Oxford Instruments plc

Press Release

Tubney Woods, Abingdon, Oxon OX13 5QX, UK
Tel: +44 (0) 1865 393200
Email:info.plc@oxinst.com
www.oxford-instruments.com

Release Date: 7am Tuesday 11 June 2019
Oxford Instruments plc
Announcement of Preliminary Results for the year ended 31 March 2019
Oxford Instruments plc, a leading provider of high technology products and systems for industry and research, today
announces its Preliminary Results for the year ended 31 March 2019.

Revenue1
Adjusted* operating profit1
Adjusted* profit before tax1
Profit before tax1
Adjusted* basic earnings per share1
Basic earnings per share1
Dividend per share (full year)
Cash generated from operations1
Net cash/(debt)

Year ended
31 March 2019Year ended
31 March 2018

£m

£m

333.6
49.7
47.5
35.5
64.9p
50.1p
14.4p
56.3
6.7

296.9
46.5
42.3
34.2
56.3p
34.3p
13.3p
33.4
(19.7)% change
reported% change
constant
currency+12.4%+6.9%+12.3%+3.8%+15.3%+46.1%+8.3%+10.8%+9.7%

1Continuing operations

Financial Highlights:• Orders up 12.9% to £353.5m (2018: £313.0m), an increase of 12.0% at constant currency• Order book of £171.6m (31 March 2018: £153.0m, restated for IFRS 15) up 12.2% (9.4% at constant currency)• Reported revenue increased by 12.4% to £333.6m. The Group has adopted IFRS 15 ‘Revenue from Contracts with
Customers’ and IFRS 16 ‘Leases’. The impact is to increase revenue by £7.0m• Adjusted operating profit from continuing operations up 6.9% to £49.7m• Adjusted operating margin of 14.9% (2018: 15.7%), 15.5% at constant currency, impacted by a currency headwind
and in-year investment in operational excellence• Reported profit before tax up 3.8% to £35.5m after mark-to-market movement on currency derivatives and adjusting
items• Net cash of £6.7m following strong cash conversion of 103%
• Full year dividend increased by 8.3% to 14.4p
Operational Highlights:•
Continued progress with the implementation of our Horizon strategy, embedding defined capabilities and disciplines
across the businesses•
Incremental in-year investment in operational excellence with a focus on strategic procurement and operatingprocesses•
Strong order, revenue and profit growth in Materials & Characterisation supported by growth in advanced materialand semiconductor customer segments•
Healthy end markets across life science, quantum technology and academia supported strong order and revenue
growth across our Research & Discovery sector. Operating profit was held back in the period by a lower
performance from scientific X-ray tubes and Scienta Omicron•
Order, revenue and profit growth, with margin improvement, in Service & Healthcare, supported by growth in service
and support of our own products and an improved performance from our healthcare businesses•
Investment in R&D supporting new and future product launches; received the Queen’s Award for Innovation for ourlatest material analyser

Announcement of Preliminary Results for the year to 31 March 2019
Summary and Outlook:
Ian Barkshire, Chief Executive of Oxford Instruments plc, said: “We have made good progress in the year with thecontinued implementation of our Horizon strategy, which is delivering good growth and improved profitability. We areserving attractive markets with long-term fundamental growth drivers and focusing on segments where we can maintainleadership positions.
“Our core purpose is to address some of the world’s most pressing challenges. We have positioned the Group to be aleading provider of high technology products and services to image, analyse and manipulate materials down to theatomic and molecular level, facilitating a greener economy, increased connectivity, improved health and leaps in scientificunderstanding.
“While mindful of the backdrop of geopolitical and market uncertainty, we remain focused on improving the business andexpect to make further progress in the year.”

Enquiries:
Oxford Instruments plc
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director

Tel: 01865 393200

MHP Communications
Rachel Hirst / Luke Briggs

Tel: 020 3128 8100

Number of pages: 44*NOTE: Throughout this announcement we make reference to adjusted numbers. A full definition of adjusted numbers
can be found in note 1. Where we make reference to constant currency numbers these are prepared on a month bymonth basis using the translational and transactional exchange rates which prevailed in the previous year rather than
the actual exchange rates which prevailed in the year. Transactional exchange rates include the effect of our hedging
programme.

Oxford Instruments plc

2Announcement of Preliminary Results for the year to 31 March 2019
Chairman’s Statement
I was delighted to join Oxford Instruments as Chairman in December 2018 and this is my first report since taking on therole.
Oxford Instruments is a business that inspires the greatest admiration, with 2019 marking the Group’s 60th anniversary.
Today, Oxford Instruments’ technologies are helping to find cures for cancer, advance space exploration and develop
next generation electronics, advanced materials and quantum technologies. Our brand and capabilities are recognisedby the world’s leading industrial manufacturers and scientific research institutions, who specify our products to accelerate
their R&D, increase productivity in high tech manufacturing and achieve ground-breaking innovations.
In my first six months with the Group, I have enjoyed travelling around our sites and meeting our talented teams. I havebeen impressed with the quality of our businesses and the calibre of management driving our growth strategy.
This is evident in our full year results, which show strong progress across our businesses and in each of our major
geographies. I am especially heartened by the Group’s success in increasing its commercial customer base and its
market share in segments with long-term growth potential. I am also impressed by the Group’s strong cash position,
which represents a major turnaround over the last couple of years.
As Ian Barkshire sets out in the Chief Executive’s Review, the Group is making good progress transitioning from a
product focus to become a customer centric, market driven Group, increasing the value for our existing customers whilst
expanding our addressable markets. By building on our innovative technology and targeting attractive markets, I am
confident that the Group will deliver long-term sustainable growth and margin improvements.
Given our positive cash position and continued confidence, the Board has proposed to raise the final dividend to 10.6
pence (2018: 9.6 pence), giving a full-year dividend of 14.4 pence (2018: 13.3 pence), an increase of 8.3%.
I would like to thank Steve Blair for his commitment as Interim Chairman during the year. I also thank the Board and all
our employees for their contribution that has resulted in a successful year.

Oxford Instruments plc

3Announcement of Preliminary Results for the year to 31 March 2019
Chief Executive’s Review
We were delighted to welcome Neil Carson to the Board as our Non-Executive Chairman in December 2018. His wealthof Board and strategic leadership experience in high tech companies will be invaluable in helping us realise our growth
aspirations. I, and the rest of the Board, would like to thank Steve Blair for his leadership as Interim Chairman.
Embedding the Horizon Strategy
It has been a positive year for Oxford Instruments, with the Horizon strategy now well embedded across the Group. Thisis driving our long-term plans and initiatives and has transformed our operating processes and day-to-day activities,
resulting in a return to growth and improved financial performance. In particular, I have been delighted by the level of
employee engagement and their ownership of the execution of our new strategy. Through Horizon we are building astronger Oxford Instruments, positioning ourselves to deliver long-term sustainable growth and improved margins. Our
performance in the year is testament to our progress, with strong order and revenue growth across each of our threesectors, year on year profit growth, a closing net cash position, strong orderbook growth, and a book-to-bill ratio of 1.06.
Horizon is our transformational programme for the Group and has now been in place for two years. Through our focus
on Market Intimacy, Innovation and Product Development, Customer Support Services, and Operational Excellence wehave been changing the way we operate and have been embedding clearly defined capabilities and disciplines acrossour businesses. Whilst there is still much to do, we have made significant progress over the past two years and are
already seeing tangible returns.
We are now better positioned to address a broad and diverse range of attractive end markets and industrial sectors, andwe have seen the share of commercial customers rise to over 50% of revenue. This was achieved by reshaping ourportfolio and focusing on those areas where our key enabling technologies are driving long-term success for ourcustomers, where we can achieve and maintain leadership positions. Within these markets, our products, solutions andservices are facilitating a greener economy, increased connectivity, improved health and leaps in scientificunderstanding.
Through our Horizon focus, we help our customers accelerate their applied R&D, increase productivity in high tech
manufacturing and make ground-breaking discoveries. Our solutions are being used by customers to find cures forcancer, advance space exploration and develop next generation electronics, advanced materials and quantum
technologies.
Market Intimacy
We have made good progress in our transformation to a more customer-centric, market focused Group. Through a
deeper understanding of our target market segments and the diverse challenges faced by our customers, we havechanged the way we communicate and reach our prospective and existing customers, more clearly identifying the value
our products can add.
As we get closer to our customers across our target markets we have been able to identify growth opportunities within
our current markets and into new markets. We are seeing strong revenue growth from commercial customers as we
expand our offerings and addressable markets. Examples include the analytical solutions we offer for batteries, additive
manufacturing, automotive and aerospace, neuroscience and cell biology, lasers and optoelectronic devices, powerelectronics, and astronomy. Our heightened customer application-based market intelligence has strengthened our future
product roadmaps by identifying more attractive development opportunities and driving our priorities and focus forinnovation.
Operational Excellence
In the year, with our cohort of lean champions in place, we undertook a significant investment to deliver a step change
in our operational excellence programme, targeting three key areas: strategic procurement, operational efficiency andlogistics. This has re-shaped our operational teams and embedded new operating practices. Already this has increased
our revenue capacity with improved productivity for the current year. Investment in our operational excellence
programme within the year held back operating margins but helped to deliver increased revenues and established thefoundations and methodologies to support future growth and margin improvement.

Oxford Instruments plc

4Announcement of Preliminary Results for the year to 31 March 2019
People Capabilities
Within the Group we continue to build our leadership team, while enhancing commercial focus and core capabilities
across and within the Group at an operational level. This has been a dual approach of investing in our existing employees
as well as looking outside the organisation for individuals with specific capabilities and experience to accelerate ourprogress.
Innovation & Product Development
Innovation is part of our heritage and remains central to our strategy. Through Horizon we are more keenly targeting
our R&D investment to create differentiated products and solutions that will provide significant value for our customers
in our chosen long-term, high growth market segments. In the year, the success of our recently launched products
helped drive our growth across Advanced Materials, Semiconductor, Life Science and Quantum Technology
applications. Examples of new product innovations are provided in the Operations Review.
Results
The Group delivered a strong full year performance, with positive second half trading building on the progress seen in
the first half of the year. This resulted in strong order, revenue and profit growth, with the Horizon strategy producing
tangible improvements in business performance. This was underpinned by our chosen end markets and their underlying
growth drivers remaining attractive and robust. In addition, continued success from recently launched products further
strengthened our market leading product portfolio, supported by an increased commercial focus and progress inestablishing our customer-centric end application approach.
Reported revenue rose to £333.6m (2018: £296.9m), an increase of 12.4% (10.8% at constant currency). Materials &Characterisation and Research & Discovery sectors both delivered double digit revenue growth supported by the
success of recently launched products and an increased presence and demand from commercial customers. The
Service & Healthcare sector delivered good growth, driven predominantly by increased demand for services related toour own products. From an end market perspective, we had significant growth in Advanced Materials (31%), with strong
growth across the Lifescience (5%), Quantum Technologies (14%) and Semiconductor (4%) segments. From ageographical perspective, we had strong constant currency revenue growth in Asia and North America of 17.7% and9.8% respectively, with modest growth of 2.5% in Europe. Within Asia we had strong growth across the region including
China, Japan and South East Asia. Global distribution of revenues remains broadly in line with the previous year, with
Asia representing 43% of Group revenue, Europe 24% and North America 31%, which are broadly in line with global
R&D spend profiles.
Increased volumes and our enhanced commercial focus drove reported adjusted operating profit up 6.9% to £49.7m(2018: £46.5m) despite a modest currency headwind, representing an increase of 9.7% at constant currency. Adjusted
operating margin for the Group of 14.9% (2018: 15.7%) was impacted by an incremental in-year investment in ouroperational excellence programme and a small currency headwind. Operating margin at constant currency of 15.5%
was broadly in line with last year. Adjusted profit before tax increased by 12.3% to £47.5m (2018: £42.3m), representing
an increase of 15.4% at constant currency.
Continuing adjusted basic earnings per share increased by 15.3% to 64.9 pence (2018: 56.3 pence).
Reported orders for the Group were up 12.9% (12.0% at constant currency) to £353.5m (2018: £313.0m) with strong
growth across all three sectors. We continue to see increased customer demand, supported by our enhanced customer
application and market focus with good order growth from academic customers and stronger growth from commercial
customers. Orders grew in Europe, North America and Asia and across each of our market segments.
The orderbook, representing orders for future delivery, increased by 12.2% to £171.6m (2018: £153.0m), growth of 9.4%
at constant currency, with strong growth across Materials & Characterisation, Research & Discovery and services related
to our own products.
Good cash collection resulted in the Group moving to a net cash position of £6.7m from net debt of £19.7m at theprevious year end.

