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 9 June 2015
Oxford Instruments plc
Announcement of Preliminary Results for the year to 31 March 2015
Oxford Instruments plc, a leading provider of high technology tools and systems for industry and research,
today announces its Preliminary Results for the year to 31 March 2015.
Highlights:

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Orders grew by 13.0% to £386.6 million (2014: £342.2 million)
Revenue grew by 7.1% to £385.5 million (2014: £360.1 million)
On an Organic Constant Currency basis, Orders flat on prior year and Revenues declined by 5.4%
Adjusted profit before tax* of £35.6 million (2014: £47.1 million), reflecting macro headwinds in Japanand Russia, and weaker trading than expected in Industrial Analysis
Adjusted EPS* of 48.2p (2014: 67.7p)
Andor Technology acquisition has integrated well and is performing strongly
Cost reduction programme accelerated and delivering greater than planned savings
Investment in future organic growth: R&D spend increased to £35.2 million (2014: £27.9 million)
Proactive portfolio management to deliver long-term shareholder value: acquisition of MIR; joint
venture to combine Oxford Instruments’ Omicron business with Scienta Scientific AB
Proposed final dividend of 9.30 pence (2014: 9.04 pence), giving a total dividend for the year of 13.0
pence (2014: 12.4 pence)*Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items
can be found in Note 1.

Jonathan Flint, Chief Executive of Oxford Instruments plc, said:“Overall, we have had a challenging year. We expect a return to organic growth in the coming year, withpotential for margin improvement in the medium term. This reflects our swift and decisive action to improve
our business, and our confidence that nanotechnology continues to drive long term demand for our hightechnology tools. Our strategy remains to grow our core markets of physical and materials science, andexpand into life sciences.”
Enquiries:
Oxford Instruments plc
Jonathan Flint, Chief Executive
Kevin Boyd, Group Finance Director

Tel: 01865 393200

MHP Communications
Rachel Hirst / Jamie Ricketts

Tel: 020 3128 8100

Number of pages: 28

Chairman’s Statement
The Group delivered revenues of £386 million (2014: £360 million) and an adjusted profit before tax of£35.6 million (2014: £47.1 million). Whilst this was consistent with the guidance given in our January tradingstatement, it fell short of our expectations at the beginning of the year.
The outcome reflects a testing year for Oxford Instruments. In the first half of the year, despite overall
increases in orders and revenues, progress was adversely impacted by weaker demand in Japan and toughtrading conditions for our Plasma Technology business. We were therefore cautious about the outlook. As
reported in our January trading update, in the second half we encountered a combination of headwinds that
unexpectedly put our short-term performance projections off-course. Three factors were primarily at play:
the sudden tightening of trade sanctions for sales to Russia, a slower-than-expected recovery in Japanesemarkets, and weaker trading in our Industrial Analysis business.
In response to the downturn in trading conditions, we rapidly implemented a wide-ranging programme tobring our cost-base in line with our trading environment and to secure efficiencies that will deliver a fast
turnaround in our performance. I am pleased to report that as a consequence of these actions, we are on
track to deliver a higher level of cost savings in the current financial year than we had previously
anticipated.
Our team has rallied to the challenge and I want to thank all our staff for responding so vigorously and forretaining their enthusiasm and creativity despite the difficult conditions.
In addition to our focus on restructuring the Group, we have taken positive strategic steps that will help drive
future growth. We have increased our investment in R&D to underpin future organic growth. Since the year
end, we have announced the acquisition of Medical Imaging Resources, and the formation of a joint venture
between our Omicron business and Scienta Scientific AB.
During the year, we added new talent to our Board. Professor Sir Richard Friend joined the Board of
Oxford Instruments on 1 September 2014. Richard brings with him strong technical capability and valuable
contacts in the worldwide academic community. Professor Sir Mike Brady stood down from the Board on 9
September 2014 after serving as a Non-Executive Director since 1995. I would like to thank Mike for his
immense contributions over many years and we welcome Richard to the Group.
The Directors are proposing a final dividend of 9.3 pence per share (2014: 9.04 pence), a 2.9% increase,bringing the total for the year to 13.0 pence (2014: 12.4 pence). This represents the fifth consecutive yearof dividend growth.
With these strategic moves made and the streamlined cost base in place, the Group looks forward to aperiod of solid growth.

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2

Chief Executive’s Review
In the year, group orders grew by 13.0%. On a constant currency organic basis, order intake was flat.
Market conditions demonstrated a mixed picture around the world. In Europe, orders grew by 9.6%,
supported by a strong contribution from Andor Technology. On a constant currency organic basis,
European orders fell by 4.3%. In North America, where demand for our Nanotechnology Tools is particularly
strong, we saw orders grow by 23.8%. On a constant currency organic basis, growth was 2.6%. In Asia, we
saw order growth of 8.9% or 1.5% on a constant currency organic basis.
Reported sales grew by 7.1%. On a constant currency organic basis, sales fell by 5.4%. Part of this decline
was due to the completion of the ITER contract in the previous year and the decline in the Siemens MRI
service business explained in the Operations section. Excluding these one off factors, underlying sales
were 4.1% lower, reflecting in particular the issues in our Plasma Technology and Industrial Analysis
businesses as described below, and weaker trading in Japan.
Developments in the Second Half
In Russia, we had anticipated that we would see increased revenues in the second half, as a number oflarge contracts were due for delivery. However, the delicate political situation in Russia led to an
unexpected tightening of European Union export sanctions. This resulted in existing export licences being
withdrawn and as a consequence, previously-booked orders had to be cancelled. It is currently unclear
when further export licences will be approved. We saw little revenue from Russia during the second half
and we have assumed no resumption in sales to Russia in the current year. This issue particularly affected
our Plasma Technology business.
In Japan, our forecast of market recovery has proved slower than expected. While we have seen some pickup in the order run rate, this came too late to generate the level of sales forecast for the second half of theyear.
In addition to these macroeconomic headwinds, and the anticipated impact of adverse currency movements
throughout the year, we experienced weaker trading in our Industrial Analysis business. This is a shortlead-time operation and sales in the second half fell short of expectations, partly due to a delay inintroducing our new handheld X-ray florescence analysers which did not start shipping until the end of theyear.
Recognising the weaker trading environment, the Group accelerated a wide-reaching cost reduction
programme aimed at improving our long term efficiency and margins. This programme originally targeted
cost savings of £6 million which were expected to flow through to operating profit from financial year
2015/16 onwards. Through a rigorous and targeted pursuit of efficiencies, the anticipated savings are now
estimated to be in the region of £8 million in the current financial year. This has been achieved throughstructural changes which have been embedded in the cost base of our businesses. As a result, it should
benefit our performance in the current financial year and beyond.
The head count reduction has resulted in a loss of approximately 160 staff, representing 7% of ourworkforce. This has been achieved through a combination of voluntary and involuntary redundancies.
Importantly, despite this level of restructuring, our efficiency savings have been achieved whilst retaining the
key skills that we need to drive future innovation and growth.
The drive for efficiencies has also involved the closure of six of our smaller sites, to be completed by half
year: Mannheim, Germany; Cowfold, UK; Dallas, USA; one of our Tokyo sites, one of our sites in
Taunusstein, Germany and one of our sites in Beijing, China.
Strategic Progress
Our focused efforts to restructure our cost base and drive through efficiencies have not distracted us frompursuing strategic actions that will deliver future growth and profitability. The Group has increased its spend

