Oxford Instruments plc
Report and Financial Statements 2019

ABOUT US

Oxford Instruments plc
is a leading provider of hightechnology products and services
to the world’s leading industrial
companies and scientific researchcommunities.
We help our customers to image, analyseand manipulate materials down to theatomic and molecular level, enabling themto accelerate their R&D, increase productivity
and make new scientific discoveries.

Find out more about us

www.oxinst.com

Front cover image:
Biological tissue grown from patient cells capturedby an Andor Dragonfly microscopy system

Oxford Instruments plc Report and Financial Statements 2019

Inside this year’s
Report and Financial
Statements

Enabling
5G

in this section

We discuss the progress wehave made over the past year
pages 2 to 59

	Find out more on page 8

in this section

Read about how we manage
our Company and maintainhigh standards
pages 60 to 103

	Find out more on page 9

Electric
VehiclesSee how we are performingin light of developmentsin the past year
pages 104 to 163

	Find out more on page 10

Quantum
Technology
Find additional
information about us

4

Investment Case

7

How We Make a Difference

8

Chairman’s Statement

12

Chief Executive’s Review

14

Market Context

18

Business Model

20

Our Strategy

22

Key Performance Indicators

24

Operations Review

26

Finance Review

36

Principal Risks

43

Viability Statement

48

Corporate Responsibility

50

Governance
Leadership

61

Effectiveness67

Accountability

74

Remuneration

80

Relations with Shareholders

100

Report of the Directors

102

Financial Statements
Directors’ Responsibilities

104

Independent Auditor’s Report

105

Consolidated Statement of Income

110

Consolidated Statement ofComprehensive Income

111

Consolidated Statementof Financial Position

112

Consolidated Statementof Changes in Equity

113

Consolidated Statement of Cash Flows114

Accounting Policies

116

Notes to the Financial Statements

123

Parent Company Statementof Financial Position

153

Parent Company Statementof Changes in Equity

154

Notes to the Parent Company
Financial Statements

155

Company Information
Historical Financial Summary

164

Oxford Instruments Directory

166

Directors and Advisers

168

pages 164 to 168

	Find out more on page 11

1

Company Informationin this section

2

Financial Statementsin this section

Performance Highlights
Our BusinessGovernance

CancerResearch

Strategic Report
Strategic Report

How we makea difference

CONTENTSOxford Instruments plc Report and Financial Statements 2019

PERFORMANCE HIGHLIGHTS

We have made good progress in the year with the continued
implementation of our Horizon strategy, which is delivering
good growth and improved profitability.
Revenue1

Adjusted2 operating profit1£333.6m +12.4% £49.7m(2018: £296.9m)(2018: £46.5m)

Adjusted2 profit before tax1

Profit before tax1

£47.5m+12.3% £35.5m

+6.9%
+3.8%

(2018: £42.3m)(2018: £34.2m)

Adjusted2 basic earnings per share1

Dividend per share (full year)

64.9p+15.3% 14.4p(2018: 56.3p)(2018: 13.3p)

Cash generated from operations1

Net cash/(debt)£56.3m£6.7m(2018: £33.4m)(2018: £(19.7)m)+8.3%

1. Continuing operations.
2. Throughout these Financial Statements we make reference to adjusted numbers. A full definition of adjusted numbers can be found in Note 1. Where we make reference to constant currency
numbers these are prepared on a month by month basis using the translational and transactional exchange rates which prevailed in the previous year rather than the actual exchange rates
which prevailed in the year. Transactional exchange rates include the effect of our hedging programme.

2

Oxford Instruments plc Report and Financial Statements 2019

Operational highlights:• Orders up 12.9% to £353.5 million(2018: £313.0 million), an increase of
12.0% at constant currency.

• Continued progress with the implementationof our Horizon strategy, embedding defined
capabilities and disciplines across the businesses.

• Order book of £171.6 million (31 March 2018:£153.0 million, restated for IFRS 15) up 12.2%(9.4% at constant currency).

• Significant in-year investment in operational
excellence with a focus on strategic procurement
and operating processes.

• The Group has adopted IFRS 15 Revenue fromContracts with Customers and IFRS 16 Leases.
The impact is to increase revenue by £7.0 million.

• Strong order, revenue and profit growth inMaterials & Characterisation supported by
growth in advanced material and semiconductor
customer segments.

• Adjusted operating profit from continuing
operations up 6.9% to £49.7 million (9.7%
at constant currency).

• Reported profit before tax up 3.8% to£35.5 million after mark-to-market movement
on currency derivatives and adjusting items.
• Net cash of £6.7 million following strong cash
conversion of 103%.
• Full‑year dividend increased by 8.3%
to 14.4 pence.

	Find out more in the
Finance Review on pages 36 to 42• Order, revenue and profit growth, with margin
improvement, in Service & Healthcare, supported
by growth in service and support of our own
products and an improved performance fromour healthcare businesses.

Financial Statements• Adjusted operating margin of 14.9% (2018:
15.7%), 15.5% at constant currency, impacted
by a currency headwind and one-off investment
in operational excellence.

• Healthy end markets across life science, quantum
technology and academia supported strong
order and revenue growth across our Research& Discovery sector. Operating profit was heldback in the period by a lower performance fromscientific X-ray tubes and Scienta Omicron.

Governance• Reported revenue increased by 12.4% to£333.6 million (10.8% at constant currency).

Strategic Report

Financial highlights:• Investment in R&D supporting new and future
product launches; received the Queen’s Award
for Innovation for our latest material analyser.

	Find out more in the
Operations Review on pages 26 to 35

Company Information3

Oxford Instruments plc Report and Financial Statements 2019

OUR BUSINESSOur core purpose is to address someof the world’s most pressing challenges.

Our business is structured around three sectors to support our customer and application focus:

Materials &Characterisation
Products and solutions that enable thefabrication and characterisation of materials anddevices down to the atomic scale, predominantly
supporting customers across applied R&D as
well as the production and manufacture of hightechnology products and devices.
Find out more on pages 26 to 29

Research &Discovery
Provides advanced solutions that create
unique environments and enable imaging
and analytical measurements down to themolecular and atomic level, predominantly
used in scientific research and applied R&D.
Find out more on pages 30 to 33

Service &Healthcare
Provides customer service and support for ourown products and the service, sale and rentalof third‑party healthcare imaging systems.
Find out more on pages 34 and 35

4

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

Our key enabling technologies, products and services facilitate agreener economy, increased connectivity, improved health andleaps in scientific understanding.

Our global end market segments
Revenue£137.9m

Materials & Characterisation
41% of Group revenue
End market segments revenue+16.8%(2018: £118.1m)

Adjusted operating profit+10.0%

Academic

58%

Quantum Technology

Research & Discovery
38% of Group revenue
End market segments revenue+11.8%(2018: £112.0m)

Adjusted operating profit£12.7m-8%

69%£70.5mGrowth is being driven in quantum
communications, computing and sensors,
where quantum effects radically change
the “rule book” of what is possible.

Environment
This includes greener production, recycling,detection of hazardous substances in soil,
and agriculture and food.

Academic

31%
Commercial(2018: £13.8m)

Revenue

Where there is a focus on speed,
security and capacity.

Financial Statements£125.2m

	Semiconductor &Communications

Commercial(2018: £20.1m)

Revenue

Where growth is driven by demand for
improvements in disease detection and theunderstanding of fundamental mechanisms.

Governance£22.1m42%

Healthcare & Lifescience

Service & Healthcare
21% of Group revenue

EnergyWhere improved efficiencies andsustainability remain core drivers,
and includes work in photovoltaics
and batteries.

Advanced Materials
Where we help customers lead therace to develop lighter, stronger, higher
functioning and more affordable materials.

+5.5%

Adjusted operating profit

Company Information

	Research &Fundamental Science(2018: £66.8m)

Where we help customers develop
breakthrough applications, gaining
previously unknown insights.

£14.9m+18.3%(2018: £12.6m)

This segment is captured within total Group revenue.

5Oxford Instruments plc Report and Financial Statements 2019

OUR BUSINESS CONTINUED

We are proud to be a globally recognised
premium brand with a reputation for
innovation and product excellence.

Principal offices and development& manufacturing sites
For a full list of our locations please visit
our website:www.oxinst.com/service-and-support

28
offices around the world

1,579

Revenue from external customers by destination
Rest of World Germany£9.5m£28.3mUK£14.2m6

Rest of Asia
£34.4mRest of Europe£38.7mpeople employed worldwide

China£70.0mJapan£38.7mUSA£99.8mOxford Instruments plc Report and Financial Statements 2019

INVESTMENT CASE

Strategic Report

Horizon, our transformational programme for the Group, is building
a stronger Oxford Instruments, positioned to deliver long-termsustainable growth and margin improvement.
As a customer‑centric, market‑focused Group, we understandthe technical and commercial challenges faced by our customers.

Oxford Instruments is positioned to address a broad range ofmarkets and industrial sectors. Its key enabling technologies
are underpinning the shift to a greener economy, increased
digital connectivity, improved healthcare and leaps in scientificunderstanding. This provides a global base and comprehensive
portfolio, offering diversification of opportunity and reduced impact
from individual market risks.

Attractive end markets

Focused investment

The Group focuses on attractive segments where their key enabling
technologies drive long-term growth for customers and where they
can maintain leadership positions. These end markets are robust,
supported by sustained commercial and Government investment.
This, alongside a customer application focus and excellent corecapabilities, provides strong long-term drivers for future growthand margin improvement.

The Group focuses investment on market segments where its key
enabling technologies drive product innovation, world-leading
research and long-term growth for customers, where it canmaintain leadership positions.

Financial Statements

Global businessA globally recognised premium brand with a reputation for
innovation, world-class product performance, unprecedented
ease of use and excellence in service and support. Oxford
Instruments offers increased value to existing customers, as well as
creating growth opportunities in new market segments, throughapplication‑specific solutions with improved workflows, bespoke
analytics, data interpretation and associated support services.

GovernanceBrand and reputation

Company Information

Strong customer relationships
By being customer‑centric and market‑driven, the Group has
developed an in-depth understanding of customer needs,
helping customers to accelerate their applied R&D, increase their
manufacturing productivity and make ground-breaking discoveries.
Today, just over half of Oxford Instruments’ customer basecomprises commercial organisations.

7

Oxford Instruments plc Report and Financial Statements 2019

How we make a difference

Enabling
5G
5G is the latest iteration of cellular technology
with the prospect of a transformational increasein speed, coverage and responsiveness of wirelessnetworks. As a result of these improvements
there will also be increasing demands on network
infrastructure. Our capabilities in compound
semiconductors are supporting manufacturers
to develop the optoelectronic components, lasers
and high-speed electronics required to deliver the
improved performance enabling 5G and the risein the data economy.

	Find out moreon page 29

8

Oxford Instruments plc Report and Financial Statements 2019

How we make a difference

Strategic Report

CancerResearch

GovernanceIn the UK alone, 1 in 2 people will get cancer intheir lifetime. However, while cancer rates are
increasing, the number of people who will die fromthe disease is decreasing. It’s thanks to research thatmany people are now surviving cancer. With morethan 200 different types of cancer, researchers arelearning more about what causes the disease andare making breakthroughs in therapeutic responses.
The imaging resolution and speed of our products
are revealing unprecedented detail in living cells,
helping to build an understanding of the complex
intracellular mechanisms that underlie a wide
range of disease states.

	Find out moreon page 32
Financial Statements
Company Information

9

Oxford Instruments plc Report and Financial Statements 2019

How we make a differenceElectric
VehiclesElectric vehicles are widely seen as one of themost important innovations in transportation.
As technology develops and we focus more on
renewable energy and improved urban air quality,
demand for them will continue to increase and they
are expected to represent 22% of global share by2030. With the rising popularity, demands on theperformance capabilities have also increased. We areproviding manufacturers with the solutions to addresssome of the most pressing problems, such as therange of electric vehicles, recharge speeds andreduction in energy loss. We also are enabling
the manufacture of advanced sensors to help
improve the safety of autonomous vehicles.
	Find out moreon page 29

10

Oxford Instruments plc Report and Financial Statements 2019

How we make a difference

Strategic Report

Quantum
Technology

Governance

Quantum technology exploits the bodyof science that covers the extraordinary
and unconventional behaviour of particles
and matter when observed at the smallest
of scales and under extreme conditions.
Exploiting the quantum nature of matterenables a paradigm shift in performanceacross a range of exciting applications such as
quantum computing, secure communications
and medical sensors. We continue to workwith leading companies and researchers
worldwide to provide the fundamental
tools for research and the development ofsolutions for commercial applications.
	Find out moreon page 33

Financial Statements
Company Information

11

Oxford Instruments plc Report and Financial Statements 2019

CHAIRMAN’S STATEMENT

I was delighted to join
Oxford Instruments
as Chairman in
December 2018 and thisis my first report since
taking on the role.

Oxford Instruments is a business thatinspires the greatest admiration, with 2019
marking the Group’s 60th anniversary. Today,
Oxford Instruments’ technologies are helping
to find cures for cancer, advance space
exploration and develop next generationelectronics, advanced materials and quantum
technologies. Our brand and capabilities arerecognised by the world’s leading industrial
manufacturers and scientific research
institutions, who specify our products toaccelerate their R&D, increase productivity
in high tech manufacturing and achieve
ground‑breaking innovations.
In my first six months with the Group,
I have enjoyed travelling around our sites
and meeting our talented teams. I have been
impressed with the quality of our businesses
and the calibre of management driving our
growth strategy.

Our governance principles
Leadership

Remuneration

The Chairman is responsible for leadership ofthe Board and ensuring its effectiveness on
all aspects of its role.

The Remuneration Policy promotes thedelivery of the Group’s strategy andseeks to align the interests of Directors
and Shareholders.

Find out more on page 61

EffectivenessThis year, the Board carried out its annual
effectiveness evaluation exercise, including
a specific review of the effectiveness of its
principal Committees and members.
Find out more on page 67

Risk management
The Board has accountability for reviewing
and approving the adequacy andeffectiveness of internal controls, including
financial, operational and compliance
controls and risk management.
Find out more on pages 74 to 79

12

Find out more on page 80

Engagement
We continue to ensure our investors receive
regular and transparent communications.
Find out more on pages 100 and 101

Oxford Instruments plc Report and Financial Statements 2019

I would like to thank Steve Blair for his
commitment as Interim Chairman during
the year. I also thank the Board and all our
employees for their contribution that has
resulted in a successful year.

Our brand andcapabilities
are recognisedby the world’s
leading industrial
manufacturers andscientific research
institutions.

Neil Carson
Non-Executive Chairman
11 June 2019

Financial Statements

As Ian Barkshire sets out in the Chief
Executive’s Review, the Group is making good
progress transitioning from a product focus
to become a customer‑centric, market‑driven
Group, increasing the value for our existingcustomers whilst expanding our addressable
markets. By building on our innovativetechnology and targeting attractive markets,
I am confident that the Group will deliver
long-term sustainable growth and margin
improvements.

Given our positive cash position and continued
confidence, the Board has proposed to raise
the final dividend to 10.6 pence (2018:
9.6 pence), giving a full-year dividend of
14.4 pence (2018: 13.3 pence), an increaseof 8.3%.

GovernanceThis is evident in our full‑year results, whichshow strong progress across our businesses
and in each of our major geographies. I am
especially heartened by the Group’s successin increasing its commercial customer baseand its market share in segments withlong‑term growth potential. I am also
impressed by the Group’s strong cash position,
which represents a major turnaround over thelast couple of years.

Strategic Report

Oxford Instruments is a business thatinspires the greatest admiration, with2019 marking the Group’s 60th anniversary.

1: Technician working on a Triton

Company Information

13

Oxford Instruments plc Report and Financial Statements 2019

CHIEF EXECUTIVE’S REVIEW

It has been a positive year
for Oxford Instruments,
with the Horizon strategy
now well embedded
across the Group.

Summary

Materials &Characterisation

Research &Discovery

Service &Healthcare

Building on a positive first
half, the sector delivered astrong financial performance
underpinned by increased
demand from commercial
customers within the
Advanced Materials
and Semiconductor &Communications segments.

Healthy end markets acrossLifescience, Quantum
Technologies and academic
funded Research &Fundamental Science drovestrong order and revenue
growth in the year.

Good growth in orders
and revenue, resulting inincreased profitability andhigher margins throughour increased focus onservice products.

14

We were delighted to welcome Neil Carson
to the Board as our Non-Executive Chairman
in December 2018. His wealth of Board andstrategic leadership experience in high techcompanies will be invaluable in helping us
realise our growth aspirations. I, and the restof the Board, would like to thank Steve Blairfor his leadership as Interim Chairman.

Embedding the Horizon strategy
It has been a positive year for Oxford
Instruments, with the Horizon strategy now
well embedded across the Group. This isdriving our long-term plans and initiatives andhas transformed our operating processes andday-to-day activities, resulting in a return to
growth and improved financial performance.
In particular, I have been delighted by the levelof employee engagement and their ownershipof the execution of our new strategy. ThroughHorizon we are building a stronger Oxford
Instruments, positioning ourselves to deliver
long-term sustainable growth and improved
margins. Our performance in the year is
testament to our progress, with strong orderand revenue growth across each of our threesectors, year‑on‑year profit growth, a closing
net cash position, strong order book growth
and a book-to-bill ratio of 1.06.
Horizon is our transformational programme
for the Group and has now been in place
for two years. Through our focus on
Market Intimacy, Innovation and ProductDevelopment, Customer Support Services,and Operational Excellence we have beenchanging the way we operate and have been
embedding clearly defined capabilities anddisciplines across our businesses. Whilst there
is still much to do, we have made significant
progress over the past two years and are
already seeing tangible returns.

Oxford Instruments plc Report and Financial Statements 2019Market Intimacy
We have made good progress in ourtransformation to a more customer-centric,
market‑focused Group. Through a deeper
understanding of our target market segments
and the diverse challenges faced by ourcustomers, we have changed the way wecommunicate and reach our prospective andexisting customers, more clearly identifying
the value our products can add.

As we get closer to our customers acrossour target markets we have been able toidentify growth opportunities within ourcurrent markets and into new markets.
We are seeing strong revenue growthfrom commercial customers as we expand
our offerings and addressable markets.
Examples include the analytical solutions weoffer for batteries, additive manufacturing,
automotive and aerospace, neuroscienceand cell biology, lasers and optoelectronic
devices, power electronics, and astronomy.
Our heightened customer application-based
market intelligence has strengthened our
future product roadmaps by identifying more
attractive development opportunities anddriving our priorities and focus for innovation.

Operational model

Financial Statements

Through our Horizon focus, we help ourcustomers accelerate their applied R&D, increase
productivity in high tech manufacturing andmake ground‑breaking discoveries.

Our solutions are being used by customers
to find cures for cancer, advance space
exploration and develop next generationelectronics, advanced materials andquantum technologies.

Governance

We are now better positioned to address abroad and diverse range of attractive end
markets and industrial sectors, and we haveseen the share of commercial customers rise
to over 50% of revenue. This was achieved byreshaping our portfolio and focusing on thoseareas where our key enabling technologies are
driving long-term success for our customers,
where we can achieve and maintain leadership
positions. Within these markets, our products,
solutions and services are facilitating a greener
economy, increased connectivity, improved
health and leaps in scientific understanding.

Strategic Report

We have been able to identify
growth opportunities within ourcurrent markets and into new markets.

MarketIntimacy

Customer
SupportCustomerInnovation
and ProductDevelopment

Company Information

Operational
Excellence	Find out moreon page 22
15

Oxford Instruments plc Report and Financial Statements 2019

CHIEF EXECUTIVE’S REVIEW CONTINUED

Embedding the
Horizon strategy continued
Operational Excellence
In the year, with our cohort of lean champions
in place, we undertook a significant
investment to deliver a step change in ouroperational excellence programme, targeting
three key areas: strategic procurement,
operational efficiency and logistics. This
has re‑shaped our operational teams andembedded new operating practices. Alreadythis has increased our revenue capacity withimproved productivity for the current year.
Investment in our operational excellence
programme within the year held back
operating margins but helped to deliver
increased revenues and established thefoundations and methodologies to support
future growth and margin improvement.

Innovation & Product Development
Innovation is part of our heritage and remains
central to our strategy. Through Horizon weare more keenly targeting our R&D investment
to create differentiated products and solutions
that will provide significant value for ourcustomers in our chosen long-term, highgrowth market segments. In the year, thesuccess of our recently launched products
helped drive our growth across advanced
materials, semiconductor, life science andquantum technology applications. Examplesof new product innovations are provided in
the Operations Review.

People Capabilities
Within the Group we continue to build
our leadership team, while enhancing
commercial focus and core capabilities acrossand within the Group at an operational level.
This has been a dual approach of investingin our existing employees as well as looking
outside the organisation for individuals
with specific capabilities and experience toaccelerate our progress.

Results
The Group delivered a strong full‑year
performance, with positive second halftrading building on the progress seen in
the first half of the year. This resulted instrong order, revenue and profit growth,with the Horizon strategy producing
tangible improvements in businessperformance. This was underpinned by ourchosen end markets and their underlying
growth drivers remaining attractive and robust.
In addition, continued success from recently
launched products further strengthened ourmarket‑leading product portfolio, supported
by an increased commercial focus andprogress in establishing our customer-centric
end application approach.
Reported revenue rose to £333.6 million(2018: £296.9 million), an increase of 12.4%(10.8% at constant currency). Materials &Characterisation and Research & Discovery
sectors both delivered double‑digit revenue
growth supported by the success of recently
launched products and an increased presence
and demand from commercial customers.
The Service & Healthcare sector delivered
good growth, driven predominantly byincreased demand for services related toour own products. From an end market
perspective, we had significant growth inAdvanced Materials (31%), with strong
growth across the Lifescience (5%), Quantum
Technologies (14%) and Semiconductor (4%)
segments. From a geographical perspective,
we had strong constant currency revenue
growth in Asia and North America of 17.7%
and 9.8% respectively, with modest growth of
2.5% in Europe. Within Asia we had strong
growth across the region including China,
Japan and South East Asia. Global distributionof revenues remains broadly in line with theprevious year, with Asia representing 43%
of Group revenue, Europe 24% and North
America 31%, which are broadly in line with
global R&D spend profiles.

Increased volumes and our enhanced
commercial focus drove reported adjusted
operating profit up 6.9% to £49.7 million(2018: £46.5 million) despite a modest
currency headwind, representing an
increase of 9.7% at constant currency.
Adjusted operating margin for the Groupof 14.9% (2018: 15.7%) was impacted byan incremental in-year investment in ouroperational excellence programme and asmall currency headwind. Operating margin
at constant currency of 15.5% was broadly inline with last year. Adjusted profit before tax
increased by 12.3% to £47.5 million (2018:£42.3 million), representing an increase of
15.4% at constant currency.
Continuing adjusted basic earnings per share
increased by 15.3% to 64.9 pence (2018:56.3 pence).
Reported orders for the Group were up
12.9% (12.0% at constant currency) to£353.5 million (2018: £313.0 million) withstrong growth across all three sectors. We
continue to see increased customer demand,
supported by our enhanced customer
application and market focus with goodorder growth from academic customers andstronger growth from commercial customers.
Orders grew in Europe, North America andAsia and across each of our market segments.
The order book, representing orders for futuredelivery, increased by 12.2% to £171.6 million(2018: £153.0 million), growth of 9.4% atconstant currency, with strong growth acrossMaterials & Characterisation, Research &Discovery and services related to our own
products.
Good cash collection resulted in the Groupmoving to a net cash position of £6.7 million
from net debt of £19.7 million at the previous
year end.

Sector performance
Turning to the individual sector performance:
Materials & Characterisation products
and solutions enable the fabrication andcharacterisation of materials and devices down
to the atomic scale, predominately supporting
customers across applied R&D as well as
the production and manufacture of hightechnology products and devices. Building
on a positive first half, the sector delivereda strong financial performance underpinned
by increased demand from commercial
customers within the Advanced Materials andSemiconductor & Communications segments.

16

Oxford Instruments plc Report and Financial Statements 2019

In addition to the strategic investment in
operational excellence, adjusted operating
profit was held back in the period due toa temporary but sustained period of low
manufacturing yield and increased costs
within our scientific X-ray tube business aswell as a lower contribution from our shareof the Scienta Omicron joint venture. As aconsequence, operating margin reduced
220 basis points in the period to 10.1%(2018: 12.3%).
Service & Healthcare provides customer
services and support for our own products
and the service, sale and rental of third‑party
healthcare imaging systems under the OI
Healthcare brand. The sector had good growthin orders and revenue, resulting in increased
profitability and higher margins through ourincreased focus on service products, customer
support offerings and consumables related
to our own products. In addition, this was
combined with an improved performancefrom the US OI Healthcare business. Reported
orders increased by 8.7% to £71.3 million(2018: £65.6 million), reported revenue grew
5.5% to £70.5 million (2018: £66.8 million)
and adjusted operating profit increased
18.3% to £14.9 million (2018: £12.6 million).
Reported operating margin improved
220 basis points to 21.1% (2018: 18.9%).

One of the core elements of our Horizon
strategy is our investment in highly targeted
innovation and product development in linewith our short, medium and longer-term
roadmaps to improve our market shares andexpand our addressable markets.

Our staff are fundamental to ourbusiness success and I am delighted
with their engagement, development
and implementation of our Horizon
strategy. We have continued to increase
the capabilities of our teams through thedevelopment of existing employees and thetargeted recruitment of new talent.
I would like to thank all our employees fortheir commitment to Oxford Instruments
and their passion to deliver an exceptional
experience for all our customers.

Summary and outlook
We have made good progress in the year withthe continued implementation of our Horizon
strategy, which is delivering good growthand improved profitability. We are serving
attractive markets with long-term fundamental
growth drivers and focusing on segments
where we can maintain leadership positions.
Our core purpose is to address some of theworld’s most pressing challenges. We havepositioned the Group to be a leading providerof high technology products and services
to image, analyse and manipulate materials
down to the atomic and molecular level,
facilitating a greener economy, increased
connectivity, improved health and leaps inscientific understanding.
While mindful of the backdrop of geopoliticaland market uncertainty, we remain focusedon improving the business and expect to makefurther progress in the year.

Company Information

R&D

PeopleFinancial Statements

Research & Discovery provides advanced
solutions that create unique environments andenable imaging and analytical measurements
down to the molecular and subatomic level,
predominantly used in scientific research andapplied R&D. Healthy end markets acrossLifescience, Quantum Technology and academic
funded Research & Fundamental Sciencedrove strong order and revenue growth in theyear. Whilst the proportion of revenue fromcommercial customers increased in the year,
69% of sales in the sector are from academic
and Government‑funded research communities.
Growth in Lifescience was predominantly
driven by increased demand for our optical
microscopy products and scientific cameras;
Quantum Technology by the continued global
investment in fundamental technologies andapplied development in quantum computing,communication and optics; and Research& Fundamental Science by the increased
funding globally in larger scale national
facilities driving demand across our portfolioof scientific instruments, cryogenics and highmagnetic field platforms.

The Group has adopted IFRS 15 Revenue
from Contracts with Customers. The primary
impact is the recognition of revenue on ourcomplex cryogenic and magnet systems
on installation, rather than shipment. The
financial impact in the year between the two
accounting policies is an increase in revenue of£7.0 million. The business has fundamentallychanged its approach to its operational
processes, from assembly through to testingand onsite installation. Accordingly, we haveseen a significant reduction in the backlog ofuninstalled complex systems.

We incurred expenditure of £25.4 million(2018: £24.8 million) with an increased
emphasis on products, solutions andtechnologies that provide new capabilities, easeof use and enhanced productivity. We monitor
the proportion of revenue which originatesfrom products launched in the last three years(our vitality index). In the period, our vitality
index remained in line with the previous year
at 37% (2018: 37%) representing a continued
healthy pipeline and performance of newly
launched products.

Governance

Growth in Advanced Materials is driven by
the increasing demand for lighter, stronger
and higher performing materials to address
customer needs across a broad range of end
applications including autonomous vehicles,
increased connectivity and a greener economy.
Order and revenue growth of 8% and 4%
respectively within the Semiconductor &Communications segment was supported byour breadth of analytical solutions utilised toaccelerate the development of next generation
devices, as well as the increasing demand forcompound semiconductor processing solutions
required for 5G, autonomous vehicles andhigher efficiency energy devices. This has
more than offset a reduction in demand frommainstream silicon-based semiconductor chip
manufacture and consumer electronics.

Reported orders of £138.2 million (2018:£118.2 million) represented growth of 16.9%,
with increases from both academic andcommercial customers. Reported revenue
increased by 11.8% to £125.2 million (2018:£112.0 million).

Strategic Report

The proportion of revenue from commercial
customers rose in the year, representing 58%
of sales from the sector. Reported orders grewin the period by 11.2% to £144.0 million(2018: £129.5 million). Reported revenue
increased by 16.8% to £137.9 million, with
reported adjusted operating profit rising to£22.1 million (2018: £20.1 million), growthof 10.0%. The order book for future deliveries
increased by 20.5% to £41.2 million (2018:£34.2 million). The reported operating marginof 16.0% (2018: 17.0%) was held back by
a currency headwind and investment in ouroperational excellence programme, withconstant currency margin of 16.8%.

Ian Barkshire
Chief Executive
11 June 201917

Oxford Instruments plc Report and Financial Statements 2019

MARKET CONTEXT

We are well positioned to address a broad and diverse
range of attractive markets and industrial sectors.

Growth drivers
Our key markets with strong growth drivers include:

Healthcare & Lifescience

Advanced Materials

Growth is driven by demand for improvements in disease detection
and the understanding of fundamental mechanisms. As technology
evolves, researchers are gathering more information and generating
huge datasets, with increasing cellular details. By looking at thebiological processes involved in conditions such as cancer, Alzheimer’sand Parkinson’s, researchers can develop new therapeutic approacheswith the aim of finding a cure for life-limiting diseases. Having theability to observe such mechanisms is also facilitating gene sequencing,which aides the development of personalised medicines, and drug
development within the pharmaceutical industry.

Those working in this area are racing to develop lighter, stronger, higher
functioning and more affordable materials, and range from Nobel
Prize winners through to Quality Assurance for leading manufacturers.
Researchers need to be able to assess a material’s properties,
performance and quality, which also helps optimise manufacturing
processes. The disruptive transformation within the automotive
industry towards electric, hybrid and autonomous vehicles is driving
manufacturers to use new composite materials, super alloys, faster
dynamic control electronics, and develop more efficient battery storage
and power delivery solutions. There has been a further shift towards
using additive manufacturing to produce much lighter and more
complex components.

28%

24%

Our solutions

Our solutions

Our advanced imaging and analysis solutions, such as our confocal
microscopy systems, high performance scientific cameras and ourvisualisation and analysis software, are providing enhanced capabilities
and productivity for investigators working in this area. We are helping
to reveal detail not previously seen in applications such as neuroscienceand cancer research, while our software is helping to analyse andinterpret the extremely large datasets now being produced. By offeringenhanced performance at low light levels, we enable the measurement
and observation of the cellular interactions taking place in real time.
This greatly increases the accuracy and relevance of the results.

Our portfolio enables customers to undertake significantly moreaccurate and much faster analysis, driving both capability andproductivity for customers in the automotive and aerospace industries,
as well as those analysing metals, ceramics, composites and polymers.
We are helping develop the next generation of products andcomponents and in the quality control and quality assurance of current
manufactured products. Further, we have exploited our expertise inparticle analysis to develop a tailored solution for the quality controlof the raw material feedstock, helping avoid contamination andmaintaining end-product performance.

of Group revenue

18of Group revenue

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

We are focusing on those areas where our key enabling
technologies are driving long-term success for our customers
and where we can achieve and maintain leadership positions.

Governance

Quantum Technology

There is an increasing focus on creating more compact devices, higher
speeds, larger capacity and higher energy efficiency. This is required
to deliver the functionality and demands for big data, IoT, AI, highspeed communications and autonomous vehicles. Within compound
semiconductors increasing demand is being driven by the long-termtransitioning of technology away from silicon-based solutions for powerelectronics, connectivity and communications. Power electronics are theenabling technologies to use, distribute and generate electrical energy
and are increasingly important in the development of electric vehicles.
With the rise of the data economy, improved connectivity is focused onincreasing the speed and infrastructure capacity to support the rollout
of 5G. Finally, demand for increased communication is driving growthacross sensors and optoelectronic devices.

This is the exploitation of the regime where quantum effects
dominate and radically change the rulebook of what is possible.
Quantum technologies offer the potential for vast increases incomputation speed, new paradigms for secure information transfer
and unprecedented sensor sensitivities applicable across a broad range
of industrial and medical applications. A number of quantum imaging
centres of excellence have been established in support of this rapidly
growing and well-funded market.

22%

9%

Our solutions

Our solutions

It is our ability to provide the fabrication capabilities for new materials
and device structures, and the subsequent characterisation of theirperformance that helps our customers, for example in photonics,
semiconductors and data storage devices. Our solutions are being utilised
by fundamental science right through to the practical application of newmaterials within this area. We are targeting growth applications within
the compound semiconductor device market, tailoring and adapting
our market‑leading research and applied R&D products for production
customers. We have helped customers working to enhance wirelesscharging capabilities and increase energy storage, providing longer range
electric vehicles and the higher data communications rates and capacity
required for 5G networks.

Our cryogenics, advanced fabrication, imaging and characterisation
capabilities are all critical to the advancement of this field. Our single
photon sensitive cameras are helping researchers investigate anddevelop quantum optics, which are required for communication
systems and imaging solutions. We work with the leading companies
and researchers worldwide to provide the fundamental tools forresearch and the development of solutions for commercial applications.

of Group revenue

Financial Statements

Semiconductor & Communicationsof Group revenue

Company Information

19

Oxford Instruments plc Report and Financial Statements 2019

BUSINESS MODEL

We are well positioned to address a broad and diverse
range of attractive end markets and industrial sectors.
How wedo it

Customer relationships

Research &amental Science
d
n
Fu

A
M d
a

ed
nc ialsav ter

We recognise that relationships built on trust
and respect with our business partners establish
mutually beneficial relations. We perform
regular inspections and audits and have strategic
reviews in place for key suppliers. We have aGroup supplier management process in placethat promotes a common supply chain strategy
driving the business towards fewer, high level,
quality suppliers.

20

-sp
ec
if

Mar
ket
an
Applicati
d
on

es
rvic
se

Supplier partnerships

cts
duThe significant management we haveundertaken of our portfolio has delivereda more focused, synergistic Group. We are
creating greater value by breaking down silos,
establishing cross-business and cross-functional
working groups to extract best practice andbetter leverage our scale and synergies.

ose pr
o
urp
ip

t
an o
Qu chnTe

Our infrastructure

an
aly
tic

t
men

We have invested in building a new
management and leadership team across thebusiness as well as defining and building on
the core capabilities we need to succeed. This
includes undertaking professional sales skills
training, internal workshops on the Jobs to be
Done methodology and operational excellence
lean training. We are developing a culture ofaccountability, empowering our employees to
own the challenge and the solution.

kfl
or
w
ic

n
EnviroOur people

EnergyWe focus our investment on market segments
where our key enabling technologies drive
product innovation, world-leading research andlong‑term growth for our customers and where
we can maintain leadership positions. We use
the insights we get from our market intimacy todrive our development priorities and to ensure
future higher returns on our innovation.

-specific sol
tion
uti
a
c
on
li
p
sa
processes,
ows,
ap
tion
nd
orma
inf
nd
sa

Continuous innovation&reca ncelth cieea s
H LifeWe are a leading provider of high technology
products and services to the world’s leadingindustrial companies and scientific researchcommunities. We enable our customers toimage, analyse and manipulate materials down
to the atomic and molecular level. We have
implemented a new sector structure to alignour businesses with our chosen customer
segments and applications.

Mu
lt

Relationships
and resources

u
lo m
gy

r
to s
uc tiondn
ico caSem munimoC&

By better understanding our customers’ world we are transforming the way we communicate
the value and benefits of our products by tailoring the information for each specific end market
application, as represented above.
We are increasingly providing application‑specific solutions building on our existing platforms
through tailored products, software upgrades, bespoke data interpretation and associated support
services. This is creating more value for our existing customers and, importantly, expanding ouraddressable market at improved margins.

Oxford Instruments plc Report and Financial Statements 2019

Our
offering

Strategic Report

Within these markets, our products, solutions and services
are facilitating a greener economy, increased connectivity,
improved health and leaps in scientific understanding.
What wedeliver

Imaging, analysis and manipulation is critical fromfundamental research into applied R&D and commercial
markets; enabling commercial exploitation andfundamental discovery of advanced technology.

Value for customers through solutions
We provide advanced technology solutions to a broad range of end
markets, supported by new product offerings and personalised customer
support. We enable our customers to accelerate their R&D, increase
productivity and make new scientific discoveries.

Thought leadership

Providing solutions to those exploring new frontiers
at the nanoscale.

Rewarding careers

Physical & Life Sciences
Innovation approach

Our key enabling technologies provide the basis for innovation across a
range of markets and industrial sectors and help underpin the shift to agreener economy, increased digital connectivity, and advances in materials,
life science, manufacturing and healthcare.

Product application insight

Financial Statements

We are proud to be widely recognised as leaders in what we do andfor the difference we make in the world. We have high performance
expectations and, by working together, our committed and skilledemployees make a real impact. We are committed to being the company
where the best people in our sector want to work.

Corporate responsibility
Applied R&D
Our key enabling technologies and solutions facilitate
the development of more advanced products.
Market insightGovernanceFundamental research

Product application insight

Corporate responsibility is integral to our ongoing business success.
It reminds us of the need to minimise our impact on the environment,
encourages us to pay attention to the needs of our customers,
employees and investors, and to build engagement with local
communities.

Shareholder value
The business is underpinned by sound financial management. By achieving
sustainable revenue growth and margin improvement, we are well placed
to deliver business growth and maximise Shareholder returns over thelong term.

Commercial markets
Providing products to support today’s manufacturing
challenges and create new opportunities.

We have positioned the Group to become a leading provider of hightechnology products and services to the world’s leading industrial andscientific research companies. Our chosen end markets remain robust
and, combined with our customer applications focus and improved
core capabilities, provide strong long-term drivers for future growthand margin improvement.

Company Information

	Find out moreon pages 18 and 19

Strong financials

21

Oxford Instruments plc Report and Financial Statements 2019

OUR STRATEGY

Horizon is a transformational programme for
Oxford Instruments and has been in place for two years.
Our strategy
Horizon is now well embedded across the Group and is helping us todeliver sustained revenue growth and margin improvement. Horizon
is driving our long-term plans and initiatives and has transformed
our operating processes and day-to-day activities. We are building astronger Oxford Instruments, changing the way we operate, enhancing
our commercial focus and core capabilities across the Group.
We are now better positioned to address a broad and diverse range ofattractive end markets and industrial sectors.

Our products, solutions and services are facilitating a greener
economy, increased connectivity, improved health and leaps inscientific understanding. Through our Horizon focus, we help ourcustomers accelerate their applied R&D, increase productivity inhigh tech manufacturing and make ground-breaking discoveries.
Our solutions are being used by customers to find cures for cancer,
advance space exploration and develop next generation electronics,
advanced materials and quantum technologies.

Operational model

MarketIntimacy

Customer
SupportCustomer

Operational
Excellence

22

Innovation
and ProductDevelopment

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

Whilst there is still much to do, we have made significant
progress over the past two years and are already seeing
tangible returns.
Our Horizon strategy has the following key elements:• we will focus our investment on market segments where our key
enabling technologies drive long-term growth for our customers
and where we can maintain or develop leadership positions;• we will drive the delivery of synergies and enhanced collaboration.
For example, in R&D we will prioritise our high-impact projects andresource them from across the Group;• we will be a more commercially focused, market-driven Group by
maintaining our heritage in supporting fundamental research whilst
increasing our focus on solutions for applied R&D and productsthat can support our commercial manufacturing and production
customers;• we will provide more value to our existing customers, as well as
creating growth opportunities in new market segments throughapplication-specific solutions with improved workflows, bespoke
analytics, data interpretation and associated support services; andMarket Intimacy

Progress during the year

We continue to develop an in-depth understanding of our customer
segments and are tailoring our solutions to more closely meet customer
needs. Insights from our stronger customer relationships are informing
and aligning our innovation and product development initiatives tocustomers’ strategic roadmaps.

We have made good progress in our transformation to a morecustomer-centric, market‑focused Group. We have changed theway we communicate and reach prospective and existing customers,
and we are seeing strong revenue growth from commercial customers
as we expand our offerings and addressable markets.

Innovation and Product Development

Progress during the year

We are focusing our R&D investment on higher growth segments,
prioritising our efforts on the most valuable product development
opportunities. Importantly, our new operating model is enhancing
our ability to leverage the technical capabilities and synergies acrossthe Group, ensuring the more effective delivery of our chosenpriority projects.

Our heightened customer application-based market intelligencehas strengthened our future product roadmaps by identifying more
attractive development opportunities and driving our priorities andfocus for innovation.

Customer Support

Progress during the year

We are building on the growing customer demand for a higher
level and broader range of services and support to help meet their
evolving commercial and strategic needs. Service will become a coredifferentiator in our markets.

We continue to develop our customer service offerings to support ourcustomers’ needs. We are offering remote support packages, dynamic
and remote monitoring of system performance and are developing
bespoke training packages to ensure that our customers can achieve
the most from our products and solutions.

Operational Excellence

Progress during the year

We are targeting improvements in cost, time and defects to delivera world-class experience for Oxford Instruments’ customers.
Operational excellence is driving us to become a more delivery
and outcome‑focused business.

We undertook a significant investment in the year to deliver a
step change in three key areas: strategic procurement, operational
efficiency and logistics. Already this has increased our revenue capacitywith improved productivity for the current year.

• we will transform our operational model to embed consistency andexcellence across our businesses, measured by clearly defined corecapabilities that will enhance our competitive advantage.
Governance
Financial Statements
Company Information

23

Oxford Instruments plc Report and Financial Statements 2019

KEY PERFORMANCE INDICATORSThe Group uses a range of measures to monitor progressagainst its strategic plans. The key performance indicators
are presented below:

Strategic priorities

Inventing the Future
Link to strategy

What we measure
Proportion of revenue coming from products
launched in the previous three years1

How we performed %
45
35

37

37

2018

2019

60

58

61

2017

2018

2019

1.51

1.50

2018

2019

30

Why we measure
To measure the effectiveness of our
R&D programmes

2015

Realising the Brand

What we measure

2016

How we performed

Net Promoter Score®2

52

Link to strategy

2017

55

Why we measure
To measure customer feedback

2015

Adding Personal Value
Link to strategy

2016

What we measure

How we performed“Value add” = (adjusted operating profit +employment costs)/employment costs

1.40

1.48

1.41

2015

2016

2017

Why we measure
To measure efficiency

1. To ensure this metric better reflects the performance of those businesses which invest in R&D, the revenue from the Group’s OI Healthcare division has been excluded from this metric.
Results from previous years have been restated to show this.
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 zeroand 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 number 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. Calculated as adjusted operating profit divided by revenue.
4. Cash conversion is defined as the ratio of cash generated from continuing operations before non-recurring items and acquisition‑related costs, and pension scheme payments,
less capitalised development expenditure and net capital expenditure on property, plant and equipment to adjusted operating profit (see Income Statement).
5. Calculated as adjusted operating profit less amortisation (but before impairment) of intangible assets divided by capital employed. Capital employed is defined as assets (excluding cash,
tax and derivative assets) less liabilities (excluding tax, debt, derivative and pension liabilities).

24

Oxford Instruments plc Report and Financial Statements 2019

Financial goal
To deliver Shareholder returns through profitable, sustainable growth with strong cash conversion and efficient use of capital.

Link to strategy

Why we measure

How we performed %To drive profitable, sustainable growththrough the implementation of our strategy

13.3

Adjusted operating
profit and margin3

Why we measure

12.4

11.1

(1.1)

(4.3)

2015

2016

Strategic Report

Revenue growth

2017

2018

2019

15.7

14.9

2018

2019

How we performed %To consistently maintain underlying
operating margins

12.9

14.1

12.7

Link to strategy

Adjusted earnings per
share (EPS) growth

Why we measure

2016

2017

Governance2015

How we performed %35.7

To achieve long-term,
consistent growth in EPS

15.3

Link to strategy

Why we measure

Link to strategy

To maintain a strong operating
cash conversion ratio and high levelof free cash flow

(0.5)

1.2

2015

2016

2017

2019

How we performed %
124

109
90

74

2015

Return on capital
employed (ROCE)5

2018

Financial Statements

Cash flow4(24.7)

Why we measure

69

2016

2017

2018

2019

How we performed %20.6

To deliver ROCE in excess of ourcost of capital

17.0
Company Information

Link to strategy
6.8

2015

Core capabilities:

MarketIntimacy

Innovation and
Product Development

Customer
Support

8.5

8.9

2016

2017

2018

2019

Operational
Excellence25

Oxford Instruments plc Report and Financial Statements 2019

OPERATIONS REVIEW

Materials &Characterisation
This sector includes:
NanoAnalysis, Asylum Research and Plasma Technology.

Semiconductor wafer

Materials & Characterisation delivered strong
growth in orders, revenue and profitability.
Revenue

Adjusted2 operating profit£137.9m+16.8%£22.1m

+10.0%(2018: £118.1m)+15.3%1(2018: £20.1m)+13.9%1

At constant currency

At constant currency

Adjusted2 operating margin

Profit before tax after adjusting items

16.0%

19.7m

(2018: 17.0%)(2018: £17.3m)

26

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report
Governance

We provide leading product performance,
improved ease of use and enhanced
productivity, with the analytics andinformation to aid the interpretation of
acquired data.

Company Information

Materials & Characterisation delivered strong
growth in orders, revenue and profitability.
This was supported by our continued focus on
tailoring our product offering to targeted end
customer segments and the success of recently
launched products and solutions. Throughour applications focus we have been able toincrease value for our existing customers andexpanded our reach into new addressable
markets. This led to significant growthfrom industrial and commercial customers,
with their proportion of sales in the period
increasing to 58% (2018: 49%). Academic
markets remained robust, with orders broadly
in line with the previous year.

The sector had growth across each of ourtarget application segments, with particularly
strong growth within Advanced Materials,
which accounted for 39% of sales in the
sector. Semiconductor & Communications
represented 42% of sales, with Energy,
Environment and Healthcare & Lifescience
applications representing 7%, 6% and 5%
of sales, respectively. From a geographic
perspective, revenue grew in each of the
major regions of Europe, North Americaand Asia.

Financial Statements

This sector has a broad customer base across awide range of applications for the imaging andanalysis of materials down to the atomic level
as well as the fabrication of semiconductor
devices and structures through our range ofadvanced semiconductor etch and deposition
process systems. Our portfolio of imaging
systems includes our range of market‑leading
X-ray and electron analysis systems used inconjunction with electron and ion microscopes
as well as our performance‑leading atomic
force microscopes. The sector has a strong
focus on supporting and accelerating
our customers’ applied R&D, enabling
the development of new devices, next
generation higher performance materials
and enhancing productivity in advanced
manufacturing, quality assurance (QA) andquality control (QC).

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

27

Oxford Instruments plc Report and Financial Statements 2019

OPERATIONS REVIEW CONTINUED

Materials &Characterisation
The continued demand for lighter, stronger
and higher functioning materials has driven
our growth in Advanced Materials. Here,our solutions are being used to aid thedevelopment of next generation products andcomponents, as well as in the QC and QA of
current manufactured products. Some of the
key market applications include automotive
and aerospace, additive manufacturing,consumer electronics, displays, and polymers.
As an example, the disruptive transformation
within the automotive industry towards
electric, hybrid and autonomous vehicles isdriving manufacturers to use new composite
materials and super alloys, faster dynamic
control electronics, and develop more efficientbattery storage and power delivery solutions.
This is driving an increasing demand for ouradvanced analytical imaging and etch anddeposition systems, with the mechanicalproperties, performance and reliabilityof advanced materials being determinedthrough the design and precise control of
the composition, microstructure and thinfilm coatings.

28

In particular, we have had strong sales growthfrom our imaging and analysis products usedwith electron microscopes, namely our UltimTM
range of large area X-ray detectors andSymmetryTM, our super-fast material structural
analysers. These analysers enable productivity
improvement through higher speed,
resolution and accuracy of analysis.
We have also had good growth within
additive manufacturing applications where
our imaging systems are being used
to measure a range of critical material
properties, assess the performance andquality of the manufactured components,and help optimise the manufacturing process.
Building on our expertise in particle analysis,
we have developed a tailored solution for the
QC of the raw material feedstock, helping
avoid contamination and maintaining end
product performance.

The Semiconductor & Communications
segment saw continued order and revenue
growth in the year. Whilst sales to mainstream
silicon chip manufacturing and electronics
declined, we received particularly strong
growth from commercial customers across
our portfolio of semiconductor etch anddeposition solutions, underpinned by ourleading performance and expertise incompound semiconductors. Here, materials
such as silicon carbide, indium phosphideand gallium nitride are critical to produce
the higher speeds, larger capacity andimproved energy efficiencies required torealise a greener economy, autonomousvehicles and ubiquitous unbound connectivity,
when compared to current silicon‑based
technologies. Success in the segment was
supported by the breadth of end applications
that we support, as well as our reach acrossfundamental research, applied R&D of next
generation products, and the manufacturing
support and production of current products.

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

We have been working with a numberof leading commercial organisations to
help develop the necessary semiconductor
device performance, quality and reliability
at commercially effective price points.

Financial Statements

In the Energy segment, we saw good growthacross energy generation, storage and battery
applications as a result of the increasing
interest in lithium (Li) batteries. Here ourmaterial analysers support two key drivers.
First, our advanced high energy-resolution
and ultra‑sensitive Extreme™ X-ray analyser isthe market leader in imaging of the internal
chemistry and active interfaces at the nanoscalerequired for the development of new, higher
capacity and faster charging systems. Second,
we have developed a tailored particle analysis
solution to aid the detection of microscale
metal impurities, which degrade performanceand can cause catastrophic failure.
In recognition of the innovation encompassed
within the Extreme™, it has recently received
the Queen’s Award for Innovation.

As our analytical systems become increasingly
sensitive and easier to use by non-experts, wehave found new opportunities within several
markets for our X-ray analysers and atomic
force microscopes. In Lifescience, researchers
are using our video rate CypherTM atomic
force microscope to observe biomolecularinteractions in real-time, furthering theirunderstanding of how our bodies work.
Our large area and high sensitivity X-ray
solutions are being used to observe the roleof calcium, sodium and potassium ions in
cardiac, brain and nerve cell functionality;
while in food markets we are helping to
improve food integrity and production yield.

GovernanceWithin compound semiconductors we haveseen increasing demand being driven by
the long-term transitioning of technology
away from silicon‑based solutions for
power electronics, connectivity andcommunication. Power electronics are theenabling technologies to use, distributeand generate electrical energy. The moveto silicon carbide and gallium nitride‑based
solutions enables a step change in energy
efficiency, with increased sales across a range
of end applications including electric vehicles
and distribution networks. Our gallium
arsenide and indium phosphide processsolutions support the increased speed andinfrastructure capacity required to deliver
the desired transformation in connectivity,for example 5G networks and the rise in
the data economy. Demand for increased
communication is driving growth acrosssensors and optoelectronic devices such asvertical cavity surface emitting lasers (VCSELs),
three-dimensional sensor arrays and microLEDs
used across heads‑up displays, video walls andsmart watches.

