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Half Year Report September 2010

working together
our customers

Oxford Instruments plc
Half Year Report
September 2010

Summary of Half Year Results

Orders
Revenue
Trading profit
Adjusted profit before tax (note 2)
Net borrowings
Shareholders’ equity

Adjusted basic earnings
Basic earnings
Proposed dividends
Net assets
Employees at half year end

2010
£m
141.3
113.2
11.9
10.6
(3.9)
59.6

2009
£m
133.9
92.8
4.1
2.8
(29.6)
50.3

2010
Pence
per share
17.4
20.7
2.52
119.6

2009
pence
per share
4.1
8.3
2.40
101.8

1,506

1,324

About Us

Oxford Instruments aims to pursue responsible development and deeper understanding of
the world through Science & Technology.
As one of the first commercial spin-out companies from Oxford University, this vision has been at the heartof our business for over 50 years. We use innovation to turn smart science into world-class products thatstsupport research and industry to address the great challenges of the 21 Century.

Page 1Operational Review
Introduction
The Group achieved an excellent first half result, reflecting operational improvements throughout theorganisation, continued success of new products and a significantly improved market environment.
Revenues grew by 22% to £113.2 million (2009: £92.8 million). This growth was evident across the Group’sbusinesses. Adjusted profit before tax grew to £10.6 million (2009: £2.8 million).
Markets for our products used for scientific research continued to be robust. In addition our industrial
markets, which had been hit by recession, demonstrated a sustained increase in demand during the first halfof the year. This reflected increasing confidence amongst our industrial customers and demand for our new
products. Many industrial customers had delayed their capital purchases during the last 2 years and, as
investment levels now rise, we are seeing benefits of this pent up demand. The pricing pressure which we
saw in the second half of last year has abated somewhat and we are maintaining pricing levels supported by
the increased demand. Our growth has been evident in all our operating regions with China continuing to be
our fastest growing sales area. Sales in China grew by 52% year on year and made up 13% of Groupturnover.
Cash generation in the first half was strong and our net debt position reduced to £3.9 million (31 March
2010: £10.4 million).
Order intake was £141.3 million (2009: £133.9 million). The prior year figure included the one-off orderamounting to £40.4 million for the ITER experimental energy programme. This strong order intake has
meant our order book increased by £25.7 million to £127.2 million in the six months to September.
Approximately 60% of this order book is deliverable during the second half of the current year.
In 2006 we announced a five year objective to double the size of the business and improve our margins
significantly. We are now in the fifth year of this plan. Our organic growth targets have been met but
recessionary pressure caused us to put our acquisition programme on hold for two years. Now that markets
have stabilised we are actively looking at potential acquisition targets. In the first half of this year, our
Trading Profit margins exceeded 10% for the first time in the plan.
Financials
Orders of £141.3 million were £7.4 million ahead of the same period last year. Excluding the one-off ITER
order in the prior period, orders grew by £47.8 million or 51.1%.
Revenues in the half year grew by 22.0% (£20.4 million) to £113.2 million. Favourable foreign currency
exchange rate movements contributed £2.9 million, while pricing negatively impacted the total by £1.5
million. As a result, volume growth was 20.5%. In our Nanotechnology Tools division which had been lessaffected by the global downturn and therefore has a stronger comparator period, sales grew by 13.1% while
the Industrial Products division continued the recovery seen in the second half of last year with growth of
40.1%. This was helped by the first shipment of superconducting wire to the ITER programme. Service
revenues grew by 17.1% on the back of a strong performance from our Austin Scientific business and amore general willingness in the market to renew service contracts.
Gross margins rose from 42.1% to 43.1%, helped by favourable movements in the exchange rates between
sterling and the US dollar, euro and yen.
Constant currency operating expenses increased by £4.2 million, partly due to the growth in variable
overhead costs as a result of higher volumes and partly due to investment for the future; R&D spend wasincreased by £1.1 million and a further £1.0 million was spent on ITER start-up costs. Translational foreignexchange effects added £0.5 million, resulting in a net increase of £4.7 million in reported operating
expenses.