Oxford Instruments plc

5Announcement of Preliminary Results for the year to 31 March 2019
Sector Performance
Turning to the individual sector performance:
Materials & Characterisation products and solutions enable the fabrication and characterisation of materials anddevices down to the atomic scale, predominately supporting customers across applied R&D as well as the production
and manufacture of high technology products and devices. Building on a positive first half, the sector delivered a strong
financial performance underpinned by increased demand from commercial customers within the Advanced Materials
and Semiconductor & Communications segments.
The proportion of revenue from commercial customers rose in the year, representing 58% of sales from the sector.
Reported orders grew in the period by 11.2% to £144.0m (2018: £129.5m). Reported revenue increased by 16.8% to£137.9m, with reported adjusted operating profit rising to £22.1m (2018: £20.1m), growth of 10.0%. The orderbook for
future deliveries increased by 20.5% to £41.2m (2018: £34.2m). The reported operating margin of 16.0% (2018: 17.0%)
was held back by a currency headwind and investment in our operational excellence programme, with constant currency
margin of 16.8%.
Growth in Advanced Materials is driven by the increasing demand for lighter, stronger and higher performing materials
to address customer needs across a broad range of end applications including autonomous vehicles, increased
connectivity and a greener economy. Order and revenue growth of 8% and 4% respectively within the Semiconductor &Communications segment was supported by our breadth of analytical solutions utilised to accelerate the developmentof next generation devices, as well as the increasing demand for compound semiconductor processing solutions requiredfor 5G, autonomous vehicles and higher efficiency energy devices. This has more than offset a reduction in demand
from mainstream silicon-based chip semiconductor chip manufacture and consumer electronics.
Research & Discovery provides advanced solutions that create unique environments and enable imaging andanalytical measurements down to the molecular and subatomic level, predominantly used in scientific research andapplied R&D. Healthy end markets across Lifescience, Quantum Technologies and academic funded Research &Fundamental Science drove strong order and revenue growth in the year. Whilst the proportion of revenue fromcommercial customers increased in the year, 69% of sales in the sector are from academic and government funded
research communities. Growth in Lifescience applications was predominantly driven by increased demand for our
optical microscopy products and scientific cameras; Quantum Technologies by the continued global investment in
fundamental technologies and applied development in quantum computing, communication and optics; and Research& Fundamental Science by the increased funding globally in larger scale national facilities driving demand across ourportfolio of scientific instruments, cryogenics and high magnetic field platforms. Reported orders of £138.2m (2018:£118.2m) represented growth of 16.9%, with increases from both academic and commercial customers. Reported
revenue increased by 11.8% to £125.2m (2018: £112.0m).
The Group has adopted IFRS 15 ‘Revenue from Contracts with Customers’. The primary impact is the recognition ofrevenue on our complex cryogenic and magnet systems on installation, rather than shipment. The financial impact inthe year between the two accounting policies is an increase in revenue of £7.0m. The business has fundamentallychanged its approach to its operational processes, from assembly through to testing and on-site installation. Accordingly,
we have seen a significant reduction in the backlog of uninstalled complex systems.
In addition to the strategic investment in operational excellence, adjusted operating profit was held back in the period
due to a temporary but sustained period of low manufacturing yield and increased costs within our scientific X-ray tube
business as well as a lower contribution from our share of the Scienta Omicron joint venture. As a consequence,
operating margin reduced 220 basis points in the period to 10.1% (2018: 12.3%).
Service & Healthcare provides customer services and support for our own products and the service, sale and rental of
third-party healthcare imaging systems under the OI Healthcare brand. The sector had good growth in orders andrevenue, resulting in increased profitability and higher margins through our increased focus on service products,
customer support offerings and consumables related to our own products. In addition, this was combined with an
improved performance from the US OI Healthcare business. Reported orders increased by 8.7% to £71.3m (2018:£65.6m), reported revenue grew 5.5% to £70.5m (2018: £66.8m) and adjusted operating profit increased 18.3% to£14.9m (2018: £12.6m). Reported operating margin improved 220 basis points to 21.1% (2018: 18.9%).

Oxford Instruments plc

6

Announcement of Preliminary Results for the year to 31 March 2019
R&D
One of the core elements of our Horizon strategy is our investment in highly targeted innovation and productdevelopment in line with our short, medium and longer-term roadmaps to improve our market shares and expand ouraddressable markets. We incurred expenditure of £25.4m (2018: £24.8m) with an increased emphasis on products,
solutions and technologies that provide new capabilities, ease of use and enhanced productivity. We monitor the
proportion of revenue which originates from products launched in the last three years (our vitality index). In the period,
our vitality index remained in line with previous year at 37% (2018: 37%) representing a continued healthy pipeline andperformance of newly launched products.
PeopleOur staff are fundamental to our business success and I am delighted with their engagement, development andimplementation of our Horizon strategy. We have continued to increase the capabilities of our teams through thedevelopment of existing employees and the targeted recruitment of new talent.
I would like to thank all our employees for their commitment to Oxford Instruments and their passion to deliver an
exceptional experience for all our customers.
Summary and Outlook
We have made good progress in the year with the continued implementation of our Horizon strategy, which is delivering
good growth and improved profitability. We are serving attractive markets with long-term fundamental growth drivers
and focusing on segments where we can maintain leadership positions.
Our core purpose is to address some of the world’s most pressing challenges. We have positioned the Group to be aleading provider of high technology products and services to image, analyse and manipulate materials down to theatomic and molecular level, facilitating a greener economy, increased connectivity, improved health and leaps in scientificunderstanding.
While mindful of the backdrop of geopolitical and market uncertainty, we remain focused on improving the business andexpect to make further progress in the year.

Oxford Instruments plc

7

Announcement of Preliminary Results for the year to 31 March 2019
Operations Review
Our Group reports in the following three sectors: Materials & Characterisation, Research & Discovery, and Service &Healthcare.
Materials & Characterisation

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

2019
£m

2018
£m

Growth

137.9
22.1
16.0%
19.7

118.1
20.1
17.0%
17.3

16.8%

Constant
Currency
Growth1
15.3%

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

1
2

The Materials & Characterisation sector comprises Asylum Research, NanoAnalysis and Plasma Technology. This
sector has a broad customer base across a wide range of applications for the imaging and analysis of materials down
to the atomic level as well as the fabrication of semiconductor devices and structures through our range of advanced
semiconductor etch and deposition process systems. Our portfolio of imaging systems include our range of market
leading X-ray and electron analysis systems used in conjunction with electron and ion microscopes as well as our
performance leading atomic force microscopes. The sector has a strong focus on supporting and accelerating ourcustomers’ applied R&D, enabling the development of new devices, next generation higher performance materials andenhancing productivity in advanced manufacturing, quality assurance (QA) and quality control (QC). We provide leading
product performance, improved ease of use and enhanced productivity, with the analytics and information to aid theinterpretation of acquired data.
Materials & Characterisation delivered strong growth in orders, revenue and profitability. This was supported by ourcontinued focus on tailoring our product offering to targeted end customer segments and the success of recently
launched products and solutions. Through our applications focus we have been able to increase value for our existingcustomers and expanded our reach into new addressable markets. This led to significant growth from industrial andcommercial customers, with their proportion of sales in the period increasing to 58% (2018: 49%). Academic markets
remained robust with orders broadly in line with the previous year.
The sector had growth across each of our target application segments, with particularly strong growth within Advanced
Materials, which accounted for 39% of sales in the sector. Semiconductor & Communications represented 42% of sales,with Energy, Environment and Healthcare & Lifescience applications representing 7%, 6% and 5% of sales, respectively.
From a geographic perspective, revenue grew in each of the major regions of Europe, North America and Asia.
The continued demand for lighter, stronger and higher functioning materials has driven our growth in Advanced Materials.
Here, our solutions are being used to aid the development of next generation products and components, as well as in
the QC and QA of current manufactured products. Some of the key market applications include automotive andaerospace, additive manufacturing, consumer electronics, displays, and polymers.
As an example, the disruptive transformation within the automotive industry towards electric, hybrid and autonomousvehicles is driving manufacturers to use new composite materials and super alloys, faster dynamic control electronics,
and develop more efficient battery storage and power delivery solutions. This is driving an increasing demand for ouradvanced analytical imaging and etch and deposition systems, with the mechanical properties, performance andreliability of advanced materials being determined through the design and precise control of the composition,
microstructure and thin film coatings. In particular, we have had strong sales growth from our imaging and analysis
products used with electron microscopes, namely our UltimTM range of large area X-ray detectors and SymmetryTM, oursuper-fast material structural analysers. These analysers enable productivity improvement through higher speed,
resolution and accuracy of analysis.
We have also had good growth within additive manufacturing applications where our imaging systems are being used
to measure a range of critical material properties, assess the performance and quality of the manufactured components,and help optimise the manufacturing process. Building on our expertise in particle analysis, we have developed a tailoredsolution for the QC of the raw material feedstock, helping avoid contamination and maintaining end product performance.

Oxford Instruments plc

8

Announcement of Preliminary Results for the year to 31 March 2019The Semiconductor & Communications segment saw continued order and revenue growth in the year. Whilst sales tomainstream silicon chip manufacturing and electronics declined, we received particularly strong growth from commercial
customers across our portfolio of semiconductor etch and deposition solutions, underpinned by our leading performanceand expertise in compound semiconductors. Here, materials such as silicon carbide, indium phosphide and gallium
nitride are critical to produce the higher speeds, larger capacity and improved energy efficiencies required to realise agreener economy, autonomous vehicles and ubiquitous unbound connectivity, when compared to current silicon based
technologies. Success in the segment was supported by the breadth of end applications that we support, as well as ourreach across fundamental research, applied R&D of next generation products, and the manufacturing support andproduction of current products.
Within compound semiconductors we have seen increasing demand being driven by the long-term transitioning oftechnology away from silicon based solutions for power electronics, connectivity and communication. Power electronics
are the enabling technologies to use, distribute and generate electrical energy. The move to silicon carbide and gallium
nitride based solutions enables a step change in energy efficiency, with increased sales across a range of end
applications including electric vehicles and distribution networks. Our gallium arsenide and indium phosphide processsolutions support the increased speed and infrastructure capacity required to deliver the desired transformation inconnectivity, for example 5G networks and the rise in the data economy. Demand for increased communication is driving
growth across sensors and optoelectronic devices such as vertical cavity surface emitting lasers (VCSELs), threedimensional sensor arrays and microLEDs used across heads up displays, video walls and smart watches. We havebeen working with a number of leading commercial organisations to help develop the necessary semiconductor device
performance, quality and reliability at commercially effective price points.
In the Energy segment, we saw good growth across energy generation, storage and battery applications as a result of
the increasing interest in lithium (Li) batteries. Here our material analysers support two key drivers. First, our advanced
high energy-resolution and ultra-sensitive Extreme™ X-ray analyser is the market leader in imaging of the internal
chemistry and active interfaces at the nanoscale required for the development of new, higher capacity and fastercharging systems. Second, we have developed a tailored particle analysis solution to aid the detection of microscale
metal impurities, which degrade performance and can cause catastrophic failure. In recognition of the innovationencompassed within the Extreme™, it has recently received the Queen’s Award for Innovation.
As our analytical systems become increasingly sensitive and easier to use by non-experts, we have found newopportunities within several markets for our X-ray analysers and atomic force microscopes. In Lifescience, researchers
are using our video rate CypherTM atomic force microscope to observe biomolecular interactions in real-time, furthering
their understanding of how our bodies work. Our large area and high sensitivity X-ray solutions are being used to observe
the role of calcium, sodium and potassium ions in cardiac, brain and nerve cell functionality; while in food markets weare helping to improve food integrity and production yield.