1: Cypher Atomic Force Microscope

Company Information

2: PlasmaPro etching system

29

Oxford Instruments plc Report and Financial Statements 2019

OPERATIONS REVIEW CONTINUED

Research &Discovery
This sector includes:
Andor Technology, NanoScience, Magnetic Resonance,
X-ray Technology and our minority share in Scienta Omicron.

Mould specimen captured by a Sona camera

The sector had good growth in orders and revenue.

Revenue

Adjusted2 operating profit£125.2m+11.8%£12.7m-8.0%(2018: £112.0m)+9.9%1(2018: £13.8m)-2.2%1

At constant currency

At constant currency

Adjusted2 operating margin

Profit before tax after adjusting items

10.1%

£6.6m

(2018: 12.3%)(2018: £4.1m)

30

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report
Governance

We had growth across our three largest
customer segments of Healthcare &Lifescience, Quantum Technology andResearch & Fundamental Science, which
represent 41%, 22% and 19% of sales
respectively. Sales to customers exploring
new advanced materials, semiconductors
or developing energy and environmental
applications remained broadly in line withthe previous year. From a geographicalperspective, we had good growth acrossEurope, Asia and North America.

Company Information

The sector had good growth in orders andrevenue driven by a strong performancefrom our optical microscopy systems,
scientific cameras, cryogenic systems
and superconducting research magnets.
Performance was supported by positive
academic end markets leading to strong
order growth across the product portfolio,
augmented by further growth into commercial
customers for our scientific cameras, cryogenic
and optical microscopy systems. We saw
continued improvement in our NanoSciencebusiness under a new leadership team.
However, underlying profit improvement
within the sector was more than offset bya temporary, but sustained, period of low
manufacturing yield at X-Ray Technology,
which produces our scientific X-ray tubes forthird‑party customers, a lower contribution
from the Scienta Omicron joint venture andan investment in operational excellence.

Financial Statements

This sector provides advanced solutions thatcreate unique environments and enable
imaging and analytical measurements down
to the molecular and subatomic level, usedpredominantly in fundamental and appliedresearch. We build on our relationships
with customers working on breakthroughapplications in research to gain insights andsupport future commercial applications. We
have strong brand recognition and leading
product performance in our chosen market
segments, with 69% of sales from theacademic or Government‑funded researchcommunity and 31% from industrial orcommercial customers.

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

31

Oxford Instruments plc Report and Financial Statements 2019

OPERATIONS REVIEW CONTINUED

Research &Discovery
Growth in Healthcare & Lifescience was driven
by a strong performance from our optical
microscopy products and solutions, including
our DragonflyTM confocal microscope, ourimage visualisation and analysis softwareand scientific cameras used on third‑party
measurement solutions. The launch of our
SonaTM camera further enhanced our portfolioof high sensitivity cameras specifically tailoredfor life science applications.
There is an increasing need from thoseworking in neuroscience, cell anddevelopmental biology to be able to acquire,visualise and analyse multiple large samples
to better understand the core biologicalprocesses that lead to disease. DragonflyTM
has become a platform of choice for theseresearchers as it can handle such sample
types while offering ease of use and an
exceptional imaging capability that spansfrom the millimetre scale right down to thenanometre scale.

32

The enhanced performance it provides
researchers is enabling improved
understanding and the development of
new therapeutic approaches for cancer andneurological conditions, such as Alzheimer’sand Parkinson’s.

This has proven especially valuable forour strategic OEM partners. It is providingthem with a core capability for their genesequencing and clinical screening solutions,which are used for drug feasibility studies andin the development of personalised medicines.

Building on our understanding of the needsof researchers in this segment, Imaris™, our
imaging software, enables the visualisation
and analysis of the huge datasets modern
optical microscopy systems create. Imaris™
offers enhanced interpretation of results
and our customers are using it to better
understand conditions, such as autism andAlzheimer’s, and processes, such as cellular
activity during wound and organ repair andimmune response to foreign organisms.

With the expanding role of technology
in the world we have seen an increase inacademic and Government investment inmore basic and fundamental science acrossa broad range of disciplines, as well as
an ongoing renewal and regeneration oflarge‑scale national user facilities. While end
user applications vary, we are well positioned
to support them with a range of optical,
cryogenic, magnetic resonance imaging
and high magnetic field solutions.

Our high sensitivity cameras, which offer
enhanced performance at low light levels,
are being used to measure and observe theinteraction with individual biomolecules
in real time, increasing the accuracy andrelevance of results.

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

Fundamental shifts in technology andcapability are driving increased research andapplied development for both academic andcommercial customers. Quantum Technology
continues to deliver strong demand andwe had increased order growth in the year
for this segment. Global annual spend on
quantum technologies is estimated to exceed$1.5 billion and is set to continue over the
next decade. Quantum technologies offer the
potential for vast increases in computational
speed, new paradigms for secure informationtransfer and unprecedented sensor sensitivities
applicable across a broad range of industrial
and medical applications. With our Triton™
ultra-low temperature cryogenic platforms and
iXon™ cameras, we are well placed to exploit
these growing opportunities.

Within the Energy, Environment andAdvanced Materials segments our broad rangeof analytical systems are supporting research
into sustainable foods, water cleanlinessand advanced fabrics, as well as ensuring
compliance within food supply. For example,
our high field benchtop magnetic resonanceanalysers are being used to measure the oiland fat content of foods, contamination
within water, and are aiding the productivity
and quality control of high-performance
fabrics for clothing manufacture.

Financial Statements

We continue to see sales growth in astronomy,
where our specialised cameras, such as therecently launched Marana™, are allowing the
rapid imaging of large areas of the sky withincreased sensitivity. This is enhancing the
tracking of small particles of space junk that
had been previously undetectable; space junkcan be very damaging to operational satellites
and future space missions.

Exoplanet discovery continues to attract
notable funding within astronomy and ourrange of large area cameras are well placed
for this application. The drive to find otherearth-like planets and the increased level ofprivately funded space developments provide
continued growth opportunities.

GovernanceDuring the year we won a significant global
tender to supply several high-performancecryogenic and extreme magnetic field systems
to the renowned Institute of Physics Chinese
Academy of Sciences (IOP-CAS). This builds
on the performance and reliability of themany systems we have previously supplied
to the IOP-CAS’s existing laboratories.
Our solutions will allow researchers to makeground‑breaking discoveries of new materials
and novel phenomena, furthering ourunderstanding of the structure, properties
and performance of these materials on aquantum scale.

Company Information

1: Royal Mail stamp commemorating thesuperconducting magnet
2: Scientist analysing crisp sample using
Pulsar NMR

33

Oxford Instruments plc Report and Financial Statements 2019

OPERATIONS REVIEW CONTINUED

Service &Healthcare
This sector includes:
The Group’s maintenance service contracts, billable repairs,
training and support services, and spare part sales.

Engineer servicing a Triton dilution refrigerator

In OiService we have seen an increased demand forservices and support related to our own products.
Revenue

Adjusted2 operating profit£70.5m+5.5%£14.9m+18.3%(2018: £66.8m)+4.2%1(2018: £12.6m)+15.9%1

At constant currency

At constant currency

Adjusted2 operating margin

Profit before tax after adjusting items

21.1%£14.1m(2018: 18.9%)(2018: £10.6m)

34

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report
GovernanceIn the year the sector had order and revenue
growth, with increased profitability andoperating margin, as a result of an improved
performance from both OI Healthcare and
OiService.

2. Details of adjusting items can be found in Note 1
to these Financial Statements.

Within Japan, we continue our focus on
supporting our key account customers
through the provision of best‑in‑classservice support for a range of MRI systems.
Our technical expertise, response times andnational coverage has enabled us to win
further accounts within the year.

In OiService we have seen an increased
demand for services and support related toour own products. As part of our Horizon
strategy we continue to develop our customer
service offerings, supporting our customers’
needs by focusing on how we can add value
in their day-to-day work and increase theiroverall productivity. We offer remote support
packages and can undertake dynamic andremote monitoring of system performance
to improve yield and maximise up-time.
We have also created bespoke training
packages to help our customers get the mostfrom their equipment and help with expert
data interpretation. We have built on theongoing success of our Chinese Summer
Microscopy School by hosting Taiwan’s first
School of Microscopy with the National Taiwan
University. This two-day event attracted over
150 participants from academia and industry.
Through our dedicated e-commerce website,
our customers can conveniently find a rangeof relevant consumables and a selection ofrelated services.

35

Company Information

1. For definition refer to note on page 2.

Our US OI Healthcare business continues
to return a higher proportion of revenue
from service contracts relative to the sale ofrefurbished systems, in line with our strategy.
In the year there has been good improvementin the lease utilisation of our fleet ofmobile imaging systems, and our increased
focus on service capabilities has helped
win multi‑instrument contracts at larger
imaging centres.

Financial Statements

The Service & Healthcare sector comprises theGroup’s maintenance service contracts, billable
repairs, training and support services, andspare part sales related to Oxford Instruments’
own products under the OiService brand;
and the sale, service and rental of refurbishedthird-party MRI and CT machines under the
OI Healthcare brand.

Oxford Instruments plc Report and Financial Statements 2019

FINANCE REVIEWRevenue£333.6m +12.4%(2018: £296.9m)

Adjusted operating
profit from continuing
operations increased by
6.9% to £49.7 million(2018: £46.5 million)
Summary• Orders up 12.9% to £353.5 million.
• Order book of £171.6 million,
up 12.2%.
• Net cash of £6.7 million following
strong cash conversion of 103%.
• Full‑year dividend increasedby 8.3% to 14.4 pence.
The Group has adopted IFRS 15 Revenue fromContracts with Customers using the modified
retrospective approach. Comparatives havenot been restated. The main difference iswithin our NanoScience business where therevenue recognition on complex customised
magnetic and cryogenic systems is deferredfrom being primarily on transfer of rights
and rewards of ownership to completionof installation. The Group has also adopted
IFRS 16 Leases in the 2018/19 financial year.
The net accounting impact of adopting
IFRS 15 and IFRS 16 is to increase revenueby £7.0 million and profit before tax by£2.6 million.

36

Reported orders increased by 12.9% to£353.5 million (2018: £313.0 million), an
increase of 12.0% at constant currency.
At the end of the period the Group’s orderbook for future deliveries stood at £171.6
million (31 March 2018: £134.0 million).
The order book as at 31 March 2018 restatedon an IFRS 15 basis is £153.0 million, against£134.0 million as previously reported. Against
this IFRS 15 adjusted comparative, the orderbook grew 12.2% on a reported basis and9.4% at constant currency.
Reported revenue increased by 12.4%
to £333.6 million (2018: £296.9 million).
Revenue, excluding currency effects, increasedby 10.8%, with the movement in average
currency exchange rates over the year
increasing reported revenue by £4.7 million.
Adjusted operating profit from continuing
operations increased by 6.9% to £49.7 million(2018: £46.5 million). Adjusted operating
profit from continuing operations, excluding
currency effects, increased by 9.7%. Adjusted
operating margin from continuing operations
decreased by 80 basis points to 14.9% (2018:
15.7%), impacted by a currency headwind
and in-year investment in operational
excellence. Excluding currency effects,
adjusted operating margin fell by 20 basis
points to 15.5%.

Adjusted profit before tax from continuing
operations grew by 12.3% to £47.5 million(2018: £42.3 million), representing a marginof 14.2% (2018: 14.2%).
Adjusting items include amortisation of
acquired intangibles of £9.6 million and a
net charge of £0.9 million relating to loannote make-whole settlement payments, a net
credit from our associate, Scienta Omicron,and a charge due to Guaranteed Minimum
Pension equalisation. The movement in themark‑to‑market valuation of un-crystallised
currency hedges for future years gave rise toa charge of £1.5 million.
After adjusting items, the Group recorded
an operating profit of £38.6 million (2018:£38.4 million) and profit before tax of£35.5 million (2018: £34.2 million).
Continuing adjusted basic earnings per
share grew by 15.3% to 64.9 pence (2018:56.3 pence). Continuing basic earnings per
share were 50.1 pence (2018: 34.3 pence).
Cash generated from operations of£56.3 million (2018: £33.4 million),
represents 103% (2018: 69%) cash
conversion. Net debt decreased from
£19.7 million on 31 March 2018 to net
cash of £6.7 million.
Adjusted operating profit is stated before
impairment and amortisation of goodwill
and acquired intangibles, restructuringcosts, the mark-to-market valuation of
unexpired currency hedges, and otheradjusting items, as set out in Note 1 to
the Financial Statements.

Oxford Instruments plc Report and Financial Statements 2019

Adjusted operating profit£177.0m +17.3% £49.7m(2018: £150.9m)+6.9%(2018: £46.5m)

Strategic Report

Gross profit

Income Statement
The Group’s Income Statement is summarised below.
								Year ended							31 March 2019								£mYear ended
31 March 2018£m

ChangeRevenue							
333.6

296.9

12.4%
17.3%

150.9
(105.8)0.2

0.5

Share of profit of associate 						Foreign exchange							
(1.2)

0.9

Adjusted operating profit							
49.7

46.5

Net finance costs							
(2.2)

(4.2)

Adjusted profit before tax							
47.5

42.3

Amortisation of acquired intangibles						(9.6)(10.9)

Non-recurring items							
(0.9)

(0.3)
3.1

Profit before tax							
35.5

34.2

Tax from continuing operations						(6.8)(14.6)

12.3%

Profit for the period from continuing operations					

28.7

19.6

Adjusted effective tax rate1						

21.9%

23.9%

Continuing adjusted earnings per share – basic					

64.9p

56.3p

15.3%

Continuing earnings per share – basic						

50.1p

34.3p

46.1%

Continuing adjusted earnings per share – diluted				

64.3p

56.1p

14.6%

Continuing earnings per share – diluted						

49.7p

34.1p

45.7%

Dividend per share							
14.4p

13.3p

8.3%

			

Financial Statements

Mark-to-market of currency hedges						
(1.5)

6.9%

Governance

Gross profit							177.0Administrative expenses							(126.3)						
1. The adjusted effective tax rate is calculated excluding amortisation of acquired intangibles, the mark-to-market of financial derivatives, and other adjusting items.

Orders and revenue
Total reported orders grew by 12.9% (12.0% at constant currency) to £353.5 million. Orders, at constant currency, increased by 10.3% forMaterials & Characterisation, 16.1% for Research & Discovery and 7.6% for Service & Healthcare.

The book-to-bill ratio (orders received to goods and services billed in the period) for the year was 1.06.
Revenue, at constant currency, increased by 15.3% for Materials & Characterisation, with a particularly strong performance from NanoAnalysis
and Plasma Technology. Constant currency growth of 9.9% in Research & Discovery was primarily driven by good progress from Andor Technology,
partially offset by a small decline in revenue for X-Ray Technology. Service & Healthcare constant currency revenue grew by 4.2%, with good
growth from the service of our own products.
On a geographical basis, at constant currency, revenue grew by 2.5% in Europe, 9.8% in North America, 17.7% in Asia, with a small decline inRest of World of 5.9%.

37

Company Information

Reported revenue of £333.6 million (2018: £296.9 million) increased by 12.4% (10.8% at constant currency). Reported revenue increased by
16.8% for Materials & Characterisation, 11.8% for Research & Discovery and 5.5% for Service & Healthcare.

Oxford Instruments plc Report and Financial Statements 2019

FINANCE REVIEW CONTINUED

Income Statement continued
Orders and revenue continued
After adjusting the comparative period for IFRS 15, total reported order book grew by 12.2% (9.4% at constant currency). The order book,at constant currency, compared to 31 March 2018, increased by 16.7% for Materials & Characterisation and 15.3% for Research & Discovery.
Good growth in orders from the service of our own products was offset by a decline in OI Healthcare’s order book, resulting in a segment declineof 8.0%.
							Materials &£m							Characterisation

Research &Discovery

Service &Healthcare

Total1

Revenue: 2017/18						
118.1

112.0

66.8

296.9

Underlying movement						
18.1

11.1

2.8

32.0

Foreign exchange						1.7

2.1

0.9

4.7

Revenue: 2018/19						
137.9

125.2

70.5

333.6

Revenue growth: reported						
16.8%

11.8%

5.5%

12.4%

Revenue growth: constant currency					

9.9%

4.2%

10.8%

15.3%

1. Excluding inter-sector revenue.

Gross profit
Gross profit increased by 17.3% to £177.0 million (2018: £150.9 million), representing a gross profit margin of 53.1%, an increase of 230 basis
points over last year.

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

Research &Discovery

Service &Healthcare

Total

Adjusted operating profit: 2017/18					20.1

13.8

12.6

46.5

Underlying movement						
2.8

(0.3)

2.0

4.5

Foreign exchange						
(0.8)

(0.8)

0.3

(1.3)

Adjusted operating profit: 2018/19					22.1

12.7

14.9

49.7

Margin: 2017/18						
17.0%

12.3%

18.9%

15.7%

Margin: 2018/19						16.0%

10.1%

21.1%

14.9%

38

Oxford Instruments plc Report and Financial Statements 2019

Adjusting items

Net movements on marking-to-market
derivatives in respect of future periods aredisclosed in the Income Statement as foreignexchange and excluded from our calculationof adjusted profit before tax.

Profit before tax
Continuing adjusted profit before tax
increased by 12.3% to £47.5 million (2018:£42.3 million). The adjusted profit before tax
margin of 14.2% (2018: 14.2%) was in linewith last year.
Profit before tax of £35.5 million (2018:£34.2 million) is after the mark-to-market
movement on derivative financial instruments,
amortisation of acquired intangibles and otheradjusting items.

Tax
The adjusted tax charge from continuing
operations of £10.4 million (2018: £10.1
million) represents an effective tax rate of
21.9% (2018: 23.9%). In April 2019, theTax Tribunal adjudicated on a historical loanarrangement structure. The decision went
against Oxford Instruments and as a result apayment of £4.0 million was made to HMRC
in April 2019. The liability was broadly coveredby historical provisions and one-off credits.

Earnings per share
Continuing adjusted basic earnings per
share increased by 15.3% to 64.9 pence(2018: 56.3 pence); continuing adjusted
diluted earnings per share grew by 14.6% to64.3 pence (2018: 56.1 pence). Continuing
basic earnings per share increased by 46.1%
to 50.1 pence (2018: 34.3 pence); continuing
diluted earnings per share grew by 45.7% to49.7 pence (2018: 34.1 pence).

The Group maintains a hedging programme
against its net transactional exposure using
internal projections of expected currency
trading transactions expected to arise overa period extending from 12 to 24 months.
As at 31 March 2019 the Group had currency
hedges in place extending up to twelve
months forward.

Discontinued operations
In May 2019, the Group received £1.6 million
in relation to the finalisation of tax affairs
outstanding upon the disposal of the Industrial
Analysis business. A gain of £1.3 million
after taxation has been recorded underdiscontinued operations. Recorded within
the comparative period under discontinued
operations is a post-tax profit of £45.9 million
from the sale of Industrial Analysis, which
was completed on 3 July 2017.

Dividend
The Group’s policy is to increase thedividend each year in line with the increasein underlying earnings, considering
movements in currency. The Board has
proposed to increase the final dividend to
10.6 pence (2018: 9.6 pence). This results
in a total dividend of 14.4 pence (2018:13.3 pence), an increase of 8.3%. The final
dividend will be paid, subject to Shareholder
approval, on 18 October 2019 to Shareholders
on the register as at 13 September 2019.

The number of undiluted weighted average
shares remained constant at 57.2 million.
Company Information

The mark-to-market loss in respect ofderivative financial instruments was£1.5 million (2018: £3.1 million gain).
This reflects the movement on currency
derivatives that are hedging futuretransactional currency exposures for theGroup – from an opening net fair value assetof £1.5 million to a closing neutral position.
The year‑end neutral position reflects an
un‑crystallised loss arising from a fall in thevalue of Sterling at the balance sheet dateagainst a blended rate achieved on US Dollar
forward contracts that will mature over the
next twelve months.

The Group’s adjusted net finance costs
fell by £2.0 million to £2.2 million (2018:£4.2 million) with net finance charges fallingby £1.7 million to £1.9 million, and pension
financing charges falling by £0.3 million to£0.3 million.

The Group faces transactional andtranslational currency exposure, most notably
against the US Dollar, Euro and Japanese Yen.
For the year, approximately 14% of Grouprevenue was denominated in Sterling, 55%
in US Dollars, 18% in Euros, 11% in Japanese
Yen and 2% in other currencies. Translational
exposures arise on the consolidation ofoverseas Company results into Sterling.
Transactional exposures arise where thecurrency of sale or purchase transactions
differs from the functional currency in which
each company prepares its local accounts.

Financial Statements

The Group uses derivative products to hedge
its short-term exposure to fluctuations inforeign exchange rates. It is Group policy
to have in place at the beginning of thefinancial year hedging instruments to cover
80% of its forecast transactional exposurefor that year. The Group has decided thatthe additional costs of meeting the extensive
documentation requirements of IFRS 9 toapply hedge accounting to these foreignexchange hedges cannot be justified.
Accordingly, the Group does not use hedge
accounting for these derivatives.

Net finance costs

Foreign exchange

GovernanceNon-recurring items were a net charge of£0.9 million. During the period we repaid£11.5 million of the principal outstandingon loan notes as a condition of the saleof Industrial Analysis. The make-whole
settlement cost due at the time of therepayment was £0.9 million. Following theHigh Court’s confirmation on Guaranteed
Minimum Pension equalisation between males
and females, we have recognised a chargeof £0.3 million. Our associate recognised
a net gain of £0.3 million, comprised ofa gain of £0.6 million on a reversal of an
impairment, partially offset by £0.3 millionof restructuring costs.

This has been offset by an un-crystallised gain
attributable to a rise in the value of Sterling at
the balance sheet date against a blended rateachieved on Euro and Japanese Yen forward
contracts that will mature over the next
twelve months.

Strategic Report

Amortisation of acquired intangibles of£9.6 million relates to intangible assets
recognised on acquisitions, being thevalue of technology, customer relationships
and brands.

39

Oxford Instruments plc Report and Financial Statements 2019

FINANCE REVIEW CONTINUED

Cash flow
The Group cash flow is summarised below.
									Year ended									31 March 2019								£mYear ended
31 March 2018£m

Adjusted operating profit							
49.7

46.5

Depreciation and amortisation							
11.0

9.1

Adjusted EBITDA								
60.7

55.6

Working capital movement								3.7(13.2)

Purchase of rental assets held for subsequent sale						

(1.1)

(0.7)

Loss on disposal of property, plant and equipment						

0.2

0.3

Equity settled share schemes							
0.8

1.1

Share of profit from associate							
(0.2)

(0.5)

Restructuring costs								
(0.7)

(1.3)

(7.1)

(7.9)

Cash generated from operations							
56.3

33.4

Pension scheme payments above charge to operating profit					Interest								
(3.2)

(2.1)

Tax									
(8.7)

(3.8)

Capitalised development expenditure						

(3.5)

(5.8)

Expenditure on tangible and intangible assets						

(6.3)

(4.8)

Proceeds from sale of property, plant and equipment						

—

9.3Increase in investment in associate							
—

(2.1)

—

71.2

Proceeds from sale of subsidiary undertaking						Decrease in long-term receivables							
1.1

0.9

(7.6)

(7.4)

Proceeds from issue of share capital and exercise of share options					

0.2

0.2

Payments made in respect of lease liabilities						

(3.2)

—

Decrease in borrowings								(11.5)(96.8)Net increase/(decrease) in cash and cash equivalents from continuing operations 			(7.8)

Dividends paid							13.6Note: Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation of acquired intangibles, mark-to-market of financial derivatives, restructuring costs and other non-cash adjusting items.

Cash generated from operations
Cash generated from operations of £56.3 million (2018: £33.4 million) represents 103% (2018: 69%) cash conversion. The impact of IFRS 16 isto recognise a lease liability and corresponding asset for leases previously classified as operating leases. As a result, the depreciation charge for theyear includes an additional £3.3 million reflecting the increase in asset base. Compared to the comparative period, cash generated from operations
is also higher by £3.3 million. Cash conversion is defined as cash generated from operations before non-recurring items and pension scheme
payments, less capitalised development expenditure, capital expenditure and payments made in respect of finance leases/adjusted operating profit.
Payments made in respect of finance leases are now included within our definition of cash conversion to retain a like-for-like comparison following
the introduction of IFRS 16.
Working capital fell by £3.7 million, reflecting an increase in inventories of £4.0 million and receivables of £3.5 million, combined with payables
and customer deposits increasing by £4.1 million and £7.1 million respectively.

Interest
Net interest paid was £3.2 million (2018: £2.1 million). This includes loan note make-whole payments of £0.9 million as a consequence of repaying
loan note principal following the sale of Industrial Analysis. Net interest paid in the comparative period was low due to payment timing differences.

Tax
Tax paid was £8.7 million (2018: £3.8 million), the comparative period benefiting from tax deductions on allowable adjusting items and utilisationof brought‑forward tax losses. Following the Tax Tribunal adjudication on historical loan structures, the Group made a cash settlement to HMRC of£4.0 million in April 2019, after the end of the financial year.

40

Oxford Instruments plc Report and Financial Statements 2019

Investment in Research and Development (R&D)

									Year ended									31 March 2019								£mYear ended
31 March 2018
£m

25.4

23.4

Depreciation of R&D-related fixed assets							
(0.1)

(0.1)

Amounts capitalised as fixed assets							
0.1

0.1

(3.5)

(4.4)

R&D expense charged to the Income Statement						Amortisation and impairment of R&D costs capitalised as intangibles					Amounts capitalised as intangible assets							
3.5

5.8

Total cash spent on R&D during the year						
25.4

24.8

Strategic Report

Total cash spend on R&D in the year was £25.4 million, equivalent to 7.6% of sales (2018: £24.8 million, 8.4% of sales). A reconciliation between
the amounts charged to the Income Statement and the cash spent is given below:

Investment in associate
In the comparative period, the Shareholders of Scienta Omicron agreed to a capital injection to strengthen the balance sheet of the joint ventureand ensure future liquidity in support of the business strategy. Our share was £2.1 million and was paid in September 2017.

Disposals
The sale of Industrial Analysis was completed on 3 July 2017. A post-tax profit of £45.9 million is recorded within discontinued operations for thecomparative period.

Net debt
Good cash generation in the year moved the Group from having opening net debt of £19.7 million to net cash of £6.7 million. Cash generated fromoperations was £56.3 million. The Group invested in capitalised development costs of £3.5 million and tangible and intangible assets of £6.3 million.

GovernanceNet debt and funding

Movement in net debt									
£mNet debt as at 31 March 2018								19.7Cash generated from operations								(56.3)
Interest									
3.2Capitalised development expenditure								
3.5Capital expenditure on tangible and intangible assets							

6.3Payments made in respect of lease liabilities							

3.2

(1.1)
Decrease in long-term receivables								Dividends paid									
7.6Financial Statements

8.7
Tax										Foreign exchange and other items								(1.5)
Net cash as at 31 March 2019								(6.7)

Funding
On 2 July 2018 the Group entered into a new unsecured multi-currency revolving facility agreement, which is committed until June 2023
with one‑year extension options at the end of the first and second years. The facility has been entered into with two banks and comprises
a Euro‑denominated multi-currency facility of €50.0 million and a US Dollar‑denominated multi-currency facility of $80.0 million.
In the first half of the year the Group repaid, as a pre-condition relating to the sale of Industrial Analysis, £11.5 million of its bilateral private
placement note, leaving an outstanding note of £27.9 million, which matures in March 2021. Associated make-whole settlement costs of£0.9 million have been included within non-recurring items.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 31 March 2019 the businesshad net cash.
Company Information

41

Oxford Instruments plc Report and Financial Statements 2019

FINANCE REVIEW CONTINUED

Pensions

Going concern

Forward-looking statements

The Group has defined benefit pension
schemes in the UK and USA. Both have beenclosed to new entrants since 2001 and closed
to future accrual from 2010.

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

This document contains certain
forward‑looking statements.
The forward‑looking statements reflect theknowledge and information available to theCompany during the preparation and up to
the publication of this document. By theirvery nature, these statements depend uponcircumstances and relate to events that may
occur in the future, thereby involving a degreeof uncertainty. Therefore, nothing in thisdocument should be construed as a profit
forecast by the Company.

At 31 March 2019, the net liability
arising from our defined benefit
scheme obligations was £6.5 million(31 March 2018: £15.3 million), a fall of£8.8 million. The reduction in the deficit
was primarily due to the contributions
paid in the period. Total scheme assets
at 31 March 2019 were £311.4 million(31 March 2018: £289.5 million)
while liabilities were £317.9 million(31 March 2018: £304.8 million).
As at 31 March 2019, the UK defined benefit
pension liability includes an allowanceof £0.3 million for the expected cost ofequalising Guaranteed Minimum Pension
between males and females.
We have commenced a process to terminate
the US defined benefit pension scheme.
This will extinguish all liabilities of thescheme. The process is in its early stages
and is not expected to complete until theend of March 2020. We estimate that the
cash cost of termination will be approximately
US$4.5 million, with most of this due tobe paid in the second half of the 2019/20
financial year.

42

The diverse nature of the Group, combinedwith its financial strength, provides a solid
foundation for a sustainable business. The
Directors have reviewed the Group’s forecasts
and flexed them to incorporate a numberof potential scenarios relating to changes in
trading performance. The Directors believethat the Group will be able to operate within
its existing debt facilities. This review also
considered the hedging arrangements inplace. The Directors believe that the Group
is well placed to manage its business risks
successfully.
The Financial Statements have been preparedon a going concern basis, based on the
Directors’ opinion, after making reasonableenquires, that the Group has adequate
resources to continue in operational existence
for the foreseeable future.

Gavin Hill
Group Finance Director
11 June 2019

Oxford Instruments plc Report and Financial Statements 2019

PRINCIPAL RISKS

Risk management

During the course of the year, the Grouphas undertaken a detailed risk analysis on
Brexit‑related risks. The key Brexit‑relatedrisks are set out at risk 6 overleaf. The work
performed shows that the Group is likely
to be sheltered from a number of common
Brexit‑related risks that are faced by UK
companies. For example, the risks relating
to potential future tariffs on EU purchases
or sales post Brexit are largely mitigated by
the type of goods that the Group produces
and purchases as they typically havepreferential (i.e. 0%) tariff rates. Further,
the Group already exports its products tocountries outside the EU so it is already set
up to deal with the additional administrativerequirements that would arise from tradingwith the remaining EU 27 post Brexit. The riskof the potential devaluation of Sterling post
Brexit would not have an adverse impact on
the Group’s earnings – rather, due to thesignificant proportion of earnings in foreign
currencies, any devaluation of Sterling shouldhave a positive impact on profitability.

Governance
Financial Statements

The risk management process starts witha detailed assessment of key risks in all
operating business units. Business units reporttheir risk registers to Group every quarter.
A common methodology for the classificationof risks is used across all business units,
following a standard approach to quantify
the financial impact of a risk materialising,combined with an assessment of the likelihoodof it arising to generate a gross risk score.
The impact of any existing mitigating actions
is considered to quantify the level of residual
risk. The resultant score is used to classify therisks as low, moderate, high or significant.
Group risk management consolidates thebusiness units’ risk registers and adds
additional Group-wide risks to generate theGroup risk register. The Group risk register
focuses on the risks that are classified as highand significant. Where appropriate, all highand significant risks are ascribed to a riskowner who is responsible for agreeing andimplementing any ongoing mitigating actions.

In its review of Brexit‑related risks,management concluded that the mostsignificant risk relates to the risk of supply
chain disruption in the event that ports andairports are congested, resulting in significant
delays to the movement of goods. A potential
mitigating solution to this risk is stock-pilingof raw materials. However, having considered
the risks and rewards of such an approach, theGroup took the decision not to stockpile.

Strategic Report

The effective management of risk plays asignificant part in achieving strategic plans andobjectives. Consequently, risk management
forms a key element of all business units’
recurring management activities. This is
supported by Group risk management which
provides challenge, support and the reporting
link to the Audit and Risk Committee.

The update and review of individual business
units’ risk registers are embedded in theregular activities of their senior management
teams. At Group level, the consolidationof business unit risks and the addition ofGroup-wide risks are reviewed and approvedby either the Group Finance Director or the
Chief Executive in conjunction with Grouprisk management. Once approved, the Grouprisk register is reported to the Audit and Risk
Committee at each of its regular meetings.

Company Information

43

Oxford Instruments plc Report and Financial Statements 2019

PRINCIPAL RISKS CONTINUED

Principal risks and uncertainties
Specific risk 1: Routes to market
Context: In some instances, the Group’s products are components of higher‑level systems sold by OEMs, and thus the Group does not control its
route to market.

Risk

Possible impact

Control mechanisms

Mitigation• Vertical integration by OEMs.

• Loss of key customers/routes
to market.

• Customer intimacy to matchproduct performance tocustomer needs.

• Strategic relationships with
OEMs to sell performance ofthe combined system.

• Positioning of Oxford
Instruments brand andmarketing directly to end
users.

• Product differentiation
to promote advantagesof Oxford Instruments
equipment and solutions.

• Reduction in sales volumes or
pricing and lower profitability.

• Direct marketing to end users.

Specific risk 2: Technical risk
Context: The Group provides high technology equipment, systems and services to its customers.

Risk

Possible impact

Control mechanisms

Mitigation• Failure of the advanced
technologies applied by
the Group to produce
commercially viable products.

• Loss of market share or
negative pricing pressure
resulting in lower turnover andreduced profitability.

• “Voice of the Customer”
approach and market intimacy
to direct product development
activities.

• Additional NPI expenditure.

• Formal NPI processes toprioritise investment and to
manage R&D expenditure.

• Understanding customer
needs/expectations andtargeted new productdevelopment programme
to maintain and strengthen
product positioning.

• Adverse impact on the Group’s
brand and reputation.

• Product lifecycle management.

• Stage gate process in
product development tochallenge commercial
business case and mitigate
technical risks.
• Operational practices
around sales-production
matching and inventory
management to mitigate
stock obsolescence risks.

Specific risk 3: Economic environment
Context: Government expenditure may become constrained in key markets.

Risk

Possible impact

Control mechanisms

Mitigation• Reduction in researchfunding in key markets suchas the US, China and the EU(including the UK).

• Lower sales and profitability.

• Market intimacy andcommercial market
diversification.

• Increased focus on customers
that are not reliant on
Government funding.

44

Oxford Instruments plc Report and Financial Statements 2019

Specific risk 4: Political risk
Risk

Possible impact

Control mechanisms

Mitigation• Changes in the geopoliticallandscape or a global trade
war resulting in a complete
embargo on trade withspecific nations, barriers
to trade with individual
customers, or significant
increases in tariffs.

• Lower export volumes or
net pricing to key markets
adversely affecting turnover.

• Contract review andprotection against breachshould export licences be
withheld.

• Broad global customer base;contractual protection.

• Increases to input costs andlower gross margins.

Strategic Report

Context: The Group operates in global markets and can be required to secure export licences from Governments.

• Limitations on ability toprovide after‑sales service toexisting customers.

Specific risk 5: Legal/compliance risk
Context: The Group operates in a complex regulatory and technological environment. The Group may at times experience unintentional
non‑conformance with regulations and competitors may seek to protect their position through intellectual property rights.

Possible impact

Control mechanisms

Mitigation• Infringement of a third
party’s intellectual property.

• Potential loss of future
revenue.

• Regulatory breach.

• Future royalty payments.

• Formal “Freedom to Operate”
assessment to identify
potential IP issues during
product development.

• Confirmation of “Freedom
to Operate” during new
product development stagegate process.

• Internal control framework
including policies, procedures
and training in risk areas suchas bribery and corruption,
sanctions and export controls.

• Compliance monitoring
programmes.

• Payment of damages.
• Fines and non-financial
sanctions such as restrictions
on trade, disbarment frompublic procurement contracts.

Financial Statements• Reputational damage.

Governance

Risk

Specific risk 6: Brexit-related risks
Context: The UK has triggered Article 50 to leave the EU.

Risk

Possible impact

Control mechanisms

Mitigation• Supply chain disruption.

• Delays to shipments.

• Lower participation in
EU‑funded research projects
post-Brexit.

• Lower sales and profitability.

• Sales production matching andresource planning.

• Existing stock of raw
materials and work inprogress.

• Potential short-term hiatus
in UK research funding.
• Barriers to existing freemovement of goods andservices in the EU.
• Tariffs on exports to EU
countries from the UK andvice versa.

• Loss of key skills, and/or
increased recruitment,
and/or salary costs.

• Customer intimacy andmonitoring of funded projects.
• Strategic sourcing programme.
• Product pricing reviews.

• Supply chain disruption.

• Skills and capabilities reviews.

• Lower net pricing on UK
exports to EU and cost
increases on products sourced
from the EU.

• International Trade
Committee.

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

45

Company Information• UK becomes less attractive
to EU nationals as a place
to work.

• Salary inflation.

Oxford Instruments plc Report and Financial Statements 2019

PRINCIPAL RISKS CONTINUED

Principal risks and uncertainties continued
Specific risk 7: Adverse movements in long-term foreign currency rates
Context: A high proportion of the Group’s revenue is in foreign currencies, notably US Dollars, while the majority of the cost base is denominatedin Sterling.

Risk

Possible impact

Control mechanisms

Mitigation• Long-term strengtheningof Sterling against key
currencies such as the US
Dollar, Japanese Yen and theEuro. (Short-term exposure
to volatility is managed byhedging programme.)• Reduced profitability.

• Procurement “make or buy”
strategy.

• Strategic procurement in US
Dollars, Euros and Yen.

• Treasury management.

• Active review of exposure in
key currencies.

Specific risk 8: Supply chain risk
Context: The Group operates a strategic “make or buy” policy which places reliance on key partners, notably single source suppliers, in terms ofpricing and on-time delivery.

Risk

Possible impact

Control mechanisms

Mitigation• Supply chain disruption, inparticular for single sourcecomponents, leading to
production delays andpotentially lost revenue.

• Disruption to customers.

• Procurement strategy tomanage stock availability.

• Buffer stocks of key
components.

• Lower sales and profitability.

• Where possible, dual source
supply is sought.

• Higher input costs.
• Negative impact on theGroup’s reputation.

Specific risk 9: People
Context: A number of the Group’s employees have business-critical skills.

Risk

Possible impact

Control mechanisms

Mitigation• Key employees leaveand effective replacements
are not recruited on atimely basis.

• Adverse impact on NPI.

• HR people strategy for
retention and recruitment ofstaff with key skills.

• Succession management
plans.

46• Operational disruption.
• Lower sales and profitability.

• Technical career paths.
• UK work permit scheme
to facilitate employmentof non‑UK/EU nationals
in place.

Oxford Instruments plc Report and Financial Statements 2019

Specific risk 10: IT risk
Risk

Possible impact

Control mechanisms

Mitigation• Cyber attack on the Group’s
IT infrastructure.

• Disruption to business as usual
operations.

• Spread of viruses or malware
through “Zero-day”
incidents or phishing attacks.

• Loss of business-critical data.

• IT security policy andassociated standards andprotection systems.

• Regular review, monitoring
and testing of key security
measures to assess adequacyof protection against known
threats.

• Financial and reputational
damage.

• Insider threat.

• Internal IT governance tomaintain those protection
systems and our incident
response.
• Employee awareness training.

Strategic Report

Context: Elements of production, financial and other systems rely on IT availability.

• Citadel approach to protect
key data.
• User education.

Specific risk 11: Operational risk
Context: Business units’ production facilities are typically located at a single site.

Possible impact

Control mechanisms

Mitigation• Sustained disruption to
production arising from amajor incident at a site.

• Inability to fulfil orders inthe short term, resulting
in a reduction in sales andprofitability.

• Business Continuity
Plans (BCPs) exist for all
manufacturing sites.

• Detailed response plans in
BCPs can reduce downtime
arising from incidents andfacilitate the restoration or
relocation of production.

• Additional, non-recurring
overhead costs.

• Contractual clauses to limit
financial consequences ofdelayed delivery.

Governance

Risk• Standard sales contracts
include clauses for limitationof liability, liquidated
damages and the exclusionof consequential losses.

Financial Statements

Specific risk 12: Pensions
Context: The Group’s calculated pension deficit is sensitive to changes in the actuarial assumptions.

Risk

Possible impact

Control mechanisms

Mitigation• The reported pension deficit
is sensitive to movements in
actuarial assumptions andreturns on investments.

• Increase in net debt asadditional Group contributions
become payable to fund the
deficit.

• Regular review of pension
strategy.

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

• Increase in the annual levy
paid to the Pension Protection
Fund.
• Reduction in net assets.

• Liability hedging programme
to mitigate exposure to
movements in interest rates
and inflation.

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

Company Information

47

Oxford Instruments plc Report and Financial Statements 2019

VIABILITY STATEMENT

In accordance with the UK Corporate
Governance Code 2016, the Directors are
required to perform an assessment of theGroup’s viability over a period longer than
the twelve months required for the going
concern statement. This year’s viability
assessment covers a three-year period. This
has not changed since the requirement was
introduced in the 2016 Report and Financial
Statements. The Directors consider that three
years continues to be the most appropriate
time frame for assessing the Group’s
longer‑term viability. This is largely because
the medium‑term strategic financial plan (SFP)
provides appropriate visibility of key areas
such as product development and capital
expenditure requirements over this period.
This year’s assessment covers the period from
1 April 2019 to 31 March 2022 (the “Viability
Assessment Period”).

Key criteria appliedin the assessment
As in previous years, the Board considers that
the Group’s viability can reasonably be assured
if it can maintain a net cash position or, failingthat, is able to obtain sufficient debt funding
to meet its liabilities as they fall due. During theyear, the Group refinanced its revolving credit
facility, which includes covenants requiring theGroup to operate at a leverage level of no morethan three to one net debt to EBITDA. On thisbasis, the Directors consider that being able tooperate within the parameters of three times
leverage is the key criterion to consider in theviability assessment.

Methodology andsensitivities applied
The viability assessment evaluates thepotential financial impact of the principal
risks and uncertainties which are faced by
the Group to assess the Group’s ability towithstand them. The calculations start withthe financial budgets and strategic financial
plans which include profit and loss data andcash flow movements and form the baseline

for the assessment. Adverse sensitivities
are applied to the baseline in each year in
the Viability Assessment Period to quantify
the financial impact of the key risks anduncertainties materialising. It also includes
the estimated impact of certain mitigating
actions that could be taken by management
to offset the potential impact of downside
risks. The key risks and uncertainties
considered in the assessment are disclosed on
the preceding pages 44 to 47 of the Report
and Financial Statements.
In performing the viability assessment,
the financial impact of risks having similarconsequences has been aggregated andthe potential impact has been quantified byreference to the following four consequences:
1. reduction in revenue;
2. increased cost of sales;
3. additional overhead costs; and4. reduction in net profitability arising fromadverse movements in exchange rates(in practice this would be the sum of lower
contribution margin and higher overheads).

The potential financial consequences of the twelve principal risks and uncertainties faced by the Group is set out in the table below.
Potential direct financial consequences							LowerRisk ID
Description					turnover

Higher costof salesHigheroverheads

Lower
net profit1		Routes to market					
✓			2		Technical risk					
✓		
✓
3		
Economic environment					
✓			
4		Political risk					
✓

✓		

5		
Legal/compliance risk					
✓

✓

✓

6		
Brexit-related risks					
✓

✓

✓

7		

Adverse movements in long-term foreign currency rates		

				

8		
Supply chain risk					
✓

✓

✓

9		
People					
✓		
✓
10		
IT risk					
✓		
✓
11		
Operational risk					
✓

✓

✓

12		
Pensions							✓1. For the purpose of this viability assessment, EBITDA = Adjusted EBITDA (as defined in Note 1 to the Financial Statements).

48✓

Oxford Instruments plc Report and Financial Statements 2019

OutcomeThe second largest downside risk modelled inquantum terms in this year’s assessment relates
to possible increases in overheads. In eachyear in the Viability Assessment Period, thepotential for additional overheads is quantified
by the same fixed value increase to annual
overheads. In total, the downside risk includedin the assessment represents 3.8% of total
overheads in the baseline model. In the prioryear assessment, the downside risk quantified
for overheads was 3.2% of the total.

This assessment supports not only the viability
statement above, but also the statement on
going concern, set out below.

Over the Viability Assessment Period as awhole, the impact of the downside risks
modelled resulted in a decrease to the baseline
EBITDA of roughly 39%. For the purposes of
the assessment, the impact on EBITDA of all of
the sensitivities considered is expected to flow
through to cash in the same period, resulting
in an equal reduction to net cash balances.

Going concern statement
The Group’s business activities and factorsthat are considered likely to affect its
performance and position in the future areset out in the Strategic Report on pages 2 to
59. The Finance Review on pages 36 to 42
discloses information relevant to the Group’s
financial position, its cash flows, borrowing
facilities and liquidity.
The Directors have considered the Group’s
current financial position and future prospects
and, as set out in the viability statement
above, have performed an assessment of
longer‑term viability up to 31 March 2022.
On this basis, the Directors conclude that
there is a reasonable expectation that theGroup will continue in operational existence
for the foreseeable future and that there
are no material uncertainties that may castsignificant doubt over its ability to continue
as a going concern.

Financial Statements

The potential impact of increases to direct
costs (i.e. cost of sales) arising from increases
in input costs due to factors such as Brexit,
tariffs, etc. has been considered in a consistent
way to the prior year. The risk is quantified by
a 4% increase in the cost of sales figures ineach year in the period.

As quantified, the impact of the sensitivities
applied is to reduce cash generation ineach year of the Viability Assessment
Period. However, each year in the Viability
Assessment Period remains cash generative,
resulting in year-on-year increases to theGroup’s net cash position. On this basis, theBoard has a reasonable expectation that theGroup will be able to continue in operationand meet its liabilities as they fall due overthe next three years.

GovernanceIn the prior year assessment, the potential
impact from adverse movements in exchange
rates (risk 7) was the most significant risk
quantified in value terms. In contrast, it is lesssignificant in this year’s assessment because
there is less variation and less downside risk,
as calculated, in the downside currency rates
applied compared to the rates used in thebudget/SFP. The relative importance is also
diminished due to the magnitude of thedownside revenue risk in this year’s assessment.
However, the methodology used to quantify
this risk has not changed. As described on page46, long-term adverse movements in three key
currencies (US Dollar, Euro and Japanese Yen)
would be detrimental to Group profitability
because the Group predominantly operates
with a Sterling cost base.

The risk of short-term adverse movements in
exchange rates is mitigated by the Group’s
hedging programme. In this assessment,
the impact has been quantified in terms of
net profitability, by reference to estimatednet currency exposure. However, if this risk
were to materialise, the reported impact inSterling would be more complex – foreign
currency‑denominated turnover, prime costs
and overheads would all reduce in absolute,
Sterling terms, and the net impact would be
unfavourable in terms of net profitability.

Strategic Report

In this year’s assessment, the most significant
risk quantified relates to the reduction inrevenue that is a potential consequenceof multiple risk factors. Over the Viability
Assessment Period, the sensitivities applied inthis area represent a 20% reduction in sales
against the baseline total. The quantum of thissensitivity is the most significant of the four
set out above and represents almost 80% of
the sensitivities applied in value terms. As inprevious years, this sensitivity has been applied
at a Group level, rather than at a business unit
or segment level. While the impact of the lossof a key customer or market in an individual
business unit might be severe for the specificbusiness unit, the risk is mitigated at a Grouplevel by operating in diverse geographic
markets and through diversification of thecustomer base within those markets.

As a result, the Directors continue toprepare the Financial Statements under
the going concern basis.

Company Information

49

Oxford Instruments plc Report and Financial Statements 2019

CORPORATE RESPONSIBILITY

Corporate responsibility is integral
to our ongoing business success.

Through ourcommitment tocorporate responsibility,
we recognise theimpact we have on theworld, our employees,
our communities
and our working
environments.

50

Our values

Inclusive:

Innovative and progressive:

We listen and engage withcustomers, colleagues, Shareholders
and partners for mutual success

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

Trusted:Wholehearted:

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

We approach what we
do with passion, withcare and with paceOxford Instruments plc Report and Financial Statements 2019

Strategic Report
GovernanceOxford Instruments is committed to thefollowing guiding principles of corporate
responsibility:• the development, engagement
and wellbeing of our employees;• establishing and maintaining long‑term,
effective stakeholder relationships;• sustaining and developing an
inclusive workplace;• offering our people an excellent
employment experience and sense of
belonging;• health and safety andenvironmental improvements; and• the ethics of how we do business,
including human rights andbusiness malpractice.

• strengthening our business throughdiversity and inclusion; and• operating in an ethical, sustainable andenvironmentally responsible manner.

Financial Statements

The key areas in which we focus ourefforts are:Just as we approach what we do for ourcustomers and investors with passion, careand pace, this same wholehearted value
underpins our work to ensure that Oxford
Instruments is a responsible business.
We enable our customers to image, analyseand manipulate materials at the nanoscaleand our technologies help to underpin theshift to a greener economy, increased digitalconnectivity and advances in healthcare andlife sciences. We take our role in the world
seriously, and recognise that how we dobusiness is as important as what we do.

Company Information

51

Oxford Instruments plc Report and Financial Statements 2019

CORPORATE RESPONSIBILITY CONTINUED

Our people vision is to be proud to be recognised as the leadersin what we do and for the difference we make in the world.

Our employees
At Oxford Instruments, our employees arefundamental to our business success. We
continually invest in our people, developing
the capabilities that we will need to succeed
over the longer term. We are committed
to being the company where the best in
our sector want to work and strive to offer
opportunities that will attract, motivate andretain talented employees, enabling them togive their best.
Our people vision is to be proud to berecognised as the leaders in what we do andfor the difference we make in the world; andthis year we have continued to develop our
employer brand and value proposition to
articulate this for both internal and externalaudiences. Our aim is to retain, attract andenable the best people to perform, creating
an inclusive environment and culture, where
difference is valued and people are recognised
for what they deliver and bring to the team.
This year, we conducted a global Employee
Engagement survey to find out more from ouremployees about what they thought of theexperience of working for Oxford Instruments
across all of our businesses and the regionsin which we operate. Since the last global
engagement survey in 2015, our overall
Engagement Score has increased to 79%, andwe were ahead of global benchmark data on
all of the measures of Employee Engagement
included the survey. Our employees are proud
to tell people where they work, feel safe in
the workplace, are encouraged to make theirown decisions, and feel trusted, valued andmotivated to do more than is required intheir roles.

52

Going forward, members of our main Board
and Management Board will be runningfocus groups and informal employee groupmeetings to ensure that there are sufficient
future opportunities for two-way dialogue,
and we will be repeating our Employee
Engagement survey on an annual basis as
we continue to build on our strengths andaddress areas of concern.

Health and wellbeing
This year we launched our Mental Health First
Aider programme. A team of colleagues fromeach of our UK sites and our global regions
volunteered to attend an internationallyrecognised training programme, and act asa first point of contact for any colleagues
who are experiencing mental health issues
or emotional distress, either themselves or in
their families. This service complements our
Employee Assistance Programmes and thephysical health checks we already provide
at many of our locations.
In addition, many of our sites organise
wellbeing activities such as mindfulness
sessions, onsite massages and Pilates classes,
and we encourage staff to set up walking
groups and informal running and cycling clubs
to help increase physical activity and exercise.
We also offer our employees the opportunity
to purchase additional leave entitlement.
This year, more than one in five of our
UK‑based staff have taken advantage of this.