Page 2

Operational Review (continued)
Trading profit increased by £7.8 million to £11.9 million. The net interest charge on debt increased by £0.2
million to £0.8 million, and net interest on the pension fund reduced by £0.2 million, resulting in a rise inadjusted profit before tax (note 2) of £7.8 million to £10.6 million. A significant proportion of this increase isdue to better transactional foreign exchange rates. We believe that the majority of transactional foreignexchange benefit for the year has been realised in the first half. This, combined with improved operational
efficiencies, should result in first and second half performance being more evenly balanced.
The ability to utilise brought forward tax losses in the UK reduced the underlying effective tax rate to 20%(2009: 29%). This combined with the increase in adjusted profit before tax resulted in an increase inadjusted earnings per share (EPS) of 13.3 pence to 17.4 pence. Reported EPS increased by 12.4 pence to20.7 pence.
In July the Group ceased future accrual for those employees who were members of our UK and US defined
benefit pension schemes. This resulted in a one-off credit of £3.8 million which is being treated as an
exceptional profit item.
During the period it was decided that the relocation of our Yatton site will not take place as originallyplanned. Due to the exceptional growth of the Plasma Technology business the site which had been
selected is now too small and a new location is therefore being sought. As a result, £0.6 million of costs
relating to the move have been written off as an exceptional item.
Amortisation of acquired intangibles fell to £1.8 million (2009: £2.2 million) and a credit of £1.2 million (2009:
credit £5.5 million) was recorded in respect of mark-to-market adjustments resulting from our policy of not
applying hedge accounting to our foreign currency financial instruments.
Reported profit before tax was £13.2 million (2009: £5.7 million).
At the period end net debt was £3.9 million (31 March 2010: £10.4 million, 2009: £29.6 million). Cashgenerated in the period was £6.5 million (2009: £1.3 million outflow). The Group has a committed £50
million revolving credit facility with a club of banks which expires in July 2012.
As calculated under IAS19, the defined benefit pension deficit has decreased by £5.2 million to £29.9 million
since 31 March 2010. Assets have grown by 4% to £164.6 million while liabilities have increased by 1% to£194.5 million due mainly to the reduction in corporate bond yields which are used to discount liabilities.
The cessation of future accrual discussed above and the Government’s decision to move from RPI to CPI as
the measure of inflation used in pension calculations offset the overall increase in liabilities by £11.7 million.
The Directors have declared an interim dividend of 2.52 pence, 5% higher than the previous year, payable
on 7 April 2011 to shareholders who are on the register on 4 March 2011.
Nanotechnology Tools
Our Nanotechnology Tools sector comprises the Group’s NanoAnalysis, Plasma Technology and
NanoScience businesses. These businesses produce instruments and systems for our customers working inscientific research and with the most advanced industrial processes. The sector produced revenues of £49.2
million (2009: £43.5 million) and a profit of £5.8 million (2009: £2.1 million).
Our NanoAnalysis business produces equipment that enables customers using electron microscopes to gain
precise chemical and structural data. Our instruments are used in a broad range of applications. For
example, geologists use the technique to determine the origin of rocks for commercial and academic
purposes. Our X-Max detector dominates the market for this type of product. Our new version of X-Max,
aimed at the highest end of the electron microscope market, has been a success with sales exceeding our
expectations. Overall the electron microscope market is recovering and this growth has further improved theaddressable market for this business.