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3

on R&D to further exploit the opportunities that our technologies offer. Total cash spend on R&D in the year
was £35.2 million or 9.1% of sales, up from 7.7% in the prior year.
In addition, since year end, the Group has announced an acquisition and a joint venture.
On 1 May 2015, Oxford Instruments announced the acquisition of Medical Imaging Resources Inc. (MIR).
MIR specialises in the build, lease and service of mobile medical imaging labs. These labs are built in
MIR’s factory incorporating magnetic resonance imaging (MRI) and Computed Tomography (CT) systems
from Siemens, GE, Phillips and Toshiba. These mobile labs are leased to customers across the USA.
Customers include hospitals and clinics that need additional capacity or wish to trial MRI or CT machines
without committing to the infrastructure associated with a permanent unit. MIR forms a part of OI
Healthcare, within the Group’s Service sector, our business which already services GE MRI and CT
machines in the USA.
On 28 May 2015, we announced a joint venture with Scienta Scientific AB in the area of surface science.
The joint venture will see a combination of Oxford Instruments’ Omicron business and Scienta’s surface
science business. The combined organisation will use the strength of each of the partners to better address
the specialist high technology surface science market niche. The combination of key technologies from
Omicron and Scienta will create the dominant player in this growing market segment. Combining the twobusinesses also creates a number of operational synergies. Oxford Instruments owns 47% of the joint
organisation and has the right to appoint two of the five Board members.
Strategic Direction
Across the world, people are focused on addressing the great challenges of the 21st Century. Constantadvances are needed to keep pace with our rapidly evolving world. With finite resources, we need toachieve more with a dwindling supply of raw materials. Oxford Instruments offers the means for customers
to address these challenges at the atomic and molecular level. We use innovation to turn our smart
science into commercial tools and systems that analyse and manipulate matter at the nano scale. The
continued expansion of our capabilities and expertise allows us to address customers’ needs in a wide
variety of markets that have an interest in working at the very small scale.
Our staff deploy a high level of technical skill and deep understanding of technology trends to convert our
intellectual property into new tools using the latest nanotechnology techniques. We enjoy a high Vitality
Index measured by the proportion of revenues coming from products introduced in the last three years. This
stands at 41%. Our Voice of the Customer programme constantly calibrates emerging customer
requirements against available technology to ensure our R&D activities are focused on the mostcommercially attractive areas.
We adopt a business model whereby the Group sells tools to customers who wish to exploit theopportunities offered by Nanotechnology. This model enables us to generate revenues from emerging
industries which need to utilise nanotechnology without the Group incurring undue exposure to any one
application or market. The Oxford Instruments’ brand is well recognised and valued, particularly in the
research and academic communities.
Advances in information technology, new materials, imaging and quantum physics, have transformed
physical science in recent years. Oxford Instruments is a leading tool provider for the advancement ofphysical science. These same advances are now beginning to transform the life sciences. Last year weannounced the evolution of our strategy to exploit the current convergence of the sciences, especially at thenanoscale, which is driving increased demand for nanotechnology tools. ‘Convergence’ is an increasingly
important aspect of scientific research where the merging of previously distinct areas of research andtechnology into a unified discipline creates new scientific and commercial opportunities. Convergence gives
the Group an opportunity to take the technical tools and the disciplined design approach traditional toengineering and physics, and apply them to life science research. This provides the Group with anopportunity to access a new set of customers who are working at the molecular scale. Oxford Instruments’acquisitions of Asylum Research in 2012 and Andor Technology in 2014 support this strategy of extending
our reach into analysis tools for Nano-Bio research.

Oxford Instruments plc
4Current Trading and Outlook
It has been a slow start in the first two months of the year; however we expect to see a return to organic
growth in the remainder of the year as recently launched products and improved routes to market gain
traction. This, together with the benefit of announced cost savings, mean that our expectations for thecurrent year are unchanged. The benefit of our leaner structure, ongoing cost savings and more favourable
currency rates combined with our high gross margins offer the potential for a continuing improvement in our
return on sales in the medium term.
Nanotechnology, applied to both the physical sciences and life sciences, will continue to yield long term
structural growth in demand for high technology tools. Our strategy is focused on growing the business inour core markets of physical and materials science, and exploiting convergence to expand into life
sciences.
Operations Review
Our Group reports in three sectors: Nanotechnology Tools, Industrial Products and Service.
Nanotechnology Tools

Revenue
Operating Profit

2015

2014

GrowthUnderlying
Growth*

£m
211.2
20.7

£m
180.6
21.2

16.9%

-8.2%

*excludes Fx, acquisitions and completed contracts

The Nanotechnology Tools sector produces our highest technology products primarily to researchcustomers (85% of its revenues come from research and academia). Our customers in this sector provide a
unique insight into emerging trends in public and privately funded research, thus informing our approach toinnovation and product application. In the research field, our tools are used to advance the frontiers ofscience. We count many Nobel laureates amongst our customers.
This sector delivered a mixed performance in 2015, benefitting from the inclusion of a full year of Andor
Technology, which has performed well, but suffering from trading difficulties at Plasma Technology as aresult of the sanctions on exports to Russia, and a decrease in orders from Japan.
Our NanoAnalysis business produces leading-edge tools that enable materials characterisation and sample
manipulation at the nanoscale. Its products are used on electron microscopes and ion-beam systems inacademic institutions and industrial applications including semiconductors, renewable energy, mining,
metallurgy and forensics. We launched our new AZtec Feature tool providing a solution for in-factory
analysis including cleanliness of high technology manufactured parts. Within AZtec we introduced
improvements, beyond our already class-leading performance, for the analysis of low energy X-rays. This
benefits research into biological and other fragile sample types that are studied at low microscope power toavoid sample damage. Record orders were received in America, while Europe also saw a performance
improvement on last year. However, there was a reduction in orders in Japan and this impacted the full year
results.
Andor Technology is a global leader in the design and manufacture of high performance scientific imaging
cameras, spectroscopy solutions and microscopy systems for research and industrial markets. A number ofkey products were launched during the year that will continue to drive revenue. The iXon Ultra 888 is themost flexible high performance camera for those working in areas such as live cell imaging and superresolution microscopy. The sensitivity of the camera enables customers to image more detail in cellstructures than ever before. This allows them to better understand such biological processes as cancer cell
behaviour and the molecular mechanisms that go wrong in conditions such as Parkinson’s or Alzheimer’s.
Our customers continue to make scientific advancements using our products. Our world class Imaris
software has recently been used by researchers to visualise how the Ebola virus infected cells, allowing
scientists to try different potential treatments. In physical science, two iKon M cameras have made over one

