercise was £13.85.
The gain yielded on the exercise of options was £236,300. She holds as at 31 March 2013 ESOS options over 58,250 shares with exercise prices ranging from £7.05 to £13.88.

The market price of the shares at 31 March 2013 was £16.55 (2012: £12.15) and the range during the year was £10.81-£17.78(2012: £7.03-£12.62).
Performance conditions outstanding for awards are described below (all other awards in the table above have achieved therelevant performance conditions that had been set):
Date of AwardESOS

SELTIS

7 January 2011

EPS growth – 5% p.a. (33.3% vesting) to 10% p.a.
(100% vesting)¹

TSR v FTSE Small Cap Index (excluding certain sectors²)– median (33.3% vesting) to upper quartile (100% vesting)

14 December 2011

EPS growth – CPI + 5% p.a. (33.3% vesting
to 10% p.a. (100% vesting)¹

TSR v FTSE 250 Index (excluding Financial companies3)– median (33.3% vesting) to upper quartile (100% vesting)

19 December 2012

EPS growth – CPI + 5% p.a. (33.3% vesting
to 10% p.a. (100% vesting)¹

TSR v FTSE 250 Index (excluding Financial companies3)– median (33.3% vesting) to upper quartile (100% vesting)

1 For employees who are not Executive Directors, options become exercisable in full for achieving the threshold level.
2	S ectors excluded Food & Drug Retailers, General Retailers, Banks, Non-life Insurance, Life Insurance, Real Estate, General Financial, Equity Investment Instruments andNon-equity Investment Instruments sectors.
3	Sectors excluded Banks, Equity Investment Instruments, Finance Services, Life Insurance, Non-life Insurance, Real Estate Investment Trusts and Real Estate Investment Services.

Business Overview

51

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Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

PART B: Implementation Report –The financial information in this part of the report has been audited where indicated continued
Achievement of performance conditions (unaudited)
The calculation of the TSR performance conditions were independently measured by Thomson Reuters for options granted prior
to 2008 and are measured by New Bridge Street for options granted thereafter. EPS performance conditions are measured using
the audited accounts of the Company. All performance conditions are then verified by the Committee. During the year the 2009
ESOS and SELTIS grants vested as to 100% because of the Company’s strong EPS and relative TSR performance.
Dilution limits (unaudited)
The ESOS, SELTIS and SAYE share option schemes provide that overall dilution through the issuance of new shares for employee
share schemes should not exceed an amount equivalent to 10% of the Company’s issued share capital over a ten year period.
Awards made under the SELTIS scheme prior to 2009 and shares required by the SIP are satisfied by market purchased shares.
The Committee monitors the position prior to the making of any award under these share option schemes to ensure that theCompany remains within this limit. As at the date of this Report, the Company’s headroom position remains within the 10% limit.
Shareholding guidelines (unaudited)
The Committee has established shareholding guidelines which encourage the Executive Directors to build and retain a shareholding
equivalent in value to 100% of basic salary. Until the guideline is met in full, whenever ESOS or SELTIS options are exercised Executive
Directors are expected to retain or purchase shares equivalent to the value of 50% of the net amount realised from exercise of
the options after allowing for tax payable.
Executive Directors’ shareholdings as at 31 March 2013 are shown in the table below:

Guideline
met as at
31 March 2013

Subject toperformance
conditions
under theLTIP unvested

Legallyowned

LTIP options
vested but
unexercised

Percentage ofsalary held inshares under shareholding guideline1

191,301

—

754%

Yes

246,450

Kevin Boyd

78,761

7,371

461%

Yes

168,750

Charles Holroyd

78,763

—

621%

Yes

99,450Jonathan Flint

1 Shares valued using the market price of the shares on 31 March 2013: £16.55.

Pension plans
For UK employees and Executive Directors, the Company operates the Oxford Instruments Group Personal Pension Plan (a defined
contribution scheme). It also operates the Oxford Instruments Defined Benefit Pension Scheme but this has been closed to new
employees since April 2001 and closed to new accruals at the end of July 2010.
Oxford Instruments Defined Benefit Pension Scheme (unaudited)
For UK-based Executive Directors and employees employed prior to April 2001, a contributory pension, depending on lengthof service, of up to two-thirds of pensionable salary is provided on retirement through the Oxford Instruments Defined Benefit
Pension Scheme (“Defined Benefit Scheme”). This was a contracted-out contributory pension scheme and it provides benefits ator near retirement based on earnings and is funded through a separate trust. Early retirement is possible on a reduced pension
from age 55 with the consent of the Company. Pensions in payment are guaranteed to increase by a level of inflation up to a
maximum of 3% per year on pension earned before 1 April 1997 and a maximum of 5% per year thereafter, subject to any applicablestatutory requirements. In the case of death before retirement a spouse’s pension of one-half of the member’s pension at deathis payable and a refund of the member’s contributions. This Scheme was closed to future accrual on 31 July 2010.
Oxford Instruments Group Personal Pension Plan
Employees and Executive Directors are offered membership of the Oxford Instruments Group Personal Pension Plan (GPP Plan).
The Company contribution rate and employee contribution rate varies between grades and whether the individual had previously
been in the Defined Benefit Scheme. The Company contribution ranges between 1% and 14% of base salary.
Executive Director Pension Arrangements (audited)
Under the terms of their service contracts Executive Directors can ask the Company to contribute to a pension plan of their own
choice. The Company contributes a maximum of 14% of base salary if matched by a contribution of 10% by the Director or, if
lower, a contribution by the Director which brings the total pension contribution to £50,000. Only base salary is pensionable andcontributions are not included in the calculation of bonus and share award entitlements. Where the Company’s pension
contribution exceeds £50,000 for the tax year 2013/14 reducing to £40,000 for the tax year 2014/15 (the maximum pension
contribution allowable per tax year) a balancing payment is paid by the Company to the Director which will be taxed as income.
During the year the Company contributed £49,472 (2012: £48,422) into a personal defined contribution pension plan in respect ofJonathan Flint, £38,167 (2012: £33,407) into a personal defined contribution plan in respect of Kevin Boyd and £29,050 (2012: £27,667)
into the GPP Plan in respect of Charles Holroyd. Charles Holroyd is a deferred member of the Defined Benefit Scheme and is nolonger accruing benefits in the Scheme. In accordance with the rules of the Scheme his deferred benefits are subject to increases
in line with statutory revaluation. The transfer value of his accrued benefits at 31 March 2013 was £536,526 (2012: £506,000).

52

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Remuneration Report continued
PART B: Implementation Report –The financial information in this part of the report has been audited where indicated continued
Performance graph (unaudited)
The graph below shows for the five years ended 31 March 2013 the Total Shareholder Return (TSR) on a holding of the Company’s
ordinary shares compared with a hypothetical holding of shares made up of shares of the same kind and number as those by reference
to which the FTSE 250, FTSE Techmark and FTSE Electronic and Electrical Equipment indices are calculated. These indices havebeen chosen as they are considered to be the most appropriate comparator groups for the Company. TSR has been calculated
by reference to the relevant share price for each constituent company assuming dividends are reinvested.
1,100
1,000
900

Total Shareholder Return
This graph shows the value, by
31 March 2013, of £100 invested in
Oxford Instruments plc on 31 March
2008 compared with the value of £100
invested in the FTSE Techmark All Share
Index, the FTSE All Share Electronic
and Electrical Equipment Index or the
FTSE 250 Index over the same period.
The other points plotted are the values
at intervening financial year ends.

Oxford Instruments plc
FTSE Techmark
FTSE E&EE
FTSE 250

800

Value (£)

700
600
500
400
300
200
100
Source: Thomson Reuters

0
31 March
2008

31 March
2009

31 March
2010

31 March
2011

31 March
2012

31 March
2013

Statement of shareholder voting (unaudited)
At last year’s AGM, the Directors’ Remuneration Report received the following votes from shareholders:
Remuneration Report
Total numberof votes% ofvotes castFor

32,759,847

75.1

Against4,142,005

9.5

Abstentions

6,744,126

15.4

43,645,978

100

Total

This report was adopted by the Committee at a meeting on 3 June 2013 and has been approved subsequently by the Board forsubmission to shareholders at the AGM to be held on 10 September 2013.

Nigel Keen
Chairman of the Remuneration Committee
11 June 2013

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Corporate Governance

Financial Statements

Oxford Instruments plc / Report and Financial Statements 2013

Financial Statements
Financial Statements
Directors’ Responsibilities 54
Report of the
Independent Auditor
55
Accounting Policies
57
Consolidated Statementof Income64
Consolidated Statementof Comprehensive Income 66
Consolidated Statementof Financial Position
67
Consolidated Statementof Changes in Equity
68
Consolidated Statementof Cash Flows70
Notes to the Financial
Statements
71
Parent Company
Balance Sheet
98
Notes to the
Parent Company
Financial Statements
99
Historical Financial
Summary
104

Company Information
Shareholder Information
Oxford Instruments
Directory
Advisers

105
107
109

Company Information

54

Oxford Instruments plc / Report and Financial Statements 2013

Directors’ Responsibilities

in relation to the Report and Financial Statements
The Directors are responsible for preparing the Report and the Group and Parent Company Financial Statements in accordancewith applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under
that law they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU andapplicable law and have elected to prepare the Parent Company Financial Statements in accordance with UK AccountingStandards and applicable law (UK Generally Accepted Accounting Practice).
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true andfair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of
the Group and Parent Company Financial Statements, the Directors are required to:•

select suitable accounting policies and then apply them consistently;•

make judgements and estimates that are reasonable and prudent;•

for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;•

for the Parent Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Parent Company Financial Statements; and•prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the
Parent Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’stransactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them toensure that its Financial Statements comply with the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation inother jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:•

the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation
taken as a whole; and•the Directors’ Report includes a fair review of the development and performance of the business and the position of theCompany and Group taken as a whole, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board

Jonathan Flint
Chief Executive
11 June 2013

Kevin Boyd
Group Finance Director					Business Overview

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55

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Report of the Independent Auditor
to the members of Oxford Instruments plc

We have audited the Financial Statements of Oxford Instruments plc for the year ended 31 March 2013 set out on pages 57 to 104.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law andInternational Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been appliedin the preparation of the Parent Company Financial Statements is applicable law and UK Accounting Standards (UK Generally Accepted
Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state tothem in an Auditor’s 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 and the Company’s members, as a body, for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 54, the Directors are responsible for the
preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit,
and express an opinion on, the Financial Statements in accordance with applicable law and International Standards on Auditing(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the Financial Statements
A description of the scope of an audit of Financial Statements is provided on the Financial Reporting Council’s website atwww.frc.org.uk/auditscopeukprivate.
Opinion on Financial Statements
In our opinion:•

the Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2013
and of the Group’s profit for the year then ended;•

the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU;•

the Parent Company Financial Statements have been properly prepared in accordance with UK Generally Accepted
Accounting Practice;•

the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006; and, asregards the Group Financial Statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:•

the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006;•

the information given in the Directors’ Report for the financial year for which the Financial Statements are prepared isconsistent with the Financial Statements; and•the information given in the Corporate Governance Statement set out on pages 36 to 42 with respect to internal control andrisk management systems in relation to financial reporting processes and about share capital structures is consistent with
the Financial Statements.

56

Oxford Instruments plc / Report and Financial Statements 2013

Report of the Independent Auditor continued
to the members of Oxford Instruments plc

Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:•adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or•the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not inagreement with the accounting records and returns; or•certain disclosures of Directors’ remuneration specified by law are not made; or•

we have not received all the information and explanations we require for our audit; or•a Corporate Governance Statement has not been prepared by the Company.

Under the Listing Rules we are required to review:•the Directors’ Statement, set out on page 54, in relation to going concern;•

the part of the Corporate Governance Statement on pages 36 to 42 relating to the Company’s compliance with the nine
provisions of the UK Corporate Governance Code specified for our review; and•certain elements of the report to shareholders by the Board on Directors’ remuneration.

Simon Haydn-Jones (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
11 June 2013

Business Overview

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Corporate Governance

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Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Accounting Policies
Oxford Instruments plc (the “Company”) is a company incorporated and domiciled in the UK.
The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU (“Adopted IFRSs”). The Company has elected to prepare its Parent Company Financial
Statements in accordance with UK GAAP; these are presented on pages 98 to 103.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in theseGroup Financial Statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set
out in the Chief Executive’s Statement on pages 14 to 15. The financial position of the Group, its cash flows, liquidity position andborrowing facilities are described in the Financial Review on pages 22 to 25.
The relatively diverse nature of the Group together with its current financial strength provides a solid foundation. The Directors
have reviewed the Group’s forecasts and flexed them to incorporate a number of potential scenarios relating to changes in trading
performance and believe that the Group will be able to operate within its existing debt facility which expires in December 2014.
This review also considered hedging arrangements in place. As a consequence, the Directors believe that the Group is well placed
to manage its business risks successfully.
The Financial Statements have been prepared on a going concern basis based on the Directors’ opinion, after making reasonableenquiries, that the Group has adequate resources to continue in operational existence for the foreseeable future.
The Financial Statements were authorised for issuance on 11 June 2013.
(a) New accounting standards
In the current year, the Group has adopted the following new standards, amendments and interpretations. These were mandatory
for the year ended 31 March 2013.
•

Amendments to IAS 12 Income Taxes – Deferred Tax: Recovery of Underlying Assets provides for there to be a presumption(for the purpose of calculating deferred tax liabilities) that the value of investment property is recovered through sale.

•

Amendments to IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets requires additional disclosures abouttransfers of financial assets, e.g. securitisations, and should enable users to understand the possible effects of any risks that
may remain with the transferor. The amendment also requires additional disclosures if a disproportionate amount of transfer
transactions are undertaken around the end of a reporting period.

•

Amendments to IFRS 1 First Time Adoption of IFRS – Severe Hyperinflation and Removal of Fixed Dates for First Time Adoptersprovides guidance to entities emerging from severe hyperinflation and provides relief for first-time adopters of IFRSs from having
to reconstruct transactions that occurred before their date of transition to IFRSs.

None of the above standards and interpretations have had any impact on profit, earnings per share or net assets in the year
ended 31 March 2013.
(b) Basis of preparation
The Financial Statements are presented in Pounds Sterling, rounded to the nearest £0.1m and are prepared on the historical costbasis except as described below under the heading “Financial Instruments”.
The preparation of Financial Statements in conformity with adopted IFRSs requires management to make judgements, estimatesand assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The key judgements and estimates made in applying
the Group accounting policies relate to:Fair value measurements on business combinations
The measurement of fair values on a business combination requires the recognition and measurement of the identifiable assets,
liabilities and contingent liabilities. The key judgements involved are the identification and valuation of intangible assets which
require the estimation of future cash flows and the selection of a suitable discount rate (see Note 13).
Contingent purchase consideration
Contingent purchase consideration is measured at fair value at the date of acquisition and tested annually against the criteria for
payment. The key judgements involved are the estimation of future cash flows and profitability of the acquired business and theselection of a suitable discount rate.
Impairment of intangible assets (including goodwill) and tangible assets
Goodwill is held at cost and tested annually for impairment and amortised intangibles and tangible assets are tested for impairment
where there are indications of impairment. These impairment tests require the Group to make an estimate of the expected cash
flows and to select suitable discount rates. These require an estimation of the value in use of these assets (see Note 13).

