Oxford Instruments plc
Report and Financial Statements 2014

Empowering scienceand industry

www.oxford-instruments.com

Overview
02

What We Do

04

Highlights

Strategic report
05

Review of the Year08

Our Business Model

10

Strategic Context

12

Our Strategy

Oxford Instruments is a leading
provider of high technology tools
and systems for research and industry
As one of the first commercial spin-out companies
from Oxford University, we have been at the forefront of
atomic and molecular innovation for more than ten years.
We use innovation to turn smart science into world-classproducts that support research and industry to address
the great challenges of the 21st Century.

14

Key Performance Indicators

16

Principal Risks and Uncertainties

18

Performance by Division

21

Financial Review

24

Corporate Responsibility

28

Board of Directors

30

Report of the Directors

33

Corporate Governance

41

Audit Committee Report

Forward-looking statements

47

Remuneration Report

66

Directors’ Responsibilities

67

Independent Auditor’s Report

This document contains certain forward-looking statements.
The forward‑looking statements reflect the knowledge and information
available to the Company during the preparation and up to the publicationof 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.

70

Accounting Policies

78

Consolidated Statement of Income

80

Consolidated Statement of Comprehensive Income

81

Consolidated Statement of Financial Position

82

Consolidated Statement of Changes in Equity

84

Consolidated Statement of Cash Flows85

Notes to the Financial Statements

Governance

Financial statements

115 Parent Company Balance Sheet
116 Notes to the Parent Company Financial Statements
122 Historical Financial Summary

Company information
123 Shareholder Information
126 Oxford Instruments Directory
129 Advisers

Oxford Instruments plc / Report and Financial Statements 2014

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We enable the pioneersof today to work on

A
Different
Level
Across the globe, people are focused on addressing thesignificant challenges that impact all of our lives. Constantadvances are needed to keep pace with our rapidly evolving
world. We need to work faster, more intelligently, morecollaboratively. And with a finite amount of resources,
we need to do more with less.
Oxford Instruments offers the means for customers to addressthese challenges on a different level: the atomic and molecularlevel. We turn smart science into commercially viable tools andsystems that can fabricate, analyse and manipulate matter at
the nano scale. The continued expansion of our capabilities
and expertise allows us to serve customers across all sectorsthat have an interest in working at this level and enable evengreater progress to be made.

www.oxford-instruments.com

What We Do

Our vision is to pursue
responsible development
and a deeper understandingof the world throughScience andTechnology
Our business is structured around three segments whichreflect our expertise and business objectives:

02

Nanotechnology Tools

Industrial Products

ServiceHigh technology tools to characterise,
analyse, manipulate and fabricate
at the nano scale

Developing and manufacturing tools andcomponents for industrial applications

Supplying knowledgeable support
services, training and refurbishment

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

We meet the needs of growing markets:

Research andacademia
Our largest market
sector includes
research into
nanotechnology
applications, newmaterials, and otherdevelopments.

Semiconductors/
IT
Includes semiconductor
electronics, Micro
Electro Mechanical
Systems (MEMS),
compoundsemiconductormaterials, thin film
and particle analysis.

Life sciences

Metals/construction

A rapidly growing
sector including
the support andservice of MR and CT
imaging equipment
and new opportunities
based on the overlapof physics and biology.

Supporting global
industries including
metals, alloy
manufacturing,steel foundries
and scrap recycling.

EnergyEnvironment

We have been involvedin the search forsustainable energy(ITER), solar
technologies, oiland gas explorationand superconductormaterials.

Tools for High
Brightness LEDs;
recycling; detectionof hazardous
substances in soil;
and agriculture
and food.

And bring together discrete businesses which arerecognised leaders in their fields:

NanoCharacterisation

NanoSolutions

Industrial
Analysis

Industrial
Components

Read more atwww.oxford-instruments.com/
businesses

OiService
CT & MR

Report and Financial Statements 2014 / Oxford Instruments plc

03

www.oxford-instruments.com

Highlights

The Group delivered anothersuccessful result, with increases
in orders, sales and profit
Our results were bolstered by a strong trading performance in the last quarter. The integrationof Andor Technology is proceeding to plan and has aided the results. However this has been offset
by the strength of Sterling against our main trading currencies. 2013/14 also marked the completionof the period covered by our 14 Cubed plan and the announcement of the next phase of Oxford
Instruments’ plan for growth. This new strategy seeks to exploit the convergence of the sciences
which is driving increased demand for nanotechnology tools and is discussed in more detail
within the Strategic Report.

Revenue (£m)
350.8

360.1

Adjusted profit before tax* (£m)

£360.1m

47.0

47.1

+2.7%
2013

2014

66.5

67.7

+0.2%
2013

Adjusted earnings per share* (p)

67.7p

2014

Read more
Turn to page 21

2014

Dividend per share (p)

11.2

12.4

12.4p

+10.7%+1.8%
2013£47.1m2013

2014

Highlights include:• O rders grew by 2.5% to £342.2 million(2013: £334.0 million)• Investment in R&D, up 11.2% to£27.9 million (2013: £25.1 million)• A djusted operating margin* of
14.0% (2013: 14.1%), in linewith 14 Cubed objectives• O ur strategy seeks to exploit theconvergence of the sciences which
is driving increased demand for
nanotechnology tools• AndorTechnology acquisition integrating
well and performing ahead of plan

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

04

Oxford Instruments plc / Report and Financial Statements 2014

A full discussionof our financial
performance during
the year can befound in the
Financial Review.

Overview

Strategic report

Governance

Financial statements

Company information

Review of the Year

Nigel Keen, Chairman

Performance
The Group delivered another successful result, withorders, sales and profit all up on the prior year. Orders
grew by 2.5% to £342.2 million (2013: £334.0 million).
Our closing order book was £126.1 million. Revenues
grew 2.7% to £360.1 million (2013: £350.8 million)
against a currency headwind caused by the relative
strength of the Pound compared to our major trading
currencies. Revenue growth on a constant currency
basis was 4.3%.
As previously reported, during the first two months of
2013/14 we experienced weak demand, particularly from
Government funded research. Since then, as expected,
we have seen gradual sustained improvement throughout
the year.
Adjusted operating profit grew 2.0% to £50.3 million(2013: £49.3 million). In line with our 14 Cubed objectives
we delivered an adjusted operating margin of 14.0%(2013: 14.1%).
During the year we saw strong revenue growth in the
USA of 10.9% and modest declines in Europe and Asia.
In Asia, continued weakness in the High Brightness Light
Emitting Diodes (HBLED) market suppressed growth, while
in Europe, Government spending, particularly in the first
half, was muted. Revenues elsewhere in the world grewby 18.5%, helped in particular by strong performancesin South America and Australia.
We have now reached the end of the period coveredby our 14 Cubed plan which set a target of achieving
an average compound annual sales growth rate of 14%
in the years 2011 to 2014 and a return on sales of 14%
by 2014. We delivered the targeted 14% return on sales.
We achieved 11% compound annual growth rate.

Jonathan Flint, Chief Executive

Strategy and business model
Across the world, people are focused on addressing
the great challenges of the 21st century. Constant advances
are needed to keep pace with our rapidly evolving world.
With finite resources, we need to achieve more with fewer
raw materials. Oxford Instruments offers the means forcustomers to address these challenges at the atomic
and molecular level. We use innovation to turn our smart
science into commercial tools and systems that analyseand manipulate matter at the nano scale. The continued
expansion of our capabilities and expertise allows us toaddress customers’ needs in a wide variety of markets
that have an interest in working at this scale.
Our Group operates in three sectors: Nanotechnology
Tools, Industrial Products and Service. Our Nanotechnology
Tools sector sells high technology tools, primarily to researchcustomers (74% of its revenues come from research andacademia). It provides a unique insight into emerging trends
in public and privately funded research, thus informing
our approach to innovation and product application.
Our Industrial Products sector sells more mature, thoughstill technically advanced products, primarily to industrial
customers (58% of its revenues come from industry).
The tools and systems produced by this sector enable us
to benefit from the economies of scale offered by tradingin larger industrial markets, thereby maximising the returns
from our R&D programmes. Our Service sector addresses
the aftermarket for both our own and third party hightechnology equipment, notably MRI and CT scanners.
The complexity and uniqueness of our products mean
our customers increasingly purchase multi-year
service contracts.

Report and Financial Statements 2014 / Oxford Instruments plc

05

www.oxford-instruments.com

Review of the Year continued

Strategy and business model continued
Improvement of our operational excellence forms a key
part of our strategy. Following the successful introductionof continuous improvement and lean six sigma activities
in selected Nanotechnology Tools and Industrial Products
businesses, we have initiated a global Operational
Excellence programme that develops and deploys bestpractice lean six sigma methodologies throughout theGroup to ensure our processes are continually improved
and deliver the benefits of economies of scale as thebusiness grows.
This year we announced the evolution of our strategy
to exploit the current convergence of the sciences, especiallyat the nano scale, which is driving increased demand for
nanotechnology tools.
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 in our core markets ofphysical and materials science, and exploiting convergenceto expand into life sciences.
Acquisitions
The acquisition of Andor Technology (Andor), an AIM
listed company based in Belfast, Northern Ireland, wascompleted on 21 January 2014. Andor is a market leading
supplier of high performance optical cameras, microscope
systems and software. For example, its cameras are being

used to understand protein distribution in cells, giving
insights into diseases such as Alzheimer’s, Parkinson’s andcancer. Live-cell super resolution microscopy, using Andor’s
iXon emCCD camera, gives much higher accuracy thanpreviously attained. The acquisition of Andor is strategicallyimportant to Oxford Instruments and offers substantial
opportunities to expand the Group’s current markets andtechnologies in both the physical science and life sciencearenas. A tailored integration programme is in placethat focuses on building relationships that create a firm
foundation for common processes, shared staff talentand joint future development opportunities. Integrationis going to plan and current performance is ahead of
our acquisition assumptions.
In the year, the Group also made two bolt-on
acquisitions to the Industrial Analysis business to broaden
the product offerings in metals analysis and coating
thickness measurement. RMG, a small UK based company,
adds a unique hand-held analyser branded mPulse to ourportfolio. Using the technique of laser induced breakdown
spectroscopy (LIBS), it is initially targeted at the scrap metals
industry and sales are already contributing to the businessahead of acquisition assumptions. Another recent addition
is Germany-based Roentgenanalytik, which strengthens
Oxford Instruments’ range of X-ray Fluorescence (XRF)
materials and coating thickness analysers. It will becomea centre of excellence for our benchtop XRF analysers,
enabling the development of a new generation of
manufacturing tools for our customers.

Our tools-based development model

Global markets
Research and academia — Life sciences — Semiconductor/IT
Energy — Metals and construction — Environment

Oxford Instruments
tools and systems areused by customers at
all levels– fundamental research

Key growth technologies
Repeatable fabrication and analysis tools– development of newtechnologies– commercialisation andmanufacture

New scientific discoveries

06

Oxford Instruments plc / Report and Financial Statements 2014

Read about our
new strategic plan
Turn to page 10

Overview

Strategic report

Governance

Financial statements

Company information

PeopleThe Andor Zyla
sCMOS camera is a tool
used in both the life andphysical science arenas.
Application areas include Live-Cell Microscopy
and Semiconductor Analysis.

Asylum Research, acquired in December 2012, has
integrated well and has made a good contribution to theGroup’s performance this year. The launch of new products
in its leading portfolio of atomic force microscopes has
extended the range of applications available to ourcustomers in the materials and bioscience markets.
As previously reported, and uniquely amongst our recent
acquisitions, Omicron Nanotechnology, acquired in 2011,
has underperformed against our acquisition assumptions.
As a result, we made changes to its management earlier
in the year and have laid out a new strategy. This businesswill now seek to establish a leadership position, along withother Group businesses in the nanotechnology tools sector,
in the study and fabrication of complex atomic scale materials
and devices. For example, it will target the emerging
technology of quantum computing, where Oxford Instruments
already has a strong position. The strategic actions we havetaken should enable the business to break even in the current
year and we anticipate that it will return to profitability inthe 2015/16 financial year. Once complete, we will havea world-class surface science business, which complements
our material science and bio-science activities. This will
enable us to offer our customers a unique portfolio of
nanotechnology tools.

Our strategy sets thestage for the next
phase of growth for
Oxford Instruments

The dedication and hard work demonstrated by our
employees is key to the success of Oxford Instruments,
and we thank them for their continued contribution to
our success. Developing our employees is central to ourstrategy for market leadership and profitable growthacross all our sectors. We believe that our increased focus
on diversity and inclusion across our global territories willfurther strengthen our business.
On 11 June 2013, Jennifer Allerton joined the Board of
Oxford Instruments as a Non-Executive Director. She has abroad range of technological, commercial and international
experience with large multinational businesses. Jennifer sitson the Audit, Remuneration and Nomination Committees.
Thomas Geitner, who was appointed to the Board on
1 January 2013, took over the Chair of the Remuneration
Committee on 9 September 2013.
At this year’s AGM Professor Sir Mike Brady will step
down from the Board. He was appointed in August 1995
and became Deputy Chairman in 2000. He was a memberof the Nomination Committee until 2011 and is a memberof the Audit and Remuneration Committees. We would liketo thank Mike for his outstanding service and commitment
to the Group over the last 20 years.
During the year, a new post of Chief Information Officer
was created to strengthen the IT infrastructure of the Group,
investigate ways in which we can better use IT to differentiate
our products and manage the implementation of a newGroup-wide ERP system.
Outlook
Orders for the first two months of the year are aheadof the same period last year on both a reported andconstant currency organic basis.
Our strategy, which sets the stage for the next phaseof growth for Oxford Instruments, will continue to focus
on developing innovative new products and growing market
share in our core areas of physical science. In addition, we
will seek to extend our reach into adjacent new markets
by applying our tools and technologies to life science
research and analysis.
This convergence of the sciences will drive long term
demand for our nanotechnology tools and enable us toreach a new set of customers. Despite the headwind fromforeign exchange at current levels, these factors, together
with a full year contribution from recent acquisitions,complemented by our talented people and our focus on
operational excellence will underpin our continued growthin the current year.

Report and Financial Statements 2014 / Oxford Instruments plc

07

www.oxford-instruments.com

Our Business Model

We engage with the growing
nanotechnology industry: an area
key to continued economic
progress and growth1

Research

Systems
and Tools+

In the research field, our tools
are used to advance thefrontiers of science. We countmany winners of the Nobel
Prize amongst our customers.

+

2

+

Industry
In the industrial field, ourtools are used to improve
production efficiency, ensurehigh standards of quality
control and demonstratecompliance to environmental
legislation.

What we provide
We adopt a business model
whereby the Group sells tools
to customers who wish to
exploit the opportunities
offered by nanotechnology.

08

Our customers
This tools model enables us
to generate revenues fromemerging industries utilisingnanotechnology without undue
exposure to any one applicationor market.

Oxford Instruments plc / Report and Financial Statements 2014

We provide high-performancetools for research and industry.
Our aim is to be the bridge
between industry and academia,
pushing the boundaries of science
for the benefit of all.

Overview

Strategic report

Governance

Financial statements

Company information

Our strategy
Analysis and fabrication ofmatter at the nano scale is a
now a worldwide requirement.
We are responding to the current
convergence of the sciences byapplying our tools and expertiseto growing market opportunities.

Read more
Turn to page 10

Expertise

Value
Quality

What sets us apart
Expertise_ Our staff deploy a highlevel of technical skill and deep
understanding of technology
trends to convert our intellectual
property into new tools using thelatest nanotechnology techniques.

Value_ Our Voice of the Customer
programme constantly calibrates
emerging customer requirements
against available technology toensure our R&D activities arefocused on the most commerciallyattractive areas.

Quality_ The Oxford Instruments’brand is well recognised andvalued, particularly in the research
and academic communities. Its
quality attracts customers,
collaborators and employees.

Report and Financial Statements 2014 / Oxford Instruments plc

09

www.oxford-instruments.com

Strategic Context

Our tools and expertise
now cross the boundaries
of physics and biology“Convergence” is an increasingly important aspectof scientific research. It is the merging of previously
distinct areas of research and technology into a
unified discipline that creates new scientific andcommercial opportunities.

Convergence gives the Group an opportunity to takethe technical tools and the disciplined design approachtraditional to engineering and physics and apply them tolife science research. This provides the Group with a unique
opportunity to access a new set of customers who need
to work at the molecular scale. The use of techniques
previously associated with the physical sciences, where
the Group has great strength, in the biological sciences
produces an important area of growth. For example, theconvergence of nanotechnology and biotechnology(“Nano-Bio”) will lead to innovative advances in medicine,energy production, agriculture, aerospace and manufacturing.
Oxford Instruments’ acquisitions of Asylum in 2012,
and Andor in the year just ended, support this strategy
of extending our reach into analysis tools for
Nano‑Bio research.

This new model is being adopted by many research
institutions around the world in different forms. The
past decade has seen the emergence of interdisciplinary
research areas such as nanobiology, bioinfomatics,
engineered biomaterials and the human genome project.
In these new fields the underlying research models
have converged. This creates significant commercial
opportunities for Oxford Instruments as tools that wereonce restricted to one discipline can now be utilised acrossa number of research areas, increasing our addressable
market. For example, the Andor Zyla sCMOS camera isa tool used in both the life andphysical science arenas. Application
areas include live-cell microscopy
The convergence of the sciences
and semiconductor analysis.
Oxford Instruments’ core markets and core
Advances in informationcompetencies are in the physical sciences arena.
technology, new materials,
Sciences like physics and biology have previously
imaging, and quantum physics,
been separated but now they are moving closer
have transformed physical science
together and the boundaries are crossing.
in recent years. Oxford Instruments
has been the leading tool provider
for this change. These sameadvances are now beginningto transform the life sciences.

Watch Jonathan
Flint discuss theGroup’s strategy(available from
September 2014)www.oxford
instruments.com/
strategyvideo

Nano-Bio
Physics

Biology

Convergence offers new opportunities for our tools and systems

10

Oxford Instruments plc / Report and Financial Statements 2014

There are a number ofcellular mechanisms that could
potentially fail and lead to theformation of cancerous cells
and tumour development.
One of these importantmechanisms is the cell’s ability toequally share its DNA between two
daughter cells during cell division.
Using Andor’s Revolution XD
system, researchers are investigating
the fine detail of microtubulealignment mechanisms in live cells,
to better understand how these failin the hope of finding a therapeutic
treatment for cancer.

Revolution XG system

 new level ofAcancer research“One of the major benefits of the Revolution XD has
to do with the quickness of image acquisition at low
intensity illumination. Conventional confocal microscopy
would not have allowed for acquisition of mitotic cells
without severely impairing cell viability.”— Dr Tatiana Moutinho dos Santos PhD, Molecular Genetics Lab,
IBMC-INEB; Porto, Portugal
11www.oxford-instruments.com

Our Strategy

Our strategy builds on ourstrong position and exposure
to growing markets
Going forward, Oxford Instruments intends to leverage its tools and expertise to exploit the convergence of the sciences.
This will drive long term demand for our nanotechnology tools and increase our addressable markets by giving us accessto a new set of customers. Four key themes underpin our plan for delivering on this strategy while maximising customer
and Shareholder value.

13

People development

Market development

Our highly skilled employees are key to our continued
growth and success. Developing talent through leadershipand technology training and recruitment programmes iscentral to our strategy for market leadership and profitable
growth across all our sectors.

We will continue to focus on developing innovative new
products and growing market share in our core areas ofphysical and materials science. In addition, we will seek toextend our reach into adjacent new markets by applying ourtools and technologies to life science research and analysis.

Focus areas include:

Focus areas include:• Adaptability• Target fast growing markets• Engagement• Expand our portfolio of techniques• Calibre• High potential acquisitions• Skill• Expand into attractive adjacent markets

We measure progress through our regular employee
surveys, benchmarking staff engagement externally.

One measure of our success is the growth in ouraddressable markets.

2

4

Product development

Processes development

We have a broad spectrum of products operating inhigh growth technology markets, supported by theworld-renowned Oxford Instruments brand. Innovation
remains at the core of the Group’s culture, made possible
by our continued investment in commercially driven R&D.

Improvement of our operational excellence forms a
key part of our strategy. A global Operational Excellence
programme develops and deploys “Best Practice Leansix sigma methodologies” throughout the Group to ensure
our processes are continually improved and deliver the
benefits of economies of scale as the business grows.

Focus areas include:• Strategic and market driven R&D

Focus areas include:• Aligned with a long term vision• Promoting a culture of continuous improvement• Delivery enabled environment• Driving a vision of business excellence• Market leading high margin tools

We measure the value and success of operational
excellence through the Value Add Index (adjusted
operating profit + employment costs)/employment
costs. Our 2014 Value Add Index is 1.51.

Measured by the proportion of revenues comingfrom new products introduced in the last three years(Vitality Index). Our 2014 Vitality Index is 42%.
12

Oxford Instruments plc / Report and Financial Statements 2014

In order for consumers to bebetter informed about their salt
consumption, manufacturers
need to be able to quickly andaccurately monitor sodium
levels in their food products.
The cheese industry in particular
has a great desire to reduce sodium
content and variability. To assist in
the effort, the industry is piloting
X-ray Fluorescence Spectrometry(XRF) from Oxford Instruments. Theenergy of the X-ray indicates whichelements, such as sodium, are in acheese and how much of eachelement is present. The process
takes just five minutes.
Current methods may take one
day in-house or three to five days if
product is sent to an outside source
for measuring.

X-Supreme
Benchtop XRF analyser onitoring sodiumM
at a different level”These rapid results will allow cheese makers to adjust
salt levels during the cheese-making process. The wholetechnology appears to be a big win for the cheeseindustry with potential applications for other foods.”— Bill Graves, senior vice-president of product research
for the Dairy Research Institute13

www.oxford-instruments.com

Key Performance Indicators

The Group uses a range ofmeasures to monitor progressagainst its strategic plans
The key performance indicators are presented below:

2014

Goal:
Liberating cash

66

62

64

Net Promoter Score® 2
Measurescustomer feedback

14.1

14.0

12.5

2014

2012

2013

2014

2013

2014

Goal: To deliver
Shareholder return

Measures theeffectiveness of
our R&D
programmes
Goal: Inventing
the future

Value Add Index3
Measuresefficiency

Goal: Adding
personal value

Goal: Realising
the brand
2012

Tracks our
performance on
our profitability
strategy

Vitality Index (%)
42

2013

2013

1.51

85.4
51.1

2012

Monitors our use
of fixed assets,working capitaland R&D

2012

41

Goal: To deliver
Shareholder return

1.54

2014

Cash conversion from profit1,3 (%)
110.5

Strategic
priorities

2013

2.7

4.0
2012

44

Tracks our
performance on
our growthstrategy

Net return on sales3 (%)

1.49

Revenue growth (%)
28.6

Financial
goals

2012

2013

2014

1 Cash conversion is defined as the ratio of cash generated to adjusted operating profit (see Income Statement). Cash generated is calculated as adjusted
operating profit plus depreciation on property, plant and equipment and amortisation on research and development, minus capital expenditure on property,
plant and equipment and research and development, and adjusted for movements in working capital.
2 The Net Promoter Score is a metric which is compiled by asking customers whether they would recommend Oxford Instruments to a friend or colleague.
Customers give a score between zero and ten. Those customers who score nine or ten are promoters, those customers who score seven or eight are neutral
and customers who score six or less are detractors. The net promoter score is the difference between the numbers of promoters and the number of detractors(both expressed as a percentage of the number of replies received). The score can range between –100 (no customers are promoters) and +100 (all customers
are promoters). A positive score indicates that the Company has fewer detractors than promoters.
3 2013 figure has been restated – see Accounting Policies.

14

Oxford Instruments plc / Report and Financial Statements 2014

Diseases of the immune
system are on the rise, from foodallergies to autoimmune disorders
like Type 1 diabetes, immune
deficiencies, and cancer.
To answer fundamental andtherapeutic questions, paediatricimmunologists are utilising Atomic
Force Microscopy (AFM) to study
the T-cells at the nanoscale.
With AFM scientists are able
to manipulate single moleculesand control their interaction withreceptor proteins on the surface
of immune cells. These tools allow
researchers to dissect the functionof cells in health and their
dysfunction in immune disease.

Atomic Force Microscopy

 tudying the immune
S
system at a deeper level“Signal transmission among immune cells occurs at the nanoscale,and AFM allows us to image, quantify, interact with, and study
these processes. These methods allow an unprecedented look at
how immune cells communicate with one another.“— Manish J. Butte, MD PhD, Assistant Professor of Paediatrics/Immunology & Allergy,Child Health Research Institute, Stanford University15

www.oxford-instruments.com

Principal Risks and Uncertainties

Specific risk

Context

Risk

Possible impact

Technical
risk

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

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

Lower profitability andfinancial returns.
Negative impact on theGroup’s reputation.

Economic
environment

The recent global recession and prevailing
economic downturn have resulted in cuts
to both Government and private
sector spending.

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

Lower profitability andfinancial returns.

Acquisitions

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

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

Lower profitability andfinancial returns.

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

Management focus
taken away fromthe core businessin order to manage
integration issues.

Foreignexchangevolatility

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

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

Lower profitability andfinancial returns.

Outsourcing

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

Failures in the supply chain impacting sales.

Disruption to customers.

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

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

Pensions

Negative impact on theGroup’s reputation.

Additional cash requiredby the Group to fundthe deficit.
Reduction in net assets.

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

The employee leaves the Group.

Lower profitability andfinancial returns.

Routes tomarketIn some instances the Group’s products arecomponents of higher level systems andthus the Group does not control its routeto market.

The systems integrator switches supplierdenying the Group’s route to market.

Lower profitability andfinancial returns.

16

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Associated strategic priorities

Mitigation

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

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

Liberate cash: Support and develop our employees
to maximise their value add.

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

Realising the brand: Developing a strong brandin existing and developing markets.

The Group has a broad spread of customers, applications and geographical markets.

Delivering shareholder value: Focus on balanced
and attractive global markets.

The Group is expanding in the so called BRIC nations, whose markets have been
more resilient during the economic downturn.

Realising the brand: Developing a strong brand in
existing and developing markets.

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

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

Each transaction has a comprehensive post acquisition integration plan whichis reviewed at the highest level.

Adding personal value: Supporting and developing
our employees.
Delivering shareholder value: Focus on balanced
and attractive global markets.

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

Liberating cash: Developing a competitive global
supply base that supports our growth.

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

Liberating cash: Developing a competitive global
supply base that supports our growth.

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

Realising the brand: Developing a strong brandin existing and developing 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
to future accrual.

Liberating cash: Developing a competitive global
supply base that supports our growth.

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

Adding personal value: Supporting and developing
our employees.

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

Inventing the future: Providing an environment for
inventing and innovation.

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.
A management development programme provides exposure to key skills needed
for growth. Regular individual performance reviews take place.

Inventing the future: Developing products thatoffer the best technical solution.

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

Realising the brand: Ensuring that end
customers appreciate the benefits of Oxford
Instruments’ technology.

Co-marketing with system integrators to promote the merits of the Group’s products
to end customers.
Seeking to increase the number of integrators supplied by the Group.

Report and Financial Statements 2014 / Oxford Instruments plc

17

www.oxford-instruments.com

Performance by Division

The Group operates
in three sectors:
Nanotechnology Tools,
Industrial Products
and Service

Nanotechnology Tools
The Nanotechnology Tools sector produces ourhighest technology products and serves researchand industrial customers in both the public andprivate sectors.
Since the year end this sector has been managed as
the NanoCharacterisation division (comprising Nanoanalysis,
Asylum Research and Andor Technology) and the
NanoSolutions division (comprising Plasma Technology
and Omicron NanoScience). This allows us to bring together
our three microscopy techniques (optical, atomic force andelectron) under a unified structure in NanoCharacterisation,whilst NanoSolutions focuses on advanced research
environments and systems.
This sector delivered an encouraging performance in2014, despite weaker Government spending in researchand development, with revenues of £180.6 million(2013: £166.1 million) and an adjusted operating profitof £21.2 million (2013: £20.6 million). New products
introduced by the NanoAnalysis and Asylum businesses
have been particularly successful, rapidly contributing
to the overall performance of the sector.

Highlights:
 anotechnology Tools delivered an• Nincrease in both revenues and profit• Industrial Products performed wellin all territories• Our Service business performed wellin all territories

Our NanoAnalysis business produces leading-edge
tools that enable materials characterisation and sample
manipulation at the nano scale. Its products are used onelectron microscopes and ion-beam systems in academic
institutions and industrial applications including
semiconductors, renewable energy, mining, metallurgy
and forensics. Our new Layerprobe tool works with ourmarket leading Aztec electron microscopy software
platform. It gives customers the ability to measure thethickness and composition of nano scale thin films andmembranes in a scanning electron microscope. We are
the only company providing this capability in our software.
For the first time, it unlocks information about variations
in sample depth by showing composition in the third

Nanotechnology Tools headline figures
Revenue (£m)

166.1

180.6

Profit1 (£m)

£180.6m

20.6

21.2

+8.7%
2013

2014

£21.2m

12.4

11.7

+2.9%
2013

2014

1 2013 figure has been restated – see Accounting Policies.

18

Return on sales1 (%)

Oxford Instruments plc / Report and Financial Statements 2014

2013

2014

11.7%

Strategic report

Overview

Governance

Financial statements

Company information

dimension. This is vital for applications involving
photovoltaic devices, light emitting diodes, and powerelectronics where device performance depends on boththe thickness and composition of ultra-thin films.

field of quantum computing. Quantum computers havethe potential to make safer aeroplanes, detect cancers
through complex computational modelling and design
software that allows cars to drive themselves.

Asylum’s Cypher ES environmental atomic force
microscope (AFM) is the best commercial AFM on themarket. It makes atomic scale imaging routine for the
average user. It combines fast, ultra stable, high resolution
imaging in gaseous or liquid environments with cooling,heating and other sample control capabilities. It is used ina variety of disciplines, including material science, energy
research, biology and biophysics.

Plasma Technology, which produces nanofabricationequipment for specialist semiconductor research andmanufacturing, had a challenging year due primarily to thecontinued weakness in demand for High Brightness Light
Emitting Diodes (HBLED). However, Plasma Technology
spearheaded an evolution in semiconductor etch technology
with the launch of the PlasmaPro1000 Astrea etch system.
This tool enables large batches of advanced semiconductors
to be etched simultaneously and will offer manufacturersof HBLEDs market leading productivity and cost efficiencies.

Andor Technology brings the Group a strong capability
in optics. This, combined with our capability in atomic force
microscopy and spectrometers for electron microscopy,means the Group can offer our customers a spectrumof tools with which to observe the nano world. Andor
has continued to drive innovation with the launch of
the ultra-sensitive Zyla 4.2 sCMOS camera. Offering thehighest sensitivity available, this camera is the technology
leader in the fast growing life science imaging market.
Andor was also recognised with the “Best in the World”
award from Yokogawa as the leading global distributorof laser spinning disk systems for high resolution living cell
imaging. Its Imaris software was used in the Clarity Brainanalysis project at Stanford University, providing accurate
3D images and analyses of specifically labelled neurons in
an otherwise transparent brain.

Industrial Products
Our Industrial Products sector, comprising our
Industrial Analysis and Industrial Components
divisions, supplies analytical systems for quality
control, environmental and compliance testing,and components for industry and research.
Industrial Analysis comprises our X-ray Fluorescence(XRF), Optical Emission Spectroscopy (OES) and Magnetic
Resonance (NMR) businesses. Industrial Components
comprises our Superconducting Wire, Austin Scientificand X-Ray Technology businesses.

The Omicron NanoScience business which specialises inanalytical measurement in high vacuum, at low temperaturesand in high magnetic fields, had a challenging year, due
in part to reduced Government spending and a generalslowdown in research markets in its field. However, thisbusiness delivered its largest ever single order to a customer
in Germany to facilitate the fabrication and characterisationof materials for nano electronics. This could revolutionise
the industry and provide key components into the nascentThis sector delivered revenues of £114.7 million(2013: £125.1 million) and an adjusted operating profitof £15.6 million (2013: £17.3 million). Deliveries ofsuperconducting wire to the ITER programme, whichseeks to develop a commercially viable source of energy
from nuclear fusion, were completed in the first quarterof the year. Revenue from the ITER programme totalled£40 million over the last three years. Excluding the effect of
the ITER project, underlying growth in this sector was 2.3%.

Industrial Products headline figures
Revenue (£m)
125.1

114.7

Profit1 (£m)

£114.7m

17.3

-8.3%
2013

2014

2013

15.6

2014

Return on sales1 (%)£15.6m

13.8

13.6

2013

2014

-9.8%

13.6%

1 2013 figure has been restated – see Accounting Policies.

Report and Financial Statements 2014 / Oxford Instruments plc

19

www.oxford-instruments.com

Performance by Division continued

The Industrial Components division delivered a strong
performance. Austin Scientific was successful in winningmore orders for tools used in the mobile phone industry.
X-ray Technology also did well, with sales from Shasta,a new power supply system, exceeding our targets.
Our Superconducting Wire business also had a goodyear, increasing productivity as a result of operational
efficiency programmes and with continuing strong
demand for MRI wire.

Using the technique of
Laser Induced Breakdown
Spectroscopy (LIBS), our
new mPulse hand-held
analyser is initiallytargeted at the scrap
metals industry.

Service
The Industrial Analysis business achieved growth in all
geographic territories, despite a downturn in its steel markets.
A new portable optical emission spectrometer, PMI-Master
Smart, was launched in the year as a result of a breakthroughin the miniaturisation of OES instrumentation, based on
the use of optics made of carbon fibre reinforced plastics.
The improved mobility offered by this product brings
advantages to customers in the fields of metals analysis,
positive material identification, rapid material verificationand sorting. During the year we also launched Pulsar, acost effective nuclear magnetic resonance (NMR) analyser.
One specific application is its ability to identify different
species in raw meat. The analysis can be completed locally,on site in a few seconds, whereas current testing methods
for food samples are costly and can take several days. We
have seen significant interest from testing laboratories,
supermarkets and Government bodies. Other NMR based
tools are being used in numerous applications ranging
from monitoring octane levels in power stations tomeasuring salt levels in cheese.

The Service sector comprises the service, support,
training, refurbishment, consumables and accessories
elements of our business, together with a businessproviding service for MRI and CT machines.
This sector performed well across all territories withrevenue of £66.4 million (2013: £60.6 million) and an
adjusted operating profit of £13.5 million (2013:£11.4 million). This was driven in part by our clinicalinstrumentation service business which has grown its
servicing of GE Healthcare MRI machines in the USA andselling refurbished parts and systems to the healthcare
market. Successful initiatives such as the OI Training
Academy and remote monitoring have increased revenues
and added to the customer experience, increasing our
Net Promoter Score (customer satisfaction) from 62
to 66 this year.

Service division headline figures
Revenue (£m)

60.6

66.4

Profit1 (£m)

£66.4m
+9.6%

2012
2013

2013
2014

13.5
11.4

2012
2013

£13.5m18.8

20.3+18.4%
20132014

1 2013 figure has been restated – see Accounting Policies.

20

Return on sales1 (%)

Oxford Instruments plc / Report and Financial Statements 2014

2013

2014

20.3%

Overview

Strategic report

Governance

Financial statements

Company information

Financial Review

Kevin Boyd, Group Finance Director

Trading performance
Orders in the period were up 2.5% to £342.2 million(2013: £334.0 million). Including inter-segment trade,the split between sectors was: Nanotechnology Tools£166.3 million, down 0.2%; Industrial Products £110.0
million, up 7.6%; and Service £67.5 million, up 0.9%.
At the end of the year the Group order book for futuredeliveries fell to £126.1 million (2013: £130.8 million),
partly reflecting the reduced lead times demandedby our customers.
Revenues in the year grew by 2.7% to £360.1 million(2013: £350.8 million). The increase in revenues due toacquisitions in the comparator periods was £27.4 million.
Adverse foreign currency exchange rate movements
reduced reported sales by £5.9 million.
In Nanotechnology Tools, revenues grew 8.7% aided
by a full year’s contribution from Asylum, an acquisition
made in December 2012, and just over two months ofAndor revenues. We saw growth in both our NanoAnalysis
and Omicron Nanoscience businesses but this was offset
by a decline at Plasma Technology as the forecast recovery
in the HBLED market failed to materialise. On a constantcurrency organic basis and excluding the fall in HBLED
sales, growth was 1.0%.
In Industrial Products, revenues reduced by 8.3%. Thiswas expected due to the completion of the ITER contract in
the first quarter of the year. The RMG and Roentgenanalytik
acquisitions made in November 2013 and December 2013
respectively, made a small contribution in the year. On a
constant currency organic basis and excluding the ITER
contract, growth was 1.6%.
Service revenues increased by 9.6% as we continued
to increase the proportion of extended service contracts
in the Nanotechnology Tools and Industrial Products
sectors and saw continued growth in Platinum Medical
Imaging in the USA. On a constant currency organic
basis, growth was 10.1%.