Oxford Instruments plc
5billion measurements of the most luminous objects in the universe, allowing scientists to identify previously
undiscovered objects including stars and galaxies.
Asylum Research is the technology leader in Atomic Force and Scanning Probe Microscopy for bothmaterials and bioscience applications. Asylum Research saw good returns from two of our highperformance Atomic Force Microscopes (AFM): the Cypher and the MFP-3D Infinity. An AFM uses an ultrafine stylus to mechanically image objects at the nano-scale. Orders for the Cypher are increasing as it offers
market leading resolution at the atomic scale. There is also good traction for Infinity, which offers the mostcomprehensive selection of accessories for materials and life science research, making it an ideal tool forcustomers who want to use it for a variety of applications.
Plasma Technology provides processes and platforms to customers in research laboratories andspecialised semi-conductor fabrication facilities who are developing new materials, nano-devices andproducts. The business experienced a challenging year, primarily due to the cancellation of orders to
Russia. In addition there was continued weakness in the demand for High Brightness Light Emitting Diodes(HBLED). As a result we have refocused Plasma Technology on its core competence of designing tools forresearch into advanced materials and we have terminated certain product developments that were not inline with this strategy. This resulted in a restructuring cost (including write offs of inventory, development
costs and fixed assets) and enabled us to right size the business. We continue to develop market leading
solutions in the research markets. For example this year we introduced the NanoFab 1200 for the growth ofgraphene and other 2-D materials. In the Specialised Production market, we introduced an enhanced
deposition process for Power Semiconductor applications that will improve the performance of advanced
semi-conductor devices.
NanoScience designs, manufactures and supports market-leading research tools that enable quantum
technologies, new materials and device development in the Physical Sciences. Our latest product, theOptistat Dry, was designed for low temperature optical spectroscopy applications including device
development for telecommunications. As it does not use costly liquid helium there has been particularinterest in China and India, where the availability of helium and budget constraints can impact the extent of
their research abilities. At a time when quantum computing is evolving rapidly, the launch of the Triton XL
offers higher cooling powers and more sample space, allowing scientists to perform multiple operations inparallel, increasing the processing power of the devices. The recent advancements we have made withsuperconducting magnet systems include the development of novel methods for coil design, stored energy
and quench management. With growing interest in graphene and other 2D material properties in ultra highmagnetic fields, we are well placed as a world leader in such systems delivering significant reductions inrunning costs compared to traditional techniques which do not use these high power superconducting
magnets.
Omicron Nanotechnology is a world leader in the specialised field of ultra-high vacuum (UHV) surface
science, combining thin film deposition techniques with leading edge surface analysis techniques such as
scanning probe microscopy and X-ray Photoelectron Spectroscopy (XPS). We have a strong position in the
global academic research market, selling to leading universities from China to the USA. Customers areusing our products to research into the properties of materials using ultra high vacuum to ensure extreme
sample purity. The microscopes can image and move individual atoms, allowing the observation andmanufacture of nanostructures and this is used in applications such as research into next generation
computer storage and processing devices.
Post-period end, we announced a joint venture to merge Omicron with Scienta Scientific AB, creating thelargest player in the growing UHV surface science market. The joint venture provides excellent
opportunities to enhance product development, cut production costs and broaden the product range, whilst
extending market reach and strengthening customer relationships.

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6

Industrial Products

Revenue
Operating Profit

2015

2014

GrowthUnderlying
Growth*

£m
107.1
6.3

£m
114.7
15.6

-6.6%

-4.1%

*excludes Fx, acquisitions and completed contracts

Our Industrial Products sector sells more mature, though still technically advanced, products primarily toindustrial customers (59% of its revenues come from industrial customers). The tools and systems
produced by this sector enable us to benefit from the economies of scale offered by trading in the larger
industrial markets, thereby maximising the returns from our R&D programmes. In the industrial field, ourtools are used to improve production efficiency, ensure high standards of quality control and demonstratecompliance with environmental legislation.
Revenues were lower than last year as a result of the successful completion of the ITER order which
produced revenues of £3 million in the first quarter of 2014. In addition, the launch of the new, premium
priced X-MET8000 handheld analyser came late in the year and could not therefore compensate for falling
sales of our preceding product, which had encountered increased market competition.
Industrial Analysis designs and sells a range of spectrometers for industrial markets. The recently launched
X-MET8000 supports the regulatory compliance screening of consumer goods. It will help our customers
prevent costly rejects, identifying hazardous elements before they enter the manufacturing process. A new
distribution network has been established in North America to better reach and support the market andthere has been additional focus on building the distribution channels in China. The integration of the two
acquisitions made in the prior year, RMG and Roentgenanalytik, is near completion. Production of therevolutionary mPulse LIBS analyser, which uses a laser to cost effectively identify materials, is now
proceeding well after an extensive period of production engineering. The Maxxi 6, a new tool for coating
thickness measurement and materials analysis, was released in early 2015 and is the first fully developed
product to result from our Roentgenanalytik acquisition. Whilst these improvements in product portfolio anddistribution network are now in place and cause us to be optimistic about future trading, theirimplementation happened late in the year and as a result, the Industrial Analysis business under-performed
against its objectives for the year as a whole.
Industrial Components comprises our Superconducting Wire, Austin Scientific and X-ray Technology
businesses. The Industrial Components division experienced a mixed year. In our Superconducting Wirebusiness the demand for wire for MRI scanners continued to be steady. The successful completion of the
ITER order in the first quarter of 2014 meant that revenues were lower than in the previous year. There wascontinued success internationally, with diversification in China to work with new customers who havedeveloped MRI capabilities. X-ray Technology continues to be successful, but it was a difficult year for ourAustin Scientific business with a key customer, GTAT, filing for protection from its creditors under Chapter 11
in the USA.
Service Sector

Revenue
Operating Profit

2015

2014

GrowthUnderlying
Growth*

£m
68.6
15.7

£m
66.4
13.5

3.3%

7.1%

*excludes Fx, acquisitions and completed contracts

The Service sector comprises the Group’s maintenance service contracts, spare part sales of Oxford
Instruments equipment and the servicing of third party MRI and CT machines, under the OIHealthcare
brand. The complexity and uniqueness of our products mean our customers increasingly purchasemultiyear service contracts. This sector performed well. A good performance in the USA was driven largelyby the ongoing success of our MRI and CT scanner servicing business. There was also an increase inrefurbished turnkey systems and spare parts. However, this year saw the completion of our nationwide
maintenance contract with Siemens (c. £4 million revenue in 2014/15) after 17 years and this will not be

Oxford Instruments plc
7

renewed. While business remains strong in Japan, with an increase in billable servicing and spare partsales, the negative impact of the exchange rate is reflected in the revenue reported. Our service business in
China experienced a strong year. Elsewhere, Andor Technology contributed to the ongoing success of thesector in its first full year of reporting. Post period end we successfully completed the acquisition of Medical
Imaging Resources, which specialises in the build, lease and service of mobile MRI, CT and PET-CT. MIR
will become part of OIHealthcare and positions us well to maximise the opportunities made available to us
through the Affordable Healthcare Act, which seeks to provide more cost effective healthcare solutions in
the USA.
PeopleDuring the year, some of our valued friends and colleagues left the Group as part of the cost reduction
programme. In order to hear from our staff about how these changes have affected them, our Management
Board has been taking part in a number of listening sessions with our staff around the world. These small
group discussions have proved beneficial for us all, allowing us to communicate the Oxford Instruments
strategy and discuss suggestions for the future. This has resulted in a number of actions that support thecontinued engagement of our people and will further drive the business forward.
We are now focused on rebuilding the momentum in our business and taking advantage of the many
exciting opportunities in our markets. Our people remain the most important part of our differentiation andinnovation that is so valued by our customers. I thank everyone for their hard work and effort during what
has been a challenging year and recognise the valuable contribution all our staff have made, and continue
to make, to our ongoing success.
Financial Review
Trading Performance: Orders in the period were up 13.0% to £386.6 million (2014: £342.2 million).
Including inter-segment trade, the split between sectors was: Nanotechnology Tools £213.1 million, up
28.1%; Industrial Products £105.5 million, down 4.1%; and Service £69.2 million, up 2.5%. At the end of
the year the Group order book for future deliveries stood at £125.9 million (2014: £126.1 million).
Revenues in the year grew by 7.1% to £385.5 million (2014: £360.1 million). The increase in revenues due
to acquisitions made in 2013/14 was £54.8 million. Adverse foreign currency exchange rate movements
reduced reported sales by £10.7 million.
In Nanotechnology Tools, revenues grew 16.9% as a result of a full year’s contribution from Andor
Technology, an acquisition made in January 2014. On a constant currency organic basis revenues fell by
8.2% due primarily to a decline in our NanoAnalysis business in Japan and a marked decline, particularly in
Russia, for our Plasma Technology business.
In Industrial Products, revenues reduced by 6.6%. Part of this decline was due to the completion of the
ITER contract in the first quarter of the previous year. Excluding ITER, foreign exchange effects and thegrowth in sales from the RMG and Roentgenanalytik acquisitions that were made in the third quarter of theprevious year, sales fell by 4.1%. This was due to increased competition in the hand held XRF market
where our outgoing XMet-7000 range struggled against newer models from competitors and a steadymarket for superconducting wire for MRI applications.
Service revenues increased by 3.3%. This was despite a £2.0 million decline in our business that services
Siemens MRI machines in North America. We believe that this business, which had sales of approximately£4.0 million in 2014/15, will cease in 2015/16. Excluding the Siemens effect, foreign exchange andacquisitions we saw underlying growth of 7.1%. This was due to good growth in the servicing of Oxford
Instruments’ equipment in Asia and the continued growth of OIHealthcare.
Adjusted Group gross margins reduced from 45.4% to 44.4% due to adverse currency movements and theoperational gearing effect of reduced sales in Plasma Technology and Industrial Analysis.