58

Oxford Instruments plc / Report and Financial Statements 2013

Accounting Policies continued(b) Basis of preparation continued
Capitalised development costs
Capitalised development costs involve judgements around the future economic benefits that will flow from the associated development
activity and in particular the Group’s assessment of the technical and commercial feasibility of the product to be developed.
Measurement of defined benefit scheme liabilities
The Group recognises and measures costs relating to defined benefit pension schemes in accordance with IAS 19 Employee Benefits.
In applying IAS 19 the costs are assessed in accordance with the advice of independent qualified actuaries. This requires the exerciseof judgement in relation to the estimation of future changes in salaries and inflation, as well as mortality rates, expected returns
on plan assets and the selection of suitable discount rates. Further detail is provided in Note 21.
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past
expectations or events which can be reasonably estimated. The timing of recognition requires the application of judgement toexisting facts and circumstances which can be subject to change. Amounts provided represent the Group’s best estimate of
exposure based on currently available information.
Deferred tax assets
A deferred tax asset is recognised in the period if it is probable that future taxable profits will be available against which the asset
can be utilised. This requires the exercise of judgement in relation to the estimation of future taxable profit.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods. The key areas where
estimates have been used and assumptions applied are in the calculation of provisions, the valuation of acquired intangible
assets, the impairment testing of goodwill and the estimation of defined benefit pension plan liabilities.
(c) Basis of consolidation
The Group Financial Statements include the accounts of Oxford Instruments plc and its subsidiary companies adjusted to eliminate
intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the control, directly or indirectly, to govern
the financial and operating policies of an entity so as to obtain economic benefits from its activities. In assessing control, potential
voting rights that are currently exercisable or convertible are taken into account. The results of subsidiary companies are included
from the date that control is obtained to the date of their disposal, where control is lost.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated
into Sterling at exchange rates ruling at the end of the reporting period. Income statements and cash flows of foreign operations
are translated into Sterling at average quarterly exchange rates which approximate foreign exchange rates at the date of thetransaction. Foreign exchange differences arising on retranslation are recognised directly in a separate translation reserve.
The acquisition method is used to account for the acquisition of subsidiaries.
(d) Foreign currency
An individual entity’s transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rateruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets andliabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of
the transaction.
(e) Financial instruments
Financial assets and liabilities are recognised in the Group’s Consolidated Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument.
(i)	The Group’s investments in equity securities are classified as “available for sale” financial assets. Subsequent to initialrecognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains
and losses on available for sale monetary items, are recognised directly in equity. When an investment is derecognised, thecumulative gain or loss in equity is transferred to profit and loss.
(ii)	Derivative financial instruments of the Group are used to hedge its exposure to interest rate, foreign currency and commodity
pricing risks arising from operational, financing and investment activities. The Group does not hold or issue derivative financial
instruments for trading purposes. All derivatives are initially recognised at fair value; attributable transaction costs are recognised
in profit or loss as incurred. Derivatives comprising interest rate swaps, foreign exchange contracts and options and metal futurescontracts are classified as “fair value through profit and loss” under IAS 39, unless designated as hedges. Subsequent to initialrecognition, derivatives are measured at fair value and gains or losses on the settlement of such derivatives are recognised
in operating expenses. Where such derivatives relate to the following year’s exposure, any gains or losses resulting from thechange in fair value are taken to the mark to market gains/losses line within financial income or expense.

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Oxford Instruments plc / Report and Financial Statements 2013(e) Financial instruments continued(iii)	Changes in the fair value of the derivative hedging instruments designated as cash flow hedges are recognised in equity to
the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in theConsolidated Statement of Income. If the hedging instrument no longer meets the criteria for hedge accounting, expires oris sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously
recognised in equity remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, theamount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amountrecognised in equity is transferred to the Consolidated Statement of Income in the same period that the hedged item affects
profit or loss.
(iv)	The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting
estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar
instrument at the measurement date.
(v)	The fair value of forward exchange contracts is their market price at the Consolidated Statement of Financial Position date,
being the present value of the forward price. The gain or loss on remeasurement to fair value of forward exchange contracts
is recognised immediately in the Consolidated Statement of Income.
(vi)	Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised
in profit or loss over the period of the borrowing on an effective interest basis.
(f) Property, plant and equipment
Property, plant and equipment is stated at historical cost less provisions for impairment (see accounting policy l) and depreciation
which, with the exception of freehold land which is not depreciated, is provided on a straight-line basis over each asset’s estimatedeconomic life. Depreciation is provided based on historical cost less estimated residual value. The principal estimated economic
lives used for this purpose are:Freehold buildings, long leasehold land and buildings
Leasehold improvements (less than 50 years’ duration)
Furniture and fittings
Machinery and other equipment

50 years
Period of lease
10 years
5 to 10 years

Computer equipment

4 years

Vehicles4 years

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment and are recognised in the Income Statement.
(g) Intangible assets(i) Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents amounts arising on acquisitionof subsidiaries. In respect of business acquisitions that have occurred since 31 March 2004, goodwill represents the difference
between the cost of the acquisition and the fair value of the assets, liabilities and contingent liabilities acquired. In respect ofacquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded underprevious GAAP.
The Group now expenses transaction costs associated with its acquisitions and movements in liabilities relating to contingent
consideration within the Income Statement in conformity with the revised IFRS 3. The carrying value of contingent considerationis reassessed annually.
Goodwill arising on acquisitions is stated at cost less any accumulated impairment losses and allocated to cash generating units
that are anticipated to benefit from the combination. It is not amortised but is tested annually for impairment (see accounting
policy l), or more frequently when there is an indicator that the unit may be impaired.
(ii) Development costs
Research and development costs are charged to the Consolidated Statement of Income in the year in which they are incurred
unless development expenditure is applied to a plan or design for the production of new or substantially improved products,
in which case they are capitalised. The criteria for capitalisation include demonstration of the technical feasibility of completinga new intangible asset that will be available for sale and that the asset will generate probable future economic benefits. Where
expenditure meets the criteria, development costs are capitalised and amortised through the Consolidated Statement of Income
over their useful economic lives.
(iii) Acquired intangible assets
An intangible asset acquired with a subsidiary undertaking is recognised as an intangible asset if it is separable from the acquired
business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value can bereliably measured. The asset is amortised through the Consolidated Statement of Income over it useful economic life.

60

Oxford Instruments plc / Report and Financial Statements 2013

Accounting Policies continued(g) Intangible assets continued(iv) Amortisation
Amortisation of intangible assets is charged to the Consolidated Statement of Income on a systematic basis in proportion to theuse of the assets over their estimated useful economic lives as follows:
Capitalised development costs
Technology related acquired intangibles
Customer related acquired intangibles

3 to 5 years
5 to 10 years
6 months to 8 years(h) Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently stated at their amortised cost less appropriate
allowances for amounts which are expected to be non-recoverable.
(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour, an attributable proportionof production overheads based on normal operating capacity and all other expenditure incurred in acquiring the inventories andbringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course ofbusiness, less the estimated costs of completion and selling expenses.
Provision is made for obsolete, slow-moving and defective stock where appropriate in light of recent usage, expected future
requirements, new product introduction plans and likely realisable values.
(j) Cash and cash equivalents
Cash and cash equivalents are carried in the Statement of Financial Position at amortised cost.
Cash and cash equivalents comprise cash balances and call deposits and are carried at amortised cost. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purpose of the Statement of Cash Flows.
(k) Non-current assets held for sale
A non-current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than
through continuing use, it is available for immediate sale and sale is highly probable within one year.
Immediately before classification as held for sale, the measurement of the assets is brought up-to-date in accordance withapplicable IFRSs. Then, on initial classification as held for sale, non-current assets are recognised at the lower of their carrying
amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale are included in the Consolidated Statement of Income, even when theasset has previously been revalued. The same applies to gains and losses on subsequent remeasurement.
(l) Impairment of non-current assets
All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying value may be
impaired. Additionally, goodwill is subject to an annual impairment review.
For the purposes of impairment testing assets are grouped together into the smallest group of assets that generates cash flows
from continuing use that are largely independent of the cash inflows from other groups of assets.
An impairment loss is recognised in the Consolidated Statement of Income as under the administration and shared services heading,to the extent that an asset’s carrying value, or a cash generating unit’s carrying value, exceeds its recoverable amount, which
represents the higher of its net realisable value and its value in use. Value in use is the present value of the future cash flows
expected to be derived from the asset or from the cash generating unit to which it relates. The present value is calculated using
a discount rate that reflects the current market assessment of the time value of money and the risks specific to the asset concerned.
Impairment losses recognised in previous periods for an asset other than goodwill are reversed if there has been a change inestimates used to determine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does
not exceed its carrying amount had the impairment loss not been recognised in previous periods. Impairment losses in respect of
goodwill are not reversed.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit.

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Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013(m) Employee benefits
The Group operates a number of defined benefit and defined contribution plans which require contributions to be made to
independent trustee administered funds.
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Statementof Income as incurred.
(ii) Defined benefit plans
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating theamount of future benefit that current and past employees have earned in return for their service in prior periods. That benefit is
discounted to determine its present value and the fair value of any plan assets is deducted. The calculation is performed by aqualified actuary using the projected unit credit method.
All actuarial gains and losses in calculating the Group’s net obligation are recognised in the Consolidated Statement ofComprehensive Income in the year.
The charge to the Consolidated Statement of Income reflects the current service cost. The expected return on scheme assets andthe interest cost on scheme liabilities are included within financial income or financial expenditure in the Consolidated Statementof Income respectively.
(iii) Share-based payment transactions
The fair value of equity settled share option programmes is measured at grant date and charged to the Consolidated Statementof Income, with a corresponding increase in equity, on a straight-line basis over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking
into account the terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeitureis only due to market performance conditions not being met.
(n) Provisions
A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive
obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.
A provision for warranty is recognised when the underlying products are sold. A provision for restructuring is recognised when theGroup has approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced
publicly. A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract
are lower than the unavoidable cost of meeting its obligations under the contract.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific to the liabilities.
(o) Trade and other payables
Trade and other payables are initially recognised at their fair value and subsequently stated at amortised cost.
(p) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognisedin the Income Statement over the period of the borrowings on an effective interest basis.
(q) Revenue
Revenue is recognised in the Consolidated Statement of Income when the significant risks and rewards of ownership have transferredto the buyer. Revenue excludes value added tax and similar sales based taxes, represents sales to external customers of products
and services and is stated before commissions payable to agents. Revenue from installation is separately recognised on completionof the installation. Revenue from contracts for maintenance and support is recognised on a pro-rata basis over the length of thecontract period.

62

Oxford Instruments plc / Report and Financial Statements 2013

Accounting Policies continued(r) Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: theinitial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; anddifferences relating to investments in subsidiaries to the extent that they will probably not reverse in the future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount ofassets and liabilities, using tax rates enacted or substantively enacted at the Statement of Financial Position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the
related dividend.
(s) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised in the Income Statement as an integral part of the total lease expense.
(t) Segment reporting
An operating segment is a distinguishable component of the Group that engages in business activities from which it may earnrevenues and incur expenses, including any revenues and expenses that relate to transactions with any of the Group’s othercomponents. Operating segments are combined into aggregated operating segments to the extent that they have similar
economic characteristics. Aggregated operating segment’s operating results are reviewed regularly by the Group’s Board of
Directors to make decisions about resources to be allocated to the segment and to assess its performance, for which discrete
financial information is available. Segment results that are reported to the Board include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis.
A reportable segment is an aggregated operating segment in respect of which revenue or profit exceeds 10% of the Group total.
Discrete financial information is disclosed for each reportable segment.
(u) Dividends
Interim and final dividends are recognised as a liability when they are no longer at the discretion of the Company.
(v) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been issued by the IASB and endorsed by the
EU and are effective for annual periods beginning after 1 April 2013. They have not been applied in preparing these consolidated
Financial Statements. Those which may be relevant to the Group are set out below:•

Amendments to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Liabilities: which becomesmandatory for the Group’s consolidated Financial Statements for the annual period beginning on 1 April 2013 and which will
require additional disclosures about offsetting of financial assets and liabilities. The Group has considered the impact of thisamendment in future periods on profit, earnings per share and net assets. It is not expected to have a material impact.

•

Amendment to IAS 19 Employee Benefits: which becomes mandatory for the Group’s consolidated Financial Statements forthe annual period beginning on 1 April 2013 and is expected to reduce reported profits by £1.6m and earnings per share by
2.8p as the expected return on pension plan assets is required to be calculated by applying the discount rate used for
scheme liabilities to scheme assets.

•

Amendments to IAS 1 Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income: whichbecomes mandatory for the Group’s consolidated Financial Statements for the annual period beginning on 1 April 2013 andis expected to require changes to presentation of the Consolidated Statement of Comprehensive Income.

•IFRS 10 Consolidated Financial Statements which becomes mandatory for the Group’s consolidated Financial Statements
for the annual period beginning on 1 April 2014. The Group has considered the impact of this amendment in future periods
on profit, earnings per share and net assets. It is not expected to have a material impact.

•

IFRS 11 Joint Arrangements which becomes mandatory for the Group’s consolidated Financial Statements for the annual period
beginning on 1 April 2014. The Group has considered the impact of this amendment in future periods on profit, earnings per shareand net assets. It is not expected to have a material impact.

•

IFRS 12 Disclosure of Interests in Other Entities which becomes mandatory for the Group’s consolidated Financial Statements
for the annual period beginning on 1 April 2014. The Group is currently considering whether IFRS 12 may result in the need for
additional disclosures.

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Company Information

Oxford Instruments plc / Report and Financial Statements 2013(v) New standards and interpretations not yet adopted continued• IFRS 13 Fair Value Measurement: which becomes mandatory for the Group’s consolidated Financial Statements for the annual
period beginning on 1 April 2013. The Group has considered the impact of this amendment in future periods on profit, earnings
per share and net assets. It is not expected to have a material impact.
•

IAS 27 (2011) Separate Financial Statements: which becomes mandatory for the Group’s consolidated Financial Statements forthe annual period beginning on 1 April 2014. The Group has considered the impact of this amendment in future periods on
profit, earnings per share and net assets. It is not expected to have a material impact.

•

IAS 28 (2011) Investments in Associates and Joint Ventures: which becomes mandatory for the Group’s consolidated Financial
Statements for the annual period beginning on 1 April 2014. The Group has considered the impact of this amendment in future
periods on profit, earnings per share and net assets. It is not expected to have a material impact.

•

Amendments to IAS 32 Financial Instruments: Disclosure and Presentation – Offsetting Financial Assets and Financial Liabilities:
which becomes mandatory for the Group’s consolidated Financial Statements for the annual period beginning on 1 April 2014.
The Group has considered the impact of this amendment in future periods on profit, earnings per share and net assets. It is notexpected to have a material impact.

A number of other new standards, amendments to standards and interpretations have been issued by the IASB, although they
are not yet endorsed by the EU, and are effective for annual periods beginning after 1 April 2013. They have not been appliedin preparing these consolidated Financial Statements. The one standard which may be relevant to the Group is set out below:•

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

64

Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Income
year ended 31 March 2013

Notes

Revenue

Adjusted*£m

Adjustingitems*
£m

Total
£m

350.8

—

350.8

Cost of sales(194.0)(0.5)(194.5)Gross profit

156.8

(0.5)

156.3

2

(24.3)—(24.3)

Selling and marketing(51.1)—(51.1)

Administration and shared services(34.9)(15.9)(50.8)———

Foreign exchange

3.2

—

3.2

Operating profit

49.7(16.4)

33.3

Research and development

4

Other operating income

9.5

—

9.5

Other financial income

0.3

—

0.3

Financial income

9.8

—

9.8

(10.4)—(10.4)

Expected return on pension scheme assets

Interest charge on pension scheme liabilities

21

21

Other financial expenditure
Financial expenditure
Profit before income tax
Income tax (expense)/credit

9

Profit for the year attributable to equity shareholders of the parent

(0.9)

(2.2)

(3.1)

(11.3)(2.2)(13.5)

48.2(18.6)

29.6

(9.9)

2.3

(7.6)

38.3

(16.3)

22.0

pence

pence

Earnings per share
Basic earnings per share

10

68.3

39.2

Diluted earnings per share

10

67.5

38.8

Dividends per share
Dividends paid

11

10.0

Dividends proposed

11

11.2

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

The attached notes form part of the Financial Statements.