Oxford Instruments plc

9Announcement of Preliminary Results for the year to 31 March 2019
Research & Discovery

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

2019
£m

2018
£m

Growth

125.2
12.7
10.1%
6.6

112.0
13.8
12.3%
4.1

11.8%

Constant
Currency
Growth1
9.9%

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

1
2

The Research & Discovery sector includes Andor Technology, Magnetic Resonance, NanoScience, X-Ray Technology
and our minority share in Scienta Omicron. This sector provides advanced solutions that create unique environments
and enable imaging and analytical measurements down to the molecular and subatomic level, used predominantly infundamental and applied research. We build on our relationships with customers working on breakthrough applications
in research to gain insights and support future commercial applications. We have strong brand recognition and leading
product performance in our chosen market segments, with 69% of sales from the academic or government funded
research community and 31% from industrial or commercial customers.
The sector had good growth in orders and revenue driven by a strong performance from our optical microscopy systems,
scientific cameras, cryogenic systems and superconducting research magnets. Performance was supported by positive
academic end markets leading to strong order growth across the product portfolio, augmented by further growth into
commercial customers for our scientific cameras, cryogenic and optical microscopy systems. We saw continued
improvement in our NanoScience business under a new leadership team. However, underlying profit improvement within
the sector was more than offset by a temporary, but sustained, period of low manufacturing yield at X-Ray Technology,
which produces our scientific X-ray tubes for third party customers, a lower contribution from the Scientia-Omicron joint
venture and an investment in operational excellence.
We had growth across our three largest customer segments of Healthcare & Lifescience, Quantum Technology, andResearch & Fundamental Science, which represent 41%, 22% and 19% of sales respectively. Sales to customers
exploring new advanced materials, semiconductors or developing energy and environmental applications remained
broadly in line with the previous year. From a geographical perspective we had good growth across Europe, Asia andNorth America.
Growth in Healthcare & Lifescience was driven by a strong performance from our optical microscopy products andsolutions, including our DragonflyTM confocal microscope, our image visualisation and analysis software and scientificcameras used on third party measurement solutions. The launch of our SonaTM camera further enhanced our portfolioof high sensitivity cameras specifically tailored for life science applications.
There is an increasing need from those working in neuroscience, cell and developmental biology to be able to acquire,visualise and analyse multiple large samples to better understand the core biological processes that lead to disease.
Dragonfly™ has become a platform of choice for these researchers as it can handle such sample types while offering
ease of use and an exceptional imaging capability that spans from the millimetre scale right down to the nanometre
scale. The enhanced performance it provides researchers is enabling improved understanding and the development of
new therapeutic approaches for cancer and neurological conditions, such as Alzheimer’s and Parkinson’s.
Building on our understanding of the needs of researchers in this segment, Imaris™, our imaging software, enables thevisualisation and analysis of the huge data set modern optical microscopy systems create. Imaris™ offers enhanced
interpretation of results and our customers are using it to better understand conditions, such as Autism and Alzheimer’s,and processes, such as cellular activity during wound and organ repair and immune response to foreign organisms.
Our high sensitivity cameras, which offer enhanced performance at low light levels, are being used to measure andobserve the interaction with individual biomolecules in real time, increasing the accuracy and relevance of results. Thishas proven especially valuable for our strategic OEM partners. It is providing them with a core capability for their genesequencing and clinical screening solutions, which are used for drug feasibility studies and in the development of
personalised medicines.

Oxford Instruments plc

10Announcement of Preliminary Results for the year to 31 March 2019
With the expanding role of technology in the world we have seen an increase in academic and government investment
in more basic and fundamental science across a broad range of disciplines, as well as an ongoing renewal andregeneration of large-scale national user facilities. While end user applications vary, we are well positioned to support
them with a range of optical, cryogenic, magnetic resonance imaging and high magnetic field solutions.
During the year we won a significant global tender to supply several high-performance cryogenic and extreme magnetic
field systems to the renowned Institute of Physics Chinese Academy of Sciences (IOP-CAS). This builds on theperformance and reliability of the many systems we have previously supplied to the IOP-CAS’s existing laboratories.
Our solutions will allow researchers to make ground breaking discoveries of new materials and novel phenomena,
furthering our understanding of the structure, properties and performance of these materials on a quantum scale.
We continue to see sales growth in Astronomy, where our specialised cameras, such as the recently launched Marana™,
are allowing the rapid imaging of large areas of the sky with increased sensitivity. This is enhancing the tracking of small
particles of space junk that had been previously undetectable; space junk can be very damaging to operational satellites
and future space missions. Exoplanet discovery continues to attract notable funding within astronomy and our range oflarge area cameras are well placed for this application. The drive to find other earth-like planets and the increased levelof privately-funded space developments provide continued growth opportunities.
Fundamental shifts in technology and capability are driving increased research and applied development for bothacademic and commercial customers. Quantum Technology continues to deliver strong demand and we had increasedorder growth in the year for this segment. Global annual spend on quantum technologies is estimated to exceed $1.5
billion and is set to continue over the next decade. Quantum technologies offer the potential for vast increases incomputational speed, new paradigms for secure information transfer and unprecedented sensor sensitivities applicable
across a broad range of industrial and medical applications. With our Triton™ ultra-low temperature cryogenic platforms
and iXon™ cameras, we are well placed to exploit these growing opportunities.
Within the Energy, Environment and Advanced Materials segments our broad range of analytical systems are supporting
research into sustainable foods, water cleanliness and advanced fabrics, as well as ensuring compliance within foodsupply. For example, our high field benchtop magnetic resonance analysers are being used to measure the oil and fat
content of foods, contamination within water, and are aiding the productivity and quality control of high-performance
fabrics for clothing manufacture.

Oxford Instruments plc

11Announcement of Preliminary Results for the year to 31 March 2019
Service & Healthcare Sector

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

2019
£m

2018
£m

Growth

70.5
14.9
21.1%
14.1

66.8
12.6
18.9%
10.6

5.5%

Constant
Currency
Growth1
4.2%

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

1
2

The Service & Healthcare sector comprises the Group’s maintenance service contracts, billable repairs, training andsupport services, and spare part sales related to Oxford Instruments’ own products under the OiService brand; and thesale, service and rental of refurbished third-party MRI and CT machines under the OI Healthcare brand.
In the year the sector had order and revenue growth, with increased profitability and operating margin, as a result of an
improved performance from both OI Healthcare and OiService.
Our US OI Healthcare business continues to return a higher proportion of revenue from service contracts relative to thesale of refurbished systems, in line with our strategy. In the year there has been good improvement in the lease utilisationof our fleet of mobile imaging systems, and our increased focus on service capabilities has helped win multi-instrument
contracts at larger imaging centres.
Within Japan, we continue our focus on supporting our key account customers through the provision of best in classservice support for a range of MRI systems. Our technical expertise, response times and national coverage has enabled
us to win further accounts within the year.
In OiService we have seen an increased demand for services and support related to our own products. As part of our
Horizon strategy we continue to develop our customer service offerings, supporting our customers’ needs by focusing
on how we can add value in their day-to-day work and increase their overall productivity. We offer remote support
packages and can undertake dynamic and remote monitoring of system performance to improve yield and maximise uptime. We have also created bespoke training packages to help our customers get the most from their equipment andhelp with expert data interpretation. We have built on the ongoing success of our Chinese Summer Microscopy Schoolby hosting Taiwan’s first School of Microscopy with the National Taiwan University. This two-day event attracted over
150 participants from academia and industry. Through our dedicated e-commerce website, our customers canconveniently find a range of relevant consumables and a selection of related services.

Oxford Instruments plc

12Announcement of Preliminary Results for the year to 31 March 2019
Finance Review
The Group has adopted IFRS 15 ‘Revenue from Contracts with Customers’ using the modified retrospective approach.
Comparatives have not been restated. The main difference is within our NanoScience business where the revenue
recognition on complex customised magnetic and cryogenic systems is deferred from being primarily on transfer of rights
and rewards of ownership to completion of installation. The Group has also adopted IFRS 16 ‘Leases’ in the 2018/19
financial year. The net accounting impact of adopting IFRS 15 and IFRS 16 is to increase revenue by £7.0m and profit
before tax by £2.6m.
Reported orders increased by 12.9% to £353.5m (2018: £313.0m), an increase of 12.0% at constant currency. At theend of the period the Group’s order book for future deliveries stood at £171.6m (31 March 2018: £134.0m). The orderbook as at 31 March 2018 restated on an IFRS 15 basis is £153.0m, against £134.0m as previously reported. Against
this IFRS 15 adjusted comparative, the order book grew 12.2% on a reported basis and 9.4% at constant currency.
Reported revenue increased by 12.4% to £333.6m (2018: £296.9m). Revenue, excluding currency effects, increased by
10.8%, with the movement in average currency exchange rates over the year increasing reported revenue by £4.7m.
Adjusted operating profit from continuing operations increased by 6.9% to £49.7m (2018: £46.5m). Adjusted operating
profit from continuing operations, excluding currency effects, increased by 9.7%. Adjusted operating margin fromcontinuing operations decreased by 80 basis points to 14.9% (2018: 15.7%), impacted by a currency headwind and inyear investment in operational excellence. Excluding currency effects, adjusted operating margin fell by 20 basis points
to 15.5%.
Adjusted profit before tax from continuing operations grew by 12.3% to £47.5m (2018: £42.3m), representing a marginof 14.2% (2018: 14.2%).
Adjusting items include amortisation of acquired intangibles of £9.6m and a net charge of £0.9m relating to loan note
make-whole settlement payments, a net credit from our associate, Scienta Omicron, and a charge due to Guaranteed
Minimum Pension equalisation. The movement in the mark-to-market valuation of un-crystallised currency hedges for
future years gave rise to a charge of £1.5m.
After adjusting items, the Group recorded an operating profit of £38.6m (2018: £38.4m) and profit before tax of £35.5m(2018: £34.2m).
Continuing adjusted basic earnings per share grew by 15.3% to 64.9 pence (2018: 56.3 pence). Continuing basic
earnings per share was 50.1 pence (2018: 34.3 pence).
Cash generated from operations of £56.3m (2018: £33.4m), represents 103% (2018: 69%) cash conversion. Net debt
decreased from £19.7m on 31 March 2018 to net cash of £6.7m.
Adjusted operating profit is stated before impairment and amortisation of goodwill and acquired intangibles, restructuringcosts, the mark-to-market valuation of unexpired currency hedges, and other adjusting items, as set out in Note 1 to the
Financial Statements.

Oxford Instruments plc

13

Announcement of Preliminary Results for the year to 31 March 2019
Income Statement
The Group’s Income Statement is summarised below.
Year
ended 31
March
2018
£m
296.9
150.9
(105.8)
0.5
0.9
46.5
(4.2)
42.3
(10.9)
(0.3)
3.1
34.2
(14.6)
19.6
23.9%

ChangeRevenue
Gross profit
Administrative expenses
Share of profit of associate
Foreign exchange
Adjusted operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquired intangibles
Non-recurring items
Mark-to-market of currency hedges
Profit before tax
Tax from continuing operations
Profit for the period from continuing operations
Adjusted effective tax rate1

Year
ended 31
March
2019
£m
333.6
177.0
(126.3)
0.2
(1.2)
49.7
(2.2)
47.5
(9.6)
(0.9)
(1.5)
35.5
(6.8)
28.7
21.9%

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

64.9p
50.1p

56.3p
34.3p

15.3%
46.1%

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

64.3p
49.7p

56.1p
34.1p

14.6%
45.7%

Dividend per share

14.4p

13.3p

8.3%

1.

12.4%
17.3%

6.9%
12.3%

The adjusted effective tax rate is calculated excluding amortisation of acquired intangibles, the mark-to-market of financial derivatives, and other adjusting items.

Orders and Revenue
Total reported orders grew by 12.9% (12.0% at constant currency) to £353.5m. Orders, at constant currency, increasedby 10.3% for Materials & Characterisation, 16.1% for Research & Discovery and 7.6% for Service & Healthcare.
Reported revenue of £333.6m (2018: £296.9m) increased by 12.4% (10.8% at constant currency). Reported revenue
increased by 16.8% for Materials & Characterisation, 11.8% for Research & Discovery and 5.5% for Service &Healthcare.
The book-to-bill ratio (orders received to goods and services billed in the period) for the year was 1.06.
Revenue, at constant currency, increased by 15.3% for Materials & Characterisation, with a particularly strong
performance from NanoAnalysis and Plasma Technology. Constant currency growth of 9.9% in Research & Discovery
was primarily driven by good progress from Andor Technology, partially offset by a small decline in revenue for X-Ray
Technology. Service & Healthcare constant currency revenue grew by 4.2%, with good growth from the service of ourown products.
On a geographical basis, at constant currency, revenue grew by 2.5% in Europe, 9.8% in North America, 17.7% in Asia,with a small decline in Rest of World of 5.9%.
After adjusting the comparative period for IFRS 15, total reported order book grew by 12.2% (9.4% at constant currency).
The order book, at constant currency, compared to 31 March 2018, increased by 16.7% for Materials & Characterisationand 15.3% for Research & Discovery. Good growth in orders from the service of our own products was offset by a decline
in OI Healthcare’s order book, resulting in a segment decline of 8.0%.