Adjusted Group gross margins increased from 44.7%
to 45.4% despite adverse currency movements. We saw
a positive mix variance due to a reduction in lower value
superconducting wire sales following the completion of
the ITER contract and an increase in contributions fromour higher margin businesses.
Adjusted operating expenses rose by £4.2 million,
reflecting an increase of £10.9 million spend due to theinclusion of the acquired businesses, a £0.3 million benefit
from foreign exchange rate movements and a saving of£6.4 million in underlying costs.
Adjusted operating profit increased by 2.0% to£50.3 million with an adjusted operating profit marginof 14.0% (2013: 14.1%).
Adjusting items
The Directors believe that adjusted profit before tax
gives a clearer indication of the underlying performanceof the business. A reconciliation of reported profit before
tax to adjusted profit before tax is given below:
2014
£m

2013
(Restated)£m

Profit before income tax
Reversal of acquisition related fair value
adjustments to inventory
Acquisition related costs
Amortisation and impairment of acquired intangibles
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

24.0

28.4

3.7
7.8
14.7
0.9

0.5
2.1
13.8
0.2

(4.1)
0.1

2.0
—

Adjusted profit before income tax
Share of taxation
Adjusted profit for the year

47.1
(8.7)
38.4

47.0
(9.7)
37.3

Report and Financial Statements 2014 / Oxford Instruments plc

21

www.oxford-instruments.com

Financial Review continued

Financial income and expenditureWithin financial income and expenditure, the cost ofinterest on loans and overdrafts and the commitment fee
for our revolving credit facility, offset by deposit interest,
amounted to £1.2 million (2013: £0.6 million). The interest
charge on net pension scheme liabilities was £2.0 million,
a movement of £0.3 million over the prior year.
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. On acquisition, Andor had limited
foreign exchange hedges in place. Hedges will be put inplace during the first half of 2014/15 so that by the endof the half year they will be in line with Group policy.
Based on current spot rates and the hedging we havein place, we believe that foreign exchange will adversely
impact profits in the year to March 2015 by approximately£5 million.
In common with a number of other companies, theGroup 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 gain in
respect of derivative financial instruments was £4.1 million(2013: £2.0 million loss).
The Group also uses derivative products to hedge
its exposure to fluctuations in the price of copper, amajor component for the Superconducting Wire business.
Given the small number of contracts involved, we apply
hedge accounting for these transactions and consequently
the results of marking to market are excluded from theIncome Statement.
Taxation
The Group’s weighted average statutory tax rate was 29%(2013: 30%). The underlying rate on the profit before tax
for the Group before adjusting items was 18% (2013: 21%).
This difference is due to brought forward tax losses (seebelow), tax incentives relating to income earned fromtechnology assets and a tax efficient financing structure.
In the year ended March 2011, due to the improved
performance of the Group’s UK businesses, we recogniseda deferred tax asset of £11.3 million in respect of brought
forward tax losses in the UK and a corresponding credit to
the Income Statement. We believe that this was exceptional
both in nature and quantum and therefore excluded it fromour calculation of adjusted earnings per share. Of this asset
value £2.2 million reversed in the year ended March 201422

and to be consistent we have excluded it from the calculationof adjusted earnings per share (see Note 2). We expect the
final £1.2 million to reverse in the year ending March 2015.
Earnings
After a tax charge of £5.8 million (2013: £7.4 million),
the reported net profit for the financial year was £18.2 million(2013: £21.0 million). With a weighted average number ofshares of 56.8 million (2013: 56.2 million), the reported basic
earnings per share were 32.1 pence (2013: 37.4 pence).
Adjusted profit before tax (Note 1) grew by £0.1 million
to £47.1 million which equates to adjusted earnings per shareof 67.7 pence (2013: 66.5 pence), an increase of 1.8%.
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 thesame proportion. In recommending the dividend, theDirectors take account of the perceived need for cash
to expand the business both organically and throughacquisition. For the year just ended, the proposed final
dividend of 9.04 pence per share (2013: 8.15 pence),payable on 23 October 2014 to Shareholders who are on
the register on 26 September 2014, gives a total dividend
for the year of 12.4 pence per share (2013: 11.2 pence).
Dividend cover before adjusting items was 5.5 times(2013: 5.9 times).

Investment in research and development (R&D)
Total cash spend on R&D in the year was £27.9 million or 7.7% of sales(2012: £25.1 million, 7.2%).
A reconciliation between the amounts charged to the Income Statement
and the cash spent is given below:
2014
£m

2013
£m

R&D expense charged to the Consolidated
Statement of Income

25.1

24.3

Less: depreciation of R&D related fixed assets

(0.8)

(0.7)

Add: amounts capitalised as fixed assets

2.1

0.8

Less: amortisation of R&D costs capitalised
as intangibles

(3.9)

(3.9)

Add: amounts capitalised as intangible assets

5.4

4.6

Total cash spent on R&D during the year

27.9

25.1

The net book value of capitalised development costs at the end of the financial
year was £14.1 million (2013: £12.3 million).

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Balance sheet
Net assets rose from £137.7 million to £140.2 million
in the year.
Net working capital (excluding derivative financial
instruments, contingent consideration and tax payable/
receivable) rose to £41.0 million.
Inventory turns decreased by 0.4 to 2.9 while debtor
days reduced from 51 days to 45 days.
Acquisitions and disposals
On 21 January 2014 the Group acquired Andor Technology
plc for a net cash consideration of £158.1 million. Andor isa market leading supplier of high performance optical cameras,
microscope systems and software. The acquisition was
funded from a mixture of cash and a new debt facility.
On 31 December 2013 the Group acquired
Roentgenanalytik Systeme GmbH for a net cash considerationof £1.6 million. The company specialises in designing andsupplying instruments for coating thickness measurement andmaterial analysis, using X-ray Fluorescence. The acquisition
was funded from existing facilities.
On 8 November 2013 the Group acquired RMG
Technology Limited for an initial net cash considerationof £5.7 million. RMG is a UK business specialising in laser
induced breakdown spectroscopy. The acquisition was
funded from existing facilities.
Pensions

Financial statements

Company information

Cash generated from operations was £28.4 million(2013: £50.4 million). The ratio of operating cash to adjusted
operating profit, which is one of our Key Performance
Indicators, was 51.9% (2013: 84.6%). Performance in theyear was impacted by an increase in working capital, inparticular a decrease in customer deposits of £10.9 million
primarily due to individually significant customer deposits
received in the prior year.
Net debt at the year end was £124.3 million (2013: net
cash £39.2 million). During the year the Group entered into
a committed revolving credit facility with a club of threebanks. The facility, which extends to December 2018, is for£100 million and is extendable to £150 million by mutual
consent. On 31 March 2014 the Group issued a £44.5 million
seven year fixed rate loan note to Pricoa Capital. In August
2013 the Group borrowed £25 million from the European
Investment Bank. This fixed rate loan has a seven year termwith amortisation starting in the fourth year.
These facilities were entered into to support the acquisitionof Andor Technology plc. In addition, the Group has overdraft
facilities totalling £15.7 million.
Employees
The average number of people employed during the year
was 2,050, an increase of 123 over the prior year. As aresult of acquisitions made in the year, 434 employees
joined the Group.
Going concern

The Group has defined benefit pension schemes in the
UK and the USA. Both have been closed to new entrants
since 2001 and closed to future accrual from July 2010.
The total deficit, before tax, under IAS 19 on these pension
schemes fell in the year by £1.6 million to £46.3 million.
There is a corresponding deferred tax asset of £9.6 million.

The Group’s business activities, together with the factors
likely to affect its future development, performance andposition, are set out in the Performance and Strategy andOperations sections. The financial position of the Group,
its cash flows, liquidity position and borrowing facilities
are described in this Financial Review.

Assets of the schemes at 31 March 2014 were
£196.6 million (2013: £198.0 million), while liabilities
reduced from £245.9 million to £242.9 million.

The diverse nature of the Group, combined with
its financial strength, provides a solid foundation for asustainable business. The Directors have reviewed theGroup’s forecasts and flexed them to incorporate a numberof 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 the Group is well placed
to manage its business risks successfully.

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 forrecovering the deficit over eight years has been agreed
between the Company and the Pension Trustee. Under
the deficit recovery plan, payments will increase for thethree years to March 2015 by the greater of 10% or thepercentage increase in dividend per share. Thereafter,
the payment will increase by 3.05% per annum.
The payment in 2013/14, the second year of the
new plan, was £5.6 million.

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.

Cash
Adjusted earnings before interest, tax, depreciation andamortisation (EBITDA) increased by 2.4% to £59.2 million.
Working capital increased by £20.9 million.

Report and Financial Statements 2014 / Oxford Instruments plc

23

www.oxford-instruments.com

Corporate Responsibility

We are committed to
the following guiding
principles of corporate
responsibility:• T o establish and maintain long term, effective
stakeholder relationships• T o offer all our people an excellent
employment experience

Oxford Instruments’ brand and reputation is one of its
key assets. As a leading supplier of high technology tools
and systems we set ourselves the highest standards ofintegrity, personal conduct, and fairness.
We believe that it is important for a sustainable businessto focus on the needs of employees, customers and otherstakeholders through shared goals and trusted relationships.
While the Group is accountable to our Shareholders,
we take into account the interest of all our stakeholders,
including our employees, our customers and our suppliers,
as well as the local communities and environments in which
we operate.
Our stakeholders• T o strengthen our business through Diversity
and Inclusion• T o operate in an ethical, sustainable andenvironmentally responsible manner

Investors
In line with stock exchange and other relevant
requirements, the Group ensures that investors receive
regular and transparent communications on all mattersthat are material to an understanding of the performanceand future prospects of the organisation. It aims to protect
investors’ funds and manage risks appropriately.
The Chief Executive and Group Finance Director allocate
a significant proportion of their time to investor meetings,
and host regular site visits for both analysts and investors.
In 2014, investors made over 20 visits to sites in the UK
and Germany.
The Investor pages of Oxford Instruments’ website
provide a comprehensive overview of the business(www.oxford-instruments.com/investors).

Our Values

Customers

Inclusive

Innovative andprogressive

We listen and engage
with customers, colleagues,
Shareholders and partners formutual success

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

TrustedWholehearted

We build long term
relationships based on integrity,
trust and respect

We approach what we
do with passion, with careand with pace24

Oxford Instruments plc / Report and Financial Statements 2014

The Group believes that effective customer relationships
are built on mutual trust, respect and integrity, and that
this principle should govern all aspects of the business.
We seek to be honest and fair in our relationships and provide
the standards of product and service that are expected.
We also take all reasonable steps to ensure focus on thesafety and quality of our products and services.
The continued focus on the “Voice of the Customer”
in any new product introduction or current productdevelopment ensures that the customer needs are at thecore of our business. The success of new products introduced
in 2013/14 supports this focus. The percentage of revenue
that is made up of products launched or acquired in thelast three years is a key indicator of the vitality of our new
product development and was at 42% for the financial
year 2013/14.
Externally, the Group makes extensive use of social media
platforms to keep all stakeholders, including the media,
up to date and informed of news, product launches andevents. The Group websites are mobile responsive.

Overview

Strategic report

Governance

Financial statements

Company information

Employees
Our highly skilled employees are key to our continued
growth and success. We aim to provide careers, opportunities
and working environments in which our people can achieve
their potential. We do this through safe, modern working
environments; recognition of the value of culture anddiversity; managing and developing talent; employee
incentive and engagement activities; and regular,
informative, two-way communication.
Learning and development
Training and development
Developing talent is important to Oxford Instruments
as the quality of our high technology products and services
depends on the skills and expertise of our workforce.
We continue to recruit and invest in apprentice, traineeand graduate programmes to help meet our future technicaland management requirements. In 2013/14 we delivered
540 days of training on our Graduate, Management
Development and Senior Leadership programmes. A new
Maximising Potential programme has been initiated in2014, focused on high potential technical and people
leaders at all levels in the business.
Diversity and inclusion
We believe diversity promotes innovation and effective
decision making. The Group’s aim is to ensure there are
equal opportunities for all employees and that we create
an inclusive culture where differences are valued andpeople are given the environment in which they can dotheir best work. Decisions regarding recruitment, selection
and access to training and promotion are based on merit.
Selection, promotion and succession planning processes
ensure that we recruit, train and promote the best candidates
based on suitability for the job. Our Code of Conduct andEthics requires that all employees are treated fairly and noone suffers harassment or intimidation.

Claire Flint, Group HR Director
Dawn Brooks, Group Service Director

Our Diversity Champion is Dawn Brooks, Group Service
Director. In 2013/14, Dawn has been responsible for leadinga full programme of diversity and inclusion awareness andengagement sessions to all parts of the business. We haveembedded diversity and cross cultural awareness in ourGroup-wide development programmes, fostering a sharedunderstanding of our position and ambitions in regard
to developing our diverse global talent pool. The Group
has a proud track record of encouraging flexible working.
On 11 June 2013 Jennifer Allerton, our first female
Board member, joined the Board of Oxford Instruments
as a Non-Executive Director. The Board recognise thebenefits that a diverse Board offers the Group.
Our Management Board, which is responsible fordelivering the Group’s strategy, consists of eight male
Directors and two female Directors. Oxford Instruments is
actively engaged with the BIS Women on Boards initiative.
We wish to continue our focus on developing an organisation
which mirrors the diversity of our customers and employees
globally. Our aim over the next two years will be that at
the end of that time, each level of Executive Management
reflects approximately the same gender balance as exists
in the Company overall.

Highly qualified and talented workforce

Workforce gender diversity

54%

Board

14%

86%

Mgmt Board

20%

80%

Managers

15%

85%

Employees

22%

78%

with higher level
qualifications

Higher level

Basic

FemaleMale

Report and Financial Statements 2014 / Oxford Instruments plc

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www.oxford-instruments.com

Corporate Responsibility continued

Learning and development continued
Communication
We recognise that information about business strategy
and performance and regular opportunities for a two way
dialogue with employees are important. We have a regularcommunications programme that informs all employees
on strategy; divisional and Group business performance;
operational changes and initiatives; and examples of bestpractice and success stories. Employees access our intranet
to obtain this and other general information on the Group,
and we make use of video, blogs and company meetings
where appropriate. We invite feedback and suggestions
at every opportunity.
Our most recent Group-wide employee engagement survey
was conducted in September 2012 and feedback and actionplans were formed with input from staff across the business.
Our next survey will be conducted in September 2014.
Three to four months after any acquisition, we conduct
a short pulse survey to monitor and benchmark employee
engagement and allow us to chart progress as integration
advances. Such a survey was conducted in Andor
Technology in April 2014, with a 70% response rate.
Reward and recognition
The Group believes it is important that our highly skilled
and educated workforce receive a share in the successof the business. In addition to the regular management
bonus and sales commission schemes, we operate a Gain
Share scheme for all non-management employees. This
plan is linked to achievement of our strategy and aligns
employees’ interest with that of our Shareholders.
In addition, through our Extra Intranet site, we offer
employees extra benefits such as discounts on certain
local activities, merchandise, insurance, and healthand dental cover.
Employees are encouraged to suggest ways to improve
performance and efficiency. Local reward and recognition
schemes exist to support this. The annual Chairman’s
Awards recognise innovation in four categories; Technical,
Operational Excellence, Customer Focus and Brand. Entries
for the ninth awards competition this year were double thatof the previous year. Teams from our recent acquisitions,
Andor and Asylum Research, were among the winners.
Suppliers/partners
The Group works hard to establish trust, respect andmutually beneficial relations with its business partners,
including suppliers, banks and collaborative associates.
There is a Group supplier management process in place
which promotes a common supply chain strategy split bycommodity, driving the business towards fewer high levelsuppliers. Regular inspections and audits are conducted
and strategic reviews are in place for key suppliers. In
accordance with ISO9001 and ISO 14001, only quality
approved organisations are used.
26

Local communities
We encourage our local businesses to support theircommunities through charity and community activities.
The Group also sponsors a number of internationaland national science based awards and events including
the prestigious Sir Martin Wood Prize through theMillennium Science Forum in Japan. A new award
recognising young nanotechnology scientists is to belaunched in India during 2014.
Ethics
We work ethically, openly, responsibly and inclusively.
We strive for maximum transparency; do not tolerate any
form of bribery, corruption or fraud and do not makepolitical donations. We have in place a Business Conduct
and Ethics Code which all employees are made aware of at
the time of joining the Company and through subsequent
exposure on the Company intranet and corporate website.
We have a zero tolerance attitude towards bribery
and corruption and perform regular due diligence on our
agents, distributors and suppliers to minimise the risk of
any unethical behaviour.
Suppliers are required to prove they do not employ workers
under the age of 15 or, in those countries subject to thedeveloping country exception of the ILO Convention 138,
to employ no children under the age of 14.

Ensuring safety across the Group

Total
Total accidents have reduced to
109 during the year – a 33%
reduction on the previous year.

Globally
Globally there were four serious
accidents reported during theyear – a 20% reduction on theprevious year1.

Between2010–11
Accidents were reduced by 50%
from 217 to 109, which reflect
the increased focus on theseissues.

Oxford Instruments plc / Report and Financial Statements 2014

-33%
(109)

-20%
(4)

-50%
(4)

1 Global serious accidents
were normalised using
the UK definition of overseven days’ absencefrom work.

Overview

Strategic report

Governance

Our Code is supported by a range of policies which
are regularly monitored by the Board and updated andadded to whenever necessary. Each policy gives detailed
information on how to manage sensitive issues once anassessment of risk has been identified. This includes a
global business malpractice policy.
Health, safety and environment
Health and safety within Oxford Instruments is managed
at the Executive level by Charles Holroyd, Group Business
Development Director. Each site has a nominated Health,
Safety and Environment Manager or representative
responsible for ensuring that day-to-day activities arecarried out safely. All sites are audited annually.

Financial statements

Company information

Summary
We will maintain the focus on corporate social
responsibility in the way we run Oxford Instruments.
We will continue to meet our customer needs throughadvanced technology and premium service, and wewill maintain a wholehearted commitment to all our
stakeholders to conduct our business in an ethicaland sustainable manner.

Jonathan Flint
Chief Executive
10 June 2014

Our priorities are the efficient use of energy and waste
minimisation, and we seek to continuously improve theseareas. Each business has an Energy Champion responsible
for the day-to-day issues of environmental compliance andenergy management. This includes the monitoring of energyuse, waste streams, recycling and emissions to air, waterand land.
The Group complies with all relevant legislation incountries where we operate including European Directives
such as the Waste Electronic and Electrical Equipment(WEEE) Directive, the Restriction on use of Hazardous
Substances (RoHS) Directive and the Registration,
Evaluation, Authorisation of Chemicals (REACh) Directive.
Oxford Instruments plc is a full participant in the UK
Carbon Reduction Commitment Energy Efficiency Schemeand purchases carbon allowances to cover its UK energy
use when necessary.
This year our global carbon emissions are reported as
separate indicators required as part of the UK Companies
Act 2006 (Strategic Report and Directors’ reports) Regulations
2013. In addition to the mandatory reporting of greenhousegases, the Company will make a voluntary report to the
Carbon Disclosure Project (CDP) on our emissions. The CDP
is an international, not-for-profit organisation providing
the only global system for companies to measure, disclose,
manage and share environmental information.
Oxford Instruments, where possible, also measuresenergy equivalent consumption of employee air travel.
Over 2013 UK and USA air travel equated to 2,545 tCO2e.
The global consumption of energy during the year fell
by 8.1% as a percentage of revenues from the prior year.
A contributing factor was the relocation of business andoffice functions to new, modern, energy efficient facilities
in Finland, Japan and China.
In accordance with our Energy and Environmental
Policies the business is committed to improving its
efficiency in relation to energy use and we are investingin energy reducing technologies such as upgrading to
LED lighting.

Greenhouse gas (GHG) emissions
Oxford Instruments is a global business with operations in many parts of theworld and has been monitoring energy use and carbon emissions since 2008.
Emissions from 26 of the Company’s sites are reported on below. Small sales
offices where energy consumption is less than 0.01% of the Group’s totalenergy consumption are omitted. The amount of recorded hydrofluorocarbons
is below 5kg globally and has therefore been omitted from the figures.
Emissions
Emissions from purchased electricity, emissions from fuel burned on site forheating or process purposes (gas and oil) and fugitive emissions from processgases are reported in tonnes of carbon dioxide equivalent (tCO2e).
RegionPurchased
electricity

Secondary
fuel

Fugitiveemission

Total

UK

3,556

350

—

3,906

North America

3,716

450

1,056

5,222

Europe

454

78

—

532

Asia

243

—

—

243

Total

7,969

878

1,056

9,903

Intensity ratio
The Company’s declared intensity ratio is tonnes of CO2 equivalent (tCO2e) per£million of revenue.

9,903 tCO2e£360.1 million

27.50 tCO2e= /£million revenue

Report and Financial Statements 2014 / Oxford Instruments plc

27

www.oxford-instruments.com

Board of Directors

1

3

2

4

Nigel
Keen

JonathanFlint, CBE

Kevin
Boyd

Professor
Sir Mike Brady

1	

2	

3	

4	

Non-Executive Chairman

Chief Executive

Group Finance Director

Deputy Chairman
and Non‑Executive Director

Appointed to the Board

Appointed to the Board

Appointed to the Board

Appointed to the Board

Committee membership

Committee membership

Committee membership

Committee membership

Background

Background

Background

External appointments

External appointments

February 1999

Nomination, Chairman
Remuneration, Chairman(to September 2013)

BackgroundHolds an engineering degree from
Cambridge University and has been
involved in the formation anddevelopment of high technology
businesses for more than 30 years.
He is a fellow of the Institute ofChartered Accountants and theInstitution of Engineeringand Technology.

External appointments
Chairman of:
Bioquell Plc
Deltex Medical Group Plc
Syncona Partners LLP(a Wellcome Trust company)

Chairman/ Trustee of:
The David Shepherd Wildlife Foundation
ISIS Innovation Ltd (an Oxford
University company)
Oxford Academic Health Science
Network

April 2005
None

Holds a BSc in physics from Imperial
College and an MBA from Southampton
University. He is a Fellow of the Instituteof Physics, the Royal Academy ofEngineering and the Institution ofEngineering and Technology. He wasawarded the CBE in the 2012 New
Year’s Honours for services to scienceand business.

None

Holds a BEng in electronic andinformation engineering and is a
Chartered Engineer, Chartered
Accountant and a Fellow of theInstitute of Chartered Accountants
and the Institution of Engineeringand Technology.

External appointments

Non-Executive Director of:
Guidance Ltd (to March 2014)
EMIS Group plc (from May 2014)

Previous experience

Member of:
London Stock Exchange’s PrimaryMarkets Group

Non-Executive Director of:
Cobham plc

Senior management positions within:
Vislink plc
BAE Systems
GEC Marconi
Matra-Space Systems

Previous experience
Chairman of:
Laird PLC
Axis-Shield Plc

28

August 2006

Oxford Instruments plc / Report and Financial Statements 2014

Previous experience

Group Finance Director of:
Radstone Technology plc
Finance Director of:
Siroyan Ltd
Senior finance positions within:
TI Group (now Smiths Group plc)

August 1995
Nomination

Professor in the Department of Oncology
and Biology at the University of Oxford,
a Fellow of the Royal Society, of theRoyal Academy of Engineering andof the Academy of Medical Sciences
and a Commissioner of the Royal
Commission for the Exhibition of 1851.
Chairman and founding Director of:
Guidance Ltd
Mirada Medical Ltd
Matakina Ltd (a New Zealand based
company)
Chairman of:
Acuitas Medical Ltd
colwiz Ltd
Perspectum Diagnostics Ltd
IRISS Medical Ltd

Previous experience

BP Professor of Information
Engineering at:
Oxford University
Non-Executive Director of:
Rehabox Ltd

Overview

Governance

Strategic report

Financial statements

Company information

5

7

6

8

Jock
LennoxThomasGeitner

Jennifer
Allerton

Susan
Johnson-Brett

5	

6	

7	

8	

Senior Independent
Non-Executive Director

Independent
Non-Executive Director

Independent
Non-Executive Director

Company Secretary

Appointed to the Board

Appointed to the Board

Appointed to the Board

Committee membership

Committee membership

Committee membership

April 2009

Audit, Chairman
Nomination
Remuneration

BackgroundHolds a law degree from Edinburgh
University and is qualified as a Chartered
Accountant with the Institute ofChartered Accountants of Scotland.

External appointments
Chairman of:
Tall Ships Youth Trust

Non-Executive Director of:
Dixons Retail plc
EnQuest PLC
Hill & Smith Holdings PLC
A&J Mucklow Group plc

Previous experience

Senior Audit Partner at:
EY (formerly Ernst & Young)

January 2013

Audit
Nomination
Remuneration, Chairman(from November 2013)

Background

Extensive international experiencein the technology and engineering
sectors, having spent over 30 years inbusiness operating across the globe.

External appointments

Chairman of:
Bibliotheca RFID Library Systems AG
Switzerland
Non-Executive Director of:Supervisory Board of Constantia
Flexibles GmbH Vienna

Previous experience

Non-Executive Director of:
BBC Worldwide Ltd
Singulus Technologies AG
Executive Director of:Vodafone Group Plc
Henkel AG & Co. KGaA
RWE AG

June 2013

Audit
Nomination
Remuneration

Background

Jennifer holds a BSc from Imperial
College and an MSc from the Universityof Manitoba, Canada. She is a Costand Management Accountant. Jennifer
has extensive international experience
beginning her career with Unilever andhas worked in the UK, Brazil, the US,
Switzerland, Canada, Italy and Asia.

Committee membership
Secretary to:
Audit
Nomination
Remuneration

BackgroundSusan has a BA from the University of
Keele and has previously worked in the
Secretariats of St. Modwen Properties plc
and Hydro Agri UK Limited.

External appointments
Non-Executive Director of:
AVEVA Group plc

Previous experience

Chief information Officer at:
F.Hoffmann-La Roche, Pharma
Division, Switzerland
Technology Director of:
Barclaycard
Chief Operating Officer of:ServiceNet, USA
Chief Information Officer of:
BOC (now Linde)

Report and Financial Statements 2014 / Oxford Instruments plc

29

www.oxford-instruments.com

Report of the Directors

The Directors present their Report and the Financial
Statements of Oxford Instruments plc for the year ended
31 March 2014.
Principal activity and business reviews
The Company is the ultimate holding company of a groupof subsidiary undertakings (“the Group”) engaged in the
research, development, manufacture and sale of hightechnology tools and systems. The Company is required to
set out in this report a true and fair view of the business of
the Group during the financial year ended 31 March 2014,
the position of the Group at the end of the financial year
and a description of the principal risks and uncertainties
facing the Group. The information which fulfils theserequirements includes a business and financial review
on pages 5 to 23 and Corporate Responsibility Review
on pages 24 to 27, which are incorporated in this reportby reference. The Business, the Strategic Review, theResearch and Development Activities and likely future
prospects of the Group are reviewed in the Strategic
Report on pages 5 to 23.

Directors
Biographies of all the Directors at the date of this report,
including the Non-Executive Directors, appear on pages
28 to 29. During the year, Jennifer Allerton was appointed
as Non-Executive Director on 10 June 2013 and at theconclusion of the AGM held on 10 September 2013
Mike Hughes retired as a Non-Executive Director,
Charles Holroyd stepped down as an Executive Directorof the Company and Thomas Geitner took over from
Nigel Keen as Chairman of the Remuneration Committee.
Directors’ conflicts of interest
With effect from 1 October 2008, the Companies Act 2006
allows Directors of public companies to authorise conflicts
and potential conflicts of interest, where appropriate. Only
Directors with no interest in the matter under consideration
may participate in the relevant decision and in doing sothey must act in a way which they consider in good faithwill be most likely to promote the Company’s success.
A conflicts policy has been drawn up and a register ofconflicts and potential conflicts is maintained.

Results and dividends

Directors’ interests

The results for the year are shown in the Consolidated
Statement of Income on page 78. The Directors recommend
a final dividend of 9.04p per ordinary share, which together
with the interim dividend of 3.36p per ordinary sharemakes a total of 12.4p per ordinary share for the year
(2013: 11.2p). Subject to Shareholder approval, the final
dividend will be paid on 23 October 2014 to Shareholders
registered at close of business on 26 September 2014.

The beneficial interests of the Directors in the Company’s
share capital, all in fully paid up shares at 31 March 2014,
are shown below.
Details of share options for the Executive
Directors are shown in the Directors’
Remuneration Report on pages 47 to 65.

Risks and uncertainties
The Board exercises proper and appropriate corporate
governance for the Group. It ensures that there are
effective systems of internal controls in place to manage
Shareholders’ interests and the Group’s assets, including
the assessment and the management of the risks to which
the businesses are exposed, and to monitor and manage
the compliance with all the legal requirements that affect
the Group’s worldwide business activities. However, such
systems are designed to manage rather than eliminate therisk of failure to achieve business objectives and canprovide only reasonable and not absolute assurance
against material misstatement or loss.
The Executive Directors report to the Board on changes
in the business and in the external environment which
may affect the risks which the Group faces. The Executive
Directors also provide the Board with monthly financial
information. Key performance indicators are reviewed
by the Board quarterly.
There are a number of risks and uncertainties which may
have a material effect on the Oxford Instruments Group.
These are described in Principal Risks on pages 16 to 17.

30

Jennifer Allerton
Kevin Boyd
Mike Brady
Jonathan Flint
Thomas Geitner
Nigel Keen
Jock Lennox

2014
Shares

2013
Shares

1,000
91,6112,500
205,803—
126,580
3,500—
78,761
2,500
194,236—
126,580
3,500

No Director was beneficially interested in the shares of any
subsidiary company at any time during the year. In the year
to 31 March 2014 no Director had a material interest in
any contract of significance with the Company or any of
its subsidiaries other than as described in the Directors’
Remuneration Report on page 47. Since the year end, there
have been no changes to the above shareholdings apartfrom for Jonathan Flint and Kevin Boyd who participate in
the Oxford Instruments Share Incentive Plan and since theyear end have each increased their beneficial shareholding
by 20 and 22 shares respectively.

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

GovernanceInsurance cover and Directors’ indemnities
For a number of years the Group has purchased insurance
to cover its Directors and Officers against their costs indefending themselves in legal proceedings taken againstthem in that capacity and in respect of damages resulting
from the unsuccessful defence of any proceedings. In
addition, to the extent permitted by UK law, the Group
indemnifies its Directors and Officers for liabilities arisingfrom such proceedings.
Neither the insurance nor the indemnity provides coverfor situations where the Director has acted fraudulently
or dishonestly.
Share capital
The Company only has one class of share capital which
comprises ordinary shares of 5p each. All shares forming
part of the ordinary share capital have the same rights
and carry one vote each. There are no unusual restrictions
on the transfer of a share. The full rights and obligations
attaching to the Company’s ordinary shares, as well as
the powers of the Directors, are set out in the Company’s
Articles of Association, a copy of which is available on
the Company’s website. These can also be obtained from
Companies House or by writing to the Company Secretary.

Financial statements

Company information

During the year to 31 March 2014 the issued share capital
was increased by 0.6% with the issue of 334,005 ordinary
shares (2013: 750,107) following the exercise of options under
the Company’s share option schemes. At 31 March 2014, theissued share capital of the Company was therefore 57,250,835
ordinary shares of 5p each. In connection with the Company’s
equity incentive plans, a separately administered trust held
183,145 ordinary shares at 31 March 2014 (representing
0.3% of the total issued share capital of the Company).
No shares in the Company were acquired by the Company
during the year (2013: nil). Details of the share capital andoptions outstanding as at 31 March 2014 are set out in
Notes 11 and 21 respectively of the Financial Statements.
At this year’s Annual General Meeting, the Directors
propose to: a) renew the authority granted to them at lastyear’s AGM to allot ordinary shares up to an aggregate
nominal value of one-third of the Company’s issued sharecapital and, where full pre-emption rights are applied,
up to an aggregate nominal value of two-thirds of theCompany’s issued share capital; b) allot ordinary shares up
to an aggregate nominal value of 5% of the Company’s
issued share capital without first offering them to existing
Shareholders; and c) to buy back up to 10% of the Company’s
issued share capital. Shareholders will be requested torenew these authorities at the AGM and details of theseresolutions are set out in the notice of the meeting.

Substantial shareholdings
The following are beneficial interests of 3% or more (where the holding is direct) or of 5% or more (where the holding
is indirect) of which the Directors have been notified in accordance with Chapter 5 of the Disclosure and Transparency
Rules, of the Company’s issued ordinary share capital, the only class of voting capital, at 3 June 2014:
Direct/indirect

BlackRockAmeriprise Financial
Aberdeen Asset Managers Limited
Sir MF and Lady KA Wood
Baillie Gifford
The Capital Group Companies

Indirect
Indirect/direct
Indirect
DirectIndirect
Indirect

Shares000

6,282,922*
4,983,663
3,182,304
3,105,530
2,917,516
2,232,800

% of
total

11.0
8.7
5.6
5.4
5.1
3.9

* Of which 285,813 shares (0.5%) are held in Contracts for Difference which are disclosable under the Disclosure and Transparency Rules.

Report and Financial Statements 2014 / Oxford Instruments plc

31

www.oxford-instruments.com

Report of the Directors continued

Payment of suppliers

Change of control arrangements

The Group does not follow a standard payment practice
but agrees terms and conditions for its business transactions
with each of its suppliers. Payment is then made in accordancewith these terms. At 31 March 2014 trade creditors of theCompany and the Group’s UK subsidiaries were equivalent
to 32 days (2013: 31) and 72 days (2013: 70) of purchases
respectively, based on the amounts invoiced by suppliers
during the year and the amounts owed to trade creditors
at the end of the year.

There are a number of agreements that take effect, alteror terminate upon a change of control of the Company
following a takeover, such as banking agreements andcompany share plans. On a change of control, the Company’scommitted credit facilities may be cancelled by lenders bygiving not less than three days’ notice. It is also possiblethat pension plan funding arrangements would need to
be changed following a change of control if that resulted
in a weakening of the employer covenant.

Charitable donations

Corporate governanceDuring the year, the Group made charitable donationsof £2,596 (2013: £3,145). There have been no political
donations during the year.

The Board reviews its work on corporate governancein the Corporate Governance Review on pages 33 to 40.
Financial risk management

Fixed assets
Whilst the market value of some fixed assets may differ
from book value, the Directors believe that the differences
are not material.

Details of the Group’s financial risk management objectives
and policies, including the exposure to price, credit and liquidity
risk are set out in Note 19 to the Financial Statements.
Diversity and inclusion

Disclosure of information to auditor
Pursuant to Section 418(2) of the Companies Act 2006
the Directors who held office at the date of approval ofthis Directors’ Report confirm that, so far as they are eachaware, there is no relevant audit information of which theCompany’s auditors are unaware; and each Director hastaken all the steps that he or she might reasonably havebeen expected to have taken as a Director to make himself
or herself aware of any relevant audit information and toestablish that the Company’s auditors are aware ofthat information.
Annual General Meeting
The Notice of the Annual General Meeting to be held on
9 September 2014 is set out in a letter to Shareholders
together with explanatory notes relating to the resolutions.
During the year, the external audit was put out to tenderand Deloitte and PricewaterhouseCoopers were invited totender alongside the incumbent firm, KPMG. After carefulconsideration the Audit Committee decided to recommend
to the Board the re-appointment of KPMG. The Board
accepted the Audit Committee’s recommendation to
re-appoint KPMG, notwithstanding the longevity of its
audit tenure, and accordingly a resolution to re-appoint
KPMG LLP as auditor and to authorise the Directors to
set its remuneration will be proposed at the Annual
General Meeting.

32

The Board recognises that its employees are fundamental
to the Group’s success. The Group’s aim is to ensure there
are equal opportunities for all employees and that there isan inclusive culture where differences are valued and people
are given the environment in which they can do their best
work. The Corporate Responsibility Review on page 24
further describes how diversity and inclusion is managed
within Oxford Instruments.
Greenhouse gas emissions
To meet the requirements of the Companies Act 2006
(strategic and Directors’ Report) Regulations 2013 CO2emissions are reported on as part of our reporting on
greenhouse gas emissions in the Corporate Responsibility
Review on page 24.
Material events
There were no material events since 31 March 2014
to report.
By order of the Board

Susan Johnson-BrettCompany Secretary
10 June 2014

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Corporate Governance

The Board is committed to ensuring thathigh standards of corporate governanceare maintained by the Group.
The Board endorses the main and supporting
principles and the provisions set out in the UK
Corporate Governance Code (“the GovernanceCode”) except as detailed below.
The Board’s policies and procedures are documented
in the Board Reference File that sets out the rolesand delegated authorities applying to the Directors,
the Board and the Board Committees. The Board
Reference File is reviewed annually by the Board aspart of the annual governance review undertakenby the Chairman.

Board constitution
In late 2010, prior to Oxford Instruments’ promotion
to the FTSE 250, the Nomination Committee reviewed
its Board Development programme and put in place
a multi-year plan to allow for an orderly refreshing of
its Non-Executive Directors over this extended period.
This programme is under annual review. The Board
Development programme ensures that the constitutionof the Board is compliant with the Governance Codefollowing the Company’s admission to the FTSE 250.
In line with the programme, Jennifer Allerton has joined
the Board as an Independent Non-Executive Director in
June 2013 and Mike Hughes stepped down from theBoard at last year’s AGM. Since 2010, the Company has
been through a strong period of growth and the Executive
team has reorganised the business into a divisional structure.
In light of the Group’s new divisional structure, the Nomination
Committee recommended that the Executive representationon the Board be the Chief Executive and the Group FinanceDirector. Accordingly, Charles Holroyd also stepped downfrom the Board at last year’s AGM.