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Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Income continued
year ended 31 March 2012

Notes

Revenue

Adjustingitems*
£m

Total
£m

337.3

—

337.3

Cost of sales(188.3)(1.7)(190.0)Gross profit

149.0

(1.7)

147.3

Research and development

2

Adjusted*£m(25.8)—(25.8)

Selling and marketing4(48.7)—(48.7)

Administration and shared services(32.1)(12.7)(44.8)

—

7.0

7.0

Foreign exchange

(0.3)

—

(0.3)

Operating profit

42.1

(7.4)

34.7

Other operating income

10.9

—

10.9

Other financial income

Expected return on pension scheme assets

0.2

1.5

1.7

Financial income

11.1

1.5

12.6

(10.2)—(10.2)

Other financial expenditure

(1.0)

—

(1.0)

Financial expenditure(11.2)—(11.2)

Interest charge on pension scheme liabilities

21

21

Profit before income tax
Income tax (expense)/credit

9

Profit for the year attributable to equity shareholders of the parent

42.0

(5.9)

36.1

(8.8)

(2.5)

(11.3)

33.2

(8.4)

24.8

pence

pence

Earnings per share
Basic earnings per share

10

61.6

46.0

Diluted earnings per share

10

60.3

45.0

Dividends per share
Dividends paid

11

9.0

Dividends proposed

11

10.0

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

66

Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Comprehensive Income
year ended 31 March 2013

Notes

Profit for the year

2013
£m

2012
£m

22.0

24.8

Other comprehensive income/(expense)
3.4

(2.6)

(16.9)(28.6)

—

(0.4)

3.7

7.2

Total other comprehensive expense(9.8)(24.4)

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

12.2

0.4

Foreign exchange translation differences
Actuarial loss in respect of post-retirement benefits

21

Loss on effective portion of changes in fair value of cash flow hedges, net of amounts recycled
Tax on items recognised directly in other comprehensive income

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Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Financial Position
as at 31 March 2013

Notes

2013
£m

2012
£m

AssetsNon-current assets
Property, plant and equipment

12

32.9

28.2

Intangible assets

13

91.9

78.1

Deferred tax assets

14

25.0

19.3

149.8

125.6

Current assets
Inventories

15

58.1

59.3

Trade and other receivables

16

71.8

61.0

0.4

1.3

2.2

2.4

39.2

35.1

171.7

159.1

321.5

284.7

2.8

2.8

Share premium

60.6

60.2

Other reserves

0.1

0.1

Translation reserve

4.0

0.6

Retained earnings

70.2

63.4

137.7

127.1

Current income tax recoverable
Derivative financial instruments

18

Cash and cash equivalents

Total assets
EquityCapital and reserves attributable to the Company’s
equity shareholders
Share capital

19

Liabilities
Non-current liabilities
Other payables

22

11.1

2.8

Retirement benefit obligations

21

47.9

35.2

Deferred tax liabilities

14

6.2

7.0

65.2

45.0

101.4

96.4

Current liabilities
Trade and other payables

22

4.3

6.0

Derivative financial instruments

18

2.6

1.2

Provisions

23

10.3

9.0

118.6

112.6

Total liabilities

183.8

157.6

Total liabilities and equity

321.5

284.7

Current income tax payables

The Financial Statements were approved by the Board of Directors on 11 June 2013 and signed on its behalf by:

Jonathan Flint
Director
Company Number: 775598

Kevin Boyd
Director

68

Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Changes in Equity
year ended 31 March 2013

Sharecapital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

2.8

60.2

0.1

0.6

63.4

127.1

—

—

—

—

22.0

22.0

– Foreign exchange translation differences

—

—

—

3.4

—

3.4

Balance at 1 April 2012
Profit for the year
Other comprehensive income:– Actuarial loss in respect of post-retirement benefits

—

—

—

—

(16.9)(16.9)– Loss on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

—

—

—

—

—

—

– Tax on items recognised directly in othercomprehensive income

—

—

—

—

3.7

3.7

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

—

—

—

3.4

8.8

12.2

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

—

—

—

—

1.4

1.4

– Tax credit/(charge) in respect of share options

—

—

—

—

2.2

2.2

– Proceeds from shares issued

—

0.4

—

—

—

0.4

– Dividends paid

—

—

—

—

(5.6)

(5.6)

Total contributions by and distributions
to equity shareholders

—

0.4

—

—

(2.0)

(1.6)

2.8

60.6

0.1

4.0

70.2

137.7

Transactions recorded directly in equity:

Balance at 31 March 2013

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased and thencancelled during the year ended 31 March 1999, and the hedging reserve in respect of the effective portion of changes in valueof commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 from thetranslation of the Group’s net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2012: 173,794) of its own shares in an employee benefit trust. The cost of these shares is included within
retained earnings.

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Financial Statements

Corporate Governance

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Changes in Equity continued
year ended 31 March 2012

Share
capital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

2.5

22.5

0.4

3.2

64.9

93.5

—

—

—

—

24.8

24.8

– Foreign exchange translation differences

—

—

—

(2.6)

—

(2.6)

– Actuarial loss in respect of post-retirement benefits

—

—

—

—

(28.6)(28.6)– Loss on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

—

—

(0.3)

—

(0.1)

(0.4)

– Tax on items recognised directly in othercomprehensive income

—

—

—

—

7.2

7.2

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

—

—

(0.3)

(2.6)

3.3

0.4

—

—

—

—

1.0

1.0

Balance at 1 April 2011
Profit for the year
Other comprehensive income:Transactions recorded directly in equity:– Credit in respect of employee service costs
settled by award of share options– Tax credit/(charge) in respect of share options

—

—

—

—

(1.0)

(1.0)

0.3

37.7

—

—

—

38.0

—

—

—

—

(4.8)

(4.8)

Total contributions by and distributions
to equity shareholders

0.3

37.7

—

—

(4.8)

33.2

Balance at 31 March 2012

2.8

60.2

0.1

0.6

63.4

127.1

– Proceeds from shares issued– Dividends paid

70

Oxford Instruments plc / Report and Financial Statements 2013

Consolidated Statement of Cash Flows
year ended 31 March 2013

2013
£m

2012
£m

Profit for the year
Adjustments for:
Income tax expense
Net financial expense/(income)
Other operating income
Acquisition related fair value adjustments to inventory
Acquisition related costs
Amortisation and impairment of acquired intangibles
Depreciation of property, plant and equipment
Amortisation and impairment of capitalised development costs

22.0

24.8

7.6
3.7
—
0.5
2.1
13.8
4.6
3.9

11.3
(1.4)
(7.0)
1.7
1.5
11.2
4.8
5.2

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

58.2
0.2
1.4
(1.2)
(5.3)

52.1
0.5
1.0
(1.0)
(4.5)

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

53.3
4.7
(9.4)
2.8
(1.0)

48.1
(0.2)
(1.7)
5.7
(1.4)

Cash generated from operations
Interest paid
Income taxes paid

50.4
(0.5)
(8.4)

50.5
(1.1)
(7.8)

Net cash from operating activities

41.5

41.6

Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from sale of product line and subsidiary
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Capitalised development expenditure—
1.0(20.1)
(8.6)
(4.6)

0.1
7.3
(51.6)(5.6)(2.4)

Net cash used in investing activities(32.3)(52.2)Cash flows from financing activities
Proceeds from issue of share capital
Repayment of borrowings
Increase in borrowings
Dividends paid

0.4
—
—
(5.6)

38.0
(13.1)
2.5(4.8)

Net cash from financing activities

(5.2)

22.6

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

4.0
35.1
0.1

12.0
23.7
(0.6)

Cash and cash equivalents at end of the year

39.2

35.1

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

4.0
0.1

12.0
(0.6)

Cash outflow from decrease in debt
Cash inflow from increase in debt

4.1
—
—

11.4
13.1
(2.5)

Movement in net cash in the year
Net cash at start of the year

4.1
35.1

22.0
13.1

Net cash at the end of the year

39.2

35.1

Business Overview

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71

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements
year ended 31 March 2013

1 Non-gaap measures
The Directors present the following non-GAAP measures as they consider that they give a better indication of the underlying
performance of the business.
Reconciliation between profit before income tax and adjusted profit
Year to31 March
2013£mYear to31 March2012£mProfit before income tax

29.6

36.1

Reversal of acquisition related fair value adjustments to inventory

0.5

1.7

—

(7.0)

Acquisition related costs

2.1

1.5
11.2

Gain on disposal of product line
Amortisation and impairment of acquired intangibles

13.8

Unwind of discount in respect of deferred consideration

0.2—

Mark to market loss/(gain) in respect of derivative financial instruments

2.0

(1.5)

Adjusted profit before income tax

48.2

42.0

Share of taxation

(9.9)

(8.8)

Adjusted profit for the year

38.3

33.2

The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide a measure that
includes results from acquired businesses on a consistent basis over time to assist comparison of performance. Acquisition related
costs comprise professional fees incurred in relation to mergers and acquisitions activity and any consideration which, under
IFRS 3 (revised), falls to be treated as a post-acquisition employment expense.
In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment of acquired
intangible assets.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they arealso measured at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does
not take advantage of the hedge accounting rules provided for in IAS 39 since that standard requires certain stringent criteria tobe met in order to hedge account, which, in the particular circumstances of the Group, are considered by the Board not to bringany significant economic benefit. Accordingly, the Group accounts for these derivative financial instruments at fair value throughprofit or loss. To the extent that instruments are hedges of future transactions, adjusted profit for the year is stated beforechanges in the valuation of these instruments so that the underlying performance of the Group can be more clearly seen.
In calculating the share of tax attributable to adjusted profit before tax in 2011 a one-off recognition of deferred tax assets relating
to the Group’s UK businesses of £11.3m was excluded. At that time the Group announced its intention to exclude the reversal ofthis deferred tax from the calculation of the share of tax attributable to adjusted profit before tax in the years in which it reverses.
In the current period deferred tax of £3.3m (2012: £4.6m) has reversed and consequently been excluded from the tax attributable
to adjusted profit before tax.
During the prior year the Group:•

disposed of a product line for a consideration of £8.1m. £1.0m of the consideration was deferred for one year. The product line
was part of the Industrial Products segment. The profit on disposal was £7.0m; and•transferred its ownership of Technologies and Devices Inc (TDI) to Ostendo, a privately owned company based in California.
The Group has received 650,000 shares of Ostendo common stock plus $0.9m in cash. The Group considers the fair valueof the shares to be nil. The profit on disposal was nil.

72

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 2013

2 Segment information
The Group has six operating segments. These operating segments have been combined into three aggregated operating segments
to the extent that they have similar economic characteristics, with relevance to products and services, type and class of customer,
methods of sale and distribution and the regulatory environment in which they operate. Each of these three aggregated operating
segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed below:•

the Nanotechnology Tools segment contains a group of businesses supplying similar products, characterised by a high degreeof customisation and high unit prices. These are the Group’s highest technology products serving research customers in boththe public and private sectors;•

the Industrial Products segment contains a group of businesses supplying high technology products and components
manufactured in medium volume for industrial customers; and•the Service segment contains the Group’s service business as well as service revenues from other parts of the Group.

Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a reasonablebasis. Inter-segment pricing is determined on an arm’s length basis. The operating results of each are regularly reviewed by the
Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete financial information is available for eachsegment and used by the Board of Directors for decisions on resource allocation and to assess performance. No asset information
is presented below as this information is not presented in reporting to the Group’s Board of Directors.
a) Analysis by businessYear to 31 March 2013

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

External revenue

350.8

165.8

124.5

60.5

Inter-segment revenue

0.3

0.6

0.1

Total segment revenue

166.1

125.1

60.6

Segment operating profit

20.8

17.4

11.5

49.7

Year to 31 March 2012

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

External revenue

153.3

128.0

56.0

337.3

Inter-segment revenue

0.6

1.1

0.3

Total segment revenue

153.9

129.1

56.3

Segment operating profit

17.3

13.8

11.0

42.1

2013
£m

2012
£m

49.7

42.1

Reconciliation of reportable segment profit

Profit for reportable segments
Other operating income—

7.0

Acquisition related costs

(2.1)

(1.5)

Reversal of acquisition related fair value adjustments to inventory

(0.5)

(1.7)

Amortisation and impairment of acquired intangibles(13.8)(11.2)

9.8

12.6

Financial expenditure(13.5)(11.2)

Profit before income tax

29.6

36.1

Financial income

Business Overview

73

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

2 Segment information continueda) Analysis by business continued
Reconciliation of reportable segment profit continued
Depreciation, capital expenditure, amortisation and impairment and capitalised development costs arise in the following segments:
2013
Depreciation£m

2012
Capitalexpenditure£m

Depreciation£m

Capitalexpenditure£mNanotechnology Tools

2.6

2.6

2.9

2.8

Industrial Products

1.6

4.3

1.6

2.5

Service

0.2

0.4

0.1

0.1

Unallocated Group items

0.2

1.3

0.2

0.2

Total

4.6

8.6

4.8

5.6

Capitalised
development
costs
£m

Amortisation
andimpairment£m

Capitalised
development
costs
£m

2013
Amortisation
andimpairment
£m

2012

Nanotechnology Tools

2.8

2.7

2.8

1.7

Industrial Products

1.1

1.9

2.4

0.7

—

—

—

—

Unallocated Group items

13.8

—

11.2

—

Total

17.7

4.6

16.4

2.4

Service

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

2013
£m

2012
£m

USA

86.5

92.3

Rest of Europe

72.6

61.2

Rest of Asia

37.2

28.4

UK

30.6

30.2

Japan

33.5

36.6

China

52.3

48.9

Germany

23.0

23.9

Rest of World

15.1

15.8

Total

350.8

337.3

74

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 2013

2 Segment information continuedb) Geographical analysis continued
Non-current assets (excluding deferred tax)

2013
£m

2012
£m

UK

45.4

28.0

Germany

34.3

40.3

USA

37.0

30.2

Japan

0.2

0.2

China

0.3

0.2

Rest of World

7.6

7.4

124.8

106.3

2013
£’000

2012
£’000

115

115

– Audit of Financial Statements of subsidiaries pursuant to legislation

282

275

Total
3 Auditor’s remuneration

Audit of these Financial Statements
Amounts received by the auditor and their associates in respect of:– Taxation compliance services

16

110

– Other non-audit services

26

52

Total fees paid to the auditor and its associates

439

552

4 Research and development (R&D)
The total R&D spend by the Group is as follows:
2013
Nanotechnology
Tools
£m

2012

Industrial
Products£mNanotechnology
Total
Tools
£m
£m

Industrial
Products
£m

Total
£m

R&D expense charged to the Consolidated
Statement of Income

17.0

7.3

24.3

16.8

9.0

25.8

Less: depreciation of R&D related fixed assets

(0.2)

(0.5)

(0.7)

(0.1)

(0.1)

(0.2)

Add: amounts capitalised as fixed assets

0.1

0.7

0.8

0.7

0.2

0.9

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

(2.9)

(1.0)

(3.9)

(2.8)

(2.4)

(5.2)

Add: amounts capitalised as intangible assets

2.7

1.9

4.6

1.7

0.7

2.4

Total cash spent on R&D during the year

16.7

8.4

25.1

16.3

7.4

23.7

The Group has identified that certain depreciation and capital expenditures were double counted in the calculation of cash spent
on R&D in the prior year. This has been corrected in the above table resulting in an increase of cash spent on R&D by £1.0m in theyear to 31 March 2012. This has had no impact on the primary Financial Statements.