Oxford Instruments plc

14

Announcement of Preliminary Results for the year to 31 March 2019£m
Revenue: 2017/18
Underlying movement
Foreign exchange
Revenue: 2018/19

Materials &Characterisation
118.1
18.1
1.7
137.9

Research &Discovery
112.0
11.1
2.1
125.2

Service &Healthcare
66.8
2.8
0.9
70.5

Total1

Revenue growth: reported
Revenue growth: constant currency

16.8%
15.3%

11.8%
9.9%

5.5%
4.2%

12.4%
10.8%

1.

296.9
32.0
4.7
333.6

Excluding inter-sector revenue.

Gross profit
Gross profit increased by 17.3% to £177.0m (2018: £150.9m), representing a gross profit margin of 53.1%, an increaseof 230 basis points over last year.
Operating profit
Adjusted operating profit from continuing operations increased by 6.9% to £49.7m (2018: £46.5m), representing an
adjusted operating profit margin of 14.9%, a decrease of 80 basis points against last year. At constant currency, theadjusted operating profit margin was 15.5%, a decrease of 20 basis points. The margins across all three segments havebeen impacted by the allocation of £2.0m of incremental costs associated with our operational improvement programme.
Excluding these costs, adjusted operating margin would have been 15.5% on a reported basis and 16.1% at constantcurrency.
Materials & Characterisation margin declined by 100 basis points to 16.0% (2018: 17.0%). At constant currency, themargin was 16.8%, a decline of 20 basis points.
Research & Discovery’s adjusted operating margin declined to 10.1% (2018: 12.3%), a decline of 220 basis points. At
constant currency, the margin was 11.0%, a decline of 130 basis points. In addition to the segment’s share of operational
improvement costs, the reduction was impacted by a loss in the year incurred within our X-Ray Technology business.
Service & Healthcare margin increased by 220 basis points to 21.1% (2018: 18.9%). At constant currency, the margin
was 21.0%, an increase of 210 basis points.
During the year the Group received a favourable legal opinion on a long-term patent dispute. Consequently, a provisionof £1.5m was released to adjusted operating profit. As a key element of its operational excellence programme, the Groupis committed to reducing working capital across its portfolio of businesses. Inventories and receivables are being closely
scrutinised and measured against set targets. The Group has increased the provision for a write-down of working capitalby £1.8m.
Our share of the Scienta Omicron joint venture showed an adjusted profit after tax of £0.2m for the year, against a profitof £0.5m for the comparative period. After adjusting items, our share of the Scienta Omicron joint venture was a profit of£0.5m.
Currency effects (including the impact of transactional currency hedging) have reduced reported adjusted operating
profit by £1.3m when compared to blended hedged exchange rates for the comparative period.

£mAdjusted operating profit: 2017/18
Underlying movement
Foreign exchange
Adjusted operating profit: 2018/19

Materials &Characterisation
20.1
2.8
(0.8)
22.1

Research &Discovery
13.8
(0.3)
(0.8)
12.7

Service &Healthcare
12.6
2.0
0.3
14.9

Total

Margin: 2017/18
Margin: 2018/19

17.0%
16.0%

12.3%
10.1%

18.9%
21.1%

15.7%
14.9%

Oxford Instruments plc

46.5
4.5
(1.3)
49.7

15

Announcement of Preliminary Results for the year to 31 March 2019
Adjusting items
Amortisation of acquired intangibles of £9.6m relates to intangible assets recognised on acquisitions, being the value oftechnology, customer relationships and brands.
Non-recurring items were a net charge of £0.9m. During the period we repaid £11.5m of the principal outstanding onloan notes as a condition of the sale of Industrial Analysis. The make-whole settlement cost due at the time of therepayment was £0.9m. Following the High Court’s confirmation on Guaranteed Minimum Pension equalisation between
males and females, we have recognised a charge of £0.3m. Our associate recognised a net gain of £0.3m, comprisedof a gain of £0.6m on a reversal of an impairment, partially offset by £0.3m of restructuring costs.
The Group uses derivative products to hedge its short-term exposure to fluctuations in foreign exchange rates. It is
Group policy to have in place at the beginning of the financial year hedging instruments to cover 80% of its forecast
transactional exposure for that year. The Group has decided that the additional costs of meeting the extensive
documentation requirements of IFRS 9 to apply hedge accounting to these foreign exchange hedges cannot be justified.
Accordingly, the Group does not use hedge accounting for these derivatives.
Net movements on marking-to-market derivatives in respect of future periods are disclosed in the Income Statement asforeign exchange and excluded from our calculation of adjusted profit before tax.
The mark-to-market loss in respect of derivative financial instruments was £1.5m (2018: £3.1m gain). This reflects the
movement on currency derivatives that are hedging future transactional currency exposures for the Group - from an
opening net fair value asset of £1.5m to a closing neutral position. The year-end neutral position reflects an uncrystallised loss arising from a fall in the value of Sterling at the balance sheet date against a blended rate achieved on
US Dollar forward contracts that will mature over the next twelve months. This has been offset by an un-crystallised gain
attributable to a rise in the value of Sterling at the balance sheet date against a blended rate achieved on Euro andJapanese Yen forward contracts that will mature over the next twelve months.
Net finance costs
The Group’s adjusted net finance costs fell by £2.0m to £2.2m (2018: £4.2m) with net finance charges falling by £1.7m
to £1.9m, and pension financing charges falling by £0.3m to £0.3m.
Profit before tax
Continuing adjusted profit before tax increased by 12.3% to £47.5m (2018: £42.3m). The adjusted profit before tax
margin of 14.2% (2018: 14.2%) was in line with last year.
Profit before tax of £35.5m (2018: £34.2m) is after the mark-to-market movement on derivative financial instruments,
amortisation of acquired intangibles and other adjusting items.
Tax
The adjusted tax charge from continuing operations of £10.4m (2018: £10.1m) represents an effective tax rate of 21.9%(2018: 23.9%). In April 2019, the Tax Tribunal adjudicated on a historical loan arrangement structure. The decision went
against Oxford Instruments and as a result a payment of £4.0m was made to HMRC in April 2019. The liability wasbroadly covered by historical provisions and one-off credits.
Earnings per share
Continuing adjusted basic earnings per share increased by 15.3% to 64.9 pence (2018: 56.3 pence); continuing adjusted
diluted earnings per share grew by 14.6% to 64.3 pence (2018: 56.1 pence). Continuing basic earnings per share
increased by 46.1% to 50.1 pence (2018: 34.3 pence); continuing diluted earnings per share grew by 45.7% to 49.7
pence (2018: 34.1 pence).
The number of undiluted weighted average shares remained constant at 57.2m.
Foreign exchange
The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euro andJapanese Yen. For the year, approximately 14% of Group revenue was denominated in Sterling, 55% in US Dollars,
18% in Euros, 11% in Japanese Yen and 2% in other currencies. Translational exposures arise on the consolidation ofoverseas company results into Sterling. Transactional exposures arise where the currency of sale or purchasetransactions differs from the functional currency in which each company prepares its local accounts.

Oxford Instruments plc

16

Announcement of Preliminary Results for the year to 31 March 2019
The Group maintains a hedging programme against its net transactional exposure using internal projections of expectedcurrency trading transactions expected to arise over a period extending from 12 to 24 months. As at 31 March 2019 theGroup had currency hedges in place extending up to twelve months forward.
Discontinued Operations
In May 2019, the Group received £1.6m in relation to the finalisation of tax affairs outstanding upon the disposal of theIndustrial Analysis business. A gain of £1.3m after taxation has been recorded under discontinued operations. Recorded
within the comparative period under discontinued operations is a post-tax profit of £45.9m from the sale of Industrial
Analysis, which was completed on 3 July 2017.
Dividend
The Group’s policy is to increase the dividend each year in line with the increase in underlying earnings, considering
movements in currency. The Board has proposed to increase the final dividend to 10.6 pence (2018: 9.6 pence). This
results in a total dividend of 14.4 pence (2018: 13.3 pence), an increase of 8.3%. The final dividend will be paid, subject
to shareholder approval, on 18 October 2019 to Shareholders on the register as at 13 September 2019.
Cash flow
The Group cash flow is summarised below.

Adjusted operating profit
Depreciation and amortisation
Adjusted EBITDA
Working capital movement
Purchase of rental assets held for subsequent sale
Loss on disposal of property, plant and equipment
Equity settled share schemes
Share of profit from associate
Restructuring costs
Pension scheme payments above charge to operating profit
Cash generated from operations
Interest
Tax
Capitalised development expenditure
Expenditure on tangible and intangible assets
Proceeds from sale of property, plant and equipment
Increase in investment in associate
Proceeds from sale of subsidiary undertaking
Decrease in long-term receivables
Dividends paid
Proceeds from issue of share capital and exercise of share options
Payments made in respect of lease liabilities
Decrease in borrowings
Net increase/(decrease) in cash and cash equivalents from continuing
operations

Year
ended
31 March
2019
£m
49.7
11.0
60.7
3.7
(1.1)
0.2
0.8
(0.2)
(0.7)
(7.1)
56.3
(3.2)
(8.7)
(3.5)
(6.3)
1.1
(7.6)
0.2
(3.2)
(11.5)
13.6

Year
ended
31 March
2018
£m
46.5
9.1
55.6
(13.2)
(0.7)
0.3
1.1
(0.5)
(1.3)
(7.9)
33.4
(2.1)
(3.8)
(5.8)
(4.8)
9.3
(2.1)
71.2
0.9
(7.4)
0.2
(96.8)(7.8)

Note: Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation of acquired intangibles, mark-to-market of financial derivatives, restructuring costs andother non-cash adjusting items.

Cash generated from operations
Cash generated from operations of £56.3m (2018: £33.4m), represents 103% (2018: 69%) cash conversion. The impact
of IFRS 16 is to recognise a lease liability and corresponding asset for leases previously classified as operating leases.
As a result, the depreciation charge for the year includes an additional £3.3m reflecting the increase in asset base.
Compared to the comparative period, cash generated from operations is also higher by £3.3m. Cash conversion isdefined as cash generated from operations before non-recurring items and pension scheme payments, less, capitalised
development expenditure, capital expenditure and payments made in respect of finance leases / adjusted operating

Oxford Instruments plc

17

Announcement of Preliminary Results for the year to 31 March 2019
profit. Payments made in respect of finance leases are now included within our definition of cash conversion to retain alike-for-like comparison following the introduction of IFRS 16.
Working capital fell by £3.7m, reflecting an increase in inventories of £4.0m and receivables of £3.5m, combined withpayables and customer deposits increasing by £4.1m and £7.1m respectively.
Interest
Net interest paid was £3.2m (2018: £2.1m). This includes loan note make-whole payments of £0.9m as a consequenceof repaying loan note principal following the sale of Industrial Analysis. Net interest paid in the comparative period was
low due to payment timing differences.
Tax
Tax paid was £8.7m (2018: £3.8m), the comparative period benefiting from tax deductions on allowable adjusting items
and utilisation of brought forward tax losses. Following the Tax Tribunal adjudication on historical loan structures, theGroup made a cash settlement to HMRC of £4.0m in April 2019, after the end of the financial year.
Investment in Research and Development (R&D)
Total cash spend on R&D in the year was £25.4m, equivalent to 7.6% of sales (2018: £24.8m, 8.4% of sales). A
reconciliation between the amounts charged to the Income Statement and the cash spent is given below:

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

Year
ended
31 March
2019
£m
25.4
(0.1)
0.1
(3.5)
3.5
25.4

Year
ended
31 March
2018
£m
23.4
(0.1)
0.1
(4.4)
5.8
24.8

Investment in associate
In the comparative period, the shareholders of Scienta Omicron agreed to a capital injection to strengthen the balance
sheet of the joint venture and ensure future liquidity in support of the business strategy. Our share was £2.1m and was
paid in September 2017.
Disposals
The sale of Industrial Analysis was completed on 3 July 2017. A post-tax profit of £45.9m is recorded within discontinued
operations for the comparative period.
Net debt and funding
Net debt
Good cash generation in the year moved the Group from having opening net debt of £19.7m to net cash of £6.7m. Cashgenerated from operations was £56.3m. The Group invested in capitalised development costs of £3.5m and tangible
and intangible assets of £6.3m.