At this year’s AGM, Mike Brady will not seek re-election
as a Non‑Executive Director having served for an extended
period of time. The Board is in the process of identifying
a Non-Executive Director with a strong scientificbackground to serve on the Board as an Independent
Non-Executive Director.
Resolutions for the election of Directors will be put
to Shareholders at the Company’s forthcoming AGM.
This will continue to deliver a Board which meets therequirements of Provision B.1.2 of the Governance Code.
Compliance
The Board considers that, throughout the period underreview, the Group has complied with the provisions
recommended in the UK Corporate Governance Code(June 2010 and September 2012), other than in respect of:• Provision D.2.1: Nigel Keen was Chairman of theRemuneration Committee until the Company’s AGM in
September 2013. However, as more fully explained below,
the Group became compliant with this provision when
Thomas Geitner took over as Remuneration Committee
Chairman at the conclusion of the AGM; and• Provision B.1.2: Up until the AGM in September 2013less than half the Board, excluding the Chairman,
comprised Independent Non-Executive Directors.
Following the changes described above, theconstitution of the Board has been compliant since
the AGM in September 2013.
Preservation of value
The basis on which the Group generates and preserves
value over the longer term and the strategy for delivering
the objectives of the Group are to be found in theStrategic Report.

Read more in theStrategic Report
Turn to pages
10 and 12

Changes in the Board
Joining the Board

Key

Retiring from the Board

Entering Board
Jennifer Allerton

Mike HughesCharles Holroyd

Mike Brady

Independent Non-Executive Director

Non-Executive Director

Executive Director

Chairman and Non-Executive Director

Joined: 10/06/13

Retired: 10/09/13

Retired: 10/09/13

Retires: 09/09/14

Leaving Board

Report and Financial Statements 2014 / Oxford Instruments plc

33

www.oxford-instruments.com

Corporate Governance continued

Board of Directors and management structure
Board of Directors
The Board currently comprises the Chairman, four
Non-Executive Directors and two Executive Directors.
The Directors’ biographies and details of length of service
are shown on pages 28 to 29. All the Directors havewritten letters of appointment that have been approvedby the Board and which are available for inspection at
the Company’s Annual General Meeting.
The Chairman is responsible for leadership of the Boardand ensuring its effectiveness on all aspects of its role.
The division of responsibilities between the role of
Chairman and the Chief Executive has been set out
in writing and agreed by the Board.
The Board has delegated Group responsibility for the
management of health, safety and the environment
to Jonathan Flint and he reports to the Board on thesematters at each meeting.
Board members length of service
Nigel Keen

15 years

Jonathan Flint

9 years

Kevin Boyd

7 years

Sir Mike Brady

19 years

Jock Lennox

5 years

Thomas Geitner

1 yearJennifer Allerton

1 yearManagement Board
The Board delegates management of the business to
the Chief Executive. To assist in this, the Chief Executive
has created a Management Board that consists of the
Executive Directors, the Group Operations Director and
the Group Human Resources & Brand Director and theDivisional Managing Directors.
The Management Board meets monthly either physicallyor by video or telephone conference and focuses onGroup‑wide performance, strategy and risk management.
Operation of the Board
The Board is responsible to Shareholders for delivering
sustainable incremental Shareholder value throughentrepreneurial leadership within a framework of controls
for managing risk. The Board sets the Group’s strategy,
maintains the policy and decision making framework inwhich this strategy is implemented, verifies that thenecessary financial and human resources are in place tomeet strategic aims, monitors performance against key
financial and non-financial indicators, oversees the systemof risk management and sets values and standards ingovernance matters.
34

The details of the way the Board operates, including aschedule of matters reserved to the Board for decision,
are set out in the Board Reference File.
The Board retains control over strategy, investments andcapital expenditure, and limits the decisions which can betaken by management in the areas of strategic and financial
management and reporting, capital structure, corporate
actions, mergers and acquisitions, major contracts andother commitments, litigation and regulatory proceedings,
remuneration and share incentive plans.
Where the Board delegates authority to management
it is on a structured basis, which requires that proper
management oversight exists at the appropriate level.
The Board meets on a regular basis, at least nine times
a year, and otherwise as required. Of the nine regularmeetings, typically six are held at Group locations and theremaining three are held by telephone conference. Other
Board meetings are held on an as needed basis and during
the year an additional four single issue meetings were held
to consider matters relating to proposed acquisitions. The
Board also had an off site meeting specifically to discuss
the Company’s strategic direction during the year.
Board meetings involve reviews of financial and businessperformance against the plan approved by the Board. Risk
management review, both at Group level and also for eachof the business units, is embedded in the reporting system.
On a rotating basis, the Board receives presentations fromthe business units and key functional areas enabling it to
explore specific issues in more detail. Any matter requiring
a decision by the Board will be supported by a pre‑circulated
paper analysing all relevant aspects of the proposal andrecommending a course of action.
Board papers are distributed in advance of the relevant
meeting in sufficient time to allow the Directors to prepare
for meetings. Minutes of Committee meetings are circulated
to the relevant Directors. In the very few instances when a
Director has not been able to attend Board or Committee
meetings, his comments on the papers to be consideredat the meeting are communicated in advance to therelevant Chairman.
The Non-Executive Directors meet without the Executive
Directors at least annually, with the Chairman leadingthese meetings. The Non-Executive Directors also meet
annually without the Chairman in attendance. The Deputy
Chairman chairs these meetings.
The Company Secretary and the Company Secretary’s Office
are responsible for implementing Board procedures and foradvising the Board on corporate governance matters.

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Board balance and independence
The Governance Code requires the Board should
be of sufficient size that the balance of skills andexperience is appropriate for the requirements of thebusiness and that there is a balance of Executive and
Non-Executive Directors such that no individual or
small group of individuals can dominate the Board’s
decision making. The composition of the Board andthe combination of diverse backgrounds andexpertise of the Non‑Executive Directors meetthese principles.
Nigel Keen, Chairman, has been a member of theBoard since February 1999. He has a degree in engineeringfrom Cambridge University, is a Fellow of the Institute ofChartered Accountants and of the Institute of Engineeringand Technology and has been involved in the formationand development of high technology businesses for morethan 30 years. He fulfilled the independence criteria at thetime of his appointment as set out in the Governance Code.
Nigel Keen also serves as Chairman of Oxford Instruments
Pension Trustee Limited, the Trustee of the Company’s UK
defined benefit pension scheme.
The Board of the Company and the Board of the Trustee
to the Pension Scheme have each independently considered
whether it is appropriate to have the Chairman of theCompany as Chairman to the Board of the Trustee of thePension Scheme, notwithstanding the potential conflictsof interest inherent in the same person holding both these
positions, and they each have unanimously confirmed thatthey believe that it is in the interest of all parties for thisto continue.
He is Chairman of the Nomination Committee anda member of the Remuneration Committee.
He was Chairman of the Remuneration Committee until
the conclusion of the 2013 AGM as the Board consideredthat whilst the Company was a SmallCap company it wasappropriate and necessary for the Chairman of the Board
to also be Chairman of the Remuneration Committee.
In January 2013, the Board appointed Thomas Geitneras an Independent Non-Executive Director with theappropriate mix of skills to take over the Chair of theRemuneration Committee which he did once thereporting requirements for the 2012/13 reporting
year were completed.
Mike Brady, Deputy Chairman and Non-Executive
Director, has been a member of the Board since June 1995.
He is Professor of Oncological Imaging in the Departmentof Oncology at the University of Oxford, having retired as
BP Professor of Information Engineering at that university,and is one of the UK’s leading engineers.

His technical expertise as the only Non-Executive Director
from a scientific profession brings a depth of technicalexpertise to Board discussions. As a result of his tenure asa Director of the Company, the Board has, in the light of
guidance by the Governance Code, determined that heshould not be considered independent. Mike is a memberof the Nomination Committee. Mike will be retiring fromthe Board immediately following the AGM in September.
Jennifer Allerton was appointed to the Board as an
Independent Non-Executive Director on 11 June 2013.
Jennifer is a graduate of Imperial College, London andhas a masters degree in physics from the University of
Manitoba and is a chartered engineer.
She has extensive international business experience
which strengthens the skills and expertise of the Board.
Jennifer is a member of the Audit, Remuneration and
Nomination Committees.
Thomas Geitner was appointed to the Board as an
Independent Non-Executive Director on 15 January 2013.
He is a graduate of the Technische Universität München
and holds an INSEAD MBA.
Thomas has extensive international experience in thetechnology and engineering sectors, having spent morethan 30 years in businesses operating across the globe.
Having worked in a number of global companies heunderstands the importance of remuneration connectingwith strategy to appropriately incentivise the executive team.
The Board believes that his skills, experience and knowledge
make Thomas well suited to run the Remuneration Committee
and accordingly he was appointed Chairman of theRemuneration Committee at the conclusion of the AGM
in September 2013. Thomas is a member of the Audit,
Remuneration and Nomination Committees.
Jock Lennox was appointed to the Board as an
Independent Non-Executive Director on 1 April 2009.
Prior to that he was a Senior Audit Partner at EY where
he gained extensive experience advising clients in a variety
of industries on financial reporting, financing, transactions
and international expansion.
The Board believes that Jock’s skills, experience andknowledge enhance and maintain an effective Board andprovide a well qualified Chairman of the Audit Committee.
Jock is Chairman of the Audit Committee and is a memberof the Remuneration and Nomination Committees.
He was appointed Senior Independent Director at the closeof 2013’s AGM when Mike Hughes retired from the Board.

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35

www.oxford-instruments.com

Corporate Governance continued

Board balance and independence continued
Independence of Non-Executive Directors
In the opinion of the Board, Jock Lennox, Thomas Geitnerand Jennifer Allerton are independent. Mike Brady is nolonger considered independent in accordance with theguidelines set out in the Governance Code and is due toretire from the Board at the Company’s forthcoming AGM.
The Board considers that they are each independent incharacter and judgement and do not have relationships
which are likely to affect their judgement. This opinion isbased on current participation and performance on boththe Board and Board Committees including considerationof the length of service at Oxford Instruments plc.
Term of appointment of Non-Executive Directors
Each Non-Executive Director was appointed for an initial
term of three years. In line with provision B.7.1 of theGovernance Code, the Board has determined that all
Directors of the Board are to be subject to annual
re-election by Shareholders and accordingly theappropriate resolutions will be put to Shareholders
at the Company’s forthcoming AGM.

Composition of the Board:
Independent vs. non-independent

50%*

Independent membersof the board* rising to 60% after the AGM

Independent (3)non-independent (3)(In line with the Governance Code the Chairman is excluded fromthese numbers)

Board development and evaluation
Board development

Board evaluation

On appointment, Directors undertake an induction
process which is designed to develop knowledge andunderstanding of the Group’s businesses through visits
to various Group operating sites, discussion of relevant
technology, as well as product demonstrations, briefings
from management and familiarisation with investor
perceptions of the Group. This induction is supported bybriefing papers prepared by the Company Secretary.

In light of the provisions of Section B.6.2 of the Governance
Code which expects that an externally facilitated evaluationof the Board be carried out at least triennially, John Stopford,
an emeritus professor of the London Business School,
carried out a “light touch” external evaluation of thegovernance review process in 2011. He found that theprocess described below effectively reviews the mechanicsof the operation of the Board and he found the written
statement on governance each Director completes a very
helpful input. His observation was that the Board wasfunctional and effective.

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

36

The Board has sought proposals from external
providers to undertake an external Board
effectiveness review. This will be carried out
over the summer of 2014 and will be reported
on in next year’s report.

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

GovernanceFor the year ended 31 March 2014 the Board has conducted
its annual effectiveness evaluation exercise, including a
specific review of the effectiveness of its principal committees
and members. This was an internal exercise under thecontrol of the Chairman using a detailed questionnairecompleted by all Directors in relation to the key areas ofBoard accountability and the arrangements in place toenable effective focus on these areas. Topics covered
included Group strategy, performance, delegation andaccountability, success, development and reward, Board
and Committee composition, Board induction and training,internal control and risk management. In addition, each

Financial statements

Company information

Director has prepared a written statement concerning
governance of the Company and has discussed the statementwith the Chairman at the individual one-to-one interviews
which the Chairman holds with each Director. The Chief
Executive is also involved in the process by giving his input
on the way the Board helps him in his role. The output
from these evaluations allows the Chairman to review
objectively the overall balance and effectiveness of theBoard and will be used as an input to the independent
review currently in process. The Non-Executive Directors
meet annually to appraise the Chairman’s performance.

Attendance at meetings
No one other than the Committee Chairman and members is entitled to be present at a meeting of the Nomination,
Audit or Remuneration Committee, but others may attend by invitation of the Committee. No Director votes on matterswhere he has a conflict of interest. Further details of the individual Committees’ activities are described below.
The following table sets out the frequency of, and attendance at, Board and principal Board Committee meetings for theyear to 31 March 2014:
Main
Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Number of meetings held

13

6

6

3

Nigel Keen
Jonathan Flint
Kevin Boyd
Mike Brady
Jock Lennox
Thomas Geitner
Jennifer Allerton³
Charles Holroyd²
Mike Hughes²

13
13
13
13
13
13
10
5
5

6¹
6¹
6¹
6¹
6
5
4
3¹
3

6
2¹
1¹
6¹
6
6
3
—
2

2
1¹
1¹
3
3
3
2
1¹
3

Note:
1 Attended by invitation.
2 Charles Holroyd and Mike Hughes resigned on 10 September 2013.
3 Jennifer Allerton was appointed to the Board on 10 June 2013.

Board committees
The Board has formed the following Committees:
Nomination, Remuneration, Audit and Administration.
Membership of Board Committees, which is set out on
pages 28 to 29, is determined by the Board and is reviewed
regularly. The written terms of reference of the Board
Committees are reviewed annually by each Committee
and the Board and are available on the Company’s website
at www.oxford-instruments.com/investors and from theCompany on request. They will be on display at theAnnual General Meeting.
Nomination Committee
The Nomination Committee comprises all the Non-Executive
Directors, under the chairmanship of the Chairman of theBoard. The Nomination Committee is responsible for assisting
the Board in the formal selection and appointment of Directors
and considers succession planning for the Board. It also

considers potential candidates and recommends appointmentsof new Directors to the Board. The appointments are basedon merit and against objective criteria including time
available and the commitment that will be required ofthe potential Director.
There is a formal, rigorous and transparent procedure for theappointment of new Non-Executive Directors to the Board,the prime responsibility for which is delegated to theNomination Committee. Each appointment process begins
with an evaluation of the balance of skills, knowledge andexperience existing on the Board that is effected througha series of one-on-one meetings between the Committee
Chairman and Directors. The Nomination Committee
takes external advice when considered appropriate.

Report and Financial Statements 2014 / Oxford Instruments plc

37

www.oxford-instruments.com

Corporate Governance continued

Board committees continued
Nomination Committee continued
During the year, the sub-committee, established by the
Nomination Committee to evaluate the balance of skills,
knowledge and experience on the Board and to identify
appropriate candidates for Non-Executive Director positions
on the Board, has continued its work. Accordingly, using
information it has gathered, taking into account both diversity
within the Board and the balance of skills on the Board, it
has drawn up descriptions of the role and desired capabilities
for candidates to help in the search of new Non-Executive
Directors. With the help of executive search consultants
Korn/Ferry, the Committee developed shortlists of qualifying
candidates. Candidates met with the Chairman and the
Deputy Chairman and a final selection of potential appointees
met several Directors individually. Following these meetings,
the Nomination Committee considered each Director’s
feedback and made a final recommendation to the Board
concerning any further appointment.
Following this process, the Committee has during the year:• recommended the appointment of Jennifer Allerton
to the Board as an Independent Non-Executive Director.
Her appointment to the Board commenced 11 June 2013;
and• has started the process of identifying a Non-Executive
Director with a strong scientific background to serveon the Board as an Independent Non-Executive Director.
The Nomination Committee, taking into account theperformance of the individual, has considered whether
each of the Non-Executive Director’s appointments should
be renewed and has confirmed that they should.
The Nomination Committee has also carried out its annual
review of the performance of the Chief Executive andsuccession planning within the business.

The Remuneration Committee is responsible forrecommending to the Board the remuneration packages
for Executive Directors and the bonus and share option
strategy for the Group’s executive management.
Independent professional advice is sought when considerednecessary. Under its terms of reference the Chairman of theBoard may be Chairman of the Committee. The Chairman
and the Executive Directors are responsible for fixing the
remuneration of the Non-Executive Directors and theNon-Executive Directors are responsible for fixing the
remuneration of the Chairman.
The Chief Executive is invited to attend Remuneration
Committee meetings as deemed appropriate, for example
when consideration is being given to the performance ofother Executive Directors and on significant Group‑widechanges in salary structure and terms and conditions
affecting other employees at senior executive level.

Further details of the work of the Remuneration
Committee are included in the Directors’
Remuneration Report set out on pages 47 to 65.

Audit Committee
The Audit Committee comprises all the Independent
Non-Executive Directors and its chairman is Jock Lennox.
Other members of the Board, senior management
and the external auditor are invited to attend all or partof any meetings. The Board has determined that, as aChartered Accountant and former Senior Audit Partner
at EY, Jock Lennox is the designated financial expert.
The Audit Committee’s main responsibilities are focused on
financial reporting, external audit, internal audit, internal
controls and financial risk management.

Remuneration Committee
The Remuneration Committee comprises all the
Independent Non‑Executive Directors and the Chairmanof the Board. Thomas Geitner, appointed to the Board
in January 2013, worked closely with Nigel Keen on
remuneration matters until he took over as Chairmanof the Remuneration Committee at the end of the Company’s
AGM on 10 September 2013. The Board considers that
Thomas, with his experience of working at senior levels
in global companies, including high technology companies,
has an appropriate blend of skills to make a successful
Chairman of the Remuneration Committee. Prior to that,
the Chairman of the Board, Nigel Keen, who fulfilled the
independence criteria at the time of his appointment as
set out in the Governance Code, was Chairman of theRemuneration Committee as the Board considered thatin a SmallCap company it was essential that the Chairman
be involved in setting remuneration policy. The membersof the Committee are appointed by the Board.

38

Full details of the operation and the work of
the Audit Committee are included in the Audit
Committee Report set out on pages 41 to 46.

Administration Committee
The Administration Committee consists of a minimumof two Directors and deals with items of a routine andadministrative nature. The Board receives a summary
outlining all matters decided by the Administrative
Committee since the previous Board Meeting.

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Annual General Meeting (AGM)
The AGM is an opportunity for the Board to meet
Shareholders. At its AGM, the Group complies withthe provisions of the Governance Code relating to thedisclosure of proxy votes, the separation of resolutions
and the attendance of Committee Chairmen. The Grouparranges for the Annual Reports and Financial Statements
and related papers to be posted on its website and, where
Shareholders have elected to receive paper copies, posted
to Shareholders so as to allow at least 20 working days
for consideration prior to the AGM. The next AGM will
be held on 9 September 2014 at the Group’s offices in
Tubney Woods, Oxfordshire.
Investor relations
The Group places considerable importance on regularcommunications with its Shareholders with whom it has
an ongoing programme of dialogue. All Shareholders
are encouraged to participate in the AGM at which the
Chairman and Chief Executive present an overview of
the Group’s business and review the results and makecomments on strategy and current business activity.
The Non-Executive Directors meet informally with
Shareholders both before and after the AGM and respondto Shareholder queries and requests. The Chairman and
the Senior Independent Director make themselves
available to meet Shareholders, as required.
All Group announcements are posted on the Group website,www.oxford-instruments.com/investors, as soon as they
are released. The Investor Relations section of the website
provides financial and other information on the Groupand the website itself carries additional informationon the Group’s products, services and markets.
Risk management
Within the Group there is an ongoing embedded process
for identifying, evaluating and managing the significant
risks faced by the Group. Day-to-day management of thisprocess has been delegated by the Board to the Executive
Directors. Detail of the process is set out in the Audit
Committee Report on pages 41 to 46. This process has
been in place for the year under review and up to thedate of approval of the Annual Report and Financial
Statements. It is regularly reviewed by the Board of
Directors and accords with the Turnbull principles.
Details of all major risks identified and the mitigating actions
in place are reported to and reviewed by the Board. The
Principal Risks (page 16) gives an overview of the majorrisks and uncertainties faced by the Group. A standard
process is in place throughout the Group that requires thesenior management of each business to identify significant
business risks and to classify them both as to probability
and potential impact. Once identified, mitigating action,
where possible, is formulated and responsibility within

Financial statements

Company information

the management team assigned. On a regular basis eachbusiness reviews and updates its risk summary which isthen reported to the Chief Executive. If a material riskchanges or arises, the Managing Director of the business
reports this in writing to the Chief Executive at which time
there is a discussion on the adequacy of the mitigating
actions taken.
In addition, the Board considers risks to the Group’s
strategic objectives which are not addressed within theGroup’s businesses and develops appropriate actions
to manage and mitigate these risks.

“The management of each business is responsible
for risk management and control within
their business”

Internal audit and assurance
The Group’s Internal Audit function has responsibility forindependently assessing the adequacy and effectivenessof the management of significant risk areas and acts asa third line of defence behind operational management’s
front line and own assurance activities. Further detailsof this are set out in the Audit Committee Report on
pages 41 to 46.
Internal control
The Board has accountability for reviewing and approving
the adequacy and effectiveness of internal controls
operated by the Group, including financial, operationaland compliance controls and risk management. The
management of each business is responsible for risk
management and control within their business and,through the Management Board, implementing Board
policies on risk and control.
The internal control framework includes central direction,
oversight and risk management of the key activities within
the Group. As part of this framework there is a financial
planning process which includes a three year planningmodel and the preparation of an annual budget approvedby the Board. The results of the business units are reported
monthly and compared with the budget. Forecasts are also
prepared monthly.

Read more about
Principal Risks andUncertainties
Turn to pages
16 and 17

Control activities include policies and practices covering
appropriate authorisation and approval of transactions,the application of financial reporting standards and reviewsof significant judgements and financial performance.
Financial, regulatory and operational controls, procedures
and risk activities across the Group are reviewed by theGroup’s assurance function.

Report and Financial Statements 2014 / Oxford Instruments plc

39

www.oxford-instruments.com

Corporate Governance continued

Internal control continued
The internal control framework complies with the Turnbull
guidance and has been designed to manage rather thaneliminate material risks to the achievement of strategic andbusiness objectives and can provide only reasonable, andnot absolute, assurance against material misstatement orloss. Because of inherent limitations, internal controls overfinancial reporting may not prevent or detect all misstatements.
There has been no material change to the Group’s internal
control framework during the period covered by thisAnnual Report.
The key components designed to provide effective internal
control within the Group are as follows:• there is a formal schedule of matters reserved to theBoard for decision; other than these matters, the Board
delegates to the Chief Executive and reviews the delegationof authorities throughout the management structure;• the Group’s management structure is headed up by
the Management Board. Its membership comprises the
Executive Directors, senior managers with Group‑wide
functional responsibilities and the heads of the principal
businesses of the Group’s activities. Day‑to‑day
responsibility for the management of the Group isdelegated to the Management Board. The responsibility
is based on the identification of separate businesses
for each of the Group’s activities for which there areclearly defined lines of management responsibilities
at all levels up to and including the Group Board andthe Group’s accounting and reporting functions reflect
this organisation;• financial executives within Group businesses reportto their own operational head but there is also a wellestablished and acknowledged functional reporting
relationship through to the Group Finance Director;• the Board reviews strategic issues and options formallyonce a year during the annual strategic planning process
and during the year as appropriate. In addition the
Executive Directors maintain a three year planningmodel of the Group and its individual businesses;• annual budgets are prepared for each of the Group’sbusinesses which include monthly figures for turnover,profit, capital expenditure, cash flow and borrowings.
The budgets are reviewed through the Group management
structure and result in a Group financial budget whichis considered and approved by the Board;• the businesses prepare monthly management accounts
which compare the actual operating result with boththe budget and the prior year. The businesses also prepare
rolling reforecasts for orders, turnover, operating profit
and cash. Both are reviewed by the Board monthly;40• the Board approves all acquisition and divestment proposals
and there are established procedures for the planning,approval and monitoring of capital expenditure;• for all major investments the performance of at least
the first 12 months against the original proposal isreviewed by the Board;• each Group site, except for representative sales offices,
is required to submit a self-assessment internal control
questionnaire annually;• internal audit is carried out through a system of regularreviews of the financial and non-financial internal controls
at each site and this is further reported on in the Audit
Committee Report on pages 41 to 46. These reviews
are coordinated by the Group Audit & Risk Manager;• the Board receives regular updates on treasury, tax,
property, pensions, insurance, litigation, humanresources, corporate social responsibility, businessethics and health and safety matters;• authorisation limits are set at appropriate levels
throughout the Group; compliance with these limits
is monitored by the Group Finance Director and theGroup Audit & Risk Manager;• all requests to quote for substantial fixed price contracts
are reviewed by the Chief Executive and/or the Group
Finance Director to assess both technical and financial
risk and to fix an appropriate balance between risk
and reward. However, no procedure can guarantee
the avoidance of losses on fixed price contracts ofa technical nature; and• with respect to the UK pension scheme, the Groupnominates half of the trustee directors of the corporate
trustee to the pension scheme, involves its own
independent actuary with whom actuarial assumptions
are reviewed, agrees the investment policy with thetrustee, works with the trustee on its investment
sub-committee to deal with day-to-day investment
matters and to act as a co-ordinator between theinvestment advisors, investment managers and thetrustee, ensures there is an independent actuarial
valuation every three years and agrees funding levels
to provide adequate funding to meet the benefit
payments of the members as they fall due.

Susan Johnson-BrettCompany Secretary
10 June 2014

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Audit Committee Report

Dear Shareholder,The role of the Audit Committee is to undertakean independent assessment of the integrity of
the Financial Statements and to ensure that there
is a sound system of internal financial control
throughout the Group. The recent revisions to the
UK Corporate Governance Code serve to highlight
this further, particularly the new duties to:• advise the Board on whether the Annual Report, taken
as a whole, is fair, balanced and understandable andprovides the information necessary for Shareholders
to assess the Company’s performance, businessmodel and strategy;

Composition of the Audit Committee
Chairman
Jock Lennox

Members
Jennifer Allerton
Thomas Geitner• ensure that the external audit is put out to tenderat least once every ten years; andMike Hughes• report formally to the Board and Shareholders
on how it has discharged its responsibilities.
I would therefore like to present to you our reportwhich describes in more detail than in previous years
the role of the Committee and the way in which our
structured programme of activities enables us todischarge our responsibilities. The programme not
only supports the key events in the Group’s financial
reporting cycle, but enables us to monitor the effectivenessof the internal financial control and risk management
systems and to monitor the activities and performanceof both our internal and external auditors. Our report
also highlights the significant matters which we dealt
with in 2013/14 and how we satisfied ourselves as totheir appropriateness.

During the year, we also decided it would be appropriate
to put the external audit out to tender. Mindful of thelongevity of KPMG’s audit tenure and that we hadreached the point of partner rotation, we invitedDeloitte and PricewaterhouseCoopers to tenderalongside KPMG. After careful consideration we
decided to re-appoint KPMG and recommended
such decision to the Board.
As the size and complexity of Oxford Instruments
continues to grow we will continue to direct ouractivities to ensure the Group’s governance andcontrol mechanisms remain appropriate.
I hope that you will be supportive of the resolutions
to be proposed at our AGM. If you have any queries
in the meantime I will be pleased to engage with you.

Jock Lennox
Audit Committee Chairman

Report and Financial Statements 2014 / Oxford Instruments plc

41

www.oxford-instruments.com

Audit Committee Report continued

Composition

External audit

The members of the Audit Committee are Jock Lennox (Chair),Jennifer Allerton and Thomas Geitner. The compositionof the Committee changed during the year with theappointment of Jennifer Allerton to the Board and theCommittee in June 2013 and the retirement from the Boardand the Committee of Mike Hughes in September 2013.
The Chairman and Deputy Chairman of the Board, Chief
Executive, Group Finance Director, Group Audit and Risk
Manager and the external auditor, KPMG, are invited toattend all or part of any meetings at the discretion of the
Audit Committee. The Company Secretary acts as secretary
to the Committee. Other relevant people from the businessare also invited to attend certain meetings in order to provide
a deeper level of insight into key issues and developments.
Each meeting allows time for the Committee to speak withthe external auditors without the presence of the executive
management. The Board has determined that, as a Chartered
Accountant, Audit Committee Chairman of certain otherpublic companies and former Senior Audit Partner of EY,
Jock Lennox is deemed to be independent and have recent
and relevant financial experience.

• Overseeing the relationship with the external auditor.
• Monitoring and reviewing auditor independence andobjectivity and evaluating the effectiveness of theaudit process.
• Reviewing and approving the annual audit plan andaudit findings.
• Making recommendations to the Board for theappointment or re-appointment of the external auditor.
• Reviewing and monitoring the non-audit services policy
and the level of non-audit services provided by theexternal auditor.
Internal audit• Monitoring the role, resources and effectiveness of theGroup Internal Audit function.
• Approving an annual programme of internal audit
work and reviewing the results of such work.
Internal controls and risk management• Monitoring the adequacy and effectiveness of theinternal financial control environment.

Role
The remit of the Committee is summarised below and isdetailed in full in the terms of reference, a copy of which
can be found on our website at www.oxford-instruments.
com/investors. The main responsibilities of the Committee
are focused on the following five areas:
Financial reporting• Reviewing our financial results announcements andFinancial Statements and monitoring compliance with
relevant statutory and listing requirements.

• Reviewing the operation of the Group’s risk
management processes.
Whistle-blowing• Reviewing the Group’s whistle-blowing arrangements
and matters reported to the whistle-blowing hotline.
The Committee periodically reviews its terms of reference
and its effectiveness and recommends to the Board anychanges required as a result of such review.

• Advising the Board on whether the Annual Report and
Financial Statements, taken as a whole, are fair, balanced
and understandable and provide the informationnecessary for Shareholders to assess the Company’s
performance, business model, strategy and risks.
• Reviewing and challenging significant financial reporting
judgements and accounting policies and compliancewith accounting standards.

42

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Activities of the Audit Committee in respect of the financial year ended 31 March 2014
The Committee has worked largely to a recurring and structured programme of activities developed from its terms ofreference and agreed with the Committee Chair at the start of the financial year. A summary of the items discussed ineach meeting is set out in the table below:
Agenda item

July
2013

September
2013

January
2014



Review the integrity of the draft Financial Statements,
appropriateness of accounting policies and going
concern assumption (reports received frommanagement and KPMG)
Review and recommend for approval the half-year andyear end announcements, interim management andAGM statements and the Annual ReportExternal audit tender process

Assess the effectiveness of the external audit process

November
2013



March
2014

June
2014
















Approve external audit plan and fee proposal
Review and approve non-audit services policy
Consider independence and objectivity of
external auditor

Review internal management representation letters

Agree internal audit plan

Review the output of the internal audit workRe-evaluate the effectiveness of the internal audit function



Review internal control framework



Review risk management processAnnual review of whistle-blowing arrangements
Discuss Audit Committee effectiveness survey and review
the Committee composition and terms of reference

In addition to its usual business as described above theCommittee met individual business managers in order togain a deeper insight into areas relevant to the Committee’s
work and to provide an opportunity to discuss specificareas of interest. These included progress updates on theGroup-wide Enterprise Resource Planning (ERP) project,
Project Connect, and a presentation on the nature of thecyber security threat posed to the Group.

Significant matters related to the Financial Statements

Following the publication of the revised version of the UK
Corporate Governance Code, which applies to financial
years commencing on or after 1 October 2012, the Board
requested that the Committee advise it on whether the
Annual Report, taken as a whole, is fair, balanced andunderstandable and provides the information necessary
for Shareholders to assess the Company’s performance,business model and strategy.

For each acquisition the consideration was required to beallocated to the identifiable assets, liabilities and contingent
liabilities with any positive balance remaining being recognised
as goodwill. This requires the assets and liabilities to bevalued at their fair value at the acquisition date andidentifiable intangible assets to be recognised separatelyfrom goodwill. The total value of intangibles acquired
during the year was valued at £172.6m, further details of
which can be found in Note 5 to the Financial Statements.

The Committee reviews all significant issues concerning
the Financial Statements. The principal matters considered
concerning the 2014 Financial Statements were:
Acquisition accounting
During the year the Group acquired Andor plc and two
smaller companies.

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Audit Committee Report continued

Significant matters related to the Financial Statements
continued
Acquisition accounting continued
The fair value of the intangible assets was assessed, using
the advice of independent experts, by discounting theestimated future cash flows generated from the ownershipof the asset over its useful economic life. This requires making
assumptions on variables such as discount rates, economic
life of the asset, future expected cash flows from productsales, customer contracts and acquired developed technologies
and patents. The selection of these assumptions is subjective
and small changes would have a significant impact on thevaluation of the intangible and on the allocation of theconsideration between intangible assets and goodwill.
The Committee received reports from management on
the valuation techniques and significant estimates usedand satisfied itself that these had been reasonably andappropriately applied.
Impairment of intangible assets
The Group has undertaken a number of acquisitions, bothin the current year and historically. Any goodwill acquiredin these acquisitions is required, in accordance with IFRS,
to be tested for impairment on an annual basis. The valueof goodwill amounts to £106.4m at 31 March 2014.
Impairment testing for goodwill is always carried out in thecontext of a cash generating unit (CGU) or groups of CGUs,
since goodwill does not generate cash flows independently.
Any goodwill acquired is allocated, at acquisition, to the
CGU that is expected to benefit from the acquisition.
The Group’s CGUs are set out in Note 13.
Goodwill is considered to be impaired when its recoverable
amount falls below its carrying amount. In determining therecoverable amount the value in use of the associated CGU
is calculated by discounting expected future cash flows.
This requires making assumptions on discount rates, growth
rates, expected selling volumes and prices and direct costs.
This year, the outcome of the impairment review concluded
that the carrying value of the Omicron CGU was less than
its recoverable amount by £2.6m.
Management highlighted to the Committee how it arrived
at the key assumptions to estimate the expected future
cash flows for the CGUs. Management also brought tothe attention of the Committee the sensitivity analysis
to be disclosed in Note 13 to the Financial Statementswith regards to the recoverable amount of the CGUs
goodwill that had not been impaired.
The external auditor reported to the Committee its audit
procedures to test management’s impairment assessment
and its assessment of the Group’s disclosures on thesubject. No additional impairment to the carrying amountat 31 March 2014 had been identified through theauditor’s work.

44

Provisions for other liabilities and charges
A provision is required to be made for any claim or dispute
when it is considered probable that an adverse outcome
will occur and the amount of the loss can be reasonably
estimated. From time to time the Group will be subject toa variety of legal claims and disputes which, as a result of
its high technology products, may include patent infringement
claims and disputes. Details of provisions and contingencies
can be found in Note 23 and 26 to the Financial Statements.
The level of provisioning, when required, will be subject
to a significant degree of estimation since at the point ofrecognition the liability may be of an uncertain amount.
Revenue recognition
Certain products supplied by the Group contain customer
specific design and a high degree of technical specification.
Although considerable technical expertise is employed to
manufacture and install these products at the customer
site, there is a risk that a particular term of sale is notachieved and revenue is recognised incorrectly.
The external auditor considers revenue recognition to bea significant risk and has included this as an area of audit
focus in its plan which was presented and approved by
the Committee in January 2014.
Specific policies are applied by the Group’s management suchthat revenue recognition is appropriate in these circumstances.
The Committee was satisfied that revenue has been
appropriately recognised within the Financial Statements.
Misstatements
Management reported to the Committee that they were
not aware of any material misstatements or immaterial
misstatements made intentionally to achieve a particularpresentation. The auditor reported to the Committee themisstatements that it had found in the course of their work
none of which were material and required adjustment.
The Committee concluded that it was satisfied that theauditor had fulfilled their responsibilities with diligenceand professional scepticism.
After reviewing the presentations and reports frommanagement, and after consulting, where necessary, withthe external auditor the Committee was satisfied that the
Financial Statements appropriately addressed the criticaljudgements and key estimates (both in respect to theamounts reported and the disclosures). The Committee
was also satisfied that the significant assumptions used
for determining the value of assets and liabilities,
including the pension commitments of the Group,
had been appropriately scrutinised and challenged.

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

External auditor

Auditor independence

The Committee is responsible for monitoring the performance,
objectivity and independence of the external auditor,
recommending the appointment of the external auditor
to the Board and approval of its fees. At the Committee
meeting in January 2014 the external auditor, KPMG, provided
the Committee with its plan for undertaking the external
audit. This highlighted the proposed approach, scope andplanned materiality of the audit for the coming year andidentified the key risks and areas of audit focus, including
the approach for these areas in detail.

In its assessment of the independence of the auditor theCommittee receives confirmation of any relationships
between the Group and KPMG that may have a bearing
on its independence and receives confirmation that it isindependent of the Group.