Page 3

Operational Review (continued)
Our Plasma Technology business provides tools for nanotechnological fabrication for a range of emerging
industries. This business has seen strong demand across its full range of products. Demand for products
used in the fabrication of high brightness light emitting diodes (HBLED), used in computer displays andtelevision screens, continues to be particularly strong. This demand is led from Asia which now constitutes
60% of turnover for Plasma Technology. The business’ improved performance is due to the wide range ofapplications that can be run on our tools and our worldwide service capability which enables us to accessthe market for production tools more effectively than before. This year, our capabilities have been further
enhanced by the establishment of technology partnerships with Southampton University and the Taiwanesenanotechnology institute, ITRI.
Our NanoScience business produces equipment to work at very high magnetic fields and extremely low
temperatures. Customers are principally from the research and academic community who work at thefrontiers of science in areas such as quantum information processing. For example, our equipment is usedby this year’s winner of the Nobel Prize for Physics, Professor Kostya Novoselov from the University ofManchester, who is researching the properties of the new nano-material graphene. Sales of our dilution
refrigerators continue to be strong and to dominate the market for low temperature research equipment. We
are increasingly introducing “dry” products which can reach very low temperatures without the use of liquid
helium. The latest product in this range is the cryogen-free SpectromagCF, which allows opticalmeasurements on samples under simultaneous high magnetic field and very low temperatures. Research inthis field may lead to advances in ultra fast electronics.
Industrial Products
The Industrial Products sector contains our Industrial Analysis, Magnetic Resonance and Superconducting
Wire businesses. The revenue and profits in the half year were £43.3 million (2009: £30.9 million) and £2.0
million (2009: £0.7 million loss) respectively. This sector recovered strongly in the half year and benefited
from increased demand and improved internal efficiency.
Our Industrial Analysis business produces analytical equipment for quality control and environmental
monitoring in the industrial sector. For example, our X-MET handheld X-ray fluorescence instrument can beused for identifying hazardous substances in soil, in situations such as the recent toxic chemical leak in
Hungary. Demand has increased significantly over the past twelve months and is now running ahead of prerecession levels. Current high levels of demand may be in some part a result of the release of a backlog ofcapital investments which had been delayed during the recession. This business is showing significantly
improved profitability in the year, driven by the restructuring carried out in 2008/09 and strong demand. In
some areas rapid growth has taxed our supply chain and investment has been made in supplierdevelopment to ensure that we can fully meet the foreseen demand.
Our Magnetic Resonance business produces bench top instruments for industrial quality control and theanalysis of rock cores for the oil industry. This business has seen increased orders. In particular our seed
analysers are selling well in emerging nations and our spin finish products for the fabrics industry haveshown strong growth. We have just launched new hardware which will provide world leading performance inthe analysis of tightly bound rocks, which is increasingly important in the oil and gas industry as they seekout new reserves in more challenging environments.
Our Superconducting Wire business is the leading provider of commercial superconducting wire for the MRI
body scanner market. We are seeing strong demand from all our major customers driven by new higher
magnetic field versions of MRI scanners, which require up to three times as much superconducting wire foreach instrument. We have put in place additional capacity to cope with this demand. We are now providing
wire to all the major MRI manufacturers. In addition to the MRI wire business, we have made our firstdeliveries of superconducting wire to the ITER programme. ITER is a multinational carbon free energy
programme being undertaken in Cadarache, France. Further deliveries to the ITER programme will be madein the second half of the year and in the following three years.

Page 4

Operational Review (continued)
ServiceOur Service business includes activities in the United States and Japan servicing MRI machines and theAustin Scientific business in the USA. In addition the aftermarket revenues associated with our two
manufacturing sectors are reported under this sector. Sales in the half year were £21.9 million (2009: £18.7
million) and profits £4.1 million (2009: £2.7 million).
Austin Scientific had a particularly strong half year. Significant orders were won from manufacturers ofphotovoltaic devices who use our equipment as part of the fabrication process. In Japan our Service
business is performing well with strong user demand for our Cryocare MRI service contracts. MRI service
demand in the USA is less strong as smaller healthcare providers are still suffering from recessionarypressure.
The aftermarket revenues associated with our two manufacturing sectors are split into three main revenue
streams: service contracts, billable service and spare parts/consumables. All three revenue streams are
performing well with particular growth coming from contract sales, especially in the USA. We are also seeing
increasing service revenues from Asia. This growth has been supported by the recruitment of additional
service sales staff and a more focused approach towards after-sales care.
Sustainability
Our Sustainability programme has a high profile across the Group. Every site has an Energy Champion andeach location has developed a set of plans and actions to reduce energy consumption. We continue toimprove the energy efficiency of our sites through investments in new infrastructure such as instant heatboilers for hot water, voltage power optimisation, automatic meter reading for all utilities and new air
conditioning chillers. These investments reduce our energy costs and underline our commitment to asustainable future. In the UK we are participating in the Government’s Carbon Reduction Commitment
Energy Efficiency Scheme (CRC). At the beginning of the year we set a target of a 5% reduction in energy
consumption as a percentage of sales. Our teams have achieved an 11% reduction in electricity consumed
as a percentage of sales in the first half of this financial year.
PeopleOur technically skilled and committed workforce has again delivered against demanding targets. Our recent
improved performance is a testament to their wholehearted support for Oxford Instruments. Our thanks go to
the whole team.

Outlook
The Group has delivered an excellent first half result. This performance resulted from new products,
operational improvements, a strong recovery in industrial markets and favourable currency movements. The
bulk of the transactional currency movements expected for the full year have been achieved in the first half.
This, combined with the operational improvements, will yield more equally balanced first and second halftrading.
Our order book is at a record high and current levels of customer interest indicate that demand will continue
to be strong for the remainder of the current financial year. We are actively pursuing acquisition targets thathave the potential to enhance value and our technical capabilities. We remain confident in the continued
growth prospects of Oxford Instruments and our ability to produce sustained shareholder value.
Nigel Keen
Chairman
16 November 2010