Our workplace
As an international organisation, ouremployees are located across the world,
frequently based in satellite offices that are
remote from the main business sites. In thiscontext it is important that we work hard tocreate a sense of belonging for our employees,
and so we continued to run a series of global
and local initiatives to ensure people feel partof a wider Oxford Instruments team. We havecommissioned eye-catching new artwork
using images from our customers and theirapplications of our technology for all of oursites to display. This improves the working
environments for our colleagues and brings
a sense of connection to the wider Groupfor each of our sites. We have also produced
a new Company video which has been
displayed prominently in all of our sites andgives a global overview of who we are, ourcustomer groups, and example applicationsof our technology. We have used this toincrease the sense of belonging internally,
and raise awareness of our employer brandand values externally.
This year, we have also organised a virtual
team of more than 120 employees who are
logging their running, swimming, cycling andskiing miles and we are tracking these against
the distances between our office locations,with updates on the intranet each time theteam reaches a new location. This gives
everyone in the Group the opportunity to findout more about the work of each of our sites,
and the colleagues who are based there.

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

1: Oxford Instruments Town & Gown runners
2: Young Scientist award in India
3: UK China space event
4: International Women’s Day celebrations
5: Recent MDP cohort

Developing capability

We continue to underpin our capability
development through the various leadershipdevelopment programmes we run. Our
flagship Management Development
Programme (MDP) covers many of the skills
needed to be a successful manager in Oxford
Instruments. We have built on this further with
our Early Careers and Maximising Potential
programmes that focus on introducing highpotential candidates to the business andhelping them to succeed within the Group.

We offer Industrial Post-Doctoral placements
to high‑calibre researchers, providing them theopportunity to experience a role in industry.
In many cases, these individuals have decided
to join us on a permanent basis, helping toensure that our technical skill base remains at
the cutting edge.
Our values are deeply ingrained in Oxford
Instruments and we endeavour to embody
them in all we do. This year, we completed
the global rollout of our Accountability Builder
workshop for managers. All of our people
managers, and those leading change, have theskills needed to increase performance, boost
innovation and create joint accountability fordelivering our strategically important results.
The results from our global staff survey
confirmed that our managers do what they
say they will do to a far greater extent thanmanagers at benchmark organisations.

53

Company Information

We regularly undertake capability reviews,
recognising the importance of ensuring wehave the skills we need to help us deliver
long-term sustainable growth. We have beenworking hard to address capability gaps acrossthe Group by bringing in the capabilities
we need for the future, and by investing in
the talented people we have. This year wehave made a significant investment in ourcommercial and operations teams across theGroup, as well as in the business systems thatgive our employees the data they need tomake evidence-based decisions.

Our training programme for our commercial
staff, developed and delivered by Miller
Heiman, has continued this year, and 249
employees have now successfully completed
this training. Notable successes from our
Operational Excellence training programme,
accredited by Cardiff University, include
now having over 90 colleagues fromacross our businesses who are trained in all
aspects of OpEx. The financial savings madefrom continuous improvement projects
completed during this programme represent
almost a five-fold return on investment of the
training fees.

We continue to offer our TechnicalDevelopment Programme and structured
career development opportunities for our
technical staff, and we use this programme tohelp us attract and retain the best engineers
and scientists. Through our technicalcompetency framework and technical career
ladder, our employees in these roles can see
clear future career paths that offer a choice
between technical or people management
pathways and that allow them to develop theircareers with the Company in the direction thatbest suits them.

Financial Statements

We have also rolled out a number of green
initiatives at our different sites. Each businesshas an energy champion at a local level who
is responsible for monitoring energy use,
waste streams, recycling and emissions to air,water and land. As part of their work, wehave installed electric car charging points at
two of our locations, with plans to expand
this next year, organised a sunflower growing
competition in Bristol to raise awareness of
our Go Green initiative, and removed plastic
cutlery, polystyrene food boxes and single use
coffee cups from our Oxford site.

Examples include rolling out additional
functionality of Gem, our cloud-based HR
Information System, as well as the deployment
to further sites and businesses of ourintegrated Enterprise Resource Planning,
Customer Relationship Management andProduct Lifecycle Management systems.

GovernanceTo mark International Women’s Day, our sitesaround the world held a series of lunches andinformal networking events. Our Group HR
Director, Vicki Potter, attended a number ofthese, and was able to share some findings
from the Employee Engagement survey about
women’s experiences of working for theCompany.

Oxford Instruments plc Report and Financial Statements 2019

CORPORATE RESPONSIBILITY CONTINUED

We continue to encourage our sites to support their local
communities through charity and community activities.

Our local communities
We believe the work we do and that we
enable others to do is important and bothbenefits and advances society. To ensure thiscontinues, we are committed to helping thegenerations coming up through all stages of
education to see the importance of choosing
STEM subjects and the career opportunities
this will offer them.
This year, we have organised events forgraduates, post-graduates and academics
at the Universities of Oxford, Bristol andExeter, both on their campuses and hosted
at our business sites. We were also pleased
to work with the National Taiwan University
to host Taiwan’s first School of Microscopy,
a two‑day event involving over 150 delegatesand representatives from multiple Oxford
Instruments businesses.
We were involved in the 2019 ATOM
Festival of Science & Technology inAbingdon‑on‑Thames, which has the missionof making science available to everyone in
the local community around our Oxford site.
Not only did we sponsor the Festival, but
our Group HR Director, Vicki Potter, was aninvited panellist for a VIP night to discuss
the challenges of making science accessible
to all. Some of our scientists and engineers
also gave up their time to attend a careers
event for local schoolchildren and a seriesof demonstrations and workshops whichwere open to the public around the area
throughout the Festival.

54

Separately, we also welcomed pupils fromlocal primary and secondary schools to our
Oxford site for a hands-on demonstration of
low-temperature physics, and hosted a careers
in STEM workshop for middle school girls at
our Santa Barbara site.
All of our UK sites continue to run school
work experience programmes and we areworking with a range of Centres for Doctoral
Training to offer students the opportunity
to build on their educational learning withpractical, project-based experience. We alsooffer industrial postdocs, which are fixed‑term
contracts that allow postdoc students theopportunity to gain meaningful industrial
experience as they decide whether to pursue
careers in academia or industry.
We continue to encourage our sites to support
their local communities through charity andcommunity activities. This year, as well as
regular charity coffee mornings and bakesales, colleagues donated over 250 bras to be
donated to women in Africa, collected foodfor homeless shelters and food banks in our
local communities in the UK and the US, andran events at a local community centre whichaims to tackle loneliness and boost health andwellbeing for older residents at risk of social
isolation. We also continued our sponsorshipof local community sports teams and events
such as the Christmas lights in Yatton, Bristol.

Our working environment
Diversity and inclusion
Our objective is to ensure that we have a highcapability, diverse workforce that enables us tobetter understand our customers and markets;with a broad range of perspectives andexperiences that maximise our capability toinnovate, make the right decisions and exceed
our customers’ expectations. In order to retain,
attract and enable the best people to perform,
we need to create an inclusive environmentand culture, where difference is valued andeveryone can contribute to their full potential.
Questions around inclusion were included
in our global Employee Engagement survey.
We were ahead of the global benchmark dataon the recognition by employees that we
make an effort to have a diverse mix of people
working in the Company, and we matched thebenchmark data on the belief that everyone at
the Company is treated with respect. We also
learned from the survey that the positive senseof feeling included and valued is a key driverfor overall levels of employee engagement,
and are proud that this forms an importantpart of our culture.
Analysis of the survey results by gender
showed that women are more engaged overallthan men, and also rated the Company morefavourably than men for all questions relating
to inclusion. However, we still have more work
to do to improve the gender balance acrossour Group.

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

1: Some of our mental health first aiders
2: An Oxford Instruments lab in Lego®
3: Family fun day
4: Attendees on our TechnicalDevelopment Programme
5: Team member at our NanoScience site

Our drive to introduce balanced shortlists forleadership recruitment saw a small increasein the number of final shortlists which
included at least one candidate from a groupthat is typically under-represented in the
Company. Last year, 52% of our Director‑levelappointments were made from a balanced
shortlist. This year, the figure was 55%. Whilst
this was a slight improvement, it was short ofour target of 60%, and shows there is more
we can do to attract diverse candidates to theCompany. We were able to capture additional
data so we can also measure the successof this initiative for senior management
recruitment going forwards.

This year we published a new Code ofBusiness Conduct and Ethics, with updated
policies on how we do business and what
we expect of others. We are a Company
united by strong standards and values andby creating a clearer, more helpful document
for stakeholders, we are providing moretransparency for our employees about what’s
expected of them. This will help give themconfidence that they are taking the rightactions in various situations.

Human rights and modern slavery
We continue to review our policies andsystems supporting human rights. Our policy
is guided by the United Nations Guiding
Principles on Business and Human Rights.
Our Human Rights Policy states our intent to
be inclusive, supportive and safe, covering
matters including forced labour, child labour,
discrimination and the right to form or join a
trade union and to bargain collectively.
We expect every employee to adhere to thespirit of our Policy and it is fully supported
by our Board. All members of the Group’s
Executive Committee take responsibility forensuring its implementation within their partof the Group. We also extend our expectations
on human rights to those we work with: ourpartners, contractors and suppliers.

We are committed to preventing acts ofmodern slavery and human trafficking fromoccurring within our business and supply
chain and put in place effective systems andcontrols in order to do so. We have reviewed,
and improved, our supplier due diligence andaudit procedures. We have a zero-tolerance
approach to all forms of modern slavery,
including servitude, forced, bonded andcompulsory labour and human trafficking
and we expect our suppliers to adopt thesame approach.

Health and safety –protecting our employees
During the year, our Group HR Director,
Vicki Potter, has taken up responsibility for
Health and Safety across Oxford Instruments.
Vicki is supported by Dave Wales, Group
Health, Safety and Environment Manager,
who is responsible for ensuring that day‑to‑day
activities are carried out safely and that we havethe capabilities, infrastructure and processes inplace across the Group to manage our health,safety and environment matters effectively.

Company Information

This year we published our second gender pay
gap report. This is available on our website atwww.oxinst.com/gender-pay-review andshows that our mean and median gender pay
gaps have decreased since last year.

Financial Statements

All UK staff have now completed our Respect
training, which is a workshop designed to help
to create an inclusive performance-orientatedworking environment. Feedback has beenhighly positive, and this session is now being
adapted and rolled out globally.

EthicsGovernanceThis year, we invited a representative of the
National Autistic Society to run a workshop
for our global HR Directors to understand
how we can be an effective employer for
autistic talent, and we signed up to support
the Leonard Cheshire Change 100 programmeand offered four internships to talented
students and graduates with disabilities orlong-term health conditions.

55

Oxford Instruments plc Report and Financial Statements 2019

CORPORATE RESPONSIBILITY CONTINUED

The global carbon footprint for 2018/19 continued to reduce –falling to 6,835 tCO2e from 7,161 tCO2e the previous year1.
Five-year view of accidents in ongoing businesses
showing severity Excludes disposals

Group energy consumption (kWhs) 2014-2019
Data for ongoing businesses only
54 1

2014
42

2015
2016

48

2017

49

3

2018

48

5

2019

0
0

10

20

30

40

14.7m

2014/154
7

2015/1613.9m

2016/1714.1m

2017/18

14.3m

Minor

Serious2018/1950

60

0Global accident figures
remain at a low level

Sustainability –Protecting the environment

The total number of accidents recorded
worldwide during 2018/19 increased slightly
from 52 to 53. The accident numbers for our
ongoing businesses over the past five years
have been fairly static, with an average of
52 accidents each year. When looked at inrelation to the number of accidents per 1,000
employees, the average number over the last
five years is 34 accidents/1,000 employees,
which benchmarks positively against industry
norms in the regions in which we operate.

The global carbon footprint for 2018/19
continued to reduce – falling to 6,835 tCO2e
from 7,161 tCO2e the previous year1.

We are committed to the health and safetyof our employees and our customers andwork hard, as a team, to effect improvements.
We record accidents down to the very smallest
cuts and abrasions – which account for the
majority of accidents recorded – and havebegun a campaign across the Group to drive
pro-active accident prevention.

14.1m
4m

Our overall priority here is to minimise theenvironmental footprint of our products
and services, and our operations aroundthe world. Each business has an Energy
Champion at a local level who is responsible
for monitoring energy use, waste streams,
recycling and emissions to air, water and land.
They also continuously look for innovative
ways to reduce their environmental footprint.
Current initiatives include energy reduction,
improving wildlife habitats, the installationof electric car charging points and the removalof single use plastics.

8m

16m

Energy consumption
We continue to monitor our global energy
use and implement energy‑saving techniques.
Oxford Instruments consumed 12.41 GWhof electricity, 1.01 GWh of gas and 0.5 GWhof oil globally during 2018/19, reflecting
our increased manufacturing output.
The Company’s measure of total energy
use was 41.73 MWh/£million of revenue
compared to 44.7 MWh/£million of revenue
in the previous year.

Globally, five serious accidents occurred
during 2018/19 of which four were reportable
accidents. This was an increase fromthree serious accidents the previous year.
For reporting purposes, global reportable
accidents were normalised using the UK
RIDDOR definition of over seven days’ absencefrom work. The graph above shows thefive‑year accident performance for ongoing
businesses with all business disposals removed.

1. It should be noted that the above reduction was due in part to the Government reducing the greenhouse gas carbon conversion factors for electricity.
Without this reduction our carbon footprint would have increased slightly.

56

12m

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

1: Electric charging points on site
2: Tree planting to mark 60th anniversary

Waste outputs

The Group complies with all environmental
legislation in countries where it operates.
This includes European Directives such as:

We aim to minimise our waste outputs andensure that as little as possible goes to landfill.
Several of our sites are now “zero waste tolandfill” where waste is recycled either directly,
e.g. cardboard, metals, wood and paper, or
indirectly for non‑recyclable general waste andfood waste, which is sent to waste incineratorsites where it can be burned to produce energy.

• Waste Electronic and Electrical Equipment(WEEE) Directive – compliance achievedby membership of B2B Compliance –an authorised compliance body;• Restriction on use of certain Hazardous
Substances (RoHS) regulations – allproducts that were within scope and weresold into Europe since July 2017 complied.
Some of our products are outside of
the RoHS scope or are covered by an
exemption; and• Registration, Evaluation, Authorisationof Chemicals (REACh) Directive. All sites
are working towards compliance via their
supply chains.

Carbon reportingAs part of the UK Companies Act 2006
(Strategic Report and Directors’ Report)
Regulations 2013, Oxford Instruments has
a mandatory duty to report greenhousegas emissions as tonnes of carbon dioxide
equivalent (tCO2e). The Company’s measureof carbon emissions is tonnes of carbon
dioxide equivalent (tCO2e) per £million ofrevenue. This year the global carbon emissions
figure is 11.55 tCO2e/£million revenue.

Financial Statements

The Government closed the Carbon Reduction
Commitment Energy Efficiency Scheme (CRC)
on 31 March 2019. This has been supersededby the Streamlined Energy and Carbon
Reporting regulations (SECR) which came into
force from 1 April 2019. The Company will nolonger have to purchase carbon credits eachyear to cover carbon emissions. However, thecost of carbon compliance will be transferredto our energy bills as the Climate Change Levy,
which is imposed on each kilowatt hour (kWh)of energy consumed, will be increased to givea similar cost burden.

Environmental Directives

Governance

Legal compliance –Streamlined Energy andCarbon Reporting regulations

Company Information

57

Oxford Instruments plc Report and Financial Statements 2019

CORPORATE RESPONSIBILITY CONTINUEDThe Group complies with all environmental
legislation in countries where it operates.

Greenhouse gas (GHG) emissions
Oxford Instruments is a global business with operations in many parts of the world. Emissions from 14 Company sites are monitored and arereported below. Some small sales offices where energy consumption is less than 0.01% of the Group’s total energy consumption are omitted.
The recorded use of hydro-fluorocarbons is below 5kg and has therefore been excluded. Emissions from purchased electricity, fuel for heatingor process purposes (gas and oil) and fugitive emissions from process gases are reported in tonnes of carbon dioxide equivalent (tCO2e).

Intensity ratio
The Company’s declared intensity ratio for greenhouse gas reporting is tonnes of CO2 equivalent (tCO2e) per £million of revenue. With revenues
for the year at £333.6 million and the total emissions of carbon dioxide equivalent of 3835.57 tCO2e, this gives an intensity ratio as follows:
Carbonemissions= 11.50 tCO2e

Revenue£million revenue				
Purchased		
Secondary		Fugitive							electricity		
fuel		
emissions		
Total
Region			(tCO2e)		
(tCO2e)		
(tCO2e)		(tCO2e)UK				
2212.18		
324.05		0		
2536.23
North America			
1159.39		0		
0		
1159.39
Europe 			22.40		
0		
0		
22.40
Asia			117.55		0		
0		
117.55
Total			3511.52		
324.05		0		
3835.57

58

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

1: Lunchtime running group
2: Onsite team meeting
3: China technology forum
4: Founders Sir Martin and Lady Audrey
Wood celebrate 60 years of Oxford
Instruments
5: Half marathon charity teamGlobal Oxford Instruments

78%

22%

Plc Board

86%

14%

Management Board

86%

14%

Managers

79%

21%

Americas 21%

Employees

78%

22%

Asia 15%

Governance

Geographical spreadof employees

Gender

UK 58%

Financial Statements

Europe 6%

Signed on behalf of the Board

Ian Barkshire
Chief Executive
11 June 2019

Company Information

59

Oxford Instruments plc Report and Financial Statements 2019

GOVERNANCE

Governance is an important element of our Board environment.
To support how we do business and how we serve our
stakeholders it needs to be relevant, authentic and meaningful.

Leadership
See pages 61 to 66 of the Corporate Governance Report.

Relations with
Shareholders
See pages 100 and 101.

EffectivenessSee pages 67 to 70 of the Corporate Governance Report
and the Nomination Committee Report on page 71 to 73.

Report of the Directors
See pages 102 and 103.

Accountability
See the Audit and Risk Committee Report on pages 74
to 79, risk management disclosures on pages 43 and 79
and Financial Statements on pages 104 to 163.

Remuneration
See the Remuneration Report on pages 80 to 99.

Biological tissue grown from patient cells capturedby an Andor Dragonfly microscopy system.
60

Oxford Instruments plc Report and Financial Statements 2019

LEADERSHIPCHAIRMAN’S INTRODUCTION

The main Group‑wide governance documents
are the Oxford Instruments Code of BusinessConduct and Ethics together with the policies
which sit within our statement on Corporate
and Social Responsibility. These can befound on our website atwww.oxinst.com/investors‑content/
corporate-social-responsibility. The ethics
programme is managed by a cross‑functionalteam, the CBCE Forum, which works with
the Group’s businesses to ensure that
employee communications relating to the
ethics programme is delivered in a consistentand engaging manner. There is a policy
portal on the intranet which makes it easy
for employees to access those policies andprocedures that are relevant to them.
These policies and statements set out thevalues and standards that we expect ouremployees to meet. These documents,
together with our policies, govern how we
conduct our business and set the standards
that drive performance. Compliance training
and, in some areas, standard procedures,
help to enforce this. Board oversight, reviews
and audits form part of the monitoringand supervision process. Risk processes areembedded and reviewed on an ongoing basis
across the organisation.

I encourage all Shareholders to attend theAGM which will be held at the Company’s
Head Office in Tubney Woods, Oxfordshire,on Tuesday 10 September 2019. This event
provides an opportunity for Shareholders
to meet the Executive and Non‑Executive
Directors.

Neil Carson
ChairmanCompany Information

During the year, I agreed with the Board that
we would carry out an internal evaluationof the Board which built on the external
evaluation carried out last year by ICSA Board
Evaluation. I am pleased to confirm that we
continue to have a committed, engaged andeffective Board. More details on the findingsof the evaluation are outlined below.

In July 2018, we were saddened by the lossof Alan Thomson, who had led the Board
since June 2016. The Board undertook
a comprehensive search to identify anappropriate successor to Alan, resulting in
my appointment in December 2018. Since
1 December I have been spending a significant
amount of time with the CEO, Ian Barkshire,and have visited most of the facilities. I havefound a very committed and enthusiastic
group of senior managers alongsideknowledgeable scientists that are leaders intheir field. They have a strong new productpipeline and are fully committed to project
Horizon and the advancement of the Oxford
Instruments strategy. The Chief Executive’s
Review on pages 14 to 17 and the Operations
Review on pages 26 to 35 give full details of
the year’s activities.

Financial Statements

I am pleased to introduce the Group’s
Corporate Governance Report on behalfof the Board. The Corporate GovernanceStatement provides an insight into how the
Board operated during the year. The Board iscommitted to conducting business responsibly
and maintaining high standards of corporate
governance and is collectively responsible
for the long‑term success of the Company.
This will, when underpinned by our businessstrategy and close attention to operations,finance and risk, enhance performance andgrow the business of Oxford Instruments.
The Board remains committed to driving theGroup’s long‑term objectives, overseeing
the Group’s operations to ensure competentand prudent management and continuous
leadership development and succession
planning. The approach to governance is set
by the Board and the Management Board
ensures that the approach is effectively
implemented across Oxford Instruments’businesses around the world.

Governance

Dear Shareholders,

Strategic Report

The Board is committed to conducting
business responsibly and maintaining
high standards of corporate governance.
This commitment extends to driving theGroup’s long-term objectives and overseeing
the Group’s operations to ensure competentand prudent management, continuous leadershipdevelopment and ongoing succession planning.

11 June 2019

61

Oxford Instruments plc Report and Financial Statements 2019

LEADERSHIPBOARD OF DIRECTORS

Neil Carson (62)

Ian Barkshire (53)Gavin Hill (51)

Steve Blair (59)Non‑Executive Chairman

Chief Executive

Group Finance Director

Independent
Non‑Executive Director andSenior Independent Director

Appointed to the Board
December 2018

Appointed to the Board
November 2015

Appointed to the Board
May 2016

Appointed to the Board
July 2017

Appointed Chairman
December 2018

Appointed Chief Executive
May 2016

Background
Over 30 years’ experience of
operations management in the
UK and the US, technical innovationand strategic planning, culminatingin ten years as Chief Executive at theFTSE 100 science/R&D based company,
Johnson Matthey. In 2016 he wasawarded an OBE for services tothe chemical industry.

BackgroundHolds a BSc and DPhil in physics
from the University of York, is a
Chartered Physicist and a Memberof the Institute of Physics. Ian has
worked for Oxford Instruments since1997 in a number of senior leadershiproles, including NanoCharacterisation
Divisional Head, Group Technical
Director and Chief Operating Officer.

BackgroundHolds a BA in economics andagricultural economics from the
University of Exeter. Gavin is a
Chartered Accountant and an
Associate Member of the Associationof Corporate Treasurers.

BackgroundHolds an engineering degree fromthe University of Sheffield. Extensive
experience in established andhigh‑growth emerging markets,
strategic planning and portfolio
development.

External appointments
Chairman:
TT Electronics plc

Previous experience
Senior Principal Scientist:
GEC Marconi Materials Technology

Previous experience
Group Finance Director:
Synergy Health plc

External appointments
Chief Executive:
Ordnance Survey

Non‑Executive Director:
Royal Dutch Shell plc

Research Fellow:
University of York

Director, Corporate Finance:
Serco Group plc

Director:
The Goldsmiths’ Company Charity

Senior finance positions:Syngenta AG and AstraZeneca plc

Honorary President:
SCI (the Society of Chemical Industry)Previous experience
Chief Executive:
e2v
Director:
Spectris plc

Previous experience
Deputy Chairman:
TI Fluid Systems plc
Non‑Executive Director:
Paypoint plc
Amec Foster Wheeler plc
Founder Member:
Prince of Wales’ Corporate
Leaders Group on Climate Change
Chief Executive:
Johnson Matthey plc

Board diversity
Gender diversity

Tenure

86%

57%
29%
14%

14%
Male

62

Female1‑2 years

3‑4 years

5‑6 years

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

Mary Waldner (49)Thomas Geitner (64)Independent
Non‑Executive Director

Independent
Non‑Executive Director

Appointed to the Board
February 2016

Appointed to the Board
January 2013

Appointed to the Board
September 2014

BackgroundHolds an MA in physics fromthe University of Oxford and is a
Fellow of the Chartered Instituteof Management Accountants.
Mary started her career at Coopers& Lybrand Management Consultancy
Services and then went on to holdsenior financial positions in a numberof major businesses.

BackgroundA graduate of the Technische
Universität München and holds an
INSEAD MBA. Extensive international
experience in the technology andengineering sectors, having spent over
30 years in businesses operating acrossthe globe.

Background
Richard’s research encompasses
the physics, materials science andengineering of semiconductor
devices made with carbon‑based
semiconductors. He is a Fellow of
the Royal Society and of the Royal
Academy of Engineering and a
Foreign Member of the US National
Academy of Engineering.

External appointments
Chief Financial Officer:
Lloyd’s Register

External appointments
Chairman:
Bibliotheca RFID Library Systems
AG Switzerland

External appointments
Cavendish Professor of Physics anda Fellow of St. John’s College at the
University of Cambridge

Non‑Executive Director:
BBC Worldwide Limited
Constantia Flexibles GmbH
Supervisory Board ofHaniel & Cie GmbH Duisburg

Susan Johnson‑BrettFinancial Statements

Director, Group Finance:
Qinetiq plc

Previous experience
Executive Director:
Vodafone Group Plc
Henkel AG & Co. KGaA
RWE AG

Independent
Non‑Executive Director

GovernancePrevious experience
Group Finance Director:
Ultra Electronics plc

Professor
Sir Richard Friend (66)

Non‑Executive Director:
Eight19 Ltd
Heliochrome Limited
Previous experience
Council member:
The Engineering andPhysical Sciences Research Council

Key to Committees

Company Secretary
Committee membership
Secretary:
Audit and Risk
Nomination
Remuneration

Nomination
Remuneration
Chairman of Committee

Company Information

BackgroundHolds a BA from the University of
Keele and has previously worked
in the Secretariats of St. Modwen
Properties plc, Hydro Agri (UK)
Limited and TSB Group plc.

Audit and Risk

63

Oxford Instruments plc Report and Financial Statements 2019

LEADERSHIPCORPORATE GOVERNANCE REPORTBoard priorities during the year
Strategic• Annual strategy day and technology strategy session to consider progress
and provide challenge on the Horizon strategy and next steps.
• Reviewed, challenged and approved the strategic direction of the Group’s
medium‑term plan.
• Deep dive reviews into aspects of the strategic plan.

Operations• Received regular operational updates through the Management Board.
• Site visits to Group manufacturing sites.
• Monitored performance and provided challenge in key areas of operations, such as healthand safety, operational excellence, human resources, innovation and business development.

Leadership and people• Appointed Chairman to the Board.
• Continued the focus on organisation capability and succession planning within thesenior leadership teams and more generally across the organisation.

Finance• Monitored progress against the 2018/19 financial plan and considered and approved
the 2019/20 financial plan.
• Reviewed and approved the financial elements of the Group’s medium‑term plan.
• Continued to monitor the progress of Project Connect (the new ERP system) and its
implementation.
• Updates on major tax matters.
• Approved the Annual Report, half‑year results and presentations to analysts.
• Considered and approved the Group’s going concern and viability statements.
• Reviewed and recommended payment of the interim and final dividends.

Governance and ethics• Induction of the new Chairman of the Board.
• Carried out an internal Board evaluation, discussed the output openly and transparently
and agreed opportunities for improvement.
• Discussed ways to further develop employee engagement.
• Reviewed feedback from institutional Shareholders.
• Commenced review and consideration of new requirements introduced by the 2018
UK Corporate Governance Code.
• Regular meetings of the Non‑Executive Directors without management being present.

Compliance
The Board endorses the main and supporting
principles and the provisions set out in the2016 UK Corporate Governance Code(“the Governance Code”) and considers
that, throughout the period under review,
the Group has complied with the provisions
recommended in the Governance Code,save that Steve Blair was Interim Chairman
whilst continuing as Senior Independent
Director from July 2018 until Neil Carson
was appointed Chairman of the Board
in December 2018. In the exceptional
circumstances following the death of AlanThomson on 22 July 2018, it was considered
proportionate for Steve Blair to fulfil both
responsibilities whilst a new Chairman was
being appointed.

64

Taken together with the reports of theNomination Committee, Audit and Risk
Committee, the reports on Remuneration
and Corporate Responsibility, this Statement
explains how Oxford Instruments has applied
the principles of good corporate governanceas set out in the Governance Code.
Resolutions for the election of all Directors
will be put to Shareholders at the Company’s
forthcoming AGM. Once passed, this willcontinue to deliver a Board which meetsthe requirements of Provision B.1.2 of theGovernance Code.
The UK Corporate Governance Code wasreissued in July 2018 (the “Revised Code”)
and contains a number of new and amended
provisions. The Board is reviewing the changes
and identifying what it needs to do to comply
with the Revised Code.

Preservation of value
The basis on which the Group generates andpreserves value over the longer term and thestrategy for delivering the objectives of theGroup are to be found in the Strategic Report.

Board of Directors andmanagement structure
Board of Directors
As at the date of this report, the Board
comprises the Chairman, four Non‑Executive
Directors and two Executive Directors.
The Directors’ biographies and details of lengthof service are shown on pages 62, 63 and
65. All the Directors have written letters of
appointment that have been approved by the
Board and which are available for inspection at
the Company’s Annual General Meeting.

Oxford Instruments plc Report and Financial Statements 2019

The Board is responsible to Shareholders
for good corporate governance, setting
the Group’s strategic objectives, values andstandards, and ensuring the necessary resources
are in place to achieve the objectives.
The Board has delegated Group responsibility
for the management of health, safety and theenvironment to Ian Barkshire and he reports to
the Board on these matters at each meeting.

Board members’ length of service
6 years
4 years

Ian Barkshire

3 years

Mary Waldner

3 years

Gavin Hill

3 years

Steve Blair

2 years

Neil Carson

1 yearManagement Board

The Management Board meets monthly, eitherin person or by video or telephone conference,and focuses on Group‑wide performance,
strategy and risk management.

The details of the way the Board operates,
including a schedule of matters reserved to
the Board for decision, are set out in the
Board Reference File, which also includes
the documented policies and procedures
and sets out the roles and delegatedauthorities applying to the Directors, theBoard and the Board Committees. The Board
Reference File is reviewed annually as part of
the annual governance review undertakenby the Chairman.
The Board retains control over strategy,
investments and capital expenditure, andlimits the decisions which can be taken bymanagement in the areas of strategic andfinancial management and Shareholder
reporting. The Board also decides on theGroup’s capital structure, corporate actions,mergers and acquisitions, major contracts
and other commitments, litigation andregulatory proceedings, remuneration andshare 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. Compliancewith the delegation of authorities is monitoredby the Group’s internal audit function.

The Board meets on a regular basis, at least
seven times a year, and otherwise as required.
Board meetings are held at a number ofGroup and other locations during the year.
The Board holds one meeting specifically to
discuss the Company’s strategic direction
during the year.
Board meetings involve reviews of financial
and business performance against the plan
approved by the Board. Risk management
review, both at Group level and also for eachof the Group’s businesses, is embedded in
the reporting system. On a rotating basis,the Board receives presentations from thebusinesses and key functional areas enabling
it to explore specific issues in more detail.
Matters requiring a decision by the Board aresupported by a pre‑circulated paper analysing
all relevant aspects of the proposal andrecommending a course of action.
Board papers are distributed in advance of therelevant meeting in sufficient time to allow
the Directors to prepare for meetings. Minutesof Committee meetings are circulated to therelevant Directors. In the very few instances
when a Director has not been able to attend
Board or Committee meetings, his/hercomments on the papers to be considered at
the meeting are communicated in advance tothe relevant Chairman.
The Non‑Executive Directors meet without
the Executive Directors at least annually,
with the Chairman leading these meetings.
The Non‑Executive Directors also meet
annually without the Chairman in attendance.
The Senior Independent Director chairs
these meetings.

Financial Statements

The Board delegates management of thebusiness to the Chief Executive. To assist
in this, the Chief Executive has created aManagement Board that consists of the
Executive Directors, senior managers withGroup‑wide functional responsibilities andheads of the principal operating businesses.

The Board is responsible to Shareholders
for delivering sustainable incremental
Shareholder value through entrepreneurial
leadership within a framework of controls for
managing risk. The Board sets the Group’s
strategy and maintains the policy anddecision‑making framework in which thisstrategy is implemented. Further, it verifies
that the necessary financial and humanresources are in place to meet strategic aims,
monitors performance against key financial
and non‑financial indicators, oversees thesystem of risk management and sets values
and standards in governance matters.

GovernanceThomas Geitner
Richard Friend

Operation of the Board

Strategic Report

The Chairman is responsible for leadership ofthe Board and for ensuring its effectivenesson all aspects of its role. The division of
responsibilities between the role of the
Chairman and the Chief Executive has been
agreed by the Board and documented in the
Board Reference File.

The Company Secretary and theCompany Secretary’s office are responsiblefor implementing Board procedures andfor advising the Board on corporate
governance matters.

Company Information

65

Oxford Instruments plc Report and Financial Statements 2019

LEADERSHIPCORPORATE GOVERNANCE REPORT CONTINUED
Board balance
and independence
The Governance Code requires the Board
to be of sufficient size that the balance ofskills and experience is appropriate for therequirements of the business 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 Board is committed topromoting diversity and inclusiveness of all
kinds, both on the Board and throughout theGroup. The Board recognises that diversity,
which should be construed in its broadest
sense and includes gender, religious andethnic diversity, background and age, isan important factor in Board and, indeed,
operational effectiveness. The way inwhich the Board manages diversity within
the Board is reported on more fully in the
Nomination Committee Report on page
71 and diversity is more generally reported
on pages 54 and 55 in the Corporate
Responsibility Report. The compositionof the Board and the combination ofdiverse backgrounds and expertise of theNon‑Executive Directors meet these principles.
Neil Carson, Chairman, was appointed to
the Board as Non‑Executive Chairman in
December 2018. Neil has a proven trackrecord of delivering growth as a leader ofJohnson Matthey, a FTSE 100 science/R&D
based company, where he worked for over
30 years, gaining experience of operations
management, technical innovation andstrategic planning; all skills which arehighly complementary to the Company’s
needs. He has also worked across a wide
range of industry sectors, having served
as a Non‑Executive Director to a numberof UK listed companies, on a number ofGovernment bodies and has worked with

the Corporate Leaders Group on Climate
Change. Neil is also Chairman of theNomination Committee and a memberof the Remuneration Committee.
Steve Blair was appointed to the Board
in July 2017. Prior to his appointment,
he was Chief Executive of Teledyne e2v
Limited (previously e2v technologies plc),
a manufacturer of sensors, radio frequency
generators and semiconductors and a listedcompany until its acquisition by Teledyne
Technologies in March 2017. Previously he
was Business Group Director for Spectris plc.
He has broad operational experience and abreadth of experience covering establishedand high‑growth emerging markets, strategicplanning and portfolio development.
Steve is Senior Independent Director andalso a member of the Audit and Risk,
Remuneration and Nomination Committees.
Richard Friend was appointed to the Board
as an independent Non‑Executive Director
in September 2014. Richard is a Fellow of
the Royal Society and Fellow of the Royal
Academy of Engineering. He is also Cavendish
Professor of Physics and a Fellow of St. John’sCollege at the University of Cambridge.
His research encompasses the physics,
materials science and engineering ofsemiconductor devices made withcarbon‑based semiconductors. His researchadvances have shown that these materials
have significant applications in LEDs, solar
cells, lasers and electronics. He was knighted
for services to physics in the Queen’s Birthday
Honours List in 2003. He has also been
directly involved in the commercialisation oftechnology through several spin‑off companies
from the University of Cambridge.

including consideration of the lengthof service at Oxford Instruments plc.

In the opinion of the Board, Steve Blair,
Richard Friend, Thomas Geitner and Mary
Waldner are independent and Neil Carson,
Chairman of the Board, was independent on
appointment.

Term of appointment of
Non‑Executive Directors

66

Thomas has extensive international
experience in the technology andengineering sectors, having spent more than
30 years in businesses operating across theglobe. Having worked in a number of global
companies he understands the importanceof remuneration connecting with strategy toappropriately incentivise the executive team.
The Board believes that his skills, experienceand knowledge make Thomas well suited tochair the Remuneration Committee.
Thomas is Chairman of the Remuneration
Committee and also a member of the Audit
and Risk and Nomination Committees.
Mary Waldner was appointed to the Board
as an independent Non‑Executive Director
in February 2016. She is Chief Financial
Officer at Lloyd’s Register. She has a Masters
degree in physics from Oxford University
and is a Fellow of the Chartered Instituteof Management Accountants.
Mary has a broad range of financial
experience in high technology companies
that operate internationally and has worked
in a number of senior financial roles
within major public limited companies,
including as Group Finance Director of
Ultra Electronics plc. The Board believes
that Mary’s background gives her the various
insights needed to make her a well qualified
Chairman of the Audit and Risk Committee.
Mary is Chairman of the Audit and Risk
Committee and also a member of theRemuneration and Nomination Committees.

Richard is a member of the Audit and Risk,
Remuneration and Nomination Committees.

Independence of
Non‑Executive Directors

The Board considers that they are eachindependent in character and judgement anddo not have relationships which are likely toaffect their judgement. This opinion is basedon current participation and performance on
both the Board and Board Committees,

Thomas Geitner was appointed to theBoard as an independent Non‑Executive
Director in January 2013. He is a graduateof the Technische Universität München andholds an INSEAD MBA.

Each Non‑Executive Director was appointed
for an initial term of three years. In line with
provision B.7.1 of the Governance Code, theBoard has determined that all Directors of theBoard are to be subject to annual re‑election by
Shareholders and, accordingly, the appropriate
resolutions will be put to Shareholders at theCompany’s forthcoming AGM.

Composition of the Board
5
2

Independent

Non‑independent

Oxford Instruments plc Report and Financial Statements 2019

EFFECTIVENESSCORPORATE GOVERNANCE REPORTBoard development
On appointment, Directors undertake an
induction process which is designed todevelop knowledge and understanding of
the Group’s businesses through visits tovarious Group operating sites, discussionof relevant technology, as well as productdemonstrations, briefings from management
and familiarisation with investor perceptionsof the Group. This induction is supported bybriefing papers prepared by the Company
Secretary. Since his appointment, Neil Carson
has been through the induction process,which he has confirmed was effective at
raising his knowledge and awareness of theGroup, its technologies, businesses, markets
and people.

The Company Secretary and her office act asadvisers to the Board on matters concerning
governance and ensure compliance with Board
procedures. All Directors have access to thisadvice and a procedure also exists for Directors
to take independent professional advice at theGroup’s expense. No such advice was sought
during the year. The appointment and removalof the Company Secretary are matters for the
Board as a whole.

Overall, the Board concluded it and its
Committees had performed satisfactorily
in the year under review.
To complete the internal Board evaluation,
the Chairman reviewed the performanceof each Board member and has confirmedwith the Nomination Committee that all
Directors continue to perform effectively
and demonstrate commitment to theirroles. The Chief Executive, Ian Barkshire,
was appraised by the Chairman and theNon‑Executive Directors and the Group
Finance Director, Gavin Hill, was appraisedby the Chairman, the Non‑Executive
Directors and the Chief Executive in
May 2019. Led by the Senior Independent
Director, Steve Blair, the Non‑Executive
Directors carried out an evaluation of the
Chairman’s performance and concluded
that they were satisfied with the Chairman’scommitment and performance.

Company Information

This year, the Chairman determined withthe rest of the Board that the annual
evaluation of the performance andeffectiveness of the Board, its principal
Committees and its Directors should be
subject to an internal review. This exercise
was under the control of the Chairman,
using detailed questionnaires completed by
all Directors in relation to the key areas ofBoard accountability and the arrangements
in place to enable effective focus on theseareas. Topics covered included Groupstrategy, performance, delegation andaccountability, success, development andreward, Board and Committee composition
and Committee effectiveness, Board
induction and training, internal control
and risk management. The output of thequestionnaires was shared with all Directors.
The Chairman had one‑to‑one discussions
with each Director at which they discussed
individual performance and the operationof the Board and its Committees in somedetail. Each Committee Chairman held
similar meetings with members of their
Committees. The Senior Independent
Director discussed with the Non-Executive
Directors the effectiveness of the Chairmanof the Board. The process culminated ina round table discussion, chaired by the
Chairman, at which each Chairman reported
on his/her findings and led to an open andfrank discussion on the effectiveness of theoperation of the Board and Committees.
The Board came to a collective view aroundwhat worked well and where there wereareas for improvement. The output of theprocess allowed the Chairman, with theBoard, to objectively evaluate the overallbalance and effectiveness of the Board and
its Committees.

The Board concluded that it is operating
in an open and transparent way with all
Board members having freedom to express
their opinions, which creates an appropriate
environment to take effective decisions andprovide appropriate challenge and support
to the Executive Directors. The Board
welcomed changes that the Chairman
has introduced since his appointment in
December 2018, which is creating a greater
focus on supporting the development andchallenge of strategy at its meetings. Each
Committee was considered to be working
well and meeting its legal obligations.
In terms of possible areas of attention in the
future, the evaluation process highlighted
the need for: (i) additional informal sessions
as part of the budget and strategy setting
processes to give more opportunity for the
Non‑Executive Directors to explore and more
fully understand the implications of factors,
such as customer/competitor activities, theimplications of investing in new sectors
to better understand the reasons behindtrade‑offs and choices that are made whensetting strategy and budgets; (ii) building
better interactions between the Board andthe senior leadership teams and employees
more generally; (iii) continuing to evolve
the way the Audit and Risk Committee
oversees risk; and (iv) reviewing how tomore effectively present some categories
of information and data to the Board
and Committees.

Financial Statements

Throughout the year, Non‑Executive Directors
attend Oxford Instruments events, exhibitions
and award presentations.

To comply with the provisions of Section
B.6.2 of the Governance Code, the Board
expects to carry out an externally facilitatedreview of Board effectiveness at leasttriennially. It underwent such an externallyfacilitated evaluation of the Board last year,
in which ICSA Board Evaluation carriedout a full evaluation of the performance of
the Board of the Company. It concluded
that the Board was performing well in allareas that were reviewed, that the Board
comprised a strong team of Executive
and Non‑Executive Directors, that theCommittees of the Board were effective andthat the Board has adopted high governancestandards throughout.

Governance

The operating businesses’ senior
management teams and functional leaderspresent to the Board on a regular basis.
Non‑Executive Directors are encouraged
to meet individual members of the senior
management team and are invited toparticipate in relevant events. This they
have done during the year under review.

Board evaluation

Strategic Report

Board development
and evaluation

67

Oxford Instruments plc Report and Financial Statements 2019

EFFECTIVENESSCORPORATE GOVERNANCE REPORT CONTINUED
Attendance at meetings
Only the Committee Chairman and members are entitled to be present at a meeting of the Audit and Risk, Nomination or Remuneration
Committees, but others may attend by invitation. No Director votes on matters where he or she has a conflict of interest. Further details of theindividual Committees’ activities are described below and in the Committee reports.
The following table sets out the frequency of, and attendance at, Board and principal Board Committee meetings for the year to 31 March 2019:								Audit and Risk							BoardCommittee

Remuneration
Committee

Nomination
Committee

Number of meetings held						9

5

4

4

Neil Carson1						
31

11

11

—1

Alan Thomson2						
22

12

22

22

Ian Barkshire						
9

53

33

33

Gavin Hill						
9

53

23

13

Steve Blair						
9

5

4

4

9
Richard Friend 						

5

4

4

Thomas Geitner						
9

5

4

4

Mary Waldner						9

5

4

4

1. Neil Carson has attended all meetings since his appointment to the Committee on 1 December 2018.
2. Apart from meetings held in July 2018, Alan Thomson attended all meetings held before his death on 22 July 2018.
3. Attended by invitation.

Board Committees

Remuneration Committee

Audit and Risk Committee

The Board has formed the following
Committees: Audit and Risk, Nomination,
Remuneration and Administration.

The Remuneration Committee comprises all
the independent Non‑Executive Directors andthe Chairman of the Board. Thomas Geitneris the Chairman of the Committee. The Board
considers that Thomas, with his experience ofworking 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. The members of the Committee
are appointed by the Board.

The Audit and Risk Committee comprises all the
independent Non‑Executive Directors and its
Chairman is Mary Waldner. Other members of
the Board, senior management and the external
auditor are invited to attend all or part of any
meetings. The Board has determined that Mary,
with her background in financial management,is the designated financial expert and is a wellqualified Audit Committee Chairman.

Membership of Board Committees, which
is set out on pages 62 and 63 and above,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 areavailable on the Company’s website atwww.oxinst.com/investors and from theCompany on request. They will be on display
at the Annual General Meeting.
Detail on the operation of each of the Audit
and Risk, Remuneration and Nomination
Committees is to be found within the relevantCommittees’ reports.

Nomination Committee
The Nomination Committee comprises all
the Non‑Executive Directors, under thechairmanship of the Chairman of the Board.
During the period following the deathof Alan Thomson and the appointmentof Neil Carson, Steve Blair was Interim
Chairman of the Nomination Committee.
The Nomination Committee is responsible
for assisting the Board in the formal selection
and appointment of Directors and considers
succession planning for the Board, which it
reviews annually.

68

The Remuneration Committee is responsible
for recommending 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 considered necessary. The Chairman
and the Executive Directors are responsible forfixing the remuneration of the Non‑Executive
Directors and the Remuneration Committee
is responsible for fixing the remuneration of
the Chairman. No Director is involved in theprocess that sets his/her own remuneration.
The Chief Executive is invited to attend
all or part of Remuneration Committee
meetings as deemed appropriate, for example
when consideration is being given to theperformance of other Executive Directors andon significant Group‑wide changes in salarystructure and terms and conditions affecting
other employees at senior executive level.

The Audit and Risk Committee’s main
responsibilities are focused on financial
reporting, external audit, internal audit,
internal controls and risk management.
Full details of the operation and the work of
the Audit and Risk Committee are included in
the Audit and Risk Committee Report set out
on pages 74 to 79.

Administration Committee
The Administration Committee consists ofa minimum of two Directors and deals withitems of a routine and administrative nature.
At each of its meetings, the Board receives asummary outlining all matters decided by the
Administration Committee since the previous
Board Meeting.

Oxford Instruments plc Report and Financial Statements 2019

Annual General Meeting (AGM)

The next AGM will be held on
10 September 2019 at the Group’s offices
in Tubney Woods, Oxfordshire.

Investor relations

All Group announcements are posted on theGroup website, www.oxinst.com/investors,
as soon as they are released. The Investor
Relations section of the website provides
financial and other information on theGroup and the website itself carries additional
information on the Group’s products, services
and markets.

Risk management

The Group’s internal audit function assesses theadequacy and effectiveness of the managementof significant risk areas and provides oversightof operational management’s front line andassurance activities. Further details of the scopeof internal audit activities are set out in the
Audit and Risk Committee Report on pages
74 to 79.

Internal control
The Board has accountability for reviewing
and approving the adequacy and effectivenessof internal controls operated by the Group.
This covers financial, operational andcompliance controls and risk management.
The management of each business is
responsible for risk management and control
within their business and, through theManagement Board, implementing Board
policies on risk and control.
The internal control framework includes central
direction, oversight and risk managementof the key activities within the Group.
This framework includes a financial planning
process which comprises a five‑year planningmodel and a detailed annual budget which
is subject to Board approval. All Groupbusinesses’ results are reported monthly andinclude variance analysis to budget and theprior year. Management also prepare monthly
reforecasts.

• there is a formal schedule of mattersreserved to the Board for decision; otherthan these matters, the Board delegatesto the Chief Executive and reviews thedelegation of authorities throughout the
management structure;• the Group’s management structureis headed up by the Management
Board. Its membership comprises the
Executive Directors, senior managers withGroup‑wide functional responsibilities
and the heads of the principal businessesof the Group’s activities. Day‑to‑day
responsibility for the management of theGroup is delegated to the Management
Board. The responsibility is based on
the identification of separate businesses
for each of the Group’s activities forwhich there are clearly defined lines ofmanagement responsibilities at all levels
up to and including the Group Board andthe Group’s accounting and reporting
functions reflect this organisation;• financial executives within Groupbusinesses report to their own operational
head but there is also a well‑establishedand acknowledged functional reporting
relationship through to the Group
Finance Director;

69

Company Information

Within the Group there is an ongoing process
for identifying, evaluating and managing thesignificant risks faced by the Group that isembedded in all business units. Day‑to‑day
management of this process has beendelegated by the Board to the Executive
Directors. Details of the process are set out
in the Audit and Risk Committee Report on
pages 74 to 79. This process has been inplace throughout the financial year and up
to the date of approval of the Report and
Financial Statements. It is regularly reviewed
by the Board of Directors and accords withthe principles of the Governance Code.

Internal audit and assurance

The key components designed to provide
effective internal control within the Group
include the following:

Financial Statements

The Non‑Executive Directors meet informallywith Shareholders both before and after the
AGM and respond to Shareholder queries
and requests. The Chairman and the Senior
Independent Director make themselves
available to meet Shareholders as required.

The internal control framework has been
designed to manage rather than eliminate
material risks to the achievement of strategic
and business objectives and can provide only
reasonable, and not absolute, assurance
against material misstatement or loss. Because
of inherent limitations, internal controls overfinancial reporting may not prevent or detect
all misstatements. There has been no materialchange to the Group’s internal control
framework during the period covered by thisReport and Financial Statements.

Governance

The Group places considerable importance on
regular communications 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, review theresults and make comments on strategy andcurrent business activity.

Control activities include policies andprocedures for appropriate authorisation andapproval of transactions, the application offinancial reporting standards and reviewsof significant judgements and financial
performance. Financial, regulatory andoperational controls, procedures and risk
activities across the Group are reviewed by
the Group’s assurance function.

Strategic Report

The AGM is an opportunity for the Board
to meet Shareholders. At its AGM, theGroup complies with the provisions of theGovernance Code relating to the disclosureof proxy votes, the separation of resolutions
and the attendance of Committee Chairmen.
The Group arranges for the Report and
Financial Statements and related papers to beposted on its website and, where Shareholders
have elected to receive paper copies, posted toShareholders so as to allow at least 20 working
days for consideration prior to the AGM.

The Board has carried out a robust assessmentof the principal risks facing the Group,
including those which threaten its businessmodel, future performance, solvency andliquidity. Details of all major risks identified,
and the mitigating actions adopted, arereported to and reviewed by the Board andthe Audit and Risk Committee on a quarterly
basis. The principal risks set out on pages 43 to
47 provide an overview of the major risks anduncertainties faced by the Group. All operating
businesses follow a standard process for risk
identification and reporting. The process isfurther described on page 69. On a regularbasis each business reviews and updates its risk
register which is then reported to the Chief
Executive. If a material risk changes or arises,
the Managing Director of the business reports
this to the Chief Executive, at which time
there is a discussion on the adequacy of the
mitigating actions taken. In addition, the Boardand the Audit and Risk Committee consider
risks to the Group’s strategic objectives whicharise at a Group level and develop appropriate
actions to manage and mitigate these risks
where possible.