The Committee reviewed and, as appropriate, challenged
the basis for these before agreeing the plan. The Committee
assesses the effectiveness of the audit process in addressingthese matters through the reporting received from KPMG
at the half year and year end and through feedback fromkey stakeholders at all levels across Oxford Instruments.
The current KPMG audit engagement partner, Simon
Haydn-Jones, will rotate off the Oxford Instruments’audit account at the conclusion of the 2014 audit having
completed his permitted tenure of five years. It was decided
by the Committee that, mindful of the regulatory changes
in Europe and the longevity of the KPMG audit tenure,
it would be appropriate to put the external audit out totender aligned to the partner rotation. Oxford Instruments
has adopted the policy to tender the external audit at least
every ten years, aligned with the audit engagement partner
rotation and subject to the Financial Reporting Council’s
implementation in the UK of the European regulation on
statutory audit.
KPMG, Deloitte and PricewaterhouseCoopers wereapproached in January 2014 and a six stage tender process
was conducted. During the process the tendering firms
were granted access to the Group’s manufacturing sites
in the UK, the USA and Germany; to the Non-Executive
Directors; to key management; and to company information
through an online data room. This information gathering
stage was conducted over five weeks and allowed thefirms the opportunity to obtain a more in-depth knowledgeof our business. Each audit firm was then required to submit
a written proposal and make a presentation to the selection
panel chaired by the Committee Chairman. Each firm was
rated against pre-determined selection criteria and thefinal score, which included feedback from senior business
management involved in the process, was used to support
the decision. Following this process the Committee
recommended to the Board at a Committee meeting
convened in April 2014 that KPMG LLP be re-appointed
as the Group’s external auditors. Greg Watts will replace
Simon Haydn-Jones as the lead audit partner for 2015.

To further safeguard the objectivity and independenceof the external auditor firm becoming compromised, theCommittee has a formal policy governing the engagementof the external auditor to provide non-audit services.
No change to this policy has been made during the year.
All non-audit related engagements over £50,000 require
formal advance approval by the Committee. The detailsof the audit fees for the year, together with fees for
non-audit services, are set out in Note 4 (page 89) tothe Financial Statements.
Internal audit
Internal Audit plays an important role in assessing theeffectiveness of internal controls. This is achieved throughan audit programme that includes rotational site visits
providing core assurance over the Group’s financial processes
and risk-based reviews to provide assurance that controls
over certain key risks are operating effectively.
During the year a significant amount of Internal Audit’stime has been spent on providing assurance over the input
into the design of Project Connect and on reviewing theimplementation of the findings of a third party audit ofProject Connect.
The Committee has assessed the internal audit plan sothat it provides appropriate coverage over the internal
control environment and provides a balanced overview
across the Group, taking into account the level of risk,other assurance activities and previous coverage. Reports
from the Group Audit & Risk Manager include updates
on audit activities, progress against the audit plan, andthe results of the audit work and status of any control
remediation plans.
The Group Audit & Risk Manager has direct access anda reporting line to the Chairman of the Audit Committee
and meets independently with him during the year. The
Committee monitors the resources and scope of work of
the internal audit function to ensure that its development
is commensurate with the increasing scale and complexityof the business.

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Audit Committee Report continued

Internal control and risk management

Whistle-blowing

As we continue to expand and increase our global footprint
it is recognised that the management of risk continues
to be ever more important to the Group achieving its
key strategic plans and objectives. This year the Grouphas refreshed its risk management process to ensure that
the Group continues to effectively identify and respondto the risks it faces. The Group’s risk management process
is underpinned by business risk reports and a reporting
framework that escalates risks to the appropriate
stakeholders. Annually the business risk reports areconsolidated into the Group Risk Register and reviewed
by executive management before being reported to
the Board.

The Group’s Business Malpractice Policy comprises an internal
process that has been communicated directly to all employees
by which employees can raise a concern, including concerns
relating to fraud, damage to the environment, criminal
activity or danger to health and safety, in the knowledge
that it will be taken seriously, treated as confidential andthat no action will be taken against the employee raising
the concern. There is also provision within the Policy
for employees to raise concerns directly with the Senior
Independent Director. This policy is reviewed annuallyby the Committee. No serious matters were reported
during the year.

Internal audit provides assurance on the risk management
processes as part of its audit work and utilises the outputof the business risk reporting to identify the risk-based
reviews to be included within its audit plan.
The Committee reviewed the system of internal financial
control on behalf of the Board and satisfied itself that theGroup is meeting the required standards both for the year
ended 31 March 2014 and up to the date of approval ofthis Annual Report. No concerns were raised with theCommittee in 2014 about possible improprieties in mattersof financial reporting.

Summary
The Committee has concluded, as a result of its work
during the year, that it has acted in accordance with its
terms of reference and fulfilled its responsibilities. The
Chairman of the Committee will be available at the AGM
to answer any questions on the work of the Committee.

In coming to these conclusions the Committee reviewed
reports from internal audit and external audit on internal
control findings, received in-depth reviews into the control
environment and risk management process; and had regard
for the other assurance activity performed by the Groupfunctional heads over operations, health and safety, researchand development, human resources and IT. The Committee
noted the Group’s move to more detailed policies, theimplementation of minimum financial control standards
and a related programme of self-assessment.

46

Oxford Instruments plc / Report and Financial Statements 2014

A discussion of ourprincipal risks anduncertainties canbe found on
pages 16 and 17

Overview

Strategic report

Governance

Financial statements

Company information

Remuneration Report

Dear Shareholder,
On behalf of the Board, I am pleased to present
the Directors’ Remuneration Report for 2013/14.
In accordance with the new Directors’ remuneration
reporting regulations our Remuneration Reporthas been split into two parts. The Directors’
Remuneration Policy, which sets out our
remuneration policy for 2014/15 and beyond, will
be put to a binding Shareholder resolution at theAGM on 9 September 2014. The Annual Report on
Remuneration, which sets out the remuneration
paid to the Executive and Non-Executive Directors
in respect of 2013/14 and how our policy will be
implemented in 2014/15, will be put to anadvisory Shareholder resolution. Shareholders
will also be asked to approve a new long term
incentive plan at the AGM.
Summary of main remuneration policy
decisions during the year
During the year the Remuneration Committee reviewed
the Company’s long term incentive arrangements toensure they supported the Group’s strategy for growthand, as explained in the Strategic Report on pages 5
to 27, the evolution of that strategy to extend Oxford
Instruments’ reach into adjacent new markets. Up until
now, the Company has operated two share plans, theExecutive Share Option Scheme (ESOS), using market
value options, and the Senior Executive Long Term
Incentive Scheme (SELTIS), using performance shares.
As a result of this review and with a view to simplificationof the executives’ remuneration arrangements theCommittee has determined that for the next policy
period it will make awards of performance shares only
instead of the current combination of market value
options and performance shares. A higher level of
performance share awards (to replace the previous
combination of market value options and performance
shares) cannot be made under the award limits of theexisting performance share plan. A new long term
incentive plan will therefore be put to Shareholders forapproval at the AGM to replace the existing performance
share plan, the SELTIS. This new Performance Share Plan
(PSP) will be similar in design to the existing SELTIS but
will take into account where relevant developments inmarket best practice including a reduced level of vestingfor threshold performance (25% of maximum instead of
the current 33.33%). The ESOS will continue to be used,
but only for Executives below Board level.
The first awards will be made under the new PSP following
the AGM. As in previous years, the 2014/15 awards will
be subject to relative Total Shareholder Return andComposition of the Remuneration Committee
ChairmanThomas Geitner

Members
Nigel Keen
Jock Lennox
Jennifer Allerton
Mike Hughes

growth in earnings per share performance conditions.
Given the international nature of our business, theCommittee has agreed to remove the CPI reference inthe EPS targets and will instead build into the targets set
assumptions about the global inflationary environment.
As part of its review the Committee also consideredaward levels under the new PSP. While the Committee
has determined that the PSP awards to be made to the
Executive Directors following the 2014 AGM will be at
a level amounting to 150% of salary, it wishes to retain
the flexibility to increase award levels in future years,
up to the maximum plan limit of 250% of salary, if it
determines that this is appropriate to support and drive
the Company’s strategy for growth. The Committee
would not make awards in excess of the current levelof 150% of salary without first consulting with major
Shareholders on quantum, structure and performance
conditions for the incremental awards.
The Committee has had oversight of the overall Group
compensation policy when setting the Executive Directors’compensation. Taking into account all relevant matters,
including the salary increases within the Group, the salaryof the Executive Directors is to be increased by 3% witheffect from 1 July 2014.
A summary of the remuneration policy is set out on
pages 48 to 54, with more details on how it will beapplied for 2014/15 set out in the Annual Report on
Remuneration on pages 55 to 65.
As part of the Committee’s review of its long term incentive
arrangements, the Committee consulted extensively with
its Shareholders, the views of whom have been taken
into account in arriving at the proposals which will be
submitted to the Shareholders for approval at the AGM.

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Remuneration Report continued

Corporate performance and remuneration for 2013/14
The Group has delivered another successful year, withorders, sales and profits all ahead of the prior year.
• As we reported last year, following consultation withmajor Shareholders in 2012, it was agreed that the
Executive Directors would receive the second part ofa two-stage salary increase on 1 July 2013. The
Executive Directors asked and the Committee agreed
for the second part of that salary increase to bedeferred to 1 March 2014 at which point it was
put into payment.
• The Committee sets stretching performance targets
for the annual bonus which are clearly linked to thestrategy and financial performance of the Group.
In the outturn, the growth rates for the Group were
low and as a result the financial targets for theannual bonus were not met and these elements ofthe bonus did not pay out. The Committee awarded
15% of salary to the CEO and GFD (out of a total
15% of salary) in respect of achievement against thestrategic targets and reflecting the importance ofexecuting the strategic targets which lay thefoundations for future growth of the business.

• The Executive Directors received share awards in 2011
under the Executive Share Option Scheme (ESOS) andSELTIS and the performance periods for these awards
ended during the year. The ESOS award is subject to anearnings per share (EPS) performance target and the
SELTIS award a relative Total Shareholder Return (TSR)
performance target. Both the performance conditions
for the ESOS and SELTIS awards vested in full reflecting
the strong EPS growth and Total Shareholder Return
over the three year performance periods.
Summary
The Committee believes that the Remuneration Policy
will both support and motivate our senior team toachieve the Company’s strategic objectives and longterm growth for our Shareholders.
I hope that you will be supportive of the resolutions tobe proposed at our AGM. If you have any queries in themeantime I will be pleased to engage with you either at
the AGM or beforehand.
Yours sincerely

Thomas Geitner
Chairman of the Remuneration Committee

Part A: Directors’ Remuneration Policy
This part of the Remuneration Report sets out the Group’s
remuneration policy for its Directors. The policy will be put
to a binding Shareholder vote at the AGM on 9 September
2014 and subject to Shareholder approval will take effectfrom that date.
Policy overview
The remuneration policy promotes the delivery of the Group’s
strategy and seeks to align the interests of Directors andShareholders. The Committee regularly reviews the link
between incentive structure and strategy to ensure that
remuneration packages are appropriate to attract, motivate
and retain the high calibre Executives who are needed todeliver the Group’s strategy.
The Company has an incentive driven policy that seeks
to reward executives fairly and responsibly based onGroup performance and their individual contribution

The Committee considers carefully the motivational effectsof the incentive structure in order to ensure that it is effective
and does not have any unintentionally negative impact onmatters such as governance, environmental or social
issues. More generally, the Committee ensures that theoverall remuneration policy does not encourage
inappropriate risk taking.
Other matters taken into considerationin determining policy
The Committee reviews the Executive Directors’ packages
annually taking account of the level of remuneration paid
for comparable positions in similar companies. Comparative
pay data is used carefully recognising the potential for an
upward ratchet in remuneration caused by over relianceon such data.

The Company has a strategy aimed at delivering significant
growth and it is important for motivation and retention
that the remuneration of the executives reflects its
sustainable, profitable growth and the increasing
complexity of the business.

48

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

In determining the remuneration of the Group’s Directors, the Committee also takes into account the general trends in pay
and conditions across the Group as a whole. The Committee seeks to ensure that the underlying principles which form thebasis for decisions on Directors’ pay are consistent with those on which pay decisions for the rest of the workforce aretaken. Employees have not been consulted on Executive pay. The Committee will keep this under review.
The Remuneration Committee considers feedback from Shareholders received at each AGM and any feedback fromadditional meetings, as part of any review of Executive remuneration. In addition, the Remuneration Committee engages
proactively with Shareholders and will ensure that Shareholders are consulted in advance, where any material changes tothe remuneration policy are proposed. During the year, the Committee consulted with Shareholders holding approximately
50% of the Company’s shares. Taking into account the feedback received from them, the Committee was able to finalise
its remuneration policy for the forthcoming period and has formulated the proposals for a new PSP which will be put toShareholders at the AGM in September.
Remuneration policy table
Element of pay

Purpose and link to strategy

Operation

Maximum opportunity

Base salary• To provide a competitive and• Reviewed annually with any increase• No maximum or maximum
appropriate level of basic fixed pay tousually effective 1 July.
annual increase.
recruit and retain superior talent and • Takes account of experience, performance • Higher increases than the average
avoid excessive risk taking that might
and responsibilities as well as thepercentage for the workforce may beotherwise result from an over-reliance
performance of the Company, theappropriate, for example, where an
on variable remuneration.
complexity of the role within the Group
individual changes role, where the• Reflects the experience, performanceand salary increases for employees
complexity of the Group changes, where
and responsibilities of the individual.
generally.
an individual is materially below market
comparators or is appointed on a below• Set with regard to market data formarket salary with the expectation thatcomparable positions in similar companies
his/her salary will increase with experiencein terms of size, internationality, businessand performance.
model, structure and complexity, including
within the industry.

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

• Currently include but are not limited to:• life assurance, private medical, company
car benefit.
• The benefits provided may be subject toamendment from time to time by theCommittee within this policy.

• Current salary levels are disclosed on
pages 56 and 57.
• The value of benefits varies from year toyear depending on the cost to theCompany and is not subject to a specificcap. Benefit costs are monitored andcontrolled and represent a small elementof total remuneration costs.

• Relocation costs may be provided asnecessary and reasonable.
• Benefits are not part of pensionable earnings.
Pension• To provide a market-competitive
benefit for retirement.

• Company contributions to a money
purchase pension scheme; or• 14% of base salary.

• Salary supplement where HMRC annual
or lifetime allowances exceeded.
Annual bonus• Drives and rewards the successfulachievement of short term targets
set at the start of the year.

• Paid annually in June.
• Performance targets based on the key
performance indicators and strategic
objectives of the business.
• At least 70% of the bonus based on
financial metrics and the balance on
non-financial strategic metrics.

• 75% of salary at year end payableat target performance.
• 100% of salary at year end payable
for maximum performance.
• Bonuses start to be earned from
0% of salary for achieving
threshold performance.

• Clawback applies for financial years
commencing 2013/14 for misstatement,
error or misconduct.

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Remuneration Report continued

Part A: Directors’ Remuneration Policy continued
Element of pay

Purpose and link to strategy

OperationLong term
incentives• To incentivise the Executives and• Annual awards under the 2014
reward them for meeting stretching
Performance Share Plan (PSP) of
targets in the long term which accrue
performance shares (or nil cost options)substantial value to and align thewith vesting subject to achievement of
Directors’ interests with Shareholders.
performance targets. Both the vestingand performance period will be over
• Facilitates share ownership to provide
a minimum of three years but may befurther alignment with Shareholders.
up to five years at the discretion of• Annual awards aid retention.
the Committee.
• It is the Committee’s intention to set
relative TSR targets for 50% of the award
and for the other 50% absolute EPS
growth targets although the Committee
will review the performance conditions
each year prior to awards being made.

Maximum opportunity• The maximum limit under the plan rules
is 250% of salary (value of shares at
date of grant). The Committee will notincrease above the 2014 award levelsof 150% of salary without priorconsultation with major Shareholders.
• Dividend equivalents may accrue on the
PSP awards over the vesting period andbe paid out either as cash or as shareson vesting and in respect of the numberof shares that have vested.

• 25% of the awards will vest at thresholdperformance under each performance
condition.
• Clawback may be applied for
misstatement, error or misconduct.
All-employee• To encourage employee share
share schemes
participation.

• The Company may from time to time
• The schemes are subject to the limits set
operate tax-approved share schemes (suchby tax authorities.
as the HMRC-approved Share IncentivePlan) for which executive Directors could
be eligible.
• The SIP is open to all UK permanent staff
employed for at least six months.

Shareholding
guideline• To further align Executive Directors’interests with Shareholders.

• The Committee has established• Not applicable.
shareholding guidelines which encourage
the Executive Directors to build and retain
a holding of Company shares equivalent toa multiple of base salary, as determined by
the Committee. The guideline and current
shareholdings of the Directors are set out
in the Annual Report on Remuneration.
• Until the guideline is met in full, Executive
Directors are expected to retain or acquire
shares equivalent to the value of 50% of
the net amount realised from exercise/vesting of share awards as appropriate
after allowing for tax payable.

Non-Executive • To remunerate Chairman and
Director fees
Non-Executive Directors.

• Reviewed annually.
• For the Non-Executive Directors agreed by
the Executive Directors and Chairman.
• For the Chairman agreed by the
Non-Executive Directors.
• Determined and reviewed taking into
account time commitment, experience,
knowledge and responsibilities of the role
as well as market data for similar roles inother companies of a similar size and/or
business to Oxford Instruments.

50

Oxford Instruments plc / Report and Financial Statements 2014

• There is no prescribed maximum or
maximum annual increase.

Overview

Strategic report

Governance

Financial statements

Company information

Differences in the remuneration policy of the
Executive Directors and the general employees

Discretions retained by the Committee in operating
its incentive plans

There are no material differences in the structure of
remuneration arrangements for the Executive Directors andsenior management population, aside from quantum andparticipation levels in incentive schemes, which reflect thefact that a greater emphasis is placed on performance-related
pay for Executive Directors and the most senior individuals
in the management team. Outside the senior management
team, the Company aims to provide remuneration structures
for employees which reflect market norms.

The Committee operates the Group’s various incentive
plans according to their respective rules and in accordancewith HMRC rules where relevant. To ensure the efficientadministration of these plans, the Committee may apply
certain operational discretions. These include the following:

Choice of performance measures and approachto setting targets
The Committee selects financial and strategic measures(such as sales, profit, cash generation) for the annual
bonus that are key performance indicators for the businessover the short term. For the long term incentives theCommittee will select a combination of measures thatprovide a good focus on the outcomes of the Company
strategy together with sustainable improvements in longterm profitability.
The Committee sets appropriate and demanding targets
for variable pay in the context of the Company’s trading
environment and strategic objectives. The targets for theannual bonus plan will be set each year with reference
to the Company’s budget and business and strategic plan.
The Committee will review the performance conditions
and targets for awards under the PSP each year prior toawards being made taking account of the Company’s
internal financial planning, market forecasts and thebusiness environment (e.g. to determine whether the
TSR peer group continues to remain appropriate, whether
the range of EPS performance targets remains appropriate
and, more generally, in light of the Company’s long term
strategy and growth aspirations). Should there be a materialchange in the Company’s performance conditions (e.g.
introducing an additional performance metric) appropriate
dialogue with the Company’s major Shareholders would
take place along with a full explanation in the Annual
Report on Remuneration to support any such change.

• select the participants in the plans;• determine the timing of grants and/or payments;• determine the quantum of grants and/or payments(within the limits set out in the policy table above);• determine the extent of vesting based on theassessment of performance;• determine “good leaver” status and where relevant
extent of vesting in the case of the share-based plans;• where relevant determine the extent of vesting in the caseof share-based plans in the event of a change of control;• making the appropriate adjustments required in certain
circumstances (e.g. rights issues, corporate restructuring
events, variation of capital and special dividends); and• the annual review of weighting of performancemeasures, and setting targets for annual bonus planand discretionary share plans from year to year.
The Committee may adjust the targets and/or set different
measures and alter weightings for the annual bonus planand share-based awards only if an event occurs which causes
the Committee to reasonably consider that the performance
conditions would not without alteration achieve its original
purpose and the varied conditions are no less difficult tosatisfy than the original conditions. Any changes and therationale for those changes will be set out clearly in the
Annual Report on Remuneration in respect of the year
in which they are made.

The metrics for awards granted under this policy are set
out in the Annual Report on Remuneration.

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Remuneration Report continued

Part A: Directors’ Remuneration Policy continued
Legacy arrangements
In approving this Directors’ Remuneration Policy, authority
is given to the Company to honour any commitments enteredinto with current or former Directors (such as the paymentof a pension or the vesting or exercise of past share awards)
that have been disclosed to and approved by Shareholders
in previous remuneration reports. Details of any payments

to former Directors will be set out in the Annual Report on
Remuneration as they arise. This will include all subsisting
awards granted under the Executive Share Option Scheme(ESOS) and the Senior Executive Long Term Incentive Scheme(SELTIS) details of which are disclosed in the Annual Report
on Remuneration.

Remuneration scenarios for Executive Directors
The charts below show the level of remuneration potentially payable to Executive Directors under different performance
scenarios for the financial year 2014/15 (see notes for assumptions):£2,000,000
PSP
Annual bonus
Fixed pay

£1,705,140£1,750,000£1,500,000£1,241,640£1,250,000£831,760
28%£546,39027%£500,000£250,0000£1,140,760

28%£1,000,000£750,000

41%

100%
Minimum

44%

32%

On-target

Maximum

Chief Executive

41%

28%
£368,260

28%

27%

100%

44%

32%

On-target

Maximum

Minimum

Finance Director

Assumptions for charts above:
1.	Fixed pay comprises salary levels as at 1 July 2014, pension contribution of 14% and the value of benefits received in 2013/14.
2.	The on-target level of bonus is 75% of the maximum opportunity, i.e. 75% of salary.
3.	The on-target level of vesting under the annual PSP is taken to be 50% of the face value of the award at grant,
i.e. 75% of salary.
4.	The maximum level of bonus and vesting under the PSP is 100% of the bonus opportunity and 100% of the facevalue of the PSP award at grant, i.e. 100% and 150% of salary respectively.
5.	No share price appreciation has been assumed for the PSP awards and for simplicity SIP awards are excluded.

52

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Governance

Strategic report

Financial statements

Company information

Recruitment and promotion policy for Executive Directors
In setting total remuneration levels and in considering
quantum for each element of the package for a new
Executive Director, the Committee would take into accountthe skills and experience of the individual, the market rate
for a candidate of that experience and the importance of
securing the relevant individual.
The Company would seek to align the remuneration
package with the remuneration policy approved by
Shareholders, including the maximum plan limit for thelong term incentives and an annual bonus entitlement inline with that of the other Executive Directors. Currently,
this would facilitate annual bonus and PSP awards of no
more than 100% and 250% of base salary respectively(not including any arrangements to replace forfeiteddeferred pay). Salary would be provided at such a level
as required to attract the most appropriate candidate.
For new appointments base salary and total remuneration
may be set initially at below normal market rates on thebasis that it may be increased once expertise andperformance has been proven and sustained.
Specific variable remuneration performance targets could
be introduced for an individual where necessary for the
first year of appointment if it is appropriate to do so toreflect the individual’s responsibilities and the point in theyear in which they joined the Board.
Flexibility is retained to offer additional cash and/or
share‑based payments on appointment in respect ofdeferred remuneration or benefit arrangements forfeitedon leaving a previous employer. The Committee would
look to replicate the arrangements being forfeited as
closely as possible and in doing so, will take accountof relevant factors including the nature of the deferredremuneration, performance conditions, attributed
expected value and the time over which they would havevested or been paid. Such awards may be made under theterms of the PSP or as permitted under the Listing Rules.
For an internal Executive Director appointment, any variable
pay element awarded in respect of the prior role may beallowed to pay out according to its terms, adjusted as relevant
to take into account the appointment. In addition, anyother ongoing remuneration obligations existing prior toappointment may continue.
For external and internal appointments, the Committee
may agree that the Company will meet certain relocation,legal and any other incidental expenses as appropriate.

Executive Directors’ service contracts and policy on cessation
Details of the service contracts of the Executive Directors, available for inspection at the Company’s registered office andat the Company’s AGM, are as follows:
Jonathan Flint
Kevin Boyd

Contract dateUnexpired term of contract

21 February 2005
9 May 2006

Rolling contract
Rolling contract

Details of contractual terms and the policy on cessation of employment are summarised in the table below.
Contractual provision

Detailed terms

Notice period

12 months by the Company or by the Director.

Termination
payment

A Director’s service contract may be terminated without notice and without any further payment
or compensation, except for sums accrued up to the date of termination, in the event of grossmisconduct. If the Company terminates the employment of an Executive Director in othercircumstances, compensation is limited to base salary due for any unexpired notice period.
The Company has a right to pay 12 months’ salary in lieu of notice if it so determines.
In addition, any statutory entitlements in connection with the termination would be paid
as necessary.

Remuneration
entitlements

Pro-rata bonus may also become payable for the period of active service along with vestingfor outstanding share awards (in certain circumstances – see below).

Change of control

No Executive Director’s contract contains additional provisions in respect of a change of control.

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53

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Remuneration Report continued

Part A: Directors’ Remuneration Policy continued
Executive Directors’ service contracts and policy
on cessation continued
Any share-based entitlements granted to an Executive Director
under the Company’s share plans will be determined basedon the relevant plan rules. The default treatment for existing
awards is that any unvested awards lapse on cessation of
employment. However, in certain prescribed circumstances,such as death, injury, ill health, disability, retirement orother circumstances at the discretion of the Committee,“good leaver” status may be applied. For good leavers,
under the ESOS awards will vest at cessation to theextent the performance condition is satisfied, but with
the Committee having discretion to vest on the normal
vesting date if appropriate and to waive the performance
condition. In the case of the SELTIS, awards continue on
their normal terms.
Under the 2014 PSP, awards to good leavers will vest on
the normal vesting date, subject to the satisfaction of therelevant performance conditions at that time and be scaled
back to reflect the proportion of the performance period
actually served. The Committee has discretion in exceptional
circumstances to disapply time pro-rating and/or to measureperformance to and vest awards at the date of cessation.
Vesting at cessation would be the default position wherea participant dies.
In the event of a takeover:• under the ESOS awards vest at that time to the extent theperformance condition is satisfied (with no scaling back);• under the SELTIS awards continue on their normal
terms; and• under the new 2014 PSP, awards vest to the extent theperformance condition is satisfied and are scaled backto reflect the actual period of service with the Committee
having the discretion in exceptional circumstances not
to scale back.

Non-Executive Directors
For the appointment of a new Chairman or Non-Executive
Director, the fee arrangement would be in accordance withthe approved remuneration policy in place at the time.
Non-Executive Directors do not have service contracts but
are appointed under letters of appointment for an initialperiod of three years with subsequent reviews. With theintroduction in the UK Corporate Governance Code ofannual re-election of all Directors, Non-Executive Director
appointments are now renewed for periods of one year.
Their appointment can be terminated without notice andwith no compensation payable on termination, other than
accrued fees and expenses.
ChairmanUnder an arrangement between the Company andImperialise Limited, Nigel Keen is retained to act as
Chairman of the Company and Chairman of the Trustee
to the Oxford Instruments Pension Scheme via Imperialise
Limited. His current term of appointment commenced on
25 February 2014 and is for one year. This arrangement
can be terminated by either party at any time by the givingof six months’ notice.
Nigel Keen
Jennifer Allerton
Mike Brady1
Thomas Geitner
Jock Lennox

Notice period

25 February 2014
10 June 2013
6 March 201315 January 2013
6 March 2013

Six months
None
None
None
None

1 Mike Brady will retire from the Board on 10 September 2014.

External appointments
The Board encourages Executive Directors to accept
appropriate external non-executive appointments provided
the aggregate commitment is compatible with their duties
as Executive Directors. The Executive Director concerned
may retain fees paid for these services, which will be
subject to approval by the Board.

54

Date of last appointment

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

PART B: Annual Report on Remuneration
The financial information in this part of the report has been audited where indicated.
The Remuneration Committee (unaudited)
The Remuneration Committee (the “Committee”) is
responsible for recommending to the Board the remuneration
packages for Executive Directors and the bonus and share
incentive strategy for the Group’s executive management.
The Chairman and the Executive Directors are responsiblefor determining the remuneration of the Non-Executive
Directors, and the Non-Executive Directors are responsiblefor determining the remuneration of the Chairman.
The role of the Committee includes:• considering and determining the remuneration policy
for the Executive Directors and executive management;• within this agreed policy, considering and determining
the total remuneration packages of each Executive
Director of the Company;• approving the design and performance targets for all
performance-related plans for Executives as well as theoverall total annual payments made under such plans;• reviewing and noting remuneration trends across theGroup; and• determining the policy for pension arrangements,
service agreements and termination payments to
Executive Directors.
The members of the Committee are appointed by the
Board and during the year comprised all the Independent
Non-Executive Directors: Thomas Geitner, Jennifer Allerton,
Jock Lennox, Mike Hughes; and the Chairman of the Board,
Nigel Keen. As of 10 September 2013, Thomas Geitner took
over Chairmanship of the Committee from Nigel Keen andMike Hughes stepped down from the Board and therefore
the Committee. Jennifer Allerton joined the Board and theCommittee on 11 June 2013.

The Committee acts within its agreed written termsof reference (which are published on the company’s
website: www.oxford-instruments.com/investors)
and complies with the provisions of the Governance
Code regarding best practice on the design ofperformance-related remuneration.
The performance of the Committee is reviewed at least
once a year as part of the wider Board evaluation process.
During the year the Committee fulfilled its duties, as
laid down in the Committee’s terms of reference and,as described above, considered the future remuneration
requirements of the Executive Directors to carry Oxford
Instruments through its next period of growth.
New Bridge Street (a trading name of Aon Hewitt Limited
and part of Aon plc) (“NBS”) is the Committee’s independent
remuneration consultants. NBS was appointed by theCommittee to provide advice on all aspects of Executive
remuneration as required by the Committee.
NBS is a signatory to the Remuneration Consultants’ Codeof Conduct and has confirmed to the Committee that it
adheres to the Code. During the year NBS met with theCommittee and the Committee Chairman to discuss
remuneration matters which are of particular relevanceto the Company and how best it can work with theCompany to meet the Committee’s needs.
Fees are charged predominately on a “time spent” basis.
The total fees paid to NBS for the advice provided to theCommittee during the year was £150,659.
No other services are provided to the Company by the Aon plc
group and the Committee is satisfied that the advice it hasreceived from NBS is objective and independent.

The Chief Executive, the Group HR Director and otherexecutives are invited to attend Committee meetings as
deemed appropriate. For example the Chief Executive isable to make a significant contribution when considering
the performance of other Executive Directors and on
significant Group-wide changes in salary structure andterms and conditions affecting other employees at senior
executive level. However, no Executive Director is present
when the Committee is determining his or her remuneration.

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55

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Remuneration Report continued

PART B: Annual Report on Remuneration continued
Directors’ remuneration (audited)
The remuneration paid to the Directors during the year under review and the previous year is summarised in thetables below:
Salaryand fees3

Benefits

4

Pension5

Annualbonus 6Long term
incentive
awards7

Other 8

Total

2014
2013

423
403

18
18

59
56

68
290

891
1,578

1
3

1,460
2,348

Kevin Boyd

2014
2013

284
273

16
16

40
38

45
196

614
1,078

1
3

1,000
1,604

Charles Holroyd2

2014
2013

93
208

7
15

13
29

18
109

—
881

1
3

132
1,245

Total

2014
2013

800
884

41
49

112
123

131
595

1,505
3,537

3
9

2,592
5,197

£’000

Executive
Jonathan Flint1

1 In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £300,000. Jonathan Flint bought a further
proportion of the house owned by the Company and Jonathan Flint by paying £99,900 to the Company in each of the years to 31 March 2012, 31 March 2013
and 31 March 2014. These proportions were recalculated based on the original purchase price. Independent valuations have established that the price paid
by Jonathan Flint was in excess of the market value of the house at the time of each payment. Jonathan Flint lives in the house and paid a full commercial
rent amounting to £757 (2013: £4,640) during the financial year for use of the Company asset.
2 Charles Holroyd stepped down from the Board on 10 September 2013. His remuneration is in respect of the period 1 April 2013 to 10 September 2013.
LTI values are not included in the table above but are referred to on page 62 under Payments to past Directors.
3 Under the terms of a salary sacrifice arrangement, UK employees are able to elect to cease making personal contributions into relevant pension schemes. Each
employee’s salary is reduced by the amount of their pension contributions and the Company pays the same amount directly to the pension schemes. Accordingly,
the annual salaries of Jonathan Flint, Kevin Boyd and Charles Holroyd were reduced to £422,500, 274,247 and £78,666 (pro-rated) respectively (2013: 402,242,£260,793 and £187,238 respectively). For reasons of clarity, the salaries shown in the table above for these Directors are the amount they would have been
paid had they not made such salary sacrifices. These “notional” base salaries are used to calculate salary linked remuneration such as bonus and some benefits.
4 “Benefits” comprise provision of a car or car allowance, health insurance and life assurance.
5 Each Executive Director receives a contribution to a money purchase pension scheme worth 14% of salary. Where the contractual pension contribution exceeds
the annual allowance, any balancing payment is made by the Company in a cash allowance.
6 “Annual bonus” represents cash bonus payments.
7 “Long term incentive awards” are those awards where the vesting is determined by performance periods ending in the year under report under both the
SELTIS and ESOS and therefore calculates the value of the SELTIS option granted in January 2011 and the ESOS option granted in December 2011. Further
details of how these sums are arrived at are set out below. The prior year has been restated using the share price on the date of vesting for the ESOS options.
Charles Holroyd ceased to be a Director on 10 September 2013 at which point neither of these long term incentive awards had vested.
8 The Company operates a Share Incentive Plan (SIP) which is open to all UK permanent staff employed for at least six months. “Other” includes the value ofmatching SIP shares attributable to the year. The Executive Directors all participate in the SIP to the maximum extent permitted by HMRC. The Company offers
a 1:5 match for partnership shares purchased by employees.

56

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Governance

Strategic report

Financial statements

Company information

Directors’ remuneration (audited) continued
PensionAnnualbonus

Long term
incentive
awards

Total

—
—

—
—

—
—

—
—

183
183

45
45

—
—

—
—

—
—

—
—

45
45

2014
2013

20
45

—
—

—
—

—
—

—
—

20
45

Jock Lennox

2014
2013

45
45

—
—

—
—

—
—

—
—

45
45

Thomas Geitner3

2014
2013

43
8

—
—

—
—

—
—

—
—

43
8

Jennifer Allerton3

2014
2013

32
—

—
—

—
—

—
—

—
—

32
—

Bernard Taylor2

2014
2013

—
20

—
—

—
—

—
—

—
—

—
20

Total

2014
2013

368
346

—
—

—
—

—
—

—
—

368
346

Salaryand fees

Benefits

2014
2013

183
183

Mike Brady

2014
2013

Mike Hughes2£’000

Non-Executive
Nigel Keen1

1 Under an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Company and Chairman of the Trustee
to the Oxford Instruments Pension Scheme and he must account to Imperialise Limited for his services. Imperialise Limited is paid fees for Nigel Keen’s services
together with a sum equivalent to the employer’s national insurance contributions on these fees as it is responsible for the cost of national insurance on payments
to Nigel Keen, whereas national insurance contributions in respect of the other Non-Executive Directors are made direct to the UK Inland Revenue. For the year
to 31 March 2014, Nigel Keen’s fees as Chairman were £161,000 (2013: £161,000) and as Chairman to the Trustee were £25,000 (2013: £25,000) for his
services for which he must account to Imperialise Limited. In addition, Imperialise Limited has been paid a sum equivalent to the national insurance on boththese fees of £25,668.
2 Mike Hughes and Bernard Taylor retired from the Board on 10 September 2013 and 9 September 2012 respectively.
3 Thomas Geitner and Jennifer Allerton were appointed Non-Executive Directors on 15 January 2013 and 11 June 2013 respectively.

External appointments (unaudited)
The Board encourages Executive Directors to accept
appropriate external commercial non-executive appointments
provided the aggregate commitment is compatible with
their duties as Executive Directors. The Executive Director
concerned may retain fees paid for these services, which
will be subject to approval by the Board.
Jonathan Flint was appointed a Non-Executive Director of
Cobham plc on 1 May 2013 and received fees of £52,375
during the year.

External appointments
Jonathan Flint

Kevin Boyd

Cobham plc

Emis Group plc,
London Stock Exchange
Primary Markets Group

Kevin Boyd was a Non-Executive Director of Guidance Ltd
until 26 March 2013 and a member of the London Stock
Exchange’s Primary Markets Group. During the year hereceived fees of £8,900 and shares with a value at dateof acquisition of £9,814 (2013: £15,567) for his role atthe former. Since the year end, Kevin was appointed a
Non-Executive Director of EMIS Group plc with effectfrom 9 May 2014.