Jonathan Flint
Chief Executive

Page 5

Condensed Consolidated Statement of Income half year ended 30 September 2010 – unaudited

Revenue
Cost of sales
Gross profit
Trading expenses excluding cost of sales
Trading profit
Other operating income
Reorganisation costs and impairment
Amortisation of acquired intangibles
Operating profit

Notes
3
4
3
6
7

Bank interest receivable
Expected return on pension scheme assets
Mark to market gain in respect of derivative
financial instruments
Financial income
Interest payable on bank loans andoverdrafts
Interest charge on pension scheme
liabilities
Financial expenditure
Profit before income tax
Income tax expense
Profit for the period attributable to equity
shareholders of the parent

8

Half year to
30 Sept
2010
£m
113.2
(64.4)
48.8(36.9)
11.9
3.8
(0.6)
(1.8)
13.3

Half year to
30 Sept
2009
£m
92.8
(53.7)
39.1(35.0)
4.1
(0.4)
(2.2)
1.5

Year to31 March
2010
£m
211.5
(120.9)90.6(75.9)
14.7
(0.4)
(4.1)
10.2

0.1
4.8

3.8

7.9

1.2
6.1

5.5
9.3

10.7
18.6

(0.9)

(0.6)

(1.3)

(5.3)
(6.2)

(4.5)
(5.1)

(9.4)
(10.7)

13.2

5.7

18.1

(3.0)

(1.6)

(4.8)

10.2

4.1

13.3

pence

pence

pence

Earnings per share
Basic earnings per share
Diluted earnings per share

9
9

20.7
20.3

8.3
8.2

27.2
27.1

Dividends per share
Dividends paid
Dividends proposed

10
10

2.40
2.52

2.40
2.40

8.40
8.40

£m
13.2
(3.8)
0.6
1.8

£m
5.7
0.4
2.2

£m
18.1
0.4
4.1

(1.2)
10.6

(5.5)
2.8

(10.7)
11.9

pence

pence

pence

17.4
17.1

4.1
4.1

17.8
17.8

Adjusted profit before tax is calculated as follows
Profit before income tax
Other operating income
Reorganisation costs and impairment
Amortisation of acquired intangibles
Mark to market gain in respect of derivative
financial instruments
Adjusted profit before tax

Adjusted earnings per share
Basic earnings per share
Diluted earnings per share

99Page 6

Condensed Consolidated Statement of Comprehensive Income half year ended 30 September
2010 - unaudited

Profit for the period attributable to equity
shareholders of the parent

Half year to
30 Sept
2010£m

Half year to
30 Sept
2009£mYear to31 March
2010
£m

10.2

4.1

13.3

Other comprehensive expense
Foreign exchange translation differences
Actuarial loss in respect of retirement benefit obligations
Net profit on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled
Tax on items recognised directly in equity
Total other comprehensive expense

(1.1)
(1.6)

(4.1)
(15.6)(3.8)(22.8)

0.1
0.5
(2.1)

0.9
4.1
(14.7)

0.8
6.1(19.7)

Total comprehensive income/(expense) for theperiod attributable to equity shareholders of theparent8.1(10.6)(6.4)

Page 7

Condensed Consolidated Statement of Changes in Equity half year ended 30 September 2010 unaudited

Balance at 1 April 2010
Total comprehensive income/(expense)
attributable to equity shareholders of theparentTransactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options- Proceeds from shares issued- Dividends paid
Total contributions by and distributions toequity shareholders
Balance at 30 September 2010

Balance at 1 April 2009
Total comprehensive income/(expense)
attributable to equity shareholders of theparentTransactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options- Dividends paid
Total contributions by and distributions toequity shareholders
Balance at 30 September 2009

Balance at 1 April 2009
Total comprehensive income/(expense)
attributable to equity shareholders of theparentTransactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options- Proceeds from shares issued- Dividends paid
Total contributions by and distributions toequity shareholders
Balance at 31 March 2010

Other
reserves£m
0.2

Foreignexchangetranslation
reserve£m
4.1

Retainedearnings
£m
23.8

Total
£m
52.2

-

0.1

(1.1)

9.1

8.1

-

-

-

0.2
(1.2)

0.2
0.3
(1.2)

2.5

0.3
21.9

0.3

3.0

(1.0)
31.9

(0.7)
59.6

Share
capital
£m
2.5

Share
premium
account
£m
21.3

Other
reserves£m(0.3)

Foreignexchangetranslation
reserve£m
7.9

Retainedearnings
£m
30.5

Total
£m
61.9

-

-

0.6

(4.1)