Oxford Instruments plc Report and Financial Statements 2019

EFFECTIVENESSCORPORATE GOVERNANCE REPORT CONTINUEDInternal control continued• the Board reviews strategic issues andoptions formally once a year during theannual strategic planning process andduring the year as appropriate. In addition,
the Executive Directors maintain a five‑year
planning model of the Group and its
individual businesses;• annual budgets are prepared for eachof the Group’s businesses which include
monthly figures for turnover, profit, capital
expenditure, cash flow and borrowings.
The budgets are reviewed through theGroup management structure and resultin a Group financial budget which isconsidered and approved by the Board;• the businesses prepare monthly
management accounts which compare
the actual operating result with both thebudget and the prior year. The businesses
also prepare rolling reforecasts for orders,turnover, operating profit and cash. Bothare reviewed by the Board at each of its
scheduled meetings;• the Board approves all acquisitionand divestment proposals and there
are established procedures for theplanning, approval and monitoringof capital expenditure;• for all major investments, the performanceof at least the first twelve months against
the original proposal is reviewed by
the Board;• an internal audit is carried out through asystem of regular reviews of the financial
and non‑financial internal controls at eachsite. This is further reported on in the Audit
and Risk Committee Report on pages 74 to
79. These reviews are coordinated by theGroup Internal Audit and Risk Manager;• the Board receives regular updates
on pensions, corporate responsibility,business ethics and health and safety
and the Audit and Risk Committee receives
regular updates on treasury, tax, insurance
and litigation;

70• authorisation limits are set at appropriate
levels throughout the Group; compliancewith these limits is monitored by the Group
Finance Director and the Group Internal
Audit and Risk Manager;• there is a detailed and risk‑based
delegation of authority structure inplace for sales contracts and managing
commercial risks. Contracts with onerous
terms and conditions (such as unlimited
liability contracts) require approval byeither the Chief Executive or Group FinanceDirector;• the International Trade Committeemonitors, considers action and makes
recommendations around the managementof key risks relating to international
trade including sanctions, export controls
and tariffs; and• with respect to the UK pension scheme,
the Group nominates half of the trustee
directors of the corporate trustee to thepension scheme, involves as appropriate
its own independent actuary to review
actuarial assumptions, agrees theinvestment policy with the trustee,works with the trustee on its investment
sub‑committee to deal with day‑to‑day
investment matters, ensures there is anindependent 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
11 June 2019

Oxford Instruments plc Report and Financial Statements 2019

EFFECTIVENESSNOMINATION COMMITTEE REPORT
Strategic Report

The Committee’s key objective is to ensure
there is a formal, rigorous and transparent
process for the appointment of new Directors
to the Board and to ensure that effective
succession planning processes are in placeacross the Group.
Key responsibilities

Attendance at meetings year ended 31 March 2019

• The Committee is responsible for assisting
the Board in the formal selection andappointment of Directors. It considers
potential candidates and recommends
appointments of new Directors to the Board.

				Neil Carson1 (Chairman from 1 December 2018)—

1 December 2018

• The Committee considers succession
planning for the Board and the top levelof senior management.

Alan Thomson2 (Chairman to 22 July 2018)2

1 June 2016

Steve Blair (Interim Chairman from 23 July 2018-30 November 2018)4

1 July 2017

Richard Friend

4 1 September 2014

• Annual performance appraisal of the
Chief Executive.

Thomas Geitner

4

15 January 2013

Mary Waldner				

44 February 2016

• Annual review of the Committee’s termsof reference.

Number of meetings in attendance:

Nomination
Committee

Number of meetings held				Date of appointment
to Committee

4

Number of meetings attended:3

Gavin Hill

13

2. Alan Thomson died on 22 July 2018. He attended all meetings until his death.
3. Attended by invitation.

Dear Shareholder,I am pleased to introduce theNomination Committee Report for 2018/19.
The Committee’s key objective is to support
the Board in fulfilling its responsibilities
to ensure there is a formal, rigorous andtransparent process for the appointment of
new Directors to the Board and to ensure that
effective succession planning processes are inplace across the Group.

I took over as Chairman of the Committee
and the Board in December 2018. Prior to myappointment, the Committee, with Steve Blair
acting as Interim Chairman of the Nomination
Committee, carried out an executive search
to identify potential candidates to succeed
Alan Thomson as Chairman of the Board. The
Committee, with the help of Russell Reynolds
Associates, undertook such a search andmet with a number of interested candidates.
This culminated in a recommendation of
appointment to the Board and my subsequentappointment on 1 December 2018 as
Non‑Executive Chairman of the Board andChairman of the Nomination Committee.

The Committee will continue to focus
on ensuring that the present and futurecomposition of the Board is appropriate forthe delivery of the Group’s strategy and tomaintain, and where applicable, broaden, therange of expertise, experience and diversity of
those serving on the Board. The Committee
will continue to work to ensure all relevant
requirements in the UK Corporate Governance
Code are met.

Financial Statements

1. Neil Carson was appointed to the Board on 1 December 2018. He has attended all meetings since his appointment.

Governance

Ian Barkshire3

Neil Carson
Chairman of the Nomination Committee
11 June 2019
Company Information

71

Oxford Instruments plc Report and Financial Statements 2019

EFFECTIVENESSNOMINATION COMMITTEE REPORT CONTINUEDThe Nomination Committee
The Nomination Committee comprises all
the Non‑Executive Directors, under thechairmanship of the Chairman of the Board.
The composition of the Committee istherefore compliant with the UK Corporate
Governance Code 2016 (“GovernanceCode”). Full details of the Committee’s
responsibilities are set out in its terms ofreference, which can be found on our website
at www.oxinst.com/investors-content/
advisers-and-company-secretary, andinclude all matters required by the GovernanceCode. The main responsibilities of theCommittee are summarised below:• the Committee is responsible for assisting
the Board in the formal selection andappointment of Directors. It considers
potential candidates and recommends
appointments of new Directors to
the Board:• there is a formal, rigorous andtransparent procedure for theappointment of new Directors to theBoard, the prime responsibility forwhich is delegated to the Committee;• the purpose of the Committee’s
selection process is to identify the mostsuitably qualified candidates who willcomplement and balance the current
skills, knowledge and experience of
the Board:−− recommendations for appointments
seek to strengthen the Board byselecting the best candidate basedon merit and against objective
criteria, including time available
and the commitment that will be
required of the potential Director;

72−− each appointment process begins
with an evaluation of the balanceof skills, knowledge, experienceand diversity existing on the Board
that is drawn up through a series ofmeetings between the Committee
Chairman and Directors;

Succession planning−− the Board recognises that diversity,
construed in its broadest sense
and including gender, religious
and ethnic diversity, age,personality and background, isan important factor in Board andoperational effectiveness;• The Committee discussed Board diversity
and succession planning for Directors.

−− in drawing up long and shortlists ofpotential candidates, the Committee
considers not only relevant skills,
experience and knowledge but
also diversity;−− the Committee actively considers
diversity before making a
recommendation to appoint
to the Board;• the Committee takes external advice
when considered appropriate and will
only engage executive search firms who
have signed up to the Voluntary Codeof Conduct for Executive Search Firms
on gender diversity and best practice;• the Committee considers succession
planning for the Board and the top levelof senior management;• annual performance appraisal of the
Chief Executive; and• annual review of the Committee’s termsof reference.

• The Group HR Director and the Chief
Executive presented the work that had
been carried out within the business on
succession planning, talent management,
and leadership, including at Management
Board and Executive Director level.

Performance review of
Executive Directors• The Committee also carried out its annual
review of the performance of:• the Chief Executive;• with the help of the Chief Executive,
the Group Finance Director; and• excluding the Chairman, reviewed theperformance of the Chairman.

Other• Annual review of the Nomination
Committee’s terms of reference.

Oxford Instruments plc Report and Financial Statements 2019

Strategic Report

Principal activities of the Committee during the year
Constitution of the Board
The Committee undertook a search for, and appointed, a Non‑Executive Chairman of the Board.
This comprised a number of steps.

4

8

The Committee established asub‑committee comprising the Interim
Chairman, CEO and Group HR Director.

Russell Reynolds then presented,
and discussed in detail, a long list of
candidates with the sub‑committee,
the output of which generated a shortlistof candidates who were interviewed by
the sub‑committee.

The Board convened a meeting at which
the Committee’s recommended candidate
was considered and approval was given
to appoint the preferred candidate at thelevel of fees agreed by the Remuneration
Committee.

59After interviews were completed, thesub‑committee discussed with theCommittee the shortlisted candidates.
The Committee determined its final
shortlist of two candidates. All members of
the Committee met with, in person or byvideo conference, the two final candidates.

Following successful completion of
the search, on 1 December 2018
Neil Carson was appointed to theBoard as Non‑Executive Chairman.

2
Russell Reynolds Associates was appointed
as adviser to the Committee on theappointment of Chairman. They spoke
to each member of the Board to establish
a clear specification of requirements.
Taking the output of these discussions
into consideration, the sub‑committee,
with the help of Russell Reynolds, drew
up a description of the role and desired
capabilities for candidates. Russell Reynolds
was asked to consider diversity, including
gender, religion, ethnicity, age, personality
and background, when undertaking its
search for potential candidates.

The search was focused on experienced
Non‑Executive Directors and chairmen,
and former CEOs and CFOs. Candidates
considered came from various backgrounds
including engineering, manufacturing,
technology and pharmaceuticals. They
all brought a global outlook and goodknowledge of plc environments.

Appropriate references were taken up for
the final shortlisted candidates and theCommittee convened a meeting where it
considered each Director’s feedback andagreed its recommended candidate.

7
The Remuneration Committee convened ameeting to consider and agree the fees forthe appointment.

10
All Directors of the Board are put forward
for re‑appointment by Shareholders eachyear at the AGM and this includes those
appointed during the year. The Committee,
taking into account the performance andvalue that each Director brings to theBoard, has considered whether each of
the Non‑Executive and Executive Director
appointments should be renewed fora further year and has confirmed that
this is indeed the case. Accordingly, aresolution to re‑appoint each Director will
be put to Shareholders at the Company’s
forthcoming AGM.

Financial Statements

3

6

Governance1

Company Information73

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTABILITY
AUDIT AND RISK COMMITTEE REPORTThe Committee retains its focus on a range
of key financial and non‑financial risk areasand has overseen improvements to theGroup’s risk management process.

Key responsibilities

Attendance at meetings year ended 31 March 2019

• Financial reporting.

				• External audit.
• Internal controls and risk management.
• Internal audit.
• Business malpractice.

Audit and Risk
Committee

Number of meetings held				Date of appointment
to Committee

5

Number of meetings attended:
Mary Waldner, Chairman				5

4 February 2016

Neil Carson1

1

1 December 2018

Alan Thomson2

1

1 June 2016

Steve Blair

5

1 July 2017

Richard Friend

5 1 September 2014

Thomas Geitner

5

15 January 2013

Number of meetings in attendance:
Ian Barkshire3

5

Gavin Hill

53

1. Neil Carson has attended all meetings since his appointment to the Committee on 1 December 2018.
2. Apart from meetings held in July 2018, Alan Thomson attended all meetings held before his death on 22 July 2018.
3. Attended by invitation.

Dear Shareholder,The year ended 31 March 2019 has been ayear of stability in the Group structure. In thisperiod, the membership of the Audit andRisk Committee (the “Committee”) has also
remained stable, although it has continued
to adapt its activities to ensure that it deals
with the areas of most significant risk. From agovernance perspective, the most significant
change in the year relates to the creation by
the Company of a new committee to assimilate
the management of key risks relating tointernational trade such as sanctions, export
controls and tariffs. The creation of theInternational Trade Committee is a welcome
development in an area of key importance for aGroup that derives such a significant proportionof revenue and profit from exporting.

74

The Committee’s core activities have notchanged significantly since last year, reflecting
the stable corporate environment, althoughcertain areas of risk have received greaterattention, responding to changes in theexternal environment. At the same time,assurance over the adequacy of internalfinancial controls and oversight of activities
in key risk areas such as new productinnovation, cyber security and health andsafety remain central to the Committee’s
remit. To fulfil its obligations under the UK
Corporate Governance Code, the Committee
performs reviews to assess the integrity of
the Financial Statements, considers key areasof accounting judgement that are material
to the Group’s results and considers whether
the Financial Statements are fair, balanced
and understandable. It continues to monitor
annually the effectiveness of internal audit
and retains oversight of the external auditor
independence and audit relationship.
This extends to monitoring the provisionof non‑audit services.

The Committee has overseen improvements
to the risk management process during theyear, with more granular reporting requiredin relation to the most significant areas ofrisk across the Group. The internal audit
programme retains a mix of work to provide
assurance over the effective operation of
key financial controls and other risk areas
which are principally derived from theGroup risk register. In the year ahead, thisapproach will continue and will include
additional assurance work on key compliancerisks relating to international trade and theongoing implementation of the new ERP
system.
A summary of the main areas of recurring
work is set out below:• review of the Financial Statements andthe significant accounting judgementsthat were used in their compilation.
(The significant accounting judgements
relating to the 2019 Financial Statements
are set out on page 117, section (b) ofpolicies);

Oxford Instruments plc Report and Financial Statements 2019• review of the Group’s viability statement,
including the supporting calculations andlinks to key risks and uncertainties;• review of the Group risk register at
each meeting of the Committee,
including discussion of key risk areas
and emerging risks;• an annual review of treasury and tax matters;• a bi‑annual review of key litigation mattersand risks;• evaluation of the effectiveness of internal
audit; and• review of the effectiveness of the external
audit process.

• risks relating to international trade;• Brexit‑related risks;• principal risks in the Andor and
NanoScience business units;• IT and cyber security risks; andThe structure of the rest of the Committee’sreport is set out in the following sections:• the composition and terms of reference of
the Audit and Risk Committee;• a summary of the Committee’s role andresponsibilities;• a summary of activities by meeting over thecourse of the year;• significant matters relating to the Financial
Statements;• the external auditor and auditor
independence;• internal audit, risk management andinternal control; and• whistle‑blowing.

To carry out its duties, the Committee
receives reports, presentations and otherinformation to assess the various areas within
its remit. Information is generally provided
to the Committee by internal and external
audit, the Executive Directors and relevant
subject matter experts. These include internaland external advisers on risk areas such as
cyber security, intellectual property, healthand safety, financial reporting, pensions andtax. During the last financial year, the external
auditor attended three of the four Committee
meetings and at each of those meetings met
with the Committee without the presence of
the Executive Directors.

Role and responsibilities
Full details of the Committee’s responsibilities
are set out in its terms of reference, which
can be found on our website atwww.oxinst.com/investors-content/
advisers-and-company-secretary.
The Committee periodically reviews its
terms of reference and its effectivenessand recommends to the Board anychanges required. Its main responsibilities
are set out below:• The Committee’s review of the Financial
Statements includes a review of significant
financial reporting judgements, theaccounting policies that have been used,and compliance with accounting standards.
The Committee’s comments on thesignificant financial reporting judgements
are set out on page 77 below. The review
also includes an assessment as to whether
all material matters have been taken into
account and treated appropriately.
• The Committee monitors compliance with
relevant statutory and listing requirements.

External audit• The Committee has responsibility foroverseeing the relationship with KPMG,
the Company’s external auditor.
• The Committee holds regular meetings
with KPMG to discuss key mattersrelated to the financial reporting process
which include KPMG’s audit strategy
and planning, key areas of audit risk andfinancial reporting requirements.
• The annual audit plan is reviewed andapproved by the Committee. It also reviews
the key audit findings presented by KPMG
at the full and half year.
• The Committee evaluates the effectivenessof the external audit process on an annual
basis.
• The Committee oversees and evaluates
the external auditor’s independence andobjectivity. It also exercises responsibility forthe non‑audit services policy and reviews
the value and nature of all non‑audit
services provided.
• The Committee makes recommendations
to the Board relating to the appointment
or re‑appointment of the external auditor.

Mary Waldner
Audit and Risk Committee Chairman
11 June 201975

Company Information

As in previous years, I will be attending theAGM in September. In the meantime, if you
have any questions or comments I should bedelighted to hear from you.

The Audit and Risk Committee’s terms ofreference require that at least one member of
the Committee has recent and relevant financial
experience. This is in line with the FRC’s
Guidance on Audit Committees. Mary Waldneris the current Chief Financial Officer of Lloyd’s
Register and has previously held senior financial
roles at companies quoted on the London
Stock Exchange. On this basis, the Board
considers that Mary fulfils the requirement tohave recent and relevant financial experienceand is also independent. The other members
bring valuable sector‑specific experience andinsight to the Committee.

• The Committee performs a review of
the Financial Statements and the results
announcements at the half year and full
year. As part of its remit, the Committee
advises the Board whether the Report and
Financial Statements, taken as a whole,
are fair, balanced and understandable.
It also considers whether there is sufficient
information and disclosure for Shareholders
to assess the Company’s performance,business model, strategy and risks.

Financial Statements• the Group’s delegation of authority andmechanisms for managing contractual risks.

Mary Waldner, Sir Richard Friend,
Steve Blair and Thomas Geitner havecontinued their service throughout theyear, with Mary Waldner exercising therole of Chairman.

Financial reporting

GovernanceFurther, the Committee has focused on thefollowing specific subject areas during thelast year:

Composition andterms of reference

Strategic Report• review of the statement issued at the AGM
and the statements relating to the half‑yearand full‑year results;

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTABILITY
AUDIT AND RISK COMMITTEE REPORT CONTINUED
Role and responsibilities continued
Internal controls and risk
management• Monitors the adequacy and effectivenessof the internal control environment.
• Reviews the Group’s risk management
processes and the Group’s risk register thatis reported every quarter.

Internal audit• The Committee performs an annual
evaluation of the effectiveness of theinternal audit function.

Reporting• Approves the annual internal audit
programme and reviews all financial andnon‑financial internal audit reports.

• Produces a report on its activities,
in accordance with the UK Corporate
Governance Code.

Business malpractice• Evaluates the adequacy of thewhistle‑blowing arrangements in place at
the Group and the Group’s response to any
reports received of business malpractice.
• Performs a review of the Group’s
procedures and controls relating to theprevention of fraud and the detectionof bribery.

• Reports to the Board on any matter it
considers requires action or improvement.
• Advises the Board on Directors’
responsibilities relating to the Financial
Statements.

Activities of the Committee in respect of the financial year ended 31 March 2019
The Committee’s work is principally based on a structured programme of recurring activities that has been developed from its terms of reference
and designed to fulfil its responsibilities throughout the financial year. A summary of the items discussed at each meeting since the publication oflast year’s Report and Financial Statements is set out in the table below:						
July
Agenda item					2018

September
2018

November
2018

January
2019

June
2019

Review the integrity of the draft Financial Statements, appropriatenessof accounting policies and going concern assumption (reports received
from management and KPMG)						
•		•Review and recommend for approval the half‑year and year‑end
announcements, interim management and AGM statements and theReport and Financial Statements						•		•
Review of significant financial reporting issues and judgements				•		

•

Review the viability statement								•Assess the effectiveness of the external audit process				•Consider the independence and objectivity of the external auditor					•

•Review internal management representation letters							•Review and agree the internal audit plan 							

•Review the output of the internal audit work					•

•Review the effectiveness of the Audit and Risk Committee						

•Detailed report on business‑specific risk areas			

•

•

•

Review of cyber security						•Update on litigation 							
•		•Evaluate the effectiveness of the internal audit function 						

•Review the internal control framework							•Review the risk management processes							•Review the Group risk register				•

•

•

•

Review of whistle‑blowing arrangements							•Review systems and controls for detecting fraud and the preventionof bribery and corruption								•Annual review of insurance							•Annual review and approval of policy relating to non‑audit services					

•Annual review of tax arrangements							•Annual review of treasury arrangements							
•

76

•

Oxford Instruments plc Report and Financial Statements 2019

The Committee reviews all significant
issues concerning the Financial Statements.
The principal areas of significant accounting
judgement considered in relation to the 2019
Financial Statements were:

Revenue recognition

IAS 19 also requires the Group to appointan external actuary to advise on suitable
assumptions to adopt in calculating the netpresent value of the scheme’s liabilities at thebalance sheet date. The Group has retained
Aon Hewitt (the pension scheme‘s actuary) toundertake bi‑annual valuations on its behalf
for accounting purposes.
For the year‑end accounts, Aon Hewitt
recommended assumptions on a consistentbasis with those adopted at the previous
year end. Market conditions did not movesignificantly during the year and as a result
the actual assumptions used were broadly
the same as those used at 31 March 2018.
Mortality assumptions were also updated touse the latest CMI 2018 tables. The valuationof the scheme assets was provided by Riverand Mercantile (the scheme’s investment
manager) in accordance with market practicefor valuing investment assets.
As set out in Note 25 to the Financial
Statements, the reported deficit for the
UK scheme reduced from £12.5 million
at 31 March 2018 to £3.5 million at
31 March 2019. This was largely due toimproved investment performance relating
to the scheme’s assets and deficit recovery
contributions of £7.3 million made by theGroup during the year.

Adjusted profit and EPS
As explained in Note 1 to the Financial
Statements, the Group applies adjustments
to the statutory definition of profit and EPS
to present adjusted profitability and earnings,
as the Board believes they present a clearer
picture of the financial performance of theGroup. In the year ended 31 March 2019,adjustments to operating profit totalled£11.1 million. The principal adjusting item
to profit before tax was the charge of£9.6 million relating to the amortisationof acquired intangible assets. The only
other significant adjustment (in excess of£1.0 million) to operating results is themark‑to‑market gain of £1.5 million relating
to currency hedging contracts. Note 1 also
shows £10.4 million of the taxation charge
in the year as an adjusting item which arises
from a change to corporation tax rates in
the United States, and an interest charge of£0.9 million relating to the early repaymentof loan notes. The Committee has considereda paper from management setting out allof the adjustments and concluded that theGroup’s definitions have been consistently
applied year‑on‑year. The nature of theseadjustments requires appropriate judgement
to be exercised. The Committee is satisfied
with the process adopted and the disclosurein the Financial Statements.

77

Company Information

As set out on page 116 the Group adopted
IFRS 15 Revenue from Contracts with
Customers and revenue is recognised inaccordance with this standard. Revenue isrecognised using principles‑based criteria
and the trigger point for recognition is when
the performance conditions in the contract
with the customer are met. The Groupapplies prescriptive rules relating to revenue
recognition that are appropriate to bothproducts and services.

In accordance with the provisions of IAS 19,
the Group is required to value its pension
deficit at 31 March 2019 as the difference
between the net present value of the defined
benefit scheme’s assets and liabilities.

The Group faces potential exposure tothird‑party claims in relation to potential
intellectual property infringement.
Management provide updates and analysis inrelation to potential claims to the Audit andRisk Committee twice a year. The Committee
has reviewed the information and explanations
provided by management in support of
the amounts recognised in the Financial
Statements and has also received reports fromKPMG on the matter. As at 31 March 2019,the value of the provisions recognised in the
Financial Statements is not significant but,
nonetheless, it remains an area of significant
accounting judgement. The Committee hasverified that the approach and calculations
performed to estimate the level of provisions
required is reasonable and consistent withthe prior year. The Committee continues torecognise that the final outcome of eachspecific case is likely to vary from the amountprovided. However, it takes the view that no
adjustments to the provisions are required.

Financial Statements

Significant matters relating to
the Financial Statements

UK defined benefit pension scheme

Provisions for intellectual
property claims

GovernanceThe 2016 UK Corporate Governance Code,requires the Directors to prepare the Annual
Report and Accounts and to state that they
consider them, taken as a whole, to be fair,balanced and understandable and provide
the information necessary for Shareholders toassess the Group’s position and performance,business model and strategy. The Board
requested that the Committee advise it as
to whether the Annual Report meets thoserequirements. This work formed part of thereview of the draft Financial Statements thatwas undertaken by the Committee in May andJune 2019.

As a result of the adoption of IFRS 15, revenue
recognition is less subjective than in the past,
although revenue cut‑off remains an area ofaudit focus. In the reports received by theCommittee, no significant errors in revenue
recognition were reported.

Strategic Report

The scope of the Committee’s oversight
includes a range of financial and non‑financial
matters which are particularly relevant to theGroup’s performance. Assurance programmes
relating to New Product Innovation (NPI), andsupport functions such as IT and Health and
Safety continue to feature on the Committee’s
agenda. Cyber security is subject to a recurring
annual review by the Committee. Key findings
from financial and health and safety audits are
discussed at each meeting of the Committee.
Other areas such as NPI, IT and HR are typicallyreviewed on an annual basis. The increased
focus on international trade risks in the last
financial year will continue in 2019/20. The
Committee will continue to review the key
risks faced by the Group to ensure that focus
is appropriately directed.

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTABILITY
AUDIT AND RISK COMMITTEE REPORT CONTINUED
Misstatements
Group management reported to theCommittee that they were not aware ofany material misstatements or immaterial
misstatements that had been madeintentionally in order to achieve a particularpresentation. The Committee also received areport from KPMG that set out its scheduleof unadjusted audit differences. The schedule
was discussed with both Group management
and KPMG. On the basis of those discussions,the Committee concluded that the unadjusted
differences were not material to the Financial
Statements and therefore no adjustment was
required. The Committee also concluded thatthe external auditor had fulfilled its duties withdiligence and professional scepticism.
Having reviewed presentations and reports
from management in conjunction with theinformation and reports received from KPMG,
the Committee was satisfied that the Financial
Statements appropriately addressed the
key estimates and critical judgements, bothin terms of quantum and the information
disclosed. The Committee was also satisfied
that the key assumptions adopted indetermining the value of assets and liabilities
reported in the Financial Statements had been
subject to appropriate scrutiny and challenge.

External auditor
The Committee monitors the performance,
objectivity and independence of the external
auditor. It also recommends the appointment
or re‑appointment of the external auditor to
the Board and is responsible for the approvalof its fees.
The Audit and Risk Committee received KPMG’spresentation on its audit strategy and planningmemorandum at its January 2019 meeting.
The audit strategy and planning memorandum
set out the proposed audit methodology,
scope and planned materiality for its audit of
the Financial Statements for the year ended
31 March 2019. It also identified the principal
areas of audit risk and how the audit would
address them. The audit strategy was compiled
following meetings with a number of relevant
stakeholders including, but not limited to, theChairman of the Audit and Risk Committee, theChairman of the Board and the Group FinanceDirector. After due consideration, KPMG’s audit
strategy and planning memorandum wereapproved by the Committee.

78

The Committee is responsible for reviewing
the effectiveness of the external audit process.
This review is based on reports from KPMG atboth the half year and year end and also on
feedback from key members of the financecommunity within Oxford Instruments.
The effectiveness of the process for the year
ended 31 March 2019 will be evaluated by
the Committee at its next meeting, which isscheduled to take place in September 2019.
KPMG was re‑appointed as auditor following
a tender process in 2014. In accordance withthe rules for audit tendering and rotation
implemented in June 2016, the Group shall be
required to replace KPMG as auditor for theyear ending 31 March 2022. In the meantime,
the Committee shall monitor annually thecontinuing appointment of KPMG and will
issue a call for tender for the external audit
when it considers it is appropriate to do so.

Auditor independence
In order to assess auditor independence,
the Committee obtains confirmation of any
relationships between the Group and KPMG
that may have a bearing on its independence.
It also receives confirmation that KPMG is
independent from the Group.
As mitigation to the risk that the external
auditor firm’s independence might become
compromised, the Committee operates a strict
policy that governs the engagement of theexternal auditor to provide non‑audit services.
Inter alia, the policy sets out a list of prohibited
services and a series of authority levels for
permitted services. All non‑audit related
engagements over £50,000 require formal
approval by the Committee. Note 4 (page 128)
to the Financial Statements sets out the valueof audit fees for the year, together with fees
for non‑audit services. In the year ended
31 March 2019, audit fees paid to KPMG were£469,000 and non‑audit fees were £42,000.
This represents a non‑audit to audit fee ratioof 0.09:1.

Internal audit and internal control
The Committee seeks assurance over theeffective design and operation of internal
controls from the internal audit function.
The Committee approves internal audit’sannual programme which includes auditsthat consider the effectiveness of internalfinancial controls. Internal audit performs
financial controls audits on a rotational basis
across operational business units and theprincipal Regional Offices. The internal audit
programme also includes non‑recurring,risk‑based audit topics which are derived
from the Group’s risk register.
It is planned that the new ERP system will
be implemented at several business units in
2019/20. Consequently, the internal audit planfor the year includes a greater focus on post
implementation work to complement the coreinternal financial controls reviews. The overall
strategy remained consistent with prior years
and was developed to provide the assurance
required by the Committee in relation to keyrisk areas. The internal audit plan for 2019/20
was approved by the Committee at its
meeting in January 2019, having considered
key areas of risk, other assurance activities
and historical audit findings.
The head of internal audit has a direct
reporting line to the Chairman of the
Audit and Risk Committee and they meet
regularly throughout the year. The headof internal audit also meets independently
with the external auditor to discuss risk
areas. All reports issued by internal audit areprovided to the external auditor once finalised.
The Committee’s evaluation of theeffectiveness of the internal control
environment is based on internal assurance
reports across multiple areas of activity
including operations, finance, NPI and IT,
discussions with the head of internal audit
at its meetings, and on external audit reports.
The Committee reviewed the system ofinternal financial control on behalf of theBoard and satisfied itself that the Group is
meeting the required standards both for theyear ended 31 March 2019 and up to thedate of approval of this Report and Financial
Statements. No concerns were raised with
the Committee in the year about possible
improprieties in matters of financial reporting.

Oxford Instruments plc Report and Financial Statements 2019

Whistle‑blowing

A summary of key risk management activities
performed by the Group is set out on page
43. The Committee takes an active role in therisk management process. Inter alia, it reviews
the Group risk register at every meeting andalso receives more detailed presentations on
key risks from a number of individual business
units. As set out on page 75, the Committee
has also played a role in shaping Group risk
reporting during the year.

The Group operates a confidential reporting
mechanism, operated by a third‑party provider,which enables employees to raise concernsof malpractice, non‑compliance or unethicalconduct. Other reporting channels are alsoavailable, including to the Senior Independent
Director. The options for raising concerns arewidely communicated to employees. Thesechannels are clearly set out in the Code ofBusiness Conduct and Ethics. The Group’sreporting policy and procedures set out theframework for protected disclosure andspecify a formal protocol for the independent
investigation of reports received through any
reporting channel.
The Committee conducts an annual review
of its Reporting a Business Malpractice Policy
and the outcomes of the investigations
into the reports received. This includes areview of the log of all matters reported
through the independent reporting channel
which is maintained by the head of internal
audit and risk management. The latest
review of findings took place in June2019 and all matters raised in the year
ended 31 March 2019 had been resolved.
There were no significant matters arising.

Governance

The Group’s principal risks and uncertainties
are set out on pages 43 to 47. Although thenature of the key risks has not changed in thelast twelve months, the relative importanceof certain risks has evolved. This is reflectedin how they have been reported and also
in the sensitivities used in the calculations
supporting the viability statement, which is set
out on pages 48 and 49. In the year ahead,
the Committee will continue to work with theBoard and senior management teams to ensurethat there is appropriate focus on key risk areas
and the mitigating actions that are taken.

Strategic Report

Risk management

Financial Statements

Summary
The Committee has concluded that, as aresult of its work during the year, it has acted
in accordance with its terms of reference andfulfilled its responsibilities. I will be available
at the AGM to answer any questions.

Mary Waldner
Audit and Risk Committee Chairman
11 June 2019

Company Information

79

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORTWe are building a stronger Oxford Instruments,changing the way we operate, enhancing
our commercial focus and core capabilities
across the Group.

Key responsibilities

Attendance at meetings year ended 31 March 2019

• Determining the Remuneration Policy
for the Executive Directors.

				• Determining the total Executive
remuneration packages.

Number of meetings attended:• Performance‑related remuneration plans.
• Reviewing the Group’s remuneration policy.
• Executive Policy for pension arrangements,
service agreements, recruitment terms andtermination payments.

Remuneration
Committee

Number of meetings held				Date of appointment
to Committee

4

Thomas Geitner, Chairman

4

15 January 2013

Neil Carson1

1

1 December 2018

Alan Thomson2

2

1 June 2016

Steve Blair

4

1 July 2017

Richard Friend

4 1 September 2014

Mary Waldner

44 February 2016

Number of meetings in attendance:
Ian Barkshire33

Gavin Hill

23

1. Neil Carson has attended all meetings since his appointment to the Committee.
2. Alan Thomson attended all meetings before his death on 22 July 2018.
3. Attended by invitation.

Executive Directors’ remuneration at a glance
Total remuneration payable for 2018/19
				Base			Annual							salaryBenefits
Pension
bonus
LTIP
Other
Total
				
£’000
£’000
£’000
£’000
£’000
£’000
£’000

Ian Barkshire			428

88

54

407

779

1

1,757

Gavin Hill			334

22

42

324

608

1

1,331

Remuneration performance scenarios for 2019/20
The chart illustrates how the composition of the Chief Executive’s and Group Finance Director’s remuneration could vary at different levels of
performance under the Company’s Remuneration Policy.

Company performance against annual bonus and PSP performance measures								Performance conditions		Annual bonus						ThresholdOn target
Maximum

Actual Company
performance

Adjusted PBT						£39m£43.6m£46m£45.6mOrganic sales						
£290m

£302m

£307m

£328.7m

Cash conversion						
75%

80%

85%

102.8%

Strategic objectives

Targets based on a range of objectives

Strong										Actual Company
Performance Share Plan (three‑year performance)				
Threshold		
Maximum		
performance

Earnings per share growth					7% p.a. CAGR

12% p.a. CAGR		 17.1% CAGR

Total shareholder return					50th percentile		75th percentile
70.2 percentile(compared to FTSE 250)								 (+47.3% TSR)

80

Oxford Instruments plc Report and Financial Statements 2019

Fixed pay

Bonus

LTIP

50% share price growth on LTIP value

Chief Executive

Strategic Report

Total remuneration payable

33%
39%
26.5%

100%

26.5%
16%

Maximum
payableTarget

Fixed
pay

35%

22%

26%

47%

£593k

Total including
share pricegrowth29%£1,700k£1,257k£2,031k

Group Finance Director

34%

Governance

40%
28%
100%

Fixed
pay

28%
33%

Total including
share pricegrowth

22%

27%

44%

27%

£934k

Dear Shareholder,
It has been a year of strong performance for
Oxford Instruments, with the Horizon strategy
now well embedded across the Group.
We closed the year with a strong order book,revenue and profit growth, as the Horizon
strategy delivers tangible improvements inbusiness performance. By being clear about
our long‑term vision and goals, we havefocused the business and transformed ouroperating processes and day‑to‑day activities,
resulting in a return to growth and improved
financial performance. Through Horizon weare building a stronger Oxford Instruments,
positioned to deliver long‑term sustainablegrowth and improved margins.

£1,280k

Work of the Committee
during 2018/19

Corporate performanceand annual bonus andPSP payments for 2018/19
The annual bonus for 2018/19 was determinedby a combination of cash, sales and profit
targets, and non‑financial strategic targets.
As in previous years, the Committee set
stretching performance targets which wereclearly linked to the strategy and financial
performance of the Group. Group financial
performance, on which 85% of bonus
was based, has been strong with profit up
12.3% and the bonus payable reflects this.
The adjusted pre‑tax profit target for maximum
payment was almost reached and the organic
sales and cash conversion elements of thebonus are payable at maximum.

81

Company Information

In addition to its usual annual agenda
items, the Committee reviewed the changes
to the UK Corporate Governance Codeand Directors’ Remuneration Reporting
Regulations, considering the changes thatare required to our remit as well as our current
policy and procedures to ensure compliance.
There has also been updated guidance from anumber of investors and proxy voting agencies
following the Corporate Governance Codechanges and the Committee has reviewed
and taken account of these in considering
operation of its Remuneration Policy for
FY20 but also noting their applicability to ourforthcoming policy review. I refer to this in
more detail below.

£1,539k

Financial Statements£416k

Target17%

Maximum
payableOxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
Corporate performanceand annual bonus andPSP payments for 2018/19 continued
This results in a bonus payable in respectof the financial elements of the bonus of
98.2% of the maximum payable. In relation
to the strategic targets, set for 15% of thebonus, the Committee carefully reviewed
performance against the objectives andscored the Chief Executive (CEO) and Group
Finance Director (GFD) at 73.3% and 86.7%
respectively, noting the strong performanceof the Executive Directors in driving growthand improved financial performance with
continued focus on the transformation ofoperational delivery throughout the Group.
Full details of the annual bonus outturn forboth the CEO and GFD of 94.4% and 96.4%
of salary (and maximum) respectively (against
a target level of 75% of salary) are set out in
the Annual Report on Remuneration.
As both executives are relatively new totheir role, this is the first year that theperformance targets for their awards under
the Performance Share Plan (PSP) were tested.
The EPS performance condition, for the period
ending 31 March 2019, was met in full withEPS growth of 17.1% per annum, resulting in
100% of this element vesting. The Company’s
TSR was 47.3% over the three‑year
performance period, ranking it at the70.2 percentile of its comparative group andresulting in 85.6% of this element vesting.
Accordingly, across both measures, 92.8% of
the total award vests and delivers a substantial
increase to total remuneration year to year.
Given the strong performance of thebusiness over both 2018/19 and the longer
three‑year performance period of the PSP
award, the Committee is comfortablethat there has been a robust link between
reward and performance and alignment
with investor returns. Accordingly, theCommittee has concluded that there areno circumstances arising where it would
need to exercise its discretion to adjust
any of the variable pay outcomes.

82

Review of Remuneration Policy

Operation of Policy for 2019/20

Shareholders are asked to approve our
Directors’ Remuneration Policy at least every
three years. Our current Policy was approvedin 2017 and re‑approval is therefore required
next year at our 2020 AGM.

Executive Directors

The Remuneration Committee is comfortablethat the current policy remains appropriate
for the final year of the three‑year policy
period. A full review will be carried out during
this year and a new policy will be brought toShareholders for approval at our AGM in 2020.
During the year we considered carefully
the impact of the changes to the UK
Corporate Governance Code (the “2018Code”) and new secondary legislation on
our Remuneration Policy for executives, theRemuneration Policy more widely throughout
the Group and our current disclosure andreporting. It was agreed that many of thechanges would be considered as part of thereview of the Directors’ Remuneration Policy
which the Committee is due to consider
in 2019/20 and which will be formally put
forward for approval by Shareholders at
2020’s AGM. In the meantime, to meetthe more urgent requirements of the 2018
Code, the Committee determined that the
remuneration offered to any new Executive
Director appointments would include pension
with a contribution rate aligned to thoseavailable to the workforce and that therecovery and withholding provisions in ourannual bonus and PSP, as well as the discretionto adjust the formulaic outcome of incentive
payments, would be aligned with the updated
requirements of the Code.

Effective from 1 July 2019, the Executive
Directors’ salaries will be increased by 2.75%,
in line with general workforce increases.
Annual bonus maximum and the PSP award
level remain unchanged at 100% and 150%of salary respectively.
As explained in more detail in our strategy
section on pages 22 and 23, our strategy
focuses on improving the profitability of theGroup, its capital efficiency and the businessportfolio to develop higher margin and growthbusinesses. To this end, the performancemeasures for the annual bonus and PSP
reflect these objectives.
As progress is made against the Horizon
strategy, the Committee continues to review
each year the most appropriate metrics todrive and reward performance over the
short term. For 2019/20 the annual bonus
will be determined by the same metrics andweighting as 2018/19 for profit before tax
and cash. The Committee has, however,decided to replace the organic revenue
metric with adjusted operating profit margin,
reflecting the need to drive and rewardmargin improvement and profitable growth.
The measures and weightings are thus profit
before tax (30% salary at target/42.5%
maximum), adjusted operating profit
margin (15%/21.25%), cash conversion(15%/21.25%) and strategic objectives(15% at maximum).
The strategic targets will remain focusedon continuing the strategic transformation
to deliver long‑term sustainable growth.
Appropriately stretching sliding scales will
be set for each financial measure, with full
disclosure of targets and performance againstthem being made in next year’s Annual Report
on Remuneration. The bonus is payable fullyin cash, recognising that the balance of theannual bonus and share‑based PSP is weighted
60% in favour of the latter.

Oxford Instruments plc Report and Financial Statements 2019

Because there were no changes to theRemuneration Policy, nor substantive changes
to the operation of policy for FY19, theCommittee has not consulted during the yearwith Shareholders regarding remuneration
matters. The Committee has, however, kept up
to date with new and updated remuneration
guidance from investors and proxy voting
agencies and considered the impact of this on
policy and operation. Specific engagement with
our Shareholders will however take place overthe next twelve months as we move towards a
policy vote on our new policy at our 2020 AGM.

• alignment with Shareholders andlonger‑term performance: our long‑term
performance share awards already havea two‑year post‑vesting holding period
in addition to a three‑year vesting period
and this continues post cessation of
employment. As part of our policy review
the Committee will consider the structureof the annual bonus and post‑employment
shareholding requirement;• alignment of pension with theworkforce: the Committee has agreed
that the pension provision for new Director
appointments will be aligned to thosefor the workforce and our policy will be
updated with the requisite wording next
year; andConclusion
I hope you will be supportive of the annual
advisory vote to approve the Annual Report
on Remuneration, which sets out the
remuneration outcomes for the year underreview and how the policy will be operated
for the year ahead. This resolution will be
brought to Shareholders at our AGM to beheld on 10 September 2019 and I will bein attendance to answer any questions you
may have.
If you have any queries in the meantime, I will
be pleased to engage with you and you may
make contact through our Company Secretary.
Yours sincerely

Thomas Geitner
Chairman of the Remuneration Committee
11 June 2019

• recovery and withholding anddiscretion to adjust formulaic variable
pay outcomes: our variable pay planrules and PSP award documentation andplan rules have been updated to cover therequirements of the Governance Code andthe wording of our policy will be updated
next year to reflect these changes.
The Committee has also agreed toincorporate some of the new Directors’
Remuneration Reporting Requirements a year
early, although we will not be reporting a CEO
pay ratio this year.
Company Information

The Committee values the opinions of its
Shareholders and will continue to gather
broader stakeholder input, as required by
the revised UK Corporate Governance Code,including from its employees. As mentioned
in our Governance Report, the Board will use
and enhance its current approach to employee
engagement to ensure compliance with theCode. Consideration is being given by theCommittee with our Group HR Director on
how to most effectively engage with employees
to explain the alignment of our Executive
Directors’ remuneration to the wider Group
policy and I will set out in next year’s report
our activities in carrying out this engagement.

• workforce policies and practices: theCommittee already considers, and provides
challenge as appropriate, to workforce
policies and practices and takes these
into account when setting the Executive
Directors’ Remuneration Policy andoperation. The Committee will consider
the breadth and depth of its review andbroaden this as appropriate;

The Non‑Executive Directors’ basic Board
fee will be increased by 2.75% from
1 July 2019, in line with the increases tothe Executive Directors and workforce as awhole. The additional fees for the role ofSenior Independent Director and chairing theRemuneration and Audit and Risk Committees
remain at £7,500. As the Chairman was
appointed during the year there will be nochanges to his fee for 2019/20.

Financial Statements

Corporate Governance Codeand regulatory changes• Remuneration Committee remit: theCommittee’s terms of reference are being
updated to include the broader remit of
the Committee to set the remuneration of
our Executive Management Team as well asother matters required by the new Code;Non‑Executive Directors’ fees

GovernancePSP awards will continue to be based 50%
on ROCE and 50% on earnings per share.
EPS will ensure a continued focus on growing
profitability and the continued use of ROCE,
which was introduced in 2017/18, provides
a close link to the business strategy over the
next few years to support and incentivise
management to make the changes needed toour business portfolio by ensuring that thereis efficient redeployment of our capital intohigher margin and growth businesses. The
Committee has considered carefully the target
ranges for both measures and has increased
the range for ROCE compared to those set
for last year’s awards. EPS targets will remainunchanged but the growth will be measured
from an all‑time‑high EPS baseline.

In addition, the Committee has already taken
certain steps to address the requirements of
the new Code as follows:

Strategic Report

Our annual bonus is structured to start payingout at zero at threshold and pays out at 75%
of maximum for target performance, witha sliding scale vesting in between and has
done so for many years. The Committee sets
stretching targets which support the relatively
high level of payment at target, always
reviews the formulaic outcome to ensurethat payments are appropriate and does notconsider that historically payments have beenout of line with performance.

83

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUEDPART A: Directors’ Remuneration Policy
This part of the Remuneration Report sets out the Group’s Remuneration Policy for its Directors. The Policy was approved in abinding Shareholder vote at our AGM on 12 September 2017. The Policy took effect from that date and, unless changed with
Shareholders’ prior agreement, will stay in place until September 2020.

Policy overview
The Remuneration Policy promotes the deliveryof the Group’s strategy and seeks to align theinterests of Directors and Shareholders. The
Committee regularly reviews the link between
its incentive structures and strategy to ensurethat remuneration packages are appropriate
to attract, motivate and retain the high calibre
executives that are needed to deliver theGroup’s strategy.
The Company seeks to reward executives fairly
and responsibly based on Group performanceand their individual contribution. The
Company has a strategy aimed at deliveringsignificant, balanced and sustainable
long‑term growth and it is importantfor motivation and retention that the
remuneration of the executives reflects this.

The Committee considers carefully the
motivational effects of the incentive structure
in order to ensure that it is effective anddoes not have any unintentionally negative
impact on matters such as governance,
environmental or social issues. More generally,
the Committee ensures that the overall
Remuneration Policy does not encourage
inappropriate risk taking.

Other matters taken
into consideration in
determining policy
The Committee reviews the Executive
Directors’ packages periodically, taking
account of the level of remuneration
paid for comparable positions in similar
companies. Comparative pay data is usedcarefully, recognising the potential for an
upward ratchet in remuneration caused byover‑reliance on such data.

In determining the remuneration of the
Executive 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 theunderlying principles which form the basis for
decisions on Directors’ pay are consistent withthose on which pay decisions for the rest of
the workforce are taken. Employees are notcurrently consulted on executive pay. However,
the Committee will keep this under review.
The Committee considers feedback from
Shareholders received at each AGM, together
with any feedback from additional meetings,
as part of any review of Executive Director
remuneration. In addition, the Committee
engages proactively with Shareholders where
any material changes to the Remuneration
Policy are proposed.

Remuneration Policy
Element of pay

Purpose and link to strategy

Base salary• To provide a competitive • Reviewed annually with any increase usually effective
and appropriate level
1 July.
of basic fixed pay• Takes account of experience, performance andto recruit and retain
responsibilities as well as the performance of thesuperior talent and avoid
Company, the complexity of the role within theexcessive risk taking thatGroup and salary increases for employees generally.
might otherwise result• Set with regard to market data for comparablefrom an over‑reliance on
positions in similar companies in terms of size,
variable remuneration.
internationality, business model, structure and• Reflects the experience,complexity, including within the industry.
performance andresponsibilities of
the individual.

• There is no minimum or maximum
annual increase.

• Provided on amarket‑competitive
basis, aids retention andfollows reward structure
for all employees.

• The value of benefits varies fromyear to year depending on the costto the Company and is not subject
to a specific cap. Benefit costs
are monitored and controlled andrepresent a small element of total
remuneration costs.

Benefits

Operation• Currently include, but are not limited to, the cost of:• life assurance;• private medical insurance;• company car benefit (car, driver, car allowance);
and/or• overnight hotel accommodation where necessary
to enable the executive to carry out his duties
efficiently at the Head Office and other
Company sites.
• The benefits provided may be subject to amendmentfrom time to time by the Committee within thisPolicy.
• Relocation costs and other incidental expenses may
be provided as necessary and reasonable.
• Benefits are not part of pensionable earnings.

84

Maximum opportunity• Higher increases than the average
percentage for the workforce may
be appropriate; for example, where
an individual changes role, where thecomplexity of the Group changes,
where an individual is materiallybelow market comparators or isappointed on a below‑market salarywith the expectation that his/hersalary will increase with experienceand performance.

Oxford Instruments plc Report and Financial Statements 2019

Purpose and link to strategy

Operation

Pension• To provide amarket‑competitive
benefit for retirement.

• Company contributions to a money purchase pension • 14% of base salary.
scheme; orAnnual bonus• Drives and rewards the
successful achievementof annual targets set atthe start of the year.

• Salary supplement where HMRC annual or lifetime
allowances are exceeded.
• Performance targets based on the key performanceindicators and strategic objectives of the business.

• Facilitates shareownership to provide
further alignment with
Shareholders.

• To encourage
employee shareparticipation.

• The maximum normal award• Annual awards under the 2014 Performance Sharelimit is 150% of salary. This limit
Plan of performance shares (or nil‑cost options)
may be exceeded in exceptionalwith vesting subject to achievement of performance
circumstances e.g. recruitment, up
targets. Both the vesting and performance period willto the limit in the PSP rules of 250%
be over a minimum of three years.
of base salary.
• The Committee will set targets each year based• Dividend equivalents may accrue
on the PSP awards over the vesting
period and for awards granted• 25% of the awards will vest at threshold performancefrom 2018 to the end of the post
under each performance condition.
vesting holding period and be paid
• Clawback may be applied for misstatement, error
out either as cash or as shares onor misconduct.
vesting or at the end of the holding• For PSP awards granted from 2017/18, vested awards
period as appropriate and in respect
must be held for a further two years before sale ofof the number of shares thatthe shares (other than to pay tax).
have vested.
on long‑term financial performance and/or a stock
market based metric.

• The Company may from time to time operate
tax‑approved share schemes (such as the
HMRC‑approved Share Incentive Plan (SIP)) for which
Executive Directors could be eligible.

• The schemes are subject to thelimits set by tax authorities.

• The SIP is open to all UK permanent staff employed
for at least six months.
Shareholding
guideline• To further alignExecutive Directors’interests with
Shareholders’.

• The Committee has established shareholding
guidelines which encourage the Executive Directors
to build and retain a holding of Company sharesequivalent to 150% of base salary.

Financial Statements

All‑employee
share schemes• Bonuses start to be earned
from 0% of salary for achieving
threshold performance.

Governance• To incentivise theexecutives and reward
them for meeting
stretching targets inthe long term which
accrue substantial
value to and align the
Directors’ interests with
Shareholders’.

• 75% of salary at year end payableat target performance.

• At least 70% of the bonus is based on financial metrics • 100% of salary at year end payable
for maximum performance.
and the balance on non‑financial strategic metrics.
• Clawback provisions apply for misstatement, error
or misconduct.

Long‑term
incentives

Maximum opportunity

Strategic Report

Element of pay• Not applicable.

• 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 fromexercise/vesting of share awards as appropriate after
allowing for tax payable.
Non‑Executive
Director fees

• There is no prescribed maximum
or maximum annual increase.
Company Information• To remunerate• Reviewed annually.
the Chairman and• Determined and reviewed taking into accountNon‑Executive Directors.
time commitment, experience, knowledge andresponsibilities of the role as well as market data
for similar roles in other companies of a similar
size and/or business to Oxford Instruments.
• Out‑of‑pocket expenses including travel may bereimbursed by the Company in accordance with
the Company’s expenses policy including tax
thereon “grossed up” as appropriate.

85

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
Differences in the Remuneration
Policy of the Executive Directors
and the general employees

Discretions retained by theCommittee in operating its
incentive plans

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

The Committee may adjust the formula‑driven
outturn for an annual bonus or PSP
performance condition in the event that
the Committee considers that the quantum
would be inappropriate in light of wider
Company performance or overall Shareholder
experience. Any such use of discretion
would be detailed in the Annual Report on
Remuneration in Part B.

