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Oxford Instruments plc

Half-year Report for the six months
ended 30 September 2020

Our Purpose
Our core purpose is to support our customers in addressing
some of the world’s most pressing challenges, enabling agreener economy, increased connectivity, improved health,and leaps in scientific understanding.
We provide high technology products and services to theworld’s leading industrial companies and scientific researchcommunities, exploiting our world-class ability to image,analyse and manipulate materials down to the atomic
and molecular level.

Employee Pride

Respect

Reputation

in working for us andmaking a difference

being inclusive andvaluing our employees

for positive
contribution to society

Being
OxfordInstruments

FTSE 250 constituent

Accountability

Health and Safety

Trustfor our actions

ensuring everyone is safe

our people to deliver

Contents
in this section

Strategic Report

We discuss the progress wehave made over the first half

Our Purpose

pages 1 to 25

Performance Highlights

2

Chief Executive’s Review

4Operations Review

8

Finance Review

18

in this section

Financial Statements

See how we have performedin the first halfPrincipal Risks and Uncertainties

pages 26 to 48

IFC

26

Responsibility Statement of the Directors

27

Condensed Consolidated Statement of Income

28

Condensed Consolidated Statement of Comprehensive Income

30

Condensed Consolidated Statement of Changes in Equity

31

Condensed Consolidated Statement of Financial Position

33

Condensed Consolidated Statement of Cash Flows

34

Notes to the Half-year Financial Statements

36

Independent Review Report

47

Directors and Advisers48

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

Materials & Characterisation
Products and solutions that enable the fabrication andcharacterisation of materials and devices down to the atomic
scale, predominantly supporting customers across applied R&D
as well as the production and manufacture of high technology
products and devices.

Research & Discovery
Provides advanced solutions that create unique environments
and enable imaging and analytical measurements down to themolecular and atomic level, predominantly used in scientificresearch and applied R&D.

Service & Healthcare
Provides customer service and support for our own products.

Oxford Instruments plc Half-year Report for the six months ended 30 September 20201

Performance Highlights
The Group has delivered a resilient first half
performance considering the severity of the
global disruption caused by the covid pandemic.

Revenue1

Adjusted2 operating profit1£140.3m (11.0%) £24.3m(HY 2019: £157.6m)(11.0%)(HY 2019: £26.2m)

At constant currency

Adjusted2 profit before tax1

£23.7m

(7.3%)

Profit before tax1

(8.1%) £20.2m(HY 2019: £25.8m)(HY 2019: £18.9m)

Adjusted2 basic earnings per share1

Dividend per share (half year)

32.8p(HY 2019: —)Cash generated from operations1

Net cash(HY 2019: £15.3m)+6.9%(8.9%) 4.1p

(HY 2019: 36.0p)£23.3m(11.5%)

At constant currency+52.3% £81.4m(HY 2019: £14.2m)

1.

Continuing operations.

2.

Throughout this report we make reference to adjusted numbers. A full definition of adjusted numbers can be found in Note 2 to the Condensed Consolidated
Financial Statements. Where we make reference to constant currency numbers, these are prepared on a month-by-month basis using the translational andtransactional 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 Half-year Report for the six months ended 30 September 2020

Financial highlights:

Operational highlights:• Reported orders up 6.0% to £175.7m (2019: £165.7m),
an increase of 5.9% at constant currency; book-to-billratio of 1.25

• Continued progress with our Horizon strategy;
accelerating market intimacy and the transformationof our customer services• Order book of £204.6m (31 March 2020: £175.0m),
up 16.9% (16.6% at constant currency)• Strong order growth driven by:• Reported and constant currency revenue down by
11.0% to £140.3m, affected by customer site closuresand the introduction of new covid-related working
practices• Adjusted operating profit from continuing operations
down 7.3% at £24.3m (a decline of 11.5% at constantcurrency)• Adjusted operating margin of 17.3% (2019: 16.6%),
sustained at 16.6% constant currency despite therevenue decline• Net cash grew to £81.4m, aided by good operating
cash flow (97% cash conversion). At the end of
September, the Group had total headroom ofapproximately £214m, including the undrawn£105m credit facility• Robust half-year trading performance and strong
order book supports an interim dividend of 4.1p

• Continued demand from both academic andcommercial customers• Buoyant demand in Semiconductor &Communications, Quantum Technology andAdvanced Materials market segments• Good growth in North America and Asia offset
by a modest decline in Europe• Revenues held back by covid-related disruption incustomer installation and acceptances; manufacturing
sites remained operational and are adapting to newcovid-safe working practices• Strong margin performance driven by improved
service profitability, tangible gains from Horizon
strategy and cost controls• Continued investment in our strategic productdevelopment programme; R&D spend maintainedat £12.7m providing a healthy pipeline of future
product launches• Long-term growth drivers for end markets
remain robust

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

3

Chief Executive’s Review
The underlying long-term growth drivers forour chosen markets remain relevant androbust despite the coronavirus.

Introduction
As a global provider of high technology
products and solutions to the world’s
leading industrial companies andscientific research communities,
we recognise our responsibility and rolein the advancement of society, helping
to create a more sustainable future.
Through our core purpose we are
addressing some of the world’s mostpressing challenges, by enabling agreener economy, increased connectivity,
improved health, and leaps in scientificunderstanding. The underlying long-term
growth drivers for our chosen markets
remain relevant and robust despite thecoronavirus.

Ian Barkshire
Chief Executive

The Group has delivered a resilient firsthalf performance considering the severityof the global disruption caused by thecovid pandemic. This disruption has
impacted our customers and end markets
by varying amounts depending on
regional and local responses to containthe virus, which have included reduced
access to customer sites, protracted
administrative processes and travel
restrictions. Whilst we have kept all oursites open during this time, implementing
covid-safe workplaces impacted ourmanufacturing capacity in the first half.

While these factors had a significant
impact on first quarter performance,
we have seen a steady improvement
through the second quarter with
continued positive momentum inorders and revenue through the period.
The combination of prudent cost control
measures, improved commercial
practices, the transformation of ourcustomer service approach and ongoinggains from our operational excellence
programme supported a sustained
operational margin for the Group despite
reduced revenue.
We have continued to make good
progress with the implementation of our
Horizon strategy and have accelerated
certain elements to align our operations
more closely to their end markets.
This has resulted in the transfer of ourMagnetic Resonance business to theMaterials & Characterisation sector,
allowing us to better exploit sales,
marketing and service synergies,
providing increased reach and improved
support for our target customers andapplications.