Business Overview

Business Review

75

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

5 Acquisitions
Asylum Research Corporation
On 19 December 2012 the Group acquired the trade and certain assets of Asylum Research Corporation for an initial cash
consideration of £19.8m. Further contingent consideration of between £2.0m and £31.6m is payable based on post acquisitionbusiness performance. At 31 March 2013 £6.5m is provided in the accounts in respect of this contingent consideration being thefair value of the contingent consideration payable. Asylum Research is a leading manufacturer of atomic force and scanning probe
microscopes and is headquartered in Santa Barbara, USA with subsidiaries in the UK, Germany and Taiwan.
The provisional book and fair value of the assets and liabilities acquired is given in the table below. Fair value adjustments havebeen made to better align the accounting policies of the acquired business with the Group accounting policies. The business has
been acquired for the purpose of integrating into the Nanotechnology Tools segment where it is believed that synergies can beobtained particularly in respect of routes to market.
Provisional
book value£mProvisional
adjustments£mProvisional
fair value£mIntangible fixed assets

—

14.4

14.4

Tangible fixed assets

0.4

(0.1)

0.3

Inventories

2.4

(0.3)

2.1

Trade and other receivables

1.7

—

1.7

Trade and other payables

(2.3)

(0.2)

(2.5)

—

0.3

0.3

2.2

14.1

16.3

Deferred tax
Net assets acquired
Goodwill

9.3

Total consideration

25.6

Contingent consideration at acquisition(5.8)

Net cash outflow relating to the acquisition

19.8

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce and synergistic
benefits expected to arise from the acquisition.
The fair values shown are provisional and may be amended if information not currently available comes to light. Provisional values
have been used to allow the finance team to finalise the fair value adjustments.
This acquisition contributed revenue of £3.2m and a reported operating loss of £0.1m to the Group’s result for the period. Had theacquisitions taken place on 1 April 2012 the equivalent Group numbers would have been revenue of £358.6m and a reported operating
profit of £32.1m.
Omicron NanoTechnology GmbHOn 13 June 2011 the Group acquired 100% of the share capital of Omicron NanoTechnology GmbH for cash consideration totalling£29.7m. Omicron NanoTechnology GmbH specialises in the manufacture of very high-end microscopes for nanotechnology researchand is headquartered in Taunusstein, Germany. It has a manufacturing facility in East Grinstead, UK and sales offices in the USA,France and Japan. The book and fair value of the assets and liabilities acquired is given in the table below. The business has beenacquired for the purpose of integrating into the Nanotechnology Tools segment.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

—

27.8

27.8

Tangible fixed assets

6.2

(1.7)

4.5
12.8

Inventories

14.1

(1.3)

Trade and other receivables

5.1

—

5.1

Trade and other payables

(4.7)

(0.2)

(4.9)

Customer deposits(10.5)(0.1)(10.6)

—

(6.8)

(6.8)

Cash

Deferred tax liabilities

1.4

—

1.4

Net assets acquired

11.6

17.7

29.3

Goodwill

0.4

Total consideration

29.7

Cash acquired(1.4)

Net cash outflow relating to the acquisition

28.3

The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce.

76

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 2013

5 Acquisitions continued
Omniprobe, Inc.
On 13 June 2011 the Group acquired 100% of the share capital of Omniprobe, Inc. for cash consideration totalling £13.1m of which£0.5m is deferred for two years. Omniprobe, Inc. designs and manufactures nano-manipulators for use within scanning electron
microscopes and is headquartered in Dallas, USA. The book and fair value of the assets and liabilities acquired is given in the tablebelow. The business has been acquired for the purpose of integrating into the Nanotechnology Tools segment.
Book value£m

Adjustments£m

Fair value
£m

0.2

11.3

11.5

Tangible fixed assets

0.6

(0.5)

0.1

Inventories

0.5

—

0.5

Intangible fixed assets

Trade and other receivables

0.6

—

0.6

Trade and other payables

(0.3)

(0.3)

(0.6)

Cash

0.3

—

0.3

Net assets acquired

1.9

10.5

12.4

Goodwill

0.7

Total consideration

13.1

Cash acquired(0.3)

Contingent consideration at acquisition(0.5)

Net cash outflow relating to the acquisition

12.3

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce and the value ofpatents which it has not been possible to separately identify.
Platinum Medical Imaging LLC
On 3 November 2011 the Group acquired 100% of the share capital of Platinum Medical Imaging LLC for an initial cash
consideration of £10.8m.
Further contingent consideration is payable up until the third anniversary of the acquisition dependent on post acquisition earnings.
The amount of this consideration could be between nil and £19.4m. The fair value of the amount likely to be paid is £2.6m and isbased on management forecasts of future profitability.
Platinum Medical Imaging LLC is an established USA company providing high quality parts and services for Magnetic ResonanceImaging (MRI) and Computed Tomography (CT) medical imaging instruments. It operates from sites in Florida and California fromwhich the business sells parts, carries out service and maintenance and performs system rebuilds.
The book and fair value of the assets and liabilities acquired is given in the table below. The business has been acquired for the
purpose of integrating into the Service segment.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

—

12.5

12.5

Tangible fixed assets

0.5

(0.2)

0.3

Inventories

0.9

0.8

1.7

Trade and other receivables

0.6

(0.3)

0.3

Trade and other payables

(0.4)

(0.4)

(0.8)

Customer deposits

(0.4)

(0.3)

(0.7)

—

(0.2)

(0.2)

Overdraft

(0.1)

—

(0.1)

Net assets acquired

1.1

11.9

13.0

Deferred tax

Goodwill

0.4

Total consideration

13.4

Overdraft acquired

0.1

Contingent consideration at acquisition(2.6)

Net cash outflow relating to the acquisition

10.9

Business Overview

Business Review

77

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

5 Acquisitions continued
Platinum Medical Imaging LLC continued
The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce and expectedsynergies arising from the integration with the Group’s existing service business.
The book value of receivables given in the tables on pages 75 and 76 represents the gross contractual amounts receivable. The fairvalue adjustment to receivables represents the best estimate at the acquisition date of the cash flows not expected to be collected.
During the prior year the acquisitions of Omicron Nanotechnology GmbH, Omniprobe, Inc. and Platinum Medical Imaging LLC
contributed revenue of £27.8m, £4.5m and £3.8m respectively and operating losses of £4.6m, £0.8m and £0.7m to the Group’s
result for the period. Had the acquisitions taken place on 1 April 2011 the equivalent Group numbers for 2011/12 would have beenrevenue of £351.2m and operating profit of £33.6m.
6 Personnel costs
2013
£m

2012
£m

Wages and salaries

77.0

72.5

Social security costs

9.7

9.7

Contributions to defined contribution pension plans

3.5

3.1

Charge in respect of employee share options

1.4

1.0

91.6

86.3

Directors’ emoluments are disclosed in the Directors’ Remuneration Report on pages 43 to 52 of this Annual Report.
7 Employees
The average number of people employed by the Group (including Directors and temporary employees) during the year was as follows:
2013
Number

2012
NumberProduction

958

954

Sales and marketing

414

377

Research and development

281

240

Administration and shared services

274

263

Total average number of employees

1,927

1,834

8 Share option schemes
The Group operates three share option schemes:
Executive Share Option Scheme (ESO)
Options awarded under the Executive Share Option Scheme are made annually to certain senior managers. The exercise prices are
determined according to the mid-market closing share price on the day before the date of grant. Options have a life of ten years
and a vesting period of three years.
Senior Executive Long Term Incentive Scheme (SELTIS)
Options awarded under the Senior Executive Long Term Incentive Scheme are made annually to certain senior managers.
The exercise prices are nil. Options have a life of seven years and a vesting period of three years.
Both the Executive Share Option Scheme and Senior Executive Long Term Incentive Scheme are subject to performance
conditions which can be found in the Directors’ Remuneration Report on pages 43 to 52.
All employee Share Incentive Plan (SIP)All UK employees are eligible to participate in the Group’s HM Revenue and Customs approved SIP. Participating employees makea cash contribution to the plan each month. The Group contributes a further amount equal to 20% of the employee’s contribution.
Independent trustees then purchase matching shares in the market on behalf of the employees. The matching shares vest on
the completion by the participating employee of a further three years’ service and can be withdrawn from the plan tax-free after
five years’ service.
Administrative expenses include a charge of £1.4m (2012: £1.0m) in respect of the cost of providing share options. The costis calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period after
adjusting for an expectation of non-vesting.
Fair values are determined using an internal calculation based on a modified Black-Scholes model. Expected volatility has been
based on historical volatility over a period of time of the same length as the expected option life and ending on the grant date.
Half of the ESO options issued before 2009 and all SELTIS options use Total Shareholder Return (TSR) as a performance condition.
As TSR is a market based performance condition, the accounting treatment differs from that for shares subject to non-market
performance conditions. This means that the TSR performance conditions have been incorporated into the calculation of the fairvalue as a discount in calculating the fair value.

78

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 20138 Share option schemes continued
All employee Share Incentive Plan (SIP) continued
For options granted in 2013 and 2012, the fair value per option granted and the assumptions used in the calculation are as follows:
Senior Executive Long Term
Incentive Scheme

Fair value at measurement date
Share price at grant date
Exercise price

Executive Share
Option Scheme

2013

2012

2013

2012

£9.74

£4.21

£5.16

£3.60

£13.85£9.90£13.85

£9.90

£nil

£nil

£13.88£9.90

Expected volatility

36.1%

43.1%

40.6%

40.2%

Expected option life (expressed as weighted average life used in the modelling)

3 years

3 years

6 years

6 years

Expected dividend yield

0.7%

0.9%

0.7%

0.9%

Risk free interest rate

0.5%

0.6%

1.2%

1.3%

The options existing at the year end were as follows:
2013
Numberof shares

Exercise
price

Period when exercisable

2012
Numberof shares

July 2003

3,000

£1.88

15/07/06–14/07/13

10,000July 2004

6,250

£2.18

15/07/07–14/07/14

7,250

July 2005

1,715

£2.19

15/07/08–14/07/15

5,329

July 2006

13,875£2.10

15/07/09–14/07/16

21,105September 2007

15,000£2.32

28/08/10–27/09/17

37,500December 2008

33,243£1.35

16/12/11–15/12/18

72,098644,500

Options subsisting at the year end on unissued ordinary shares
Executive Share Option Schemes

87,987£2.04

17/12/12–16/12/19

January 2011

414,000£7.05

07/01/14–06/01/21

457,000

December 2011

464,720£9.90

14/12/14–13/12/21

498,240

December 2012

386,825£13.88

19/12/15–18/12/22

—

—

£1.73

01/02/12–31/07/12

1,893

December 2009

Save As You Earn
December 2006
Total options subsisting on unissued ordinary shares
Percentage of issued share capital

1,426,615

1,754,915

2.5%

3.1%

Options subsisting at the year end
on existing ordinary shares held in trust
Senior Executive Long Term Incentive Scheme—

nil

January 2011

62,000December 2011

39,800December 2012

32,800Total options subsisting on existing ordinary shares held in trust

134,600

December 200917/12/12–16/12/16

160,000

nil

07/01/14–06/01/18

62,000nil

14/12/14–13/12/18

39,800nil

19/12/15–18/12/19—
261,800

Business Overview

Business Review

79

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 20138 Share option schemes continued
All employee Share Incentive Plan (SIP) continued
The number and weighted average exercise prices of those options are as follows:
Weighted
average
exercise price2013

Numberofoptions
2013

Weighted
average
exercise price2012

Numberofoptions
2012

Outstanding at the beginning of the period£4.83

2,016,715£2.32

2,851,812

Granted during the year

£12.81

428,625£9.17

538,040

Forfeited during the year

£7.26

(44,741)£2.15(8,063)

Exercised during the year

£1.81

(750,107)£1.27(1,229,338)

Lapsed during the year

£3.56

(89,277)£1.69(135,736)

Outstanding at the year end£8.47

1,561,215£4.83

2,016,715

Exercisable at the year end£1.93

161,070£1.79

155,175

2013
£m

2012
£m

Current year

8.8

10.4

Adjustment in respect of prior years

(1.0)

—

7.8

10.4

Origination and reversal of temporary differences

(0.2)

1.4

Recognition of deferred tax not previously recognised

(0.2)

(0.2)

Adjustment in respect of prior years

0.2

(0.3)

(0.2)

0.9

7.6

11.3

29.6

36.1

7.1

9.4

Tax rates other than the UK standard rate

1.9

2.4

Change in rate at which deferred tax recognised

(0.3)

0.3

The weighted average share price at the time of exercise of the options was £14.10 (2012: £9.63).
9 Income tax expense
Recognised in the Consolidated Statement of Income

Current tax expense

Deferred tax expense

Total tax expense
Reconciliation of effective tax rate
Profit before income tax
Income tax using the UK corporation tax rate of 24% (2012: 26%)
Effect of:

Non-taxable income and expenses

0.7

0.2

Tax incentives not recognised in the Consolidated Statement of Income

(1.2)

(0.5)

Recognition of deferred tax not previously recognised

(0.2)

(0.2)

Movement in unrecognised deferred tax

0.4—

Adjustment in respect of prior years

(0.8)

(0.3)

Total tax expense

7.6

11.3

Taxation credit recognised in other comprehensive income
Current tax – relating to employee benefits——

Deferred tax – relating to employee benefits

(3.7)

(7.1)

Deferred tax – relating to cash flow hedges

—

(0.1)

(3.7)

(7.2)

(2.2)

1.0

Taxation (credit)/expense recognised directly in equity
Deferred tax – relating to share options

80

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 2013

9 Income tax expense continued
On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
A reduction in the rate from 25% to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012 and a further
reduction to 23% (effective from 1 April 2013) was substantively enacted on 3 July 2012.
It has not yet been possible to quantify the full anticipated effect of the announced further 3% rate reduction, although thiswill further reduce the Group’s future current tax charge and reduce the Group’s deferred tax assets and liabilities accordingly.
The deferred tax assets and liabilities at 31 March 2013 have been calculated using the rate of 23% which was substantively
enacted at the balance sheet date.
10 Earnings per share
The calculation of basic earnings per share is based on the profit for the period as shown in the Consolidated Statement of Income
divided by the weighted average number of ordinary shares outstanding during the year, excluding shares held by the Employee
Share Ownership Trust, as follows:
2013
Sharesmillion2012
SharesmillionWeighted average number of shares outstanding

56.4

54.2

Less shares held by Employee Share Ownership Trust

(0.2)

(0.2)

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

56.2

54.0

2013
Sharesmillion2012
SharesmillionWeighted average number of ordinary shares per basic earnings per share calculations

56.2

54.0

Effect of shares under option

0.6

1.1

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

56.8

55.1

2013
pence

2012
pence

Previous year interim dividend

2.772

2.52

Previous year final dividend

7.228

6.48

10.000

9.00

2013
pence

2012
pence

Interim dividend

3.05

2.772

Final dividend

8.15

7.228

11.20

10.000The following table shows the effect of share options on the calculation of diluted earnings per share:

11 Dividends per share
The following dividends per share were paid by the Group:

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

The interim dividend was not provided for at the year end and was paid on 8 April 2013. The payment of the interim dividend remains
discretionary until it is paid. The final proposed dividend of 8.15p per share (2012: 7.228p) was not provided at the year end and will
be paid on 24 October 2013 subject to authorisation by the shareholders at the forthcoming Annual General Meeting.

Business Overview

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81

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 201312 Property, plant and equipment
Land andbuildings£mPlant andequipment£mFixtures andfittings
£m

Total
£m

Balance at 1 April 2011

17.7

Additions – business combinations

3.6

40.2

7.6

65.5

0.2

1.1

4.9

Cost

Additions – other

0.1

5.4

0.1

5.6

Disposals

(0.1)

(4.0)

—

(4.1)

Effect of movements in foreign exchange rates

(0.1)

(0.1)

—

(0.2)

Balance at 31 March 2012

21.2

41.7

8.8

71.7

Balance at 1 April 2012

21.2

41.7

8.8

71.7

—

0.3

—

0.3

Additions – other

2.4

5.6

0.6

8.6

Disposals

(0.1)

(1.0)

(0.1)

(1.2)

Effect of movements in foreign exchange rates

0.3

0.7

0.1

1.1

Balance at 31 March 2013

23.8

47.3

9.4

80.5

Balance at 1 April 2011

4.7

31.6

5.6

41.9

Depreciation charge for the year

0.7

3.6

0.5

4.8

Additions – business combinations

Depreciation and impairment losses

Disposals

—

(3.1)

—

(3.1)

Effect of movements in foreign exchange rates

—

(0.1)

—

(0.1)

Balance at 31 March 2012

5.4

32.0

6.1

43.5

Balance at 1 April 2012

5.4

32.0

6.1

43.5

Depreciation charge for the year

0.8

3.3

0.5

4.6

—

(0.9)

(0.1)

(1.0)

Effect of movements in foreign exchange rates

0.1

0.4

—

0.5

Balance at 31 March 2013

6.3

34.8

6.5

47.6

At 1 April 2011

13.0

8.6

2.0

23.6

At 31 March 2012 and 1 April 2012

15.8

9.7

2.7

28.2

At 31 March 2013

17.5

12.5

2.9

32.9

Disposals

Carrying amounts

At 31 March 2013, additions included assets under construction totalling £3.4m (2012: £1.9m).