Choice of performance measuresand approach to setting targets
The Committee selects financial and strategic
measures for the annual bonus that are key
performance indicators for the business overthe short term. For the long‑term incentives,
the Committee will select a combination of
measures that provide a good focus on theoutcomes of the Company strategy together
with sustainable improvements in long‑term
profitability.
The Committee sets appropriate anddemanding targets for variable pay in thecontext of the Company’s trading environmentand strategic objectives. The targets for theannual bonus plan will be set each year withreference to the Company’s budget andbusiness and strategic plan. The Committee
will review the performance conditions
and targets for awards under the PSP eachyear prior to awards being made, taking
account of the Company’s internal financial
planning, market forecasts and the businessenvironment.

86

The Committee operates the Group’s various
incentive plans according to their respective
rules and in accordance with HMRC rules
where relevant. To ensure the efficientadministration of these plans, the Committee
may apply certain operational discretions.
These include the following:• selecting the participants in the plans;• determining the timing of grants and/or
payments;• determining the quantum of grants and/or
payments;• determining the extent of vesting based on
the assessment of performance;• determining “good leaver” status and,
where relevant, the extent of vesting in thecase of the share‑based plans;• where relevant, determining the extent ofvesting in the case of 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
performance measures and setting targets
for annual bonus plan and discretionary
share plans from year to year.

The Committee may adjust the targets and/or
set different measures and alter weightings forexisting annual bonus plans and share‑based
awards only if an event occurs which causes
the Committee to reasonably consider that theperformance conditions would not without
alteration achieve its original purpose and thevaried conditions are no less difficult to satisfy
than the original conditions. Any changes, andthe rationale for those changes, will be set out
clearly in the Annual Report on Remunerationin respect of the year in which they are made.

Legacy arrangements
In approving this Directors’ Remuneration
Policy, authority is given to the Company
to honour any commitments entered intowith current or former Directors (such as
the payment of 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 ofany payments to former Directors will be set
out in the Annual Report on Remuneration as
they arise.

Oxford Instruments plc Report and Financial Statements 2019

Remuneration scenarios for Executive Directors

Remuneration scenarios:
Chief Executive (CEO)£’000Group Finance Director (GFD)

Strategic Report

The charts below show the level of remuneration potentially payable to Executive Directors under different performance scenarios for the financial
year 2019/20 (see notes for assumptions):

2,500
Total including
share price growth:

Fixed pay

£2,031k

Annual bonus

2,000

LTIP
50% share price growth on LTIP value

Total:

Total including
share price growth:£1,700k£1,539k

1,500

Total:£1,257k
26.5%

1,000

26.5%

£934k
26%

500
100%

47%

35%

Fixed pay

Target

Max

40%

28%
£416k

28%

27%

100%

44%

33%

Fixed pay

TargetMax

Governance

£593k

0

£1,280k

39%

Assumptions for charts above:
1. Fixed pay comprises salary levels as at 1 July 2019, pension contribution of 14% and the value of benefits received in 2018/19.
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.

Financial Statements

4. The maximum level of bonus and vesting under the PSP is 100% of the bonus opportunity and 100% of the face value of the PSP award at grant, i.e.100% and 150% of salary respectively.
5. Share price growth is shown in the maximum scenario of 50% of the PSP award value at the date of grant. For simplicity, SIP awards, as well as dividend equivalents, are excluded.

Recruitment and promotion
policy for Executive Directors
In setting total remuneration levels and inconsidering quantum for each element of
the package for a new Executive Director, theCommittee takes into account the skills andexperience of the individual, the market rate
for a candidate of that experience and theimportance of securing the relevant individual.

For an internal appointment, any variable
pay element awarded in respect of the priorrole may be allowed to pay out according to
its terms, adjusted as relevant to take into
account the appointment. In addition, anyother ongoing remuneration obligations
existing prior to appointment may continue.

Flexibility is retained to offer additional cash
and/or share‑based payments on appointment
in respect of deferred remuneration or benefit
arrangements forfeited on leaving a previous
employer. The Committee would look to
replicate the arrangements being forfeitedas closely as possible and, in doing so, willtake account of relevant factors including
the nature of the deferred remuneration,
performance conditions, attributed expectedvalue and the time over which they would
have vested or been paid. Such awards may
be made under the terms of the PSP or as
permitted under the Listing Rules.

For external and internal appointments, theCommittee may agree that the Company willmeet certain relocation, legal and any otherincidental expenses as appropriate.

Company Information

The Company seeks to align the remuneration
package with the Remuneration Policy
approved by Shareholders, including the
maximum plan limit for the long‑term
incentives and an annual bonus entitlement inline with that of the other Executive Directors.
Salary is provided at such a level as required
to secure the most appropriate candidate.
For new appointments, base salary and total
remuneration may be set initially at below
normal market rates on the basis that it may
be increased once expertise and performancehas been proven and sustained.

Specific variable remuneration performancetargets can 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 andthe point in the year in which he or shejoined the Board.

87

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
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 and at the Company’s AGM,
are as follows:								Contract dateUnexpired term of contract

Ian Barkshire							11 May 2016

Rolling contract

Gavin Hill						Rolling contract

9 February 2016

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

Detailed terms

Notice period

Twelve 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 gross misconduct.
For termination in other circumstances, the Company has a right to pay salary in lieu of the notice period (or part
thereof) if it so determines.
In addition, any statutory entitlements in connection with the termination would be paid as necessary, and, at theCommittee’s discretion if deemed necessary and appropriate, outplacement, legal fees and settlement of claims or
potential compensation claims.

Remuneration entitlements

Pro‑rata bonus may also become payable for the period of active service along with vesting for outstanding shareawards (in certain circumstances – see below).

Change of control

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

Any share‑based entitlements granted to an Executive Director under the Company’s share plans will be determined based on the relevant planrules. The default treatment for existing awards is that any unvested awards lapse on cessation of employment. However, in certain prescribedcircumstances, such as death, injury, ill health, disability, retirement or other 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 the extent the performance condition is satisfied, butwith the Committee having discretion to vest on the normal vesting date if appropriate and to waive the performance condition. Under the 2014
PSP, awards to good leavers will vest on the normal vesting date, subject to the satisfaction of the relevant performance conditions at that time andbe scaled back to reflect the proportion of the normal vesting period actually served. The Committee has discretion in exceptional circumstances
to disapply time pro‑rating and/or to measure performance to and vest awards at the date of cessation. Vesting at cessation would be the default
position where a participant dies.
In the event of a takeover, awards vest to the extent the performance condition is satisfied and are scaled back to reflect the actual period ofservice, with the Committee having the discretion, acting fairly and reasonably, not to scale back.

External appointments
The Board encourages Executive Directors to accept appropriate external non‑executive appointments provided the aggregate commitment iscompatible 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. Currently, the Executive Directors do not hold any outside directorships.

Non‑Executive Directors
For the appointment of a new Chairman or Non‑Executive Director, the fee arrangement would be in accordance with the 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 initial period of three years withsubsequent reviews. Non‑Executive Director appointments are now renewed for periods of one year, terminating at the next AGM. Theirappointment can be terminated without notice and with no compensation payable on termination, other than accrued fees and expenses.
							

Date of last appointment

Notice period

Neil Carson 						1 December 2018

Six months

Richard Friend						1 September 2014

None

Thomas Geitner						13 March 2017

None

Mary Waldner						4 February 2016

None

Steve Blair							1 July 2017		
None

88

Oxford Instruments plc Report and Financial Statements 2019

PART B: Annual Report on Remuneration
The Remuneration Committee (unaudited)
The Remuneration Committee (the “Committee”) is responsible for recommending to the Board the remuneration packages for Executive Directors
and has oversight of the pay, bonus and share incentive strategy for the Group’s executive management. The Chairman and the Executive Directors
are responsible for determining the remuneration of the Non‑Executive Directors, and the Remuneration Committee, in the absence of the
Chairman, is responsible for determining the remuneration of the Chairman.

Strategic Report

The financial information in this part of the report has been audited where indicated.

The role of the Committee includes:• considering and determining the Remuneration Policy for the Executive Directors;• within this agreed policy, considering and determining the various elements and total remuneration packages of each Executive Director of
the Company;• approving the structure and targets for all performance‑related remuneration plans for executives as well as the overall payments made undersuch plans;• reviewing and noting remuneration policy and trends across the Group and considering the Executive Directors’ remuneration within thiscontext; and• determining the policy for pension arrangements, service agreements, recruitment terms and termination payments to Executive Directors.

The Chief Executive, the Group HR Director and other executives are invited to attend Committee meetings as deemed appropriate. For example,
the Chief Executive is able to make a significant contribution when considering the performance of other Executive Directors and to discuss
the wider Group Remuneration Policy affecting employees. However, no Executive Director is present when the Committee is determining his
or her own remuneration.

Financial Statements

The Committee acts within its agreed written terms of reference (which are published on the Company’s website: www.oxinst.com/investors)
and complies with the provisions of the 2016 UK Corporate Governance Code regarding remuneration.

Governance

The members of the Committee are appointed by the Board and currently comprise all the independent Non‑Executive Directors: Thomas Geitner,
Steve Blair, Richard Friend, Mary Waldner, and the Chairman of the Board, Neil Carson. Thomas Geitner is the Chairman of the Committee.
All members served throughout the year except for Neil Carson, who joined the Board and the Committee on 1 December 2018,
and Alan Thomson, who served until 22 July 2018.

The performance of the Committee is reviewed at least once a year as part of the Board evaluation process.
During the year the Committee fulfilled its duties, as laid down in the Committee’s terms of reference.
Korn Ferry (KF) was the Committee’s independent remuneration consultant during the year and continues with this appointment in 2019/20.
KF is appointed by the Committee to provide advice on all aspects of executive remuneration as required by the Committee.
During the year KF also provided executive search related services to the Company through a separate part of the business. The Committee was
comfortable that the controls in place at KF do not result in the potential for any conflicts of interest to arise.
KF is a signatory to the Remuneration Consultants’ Code of Conduct and has confirmed to the Committee that it adheres to the Code. During theyear, KF had discussions with the Committee Chairman on remuneration matters relevant to the Company and on how best their team can workwith the Committee to meet the Company’s needs.
Fees are charged predominately on a “time spent” basis. The total fees paid to KF for the advice provided to the Committee during the year
were £36,648.

Company Information

89

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
Directors’ remuneration (audited)
The remuneration paid to the Directors during the year under review and the previous year is summarised in the tables below:								Long‑term		
				Salary			Annualincentive		
1
2
3
				
and fees
Benefits
Pensionbonus
awards4
Other5
Total
Executive			£’000
£’000
£’000
£’000
£’000
£’000
£’000

2019

428

88

54

407

779

1

			
2018

418

51

53

268

—

1

791

2019

334

22

42

324

608

1

1,331

			
2018

326

18

41

209

—

1

595

Total		
2019

762

110

96

726

1,387

2

3,088

			
2018

744

69

94

477

—

2

1,386

Ian Barkshire		
Gavin Hill		

1,757

1. “Benefits” comprise provision of a car or car allowance, health insurance, life assurance, overnight hotel accommodation where necessary to carry out duties at the Head Office of the Company
and, from August 2017 for Ian Barkshire, provision of a driver to allow him to make best use of his commuting time. For the year to 31 March 2019, provision of a driver accounted for £67,687(August 2017‑March 2018: £29,667) of the total benefits for Ian Barkshire.
2. Contractually, each Executive Director is entitled to receive 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 as a cash allowance which, in line with the policy for all UK employees, is paid net of employer’s national insurance
contributions.
3. “Annual bonus” represents the full annual bonus, payable in cash, payable for the year to 31 March 2019 and paid in the July 2019 payroll.
4. “Long‑term incentive awards” are those awards where the vesting is determined by performance periods ending in the year under report and therefore reports the value of the PSP award
granted on 21 June 2016. The value has been determined using the average share price over the three months to 31 March 2019, £9.62. Further details of how these sums are arrived at are
set out on pages 93 and 94. The share price used on grant of the 2016 PSP award was £7.375 and the total face value at grant of the vested number of shares is £570,721 for the CEO and£445,441 for the GFD. On vesting (based on an average share price for the last three months of the financial year) the share price was £9.62, giving a total vested award value of £744,443 for
the CEO and £581,028 for the GFD. Dividend equivalents have been added to arrive at the total figure included in the table above.
5. The Company operates a Share Incentive Plan (SIP) which is open to all UK permanent staff employed for at least six months. “Other” is the value of matching SIP shares attributable to the year.
In 2018/19 Ian Barkshire and Gavin Hill participated in the SIP up to the maximum extent permitted by HMRC. The Company offers a 1:5 match for partnership shares purchased by employees
and this amounted to £360 each of matching shares for Ian Barkshire and Gavin Hill.
									Long‑term								Annualincentive
					
Fees
Benefits
Pensionbonus
awardsNon‑Executive				£’000
£’000
£’000
£’000
£’000

Total
£’000

Neil Carson1			
2019

60

—

—

—

—

				
2018

—

—

—

—

—

—

Alan Thomson3			
2019

57

—

—

—

—

57

				
2018

168

—

—

—

—

168

2019

82

—

—

—

—

82

				
2018

41

—

—

—

—

41

Steve Blair2 			

60

2019

48

—

—

—

—

48

				
2018

47

—

—

—

—

47

Richard Friend			

2019

56

—

—

—

—

56

				
2018

54

—

—

—

—

54

Thomas Geitner			

2019

56

—

—

—

—

56

				
2018

54

—

—

—

—

54

Total			
2019

359

—

—

—

—

359

				
2018

364

—

—

—

—

364

Mary Waldner			

1. Neil Carson was appointed Non‑Executive Director and Chairman of the Board on 1 December 2018.
2. Steve Blair was appointed Non‑Executive Director and Senior Independent Director on 1 July 2017. He was Interim Chairman of the Board from 23 July 2018 until 30 November 2018. His fees
were uplifted to £130,000 per annum for this period.
3. Alan Thomson, Chairman of the Board, passed away on 22 July 2018.

90

Oxford Instruments plc Report and Financial Statements 2019

External appointments (unaudited)

Details of annual bonus earned in year (audited)
The CEO and GFD have made good progress this year with the implementation of the Horizon strategy, delivering both growth and improved
profitability. The Group’s results and resulting incentive payments demonstrate the positive impact that the Horizon transformation programme ishaving on our performance as we focus on market intimacy, innovation and product development, customer services and operational excellence.
The Group is making good progress in its transition from being product focused to becoming a customer‑centric, market‑driven Group, increasing
value for existing customers. We create value for our customers by helping them to accelerate their applied R&D, increase their productivity in hightech manufacturing and make ground‑breaking discoveries. By building on our innovative technology and targeting attractive markets, the Groupwill continue to deliver long‑term sustainable growth and margin improvements.

Strategic Report

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. There were no such appointments during the year.

As in previous years, the Committee set stretching performance targets for the annual bonus which are clearly linked to the strategy and financial
performance of the Group. As explained in the Finance Review on pages 36 to 42, reported revenue rose to £336.6 million, up 12.4% on the prioryear, increased volumes and improved commercial focus drove adjusted profit before tax from continuing operations, up by 12.3% to £47.5 millionand £56.3 million cash was generated from operations delivering a cash conversion rate of 102.8%, significantly better than the prior year.

Percentage of salary payable
Targets					ThresholdOn target
Maximum
ThresholdOn target
Maximum
Measure		
CEO/GFD
CEO/GFD
CEO/GFD£m£m£m

Actual1£m

Governance

When the Remuneration Committee set the adjusted profit before tax and organic sales targets for FY19 it took into account expected currency
headwinds but retained the discretion to adjust the targets or formulaic outturn of the bonus, if considered appropriate, based on actual exchange
rates. In determining the bonus payment, the Committee has adjusted the reported adjusted profit before tax and organic sales (downwards)
to take account of the difference in actual exchange rates compared to those anticipated and on which the targets were set. The table below
shows the adjusted profit before tax and organic sales outturn after adjustment for actual exchange rates. The impact of the adjustment reduces
the amount payable on the adjusted profit before tax from 100% to 95% of the maximum payable for this metric. The organic sales outturn
continued to exceed the maximum target set.
Payout% of maximum

30%

42.5%

39.0

43.6

46.0

45.7

96%

15%

21.25%

290.0

302.0

307.0

328.7

100%

Cash conversion		 0%15%21.25%

75%

80%

85%

102.8%

100%

Strategic objectives		
0%

—

15%

—

—

—

See page 92

CEO:73.3%										GFD:86.7%
1. The actual numbers reported for adjusted PBT and organic sales are adjusted for the impact of currency as described above.

The non‑financial strategic objectives were set at the start of the year. Performance against them is set out on page 92. The Committee in its
review noted the exceptional performance in achieving the Horizon strategy objectives, laying the foundations for future growth and agreed that,when taking into account all the circumstances, a bonus of 11% out of the total 15% of salary available was appropriate for Ian Barkshire and
13% out of the total 15% of salary available was appropriate for Gavin Hill.

Financial Statements

Adjusted PBT		 0%Organic sales		 0%Company Information

91

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
Details of annual bonus earned in year (audited) continued
CEO objectives

WeightingAchievements towards objectives/performance

Build people capability across the Group,
closing core leadership, commercial,
operational and technical capability gaps.

1/3• Good appointments in business unit senior leadership and technical teams,
including internal appointment of Chief Technical Officer.
• Invested in the development of clearly defined capabilities across theGroup’s businesses.
3 out of 5

Define and progress an active portfolioof opportunities to deliver organic and/or
inorganic growth in line with the Horizon
strategy.

1/3

Deliver significant financial benefits
through the implementation ofsustainable operational efficiencies
and a stronger commercial focus.

1/3• Inorganic growth opportunities identified and targeted.
• Good organic growth delivered progress through new product introductionand extension of addressable markets.
4 out of 5
• Facilitated an accelerated programme of operational and procurement
improvements delivering in‑year results and will deliver continuing benefits
in years to come.
• Built internal capabilities to sustain the improvements made.
• Created stronger commercial focus by embedding sales excellence and market
intimacy practices and capabilities across all businesses and regions.
4 out of 5

Total

100%

GFD objectives

Weighting

Drive the implementation of Connect
1/3(Group‑wide ERP system), ensuring that atleast 40% of revenue from the Group isachieved by business units using Connect
and an accelerated and costed plan iscompleted for specified non‑UK locations.

73.3%
Achievements towards objectives/performance• Good progress against this objective taking into account a decision within
the year to divert essential resources onto a key, strategic operational
improvement programme.
• Ensured operational improvement programmes developed processes that would
be implementable in Connect.
• Successfully rolled out Connect in three units. Revised and accelerated plan
now in progress.
3 out of 5

Deliver a step change in the way
the Group manages working capitalthrough greater transparency and active
management of working capital acrossthe Group.

1/3• £3 million improvement in working capital.
• Changed the way working capital is managed, developing a stronger focus on
active management of working capital in finance teams across all businesses.
Transparent reporting throughout the organisation.
• Brought in disciplines to maintain and continue to improve working capital
best practice.
5 out of 5

Deliver profit growth from Healthcarein accordance with the Group plan andagree the plan for smooth transition ofleadership.

1/3• Delivered profitable growth with profits increasing by more than £1 million
in FY19.
• Transitioned to a consolidated and focused leadership team to drive business
improvement.
5 out of 5

Total

92

100%

86.7%

Oxford Instruments plc Report and Financial Statements 2019									Actual bonus							On‑target
Maximum
payable for							bonus2bonus
2018/19							
(% of salary)(% of salary)(% of salary)1

Actual bonus
payable1 for
2018/19(£’000)Ian Barkshire						
75%

100%

94.44%

407

Gavin Hill						
75%

100%

96.44%

324

Strategic Report

The on‑target and maximum bonus potentials for the Executive Directors, as well as the amounts actually payable for the year ended
31 March 2019, are set out below.

1. Bonus is calculated on salary as at 31 March 2019.
2. Target bonus is set at 75% of maximum. The Committee is comfortable with target payment at 75% of maximum taking into account the maximum bonus opportunity of 100% of salaryand the level of stretch in the bonus targets evidenced by historic levels of payment. The Committee will review the target level of bonus payment as part of the policy review during FY20.

Long‑Term Incentive Plans (audited)
The performance targets, performance against them and the resulting payment in respect of the long‑term incentive awards where vesting isdetermined by a performance period ending in 2018/19 are as follows:

Performance Share Plan (PSP)The performance targets which applied to the awards made on 21 June 2016 for the performance period ending in the year under review andactual performance achieved against them were as follows:
50% of the award is based on EPS measured over a three‑year performance period starting 1 April 2016:
EPS growth required

Below threshold				Less than 7% per annum over three years

0%

Threshold				

7% per annum over three years

25%

Between threshold and maximum			

7% to 12% per annum over three years

25%-100%

Maximum				12% per annum and above over three years

100%

Actual EPS				

64.9p

Actual achieved over the period1			

17.1%% of award that will vest

Governance

Performance level				100%

1. The starting EPS for FY16 has been restated from the FY16 reported adjusted EPS of 49.2 pence to 40.4 pence on a continuing operations basis using disclosures as set out in the 2018 Financial
Statements by adjusting for disposals of the superconducting wire business in November 2016 and the Industrial Analysis business in July 2017.

Performance level				

TSR relative to FTSE 250 (excluding certain sectors)1

Below threshold				Below median0%Median25%

Between threshold and maximum			

Between median and upper quartile

25%-100%

Maximum				Upper quartile and above

100%

Threshold				% of award that will vest

Financial Statements

50% of the award is based on total shareholder return (TSR) being measured for the final year of the three‑year performance period starting
1 April 2016:

Results over performance period:
Median TSR						
26%Upper quartile TSR 				

60%Actual achieved over the period			

47.3%

85.6%

1. Sectors excluded within the FTSE Industry classification of “Financials” (namely, banks, equity investment instruments, financial services, life insurance, non‑life insurance, real estate investment
trusts and real estate investment services sectors).

Based on the performance against targets as set out above, the PSP awards will vest on 21 June 2019 as follows:										Value1 of									Number of sharesshares vesting
				
Date
Total number
Percentage		
Value1 ofawarded as including dividend
				
award
of sharesof award
Number ofshares vesting
dividend
equivalent				
grantedgrantedvesting
shares vesting(£’000)equivalent(£’000)Ian Barkshire			 21 June 2016

83,39092.8%

77,385

744

3,588

779

Gavin Hill			 21 June 2016

65,08592.8%

60,398

581

2,800

608
Company Information

1. As the awards vest after the date of this report, value has been calculated using the average mid‑market closing price of the Company’s shares over the three‑month period ending
31 March 2019, £9.62. This will be restated for the actual value on vesting next year.

93

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
Long‑Term Incentive Plans (audited) continued
Performance Share Plan awards made in the year and outstanding share incentive awards (audited)Awards made under the PSP on 3 July 2018 were as follows:							Total number		Share price							of shares
Percentage
on day before							grantedof salary
award date

Vesting date

Ian Barkshire						64,613150%£10.003 July 2021

Gavin Hill						50,430150%£10.003 July 2021

The awards are subject to two performance conditions measured over a three‑year period commencing 1 April 2018. One half of each award is
subject to a performance condition based on the Company’s compound annualised earnings per share (EPS) growth. The other half of each award
is subject to a performance condition based on the Company’s return on capital employed in the final year of the performance period.
Vesting of 50% of the award is based on EPS measured over a three‑year performance period starting 1 April 2018 as follows:
Performance level				EPS growth required% of award that will vest

Below threshold				Less than 4% per annum over three years

0%

Threshold				

4% per annum over three years

25%

Between threshold and maximum			

4% to 12% per annum over three years

25%-100%

Maximum				12% per annum and above over three years

100%

Vesting of the other 50% of the award is based on return on capital employed (ROCE) for the final year of the three‑year performance period
starting 1 April 2018:
Performance level				ROCE1 for the final year of the performance period

Below threshold				% of award that will vest

Less than 16%

0%

16%

25%

Between threshold and maximum			

Between 16% and 20%

25%-100%

Maximum				

20% per annum and above

100%

Threshold				

1. ROCE is calculated as EBIT/average capital employed where EBIT is adjusted operating profit less amortisation of acquired intangibles, acquisition‑related costs and changes in themark‑to‑market values of financial instruments, and capital employed is the sum of net working capital and net book value of fixed assets, goodwill, intangible assets, investments in associatesand excluding cash.

As at 31 March 2019, the outstanding options for Ian Barkshire and Gavin Hill under the Executive Share Option Scheme (ESOS) and the PSP1
were as follows:						
Share price					
March
Movements during the year
March
Exerciseon dateDate of
Earliest
LatestName
Scheme2019
GrantedExercised
Lapsed2018
priceof grant
grant
exercise
exercise

Ian Barkshire2

Gavin Hill

ESOS

37,549				 37,549£10.28£10.31

15/06/15

15/06/18

14/06/25

ESOS

15,000				 15,000

£9.90

£9.87

14/12/11

14/12/14

13/12/21

PSP

83,390				 83,390

Nil

£7.34

21/06/16

21/06/19

20/06/26

PSP

65,630				 65,630

Nil

£9.58

25/09/17

25/09/20

24/09/27

PSP

64,613—Nil£10.1003/07/18

03/07/21

02/07/28

PSP

65,085				 65,085

Nil

£7.34

21/06/16

21/06/19

20/06/26

PSP

51,223				 51,223

Nil

£9.58

25/09/17

25/09/20

24/09/27

PSP

50,430Nil£10.1003/07/18

03/07/21

02/07/28

64,613			

50,430			—

1. Dividend equivalents are payable on PSP shares vesting, for the period to vesting, in respect of the actual number of shares vesting.
2. Ian Barkshire was appointed to the Board on 10 November 2015. His ESOS options were granted to him as an employee of the Company prior to his appointment to the Board.

The market price of the shares at 31 March 2019 was £9.77 (2018: £7.41) and the range during the year was £7.41‑£10.96 (2018: £6.76‑£11.38).

94

Oxford Instruments plc Report and Financial Statements 2019

Performance conditions for outstanding awards are described below:
50% of award

50% of award

21 June 2016

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

TSR v FTSE 250 (excluding financial companies1) –median (25% vesting) to upper quartile (100% vesting)

25 September 20173

EPS growth – 4% p.a. (25% vesting)to 10% p.a. (100% vesting)

ROCE2 in the final year of the performance period –13% (25% vesting) to 15.5% (100% vesting)

3 July 20183

EPS growth – 4% p.a. (25% vesting)to 12% p.a. (100% vesting)

ROCE2 in the final year of the performance period –16% (25% vesting) to 20% (100% vesting)3

Strategic ReportPSP

1. Sectors excluded within the FTSE Industry classification of “Financials” (namely, banks, equity investment instruments, financial services, life insurance, non‑life insurance, real estate investment
trusts and real estate investment services sectors).
2. ROCE is calculated as EBIT/average capital employed where EBIT is adjusted operating profit less amortisation of acquired intangibles, acquisition‑related costs and changes in themark‑to‑market values of financial instruments, and capital employed is the sum of net working capital and net book value of fixed assets, goodwill, intangible assets, investments
in associates and excluding cash.
3. Three‑year performance period commencing 1 April prior to date of grant.

Achievement of performance conditions (unaudited)
The calculation of TSR performance is independently measured. EPS and ROCE performance targets are tested using the audited accounts of theCompany. Performance against targets and the resulting level of vesting is then verified by the Remuneration Committee.
GovernanceDilution limits (unaudited)
The Company’s share plans provide that overall dilution through the issuance of new shares for employee share schemes should not exceed anamount equivalent to 10% of the Company’s issued share capital over a ten‑year period. The SIP scheme only uses market‑purchased shares.
The Committee monitors the position prior to the making of any award under these share 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 at 3.8%.

Shareholding requirements (audited)

Executive Directors’ shareholdings as at 31 March 2019 are shown in the table below.
							Percentage of			Subject to							salary held in			
performance							shares under
Guideline
ESOS options
conditions						
Legally
shareholding
met as atvested but
under the1						
owned
guideline
31 March 2019
unexercised
PSP unvested

Ian Barkshire2					12,38828%

No52,549213,633

Gavin Hill					
5,906

17%

No

—

166,738

Financial Statements

The Executive Directors are required to build and retain a shareholding in the Company equivalent in value to 150% of basic salary. Until therequirement is met, the Executive Directors are expected to retain or purchase shares equivalent to the value of 50% of the net amount realised
on exercise of long‑term incentive awards after allowing for tax payable.

1. Shares valued using the market price of the shares on 31 March 2019: £9.77.
2. Ian Barkshire was appointed to the Board on 10 November 2015. Shares acquired on exercise of the share option award granted to him in June 2015 (prior to his appointment to the Board) areonly required to be retained if the executive holds less than 50% of salary in shares. All awards granted after the date of his appointment are subject to the shareholding requirement as detailed
above of 150% of salary.

Company Information

95

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
Pension arrangements
Executive Director pension arrangements (audited)
Under the terms of their service contracts, Executive Directors can ask the Company to contribute to a pension plan of their choice. The Company
contributes a maximum of 14% of base salary. Only base salary is pensionable and contributions are not included in the calculation of bonus andshare 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. In line with the policy for all UK employees, this cash payment is reduced by 12.1% to cover employer’s
national insurance costs.
During the year, the Company contributed £10,000 (2018: £9,973) into the Company’s Group Personal Pension Plan in respect of Ian Barkshireand £10,000 (2018: £9,950) into a personal defined contribution plan in respect of Gavin Hill. Balancing payments to 14% of base salary(net of employer’s national insurance contributions) were paid as cash.
Ian Barkshire is a deferred member of the defined benefit scheme and is no longer accruing benefits in the scheme. In accordance with therules 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 2019 was £788,549 (2018: £599,835).

Payments to past Directors and for loss of office (audited)
There were no payments to Directors for loss of office.

Performance graph and CEO’s remuneration (unaudited)
The graph below shows for the ten years ended 31 March 2019 the total shareholder return (TSR) on a holding of the Company’s ordinary
shares compared with a hypothetical holding of shares made up of shares of the same kind and number as those by reference to which the FTSE
SmallCap, FTSE Techmark and FTSE 350 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 foreach constituent company assuming dividends are reinvested.
2,000£
Oxford Instruments
FTSE SmallCap

1,500

FTSE Techmark
FTSE 350 E & EE

1,000

500

0
31 March
2009

31 March
2010

31 March
2011

31 March
2012

31 March
2013

31 March
2014

31 March
2015

31 March
2016

31 March
2017

31 March
2018

31 March
2019

This graph shows the value, by 31 March 2019, of £100 invested in Oxford Instruments plc on 31 March 2009 compared with the value of£100 invested in the FTSE SmallCap, FTSE Techmark and FTSE 350 Electronic and Electrical Equipment indices. The other points plotted are thevalues at intervening financial year ends.

96

Oxford Instruments plc Report and Financial Statements 2019Year ending

20171

31 March

2010

2011

2012

2013

2014

2015

2016

DJF

IRB

2018

2019

Total
remuneration(£’000)

939

2,596

3,464

2,348

1,179

579

743

64

620

791

1,754

Annual bonus
outcome (%) 100%

100%

100%

69.1%

15.0%

7.5%

38.6%

0%

56.3%

63.7%

94.4%

ESOS2
vesting (%)

100%

100%

100%

100%

100%

0%

0%

0%

N/A

N/A

N/A

SELTIS/PSP2
vesting (%)

50%

50%

100%

100%

100%

0%

0%

0%

N/A

N/A

92.8%

Strategic Report

The total remuneration of the CEO over the last ten years is shown in the table below. The annual bonus payout and PSP vesting level as apercentage of the maximum opportunity is also shown.

1. 2016/17 financial year: remuneration shown separately for Jonathan Flint (DJF) who was CEO from 1 April to 11 May 2016 and Ian Barkshire (IRB) who was CEO from 12 May 2016 to
31 March 2017.
2. Executive Directors were last granted ESOS (market value share options) and SELTIS (nil cost options) in June 2014. PSP awards have been granted after June 2014 as the sole long‑term
incentive.

Percentage change in the remuneration of the Chief Executive (unaudited)

CEO
				
£’000				2018/192017/18% change

Salary2				
428.1

Average employee1
2018/192017/18% change

417.7

2.5%

41.0

41.9	-2.1%

Benefits3				
88.5

51.0

73.5%

1.9

1.7

11.8%

Bonus4				
406.8

267.9

51.8%

2.6

1.7

51.4%

Governance

The table below shows the percentage change in each of the CEO’s salary, taxable benefits and annual bonus earned between 2017/18 and2018/19, compared to that for the average UK‑based employee of the Group (on a per capita full‑time equivalent basis).

1. Average employee includes all UK employees in service on 1 April 2017 and 31 March 2019 but excludes those who were on maternity leave, long‑term sick leave and those who started
or ended employment within the period.
2. Change in average employee salary reflects restructuring at the top of the business. The average pay increase across all employees in the UK in 2018/19 was 2.4%.
3. In August 2017, the CEO was provided with a driver. The cost of this benefit for 2018/19 was £67,687 (2017/18: £29,667).

Relative importance of the spend on pay
The following table shows the Group’s employee costs relative to dividends and share buybacks:								Year ended								31 March								2019Year ended
31 March2018% change

Employee costs (£m)							
98.9

96.6

2.4%

Dividends (£m)							
7.6

7.5

1.3%

Share buybacks (£m)							
0.0

0.0

0%

Financial Statements

4. The value of the average employee bonus for the year ended 31 March 2019 (to be paid in July 2019) was not known at the time the Report and Financial Statements were approved andhas been subsequently included.

Statement of Shareholder voting (unaudited)
At last year’s AGM, the resolution to approve the Annual Report on Remuneration received the following votes from Shareholders:										Votes marked
Resolution					Votes forVotes against% for% against
as abstain

To approve the Annual Report on Remuneration			

48,326,065

564,647

98.8

1.2

15,835

The resolution to approve the Remuneration Policy was passed at the AGM held in 2017 and received the following votes from Shareholders:										Votes marked
Resolution					Votes forVotes against% for% against
as abstain

To approve the Directors’ Remuneration Policy 			48,991,763

548,61498.9

1.1

19,533Company Information

97

Oxford Instruments plc Report and Financial Statements 2019

REMUNERATIONREMUNERATION REPORT CONTINUED
How the policy will be applied in 2019/20 (unaudited)
Base salaries
In line with the general workforce, the Executive Directors will receive salary increases of 2.75% for 2019/20 effective from 1 July 2019. The CEO’ssalary as a result of the increase will be £442,600 (from £430,750) and the GFD’s £345,450 (from £336,200).

Benefits and pension
These will be awarded in accordance with the approved Policy. Benefits will be in line with those received in 2018/19.

Annual bonus
The maximum opportunity under the annual bonus plan for 2019/20 will be 100% of base salary for both the CEO and GFD, payable in cash.
A combination of financial (85%) and non‑financial strategic (15%) metrics will be used to determine the level of payment under the annual bonus
for the CEO and GFD and as detailed in the table below:
Weighting as a % of opportunity
Measure								On target

Maximum

Adjusted operating profit margin (%)							
15%21.25%

30%
Profit (£m)								42.5%Cash generation (%)								
15%21.25%Up to 15%

Strategic objectives

1. Target bonus is set at 75% of maximum. The Committee is comfortable with the target payment at 75% of maximum taking into account the maximum bonus opportunity of 100% of salaryand the level of stretch in the bonus targets evidenced by historic levels of payment. The Committee will review the target level of bonus payment as part of the policy review during FY20.

Non‑financial strategic objectives have been agreed and are linked to the development and implementation of the Horizon strategy. For the CEO
these objectives focus on leadership culture and people capabilities across the Group and Shareholder engagement. For the GFD these objectives
focus on the successful implementation of Connect (ERP) and building on and sustaining operational efficiencies.
The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include matters which theCommittee considers commercially sensitive. Retrospective disclosure of the performance against them will be made in next year’s Annual Report
on Remuneration.

Long‑term incentives in respect of the 2019/20 financial year
The 2019/20 PSP 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 theperformance conditions as set out below measured over a three‑year performance period commencing 1 April 2018. The range for the ROCE
measure has been increased from that set for last year’s awards.
Half of the award

Half of the award

EPS growth – 4% p.a. (25% vesting) to 12% p.a. (100% vesting) overthree financial years commencing with the 2019/20 financial year.

ROCE – 20.5% in the final year of the performance period(2021/22 financial year) (25% vesting) to 23.4% (100% vesting).

98

Oxford Instruments plc Report and Financial Statements 2019

Non‑Executive Directors’ fees								2018/191

2019/201% increase

Board Chairman 							£180,000£180,0000%2Additional fee for Deputy Chairman						£5,000£5,0000%£48,700
Basic fee							£50,0402.75%

Additional fee for Senior Independent Director					£7,500£7,5000%Additional fee for Committee Chairman						£7,500£7,5000%Strategic Report

The Committee and the Board, as appropriate, have reviewed the fees for the Chairman and Non‑Executive Directors. In line with the general
workforce, the basic fees for the Non‑Executive Directors will increase by 2.75% for 2019/20, effective from 1 July 2019. There will be no increase
to fees for the Chairman for 2019/20.

1. The fees shown for 2018/19 and 2019/20 are the annual rates as at 1 July 2018 and 1 July 2019 respectively.
2. 2018/19 fee for the Board Chairman is shown as at date of appointment, 1 December 2018.

ApprovalThis report was approved by the Committee on 11 June 2019 and has been approved subsequently by the Board for submission to Shareholders at
the Annual General Meeting to be held on 10 September 2019.

Thomas GeitnerGovernance

Chairman of the Remuneration Committee
11 June 2019

Financial Statements
Company Information

99

Oxford Instruments plc Report and Financial Statements 2019

RELATIONS WITH SHAREHOLDERS

Administrative enquiries
concerning shareholdings
Financial calendar
28 February 2019

Ordinary shares quoted ex‑dividend

1 March 2019

Record date for interim dividend

15 March 2019

Dividend reinvestment (DRIP) last date for election

31 March 2019

Financial year end

8 April 2019

Payment of interim dividend

11 June 2019

Announcement of preliminary results

11 June 2019

Announcement of final dividend

End July 2019

Publication of Annual Report

10 September 2019

Annual General Meeting

12 September 2019

Ordinary shares quoted ex‑dividend

13 September 2019

Record date for final dividend

27 September 2019

DRIP date18 October 2019

Payment of final dividend

12 November 2019

Announcement of half‑year results

March 2020

Ordinary shares quoted ex‑dividend

March 2020

DRIP last date for election

March 2020

Record date for interim dividend

31 March 2020

Financial year end

Investor publications
The Group website provides up‑to‑date
information on corporate and investor
news, as well as a wide range of additional
supporting documentation.

The Company’s Annual and Interim Reports
are available to download from the website,
alongside recent recordings of the City
results presentations.
Find out more online
www.oxinst.com/investors

You may view your shareholding and dividend
history, register to receive your dividends direct
to your bank account or elect to re‑invest yourdividends and register a change of address
online at www.signalshares.com. To register
to use this facility you will need your Investor
Code (IVC), which can be found on your sharecertificate, dividend confirmation statement or
proxy card.
Administrative enquiries concerning
shareholdings in Oxford Instruments plc,
such as the loss of a share certificate, dividend
payments, or a change of address should
be directed, in the first instance, to theRegistrar, Link Asset Services, The Registry,
34 Beckenham Road, Beckenham, Kent
BR3 4TU.
Tel: +44 (0)871 664 0300 (calls cost 12 pence
per minute plus your phone company’s accesscharge. Calls outside the United Kingdom will
be charged at the applicable internationalrate. Lines are open between 09:00-17:30,
Monday to Friday excluding public holidays in
England and Wales).
Email: shareholder.enquiries@linkgroup.co.uk
Website: www.signalshares.com
Correspondence should refer to Oxford
Instruments plc and state clearly the registeredname and address of the Shareholder. Please
notify the Registrar promptly of any changeof address.

Dividend bank mandates
If you wish dividends to be paid directly
into a bank or building society account andnotification to be sent to your Shareholder
register address, please contact the Company’s
Registrar at the address given above for adividend mandate form. Overseas holders canalso choose to receive payment directly into
their bank account, or can be sent a draft inlocal currency. Further details on international
payments are available from Link Asset
Services at the contact details below.
Tel: +44 (0)871 664 0300 (calls cost 12 pence
per minute plus your phone company’s accesscharge. Calls outside the United Kingdom will
be charged at the applicable internationalrate. Lines are open between 09:00-17:30,
Monday to Friday excluding public holidays in
England and Wales).
Website: www.signalshares.com

100

Oxford Instruments plc Report and Financial Statements 2019

Duplicate share register accounts

Shareholder communications

Shareholder enquiries
Shareholders who have questions relating to
the Group’s business or who wish to haveadditional copies of the Report and Financial
Statements should apply to:Company registration
Registered office: Tubney Woods, Abingdon
Oxfordshire OX13 5QXRegistered in England number: 775598
Website: www.oxinst.com

This is not a recommendation to buy or sellshares. Remember the price of shares cango down as well as up, and you are notguaranteed to get back the amount thatyou originally invested.

Financial Statements

Company Secretary
Oxford Instruments plc, Tubney Woods,
Abingdon, Oxfordshire OX13 5QX
Tel: 01865 393200 Fax: 01865 393442
Email: info.oiplc@oxinst.com
Website: www.oxinst.com

A quick and easy share dealing service toeither sell or buy shares in many leading UK
companies is provided by Link Share Dealing
Services. An online and telephone facility isavailable, providing our Shareholders withan easy‑to‑access and simple‑to‑use service.
There’s no need to pre‑register and there areno 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 yourinstruction. To deal online or by telephone
all you need is your surname, Investor Code
(IVC) reference number, full postcode, yourdate of birth and National Client Identifier.
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 Link Asset Services
on +44 (0)871 664 0300 (calls cost 12 pence
per minute plus your phone company’s accesscharge. Calls outside the United Kingdom will
be charged at the applicable internationalrate. Lines are open between 09:00-17:30,
Monday to Friday excluding public holidays
in England and Wales). Please have theappropriate documents to hand when you log
on or call, as this information will be needed
before you can buy or sell shares.

Governance

Unless you have elected to continue to receive
Shareholder communications by post, you will
be notified by post or, where you have given
us an email address for electronic notification,by email that Shareholder communications
are available for viewing on the Company’s
website at www.oxinst.com/investors.
The Company reserves the right to distribute
any communication in hard copy if it deems
this necessary.

Link Share Dealing Services

For further information on this service,or to buy and sell shares, please contact
www.linksharedeal.com (online dealing)or +44 (0)371 664 0445 (telephone dealing).
Calls are charged at the standard geographic
rate and will vary by provider. Calls outside
the United Kingdom will be charged at theapplicable international rate. Lines are open
between 09:00-17:30, Monday to Friday
excluding public holidays in England andWales). Full terms, conditions and risks apply
and are available on request or by visitingwww.linksharedeal.com.

Strategic Report

If you are receiving more than one copy of
our report, it may be that your shares areregistered in two or more accounts on our
register of members. If that was not yourintention you might consider merging theminto one single entry. Please contact Link
Asset Services, who will be pleased to carryout your instructions.

Oxford Instruments has an extensive website
which gives details of all its products andservices, contact information, vacancies andlatest news announcements. An interactive
investor relations section gives information
on recent trading reports, share price data andforthcoming events.

Analysis of Shareholders as at 31 March 2019
% of total

Total holding% of total

Up to 5,000 shares						
1,869

87.71

1,078,294

1.88

5,001 to 50,000 shares						
144

6.76

2,675,279

4.66

50,001 to 200,000 shares						
38

1.78

2,792,286

4.87

Over 200,000 shares						
80

3.75

50,829,745

88.59

Total						
2,131

100%

57,375,604

100%

101

Company Information

Size of shareholding						 Number of holders

Oxford Instruments plc Report and Financial Statements 2019

REPORT OF THE DIRECTORSThe Directors present their Report and the
Financial Statements of Oxford Instruments plc
for the year ended 31 March 2019.

Principal activity
and business reviews
The Company is the ultimate holding company
of a group of subsidiary undertakings(the “Group”) engaged in the research,development, manufacture, rental, sale andservice of high technology tools and systems.
The Company is required to set out in thisreport a true and fair view of the business of
the Group during the financial year ended
31 March 2019, the position of the Group at
the end of the financial year and a descriptionof the principal risks and uncertainties facing
the Group. The information which fulfils theserequirements includes the Operations andFinance Review on pages 36 to 42 and thereport on Corporate Responsibility on pages
50 to 59, which are incorporated in this reportby reference. The operations, the strategic
review, the Research and Development
activities and likely future prospects of theGroup are reviewed in the Strategic Reporton pages 2 to 59.

Results and dividends
The results for the year are shown in theConsolidated Statement of Income on
page 110. The Directors recommend a final
dividend of 10.6 pence per ordinary share,
which together with the interim dividend of
3.8 pence per ordinary share makes a totalof 14.4 pence per ordinary share for the year(2018: 13.3 pence). Subject to Shareholder
approval, the final dividend will be paid on
18 October 2019 to Shareholders registeredat close of business on 13 September 2019.

Risks and uncertainties
The Board exercises proper and appropriate
corporate governance for the Group.
It ensures that there are effective systems
of internal controls in place to manage
Shareholders’ interests and the Group’s
assets, including the assessment and the
management of the risks to which thebusinesses are exposed, and to monitor
and manage the compliance with all thelegal requirements that affect the Group’s
worldwide business activities. However, such
systems are designed to manage rather thaneliminate the risk of failure to achieve businessobjectives and can provide only reasonable
and not absolute assurance against material
misstatement or loss.

102

The Executive Directors report to the Board onchanges 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 arereviewed periodically.
There are a number of risks and uncertainties
which may have a material effect on the
Oxford Instruments Group. These are describedin Principal Risks on pages 43 to 47.

Directors
Biographies of all the Directors at the dateof this report, including the Non‑Executive
Directors, appear on pages 62 and 63. During
the year, on 22 July 2018, Alan Thompson
sadly passed away. Neil Carson was
appointed Non‑Executive Chairman on
1 December 2018. Steve Blair acted as
Interim Chairman from 23 July 2018 until
30 November 2018.

Directors’ conflicts of interest
The Companies Act 2006 allows Directorsof public companies to authorise conflicts
and potential conflicts of interest, whereappropriate. Only Directors with no interestin the matter under consideration may
participate in the relevant decision and indoing so they must act in a way which they
consider in good faith will be most likely topromote the Company’s success. A conflicts
policy has been drawn up, which is reviewed
annually, and a register of conflicts andpotential conflicts is maintained.

Directors’ interests
The beneficial interests of the Directors in the
Company’s share capital, all in fully paid up
shares at 31 March 2019, are shown below.
Details of share options for the Executive
Directors are shown in the Remuneration
Report on pages 80 to 99.
31 March
2019
Shares31 March
2018
Shares12,388

11,982

Steve Blair——

Neil Carson——

Richard Friend——

Thomas Geitner——

Gavin Hill

5,906

5,500

Mary Waldner

1,000

1,000

Ian Barkshire

No Director was beneficially interested in theshares of any subsidiary company at any time
during the year.

In the year to 31 March 2019, no Director
had a material interest in any contractof significance with the Company or anyof its subsidiaries. Since the year end,
there have been no changes to the above
shareholdings apart from for Ian Barkshire
and Gavin Hill, who each participate in the
Oxford Instruments Share Incentive Plan andsince the year end have each increased theirbeneficial holding by 28 shares.

Insurance coverand Directors’ indemnities
For a number of years, the Group has
purchased insurance to cover its Directors
and Officers against their costs in defending
themselves in legal proceedings taken
against them in that capacity and in respectof damages resulting from the unsuccessful
defence of any proceedings. In addition, tothe extent permitted by UK law, the Group
indemnifies its Directors and Officers forliabilities arising from such proceedings.
Neither the insurance nor the indemnity
provides cover for situations where the
Director has acted fraudulently or dishonestly.

Share capital
The Company only has one class of sharecapital which comprises ordinary shares of
5 pence each. All shares forming part ofthe ordinary share capital have the samerights 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 thepowers of the Directors, are set out in the
Company’s Articles of Association, a copy ofwhich is available on the Company’s website.
These can also be obtained from Companies
House or by writing to the Company Secretary.
During the year to 31 March 2019 theBoard issued no new shares (2018: 59,688)
following the exercise of options under
the Company’s share option schemes.
At 31 March 2019, the issued share capitalof the Company was 57,375,604 ordinary
shares of 5 pence each. In connection with theCompany’s equity incentive plans, a separately
administered trust held 152,710 ordinary
shares at 31 March 2019 (representing
0.27% of the total issued share capital of theCompany). No shares in the Company wereacquired by the Company during the year(2018: nil). Details of the share capital andoptions outstanding as at 31 March 2019 are
set out in Notes 23 and 12 respectively to the
Financial Statements.

Oxford Instruments plc Report and Financial Statements 2019• allot ordinary shares up to an aggregate
nominal value of one‑third of theCompany’s issued share capital and, wherefull pre‑emption rights are applied, up toan aggregate nominal value of two‑thirdsof the Company’s issued share capital;• allot ordinary shares up to an aggregate
nominal value of 10% of the Company’s
issued share capital without first offering
them to existing Shareholders; and• buy back up to 10% of the Company’s
issued share capital.
Shareholders will be requested to renew theseauthorities at the AGM, details of which are
set out in the Notice of the Meeting.

The following are beneficial interests of 3% ormore (where the holding is direct), or of 5%
or more (where the holding is indirect), whichhave been notified to the Directors of theCompany, in accordance with Chapter 5 of
the Disclosure and Transparency Rules, of theCompany’s issued ordinary share capital, theonly class of voting capital, at 5 June 2019:

Change of control arrangements

The Group does not follow a standard
payment practice but agrees terms andconditions for its business transactions
with each of its suppliers. Payment is thenmade in accordance with these terms.
At 31 March 2019 trade creditors of theCompany and the Group’s UK subsidiaries
were equivalent to 35 days (2018: 45) and47 days (2018: 67) 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 takeeffect, alter or terminate upon a change ofcontrol of the Company following a takeover,such as banking agreements and Company
share plans. On a change of control, theCompany’s committed credit facilities may
be cancelled by lenders by giving not lessthan three days’ notice. It is also possible thatpension plan funding arrangements would
need to be changed following a change ofcontrol if that resulted in a weakening of theemployer covenant.

Charitable donations

Corporate governanceDuring the year, the Group made charitable
donations of £3,441 (2018: £5,068). There
have been no political donations during
the year.

The Board reviews its work on corporate
governance in the Corporate Governance
Report on pages 64 to 70.

Fixed assets

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 21 to the Financial
Statements.

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

Disclosure of information
to auditor

5.6

Sir MF and Lady
KA Wood

5.3

Annual General Meeting

Direct/indirect

Ameriprise
Financial

Shares
‘000

% of
total

Indirect/direct 8,080,361 14.1

Direct 3,045,530

Baillie Gifford& Co

Indirect 2,917,516

5.1

T Rowe Price

Indirect 2,911,012

5.1

Artemis Investment
Management LLP
Indirect 2,894,989

5.0

The Notice of the Annual General Meeting
to be held on 10 September 2019 is set out
in a letter to Shareholders together with
explanatory notes relating to the resolutions.
A resolution to re‑appoint KPMG LLP as
auditor and to authorise the Directors to set
their remuneration will be proposed at theAnnual General Meeting.

Diversity and inclusion
The Board recognises that its employees arefundamental to the Group’s success. The
Group’s aim is to ensure there are equal
opportunities for all employees and that there
is an inclusive culture where differences arevalued and people are given the environment
in which they can do their best work.
Corporate Responsibility on pages 50 to 59
further describes how diversity and inclusion is
managed within Oxford Instruments.