Summary

4

Materials & Characterisation

Research & Discovery

Service & Healthcare

The sector delivered strong growth inreported orders; covid-related
disruptions negatively impacted
shipments and installations in the
period resulting in a reduction inrevenue, adjusted operating profit
and operating margin.

Revenues and orders for the sector
were significantly impacted by disruptions
caused by the coronavirus in the period.
The disruption was most severe in thefirst quarter with continued improvement
through the second quarter.

In the first half the sector delivered orderand revenue growth driven by increased
demand for support services related toour own products. Revenue from ourJapan MRI service operations werebroadly in line with the previous year.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

We remain focused on addressing abroad and diverse range of attractiveend markets where our key enabling
technologies enable customers toimage, analyse and manipulatematerials down to the atomic andmolecular level, supporting theirlong‑term growth. By addressing theacademic, applied R&D and high-tech
manufacturing segments, we areengaged throughout the technology
cycle and are well positioned to benefit
from each wave of commercialisationand technology disruption.

Results
Reported orders for the Group increasedto £175.7m (2019: £165.7m) up 6.0% (5.9%
at constant currency), reflecting strong
growth from commercial customers andimproved demand from academic andGovernment-funded institutions. Looking
at our end markets, we saw strong
growth across the Semiconductor &Communications, Quantum Technology
and Advanced Materials segments,
partially offset by lower contributions
from the Healthcare & Lifescience,
Energy & Environment and Research &Fundamental Science segments. This inturn led to strong growth in the Materials& Characterisation sector and a modest
decline from our Research & Discovery
sector. The initial phase in thetransformation of our customer service
approach supported good order growth
for the Service & Healthcare sector. At aregional level, good order growth acrossNorth America and Asia was partially
offset by a small decline in orders in
Europe, where customer activity, local
restrictions and reduced access havebeen most pronounced. Within Asia,
orders for China grew by 18% supported
by strong growth within Semiconductorand Advanced Materials end markets.

Revenue for the Group was impacted
throughout the period by covid-related
disruption to the fulfilment of customer
orders. This resulted in a decline inreported and constant currency revenue
to £140.3m (2019: £157.6m) a reduction of
11.0%, with a decline across the Materials& Characterisation and Research &Discovery sectors of 10.9% and 16.4%
respectively. The Service & Healthcare
sector delivered modest growth
supported by increased demand forthe services related to our own products.
The combination of customer disruption
and product mix in the period resulted in
the proportion of revenue from academic
customers increasing slightly to 54%(2019: 52%) in the first half. Operating
margin was maintained at 16.6% on aconstant currency basis supported bygains realised in the period from our
Horizon strategy and cost controls.
From an end market perspective, we saw
good constant currency revenue growth
for the Semiconductor & Communications(30% of Group revenue) customer
segment with strong growth for Quantum
Technology (6% of revenue). In the
Advanced Materials segment (27% ofrevenue), despite positive order andrevenue growth to commercial
customers, we saw a double-digit decline
in revenue due to deferred shipments andtemporary academic customer site
closures. The Healthcare & Lifescience(20% of revenue) and Energy &Environment (8% of revenue) segments
were strongly impacted by the logisticsof accessing customer sites and the
reduced academic customer activity inEurope and America during the period.
Revenue for the Research & Fundamental
Science market segment (9% of revenue)
was in line with the comparable period
last year.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

From a geographical perspective,
regional Government and customer
responses to the pandemic dominatedrevenue profiles, with the strongest
impacts being felt in North America andEurope, down 26% and 12% respectively.
Asia delivered revenue broadly in linewith previous first half as it recovered
earlier from the first wave of thepandemic, allowing access tocustomer sites.
With good order growth and a deferralof revenue in the period, the order book,representing orders for future delivery,
increased by 17% on a constant currency
basis since March 2020, with significant
growth in Materials & Characterisationand good growth across Research &Discovery and Service & Healthcare.
The book-to-bill ratio for the period
increased to 1.25.
Continued good cash collection, reflectedin cash conversion of 97% in the period,
resulted in an improved net cash positionof £81.4m, up from £67.5m at year end.

5

Chief Executive’s Review continued
Sector performance
Turning to the performance of theindividual sectors:
Materials & Characterisation provides
products and solutions that enable thefabrication and characterisation ofmaterials down to the atomic scale,predominantly supporting customers
across applied R&D as well as the
production and manufacture of hightechnology products. Orders for thesector increased by 16.5% to £91.0m (2019:£78.1m), with growth from both academic
and commercial customers, underpinned
by strong growth to customers within the
Semiconductor & Communications
segment and improved demand within
the Advanced Materials, Quantum and
Healthcare & Lifescience segments.
Order growth was strong in North
America and Asia, supported by good
growth in Europe. Reported and constantcurrency revenue of £65.2m (2019:£73.2m) declined by 10.9%, predominantly
due to covid-related issues at ourcustomers’ sites. The impact was mostpronounced among our higher-margin
measurement and characterisation
solutions where growth from
Semiconductor & Communications
and Quantum customers was offset bydelayed shipments to other segments
within Europe and North America.
Reduced revenue, combined with a lower
proportion of higher margin product,
negatively impacted profitability within
the period with reported adjusted
operating profit declining by 27.0% to£8.9m (2019: £12.2m), representing a
reduction of 32.0% at constant currency.
Consequently, reported operational
margin fell by 300 basis points (down
400 basis points at constant currency)
to 13.7% (2019: 16.7%). The combinationof strong orders and delayed shipments
resulted in order book growth of 43.8%
to £76.8m (March 2020: £53.4m).
Research & Discovery provides
advanced solutions that create uniqueenvironments and enable the imaging
and analytical measurements down tothe atomic and molecular level, usedpredominantly within scientific research
and applied R&D. Revenue and orders forthe sector were significantly impacted in
the first quarter by covid-related
disruption to our academic customers inlife sciences and semiconductor research.