Oxford Instruments plc
8Adjusted operating expenses rose by £16.3 million reflecting an increase of £20.0 million spend due to theinclusion of the acquired businesses, a £2.7 million benefit from foreign exchange rate movements and asaving of £1.0 million in underlying costs.
Adjusted operating profit decreased from £50.3 million to £42.7 million which equates to an adjusted
operating profit margin of 11.1% (2014: 14.1%). The interest charge increased to £7.1 million (2014: £3.2
million) primarily as a result of the increased debt due to the Andor acquisition in the prior year. As a result
adjusted profit before tax fell from £47.1 million to £35.6 million. This compares with a reported loss before
tax of £9.7 million (2014: profit of 24.0 million). The table below provides reconciliation.
Adjusting Items: The Directors believe that adjusted profit before tax gives a clearer indication of theunderlying performance of the business. A reconciliation of reported profit before tax to adjusted profit
before tax is given below:(Loss)/Profit before income tax
Reversal of acquisition related fair value adjustments to inventory
Acquisition related costs
Restructuring costs
Amortisation and impairment of acquired intangibles
Contingent consideration - further amount deemed payable
Contingent consideration deemed no longer payable
Unwind of discount in respect of contingent consideration
Mark to market loss/(gain) in respect of derivative financial instruments
Settlement loss on US pension scheme
Adjusted profit before income tax
Share of taxation
Adjusted profit for the year

2015
£m
(9.7)
0.2
2.2
9.9
21.7
6.8
(1.4)
1.1
4.8
—
35.6
(8.1)
27.5

2014
£m
24.0
3.7
7.8
—
14.7
—
—
0.9
(4.1)
0.1
47.1
(8.7)
38.4

Financial income and expenditure: Within financial income and expenditure, the cost of interest on loans
and overdrafts and the commitment fee for our revolving credit facility, offset by deposit interest, rose to£5.2 million (2014: £1.2 million) due to the increased borrowing that financed the Andor Technology
acquisition. The interest charge on net pension scheme liabilities was £1.9 million, in line with the prioryear.
The Group uses derivative products to hedge its exposure to fluctuations in foreign exchange rates. It is
Group policy to have in place at the beginning of a financial year hedging instruments to cover 80% of its
forecast transactional exposure for that year.
In common with a number of other companies, the Group has decided that the additional costs of meetingthe extensive documentation requirements of IAS 39 to apply hedge accounting to these foreign exchange
hedges cannot be justified. Accordingly the Group does not use hedge accounting for these derivatives. Net
movements on marking to market such derivatives at the balance sheet date are disclosed in the income
statement as Financial Expenditure and excluded from our calculation of adjusted profit before tax (Note 1).
The mark to market loss in respect of derivative financial instruments was £4.8 million (2014: £4.1 million
gain).
The Group also uses derivative products to hedge its exposure to fluctuations in the price of copper, a major
component for the Superconducting Wire business. Given the small number of contracts involved, weapply hedge accounting for these transactions and consequently the results of marking to market are
excluded from the Income Statement.
Taxation: The Group’s weighted average statutory tax rate was 30% (2014: 29%). The underlying rate on
the profit before tax for the Group before adjusting items was 23% (2014: 18%). This difference is due to

Oxford Instruments plc
9prior year adjustments, tax incentives relating to income earned from technology assets and manufacturing
activities and tax efficient financing.
In the year ended March 2011, due to the improved performance of the Group’s UK businesses, werecognised a deferred tax asset of £11.3 million in respect of brought forward tax losses in the UK and acorresponding credit to the Income Statement. We believe that this was exceptional both in nature andquantum and therefore excluded it from our calculation of adjusted earnings per share. In order to beconsistent we have, over time, excluded the reversal of this asset from the calculation of adjusted earnings
per share. During the current year as a result of the restructuring the Group made a loss in the UK before
tax. Consequently no part of the deferred tax asset reversed during 2015. We now expect the final £1.2
million to reverse in the year ending March 2016.
Earnings: After a tax credit of £3.4 million (2014: charge of £5.8 million), the reported net loss for thefinancial year was £6.3 million (2014: profit of £18.2 million). With a weighted average number of shares of
57.1 million (2014: 56.8 million), the reported basic earnings per share were (11.1) pence (2014: 32.1
pence).
Adjusted profit before tax (Note 1) fell by £11.5 million to £35.6 million which equates to adjusted earnings
per share of 48.2 pence (2014: 67.7 pence).
Dividends: In 2011 the Group moved to a progressive dividend policy, whereby we seek to raise dividends
as adjusted earnings per share rise, although not necessarily in the same proportion. In recommending thedividend, the Directors take account of the perceived need for cash to expand the business both organicallyand through acquisition. For the year just ended, the proposed final dividend of 9.3 pence per share (2014:9.04 pence), payable on 22nd October 2015 to shareholders who are on the register on 25th September
2015, gives a total dividend for the year of 13.0 pence per share (2014: 12.4 pence). Dividend cover for theunderlying business before adjusting items was 3.7 times (2014: 5.5 times).
Investment in research and development (R&D): Total cash spend on R&D in the year was £35.2 million
or 9.1% of sales (2014: £27.9 million, 7.7%).
A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:

R&D expense charged to the consolidated statementof income.
Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
Less: amortisation of R&D costs capitalised as
intangibles
Add: amounts capitalised as intangible assets
Total cash spent on R&D during the year

2015
30.8

2014
25.1

(0.9)
2.0
(4.7)

(0.8)
2.1
(3.9)

8.0
35.2

5.4
27.9

The net book value of capitalised development costs at the end of the financial year was £16.1 million(2014: £14.1 million).
Balance sheet: Net assets fell from £140.2 million to £125.5 million in the year.
Net working capital (excluding derivative financial instruments, contingent consideration and tax
payable/receivable) fell from £41.0 million to £37.1 million.
Inventory turns increased by 0.1 to 3.0 while debtor days increased from 45 days to 52 days.
Net debt at the year-end was £118.9 million (2014: £124.3 million). During the year the Group renegotiatedits committed Revolving Credit Facility to extend the tenor of the facility by just over a year to February