(7.1)

(10.6)

-

-

-

-

0.2
(1.2)

0.2
(1.2)

2.5

21.3

0.3

3.8

(1.0)
22.4

(1.0)
50.3

Share
capital
£m
2.5

Share
premium
account
£m
21.3

Other
reserves£m(0.3)

Foreignexchangetranslation
reserve£m
7.9

Retainedearnings
£m
30.5

Total
£m
61.9

-

-

0.5

(3.8)

(3.1)

(6.4)

-

0.3
-

-

-

0.5
(4.1)

0.5
0.3
(4.1)

2.5

0.3
21.6

0.2

4.1

(3.6)
23.8

(3.3)
52.2

Share
capital
£m
2.5

Share
premium
account
£m
21.6

-

-

0.3

-

Page 8

Condensed Consolidated Statement of Financial Position as at 30 September 2010 – unaudited
As at
30 Sept
2010
£m

As at
30 Sept
2009
£m

As at
31 March
2010
£m

22.2
46.1
12.3
80.6

22.4
51.3
13.2
86.9

22.8
49.3
12.9
85.0

48.1
48.9
1.1
1.3
17.2
116.6

38.4
45.7
0.3
2.0
3.8
90.2

39.3
60.2
0.9
0.8
11.2
112.4

197.2

177.1

197.4

2.5
21.9
0.3
3.0
31.9
59.6

2.5
21.3
0.3
3.8
22.4
50.3

2.5
21.6
0.2
4.1
23.8
52.2

19.6
0.8
29.9
6.1
56.4

30.8
0.8
29.3
6.3
67.2

19.6
0.9
35.1
6.7
62.3

0.1
1.4
68.9
4.3
1.7
4.8
81.2

0.1
2.5
42.4
1.8
8.3
4.5
59.6

0.1
1.9
69.1
2.6
4.3
4.9
82.9

Total liabilities

137.6

126.8

145.2

Total liabilities and equity

197.2

177.1

197.4

AssetsNon-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents
Total assets
EquityCapital and reserves attributable to theCompany’s equity shareholders
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings
Liabilities
Non-current liabilities
Bank loans
Other payables
Retirement benefit obligations
Deferred tax liabilities
Current liabilities
Bank loans
Bank overdrafts
Trade and other payables
Current income tax payables
Derivative financial instruments
Provisions

Page 9

Condensed Consolidated Statement of Cash Flows half year ended 30 September 2010 –unaudited

Profit for the period
Adjustments for:
Income tax expense
Net financial expense/(income)
Other operating income
Reorganisation costs and impairment
Amortisation of acquired intangibles
Depreciation of property, plant and equipment
Amortisation of capitalised development costs
Earnings before interest, tax, depreciation andamortisation
Cost of equity settled employee share schemes
Restructuring costs paid
Cash payments to the pension scheme more than the charge
to the income statement
Operating cash flows before movements in working
capitalIncrease in inventories
Decrease/(increase) in receivables(Decrease)/increase in payables and provisions
Increase/(decrease) in customer deposits
Cash generated by operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from sale of available for sale equity securities
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Repayment of borrowings
Dividends paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the period

Half year to
30 Sept
2010
£m
10.2

Half year to
30 Sept
2009
£m
4.1

Year to31 March
2010
£m
13.3

3.0
0.1
(3.8)
0.6
1.8
1.7
2.0

1.6
(4.2)
0.4
2.2
1.8
1.9

4.8
(7.9)
0.4
4.1
3.8
4.0

15.6
0.2
-

7.8
0.2
(2.9)

22.5
0.5
(3.2)

(3.5)

(1.1)

(3.4)

12.3
(9.7)
11.3
(4.7)
2.9
12.1
(0.4)
(0.7)
11.0

4.0
(0.6)
11.0
(5.9)
(1.9)
6.6
(0.6)
(0.6)
5.4

16.4
(0.4)
(3.7)
11.2
9.3
32.8
(1.1)
(0.6)
31.1

0.1
(0.1)
(2.1)
(1.6)
(3.7)

0.1
(2.3)
(1.4)
(1.9)
(5.5)

0.2
0.7
(2.4)
(3.6)
(4.0)
(9.1)

0.3
(1.2)
(0.9)
6.4
9.3
0.1
15.8

(1.0)
(1.2)
(2.2)
(2.3)
3.6
1.3

0.3
(12.2)(4.1)(16.0)
6.0
3.6
(0.3)
9.3

6.4

(2.3)

6.0

0.1
6.5
6.5
(10.4)
(3.9)