6

Whilst we have seen increased
momentum through the second quarter,
this initial impact led to reduced volumesof our scientific cameras and optical
microscopy solutions in the period.
This more than offset strong order and an
in-line revenue performance across our
product portfolio of cryogenic platforms,
specialised high magnetic field systems
and scientific X-ray tubes. This resulted
in reported and constant currency
revenue being down 16.4% to £48.3m(2019: £57.8m) in the period. Growth inQuantum Technology related revenue
was more than offset by reductions
across Healthcare & Lifescience and
Semiconductor & Communications end
markets with other segments remaining
broadly in line with the previous year.
Profitability for the sector was supported
by realising tangible operational
improvements through our Horizon
strategy and careful cost managementin the period. This resulted in an
improvement in reported operational
margin of 220 basis points to 13.3%(2019: 11.1%) up 120 basis points atconstant currency, with reported adjusted
operating profit flat at £6.4m (2019: £6.4m)
representing a reduction of 7.5% atconstant currency. The reported orderbook increased by 5.3% to £101.7m(March 2020: £96.5m).
Service & Healthcare provides customer
service and support for our own products
and the service of third-party MRI scanners
in Japan. In the period we accelerated thetransformation of our customer service
approach to better support our customers
as they manage through the covid
pandemic. This has involved changing ourservice product offerings and the way inwhich we provide support to our customers
around the world. Through the provision ofincreased digital products, remote services
and better leveraging our global footprint
we maintained high levels of support forour customers throughout the period.
Revenue grew by 1.1% on a reported andconstant currency basis to £26.8m(2019: £26.5m). Increased reported andconstant currency operational profit
margin for the sector of 490 basis points
to 33.6% (2019: 28.7%) was supported by
improved operational efficiencies andfavourable product mix.

Reported and constant currency adjusted
operating profit increased by 18.4% to£9.0m (2019: £7.6m). Order growth of
3.8% on a reported basis to £30.4m(2019: £29.3m) was driven by increased
demand for services related to our own
products and represents 3.1% growth atconstant currency.

Covid response
The early actions we took in response tocovid enabled us to maintain business
continuity throughout the evolving phasesof the pandemic. Our approach hasenabled us to respond quickly to theassociated ongoing global businessdisruption. These actions included
establishing procedures and working
practices to make our manufacturing
sites and offices safe to work in, andensuring those staff working off-site hadfull and secure access to the systems
they required to undertake their roles.
Our priorities during this time haveremained the health and wellbeing of ouremployees and the provision of support
to our customers, helping them navigate
their own operational challenges. Our
hybrid workplace model, with its clear
practices and procedures, guides eachof our sites in line with the local situationand government guidelines. This has
provided clarity and structure across ourglobal business enabling us to maintainand optimise business continuity.
We have continued to develop and refine
working practices across our sites andbusiness functions to enable increased
operational output and efficiencies. This
has included the introduction of shifts insome of our facilities to deliver improved
output whilst maintaining covid-safe
workspaces.
The Group prudently took part in the
UK Government’s Job Retention Scheme
given the highly uncertain market outlook
at the start of the crisis. This involved asmall number of employees being
furloughed where they could notundertake their work remotely.
However, by the end of June all
furloughed colleagues had returned
to work. In light of the resilience of theGroup’s performance in the period,
we have now repaid all of the UK
Government support.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Horizon progress

R&D

We have continued with theimplementation of our Horizon strategy
to strengthen our resilience through theongoing market disruption as well asdeliver sustainable future growth andmargin improvement. In the period wecontinued the development of ourcapabilities and maintained our focus on
improved market intimacy, operational
excellence, enhanced delivery of R&D
programmes and customer service
transformation. This included continued
investment in the development of ouremployees and undertaking selective
recruitment to further enhance specificskills and capabilities to provide thefoundation for future growth.

The development and delivery of highly
innovative and market-leading products
and key enabling technologies thatdeliver ongoing, sustainable value for ourcustomers remains a central pillar within
our Horizon strategy. Throughout theperiod, we have remained focused on our
strategic R&D programme maintaining
our progress and investment in this area,
providing a healthy pipeline of future
product launches. In the period welaunched several new products in linewith original expectations and further
enriched our IP portfolio. R&D spend in
the period of £12.7m (2019: £13.0m) is
broadly in line with the previous year andrepresents 9.1% of sales.

In response to covid-related market
disruption and associated changes toour customer needs, we accelerated
the delivery of our market intimacy
programmes and the transformationof our service offering. From a market
intimacy perspective, we expanded our
digital marketing capabilities to offer
additional webinars, online productlaunches, virtual conferences and higher
value website content. Deeper market
intimacy continues to provide valuable
insights into our customers’ strategic
priorities, which allows us to identify
additional opportunities for growth inexisting and new adjacent markets.
The strength of our market intimacy,
alongside our enhanced digital presence
and the success of recently launched
products, has supported order growth in
the period. From a service and support
perspective, with travel restrictions andreduced customer site access, we
accelerated the development anddeployment of our digital and remote
service capabilities and improved our“in region” service reach and capacity bycross-training our existing service teams.
Our operational excellence programme
continued to progress and contributed tomargin enhancement in the period.

PeopleI would like to thank all our employees
for their commitment during thesechallenging times, the support they havegiven each other and their innovative
approaches to ensuring our customers
continue to receive a world-classexperience from Oxford Instruments.
Our employees are fundamental to ourongoing business progress and I remain
delighted by their continued engagementwith our Horizon strategy. Their passion toboth improve our business and support
our customers has been demonstrated
through their actions and agility
throughout the unprecedented disruption
caused by the coronavirus.

Dividend
Robust trading and positive cash
generation through the period has
resulted in the Board declaring an interim
dividend of 4.1p per share, following lastyear’s declared interim dividend of 4.1p,
which, during the early stages of thepandemic, the Board decided not to pay.

Summary and outlook
The Group is positioned to be a leading
provider of high technology products
and services to the world’s leadingindustrial customers and scientificresearch communities to image,analyse and manipulate materials
down to the atomic and molecular level.
This allows us to live up to our purposeof facilitating a greener economy,increased connectivity, improved healthand leaps in scientific understanding.