Financial Statements

BlackRock Investment
Management(UK) Limited
Indirect 3,225,962

Pursuant to Section 418(2) of the Companies
Act 2006, the Directors who held office atthe date of approval of this Directors’ Reportconfirm that, so far as they are each aware,
there is no relevant audit information of which
the Company’s auditor is unaware; and each
Director has taken all the steps that he or she
might reasonably have been expected to havetaken as a Director to make himself or herself
aware of any relevant audit information and toestablish that the Company’s auditor is awareof that information.

Financial risk management
Governance

Substantial shareholdings

Payment of suppliers

Strategic Report

At this year’s Annual General Meeting, theDirectors propose to renew the authorities
granted to them at last year’s AGM to:

Greenhouse gas emissions
To meet the requirements of the Companies
Act 2006 (Strategic and Directors’ Report)
Regulations 2013, CO2 emissions are reported
on as part of our reporting on greenhouse gas
emissions in Corporate Responsibility on pages
50 to 59.

Material events
There were no material events since the year
end to report.
By order of the Board
Company Information

Susan Johnson‑BrettCompany Secretary
11 June 2019103

Oxford Instruments plc Report and Financial Statements 2019

DIRECTORS’ RESPONSIBILITIESIN RELATION TO THE REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing
the Annual Report and the Group and Parent
Company Financial Statements in accordancewith applicable law and regulations.

• assess the Group and Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern; andCompany 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
International Financial Reporting Standards
as adopted by the European Union (“IFRSs as
adopted by the EU”) and applicable law andhave elected to prepare the Parent Company
Financial Statements in accordance with UK
accounting standards, including FRS 101
Reduced Disclosure Framework.

• use the going concern basis of accounting
unless they either intend to liquidate theGroup or the Parent Company or to cease
operations, or have no realistic alternative
but to do so.

Under company law the Directors must not
approve the Financial Statements unless they
are satisfied that they give a true and fair viewof the state of affairs of the Group and Parent
Company and of their profit or loss for that
period. In preparing each of the Group andParent Company Financial Statements, theDirectors are required to:• select suitable accounting policies and thenapply them consistently;• make judgements and estimates that arereasonable, relevant, reliable and prudent;• for the Group Financial Statements,
state whether they have been preparedin 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;

104

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Parent
Company’s transactions and disclose withreasonable accuracy at any time the financial
position of the Parent Company and enable
them to ensure that its Financial Statementscomply with the Companies Act 2006. They
are responsible for such internal control as
they determine is necessary to enable thepreparation of Financial Statements that are
free from material misstatement, whether
due to fraud or error, and have general
responsibility for taking such steps as arereasonably open to them to safeguard theassets of the Group and to prevent and detectfraud and other irregularities.
Under applicable law and regulations, theDirectors are also responsible for preparing a
Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate
Governance Statement that complies withthat 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 disseminationof financial statements may differ fromlegislation in other jurisdictions.

Responsibility statement of
the Directors in respect of theannual financial report
We confirm that to the best of ourknowledge:• the Financial Statements, prepared inaccordance with the applicable set ofaccounting standards, give a true andfair view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and• the Strategic Report/Directors’ Report
includes a fair review of the development
and performance of the business andthe position of the issuer and theundertakings included in the consolidation
taken as a whole, together with adescription of the principal risks anduncertainties that they face.
We consider the Report and Financial
Statements, taken as a whole, is fair,balanced and understandable and provides
the information necessary for Shareholders toassess the Group’s position and performance,business model and strategy.
Signed on behalf of the Board

Ian Barkshire

Gavin Hill

Chief Executive

Group Finance Director

11 June 2019

Oxford Instruments plc Report and Financial Statements 2019

INDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF OXFORD INSTRUMENTS PLC
1. Our opinion is unmodified

In our opinion:• the financial statements give a true and fair view of the state of theGroup’s and of the parent Company’s affairs as at 31 March 2019and of the Group’s profit for the year then ended;• the Group financial statements have been properly prepared inaccordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
• the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; andBasis for opinion

We were first appointed as auditor by the Company before 1984.
The period of total uninterrupted engagement is for the 36
financial years ended 31 March 2019. We have fulfilled our ethicalresponsibilities under, and we remain independent of the Group inaccordance with, UK ethical requirements including the FRC EthicalStandard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.

£1.5m (2018:£1.5m)

Coverage

81% (2018: 91%) of absolute Group profit before tax1

4.0% (2018: 4.8%) of Group normalised profit
before tax from continuing operations

Key audit mattersvs 2018

New risks:

The impact of uncertainties due to the UK exiting
the European Union, on our audit

New

Recurringrisks:

Completeness and accuracy of provisions in
respect of intellectual property claimstuParent company: Valuation of investments held by
the parent company

tu

1. This is the profit and losses as a percentage of total profits and losses that made up theGroup profit before tax

2. Key audit matters: including our assessmentof risks of material misstatement
Key audit matters are those matters that, in our professional judgment,
were of most significance in the audit of the financial statements andinclude the most significant assessed risks of material misstatement(whether or not due to fraud) identified by us, including those which
had the greatest effect on: the overall audit strategy; the allocationof resources in the audit; and directing the efforts of the engagement
team. We summarise below the key audit matters in arriving at our
audit opinion above, together with our key audit procedures to address
those matters and, as required for public interest entities, our resultsfrom those procedures. These matters were addressed, and our results
are based on procedures undertaken, in the context of, and solely forthe purpose of, our audit of the financial statements as a whole, and informing our opinion thereon, and consequently are incidental to that
opinion, and we do not provide a separate opinion on these matters.

Financial Statements

We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities aredescribed below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion
is consistent with our report to the audit committee.

Materiality:
Group financial
statements as awhole

Governance• the financial statements have been prepared in accordance with therequirements of the Companies Act 2006 and, as regards the Groupfinancial statements, Article 4 of the IAS Regulation.

Overview

Strategic Report

We have audited the financial statements of Oxford Instruments plc(“the Company”) for the year ended 31 March 2019 which comprise
the Consolidated Statement of Income, Consolidated Statement ofComprehensive Income, Consolidated Statement of Financial Position,
Consolidated Statement of Changes in Equity, Consolidated Statementof Cash Flows, Company Statement of Financial Position, Company
Statement of Changes in Equity, and the related notes, including theaccounting policies set out on pages 116 to 122.

Company Information

105

Oxford Instruments plc Report and Financial Statements 2019

INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF OXFORD INSTRUMENTS PLC
2. Key audit matters: including our assessment of risks of material misstatement continued
The impact of
uncertainties dueto the UK exiting
the European
Union, on our audit
Refer to page 45(principal risks), pages
48 and 49 (viability
statement) and page75 (Audit Committee
Report).

Completenessand accuracyof provisions
in respect ofintellectual
property claims(£1.8 million; 2018:£3.2million)
Refer to page 75(Audit Committee
Report), page 117(accounting policy)
and page 149(financial disclosures).

The risk

Our response

Unprecedented level of uncertainty:

We developed a standardised firm-wide approach to the consideration of
the uncertainties arising from Brexit in planning and performing our audits.
Our procedures included:

All audits assess and challenge the reasonablenessof estimates, in particular as described undercompleteness and accuracy of provisions in respectof intellectual property claims and related disclosuresand the appropriateness of the going concern basisof preparation of the financial statements. All ofthese depend on assessments of the future economic
environment and the Group’s future prospects andperformance.
In addition, we are required to consider the otherinformation presented in the Annual Report including
the principal risks disclosure and the viability
statement and to consider the directors’ statementthat the annual report and financial statements taken
as a whole is fair, balanced and understandable andprovides the information necessary for shareholders toassess the Group’s position and performance, businessmodel and strategy.

Our Brexit knowledge: We considered the directors’ assessment of
Brexit‑related sources of risk for the group’s business and financial resources
compared with our own understanding of the risks. We considered the
directors’ plans to take action to mitigate the risks;
Sensitivity analysis: When addressing areas that depend on forecasts,
we compared the directors’ analysis to our assessment of the full range ofreasonably possible scenarios resulting from Brexit uncertainty and, where
forecast cash flows are required to be discounted, considered adjustments todiscount rates for the level of remaining uncertainty; andAssessing transparency: As well as assessing individual disclosures as part ofour procedures on the completeness and accuracy of provisions in respect ofintellectual property claims, we considered all of the Brexit related disclosures
together, including those in the strategic report, comparing the overall picture
against our understanding of the risks.
Our results

Brexit is one of the most significant economic events
for the UK and at the date of this report its effects
are subject to unprecedented levels of uncertaintyof outcomes, with the full range of possible effects
unknown.

As reported under completeness and accuracy of provisions in respect ofintellectual property claims, we found the resulting estimates and related
disclosures of the above and disclosures in relation to going concern to be
acceptable.

Subjective estimate:

Our procedures included:

The estimation of any provision required forintellectual property claims is inherently subjective
based on the wide range of potential outcomes due
to differing settlement methods and royalty rates.

Our sector experience: Challenging the reasonableness of the key
assumptions made by the Group, such as potential royalty rates payable inrespect of intellectual property claims and likelihood of an outflow of resources
against our own expectations based on our historical knowledge, experienceand understanding and our review of correspondence with competitors.

The effect of these matters is that, as part of our risk
assessment, we determined that provisions in respectof intellectual property claims has a high degree of
estimation uncertainty, with a potential range ofreasonable outcomes greater than our materiality
for the financial statements as a whole.

However, no audit should be expected to predict the unknowable factors or
all possible future implications for a company and this is particularly the casein relation to Brexit.

Enquiry of Lawyers: Enquiring with the Group’s external legal advisers,
having assessed their experience and competence, in respect of open mattersof litigation regarding the likelihood of an outflow of resources.
Personnel interviews: Evaluating assumptions through discussion of claims
with Group’s internal legal counsel and relevant business unit managers.
Assessing transparency: Assessing whether the Group’s disclosures regarding
the range of possible outcomes appropriately reflect the risks identified.
Our results
We found the level of provisions in respect of intellectual property claims tobe acceptable (2018: acceptable).

Valuation of
investments
held bythe parent
company(£321.1 million;
2018: £320.9
million)Refer to page
158 (accounting
policy) and page160 (financial
disclosures).

Low risk/high value:

Our procedures included:

The carrying amount of the parent company’s
investments in subsidiaries represents 83%(2018: 92%) of the company’s total assets.
Their recoverability is not at a high risk of significant
misstatement or subject to significant judgement.
However, due to their materiality in the context ofthe parent company financial statements, this isconsidered to be the area that had the greatest effecton our overall parent company audit.

Tests of detail: Comparing the carrying amount of 100% of investmentswith the relevant subsidiaries’ draft balance sheet to identify whether their net
assets, being an approximation of their minimum recoverable amount, were inexcess of their carrying amount and assessing whether those subsidiaries havehistorically been profit-making.
Assessing subsidiary audits: Assessing the work performed by the subsidiary
audit team for a sample of subsidiaries and considering the results of that work,on those subsidiaries’ profits and net assets.
Our sector experience: For the investments where the carrying amountexceeded the net asset value, comparing the carrying amount of the investment
with the expected value of the business based on a suitable multiple of profit.
Our results
We found the group’s assessment of the recoverability of the investment in
subsidiaries to be acceptable (2018: acceptable).

We continue to perform procedures over revenue recognition. However, recognition of revenue is not inherently subjective or complex. We havenot assessed this risk as being one of the most significant risks in our current year audit and therefore it is not separately identified in our report
this year.

106

Oxford Instruments plc Report and Financial Statements 2019

Materiality for the group financial statements as a whole was set at£1.5m (2018: £1.5m), determined with reference to a benchmark
of profit before tax from continuing operations normalised to
exclude restructuring costs, share of impairment reversal recognisedby associate, past service costs, loan note make-whole payment
and mark to market movements in respect of derivative financial
instruments as disclosed in Note 1 (2018: with reference to abenchmark of profit before tax from continuing operations normalised
to exclude restructuring costs, net profit on disposal of buildings, shareof impairment recognised by associate and mark to market gains in
respect of derivative financial instruments as disclosed in Note 1).
Total profits and losses that made up normalised Group profit before
tax from continuing operations is calculated as £37.9m (2018: £31.4m)
of which materiality represents 4.0% (2018: 4.8%).

The Group team visited 1 (2018: 2) component location in the UK(2018: UK and Sweden) to confirm appropriate execution of the audit
strategy & plan and inspect their findings. Telephone conference
meetings were also held with these component auditors and all others
that were not physically visited. At these visits and meetings, thefindings reported to the Group team were discussed in more detail,and any further work required by the Group team was then performedby the component auditor.
Normalised profit before tax

Group Materiality£37.9m (2018: £34.1m)£1.5m (2018: £1.5m)£1,500,000

Whole financial
statements materiality(2018: £1.5m)£975,000

Range of materiality at
14 components £0.5m
to £1.0m (2018: £0.1m
to £1.0m)

Materiality for the parent company financial statements as a whole wasset at £1.0m (2018: £1.0m), determined with reference to a benchmarkof company total assets, of which it represents 0.3% (2018: 0.3%).

Misstatements reported
to the audit committee(2018: £75,000)

Group materiality

Total profits and losses
that made up group profit
before tax

Group revenue

The group team performed procedures on the items excluded fromnormalised group profit before tax.
The components within the scope of our work accounted for thepercentages indicated opposite.
The remaining 12% (2018: 6%) of total group revenue, 19%(2018: 9%) of total profits and losses that made up group profit before
tax from continuing operations and 11% (2018: 8%) of total groupassets is represented by 60 (2018: 55) reporting components, none ofwhich individually represented more than 6% (2018: 2%) of any oftotal group revenue, group profit before tax or total group assets. For
these residual components, we performed analysis at an aggregatedgroup level to re-examine our assessment that there were no significant
risks of material misstatement within these.

3

16

88%

12

(2018: 94%)

78

81%

(2018: 91%)

88

69

69

Group total assets

10

8

89%

Full scope for group audit purposes 2019(2018: 92%)

84

Specified risk-focused audit procedures 2019
Full scope for group audit purposes 201879

Specified risk-focused audit procedures 2018

Company Information

The Group team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above andthe information to be reported back. The Group team approved
the component materialities, which ranged from £0.5m to £1.0m(2018: £0.1m to £1.0m), having regard to the mix of size and risk
profile of the Group across the components. The work on 7 of the
14 components (2018: 8 of the 17 components) was performed bycomponent auditors and the rest, including the audit of the parent
company, was performed by the Group team.

19

Financial Statements

Of the group’s 74 (2018: 72) reporting components, we subjected
11 (2018: 14) to full scope audits for group purposes and 3 (2018: 3)
to specified risk-focused audit procedures. The latter were notindividually financially significant enough to require a full scope audit
for group purposes, but did present specific individual risks that needed
to be addressed.

£75,000

Normalised profit before tax

GovernanceWe agreed to report to the Audit and Risk Committee any correctedor uncorrected identified misstatements exceeding £75,000 (2018:£75,000), in addition to other identified misstatements that warranted
reporting on qualitative grounds.

Strategic Report

3. Our application of materiality andan overview of the scope of our audit

Residual components

107Oxford Instruments plc Report and Financial Statements 2019

INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF OXFORD INSTRUMENTS PLC
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or
the Group or to cease their operations, and as they have concluded
that the Company’s and the Group’s financial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the Directors’
conclusions and, had there been a material uncertainty related to going
concern, to make reference to that in this audit report. However, as wecannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgements that werereasonable at the time they were made, the absence of reference to amaterial uncertainty in this auditor’s report is not a guarantee that theGroup and the Company will continue in operation.
In our evaluation of the Directors’ conclusions, we considered the inherent
risks to the Group’s and Company’s business model and analysed how
those risks might affect the Group’s and Company’s financial resources orability to continue operations over the going concern period. The risks that
we considered most likely to adversely affect the Group’s and Company’s
available financial resources over this period were:• The impact of Brexit on the Group’s supply chain.
As these were risks that could potentially cast significant doubt
on the Group’s and the Company’s ability to continue as a going
concern, we considered sensitivities over the level of available
financial resources indicated by the Group’s financial forecasts taking
account of reasonably possible (but not unrealistic) adverse effects that
could arise from these risks individually and collectively and evaluatedthe achievability of the actions the Directors consider they would
take to improve the position should the risks materialise. We also
considered less predictable but realistic second order impacts, suchas macroeconomic uncertainty including the impact of Brexit and theerosion of customer or supplier confidence, which could result in a
rapid reduction of available financial resources.
Based on this work, we are required to report to you if:• we have anything material to add or draw attention to in relation
to the directors’ statement in Note 1 to the financial statements on
the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group andCompany’s use of that basis for a period of at least twelve months
from the date of approval of the financial statements; or• if the related statement under the Listing Rules set out on page 42 ismaterially inconsistent with our audit knowledge.
We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.

5. We have nothing to report on the otherinformation in the Annual Report
The directors are responsible for the other information presented in
the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and,accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.

108

Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, theinformation therein is materially misstated or inconsistent with thefinancial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.

Strategic report and directors’ report
Based solely on our work on the other information:• we have not identified material misstatements in the strategic report
and the directors’ report;• in our opinion the information given in those reports for thefinancial year is consistent with the financial statements; and• in our opinion those reports have been prepared in accordancewith the Companies Act 2006.

Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to beaudited has been properly prepared in accordance with the Companies
Act 2006.

Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements
audit, we have nothing material to add or draw attention to in relation to:• the directors’ confirmation within the viability statement on pages
48 and 49 that they have carried out a robust assessment of theprincipal risks facing the Group, including those that would threaten
its business model, future performance, solvency and liquidity;• the Principal Risks disclosures describing these risks and explaining
how they are being managed and mitigated; and• the directors’ explanation in the viability statement of how they
have assessed the prospects of the Group, over what period
they have done so and why they considered that period to beappropriate, and their statement as to whether they have areasonable expectation that the Group will be able to continue inoperation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Under the Listing Rules we are required to review the viability
statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As wecannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgments that werereasonable at the time they were made, the absence of anything toreport on these statements is not a guarantee as to the Group’s andCompany’s longer-term viability.

Corporate governance disclosures
We are required to report to you if:• we have identified material inconsistencies between the knowledge
we acquired during our financial statements 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 information necessary for shareholders to assess theGroup’s position and performance, business model and strategy; or• the section of the annual report describing the work of the Audit
Committee does not appropriately address matters communicatedby us to the Audit Committee.

Oxford Instruments plc Report and Financial Statements 2019

We communicated identified laws and regulations throughout our teamand remained alert to any indications of non-compliance throughout
the audit. This included communication from the group to component
audit teams of relevant laws and regulations identified at group level.

We have nothing to report in these respects.

The potential effect of these laws and regulations on the financial
statements varies considerably.

6. We have nothing to report on the other matterson which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:• adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or• the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreementwith the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are
not made; orWe have nothing to report in these respects.

7. Respective responsibilities
Directors’ responsibilities

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and toissue our opinion in an auditor’s report. Reasonable assurance is a highlevel of assurance, but does not guarantee that an audit conducted inaccordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other irregularities
or error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions ofusers taken on the basis of the financial statements.

In addition, as with any audit, there remained a higher risk of non‑detectionof irregularities, as these may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be expected todetect non-compliance with all laws and regulations.

8. The purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to theCompany’s members those matters we are required to state to themin an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for
our audit work, for this report, or for the opinions we have formed.

Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from ourgeneral commercial and sector experience, through discussion with thedirectors and other management (as required by auditing standards),
and from inspection of the group’s regulatory and legal correspondence
and discussed with the directors and other management the policies
and procedures regarding compliance with laws and regulations.

Mike Barradell (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
11 June 2019109

Company Information

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatementsin the financial statements, even though we have properly plannedand performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws andregulations (irregularities) is from the events and transactions reflectedin the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.

Financial Statements

As explained more fully in their statement set out on page 104,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fairview; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group andparent Company’s ability to continue as a going concern, disclosing,as applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate theGroup or the parent Company or to cease operations, or have norealistic alternative but to do so.

Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, forinstance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an effect:
international trading regulations, health and safety, anti-bribery andemployment law recognising the nature of the group’s activities.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of thedirectors and inspection of regulatory and legal correspondence, if any.
Through these procedures, we became aware of actual or suspected
non-compliance and considered the effect as part of our procedures on
the related financial statement items. The identified actual or suspected
non-compliance was not sufficiently significant to our audit to result inour response being identified as a key audit matter.

Governance• we have not received all the information and explanations werequire for our audit.

Firstly, the Group is subject to laws and regulations that directly affectthe financial statements including financial reporting legislation(including related companies legislation), distributable profits legislationand taxation legislation and we assessed the extent of compliance withthese laws and regulations as part of our procedures on the related
financial statement items.

Strategic Report

We are required to report to you if the Corporate GovernanceStatement does not properly disclose a departure from the elevenprovisions of the UK Corporate Governance Code specified by the
Listing Rules for our review.

Oxford Instruments plc Report and Financial Statements 2019

CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED 31 MARCH 2019
2019
2018
		
					
Adjusting		Adjusting				
Adjusted1
items1
Total
Adjusted1
items1
				
Notes
£m
£m
£m
£m
£m

Revenue

Total
£m

333.6

—

333.6

296.9

—

296.9

(156.6)—(156.6)(146.0)—(146.0)Gross profit				
177.0

—

177.0

150.9

—

150.9

5

(25.4)—(25.4)(23.4)—(23.4)

Selling and marketing				(61.3)—(61.3)(53.9)—(53.9)

Administration and shared services			(39.6)(9.9)(49.5)(28.5)(12.1)(40.6)

6

0.2

0.3

0.5

0.5

(2.4)

(1.9)

Other operating income						3

Cost of sales			
Research and Development			

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

—

—

—

—

3.3

3.3

Foreign exchange				
(1.2)

(1.5)

(2.7)

0.9

3.1

4.0

Operating profit/(loss)				
49.7(11.1)

38.6

46.5

(8.1)

38.4

0.3

—

0.3

0.3

—

0.3

Financial income				
0.3

—

0.3

0.3

—

0.3

Other financial income			

8

Interest charge on pension scheme net liabilities

25

(0.3)

—

(0.3)

(0.6)

—

(0.6)

Other financial expenditure			

9

(2.2)

(0.9)

(3.1)

(3.9)

—

(3.9)

Financial expenditure				
(2.5)

(0.9)

(3.4)

(4.5)

—

(4.5)

Profit/(loss) before income tax from
47.5
continuing operations 			(12.0)

35.5

42.3

(8.1)

34.2

(10.4)

3.6(6.8)(10.1)(4.5)(14.6)

		
37.1

(8.4)

28.7

32.2

(12.6)

19.6

—

1.3

1.3

(0.4)

46.3

45.9

Profit/(loss) for the year attributable
to equity Shareholders of the parent 		
37.1

(7.1)

30.0

31.8

33.7

65.5

Income tax (expense)/credit			
Profit/(loss) for the year fromcontinuing operations		

Profit/(loss) from discontinued operations after tax

13

7

					
pence		pence

pence		pence

Earnings per share							Basic earnings per share			2						From continuing operations			

64.9		50.1

From discontinued operations			—		2.3(0.7)		80.2

From profit for the year				64.9		52.4

55.6		114.5

56.3		34.3

Diluted earnings per share			2						From continuing operations			

64.3		49.7

56.1		34.1

From discontinued operations			—		2.3(0.7)		80.0

From profit for the year				64.3		52.0

55.4		114.1

Dividends per share							Dividends paid			14		

13.3			13.0Dividends proposed			
14			
14.4			13.31. 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 Financial Statements.

The attached notes form part of the Financial Statements.

110Oxford Instruments plc Report and Financial Statements 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 20192018£m

Profit for the year

65.5							30.0Other comprehensive income/(expense):			
Items that may be reclassified subsequently to profit or loss			Foreign exchange translation differences							
4.2

(8.8)

—

(4.8)

Net cumulative foreign exchange gain on disposal of subsidiaries recycled to the Income Statement			

Strategic Report									2019								Notes£mItems that will not be reclassified subsequently to profit or loss			Remeasurement gain in respect of post-retirement benefits				

25

2.5

2.2

Tax on items that will not be reclassified to profit or loss					

13

(0.5)

(0.9)

Total other comprehensive income/(expense)						6.2(12.3)

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

53.2

		
36.2

Governance
Financial Statements
Company Information

111

Oxford Instruments plc Report and Financial Statements 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2019									2019								
Notes
£m

2018
£m

Assets			Non-current assets			
Property, plant and equipment						
15

24.2

22.8

Right of use assets							
28

8.8

—

Intangible assets							
16

152.5

158.7

Investment in associate							
6

4.6

4.1

Long-term receivables							
19

0.3

1.4

Deferred tax assets							
17

15.3

13.4

									
205.7

200.4

Current assets			
Inventories							
18

60.8

45.9

Trade and other receivables							
19

78.3

73.3

Current income tax recoverable							
2.4

2.5

Derivative financial instruments						
22

1.1

2.4

Cash and cash equivalents							
20

35.2

20.7

									
177.8

144.8

Total assets								
383.5

345.2

Equity			Capital and reserves attributable to the Company’s equity Shareholders			
2.9

2.9

Share premium								
61.7

61.7

Share capital							
23

0.2Other reserves								

0.2

13.4
Translation reserve								

9.2

124.0
Retained earnings								105.6									
202.2

179.6

Liabilities			Non-current liabilities			Bank loans							
24

27.9

Lease payables							
28

6.0

—

Retirement benefit obligations						
25

6.5

15.3

27
Provisions							

1.1

1.7

17
Deferred tax liabilities							

6.3

6.1

									
47.8

62.5

39.4

Current liabilities			Bank loans and overdrafts							
24

0.6

1.0

26
Trade and other payables							

116.9

85.5

Lease payables							
28

3.0

—

Current income tax payables							
4.3

6.2

22
Derivative financial instruments						

1.1

0.4

27
Provisions 							

7.6

10.0

									
133.5

103.1

Total liabilities

181.3							

165.6

383.5
Total liabilities and equity							345.2The Financial Statements were approved by the Board of Directors on 11 June 2019 and signed on its behalf by:

Ian Barkshire 		 Gavin Hill
Director			Director
Company number: 775598

112

Oxford Instruments plc Report and Financial Statements 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYEAR ENDED 31 MARCH 2019

Balance at 1 April 2018 			2.9

61.7

0.2

9.2

105.6

Impact of adoption of IFRS 15			—

—

—

—

(7.2)

(7.2)

					
2.9

61.7

0.2

9.2

98.4

172.4

Total comprehensive income/(expense):

179.6

Strategic Report								Foreign								
Share		exchange		
					
Share
premium
Othertranslation
Retained					
capitalaccount
reserves
reserveearnings
Total
2019				£m
£m
£m
£m
£m
£m

					

Profit for the year				

—

—

—

—

30.0

30.0
4.2

Other comprehensive income:						– Foreign exchange translation differences			

—

—

—

4.2

—

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

2.5

2.5

– Tax on items recognised directly in other comprehensive income

—

—

—

—

(0.5)

(0.5)

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

—

—

—

4.2

32.0

36.2

Transactions with owners recorded directly in equity:						
—

—

—

—

0.2

0.2

—

—

—

—

0.8

0.8

– Tax on items recognised directly in equity		

—

—

—

—

0.2

0.2

– Dividends paid				

—

—

—

—

(7.6)

(7.6)

Total transactions with owners recorded—
directly in equity		
		

—

—

—

(6.4)

(6.4)

Balance at 31 March 2019			
2.9

61.7

0.2

13.4

124.0

202.2

Balance at 1 April 2017				 2.9

61.5

0.2

22.8

45.1

132.5

Total comprehensive income/(expense):						Profit for the year				—

—

—

—

65.5

65.5

—

(8.8)
(4.8)

Other comprehensive income:						– Foreign exchange translation differences			

—

—

—

(8.8)

– Net foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement			

—

—

—

(4.8)

—

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

2.2

2.2

– Tax on items recognised directly in other comprehensive income

—

—

—

—

(0.9)

(0.9)

Total comprehensive (expense)/income attributable toequity Shareholders of the parent			———(13.6)

66.8

53.2

Financial Statements								Foreign								
Share		exchange		
					
Share
premium
Othertranslation
Retained					
capitalaccount
reserves
reserveearnings
Total
2018				£m
£m
£m
£m
£m
£m

Governance– Proceeds from exercise of share options			–C harge in respect of employee service costs settled
by award of share options			

Transactions with owners recorded directly in equity:						– Proceeds from issue of shares			

—

0.2

—

—

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

—

—

—

—

1.1

1.1

– Dividends paid				—

—

—

—

(7.4)

(7.4)

Total transactions with owners recorded directly in equity

—

0.2

—

0.2

—

—

(6.3)

(6.1)

Balance at 31 March 2018			2.9

61.7

0.2

9.2

105.6

179.6

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 152,710 (2018: 183,145) of its own shares in an employee benefit trust. The cost of these shares is included within
retained earnings.

113

Company Information

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.

Oxford Instruments plc Report and Financial Statements 2019

CONSOLIDATED STATEMENT OF CASH FLOWSYEAR ENDED 31 MARCH 2019									2019								
Notes
£m

2018
£m

Profit for the year							

30.0

65.5

Profit for the year from discontinued operations					

7

(1.3)

(45.9)

Profit for the year from continuing operations						

28.7

19.6

6.8

14.6

Adjustments for:			
Income tax expense							
13Net financial expense								
3.1

4.2

1.5

(3.1)

Restructuring costs								—

1.2Restructuring costs – relating to associate							

0.3

0.4

Past service cost on defined benefit pension scheme						0.3

—Net profit on disposal of buildings							

—

(3.3)

Share of impairment recognised by associate						

(0.6)

2.0

Amortisation and impairment of acquired intangibles					

16

9.6

10.9

Depreciation of property, plant and equipment					

15

3.9

4.7

Depreciation of right of use assets						

28

3.3

—

Amortisation and impairment of capitalised development costs				

16

3.5

4.4

Amortisation and impairment of capitalised software costs				

16

Fair value movement on financial derivatives						

0.3

—

60.7
Adjusted earnings before interest, tax, depreciation and amortisation				55.6

Loss on disposal of property, plant and equipment						

0.2

0.3

Cost of equity settled employee share schemes					

0.8

1.1

Share of profit from associate							
(0.2)

(0.5)

12

(0.7)
Restructuring costs paid								

(1.3)

(7.1)

(7.9)

53.7
Operating cash flows before movements in working capital					47.3Cash payments to the pension scheme more than the charge to operating profit				(4.0)
Increase in inventories								

(4.5)

(3.5)
Increase in receivables								(14.4)

Increase in payables and provisions							
4.1

2.8

Increase in customer deposits							
7.1

2.9

(1.1)

(0.7)

Cash generated from continuing operations						
56.3

33.4

Purchase of rental assets held for subsequent sale						(3.5)
Interest paid								

(2.1)

(8.7)
Income taxes paid								(3.8)

Net cash from operating activities – continuing operations					
44.1

27.5

				
—

3.0

44.1
Net cash flow from operating activities						Net cash from operating activities – discontinued operations

30.5

114

Oxford Instruments plc Report and Financial Statements 2019

2018
£m

Cash flows from investing activities			Proceeds from sale of property, plant and equipment						

—

9.3Acquisition of property, plant and equipment						

(4.1)

(4.3)

Acquisition of intangible assets							
(2.2)

(0.5)

—

71.2

Capitalised development expenditure							
(3.5)

(5.8)

Increase in investment in associate							
—

(2.1)

Decrease in long-term receivables							
1.1

0.9

Net cash flow on disposal of businesses						

7Interest received								0.3

—Net cash (used in)/generated from investing activities – continuing operations				
(8.4)

68.7

Net cash used in investing activities – discontinued operations

				
—

—

Net cash (used in)/generated from investing activities

				
(8.4)

68.7

Strategic Report									2019								Notes£mCash flows from financing activities			
—

0.2

0.2

—

28

(3.2)

—

Repayment of borrowings							
24(11.5)(96.8)

Payments made in respect of lease liabilities					(7.6)
Dividends paid								(7.4)(22.1)Net cash used in financing activities							(104.0)Net increase/(decrease) in cash and cash equivalents						

13.6

(4.8)

Cash and cash equivalents at beginning of the year						

20.7

26.5

Effect of foreign exchange rate changes on cash and cash equivalents					

0.9

(1.0)

20
Cash and cash equivalents at end of the year					

35.2

20.7

Governance

Proceeds from issue of share capital							Proceeds from exercise of share options							Financial Statements
Company Information

115

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTING POLICIESOxford 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 IFRS”). The Company has elected
to prepare its Parent Company Financial
Statements in accordance with FRS 101; theseare presented on pages 153 to 163.
The accounting policies set out below
have, unless otherwise stated, been appliedconsistently to all periods presented in theseGroup Financial Statements.
The Financial Statements have been preparedon a going concern basis based on the
Directors’ opinion, after making reasonableenquiries, that the Group has adequate
resources to continue in operational existence
for the foreseeable future.
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position, are
set out in the Strategy section on pages 22
and 23. The financial position of the Group,
its cash flows, liquidity position and borrowing
facilities are described in the Finance Review
on pages 36 to 42.

The relatively diverse nature of the Group,
together with its current financial strength,
provides a solid foundation. The Directors havereviewed the Group’s forecasts and flexed
them to incorporate a number of potential
scenarios relating to changes in trading
performance and believe that the Group will
be able to operate within its existing debt
facilities which expire between March 2021
and June 2023. This review also consideredhedging arrangements in place. As aconsequence, the Directors believe that theGroup is well placed to manage its businessrisks successfully. Further information can befound in the Viability Statement on pages 48
and 49.
The Financial Statements were authorised forissuance on 11 June 2019.

(a) New accounting standards
The following standards and interpretations
have been adopted by the Group for the year
ended 31 March 2019:• IFRS 9 Financial Instruments
The Group adopted IFRS 9 on 1 April 2018.
IFRS 9 addresses the classification,measurement and derecognition offinancial instruments, introduces a new
impairment model for financial assets andnew rules for hedge accounting. It replaces
IAS 39 Financial Instruments guidance, andcomprehensive updates have been made to
IFRS 7 Financial Instruments: Disclosure andIAS 32 Financial Instruments: Presentation.
The adoption of IFRS 9 has had no material
impact on the Group’s results;• IFRS 15 Revenue from Contracts
with Customers
The Group adopted IFRS 15 using themodified retrospective approach on
1 April 2018, which means that the
cumulative impact on adoption has beenrecognised in retained earnings as of
1 April 2018. Comparative information
has not been restated. IFRS 15 provides
a single, principles-based, five‑step model
to be applied to all sales contracts, basedon the transfer of goods and services tocustomers, and it replaces the separate
model for goods and services of IAS 18
Revenue. The impact on adoption of IFRS
15 was a decrease in retained earnings of£7.2m, net of tax; an increase in inventoryof £11.0m; an increase in customer
deposits of £19.0m; an increase in deferredincome of £1.0m; a reduction in current
tax payable of £0.9m and an increase indeferred tax assets of £0.9m; and• IFRS 16 Leases
The Group adopted IFRS 16 using themodified retrospective approach on
1 April 2018. IFRS 16 provides a single
model for lessees which recognises a rightof use asset and lease liability for all leases
that are longer than one year or that are
not classified as low value. The impact on
adoption of IFRS 16 was the recognitionof right of use assets totalling £10.7m on
the balance sheet and corresponding leaseliabilities of £10.7m.

The table below summarises the effect of the adoption of IFRS 15 and IFRS 16 on the Group Income Statement during the year to 31 March 2019:							Pre IFRS 15							& IFRS 16
Continuing operations – adjusted						
£mIFRS 15
adjustment£m

IFRS 16
adjustment£m

As reported£m

Revenue						
326.6

7.0

—

333.6

Cost of sales						(152.5)(4.1)—(156.6)Gross profit						
174.1

2.9

—

177.0

Operating profit						
46.9

2.9

(0.1)

49.7

Net finance expense						
(2.0)

—

(0.2)

(2.2)

Profit before tax						
44.9

2.9

(0.3)

47.5

Tax charge						
(9.8)

(0.6)

—

(10.4)

Profit after tax

2.3

(0.3)

37.1

116

					
35.1

Oxford Instruments plc Report and Financial Statements 2019

The preparation of Financial Statements
requires management to make judgements,
estimates and assumptions that affect theapplication of accounting policies and thereported amounts of assets, liabilities, income
and expenses. Actual results may differ fromthese estimates.

Significant judgements
In the opinion of the Group there are no
judgements made in the preparation of the
Financial Statements in respect of which
taking a different view would have a material
impact on the Financial Statements.

Significant estimates

Measurement of defined benefit
scheme liabilities

Key assumptions surrounding estimation
uncertainty relate to estimating potential
royalty or profit sharing rates surrounding
any product-related intellectual property
claims (see Note 27).

(c) Basis of preparation andconsolidation
The Financial Statements are presented in
Sterling, rounded to the nearest £0.1m andare prepared on the historical cost basis except
as described on page 118 under the heading“Financial instruments”.
The Group Financial Statements include theaccounts of Oxford Instruments plc and its
subsidiary companies adjusted to eliminate
intra-Group balances and any unrealised gains
and losses or income and expenses arisingfrom intra-Group transactions.
Subsidiaries are entities controlled by theGroup. Control exists when the Group is
exposed to or has rights to variable returns
from its investment with the investee and has
the ability to affect those returns through its
power over the investee. 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 from the date that control
commences until the date that control ceases.
The acquisition method is used to account for
the acquisition of subsidiaries.

Associates are those entities in which theGroup holds more than 20% of the sharesand voting rights and has significant influence,but not control, over the financial andoperating policies.
The Group financial information includes theGroup’s share of the total comprehensive
income of the associate on an equity
accounted basis, from the date that significant
influence commences until the date thatsignificant influence ceases. When the Group’s
share of losses exceeds its interest in associate,
the Group’s carrying amount is reduced
to £nil and recognition of further losses is
discontinued except to the extent that theGroup has incurred legal or constructive
obligations or made payments on behalfof an associate.
The assets and liabilities of foreign operations,
including goodwill and fair value adjustments
arising on consolidation, are translated into
Sterling at exchange rates ruling at the end of
the reporting period. Income statements andcash flows of foreign operations are translated
into Sterling at average monthly exchange
rates which approximate foreign exchange
rates at the date of the transaction. Foreignexchange differences arising on retranslation
are recognised through the Statement ofComprehensive Income.

(d) Foreign currency
An individual entity’s transactions in foreign
currencies are translated at the foreignexchange rate ruling at the date of thetransaction. Monetary assets and liabilities
denominated in foreign currencies at thereporting date are translated at the foreignexchange rate ruling at that date. Foreignexchange differences arising on translation
are recognised in profit or loss. Non-monetary
assets and liabilities that are measured interms of historical cost in a foreign currency
are translated using the exchange rate at thedate of the transaction.

Financial Statements

The Group recognises and measures costs
relating to defined benefit pension schemesin accordance with IAS 19 (Revised) Employee
Benefits. In applying IAS 19 (Revised) the costs
are assessed in accordance with the advice ofindependent qualified actuaries. This requires
certain estimates and assumptions inrelation to future changes in salaries andinflation, as well as mortality rates, expected
returns on plan assets and the selection ofsuitable discount rates. The factors affecting
these assumptions are influenced by wider
macroeconomic factors that are largely outsideof the Group’s control. A sensitivity analysis isset out in Note 25.

Provisions for IP-related claims are recognisedin the period when it becomes probablethat there will be a future outflow offunds resulting from past expectations or
events which can be reasonably estimated.
The timing of recognition requires theapplication of judgement to existing facts andcircumstances which can be subject to change.
Amounts provided represent the Group’s
best estimate of exposure based on currently
available information.

Governance

Revisions to accounting estimates arerecognised 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 andfuture periods. The key areas where estimateshave been used and assumptions applied are
as follows.

Provisions for IP-related claims

Strategic Report(b) Significant estimatesand judgements

Company Information

117

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTING POLICIES CONTINUED(e) Financial instruments
Financial assets and liabilities are recognisedin the Group’s Consolidated Statement of
Financial Position when the Group becomesa party to the contractual provisions of the
instrument. Derivative financial instruments of
the Group are used to hedge its exposure tointerest rate, foreign currency and commodity
pricing risks arising from operational, financing
and investment activities. The Group does nothold or issue derivative financial instruments
for trading purposes. All derivatives are
initially recognised at fair value; attributabletransaction costs are recognised in profit orloss as incurred. Derivatives comprising interest
rate swaps, foreign exchange contracts andoptions and metal futures contracts areclassified as “fair value through profit andloss” under IFRS 9, unless designated ashedges. Subsequent to initial recognition,
derivatives are measured at fair value andgains or losses on the settlement of suchderivatives are recognised in operating
expenses. Where such derivatives relate to
the following year’s exposure, any gains
or losses resulting from the change in fairvalue are recognised as an adjusting item inoperating expenses.
Changes in the fair value of the derivative
hedging instruments designated as cash flow
hedges are recognised in equity to the extent
that the hedge is effective. To the extent thatthe hedge is ineffective, changes in fair value
are recognised in the Consolidated Statementof Income. If the hedging instrument
no longer meets the criteria for hedge
accounting, expires or is sold, terminatedor 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 inequity is transferred to the carrying amount of
the asset when it is recognised. In other cases
the amount recognised in equity is transferredto the Consolidated Statement of Income inthe same period that the hedged item affects
profit or loss.

118

The fair value of interest rate swaps is basedon broker quotes. Those quotes are tested
for reasonableness by discounting estimatedfuture cash flows based on the terms andmaturity of each contract and using market
interest rates for a similar instrument at themeasurement date.
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 valueof forward exchange contracts is recognised
immediately in the Consolidated Statementof Income.

(f) Property, plant and equipment
Property, plant and equipment is stated athistorical cost less provisions for impairment(see accounting policy k) and depreciation
which, with the exception of freehold land
which is not depreciated and rental assets(see below), is provided on a straight-line
basis over each asset’s estimated economic
life. Depreciation is provided based on
historical cost less estimated residual value.
The principal estimated economic lives used
for this purpose are:
• Freehold buildings, longleasehold land and buildings

50 years• Furniture and fittings

10 yearsContingent purchase consideration ismeasured at fair value at the date ofacquisition and subsequently carried at fairvalue, with movements recognised in the
Income Statement.

• Machinery and otherequipment

5 to 10 years• Computer equipment

4 years• Vehicles

4 years

Interest-bearing borrowings are recognised
initially at fair value less attributabletransaction costs. Subsequent to initialrecognition, interest-bearing borrowings arestated at amortised cost with any difference
between cost and redemption value being
recognised in profit or loss over the period of
the borrowing on an effective interest basis.

For leasehold improvements, where the lengthof the lease is less than the principal estimatedeconomic lives noted above, the length of thelease is used.
Fixed assets held for rental as part of theGroup’s service business are depreciated using
the reducing balance method at a rate of 3%
per month.
Proceeds on disposal of rental assets whichhave been refurbished by the Group arerecorded as revenue with associated costs
recorded in cost of sales. Otherwise gains andlosses on disposal of an item of property, plantand equipment are determined by comparing
the proceeds from disposal with the carrying
amount of property, plant and equipment andare recognised in the Income Statement.

Oxford Instruments plc Report and Financial Statements 2019(iii) Acquired intangible assets(j) Cash and cash equivalents(i) Goodwill

An intangible asset acquired with a subsidiary
undertaking is recognised as an intangible
asset if it is separable from the acquired
business or arises from contractual or
legal rights, is expected to generate future
economic benefits and its fair value can bereliably measured. The asset is amortised
through the Consolidated Statement of
Income over it useful economic life.

Cash and cash equivalents are carriedin the Statement of Financial Position atamortised cost.

All business combinations are accounted forby applying the acquisition method. Goodwill
represents amounts arising on acquisition ofsubsidiaries. 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 ofthe assets, liabilities and contingent liabilities
acquired. In respect of acquisitions prior to thisdate, goodwill is included on the basis of its
deemed cost, which represents the amountrecorded under previous GAAP.
The Group expenses transaction costs
associated with its acquisitions andmovements in liabilities relating to contingent
consideration within the Income Statement inconformity with IFRS 3.

Research and Development costs are charged
to the Consolidated Statement of Income inthe year in which they are incurred unlessdevelopment expenditure is applied to aplan or design for the production of new or
substantially improved products, in whichcase they are capitalised. The criteria for
capitalisation include demonstration of thetechnical feasibility of completing a new
intangible asset that will be available for saleand that the asset will generate probablefuture economic benefits. Where expenditure
meets the criteria, development costs arecapitalised and amortised through theConsolidated Statement of Income over theiruseful economic lives.

• Capitalised development costs 3 to 5 years• Technology relatedacquired intangibles• Customer related
intangibles

5 to 12 years
6 months to 15 years• Development costs
acquired intangibles

10 years• Software

10 years(h) Trade and other receivables
Trade and other receivables are initiallyrecognised at fair value and subsequently
stated at their amortised cost less appropriate
provision for impairment. The provision for
impairment of receivables is based on lifetime
expected credit losses. Lifetime expected credit
losses are calculated by assessing historic
credit loss experience. The movement in theprovision is recognised in the Consolidated
Income Statement.

(i) Inventories
Inventories are stated at the lower of cost and
net realisable value. Cost includes materials,
direct labour, an attributable proportionof production overheads based on normal
operating capacity and all other expenditure
incurred in acquiring the inventories andbringing them to their existing location andcondition. Net realisable value is the estimatedselling price in the ordinary course of business,less the estimated costs of completion andselling expenses.

All non-current assets are tested for
impairment whenever events or circumstancesindicate 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 groupof assets that generates cash flows fromcontinuing use that are largely independent of
the cash inflows from other groups of assets.
An impairment loss is recognised in theConsolidated 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 thatreflects 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 to determine the asset’s
recoverable amount, but only to the extent
that the carrying amount of the asset does
not exceed its carrying amount had the
impairment loss not been recognised inprevious periods. Impairment losses in respectof 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 thento reduce the carrying amount of the otherassets in the unit.

119Company Information

Provision is made for obsolete, slow-moving
and defective stock where appropriate in lightof recent usage, expected future requirements,
new product introduction plans and likely
realisable values.

(k) Impairment of
non‑current assets

Financial Statements(ii) Development costs

Amortisation of intangible assets is charged to
the Consolidated Statement of Income on asystematic basis in proportion to the use of theassets over their estimated useful economic
lives as follows:

Governance

Goodwill arising on acquisitions is stated atcost less any accumulated impairment losses
and allocated to cash generating units that are
anticipated to benefit from the combination.
It is not amortised but is tested annually for
impairment (see accounting policy k), or more
frequently when there is an indicator that theunit may be impaired.

(iv) Amortisation

Cash and cash equivalents comprise cash
balances and call deposits and are carriedat amortised cost. Bank overdrafts that are
repayable on demand and form an integral
part of the Group’s cash management areincluded as a component of cash and cash
equivalents for the purpose of the Statementof Cash Flows.

Strategic Report(g) Intangible assets

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTING POLICIES CONTINUED(l) Employee benefits(m) Provisions(o) Government grants

The Group operates a number of defined
benefit and defined contribution plans
which require contributions to be made to
independent trustee-administered funds.

A provision is recognised in the Consolidated
Statement of Financial Position when theGroup has a present legal or constructive
obligation as a result of a past event and it isprobable 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 approveda detailed and formal restructuring plan andthe restructuring has either commenced or
has been announced publicly. A provision
for onerous contracts is recognised whenthe expected benefits to be derived by theGroup from a contract are lower than theunavoidable 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 bereasonably estimated.

Grants from governments are recognised attheir fair value where there is a reasonableassurance that the grant will be received
and the Group will comply with all attachedconditions.

(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 priorperiods. 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 theGroup’s net obligation are recognised in theConsolidated Statement of Comprehensive
Income in the year.
The charge to the Consolidated Statementof Income reflects the current service cost.
The interest expense or income is calculated on
the net defined benefit liability by applying thediscount rate to the net defined benefit liability,
and is included within financial expenditure or
financial income in the Consolidated Statementof Income respectively.

(iii) Share-based payment transactions
The fair value of equity settled share option
programmes is measured at grant date andcharged to the Consolidated Statementof Income, with a corresponding increasein equity, on a straight-line basis over theperiod during which the employees become
unconditionally entitled to the options. The
fair value of the options granted is measured
using an option valuation model, taking into
account the terms and conditions upon which
the options were granted.
The amount recognised as an expense isadjusted to reflect the actual number of shareoptions that vest, except where forfeiture is
only due to market performance conditions
not being met.

120

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 suchproceedings 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 valueof money and, where appropriate, the risks
specific to the liabilities.

(n) Trade and other payables
Trade and other payables are initiallyrecognised at their fair value and subsequently
stated at amortised cost.

Government grants relating to costs aredeferred and recognised in the Income
Statement over the period necessary to matchthem with the costs they are intended tocompensate. Government grants relating toproperty, plant and equipment are included
in other current liabilities and are credited to
the Income Statement on a straight-line basis
over the expected useful economic lives of therelated assets.

(p) Interest-bearing borrowings
Interest-bearing borrowings are recognised
initially at fair value less attributabletransaction costs. Subsequent to initialrecognition, interest-bearing borrowings arestated 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.

Oxford Instruments plc Report and Financial Statements 2019(r) Income tax

The Group has applied IFRS 15 using themodified retrospective approach and therefore
the comparative information has not been
restated and continues to be reported under
IAS 18. The impact of the changes is disclosed
in policy (a).

Income tax on the profit or loss for the year
comprises current and deferred tax. Income
tax is recognised in profit or loss except tothe extent that it relates to items recognised
directly in equity, in which case it is recognisedin equity.

Under IFRS 15 revenue is recognised in theConsolidated Statement of Income when theperformance conditions in the contract withthe customer are met.

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 totax payable in respect of previous years.
Tax positions are reviewed to assess whether
a provision should be made based onprevailing circumstances. Tax provisions areincluded within current taxation liabilities.

The amount of deferred tax provided is basedon the expected manner of realisation orsettlement 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 theextent that it is probable that future taxable
profits will be available against which the asset
can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable thatthe related tax benefit will be realised.
Additional income taxes that arise from the
distribution of dividends are recognised at thesame time as the liability to pay the related
dividend.

Company Information

In the Service & Healthcare segment, revenue
for maintenance and support is recognised ona pro-rata basis over the length of the contract
period. Revenue relating to the rental ofmachinery is recognised on a straight-line basis
over the life of the lease. Where the Service& Healthcare segment makes asset sales,similar considerations as those set out for the
Materials & Characterisation and Research &Discovery segments are applied.

Financial Statements

Revenue is allocated between the productand installation based on the margin expected
for each component. In general, a higher
margin will be applied to the product since
the greater value add to the customer is in thedesign and manufacture of the product. In the
NanoScience business, certain contracts forthe sale of more complex systems are deemed
to comprise just one performance condition
which is met when the customer confirms
acceptance of the installed product at theirpremises. Accordingly, revenue is recognised inits entirety on completion of installation.

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 fortaxation purposes. The following temporary
differences are not provided for: the initialrecognition of a deferred tax liability in respectof goodwill arising on a business combination;
the initial recognition of assets or liabilities
that affect neither accounting nor taxable
profit; and differences relating to investments
in subsidiaries to the extent that they willprobably not reverse in the future.