Oxford Instruments plc

18

Announcement of Preliminary Results for the year to 31 March 2019
Movement in net debt
Net debt as at 31 March 2018
Cash generated from operations
Interest
Tax
Capitalised development expenditure
Capital expenditure on tangible and intangible assets
Payments made in respect of lease liabilities
Decrease in long-term receivables
Dividends paid
Foreign exchange and other items
Net cash as at 31 March 2019£m
19.7
(56.3)
3.2
8.7
3.5
6.3
3.2
(1.1)
7.6
(1.5)
(6.7)

Funding
On 2 July 2018 the Group entered into a new unsecured multi-currency revolving facility agreement, which is committed
until June 2023 with one-year extension options at the end of the first and second years. The facility has been enteredinto with two banks and comprises a Euro denominated multi-currency facility of €50.0m and a US Dollar denominatedmulti-currency facility of $80.0m.
In the first half of the year the Group repaid, as a pre-condition relating to the sale of Industrial Analysis, £11.5m of its
bilateral private placement note, leaving an outstanding note of £27.9m, which matures in March 2021. Associated makewhole settlement costs of £0.9m have been included within non-recurring items.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 31
March 2019 the business had net cash.
Pensions
The Group has defined benefit pension schemes in the UK and USA. Both have been closed to new entrants since 2001
and closed to future accrual from 2010.
At 31 March 2019, the net liability arising from our defined benefit scheme obligations was £6.5m (31 March 2018:£15.3m), a fall of £8.8m. The reduction in the deficit was primarily due to the contributions paid in the period. Total
scheme assets at 31 March 2019 were £311.4m (31 March 2018: £289.5m) while liabilities were £317.9m (31 March
2018: £304.8m).
As at 31 March 2019, the UK defined benefit pension liability includes an allowance of £0.3m for the expected cost ofequalising Guaranteed Minimum Pension between males and females.
We have commenced a process to terminate the US defined benefit pension scheme. This will extinguish all liabilitiesof the scheme. The process is in its early stages and is not expected to complete until the end of March 2020. We
estimate that the cash cost of termination will be approximately US$4.5m, with most of this due to be paid in the second
half of the 2019/20 financial year.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance andposition, are set out in the Performance, Strategy and Operations sections. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in the Financial Review.
The diverse nature of the Group, combined with its financial strength, provides a solid foundation for a sustainablebusiness. The Directors have reviewed the Group’s forecasts and flexed them to incorporate a number of potential
scenarios relating to changes in trading performance. The Directors believe that the Group will be able to operate within
its existing debt facilities. This review also considered hedging arrangements in place. The Directors believe that theGroup is well placed to manage its business risks successfully.
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after making
reasonable enquires, that the Group has adequate resources to continue in operational existence for the foreseeable
future.

Oxford Instruments plc

19Announcement of Preliminary Results for the year to 31 March 2019
Forward-looking statements
This document contains certain forward-looking statements. The forward-looking statements reflect the knowledge andinformation available to the Company during the preparation and up to the publication of this document. By their very
nature, these statements depend upon circumstances and relate to events that may occur in the future thereby involving
a degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecast by the Company.
Gavin Hill
Group Finance Director
11 June 2019

Oxford Instruments plc

20

Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Income
year ended 31 March 2019

Adjusted*
Notes£mAdjustingitems*
£m

333.6

—

333.6

Cost of sales(156.6)—(156.6)Gross profit

177.0

—

177.0

Revenue

3

Total
£m

(25.4)—(25.4)

Selling and marketing(61.3)—(61.3)

Administration and shared services(39.6)(9.9)(49.5)

0.2

0.3

0.5

Foreign exchange

(1.2)

(1.5)

(2.7)

Operating profit/(loss)

49.7(11.1)

38.6

Other financial income

0.3

—

0.3

Financial income

0.3

—

0.3

Interest charge on pension scheme net liabilities

(0.3)

—

(0.3)

Other financial expenditure

(2.2)

(0.9)

(3.1)

Financial expenditure

(2.5)

(0.9)

(3.4)

Profit/(loss) before income tax from continuing operations

47.5(12.0)

35.5(10.4)

3.6

(6.8)

37.1

(8.4)

28.7

—

1.3

1.3

37.1

(7.1)

30.0

Research and development

Share of profit of associate, net of tax

Income tax (expense)/credit

4

5

7

Profit/(loss) for the year from continuing operations
Profit from discontinued operations after tax

6

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

pence

pence

From continuing operations

64.9

50.1

From discontinued operations

—

2.3

64.9

52.4

From continuing operations

64.3

49.7

From discontinued operations

—

2.3

64.3

52.0

Earnings per share
Basic earnings per share

2

From profit for the year
Diluted earnings per share

2

From profit for the year
Dividends per share
Dividends paid

8

13.3

Dividends proposed

8

14.4

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

The attached notes form part of the Financial Statements.

Oxford Instruments plc

21

Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Income
year ended 31 March 2018

Notes

Adjusted*£m

Adjustingitems*
£m

Total
£m

3

296.9

—

296.9

Cost of sales(146.0)—(146.0)Gross profit

150.9

—

150.9

Revenue

Research and development(23.4)—(23.4)

Selling and marketing(53.9)—(53.9)

Administration and shared services(28.5)(12.1)(40.6)

0.5

(2.4)

(1.9)

—

3.3

3.3

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

4

5

Other operating income
Foreign exchange

0.9

3.1

4.0

Operating profit/(loss)

46.5

(8.1)

38.4

Other financial income

0.3

—

0.3

Financial income

0.3

—

0.3

Interest charge on pension scheme net liabilities

(0.6)

—

(0.6)

Other financial expenditure

(3.9)

—

(3.9)

Financial expenditure

(4.5)

—

(4.5)

Profit/(loss) before income tax from continuing operations

42.3

(8.1)

34.2

(10.1)(4.5)(14.6)

32.2(12.6)

19.6

(0.4)

46.3

45.9

31.8

33.7

65.5

Income tax expense

7

Profit/(loss) for the year from continuing operations(Loss)/profit from discontinued operations after tax

6

Profit for the year attributable to equity shareholders of the parent

pence

pence

From continuing operations

56.3

34.3

From discontinued operations

(0.7)

80.2

From profit for the year

55.6

114.5

From continuing operations

56.1

34.1

From discontinued operations

(0.7)

80.0

From profit for the year

55.4

114.1

Earnings per share
Basic earnings per share

Diluted earnings per share

2

2

Dividends per share
Dividends paid

8

13.0

Dividends proposed

8

13.3

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

Oxford Instruments plc

22Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Comprehensive Income
year ended 31 March 2019

2019
£m

2018
£m

30.0

65.5

4.2

(8.8)

—

(4.8)

2.5

2.2

(0.5)

(0.9)

Total other comprehensive income/(expense)

6.2(12.3)

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

36.2

53.2

Notes
Profit for the year
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences
Net cumulative foreign exchange gain on disposal of subsidiaries recycled to the Income
Statement
Items that will not be reclassified subsequently to profit or loss
Remeasurement gain in respect of post-retirement benefits
Tax on items that will not be reclassified to profit or loss

Oxford Instruments plc

723

Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Financial Position
as at 31 March 2019

2019
£m

2018
£m

Property, plant and equipment

24.2

22.8

Right of use assets

8.8—

Intangible assets

152.5

158.7

Investment in associate

4.6

4.1

Long-term receivables

0.3

1.4

Deferred tax assets

15.3

13.4

205.7

200.4

Inventories

60.8

45.9

Trade and other receivables

78.3

73.3

Current income tax recoverable

2.4

2.5

Derivative financial instruments

1.1

2.4

AssetsNon-current assets

Current assets

Cash and cash equivalents
Total assets

35.2

20.7

177.8

144.8

383.5

345.2

EquityCapital and reserves attributable to the Company’s equity Shareholders
Share capital

2.9

2.9

Share premium

61.7

61.7

Other reserves

0.2

0.2

Translation reserve

13.4

9.2

Retained earnings

124.0

105.6

202.2

179.6

Bank loans and overdrafts

27.9

39.4

Lease payables

6.0—

Retirement benefit obligations

6.5

15.3

Provisions

1.1

1.7

Deferred tax liabilities

6.3

6.1

47.8

62.5

Liabilities
Non-current liabilities

Current liabilities
Bank loans and overdrafts

0.6

1.0

Trade and other payables

116.9

85.5

Lease payables

3.0—

Current income tax payables

4.3

6.2

Derivative financial instruments

1.1

0.4

Provisions

7.6

10.0

133.5

103.1

Total liabilities

181.3

165.6

Total liabilities and equity

383.5

345.2

The Financial Statements were approved by the Board of Directors on 11 June 2019 and signed on its behalf by:

Ian Barkshire
Director

Company Number: 775598

Oxford Instruments plc

Gavin Hill
Director24

Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Changes in Equity
year ended 31 March 2019

Balance at 1 April 2018
Impact of adoption of IFRS 15
Total comprehensive income/(expense):
Profit for the year
Other comprehensive income:– Foreign exchange translation differences– Remeasurement gain in respect of post-retirement
benefits– Tax on items recognised directly in othercomprehensive income
Total comprehensive income/(expense)
attributable to equity shareholders of the parent
Transactions with owners recorded directly inequity:– Proceeds from exercise of share options– Charge in respect of employee service costs
settled by award of share options– Tax on items recognised directly in equity– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2019

Oxford Instruments plc

Otherreserves
£m
0.2
—
0.2

Foreignexchangetranslation
reserve
£m
9.2
—
9.2

Retainedearnings
£m
105.6
(7.2)
98.4

Total
£m
179.6
(7.2)
172.4

—

—

—

30.0

30.0

—

—

—

4.2

—

4.2

—

—

—

—

2.5

2.5

—

—

—

—

(0.5)

(0.5)

—

—

—

4.2

32.0

36.2

—

—

—

—

0.2

0.2

—
—
—

—
—
—

—
—
—

—
—
—

0.8
0.2
(7.6)

0.8
0.2
(7.6)

—
2.9

—
61.7

—
0.2

—
13.4

(6.4)
124.0

(6.4)
202.2

Share
capital
£m
2.9
—
2.9

Share
premium
account
£m
61.7
—
61.7

—

25

Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Changes in Equity
year ended 31 March 2018

Balance at 1 April 2017
Total comprehensive income/(expense):
Profit for the year
Other comprehensive income:– Foreign exchange translation differences– Net foreign exchange gain on disposal ofsubsidiaries recycled to the Income Statement– Remeasurement gain in respect of post-retirement
benefits– Tax on items recognised directly in othercomprehensive income
Total comprehensive (expense)/income
attributable to equity shareholders of the parent
Transactions with owners recorded directly inequity:– Proceeds from issue of shares– Charge in respect of employee service costs
settled by award of share options– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2018

Other
reserves£m
0.2

Foreignexchangetranslation
reserve£m
22.8

Retainedearnings
£m
45.1

Total
£m
132.5

—

—

—

65.5

65.5

—

—

—

(8.8)

—

(8.8)

—

—

—

(4.8)

—

(4.8)

—

—

—

—

2.2

2.2

—

—

—

—

(0.9)

(0.9)

—

—

—

(13.6)

66.8

53.2

—

0.2

—

—

—

0.2

—
—

—
—

—
—

—
—

1.1
(7.4)

1.1
(7.4)

—
2.9

0.2
61.7

—
0.2

—
9.2

(6.3)
105.6

(6.1)
179.6

Share
capital
£m
2.9

Share
premium
account£m
61.5—

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased
and then cancelled during the year ended 31 March 1999, and the hedging reserve in respect of the effective portionof changes in value of commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 fromthe translation of the Group’s net investments in foreign subsidiaries into Sterling.
The Group holds 152,710 (2018: 183,145) of its own shares in an employee benefit trust. The cost of these shares is
included within retained earnings.