We have seen strong order growthin the first half of the year with a good
improvement in the order book. Orders
have grown across our academic andcommercial customer base, particularly
for our compound semiconductor processsolutions and quantum cryogenic andmagnet systems. Covid-related
customer-disruption has affected
installation and commissioning activities.
This, along with the introduction of newcovid-safe working practices across our
manufacturing sites, has led to a fall inrevenue over the first half. Gains from our
Horizon strategy and cost control enabledsustained operating margins despite
lower revenue. The dedication, agility
and resilience of our employees during
this difficult period underpins ourconfidence in our ability to service andsupport the needs of our customers.
We are adjusting to the external andinternal effects of the pandemic andexpect uncertainty to remain high.
However, robust trading during the first
half, combined with a strong order book,gives us confidence for the second half,absent a material increase incovid‑related disruption that could
impact facility or customer site access.
We expect full-year performance to bea little behind last year on a constantcurrency basis, ahead of current analyst
forecasts.
The transformation of the Group throughour Horizon strategy has provided a solid
foundation for future growth. Our focus
on markets with sustainable long-term
growth drivers, our continuous drive forgreater efficiencies and our ability torespond to evolving customer needs
mean that we remain well positioned tonavigate the current challenges andreturn to long-term sustainable growthand margin improvement.

Ian Barkshire
Chief Executive
10 November 2020

NOTE: Oxford Instruments plc compiled analyst forecast average consensus for adjusted operating profit (year to 31 March 2021) of £41.6m with an upper range of £45.0m.

Oxford Instruments plc Half-year Report for the six months ended 30 September 20207

Operations Review

MATERIALS &CHARACTERISATION

Revenue

Adjusted2 operating profit£65.2m(10.9%)£8.9m(HY 2019: £73.2m)(10.9%)1(HY 2019: £12.2m)

At constant currency(32.0%)1

At constant currency

Adjusted2 operating margin

Operating profit after adjusting items

13.7%

£7.8m

(HY 2019: 16.7%)(2019: £296.9m)+9.9%1(2019:(HY2019:£296.9m)£11.0m)At constant currency

1.

For definition, refer to note on page 2 of highlights.

2.

Details of adjusting items can be found in Note 1 of the Condensed Consolidated Financial Statements.

8(27.0%)+9.9%1

At constant currency

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

From an end market perspective, we continued
to see strong underlying demand and order growthfrom the Semiconductor & Communications andAdvanced Materials segments.
The Materials & Characterisation
sector comprises Asylum Research,
NanoAnalysis, Magnetic Resonance andPlasma Technology. In the period wetransferred the Magnetic Resonancebusiness to this sector, better aligning theportfolio with end customer applications
and enabling further exploitation ofsynergies across the sales, marketing,and service teams. The sector has abroad customer base across a wide
range of applications for the imaging andanalysis of materials down to the atomic
level as well as the fabrication ofsemiconductor devices and structures
through our range of advanced
semiconductor etch and deposition
process systems. Our portfolio of imaging
and analysis systems includes our rangeof market-leading X-ray and electron
analysis systems used in conjunction withelectron and ion microscopes as well as
our performance-leading atomic force
microscopes and NMR analysers. The
sector has a strong focus on supporting
and accelerating our customers’ applied
R&D, enabling the development of newdevices, next generation higher
performance materials and enhancing
productivity in advanced manufacturing,
quality assurance (QA) and quality
control (QC). We provide leading productperformance, improved ease of use andenhanced productivity, with analytics andinformation to aid the interpretation of
acquired data.

Materials & Characterisation delivered
strong growth in reported orders;
covid-related disruptions negatively
impacted shipments and installations in
the period, resulting in a reduction inrevenue, adjusted operating profit andoperating margin for the sector. Strong
order performance was supported bycontinued positive underlying demand
from our end markets, our enhanced
market intimacy and the success ofrecently launched products.
Order growth was evenly split acrosscommercial and academic customers
with the strongest growth in Asia andgood growth in North America, Europe
was broadly in line with the previous first
half. Revenue was significantly impacted
by covid-related disruptions, affecting
regions, markets, and customer types
differently. This resulted in a reduction inrevenue from commercial customers,
while academic-related revenues werebroadly in line with the previous year.
Strongest declines were in Europe andNorth America where the severity andlength of disruption has been largest;revenue in Asia was broadly in line withthe previous year. Consequently, theproportion of revenue from commercial
customers reduced to 52% (2019: 57%).
The order book for future deliveries grewby 43.8% to £76.8m (2019: £53.4m).

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

From an end market perspective, we
continued to see strong underlying
demand and order growth from the
Semiconductor & Communications andAdvanced Materials segments, despite
further weakening from automotive andaerospace customers. We also had goodorder growth from Quantum Technology
and Healthcare & Lifescience segments.
Orders in Energy & Environment were
down due to subdued academic activity
in the period. The combination of regionalvariations within our end markets anddiffering levels of covid disruption
resulted in good revenue growth in
Semiconductor & Communications
and Quantum Technology, and areduction across Advanced Materials,
Energy & Environment and Healthcare& Lifescience, predominantly due totheir higher proportion of customers
within Europe and North America.
Semiconductor & Communications
represented 47% of sales in the sector,
Advanced Materials 35% with Energy &Environment 11%, and Healthcare &Lifescience 3%.

9Operations Review continued
Materials & Characterisation

The Semiconductor & Communications
segment delivered double-digit order andrevenue growth and remains a significant
focus for the sector. We provide imaging
and analysis products as well as etch anddeposition process solutions used acrossa broad range of silicon and compound
semiconductor device applications.
We saw strong growth of our imaging
and analysis solutions into mainstream
silicon semiconductor and electronics
applications in line with end market
growth. Here our market-leading spatial
resolution, ease of use and analytical
integrity support the development of next
generation technologies, the transfer toproduction of new designs and the quality
control and assurance within production.
AztecWave™, which we launched in the
period, allows a step change in the easeof use and measurement of the low
concentration materials and essential
dopants required to achieve performancefrom semiconductor wafers, devices andbond wires.
The compound semiconductor market
remains buoyant with resilient long-termsustainable growth drivers due to theability of compound semiconductor
devices to transform the energy efficiencyof power electronics, dramaticallyincrease connectivity and bandwidth,and enable faster communications.
In the period, our strategic focus on
improving the key process steps forthe critical layers which determine end
device performance supported order
growth into power electronics
applications such as example chargers,
optoelectronic structures and lasers
used in data communications, andsensors for autonomous vehicles.