82

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201313 Intangible assets

Goodwill£m

Customer
relatedacquiredintangibles£mTechnology
relatedacquiredintangibles£m

Development
costs
acquiredintangibles£m

Development
costsinternallygenerated
£m

Total
£m

Cost
Balance at 1 April 2011

14.5

4.5

27.6

—

32.3

78.9

Additions – business combinations

1.5

23.2

23.8

4.8

—

53.3

—

—

—

—

2.4

2.4

Additions – other
Disposals

—

—

(4.4)

—

(1.0)

(5.4)

Effect of movements in foreign exchange rates

(0.7)

(0.3)

(2.6)

—

(0.4)

(4.0)

Balance at 31 March 2012

15.3

27.4

44.4

4.8

33.3

125.2

Balance at 1 April 2012

15.3

27.4

44.4

4.8

33.3

125.2

Additions – business combinations

9.3

0.3

14.1

—

—

23.7

—

—

—

—

4.6

4.6

Additions – other

—

—

—

—

—

—

Effect of movements in foreign exchange rates

Disposals

1.2

1.1

1.9

0.1

0.3

4.6

Balance at 31 March 2013

25.8

28.8

60.4

4.9

38.2

158.1

Amortisation and impairment losses
1.3

4.0

14.7

—

17.3

37.3

Amortisation and impairment charge for the year

Balance at 1 April 2011

—

5.2

5.0

1.0

5.2

16.4

Disposals

—

—

(4.4)

—

(0.6)

(5.0)

Effect of movements in foreign exchange rates

(0.1)

(0.3)

(0.9)

—

(0.3)

(1.6)

Balance at 31 March 2012

1.2

8.9

14.4

1.0

21.6

47.1

Balance at 1 April 2012

1.2

8.9

14.4

1.0

21.6

47.1

—

8.0

4.8

1.0

3.9

17.7

Amortisation and impairment charge for the year

—

—

—

—

—

—

Effect of movements in foreign exchange rates

Disposals

0.1

0.4

0.5

—

0.4

1.4

Balance at 31 March 2013

1.3

17.3

19.7

2.0

25.9

66.2

At 1 April 2011

13.2

0.5

12.9

—

15.0

41.6

At 31 March 2012 and 1 April 2012

14.1

18.5

30.0

3.8

11.7

78.1

At 31 March 2013

24.5

11.5

40.7

2.9

12.3

91.9

Carrying amounts

When Omniprobe was acquired by the Nanotechnology Tools sector in June 2011 part of the consideration for the company wasdeemed to be for an intangible asset associated with a significant customer relationship which was recognised as a customer
related acquired intangible. This relationship no longer exists and as a result management have reviewed the carrying value of theintangible asset and concluded that it is of no value. Accordingly, an impairment of £2.6m has been charged to the Income
Statement. It is recorded as an adjusting item within administration and shared service costs in the Consolidated Statement ofComprehensive Income. There were no further impairments recognised in the current or prior year.

Business Overview

83

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 201313 Intangible assets continued
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected
to benefit from that business combination. The carrying amount of goodwill was allocated to individual CGUs as follows:
2013
£m

2012
£m

NanoScience

2.3

2.3

NanoAnalysis

4.2

3.9

Asylum9.9—

Omicron0.3

0.3

Industrial Analysis

3.2

3.2

Magnetic Resonance

2.3

2.3

Austin Scientific

1.7

1.7

0.6

0.4

24.5

14.1

Nanotechnology Tools

Industrial Products

ServiceOI Service

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
Accounting standards require an impairment test to be carried out by determining the recoverable amount of each cash generating
unit which contains goodwill. The recoverable amount is calculated as the higher of the fair value less costs to sell or the value in useof the CGU. In the Group’s case the recoverable amount is based on value in use calculations. Value in use is calculated by discounting
expected future cash flows and in particular Board-approved three year cash flow forecasts, prepared by the management of each
CGU, are used together with 2.5% (2012: 2.5%) per annum growth for each CGU for the subsequent 20 years. This growth rate isconsidered to be at or below long term market trends for the Group’s businesses.
Key assumptions
The key assumptions are those regarding discount rates, growth rates, expected selling volumes and prices and direct costs
during the period.
The growth rates are based on industry growth factors. Changes in selling prices and direct costs are based on past practices
and expectations of future changes in the market.
The pre-tax weighted average costs of capital used for Nanotechnology Tools, Industrial Products and Service in impairment testingare 12.25% (2012: 11.1%), 11.75% (2012: 10.6%) and 11.25% (2012: 10.1%) respectively in line with the risk associated with each of thebusiness segments. Management have estimated these discount rates by reference to past experience and an industry average
weighted cost of capital as adjusted for appropriate risk factors reflecting current economic circumstances and the risk profilesof each CGU.
Sensitivity analysis
The Group’s estimate of impairments are most sensitive to changes in the discount rate and forecast cash flows. Sensitivity
analysis has been carried out by reference to both of these assumptions. This demonstrated that, ignoring the recently acquired
Asylum business (where management consider the recent arm’s length transaction to be reflective of the business’ fair value),an impairment would only be required if there were an increase in the discount rates by 23% (2012: 13%) or more or a greater than
19% (2012: 10%) reduction in forecast cash flows on the CGU with the lowest level of headroom. Sensitivity testing on the other
CGUs shows an even greater level of headroom.
Based on the above, the Group considers that its impairment calculations are not sensitive to any reasonable change to the
key assumptions.

84

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201314 Deferred tax
Movements in deferred tax assets and liabilities were as follows:
Property,plant andequipment£m

Inventory£m

Employeebenefits£mIntangible
assets£m

Tax losses
£m

Other
£m

Total
£m

Balance 31 March 2011

3.1

1.7

6.2

(7.4)

8.6

1.1

13.3

Recognised in income

(2.0)

0.7

(2.1)

3.8

(2.9)

1.6

(0.9)

—

—

7.1

—

—

0.1

7.2

Recognised in other comprehensive
incomeRecognised directly in equity
Acquisitions
Foreign exchange

—

—

(1.0)

—

—

—

(1.0)

0.5

(0.4)

—

(6.9)

—

0.1

(6.7)

—

—

—

0.4

—

—

0.4

Balance 31 March 2012

1.6

2.0

10.2

(10.1)

5.7

2.9

12.3

Recognised in income

(0.2)

0.4

(1.1)

4.4

(2.3)

(1.1)

0.1

Recognised in other comprehensive
income

—

—

3.7

—

—

—

3.7

Recognised directly in equity

—

—

2.2

—

—

—

2.2

Acquisitions

—

—

—

—

—

0.3

0.3

Foreign exchange

—

0.1

—

—

—

0.1

0.2

1.4

2.5

15.0

(5.7)

3.4

2.2

18.8

2013
£m

2012
£m

2013
£m

2012
£m

2013
£m

2012
£m

Gross assets/(liabilities)

29.8

23.6

(11.0)(11.3)

18.8

12.3

Offset

(4.8)

(4.3)

4.8

4.3

—

—

Net assets/(liabilities)

25.0

19.3

(6.2)

(7.0)

18.8

12.3

Balance 31 March 2013

Certain deferred tax assets and liabilities have been offset as follows:
AssetsLiabilitiesNet

Of the deferred tax assets £0.3m relate to a loss making subsidiary in Japan. In the prior year £0.7m related to a loss making
subsidiary in China. Management have reviewed a detailed forecast for the Japanese subsidiary which shows that it is highly
probable that future profits will arise and on that basis it is considered appropriate to recognise the deferred tax asset.
Deferred tax assets have not been recognised in respect of the following items:
2013
£m

2012
£m

Deductible temporary differences

1.0

6.5

Tax losses

10.4

9.5

11.4

16.0

The tax losses and the deductible temporary differences do not expire under current tax legislation. Deferred tax assets havenot been recognised in respect of these items as it is not probable that future taxable profits will be available in the subsidiaries
concerned against which the Group can utilise the brought forward tax losses.
No deferred tax liability has been recognised in respect of £46.6m (2012: £50.2m) of undistributed earnings of overseas subsidiaries
since the majority of such distributions would not be taxable. In other cases the Group considers that it is able to control thetiming of remittances so that any tax is not expected to arise in the foreseeable future.
On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
A reduction in the rate from 25% to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012 and a further
reduction to 23% (effective from 1 April 2013) was substantively enacted on 3 July 2012.
The deferred tax asset at 31 March 2013 has been calculated on the rate of 23% which was substantively enacted at the balance
sheet date.

Business Overview

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85

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 201315 Inventories
2013
£m

2012
£m

Raw materials and consumables

17.0

15.8

Work in progress

23.6

25.8

Finished goods

17.5

17.7

58.1

59.3

The amount of inventory recognised as an expense was £168.9m (2012: £165.4m). In the ordinary course of business, the Groupmakes impairment provisions for slow-moving, excess and obsolete inventory as appropriate. Inventory is stated after charging
impairments of £0.7m in the current period (2012: £0.6m). There were no credits reversing previous impairments in either thecurrent or prior period. Impairments are included within gross profit.
Inventory carried at fair value less costs to sell is £2.1m (2012: £0.2m) due to the acquisitions as described in Note 5.
16 Trade and other receivables
2013
£m

2012
£m

Trade receivables

61.3

53.7

Less provision for impairment of receivables

(1.5)

(1.8)

Net trade receivables

59.8

51.9

Prepayments and accrued income

6.1

4.6

Other receivables

5.9

4.5

71.8

61.0

Trade receivables are non-interest-bearing. Standard credit terms provided to customers differ according to business and country
and are typically between 30 and 60 days.
The maximum exposure to credit risk for trade receivables by geographic region of the selling business was:
2013
£m

2012
£m

UK

16.2

12.4

Continental Europe

14.2

9.5

North America

19.4

16.9

Japan

8.0

11.5

Rest of World

2.0

1.6

59.8

51.9

2013
£m

2012
£m

Current (not overdue)

40.1

33.5

Less than 31 days overdue

The ageing of financial assets comprising net trade receivables and other receivables at the reporting date was:

13.4

9.5

More than 30 days but less than 91 days overdue

9.1

7.3

More than 90 days overdue

3.1

6.1

65.7

56.4

In both periods presented the majority of the provision against trade receivables relates to balances more than 90 days overdue.
The movement in the allowance for impairment of trade receivables during the year was as follows:
2013
£m

2012
£m

Balance at start of year

1.8

0.7

Acquired on acquisition—

0.5(Decrease)/increase in allowance

(0.3)

0.6

Balance at end of year

1.5

1.8

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

86

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201317 Financial risk management
The Group’s multinational operations and debt financing expose it to a variety of financial risks. In the course of its business, the Groupis exposed to foreign currency risk, interest rate risk, liquidity risk, commodity risk and credit risk. Financial risk management policies
are set by the Board of Directors. These policies are implemented by a central treasury function that has formal procedures to manage
foreign exchange risk, interest rate risk and liquidity risk, including, where appropriate, the use of derivative financial instruments.
Commodity risk is managed locally by the operating businesses. The Group has clearly defined authority and approval limits.
In accordance with its treasury policy, the Group does not hold or use derivative financial instruments for trading or speculative
purposes. Such instruments are only used to manage the risks arising from operating or financial assets or liabilities or highly
probable future transactions.
The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates, interest rates
and certain commodity prices.
The Group has adopted hedge accounting for a limited number of related commodity contracts as outlined below. However, in
common with a number of other companies, the Group has decided that the additional costs of meeting the extensive documentation
requirements of IAS 39 to apply hedge accounting to derivative financial instruments used for hedging exposure to foreign currency
and interest rate volatility cannot be justified. Accordingly the Group does not use hedge accounting for such derivatives.
Foreign currency risk
Foreign currency risk arises both where sale or purchase transactions are undertaken in currencies other than the respectivefunctional currencies of Group companies (transactional exposures) and where the results of overseas companies are consolidated
into the Group’s reporting currency of Sterling (translational exposures). The Group has operations around the world which record
their results in a variety of different local functional currencies. In countries where the Group does not have operations, it invariably
has some customers or suppliers that transact in a foreign currency. The Group is therefore exposed to the changes in foreign
currency exchange rates between a number of different currencies but the Group’s primary exposures relate to the US Dollar, theEuro and the Japanese Yen. To reduce uncertainty the Group maintains a rolling hedge equivalent to 80% of the exposure expected
to arise over the following 12 months. The hedge comprises a mixture of fixed forward contracts and option based products. The
remaining 20% is sold on the spot market as it arises. The fair value of outstanding currency contracts recognised as a liability as at
31 March 2013 amount to £2.5m (2012: £1.0m) and those recognised as an asset amount to £2.2m (2012: £2.4m).
Movements in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Income immediately.
However, in order to facilitate a more meaningful comparison of the Group’s performance year on year the element of these movementsthat relate to hedges in respect of future sales are treated as an adjusting item in the calculation of adjusted earnings (see Note 1).
The Group’s translational exposures to foreign currency risks can relate both to the Consolidated Statement of Income and net
assets of overseas subsidiaries. The Group’s policy is not to hedge the translational exposure that arises on consolidation of theConsolidated Statements of Income of overseas subsidiaries.
Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of interest and also theinterest cash flow risk that results from borrowing at variable rates. At this time, the Group has no borrowings and consequently
is not exposed to interest rate risk.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation. The Group manages this risk by maintaining adequate committed lines of funding from high quality lenders. The
facilities committed to the Group as at 31 March 2013 are set out in Note 20.
Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets
such as cash balances, derivative financial instruments, trade and other receivables. The Group’s credit risk is primarily attributable
to its trade receivables and cash balances. The amounts recognised in the Consolidated Statement of Financial Position are net of
appropriate allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessmentof the current economic environment. Trade receivables are subject to credit limits and control and approval procedures in theoperating companies.
Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on
its trade receivables. Credit risk associated with cash balances and derivative financial instruments is managed by transactingwith financial institutions with high quality credit ratings. In particular a Board approved policy sets out guidelines for which
categories of institutions may be used and the maximum amount which may be invested with each institution within a particular
category. Accordingly the Group’s associated credit risk is limited. The Group has no significant concentration of credit risk. The
Group’s maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative
financial instruments, in the Group Consolidated Statement of Financial Position.

Business Overview

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Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 201317 Financial risk management continued
Credit risk continued
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at
31 March 2013 was £107.1m (2012: £93.9m).
2013
£m

2012
£m

Trade receivables

59.8

51.9

Other receivables

5.9

4.5

Cash and cash equivalents

39.2

35.1

Forward exchange contracts

2.2

2.4

107.1

93.9

The maximum exposure to credit risk for trade receivables is discussed in Note 16.
Other receivables include £0.8m (2012: £1.0m) in respect of VAT and similar taxes which are not past due date.
Commodity risk
The Group is exposed to changes in commodity prices, particularly in respect of copper used as a major component in one of theGroup’s USA operations. It manages this exposure using derivative commodity hedging instruments.
At 31 March 2013, the Group had outstanding commodity hedge contracts with a fair value liability of £0.1m (2012: £0.1m liability)that were designated and effective as cash flow hedges of committed and highly probable forecast transactions. Fair value
movements of these contracts have been deferred in equity until the hedged transaction takes place. These contracts all mature
within one year of the Consolidated Statement of Financial Position date.
A £0.1m loss net of tax (2012: £0.1m loss) has been deferred in equity as at 31 March 2013 in respect of these contracts. A loss of£0.2m (2012: £0.3m gain) has been recycled to current assets (inventory) in respect of contracts designated as cash flow hedges
that have matured during the year to 31 March 2013.
Capital management
The Board considers capital to comprise share capital, reserves and the net cash or net debt position of the Company. The Company
was in a net cash position at the year end.
The Board’s long term objective is to have an efficient capital structure by maintaining a balance between the higher returns thatmight be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. This ismonitored by reference to the ratio of net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) and theBoard has set itself internal limits, which are well inside any covenants the Group has with lenders. The Group maintains the rightto purchase its own shares in the market; the timing of these purchases would depend on market prices. Buy and sell decisions
are made on a specific transaction basis by the Board.
The Board carefully considers dividend payments and the Company moved from a fixed dividend policy to a progressive one in
the year ended March 2011. In doing this the Board will look to increase dividends as adjusted earnings per share increase although
there will not be a direct correlation. The Board does not have a policy to pay a fixed dividend yield or to maintain a fixed rate ofdividend cover, but assess both of these metrics together with dividends paid by peers when assessing what dividend to recommend.
The Group outlined its medium term targets on 14 June 2011 in its 14 Cubed plan. Part of this plan calls for “bolt-on” acquisitions.
In line with the objective of maintaining a balance between borrowings and equity, the Group decided to seek to repay the debt
drawn down to finance the first two acquisitions of the 14 Cubed plan through an equity issue, improving the net debt to EBITDA
ratio, thereby allowing it to finance any future bolt-on acquisitions from its Statement of Financial Position and existing committed
facility without recourse to further equity issues.
The Board encourages employees to hold shares in the Company. As well as various share option plans (full details of which are
given in Note 8), from April 2008 all UK employees have been offered the opportunity to take part in a Share Incentive Plan (SIP).
Under this plan, employees are able to invest up to £1,500 each tax year in shares in the Company. The Company awards one
additional free share (a matching share) for every five shares bought by each employee.
There were no changes to the Group’s approach to capital management during the year. Neither the Company nor any of its
subsidiaries are subject to externally imposed capital requirements.