Oxford Instruments plc
10

2020. At the same time the Group increased the amount of the facility to include a US dollar tranche
totalling $37 million.
In addition to the Revolving Credit Facility which totals £100 million plus US$ 37 million, the Group has a£44.5 million fixed rate loan from Pricoa Capital which matures in 2021 and a £25.0 million fixed rate loan
from the European Investment Bank that matures in 2020. The Group has overdraft facilities totalling £16.3
million.
We continue to operate well within our banking covenants. Debt covenants are Net Debt / EBITDA less than
3.5 (until and including 31 March 2016), 3.0 thereafter and EBITDA / Debt interest greater than 4.0. For theyear under review, Net Debt / EBITDA was 2.3 and EBITDA / Debt interest was 10.0.
Acquisitions and Disposals: Post year-end, on 1 May 2015, the Group acquired Medical Imaging
Resources, Inc. (MIR), a US company specialising in the build, lease and service of mobile medical imaging
labs. Consideration comprised an initial $10.4 million (c. £6.7 million) plus a further $10.1 million (c. £6.5
million) earn-out payment, payable one year later. MIR had $3.0 million (c. £2.0 million) net debt atcompletion.
MIR will form a part of OIHealthcare, within the Group's Service sector. The acquisition was funded fromexisting facilities.
On 28 May 2015 the Group entered into a joint venture with GD Intressenter AB of Sweden (GDI) to create
the world’s largest player in the highly specialised Ultra High Vacuum Surface Science field. The joint
venture comprises Oxford Instruments’ Omicron Nanotechnology GmbH and GDI’s Scienta Scientific AB.
In consideration for new shares in Scienta, Oxford Instruments has transferred all of its shares in the capitalof Omicron to Scienta. Oxford Instruments holds a 47 per cent interest in the share capital of Scienta and
GDI holds 53 per cent.
In the twelve months to 31st March 2014, Omicron generated revenue of £28.5 million and a loss before taxof £0.6 million. Scienta generated revenue of SEK279 million (approximately £24.6 million) and a profit
before tax of SEK25 million (approximately £2.2 million). Oxford Instruments has provided a term loan of
SEK40 million (approximately £3.1 million) to the joint venture. The transaction will result in no profit or loss
on the carrying value of Omicron for Oxford Instruments.
Pensions: The Group has defined benefit pension schemes in the UK and the USA. Both have beenclosed to new entrants since 2001 and closed to future accrual from July 2010. The total deficit, before tax,
under IAS19 on these pension schemes grew in the year by £7.2 million to £53.5 million. There is acorresponding deferred tax asset of £11.2 million.
Assets of the schemes at 31 March 2015 were £238.6 million (2014: £196.6 million), while liabilities
increased from £242.9 million to £292.1 million.
The latest triennial actuarial valuation of the UK scheme was carried out as at 31 March 2012 and resulted
in an actuarial deficit of £48.8 million. A long-term plan for recovering the deficit over 8 years has been
agreed between the Company and the Pension Trustee. Under the deficit recovery plan, payments will
increase for the three years to March 2015 by the greater of 10 percent or the percentage increase individend per share. Thereafter, the payment will increase by 3.05% per annum. The payment in 2014/15,
the third year of the new plan, was £6.3 million. An actuarial valuation as at 31 March 2015 will be carriedout in the current year.
Cash: Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 10.5%
to £53.0 million. There was a working capital outflow of £5.1 million.
Cash generated from operations was £38.9 million (2014: £28.4 million). The ratio of operating cash tooperating profit, which is one of our Key Performance Indicators, was 80.8% (2014: 51.1%).

Oxford Instruments plc
11Restructuring: In January 2015 the Group announced that it was embarking on a restructuring programme
to reduce its cost base. The programme included a number of redundancies, the closure of six sites acrossthe Group and the costs of Plasma Technology exiting the high volume production semiconductor market.
The costs of the programme are recognised as non-recurring adjusting items as summarised below:£’M
Income StatementCash2014/15
9.9
1.2

2015/16
1.4
7.4

Total
11.3
8.6

The savings as a result of the programme are expected to be £8.0 million in 2015/16.
Employees: The average number of people employed during the year was 2,420, an increase of 370 overthe prior year, due primarily to the inclusion of Andor Technology in the Group for the full year.
Going concern: The Group’s business activities, together with the factors likely to affect its future
development, performance and position, are set out in the Performance and Strategy and Operations
sections. The financial position of the Group, its cash flows, liquidity position and borrowing facilities aredescribed in this Financial Review.
The diverse nature of the Group, combined with its financial strength, provides a solid foundation for asustainable business. The Directors have reviewed the Group’s forecasts and flexed them to incorporate anumber of potential scenarios relating to changes in trading performance. The Directors believe that theGroup will be able to operate within its existing debt facilities. This review also considered hedging
arrangements in place. The Directors believe that the Group is well placed to manage its business risks
successfully.
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion,
after making reasonable enquiries, that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Forward-Looking Statements: This document contains certain forward-looking statements. The forwardlooking statements reflect the knowledge and information available to the Company during the preparation
and up to the publication of this document. By their very nature, these statements depend uponcircumstances 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.

Oxford Instruments plc
12Consolidated Statement of Income
year ended 31 March 2015

Notes

Adjusted*£m

Adjustingitems*
£m

Total
£m

[3]

385.5

—

385.5

Cost of sales(214.3)(0.2)(214.5)Gross profit

171.2

(0.2)

171.0

Revenue(30.8)—(30.8)

Selling and marketing(65.6)—(65.6)

Administration and shared services(34.8)(39.2)(74.0)

Foreign exchange

2.7

—

2.7

Operating profit

42.7(39.4)

3.3

Other financial income

0.1

—

0.1

Financial income

0.1

—

0.1

Interest charge on pension scheme net liabilities

(1.9)

—

(1.9)

Other financial expenditure

(5.3)

(5.9)

(11.2)

Financial expenditure

(7.2)

(5.9)

(13.1)

Research and development[4]

Profit/(loss) before income tax
Income tax (expense)/credit[6]

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

35.6(45.3)

(9.7)

(8.1)

11.5

3.4

27.5

(33.8)

(6.3)

pence

pence

Earnings per share
Basic earnings per share

[2]

48.2

(11.1)

Diluted earnings per share

[2]

48.0

(11.1)

Dividends per share
Dividends paid

[7]

12.4

Dividends proposed

[7]

13.0

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

The attached notes form part of the Financial Statements.

Oxford Instruments plc
13

Consolidated Statement of Income
year ended 31 March 2014

Notes

Adjusted*£m

Adjustingitems*
£m

Total
£m

[3]

360.1

—

360.1

Cost of sales(196.6)(3.7)(200.3)Gross profit

163.5

(3.7)

159.8

Revenue(25.1)—(25.1)

Selling and marketing(56.7)—(56.7)

Administration and shared services(33.1)(22.6)(55.7)

Foreign exchange

1.7

—

1.7

Operating profit

50.3(26.3)

24.0

Other financial income

0.3

4.1

4.4

Financial income

0.3

4.1

4.4

Interest charge on pension scheme net liabilities

(2.0)

—

(2.0)

Other financial expenditure

(1.5)

(0.9)

(2.4)

Financial expenditure

(3.5)

(0.9)

(4.4)

Research and development[4]

Profit/(loss) before income tax
Income tax (expense)/credit[12]

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

47.1(23.1)

24.0

(8.7)

2.9

(5.8)

38.4

(20.2)

18.2

pence

pence

Earnings per share
Basic earnings per share

[2]

67.7

32.1

Diluted earnings per share

[2]

67.3

31.9

Dividends per share
Dividends paid

[7]

11.2

Dividends proposed

[7]

12.4

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

Oxford Instruments plc
14Consolidated Statement of Comprehensive Income
year ended 31 March 2015
2015
£m

2014
£m

(6.3)

18.2

Gain on effective portion of changes in fair value of cash flow hedges, net of amounts recycled

0.1—

Foreign exchange translation differences

7.3

(8.4)

Tax on items that may be reclassified to profit or loss——

(10.8)

(1.9)

2.3

(1.0)

(1.1)

(11.3)

(7.4)

6.9

Notes

(Loss)/Profit for the year
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss

Items that will not be reclassified subsequently to profit or loss
Remeasurement loss in respect of post-retirement benefits
Tax on items that will not be reclassified to profit or loss
Total other comprehensive expense
Total comprehensive (expense)/income for the year attributable to equity
Shareholders of the parent[6]