10

Order growth of our measurement andsemiconductor processing solutions has
been further supported by our strategy to
tailor product offerings for the specificneeds of academic, corporate R&D andproduction customers.
Our expertise in semiconductor
processing and characterisation isproviding good growth within Quantum
Technology markets where the uniformity,high purity and surface structure of thedeposited materials are critical to theperformance and lifetime of quantum
devices. We have developed dedicatedprocessing solutions for the specificmaterials being used within quantum
R&D to directly address customer needs.
Our growth in the Advanced Materials
segment is due to the continued drive todevelop, control and repeatably
manufacture stronger, lighter and higher
performing materials across a broad
range of end markets including
automotive, textiles, displays, energy
generation and construction. Our imaging
and analysis products help our customers
develop new higher performing materials
and improve their manufacturing yields.

These advanced materials provide thepathway to transform end application
performance, supporting the movetowards reduced raw material usage
and a lower end-to-end carbon footprint.
As an example, the launch of ourfaster structural material analyser,
Symmetry-S2™, in combination with
our new application specific software,is being used by a major steel
manufacturer to refine their processes
in the development and process controlof next generation advanced steels
and super alloys required by automotive
manufacturers to reduce vehicle weight
whilst retaining structural integrity.
The enhanced speed of our system
and automated software, which uses a
proprietary machine learning algorithm,
reduces the characterisation processfrom many hours down to minutes.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

The Semiconductor & Communications segment
delivered double-digit order and revenue growth
and remains a significant focus for the sector.
We have had continued strong demandand order growth in the analysis ofadvanced polymers, which are being
developed for and utilised across adiverse range of applications including
lower cost photovoltaics, enhanced
performance displays and flexible bio
implants. Our advanced atomic force
microscopes enable the accuratecharacterisation of the mechanical andphysical properties and the robustnessof the polymers under changing
environmental conditions. These
properties determine their value andutility for each target application.
Whilst orders and revenue within theEnvironment & Energy segment declinedin the period due to covid-related market
disruption we continue to see sustainablelong-term growth drivers andopportunities for growth acrossapplications such as batteries andphotovoltaics.

In the period we launched AZtecBattery™,a tailored software solution to provide
quality control and assurance for thefeedstocks used to manufacture theanodes and cathodes within batteries.
Our analysis solutions are also being
used to optimise the lifetime andperformance of batteries through thecharacterisation of the composition andstructure of the electrolytes that enable
the transfer of charge during operation of
the battery.

It has been developed in collaboration
with major manufacturers who are using
it to identify foreign body contamination
within and on the surface of medicine
tablets. Our video rate atomic force
microscopes are being used across a
broad range of biomechanics and viralstudies, including covid, due to its ability
to observe the dynamic responses of
biological material to environmental andpharmaceutical treatments in real time.

The Healthcare & Lifescience segment,
which is a relatively small proportion of
the sector, provides an opportunity for
growth as we develop and tailor solutions
for specific applications. In the period we
received increased orders supported by
the launch of AZtecPharma™, which has
the required regulatory certification andtraceable workflows for use across thepharmaceutical and biomedical industry.

1. Composition andstructure of Flip Chip
Solder Bump with
AZtecWaveTM
2. Next Generation Steelalongside Material
Structure Analyser

Oxford Instruments plc Half-year Report for the six months ended 30 September 202011

Operations Review continued

RESEARCH &DISCOVERY

Revenue

Adjusted2 operating profit£48.3m(16.4%)£6.4m(HY 2019: £57.8m)(16.4%)1(HY 2019: £6.4m)

At constant currency—(7.5%)1

At constant currency

Adjusted2 operating margin

Operating profit after adjusting items

13.3%

£3.2m

(HY 2019: 11.1%)(HY 2019: £3.2m)

1.

For definition, refer to note on page 2 of highlights.

2.

Details of adjusting items can be found in Note 2 of the Condensed Consolidated Financial Statements.

12

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Profitability for the sector was enhanced by therealisation of tangible gains from the Horizon business
improvements established in previous years.
The Research & Discovery sector includes
Andor Technology, NanoScience and
X-Ray Technology. This sector provides
advanced solutions that create uniqueenvironments and enable imaging andanalytical measurements down to themolecular and atomic level, usedpredominantly in fundamental andapplied research. We build on our
relationships with customers, working on
breakthrough applications in research
to gain insights and support futurecommercial applications. We havestrong brand recognition and leading
product performance in our chosenmarket segments.
Revenues and orders for the sector weresignificantly impacted by disruptions
caused by coronavirus in the period.
The disruption was most severe in the firstquarter with continued improvement andpositive momentum through the second
quarter. The severity of the impact in thefirst quarter was largely due to the
reduced activity at many of our target
customer sites due to temporary closures,
reduced occupancy or restricted accessas well as reduced manufacturing
capacity as we adapted our sites tocovid-safe workplaces and established
new working practices.

Customer disruption was mostpronounced within Europe and North
America and across our academic
research customers in life science
applications leading to reduced orders
and revenues for our scientific cameras
and optical microscopy solutions in the
period. This more than offset strong order
growth in Quantum Technology andAdvanced Materials and an in-line
revenue performance for our portfolioof cryogenic and high magnetic fieldsystems and scientific X-ray tubes.

Profitability for the sector was enhancedby the realisation of tangible gains fromthe Horizon business improvements
established in previous years and throughcareful cost management in the period.
This resulted in an increase in reported
operational margins to 13.3% (2019: 11.1%)
representing an improvement to 12.3% atconstant currency. Reported adjusted
operating profit remained at £6.4m
representing a fall of 7.5% at constantcurrency.

This resulted in reported revenue for thesector falling 16.4% to £48.3m. From an end
market perspective, growth in Quantum
Technology was more than offset by
reductions in Healthcare & Lifescienceand Semiconductor & Communications
markets with Advanced Materials,
Research & Fundamental Science andEnergy & Environment segments being
broadly in line with the previous firsthalf year.

Oxford Instruments plc Half-year Report for the six months ended 30 September 202013

Operations Review continued
Research & Discovery

Looking at the end market segments,
within Healthcare & Lifescience, aspreviously mentioned, demand in Europe
and North America was significantly
subdued during the first quarter withtemporary or partial site closures atacademic research facilities and central
research laboratories. The long-term
fundamental market drivers of improving
the health and wellbeing of society
remain robust, driven by the need tobetter understand fundamental diseasemechanisms at the cellular andmolecular level, and for the developmentof new treatments, therapies andpersonalised medicines. As ourcustomers’ restrictions have eased, we
have seen increased order levels withbookings in the second quarter being inline with the previous year. Our portfolioof advanced microscopy systems,
analysis and visualisation software
solutions and scientific cameras remain
key enabling technologies to help ourcustomers better understand the origins
and progression of diseases such as
cancer and neurological disorders like
Alzheimer’s, as well as the developmentof new medicines and treatments.