Oxford Instruments plc

26

Announcement of Preliminary Results for the year to 31 March 2019

Consolidated Statement of Cash Flows year ended 31 March 2019
Notes
Profit for the year
Profit for the year from discontinued operations
Profit for the year from continuing operations
Adjustments for:
Income tax expense
Net financial expense
Fair value movement on financial derivatives
Restructuring costs
Restructuring costs – relating to associate
Past service cost on defined benefit pension scheme
Net profit on disposal of buildings
Share of impairment recognised by associate
Amortisation and impairment of acquired intangibles
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation and impairment of capitalised development costs
Amortisation and impairment of capitalised software costs
Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Share of profit from associate
Restructuring costs paid
Cash payments to the pension scheme more than the charge to operating profit
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Increase in payables and provisions
Increase in customer deposits
Purchase of rental assets held for subsequent sale
Cash generated from continuing operations
Interest paid
Income taxes paid
Net cash from operating activities – continuing operations
Net cash from operating activities – discontinued operations
Net cash flow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash flow on disposal of businesses
Capitalised development expenditure
Increase in investment in associate
Decrease in long-term receivables
Interest received
Net cash (used in)/generated from investing activities – continuing operations
Net cash used in investing activities – discontinued operations
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from exercise of share options
Payments made in respect of lease liabilities
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year

Oxford Instruments plc

6

7

6

2019
£m
30.0
(1.3)
28.7

2018
£m
65.5
(45.9)
19.6

6.8
3.1
1.5
—
0.3
0.3
—
(0.6)
9.6
3.9
3.3
3.5
0.3
60.7
0.2
0.8
(0.2)
(0.7)
(7.1)
53.7
(4.0)
(3.5)
4.1
7.1
(1.1)
56.3
(3.5)
(8.7)
44.1
—
44.1

14.6
4.2
(3.1)
1.2
0.4
—
(3.3)
2.0
10.9
4.7
—
4.4
—
55.6
0.3
1.1
(0.5)
(1.3)
(7.9)
47.3
(4.5)
(14.4)
2.8
2.9
(0.7)
33.4
(2.1)
(3.8)
27.5
3.0
30.5

—
(4.1)
(2.2)
—
(3.5)
—
1.1
0.3
(8.4)
—
(8.4)

9.3
(4.3)
(0.5)
71.2
(5.8)
(2.1)
0.9
—
68.7
—
68.7

—
0.2
(3.2)
(11.5)(7.6)(22.1)
13.6
20.7
0.9
35.2

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

27

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements
year ended 31 March 20191 Non-GAAP measures
In the preparation of adjusted numbers the Directors exclude certain items in order to assist with comparability
between peers and to give what they consider to be a better indication of the underlying performance of the business.
These adjusting items are excluded in the calculation of adjusted operating profit, adjusted profit before income tax,
adjusted profit for the year from continuing operations, adjusted EBITDA, adjusted EPS, adjusted cash conversion,and adjusted effective tax rate. Details of adjusting items are given below.
Adjusted EBITDA is calculated by adding back depreciation of property, plant and equipment and amortisation of
intangible assets to adjusted operating profit and can be found in the Consolidated Statement of Cash Flows.
Calculation of Adjusted EPS can be found in note 2. Adjusted effective tax rate is calculated by dividing the share oftax attributable to adjusted profit before tax by adjusted profit before tax.
Reconciliation between profit before income tax and adjusted profit from continuing operations
2019

2018
Profit(Loss)/profit

Operating

beforeOperating

beforeprofitincome tax(loss)/profit

income tax

£m

£m

£m

£m

Statutory measure from continuing operations

38.6

35.5

38.4

34.2

Restructuring costs
Restructuring costs – relating to associate
Net profit on disposal of buildings
Business reorganisation items
Past service cost on defined benefit pension scheme
Share of impairment recognised by associate
Amortisation and impairment of acquired intangibles
Mark-to-market loss/(gain) in respect of derivative financial
instruments
Loan note make-whole payable
Total non-GAAP adjustments

—
0.3
—
0.3
0.3
(0.6)
9.6

—
0.3
—
0.3
0.3
(0.6)
9.6

1.2
0.4
(3.3)
(1.7)
—
2.0
10.9

1.2
0.4
(3.3)
(1.7)
—
2.0
10.9

1.5
—
11.1

1.5
0.9
12.0

(3.1)
—
8.1

(3.1)
—
8.1

Adjusted measure from continuing operations
Share of taxation
Adjusted profit for the year from continuing operations

49.7

47.5
(10.4)
37.1

46.5

42.3
(10.1)
32.2

Adjusted effective tax rate

21.9%

23.9%

Restructuring costs
Restructuring costs of £1.2m incurred in the prior year primarily relate to our US Healthcare business and include£0.5m to successfully defend a legal claim relating to a prior acquisition.
Restructuring costs – relating to associate
These represent the Group’s shares of mergers and acquisition costs and other one-off items incurred by the
associate.
Net profit on disposal of buildings
The Group recorded a net profit on disposal of £3.3m during the prior year, following the disposal of two buildings
previously held under property, plant and equipment.

Oxford Instruments plc

28

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 20191 Non-GAAP measures (continued)
Past service cost on defined benefit pension scheme
As at 31 March 2019, the IAS 19 defined benefit pension balance sheet liability includes an allowance of £0.3m for the
expected cost of equalising Guaranteed Minimum Pension (“GMP”) between males and females.
GMP is a portion of pension that was accrued by individuals who were contracted out of the UK State Second Pension
prior to 6 April 1997. Historically, there was an inequality of benefits between male and female members who have
GMP. A High Court case concluded on 26 October 2018 and confirmed that GMPs need to be equalised.
Share of impairment recognised by associate
During the prior year the Group’s equity accounted associate recognised an impairment relating to the disposal of its
Vacgen subsidiary. The Group’s share of this impairment was £2.0m. Following the completion and finalisation of thetransaction, £0.6m of the impairment has been reversed.
Amortisation of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets and goodwill.
Mark-to-market movements in respect of derivative financial instruments
Under IFRS 9, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition,
they are also measured at fair value. In respect of instruments used to hedge foreign exchange risk and interest raterisk the Group does not take advantage of the hedge accounting rules provided for in IFRS 9 since that standard
requires certain stringent criteria to be met in order to hedge account, which, in the particular circumstances of theGroup, are considered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts forthese derivative financial instruments at fair value through profit or loss. To the extent that instruments are hedges of
future transactions, adjusted profit for the year is stated before changes in the valuation of these instruments so thatthe underlying performance of the Group can be more clearly seen.
Loan note make-whole payable
During the year to 31 March 2019 the Group repaid £11.6m of the principal outstanding on its loan notes. This
payment was necessary due to material changes to the Group’s structure following the disposal of its Industrial
Analysis business during July 2017. The costs of £0.9m relate to the make-whole balance payable upon settlement ofthe £11.6m principal.
Share of taxation
Adjusting items include the income tax on each of the items described above. In addition, during the prior year the tax
rate in the United States reduced from 35% to 21%. As a result, this reduced the Group’s deferred tax asset by £5.4m
This was excluded from the calculation of share of taxation attributable to adjusted profit before tax.

Oxford Instruments plc

29

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 20191 Non-GAAP measures (continued)
Reconciliation of changes in cash and cash equivalents to movement in net debt
Net increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Repayment of borrowings
Movement in accrued interest
Amortisation of prepaid issuance fees
Movement in net debt in the year
Net debt at start of the year
Net cash/(debt) at the end of the year

2019
£m
13.6
0.9
14.5
11.5
0.4
—
26.4
(19.7)
6.7

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

2019£m(28.5)
35.2
6.7

2018
£m
(40.4)
20.7(19.7)

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

Bank loans and overdrafts
Cash and cash equivalents
Net cash/(debt) at the end of the year

2 Earnings per share
Basic and diluted EPS from continuing operations are based on the result for the year from continuing operations, asreported in the Group Income Statement. Basic and diluted EPS from total operations are based on the result for theyear attributable to equity shareholders of the parent. Adjusted and diluted adjusted EPS are based on adjusted profit
for the year from continuing operations. The profit measures noted above are divided by the weighted average numberof ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership Trust. The
table below reconciles these different profit measures.

Profit for the year attributable to equity
Shareholders of the parent
Adjusting items:
Business reorganisation items
Past service cost on defined benefit
pension scheme
Share of impairment recognised byassociate
Amortisation and impairment of acquired
intangibles
Mark-to-market gain in respect ofderivative financial instruments
Loan note make-whole payable
Income tax (credit)/charge
Adjusted profit for the year fromcontinuing operations

Oxford Instruments plc

ContinuingDiscontinued
operations operations
£m
£m
28.7

1.3

2019
total
£m
30.0

Continuing Discontinued
operations
operations
£m
£m
19.6

0.3

(1.7)

0.3

—

(0.6)

2.0

9.6

10.9

1.5
0.9
(3.6)

(3.1)
—
4.5

37.1

32.2

45.9

2018
total
£m
65.5

30

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

2 Earnings per share (continued)
The weighted average number of shares used in the calculation excludes shares held by the Employee ShareOwnership Trust, as follows:

Weighted average number of shares outstanding
Less shares held by Employee Share Ownership Trust
Weighted average number of shares used in calculation of basic earnings per share

2019
Sharesmillion
57.4
(0.2)
57.2

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

Weighted average number of ordinary shares per basic earnings per share calculations
Effect of shares under option
Weighted average number of ordinary shares per diluted earnings per share calculations

2019
Sharesmillion
57.2
0.5
57.7

2018
Sharesmillion
57.4
(0.2)
57.2

2018
Sharesmillion
57.1
0.2
57.4

For the purposes of calculating diluted and diluted adjusted EPS, the weighted average number of ordinary shares isadjusted to include the weighted average number of ordinary shares that would be issued on the conversion of all
potentially dilutive ordinary shares expected to vest, relating to the Company’s share-based payment plans. Potential
ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease EPS, or increase
loss per share.
3 Segment information
The Group has ten operating segments. These operating segments have been combined into three aggregatedoperating segments to the extent that they have similar economic characteristics, with relevance to products andservices, 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.
Following the disposal of the Industrial Analysis business and the introduction of the Horizon Strategy in 2017, theGroup now reports under a revised segment structure. The aggregated operating segments are as follows:•••

the Materials and Characterisation segment comprises a group of businesses focusing on applied R&D andcommercial customers, enabling the fabrication and characterisation of materials and devices down to the atomic
scale;
the Research and Discovery segment comprises a group of businesses providing advanced solutions that create
unique environments and enable measurements down to the molecular and atomic level which are used infundamental research; andthe Service and Healthcare segment provides customer service and support for the Group’s products and theservice, sale and rental of third party healthcare imaging systems.

The Group’s internal management structure and financial reporting systems have been amended to differentiate thethree aggregated operating segments on the basis of the economic characteristics discussed above.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated ona reasonable basis. Inter-segment pricing is determined on an arm’s length basis. The operating results of each are
regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete
financial information is available for each segment and used by the Board of Directors for decisions on resource
allocation and to assess performance. No asset information is presented below as this information is not presented inreporting to the Group’s Board of Directors.