Oxford Instruments plc
15

Consolidated Statement of Financial Position
as at 31 March 2015
2015
£m

2014
£m

33.1
231.3
20.1
284.5

34.4
247.9
11.2
293.5

70.8
87.3
3.3
3.4
25.1
189.9
474.4

68.3
80.9
1.0
5.3
32.6
188.1
481.6

2.9
61.5
0.2
2.9
58.0
125.5

2.9
61.3
0.1
(4.4)
80.3
140.2

144.0
0.8
53.5
6.2
204.5

141.4
13.1
46.3
12.0
212.8

—
121.6
2.6
4.1
16.1
144.4
348.9
474.4

15.5
99.2
3.7
0.5
9.7
128.6
341.4
481.6

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

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

Jonathan Flint
Kevin Boyd
Director
Director
Company Number: 775598

Oxford Instruments plc
16Consolidated Statement of Changes in Equity
year ended 31 March 2015

Balance at 1 April 2014
Total comprehensive income:Loss for the year
Other comprehensive income:– Foreign exchange translation differences– Gain on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled– Remeasurement loss 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:– Charge/(credit) in respect of employee service
costs settled by award of share options– Tax charge in respect of share options– Proceeds from shares issued– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2015

Other
reserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

61.3

0.1

(4.4)

80.3

140.2

—

—

—

—

(6.3)

(6.3)

—

—

—

7.3

—

7.3

—

—

0.1

—

—

0.1

—

—

—

—

(10.8)(10.8)

—

—

—

—

2.3

2.3

—

—

0.1

7.3

(14.8)

(7.4)

—
—
—
—

—
—
0.2
—

—
—
—
—

—
—
—
—

(0.2)
(0.2)
—
(7.1)

(0.2)
(0.2)
0.2
(7.1)

—
2.9

0.2
61.5

—
0.2

—
2.9

(7.5)
58.0

(7.3)
125.5

Share
capital£mSharepremium
account£m

2.9

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

Oxford Instruments plc
17

Consolidated Statement of Changes in Equity
year ended 31 March 2014

Balance at 1 April 2013
Total comprehensive income:
Profit for the year
Other comprehensive income:– Foreign exchange translation differences– Gain on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled– Remeasurement loss 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:– Charge/(credit) in respect of employee service
costs settled by award of share options– Tax charge in respect of share options– Proceeds from shares issued– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2014

Other
reserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

60.6

0.1

4.0

70.2

137.7

—

—

—

—

18.2

18.2

—

—

—

(8.4)

—

(8.4)

—

—

—

—

—

—

—

—

—

—

(1.9)

(1.9)

—

—

—

—

(1.0)

(1.0)

—

—

—

(8.4)

15.3

6.9

—
—
0.1
—

—
—
0.7
—

—
—
—
—

—
—
—
—

1.6
(0.4)
—
(6.4)

1.6
(0.4)
0.8
(6.4)

0.1
2.9

0.7
61.3

—
0.1

—
(4.4)

(5.2)
80.3

(4.4)
140.2

Share
capital£mSharepremium
account£m

2.8

Oxford Instruments plc
18

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

2014
£m

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

(6.3)

18.2

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

5.8
—
3.7
7.8
—
—
—
0.1
14.7
5.0
3.9

Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Acquisition related costs paid
Restructuring costs paid
Cash payments to the pension scheme more than the charge to operating profit
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
Decrease/(increase) in payables and provisions
Increase/(decrease) in customer deposits
Cash generated from operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital(Decrease)/increase in borrowings
Dividends paid
Net cash from financing activities
Net 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
Reconciliation of changes in cash and cash equivalents to movement in net debt
Decrease in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents

53.0
0.2
(0.2)
(1.9)
(1.2)
(5.9)
44.0
(3.0)
(4.4)
0.5
1.8
38.9
(5.0)
(9.1)
24.8

59.2
0.3
1.6
(6.4)
—
(5.4)
49.3
(2.9)
(3.8)
(3.3)
(10.9)
28.4
(1.0)
(6.2)
21.2

(0.8)
(4.4)
(1.0)
(8.0)
(14.2)(165.7)
(6.8)
—
(5.4)
(177.9)0.2(12.9)(7.1)(19.8)
(9.2)
32.6
1.7
25.1

0.8
156.9
(6.4)
151.3
(5.4)
39.2
(1.2)
32.6

(9.2)
1.7

(5.4)
(1.2)

(7.5)
12.9

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

5.4
(124.3)(163.5)39.2

Net debt at the end of the year

(118.9)(124.3)

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

Oxford Instruments plc
19Notes to the Financial Statements
year ended 31 March 2015
1
NON-GAAP MEASURESThe Directors present the following non-GAAP measures as they consider that they give a better indication of the underlying
performance of the business.
Reconciliation between profit before income tax and adjusted profit(Loss)/Profit before income tax
Reversal of acquisition related fair value adjustments to inventory
Acquisition related costs
Restructuring costs
Amortisation and impairment of acquired intangibles
Contingent consideration further amount deemed payable
Contingent consideration deemed no longer payable
Unwind of discount in respect of deferred consideration
Mark to market (gain)/loss in respect of derivative financial instruments
Settlement loss on US pension scheme
Adjusted profit before income tax
Share of taxation
Adjusted profit for the year

2015
£m

2014
£m

(9.7)
0.2
2.2
9.9
21.7
6.8
(1.4)
1.1
4.8
—
35.6
(8.1)
27.5

24.0
3.7
7.8
—
14.7
—
—
0.9
(4.1)
0.1
47.1
(8.7)
38.4

The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide a measure that
includes results from acquired businesses on a consistent basis over time to assist comparison of performance.
Acquisition related costs comprise professional fees incurred in relation to mergers and acquisitions activity, post acquisition
restructuring costs and any consideration which, under IFRS 3 (revised), falls to be treated as a post acquisition employment
expense.
In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment of acquired
intangible assets and goodwill and the unwind of discounts in respect of contingent consideration relating to business combinations.
In the current period, a further £6.8m has been provided in respect of additional contingent consideration expected to be due inrespect of the acquisition of Platinum Medical Imaging in November 2011.
In the current period, £1.4m relating to contingent consideration on the acquisition of RMG Technology Limited which the directors
no longer consider will be payable, has been released to other operating income.
Restructuring costs comprise the one off costs in respect of the cost reduction programme referred to in the Review of the Year andthe refocusing of the Plasma Technology business as also described in the Review of the Year.
During the prior year the Group purchased annuities for 27 members of the US defined benefit pension scheme. A settlement lossof £0.1m crystallised on purchase.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are alsomeasured at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does not takeadvantage of the hedge accounting rules provided for in IAS 39 since that standard requires certain stringent criteria to be met inorder to hedge account, which, in the particular circumstances of the Group, are considered by the Board not to bring any
significant economic benefit. Accordingly, the Group accounts for these derivative financial instruments at fair value through profit orloss. To the extent that instruments are hedges of future transactions, adjusted profit for the year is stated before changes in thevaluation of these instruments so that the underlying performance of the Group can be more clearly seen.
In calculating the share of tax attributable to adjusted profit before tax in 2011 a one-off recognition of deferred tax assets relating to
the Group’s UK businesses of £11.3m was excluded. At that time the Group announced its intention to exclude the reversal of thisdeferred tax from the calculation of the share of tax attributable to adjusted profit before tax in the years in which it reverses. In thecurrent period tax losses arose in the UK and consequently no deferred tax reversed. In the prior period £2.2m reversed and was
excluded from the tax attributable to adjusted profit before tax.