As an example, the CRISPR technique,which can be thought of as a pair ofgenetic scissors that can cut and edit
specific sequences of DNA and wasrecognised with this year’s Nobel prize,
is an important part of the cell biologists’tool box with increased interest in its
potential within cancer research.
The method relies on extremely weak
light signals and therefore requires highly
sensitive scientific cameras such as our
iXon™. Within the segment, we received
increased demand from customers andour OEM partners involved incovid‑related initiatives. This included
use of our cameras within diagnostic
testing equipment and researchers using
our broad range of products to study thevirus, understanding its genetic sequence,mutations, how it attacks patients’ cells
and organs and the response from theirimmune system.

Sales of our analysis and visualisation
software were broadly in line with theprevious year with customers able toutilise our products whilst working
remotely from their facilities. Conversely,
sales of our optical microscopy systems
were significantly impacted in the firstquarter with continued recovery throughthe second quarter and a building
pipeline of future sales opportunities.
Quantum Technology continues to attract
increased funding from governments andcommercial customers because of thepotential to transform computing,
cryptography and sensor capabilities,
in turn disrupting diverse end markets
such as banking and healthcare.
This has supported increased demandfor our cryogenic platforms and highfield magnet systems for both
fundamental research into quantum
effects, new quantum materials and in
the development toward practicalquantum computers.

CRISPR

14

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Quantum Technology continues to attract increased
funding from governments and commercial
customers because of the potential to transformcomputing, cryptography and sensor capabilities.
Our recently launched Proteox™
cryogenic system is gaining market
traction across leading academic andcommercial customers and we aredelighted to be a key partner with Rigetti,
a US based quantum systems provider,in a UK government funded consortium
to build the UK’s first commercial
quantum computer. Proteox™ will be at
the heart of the system and we will bepart of the team to build and operate
the computer which will be housed at
our Oxford facility.

Within the Advanced Materials segment
our cryogenic platforms, high fieldmagnet systems, scientific cameras
and optical components are being
used to explore and characterise thefundamental properties of next
generation materials such asgraphene‑related two-dimensional
sheets for use across a broad range ofapplications, including semiconductors,
sensors and communication devices.

Within Research & Fundamental Science
we continue to see long-term customer
interest in our specialised cryogenic andsuperconducting magnet systems, andhigh-end scientific cameras across a
broad range of research themes including
astronomy and fundamental physics,
chemistry and materials research. In thehalf we received further grants to develop
more sensitive cameras for the tracking ofspace debris with continued long-term
interest in astronomy applications.
The SOFIA space telescope, which NASA
used to recently discover water on themoon, uses one of our cameras to guidethe telescope and optically track theobjects of interest. In the period, the firsttwo systems for the Institute of Physics in
Beijing were installed as part of themultisystem order into their extreme
environments laboratory.

1. CRISPR DNA editing
2. Cryogenic system at heart ofUK’s first Commercial Quantum
Computer in development

Oxford Instruments plc Half-year Report for the six months ended 30 September 202015

Operations Review continued

SERVICE &HEALTHCARE

Revenue

Adjusted2 operating profit£26.8m

+1.1%

£9.0m

+18.4%(HY 2019: £26.6m)+1.1%1(HY 2019: £7.6m)+18.4%1

At constant currency

At constant currency

Adjusted2 operating margin

Operating profit after adjusting items

33.6%

£9.0m

(HY 2019: 28.6%)(HY 2019: £7.6m)

1.

For definition, refer to note on page 2 of highlights.

2.

Details of adjusting items can be found in Note 2 of the Condensed Consolidated Financial Statements.

16

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

To meet the changing needs of our customers as
a result of covid, we accelerated the transformationof our customer support services.
The Service & Healthcare sector
comprises the Group’s maintenanceservice contracts, billable repairs, training
and support services, and spare partsales related to Oxford Instruments’ own
products; and the support and service ofthird-party MRI scanners in Japan.
In the first half the sector delivered orderand revenue growth driven by increased
demand for support services related toour own products. Revenue from ourJapan MRI service operations werebroadly in line with the previous year, with
our team continuing to provide the samelevels of support to hospitals throughout
the disruption. Improved operational
efficiencies and higher value products
contributed to improved profitability inthe half with adjusted operating profit
increasing 18.4% to £9.0m with reported
operating margin up 490 basis points
to 33.6%.
To meet the changing needs of ourcustomers as a result of covid, as
previously mentioned, we accelerated thetransformation of our customer support
services including adapting our service
offerings, introducing remote accessproducts and changing the way inwhich we are organised and deliver
our services.

With travel restrictions in placeacross many international borders we
maximised our “in-region” capacity
through cross-training of our existing
engineers to cover a broader portfolio.
Where customer site access was notpossible, we were able to utilise our
virtual reality “Live Assist” capabilities
to enable remote product repair andcommissioning. In the period we also
made it easier for customers to reachour technical support teams through thelaunch of a live chat functionality on our
website, allowing them to either quickly
resolve their query or efficiently establish
the next course of action. These new
approaches were well received bycustomers, improving their productivity
and minimising downtime, whilst
increasing our own service capacity andefficiency. With customers’ attitudes
changing we have now released
remote‑only service contract options
for some of our products.
For those customers who had restricted
access to their facilities during the
pandemic we helped them connect toand remotely operate their equipment
or securely access their data remotely
for further analysis. We also assisted
customers to safely shut down theirsystems remotely, and as they returnedto their workplaces, to resume operations
and bring their systems back online.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

In addition, we increased the number andrange of virtual training programmes thatwere available both for purchase andwith free access.
Whilst we have accelerated the earlyphase of the transformation of ourservices offering, we have significant
scope for further developments thatwill increase the value and breadth of
support to our customers and contributeto the ongoing success of our Horizon
strategy.

1. Remote Support
2. Augmented Reality
Support17

Finance Review
I am pleased to present the Finance Review
for the half year to 30 September 2020.