88

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201318 Financial instruments
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statementof Financial Position are as follows:
Fair
value
hierarchy

Carrying
amount
2013
£m

Fair
value
2013
£m

Carrying
amount
2012
£m

Fair
value
2012
£m

59.8

59.8

51.9

51.9

Assets carried at amortised cost
Trade receivables
Other receivables

5.9

5.9

4.5

4.5

Cash and cash equivalents

39.2

39.2

35.1

35.1

2.2

2.2

2.4

2.4

2.2

2.2

2.4

2.4

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

2

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

2

(2.5)

(2.5)

(1.0)

(1.0)

– Interest rate swaps

2

—

—

(0.1)

(0.1)

– Copper hedging contracts (designated as an IAS 39 hedge)

2

(0.1)

(0.1)

(0.1)

(0.1)

Contingent consideration

3(11.7)(11.7)

(3.8)

(3.8)

(14.3)(14.3)

(5.0)

(5.0)

(72.4)(72.4)(67.4)(67.4)

Liabilities carried at amortised cost
Trade and other payables

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments
reflected in the above table.
Derivative financial instruments
Derivative financial instruments are marked to market using listed market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal and interest
cash flows using the market rate of interest at the reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the carrying amount is deemed to reflect the fair value.
All other receivables/payables are discounted to determine their fair value. Advances received are excluded from otherpayables above as these are not considered to be financial liabilities.
Contingent consideration
The fair value of contingent consideration is estimated based on the forecast future performance of the business, which
is dependent on the acquired business’ performance over a specific future timeframe.
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(ie. as prices) or indirectly (ie. derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data; andThere have been no transfers between levels during the year.

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Oxford Instruments plc / Report and Financial Statements 201318 Financial instruments continued
Maturity of financial liabilities
Carrying
amount£m

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

Trade and other payables

84.1

86.8

72.4

14.4

Foreign exchange contracts

2.5

2.5

2.0

0.5

31 March 2013

—

—

—

—

0.1

0.1

0.1

—

86.7

89.4

74.5

14.9

Carrying
amount£m

Contractual
cash flows£mDuewithinone year£mDue
1–5 years£mInterest rate swaps
Copper hedging contracts

31 March 2012

Trade and other payables

67.4

67.4

64.6

2.8

Foreign exchange contracts

1.0

0.6

0.6

—

Interest rate swaps

0.1

0.1

0.1

—

Copper hedging contracts

0.1

0.1

0.1

—

68.6

68.2

65.4

2.8

Carrying
amount2013£m

Carrying
amount
2012
£m

39.2

35.1

—

(0.1)

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Variable rate instruments
Financial assets
Fixed rate instruments
Financial liabilities

Sensitivity analysis
The Group has estimated the impact of the change to the fair value of its financial instruments and the translation of currency
profits and assets on the Consolidated Statement of Income and on equity for the following:•

one percentage point increase in interest rates;•

ten percentage point weakening in the value of Sterling against all currencies;•

ten percentage point strengthening in the value of Sterling against all currencies;•

five percentage point increase in the cost of copper; and•five percentage point decrease in the cost of copper.

The outputs from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur net of any
hedging in place at the year end. Actual results in the future may differ materially from these estimates due to commercial actions taken
to mitigate any potential losses from such rate movements, to the interaction of more than one sensitivity occurring and to further
developments in global financial markets. As such this table should not be considered as a projection of likely future gains and losses.
1% increase
in interest
rates
£m

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

5% increasein copper
prices£m

5% decreasein copper
prices£m

Impact on Consolidated Statement of Income

—

7.2

(5.9)

—

—

Impact on equity

—

7.2

(5.9)

0.1

(0.1)

Impact on Consolidated Statement of Income

—

3.4

(3.4)

—

—

Impact on equity

—

3.4

(3.4)

0.1

(0.1)

At 31 March 2013

At 31 March 2012

1
2

Of the effect on the Consolidated Statement of Income, £8.1m (2012: £4.2m) would have been recognised on the “mark to market” line (see Note 1).
Of the effect on the Consolidated Statement of Income, £(6.6)m (2012: £(4.2)m) would have been recognised on the “mark to market” line (see Note 1).

90

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201319 Called up share capital
Issued and fully paid ordinary shares:

At the beginning of the year

2013
Numberof shares

2012
Numberof shares

56,166,723

50,174,913

750,1075,991,810

56,916,830

56,166,723

Issued for cash
At the end of the year

2013

2012

Number ofsharesNumber ofshares£m

2.8 56,166,723

2.8

£m

Allotted, called up and fully paid
56,916,830

Ordinary shares of 5p each

Numberof shares

Aggregate
nominal value

Consideration
per share

1,893

£95

£1.73

New issues of ordinary shares of 5p each during the year
Exercise of savings related share options
Exercise of executive share options

342,815£17,141£nil–£9.90

Exercise of executive share options – share appreciation rights

405,399£20,270£0.05

The total consideration received from exercise of share options in the year was £0.4m (2012: £0.5m).
The holders of the ordinary shares are entitled to receive dividends as declared, a proportionate amount of capital on a winding
up of the Company and one vote per share at meetings of the Company.
20 Borrowings
The Group’s principal source of long term funding is its unsecured four year £50m revolving credit facility, which expires in
December 2014. The Group also benefits from an unsecured term loan facility from the European Investment Bank which iscurrently undrawn and which expires if not drawn before December 2013. The drawing, at the Group’s option, can be on either
a fixed or a floating rate basis with a maximum term of seven years. The Group’s undrawn committed facilities available at
31 March 2013 were £75m (2012: £50m) of which £nil (2012: £nil) mature within one year, £50m (2012: £50m) between two andfive years and £25m after more than five years.
Short term operational funding is provided by cash generated from operations and by local bank overdrafts. These overdraft
facilities are uncommitted and are generally renewed on an annual or ongoing basis and hence the facilities expire within one
year or less.
21 Retirement benefit obligations
The Group operates defined benefit plans in the UK and USA; both offer pensions in retirement and death in service benefit tomembers. Pension benefits are related to members’ final salary at retirement and their length of service. Both schemes havebeen closed to new members since 2001 and closed to future accrual since 2010.
The Group has opted to recognise all actuarial gains and losses immediately via the Consolidated Statement of Comprehensive Income.
The amounts recognised in the Consolidated Statement of Financial Position are:
UK
2013
£m

USA
2013
£m

Total
2013
£m

UK
2012
£m

USA
2012
£m

Total
2012
£m

Present value of funded obligations

235.5

10.4

245.9

206.3

9.1

215.4

Fair value of plan assets(190.6)(7.4)(198.0)(173.6)(6.6)(180.2)

44.9

3.0

47.9

32.7

2.5

35.2

Recognised liability for defined benefit obligations

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Oxford Instruments plc / Report and Financial Statements 2013

21 Retirement benefit obligations continued
Reconciliation of the opening and closing balances of the present value of the defined benefit obligation
UK
2013
£m

USA
2013
£m

Total
2013
£m

UK
2012
£m

USA
2012
£m

Total
2012
£m

Benefit obligation at the beginning of the year

206.3

9.1

215.4

177.1

7.7

184.8

Interest on obligation

10.0

0.4

10.4

9.8

0.4

10.2

Current service cost

—

—

—

—

—

—

Benefits paid

(4.4)

(0.4)

(4.8)

(3.4)

(0.4)

(3.8)

Actuarial loss on obligation

23.6

0.8

24.4

22.8

1.4

24.2

Exchange rate adjustment

—

0.5

0.5

—

—

—

235.5

10.4

245.9

206.3

9.1

215.4

USA
2013
£m

Total
2013
£m

UK
2012
£m

USA
2012
£m

Total
2012
£m

173.6

6.6

180.2

166.5

6.6

173.1

9.1

0.4

9.5

10.4

0.5

10.9

Benefit obligation at the end of the year

Reconciliation of the opening and closing balances of the fair value of plan assets
UK
2013
£m

Fair value of plan assets at the beginning of the year
Expected return on plan assets
Contributions by employers

5.0

0.3

5.3

4.5

—

4.5

Benefits paid

(4.4)

(0.4)

(4.8)

(3.4)

(0.4)

(3.8)

Actuarial gain/(loss) on assets

7.3

0.2

7.5

(4.4)

—

(4.4)

—

0.3

0.3

—

(0.1)

(0.1)

190.6

7.4

198.0

173.6

6.6

180.2

2013
£m

2012
£m

Interest on obligation

10.4

10.2

Expected return on plan assets(9.5)(10.9)

Total – defined benefit

0.9

(0.7)

Contributions to defined contribution schemes

3.5

3.1

4.4

2.4

2013
£m

2012
£m

Cost of sales

1.0

0.8

Selling and marketing costs

0.8

0.7
1.1

Exchange rate adjustment
Fair value of plan assets at the end of the year

Expense recognised in the Consolidated Statement of Income

The actual return on plan assets was £17.0m (2012: £6.5m return).
The Group expects to contribute approximately £5.8m to defined benefit plans in the next financial year.
The pension costs are recorded in the following lines of the Consolidated Statement of Income:

Administration and shared services

1.2

Research and development

0.5

0.5

Financial income(9.5)(10.9)

Financial expenditure

10.4

10.2

4.4

2.4

92

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 2013

21 Retirement benefit obligations continued
Actuarial gains and losses shown in the Consolidated Statement of Comprehensive Income

Actuarial loss

2013
£m

2012
£m

(16.9)(28.6)

Cumulative actuarial losses reported in the Consolidated Statement of Comprehensive Income since 1 April 2004, the transition
date to IFRS, are £34.7m (2012: £17.8m cumulative actuarial losses).
History of experience gains and losses are as follows:
2013
£m

2012
£m

2011
£m

2010
£m

2009
£m

Present value of benefit obligations

245.9

215.4

184.8

192.7

139.4

Fair value of plan assets(198.0)(180.2)(173.1)(157.6)(125.0)

47.9

35.2

11.7

35.1

14.4

Recognised liability for defined benefit obligations
Difference between the expected and actual return:
Amount £m

7.5

(4.4)

3.5

23.9

(27.2)% of scheme assets

4%

(2%)

2%

15%

(22%)

Amount £m

0.4

(4.7)

10.9

(46.7)

33.6% of the present value of the scheme liabilities

—%

2%

(6%)

24%

(24%)

Experience gains/(losses) on scheme liabilities:

Defined benefit scheme – United Kingdom
A full actuarial valuation of the UK plan was carried out as at 31 March 2012 and has been updated to 31 March 2013 by a qualified
independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):
As at
31 March
2013
%

As at
31 March
2012%

Discount rate

4.5

4.9

Rate of increase to pensions in payment (pre 1997)

2.5

2.4

Rate of increase to pensions in payment (post 1997)

3.2

3.1

2.35

2.25

94% of S1PA tables (97%for females) future improvement
in line with CMI 2011 with 1%long term trend

94% of S1PA tables (97%for females) – year of birth:
medium cohort (min annual
improvement of 1%)

Rate of inflation (CPI)
Mortality – pre and post-retirement – males and females

The mortality assumptions imply the following expected future lifetime from age 65:
2013
years

2012
years

Pre-retirement – males

23.9

23.7

Pre-retirement – females

26.1

26.0

Post-retirement – males

22.5

21.7

Post-retirement – females

24.6

24.1

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

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Company Information

Oxford Instruments plc / Report and Financial Statements 2013

21 Retirement benefit obligations continued
Defined benefit scheme – United Kingdom continued
The assets in the plan and the expected rates of return were:Long term rateof return
expected at
31 March
2013%

Equities

7.9

Corporate bonds
Gilts
Cash
Alternative

Value at
31 March
2013£mLong term rateof return
expected at
31 March
2012%

Value at
31 March
2012
£m

67.2

7.9

48.6

4.5

41.6

4.9

45.1

3.1

51.4

3.5

47.2

3.1

12.1

3.5

24.4

7.2

18.3

7.3

8.3

190.6

173.6

The assumptions used in determining the overall expected rate of return of the plan have been set with reference to yields
available on government bonds and appropriate risk margins.
Defined benefit scheme – United States
A full actuarial valuation of the USA plan was carried out as at 1 January 2012, which for reporting purposes has been updated to
31 March 2013 by a qualified independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were(in nominal terms):
As at
31 March
2013
%

As at
31 March
2012%

Discount rate

4.25

4.75

Rate of increase to pensions in payment

0.00

0.00

Rate of inflation

2.25

2.25

2013 IRS prescribed mortality– optional combined table forsmall plans, male and female

2012 IRS prescribed mortality– optional combined table forsmall plans, male and female

Mortality – pre and post-retirement

The assets in the plan and the expected rates of return were:Long term
rate of return
expected at
31 March
2013%

Equities

Value at
31 March
2013£mLong term
rate of return
expected at
31 March
2012%

Value at
31 March
2012
£m

9.1

3.5

9.1

3.0

Bonds

4.8

3.3

4.8

3.2

Property and other

6.5

0.6

6.8

0.4

7.4

6.6

The assumptions used in determining the overall expected rate of return of the plan have been set with reference to yields
available on government bonds and appropriate risk margins.
Defined contribution schemes
In the UK employees are offered participation in the defined contribution Oxford Instruments Stakeholder Plan. The Company
contribution rate and employee contribution rate varies between grades and whether the individual had previously been in the
Defined Benefit scheme. The Company contribution ranges between 4% and 14% of base salary. The Group also operates a 401k
defined distribution plan in the USA. Details of pension schemes contributions made in respect of Directors can be found in the
Directors’ Remuneration Report.

94

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201322 Trade and other payables
2013
£m

2012
£m

Trade payables

31.4

31.1

Advances received

28.4

28.0

Social security and other taxes

3.0

2.5

Accrued expenses and deferred income

36.4

31.9

Deferred contingent consideration due within one year

0.6

1.0

Other creditors

1.6

1.9

Current trade and other payables

101.4

96.4

Amounts due after more than one year – deferred consideration

11.1

2.8

Total trade and other payables

112.5

99.2

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

Balance at 1 April 2012

3.8

Fair value of deferred consideration on acquisition in the year

5.8

Unwind of discount in respect of deferred consideration

0.2

Deferred contingent consideration paid—

Increase in accrued deferred consideration

1.3

Effect of movement in foreign exchange

0.6
11.7

Balance at 31 March 201323 Provisions for other liabilities and charges

Balance at 1 April 2012

Warranties
£m

Other
£m

Total
£m

5.4

3.6

9.0

Provisions made during the year

4.2

1.1

5.3

Provisions used during the year

(2.5)

(0.2)

(2.7)

Provisions released during the year

(1.4)

—

(1.4)

Effect of movement in foreign exchange

0.2

(0.1)

0.1

Balance at 31 March 2013

5.9

4.4

10.3

Warranty provisions reflect the Group’s standard terms and conditions. In general these apply for a year and as a result the
majority of the provision is expected to be utilised within a 12 month period. Other provisions relate to various obligations
including claims and disputes arising against the Group in the ordinary course of business, obligations in respect of onerous
leases and obligations to employees in Japan on termination of their employment. The Group’s expectation is that the majorityof the other provisions are likely to be utilised within a 12 month period.