Oxford Instruments plc
20

2

EARNINGS PER SHARE

The calculation of basic and adjusted earnings per share is based on the profit for the year as shown in the Consolidated Statementof Income and the adjusted profit for the year as shown in Note [1] respectively. Basic and adjusted earnings are divided by theweighted average number of ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership
Trust.
2015
£m

2014
£m

Basic earnings
Adjusted earnings (Note [1])

(6.3)
27.5

18.2
38.4

Weighted average number of shares

57.1

56.8

pence

pence

Basic earnings per share
Adjusted earnings per share(11.1)
48.2

32.1
67.7

The weighted average number of shares used in the calculation excludes shares held by the Employee Share Ownership 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

2015
Sharesmillion2014
Sharesmillion

57.3
(0.2)
57.1

57.0
(0.2)
56.8

2015
Sharesmillion2014
Sharesmillion

57.1
0.2
57.3

56.8
0.4
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

In the current year the Group showed a reported loss, and as such reported basic earnings per share reported earnings per share
was equal to reported diluted earnings per share. This is because the shares under option above would have an anti-dilutive effect.
Adjusted diluted earnings per share has been calculated in a manner consistent with previous periods.
3

SEGMENT INFORMATIONThe Group has nine operating segments. These operating segments have been combined into three aggregated operating
segments to the extent that they have similar economic characteristics, with relevance to products and services, type and class ofcustomer, methods of sale and distribution and the regulatory environment in which they operate. Each of these three aggregatedoperating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating segmentson the basis of the economic characteristics discussed below:
the Nanotechnology Tools segment contains a group of businesses, supplying similar products, characterised by a high
degree of customisation and high unit prices. These are the Group’s highest technology products serving research customers
in both the public and private sectors;
the Industrial Products segment contains a group of businesses supplying high technology products and componentsmanufactured in medium volume for industrial customers; andthe Service segment contains the Group’s service business as well as service revenues from other parts of the Group.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on areasonable 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 isavailable for each segment and used by the Board of Directors for decisions on resource allocation and to assess performance. No
asset information is presented below as this information is not presented in reporting to the Group’s Board of Directors.

Oxford Instruments plc
21

3

SEGMENT INFORMATION (CONTINUED)a) Analysis by businessYear to 31 March 2015

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

210.9
0.3
211.2
20.7

106.0
1.1
107.1
6.3

68.6
—
68.6
15.7

385.5

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

180.5
0.1
180.6
21.2

113.3
1.4
114.7
15.6

66.3
0.1
66.4
13.5

360.1

2015
£m

2014
£m

42.7
(2.2)
(9.9)
—
(0.2)
(6.8)
1.4
(21.7)
0.1(13.1)
(9.7)

50.3
(7.8)
—
(0.1)
(3.7)
—
—
(14.7)
4.4
(4.4)
24.0

2014
Industrial
Products
£m

Total
£m

External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit

Year to 31 March 2014

External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit

42.7

50.3

Reconciliation of reportable segment profit

Adjusted profit for reportable segments
Acquisition related costs
Restructuring costs
Settlement loss on US pension scheme
Reversal of acquisition related fair value adjustments to inventory
Contingent consideration - further amount deemed payable
Contingent consideration deemed no longer payable
Amortisation and impairment of acquired intangibles
Financial income
Financial expenditure(Loss)/Profit before income tax
4

RESEARCH AND DEVELOPMENT

The total R&D spend by the Group is as follows:

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

Nanotechnology
Tools
£m

2015
Industrial
Products
£m

Total
£m

Nanotechnology
Tools
£m

22.5
(0.2)
0.9

8.3
(0.7)
1.1

30.8
(0.9)
2.0

17.6
(0.2)
0.6

7.5
(0.6)
1.5

25.1
(0.8)
2.1

(3.2)
6.1
26.1

(1.5)
1.9
9.1

(4.7)
8.0
35.2

(3.0)
3.8
18.8

(0.9)
1.6
9.1

(3.9)
5.4
27.9

An additional £0.7m impairment of capitalised development is included within administration and shared services in theConsolidated Statement of Income relating to the refocusing of the Plasma Technology business.

Oxford Instruments plc
22

5

ACQUISITIONS

Andor Technology plc
On 21 January 2014 the Group acquired 100% of the issued listed share capital of Andor Technology plc for a net cash
consideration of £158.1m. Andor is a market leading supplier of high performance optical cameras, microscope systems andsoftware.
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been madeto better align the accounting policies of the acquired business with the Group accounting policies and to reflect the fair value of
assets and liabilities acquired. The business has been acquired for the purpose of integrating into the Nanotechnology Tools
segment where it is believed that synergies can be obtained particularly in respect of routes to market.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

9.4

70.2

79.6

Tangible fixed assets

6.0

(4.0)

2.0

Inventories

11.1

2.5

13.6

Trade and other receivables

10.3

0.5

10.8

Trade and other payables(13.5)(2.0)(15.5)

Deferred tax(0.5)(14.2)(14.7)

Cash

17.2

—

17.2

Net assets acquired

40.0

53.0

93.0

Goodwill

82.3

Total consideration

175.3

Cash acquired(17.2)Net cash outflow relating to the acquisition

158.1

During the year ended 31 March 2015, as a result of access to further information, management made some amendments to theprovisional value adjustments presented in the prior year. As this was within the hindsight period, as allowed by IFRS 3, thedifference has been included within goodwill. As the difference is not material, the prior year balance sheet has not been restated.
The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce and synergistic benefits
expected to arise from the acquisition.
RoentgenAnalytik Systeme GmbHOn 31 December 2013 the Group acquired 100% of the issued share capital of Roentgenanalytik Systeme GmbH for a net cash
consideration of £1.6m.The company specialises in designing and supplying instruments for coating thickness measurement andmaterial analysis, using X-ray fluorescence (XRF).
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been madeto better align the accounting policies of the acquired business with the Group accounting policies and to reflect the fair value of
assets and liabilities acquired. The business has been acquired to strengthen Oxford Instruments’ range of X-ray Fluorescence(XRF) materials and coating thickness analysers.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

—

1.2

1.2

Inventories

0.2

—

0.2

Trade and other receivables

0.1

—

0.1

Trade and other payables

(0.3)

0.2

(0.1)

Cash

0.1

—

0.1

Net assets acquired

0.1

1.4

1.5

Goodwill

0.2

Total consideration

1.7

Cash acquired(0.1)

Net cash outflow relating to the acquisition

1.6

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce and synergistic
benefits expected to arise from the acquisition.

Oxford Instruments plc
23

5 ACQUISITIONS (CONTINUED)
RMG Technology Ltd
On 8 November 2013 the Group acquired 100% of the issued share capital of RMG Technology Limited for an initial net cash
consideration of £5.7m. RMG is a UK business specialising in Laser Induced Breakdown Spectrography.
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been madeto better align the accounting policies of the acquired business with the Group accounting policies. The business has been acquired
for the purpose of integrating into the Industrial Analysis segment where it will add a unique hand-held analyser to the Group’s
product portfolio.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

—

8.2

8.2

Inventories

0.1

—

0.1

Trade and other receivables

0.2

—

0.2

Trade and other payables

(0.3)

—

(0.3)

Deferred tax

—

(1.6)

(1.6)

Cash

0.4

—

0.4

Net assets acquired

0.4

6.6

7.0

Goodwill

0.5

Total consideration

7.5

Cash acquired(0.4)

Contingent consideration at acquisition(1.4)