(2.3)
1.0
(1.3)
(28.3)(29.6)

(0.3)
5.7
12.2
17.9
(28.3)(10.4)

Reconciliation of changes in cash and cash equivalents to movement in net debt
Increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash
equivalents
Cash outflow from decrease in debt
Movement in net borrowings in the period
Net borrowing at start of the period
Net borrowing at the end of the period

Page 10

Notes on the Half Year Financial Statements
Half year ended 30 September 2010 – unaudited
1

BASIS OF PRESENTATION OF ACCOUNTS

Oxford Instruments plc (the Company) is a company incorporated in England and Wales. The condensed
consolidated half year financial statements consolidate those of the Company and its subsidiaries (together
referred to as the Group). They have been prepared and approved by the Directors in accordance with
International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as adopted by the EU.
They do not include all of the information required for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group for the year ended 31 March 2010.
As required by the Disclosure and Transparency Rules of the Financial Services Authority, the half year
financial information has been prepared applying the accounting policies and presentation that were appliedin the preparation of the Group’s consolidated financial statements for the year ended 31 March 2010,
except as noted below.
The financial information contained herein is unaudited and does not constitute statutory accounts as
defined by Section 435 of the Companies Act 2006. The comparative figures for the financial year ended 31
March 2010 are not the company’s statutory accounts for that financial year. Those accounts have beenreported on by the company’s auditors and delivered to the registrar of companies. The report of theauditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report, and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The condensed consolidated half year financial statements have been prepared on a going concern basis,
based on the Directors’ opinion, after making reasonable enquiries, that the Group has adequate resources
to continue in operational existence for the foreseeable future.
The principal exchange rates used to translate the Group’s overseas results were as follows:
Period end rates
US Dollar
Euro
Yen
Average translation rates
Half year to 30 September 2010
Quarter 1
Quarter 2
Year to 31 March 2010
Quarter 1
Quarter 2
Quarter 3
Quarter 4

Half year to
30 Sept
2010
1.58
1.15
131

Half year to
30 Sept
2009
1.60
1.09
143

Year to31 March
2010
1.52
1.12
142

US Dollar

Euro

Yen

1.50
1.55

1.17
1.20

138
133

1.55
1.64
1.62
1.56

1.13
1.14
1.11
1.12

150
153
145
142

Page 11

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2010 – unaudited
2

NON GAAP MEASURESThe Directors present the following non-GAAP measure as they believe it gives a better indication of theunderlying performance of the business.
RECONCILIATION BETWEEN PROFIT BEFORE INCOME TAX AND ADJUSTED PROFIT

Profit before income tax
Other operating income
Reorganisation costs and impairment
Amortisation of acquired intangibles
Mark to market gain in respect of derivative financial
instruments
Adjusted profit before income tax
Share of taxation
Adjusted profit
Adjusted earnings per share
Basic
DilutedHalf year to
30 Sept
2010
£m
13.2
(3.8)
0.6
1.8

Half year to
30 Sept
2009
£m
5.7
0.4
2.2

Year to31 March
2010
£m
18.1
0.4
4.1

(1.2)
10.6
(2.1)
8.5

(5.5)
2.8
(0.8)
2.0

(10.7)
11.9
(3.2)
8.7

pence
17.4
17.1

pence
4.1
4.1

pence
17.8
17.8

Adjusted figures are stated before other operating income, amortisation of acquired intangibles,
reorganisation costs and impairment and unrealised changes in the fair value of financial instruments.

Page 12

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2010 – unaudited
3

SEGMENT INFORMATION

Information is presented in the condensed consolidated half year financial statements in respect of theGroup’s three business segments. These segments are Nanotechnology Tools, Industrial Products andService. The Nanotechnology Tools segment consists of the Group’s highest technology assets and ischaracterised by a high degree of customisation and high unit price. The Industrial Products segment
contains businesses that carry out medium volume production of high technology products for industrial
customers. The Service segment contains the Group’s service businesses as well as service revenues fromthe service activities from other parts of the Group.
Segment results include items directly attributable to a segment as well as those which can be allocated ona reasonable basis.
Half year to 30 September 2010

External revenue
Inter-segment revenue
Total segment revenue

Nanotechnology
Tools
£m
49.0
0.2
49.2

Industrial
Products
£m
42.3
1.0
43.3

Service
£m
21.9
21.9

Total
£m
113.2

Segment trading profit

5.8

2.0

4.1

11.9

Nanotechnology
Tools
£m
43.3
0.2
43.5

Industrial
Products
£m
30.8
0.1
30.9

Service
£m
18.7
18.7

Total
£m
92.8

2.1

(0.7)