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Remuneration Report continued

PART B: Annual Report on Remuneration continued
Details of variable pay earned in year (audited)Bonus
For the year ended 31 March 2014 the Committee set stretching performance targets for the annual bonus which wereclearly linked to the strategy and financial performance of the Group. In the outturn, the growth rates for the Group
were low and as a result the financial targets for the annual bonus were not met and no payment was payable against
these metrics. The Committee awarded 15% of salary to the CEO and GFD (out of a total 15% of salary) and 18.5%
to Charles Holroyd (the GBDD) (out of a total 20% of salary) in respect of achievement against the strategic targets andreflecting the importance of executing the strategic targets and laying the foundations for future growth of the business.
% of salary

MeasureAdjusted PBTOrganic sales
Cash generation
Strategic objectives

Performance required

ThresholdOn-target

Maximum

CEO/GFD

GBDD CEO/GFD

GBDD CEO/GFD

GBDD

9%
6%
0%
0%

15%
10%
15%
20%

55%
10%
15%
20%

12%
12%
0%
0%

20%
20%
20%
15%

45%
20%
20%
15%

Threshold On-target Maximum
£m
£m
£m

50
350
—

52
369
16.2

54
—
—

Actual£m

Payout %of maximum

44.6
0%
345.2
0%
8.6
0%
See below 15% and 18.5%

The Committee set strategic objectives for each of the Executive Directors at the beginning of the year which included
succession planning, acquisitions and the development of the Company’s strategic plan. Given the development of the
new five year plan and the successful acquisition of Andor Technology plc, the Committee determined that the Executives’performance against these objectives merited the payment of 15% of salary for the CEO and GFD and 18.5% of salary
for Charles Holroyd.
The on-target and maximum bonus potentials for the Executive Directors as well as the amount actually payable for theyear ended 31 March 2014 are set out below.
On-targetbonus(% of salary)

Maximum
bonus(% of salary)

Actual bonus
payable for2013/14(% of salary1)

Actual bonus
payable for2013/14(£’000)

75%
75%
60%

100%
100%
100%

15%
15%
18.5%

£67,500£45,000£17,6962

Jonathan Flint
Kevin BoydCharles Holroyd
1 Bonus is calculated on salary as at 31 March 2014.
2 Pro-rated for service as an Executive Director until 10 September 2013.

Long Term Incentive Plans (audited)
The performance conditions and the resulting payout in respect of the long term incentive awards that will vest based ona performance period ending in the year under report were as follows:
Executive Share Option Scheme (ESOS)
The performance conditions which applied to the 14 December 2011 award (vesting on 14 December 2014), for the
performance period which came to end in the year under review and actual performance achieved against these wereas follows:
Performance level

EPS growth over CPI performance required% of award that will vest

Below threshold
Threshold
Between threshold and maximum
Maximum

Less than 5% per annum over three years
5% per annum over three years
5% to 10% per annum over three years
10% per annum and above over three years

0%
33.3%
33.3%–100%
100%

Actual achieved over the period

CPI + 15% per annum

100%

58

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Long Term Incentive Plans (audited) continued
Executive Share Option Scheme (ESOS) continued
The total percentage of each Executive’s option vesting (subject to continued service to 14 December 2014) is set out below:
Total number
shares subject
to option

Percentage
of award
vesting

Jonathan Flint

70,700100%

Kevin Boyd

48,700100%

Exercise
price

Value ofshares thatwill vest(£’000)170,700

£9.90

£392

48,700

£9.90

£270

Number ofshares thatwill vest

1 Value determined using a share price of £15.45, being the average for the three months ending on 31 March 2014 less the exercise price. Charles Holroyd,who stepped down from the Board on 10 September 2013, also holds options from this grant over 20,200 shares.

Senior Executive Long Term Incentive Scheme (SELTIS)
The performance conditions which applied to the 7 January 2011 award (vesting on 7 January 2014), for the performance
period which came to an end in the year under review and actual performance achieved against these were as follows:
TSR relative to FTSE Small Cap (excluding certain sectors)
Performance level

Performance required% of total award vesting

Below threshold
Threshold
Between threshold and stretch
Stretch or above

Below medianMedianBetween median and upper quartile
Upper quartile

0%33%
33%–100%
100%

Actual achieved

Upper quartile TSR = 123%
Oxford Instruments’ TSR = 153%

100%

1 Sectors excluded are food and drug retailers, general retailers, banks, non-life insurance, life insurance, real estate, general financial, equity investment instruments andnon-equity investment instruments.

The total percentage of shares that vested is 100%. This resulted in the following awards vesting to the Executive Directors:
Total
number shares
granted

Percentage
of award
vesting

Number ofshares vesting

Value ofshares vesting(£’000)1

Jonathan Flint

27,500100%

27,500£498

Kevin Boyd

19,000100%

19,000£344

1 Value determined using a share price of £18.11 being the mid-market closing price on the day of vesting. Charles Holroyd, who stepped down from the Board
on 10 September 2013, also holds options from this grant over 15,500 shares.

Awards made in the year and outstanding share incentive awards (audited)
Annual awards under the ESOS and SELTIS are usually made around early December following the Company’s half yearly
announcement. The 2013/14 awards were not made at the usual time because the Company was in a close period dueto the acquisition of Andor Technology. The Board has determined that these awards should be made in the 42 day window
following the announcement of preliminary results in June 2014. As such there were no ESOS or SELTIS awards made in
the year ending 31 March 2014.

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Remuneration Report continued

PART B: Annual Report on Remuneration continued
Awards made in the year and outstanding share incentive awards (audited) continued
As at the 31 March 2014, the outstanding options3 for Jonathan Flint and Kevin Boyd under the ESOS and SELTIS schemes
were as follows:
Movements during the year
Name

Jonathan Flint

2

Kevin Boyd

Scheme

March
2014

ESOS
ESOS
ESOS
SELTISSELTISSELTIS

60,50070,700—15,10017,600
—

ESOS
ESOS
ESOS
ESOS
SELTISSELTISSELTIS

40,75048,7002,127—
10,15012,100—Granted1

Exercised

March
2013

Exercise
price

Share priceon dateof grant

Date of
grant

Date forearliest
exercise

Date forlatestexercise

60,50070,70055,00015,10017,60027,500£13.88
£9.90
£7.05
Nil
Nil
Nil

£14.08£9.87£7.02£14.08£9.87£7.02

19/12/12
14/12/11
07/01/11
19/12/12
14/12/11
07/01/11

19/12/15
14/12/14
07/01/14
19/12/15
14/12/14
07/01/14

18/12/22
13/12/21
06/01/21
18/12/19
13/12/18
06/01/18

40,75048,70038,0007,371
10,15012,10019,000£13.88£9.90£7.05£2.035
Nil
Nil
Nil£14.08
£9.87
£7.02
£2.03
£14.08£9.87£7.02

19/12/12
14/12/11
07/01/11
17/12/09
19/12/12
14/12/11
07/01/11

19/12/15
14/12/14
07/01/14
17/12/12
19/12/15
14/12/14
07/01/14

18/12/22
13/12/21
06/01/21
16/12/19
18/12/19
13/12/18
06/01/18

Lapsed55,00027,50035,873
7,371

19,0001 During the year Kevin Boyd exercised ESOS options on 11 December 2013 when the mid-market closing price on the date of exercise was £17.16 andJonathan Flint and Kevin Boyd exercised SELTIS and ESOS options on 8 January 2014 when the mid-market closing price on the date of exercise was£18.14. The gain yielded on the exercise of options during the year for Jonathan Flint and Kevin Boyd was £1,108,800 and £853,978 respectively.
2 Jonathan Flint’s wife, an employee of the Company, exercised ESOS options on 8 January 2014 when the mid-market closing price on the date of exercise
was £18.14. The gain yielded on the exercise of options was £277,250. She holds as at 31 March 2014 ESOS options over 33,250 shares with exercise prices
ranging from £9.90 to £13.88.
3 Charles Holroyd, who ceased to be a Director on 10 September 2013, holds ESOS options over 66,300 shares and SELTIS options over 33,150 shares.

The market price of the shares at 31 March 2014 was £12.67 (2013: £16.55) and the range during the year was £12.09–£18.14(2013: £10.81–£17.78).
Performance conditions outstanding for awards are described below:
Date of award

ESOS

SELTIS

7 January 2011

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

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

14 December 2011

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

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

19 December 2012

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

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

1 For employees who are not Executive Directors, options become exercisable in full for achieving the threshold level.
2 Sectors excluded Food & Drug Retailers, General Retailers, Banks, Non-life Insurance, Life Insurance, Real Estate, General Financial, Equity Investment Instruments
and Non-equity Investment Instruments Sectors.
3 Sectors excluded banks, equity investment instruments, finance services, life insurance, non-life insurance, real estate investment trusts and real estate
investment services.

60

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Governance

Strategic report

Financial statements

Company information

Achievement of performance conditions (unaudited)
The calculation of the TSR performance conditions are independently measured. EPS performance conditions
are measured using the audited accounts of the Company. All performance conditions are then verified by the
Remuneration Committee.
Dilution limits (unaudited)
The ESOS and SELTIS provide that overall dilution through the issuance of new shares for employee share schemes should
not exceed an amount equivalent to 10% of the Company’s issued share capital over a ten year period. Awards madeunder the SELTIS scheme prior to 2009 and shares required by the SIP are satisfied by market purchased shares. The SIP
scheme only uses market purchased shares.
The Committee monitors the position prior to the making of any award under these share option schemes to ensure that
the Company remains within this limit. As at the date of this Report, the Company’s headroom position remains within
the 10% limit.
Shareholding guidelines (audited)
The Committee has established shareholding guidelines which encourage the Executive Directors to build and retain ashareholding equivalent in value to 100% of basic salary. Until the guideline is met in full whenever ESOS or SELTIS options
are exercised Executive Directors are expected to retain or purchase shares equivalent to the value of 50% of the net
amount realised from exercise of the options after allowing for tax payable.
Executive Directors’ shareholdings as at 31 March 2014 are shown in the table below.

Jonathan Flint

2

Kevin Boyd

Legally owned

Percentage ofsalary held inshares under shareholding guideline1

Guideline
met as at
31 March 2014

LTIP options
vested but
unexercised

Subject toperformance
conditions under
the LTIP unvested

201,130

566%

91,611

387%

Yes

0

163,900

Yes

2,127

111,700

1 Shares valued using the market price of the shares on 31 March 2014: £12.67.
2 In addition, Jonathan Flint’s wife holds 4,673 Oxford Instruments shares.

Pension plans
For UK employees and Executive Directors, the Company operates the Oxford Instruments Group Personal Pension Plan(a defined contribution scheme). It also operates the Oxford Instruments Defined Benefit Pension Scheme which wasclosed to new employees in April 2001 and closed to new accruals at the end of July 2010.
Oxford Instruments Defined Benefit Pension Scheme (unaudited)
For UK based Executive Directors and employees employed prior to April 2001, a contributory pension, depending on
length of service, of up to two-thirds of pensionable salary is provided on retirement through the Oxford Instruments
Pension Scheme (“Defined Benefit Scheme”). This was a contracted-out contributory pension scheme and it provides
benefits at or near retirement based on earnings and is funded through a separate trust. Early retirement is possible
on a reduced pension from age 55 with the consent of the Company. Pensions in payment are guaranteed to increaseby a level of inflation up to a maximum of 3% per year on pension earned before 1 April 1997 and a maximum of
5% per year thereafter, subject to any applicable statutory requirements. In the case of death before retirement a
spouse’s pension of one half of the member’s pension at death is payable together with a refund of the member’s
contributions. This Scheme was closed to future accrual on 31 July 2010.
Oxford Instruments Group Personal Pension Plan (unaudited)
Employees and Executive Directors are offered membership of the Oxford Instruments Group Personal Pension Plan(“GPP Plan”). The Company contribution rate and employee contribution rate varies between grades and whether theindividual had previously been in the Defined Benefit Scheme. The Company contribution ranges between 2% and 14%
of base salary.

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61

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Remuneration Report continued

PART B: Annual Report on Remuneration continued
Executive Director Pension Arrangements (audited)
Under the terms of their service contracts Executive Directors can ask the Company to contribute to a pension plan of theirchoice. The Company contributes a maximum of 14% of base salary if matched by a contribution of 10% by the Director
or, if lower, a contribution by the Director which brings the total pension contribution to the annual allowance (the maximum
tax relieved pension contribution allowable per tax year). Only base salary is pensionable and contributions are not includedin the calculation of bonus and share award entitlements. Where the Company’s pension contribution exceeds the annual
allowance a balancing payment is paid by the Company to the Director which is taxed as income.
During the year the Company contributed £39,999 (2013: £49,472) into a personal defined contribution pension planin respect of Jonathan Flint, £39,818 (2013: £38,167) into a personal defined contribution plan in respect of Kevin Boydand for the period to 10 September 2013, £13,020 (2013: £29,050) into the GPP Plan in respect of Charles Holroyd.
Charles Holroyd is a deferred member of the Defined Benefit Scheme and is no longer accruing benefits in the Scheme.
In accordance with the rules of the Scheme his deferred benefits are subject to increases in line with statutory revaluation.
The transfer value of his accrued benefits at 31 March 2014 was £473,471 (2013: £536,526). His normal retirement
date is 12 January 2021.
Payments for loss of office (audited)
Charles Holroyd stepped down from the Board following the AGM on 10 September 2013 but continues as an employeeof the Group. No payments were made for loss of office.
On the same date, having served nine years on the Board, Professor Mike Hughes stepped down from the Board.
Professor Hughes received fees to 10 September 2013 and no payment was made for loss of office.
Payments to past Directors (audited)
Charles Holroyd continues to work within the business and has received no payments in respect of loss of office. He received
total remuneration of £159,373 in respect of his employment with the Company from the date he stepped down fromthe Board (10 September 2013) to the year ended 31 March 2014. This comprised a salary of £116,667, benefits of£9,000 and pension contribution of £11,667. He also received an annual bonus of £21,931 in respect of the period
10 September 2013 to 31 March 2014. Consistent with the current Executive Directors, under the SELTIS, 15,500 shares
vested on 7 January 2014 with a value of £280,705 and an option over 20,200 shares will vest on 14 December 2014
(subject to continued service to that date) under the ESOS with an estimated value of £112,110, based on the three monthshare price to 31 March 2014. As at the 31 March 2014, his outstanding options under the ESOS and SELTIS schemes
were as follows:

Charles Holroyd

At 31 March
2014

Exercise priceDate of
grant

Date for earliest
exercise

Date for latest
exercise

ESOS
ESOS
ESOS
SELTIS

15,10020,20031,0007,550£13.88
£9.90
£7.05
Nil

19/12/12
14/12/11
07/01/11
19/12/12

19/12/15
14/12/14
07/01/14
19/12/15

18/12/22
13/12/21
06/01/21
18/12/19

SELTISSELTIS

10,10015,500Nil
Nil

14/12/11
07/01/11

14/12/14
07/01/14

13/12/18
06/01/18

Mr Holroyd remains an employee of the Group and will continue to be remunerated as such going forwards.

62

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Governance

Strategic report

Financial statements

Company information

Performance graph and CEO’s remuneration (unaudited)
The graph below shows for the five years ended 31 March 2014 the Total Shareholder Return (TSR) on a holding of
the Company’s ordinary shares compared with a hypothetical holding of shares made up of shares of the same kind andnumber as those by reference to which the FTSE 250, FTSE Techmark and FTSE Electronic and Electrical Equipment indices
are calculated. These indices have been chosen as they are considered to be the most appropriate comparator groups for
the Company. TSR has been calculated by reference to the relevant share price for each constituent company assuming
dividends are reinvested.
This graph shows the value, by 31 March 2014, of £100 invested in Oxford Instruments plc on 31 March 2009 comparedwith the value of £100 invested in the FTSE Techmark All.
1,700
1,600

Oxford Instruments plc
FTSE Techmark
FTSE E&EE
FTSE 250

1,500
1,400
1,300
1,200

Source: Thomson Reuters

1,100
Value (£)

1,000
900
800
700
600
500
400
300
200
100
0
31 March 2009

31 March 2010

31 March 2011

31 March 2012

31 March 2013

31 March 2014

The total remuneration of the CEO over the last five years is shown in the table below. The annual bonus payout and LTIP
vesting level as a percentage of the maximum opportunity is also shown.
Year ending 31 March

Total remuneration (£’000)
Annual bonus outcome (%)
ESOS vesting (%)
SELTIS vesting (%)

2010

2011

2012

2013

2014

939
100%
100%
50%

2,596
100%
100%
50%

3,464
100%
100%
100%

2,348
69.1%
100%
100%

1,460
15%
100%
100%

Percentage change in the remuneration of the Chief Executive Officer (unaudited)
The table below shows the percentage change in each of the CEO’s salary, taxable benefits and annual bonus earned
between 2012/13 and 2013/14, compared to that for the average UK based employee of the Group (on a per capita basis).
Jonathan Flint, CEO

Average employee1£’000

2013/142012/13% change

2013/142012 /13% change

SalaryBenefits
Bonus2

422.5
18.3
67.5

402.5
18.3
290.2

5.0%
0%
-76.7%

37.8
1.7
1.0

36.5
1.6
2.6

3.6%
6.3%
-45.3%

1 Average employee includes all UK employees in service on 31 March 2012 and 31 March 2014 but excludes those who were on maternity or long term sick leave.
2 The value of the average employee bonus for the year ended 31 March 2014 (to be paid at the end of June 2014) was not known at the time the Report and
Financial Statements were approved and has been subsequently included.

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Remuneration Report continued

PART B: Annual Report on Remuneration continued
Relative importance of the spend on pay
The following table shows the Group’s employee costs relative to dividends and share buybacks:

Employee costs (£m)
Dividends (£m)
Share buybacks (£m)

Year ended
31 March
2013

Year ended
31 March2014% change

91.6
5.6
0.0

98.5
6.4
0.0

8%
14%
0%

Statement of Shareholder voting (unaudited)
At last year’s AGM, the Directors’ Remuneration Report received the following votes from Shareholders:
Remuneration Report
Total numberof votes% ofvotes castFor
Against42,350,613
1,538,716

96.49
3.51

Total

43,889,329

100

Abstentions

831,621

How the policy will be applied in 2014/15 (unaudited)
Base salaries
As reported last year, following a consultation with major Shareholders in 2012, it was agreed that the Executive Directors
would receive the second part of a two-stage salary increase as of 1 July 2013. The Executive Directors asked for the second
part of the salary increase to be deferred to 1 March 2014. Therefore with effect from 1 March 2014 the CEO’s salary
was increased from £420,000 to £450,000 (7.1%) and the GFD’s salary was increased from £283,000 to £300,000 (6%).
In line with the general workforce, the Executive Directors will receive salary increases of 3% for 2014/15 effective from
1 July 2014. The CEO’s salary as a result of the increase will be £463,500 and the GFD’s £309,000.
Benefits and pension
These will be made in accordance with the approved policy.
Annual bonus
The maximum opportunity under the annual bonus plan for 2014/15 will be 100% of base salary.
A combination of financial (85%) and non-financial strategic (15%) metrics will be used to determine the level of payment
under the annual bonus and as detailed in the table below:
Weighting as a % of opportunity
MeasureOrganic sales (£m)
Profit (£m)
Cash generation (£m)
Strategic objectives

CEO

GFD

20%
45%
20%
15%

20%
45%
20%
15%

The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include
items which the Committee considers commercially sensitive. Retrospective disclosure of the performance against themwill be made in next year’s Annual Report on Remuneration.

64

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

How the policy will be applied in 2014/15 (unaudited) continued
Long term incentives in respect of the 2014/15 financial year
As detailed in the Directors’ Remuneration Policy Report a new Performance Share Plan (PSP) will be put to Shareholders
for approval at the Annual General Meeting to be held on 9 September 2014.
Subject to Shareholder approval, the Committee will make the 2014/15 annual awards under the new PSP following theAGM. These awards will be over shares with a market value at grant of 150% of salary for the CEO and GFD. Vesting will
be subject to the performance condition as set out below, to be achieved over three financial years commencing with the
2014/15 financial year:
Half of the award

Half of the award

EPS growth – 7% p.a. (25% vesting) to 12% p.a.
(100% vesting)

TSR v FTSE 250 Index (excluding financial companies) –median (25% vesting) to upper quartile (100% vesting)Long term incentives in respect of the 2013/14 financial year
As explained on page 59 the Board was unable to make awards in 2013/14 under the existing ESOS and SELTIS plans
because the Company was in a close period due to its acquisition of Andor Technology. These 2013/14 awards will bemade during the 42 day window following the announcement of the Company’s preliminary results in June 2014.
The levels of awards will be the same as for 2012/13 being 200% of salary under the ESOS and 50% of salary under
the SELTIS. The number of shares subject to these awards will be determined using the salaries of the CEO and GFD as
at 31 December 2013 and using the average share price for the month of December 2013 replicating as far as possible
the quantum and structure of the awards had they been made at the usual time. The performance conditions for theseawards are as set out below. The performance period for these awards will be the three year period commencing on
1 April 2013 reflecting the fact that these awards relate to the 2013/14 financial year.
ESOS

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

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

Non-Executive Directors’ fees
Board Chairman
Additional fee Deputy Chairman3
Basic fee
Additional fee for Senior Independent Director3
Additional fee for Committee Chairman3

2014/15

2013/14% increase1£161,000£5,000£44,000£5,000£7,500£161,000£5,000£40,000£5,000£5,000

0%
0%
10%
0%
50%

1 Fees for Non-Executive Directors were last increased on 1 April 2012.
2 The increase in fees shown for 2014/2015 is effective 1 July 2014.
3 Only one additional fee is paid to any Non-Executive Director.

ApprovalThis report was adopted by the Committee at a meeting on 3 June 2014 and has been approved subsequently by
the Board for submission to Shareholders at the Annual General Meeting to be held on 10 September 2014.

Thomas Geitner
Chairman of the Remuneration Committee
10 June 2014

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Directors’ Responsibilities
in relation to the Report and Financial Statements

The Directors are responsible for preparing the Report and the Group and Parent Company Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law they are
required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare
the Parent Company Financial Statements in accordance with UK Accounting Standards.
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of thestate of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company
Financial Statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;• for the Parent Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Parent Company Financial Statements; and• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company willcontinue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its Financial
Statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them tosafeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report andCorporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:• the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;• the Strategic Report, included in this annual financial report includes a fair review of the development and performance of the business and theposition of the Company and Group taken as a whole, together with a description of the principal risks and uncertainties that they face; and• the Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and provides the information necessary for
Shareholders to assess the company’s performance, business model and strategy.
Signed on behalf of the Board

Jonathan Flint
Chief Executive
10 June 2014

66

Kevin Boyd
Group Finance Director

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Independent Auditor’s Reportto the Members of Oxford Instruments plc only

Opinions and conclusions arising from our audit
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of Oxford Instruments plc for the year ended 31 March 2014 set out on pages 70 to 122. In our opinion:• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March 2014 and of
the Group’s profit for the year then ended;• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by theEuropean Union;• the parent company financial statements have been properly prepared in accordance with UK Accounting Standards; and• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Groupfinancial statements, Article 4 of the IAS Regulation.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks of material misstatement that had the greatest effect on our audit wereas follows:
Revenue recognition in the Nanotechnology Tools segment (Revenue: £180.5m, Adjusted operating profit: £21.2m)
Refer to page 41 (Audit committee report), page 70 (accounting policy) and pages 85 to 114 (financial disclosures)
Risk – There is a risk that revenue is recognised on sales of individual products produced by the Group’s Nanotechnology Tools segment before
the significant risks and rewards of ownership have passed. This is because these products require considerable technical expertise to manufacture,they can be of individually high value, and customer specifications vary. As such there is a risk that particular terms of sale may not be met and,as a result, revenue may be recognised in the incorrect period. Consequently this is one of the key areas our audit is focused on.
Our response – Our audit procedures in this area included, among others, assessing the effectiveness of internal controls and policies regarding therecognition of revenue such as matching a sample of sales invoices recognised to sales orders and dispatch notes. We also tested, on a sample basis,
whether specific revenue transactions around the year end had been recognised in the appropriate period on the basis of the terms of sale withinsales contracts or orders with reference to the Group’s accounting policies. We considered whether a sample of credit notes issued after the year end
should reduce revenue in the period and challenged those that were not recorded by obtaining evidence and rationale for significant reversals.
We also assessed, and discussed with business unit management, the ageing and post year end realisation of accrued income, customer deposits
and installation balances with respect to the agreed terms of sale, any of which may indicate the associated revenue has been recognised toosoon or too late. In addition we assessed whether there was any evidence of management bias by forming an expectation of the current year
revenue profile, with reference to historical trends, and comparing to actual. We also considered the adequacy of the Group’s disclosures inrespect of revenue and the related estimates and judgements in the financial statements (see section (e) of Accounting Policies).
Recoverability of acquired intangible assets (£232.9m)
Refer to page 41 (Audit committee report), page 70 (accounting policy) and pages 85 to 114 (financial disclosures)
Risk – The Group balance sheet includes a significant amount of goodwill and other acquired intangible assets that have arisen as a result of
acquisitions, both in the current year and historically. There is a risk that below forecast performance of the business, or the cash generating unit,
to which the assets are allocated will result in impairment. This could be due to weaker than forecast demand, product obsolescence, or otherfactors, and is particularly the case in the current year in respect of Omicron Nanoscience, which is carried at the directors’ estimate of recoverable
amount following the recognition of an impairment to goodwill of £0.4m and an impairment to other intangibles of £2.2m. Furthermore, there isinherent uncertainty and complexity involved in estimating future cash flows, growth rates and discount rates that are the basis for the assessmentof recoverability and, as such, this is one of the key judgement areas our audit is focused on.
Our response – In this area our audit procedures included, among others, performing our own assessments of the key estimates and assumptions
used to estimate recoverable amount such as forecast cash flows, long term growth rates and the discount rate applied with reference to externallyand internally derived data including, but not limited to, industry growth rates, historical performance of similar lines of business and market
interest rates. We compared the sum of the discounted cash flows to the value derived from the Group’s market capitalisation to assess thereasonableness of those cash flows. We recalculated and assessed the impairment applied to assets in respect of Omicon Nanoscience. We also
performed sensitivity analysis in relation to the key assumptions and considered whether the Group’s disclosures regarding the valuation of
goodwill and intangible assets appropriately reflected the sensitivity, headroom and assumptions made in preparing the valuations.

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Independent Auditor’s Report continued
to the Members of Oxford Instruments plc only

Opinions and conclusions arising from our audit continued
2 Our assessment of risks of material misstatement continued
Valuation of acquired intangible assets (£172.6m)
Refer to page 41 (Audit committee report), page 70 (accounting policy) and pages 85 to 114 (financial disclosures)
Risk – During the year the Group completed the acquisition of Andor Technology plc and two smaller companies. For each acquisition theconsideration was allocated to the identifiable intangible assets, tangible assets, liabilities and contingent liabilities with the positive balanceremaining being recognised as goodwill. The identification and valuation of acquired intangible assets involved estimating future cash flows,
growth and discount rates and, as such, this is one of the key judgement areas our audit focused on.
Our response – Our audit procedures in this area included, among others, assessing the independence, objectivity and competence of theexternal expert engaged by the Group to value intangible assets recognised as a result of the Andor Technology plc acquisition by considering,
among other matters, their professional qualifications and the terms of their engagement. We tested the principles and integrity of the valuation
model used and assessing whether the key assumptions underlying the valuations were appropriate, taking into account our experience of similar
assets acquired in other comparable situations. We used our own valuation specialist to assist us in evaluating the assumptions and methodologies
used by the Group.
Completeness of provisions in respect of product related claims
Refer to page 41 (Audit committee report), page 70 (accounting policy) and pages 85 to 114 (financial disclosures)
Risk – The Group designs and builds customised, high technology products, notably in the NanoTechnology Tools segment, and as such there
is a risk that products are subject to customer claims in respect of deficiencies in design or performance. In addition, since the Group’s products
incorporate specific design features and intellectual property that are critical to ensuring the product meets its marketed, or customer specific,
performance specifications, there is a risk that the Group inadvertently infringes the intellectual property belonging third parties. This could resultin a material unrecorded, or understated, provision for compensation required to be paid to customers or third parties respectively, or alternatively
for the cost of rectification, should the Group be required to recall or rework previously supplied products.
Our response – Our audit procedures in this area included, among others, making enquiries of relevant business unit management regarding theexistence of any previously unidentified product related claims and inspecting the Group’s litigation register for any ongoing or potential patent
litigation. Where product related claims arise, or are brought forward from previous periods, we consider the specific circumstances by inspecting
correspondence between the Group and other parties, such as legal advisors, and challenge the reasonableness of the key assumptions made bymanagement to our own expectations based on our historical knowledge, experience, and understanding. We also considered the adequacy of
the Group’s disclosures about the degree of estimation involved in arriving at any provision.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the financial statements as a whole was set at £2.1m. This has been determined with reference to a benchmark of group profit
before tax, which we consider to be one of the principal considerations for members of the company in assessing the financial performance of theGroup. Materiality represents 6.5% of group profit before tax adjusted for: the reversal of acquisition related fair value adjustments to inventory;
the settlement loss on US pension scheme; the acquisition related costs; the unwind of discount in respect of deferred consideration; and themark-to-market gain as disclosed in Note 1 to the financial statements, or 8.8% of group profit before tax.
We agreed with the audit committee to report to it: separately each corrected or uncorrected misstatement we identified through our audit witha value in excess of £1.6m; other audit misstatements below £1.6m that we believe warranted separate reporting on qualitative grounds; and theaggregate of other corrected and uncorrected misstatements we identified through our audit with an individual value in excess of £0.1m but lessthan £1.6m.
Audits for group reporting purposes were performed at the key reporting components in the following countries: Japan; Germany; China; andFinland, and by the Group audit team in the following countries: the United Kingdom; and the United States of America. In addition, specified
audit procedures were performed by component auditors in Japan and by the group audit team in the United Kingdom and the United Statesof America. These group procedures covered 97% of total group revenue; 91% of group profit before taxation; and 99% of total group assets.
The audits undertaken for group reporting purposes at the key reporting components of the group were all performed to materiality levels agreed
with the group audit team. These materiality levels were set individually for each component and ranged from £0.01m to £1.9m.
Detailed audit instructions were sent to all the auditors in these locations. These instructions covered the significant audit areas that should becovered by these audits (which included the relevant risks of material misstatement detailed above) and set out the information required to bereported back to the group audit team. The group audit team visited the following locations: the United Kingdom; Germany; and the UnitedStates of America.

68

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Opinions and conclusions arising from our audit continued
4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion:• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are preparedis consistent with the financial statements.
5 We have nothing to report in respect of matters on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified otherinformation in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:• we have identified material inconsistencies between the knowledge we acquired during our audit and the directors’ statement that they
consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the informationnecessary for Shareholders to assess the Group’s performance, business model and strategy; or• the Audit committee report does not appropriately address matters communicated by us to the audit committee.
Under the Companies Act 2006 we are required to report to you if, in our opinion:• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received frombranches not visited by us; or• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with theaccounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:• the directors’ statement, set out on page 23, in relation to going concern;• the part of the Corporate Governance Statement on page 33 relating to the company’s compliance with the nine provisions of the 2010 UK
Corporate Governance Code specified for our review; and• certain elements of the report to Shareholders by the Board on directors’ remuneration.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 66, the directors are responsible for the preparation of thefinancial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities,
published on our website at www.kpmg.com/uk/auditscopeukco2013a, which are incorporated into this report as if set out in full and should
be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.

Simon Haydn-Jones (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
10 June 2014

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Accounting Policies

Oxford Instruments plc (the “Company”) is a company incorporated and domiciled in the UK.
The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards
as adopted by the EU (“Adopted IFRSs”). The Company has elected to prepare its Parent Company Financial Statements in accordance with UK GAAP;
these are presented on pages 115 to 121.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Group Financial Statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the
Performance and Strategy section on pages 5 to 20. The financial position of the Group, its cash flows, liquidity position and borrowing facilities
are described in the Financial Review on pages 21 to 23.
The relatively diverse nature of the Group together with its current financial strength provides a solid foundation. The Directors have reviewed theGroup’s forecasts and flexed them to incorporate a number of potential scenarios relating to changes in trading performance and believe that theGroup will be able to operate within its existing debt facilities which expire between December 2018 and March 2021. This review also consideredhedging arrangements in place. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.
The Financial Statements have been prepared on a going concern basis based on the Directors’ opinion, after making reasonable enquiries, that
the Group has adequate resources to continue in operational existence for the foreseeable future.
The Financial Statements were authorised for issuance on 10 June 2014.
(a) New accounting standards
The following standards and interpretations are applicable to the Group and have been adopted as they are mandatory for the year ended
31 March 2014.
• Amendments to IAS 1 Presentation of Items of Other Comprehensive Income: The amendments require that an entity present separately
the items of other comprehensive income that may be reclassified to profit or loss in the future from those that would never be reclassified
to profit or loss. The adoption of this standard has had no significant impact.
• Amendments to IAS 19 Employee Benefits: The amendments require immediate recognition of actuarial gains and losses in othercomprehensive income and eliminate the corridor method. The principal amendment that has affected most entities with a defined benefit
plan is the requirement to calculate net interest income or expense using the discount rate used to measure the defined benefit obligation.
The new standard requires retrospective application and will impact the Group’s Income Statement and Statement of Comprehensive Income
as a result of the changes in assessing the return on pension scheme assets. A prior year restatement has been made to reflect these changes,
which is explained in further detail below.
• IFRS 13 Fair Value Measurement: This is a new standard to replace existing guidance on fair value measurement in different IFRSs with a single
definition of fair value, a framework for measuring fair values and disclosures about fair value measurements. This standard applies to assets,
liabilities and an entity’s own equity instruments that, under other IFRSs, are required or permitted to be measured at fair value or when disclosureof fair value is provided. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, i.e. an exit price. The adoption of this standard has had no significant impact.
• Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities: The amendment requires specific disclosure for financial
assets and financial liabilities within the scope of the common disclosures. The adoption of this standard has had no significant impact.
There are no other new standards, amendments to standards or interpretations mandatory for the first time for the year ending 31 March 2014.
IAS 19 restatement
As a result of the amendments to IAS 19 Employee Benefits, the Group has changed its accounting policy with respect to determining the income
or expense related to its defined benefit pension scheme. The standard prescribes that an interest expense or income is calculated on the net defined
benefit liability by applying the discount rate to the net defined benefit liability. This replaces the interest expense on the defined benefit obligationand the expected return on plan assets. In addition, the revised standard clarifies the treatment for scheme administration expenses. The revised
standard requires retrospective application, therefore the table below reflects the adjustments made to the comparative amounts for the year
ended 31 March 2013.
The restatements in the year ended 31 March 2013 comprise the reversal of the interest expense on the defined benefit obligation of £10.4m
and the interest income on pension scheme assets of £9.5m to be replaced by a net interest expense of £1.7m and an increase in the scheme
administration expenses charged to the consolidated income statement of £0.4m. The associated income tax has been restated accordingly.
Actuarial losses recognised in the consolidated statement of comprehensive income of £16.9m have been restated into a remeasurement lossof £15.7m with the associated income tax also restated.

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Company information(a) New accounting standards continued
IAS 19 restatement continued
31 March2013£mConsolidated income statement
Increase in administrative and shared service expenses
Decrease in finance expense
Decrease in finance income
Decrease in income tax expense

(0.4)
8.7
(9.5)
0.2

Decrease in profit for the period
Decrease in basic and diluted earnings per share(1.0)(1.8p)

Consolidated statement of comprehensive income
Other comprehensive income:Decrease in remeasurement of defined benefit plans
Decrease in income tax on other comprehensive income

1.2
(0.2)

Increase in other comprehensive income

1.0

The revised standard stipulates that remeasurement gains and losses are recognised immediately in the periods in which they occur. The Groupalready adopted this policy and therefore there are no changes to the consolidated balance sheet and consolidated cash flow statement.
In the current year, the revised standard has had the effect of reducing the Group’s profit after tax by £2.0m and reducing the remeasurement loss
on post-retirement benefits by the same amount.
(b) Basis of preparation
The Financial Statements are presented in Pounds Sterling, rounded to the nearest £0.1m and are prepared on the historical cost basis except as
described on page 73 under the heading “Financial Instruments”.
The preparation of Financial Statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The most significant judgements and estimates made in applying
the Group accounting policies relate to:Fair value measurements on business combinations
The measurement of fair values on a business combination requires the recognition and measurement of the identifiable assets, liabilities andcontingent liabilities. The key judgements involved are the identification and valuation of intangible assets which require the estimation of future
cash flows and the selection of a suitable discount rate (see Note 15).
Impairment of intangible assets (including goodwill) and tangible assets
Goodwill is held at cost and tested annually for impairment and amortised intangibles and tangible assets are tested for impairment where there
are indications of impairment. These impairment tests require the Group to make an estimate of the expected cash flows and to select suitablediscount rates. These require an estimation of the value in use of these assets (see Note 15).
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past expectations
or events which can be reasonably estimated. The timing of recognition requires the application of judgement to existing facts and circumstances
which can be subject to change. Amounts provided represent the Group’s best estimate of exposure based on currently available information.