GovernanceIn most cases where the contract includes
the sale of both a product and installation
then the sale of the product and the related
installation are treated as two separate
performance conditions. This is because theGroup considers that the customer is able tobenefit from the product even if the Group
does not supply installation i.e. it would bepossible for them to arrange installation by athird party. Revenue in respect of the productis recognised when control passes to thecustomer, which is normally upon shipment of
the product. Revenue in respect of installationis recognised when the customer confirms
acceptance of the installation.

Strategic Report(q) Revenue

Revenue excludes value added tax andsimilar sales-based taxes and is stated before
commission payable to agents.

121

Oxford Instruments plc Report and Financial Statements 2019ACCOUNTING POLICIES CONTINUED(s) Leases
The Group has applied IFRS 16 using themodified retrospective approach and therefore
the comparative information has not been
restated and continues to be reported under
IAS 17 and IFRIC 4. The impact of the changes
is disclosed in policy (a).

Leases under which the Group
acts as lessee
The Group recognises a right of use asset anda lease liability at the lease commencement
date. The right of use asset is initiallymeasured at cost, which comprises the initialamount of the lease liability adjusted forany lease payments made at or before thecommencement date, plus any initial direct
costs incurred and an estimate of costs todismantle and remove the underlying asset
or to restore the underlying asset or thesite on which it is located, less any lease
incentives received.
The right of use asset is subsequently
depreciated using the straight-line methodfrom the commencement date to the earlierof the end of the useful life of the right ofuse asset or the end of the lease term. The
estimated useful lives of right of use assets
are determined on the same basis as thoseof property and equipment. In addition, theright of use asset is periodically reduced by
impairment losses, if any, and adjusted forcertain remeasurements of the lease liability.
The lease liability is initially measured at thepresent value of the lease payments thatare not paid at the commencement date,discounted using the interest rate implicitin the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing
rate. Generally, the Group uses its incremental
borrowing rate as the discount rate.
Lease payments included in the measurementof the lease liability comprise fixed payments.
The lease liability is measured at amortised
cost using the effective interest method. It isremeasured when there is a change in futurelease payments arising from a change in
an index or rate, if there is a change in theGroup’s estimate of the amount expected tobe payable under a residual value guarantee,
or if the Group changes its assessment of
whether it will exercise a purchase, extension
or termination option.

122

When the lease liability is remeasured in thisway, a corresponding adjustment is made to
the carrying amount of the right of use asset,
or is recorded in profit or loss if the carrying
amount of the right of use asset has been
reduced to zero.

Short-term leases and leasesof low-value assets
The Group has elected not to recognise rightof use assets and lease liabilities for short-termleases of machinery that have a lease term of
twelve months or less and leases of low-value
assets, including IT equipment. The Group
recognises the lease payments associated withthese leases as an expense on a straight-line
basis over the lease term.

Under IAS 17
In the comparative period the Group did
not have any leases which were classified as
finance leases under IAS 17. All leased assets
were classified as operating leases and were
not recognised in the Group’s statement offinancial position. Payments made underoperating leases were recognised in profit
or loss on a straight-line basis over the termof the lease. Lease incentives received wererecognised as an integral part of the totallease expense, over the term of the lease.

Leases under which the Group
acts as lessor
When the Group acts as a lessor, it determinesat lease inception whether each lease is afinance lease or an operating lease. To classify
each lease, the Group makes an overall
assessment of whether the lease transfers
substantially all of the risks and rewards
incidental to ownership of the underlying
asset. If this is the case, then the lease is afinance lease; if not, then it is an operatinglease. As part of this assessment, the Groupconsiders certain indicators such as whether
the lease is for the major part of the economic
life of the asset.
The Group recognises lease payments
received under operating leases as income
on a straight-line basis over the lease termas part of revenue.
The accounting policies applicable to theGroup as a lessor in the comparative period
were not different from IFRS 16.

(t) Segment reporting
An operating segment is a distinguishable
component of the Group that engages inbusiness activities from which it may earnrevenues and incur expenses, including
any revenues and expenses that relate totransactions with any of the Group’s othercomponents. 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 tomake decisions about resources to be allocatedto the segment and to assess its performance,
for which discrete financial information isavailable. Segment results that are reported to
the Board include items directly attributable
to a segment as well as those that can beallocated on a reasonable basis.
A reportable segment is an aggregatedoperating segment in respect of whichrevenue 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 thediscretion of the Company.

(v) New standards andinterpretations not yet adopted
There are no standards that are not yet
effective and that would be expected to havea material impact on the Group in the current
or future reporting periods and on foreseeable
future transactions.

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 20191 Non-GAAP measures

Adjusted EBITDA is calculated by adding back depreciation of property, plant and equipment and right of use assets and amortisation of intangible
assets to adjusted operating profit and can be found in the Consolidated Statement of Cash Flows. Calculation of adjusted EPS can be found in
Note 2. Adjusted effective tax rate is calculated by dividing the share of tax attributable to adjusted profit before tax by adjusted profit before tax.
Definitions of cash conversion and return on capital employed are set out in the KPI section.

Strategic Report

In the preparation of adjusted numbers, the Directors exclude certain items in order to assist with comparability between peers and to give what
they consider to be a better indication of the underlying performance of the business. These adjusting items are excluded in the calculation ofadjusted operating profit, adjusted profit before income tax, adjusted profit for the year from continuing operations, adjusted EBITDA, adjusted
EPS, adjusted cash conversion, and adjusted effective tax rate. Details of adjusting items are given below.

Reconciliation between profit before income tax and adjusted profit from continuing operations
2019
2018
		
		
								Profit		Profit							Operating
beforebeforeOperating							profitincome tax
profitincome tax							
£m
£m
£m
£m

35.5

38.4

34.2

—
Restructuring costs						

—

1.2

1.2

Restructuring costs – relating to associate					

0.3

0.3

0.4

0.4

Net profit on disposal of buildings					

—

—

(3.3)

(3.3)

Business reorganisation items					
0.3

0.3

(1.7)

(1.7)

Past service cost on defined benefit pension scheme				

0.3

0.3

—

—

Share of impairment recognised by associate				

(0.6)

(0.6)

2.0

2.0

9.6

9.6

10.9

10.9

1.5

1.5

(3.1)

(3.1)

Loan note make-whole payable					

—

0.9

—

—

Total non-GAAP adjustments					
11.1

12.0

8.1

8.1

47.5

46.5

42.3

Adjusted measure from continuing operations				

49.7

Share of taxation						(10.4)		(10.1)

Adjusted profit for the year from continuing operations				37.1		32.2

Adjusted effective tax rate						21.9%		23.9%

Restructuring costs
Restructuring costs of £1.2m incurred in the prior year primarily relate to our US Healthcare business and include £0.5m to successfully defend alegal claim relating to a prior acquisition.

Financial Statements

Amortisation and impairment of acquired intangibles				Mark-to-market loss/(gain) in respect of derivative financial instruments			

Governance

38.6

Statutory measure from continuing operations				Restructuring costs – relating to associate
These represent the Group’s shares of mergers and acquisition costs and other one-off items incurred by the associate.

Net profit on disposal of buildings
The Group recorded a net profit on disposal of £3.3m during the prior year, following the disposal of two buildings previously held under property,
plant and equipment. The effect of the disposal on the Group’s balance sheet position is shown in Note 15.

Past service cost on defined benefit pension scheme
As at 31 March 2019, the IAS 19 defined benefit pension balance sheet liability includes an allowance of £0.3m for the expected cost of equalising
Guaranteed Minimum Pension (GMP) between males and females.

Company Information

GMP is a portion of pension that was accrued by individuals who were contracted out of the UK State Second Pension prior to 6 April 1997.
Historically, there was an inequality of benefits between male and female members who have GMP. A High Court case concluded on
26 October 2018 and confirmed that GMPs need to be equalised.
The effect on the Group’s defined benefit pension liability is shown in Note 25.

123

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 20191 Non-GAAP measures continued
Reconciliation between profit before income tax and adjusted profit from continuing operations continued
Share of impairment recognised by associate
During the prior year the Group’s equity accounted associate recognised an impairment relating to the disposal of its Vacgen subsidiary.
The Group’s share of this impairment was £2.0m. Following the completion and finalisation of the transaction, £0.6m of the impairment
has been reversed.

Amortisation of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets and goodwill.

Mark-to-market movements in respect of derivative financial instruments
Under IFRS 9, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured 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 IFRS 9 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 can be
more clearly seen.

Loan note make-whole payable
During the year to 31 March 2019 the Group repaid £11.6m of the principal outstanding on its loan notes. This payment was necessary due tomaterial changes to the Group’s structure following the disposal of its Industrial Analysis business during July 2017. The costs of £0.9m relate to
the make-whole balance payable upon settlement of the £11.6m principal.

Share of taxation
Adjusting items include the income tax on each of the items described above. In addition, during the prior year the tax rate in the United States
reduced from 35% to 21%. As a result, this reduced the Group’s deferred tax asset by £5.4m. This was excluded from the calculation of share oftaxation attributable to adjusted profit before tax.

Reconciliation of changes in cash and cash equivalents to movement in net cash/(debt)									2019									
£m

2018
£m

Net increase/(decrease) in cash and cash equivalents						

13.6

(4.8)

Effect of foreign exchange rate changes on cash and cash equivalents					

0.9

(1.0)

									
14.5

(5.8)

Repayment of borrowings								
11.5

96.8

Movement in accrued interest							
0.4

(1.0)

Amortisation of prepaid issuance fees							
—

(0.4)

Movement in net debt in the year							

26.4

89.6

Net debt at start of the year							(19.7)(109.3)

Net cash/(debt) at the end of the year							6.7(19.7)

									2019								
Note
£m

2018
£m

Loan notes – unsecured							
24(28.5)(40.4)Cash and cash equivalents							
20

35.2

20.7

Net cash/(debt) at the end of the year							6.7(19.7)

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

124

Oxford Instruments plc Report and Financial Statements 2019

2 Earnings per share

				
				
				

Profit for the year attributable toequity Shareholders of the parent		

Continuing
operations£m

Discontinued
operations
£m

2019
total
£m

Continuing
operations£m

Discontinued
operations
£m

2018
total
£m

28.7

1.3

30.0

19.6

45.9

65.5

Strategic Report

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

Adjusting items:						Business reorganisation items		

0.3			
(1.7)		

Past service cost on defined benefit pension scheme

0.3			
—		

Share of impairment recognised by associate(0.6)			2.0		Amortisation and impairment of acquired intangibles

9.6

Mark-to-market loss/(gain) in respect ofderivative financial instruments		

1.5			
(3.1)		

		10.9		

0.9			
—		

Income tax (credit)/charge			(3.6)			4.5		Adjusted profit for the year from37.1			32.2		
continuing operations				The weighted average number of shares used in the calculation excludes shares held by the Employee Share Ownership Trust, as follows:
2018
SharesmillionWeighted average number of shares outstanding						

57.4

57.4

Less shares held by Employee Share Ownership Trust						

(0.2)

(0.2)

Weighted average number of shares used in calculation of basic earnings per share			57.2

57.2

The following table shows the effect of share options on the calculation of diluted earnings per share:									2019									Shares									million2018
Sharesmillion

57.2

57.2

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

Effect of shares under option							
0.5

0.2

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

57.4

57.7

Financial Statements									2019									Shares									millionGovernance

Loan note make-whole payable		For the purposes of calculating diluted and diluted adjusted EPS, the weighted average number of ordinary shares is adjusted to include theweighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary shares expected to vest,
relating to the Company’s share-based payment plans. Potential ordinary shares are only treated as dilutive when their conversion to ordinary
shares would decrease EPS or increase loss per share.

Company Information

125

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019
3 Segment information
The Group has ten 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.
Following the disposal of the Industrial Analysis business and the introduction of the Horizon strategy in 2017, the Group now reports under arevised segment structure. The aggregated operating segments are as follows:• the Materials & Characterisation segment comprises a group of businesses focusing on applied R&D and commercial customers, enabling the
fabrication and characterisation of materials and devices down to the atomic scale;• the Research & Discovery segment comprises a group of businesses providing advanced solutions that create unique environments and enablemeasurements down to the molecular and atomic level which are used in fundamental research; and• the Service & Healthcare segment provides customer service and support for the Group’s products and the service, sale and rental of third-party
healthcare imaging systems.
The Group’s internal management structure and financial reporting systems have been amended to differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed above.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated 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 notpresented in reporting to the Group’s Board of Directors.

a) Analysis by business							Materials &Results from continuing operations					 Characterisation
Year to 31 March 2019						
£mResearch &Discovery£mService &Healthcare
£m

Total
£m

External revenue						
137.9

125.2

70.5

333.6

—
Inter-segment revenue						—

—Total segment revenue						
137.9

125.2

70.5

22.1

12.7

14.9

49.7

							Materials &Results from continuing operations						Characterisation
Year to 31 March 2018						
£mResearch &Discovery£mService &Healthcare
£m

Total
£m

External revenue						
118.1

112.0

66.8

296.9

Inter-segment revenue						
—

0.1

—

Total segment revenue						
118.1

112.1

66.8

Segment adjusted operating profit from continuing operations			

13.8

12.6

Segment adjusted operating profit from continuing operations			

20.1

46.5

The adjusted profit after tax of £0.2m (2018: £0.5m) from the Group’s associate is reported within the Research & Discovery segment.
Revenue in the Materials & Characterisation and Research & Discovery segments represents the sale of products. Revenue in the Service &Healthcare segment relates to service income, with the exception of leasing of mobile MRIs of £6.4m (2018: £6.1m) and equipment sales of £3.6m(2018: £3.3m).
As at 31 March 2019 the Group had unfulfilled performance obligations under IFRS 15 of £172.5m.

126Oxford Instruments plc Report and Financial Statements 2019

Reconciliation of reportable segment profit
Research &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

Adjusted profit for reportable segments from continuing operations		

22.1

12.7

14.9

—

49.7

Restructuring costs – relating to associate				

—

(0.3)

—

—

(0.3)

Past service cost on defined benefit pension scheme			

—

—

—

(0.3)

(0.3)

Share of impairment recognised by associate			

—

0.6

—

—

0.6

Amortisation of acquired intangibles				

(2.4)

(6.4)

(0.8)

—

(9.6)

Fair value movement on financial derivatives			

(1.5)

—

—

—

(1.5)

—
Financial income					

—

—

0.3

0.3

—
Financial expenditure					

—

—

(3.4)

(3.4)

Profit/(loss) before income tax on continuing operations		19.7

6.6

14.1

(4.9)

35.5

						
Materials &						
Characterisation
Year to 31 March 2018					£mResearch &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

Adjusted profit for reportable segments from continuing operations		

13.8

12.6

—

46.5

—

(0.9)

—

(1.2)

Restructuring costs – relating to associate				

—

(0.4)

—

—

(0.4)

Net profit on disposal of buildings				

—

—

—

3.3

3.3

Share of impairment recognised by associate			

—

(2.0)

—

—

(2.0)

Amortisation of acquired intangibles				

(2.5)

(7.3)

(1.1)

—

(10.9)

Fair value movement on financial derivatives			

—

—

—

3.1

3.1

Financial income					—

—

—

0.3

0.3

Financial expenditure					—

—

—

(4.5)

(4.5)

Profit before income tax on continuing operations			17.3

4.1

10.6

2.2

34.2

2019
2018
		
		
							Capital 		Capital							Depreciation
expenditure
Depreciation
expenditure						
£m£m
£m
£m

Materials & Characterisation				

2.5

4.5

1.5

2.8

Research & Discovery					

1.3

1.1

0.8

0.8

Service & Healthcare						
2.0

0.5

1.8

1.0

Unallocated Group items						
1.4

1.3

0.6

0.9

Total						
7.2

7.4

4.7

5.5

2019
		
		
						
Amortisation
Capitalised							anddevelopment							impairment
costs						
£m£m

Financial Statements

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

Governance

20.1

Restructuring costs					(0.3)

Strategic Report						
Materials &						
Characterisation
Year to 31 March 2019					£m2018Amortisation
andimpairment£m

Capitalised
development
costs
£m

Materials & Characterisation					
4.6

2.7

5.8

4.8

Research & Discovery						
7.7

0.8

8.4

1.0

Service & Healthcare						
0.8

—

1.1

—

Unallocated Group items						
0.3

—

—

—

Total						
13.4

3.5

15.3

5.8
Company Information

127

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019
3 Segment information continuedb) 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 continuing operations from external customers by destination									2019								
£m

2018
£m

99.8

89.5

38.7
Rest of Europe								35.9USA							Rest of Asia								
34.4

31.9

14.2
UK									18.1Japan								
38.7

34.9

China 								
70.0

53.5

Germany								
28.3

24.8

9.5
Rest of World								

8.3

333.6
Total								296.9Non-current assets (excluding deferred tax)									2019								
£m

2018
£m

UK									
157.4

160.4

Germany								
3.9

3.3

USA								
15.4

11.3

1.7
Japan								

0.5China								
0.5

0.2

Rest of Europe								
9.4

9.6

Rest of Asia								0.4

—Rest of World								
1.7

1.7

Total								
190.4

187.0

4 Auditor’s remuneration									2019									
£’000

2018
£’000

Audit of these Financial Statements							
199

140

Amounts received by the auditor and its associates in respect of:		
270

255

– Taxation compliance services							
10

14– Audit‑related assurance services							
26

25– Audit of Financial Statements of subsidiaries pursuant to legislation					– Other assurance services								6

—Total fees paid to the auditor and its associates						
511

434

128

Oxford Instruments plc Report and Financial Statements 2019

5 Research and Development (R&D)
2019
		
					
Materials &Research &Materials &				Characterisation
Discovery
Total
Characterisation
				
£m
£m
£m
£m

2018
Research &Discovery
£m

Total
£m

R&D expense charged to theConsolidated Statement of Income			

14.6

10.8

25.4

12.3

11.1

23.4

Less: depreciation of R&D‑related fixed assets		

(0.1)

—

(0.1)

(0.1)

—

(0.1)

Add: amounts capitalised as fixed assets			

—

0.1

0.1

—

0.1

0.1

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

(2.2)

(1.3)

(3.5)

(3.2)

(1.2)

(4.4)

Add: amounts capitalised as intangible assets		

2.7

0.8

3.5

4.8

1.0

5.8

Total cash spent on R&D during the year		

15.0

10.4

25.4

13.8

11.0

24.8

Strategic Report

The total R&D spend by the Group as part of continuing operations is as follows:

6 Investment in associate
The Group holds a 47% interest in the ordinary share capital of Scienta Scientific AB. Scienta Scientific AB is registered and has its principal placeof business in Sweden. The investment has been accounted for as an associate taking into account the following factors:• the Group holds substantial, but minority, voting rights (47%). All other rights are controlled by a single shareholder;
Governance• the Group has a minority number of non-executive Board seats (two of five), with the remaining seats held by representatives of the othershareholder; and• whilst the Group has certain veto rights in respect of certain decisions, it cannot unilaterally direct the activities of the Scienta Scientific AB
Group.
During the prior year the Group invested a further £2.1m in its equity accounted associate.
The Group’s share of profit in its equity accounted associate for the year was £0.5m (2018: loss of £1.9m). The Group did not receive any dividends
from the associate in either period.
2018
£m

4.1

3.9

Carrying value at 1 April 2018							Addition								
—

2.1

0.5

(1.9)

Share of profit/(loss) of associate (net of tax)						Dividends received								—

—Carrying value at 31 March 20194.1						
4.6

Summary financial information for the equity accounted associate is as follows:									2019									
£m

2018
£m

Non-current assets								
0.9

2.3

25.2

23.7

Current assets							Financial Statements									2019									
£mTotal assets								
26.1

26.0

Current liabilities								(20.5)(12.1)

Non-current liabilities								
(1.8)

(9.2)

Total liabilities								(22.3)(21.3)Net assets								
3.8

4.7
51.0

Expenses								(35.4)(55.0)

Profit/(loss) for the year								
1.1

(4.0)

Group’s share of net assets							
1.8

2.2

Group’s share of profit/(loss)							
0.5

(1.9)

According to the terms of the transaction, no dividend could be paid by the associate until 27 May 2017. Following that date, any dividend paid
must be agreed by both Oxford Instruments plc and the other shareholder, up to a maximum of 50% of the previous year’s profit after tax. At thedate of signing these Financial Statements no dividend has been declared or paid.

129

Company Information

Income								36.5Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019
7 Disposal of subsidiary and discontinued operations
In the prior year, on 3 July 2017, the Group disposed of its Industrial Analysis business for a final consideration of £82.8m.

Effect of disposal on the financial position of the Group										Industrial Analysis
										2018										
£mGoodwill									(4.3)
Acquired intangible assets									(0.1)
Other intangible assets 									
(4.7)
(2.4)
Property, plant and equipment								(11.5)
Inventory									(9.8)
Trade and other receivables									Cash and cash equivalents									
(6.0)
8.6
Trade and other payables 									Provisions									
0.8
(0.4)
Tax balances									Net assets divested								(29.8)

82.8
Consideration receivable									—Deferred consideration									Consideration received, satisfied in cash								
82.8Cash disposed of									(6.0)
Transaction expenses									(5.6)
Net cash inflow									
71.2Carrying value of net assets disposed of (excluding cash and cash equivalents)					(23.8)

Deferred consideration									—Recognition of provision on disposal								(2.1)
Currency translation differences transferred from translation reserve						Gain on disposal

4.8								50.1Tax (charge)/credit on gain on disposal								(2.3)
Gain on disposal net of tax								
47.8The recognition of provisions on disposal primarily relate to onerous lease contracts. These have been recognised in the Income Statement underdiscontinued operations.

Discontinued operations
In the year to 31 March 2018 the Group’s Industrial Analysis business was classified as a discontinued operation. The Industrial Analysis business
was considered a major class of business on the basis that it was previously an operating segment and referred to in the Group Strategic Report.
On 24 May 2019 a further £1.6m was received by the Group in relation to the finalisation of tax affairs outstanding upon disposal.

Results of discontinued operations									2019									
£m

2018
£m

Revenue								—16.8Expenses								
—(16.3)

Adjusted profit before tax								—

0.5Income tax charge								
—

(0.9)

Adjusted loss after tax(0.4)

							—

Adjusting items:		
Amortisation of acquired intangibles							
—

(0.1)

—

(2.2)

Income tax on adjusting items							—

0.8One-off costs arising as a result of disposal						Loss after tax								
—

(1.9)

Gain on disposal								
1.6

50.1

Tax on gain on disposal								
(0.3)

(2.3)

Profit from discontinued operations after tax						
1.3

45.9

130

Oxford Instruments plc Report and Financial Statements 2019

Earnings per share from discontinued operations
2018
pence

Adjusted basic result/(loss) per share							
—

(0.7)

—
Adjusted diluted result/(loss) per share							(0.7)

Total basic earnings per share							
2.3

80.2

Total diluted earnings per share							
2.3

80.0

Strategic Report									2019									penceCash flows from discontinued operations									2019									
£m

2018
£m

Net cash generated from operating activities						

—

3.0Net cash generated from investing activities						

—

71.2

Net cash used in financing activities							—

—									2019									
£m

2018
£m

Interest receivable								
0.3

0.3

									0.30.38 Financial income

2018
£m

Interest payable							

2.2

3.9

Interest charge on pension scheme net liabilities					

0.3

0.6

Loan note make-whole payable						0.9—								3.44.5									2019									
£m

2018
£m

Wages and salaries							

84.5

82.5

Social security costs							

10.3

9.7

Contributions to defined contribution pension plans					

3.3

3.3

Charge in respect of employee share options					

0.8

1.1

								

98.9

96.6

10 Personnel costs

Financial Statements									2019									
£mGovernance

9 Financial expenditure

Directors’ emoluments are disclosed in the Remuneration Report on pages 80 to 99 of this Report and Financial Statements.
Included in the total above is £nil (2018: £4.6m) relating to discontinued operations.

11 Employees
The average number of people employed by the Group (including Directors and temporary employees) during the year was as follows:									2019									Number2018
NumberProduction								
620

592

Sales and marketing								
386

431

Research and Development								
355

375

Administration and shared services							
218

244

Total average number of employees						

1,579

1,642
Company Information

131

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201912 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 purchase matching shares in the market on behalf of the employees. The matching shares vest on the completion by the participating
employee of a further three years’ service and can be withdrawn from the plan tax-free after five years’ service.

Medium-Term Incentive Plan Scheme (MTIP)
Options awarded under the Medium-Term Incentive Plan are made annually to certain senior managers. The exercise prices are £nil. Options have alife of ten years and a vesting period of three years.

Performance Share Plan Scheme (PSP)
Under the Performance Share Plan awards of performance shares (or nil‑cost options) are made annually to certain senior managers. Awards havea life of ten years with vesting subject to achievement of performance targets and a vesting period of a minimum of three years (but may be up to
five years).
Share option schemes that have been discontinued but for which options were outstanding at the year end include the following:

Executive Share Option Scheme (ESO)
Options awarded under the Executive Share Option Scheme were made annually to certain senior managers. The exercise prices were determinedaccording 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.
The ESO, MTIP and PSP schemes are subject to performance conditions which can be found in the Remuneration Report on pages 80 to 99.
Administrative expenses include a charge of £0.8m (2018: £1.1m) in respect of the cost of providing share‑based remuneration. The cost of shareoptions is calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period after adjusting foran 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. Some of the ESO andPSP 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 options 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 2019 and 2018, the fair value per option granted and the assumptions used in the calculation
are as follows:							Medium-Term							Incentive Plan							Scheme							July							2018

Performance
Share Plan
SchemeJuly
2018

Medium-Term
Incentive Plan
SchemeSeptember
2017

Performance
Share Plan
SchemeSeptember
2017

Fair value at measurement date					

£3.68

£3.04

£3.38

£2.96

Share price at grant date						£10.10£10.10

£9.59

£9.59

Exercise price						
£nil

£nil

£nil

£nil

Expected volatility						
42.7%

46.9%

41.8%

48.6%

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

3 years

6 years

3 years

6 years

Expected dividend yield						
1.3%

1.3%

1.4%

1.4%

Risk-free interest rate						1.0%

1.0%

0.9%

0.9%

132

Oxford Instruments plc Report and Financial Statements 2019

The options existing at the year end were as follows:
2018
Number ofshares

Options subsisting at the year end on unissued ordinary shares:				
Executive Share Option Schemes				
December 2008					
—

£1.35

16/12/11-15/12/18

December 2009					
1,500

£2.04

17/12/12-16/12/19

3,500January 2011					13,726£7.05

07/01/14-06/01/21

35,126

December 2011					97,500£9.90

14/12/14-13/12/21

140,250

June 2015					347,729£10.2815/06/18-14/06/25

454,588

June 2016					18,000£7.38

21/06/19-20/06/26

36,000November 2016					142,071£6.27

29/11/19-28/11/26

158,321

Total options subsisting on existing ordinary shares		
Percentage of issued share capital			

7,500

620,526		

Strategic Report

2019
		
			
						
Number of
Exercise
Period when						
sharesprice
exercisable

835,285

1.1%			1.5%

Medium-Term Incentive Plan				107,982£nil

25/09/20-24/09/27

116,542

July 2018					101,720£nil

03/07/21-02/07/28—

September 2017				

Percentage of issued share capital				

209,702			116,542
0.4%

		0.2%

Performance Share Plan				
148,475£nil

21/06/19-20/06/26

148,475

116,853
September 2017					£nil25/09/20-24/09/27

116,853

July 2018					115,043£nil

03/07/21-02/07/28—

June 2016				

Total options subsisting on existing ordinary shares		
Percentage of issued share capital				

380,371				
265,328
0.7%				
0.5%

2019
		
		
							Weighted							average
Number of							exercise priceoptions

2018
Weighted
exerciseaverage price

Number ofoptions£7.69

1,217,155£7.91

1,177,322

Granted during the year						£nil218,558£nil

233,395

Forfeited during the year						£5.62(38,805)£9.35(21,600)

Exercised during the year						£8.15(93,120)£4.37(59,688)

Lapsed during the year						£10.14(93,189)£9.49(112,274)

Outstanding at the year end				£6.14

1,210,599£7.69

1,217,155

Exercisable at the year end					£10.08460,455£8.87

186,376

Financial Statements

The number and weighted average exercise prices of those options are as follows:

Outstanding at the beginning of the period			

GovernanceTotal options subsisting on existing ordinary shares		

The weighted average share price at the time of exercise of the options was £10.01 (2018: £10.17).

Company Information

133

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201913 Income tax expense
Recognised in the Consolidated Statement of Income									2019									
£m

2018
£m

Current tax expense		
Current year								
8.1

7.3

Adjustment in respect of prior years							

(0.7)

(1.7)

								7.45.6Deferred tax expense		
Origination and reversal of temporary differences					

(0.9)

7.3

Adjustment in respect of prior years							

0.3

1.7

									
(0.6)

9.0

Total tax expense								
6.8

14.6

Reconciliation of effective tax rate 		Profit before income tax								
35.5

34.2

7.8

7.5

Income tax using the weighted average statutory tax rate of 22% (2018: 22%)				
Effect of: 		
Tax rates other than the weighted average statutory rate						

(0.1)

0.3

Change in rate at which deferred tax recognised						

(1.2)

5.3

Transaction costs, deferred consideration and impairments not deductible for tax				

0.6

1.2

Non-taxable income and expenses							——Tax incentives not recognised in the Consolidated Statement of Income					

—

(0.7)

Current period losses not available for carry forward						

—

0.4Movement in unrecognised deferred tax							
0.1

0.6

(0.4)

—

Total tax expense								
6.8

14.6

Adjustment in respect of prior years							Taxation charge recognised in other comprehensive income		

0.5

0.9

									0.50.9Deferred tax – relating to employee benefits						Taxation (credit) recognised directly in equity		Current tax on adoption of IFRS 15							(0.9)

Deferred tax on adoption of IFRS 15							

(0.9)

—

Deferred tax – relating to share options							

(0.2)

—

—

Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were
substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from 1 April 2020) was substantively enacted on
6 September 2016. This will reduce the Company’s future current tax charge accordingly. The UK deferred tax liability at 31 March 2019 has
been calculated based on those rates. The Group carries tax provisions in relation to uncertain tax positions arising from the possible outcomeof negotiations with tax authorities. Such provisions are a reflection of the geographical spread of the Group’s operations and the variety ofjurisdictions in which it carries out its activities.
Effective 1 January 2018 the rate of federal tax in the US was reduced from 35% to 21% and, as a result, in the prior year deferred tax assets werereduced by £5.4m.
On 2 April 2019 the EU Commission announced that it believes that in certain circumstances the UK’s Controlled Foreign Company (CFC) regime(introduced in 2013) for certain finance income constituted State Aid. The Commission instructed the UK Government to recover any such aid from
affected parties. The Group has claimed the benefit of this exemption, and therefore may be required to repay State Aid. The maximum amountof State Aid repayable as at 31 March 2019 was £1.2m in respect of tax and £0.1m in respect of interest, unless the decision is successfully
challenged in the EU courts. However, no provision has been made in respect of this investigation since we believe that it is more likely than notthat no additional tax will ultimately be due.

134

Oxford Instruments plc Report and Financial Statements 201914 Dividends per share									2019									
pence

2018
pence

Previous year interim dividend							
3.7

3.7

Previous year final dividend								
9.6

9.3

									
13.3

13.0

Strategic Report

The following dividends per share were paid by the Group:

The following dividends per share were proposed by the Group in respect of each accounting year presented:									2019									
pence

2018
pence

Interim dividend								
3.8

3.7

10.6
Final dividend								9.6									
14.4

13.3

The interim dividend was not provided for at the year end and was paid on 8 April 2019. The final proposed dividend of 10.6 pence per share(2018: 9.6 pence) was not provided at the year end and will be paid on 18 October 2019, subject to authorisation by the Shareholders at theforthcoming Annual General Meeting.

15 Property, plant and equipment
Plant andequipment£mFixturesand fittings
£m

Total
£m

91.3

Cost				Balance at 1 April 2017						

53.7

10.6

4.5

0.4

5.0

Disposals						(12.0)(10.9)(1.0)(23.9)—
Transfer to intangibles						

(0.6)

—

(0.6)

Effect of movements in foreign exchange rates				

(0.5)

(1.4)

(0.1)

(2.0)

Balance at 31 March 2018						

14.6

45.3

9.9

69.8

Balance at 1 April 2018						

14.6

45.3

9.9

69.8

Additions – other					

0.2

4.8

0.2

5.2

Disposals					

—

(1.8)

(0.3)

(2.1)

Effect of movements in foreign exchange rates			

0.1

0.8

0.1

1.0

Balance at 31 March 2019				

14.9

49.1

9.9

73.9

Balance at 1 April 2017						

9.5

41.2

8.1

58.8

Depreciation charge for the year					

0.5

3.8

0.4

4.7

Disposals						
(4.8)

(9.6)

(0.7)

(15.1)

Depreciation and impairment losses				

Effect of movements in foreign exchange rates				

(0.5)

(1.0)

0.1

(1.4)

Balance at 31 March 2018						

4.7

34.4

7.9

47.0
47.0

Balance at 1 April 2018						

4.7

34.4

7.9

Depreciation charge for the year				

0.4

3.2

0.3

3.9

Disposals					

—

(1.7)

(0.2)

(1.9)

Effect of movements in foreign exchange rates			

—

0.7

—

0.7

Balance at 31 March 2019				

5.1

36.6

8.0

49.7

At 1 April 2017						
17.5

12.5

2.5

32.5

At 31 March 2017 and 1 April 2018					

9.9

10.9

2.0

22.8

At 31 March 2019					

9.8

12.5

1.9

24.2

Financial Statements

27.0

Additions – other						
0.1Governance							Land and							buildings							£m

Carrying amounts				

135

Company Information

At 31 March 2019, the net book value of plant and equipment included £1.6m (2018: £0.9m) of assets under construction and £2.4m(2018: £3.2m) of assets subject to leases.

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201916 Intangible assets							Development
					Customer‑related Technology‑related
costs					acquired
acquiredacquired				 Goodwill
intangibles
intangibles
intangibles
				£m£m£m£m

Development
costsinternallygenerated£m

Software
£m

Total
£m

359.9

Cost							Balance at 1 April 2017			

114.5

56.6

118.5

1.8

66.3

2.2

Additions – internally generated		—

—

—

—

6.1

0.5

6.6

Disposals			(5.6)(3.7)(24.0)—(26.4)—(59.7)

Transfer from PPE			—

—

—

—

—

0.6

0.6

Effect of movements in foreign exchange rates

(1.8)

(4.0)

(3.5)

—

(0.2)

—

(9.5)

Balance at 31 March 2018			

107.1

48.9

91.0

1.8

45.8

3.3

297.9

Balance at 1 April 2018			

107.1

48.9

91.0

1.8

45.8

3.3

297.9

Additions – external			—

1.3

—

—

—

—

1.3

Additions – internally generated		—

—

—

—

3.5

0.9

4.4

Effect of movements in foreign exchange rates

1.2

2.4

2.5

—

—

—

6.1

108.3

52.6

93.5

1.8

49.3

4.2

309.7

Balance at 31 March 2019		

Amortisation and impairment losses							Balance at 1 April 2017			

30.0

41.9

58.2

0.6

46.0

2.2

178.9

Amortisation charge for the year		 —

2.7

8.0

0.1

3.5

0.1

14.4

Impairment charge for the year		—

—

—

—

3.2

—

3.2

Disposals			(1.2)(3.7)(24.0)—(21.8)—(50.7)

Effect of movements in foreign exchange rates

(2.0)

(3.3)

(1.1)

—

(0.2)

—

(6.6)

Balance at 31 March 2018			

26.8

37.6

41.1

0.7

30.7

2.3

139.2

Balance at 1 April 2018			

26.8

37.6

41.1

0.7

30.7

2.3

139.2

Amortisation and impairment
charge for the year			 —

1.7

7.7

0.2

3.5

0.3

13.4

Effect of movements in foreignexchange rates			1.2

2.2

1.2

—

—

—

4.6

Balance at 31 March 2019		

41.5

50.0

0.9

34.2

2.6

157.2

28.0

Carrying amounts							At 1 April 2017			84.5

14.7

60.3

1.2

20.3

—

181.0

At 31 March 2017 and 1 April 2018		

80.3

11.3

49.9

1.1

15.1

1.0

158.7

At 31 March 2019			80.3

11.1

43.5

0.9

15.1

1.6

152.5

The £1.3m addition to customer‑related acquired intangible assets relates to the acquisition by the Group of a customer list from a third party
during the year.
The following intangible assets are considered material by the Directors as they represent 91% (2018: 91%) of total acquired intangible assets:
2019
		
			
									Remaining								Amortisationamortisation							periodperiod							
£m
Years
Years

Trademarks – Andor						
8.0

2018

£m

15.0

9.8

8.7

– Product related						
28.9

12.0

6.8

33.1

5.3
– Software related						

10.0

4.8

6.0

8.3

12.0

5.7

9.1

Technology, know-how and patents – Andor:				

Technology, know-how and patents – Asylum				136

Oxford Instruments plc Report and Financial Statements 2019									2019									
£m

2018
£m

Materials & Characterisation		
NanoAnalysis							

10.0

10.0

61.3

61.2

Research & Discovery		Andor							NanoScience								
6.7

6.8

Magnetic Resonance								
2.3

2.3

									
80.3

80.3

Strategic Report

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from thatbusiness combination. The carrying amount of goodwill was allocated to individual CGUs as follows:

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 CGU which contains 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 the Group’s case, therecoverable amount is based on value in use calculations. Value in use is calculated by discounting expected future cash flows and in particular(except as noted below) Board-approved five-year cash flow forecasts, prepared by the management of each CGU and reviewed and amended byGroup management as necessary, are used together with 3.0% per annum growth for the subsequent 20 years. These rates are considered to beat or below long-term market trends for the Group’s businesses.

• £1.4m in respect of a development project which has experienced delays and cost overruns; and• £1.8m in respect of a development project that was discontinued as a result of the sale of the Industrial Analysis division.
During the prior year an R&D project in the Materials & Characterisation segment fell significantly behind the original development timetable withcosts being ahead of budget. On review, management felt that some of the early work on the project had brought no value and those early costsof £1.4m were consequently derecognised as an intangible asset. A review was undertaken and a remediation plan put in place. The remainder ofthe project was still considered to have commercial value.

Key assumptions
The key assumptions are those regarding discount rates and growth rates.
The growth rates are at or below the Group’s view on long-term trends within its markets. Changes in selling prices and direct costs are based on
past practices and expectations of future changes in the market.
The pre-tax weighted average costs of capital used for Materials & Characterisation and Research & Discovery in impairment testing are 12.6%(2018: 14.1%) and 12.2%-12.6% (2018: 14.1%-14.9%) respectively, in line with the risk associated with each of the business segments.
Management has estimated these discount rates by reference to past experience and an industry average weighted cost of capital as adjusted forappropriate risk factors reflecting current economic circumstances and the risk profiles of each CGU.

Financial Statements

The £1.8m impairment of capitalised development costs related to an entire project that was discontinued as a result of the sale of the Industrial
Analysis division. The impaired capitalised costs were held in the Research & Development segment.

GovernanceDuring the prior year the Group made impairments in respect of intangible assets as follows:

Sensitivity analysis
The Group’s estimates of impairments are most sensitive to changes in the discount rate and forecast growth rate. Sensitivity analysis has been
carried out by reference to both of these assumptions. This demonstrated that an 800 basis point increase in the discount rate would be requiredin order to eliminate current headroom of £76.9m and result in an impairment in the Andor business. Similarly, a reduction in the growth rate tonil would be required in order to result in an impairment in the OI Healthcare business.

Company Information

137

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201917 Deferred tax
Movements in deferred tax assets and liabilities were as follows:				
Property,				
plant and		
Employee				equipment
Inventory
benefits				£m£m£m

Balance at 31 March 2017			

0.9

3.0

7.1

Intangible
assets£m

Tax losses
£m

Other
£m

Total
£m

(0.1)

5.0

4.5

20.4

Reclassification							Recognised in income			 0.7

(0.6)

(1.7)

(4.8)

(1.9)

(0.7)

(9.0)

Recognised in other comprehensive income

—

—

(0.9)

—

—

—

(0.9)

Recognised directly in equity		

—

—

—

—

—

—

—

Acquisitions			

—

—

—

—

—

—

—

Disposals			 (0.2)

(0.6)

(0.3)

0.7

(0.5)

(0.8)

(1.7)

Foreign exchange			 —

(0.2)

(0.2)

(0.9)

0.1

(0.3)

(1.5)

Balance at 31 March 2018			

1.6

4.0

(5.1)

2.7

2.7

7.3

1.4

Reclassification							Recognised in income			(0.2)

0.4

(1.0)

1.8

0.7

(1.1)

0.6

Recognised in other comprehensive income

—

—

(0.5)

—

—

—

(0.5)

Recognised directly in equity		

—

(1.2)

0.2

—

—

2.1

1.1

Acquisitions			—

—

—

—

—

—

—

Disposals			—

—

—

—

—

—

—

Foreign exchange			 —

0.1

—

0.3

—

0.1

0.5

Balance at 31 March 2019		1.2

0.9

2.7

(3.0)

3.4

3.8

9.0

AssetsLiabilities
		
		
					
2019
2018
2019
2018
					
£m
£m
£m
£m

2019
£m

2018
£m

Gross assets/(liabilities)				
19.3

18.7

(10.3)(11.4)

9.0

7.3

Offset				
(4.0)

(5.3)

4.0

5.3

—

—

Net assets/(liabilities)				
15.3

13.4

(6.3)

(6.1)

9.0

7.3

									2019									
£m

2018
£m

Deductible temporary differences							
3.1

12.6

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

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

1.3
Tax losses								3.5									
4.4

16.1

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 Group canutilise the brought forward tax losses.
No deferred tax liability has been recognised in respect of £58.2m (2018: £74.6m) 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.

18 Inventories									2019									
£m

2018
£m

Raw materials and consumables							
19.9

17.1

Work in progress								
19.1

14.8

Finished goods								
21.8

14.0

									
60.8

45.9

The amount of inventory recognised as an expense was £138.5m (2018: £128.7m). 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 £2.0m in
the current period (2018: £0.4m). In the current year, £nil (2018: £nil) was reversed relating to previous impairments. Impairments are included
within gross profit.
Inventory carried at net realisable value is £0.4m (2018: £0.6m).
138

Oxford Instruments plc Report and Financial Statements 201919 Trade and other receivables

2018
£m

Trade receivables								
67.4

62.8

(2.7)

(1.4)

Net trade receivables								
64.7

61.4

Prepayments								
3.6

3.7

Less provision for impairment of receivables						Accrued income								
2.4

2.3

Other receivables								
7.6

5.9

									
78.3

73.3

Strategic Report									2019									
£mTrade receivables are non-interest-bearing. Standard credit terms provided to customers differ according to business and country and are typicallybetween 30 and 60 days.
Other receivables includes £1.1m (2018: £1.2m) due from the Group’s associated undertaking.
The maximum exposure to credit risk for trade and other receivables by geographic region was:									2019									
£m

2018
£m

UK									
4.8

8.5

China								
13.4

14.0
9.6
14.9

Germany								
5.2

3.5

Rest of Europe								
11.6

12.1

Rest of Asia								
4.7

6.1

Rest of World								
1.9

2.3

Total								
75.0

71.0

									2019									
£m

2018
£m

Current (not overdue)								
49.4

46.9

13.8
Less than 31 days overdue								

12.6

6.6

7.2

More than 90 days overdue							
5.2

4.3

									
75.0

71.0

More than 30 days but less than 91 days overdue						Financial Statements

The ageing of financial assets comprising net trade receivables and other receivables at the reporting date was:GovernanceJapan								
12.8USA								20.6In 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:									2019									
£m

2018
£m

Balance at start of year							

1.4

2.4

Increase/(decrease) in allowance						

1.3

(1.0)

Balance at end of year							

2.7

1.4

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.
Long-term receivables of £0.3m (2018: £1.4m) relate to amounts due from the Group’s associated undertaking.
									2019									
£m

2018
£m

Cash balances								
35.2

20.7

35.2

20.7

Cash and cash equivalents in the Consolidated Statement of Cash Flows					All cash and cash equivalents are available for use by the Group.

139

Company Information

20 Cash and cash equivalents

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019
21 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.
In common with a number of other companies, the Group has decided that the additional costs of meeting the extensive documentation
requirements of IFRS 9 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 of forward
contracts equivalent to 80% (2018: 80%) of the exposure expected to arise over the following twelve months. The remaining 20% is sold on the
spot market. The fair value of outstanding currency contracts recognised as a liability as at 31 March 2019 amount to £1.1m (2018: £0.4m) andthose recognised as an asset amount to £1.1m (2018: £2.4m).
Movements in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Income immediately. However, inorder to facilitate a more meaningful comparison of the Group’s performance year-on-year, the elements of these movements that relate to hedges
in respect of future sales are treated as an adjusting item in the calculation of adjusted earnings (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 Income ofoverseas subsidiaries.

Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of interest and also the interest cash flowrisk that 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 2019 are set out in Note 24.

Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets such as cash
balances, derivative financial instruments, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables
and cash balances. The amounts recognised in the Consolidated Statement of Financial Position are net of appropriate allowances for doubtfulreceivables, 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 tradereceivables. 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 andthe maximum amount which may be invested with each institution within a particular category. Accordingly, the Group’s associated credit risk
is limited. The Group has no significant concentration of credit risk. The Group’s maximum exposure to credit risk is represented by the carrying
amount of each financial asset, including derivative financial instruments, in the Group Consolidated Statement of Financial Position.

140

Oxford Instruments plc Report and Financial Statements 2019

Exposure to credit risk									2019									
£m

2018
£m

Long-term receivables								
0.3

1.4

Trade receivables								
64.7

61.4

Other receivables								
10.0

8.2

Cash and cash equivalents								
35.2

20.7

Forward exchange contracts							
1.1

2.4

									
111.3

94.1

Strategic Report

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2019 was£111.3m (2018: £94.1m).

The maximum exposure to credit risk for trade receivables is discussed in Note 19.
Other receivables include £3.3m (2018: £2.9m) in respect of VAT and similar taxes which are not past due date.

Capital management
The Board considers capital to comprise share capital, reserves and the net cash or net debt position of the Company. The Company was in a net
cash position at the year end. Total capital at the end of the current year totalled £195.5m (2018: £199.3m).

Each year the Board carefully considers the appropriate level of dividend payments. In doing this, the Board looks to increase dividends in linewith underlying earnings, although the Board will also take into account other considerations in their decision-making process. The Board
does not have a policy to pay a fixed dividend yield or to maintain a fixed rate of dividend cover but assesses both of these metrics in line withsustained earnings growth.

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 12),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.

Financial Statements

As set out in the Chief Executive’s Review, the Group will actively manage its portfolio of businesses and products, selecting those markets withlong-term growth drivers where we can maintain or grow leading positions. We will focus on those markets where nanotechnology has thepotential to address some of the world’s most complex and pressing challenges and where we can deliver unique solutions and service excellence.
In line with the objective of maintaining a balance between borrowings and equity, the Group would seek to finance organic growth (e.g. throughinvestment in Research and Development) and smaller “bolt-on” acquisitions from operating cash flow, thus maintaining balance sheet efficiency.
Larger acquisitions would be financed either by equity or a mixture of equity and debt so as to ensure the Group has a manageable ratio of net
debt to EBITDA.

Governance

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 well inside
any covenants the Group has with lenders. The Group maintains the right to purchase its own shares in the market; the timing of these purchases
would depend on market prices. Buy and sell decisions are made on a specific transaction basis by the Board.

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.

Company Information

141

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201922 Financial instruments
Fair values of financial assets and liabilities
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is areasonable approximation of fair value.
2019
		
		
						
Fair
Carrying
Fair						
value
amountvalue						
hierarchy
£m
£m

2018
Carrying
amount
£m

Fair
value
£m

Assets carried at amortised cost					Long-term receivables						0.3		1.4
Trade receivables						64.7		61.4
Other receivables						10.0		8.2
Cash and cash equivalents						35.2		20.7
Assets carried at fair value					Derivative financial instruments:					– Foreign currency contracts				

2

1.1

1.1

2.4

2.4

(1.1)

(0.4)

(0.4)

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

2

(1.1)

Liabilities carried at amortised cost					Trade and other payables						(65.7)		(58.1)
Borrowings						(28.5)		(40.4)
Lease payables						(9.0)		—The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the above table.

Derivative financial instruments
Derivative financial instruments are marked-to-market using 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 to befinancial liabilities.

Lease payables
The lease liability is measured at amortised cost using the effective interest method.

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); and• Level 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.

142

Oxford Instruments plc Report and Financial Statements 2019

Maturity of financial liabilities
Contractual
cash flows£m

Due within
one year£m

Due one to
five years£m

Due more than
five years
£m

65.7

65.7

65.7

—

—

Foreign exchange contracts					
1.1

1.1

1.1

—

—

Borrowings					
28.5

28.5

0.6

27.9

—

Lease payables					
9.0

9.6

3.4

5.9

0.3

104.3

104.9

70.8

33.8

0.3

							Carrying							amount31 March 2018						£mContractual
cash flows£m

Due within
one year£m

Due one to
five years£mTrade and other payables						
58.1

58.1

58.1

—

Foreign exchange contracts						
0.4

0.4

0.4

—

Borrowings						
40.4

40.5

1.0

39.5

							98.9

99.0

59.5

39.5

									Carrying									amount									2019									
£mCarrying
amount2018£m

Trade and other payables										Strategic Report						
Carrying						
amount31 March 2019					£mAt the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:Financial assets								
35.2

20.7

Financial liabilities								—

—Governance

Variable rate instruments		

Fixed rate instruments		
Financial assets								
1.4

2.6

Financial liabilities								(28.5)(40.4)The Group has estimated the impact on the Consolidated Statement of Income and on equity of the following changes in market conditions at thebalance sheet date:• one percentage point increase in interest rates;• ten percentage point weakening in the value of Sterling against all currencies; and• ten percentage point strengthening in the value of Sterling against all currencies.
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.

Financial Statements

Sensitivity analysis

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

At 31 March 2019			
—

(7.0)

7.0

Impact on equity							
—

5.0

(4.9)

Impact on Consolidated Statement of Income					Impact on Consolidated Statement of Income					

—

(9.1)

9.1

Impact on equity							
—

1.8

(1.8)

1. Of the effect on the Consolidated Statement of Income, £8.0m (2018: £6.1m) would have been recognised on the “mark-to-market” line (Note 1).

143

Company Information

At 31 March 2018 			Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201923 Called up share capital
Issued and fully paid ordinary shares:									2019									Number									of shares

2018
Numberof shares

57,375,604

57,315,916

At the beginning of the year							Issued for cash								—59,68857,375,604

57,375,604

At the end of the year							
2019
		
		
							Number							of shares£m

2018
Numberof shares£m

57,375,604

2.9

Allotted, called up and fully paid				Ordinary shares of 5p each						57,375,604

2.9

The total consideration received from exercise of share options in the year was £0.2m (2018: £0.2m).
The holders of the ordinary shares are entitled to receive dividends as declared, a proportionate amount of capital on a winding up of theCompany and one vote per share at meetings of the Company.