2.7

4.1

External revenue
Inter-segment revenue
Total segment revenue

Nanotechnology
Tools
£m
101.5
0.3
101.8

Industrial
Products
£m
71.0
1.1
72.1

Service
£m
39.0
39.0

Total
£m
211.5

Segment trading profit

8.2

1.0

5.5

14.7

Half year to
30 Sept
2010
£m
11.9
3.8
(0.6)
(1.8)
6.1
(6.2)
13.2

Half year to
30 Sept
2009
£m
4.1
(0.4)
(2.2)
9.3
(5.1)
5.7

Year to31 March
2010
£m
14.7
(0.4)
(4.1)
18.6
(10.7)
18.1

Half year to 30 September 2009

External revenue
Inter-segment revenue
Total segment revenue
Segment trading profit/(loss)
Year to 31 March 2010

Reconciliation of reportable segment profit

Profit for reportable segments
Other operating income
Reorganisation costs and impairment
Amortisation of acquired intangibles
Financial income
Financial expenditure
Profit before income tax

Page 13

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2010 – unaudited
4

TRADING EXPENSES EXCLUDING COST OF GOODS SOLD

Selling and marketing costs
Administration and shared services
Research and development (note 5)
Foreign exchange loss

5

Half year to
30 Sept
2010
£m
19.1
10.9
6.9
36.9

Half year to
30 Sept
2009
£m
17.4
9.0
5.8
2.8
35.0

Year to31 March
2010
£m
36.1
20.0
13.1
6.7
75.9

Half year to
30 Sept
2010£m

Half year to
30 Sept
2009£mYear to31 March
2010
£m

6.5
(1.6)
2.0

5.8
(1.9)
1.9

13.1
(4.0)
4.0

6.9

5.8

13.1

Half year to
30 Sept
2010
£m
3.8

Half year to
30 Sept
2009£m-Year to31 March
2010£m-

RESEARCH AND DEVELOPMENT

Total research and development spend by the Group is as follows:

Total cash spent on research and development during
the period
Less: amount capitalised
Add: amortisation of amounts previously capitalised
Research and development charged to income
statement
6

OTHER OPERATING INCOME

Curtailment gains

During the period, the Group’s defined benefit pension schemes in the UK and US were closed to future
accrual. This gave rise to a curtailment gain under IAS 19 as the majority of active members’ accrued
benefits are no longer linked to future salary growth.
7

REORGANISATION COSTS AND IMPAIRMENT

Impairment of carrying value of assets
Restructuring costs

Half year to
30 Sept
2010
£m
(0.6)
(0.6)

Half year to
30 Sept
2009
£m
(0.4)
(0.4)

Year to31 March
2010
£m
(0.4)
(0.4)

During the period, the Group recognised an impairment charge of £0.6m against costs capitalised in relation
to the planned site move of the Plasma Technology business in the UK. This move will now not take placein the form originally planned.
In the year to 31 March 2010, the Group concluded the restructuring programme started in the previous
year. This resulted in additional redundancy and related costs at sites in Japan, France, Finland and the UK.

Page 14

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2010 – unaudited
8

TAXATION

The total effective tax rate on profits for the half year is 23% (2009: 28%). The weighted average tax rate
(excluding deferred taxation in respect of mark to market gains/losses arising from derivatives, amortisationof acquired intangibles, reorganisation costs and other operating income) for the half year is 20% (2009:
29%).
The Group estimates that its full year weighted average tax rate (excluding deferred taxation in respect ofmark to market gains/losses arising from derivatives, amortisation of acquired intangibles, reorganisation
costs and other operating income) will be 20% (2009: 29%).
9

EARNINGS PER SHAREa) Unadjusted
The earnings per share is as follows:

Basic
DilutedHalf year to
30 Sept
2010
pence
20.7
20.3

Half year to
30 Sept
2009
pence
8.3
8.2

Year to31 March
2010
pence
27.2
27.1

b) Adjusted
The earnings per share before other operating income, amortisation of acquired intangibles, reorganisation
costs and impairment, and mark to market gains or losses in respect of certain derivatives is as follows:

Basic
DilutedHalf year to
30 Sept
2010
pence
17.4
17.1

Half year to
30 Sept
2009
pence
4.1
4.1

Year to31 March
2010
pence
17.8
17.8

A reconciliation of the profit for the periods used to calculate earnings per share to the adjusted profit for theperiods used to calculate the adjusted earnings per share shown above can be found in note 2.
c) Basic
The calculation of basic earnings per share is based on the profit or loss for the period after taxation and aweighted average number of ordinary shares outstanding during the period, excluding shares held by the
Employee Share Ownership Trust, as follows:

Weighted average number of shares outstanding
Less: weighted average number of shares held byEmployee Share Ownership Trust
Weighted average number of shares used in
calculation of earnings per share

Half year to
30 Sept
2010
Sharesmillion
49.4

Half year to
30 Sept
2009
Sharesmillion
49.4

Year to31 March
2010
Sharesmillion
49.4

(0.5)

(0.6)

(0.5)

48.9

48.8

48.9

Page 15

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2010 – unaudited
9

EARNINGS PER SHARE CONTINUEDd) Diluted
The following table shows the effect of share options on the calculation of both adjusted and unadjusted
diluted basic earnings per share.

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

10

Half year to
30 Sept
2010
SharesmillionHalf year to
30 Sept
2009
SharesmillionYear to31 March
2010
Sharesmillion

48.9
1.1

48.8
0.2

48.9
0.3

50.0

49.0

49.2

Half year to
30 Sept
2010
pence
2.40
2.40

Half year to
30 Sept
2009
pence
2.40
2.40

Year to31 March
2010
pence
2.40
6.00
8.40

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:

Previous period interim dividend
Previous period final dividend

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

Interim dividend
Final dividend

Half year to
30 Sept
2010
pence
2.52
2.52

Half year to
30 Sept
2009
Pence
2.40
2.40

Year to31 March
2010
pence
2.40
6.00
8.40

The interim dividend for the year to 31 March 2011 of 2.52 pence was approved by the Board on 16
November 2010 and has not been included as a liability as at 30 September 2010. The interim dividend will
be paid on 7 April 2011 to shareholders on the register at the close of business on 4 March 2011.

Page 16

Responsibility Statement of the Directors in respect of the Half Year Financial Statements
We confirm that to the best of our knowledge:•
the condensed set of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU;•
the interim management report includes a fair review of the information required by:(a)DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important
events that have occurred during the first six months of the financial year and their impact on
the condensed set of financial statements; and a description of the principal risks anduncertainties for the remaining six months of the year; and(b)
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions thathave taken place in the first six months of the current financial year and that have materiallyaffected the financial position or performance of the entity during that period; and anychanges in the related party transactions described in the last annual report that could do
so.
Jonathan Flint Chief Executive
16 November 2010

Kevin Boyd Group Finance Director

Principal Risks and Uncertainties
The Group has in place a risk management structure and internal controls which are designed to identify,
manage and mitigate risk.
In common with all businesses, Oxford Instruments faces a number of risks and uncertainties which could
have a material impact on the Group's long term performance.
On page 13 of its 2010 Annual Report and Accounts (a copy of which is available at www.oxfordinstruments.com), the Company set out what the Directors regarded as being the principal risks anduncertainties facing the Group's long term performance. These include technical risks associated with
developing advanced technologies, foreign exchange and commodity risks, risks in relation to the availabilityof and integration of acquisition targets, the risk of supply chain failures through outsourcing and the risk offluctuations in the reported pension deficit due to changes in actuarial assumptions. Many of these risks are
inherent to Oxford Instruments as a global business and they remain valid as regards their potential impact
during the remainder of the second half of the year.
The impact of the economic and end market environments in which the Group's businesses operate areconsidered in the Chairman's Statement and outlook sections of this Half Year Report, together with anindication if management is aware of any likely change in this situation.

Page 17

Independent Review Report by KPMG Audit Plc to Oxford Instruments plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the halfyearly financial report for the six months ended 30 September 2010 which comprises the Condensed
Consolidated Statement of Income, the Condensed Consolidated Statement of Comprehensive Income,Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Changes
in Equity, Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We haveread the other information contained in the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the information in the condensed set offinancial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist thecompany in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's
Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to thecompany those matters we are required to state to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK
FSA.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs
as adopted by the EU. The condensed set of financial statements included in this half-yearly financial reporthas been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in
the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and
Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity
issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists ofmaking enquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that might be identified in anaudit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set offinancial statements in the half-yearly financial report for the six months ended 30 September 2010 is notprepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK
FSA.

S Haydn-Jonesfor and on behalf of KPMG Audit Plc
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
16 November 2010

Page 18

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Oxford Instruments plc
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Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393442
email info.oiplc@oxinst.com

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