In January 2020, the Group disposedof its minority equity stake in the
Scienta Omicron joint venture to existing
Shareholders. In the following month,the Group completed the disposal of
its OI Healthcare business in the US.
For the purposes of comparative
reporting, OI Healthcare has beenclassified as a discontinued operation.
Reported orders increased by 6.0% to£175.7m (2019: £165.7m), an increaseof 5.9% at constant currency. At the endof the period, the Group’s order bookfor future deliveries stood at £204.6m(31 March 2020: £175.0m). The orderbook grew 16.9% on a reported basis
and 16.6% at constant currency.

Gavin Hill
Group Finance Director

Reported and constant currency revenue
on a continuing basis declined by 11.0% to£140.3m (2019: £157.6m).
Adjusted operating profit from continuing
operations decreased by 7.3% to £24.3m(2019: £26.2m). Adjusted operating profit,
excluding currency effects, decreasedby 11.5% with a currency tailwind of £1.1m.
Adjusted operating margin fromcontinuing operations increased by
70 basis points to 17.3% (2019: 16.6%).
Excluding currency effects, adjusted
operating margin was flat at 16.6%.
Adjusted profit before tax from continuing
operations declined by 8.1% to £23.7m(2019: £25.8m), representing a margin of
16.9% (2019: 16.4%).

18

Amortisation of acquired intangibles
was £4.3m and the business incurred acredit of £0.8m relating to the movementin the mark-to-market valuation of
uncrystallised currency hedges for futureyears. There were no other adjusting
items in the period.
After adjusting items, the Group recorded
an operating profit of £20.8m (2019:£19.3m), an increase of 7.8%, and profit
before tax of £20.2m (2019: £18.9m), an
increase of 6.9%.
Continuing adjusted basic earnings per
share fell by 8.9% to 32.8p (2019: 36.0p).
Continuing basic earnings per share were
27.7p (2019: 26.0p), growth of 6.5%.
Cash generated from operations of £23.3m(2019: £15.3m) represents 97% (2019: 62%)
cash conversion. Net cash increased from£67.5m on 31 March 2020 to £81.4m, aided
by good operating cash flow.
At the end of September, our revolving
credit facility remained undrawn,
leaving approximately £105m ofcommitted facilities. This represents total
headroom of about £214m. The Group hasoutstanding private placement loan notesof £27.9m, which mature on 31 March 2021,
at which point headroom will fall to £186m.
Adjusted operating profit is stated before
amortisation of acquired intangibles,
restructuring costs, the mark-to-market
valuation of unexpired currency hedges,
and other adjusting items, as set out in
Note 2 to the Financial Statements.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Revenue£140.3m

Adjusted operating profit(11%) £24.3m(HY 2019: £157.6m)(7.3%)(HY 2019: £26.2m)

Income Statement
The Group’s Income Statement is summarised below.

Revenue

Half year to
30 September
2020£mHalf year to
30 September
2019£mChange

140.3

157.6

(11.0%)(10.1%)

Adjusted gross profit

71.5

79.5

Administrative expenses(47.6)(52.2)——

Share of profit/(loss) of associate
Foreign exchange

0.4

(1.1)

Adjusted operating profit

24.3

26.2

Net finance costs

(0.6)

(0.4)

Adjusted profit before tax

23.7

25.8

Amortisation of acquired intangibles

(4.3)

(4.4)

Non-recurring items——

Mark-to-market of currency hedges

0.8

(2.5)

(7.3%)(8.1%)

Profit before tax

20.2

18.9

Tax from continuing operations

(4.3)

(4.0)

Profit for the period from continuing operations

15.9

14.9

Adjusted effective tax rate1

20.7%

20.2%

Continuing adjusted earnings per share – basic

32.8p

36.0p

(8.9%)

Continuing earnings per share – basic

27.7p

26.0p

+6.5%

Continuing adjusted earnings per share – diluted

32.4p

35.6p

(9.0%)

Continuing earnings per share – diluted

27.4p

25.8p

+6.2%

Dividend per share

4.1p

—

1.

+6.9%

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

Oxford Instruments plc Half-year Report for the six months ended 30 September 202019

Finance Review continued
Income Statement continued
Orders and revenue
Total reported orders grew by 6.0% (5.9% at constant currency) to £175.7m. Orders, at constant currency, grew by 16.5% for Materials& Characterisation, declined by 6.9% for Research & Discovery and grew by 3.1% for Service & Healthcare. The decline in Research& Discovery was principally due to a reduction in orders for our cameras and spectroscopy products in the academic sector.
Reported and constant currency revenue of £140.3m (2019: £157.6m) decreased by 11.0%. Reported revenue fell by 10.9% forMaterials & Characterisation and 16.4% for Research & Discovery. Service & Healthcare reported revenue grew by 1.1%.
The book-to-bill ratio (orders received to goods and services billed in the period) for the year was 1.25.
Revenue, at constant currency, declined by 10.9% for Materials & Characterisation partly due to customer disruption from covid that
hampered our ability to ship product to customer sites, and the impact on production capacity from the implementation of new safe
working practices. A constant currency decline of 16.4% in Research & Discovery was impacted by production constraints as our
manufacturing sites adapted to new covid working practices, as well as being unable to complete high value product installations in
Asia ahead of the period end owing to customer site closures and travel constraints on service personnel.
Service & Healthcare constant currency revenue grew by 1.1%, with good growth from the service of our own products.
Revenue from Asia of £63.9m (a constant currency decline of 0.8%) constitutes 46% of total Group revenue, with China being 54%
and 25% of the regional and Group totals respectively. Revenue from Europe of £40.5m (a constant currency decline of 12.0%) is 29%
of total Group revenue. North America’s constant currency revenue declined by 26% to £33.8m, proportionate to 24% of total Grouprevenue. The Rest of World revenue for the period was £2.0m, constant currency growth of 40%.
The total reported order book grew by 16.9% (16.6% at constant currency) to £204.6m (2019: £175.0m). The order book, at constantcurrency, compared to 31 March 2020, increased by 44.9% for Materials & Characterisation, 5.5% for Research & Discovery and fell
by 1.3% for Service & Healthcare. This good growth has been supported by revenue not recognised in the year owing to delayed
shipments and installations.
Materials &Characterisation

Research &Discovery

Service &Healthcare

Total

Revenue1: Half year to 30 September 2019

73.2

57.8

26.6

157.6

Underlying movement

(8.0)

(9.5)

0.2

(17.3)

—

—

—

—

65.2

48.3

26.8

140.3

Revenue growth: reported(10.9%)(16.4%)+1.1%(11.0%)

Revenue growth: constant currency(10.9%)(16.4%)+1.1%(11.0%)£m

Foreign exchange
Revenue : Half year to 30 September 2020
1

1.