24 Borrowings								Earlier of							Effective repricing date or
Current						interest ratematurity date

2019
£m

2018
£m

Loan Notes – unsecured						

0.6

1.0

									0.61.0								Earlier of							Effective repricing date or
Non-current						interest ratematurity date

2019
£m

2018
£m

Loan Notes – unsecured						

27.9

39.4

									
27.9

39.4

4.36%

4.36%

March 2021

March 2021

The Group’s undrawn committed facilities available at 31 March 2019 were £104.5m, comprising the undrawn portion of the Group’s £104.5m
revolving credit facility. This facility expires on 29 June 2023.
The Group’s uncommitted facilities at 31 March 2019 were £20.3m.
The £0.6m (2018: £1.0m) current Loan Notes balance as at 31 March 2019 represents accrued interest due for payment during April 2019.
A reconciliation of the Group’s borrowings balances is shown below.
										Total										
£mBalance at 1 April 2018									
40.4Repayment of borrowings (cash flow from financing activities)						(11.5)

Interest charged									
1.4
(1.8)
Interest paid									Balance at 31 March 2019								
28.5

144

Oxford Instruments plc Report and Financial Statements 201925 Retirement benefit obligations
Strategic Report

The Group operates defined benefit plans in the UK and the 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:
2019
		
					
UK
USA
Total
UK
					£m
£m
£m
£m

2018
USA
£m

Total
£m

Present value of funded obligations			

309.8

8.1

317.9

297.4

7.4

304.8

Fair value of plan assets				(306.3)(5.1)(311.4)(284.9)(4.6)(289.5)

Recognised liability for defined benefit obligations		

3.5

3.0

6.5

12.5

2.8

15.3

Reconciliation of the opening and closing balances of the present value of the defined benefit obligation
2019
		
				
UK
USA
Total
UK
				
£m
£m
£m
£m

2018
USA
£m

Total
£m

7.4

304.8

304.0

9.0

313.0

0.3

—

0.3

(0.9)

—

(0.9)

Interest on defined benefit obligation		

7.9

0.3

8.2

8.1

0.3

8.4

Benefits paid			(10.1)(0.4)(10.5)(10.7)(1.1)(11.8)

Remeasurement loss/(gain) on obligation		

14.3

0.3

14.6

(3.1)

0.1

(3.0)

Exchange rate adjustment			

—

0.5

0.5

—

(0.9)

(0.9)

Benefit obligation at the end of the year		

309.8

8.1

317.9

297.4

7.4

304.8

USA
£m

Total
£m

Benefit obligation at the beginning of the year

Governance

297.4

Past service cost			

Reconciliation of the opening and closing balances of the fair value of plan assets
2018

Fair value of plan assets at the beginning of the year		

284.9

4.6

289.5

282.5

5.4

287.9

Interest on plan assets				

7.7

0.2

7.9

7.6

0.2

7.8

Contributions by employers			

7.3

0.5

7.8

7.1

0.5

7.6

Benefits paid			(10.1)(0.4)(10.5)(10.7)(1.1)(11.8)

Administrative expenses			

(0.5)

(0.2)

(0.7)

(0.5)

(0.1)

(0.6)

Actual return on assets excluding interest income

17.0

0.1

17.1

(1.1)

0.3

(0.8)

—

0.3

0.3

—

(0.6)

(0.6)

306.3

5.1

311.4

284.9

4.6

289.5

									2019									
£m

2018
£m

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

Financial Statements

2019
		
				
UK
USA
Total
UK
				
£m
£m
£m
£m

Expense recognised in the Consolidated Statement of Income
Total – defined benefit expense							
1.0

0.6

3.3

3.3

									4.33.9Contributions to defined contribution schemes						Company Information

The Group has agreed a basis for deficit recovery payments with the trustees of the UK pension scheme. The annual deficit recovery payment
to the UK scheme was £7.3m (2018: £7.1m) for the financial year, payable through to and including 2026. For the years up to and including
2026, the payment will rise by approximately 3% per annum. The weighted average durations of the UK and US defined benefit obligations at
31 March 2019 were 18 years and 14 years respectively (2018: 18 years and 16 years).

145

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201925 Retirement benefit obligations continued
Expense recognised in the Consolidated Statement of Income continued
The IAS 19 defined benefit pension balance sheet liability includes an allowance of £0.3m for the expected cost of equalising Guaranteed
Minimum Pension (GMP) between males and females.
GMP is a portion of pension that was accrued by individuals who were contracted out of the UK State Second Pension prior to 6 April 1997.
Historically, there was an inequality of benefits between male and female members who have GMP. A High Court case concluded on
26 October 2018 and confirmed that GMPs need to be equalised.
In the prior year, the trustees of the UK defined benefit scheme, in consultation with the Company, reduced its exposure to on-risk assets(a portfolio of market‑focused asset classes, the majority being equities) with a corresponding increase in its liability-driven investments, with theobjective of steering a more stable journey to being fully funded. The pension fund’s gross exposure to on-risk assets fell from 85% to 45%; themajority of transactions required to make this change were completed in February 2018. As a result, the level of risk inherent in the investment
strategy is now significantly lower than previously, in addition to a substantial reduction in funding level volatility.
The Group has considered the requirements of IFRIC 14. The terms of the scheme give the Group the right to recover any surplus assets on thescheme upon wind-up and therefore management has concluded that there is no impact on the amounts recognised in respect of retirement
benefit obligations.
The Group expects to contribute approximately £7.5m to the UK defined benefit plan in the next financial year. The Group is considering, but has
not yet made a final decision on, the closure of the US defined benefit scheme. In the event the scheme is closed, the Group contribution to theplan in the next financial year is expected to be £3.1m.
The pension costs are recorded in the following lines of the Consolidated Statement of Income:									2019									
£m

2018
£m

Cost of sales								
0.9

0.8

0.8
Selling and marketing costs								

0.7Administration and shared services							
1.4

0.8

Research and Development								
0.9

1.0

0.3
Financial expenditure								0.6									4.33.9Remeasurement gains and losses shown in the Consolidated Statement of Comprehensive Income									2019									
£m

2018
£m

Actual return on assets excluding interest income						

17.1

(0.8)

Experience loss on scheme obligations						

(4.1)

(2.8)

Changes in assumptions underlying the present value of scheme obligations:		
– Financial								(14.4)

4.0– Demographic								
3.9

1.8

Cumulative actuarial losses reported in the Consolidated Statement of Comprehensive Income since 1 April 2004, the transition date to IFRS, are£26.8m (2018: £29.3m cumulative actuarial losses).

Sensitivity analysis
The table below shows the sensitivity of the Consolidated Statement of Financial Position to changes in the significant pension assumptions:							Balance at							31 March 2019						
£m

Discount rate(-0.1% p.a.)£m

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

Present value of funded obligations				

309.8

315.3

314.8

322.7

Fair value of plan assets					(306.3)(306.3)(306.3)(306.3)

3.5

9.0

8.5

16.4

Deficit					The valuation of defined benefit liabilities is most sensitive to changes in the discount rate, inflation rate and mortality rate. The sensitivities havebeen calculated by running the liability calculations in full using the alternative assumptions. In each case, only the indicated assumption haschanged by the amount stated. For the inflation sensitivity, the impact on the assumptions that are based on RPI inflation, such as CPI inflationand the inflation-linked pension increases, has been included.

146

Oxford Instruments plc Report and Financial Statements 2019

Defined benefit scheme – UK

					
					
					
					

As at
31 March
2019
%

As at
31 March
2018%

Discount rate				

2.5%

2.7%

Rate of increase in pensions in payment (“3LPI”)		

2.5%

2.5%

Rate of increase in pensions in payment (“5LPI”)		

3.1%

3.0%

Rate of inflation (“CPI”)				

2.1%

2.0%

Mortality – pre and post-retirement			 91% of S2PA tables (93% for females)– males and females				future improvement in line with					
CMI 2018 with 1.25% long-term trend

93% of S2PA tables (96% for females)
future improvement in line withCMI 2017 with 1.25% long-term trend

Strategic Report

A full actuarial valuation of the UK plan was carried out as at 31 March 2018 and has been updated to 31 March 2019 by a qualified independentactuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):

The mortality assumptions imply the following expected future lifetime from age 65:									2019									
years

2018
years

Pre-retirement – males								
23.5

23.9

Pre-retirement – females								
25.4

25.7
22.5
24.1

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

Governance

22.2
Post-retirement – males								Post-retirement – females								23.9The assets in the plan were:
Value at
31 March
2018£mEquities								
65.2

90.8

Corporate and Emerging Market Bonds							
14.3

—

156.5
Gilts								

123.3

9.7
Property								

6.0Insurance‑linked funds								
23.0

24.1

Credit and global loan funds							
0.3

2.1

Hedge funds								
26.7

26.6

Absolute return fixed income fund							
—

5.8

4.3
Liability hedge overlay								

2.5

6.3
Cash 								3.7									
306.3

284.9

Financial Statements								Value at								31 March2019																	
£mWhere assets have no observable market price a valuation will be provided by the fund manager. The scheme’s investment manager will accept
that valuation if it is within the expected range of performance. Otherwise, the investment manager will query the valuation with the fundmanager. Complex financial instruments are valued by the scheme’s investment manager who uses financial models which take as their input
the characteristics of the instrument and observable market data such as swap rates.

Company Information

The UK pension scheme implements a liability hedge strategy which is designed to protect the scheme’s funding level from changes in gilt
yields and inflation expectations. The liability hedge strategy consists of a portfolio of gilts, gilt derivatives, interest rate and inflation swaps.
At 31 March 2019, the liability hedge strategy fully covered the scheme’s liabilities from changes in gilt yields and inflation expectations.
However, this is not a precise match for the IAS 19 defined benefit obligation, which is based on corporate bond yields rather than gilt yields.

147

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201925 Retirement benefit obligations continued
Defined benefit scheme – USA
A full actuarial valuation of the USA plan was carried out as at 31 December 2014, which for reporting purposes has been updated to
31 March 2019 by a qualified independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):						
						
						As at
31 March 2019%As at
31 March 2018%

Discount rate				

3.70%

3.95%

Rate of increase to pensions in payment			

0.00%

0.00%

Rate of inflation 				

2.25%

2.00%

Mortality – pre and post-retirement			
RP-2014 with projection						
Scale MP-2018 (fully generational),
					male and female

RP-2014 with projection
Scale MP-2017 (fully generational),
male and female

The assets in the plan were:									Value at									31 March									2019									
£mValue at
31 March
2018£mEquities								
2.2

2.0

Bonds								
2.8

2.3

Other								
0.1

0.3

									5.14.6Defined contribution schemes
In the UK, employees are offered participation in the defined contribution Oxford Instruments Stakeholder Plan. The Company contribution
rate and employee contribution rate varies between grades and whether the individual had previously been in the defined benefit scheme.
The Company contribution ranges between 4% and 14% of base salary. The Group also operates a 401k defined distribution plan in the USA.
Details of pension schemes contributions made in respect of Directors can be found in the Remuneration Report on pages 80 to 99.

26 Trade and other payables								2019									
£m

2018
£m

Trade payables 								
26.1

25.0

Customer deposits								
38.5

15.0

Social security and other taxes							
2.6

2.9

Accrued expenses and deferred income							
43.7

38.1

Other payables								
6.0

4.5

									
116.9

85.5

148

Oxford Instruments plc Report and Financial Statements 201927 Provisions for other liabilities and charges

Balance at 1 April 2018						

Other
£m

Total
£m

11.7

4.1

3.2

4.4

Provisions made during the year					
1.5

0.1

0.6

2.2

Provisions used during the year					
(1.4)

—

(1.8)

(3.2)

Provisions released during the year					
(0.5)

(1.5)

(0.3)

(2.3)

Effect of movement in foreign exchange				
0.1

—

0.2

0.3

Balance at 31 March 2019					

3.8

1.8

3.1

8.7

Amounts falling due after more than one year				

—

—

1.1

1.1

Amounts falling due before one year					

3.8

1.8

2.0

7.6

Strategic Report								IP-related							Warranties
claims							£m£m

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 typically apply for a twelve-month period. The provision represents
the Directors’ best estimate of the Group’s liability based on past experience.

Intellectual Property‑related claims

Other provisions relate to various obligations including obligations in respect of onerous leases, onerous contracts and dilapidation provisions.

Financial Statements

Other provisions

Governance

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 the Directors’ best estimate of the likely outcome. The timing of utilisation of theseprovisions is frequently uncertain, reflecting the complexity of issues and the outcome of various court proceedings and negotiations. Contractualand other provisions represent the Directors’ best estimate of the cost of settling future obligations and reflect the Directors’ assessment of thelikely settlement method, which may change over time. However, no provision is made for proceedings which have been, or might be, brought byother parties against Group companies unless the Directors, taking into account professional advice received, assess that it is more likely than notthat such proceedings may be successful. The Group’s expectation is that the other provisions are likely to be utilised within a twelve-month period.
In respect of the provision for IP-related claims the range of possible outcomes is between £nil and £2.1m. As such, there could be a material
effect on the Financial Statements in the next twelve months should the outcome be different from management’s estimate.

Company Information

149

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201928 Leases
Leases under which the Group acts as lessee
The Group leases assets including land and buildings, vehicles and machinery. Information about leases for which the Group is a lessee ispresented below.

Right of use assets								Property leases								£mOther leases
£m

Total
£m

10.7

Cost			Balance on adoption of IFRS 16 at 1 April 2018					

9.8

0.9

Additions							
0.6

0.3

0.9

Effect of movements in foreign exchange rates					

0.5

—

0.5

Balance at 31 March 2019						

10.9

1.2

12.1

Depreciation and impairment losses			Balance on adoption of IFRS 16 at 1 April 2018					

—

—

—

Depreciation charge for the year						

2.9

0.4

3.3

Balance at 31 March 2019						

2.9

0.4

3.3

At 1 April 2018							
9.8

0.9

10.7

At 31 March 2019							
8.0

0.8

8.8

Carrying amounts			

Lease liabilities										Total										
£mBalance on adoption of IFRS 16 at 1 April 2018							10.7Additions									
0.9Payments made (cash flows from financing activities)						
(3.2)
0.2
Interest charge									Effect of movement in foreign exchange rates							
0.4Balance at 31 March 2019								
9.0Amounts falling due after more than one year							

6.0Amounts falling due before one year								
3.0The maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented below:										2019										£mLess than one year									
3.4One to five years									
5.9More than five years									
0.3Total undiscounted lease liabilities at 31 March 2019							

9.6Lease liabilities included in the Statement of Financial Position at 31 March 2019					

9.0Amounts falling due after more than one year							

6.0Amounts falling due before one year								
3.0Amounts recognised in profit or loss										2019										
£mInterest on lease liabilities									(0.2)
Expenses on short‑term leases not capitalised							(0.1)

Expenses on low‑value asset leases not capitalised							

—Income from sub-letting right of use assets							

—

150Oxford Instruments plc Report and Financial Statements 2019

Amounts recognised in Statement of Cash Flows
Payments made in respect of lease liabilities				

			
(3.2)

Leases under which the Group acts as lessor
Lease income from lease contracts in which the Group acts as a lessor is as below:

Strategic Report										2019										£m										2019										
£m

6.4Operating lease income								Operating leases under which the Group acts as lessor relate to medical imaging equipment available for rent on typically short-term agreements.
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date.
								2019									
£m

2018
£m

Within one year								
1.9

2.2

Between one and five years							
0.5

0.3

Over five years								—

—									2.42.5During the year ended 31 March 2019, the Group entered into contracts to purchase property, plant and equipment which are expected to besettled in the following financial year for £0.2m (2018: £nil).

30 Contingent liabilities

31 Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed inthis note.
During the current year, members of the Group’s Management Board have taken on new responsibilities following the introduction of the Horizon
strategy. As a result of this, Management Board members are now considered to be key management personnel and their remuneration is includedin the table below.

Financial Statements

In an international group of companies liabilities may arise from time to time as a result of a variety of legal claims and/or fines and penalties
resulting from failure to comply with laws and regulations in areas such as employment, taxation, health and safety, environmental andinternational trade (e.g. export control). In particular, whilst reviewing export control compliance across the Group, the Board has become aware ofa specific area of non-compliance. Management are in the process of investigating this matter, including seeking external legal advice on potential
remedial actions which may include financial penalties. At this stage it is too early to determine whether a settlement is probable and to accurately
quantify it. However, early indications are that if a financial settlement is required it is unlikely to exceed £0.5m.

Governance

29 Capital commitments

The remuneration of key management personnel is as follows:								2019									
£m

2018
£m

Short-term employee benefits							
3.3

3.4

Post-employment benefit								
0.2

0.2

Share-based payment charge							
0.5

0.4

4.0
Total								

4.0Short-term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
During the year, the Group supplied services and materials to, and purchased services and materials from, its associate on an arm’s length basis.
It had the following transactions with its associate during the year:
Purchases£m

Receivables£m

Payables£m

ScientaOmicron GmbH						
—

0.7

1.4

—

							Revenue2018						£mPurchases£m

Receivables£m

Payables£m

ScientaOmicron GmbH						
0.6

—

3.0

—

151

Company Information							Revenue2019						£m

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 201932 Subsequent events
The interim dividend of 3.8 pence per share (total cost £2.2m) was paid after the year end. In addition, on 11 June 2019, the Directors proposeda final dividend of 10.6 pence per ordinary share (total cost £6.1m). The total amount of £6.1m has not been provided for and there are no
income tax consequences.
In April 2019 the UK Tax Tribunal adjudicated on a historical loan arrangement structure. The decision went against the Group and, as a result,a payment of £4.0m was made to HMRC during April 2019. The liability was covered by historical provisions and one-off credits.
On 24 May 2019, a further £1.6m was received by the Group in relation to the finalisation of tax affairs outstanding upon the disposal of its
Industrial Analysis division in the prior year. The impact of this receipt on the results of the Group during the current year is disclosed in Note 7.

33 Exchange rates
The principal exchange rates to Sterling used were:Year‑end rates								
2019

2018

US Dollar								
1.30

1.40

1.16
Euro								1.14Yen								
144

149

Average translation rates 2019							US Dollar

Euro

Yen

April							
1.39

1.14

150

1.36
May							

1.14

148

June							
1.33

1.14

146

July							
1.32

1.13

146

1.30
August							

1.12

144

September							
1.29

1.11

146

October							
1.29

1.13

145

November							
1.28

1.13

144

December							
1.28

1.12

142

January							
1.30

1.13

142

February							
1.31

1.15

145

1.30
March							

1.16

144

Average translation rates 2018							US Dollar

Euro

Yen

April							
1.27

1.18

142

May							
1.29

1.17

143

June							
1.29

1.14

144

July							
1.31

1.13

146

August							
1.30

1.10

143

September							
1.31

1.11

146

1.33
October							

1.13

150

November							
1.32

1.13

149

December							
1.34

1.12

151

1.39
January							

1.13

153

February							
1.41

1.14

151

March							
1.40

1.14

149

152

Oxford Instruments plc Report and Financial Statements 2019

PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2019

2018
£m

Assets			Non-current assets			
Intangible assets							
d

1.6

1.0

Tangible assets							c

0.6

0.6

Right of use assets								0.1

—Investments in subsidiary undertakings						e

321.1

320.9

Debtors							f

0.3

1.4

Deferred tax assets							
h

1.5

1.5

									
325.2

325.4

Strategic Report							 		2019								Notes£mCurrent assets			
Debtors							f

47.9

19.5

Current income tax recoverable							—

0.3Cash at bank and in hand								
15.8

3.6

									
63.7

23.4

388.9
Total assets								348.8Capital and reserves attributable to the Company’s equity Shareholders			
Share capital								
2.9

2.9

Share premium account								
61.7

61.7

Capital redemption reserve 							
0.1

0.1

Other reserves								
7.6

7.6

Profit and loss account								
118.9

99.7

									
191.2

172.0

Non-current liabilities			Long-term loans								
27.9

39.4

Retirement benefit obligations						i

0.8

2.9

Provisions for liabilities 							
h

—

0.4

									
28.7

42.7

Current liabilities			Bank loans and overdrafts								
29.9

32.8

139.1

101.3

Other creditors							g									
169.0

134.1

Total liabilities								
197.7

176.8

Total liabilities and equity							
388.9

348.8

Financial Statements

Liabilities			

Governance

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

Ian Barkshire		 Gavin Hill
Director			Director
Company number: 775598
Company Information

153

Oxford Instruments plc Report and Financial Statements 2019

PARENT COMPANY STATEMENT OF CHANGES IN EQUITYYEAR ENDED 31 MARCH 2019						
Share
				
Share
premium					 capital
account					£m£m

Balance at 31 March 2017				

Capital		
Profitredemption
Other
and loss
reserve
reserves
account
£m
£m
£m

Total
£m

2.9

61.5

0.1

7.6

114.3

186.4

Loss for the year				—

—

—

—

(8.7)

(8.7)

Other comprehensive income: 						Remeasurement of defined benefit liability, net of tax		

—

—

—

—

0.4

0.4

Total comprehensive income for the year			
Proceeds from shares issued 			

—

—

—

—

(8.3)

(8.3)

—

0.2

—

—

—

0.2

Share options awarded to employees			

—

—

—

—

0.7

0.7

Share options awarded to employees of subsidiaries		

—

—

—

—

0.4

0.4

Dividends paid				—

—

—

—

(7.4)

(7.4)

2.9

61.7

0.1

7.6

99.7

172.0

—
Profit for the year				

—

—

—

25.2

25.2

Balance at 31 March 2018				

Other comprehensive income: 						Remeasurement of defined benefit liability, net of tax

—

—

—

—

0.6

0.6

Total comprehensive income for the year		—

—

—

—

25.8

25.8

Proceeds from shares issued 			

—

—

—

—

0.2

0.2

Share options awarded to employees			

—

—

—

—

0.6

0.6

Share options awarded to employees of subsidiaries

—

—

—

—

0.2

0.2

Dividends paid				
—

—

—

—

(7.6)

(7.6)

61.7

0.1

7.6

118.9

191.2

Balance at 31 March 2019			

2.9

Details of issued, authorised and allotted share capital are included in Note 23 to 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 12 to the Group Financial Statements.
Details of the Group’s defined benefit pension scheme are included in Note 25 to the Group Financial Statements.
Details of dividends paid are included in Note 14 to the Group Financial Statements.
Other reserves relates to premium on shares issued as part of acquisitions made in the year to 31 March 1987.

154

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2019(a) Accounting policies
Strategic Report

Oxford Instruments plc is a company incorporated and domiciled in the UK.
These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
The amendments to FRS 101 (2013/14 Cycle) issued in July 2015 and effective immediately have been applied.
In preparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements of International
Financial Reporting Standards as adopted by the EU (“Adopted IFRS”), but makes amendments where necessary in order to comply with theCompanies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
In these Financial Statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:• a cash flow statement and related notes;• comparative period reconciliations for share capital, tangible fixed assets, intangible assets and investment properties;• disclosures in respect of transactions with wholly owned subsidiaries;• disclosures in respect of capital management;• the effects of new but not yet effective IFRS; and• disclosures in respect of the compensation of key management personnel.
As the consolidated Financial Statements of Oxford Instruments plc include the equivalent disclosures, the Company has also taken the exemptions
under FRS 101 available in respect of the following disclosures:

Governance• IFRS 2 Share-based Payments in respect of Group settled share-based payments; and• certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Financial
Statements.

Measurement convention
The Financial Statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value:
derivative financial instruments.
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
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.

Financial Statements

Going concern

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;
the initial 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 Balance Sheet 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.

Non-derivative financial instruments
Company Information

Non-derivative financial instruments comprise trade and other debtors, cash and cash equivalents, loans and borrowings, and trade and othercreditors.

Trade and other debtors
Trade and other debtors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using theeffective interest method, less any impairment losses.

Trade and other creditors
Trade and other creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using theeffective interest method.

155

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019(a) Accounting policies continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.

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 using the effective interest method, less any impairment losses. Details of the Group’s interest-bearing
borrowings are included in Note 24 to the Group Financial Statements.

Intra-Group lending
The Company has lent funds to and from its UK subsidiaries on interest-free terms. These amounts are repayable on demand. They are stated atcost less any impairment losses.

Derivative financial instruments
The Company’s accounting policies for financial instruments are the same as the Group’s accounting policies under IFRS, namely IAS 32 Financial
Instruments: Presentation, IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. These policies are set out in accounting policy“(e) Financial instruments” in the Group accounting policies, on page 118.

Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of tangible fixed assets have different useful lives, they are accounted for as separate items of tangible fixed assets.
Depreciation is charged to the profit and loss account on a straight-line basis over the estimated useful lives of each part of an item of tangible
fixed assets. The estimated useful lives are as follows:• Computer equipment

4 years• Motor vehicles 		

4 years

Depreciation methods, useful lives and residual values are reviewed at each Balance Sheet date.

Intangible assets
Intangible assets represents internally developed software. Amortisation is charged to the profit and loss account on a straight‑line basis over theestimated useful lives of intangible assets unless such lives are indefinite. Intangible assets are amortised from the date they are available for use.
The estimated useful lives are as follows:• Computer software

10 years

Impairment excluding deferred tax assets
Financial assets (including trade and other debtors)
The Company assesses at each Balance Sheet reporting date whether there is any objective evidence that a financial asset, or group of financial
assets, is impaired. A financial asset, or group of financial assets, is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events that have occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an
impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessmentsof the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individuallyare grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the “cash generating unit” or “CGU”).
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses arerecognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill
allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro-rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.

156

Oxford Instruments plc Report and Financial Statements 2019

A defined contribution plan is a post‑employment benefit plan under which the Company pays fixed contributions into a separate entity and will
have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised
as an expense in the profit and loss account in the periods during which services are rendered by employees.

Defined benefit plans

Strategic Report

Employee benefits
Defined contribution plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect ofdefined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in thecurrent and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets (at bid price) are deducted.
The Company determines the net interest on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure
the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(asset).
The discount rate is the yield at the reporting date on bonds that have a credit rating of at least AA that have maturity dates approximating theterms of the Company’s obligations and that are denominated in the currency in which the benefits are expected to be paid.
Remeasurements arising from defined benefit plans comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effectof the asset ceiling (if any, excluding interest). The Company recognises them immediately in other comprehensive income and all other expenses
related to defined benefit plans in employee benefit expenses in profit or loss.

The Company is the sponsoring employer of a Group-wide defined benefit pension plan. The net defined benefit cost of the plans is charged toparticipating entities on the basis of the proportion of scheme membership attributable to each legal entity at the reporting date. The contributions
payable by the participating entities are determined using an agreed ratio which has been in place for approximately ten years.

GovernanceThe calculation of the defined benefit obligations is performed by a qualified actuary using the projected unit credit method. When the calculation
results in a benefit to the Company, the recognised asset is limited to the present value of benefits available in the form of any future refunds fromthe plan or reductions in future contributions and takes into account the adverse effect of any minimum funding requirements.

Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability
is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal orconstructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Termination benefits are recognised as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to aformal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer
made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Company has madean offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits
are payable more than twelve months after the reporting date, then they are discounted to their present value.

Share-based payment transactions

Financial Statements

Termination benefits

The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increasein equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured
using an option valuation model, taking into account the terms and conditions upon which the awards were granted. The amount recognised as
an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be
met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non‑market
performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in its individual Financial Statements,
an increase in the cost of investment in its subsidiaries equivalent to the equity settled share-based payment charge recognised in its consolidated
Financial Statements with the corresponding credit being recognised directly in equity. Amounts recharged to the subsidiary are recognised as a
reduction in the cost of investment in subsidiary. If the amount recharged exceeds the increase in the cost of investment the excess is recognised asa dividend.
Company Information

Own shares held by ESOP trust
Transactions of the Company-sponsored ESOP trust are treated as being those of the Company and are therefore reflected in the Company
Financial Statements. In particular, the trust’s purchases and sales of shares in the Company are debited and credited directly to equity.

157

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019(a) Accounting policies continued
Provisions
A provision is recognised in the Balance Sheet when the Company has a present legal or constructive obligation as a result of a past event, thatcan be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determinedby discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability. The timing of the 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.

LeasesThe Company has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated andcontinues to be reported under IAS 17 and IFRIC 4.

Leases under which the Company acts as lessee
The Company recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured atcost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any
initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received.
The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of theuseful life of the right of use asset or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis
as those of property and equipment. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using
the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, theCompany uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise fixed payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable undera residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset, or isrecorded in profit or loss if the carrying amount of the right of use asset has been reduced to zero.

Short-term leases and leases of low-value assets
The Company has elected not to recognise right of use assets and lease liabilities for short-term leases of machinery that have a lease term of
twelve months or less and leases of low-value assets, including IT equipment. The Company recognises the lease payments associated with theseleases as an expense on a straight-line basis over the lease term.

Under IAS 17
In the comparative period the Company did not have any leases which were classified as finance leases under IAS 17. All leased assets wereclassified as operating leases and were not recognised in the Company’s Statement of Financial Position. Payments made under operating leases
were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral part of
the total lease expense, over the term of the lease.

Foreign currencies
The Company enters into forward exchange contracts and options to mitigate the currency exposures that arise on sales and purchases
denominated in foreign currencies. Transactions in foreign currencies are converted into Sterling at the rate ruling on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at the Balance Sheet date or at the appropriate
forward contract rates. Exchange profits and losses arising from the above are dealt with in the profit and loss account.

Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.

Dividends on shares presented within Shareholders’ funds
Dividends unpaid at the Balance Sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised
and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the Financial
Statements.

Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company
considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract as acontingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
158

Oxford Instruments plc Report and Financial Statements 2019(b) Profit for the year
Strategic Report

The Company’s profit for the financial year was £25.2m (2018: loss of £8.7m). Other comprehensive income in the year was £0.5m (2018: £0.4m).
The expense will not subsequently be reclassified to profit or loss.
The auditor’s remuneration comprised £199,000 (2018: £140,000) for the statutory audit.
The average number of people employed by the Company (including Directors) during the year was 46 (2018: 47). All of these individuals wereinvolved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:								2019									
£m

2018
£m

Wages and salaries								
5.0

3.9

Social security costs								
0.9

0.6

Other pension costs								
0.2

0.1

									6.14.6The share-based payment charge was £0.6m (2018: charge of £0.7m). Details of the Group’s share option schemes are included in Note 12 to theGroup Financial Statements.
Full details of the emoluments paid to Directors can be found in the Remuneration Report on pages 80 to 99.
								Computer									equipment									
£m

Total
£m

Cost		
Balance at 1 April 2018								
2.0

2.0

Additions								
0.3

0.3

2.3
Balance at 31 March 2019							

2.3Governance(c) Tangible fixed assets

Depreciation		
Balance at 1 April 2018								
1.4

1.4
0.3

Balance at 31 March 2019							
1.7

1.7

Net book value		At 31 March 2018								
0.6

0.6

At 31 March 2019								
0.6

0.6

Financial Statements

Charge for year								0.3(d) Intangible assets									Software										
£m

CostBalance at 1 April 2018									
3.3Additions									
0.9Balance at 31 March 2019								
4.2Depreciation and impairment losses
Balance at 1 April 2018									
2.3Charge for year									
0.3Balance at 31 March 2019								
2.6Net book value
1.6
At 31 March 2019									

159Company Information

At 31 March 2018									
1.0Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019(e) Investments										Investments										in subsidiary										undertakings										
£mCost or valuation
Balance at 1 April 2018									339.6Expense in respect of share options transferred to subsidiary undertakings					

0.2Balance at 31 March 2019								339.8Impairment
Balance at 1 April 2018 and 31 March 2019							18.7Net book value
At 31 March 2018									
320.9
321.1
At 31 March 2019									The following is a full list of the subsidiaries and associates and their country of registration as at 31 March 2019. This information is provided inaccordance with Section 409 of the Companies Act 2006.
Unless otherwise stated, entities listed below are wholly owned by either the Company or a subsidiary of the Company.
		Subsidiaries

Registeredoffice addressCountry ofincorporation

NanoTechnology Tools Limited5

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments Industrial Products Holdings Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments Industrial Products Limited

Tubney Woods, Abingdon, Oxon, OX13 5QXUK

RMG Technology Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments NanoAnalysis Limited5

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments NanoTechnology Tools Holdings Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Andor Technology Limited

7 Millennium Way, Springvale Business Park, Belfast, NI, BT12 7AL

UK

Andor U.S. Holdings, Inc

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

USA

Andor Technology Inc.1

300 Baker Avenue, Suite 150, Concord MA 01742

USA

Andor Technology KK2IS Building, 3-32-42 Higashi-Shinagawa, Shinagawa-ku, Tokyo, 140-0002

Japan

Bitplane AG

Badenerstrasse 682, 8048, Zürich

Switzerland

Bitplane Inc

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

USA

199 Bay Street, Suite 5300, Commerce Court West, Toronto ON M5L 1B9

CanadaSpectral Applied Research Inc
Oxford Instruments Molecular Biotools Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments NanoTechnology Tools Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments AFM Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments Plasma Technology Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments Overseas Holdings Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Floor 1, Building 60, 461 Hongcao Road, Xuhui District, Shanghai

China

Oxford Instruments Technologies Oy

Technopolis Innopoli 1, Tekniikantie12, Espoo, 02150

FinlandOxford Instruments Holdings 2013 Inc

300 Baker Avenue, Suite 150, Concord MA 01742

USA

Oxford Instruments Technology (Shanghai) Co. Limited

Oxford Instruments America Inc

300 Baker Avenue, Suite 150, Concord MA 01742

USA

Oxford Instruments Service LLC

300 Baker Avenue, Suite 150, Concord MA 01742

USA

Oxford Instruments Asylum Research Inc

6310 Hollister Avenue, Santa Barbara, CA 93117

USA

Asylum Research UK Limited
Oxford Instruments KK

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

IS Building, 3-32-42 Higashi-Shinagawa, Shinagawa-ku, Tokyo, 140-0002

Japan

Oxford Instruments Overseas Marketing Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments X-Ray Technology Inc

360 El Pueblo Road, Scotts Valley, CA 95066

USA

Oxford Instruments Holdings Europe Limited

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

160

Oxford Instruments plc Report and Financial Statements 2019

Registeredoffice addressCountry ofincorporation

Oxford Instruments Holdings GmbH

Borsigstraße 15a, 65205, Wiesbaden

Germany

Oxford Instruments GmbH

Borsigstraße 15a, 65205, Wiesbaden

Germany

Arenavägen 41, 10th Floor, 121 77 Johanneshov

SwedenTubney Woods, Abingdon, Oxon, OX13 5QX

UK

Oxford Instruments Nordiska Ab
Oxford Instruments Overseas Holdings 2008 Limited
Oxford Instruments UK 2013 Limited
Oxford Instruments Funding Ltd
Oxford Instruments Private Limited		

Tubney Woods, Abingdon, Oxon, OX13 5QX

UK

Frances House, Sir William Place, St Peter Port, GY1 4HQ

Guernsey3

Messrs Tan Rajah & Cheah, 80 Raffles Place,#58-01 UOB Plaza 1, Singapore, 048624

Oxford Instruments India Private Limited

Strategic Report		Subsidiaries

Singapore

Unit No.11, Marwah’s Complex, Krishanlal Marwah Marg,		Andheri East, Mumbai, Maharashtra, 400 072

India

Oxford Instruments SAS

77 ZA de Montvoisin, 91400 Gometz la Ville

FranceAssociates		
Scienta Scientific AB4ScientaOmicron GmbH

Vallongata 1, 752 28, Uppsala

SwedenGermany

No. 20 Shimokawa Building, 5-30-15, Ota-ku, TokyoJapan

Omicron Nanotechnology Limited4

St James House, Kensington Square, London W8 5HD

UK

240 Saint Paul St, Suite 301, Denver CO 80238

USA

Le Plan d’Aigues, RN 7, 1370 St. Cannat

FranceScientaOmicron Inc.4
Societe Omicron Nanotechnology EURL4
1. Incorporated 11 March 2019.
2. Incorporated 25 December 2018. Merged with Oxford Instruments KK on 1 April 2019.
3. UK tax resident.

Governance

Limburger Straße 75, 65232 Taunusstein

Omicron Nanotechnology Japan, Inc.4

4

4. Year end is 31 December. The Group has a 47% shareholding in these entities.
5. Dissolved 2 April 2019.

Equity owned by the Company represents issued ordinary share capital. All subsidiaries are consolidated in the Group accounts.
								2019									
£m

2018
£m

Amounts falling due after one year:		
Amounts owed by associate undertakings							
0.3

1.4

Amounts falling due within one year:		
43.9

15.2

Amounts owed by associate undertakings							
1.1

1.2

Amounts owed by subsidiary undertakings						Other debtors								
2.1

2.8

Prepayments and accrued income							
0.8

0.3

									
48.2

20.9

Financial Statements(f) Debtors

Company Information

161

Oxford Instruments plc Report and Financial Statements 2019

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUEDYEAR ENDED 31 MARCH 2019(g) Creditors								2019									
£m

2018
£m

Trade creditors								
0.7

0.4

Amounts owed to subsidiary undertakings							
131.8

95.4

1.2

1.6

Tax, social security and sales‑related taxes							Other financial liabilities								
1.3

1.4

Accruals and deferred income							
4.1

2.5

									
139.1

101.3

(h) Provisions for liabilities									Restructuring										provision

Balance at 1 April 2018									
0.4Provisions used during the year 								(0.4)
Balance at 31 March 2019								—Deferred tax asset								2019									
£m

2018
£m

Balance at 1 April								
1.5

1.7

Profit and loss (debit)/credit								
—

(0.1)

Other comprehensive income debit							
—

(0.1)

Balance at 31 March								
1.5

1.5

The amounts of deferred tax assets are as follows:
		Recognised												2019									
£m

2018
£m

Excess of depreciation over corresponding capital allowances				

0.5

0.6

Tax losses							—

—Provisions							0.1

—Employee benefits – pension and share schemes					

0.9

0.9

								1.51.5The Company recognises deferred tax assets only to the extent that there will be suitable taxable profits from which the future reversal of theunderlying timing differences can be deducted.
Deferred tax assets have not been recognised in respect of the following items:								2019									
£m

2018
£m

Tax losses								—0.5									
—0.5A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further
reductions to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015, and an
additional reduction to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Company’s future
current tax charge accordingly. The UK deferred asset liability at 31 March 2019 has been calculated based on those rates.

162

Oxford Instruments plc Report and Financial Statements 2019(i) Pension commitments
The Company and its employees contribute to the Oxford Instruments Pension Scheme (“the Scheme”), a defined benefit scheme, which offers
pensions in retirement and death in service benefit to members. Pension benefits are related to members’ final salary at retirement and their lengthof service.
The Scheme was closed to new members from 1 April 2001. Since this date, new employees have been invited to join the Oxford Instruments
Stakeholder Plan, a defined contribution scheme. The Scheme is also closed to future accrual.

Strategic Report

Defined benefit scheme

The Oxford Instruments Group policy for charging net defined benefit costs to participating entities states that member costs are charged directly
to a participating company if that member is also an employee of said participating company. The costs of scheme members that are no longer
employees of any participating company or directly affiliated with a Group company are allocated on the basis of the participating company’s
scheme members as a percentage of the total scheme members that are also employees of participating companies.
The policy for determining contributions to be paid by participating companies is the same as that for charging net defined benefit costs.
Details of the scheme, its most recent actuarial valuation and its funding can be found in Note 25 to the Group Financial Statements.
The contributions paid by the Company to the Oxford Instruments Pension Scheme were £1.7m (2018: £1.6m).

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 £0.2m (2018: £0.1m). There were no outstanding contributions at the end of the financial year(2018: £nil).

The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to the pension scheme. The guarantee
is for the excess of 105% of the liabilities of the scheme, calculated on the basis of Section 179 of the Pensions Act 2004, over the assets of thescheme.

Governance(j) Guarantees

The Company and its UK subsidiaries have entered into a cross-guarantee for £10.0m (2018: £10.0m) in respect of overdraft facilities, of which£nil (2018: £nil) was drawn at the year end.

(k) Commitments
Financial Statements

At 31 March 2019, capital commitments contracted were £nil (2018: £nil) and authorised were £nil (2018: £nil).

(l) Subsequent events
See Note 32 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 Remuneration Report on pages 80 to 99. There were no other significant
transactions with key management personnel in either the current or preceding year.

Company Information

163

Oxford Instruments plc Report and Financial Statements 2019

HISTORICAL FINANCIAL SUMMARYAS AT 31 MARCH 2019
2016
£m

2017
£m

2018
£m

2019
£m

Revenue from continuing operations				282.4

270.3

300.2

296.9

333.6

Adjusted operating profit from continuing operations			

36.4

38.0

38.0

46.5

49.7

Other operating income					—

—

—

3.3

—

					
2015
						£m

Consolidated Statement of Income					Contingent consideration deemed no longer payable			

—

4.9

—

—

—

Reversal of acquisition‑related fair value adjustments			

(0.2)

(1.0)

—

—

—

(2.2)
Acquisition‑related costs					

(2.5)

(0.3)

—

—

Loss on disposal of subsidiary undertakings			

—

(0.9)

(0.4)

—

—

Contingent consideration – further amount deemed payable		

(6.8)

—

—

—

—

Restructuring costs					 (8.7)

(2.9)

(0.4)

(1.2)

—

Restructuring costs – relating to associate				

—

(1.3)

(0.4)

(0.4)

(0.3)

Past service cost on defined benefit pension scheme			

—

—

—

—

(0.3)

Impairment of investment in associate				

—

—

(8.0)

—

—

Share of impairment recognised by associate			

—

—

—

(2.0)

0.6

Impairment of internally generated intangible assets			

—

—

(2.9)

—

—

Impairment of acquired intangibles				——(33.8)——

Amortisation of acquired intangibles				(17.1)(12.7)(12.5)(10.9)(9.6)

Fair value movement on financial derivatives			

(4.8)

(2.7)

1.2

3.1

(1.5)

Operating (loss)/profit from continuing operations			

(3.4)

18.9

(19.5)

38.4

38.6

Net financing costs					 (8.2)

(8.4)

(6.7)

(4.2)

(3.1)

(Loss)/profit before taxation from continuing operations			

(11.6)

10.5(26.2)

34.2

35.5

4.9
Income tax credit/(expense)					

(2.9)

0.7

(14.6)(8.0)(Loss)/profit for the year from continuing operations			

(6.7)

7.6

(25.5)

19.6

27.5

Adjusted profit before tax from continuing operations			

29.2

30.4

31.5

42.3

47.5
24.2

Consolidated Statement of Financial Position					Property, plant and equipment				33.1

35.2

32.5

22.8

Right of use assets					—

—

—

—

8.8

Intangible assets					231.3

220.8

181.0

158.7

152.5

Investment in associate					
—

13.1

3.9

4.1

4.6

Long-term receivables					 —

3.4

3.6

1.4

0.3

Deferred and current tax					

14.6

13.9

18.1

3.6

6.4

Inventories					70.8

61.1

53.9

45.9

60.8

Trade and other receivables					90.7

79.0

81.7

73.9

74.7

(126.5)(108.2)(98.0)(84.1)(115.1)

Lease payables					—

—

—

—

(3.0)

314.0

318.3

276.7

226.3

214.2
35.2

Trade and other payables					Net assets excluding net cash				Cash and cash equivalents					25.1

21.8

27.2

20.7

Bank overdrafts					
—

(1.4)

(0.7)

—

—

Bank borrowings					(144.0)(148.6)(135.8)(40.4)(28.5)Net (debt)/cash					(118.9)(128.2)(109.3)(19.7)

6.7

Lease payables					—

—

—

—

(6.0)

Provisions					(16.1)(12.1)(9.8)(11.7)(8.7)

Retirement benefit obligations				 (53.5)(35.0)(25.1)(15.3)(6.5)

Net assets employed/capital and reserves attributable
to the Company’s equity holders				

143.0

132.5

179.6

199.7

164

125.5

Oxford Instruments plc Report and Financial Statements 2019

2016
£m

2017
£m

2018
£m

2019
£m

44.1

Cash flows from continuing operations					Net cash from operating activities				

17.9

34.4

27.4

27.5

Net cash (used in)/generated from investing activities		

(11.7)(35.2)

(6.6)

68.7

(8.4)

Net cash used in financing activities				(19.8)(6.0)(20.2)(104.0)(22.1)Net (decrease)/increase in cash equivalents from continuing operations		

(13.6)

(6.8)

0.6

(7.8)

13.6

						pence

pence

pence

pence

pence

Strategic Report						2015						£m

Per ordinary share					Earnings – continuing					(11.7)

13.1(44.7)

34.3

48.1

Adjusted earnings1					41.2

41.0

41.5

56.3

64.9

Dividends					13.0

13.0

13.0

13.3

14.4

2,077

1,974

1,642

1,578

Employees					Average number of employees				2,420

1. 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.

Governance
Financial Statements
Company Information

165

Oxford Instruments plc Report and Financial Statements 2019

OXFORD INSTRUMENTS DIRECTORY

Company/address		

Country

Telephone

Fax

Email

UK

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

info.oiplc@oxinst.com

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

Materials & Characterisation
Oxford Instruments NanoAnalysis
Halifax Road, High Wycombe,
Buckinghamshire HP12 3SE, UK

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

nanoanalysis@oxinst.com

Arenavägen 41, 10th floor,
121 7 Johanneshov, Sweden

Systems for materials
analysis at the nanoscale

Sweden+46 8 5448 1550

+46 8 5448 1558

nordiska@oxinst.com

Systems for materials
analysis at the nanoscale

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

+1 (805) 696 6444

sba.sales@oxinst.com

Borsigstraße 15A,
65205 Wiesbaden, Germany		

Germany+49 6122 9370

+49 621 762117 11

sba.de.sales@oxinst.com

Room 304, Building 52, No. 195,
Section 4, ZhongXing Road,
ZhuDong Township, XinZhu County,
310 Taiwan		Taiwan+886 3 5788696+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

Tools for nanotechnology
fabricationUK+44 (0)1934 837000+44 (0)1934 837001

plasma@oxinst.com

Scientific imaging cameras,
spectroscopy solutions
and microscopy systemsUK+44 (0)28 9023 7126

+44 (0)28 9031 0792

info@andor.com

Oxford Instruments
Plasma Technology
North End, Yatton,
Bristol BS49 4AP, UK

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

Badenerstrasse 682, 		
CH-8048 Zürich		

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

info@bitplane.com

2 East Beaver Creek Road, 		Building 2, Richmond Hill,
ON L3B 2N3, Canada		

Canada+1 (905) 326 5041

info@spectral.ca+1 (905) 326 5040

Oxford Instruments NanoScience& Magnetic Resonance
Tubney Woods, Abingdon,
Oxfordshire OX13 5QX, UK

Advanced tools for				applied researchUK+44 (0)1865 393200+44 (0)1865 393333

nanoscience@oxinst.com
magres@oxinst.com

X-ray tubes and detectors

xray-sales@oxinst.com

Oxford X-Ray Technology
360 El Pueblo Road,
Scotts Valley, CA 95066, USAUSA+1 (831) 439 9729

+1 (831) 439 6051

Service & Healthcare
OiService CT & MR
740 S. Powerline Road, 					Suite E, Deerfield Beach, 					
USA+1 (954) 596 4945
+1 (954) 596 4946
Florida, 33442		

oiservice@oxinst.com
info@mobileleasing.com
info@medimagingsales.com

64 Union Way, Vacaville, 		CA 95687, USA 		oiservice@oxinst.com

166

USA

+1 (707) 469 1320

+1 (707) 469 1318

Oxford Instruments plc Report and Financial Statements 2019

Company/address		

Country

Fax

Email

USA

+1 (978) 369 9933

+1 (978) 369 8287

info@ma.oxinst.com

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

China

400 678 0609

+86 21 6127 3828

china.info@oxinst.com

Building B2 West,No. 11 West Third Ring North Road,
Haidian District, Beijing, 100085

China

400 678 0609

+86 10 5884 7901

china.info@oxinst.com

Room 3312, Building B3,
Hanxi East Road, NanCun Town,
Panyu District, Guangdong Province,
511446, Guangzhou

China

400 678 0609

+86 20 8478 7349

china.info@oxinst.com

Room 2201B, Central Plaza 1,
No. 8 Shuncheng Street,
Jinjiang District, Chengdu,
Sichuan Province, 610024

China

400 678 0609

+86 28 8620 1871

china.info@oxinst.com

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

czech.info@oxinst.com

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

infofrance@oxinst.com

Germany+49 6122 9370

+49 6122 937100

info-oiplc@oxinst.com

India+91 818 017017+91 224 4253 5110

india@oxinst.com

IS 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

Shin Osaka Sun R Building 10th Floor,
5-8-3 Nishi-Nakajima, Yodogawa,
Osaka, 532-0011, JapanJapan+81 (0)6 7639 1761

+81 (0)3 6732 8937

info.jp@oxinst.com

Republic of Korea+82 2 2008 4500

+82 2 2008 4555

nanoanalysis@oxinst.com

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

russia.info@oxinst.com

Singapore+65 6337 6848

+65 6337 6286

singapore.info@oxinst.com

Taiwan+886 3 5788696+886 3 5789993

taiwan.info@oxinst.com

Strategic Report

Telephone

Regional Sales and Service Offices				
Oxford Instruments/Canada/Latin America
300 Baker Avenue, Suite 150,
Concord, MA 01742, USA
Oxford Instruments Technology, China

Oxford Instruments Czech Republic

GovernanceVelvarska 13, CZ-160 00 Praha,
Czech Republic
Oxford Instruments France
77 ZA de Montvoisin,
91400 Gometz la Ville, France
Oxford Instruments Germany
Borsigstraße 15a, 65205 Wiesbaden,
Germany
Oxford Instruments India

Financial Statements

Plot No. A-279, Ground Floor, Road No. 16A,
Ambica Nagar, Wagle Industrial Estate,Thane (West), 400604
Oxford Instruments Japan

Oxford Instruments Korea
No. 8-S 26, 8F., 10 Chungmin-ro,
Songpa-gu, Seoul 05840, Korea(Republic of)Oxford Instruments Russia
Denisovskiy per. 26, Moscow 105005,
Russian Federation
Oxford Instruments Singapore
10 Ubi Crescent, #04-81 Ubi TechPark
Lobby E, Singapore 408564,
Republic of Singapore
Oxford Instruments Taiwan
2F-1, No. 27, Kuang-Hsin Road, Hsin-Chu
Taiwan 300, Taiwan, R.O.C.

Company Information

167

Oxford Instruments plc Report and Financial Statements 2019

DIRECTORS AND ADVISERS

Honorary President

Auditor

Sir Martin Wood OBE FRS Hon FREng DL

KPMG LLP

Company Secretary

Principal bankers

Susan Johnson-Brett ACISHSBC Bank plc
Santander plc

Company number
Registered in England and Wales
number 775598

Stockbroker

Board Committees

UK solicitors

Audit and Risk

Ashurst LLPMary Waldner, Chairman
Steve Blair
Richard Friend
Thomas Geitner

Nomination
Neil Carson1, Chairman
Steve Blair
Richard Friend
Thomas GeitnerMary Waldner

Remuneration
Thomas Geitner, Chairman
Steve Blair
Neil Carson1
Richard Friend
Mary Waldner

Administration
Any two Directors

1. Neil Carson was appointed on 1 December 2018.

168

JPMorgan Cazenove

US counsel
Wilmer Hale LLPThe paper used in this report is produced using virgin wood fibre from well‑managed forests
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Printed by CPI Colour, an FSC® and ISO 14001 accredited company, who is committed
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Designed and produced bywww.lyonsbennett.com

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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 and registrations. © Oxford Instruments plc, 2019.
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Oxford Instruments plc Report and Financial Statements 2019