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Company Information

Oxford Instruments plc / Report and Financial Statements 2013

24 Operating leases
LeasesNon-cancellable future total minimum operating lease rentals are payable as follows:
2013
£m

2012
£m

On leases expiring in less than one year

3.4

3.3

On leases expiring between one and five years

5.4

4.4

On leases expiring in greater than five years

1.7

2.5

10.5

10.2

During the year ended 31 March 2013 £1.9m was recognised as an expense in the Consolidated Statement of Income in respectof operating leases (2012: £2.7m).
The majority of operating leases relate to properties occupied by the Group in the course of its business. There are no material
contingent rent payment arrangements, purchase options or escalation clauses. It is expected that most leases could be renewed on
the existing or similar terms. The leases do not impose any material restrictions in respect of dividends, additional debt requirements
or further leasing.
25 Capital commitments
During the year ended 31 March 2013, the Group entered into contracts to purchase property, plant and equipment which are
expected to be settled in the following financial year for less than £0.3m (2012: £0.9m).
26 Contingencies
In an international group of companies a variety of legal claims arise from time to time. The Board, having taken legal advice,
are of the opinion that any ongoing actions and investigations will not have a material impact on the Group’s financial position.
27 Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note.
The remuneration of key management personnel is as follows:
2013
£m

2012
£m

Short term employee benefits

1.7

1.6

Post employment benefits

0.1

0.1

Share-based payment

0.5

0.4

Total

2.3

2.1

Short term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
During the year the Company paid £0.2m (2012: £0.2m) to Imperialise Ltd, a company for whom Nigel Keen is a Director. The
payment was for his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2012: £nil).
In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £0.3m. During theyear Jonathan Flint bought a further proportion of the house paying £0.1m (2012: £0.1m). The balance outstanding at the year end
was £0.1m (2012: £0.2m). An arm’s length rent is paid to the Company for the proportion of the house owned by the Company.

96

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Financial Statements continued
year ended 31 March 201328 Principal Group entities
Equity owned by
the Company%

Country ofincorporation

Principal
activity

Oxford Instruments Overseas Marketing Ltd*100

EnglandMarketing

Oxford Instruments Industrial Products Ltd*100

England

Trading

Oxford Instruments Nanotechnology Tools Ltd*100

England

Trading

Omicron UHV Technik Ltd*100

England

Trading

Oxford Instruments America Inc.

*100

USA

Distribution

Oxford Instruments Service LLC

*100

USA

Trading

Oxford Instruments Superconductivity Wire LLC

*100

USA

Trading

Oxford Instruments AFM Ltd*100

England

Trading

Oxford Instruments AFM Inc.

*100

USA

Trading

Oxford Instruments India Private Ltd

*100

India

Distribution

Oxford Instruments Austin, Inc.

*100

USA

Trading

Oxford Instruments X-Ray Technology Inc.

*100

USA

Trading

Oxford Superconducting Technology LP

*100

USA

Trading

Omniprobe, Inc.

*100

USA

Trading

Oxford Instruments KK

*100

Japan

Distribution

Oxford Instruments (Shanghai) Company Ltd**

*100

China

Trading

Oxford Instruments HKL Technologies A/S*100

Denmark

Trading

Oxford Instruments Analytical Oy*100

Finland

Trading

Oxford Instruments SAS*100

FranceDistribution

Omicron Nanotechnology GmbH*100

Germany

Trading

Oxford Instruments GmbH*100

Germany

Distribution

Oxford Instruments Analytical GmbH*100

Germany

Trading

Oxford Instruments Pte Ltd*100

SingaporeMarketing** Year end is 31 December.

Equity owned by the Company represents issued ordinary share capital.
A full list of the Group companies as at 31 March 2013 is available for inspection at the Company’s registered office.
All the above companies are engaged in the research, development, manufacture, service or sale of high technology tools andsystems. Equity owned by subsidiary companies is indicated by an asterisk (*). All the above companies are consolidated in theGroup accounts.
29 Subsequent events
The interim dividend of 3.05p per share (total cost £1.7m) was paid after the year end. In addition on 11 June 2013 the Directors
proposed a final dividend of 8.15p per ordinary share (total cost £4.6m). The total amount of £6.3m has not been provided forand there are no income tax consequences.

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Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

30 Exchange rates
The principal exchange rates to Sterling used were:2013

Year end rates

2012

US Dollar

1.52

1.60

Euro

1.18

1.20

Yen

143

131

Average translation rates 2013

US Dollar

Euro

Yen

Quarter 1

1.58

1.23

127

Quarter 2

1.59

1.26

125

Quarter 3

1.61

1.24

132

Quarter 4

1.56

1.19

142

Average translation rates 2012

US Dollar

Euro

Yen

Quarter 1

1.63

1.13

132

Quarter 2

1.60

1.14

125

Quarter 3

1.57

1.17

121

Quarter 4

1.58

1.19

125

98

Oxford Instruments plc / Report and Financial Statements 2013

Parent Company Balance Sheetas at 31 March 2013

Notes

2013
£m

2012
£m

Tangible assets

c

1.5

0.5

Investments in subsidiary undertakings

d

147.1

146.4

148.6

146.9

60.0

62.1

29.6

26.0

89.6

88.1

Fixed assets

Current assets
Debtors (including £48.8m (2012: £56.6m) due after more than one year)eCash at bank and in hand

Creditors: amounts falling due within one year
Bank loans and overdrafts
Other creditorsf

Net current assets
Total assets less current liabilities
Provisions for liabilitiesg

Net assets(3.8)(10.0)(25.1)(31.4)(28.9)(41.4)

60.7

46.7

209.3

193.6

(0.2)

(0.2)

209.1

193.4

Share capital

h

2.8

2.8

Share premium account

h

60.6

60.2

Capital redemption reserve

h

0.1

0.1

Other reserves

h

7.6

7.6

Profit and loss account

h

138.0

122.7

209.1

193.4

Equity shareholders’ funds
The Financial Statements were approved by the Board of Directors on 11 June 2013 and signed on its behalf by:

Jonathan Flint
Director
Company Number: 775598

Kevin Boyd
Director

Business Overview

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Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Parent Company Financial Statementsa) Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation
to the Company’s Financial Statements, except as noted below.
Basis of preparation
The Financial Statements have been prepared in accordance with applicable UK GAAP accounting standards and under the historicalcost accounting rules. In accordance with Section 408 of the Companies Act 2006, the Company is exempt from the requirement topresent its own profit and loss account.
In accordance with FRS 1 Cash Flow Statements, the Company is exempt from preparing its own Cash Flow Statement.
Going concern
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after making reasonableenquiries, that the Company has adequate resources to continue in operational existence for the foreseeable future.
Taxation
The charge for taxation is based on the result for the year and takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, inrespect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen
but not reversed by the Balance Sheet date, except as otherwise required by FRS 19 Deferred Tax.
LeasesOperating lease rentals are charged to the profit and loss account on a straight-line basis over the life of the lease.
Fixed assets and depreciation
Depreciation is provided to write off the valuation or the cost less estimated residual value of tangible fixed assets by equal
instalments over their estimated useful economic lives as follows:
Freehold buildings			

50 yearsComputer equipment 		

4 years

Motor vehicles 			

4 years

Financial instruments
The Company’s accounting policies for financial instruments under UK GAAP, namely FRS 25 Financial Instruments: presentation,
FRS 26 Financial Instruments: measurement and FRS 29 Financial Instruments: disclosures, are the same as the Group’s accounting
policies under IFRS, namely IAS 32 Financial Instruments: presentation, IAS 39 Financial Instruments: recognition and measurement
and IFRS 7 Financial Instruments: disclosures. These policies are set out in accounting policy “(e) Financial instruments” in the Groupaccounting policies. As consolidated financial information has been disclosed under IFRS 7 in Notes 16, 17 and 18 to the Group
Financial Statements, the Parent Company is exempt from the disclosure requirements of FRS 29.
Post-retirement benefits
The Company participates in a Group wide pension scheme providing benefits based on final pensionable pay. The assets of thescheme are held separately from those of the Company. The Company is unable to identify its share of the underlying assets andliabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS 17 Retirement benefits, accounts
for the scheme as if it were a defined contribution scheme. As a result, the amount charged to the profit and loss account represents
the contributions payable to the scheme in respect of the accounting period. Refer to Note i for the additional disclosures requiredby FRS 17.
Foreign currencies
The Company enters into forward exchange contracts and options to mitigate the currency exposures that arise on sales andpurchases denominated in foreign currencies. Transactions in foreign currencies are converted into Sterling at the rate ruling on
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at
the Balance Sheet date or at the appropriate forward contract rates. Exchange profits and losses arising from the above are dealt
with in the profit and loss account.
Own shares held by Employee Benefit Trust (EBT)Transactions of the Group-sponsored EBT are included in the Group Financial Statements. In particular, the trust’s purchaseof shares in the Company are debited directly to equity.
Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.

100

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Parent Company Financial Statements continueda) Accounting policies continued
Share-based payments
The share option programme allows employees to acquire shares of the Company. The fair value of options granted after
7 November 2002 and those not yet vested as at 1 April 2005 is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using an option pricing model, taking
into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted
to reflect the actual number of share options that vest except where forfeiture is only due to market conditions.
When options are granted to employees of subsidiaries of the Company, the fair value of options granted is recognised as an employee
expense in the Financial Statements of the subsidiary undertaking together with the capital contribution received. In the Financial
Statements of the Company, the options granted are recognised as an investment in subsidiary undertakings with a corresponding
increase in equity.
Dividends on shares presented within shareholders’ funds
Dividends unpaid at the Balance Sheet date are only recognised as a liability at that date to the extent that they are appropriately
authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in
the notes to the Financial Statements.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group,
the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats
the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to makea payment under the guarantee.
b) Profit for the year
The Company’s profit for the financial year was £19.5m (2012: £20.3m).
The auditor’s remuneration comprised £115,000 (2012: £115,000) for statutory audit.
The average number of people employed by the Company (including Directors) during the year was 50 (2012: 47). All of these
individuals were involved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:
2013
£m

2012
£m

Wages and salaries

5.7

4.3

Social security costs

1.3

1.8

Other pension costs

0.6

0.5

7.6

6.6

The share-based payment expense was £0.7m (2012: £0.6m).
Full details of the emoluments paid to Directors can be found in the Directors’ Remuneration Report on pages 43 to 52.
c) Tangible fixed assets
Land andbuildings£m

Motorvehicles£mComputerequipment
£m

Total
£m

Cost
Balance at 1 April 2012

0.2

0.1

3.6

3.9

Additions

—

—

1.2

1.2

Disposals

(0.1)

—

—

(0.1)

Balance at 31 March 2013

0.1

0.1

4.8

5.0

Balance at 1 April 2012

—

—

3.4

3.4

Charge for year

—

—

0.1

0.1

Balance at 31 March 2013

—

—

3.5

3.5

At 31 March 2012

0.2

0.1

0.2

0.5

At 31 March 2013

0.1

0.1

1.3

1.5

Depreciation

Net book value

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Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013d) Investments
Investments
in subsidiary
undertakings
£m

Other
investments
£m

Total
£m

162.1

0.3

162.4

0.7

—

0.7

162.8

0.3

163.1

Balance at 1 April 2012

15.7

0.3

16.0

Balance at 31 March 2013

15.7

0.3

16.0

Net book value at 31 March 2012

146.4

—

146.4

Net book value at 31 March 2013

147.1

—

147.1

Cost or valuation
Balance at 1 April 2012
Additions
Balance at 31 March 2013
Impairment

Other investments at 31 March 2013 comprise:
Investment

Principal activity

ARKeX Limited

Supply of gravity-gradiometry exploration and related services
to the oil, gas and minerals industries

Percentage ofcompany owned

0.32%

The addition to investment in subsidiary undertakings of £0.7m relates to the awarding of share options to employeesof subsidiary companies.
e) Debtors
2013
£m

2012
£m

Amounts owed by subsidiary undertakings

51.9

58.4

Other debtors

6.9

2.7

Prepayments and accrued income

0.7

0.6

Deferred tax asset

0.5—

Tax recoverable

—

0.4

60.0

62.1

2013
£m

2012
£m

Amounts falling due within one year:

Amounts owed by subsidiary undertakings include £48.8m (2012: £56.6m) due after more than one year.
f) Other creditors

Trade creditors

0.3

0.4

Amounts owed to subsidiary undertakings

16.5

26.0

Tax, social security and sales related taxes

1.3

1.1

Other financial liabilities

2.8

1.0

—

2.9

4.2

—

25.1

31.4

Accruals and deferred income
Other creditors

102

Oxford Instruments plc / Report and Financial Statements 2013

Notes to the Parent Company Financial Statements continuedg) Provisions for liabilities
Vacant leaseprovision£mBalance at 1 April 2012

0.2

Utilised during the year—

Balance at 31 March 2013

0.2

The transfer of economic benefits in relation to the vacant lease provisions is expected to be within one year.
Deferred tax asset
2013
£m

2012
£m

—

0.6

Profit and loss credit/(charge)

0.5

(0.6)

Balance at 31 March

0.5—

Balance at 1 April

The amounts of deferred tax assets are as follows:
Recognised

Excess of depreciation over corresponding capital allowances
Other timing differences

2013
£m

2012
£m

0.5

—

—

—

0.5

—

The Company recognises deferred tax assets only to the extent that there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted. Deferred tax assets have not been recognised for losses arising inprior periods of £5.8m (2012: £7.3m) as the Company does not expect to generate suitable taxable profits in the foreseeable future.
h) Reserves

Balance at 1 April 2012

Share
capital£mSharepremium
account£m

Capitalredemption
reserve£m

Otherreserves£m

Profit andlossaccount
£m

Total
£m

2.8

60.2

0.1

7.6

122.7

193.4

Profit for the year

—

—

—

—

19.5

19.5

Proceeds from shares issued

—

0.4

—

—

—

0.4

Share options awarded to employees

—

—

—

—

0.7

0.7

Share options awarded to employees of subsidiaries

—

—

—

—

0.7

0.7

Dividends paid

—

—

—

—

(5.6)

(5.6)

2.8

60.6

0.1

7.6

138.0

209.1

Balance at 31 March 2013

Details of issued, authorised and allotted share capital are included in Note 19 of the Group Financial Statements.
Details of treasury shares held by the Company are included as a note to the Consolidated Statement of Changes in Equity.
Details of the Group’s share option schemes are included in Note 8 of the Group Financial Statements.
Other reserves relates to premium on shares issued as part of acquisitions made in the year to 31 March 1987.

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Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013i) Pension commitments
Defined benefit scheme
The Oxford Instruments Pension Scheme, a defined benefit scheme, was closed to new members from 1 April 2001 and to future
accrual from the year to 31 March 2011. The Company continues to make deficit recovery contributions to this Scheme. Contributions
are based on the pension deficit of the Group as a whole. The assets of the Scheme are held in a separate trustee administered fund.
The Directors do not believe it is possible to allocate the assets and liabilities of the Scheme to individual Group members on aconsistent and reasonable basis. Accordingly, under FRS 17 the Company is exempt from recognising its share of the net pension
deficit and accounts for the scheme as though it were a defined contribution scheme. Details of the scheme and most recent
actuarial valuation can be found in Note 21 of the Group Financial Statements. The contributions paid by the Company to the
Oxford Instruments Pension Scheme were £0.3m (2012: £0.3m).
Stakeholder pension scheme
The Company makes contributions to a stakeholder pension scheme. The pension costs charge for the year represents
contributions payable by the Company to the scheme. These amounted to £0.3m (2012: £0.2m). There were no outstanding
contributions at the end of the financial year (2012: £nil).
j) Guarantees
The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to the pension scheme.
The guarantee is for the excess of 105% of the liabilities of the scheme, calculated on the basis of Section 179 of the Pensions Act 2004,
over the assets of the scheme.
The Company and its UK subsidiaries have entered into a cross-guarantee for £10.0m (2012: £10.0m) in respect of overdraft
facilities of which £nil (2012: £nil) was drawn at the year end.
k) Commitments
At 31 March 2013, capital commitments contracted were £nil (2012: £0.5m) and authorised were £nil (2012: £2.0m).
l) Subsequent events
See Note 29 to the Group Financial Statements for details of dividends paid or declared after the Balance Sheet date.
m) Related party transactions
The Company has a related party relationship with its Directors and Executive Officers and with its wholly owned subsidiary companies.
Transactions with key management personnel are disclosed in the Director’s Remuneration Report on pages 43 to 52. There wereno other significant transactions with key management personnel in either the current or preceding year other than the following.
During the year the Company paid £0.2m (2012: £0.2m) to Imperialise Limited, a company for whom Nigel Keen is a Director.
The payment was for his services as Chairman of the Group. The liability due to Imperialise Limited at the year end was £nil (2012: £nil).
In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £0.3m. During theyear Jonathan Flint bought a further proportion of the house paying £0.1m (2012: £0.1m). The balance outstanding at the year end
was £0.1m (2012: £0.2m). An arm’s length rent is paid to the Company for the proportion of the house owned by the Company.