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Accounting Policies continued(b) Basis of preparation continued
Revenue recognition
Revenue is recognised when, in the opinion of the Group, the significant risks and rewards of ownership have transferred to the buyer.
The complex technical nature of the Group’s products means that the application of judgement is required in determining whether thoserisks and rewards have passed.
The following other significant judgements and estimates were made in applying the Group accounting policies:
Measurement of defined benefit scheme liabilities
The Group recognises and measures costs relating to defined benefit pension schemes in accordance with IAS 19 Employee Benefits. In applying
IAS 19 the costs are assessed in accordance with the advice of independent qualified actuaries. This requires the exercise of judgement in relation
to the estimation of future changes in salaries and inflation, as well as mortality rates, expected returns on plan assets and the selection of suitablediscount rates. Further detail is provided in Note 23.
Contingent purchase consideration
Contingent purchase consideration is measured at fair value at the date of acquisition and tested annually against the criteria for payment. The key
judgements involved are the estimation of future cash flows and profitability of the acquired business and the selection of a suitable discount rate.
Capitalised development costs
Capitalised development costs involve judgements around the future economic benefits that will flow from the associated development activity
and in particular the Group’s assessment of the technical and commercial feasibility of the product to be developed.
Deferred tax assets
A deferred tax asset is recognised in the period if it is probable that future taxable profits will be available against which the asset can be utilised.
This requires the exercise of judgement in relation to the estimation of future taxable profit.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods. The key areas where estimates have been used
and assumptions applied are in the calculation of provisions, the valuation of acquired intangible assets, the impairment testing of goodwill andthe estimation of defined benefit pension plan liabilities.
(c) Basis of consolidation
The Group Financial Statements include the accounts of Oxford Instruments plc and its subsidiary companies adjusted to eliminate intra-groupbalances and any unrealised gains and losses or income and expenses arising from intra-group transactions.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the control, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain economic benefits from its activities. In assessing control, potential voting rights that are currently
exercisable or convertible are taken into account. The results of subsidiary companies are included in the consolidated financial statements fromthe date that control commences until the date that control ceases.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterlingat exchange rates ruling at the end of the reporting period. Income statements and cash flows of foreign operations are translated into Sterlingat average quarterly exchange rates which approximate foreign exchange rates at the date of the transaction. Foreign exchange differences
arising on retranslation are recognised directly in a separate translation reserve.
The acquisition method is used to account for the acquisition of subsidiaries.
(d) Foreign currency
An individual entity’s transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rate ruling at that date. Foreignexchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms ofhistorical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

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Company information(e) Financial instruments
Financial assets and liabilities are recognised in the Group’s Consolidated Statement of Financial Position when the Group becomes a party to thecontractual provisions of the instrument.
(i)	Derivative financial instruments of the Group are used to hedge its exposure to interest rate, foreign currency and commodity pricing risks
arising from operational, financing and investment activities. The Group does not hold or issue derivative financial instruments for trading
purposes. All derivatives are initially recognised at fair value; attributable transaction costs are recognised in profit or loss as incurred.
Derivatives comprising interest rate swaps, foreign exchange contracts and options and metal futures contracts are classified as “fair value
through profit and loss” under IAS 39, unless designated as hedges. Subsequent to initial recognition, derivatives are measured at fair value
and gains or losses on the settlement of such derivatives are recognised in operating expenses. Where such derivatives relate to the following
year’s exposure, any gains or losses resulting from the change in fair value are taken to the mark to market gains/losses line within financial
income or expense.
(ii)	Changes in the fair value of the derivative hedging instruments designated as cash flow hedges are recognised in equity to the extent that thehedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the Consolidated Statement of Income.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting
is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs.
When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when it
is recognised. In other cases the amount recognised in equity is transferred to the Consolidated Statement of Income in the same period thatthe hedged item affects profit or loss.
(iii)	The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future
cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.
(iv)	The fair value of forward exchange contracts is their market price at the Consolidated Statement of Financial Position date, being the present
value of the forward price. The gain or loss on remeasurement to fair value of forward exchange contracts is recognised immediately in theConsolidated Statement of Income.
(v)	Contingent purchase consideration is measured at fair value at the date of acquisition and tested annually against the criteria for payment.
(vi)	Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing
borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over theperiod of the borrowing on an effective interest basis.
(f) Property, plant and equipment
Property, plant and equipment is stated at historical cost less provisions for impairment (see accounting policy l) and depreciation which, with the
exception of freehold land which is not depreciated, is provided on a straight-line basis over each asset’s estimated economic life. Depreciation isprovided based on historical cost less estimated residual value. The principal estimated economic lives used for this purpose are:Freehold buildings, long leasehold land and buildings
Leasehold improvements (less than 50 years’ duration)
Furniture and fittings
Machinery and other equipment
Computer equipment
Vehicles50 years
Period of lease
10 years
5 to 10 years
4 years
4 years

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with thecarrying amount of property, plant and equipment and are recognised in the Income Statement.

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Accounting Policies continued(g) Intangible assets(i) Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents amounts arising on acquisition of subsidiaries.
In respect of business acquisitions that have occurred since 31 March 2004, goodwill represents the difference between the cost of the acquisition
and the fair value of the assets, liabilities and contingent liabilities acquired. In respect of acquisitions prior to this date, goodwill is included on
the basis of its deemed cost, which represents the amount recorded under previous GAAP.
The Group now expenses transaction costs associated with its acquisitions and movements in liabilities relating to contingent consideration
within the Income Statement in conformity with the revised IFRS 3. The carrying value of contingent consideration is reassessed annually.
Goodwill arising on acquisitions is stated at cost less any accumulated impairment losses and allocated to cash generating units that are anticipatedto benefit from the combination. It is not amortised but is tested annually for impairment (see accounting policy l), or more frequently when there
is an indicator that the unit may be impaired.
(ii) Development costs
Research and development costs are charged to the Consolidated Statement of Income in the year in which they are incurred unless development
expenditure is applied to a plan or design for the production of new or substantially improved products, in which case they are capitalised. The criteria
for capitalisation include demonstration of the technical feasibility of completing a new intangible asset that will be available for sale and thatthe asset will generate probable future economic benefits. Where expenditure meets the criteria, development costs are capitalised and amortised
through the Consolidated Statement of Income over their useful economic lives.
(iii) Acquired intangible assets
An intangible asset acquired with a subsidiary undertaking is recognised as an intangible asset if it is separable from the acquired business or arises
from contractual or legal rights, is expected to generate future economic benefits and its fair value can be reliably measured. The asset is amortised
through the Consolidated Statement of Income over it useful economic life.
(iv) Amortisation
Amortisation of intangible assets is charged to the Consolidated Statement of Income on a systematic basis in proportion to the use of the assets
over their estimated useful economic lives as follows:
Capitalised development costs
Technology related acquired intangibles
Customer related acquired intangibles
Software3 to 5 years
5 to 12 years
6 months to 15 years
10 years(h) Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently stated at their amortised cost less appropriate allowances foramounts which are expected to be non-recoverable.
(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour, an attributable proportion of production
overheads based on normal operating capacity and all other expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completionand selling expenses.
Provision is made for obsolete, slow-moving and defective stock where appropriate in light of recent usage, expected future requirements, newproduct introduction plans and likely realisable values.
(j) Cash and cash equivalents
Cash and cash equivalents are carried in the Statement of Financial Position at amortised cost.
Cash and cash equivalents comprise cash balances and call deposits and are carried at amortised cost. Bank overdrafts that are repayable on demandand form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of theStatement of Cash Flows.

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Company information(k) Non-current assets held for sale
A non-current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuinguse, it is available for immediate sale and sale is highly probable within one year.
Immediately before classification as held for sale, the measurement of the assets is brought up-to-date in accordance with applicable IFRSs. Then,
on initial classification as held for sale, non-current assets are recognised at the lower of their carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale are included in the Consolidated Statement of Income, even when the asset has
previously been revalued. The same applies to gains and losses on subsequent remeasurement.
(l) Impairment of non-current assets
All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying value may be impaired.
Additionally, goodwill is subject to an annual impairment review.
For the purposes of impairment testing assets are grouped together into the smallest group of assets that generates cash flows from continuing
use that are largely independent of the cash inflows from other groups of assets.
An impairment loss is recognised in the Consolidated Statement of Income as under the administration and shared services heading, to the extent
that an asset’s carrying value, or a cash generating unit’s carrying value, exceeds its recoverable amount, which represents the higher of its net
realisable value and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset or from the
cash generating unit to which it relates. The present value is calculated using a discount rate that reflects the current market assessment of thetime value of money and the risks specific to the asset concerned.
Impairment losses recognised in previous periods for an asset other than goodwill are reversed if there has been a change in estimates used todetermine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does not exceed its carrying amount had
the impairment loss not been recognised in previous periods. Impairment losses in respect of goodwill are not reversed.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to
cash generating units and then to reduce the carrying amount of the other assets in the unit.
(m) Employee benefits
The Group operates a number of defined benefit and defined contribution plans which require contributions to be made to independent trustee
administered funds.
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Statement of Income as incurred.
(ii) Defined benefit plans
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future
benefit that current and past employees have earned in return for their service in prior periods. That benefit is discounted to determine its present
value and the fair value of any plan assets is deducted. The calculation is performed by a qualified actuary using the projected unit credit method.
All actuarial gains and losses in calculating the Group’s net obligation are recognised in the Consolidated Statement of Comprehensive Income inthe year.
The charge to the Consolidated Statement of Income reflects the current service cost. The interest expense or income is calculated on the net
defined benefit liability by applying the discount rate to the net defined benefit liability, and is included within financial expenditure or financial
income in the Consolidated Statement of Income respectively.
(iii) Share-based payment transactions
The fair value of equity settled share option programmes is measured at grant date and charged to the Consolidated Statement of Income, witha corresponding increase in equity, on a straight-line basis over the period during which the employees become unconditionally entitled to theoptions. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions uponwhich the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due tomarket performance conditions not being met.

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Accounting Policies continued(n) Provisions
A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive obligation asa result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for warranty
and product related liability is recognised when the underlying products are sold. A provision for restructuring is recognised when the Group has
approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced publicly. A provision for
onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract. A provision for a claim or dispute is made when it is considered probable that an adverse outcome
will occur and the amount of the loss can be reasonably estimated.
Contractual and other provisions represent the Directors’ best estimate of the cost of settling future obligations where the Directors, taking
into account professional advice received, assess that it is more likely than not that such proceedings may be successful.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liabilities.
(o) Trade and other payables
Trade and other payables are initially recognised at their fair value and subsequently stated at amortised cost.
(p) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing
borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the Income Statement overthe period of the borrowings on an effective interest basis.
(q) Revenue
Revenue is recognised in the Consolidated Statement of Income when the significant risks and rewards of ownership have transferred to thebuyer. In the Industrial Products segment this is generally considered to be on dispatch, as products have a low level of customisation and are
manufactured on a routine basis. In the Nanotechnology Tools segment products are generally bespoke and customer contracts more complex.
As such, there are a number of conditions which must be satisfied before revenue can be recognised. These can include: legal, contractual
ownership; passing internal quality control testing; dispatch from manufacturing sites; installation at customer sites; customer inspection both
before and after installation; and/or, ultimately, customer acceptance. Given these conditions, a greater degree of consideration is given as
to whether the terms of sale have been met and whether revenue can be recognised for each product. In the Services segment, revenue formaintenance and support is recognised on a pro-rata basis over the length of the contract period. Revenue excludes value added tax andsimilar sales based taxes and is stated before commissions payable to agents.
(r) Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent thatit relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; theinitial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the Statement of Financial Position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
(s) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received
are recognised in the Income Statement as an integral part of the total lease expense.

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Company information(t) Segment reporting
An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including any revenues and expenses that relate to transactions with any of the Group’s other components. Operating components are
combined into aggregated operating segments to the extent that they have similar economic characteristics. Aggregated operating segments’operating results are reviewed regularly by the Group’s Board of Directors to make decisions about resources to be allocated to the segment andto assess its performance, for which discrete financial information is available. Segment results that are reported to the Board include items directly
attributable to a segment as well as those that can be allocated on a reasonable basis.
A reportable segment is an aggregated operating segment in respect of which revenue or profit exceeds 10% of the Group total. Discrete
financial information is disclosed for each reportable segment.
(u) Dividends
Interim and final dividends are recognised as a liability when they are no longer at the discretion of the Company.
(v) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been issued by the IASB and endorsed by the EU and are effective
for annual periods beginning after 1 April 2014. They have not been applied in preparing these consolidated Financial Statements. Those which
may be relevant to the Group are set out below:• IFRS 10 Consolidated Financial Statements which becomes mandatory for the Group’s consolidated Financial Statements for the annual period
beginning on 1 April 2014. The Group has considered the impact of this amendment in future periods on profit, earnings per share and net
assets. It is not expected to have a material impact.
• IFRS 11 Joint Arrangements which becomes mandatory for the Group’s consolidated Financial Statements for the annual period beginning on
1 April 2014. The Group has considered the impact of this amendment in future periods on profit, earnings per share and net assets. It is notexpected to have a material impact.
• IFRS 12 Disclosure of Interests in Other Entities which becomes mandatory for the Group’s consolidated Financial Statements for the annual
period beginning on 1 April 2014. It is not expected to have a material impact.
• IAS 27 (2011) Separate Financial Statements: which becomes mandatory for the Group’s consolidated Financial Statements for the annual
period beginning on 1 April 2014. The Group has considered the impact of this amendment in future periods on profit, earnings per shareand net assets. It is not expected to have a material impact.
• IAS 28 (2011) Investments in Associates and Joint Ventures: which becomes mandatory for the Group’s consolidated Financial Statements forthe annual period beginning on 1 April 2014. The Group has considered the impact of this amendment in future periods on profit, earnings
per share and net assets. It is not expected to have a material impact.
• Amendments to IAS 32 Financial Instruments: Disclosure and Presentation – Offsetting Financial Assets and Financial Liabilities: which becomesmandatory for the Group’s consolidated Financial Statements for the annual period beginning on 1 April 2014. The Group has considered theimpact of this amendment in future periods on profit, earnings per share and net assets. It is not expected to have a material impact.
• IFRS 15 Revenue from Contracts with Customers: which becomes mandatory for the Group’s consolidated Financial Statements for the annual
period beginning 1 April 2017. The potential impact on the Group of the new standard is still being assessed.
A number of other new standards, amendments to standards and interpretations have been issued by the IASB, although they are not yet
endorsed by the EU, and are effective for annual periods beginning after 1 April 2014. They have not been applied in preparing these
consolidated Financial Statements. The one standard which may be relevant to the Group is set out below:• IFRS 9 Financial Instruments: which becomes mandatory for the Group’s consolidated Financial Statements for the annual period beginningon 1 April 2015 and could change the classification and measurement of financial assets.

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Consolidated Statement of Income
year ended 31 March 2014

Adjusted*£m

Adjustingitems*
£m

Total
£m

360.1
(196.6)

—
(3.7)

360.1
(200.3)163.5(25.1)(56.7)(33.1)
1.7

(3.7)
—
—
(22.6)—

159.8(25.1)(56.7)(55.7)
1.7

50.3(26.3)

24.0

7

0.3

4.1

4.4

0.3

4.1

4.4

23
8

(2.0)
(1.5)

—
(0.9)

(2.0)
(2.4)

(3.5)

(0.9)

(4.4)

47.1
(8.7)

(23.1)
2.9

24.0
(5.8)

38.4

(20.2)

18.2

Notes

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Foreign exchange

35Operating profit
Other financial income
Financial income
Interest charge on pension scheme net liabilities
Other financial expenditure
Financial expenditure
Profit before income tax
Income tax (expense)/credit

12

Profit for the year attributable to equity Shareholders of the parent

Earnings per share
Basic earnings per share
Diluted earnings per share
Dividends per share
Dividends paid
Dividends proposed

2
2

pence

pence

67.7
67.3

32.1
31.9

13
13

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

The attached notes form part of the Financial Statements.

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Governance

Financial statements

Company information

Consolidated Statement of Income
year ended 31 March 2013 – as restated**

Notes

Revenue
Cost of sales
Gross profit
Research and development

35

Adjusted*£m

Adjustingitems*
£m

Total
£m

350.8
(194.0)

—
(0.5)

350.8
(194.5)156.8(24.3)

(0.5)
—

156.3
(24.3)

Selling and marketing(51.1)—

Administration and shared services(35.3)(15.9)(51.1)(51.2)

Foreign exchange

3.2

—

3.2

Operating profit

49.3(16.4)

32.9

0.3

—

0.3

0.3

—

0.3

(1.7)
(0.9)

—
(2.2)

(1.7)
(3.1)

(2.6)

(2.2)

(4.8)

47.0
(9.7)

(18.6)
2.3

28.4
(7.4)

37.3

(16.3)

21.0

Other financial income

7

Financial income
Interest charge on pension scheme net liabilities
Other financial expenditure

23
8

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

12

Profit for the year attributable to equity Shareholders of the parent

Earnings per share
Basic earnings per share
Diluted earnings per share
Dividends per share
Dividends paid
Dividends proposed

2
2

pence

pence

66.5
65.7

37.4
37.0

13
13

10.0
11.2

* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1 of these Financial Statements.
** See Accounting Policies for details of restatement of comparative information.

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Consolidated Statement of Comprehensive Income
year ended 31 March 2014

Notes

Profit for the year
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Gain on effective portion of changes in fair value of cash flow hedges, net of amounts recycled
Foreign exchange translation differences
Tax on items that may be reclassified 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 income for the year attributable to equity Shareholders of the parent* See Accounting Policies for details of restatement of comparative information.

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Oxford Instruments plc / Report and Financial Statements 2014

23
12

2014
£m

2013
(Restated)*
£m

18.2

21.0

—
(8.4)
—

—
3.4
—

(1.9)
(1.0)

(15.7)
3.5(11.3)

(8.8)

6.9

12.2

Overview

Strategic report

Governance

Financial statements

Company information

Consolidated Statement of Financial Position
as at 31 March 2014

Notes

2014
£m

2013
£m

14
15
16

34.4
247.9
11.2

32.9
91.9
25.0

293.5

149.8

68.3
80.9
1.0
5.3
32.6

58.1
71.8
0.4
2.2
39.2

188.1

171.7

481.6

321.5

2.9
61.3
0.1
(4.4)
80.3

2.8
60.6
0.1
4.0
70.2

140.2

137.7

141.4
13.1
46.3
12.0

—
11.1
47.9
6.2

212.8

65.2

15.5
99.2
3.7
0.5
9.7

—
101.4
4.3
2.6
10.3

128.6

118.6

Total liabilities

341.4

183.8

Total liabilities and equity

481.6

321.5

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

17
18
20

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

21

22
24
23
16

Current liabilities
Bank loans
Trade and other payables
Current income tax payables
Derivative financial instruments
Provisions

22
24
20
25

The Financial Statements were approved by the Board of Directors on 10 June 2014 and signed on its behalf by:

Jonathan Flint
Director
Company Number: 775598

Kevin Boyd
Director

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Consolidated Statement of Changes in Equity
year ended 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)

Share
capital£mSharepremium
account£m

2.8

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 valueof cash flow hedges, net of amounts recycled

—

—

—

—

—

– Remeasurement loss in respect of post-retirement benefits– Tax on items recognised directly in other comprehensive income

—
—

—
—

—
—

—
—

(1.9)
(1.0)

—
(1.9)
(1.0)

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

—

—

—

(8.4)

15.3

6.9

1.6
(0.4)
0.8
(6.4)

Transactions with owners recorded directly in equity:–C redit in respect of employee service costs settled by awardof share options

—

—

—

—

1.6

– Tax charge in respect of share options– Proceeds from shares issued– Dividends paid

—
0.1
—

—
0.7
—

—
—
—

—
—
—

(0.4)
—
(6.4)

Total transactions with owners recorded directly in equity

0.1

0.7

—

—

(5.2)

(4.4)

Balance at 31 March 2014

2.9

61.3

0.1

(4.4)

80.3

140.2

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased and then cancelled during theyear ended 31 March 1999, and the hedging reserve in respect of the effective portion of changes in value of commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 from the translation of the Group’s
net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2013: 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.

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Governance

Company information

Consolidated Statement of Changes in Equity
year ended 31 March 2013 – as restated*

Balance at 1 April 2012
Total comprehensive income:
Profit for the year
Other comprehensive income:– F oreign exchange translation differences– Gain on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

60.2

0.1

0.6

63.4

127.1

—

—

—

—

21.0

21.0

—

—

—

3.4

—

3.4

Share
capital£mSharepremium
account
£m

2.8

—

—

—

—

—

– Remeasurement loss in respect of post-retirement benefits– Tax on items recognised directly in other comprehensive income

—
—

—
—

—
—

—
—

(15.7)
3.5—(15.7)
3.5

Total comprehensive income attributable to equity
Shareholders of the parent

—

—

—

3.4

8.8

12.2

1.4
2.2
0.4
(5.6)

Transactions with owners recorded directly in equity:–C redit in respect of employee service costs settled by awardof share options

—

—

—

—

1.4

– T ax credit in respect of share options– P roceeds from shares issued–D ividends paid

—
—
—

—
0.4
—

—
—
—

—
—
—

2.2
—
(5.6)

Total transactions with owners recorded directly in equity:

—

0.4

—

—

(2.0)

(1.6)

Balance at 31 March 2013

2.8

60.6

0.1

4.0

70.2

137.7

* See Accounting Policies for details of restatement of comparative information.

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Consolidated Statement of Cash Flows
year ended 31 March 2014

2014
£m

2013
(Restated)*£m

Profit for the year
Adjustments for:
Income tax expense
Net financial expense
Acquisition related fair value adjustments to inventory
Acquisition related costs
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

18.2

21.0

5.8
—
3.7
7.8
0.1
14.7
5.0
3.9

7.4
4.5
0.5
2.1
—
13.8
4.6
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
Cash payments to the pension scheme more than the charge to operating profit

59.2
0.3
1.6
(6.4)
(5.4)

57.8
0.2
1.4
(1.2)
(4.9)

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

49.3
(2.9)
(3.8)
(3.3)
(10.9)

53.3
4.7
(9.4)
2.8
(1.0)

Cash generated from operations
Interest paid
Income taxes paid

28.4
(1.0)
(6.2)

50.4
(0.5)
(8.4)

Net cash from operating activities

21.2

41.5

Cash flows from investing activities
Proceeds from sale of product line and subsidiary
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Capitalised development expenditure—(165.7)
(6.8)
(5.4)

1.0
(20.1)(8.6)(4.6)

Net cash used in investing activities(177.9)(32.3)Cash flows from financing activities
Proceeds from issue of share capital
Increase in borrowings
Dividends paid

0.8
156.9
(6.4)

0.4
—
(5.6)

Net cash from financing activities

151.3

(5.2)

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

(5.4)
39.2
(1.2)

4.0
35.1
0.1

Cash and cash equivalents at end of the year

32.6

39.2

Reconciliation of changes in cash and cash equivalents to movement in net debt
(Decrease)/increase in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents

(5.4)
(1.2)

4.0
0.1

Cash inflow from increase in debt

(6.6)
(156.9)4.1—

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

(163.5)
39.2

4.1
35.1

Net debt at the end of the year

(124.3)39.2* See Accounting Policies for details of restatement of comparative information.

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Governance

Financial statements

Company information

Notes to the Financial Statements
year ended 31 March 2014

1 Non-GAAP measures
The Directors present the following non-GAAP measures as they consider that they give a better indication of the underlying performance of the business.
Reconciliation between profit before income tax and adjusted profit
2014
£m

2013
(Restated)*£m

Profit before income tax
Reversal of acquisition related fair value adjustments to inventory
Acquisition related costs
Amortisation and impairment of acquired intangibles
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

24.0
3.7
7.8
14.7
0.9
(4.1)
0.1

28.4
0.5
2.1
13.8
0.2
2.0

Adjusted profit before income tax
Share of taxation

47.1
(8.7)

47.0
(9.7)

Adjusted profit for the year

38.4

37.3

—

* See Accounting Policies for details of restatement of comparative information.

The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide a measure that includes resultsfrom 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, along with the unwind of discounts in respect of deferred consideration.
During the year the Group purchased annuities for 27 members of the US defined benefit pension scheme. A settlement loss of £0.1m crystallisedon purchase.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured atfair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does not take advantage of the hedge
accounting rules provided for in IAS 39 since that standard requires certain stringent criteria to be met in order to hedge account, which, in theparticular circumstances of the Group, are considered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts
for these derivative financial instruments at fair value through profit or loss. To the extent that instruments are hedges of future transactions,adjusted profit for the year is stated before changes in the valuation of these instruments so that the underlying performance of the Group canbe more clearly seen.
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 this deferred tax from the calculationof the share of tax attributable to adjusted profit before tax in the years in which it reverses. In the current period deferred tax of £2.2m (2013: £3.3m)
has reversed and consequently been excluded from the tax attributable to adjusted profit before tax.

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Notes to the Financial Statements continued
year ended 31 March 2014

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 Statement of Income
and the adjusted profit for the year as shown in Note 1 respectively. Basic and adjusted earnings are divided by the weighted average numberof ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership Trust.
2014
£m

2013
(Restated)*£m

Basic earnings
Adjusted earnings (Note 1)

18.2
38.4

21.0
37.3

Weighted average number of shares

56.8

56.2

pence

pence

32.1
67.7

37.4
66.5

Basic earnings per share
Adjusted earnings per share* See Accounting Policies for details of restatement of comparative information.

The weighted average number of shares used in the calculation excludes shares held by the Employee Share Ownership Trust, as follows:
2014
Sharesmillion2013
SharesmillionWeighted average number of shares outstanding
Less shares held by Employee Share Ownership Trust

57.0
(0.2)

56.4
(0.2)

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

56.8

56.2

2014
Sharesmillion2013
SharesmillionWeighted average number of ordinary shares per basic earnings per share calculations
Effect of shares under option

56.8
0.4

56.2
0.6

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

57.2

56.8

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

3 Segment information
The Group has seven operating segments. These operating segments have been combined into three aggregated operating segments to theextent that they have similar economic characteristics, with relevance to products and services, type and class of customer, methods of sale anddistribution and the regulatory environment in which they operate. Each of these three aggregated operating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating segments on the basisof the economic characteristics discussed below:• the Nanotechnology Tools segment contains a group of businesses, supplying similar products, characterised by a high degree of customisationand high unit prices. These are the Group’s highest technology products serving research customers in both the public and private sectors.
The results of Andor Technology, acquired during the year, are included in this segment;• the Industrial Products segment contains a group of businesses supplying high technology products and components manufactured in medium
volume for industrial customers; and• the Service segment contains the Group’s service business as well as service revenues from other parts of the Group.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a 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 in reporting to theGroup’s Board of Directors.

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Financial statements

Company information

3 Segment information continueda) Analysis by business
Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

External revenue
Inter-segment revenue

180.5
0.1

113.3
1.4

66.3
0.1

360.1

Total segment revenue

180.6

114.7

66.4

Segment adjusted operating profit

21.2

15.6

13.5

50.3

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

External revenue
Inter-segment revenue

165.8
0.3

124.5
0.6

60.5
0.1

350.8

Total segment revenue

166.1

125.1

60.6

Segment adjusted operating profit (restated*)

20.6

17.3

11.4

49.3

2014
£m

2013
(Restated)*£m

Adjusted profit for reportable segments
Acquisition related costs
Settlement loss on US pension scheme
Reversal of acquisition related fair value adjustments to inventory
Amortisation and impairment of acquired intangibles
Financial income
Financial expenditure

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

49.3
(2.1)
—
(0.5)
(13.8)
0.3(4.8)

Profit before income tax

24.0

28.4

Year to 31 March 2014

Year to 31 March 2013

Reconciliation of reportable segment profit* See Accounting Policies for details of restatement of comparative information.

Depreciation, capital expenditure, amortisation and impairment of intangibles and capitalised development costs arise in the following segments:
2014

2013

Depreciation£m

Capitalexpenditure£m

Depreciation£m

Capitalexpenditure£mNanotechnology Tools
Industrial Products
Service
Unallocated Group items

2.6
1.8
0.2
0.4

3.0
1.6
0.7
1.5

2.6
1.6
0.2
0.2

2.6
4.3
0.4
1.3

Total

5.0

6.8

4.6

8.6

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Notes to the Financial Statements continued
year ended 31 March 2014

3 Segment information continueda) Analysis by business continued
2014

2013

Amortisation
andimpairment£m

Capitalised
development
costs
£m

Amortisation
andimpairment£m

Capitalised
development
costs
£m

Nanotechnology Tools
Industrial Products
Service
Unallocated Group items

3.0
0.9
—
14.7

3.8
1.6
—
—

2.8
1.1
—
13.8

2.7
1.9
—
—

Total

18.6

5.4

17.7

4.6

Amortisation of development costs is included in arriving at segment operating profit. Amortisation and impairment of acquired intangibles is included
below segment operating profit and excluded from the measure of operating profit reported to the Chief Operating Decision Maker and so has
been included within unallocated Group items.
b) Geographical analysis
The Group’s reportable segments are located across a number of geographical locations and make sales to customers in countries across the world.
The analysis below shows revenue and non-current assets (excluding deferred tax) for individual countries or regions that represent more than 5%of revenue.
Revenue from external customers by destination
2014
£m

2013
£m

USA
Rest of Europe
Rest of Asia
UK
Japan
China
Germany
Rest of World

95.9
59.7
34.9
33.6
37.4
50.4
30.3
17.9

86.5
72.6
37.2
30.6
33.5
52.3
23.0
15.1

Total

360.1

350.8

2014
£m

2013
£m

UK
Germany
USA
Japan
China
Rest of World

212.4
27.3
30.0
0.7
0.4
11.5

45.4
34.3
37.0
0.2
0.3
7.6

Total

282.3

124.8

Non-current assets (excluding deferred tax)

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Company information

4 Auditor’s remuneration
2014
£’000

2013
£’000

Audit of these Financial Statements
Amounts received by the auditor and their associates in respect of:– Audit of Financial Statements of subsidiaries pursuant to legislation– Taxation compliance services– Other non-audit services

136

115

283
21
1

282
16
26

Total fees paid to the auditor and its associates

441

439

Industrial
Products
£m

Total
£m

5 Research and development (R&D)
The total R&D spend by the Group is as follows:
2014
Nanotechnology
Tools
£m

2013

Industrial
Products
£m

Total
£m

Nanotechnology
Tools
£m

17.6

7.5

25.1

17.0

7.3

(0.2)
0.6

(0.6)
1.5

(0.8)
2.1

(0.2)
0.1

(0.5)
0.7

24.3
(0.7)
0.8

(3.0)

(0.9)

(3.9)

(2.9)

(1.0)

(3.9)

Add: amounts capitalised as intangible assets

3.8

1.6

5.4

2.7

1.9

4.6

Total cash spent on R&D during the year

18.8

9.1

27.9

16.7

8.4

25.1

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

6 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 and software.
The book and provisional fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made tobetter 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

Provisional
adjustments£mProvisional
fair value£mIntangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Cash

9.4
6.0
11.1
10.3
(13.5)
(0.5)
17.2

70.2
(4.0)
3.0
—
(1.3)
(15.6)
—

79.6
2.0
14.1
10.3
(14.8)(16.1)
17.2

Net assets acquired
Goodwill

40.0

52.3

92.3
83.0

Total consideration
Cash acquired

175.3(17.2)Net cash outflow relating to the acquisition

158.1

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Notes to the Financial Statements continued
year ended 31 March 2014

6 Acquisitions continued
Andor Technology plc continued
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.
The fair values shown are provisional in respect of deferred tax assets and liabilities and provisions relating to certain claims since at the timeof publication of these financial statements it has not been possible to fully ascertain all information necessary to compute the amounts whichshould be included in the opening balance sheet.
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 and material analysis, using X-ray fluorescence (XRF).
The book and provisional fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made to betteralign 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

Provisional
adjustments£mProvisional
fair value£mIntangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Cash

—
0.2
0.1
(0.3)
0.1

1.2
—
—
0.2
—

1.2
0.2
0.1
(0.1)
0.1

Net assets acquired
Goodwill

0.1

1.4

1.5
0.2

Total consideration
Cash acquired

1.7
(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.
The fair values shown are provisional in respect of provisions relating to certain claims since at the time of publication of these financial statements
it has not been possible to fully ascertain all information necessary to compute the amounts which should be included in the opening balance sheet.

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Company information

6 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 provisional fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made tobetter align the accounting policies of the acquired business with the Group accounting policies. The business has been acquired for the purposeof integrating into the Industrial Analysis segment where it will add a unique hand-held analyser to the Group’s product portfolio.
Book
value
£m

Provisional
adjustments£mProvisional
fair value£mIntangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Cash

—
0.1
0.2
(0.3)
—
0.4

8.2
—
—
—
(1.6)
—

8.2
0.1
0.2
(0.3)
(1.6)
0.4

Net assets acquired
Goodwill

0.4

6.6

7.0
0.5

Total consideration
Cash acquired
Contingent consideration at acquisition

7.5
(0.4)
(1.4)

Net cash outflow relating to the acquisition

5.7

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. Further contingent consideration of up to £4m is payable based on revenue of the acquired business in the year
to 31 March 2015.
The fair values shown are provisional in respect of provisions relating to certain claims since at the time of publication of these financial statements
it has not been possible to fully ascertain all information necessary to compute the amounts which should be included in the opening balance sheet.
The book value of receivables in the tables above represents the gross contractual amounts receivable. The fair value adjustments to receivables
represent the best estimate at acquisition date of the cash flows not expected to be collected.
The three acquisitions above contributed revenue of £15.3m and a reported operating profit of £2.9m to the Group’s result for the period.
Had the acquisitions taken place on 1 April 2013 the equivalent Group numbers would have been revenue of £409.1m and a reported
operating profit of £28.6m.
Acquisition costs of £4.0m, £0.1m and £0.1m have been charged to the consolidated statement of income as adjusting items in respectof the purchases of Andor Technology plc, RoentgenAnalytik Systeme GmbH and RMG Technology Ltd respectively.

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Notes to the Financial Statements continued
year ended 31 March 2014

6 Acquisitions continued
Asylum Research Corporation
On 19 December 2012 the Group acquired the trade and certain assets of Asylum Research Corporation for an initial cash consideration of £19.8m.
Further contingent consideration of between £2.0m and £31.6m is payable based on post acquisition business performance. At 31 March 2014
£6.5m is provided in the accounts in respect of this contingent consideration being the fair value of the contingent consideration payable. Asylum
Research is a leading manufacturer of atomic force and scanning probe microscopes and is headquartered in Santa Barbara, USA with subsidiaries
in the UK, Germany and Taiwan.
The book and fair value of the assets and liabilities acquired is given in the table below. Fair value adjustments have been made to better alignthe accounting policies of the acquired business with the Group accounting policies. The business was 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
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax

—
0.4
2.4
1.7
(2.3)
—

14.4
(0.1)
(0.3)
—
(0.2)
0.3

14.4
0.3
2.1
1.7
(2.5)
0.3

Net assets acquired
Goodwill

2.2

14.1

16.3
9.3

Total consideration
Contingent consideration at acquisition

25.6
(5.8)

Net cash outflow relating to the acquisition

19.8

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

Interest receivable
Fair value movement on derivative financial instruments

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Oxford Instruments plc / Report and Financial Statements 2014

2014
£m

2013
£m

0.3
4.1

0.3
—

4.4

0.3

Overview

Strategic report

Governance

Financial statements

Company information

8 Financial expenditure

Interest payable
Interest charge on pension scheme net liabilities
Unwind of discount on deferred consideration
Fair value movement on derivative financial instruments

2014
£m

2013
£m

1.5
2.0
0.9
—

0.9
1.7
0.2
2.0

4.4

4.8

2014
£m

2013
£m

83.8
9.4
3.7
1.6

77.0
9.7
3.5
1.4

98.5

91.6

9 Personnel costs

Wages and salaries
Social security costs
Contributions to defined contribution pension plans
Charge in respect of employee share options

Directors’ emoluments are disclosed in the Directors’ Remuneration Report on pages 46 to 65 of this Annual Report.
10 Employees
The average number of people employed by the Group (including Directors and temporary employees) during the year was as follows:

Production
Sales and marketing
Research and development
Administration and shared services
Total average number of employees

2014
Number

2013
Number

958
478
337
277

958
414
281
274

2,050

1,927

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Notes to the Financial Statements continued
year ended 31 March 2014

11 Share option schemes
The Group operates three share option schemes:
All employee Share Incentive Plan (SIP)All UK employees are eligible to participate in the Group’s HM Revenue and Customs approved SIP. Participating employees make a cash contribution
to the plan each month. The Group contributes a further amount equal to 20% of the employee’s contribution. Independent trustees then purchasematching shares in the market on behalf of the employees. The matching shares vest on the completion by the participating employee of a further
three years’ service and can be withdrawn from the plan tax-free after five years’ service.
Executive Share Option Scheme (ESO)
Options awarded under the Executive Share Option Scheme are made annually to certain senior managers. The exercise prices are determined according
to the mid-market closing share price on the day before the date of grant. Options have a life of ten years and a vesting period of three years.
Senior Executive Long Term Incentive Scheme (SELTIS)
Options awarded under the Senior Executive Long Term Incentive Scheme are made annually to certain senior managers. The exercise prices are nil.
Options have a life of seven years and a vesting period of three years.
Both the Executive Share Option Scheme and Senior Executive Long Term Incentive Scheme are subject to performance conditions which can befound in the Directors’ Remuneration Report on pages 46 to 65.
Administrative expenses include a charge of £1.6m (2013: £1.4m) in respect of the cost of providing share options. The cost is calculated by estimating
the fair value of the option at grant date and spreading that amount over the vesting period after adjusting for an expectation of non-vesting.
Fair values are determined using an internal valuation model based on a modified Black-Scholes model. Expected volatility has been based on
historical volatility over a period of time of the same length as the expected option life and ending on the grant date. Half of the ESO options
issued before 2009 and all SELTIS options use Total Shareholder Return (TSR) as a performance condition. As TSR is a market based performance
condition, the accounting treatment differs from that for shares subject to non-market performance conditions. This means that the TSR performance
conditions have been incorporated into the calculation of the fair value as a discount in calculating the fair value.
For options granted in the years ended 31 March 2014 and 2013, the fair value per option granted and the assumptions used in the calculation
are as follows:
Senior Executive
Long Term
Incentive Scheme

Executive Share Option Scheme

December
2012

March
2014

June
2013

December
2012

Fair value at measurement date
Share price at grant date
Exercise price
Expected volatility
Expected option life (expressed as weighted average life used in the modelling)£9.74£13.85£nil
36.1%
3 years£4.99£12.72£12.8941.8%
6 years£5.49£14.55£14.55
40.7%
6 years£5.16£13.85£13.8840.6%
6 years

Expected dividend yield
Risk free interest rate

0.7%
0.5%

0.9%
2.1%

0.8%
1.5%

0.7%
1.2%

No options were granted under the Senior Executive Long Term Incentive Scheme during the year.