Oxford Instruments plc

31

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

3 Segment information (continued)a) Analysis by businessResults from continuing operations
Year to 31 March 2019
External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit from continuing operations

Materials & Research &Characterisation Discovery
£m
£m
137.9
125.2
—
—
137.9
125.2
22.1
12.7

Service &Healthcare
£m
70.5
—
70.5
14.9

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

Materials &Characterisation
£m
118.1
—
118.1
20.1

Service &Healthcare
£m
66.8
—
66.8
12.6

Research &Discovery
£m
112.0
0.1
112.1
13.8

Total
£m
333.6
49.7
Total
£m
296.9
46.5

The adjusted profit after tax of £0.2m (2018: £0.5m) from the Group’s associate is reported within the Research &Discovery segment.
Revenue in the Materials & Characterisation and Research & Discovery segments represents the sale of products.
Revenue in the Service & Healthcare segment relates to service income, with the exception of leasing of mobile MRIsof £6.4m (2018: £6.1m) and equipment sales of £3.6m (2018: £3.3m).
As at 31 March 2019 the Group had unfulfilled performance obligations under IFRS 15 of £172.5m.
Reconciliation of reportable segment profit
Year to 31 March 2019
Adjusted profit for reportable segments fromcontinuing operations
Restructuring costs – relating to associate
Past service cost on defined benefit pension scheme
Share of impairment recognised by associate
Amortisation of acquired intangibles
Fair value movement on financial derivatives
Financial income
Financial expenditure
Profit/(loss) before income tax on continuing
operations

Year to 31 March 2018
Adjusted profit for reportable segments fromcontinuing operations
Restructuring costs
Restructuring costs – relating to associate
Net profit on disposal of buildings
Share of impairment recognised by associate
Amortisation of acquired intangibles
Fair value movement on financial derivatives
Financial income
Financial expenditure
Profit before income tax on continuing operations

Oxford Instruments plc

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

22.1
—
—
—
(2.4)
—
—
—

12.7
(0.3)
—
0.6
(6.4)
—
—
—

14.9
—
—
—
(0.8)
—
—
—

—
—
(0.3)
—
—
(1.5)
0.3
(3.4)

49.7
(0.3)
(0.3)
0.6
(9.6)
(1.5)
0.3
(3.4)

19.7

6.6

14.1

(4.9)

35.5

Materials &Characterisation

Research &Discovery

Service &Healthcare

UnallocatedGroup items

Total

20.1
(0.3)
—
—
—
(2.5)
—
—
—
17.3

13.8
—
(0.4)
—
(2.0)
(7.3)
—
—
—
4.1

12.6
(0.9)
—
—
—
(1.1)
—
—
—
10.6

—
—
—
3.3
—
—
3.1
0.3
(4.5)
2.2

46.5
(1.2)
(0.4)
3.3
(2.0)
(10.9)
3.1
0.3
(4.5)
34.2

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

32

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

3 Segment information (continued)
Depreciation, capital expenditure, amortisation and impairment of intangibles and capitalised development costs arisein the following segments:
2019

Materials & Characterisation
Research & Discovery
Service & Healthcare
Unallocated Group items
Total

2018
CapitalCapitalDepreciation expenditure Depreciation expenditure
£m
£m
£m
£m
2.5
4.5
1.5
2.8
1.3
1.1
0.8
0.8
2.0
0.5
1.8
1.0
1.4
1.3
0.6
0.9
7.2
7.4
4.7
5.5

Materials & Characterisation
Research & Discovery
Service & Healthcare
Unallocated Group items
Total

2019
2018
Amortisation Capitalised Amortisation Capitalised
and development
and development
impairment
costs impairment
costs
£m
£m
£m
£m
4.6
2.7
5.8
4.8
7.7
0.8
8.4
1.0
0.8
—
1.1
—
0.3
—
—
—
13.4
3.5
15.3
5.8

b) Geographical analysis
The Group’s reportable segments are located across a number of geographical locations and make sales tocustomers 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 continuing operations from external customers by destination
USA
Rest of Europe
Rest of Asia
UK
Japan
China
Germany
Rest of World
Total

Non-current assets (excluding deferred tax)
UK
Germany
USA
Japan
China
Rest of Europe
Rest of Asia
Rest of World
Total

Oxford Instruments plc

2019
£m
99.8
38.7
34.4
14.2
38.7
70.0
28.3
9.5
333.6

2018
£m
89.5
35.9
31.9
18.1
34.9
53.5
24.8
8.3
296.9

2019
£m
157.4
3.9
15.4
1.7
0.5
9.4
0.4
1.7
190.4

2018
£m
160.4
3.3
11.3
0.5
0.2
9.6
—
1.7
187.0

33

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

4 Research and Development (“R&D”)
The total R&D spend by the Group as part of continuing operations is as follows:
Materials &Characterisation£m

2019
Research &Discovery
£m

14.6

10.8

25.4

(0.1)

—

—

R&D expense charged to theConsolidated Statement of
IncomeLess: depreciation of R&D
related fixed assets
Add: amounts capitalised as
fixed assets
Less: amortisation andimpairment of R&D costs
previously capitalised as
intangibles
Add: amounts capitalised as
intangible assets
Total cash spent on R&D
during the year

2018
Research &Discovery
£m

Total
£m

12.3

11.1

23.4

(0.1)

(0.1)

—

(0.1)

0.1

0.1

—

0.1

0.1

(2.2)

(1.3)

(3.5)

(3.2)

(1.2)

(4.4)

2.7

0.8

3.5

4.8

1.0

5.8

15.0

10.4

25.4

13.8

11.0

24.8

Materials &TotalCharacterisation£m£m

5 Investment in associate
The Group holds a 47% interest in the ordinary share capital of Scienta Scientific AB. Scienta Scientific AB isregistered and has its principal place of business in Sweden. The investment has been accounted for as an associate
taking into account the following factors:•••

the Group holds substantial, but minority, voting rights (47%). All other rights are controlled by a single
shareholder;
the Group has a minority number of Non-Executive Board seats (two of five), with the remaining seats held byrepresentatives of GDI; andwhilst the Group has certain veto rights in respect of certain decisions, it cannot unilaterally direct the activities of
the Scienta AB Group.

During the prior year the Group invested a further £2.1m in its equity accounted associate.
The Group’s share of profit in its equity accounted associate for the year was £0.5m (2018: loss of £1.9m). The Group
did not receive any dividends from the associate in either period.

Carrying value at 1 April 2018
Addition
Share of profit/(loss) of associate (net of tax)
Dividends received
Carrying value at 31 March 2019

Oxford Instruments plc

2019
£m
4.1
—
0.5
—
4.6

2018
£m
3.9
2.1
(1.9)
—
4.1

34

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

5 Investment in associate (continued)
Summary financial information for the equity accounted associate is as follows:
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets

2019
£m
0.9
25.2
26.1
(20.5)(1.8)(22.3)
3.8

2018
£m
2.3
23.7
26.0
(12.1)(9.2)(21.3)
4.7

IncomeExpensesProfit/(loss) for the year
Group’s share of net assets
Group’s share of profit/(loss)

36.5(35.4)
1.1
1.8
0.5

51.0
(55.0)
(4.0)
2.2
(1.9)

According to the terms of the transaction, no dividend could be paid by the associate until 27 May 2017. Following thatdate, any dividend paid must be agreed by both Oxford Instruments plc and GD Intressenter AB, up to a maximum of
50% of the previous year’s profit after tax. At the date of signing these Financial Statements no dividend has been
declared or paid.
6 Disposal of subsidiary and discontinued operations
In the prior year, on 3 July 2017, the Group disposed of its Industrial Analysis business for a final consideration of£82.8m.
Effect of disposal on the financial position of the Group
Industrial Analysis
2018£mGoodwill
Acquired intangible assets
Other intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Provisions
Tax balances
Net assets divested

(4.3)
(0.1)
(4.7)
(2.4)
(11.5)
(9.8)
(6.0)
8.6
0.8
(0.4)
(29.8)

Consideration receivable
Deferred consideration
Consideration received, satisfied in cash
Cash disposed ofTransaction expenses
Net cash inflow
Carrying value of net assets disposed of (excluding cash and cash equivalents)
Deferred consideration
Recognition of provision on disposal
Currency translation differences transferred from translation reserve
Gain on disposal
Tax (charge)/credit on gain on disposal
Gain on disposal net of tax

82.8
—
82.8
(6.0)
(5.6)
71.2
(23.8)
—
(2.1)
4.8
50.1
(2.3)
47.8

Oxford Instruments plc

35

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

6 Disposal of subsidiary and discontinued operations (continued)
The recognition of provisions on disposal primarily relate to onerous lease contracts. These have been recognised in
the Income Statement under discontinued operations.
Discontinued operations
In the year to 31 March 2018 the Group’s Industrial Analysis business was classified as a discontinued operation. The
Industrial Analysis business was considered a major class of business on the basis that it was previously an operating
segment and referred to in the Group Strategic Report.
On 24 May 2019 a further £1.6m was received by the Group in relation to the finalisation of tax affairs outstanding
upon disposal.
Results of discontinued operations
Revenue
Expenses
Adjusted profit before tax
Income tax charge
Adjusted loss after tax
Adjusting items:
Amortisation of acquired intangibles
One-off costs arising as a result of disposal
Income tax on adjusting items
Loss after tax
Gain on disposal
Tax on gain on disposal
Profit from discontinued operations after tax

2019
£m
—
—
—
—
—

2018
£m
16.8
(16.3)
0.5
(0.9)
(0.4)

—
—
—
—
1.6
(0.3)
1.3

(0.1)
(2.2)
0.8
(1.9)
50.1
(2.3)
45.9

2019
pence
—
—
2.3
2.3

2018
pence
(0.7)
(0.7)
80.2
80.0

2019
£m
—
—
—

2018
£m
3.0
71.2
—

Earnings per share from discontinued operations

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

Cash flows from discontinued operations
Net cash generated from operating activities
Net cash generated from/(used in) investing activities
Net cash used in financing activities

Oxford Instruments plc

36

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

7 Income tax expense
Recognised in the Consolidated Statement of Income
Current tax expense
Current year
Adjustment in respect of prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustment in respect of prior years
Total tax expense
Reconciliation of effective tax rate
Profit before income tax
Income tax using the weighted average statutory tax rate of 22% (2018: 22%)
Effect of:Tax rates other than the weighted average statutory rate
Change in rate at which deferred tax recognised
Transaction costs, deferred consideration and impairments not deductible for tax
Non-taxable income and expenses
Tax incentives not recognised in the Consolidated Statement of Income
Current period losses not available for carry forward
Movement in unrecognised deferred tax
Adjustment in respect of prior years
Total tax expense
Taxation charge recognised in other comprehensive income
Deferred tax – relating to employee benefits
Taxation (credit) recognised directly in equity
Current tax on adoption of IFRS 15
Deferred tax on adoption of IFRS 15
Deferred tax – relating to share options

2019
£m

2018
£m

8.1
(0.7)
7.4

7.3
(1.7)
5.6

(0.9)
0.3
(0.6)
6.8

7.3
1.7
9.0
14.6

35.5
7.8

34.2
7.5

(0.1)
(1.2)
0.6
—
—
—
0.1
(0.4)
6.8

0.3
5.3
1.2
—
(0.7)
0.4
0.6
—
14.6

0.5
0.5

0.9
0.9

(0.9)
(0.9)
(0.2)

—
—
—

Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective from 1
April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from 1 April2020) was substantively enacted on 6 September 2016. This will reduce the Company’s future current tax charge
accordingly. The UK deferred tax liability at 31 March 2019 has been calculated based on those rates. The Group
carries tax provisions in relation to uncertain tax positions arising from the possible outcome of negotiations with tax
authorities. Such provisions are a reflection of the geographical spread of the Group’s operations and the variety ofjurisdictions in which it carries out its activities.
Effective 1 January 2018 the rate of federal tax in the US was reduced from 35% to 21% and, as a result, in the prioryear deferred tax assets were reduced by £5.4m.
On 2 April 2019 the EU Commission announced that it believes that in certain circumstances the UK’s Controlled
Foreign Company (CFC) regime (introduced in 2013) for certain finance income constituted State Aid. The
Commission instructed the UK Government to recover any such aid from affected parties. The Group has claimed thebenefit of this exemption, and therefore may be required to repay State Aid. The maximum amount of State Aid
repayable as at 31 March 2019 was £1.2m in respect of tax and £0.1m in respect of interest unless the decision is
successfully challenged in the EU Courts. However, no provision has been made in respect of this investigation since
we believe that it is more likely than not that no additional tax will ultimately be due.