104

Oxford Instruments plc / Report and Financial Statements 2013

Historical Financial Summary
2009
£m

2010
£m

2011
£m

2012
£m

2013
£m

Revenue

206.5

211.5

262.3

337.3

350.8

Adjusted operating profit

13.1

14.7

28.1

42.1

49.7

Other operating income

—

—

4.7

7.0

—

Reversal of acquisition related fair value adjustments

—

—

—

(1.7)

(0.5)
(2.1)

Consolidated Statement of Income

Acquisition related costs

—

—

—

(1.5)

Reorganisation costs and impairment

(6.8)

(0.4)

(0.6)

—

—

Amortisation of acquired intangibles

(4.3)

(4.1)

(4.7)

(11.2)(13.8)

2.0

10.2

27.5

34.7

33.3

Net financing (costs)/income(11.3)

7.9

(0.8)

1.4

(3.7)

(Loss)/profit before taxation

(9.3)

18.1

26.7

36.1

29.6

Income tax credit/(expense)

2.6

(4.8)

5.5

(11.3)(7.6)(Loss)/profit for the year

(6.7)

13.3

32.2

24.8

22.0

Adjusted profit before tax*

11.1

11.9

26.2

42.0

48.2

Property, plant and equipment

23.5

22.8

23.6

28.2

32.9

Intangible assets

54.9

49.3

41.6

78.1

91.9

Deferred and current tax

2.5

4.5

11.2

7.6

14.9

Inventories

39.9

39.3

46.6

59.3

58.1

Operating profit

Consolidated Statement of Financial Position

Trade and other receivables

57.6

60.2

52.5

61.0

71.8

Trade and other payables(54.3)(70.0)(76.6)(99.2)(112.5)

Net assets excluding net cash

124.1

106.1

98.9

135.0

157.1

3.6

9.3

23.7

35.1

39.2

Bank borrowings(31.9)(19.7)(10.6)——Net cash(28.3)(10.4)

13.1

35.1

39.2

Cash and cash equivalents

Provisions and other items(19.5)

(8.4)

(6.8)

(7.8)

(10.7)

Retirement benefit obligations(14.4)(35.1)(11.7)(35.2)(47.9)Net assets employed/capital and reserves attributable
to the Company’s equity holders

61.9

52.2

93.5

127.1

137.7

Net cash from operating activities

14.4

31.1

35.3

41.6

41.5

Cash flow
Net cash used in investing activities(10.6)

(9.1)

(8.8)

(52.2)(32.3)Net cash from financing activities(6.6)(16.0)(12.3)

22.6

(5.2)

Net (decrease)/increase in cash equivalents

(2.8)

6.0

14.2

12.0

4.0

pence

pence

pence

pence

pence

Earnings – continuing(13.9)

27.2

65.3

46.0

39.2

Adjusted earnings*

14.8

17.8

41.5

61.6

68.3

Dividends

8.4

8.4

9.0

10.0

11.2

1,531

1,341

1,498

1,834

1,927

Per ordinary share

Employees
Average number of employees* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1 to the Group
Financial Statements.

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Financial Statements

Oxford Instruments plc / Report and Financial Statements 2013

Shareholder Information
Financial calendar
6 March 2013

Ordinary shares quoted ex-dividend

8 March 2013

Record date for interim dividend

14 March 2013

Dividend reinvestment (DRIP) last date for election

31 March 2013

Financial year end

8 April 2013

Payment of interim dividend

11 June 2013

Announcement of preliminary results

11 June 2013

Announcement of final dividend

Late July

Publication of Annual Report

10 September 2013

Annual General Meeting

25 September 2013

Ordinary shares quoted ex-dividend

27 September 2013

Record date for final dividend

29 September 2013

DRIP Date

24 October 201312 November 2013

Payment of final dividend
Announcement of interim results

March 2014

Ordinary shares quoted ex-dividend

March 2014

Dividend reinvestment (DRIP) last date for election

March 2014

Record date for interim dividend

31 March 2014

Financial year end

Administrative enquiries concerning shareholdings
You may view your shareholding and dividend history, register to receive your dividends direct to your bank account or electto re-invest your dividends and register a change of address online at www.capitashareportal.com. To register to use this facility
you will need your Investor code (IVC), which can be found on your share certificate, dividend tax voucher or proxy card.
Administrative enquiries concerning shareholdings in Oxford Instruments plc, such as the loss of a share certificate, dividend
payments, or a change of address should be directed, in the first instance, to the Registrar, Capita Registrars.
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 4TU
Tel: 0871 664 0300 (calls cost 10p per minute plus network extras; lines are open 8.30am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3399
Email: shareholder.services@capitaregistrars.com
Website: www.capitashareportal.com
Correspondence should refer to Oxford Instruments plc and state clearly the registered name and address of the shareholder.
Please notify the Registrar promptly of any change of address.
Dividend bank mandates
If you wish dividends to be paid directly into a bank or building society account and notification to be sent to your shareholder
register address, please contact the Company’s Registrar at the address given above for a dividend mandate form. Overseas
holders can also choose to receive payment directly into their bank account, or can be sent a draft in local currency. Further
details are available from Capita Registrars.
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 9ZA
Tel: 0871 664 0385 (calls cost 10p per minute plus network extras; lines are open to 9.00am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3405
Website: or by logging on to www.capitaregistrars.com/international.

106

Oxford Instruments plc / Report and Financial Statements 2013

Shareholder Information continued
Duplicate share register accounts
If you are receiving more than one copy of our report, it may be that your shares are registered in two or more accounts on our
register of members. If that was not your intention you might consider merging them into one single entry. Please contact Capita
who will be pleased to carry out your instructions.
Shareholder communications
Unless you have elected to continue to receive shareholder communications by post, you will be notified by post or, where you
have given us an email address for electronic notification, by email that shareholder communications are available for viewing
on the Company’s website at www.oxford-instruments.com/investors. The Company reserves the right to distribute any
communication in hard copy if it deems this necessary.
Shareholder enquiries
Shareholders who have questions relating to the Group’s business or who wish to have additional copies of the Report andAccounts should apply to:Company Secretary
Oxford Instruments plc
Tubney Woods, Abingdon, Oxon OX13 5QX
Tel: 01865 393200
Fax: 01865 393442
Email: info.oiplc@oxinst.com
Website: www.oxford-instruments.com
Company registration
Registered office: Tubney Woods, Abingdon, Oxon OX13 5QXRegistered in England number: 775598
Website – www.oxford-instruments.com
Oxford Instruments has an extensive website which gives details of all its products and services, contact information, vacancies
and latest news announcements. An interactive investor relations section gives information on recent trading reports, share pricedata and forthcoming events.
Capita Share Dealing Services
A quick and easy share dealing service to either sell or buy shares in many leading UK companies is provided by Capita Share
Dealing Services. An online and telephone facility is available providing our shareholders with an easy to access and simple to use
service. There’s no need to pre-register and there are no complicated forms to fill in. The online and telephone dealing service
allows you to trade “real time” at a known price which will be given to you at the time you give your instruction. To deal online orby telephone all you need is your surname, Investor Code (IVC) reference number, full postcode and your date of birth. Your Investor
Code can be found on a recent share certificate, statement or tax voucher. Should you not be able to locate your IVC number, pleasecontact Capita Registrars on 0871 664 0300 (calls cost 10p per minute plus network extras; lines are open 8.30am to 5.30pm,
Monday – Friday). Please have the appropriate documents to hand when you log on or call, as this information will be needed
before you can buy or sell shares.
For further information on this service, or to buy and sell shares, please contact: www.capitadeal.com (online dealing) or 0871 664 0446
(telephone dealing – calls cost 10p per minute plus network extras; lines are open 8.00am to 4.30pm, Monday – Friday excluding
public holidays). Full terms, conditions and risks apply and are available on request or by visiting www.capitadeal.com.
This is not a recommendation to buy or sell shares. Remember the price of shares can go down as well as up, and you are notguaranteed to get back the amount that you originally invested.
Analysis of shareholders as at 31 March 2013
Size of shareholding

Up to 5,000 shares

Number ofholders% of total

Total holding% of total

2,349

86.94

1,478,336

2.60

5,001 to 50,000 shares

213

7.88

3,758,669

6.60

50,001 to 200,000 shares

85

3.15

8,831,676

15.52

Over 200,000 shares55

2.03 42,848,149

75.28

2,702

100.00 56,916,830

100.00Total

Business Overview

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Oxford Instruments plc / Report and Financial Statements 2013

Oxford Instruments Directory
Company/address

Descriptor

Country

TelephoneUK+44 (0)1865 393200 +44 (0)1865 393333 info.oiplc@oxinst.com

Systems for materials
analysis at the nanoscaleUK+44 (0)1494 442255 +44 (0)1494 524129

nanoanalysis@oxinst.com

10410 Miller Road,
Dallas, TX 75238, USA

Omniprobe tools fornanomanipulationand fabricationUSA+1 (214) 572 6800

+1 (214) 572 6801

sales@omniprobe.com

Lejonvägen 28,
S-18122 Lidingö, Sweden

Systems for materials
analysis at the nanoscale

Sweden+46 8 5448 1550

+46 8 5448 1558

nordiska@oxinst.com

UK+44 (0)1865 393200 +44 (0)1865 393333 omicron.nanoscience@oxinst.com

Limburger Strasse 75,
D-65232 Taunusstein, Germany

Germany+49 6128 9870

+49 6128 98733230 omicron.nanoscience@oxinst.com

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

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

omicron.nanoscience@oxinst.com

5-30-15-403 Kamata, Ota-ku,
Tokyo 144-0052, JapanJapan+81 3 666 10850+81 3 666 10855

omicron.nanoscience@oxinst.com

1, The Felbridge Centre,
Willard Way, East Grinstead,West Sussex RH19 1XPK, UK

UK+44 (0)1342 331006 +44 (0)1342 331003 omicron.nanoscience@oxinst.com

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

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

Asylum Research6310 Hollister Ave,
Santa Barbara, CA 93117 USAUSA+1 (805) 696 6466

+1 (805) 696 6444

sba.sales@oxinst.com

Hauptstrasse 161,
DE-68259 Mannheim, Germany

Germany+49 621 762117 0+49 621 762117 11

sba.de.sales@oxinst.com

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

Taiwan+886 9 3837 4589

+886 2 2794 2757

sba.tw.sales@oxinst.com

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

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

UK+44 (0)1865 393200 +44 (0)1865 393333 industrial@oxinst.com

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

Finland+358 932 9411

+358 932 9413

industrial@oxinst.com

Wellesweg 31, 47589 Uedem,
Germany

Germany+49 2825 93830+49 2825 9383100

industrial@oxinst.com

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

+1 (512) 339 0620

industrial@oxinst.com

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

Fax

Email

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

Oxford Instruments Omicron NanoScience
Tubney Woods, Abingdon,
Advanced tools for
Oxfordshire OX13 5QX, UK
applied research

Systems for materials
analysis at the nanoscale+1 (952) 294 8043

omicron.nanoscience@oxinst.com

sba.uk.sales@oxinst.com

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

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

Cryogenic pumps
and compressors

USA+1 (512) 441 6893

+1 (512) 441 6665

cryo-sales@oxinst.com

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

Superconducting wireUSA

+1 (732) 541 1300

+1 (732) 541 7769

sales@ost.oxinst.com

X-ray tubes
and detectors

USA+1 (831) 439 9729

+1 (831) 439 6051

industrial@oxinst.com

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

108

Oxford Instruments plc / Report and Financial Statements 2013

Oxford Instruments Directory continued
Company/address

Descriptor

Country

Telephone

Fax

Email

Support Services
for CT and MRIUSA+1 (732) 850 9300

+1 (732) 802 0401

oiservice@oxinst.com

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

+1 (954) 596 4946

oiservice@oxinst.com

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

+1 (707) 469 1318

oiservice@oxinst.com

Company/AddressCountry

Telephone

Fax

Email

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

+1 (978) 369 8287

info@ma.oxinst.com

Oxford Instruments China
Room 714, Tower 3, Henderson Centre,
No 18 Jianguomennei Avenue, 100005 Beijing, China

China+86 (0)10 6518 8160

+86 (0)10 6518 8155

china.info@oxinst.com

Room 1/E, Building 1, Xiangzhang Garden,
No. 248, Donglan Road, 201102 Shanghai, China

China+86 (0)21 6073 2929

+86 (0)21 6490 4042 china.info@oxinst.com

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

China+86 (0)21 6490 8580 +86 (0)21 6490 4042 china.info@oxinst.com

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

China+86 (0)20 8364 9990 +86 (0)20 8364 9996 china.info@oxinst.com

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

China+86 (0)28 8670 3596 +86 (0)28 8670 3595 china.info@oxinst.com

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

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

office@oxinst.cz

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

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

infofrance@oxinst.com

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

ServiceOiService CT & MR
34 Green Street,
Woodbridge, NJ 07095, USA

Regional Sales and Service Offices

Germany+49 6122 9370

+49 6122 937100

info-oiplc@oxinst.com

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

India+91 224 4253 5100

+91 224 4253 5110

india@oxinst.com

Oxford Instruments Japan
Haseman Bldg., 2-11-6 Tomioka,
Koto-ku, Tokyo 135-0047, JapanJapan+81 (0)3 5245 3251

+81 (0)3 5245 4472

info.jp@oxinst.com

Republicof Korea+82 2 2008 4500

+82 2 2008 4555

nanoanalysis@oxinst.com

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

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

info@oxford.de

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

Singapore+65 6337 6848

+65 6337 6286

oi.admin@oxfordinstruments.
com.sgOxford Instruments Taiwan
1F, No. 23, Jing-Shang 19th Street, Hsinchu,
Taiwan 300, Taiwan, R.O.C.

Taiwan+886 3 5788696+886 3 5789993

oi.admin@oxfordinstruments.
com.tw

Oxford Instruments Korea
41/F Gangnam Finance Center, 737 Yeoksam-dong,
Gangnam-gu, Seoul 135-984, Republic of Korea

Business Overview

109

Business Review

Corporate Governance

Financial Statements

Company Information

Oxford Instruments plc / Report and Financial Statements 2013

Advisers
Honorary President
Sir Martin Wood OBE FRS Hon FREng DL
Company Secretary
Susan Johnson-Brett ACIS

Board Committees
Audit
JF Lennox, Chairman; J Allerton; MA Hughes; TO Geitner
Remuneration
NJ Keen, Chairman; J Allerton; MA Hughes; JF Lennox; TO Geitner
Nomination
NJ Keen, Chairman; J Allerton; JM Brady; MA Hughes; JF Lennox; TO Geitner
Administration
Any two Directors

Advisers
Auditor
KPMG Audit Plc
Principal Bankers
HSBC Bank plc; Clydesdale Bank plc and Santander UK plc
Stockbrokers
JPMorgan Cazenove
UK Solicitors
Laytons Solicitors LLP and Ashurst LLPUS Counsel
Wilmer Hale LLP

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Management System is certified to ISO 14001 and it is a CarbonNeutral® company. 100% of the inks
used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average
99% of any waste associated with this production will be recycled. This document is printed on
Symbol Freelife Matt plus, a paper containing 100% Environmental Chlorine Free (ECF) virgin fibre
sourced from well-managed, responsible, FSC® certified forests.

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

www.oxford-instruments.com
As part of Oxford Instruments’ environmental policy
this report has been printed on FSC paper.
This publication is the copyright of Oxford Instruments plc and provides outline information only, which (unless agreed by the Company inwriting) 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 andregistrations. © Oxford Instruments plc, 2013. All rights reserved.