Net cash outflow relating to the acquisition

5.7

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

Oxford Instruments plc
24

6 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
Recognition of deferred tax not previously recognised
Adjustment in respect of prior years
Total tax expense
Reconciliation of effective tax rate
Loss before income tax
Income tax using the UK corporation tax rate of 21% (2014: 23%)
Effect of:Tax rates other than the UK standard rate
Change in rate at which deferred tax recognised
Non-taxable income and expenses
Tax incentives not recognised in the Consolidated Statement of Income
Recognition of deferred tax not previously recognised
Movement in unrecognised deferred tax
Adjustment in respect of prior years
Total tax expense
Taxation charge/(credit) recognised in other comprehensive income
Deferred tax – relating to employee benefits

2015
£m

2014
£m

6.5
(0.3)
6.2

6.5
(0.1)
6.4

(9.0)
(0.6)
(9.6)
(3.4)

0.2
(0.8)
(0.6)
5.8

(9.7)
(2.0)

24.0
5.5

1.2
(1.5)
(0.2)
(0.9)
(3.4)

1.7
(0.2)
(0.1)
(0.4)
0.2
(0.9)
5.8

(2.3)
(2.3)

1.0
1.0

0.2

0.4

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

On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were
substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and
20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. The UK deferred tax balances at 31 March 2015 havebeen calculated based on the rate of 20% which was substantively enacted at the balance sheet date.
7

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:

Previous year interim dividend
Previous year final dividend

2015
pence

2014
pence

3.36
9.04
12.40

3.05
8.15
11.20

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

Interim dividend
Final dividend

2015
pence

2014
pence

3.70
9.30
13.00

3.36
9.04
12.40

The interim dividend was not provided for at the year end and was paid on 9 April 2015. The payment of the interim dividend
remains discretionary until it is paid. The final proposed dividend of 9.3p per share (2014: 9.04p) was not provided at the year end
and will be paid on 22 October 2015 subject to authorisation by the Shareholders at the forthcoming Annual General Meeting.

Oxford Instruments plc
25

8

BASIS OF PREPARATIONThis preliminary announcement does not constitute the company's statutory accounts for the years ended 31 March
2015 or 2014. Statutory accounts for 2014 have been delivered to the registrar of companies, and those for 2015 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 2015 is based on,
and is consistent with, that in the Group’s audited Financial Statements for the year ended 31 March 2015. No
revisions to adopted IFRS that became applicable in 2015 had a significant impact on the Group’s Financial
Statements for the year ended 31 March 2015.
The Company is registered in England Number 775598.
The principal exchange rates to Sterling used were:Year end rates

2015

2014

US Dollar
Euro
Yen

1.48
1.38
178

1.67
1.21
172

Average translation rates 2015

April 2014
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary 2015
February
March

Average translation rates 2014

April 2013
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary 2014
February
March

9

US Dollar

Euro

Yen

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

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

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

US Dollar

Euro

Yen

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

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

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

THE ANNUAL GENERAL MEETING

The Annual General Meeting will be held on Tuesday, 8 September 2015 at 2.30 pm at Group Head Office, Tubney
Woods, Abingdon, Oxfordshire, OX13 5QX.

Oxford Instruments plc
26

PRINCIPAL RISKS
Specific Risk

Context

Risk

Technical Risk

The Group provides
high technology
equipment andsystems to its
customers.

Failure of theadvanced
technologies
applied by theGroup toproducecommercial
products,
capable of being
manufactured
and sold
profitably.

Economic
Environment

Acquisitions

Foreignexchangevolatility

Outsourcing

Pensions

Government spend
on R&D has been
constrained.

Part of the growth of
Oxford Instruments
is planned to comefrom acquisitions
which provide theGroup withcomplementary
technologies.

A significant
proportion of theGroup’s profit ismade in foreign
currencies. Most
costs are in Sterling.

The Group’s
strategic plan
includes theoutsourcing of asignificantly higher
proportion of thecosts of its products
to benefit from
economies of scaleand natural currency
hedges.
The Group’s
calculated pension
deficit is sensitive tochanges in theactuarialassumptions.

Demand for theGroup’s
products may
be lower than
anticipated.

Appropriateacquisition
targets may failto provide theplanned value.

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

Failures in the
supply chain
impacting sales.

Movements inthe actuarial
assumptions
may have anappreciable
effect on thereported
pension deficit.

Possible
ImpactLower
profitability andfinancial
returns.
Negative
impact on theGroup’s
reputation.

Associatedstrategic priorities‘Realising the Brand’- Using ‘Voice of the
Customer’ to drive
rapid new productdevelopment.

Lower
profitability andfinancial
returns.

‘Realising the Brand’- Developing a strong
brand in existing anddeveloping markets.

Lower
profitability andfinancial
returns.
Management
focus taken
away from thecore businessin order tomanageintegration
issues.

Lower
profitability andfinancial
returns

Disruption tocustomers.
Negative
impact on theGroup’s
reputation.

Additional cash
required by theGroup to fundthe deficit.
Reduction in
net assets.

‘Liberate Cash’ Support and develop
our employees tomaximise their value
add.

‘Delivering
Shareholder Value’ Focus on balanced
and attractive global
markets.
‘Realising the Brand’- Developing a strong
brand in existing anddeveloping markets.
‘Inventing the Future’- Using “Voice of the
Customer” to drive
rapid new productdevelopment.
‘Adding Personal
Value’ – Supportingand developing our
employees.
‘Delivering
Shareholder Value’ Focus on balanced
and attractive global
markets.

Mitigation
The Group has moved awayfrom large scale, single
customer development
programmes towards morecommercially orientatedproducts.
The New Product Introduction
programme that any new R&D
projects must pass throughprovides a framework within
which the commercial viabilityof projects are scrutinised andassessed.
The Group has a broad
spread of customers,
applications and geographicalmarkets.

Extensive financial andtechnical due diligence isundertaken by the Groupduring any acquisition
programmes.
Each transaction has acomprehensive postacquisition integration plan
which is reviewed at thehighest level.

The Group seeks to mitigate
the exposure to transactionalrisk by the use of natural
hedges wherever possible.

‘Liberating Cash’ –Developing acompetitive global
supply base that
supports our growth.
‘Liberating Cash’ –Developing acompetitive global
supply base that
supports our growth.

The remaining transactional
foreign exchange risk in any
year is mitigated through theuse of forward and nonpremium based option
exchange contracts.
Relationships with outsourcing
businesses are monitored
closely and any potential
issues are acted upon swiftly
to avoid disruption.

‘Realising the Brand’- Developing a strong
brand in existing anddeveloping markets.

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

‘Delivering
Shareholder Value’ Focus on balanced
and attractive global
markets.

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

‘Liberating Cash’ –Developing acompetitive global
supply base that
supports our growth.

The Group has a funding planin place to reduce the pension
deficit over the short tomedium term.

Oxford Instruments plc
27

PeopleRoutes tomarketA number of theGroup’s employees
are business critical.

In some instances
the Group’s
products arecomponents ofhigher level systems
and thus the Group
does not control its
route to market.

The employee
leaves theGroup.

The systems
integrator
switches
supplier denying
the Group’sroute to market.

Lower
profitability andfinancial
returns.

Lower
profitability andfinancial
returns.

‘Adding Personal
Value’ – Supportingand developing our
employees.

The Group undertakes aregular employee survey andimplements and reviews
resulting action plans.

‘Inventing the Future’– Providing anenvironment for
inventing andinnovation.

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

‘Inventing the Future’– Developing
products that offer thebest technicalsolution.
‘Realising the Brand’– Ensuring that end
customers appreciate
the benefits of Oxford
Instruments
technology.

A management development
programme provides
exposure to key skills needed
for growth. Regular individual
performance reviews takeplace.
Use of the stage gate processand ‘Voice of the Customer’ tomake sure that the Group’s
products are the best in themarket.
Co-marketing with system
integrators to promote themerits of the Group’s products
to end customers.
Seeking to increase thenumber of integrators suppliedby the Group .

Oxford Instruments plc
28