Oxford Instruments plc

37

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

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

Previous year interim dividend
Previous year final dividend

2019
pence
3.7
9.6
13.3

2018
pence
3.7
9.3
13.0

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

Interim dividend
Final dividend

2019
pence
3.8
10.6
14.4

2018
pence
3.7
9.6
13.3

The interim dividend was not provided for at the year end and was paid on 8 April 2019. The final proposed dividend of
10.6 pence per share (2018: 9.6 pence) was not provided at the year end and will be paid on 18 October 2019 subject
to authorisation by the Shareholders at the forthcoming Annual General Meeting.
9 Basis of preparation
This preliminary announcement does not constitute the Company’s statutory accounts for the years ended 31 March
2019 or 2018. Statutory accounts for 2018 have been delivered to the registrar of companies and those for 2019 will
be delivered in due course. The auditor has reported on those accounts: their reports were (i) unqualified, (ii) did notinclude a reference to any matters to which the auditor drew attention by way of emphasis without qualifying theirreport and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial information presented in this preliminary announcement for the year ended 31 March 2019 is based on,
and is consistent with, that in the Group’s audited Financial Statements for the year ended 31 March 2019.
The following standards and interpretations have been adopted by the Group for the year ended 31 March 2019:• IFRS 9 Financial Instruments
The Group adopted IFRS 9 on 1 April 2018. IFRS 9 addresses the classification, measurement and derecognitionof financial instruments, introduces a new impairment model for financial assets and new rules for hedge
accounting. It replaces IAS 39 Financial Instruments guidance and comprehensive updates have been made to
IFRS 7 Financial Instruments: Disclosure and IAS 32 Financial Instruments: Presentation. The adoption of IFRS 9
has had no material impact on the Group’s results.
• IFRS 15 Revenue from Contracts with Customers
The Group adopted IFRS 15 using the modified retrospective approach on 1 April 2018, which means that the
cumulative impact on adoption has been recognised in retained earnings as of 1 April 2018. Comparative
information has not been restated. IFRS 15 provides a single, principles-based, five step model to be applied to all
sales contracts, based on the transfer of goods and services to customers, and it replaces the separate model forgoods and services of IAS 18 Revenue. The impact on adoption of IFRS 15 was a decrease in retained earnings of£7.2m, net of tax; an increase in inventory of £11.0m; an increase in customer deposits of £19.0m; an increase indeferred income of £1.0m; a reduction in current tax payable of £0.9m and an increase in deferred tax assets of£0.9m.
• IFRS 16 Leases
The Group adopted IFRS 16 using the modified retrospective approach on 1 April 2018. IFRS 16 provides a single
model for lessees which recognises a right of use asset and lease liability for all leases that are longer than one
year or that are not classified as low value. The impact on adoption of IFRS 16 was the recognition of right of use
assets totalling £10.7m on the balance sheet and corresponding lease liabilities of £10.7m.

Oxford Instruments plc

38

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

9 Basis of preparation (continued)
The table below summarises the effect of the adoption of IFRS 15 and IFRS 16 on the Group Income Statement
during the year to 31 March 2019.

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

Pre IFRS 15& IFRS 16

IFRS 15
adjustment

IFRS 16
adjustment

As reported

46.9
(2.0)
44.9
(9.8)
35.1

2.9
—
2.9
(0.6)
2.3

(0.1)
(0.2)
(0.3)
—
(0.3)

49.7
(2.2)
47.5
(10.4)
37.1

£m
326.6
(152.5)
174.1

£m
7.0
(4.1)
2.9

£m
—
—
—

£m
333.6
(156.6)177.0

No other revisions to adopted IFRS that became applicable in 2019 had a significant impact on the Group’s Financial
Statements for the year ended 31 March 2019.
The Company is registered in England, Registration Number 775598.
The principal exchange rates to Sterling used were:Year‑end rates
US Dollar
Euro
Yen

2019
1.30
1.16
144

2018
1.40
1.14
149

Average translation rates 2019
April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
FebruaryMarch

US Dollar
1.39
1.36
1.33
1.32
1.30
1.29
1.29
1.28
1.28
1.30
1.31
1.30

Euro
1.14
1.14
1.14
1.13
1.12
1.11
1.13
1.13
1.12
1.13
1.15
1.16

Yen
150
148
146
146
144
146
145
144
142
142
145
144

Average translation rates 2018
April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
FebruaryMarch

US Dollar
1.27
1.29
1.29
1.31
1.30
1.31
1.33
1.32
1.34
1.39
1.41
1.40

Euro
1.18
1.17
1.14
1.13
1.10
1.11
1.13
1.13
1.12
1.13
1.14
1.14

Yen
142
143
144
146
143
146
150
149
151
153
151
149

Oxford Instruments plc

39

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 2019

10 The Annual General Meeting
The Annual General Meeting will be held on 10 September 2019 at Group Head Office, Tubney Woods, Abingdon,
Oxfordshire, OX13 5QX.

Oxford Instruments plc

40

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 201911 Principal Risks and Uncertainties
Specific risk 1: Routes to market
Context: In some instances the Group’s products are components of higher‑level systems sold by OEMs, and thus the Group
does not control its route to market.
Risk
Possible impact
Control mechanisms
Mitigation•
Vertical integration by•
Loss of key customers / •Customer intimacy to•Strategic relationships with
OEMs.
route to market.
match productOEMs to sell performance
performance to customerof the combined system.
•
Reduction in sales
needs.
volumes or pricing and•
Product differentiation tolower profitability.
promote advantages of•
Positioning of Oxford
Oxford Instruments
Instruments brand andequipment and solutions.
marketing directly to end
users.
•
Direct marketing to end
users.
Specific risk 2: Technical risk
Context: The Group provides high technology equipment, systems and services to its
customers.
Risk
Possible impact
Control mechanisms
Mitigation•
Failure of the advanced •Loss of market share or •“Voice of the Customer” •Understanding customer
technologies applied bynegative pricing pressure
approach and market
needs/expectations andthe Group to produce
intimacy to direct producttargeted new productresulting in lower turnovercommercially viable
development activities.
development programme toand reduced profitability.
products.
•
Additional NPI•
Formal NPI processes tomaintain and strengthen
expenditure.
prioritise investment andproduct positioning.
to manage R&D•
Adverse impact on the•Stage gate process in
expenditure.
Group’s brand andproduct development to
reputation.
challenge commercial•
Product lifecycle
business case and mitigate
management.
technical risks.
•
Operational practices
around sales-production
matching and inventory
management to mitigate
stock obsolescence risks.
Specific risk 3: Economic environment
Context: Government expenditure may become constrained in key markets.
Risk
Possible impact
Control mechanisms•
Reduction in•
Lower sales and•Market intimacy andresearch funding in key
profitability.
diversification strategy.
markets such as the US,
China and the EU(including the UK).

Oxford Instruments plc

Mitigation•
Increased focus on
customers that are notreliant on government
funding.

41

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 201911 Principal Risks and Uncertainties (continued)
Specific risk 4: Political risk
Context: The Group operates in global markets and can be required to secure export licences from governments.
Risk
Possible impact
Control mechanisms
Mitigation•
Changes in the•Lower exports adversely •Contract review and•Broad global customer
geopolitical landscape oraffecting turnover.
base; contractual
protection against breacha global tradeprotection.
•
Increases to input costsin the event that export
war resulting in aand lower gross margins.
licence is withheld.
complete embargo•
Limitations on ability toon trade with specificprovide after sales
nations, barriers to tradeservice to existingwith individual customers,
customers
or significant increases
in tariffs.

Specific risk 5: Legal/compliance risk
Context: The Group operates in a complex technological environment and competitors may seek to protect their position throughintellectual property rights.
Risk
Possible impact
Control mechanisms
Mitigation•
Infringement of a third•
Potential loss of future•
Formal ‘Freedom to•
Confirmation of ‘Freedom toparty’s intellectual property.
revenue.
Operate’ assessment toOperate’ during new productidentify potential IP issues•
Future royalty payments.
development stagegate process.
•
Payment of damages.
during product development.
•
Regulatory breach•
Fines and non-financial•
Internal control framework •Compliance monitoring
sanctions such as
including policies,
programmes.
restrictions on trade,
procedures and training in
disbarment from publicrisk areas such as bribery
procurement contracts.
and corruption, sanctions•
Reputational damage.
and export controls.

Specific risk 6: Brexit related risks
Context: The UK will leave the EU.
Risk
Possible impact
Control mechanisms•
Supply chain disruption•
Delays to shipments.
•
Sales-production matching
and resource planning.
•
Lower participation in EU- •Lower sales and profitability.
funded research projects•
Salary inflation.
•
Customer intimacy andpost Brexit.
monitoring of funded•
Loss of key skills, and/or
projects.
increased recruitment,•
Potential short-term hiatus in
and/or salary costs.
UK research funding.
•
Strategic supply chain
review.
•
Barriers to existing free•Supply chain disruption
movement of goods and•Lower net pricing on UK•
Product pricing reviews.
services in the EU.
exports to EU and increased •Skills and capabilities
reviews.
•
Tariffs on exports to EU
input costs on products
countries from the UK andsourced from the EU.
•
Brexit Committee.
vice versa•
UK becomes less attractive
to EU nationals as a place towork

Oxford Instruments plc

Mitigation•
Existing stock of raw
materials and work inprogress.
•
Market diversification•
Long‑term pricing
agreements for key
suppliers and strategic
sourcing review.
•
Pricing strategy.
•
Renewal of UK work permit
scheme to facilitate
employment of non‑UK/EU
nationals.
•
Application for Authorised
Economic Operator status tofacilitate movement of goods
with EU 27.

42

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 201911 Principal Risks and Uncertainties (continued)
Specific risk 7: Adverse movements in long-term foreign currency rates
Context: A high proportion of the Group’s revenue is in foreign currencies, notably US dollars while the majority of the cost base isdenominated in sterling.
Risk
Possible impact
Control mechanisms
Mitigation•
Long-term strengthening of •Reduced profitability.
•
Procurement “make or buy” •Strategic procurement in
Sterling against key
strategy.
USD, Euros and Yen.
currencies such as the US•
Review of revenue andcosts by currency.
dollar, Japanese Yen and theEuro. (Short-term exposure
to volatility is managed byhedging programme).

Specific risk 8: Supply chain risk
Context: The Group operates a strategic make or buy policy which places reliance on key partners, notably single source suppliers interms of pricing and on time delivery.
Risk
Possible impact
Control mechanisms
Mitigation•
Supply chain disruption in •Disruption to customers.
•
Procurement strategy to•
Buffer stocks of key
particular for single source •manage stock availability.
components.
Lower sales and profitability.
components leading to•Higher input costs.
•
Where possible, dual source
production delays and•
Negative impact on the
supply is sought.
potentially lost revenue.
Group’s reputation.
Specific risk 9: People
Context: A number of the Group’s employees have business critical skills.
Risk
Possible impact
Control mechanisms
Mitigation•
Key employees leave and •Adverse impact on NPI.
•HR people strategy for•
Succession management
effective replacements are •retention and recruitment ofplans.
Operational disruption.
not recruited on a timely
staff with key skills.
•
Lower sales and profitability.
•
Technical career paths.
basis.
•
UK work permit scheme tofacilitate employment of
non‑UK/EU nationals inplace.
Specific risk 10: IT risk
Context: Elements of production, financial and other systems rely on IT availability.
Risk
Possible impact
Control mechanisms•
Cyber attack on the Group’s •Disruption to business as•
IT security policy and
IT infrastructure.
usual operations.
associated standards andprotection systems.
•
Spread of viruses or•
Loss of business criticalmalware through “Zero-day”
data.
•Internal IT governance tomaintain those protection
incidents or phishing attacks. •Financial and reputational
systems anddamage.
•Insider threat.
our incident response.
•
Employee awarenesstraining.

Oxford Instruments plc

Mitigation•
Regular review, monitoring
and testing of key security
measures to assess
adequacy of protection
against known threats.
•
Citadel approach to protect
key data.
•
User education.

43

Announcement of Preliminary Results for the year to 31 March 2019

Notes to the Financial Statements (continued)
year ended 31 March 201911 Principal Risks and Uncertainties (continued)
Specific risk 11: Operational risk
Context: Business units’ production facilities are typically located at a single site.
Risk
Possible impact
Control mechanisms
Mitigation•
Sustained disruption to•Inability to fulfil orders in the •Business Continuity Plans •Detailed response plans in
production arising from ashort term, resulting in a(“BCPs”) exist for all
BCPs can reduce downtime
major incident at a site.
reduction in sales andmanufacturing sites.
arising from incidents andprofitability.
facilitate the restoration or•Contractual clauses to limit
relocation of production.
financial consequences of•
Additional, non-recurring
delayed delivery.
overhead costs.
•
Standard sales contracts
include clauses for limitationof liability, liquidated
damages and the exclusionof consequential losses.
Specific risk 12: Pensions
Context: The Group’s calculated pension deficit is sensitive to changes in the actuarial assumptions.
Risk
Possible impact
Control mechanisms
Mitigation•
The reported pension deficit •Increase in net debt as•Regular review of pension •The Group has closed its
is sensitive to movements inadditional Groupstrategy
defined benefit pension
actuarial assumptions andcontributions become
schemes in the UK and US•
Liability hedging programme
returns on investments.
payable to fund the deficit.
to future accrual.
to mitigate exposure to
movements in interest rates ••Increase in the annual levy
The Group has a funding
and inflation
paid to the Pension
plan in place to reduce theProtection Fundpension deficit over the•
Reduction in net assets.
short to medium term.

Oxford Instruments plc

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