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Overview

Strategic report

Governance

Financial statements

Company information

11 Share option schemes continued
The options existing at the year end were as follows:

Options subsisting at the year end on unissued ordinary shares
Executive Share Option Schemes
July 2003
July 2004
July 2005
July 2006
September 2007
December 2008
December 2009
January 2011
December 2011
December 2012
June 2013
March 2014
Total options subsisting on existing ordinary shares
Percentage of issued share capital

2014
Numberof shares

Exercise
price

Period when exercisable

2013
Numberof shares

—
1,500
1,715
10,2506,000
14,83935,051
136,987
433,050
373,775
10,670110,000

£1.88
£2.18
£2.19
£2.10
£2.32
£1.35
£2.04
£7.05
£9.90
£13.88£14.55£12.8915/07/06–14/07/13
15/07/07–14/07/14
15/07/08–14/07/15
15/07/09–14/07/16
28/08/10–27/09/17
16/12/11–15/12/18
17/12/12–16/12/19
07/01/14–06/01/21
14/12/14–13/12/21
19/12/15–18/12/22
12/06/16–11/06/23
20/03/17–19/03/24

3,000
6,250
1,715
13,87515,00033,24387,987414,000
464,720
386,825——

1,133,837

1,426,615

2.0%

2.5%

Options subsisting at the year end on existing ordinary shares held in trust
Senior Executive Long Term Incentive Scheme
December 2009
January 2011
December 2011
December 2012—
15,50039,80032,800Total options subsisting on existing ordinary shares held in trust

88,100134,600

Percentage of issued share capital

0.2%

0.2%

nil
nil
nil
nil

17/12/12–16/12/16
07/01/14–06/01/18
14/12/14–13/12/18
19/12/15–18/12/19—
62,00039,80032,800The number and weighted average exercise prices of those options are as follows:
Weighted
average
exercise price2014

Numberofoptions
2014

Weighted
average
exercise price2013

Numberofoptions
2013

Outstanding at the beginning of the period
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year

£8.47
£13.04£10.37£4.85£7.10

1,561,215
120,670(42,270)(334,005)(83,673)£4.83£12.81
£7.26
£1.81
£3.56

2,016,715
428,625(44,741)(750,107)(89,277)

Outstanding at the year end£9.94

1,221,937£8.47

1,561,215

Exercisable at the year end£4.96

221,842£1.93

161,070

The weighted average share price at the time of exercise of the options was £16.98 (2013: £14.10).

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Notes to the Financial Statements continued
year ended 31 March 2014

12 Income tax expense
Recognised in the Consolidated Statement of Income
2014
£m

2013
(Restated)*
£m

6.5
(0.1)

8.8
(1.0)

6.4

7.8

0.2
—
(0.8)

(0.4)
(0.2)
0.2

(0.6)

(0.4)

5.8

7.4

24.0
5.5

28.4
6.8

1.7
(0.2)
(0.1)
(0.4)
—
0.2
(0.9)

1.9
(0.3)
0.8
(1.2)
(0.2)
0.4
(0.8)

Total tax expense

5.8

7.4

Taxation charge/(credit) recognised in other comprehensive income
Deferred tax – relating to employee benefits

1.0

(3.5)

1.0

(3.5)

0.4

(2.2)

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
Profit before income tax
Income tax using the UK corporation tax rate of 23% (2013: 24%)
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

Taxation charge/(credit) recognised directly in equity
Deferred tax – relating to share options* See Accounting Policies for details of restatement of comparative information.

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 2014 have been calculated based on the rate of 20% which
was substantively enacted at the balance sheet date.
13 Dividends per share
The following dividends per share were paid by the Group:

Previous year interim dividend
Previous year final dividend

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Oxford Instruments plc / Report and Financial Statements 2014

2014
pence

2013
pence

3.05
8.15

2.772
7.228

11.20

10.000Overview

Strategic report

Governance

Financial statements

Company information

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

Interim dividend
Final dividend

2014
pence

2013
pence

3.36
9.04

3.05
8.15

12.40

11.20

The interim dividend was not provided for at the year end and was paid on 7 April 2014. The payment of the interim dividend remains discretionary
until it is paid. The final proposed dividend of 9.04p per share (2013: 8.15p) was not provided at the year end and will be paid on 23 October 2014
subject to authorisation by the Shareholders at the forthcoming Annual General Meeting.
14 Property, plant and equipment

Cost
Balance at 1 April 2012
Additions – business combinations
Additions – other
Disposals
Effect of movements in foreign exchange rates

Land andbuildings£mPlant andequipment£mFixtures andfittings
£m

Total
£m

21.2
—
2.4
(0.1)
0.3

41.7
0.3
5.6
(1.0)
0.7

8.8
—
0.6
(0.1)
0.1

71.7
0.3
8.6
(1.2)
1.1

Balance at 31 March 2013

23.8

47.3

9.4

80.5

Balance at 1 April 2013
Additions – business combinations
Additions – other
Disposals
Transfer to intangible assets
Effect of movements in foreign exchange rates

23.8
0.9
1.2
(0.8)
—
(0.8)

47.3
0.9
5.0
(3.5)
(0.9)
(1.4)

9.4
0.2
0.6
(0.1)
—
(0.2)

80.5
2.0
6.8
(4.4)
(0.9)
(2.4)

Balance at 31 March 2014

24.3

47.4

9.9

81.6

Depreciation and impairment losses
Balance at 1 April 2012
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates

5.4
0.8
—
0.1

32.0
3.3
(0.9)
0.4

6.1
0.5
(0.1)
—

43.5
4.6
(1.0)
0.5

Balance at 31 March 2013

6.3

34.8

6.5

47.6

Balance at 1 April 2013
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates

6.3
0.9
(0.7)
(0.3)

34.8
3.3
(3.2)
(1.0)

6.5
0.8
(0.1)
(0.1)

47.6
5.0
(4.0)
(1.4)

Balance at 31 March 2014

6.2

33.9

7.1

47.2

Carrying amounts
At 1 April 2012

15.8

9.7

2.7

28.2

At 31 March 2013 and 1 April 2013

17.5

12.5

2.9

32.9

At 31 March 2014

18.1

13.5

2.8

34.4

At 31 March 2014, the net book value of plant and equipment included £1.0m (2013: £3.4m) of assets under construction.

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Notes to the Financial Statements continued
year ended 31 March 2014

15 Intangible assets

Goodwill£m

Customer
relatedacquiredintangibles£mTechnology
relatedacquiredintangibles£m

Development
costs
acquiredintangibles£m

Development
costsinternallygenerated£m

Software
£m

Total
£m

Cost
Balance at 1 April 2012
Additions – business combinations
Additions – internally generated
Effect of movements in foreign exchange rates

15.3
9.3
—
1.2

27.4
0.3
—
1.1

44.4
14.1
—
1.9

4.8
—
—
0.1

33.3
—
4.6
0.3

—
—
—
—

125.2
23.7
4.6
4.6

Balance at 31 March 2013

25.8

28.8

60.4

4.9

38.2

—

158.1

Balance at 1 April 2013

25.8

28.8

60.4

4.9

38.2

—

Additions – business combinations
Additions – internally generated
Transfers from property,
plant and equipment

83.6
—

19.6
—

67.6
—

1.8
—

—
5.4

—
—

158.1
172.6
5.4

—

—

—

—

—

0.9

0.9

(1.4)

(2.0)

(2.8)

(0.2)

(0.5)

—

(6.9)

108.0

46.4

125.2

6.5

43.1

0.9

330.1

Amortisation and impairment losses
Balance at 1 April 2012
Amortisation and impairment charge for the year
Effect of movements in foreign exchange rates

1.2
—
0.1

8.9
8.0
0.4

14.4
4.8
0.5

1.0
1.0
—

21.6
3.9
0.4

—
—
—

47.1
17.7
1.4

Balance at 31 March 2013

1.3

17.3

19.7

2.0

25.9

—

66.2

Balance at 1 April 2013
Amortisation and impairment charge
for the year
Effect of movements in foreignexchange rates

1.3

17.3

19.7

2.0

25.9

—

66.2

0.4

5.1

6.6

2.6

3.9

—

18.6

(0.1)

(1.2)

(0.4)

(0.1)

(0.8)

—

(2.6)

Balance at 31 March 2014

1.6

21.2

25.9

4.5

29.0

—

82.2

Carrying amounts
At 1 April 2012

14.1

18.5

30.0

3.8

11.7

—

78.1

At 31 March 2013 and 1 April 2013

24.5

11.5

40.7

2.9

12.3

—

91.9

At 31 March 2014

106.4

25.2

99.3

2.0

14.1

0.9

247.9

Effect of movements in foreignexchange rates
Balance at 31 March 2014

The transfers from property, plant and equipment in the year relate to identifiable software assets.

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Overview

Strategic report

Governance

Financial statements

Company information

15 Intangible assets continued
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit fromthat business combination. The carrying amount of goodwill was allocated to individual CGUs as follows:
2014
£m

2013
£m

2.2
3.9
8.8
—
83.0

2.3
4.2
9.8
0.4
—

4.0
2.3
1.6

3.2
2.3
1.7

0.6

0.6

106.4

24.5

Nanotechnology Tools
NanoScience
NanoAnalysis
AsylumOmicronUnallocatedIndustrial Products
Industrial Analysis
Magnetic Resonance
Austin Scientific
ServiceOI Service

Unallocated goodwill of £83.0m relates to goodwill arising on the acquisition of Andor Technology plc (see Note 6). Since fair values acquired
remain provisional and synergistic savings have not yet been fully forecast, the goodwill has not yet been allocated to CGUs.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
Accounting standards require an impairment test to be carried out by determining the recoverable amount of each cash generating unit whichcontains goodwill. The recoverable amount is calculated as the higher of the fair value less costs to sell or the value in use of the CGU. In theGroup’s case the recoverable amount is based on value in use calculations, with the exception of Andor. Value in use is calculated by discounting
expected future cash flows and in particular Board-approved three year cash flow forecasts, prepared by the management of each CGU, are used
together with 2.5% (2013: 2.5%) per annum growth for each CGU for the subsequent 20 years. This growth rate is considered to be at or below
long term market trends for the Group’s businesses. The Andor CGU has not been tested for impairment based on its fair value less costs to sell.
The Directors consider the recent arm’s length transaction to be reflective of the fair value of the assets acquired.
The Omicron business, part of the Nanotechnology Tools sector, was acquired in 2011. It has underperformed against expectations and, consequently,
during the year the Group made changes to its management and laid out a new strategy. Management have reviewed the carrying values of theintangible assets which initially arose on acquisition of Omicron. As a result of that review the carrying value of the intangible assets in respectof its brand name and acquired development costs have been impaired to zero. This has resulted in charges to the income statement of £0.4m
and £1.8m respectively. Additionally, an impairment charge of £0.4m has been made against the remaining carrying value of the goodwill of
the Omicron CGU.
Key assumptions
The key assumptions are those regarding discount rates, growth rates, expected selling volumes and prices and direct costs during the period.
The growth rates are based on industry growth factors. Changes in selling prices and direct costs are based on past practices and expectationsof future changes in the market.
The pre-tax weighted average costs of capital used for Nanotechnology Tools, Industrial Products and Service in impairment testing are 10.95%–11.45%(2013: 12.25%), 10.45%–10.95% (2013: 11.75%) and 10.45% (2013: 11.25%) respectively in line with the risk associated with each of thebusiness segments. Management have estimated these discount rates by reference to past experience and an industry average weighted costof capital as adjusted for appropriate risk factors reflecting current economic circumstances and the risk profiles of each CGU.

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Notes to the Financial Statements continued
year ended 31 March 2014

15 Intangible assets continued
Sensitivity analysis
The Group’s estimate of impairments are most sensitive to changes in the discount rate and forecast cash flows. Sensitivity analysis has been carriedout by reference to both of these assumptions. This demonstrated that an impairment would only be required if there were an increase in the
discount rates by 58% (2013: 23%) or more or a greater than 36% (2013: 19%) reduction in forecast cash flows on the CGU with the lowest
level of headroom. Sensitivity testing on the other CGUs shows an even greater level of headroom.
Based on the above, the Group considers that its impairment calculations are not sensitive to any reasonable change to the key assumptions.
16 Deferred tax
Movements in deferred tax assets and liabilities were as follows:
Property,plant andequipment£m

Inventory£m

Employeebenefits£mIntangible
assets£m

Tax losses
£m

Other
£m

Total
£m

Balance 31 March 2012
Recognised in income
Recognised in other comprehensive
income

1.6
(0.2)

2.0
0.4

10.2
(0.9)

(10.1)
4.4

5.7
(2.3)

2.9
(1.1)

12.3
0.3

—

—

3.5

—

—

—

Recognised directly in equity
Acquisitions
Foreign exchange

—
—
—

—
—
0.1

2.2
—
—

—
—
—

—
—
—

—
0.3
0.1

3.5
2.2
0.3
0.2

Balance 31 March 2013
Reclassification
Recognised in income
Recognised in other comprehensive
income

1.4
—
(1.4)

2.5
—
0.7

15.0
(0.7)
(1.5)

(5.7)
0.7
4.2

3.4
—
(2.3)

2.2
—
0.9

18.8
—
0.6

—

—

(1.0)

—

—

—

Recognised directly in equity
Acquisitions
Foreign exchange

—
0.3
0.1

—
(0.7)
(0.3)

(0.4)
—
(0.3)

—
(18.6)
(0.3)

—
1.3
—

—
—
(0.3)

(1.0)
(0.4)
(17.7)(1.1)

Balance 31 March 2014

0.4

2.2

11.1

(19.7)

2.4

2.8

(0.8)

2014
£m

2013
£m

2014
£m

2013
£m

2014
£m

2013
£m

Gross assets/(liabilities)
Offset25.0(13.8)

29.8(4.8)(25.8)
13.8(11.0)
4.8

(0.8)
—

18.8
—

Net assets/(liabilities)

11.2

25.0

(12.0)

(6.2)

(0.8)

18.8

2014
£m

2013
£m

1.2
10.7

1.0
10.4

11.9

11.4

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

Net

Deferred tax assets have not been recognised in respect of the following items:

Deductible temporary differences
Tax losses

The tax losses and the deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised
in respect of these items as it is not probable that future taxable profits will be available in the subsidiaries concerned against which the Groupcan utilise the brought forward tax losses.

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Financial statements

Company information

16 Deferred tax continued
No deferred tax liability has been recognised in respect of £37.4m (2013: £46.6m) of undistributed earnings of overseas subsidiaries since themajority of such distributions would not be taxable. In other cases the Group considers that it is able to control the timing of remittances so thatany tax is not expected to arise in the foreseeable future.
On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
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 deferred tax balance at 31 March 2014 has been calculated based on the rate of 20% which wassubstantively enacted at the balance sheet date.
17 Inventories

Raw materials and consumables
Work in progress
Finished goods

2014
£m

2013
£m

23.0
26.2
19.1

17.0
23.6
17.5

68.3

58.1

The amount of inventory recognised as an expense was £172.0m (2013: £168.9m). In the ordinary course of business, the Group makes impairment
provisions for slow-moving, excess and obsolete inventory as appropriate. Inventory is stated after charging impairments of £0.5m in the current
period (2013: £0.7m). There were no credits reversing previous impairments in either the current or prior period. Impairments are included withingross profit.
Inventory carried at fair value less costs to sell is £0.7m (2013: £2.1m) due to the acquisitions as described in Note 6.
18 Trade and other receivables
2014
£m

2013
£m

Trade receivables
Less provision for impairment of receivables

75.3
(1.6)

61.3
(1.5)

Net trade receivables
Prepayments and accrued income
Other receivables

73.7
4.4
2.8

59.8
6.1
5.9

80.9

71.8

Trade receivables are non-interest-bearing. Standard credit terms provided to customers differ according to business and country and are typicallybetween 30 and 60 days.
The maximum exposure to credit risk for trade and other receivables by geographic region was:
2014
£m

2013
£m

UK
China
Japan
USA
Germany
Rest of Europe
Rest of Asia
Rest of the World

5.7
12.3
11.5
20.1
4.6
12.2
5.7
4.4

4.9
9.2
8.2
14.0
9.3
9.9
6.7
3.5

Total

76.5

65.7

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Notes to the Financial Statements continued
year ended 31 March 201418 Trade and other receivables continued
The ageing of financial assets comprising net trade receivables and other receivables at the reporting date was:
2014
£m

2013
£m

44.8
18.6
9.4
3.7

40.1
13.4
9.1
3.1

76.5

65.7

2014
£m

2013
£m

Balance at start of year
Acquired on acquisition
Decrease in allowance

1.5
0.3
(0.2)

1.8
—
(0.3)

Balance at end of year

1.6

1.5

Current (not overdue)
Less than 31 days overdue
More than 30 days but less than 91 days overdue
More than 90 days overdue

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

Valuation allowances are used to record provisions for credit losses. The valuation allowance is reduced and the asset impaired when the customer
is in liquidation.
19 Financial risk management
The Group’s multinational operations and debt financing expose it to a variety of financial risks. In the course of its business, the Group is exposed
to foreign currency risk, interest rate risk, liquidity risk, commodity risk and credit risk. Financial risk management policies are set by the Board of
Directors. These policies are implemented by a central treasury function that has formal procedures to manage foreign exchange risk, interest raterisk and liquidity risk, including, where appropriate, the use of derivative financial instruments. Commodity risk is managed locally by the operating
businesses. The Group has clearly defined authority and approval limits.
In accordance with its treasury policy, the Group does not hold or use derivative financial instruments for trading or speculative purposes. Such
instruments are only used to manage the risks arising from operating or financial assets or liabilities or highly probable future transactions.
The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates, interest rates and certain
commodity prices.
The Group has adopted hedge accounting for a limited number of related commodity contracts as outlined below. However, in common witha number of other companies, the Group has decided that the additional costs of meeting the extensive documentation requirements of IAS 39
to apply hedge accounting to derivative financial instruments used for hedging exposure to foreign currency and interest rate volatility cannot
be justified. Accordingly the Group does not use hedge accounting for such derivatives.
Foreign currency risk
Foreign currency risk arises both where sale or purchase transactions are undertaken in currencies other than the respective functional currenciesof Group companies (transactional exposures) and where the results of overseas companies are consolidated into the Group’s reporting currencyof Sterling (translational exposures). The Group has operations around the world which record their results in a variety of different local functional
currencies. In countries where the Group does not have operations, it invariably has some customers or suppliers that transact in a foreign currency.
The Group is therefore exposed to the changes in foreign currency exchange rates between a number of different currencies but the Group’s primary
exposures relate to the US Dollar, the Euro and the Japanese Yen. To reduce uncertainty the Group maintains a rolling hedge equivalent to 80%of the exposure expected to arise over the following 12 months. The hedge comprises a mixture of fixed forward contracts and option based
products. The remaining 20% is sold on the spot market as it arises. The fair value of outstanding currency contracts recognised as a liability
as at 31 March 2014 amount to £0.4m (2013: £2.5m) and those recognised as an asset amount to £5.3m (2013: £2.2m).
Movements in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Income immediately. However,in order to facilitate a more meaningful comparison of the Group’s performance year on year the element of these movements that relate tohedges in respect of future sales are treated as an adjusting item in the calculation of adjusted earnings (see Note 1).
The Group’s translational exposures to foreign currency risks can relate both to the Consolidated Statement of Income and net assets of overseas
subsidiaries. The Group’s policy is not to hedge the translational exposure that arises on consolidation of the Consolidated Statements of Incomeof overseas subsidiaries.
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19 Financial risk management continued
Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of interest and also the interest cash flow riskthat results from borrowing at variable rates. The Group’s policy is to use a mixture of revolving short and medium term floating rate debt underpinned by longer term fixed rate debt. The short and medium term floating rate debt provides flexibility to reduce debt levels as appropriate.
The longer term fixed rate debt provides stability and cost certainty to the Group’s financing structure.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages this risk by maintaining adequate
committed lines of funding from high quality lenders. The facilities committed to the Group as at 31 March 2014 are set out in Note 22.
Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets such as cash
balances, derivative financial instruments, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables andcash balances. The amounts recognised in the Consolidated Statement of Financial Position are net of appropriate allowances for doubtful receivables,
estimated by the Group’s management based on prior experience and their assessment of the current economic environment. Trade receivables
are subject to credit limits and control and approval procedures in the operating companies.
Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its trade receivables.
Credit risk associated with cash balances and derivative financial instruments is managed by transacting with financial institutions with high quality
credit ratings. In particular a Board approved policy sets out guidelines for which categories of institutions may be used and the maximum amountwhich may be invested with each institution within a particular category. Accordingly the Group’s associated credit risk is limited. The Group has
no significant concentration of credit risk. The Group’s maximum exposure to credit risk is represented by the carrying amount of each financial
asset, including derivative financial instruments, in the Group Consolidated Statement of Financial Position.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2014 was£114.4m (2013: £107.1m).

Trade receivables
Other receivables
Cash and cash equivalents
Forward exchange contracts

2014
£m

2013
£m

73.7
2.8
32.6
5.3

59.8
5.9
39.2
2.2

114.4

107.1

The maximum exposure to credit risk for trade receivables is discussed in Note 18.
Other receivables include £1.5m (2013: £0.8m) in respect of VAT and similar taxes which are not past due date.
Commodity risk
The Group is exposed to changes in commodity prices, particularly in respect of copper used as a major component in one of the Group’s USA
operations. It manages this exposure using derivative commodity hedging instruments.
At 31 March 2014, the Group had outstanding commodity hedge contracts with a fair value liability of £0.1m (2013: £0.1m liability) that were
designated and effective as cash flow hedges of committed and highly probable forecast transactions. Fair value movements of these contracts
have been deferred in equity until the hedged transaction takes place. These contracts all mature within one year of the Consolidated Statementof Financial Position date.
A £0.1m loss net of tax (2013: £0.1m loss) has been deferred in equity as at 31 March 2014 in respect of these contracts. A loss of £0.2m(2013: £0.2m loss) has been recycled to current assets (inventory) in respect of contracts designated as cash flow hedges that have matured
during the year to 31 March 2014.

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Notes to the Financial Statements continued
year ended 31 March 201419 Financial risk management continued
Capital management
The Board considers capital to comprise share capital, reserves and the net cash or net debt position of the Company. The Company was in a net
debt position at the year end. Total capital at the end of the current year totalled £264.5m (2013: £98.5m).
The Board’s long term objective is to have an efficient capital structure by maintaining a balance between the higher returns that might be possible
with higher levels of borrowings and the advantages and security afforded by a sound capital position. This is monitored by reference to the ratioof net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) and the Board has set itself internal limits, which are wellinside any covenants the Group has with lenders. The Group maintains the right to purchase its own shares in the market; the timing of thesepurchases would depend on market prices. Buy and sell decisions are made on a specific transaction basis by the Board.
The Board carefully considers dividend payments and the Company moved from a fixed dividend policy to a progressive one in the year ended
March 2011. In doing this the Board will look to increase dividends as adjusted earnings per share increase although there will not be a direct
correlation. The Board does not have a policy to pay a fixed dividend yield or to maintain a fixed rate of dividend cover, but assess both of these
metrics together with dividends paid by peers when assessing what dividend to recommend.
As set out in the Chief Executive’s Statement the Group’s strategy is to grow its business in its core markets of physical and materials science andto exploit convergence to expand into life sciences. An essential part of this will be to make acquisitions. In line with the objective of maintaining
a balance between borrowings and equity the Group would seek to finance smaller “bolt-on” acquisitions from operating cash flow thus maintainingbalance sheet efficiency. Larger acquisitions would be financed either by equity or a mixture of equity and debt so as to ensure the Group has amanageable ratio of net debt to EBITDA.
The Board encourages employees to hold shares in the Company. As well as various share option plans (full details of which are given in Note 11),from April 2008 all UK employees have been offered the opportunity to take part in a Share Incentive Plan (SIP). Under this plan, employees areable to invest up to £1,500 each tax year in shares in the Company. The Company awards one additional free share (a matching share) for every
five shares bought by each employee.
There were no changes to the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are
subject to externally imposed capital requirements.
20 Financial instruments
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statement of Financial Position are
as follows:
Fair
value
hierarchy

Assets carried at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Assets carried at fair value
Derivative financial instruments:– Foreign currency contracts

Liabilities carried at fair value
Derivative financial instruments:– Foreign currency contracts– Copper hedging contracts (designated as an IAS 39 hedge)
Contingent consideration

Liabilities carried at amortised cost
Trade and other payables
Borrowings

2

2
2
3

Carrying
amount
2014
£m

Fair
value
2014
£m

Carrying
amount
2013
£m

Fair
value
2013
£m

73.7
2.8
32.6

73.7
2.8
32.6

59.8
5.9
39.2

59.8
5.9
39.2

5.3

5.3

2.2

2.2

5.3

5.3

2.2

2.2

(0.4)
(0.1)
(10.7)(0.4)(0.1)(10.7)(2.5)(0.1)(11.7)(2.5)(0.1)(11.7)(11.2)(11.2)(14.3)(14.3)(84.9)(156.9)(84.9)(156.9)(72.4)—(72.4)—

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the above table.
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Financial statements

Company information

20 Financial instruments continued
Derivative financial instruments
Derivative financial instruments are marked to market using market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal and interest cash flows using themarket rate of interest at the reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the carrying amount is deemed to reflect the fair value. All other receivables/
payables are discounted to determine their fair value. Advances received are excluded from other payables above as these are not considered tobe financial liabilities.
Contingent consideration
The fair value of contingent consideration is estimated based on the forecast future performance of the acquired business over a specific future timeframe.
Fair value hierarchy
The table above gives details of the valuation method used in arriving at the fair value of financial instruments. The different levels have been
identified as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); andLevel 3: inputs for the asset or liability that are not based on observable market data.
There have been no transfers between levels during the year.
Maturity of financial liabilities

31 March 2014

Trade and other payables
Deferred consideration
Foreign exchange contracts
Copper hedging contracts
Borrowings

31 March 2013

Trade and other payables
Deferred consideration
Foreign exchange contracts
Copper hedging contracts

Carrying
amount£m

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

84.9
10.7
0.4
0.1
156.9

84.9
12.9
0.4
0.1
156.9

81.8
1.4
0.4
0.1
15.5

3.1
11.5
—
—
141.4

253.0

255.2

99.2

156.0

Carrying
amount£m

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

74.2
9.9
2.5
0.1

74.2
12.6
2.5
0.1

72.4
0.6
2.0
0.1

1.8
12.0
0.5
—

86.7

89.4

75.1

14.3

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Notes to the Financial Statements continued
year ended 31 March 2014

20 Financial instruments continued
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:Carrying
amount2014£m

Carrying
amount2013£m

Variable rate instruments
Financial assets
Financial liabilities

32.6(87.8)

39.2—

Fixed rate instruments
Financial liabilities(69.1)—

Sensitivity analysis
The Group has estimated the impact on the Consolidated Statement of Income and on Equity of the following changes in market conditions at
the balance sheet date:• one percentage point increase in interest rates;• ten percentage point weakening in the value of Sterling against all currencies;• ten percentage point strengthening in the value of Sterling against all currencies;• five percentage point increase in the cost of copper; and• five percentage point decrease in the cost of copper.
The sensitivities above represent the Directors’ view of reasonably possible changes in each risk variable, not worst case scenarios or stress tests.
The outputs from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur at the year end andare applied to the risk exposures at that date. Accordingly they show the impact on the balance sheet of an instantaneous shock. The calculations
include all hedges in place at the year end.
Actual results in the future may differ materially from these estimates due to commercial actions taken to mitigate any potential losses from suchrate movements, to the interaction of more than one sensitivity occurring and to further developments in global financial markets. As such thistable should not be considered as a projection of likely future gains and losses.
1% increase
in interest
rates
£m

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

5% increasein copper
prices£m

5% decreasein copper
prices£m

At 31 March 2014
Impact on Consolidated Statement of Income
Impact on equity

—
—

4.5
4.5

(3.7)
(3.7)

—
0.1

—
(0.1)

At 31 March 2013
Impact on Consolidated Statement of Income
Impact on equity

—
—

7.2
7.2

(5.9)
(5.9)

—
0.1

—
(0.1)

1 Of the effect on the Consolidated Statement of Income, £6.7m (2013: £8.1m) would have been recognised on the “mark to market” line (see Note 1).
2 Of the effect on the Consolidated Statement of Income, £(5.5)m (2013: £(6.6)m) would have been recognised on the “mark to market” line (see Note 1).

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Financial statements

Company information

21 Called up share capital
Issued and fully paid ordinary shares:
2014
Numberof shares

2013
Numberof shares

At the beginning of the year
Issued for cash

56,916,830
334,005

56,166,723
750,107

At the end of the year

57,250,835

56,916,830

2014

Allotted, called up and fully paid
Ordinary shares of 5p each

Number ofshares57,250,835

New issues of ordinary shares of 5p each during the year
Exercise of executive share options
Exercise of executive share options – share appreciation rights

2013
£m

Number ofshares£m

2.9

56,916,830

2.8

Numberof shares

Aggregate
nominal value

Consideration
per share

202,123
131,882£10,106£6,594£nil – £9.90£0.05

The total consideration received from exercise of share options in the year was £0.7m (2013: £0.4m).
The holders of the ordinary shares are entitled to receive dividends as declared, a proportionate amount of capital on a winding up of the Company
and one vote per share at meetings of the Company.
22 Borrowings
Current

Term Loans – unsecured

Non-current

Revolving credit facility – unsecured
European Investment Bank Loan – unsecured
Loan Notes – unsecured

Effective
interest rate

Earlier of re-pricing
date or maturity date

2014
£m

2013
£m

1.73%

April 2014

15.5

—

15.5

—

Effective
interest rate

Earlier of re-pricing
date or maturity date

2014
£m

2013
£m

2.23%
3.30%
4.36%

April 2014
August 2019
March 2021

72.3
24.8
44.3

—
—
—

141.4

—

The Group’s undrawn committed facilities available at 31 March 2014 were £27m comprising the undrawn portion of the Group’s £100m revolving
credit facility. This facility expires on 10 December 2019.
The European Investment Bank loan is repayable in equal quarterly instalments commencing November 2016 with the final maturity in August 2019.

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Notes to the Financial Statements continued
year ended 31 March 2014

23 Retirement benefit obligations
The Group operates defined benefit plans in the UK and USA; both offer pensions in retirement and death in service benefit to members. Pension
benefits are related to members’ final salary at retirement and their length of service. Both schemes have been closed to new members since 2001
and closed to future accrual since 2010.
The amounts recognised in the Consolidated Statement of Financial Position are:Present value of funded obligations
Fair value of plan assets
Recognised liability for defined benefit obligations

UK
2014
£m

USA
2014
£m

Total
2014
£m

UK
2013
£m

USA
2013
£m

Total
2013
£m

235.7
(191.9)

7.2
(4.7)

242.9
(196.6)235.5(190.6)

10.4
(7.4)

245.9
(198.0)

43.8

2.5

46.3

44.9

3.0

47.9

Reconciliation of the opening and closing balances of the present value of the defined benefit obligation
UK
2014
£m

USA
2014
£m

Total
2014
£m

UK
2013
£m

USA
2013
£m

Total
2013
£m

Benefit obligation at the beginning of the year
Interest on defined benefit obligation
Settlement loss
Benefits paid
Settlement payments
Remeasurement (gain)/loss on obligation
Exchange rate adjustment

235.5
10.5
—
(5.0)
—
(5.3)
—

10.4
0.4
0.1
(0.3)
(2.8)
0.1
(0.7)

245.9
10.9
0.1
(5.3)
(2.8)
(5.2)
(0.7)

206.3
10.0
—
(4.4)
—
23.6
—

9.1
0.4
—
(0.4)
—
0.8
0.5

215.4
10.4
—
(4.8)
—
24.4
0.5

Benefit obligation at the end of the year

235.7

7.2

242.9

235.5

10.4

245.9

Reconciliation of the opening and closing balances of the fair value of plan assets
UK
2014
£m

USA
2014
£m

Total
2014
£m

UK
2013
£m

USA
2013
£m

Total
2013
£m

Fair value of plan assets at the beginning of the year
Interest on plan assets
Contributions by employers
Benefits paid
Settlement payments
Administrative expenses
Actual return on assets excluding interest income
Exchange rate adjustment

190.6
8.6
5.6
(5.0)
—
(0.4)
(7.5)
—

7.4
0.3
0.3
(0.3)
(2.8)
—
0.4
(0.6)

198.0
8.9
5.9
(5.3)
(2.8)
(0.4)
(7.1)
(0.6)

173.6
8.4
5.0
(4.4)
—
(0.4)
8.4
—

6.6
0.3
0.3
(0.4)
—
—
0.3
0.3

180.2
8.7
5.3
(4.8)
—
(0.4)
8.7
0.3

Fair value of plan assets at the end of the year

191.9

4.7

196.6

190.6

7.4

198.0

2014
£m

2013
£m

2.0
3.7

1.7
3.5

5.7

5.2

Expense recognised in the Consolidated Statement of Income

Total – defined benefit expense
Contributions to defined contribution schemes

The Group expects to contribute approximately £6.4m to defined benefit plans in the next financial year.

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23 Retirement benefit obligations continued
Expense recognised in the Consolidated Statement of Income continued
The pension costs are recorded in the following lines of the Consolidated Statement of Income:

Cost of sales
Selling and marketing costs
Administration and shared services
Research and development
Financial expenditure

2014
£m

2013
£m

1.1
0.7
1.3
0.6
2.0

1.0
0.8
1.2
0.5
1.7

5.7

5.2

2014
£m

2013
£m

(7.1)
(0.9)

8.7
0.4

2.2
3.9

(24.4)(0.4)

Remeasurement gains and losses shown in the Consolidated Statement of Comprehensive Income

Actual return on assets excluding interest income
Experience (loss)/gain on scheme obligations
Changes in assumptions underlying the present value of scheme obligations– Financial– Demographic

Cumulative actuarial losses reported in the Consolidated Statement of Comprehensive Income since 1 April 2004, the transition date to IFRS, are£39.6m (2013 restated: £37.7m cumulative actuarial losses).
History of experience gains and losses are as follows:

Present value of benefit obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
Difference between the expected and actual return:
Amount £m% of scheme assets
Experience gains/(losses) on scheme liabilities:
Amount £m% of the present value of the scheme liabilities

2014
£m

2013
£m

2012
£m

2011
£m

2010
£m

242.9
(196.6)245.9(198.0)215.4(180.2)184.8(173.1)

192.7(157.6)

46.3

47.9

35.2

11.7

35.1

(7.1)
(4%)

8.7
4%

(3.0)
(2%)

4.8
3%

23.8
15%

(0.9)
—%

0.4
—%

(4.7)
2%

10.9
(6%)

(46.7)
24%

The table below shows the sensitivity of the Consolidated Statement of Financial Position to changes in the significant pension assumptions:

Value of funded obligations
Fair value of plan assets
Deficit

Balance at
31 March 2014£m

Discount rate(-0.1% p.a.)£m

Inflation rate(+0.1% p.a.)£mLife expectancy(+1 year)£m

242.9(196.6)247.4(196.6)247.2(196.6)250.1(196.6)

46.3

50.8

50.6

53.5

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Notes to the Financial Statements continued
year ended 31 March 2014

23 Retirement benefit obligations continued
Defined benefit scheme – United Kingdom
A full actuarial valuation of the UK plan was carried out as at 31 March 2012 and has been updated to 31 March 2014 by a qualified independentactuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):

Discount rate
Rate of increase in pensions in payment (3LPI)
Rate of increase in pensions in payment (5LPI)
Rate of inflation (CPI)
Mortality – pre and post-retirement – males and females

As at
31 March
2014
%

As at
31 March
2013
%

4.5
2.5
3.1
2.3
94% of S1PA tables(97% for females) future
improvement in line with CMI
2013 with 1% long term trend

4.5
2.5
3.2
2.35
94% of S1PA tables(97% for females) future
improvement in line with CMI
2011 with 1% long term trend

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

Pre-retirement – males
Pre-retirement – females
Post-retirement – males
Post-retirement – females

2014
years

2013
years

23.8
25.9
22.4
24.4

23.9
26.1
22.5
24.6

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

Equities
Corporate bonds
Gilts
Cash
Alternative

Value at
31 March2014£mValue at
31 March
2013
£m

84.1
40.4
36.6
13.8
17.0

67.2
41.6
51.4
12.1
18.3

191.9

190.6

Defined benefit scheme – United States
A full actuarial valuation of the USA plan was carried out as at 1 January 2012, which for reporting purposes has been updated to 31 March 2014
by a qualified independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):

Discount rate
Rate of increase to pensions in payment
Rate of inflation
Mortality – pre and post-retirement110

Oxford Instruments plc / Report and Financial Statements 2014

As at
31 March
2014
%

As at
31 March
2013
%

4.50
0.00
2.25
RP-2000CH with Projection
Scale BB (fully generational),
male and female

4.25
0.00
2.25
2013 IRS prescribed mortality –optional combined table for smallplans, male and female

Overview

Strategic report

Governance

Financial statements

Company information

23 Retirement benefit obligations continued
Defined benefit scheme – United States continued
The assets in the plan were:

Equities
Bonds
Property and other

Value at
31 March2014£mValue at
31 March
2013
£m

3.0
1.0
0.7

3.5
3.3
0.6

4.7

7.4

Defined contribution schemes
In the UK employees are offered participation in the defined contribution Oxford Instruments Stakeholder Plan. The Company contribution rateand employee contribution rate varies between grades and whether the individual had previously been in the Defined Benefit scheme. The Company
contribution ranges between 4% and 14% of base salary. The Group also operates a 401k defined distribution plan in the USA. Details of pension
schemes contributions made in respect of Directors can be found in the Directors’ Remuneration Report.
24 Trade and other payables
2014
£m

2013
£m

Trade payables
Customer deposits
Social security and other taxes
Accrued expenses and deferred income
Contingent consideration due within one year
Other creditors

37.8
16.7
3.1
37.2
0.7
3.7

31.4
28.4
3.0
36.4
0.6
1.6

Current trade and other payables
Amounts due after more than one year – contingent consideration
Amounts due after more than one year – accrued expenses

99.2
10.0
3.1

101.4
9.3
1.8

Total trade and other payables

112.3

112.5

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

Balance at 1 April 2013
Fair value of contingent consideration on acquisitions in the year
Unwind of discount in respect of deferred consideration
Contingent consideration paid
Contingent consideration released to the consolidated statement of income
Effect of movement in foreign exchange

9.9
1.6
0.9
(0.5)
(0.1)
(1.1)

Balance at 31 March 2014

10.7

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Notes to the Financial Statements continued
year ended 31 March 201425 Provisions for other liabilities and charges
Warranties
£m

Other
£m

Total
£m

Balance at 1 April 2013
Provisions made during the year
Provisions used during the year
Provisions released during the year
Effect of movement in foreign exchange

5.9
3.3
(1.5)
(2.3)
(0.2)

4.4
0.3
—
(0.1)
(0.1)

10.3
3.6
(1.5)
(2.4)
(0.3)

Balance at 31 March 2014

5.2

4.5

9.7

Warranty provisions
Product warranty provisions reflect commitments made to customers on the sale of goods in the ordinary course of business and included within
the Group companies’ standard terms and conditions. Warranty commitments cover a period of between one and five years and typically apply
for a 12-month period. The provision represents the Directors’ best estimate of the Group’s liability based on past experience.
Other provisions
Other provisions relate to various obligations including obligations in respect of onerous leases, obligations to employees in Japan on terminationof their employment and claims and disputes such as intellectual property claims arising against the Group in the ordinary course of business.
The Company has on occasion been required to take legal or other actions to defend itself against proceedings brought by other parties. Provisions
are made for the expected costs associated with such matters, based on past experience of similar items and other known factors, taking into
account professional advice received, and represent Directors’ best estimate of the likely outcome. The timing of utilisation of these provisions isfrequently uncertain reflecting the complexity of issues and the outcome of various court proceedings and negotiations. Contractual and otherprovisions represent the Directors’ best estimate of the cost of settling future obligations. However, no provision is made for proceedings whichhave been or might be brought by other parties against Group companies unless the Directors, taking into account professional advice received,
assesses that it is more likely than not that such proceedings may be successful. The Group’s expectation is that the majority of the otherprovisions are likely to be utilised within a 12 month period.
26 Operating leases
LeasesNon-cancellable future total minimum operating lease rentals are payable as follows:

Within one year
Between one and five years
Over five years

2014
£m

2013
£m

2.6
7.1
2.7

3.4
5.4
1.7

12.4

10.5

During the year ended 31 March 2014 £2.6m was recognised as an expense in the Consolidated Statement of Income in respect of operatingleases (2013: £1.9m).
The majority of operating leases relate to properties occupied by the Group in the course of its business. There are no material contingent rent
payment arrangements, purchase options or escalation clauses. It is expected that most leases could be renewed on the existing or similar terms.
The leases do not impose any material restrictions in respect of dividends, additional debt requirements or further leasing.
27 Capital commitments
During the year ended 31 March 2014, the Group entered into contracts to purchase property, plant and equipment which are expected to besettled in the following financial year for less than £0.2m (2013: £0.3m).
28 Contingencies
In an international group of companies a variety of legal claims arise from time to time. The Board, having taken legal advice, are of the opinion
that any ongoing actions and investigations will not have a material impact on the Group’s financial position.

112

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Overview

Strategic report

Governance

Financial statements

Company information

29 Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note.
The remuneration of key management personnel is as follows:
2014
£m

2013
£m

Short term employee benefits
Post employment benefits
Share-based payment

1.2
0.1
0.6

1.7
0.1
0.5

Total

1.9

2.3

Short term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
During the year the Company paid £0.2m (2013: £0.2m) to Imperialise Ltd, a company for whom Nigel Keen is a Director. The payment was forhis services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2013: £nil).
In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £0.3m. During the year Jonathan Flintbought a further proportion of the house paying £0.1m (2013: £0.1m). The balance outstanding at the year end was £nil (2013: £0.1m). An arm’s
length rent was paid to the Company for the proportion of the house owned by the Company.
30 Principal Group entities

Oxford Instruments Overseas Marketing Ltd
Oxford Instruments Industrial Products Ltd
Oxford Instruments Nanotechnology Tools Ltd
Omicron UHV Technik Ltd
Oxford Instruments AFM Ltd
Andor Technology Ltd
Oxford Instruments America Inc.
Oxford Instruments Service LLC
Oxford Instruments Superconductivity Wire LLC
Oxford Instruments Austin, Inc.
Oxford Instruments X-Ray Technology Inc.
Oxford Superconducting Technology LP
Omniprobe, Inc.
Oxford Instruments AFM Inc.
Bitplane Inc.
Spectral Applied Research Inc.
Oxford Instruments KK
Oxford Instruments (Shanghai) Company Ltd**
Oxford Instruments India Private Ltd
Oxford Instruments HKL Technologies A/S
Oxford Instruments Analytical Oy
Oxford Instruments SAS
Omicron Nanotechnology GmbH
Oxford Instruments GmbH
Oxford Instruments Analytical GmbH
Roentgenanalytik Systeme GmbH
Bitplane AG
Oxford Instruments Pte Ltd

Equity owned by
the Company%

Country ofincorporation

Principal
activity

*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100
*100

UK
UK
UK
UK
UK
UK
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
Japan
China
India
Denmark
FinlandFranceGermany
Germany
Germany
Germany
Switzerland
SingaporeMarketingTrading
Trading
Trading
Trading
Trading
Distribution
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Distribution
Trading
Distribution
Trading
Trading
Distribution
Trading
Distribution
Trading
Trading
Trading
Marketing** Year end is 31 December.

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113www.oxford-instruments.com

Notes to the Financial Statements continued
year ended 31 March 2014

30 Principal Group entities continued
Equity owned by the Company represents issued ordinary share capital.
The information given above reflects only the undertakings whose results or financial position principally affect the figures in the Group consolidated
financial statements. A full list of the Group companies as at 31 March 2014 is available for inspection at the Company’s registered office and will
be included in the company’s next annual return.
All the above companies are engaged in the research, development, manufacture, service or sale of high technology tools and systems. Equity owned
by subsidiary companies is indicated by an asterisk (*). All the above companies are consolidated in the Group accounts.
31 Subsequent events
The interim dividend of 3.36p per share (total cost £1.9m) was paid after the year end. In addition on 10 June 2014 the Directors proposed a final
dividend of 9.04p per ordinary share (total cost £5.2m). The total amount of £7.1m has not been provided for and there are no income tax consequences.
32 Exchange rates
The principal exchange rates to Sterling used were:Year end rates

2014

2013

US Dollar
Euro
Yen

1.67
1.21
172

1.52
1.18
143

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

US Dollar

Euro

Yen

1.58
1.59
1.61
1.56

1.23
1.26
1.24
1.19

127
125
132
142

Average translation rates 2014

April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
February
March
Average translation rates 2013

Quarter 1
Quarter 2
Quarter 3
Quarter 4

114

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Overview

Strategic report

Governance

Financial statements

Company information

Parent Company Balance Sheetas at 31 March 2014

Notes

2014
£m

2013
£m

c
d

2.5
320.2

1.5
147.1

322.7

148.6

94.3
1.5

60.0
29.6

95.8

89.6

(31.7)(13.1)(3.8)(25.1)Net current assets(44.8)
51.0(28.9)
60.7

Total assets less current liabilities
Long term loans
Provisions for liabilities

373.7(141.4)
—

209.3
—
(0.2)

232.3

209.1

2.9
61.3
0.1
7.6
160.4

2.8
60.6
0.1
7.6
138.0

232.3

209.1

Fixed assets
Tangible assets
Investments in subsidiary undertakings
Current assets
Debtors (including £84.5m (2013: £48.8m) due after more than one year)
Cash at bank and in handeCreditors: amounts falling due within one year
Bank loans and overdrafts
Other creditorsfg

Net assets
Share capital
Share premium account
Capital redemption reserve
Other reserves
Profit and loss account

h
h
h
h
h

Equity Shareholders’ funds
The Financial Statements were approved by the Board of Directors on 10 June 2014 and signed on its behalf by:

Jonathan Flint
Director
Company Number: 775598

Kevin Boyd
Director

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

50 yearsComputer equipment

4 years

Motor vehicles

4 years

Financial instruments
The Company’s accounting policies for financial instruments under UK GAAP, namely FRS 25 Financial Instruments: presentation, FRS 26 Financial
Instruments: measurement and FRS 29 Financial Instruments: disclosures, are the same as the Group’s accounting policies under IFRS, namely IAS 32
Financial Instruments: presentation, IAS 39 Financial Instruments: recognition and measurement and IFRS 7 Financial Instruments: disclosures.
These policies are set out in accounting policy “(e) Financial instruments” in the Group accounting policies. As consolidated financial information
has been disclosed under IFRS 7 in Notes 18, 19 and 20 to the Group Financial Statements, the Parent Company is exempt from the disclosure
requirements of FRS 29.
Post-retirement benefits
The Company participates in a Group wide pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held
separately from those of the Company. The Company is unable to identify its share of the underlying assets and liabilities of the scheme on aconsistent and reasonable basis and therefore, as required by FRS 17 Retirement benefits, accounts for the scheme as if it were a defined contribution
scheme. As a result, the amount charged to the profit and loss account represents the contributions payable to the scheme in respect of theaccounting period. Refer to Note j for the additional disclosures required by FRS 17.
Foreign currencies
The Company enters into forward exchange contracts and options to mitigate the currency exposures that arise on sales and purchases denominatedin foreign currencies. Transactions in foreign currencies are converted into Sterling at the rate ruling on the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated at the rates ruling at the Balance Sheet date or at the appropriate forward contract
rates. Exchange profits and losses arising from the above are dealt with in the profit and loss account.
Own shares held by Employee Benefit Trust (EBT)Transactions of the Group-sponsored EBT are included in the Group Financial Statements. In particular, the trust’s purchase of shares in the
Company are debited directly to equity.
Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.

116

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Overview

Strategic report

Governance

Financial statements

Company informationa) Accounting policies continued
Share-based payments
The share option programme allows employees to acquire shares of the Company. The fair value of options granted after 7 November 2002 andthose not yet vested as at 1 April 2005 is recognised as an employee expense with a corresponding increase in equity. The fair value is measured
at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options
granted is measured using an option pricing model, taking into account the terms and conditions upon which the options were granted. The amountrecognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market conditions.
When options are granted to employees of subsidiaries of the Company, the fair value of options granted is recognised as an employee expensein the Financial Statements of the subsidiary undertaking together with the capital contribution received. In the Financial Statements of the Company,
the options granted are recognised as an investment in subsidiary undertakings with a corresponding increase in equity.
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past expectations
or events which can be reasonably estimated. The timing of recognition requires the application of judgement to existing facts and circumstances
which can be subject to change. Amounts provided represent the Group’s best estimate of exposure based on currently available information.
Dividends on shares presented within Shareholders’ funds
Dividends unpaid at the Balance Sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised andare no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the Financial Statements.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company
considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract as acontingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
b) Profit for the year
The Company’s profit for the financial year was £27.2m (2013: £19.5m).
The auditor’s remuneration comprised £136,000 (2013: £115,000) for statutory audit.
The average number of people employed by the Company (including Directors) during the year was 57 (2013: 50). All of these individuals wereinvolved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:

Wages and salaries
Social security costs
Other pension costs

2014
£m

2013
£m

4.0
0.6
0.3

5.7
1.3
0.6

4.9

7.6

The share-based payment expense was £0.8m (2013: £0.7m). Details of the Group’s share option schemes are included in Note 11 of the Group
Financial Statements.
Full details of the emoluments paid to Directors can be found in the Directors’ Remuneration Report on pages 46 to 65.

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Notes to the Parent Company Financial Statements continuedc) Tangible fixed assets
Software£m

Land andbuildings£m

Motorvehicles£mComputerequipment
£m

Total
£m

Cost
Balance at 1 April 2013
Additions
Disposals
Transfers between categories

—
0.8
—
0.1

0.1
—
(0.1)
—

0.1
—
—
—

4.8
0.5
—
(0.1)

5.0
1.3
(0.1)
—

Balance at 31 March 2014

0.9

—

0.1

5.2

6.2

Depreciation
Balance at 1 April 2013
Charge for year

—
—

—
—

—
—

3.5
0.2

0.2

Balance at 31 March 2014

—

—

—

3.7

3.7

Net book value
At 31 March 2013

—

0.1

0.1

1.3

1.5

At 31 March 2014

0.9

—

0.1

1.5

2.5

Investments
in subsidiary
undertakings
£m

Other
investments
£m

Total
£m

Cost or valuation
Balance at 1 April 2013
Additions
Disposals

162.8
176.1
—

0.3
—
(0.3)

163.1
176.1
(0.3)

Balance at 31 March 2014

338.9

—

338.9

Impairment
Balance at 1 April 2013
Disposals
Impairment recognised in year

15.7
—
3.0

0.3
(0.3)
—

16.0
(0.3)
3.0

Balance at 31 March 2014

18.7

—

18.7

Net book value at 31 March 2013

147.1

—

147.1

Net book value at 31 March 2014

320.2

—

320.2

3.5

d) Investments

The addition to investments in subsidiary undertakings in the year relates to the acquisition of Andor Technology plc via a subsidiary undertaking,
Oxford Instruments Nanotechnology Tools Holdings Limited.

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Overview

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Governance

Financial statements

Company informatione) Debtors

Amounts falling due within one year:
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Deferred tax asset

2014
£m

2013
£m

88.4
5.3
0.1
0.5

51.9
6.9
0.7
0.5

94.3

60.0

2014
£m

2013
£m

0.8
7.6
0.9
1.4
2.4
—

0.3
16.5
1.3
2.8
—
4.2

13.1

25.1

Amounts owed by subsidiary undertakings include £84.5m (2013: £48.8m) due after more than one year.
f) Other creditors

Trade creditors
Amounts owed to subsidiary undertakings
Tax, social security and sales related taxes
Other financial liabilities
Accruals and deferred income
Other creditorsg) Provisions for liabilities
Vacant leaseprovision£mBalance at 1 April 2013
Released during the year

0.2
(0.2)

Balance at 31 March 2014—

Deferred tax asset
2014
£m

2013
£m

Balance at 1 April
Profit and loss (charge)/credit

0.5
—

—
0.5

Balance at 31 March

0.5

0.5

The amounts of deferred tax assets are as follows:
Recognised

Excess of depreciation over corresponding capital allowances

2014
£m

2013
£m

0.5

0.5

0.5

0.5

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Notes to the Parent Company Financial Statements continuedg) Provisions for liabilities continued
Deferred tax asset continued
The Company recognises deferred tax assets only to the extent that there will be suitable taxable profits from which the future reversal of the underlying
timing differences can be deducted. Deferred tax assets have not been recognised for losses arising in prior periods of £5.8m (2013: £5.8m) as theCompany does not expect to generate suitable taxable profits in the foreseeable future.
On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
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 deferred tax balance at 31 March 2014 has been calculated based on the rate of 20% which wassubstantively enacted at the balance sheet date.
h) Reserves
Sharecapital£mSharepremium
account£m

Capitalredemption
reserve£m

Otherreserves£m

Profit andlossaccount
£m

Total
£m

Balance at 1 April 2013
Profit for the year
Proceeds from shares issued
Share options awarded to employees
Share options awarded to employees of subsidiaries
Dividends paid

2.8
—
0.1
—
—
—

60.6
—
0.7
—
—
—

0.1
—
—
—
—
—

7.6
—
—
—
—
—

138.0
27.2
—
0.8
0.8
(6.4)

209.1
27.2
0.8
0.8
0.8
(6.4)

Balance at 31 March 2014

2.9

61.3

0.1

7.6

160.4

232.3

Details of issued, authorised and allotted share capital are included in Note 21 of the Group Financial Statements.
Details of treasury shares held by the Company are included as a note to the Consolidated Statement of Changes in Equity.
Details of the Group’s share option schemes are included in Note 11 of the Group Financial Statements.
Details of dividends paid are included in Note 13 of the Group Financial Statements.
Other reserves relates to premium on shares issued as part of acquisitions made in the year to 31 March 1987.
i) Pension commitments
Defined benefit scheme
The Oxford Instruments Pension Scheme, a defined benefit scheme, was closed to new members from 1 April 2001 and to future accrual fromthe year to 31 March 2011. The Company continues to make deficit recovery contributions to this Scheme. Contributions are based on thepension deficit of the Group as a whole. The assets of the Scheme are held in a separate trustee administered fund.
The Directors do not believe it is possible to allocate the assets and liabilities of the Scheme to individual Group members on a consistent andreasonable basis. Accordingly, under FRS 17 the Company is exempt from recognising its share of the net pension deficit and accounts for thescheme as though it were a defined contribution scheme. Details of the scheme and most recent actuarial valuation can be found in Note 23 of
the Group Financial Statements. The contributions paid by the Company to the Oxford Instruments Pension Scheme were £0.4m (2013: £0.3m).
Stakeholder pension scheme
The Company makes contributions to a stakeholder pension scheme. The pension costs charge for the year represents contributions payable by
the Company to the scheme. These amounted to £0.3m (2013: £0.3m). There were no outstanding contributions at the end of the financial year
(2013: £nil).

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Financial statements

Company informationj) Guarantees
The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to the pension scheme. The guarantee isfor the excess of 105% of the liabilities of the scheme, calculated on the basis of Section 179 of the Pensions Act 2004, over the assets of the scheme.
The Company and its UK subsidiaries have entered into a cross-guarantee for £10.0m (2013: £10.0m) in respect of overdraft facilities of which£nil (2013: £nil) was drawn at the year end.
k) Commitments
At 31 March 2014, capital commitments contracted were £nil (2013: £nil) and authorised were £nil (2013: £nil).
l) Subsequent events
See Note 31 to the Group Financial Statements for details of dividends paid or declared after the Balance Sheet date.
m) Related party transactions
The Company has a related party relationship with its Directors and Executive Officers and with its wholly owned subsidiary companies.
Transactions with key management personnel are disclosed in the Directors’ Remuneration Report on pages 46 to 65. There were no othersignificant transactions with key management personnel in either the current or preceding year other than the following.
During the year the Company paid £0.2m (2013: £0.2m) to Imperialise Ltd, a company for whom Nigel Keen is a Director. The payment wasfor his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2013: £nil).
In 2010 the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £0.3m. During the year
Jonathan Flint bought a further proportion of the house paying £0.1m (2013: £0.1m). The balance outstanding at the year end was £nil
(2013: £0.1m). An arm’s length rent was paid to the Company for the proportion of the house owned by the Company.

Report and Financial Statements 2014 / Oxford Instruments plc

121

www.oxford-instruments.com

Historical Financial Summary

2010(Restated)**£m

2011(Restated)**£m

2012(Restated)**£m2013(Restated)**
£m

2014
£m

Consolidated Statement of Income
Revenue

211.5

262.3

337.3

350.8

360.1

Adjusted operating profit
Other operating income
Reversal of acquisition related fair value adjustments
Acquisition related costs
Settlement loss on US pension scheme
Reorganisation costs and impairment
Amortisation of acquired intangibles

14.3
—
—
—
—
(0.4)
(4.1)

27.7
4.7
—
—
—
(0.6)
(4.7)

41.7
7.0
(1.7)
(1.5)
—
—
(11.2)

49.3
—
(0.5)
(2.1)
—
—
(13.8)

50.3
—
(3.7)
(7.8)
(0.1)
—
(14.7)

Operating profit
Net financing (costs)/income

9.8
8.4

27.1
(2.1)

34.3
—

32.9
(4.5)

24.0
—

(Loss)/profit before taxation
Income tax credit/(expense)

18.2
(4.8)

25.0
5.9

34.3
(10.9)

28.4
(7.4)

24.0
(5.8)

(Loss)/profit for the year

13.4

30.9

23.4

21.0

18.2

Adjusted profit before tax*

12.0

24.5

40.2

47.0

47.1

Consolidated Statement of Financial Position
Property, plant and equipment
Intangible assets
Deferred and current tax
Inventories
Trade and other receivables
Trade and other payables

22.8
49.3
4.5
39.3
60.2
(70.0)

23.6
41.6
11.2
46.6
52.5
(76.6)

28.2
78.1
7.6
59.3
61.0
(99.2)

32.9
91.9
14.9
58.1
71.8
(112.5)

34.4
247.9
(3.5)
68.3
86.2
(112.8)

Net assets excluding net cash

106.1

98.9

135.0

157.1

320.5

Cash and cash equivalents
Bank borrowings

9.3(19.7)

23.7(10.6)

35.1
—

39.2
—

32.6
(156.9)Net cash(10.4)

13.1

35.1

39.2

(124.3)

Provisions and other items
Retirement benefit obligations(8.4)(35.1)(6.8)(11.7)(7.8)(35.2)(10.7)(47.9)(9.7)(46.3)Net assets employed/capital and reserves attributable to the Company’s
equity holders

52.2

93.5

127.1

137.7

140.2

Cash flow
Net cash from operating activities
Net cash used in investing activities
Net cash from financing activities

31.1
(9.1)
(16.0)

35.3(8.8)(12.3)

41.6(52.2)
22.6

41.5(32.3)(5.2)

21.2(177.9)
151.3

6.0

14.2

12.0

4.0

(5.4)

Net (decrease)/increase in cash equivalents

pence

pence

pence

pence

pence

Per ordinary share
Earnings – continuing
Adjusted earnings*
Dividends

27.4
18.0
8.4

62.7
38.9
9.0

43.5
59.1
10.0

37.4
66.5
11.2

32.1
67.7
12.4

Employees
Average number of employees

1,341

1,498

1,834

1,927

2,050

* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1 to the Group Financial Statements.
** See Accounting Policies for details of restatement of comparative information.

122

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Shareholder Information

Financial calendar
5 March 2014

Ordinary shares quoted ex-dividend

7 March 2014

Record date for interim dividend

13 March 2014

Dividend reinvestment (DRIP) last date for election

31 March 2014

Financial year end

7 April 2014

Payment of interim dividend

10 June 2014

Announcement of preliminary results

10 June 2014

Announcement of final dividend

Late July

Publication of Annual Report

9 September 2014

Annual General Meeting

24 September 2014

Ordinary shares quoted ex-dividend

26 September 2014

Record date for final dividend

28 September 2014

DRIP date23 October 2014
11 November 2014

Payment of final dividend
Announcement of interim results

March 2015

Ordinary shares quoted ex-dividend

March 2015

Dividend reinvestment (DRIP) last date for election

March 2015

Record date for interim dividend

31 March 2015

Financial year end

Administrative enquiries concerning shareholdings
You may view your shareholding and dividend history, register to receive your dividends direct to your bank account or elect to re-invest your dividends
and register a change of address online at www.capitashareportal.com. To register to use this facility you will need your Investor code (IVC), which
can be found on your share certificate, dividend tax voucher or proxy card.
Administrative enquiries concerning shareholdings in Oxford Instruments plc, such as the loss of a share certificate, dividend payments, or achange of address should be directed, in the first instance, to the Registrar, Capita Asset Services.
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 4TU
Tel: 0871 664 0300 (calls cost 10p per minute plus network extras; lines are open 8.30am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3399
Email: Shareholderenquiries@capita.co.uk
Website: www.capitaassetservices.com
Correspondence should refer to Oxford Instruments plc and state clearly the registered name and address of the Shareholder. Please notify theRegistrar promptly of any change of address.

Report and Financial Statements 2014 / Oxford Instruments plc

123www.oxford-instruments.com

Shareholder Information continued

Dividend bank mandates
If you wish dividends to be paid directly into a bank or building society account and notification to be sent to your Shareholder register address,
please contact the Company’s Registrar at the address given above for a dividend mandate form. Overseas holders can also choose to receive
payment directly into their bank account, or can be sent a draft in local currency. Further details are available from Capita Asset Services.
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 9ZA
Tel: 0871 664 0385 (calls cost 10p per minute plus network extras; lines are open to 9.00am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3405
Website: or by logging on to http://international.capitaregistrars.com/
Duplicate share register accounts
If you are receiving more than one copy of our report, it may be that your shares are registered in two or more accounts on our register of members.
If that was not your intention you might consider merging them into one single entry. Please contact Capita, which will be pleased to carry out
your instructions.
Shareholder communications
Unless you have elected to continue to receive Shareholder communications by post, you will be notified by post or, where you have given us
an email address for electronic notification, by email that Shareholder communications are available for viewing on the Company’s website atwww.oxford-instruments.com/investors. The Company reserves the right to distribute any communication in hard copy if it deems this necessary.
Shareholder enquiries
Shareholders who have questions relating to the Group’s business or who wish to have additional copies of the Report and Accounts should apply to:Company Secretary
Oxford Instruments plc
Tubney Woods, Abingdon, Oxon OX13 5QX
Tel: 01865 393200
Fax: 01865 393442
Email: info.oiplc@oxinst.com
Website: www.oxford-instruments.com
Company registration
Registered office: Tubney Woods, Abingdon, Oxon OX13 5QXRegistered in England number: 775598
Website: www.oxford-instruments.com
Oxford Instruments has an extensive website which gives details of all its products and services, contact information, vacancies and latest news
announcements. An interactive investor relations section gives information on recent trading reports, share price data and forthcoming events.

124

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Company information

Financial statements

Capita Share Dealing Services
A quick and easy share dealing service to either sell or buy shares in many leading UK companies is provided by Capita Share Dealing Services.
An online and telephone facility is available, providing our Shareholders with an easy to access and simple to use service. There’s no need to
pre-register and there are no complicated forms to fill in. The online and telephone dealing service allows you to trade “real time” at a known
price which will be given to you at the time you give your instruction. To deal online or by telephone all you need is your surname, Investor Code
(IVC*) reference number, full postcode and your date of birth. Your Investor Code can be found on a recent share certificate, statement or tax
voucher. Should you not be able to locate your IVC number, please contact Capita Registrars on 0871 664 0300 (calls cost 10p per minute plus
network extras; lines are open 8.30am to 5.30pm, Monday–Friday). Please have the appropriate documents to hand when you log on or call,as this information will be needed before you can buy or sell shares.
For further information on this service, or to buy and sell shares, please contact www.capitadeal.com (online dealing) or 0871 664 0446
(telephone dealing – calls cost 10p per minute plus network extras; lines are open 8.00am to 4.30pm, Monday–Friday excluding public holidays).
Full terms, conditions and risks apply and are available on request or by visiting www.capitadeal.com.
This is not a recommendation to buy or sell shares. Remember the price of shares can go down as well as up, and you are not guaranteed to getback the amount that you originally invested.
Analysis of Shareholders as at 31 March 2014
Number ofholders% of total

Total holding% of total

Up to 5,000 shares
5,001 to 50,000 shares
50,001 to 200,000 sharesOver 200,000 shares

2,297
202
81
55

87.17
7.67
3.07
2.09

1,437,744
3,636,610
8,034,059
44,142,422

2.51
6.35
14.03
77.11

Total

2,635

100.0057,250,835

100.00Size of shareholding

Report and Financial Statements 2014 / Oxford Instruments plc

125www.oxford-instruments.com

Oxford Instruments Directory

Company/address

Descriptor

Country

Telephone

Fax

Email

UK

+44 (0)1865 393200+44 (0)1865 393333

info.oiplc@oxinst.com

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

nanoanalysis@oxinst.com

10410 Miller Road,
Dallas, TX 75238, USA

Omniprobe tools fornanomanipulationand fabricationUSA+1 (214) 572 6800

+1 (214) 572 6801

nanoanalysis@oxinst.com

Lejonvägen 28,
S-18122 Lidingö, Sweden

Systems for materials
analysis at the nano scale

Sweden+46 8 5448 1550

+46 8 5448 1558

nordiska@oxinst.com

Asylum Research6310 Hollister Ave,
Santa Barbara, CA 93117 USA

Systems for materials
analysis at the nano scaleUSA+1 (805) 696 6466

+1 (805) 696 6444

sba.sales@oxinst.com

Hauptstrasse 161,
DE-68259 Mannheim, Germany

Germany+49 621 762117 0+49 621 762117 11

sba.de.sales@oxinst.com

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

Taiwan+886 9 3837 4589

+886 2 2794 2757

sba.tw.sales@oxinst.com

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

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

sba.uk.sales@oxinst.com

UK+44 (0)28 9023 7126

+44 (0)28 9031 0792

info@andor.com

425 Sullivan Avenue, Suite 3,
South Windsor, CT 06074 USA

USA+1 860 290 9211

+1 860 290 9566

info@andor.com

4F TK Sarugakucho Building,
2-7-6 Sarugaku-Cho, Chiyoda-Ku,
Tokyo 101-0064, JapanJapan+81 (0)3 3518 6488

+81 (0)3 3518 6489

info@andor.com

Room 1213, Building B,
Luo Ke Time Square,No. 103 Huizhongli,
Chaoyang District,
Beijing 100101, China

China+86 (0)10 5129 4977

+86 (0)10 6445 5401

info@andor.com

Badenerstrasse 682,
CH-8048 Zürich

Switzerland+41 44 430 11 00+41 44 430 11 01

info@bitplane.com

9078 Leslie St., Unit 11,
Richmond Hill, Ontario,
Canada L4B 3L8

Canada+1 (905) 326 5040

+1 (905) 326 5041

info@spectral.ca

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

plasma@oxinst.com

Oxford Instruments Omicron NanoScience
Tubney Woods, Abingdon,
Advanced tools for
Oxfordshire OX13 5QX, UK
applied researchUK+44 (0)1865 393200+44 (0)1865 393333

omicron.nanoscience@oxinst.com

Limburger Strasse 75,
D-65232 Taunusstein, Germany

Germany+49 6128 9870

+49 6128 98733230

omicron.nanoscience@oxinst.com

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

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

omicron.nanoscience@oxinst.com

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

UK+44 (0)1342 331006+44 (0)1342 331003

omicron.nanoscience@oxinst.com

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

+1 (952) 294 8043

omicron.nanoscience@oxinst.com

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

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

Andor/Bitplane/Spectral
7 Millennium Way,
Springvale Business Park,
Belfast, BT12 7AL UK

Scientific imaging cameras,
spectroscopy solutions andmicroscopy systems

NanoSolutions

126

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic reportCompany/address

Governance

Descriptor

Company information

Financial statements

Country

Telephone

Fax

Email

+44 (0)1865 393200+44 (0)1865 393333

industrial@oxinst.com

Industrial Products
Industrial Analysis
Oxford Instruments Industrial Analysis
Tubney Woods, Abingdon,
Tools for QC/QA,
UK
Oxfordshire OX13 5QX, UK
environmental and compliancetesting
Knight House, Farren Court, Cowfold,West Sussex, RH13 8BP, UK

UK+44 (0)1403 865938

industrial@oxinst.com

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

Finland+358 932 9411

+358 932 9413

industrial@oxinst.com

Georg-Ohm-Str. 6,65232 Taunusstein, Germany

Germany+61 28 95 35 0

+61 28 73 601

industrial@oxinst.com

Wellesweg 31, 47589 Uedem,
Germany

Germany+49 2825 93830+49 2825 9383100

industrial@oxinst.com

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

+1 (512) 339 0620

industrial@oxinst.com

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

Cryogenic pumps
and compressors

USA+1 (512) 441 6893

+1 (512) 441 6665

cryo-sales@oxinst.com

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

Superconducting wireUSA

+1 (732) 541 1300

+1 (732) 541 7769

sales@ost.oxinst.com

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

X-ray tubes
and detectors

USA+1 (831) 439 9729

+1 (831) 439 6051

industrial@oxinst.com

Company/address

Descriptor

Country

Telephone

Fax

Email

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

+1 (954) 596 4946

oiservice@oxinst.com

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

+1 (707) 469 1318

oiservice@oxinst.com

ServiceOiService CT & MR

Report and Financial Statements 2014 / Oxford Instruments plc

127www.oxford-instruments.com

Oxford Instruments Directory continued

Company/addressCountry

Telephone

Fax

Email

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

+1 (978) 369 8287

info@ma.oxinst.com

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

China+86 (0)10 6518 8160

+86 (0)10 6518 8155

china.info@oxinst.com

Floor 1, Building 60, No.461, Hongcao Road,
Shanghai, 200233, China

China+86 21 6127 3858

+86 21 6127 3828

china.info@oxinst.com

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

China+86 (0)21 6490 8580

+86 (0)21 6490 4042

china.info@oxinst.com

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

China+86 (0)20 8364 9990

+86 (0)20 8364 9996

china.info@oxinst.com

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

China+86 (0)28 8670 3596

+86 (0)28 8670 3595

china.info@oxinst.com

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

office@oxinst.cz

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

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

infofrance@oxinst.com

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

Regional Sales and Service Offices

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

Germany+49 6122 9370

+49 6122 937100

info-oiplc@oxinst.com

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

India+91 224 4253 5100

+91 224 4253 5110

india@oxinst.com

Oxford Instruments JapanIS Building 3-32-42, Higashi-Shinagawa, Shinagawa-ku
Tokyo 140-0002, JapanJapan+81 (0)3 6732 8961

+81 (0)3 6732 8937

info.jp@oxinst.com

Oxford Instruments Korea
No. 8-S 26, 8F., 10 Chungmin-ro, Songpa-gu,
Seoul 138-962 Korea (Republic of)

Republic of Korea+82 2 2008 4500

+82 2 2008 4555

nanoanalysis@oxinst.com

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

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

info@oxford.de

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

Singapore+65 6337 6848

+65 6337 6286

oi.admin@oxfordinstruments.com.sg

Oxford Instruments Taiwan
1F, No. 23, Jing-Shang 19th Street, Hsinchu,
Taiwan 300, Taiwan, R.O.C.

Taiwan+886 3 5788696+886 3 5789993

oi.admin@oxfordinstruments.com.tw

128

Oxford Instruments plc / Report and Financial Statements 2014

Overview

Strategic report

Governance

Financial statements

Company information

Advisers

Honorary President
Sir Martin Wood OBE FRS Hon FREng DL
Company Secretary
Susan Johnson-Brett ACIS
Board Committees
Audit
JF Lennox, Chairman; J Allerton; TO Geitner
Nomination
NJ Keen, Chairman; J Allerton; JM Brady; JF Lennox; TO Geitner
Remuneration
TO Geitner, Chairman; J Allerton; NJ Keen; JF Lennox
Administration
Any two Directors
Advisers
Auditors
KPMG LLP
Principal Bankers
HSBC Bank plc; Santander plc; and The Royal Bank of Scotland plc
Stockbrokers
JPMorgan Cazenove
UK Solicitors
Laytons Solicitors LLP, Ashurst LLPUS Counsel
Wilmer Hale LLP

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Report and Financial Statements 2014 / Oxford Instruments plc

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This publication is the copyright of Oxford Instruments plc and provides outline information only, which (unless agreed by the Company in writing)
may not be used, applied or reproduced for any purpose or form part of any order or contract or regarded as the representation relating to the
products or services concerned. Oxford Instruments’ policy is one of continued improvement. The Company reserves the right to alter, without
notice the specification, design or conditions of supply of any product or service. Oxford Instruments acknowledges all trademarks andregistrations. © Oxford Instruments plc, 2014. All rights reserved.