From continuing operations.

Adjusted gross profit
Adjusted gross profit fell by 10.1% to £71.5m (2019: £79.5m), representing a gross profit margin of 51.0%, a decline of 40 basis points
over last year.

Adjusted operating profit
Adjusted operating profit from continuing operations decreased by 7.3% to £24.3m (2019: £26.2m), representing an adjusted
operating profit margin of 17.3%, an increase of 70 basis points against last year. At constant currency, the adjusted operating profit
margin was 16.6%, in line with last year.
Materials & Characterisation margin declined by 300 basis points to 13.7% (2019: 16.7%) with the margin in NanoAnalysis falling onlower revenue. Margins in Plasma Technology have remained broadly constant and we have seen good growth in Asylum
Research’s margins. Following an internal reorganisation, the Magnetic Resonance product range and the costs of a small researchfacility in Finland are now recorded within Materials & Characterisation. Both were previously recorded within Research & Discovery.
At constant currency the margin was 12.7%.
Research & Discovery’s adjusted operating margin increased to 13.3% (2019: 11.1%), growth of 220 basis points. At constant currency,
the margin was 12.3%. Margin growth was supported by the installation of some significant complex magnet and cryogenic
systems for NanoScience. Good cost control and favourable product mix within Andor Technology prevented margin dilution froma fall in revenue.
Service & Healthcare margin increased by 490 basis points to 33.6% (2019: 28.7%) owing to our focus on improving service revenue
on our own products, combined with some large upgrades in Andor Technology. At constant currency, the margin was 33.6%.

20

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Currency effects (including the impact of transactional currency hedging) have increased reported adjusted operating profit by £1.1m
when compared to blended hedged exchange rates for the comparative period.
Materials &Characterisation

Research &Discovery

Service &Healthcare

Total

Adjusted operating profit1: Half year to 30 September 2019

12.2

6.4

7.6

26.2

Underlying movement

(3.9)

(0.5)

1.4

(3.0)

Foreign exchange

0.6

0.5

—

1.1

Adjusted operating profit1: Half year to 30 September 2020

8.9

6.4

9.0

24.3

£m

Margin: Half year to 30 September 2019

16.7%

11.1%

28.6%

16.6%

Margin: Half year to 30 September 2020

13.7%

13.3%

33.6%

17.3%

1.

From continuing operations.

Adjusting items
Amortisation of acquired intangibles of £4.3m relates to intangible assets recognised on acquisitions, being the value of technology,
customer relationships and brands.
The Group uses derivative products to hedge its short-term exposure to fluctuations in foreign exchange rates. It is Group policy
to have in place at the beginning of the financial year hedging instruments to cover 80% of its forecast transactional exposure forthat year. The Group has decided that the additional costs of meeting the extensive documentation requirements of IFRS 9 to apply
hedge accounting to these foreign exchange hedges cannot be justified. Accordingly, the Group does not use hedge accounting forthese derivatives.
Net movements on mark-to-market derivatives in respect of transactional currency exposures of the Group in future periods aredisclosed in the Income Statement as foreign exchange and excluded from our calculation of adjusted profit before tax. In thecurrent year this amounted to a credit of £0.8m (2019: £2.5m charge). The period-end asset primarily reflects an uncrystallised gain
arising from a rise in the value of Sterling at the balance sheet date against a blended rate achieved on US Dollar, Euro andJapanese Yen forward contracts that will mature over the next twelve months.
There were no other adjusting items booked in the period.

Net finance costs
The Group’s adjusted net finance costs were £0.6m (2019: £0.4m), the small increase due to a refund of overpaid interest last year.

Profit before tax
Continuing adjusted profit before tax fell by 8.1% to £23.7m (2019: £25.8m). The adjusted profit before tax margin of 16.9% (2019: 16.4%)
was above last year due good cost control offsetting lower revenue, as well as a small currency tailwind.
Continuing profit before tax of £20.2m (2019: £18.9m) is after the mark-to-market movement on derivative financial instruments, andamortisation of acquired intangibles.

Tax
The adjusted tax charge from continuing operations of £4.3m (2019: £4.0m) represents an effective tax rate of 20.7% (2019: 20.2%),
the increase reflecting a change in the geographical mix of profits earned.

Earnings per share
Continuing adjusted basic earnings per share decreased by 8.9% to 32.8p (2019: 36.0p); continuing adjusted diluted earnings per
share fell by 9.0% to 32.4p (2019: 35.6p). Continuing basic earnings per share increased by 6.5% to 27.7p (2019: 26.0p) and continuing
diluted earnings per share grew by 6.2% to 27.4p (2019: 25.8p).
The number of undiluted weighted average shares increased marginally to 57.3m.

Foreign exchange
The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euro and Japanese Yen.
Translational exposures arise on the consolidation of overseas company results into Sterling. Transactional exposures arise where
the currency of sale or purchase transactions differs from the functional currency in which each company prepares its local
accounts. With many of the manufacturing sites residing in the UK, the Group has a significant cost base in Sterling.

Oxford Instruments plc Half-year Report for the six months ended 30 September 202021

Finance Review continued
Foreign currency exposure
The Group’s foreign currency exposure for the half year is summarised below.

Revenue

Adjusted
operatingprofitSterling

26.0(30.8)US Dollar

66.9

28.1

Euro

30.3

18.4

Japanese Yen

14.3

8.6

Chinese Renminbi

2.4

0.6

Other

0.4

(0.6)

140.3

24.3

£m (equivalent)

The Group maintains a hedging programme against its net transactional exposure using internal projections of currency tradingtransactions expected to arise over a period extending from 12 to 24 months. As at 30 September 2020, the Group had currency
hedges in place extending up to 18 months forward.
For the second half of this financial year, our assessment of the currency impact is, based on hedges currently in place and forecast
rates, a reduction in revenue of £1.0m and an increase in adjusted operating profit of £0.2m. As an example sensitivity for the second
half of the year, if we assume a 5% appreciation of Sterling against our major trading currencies from forecast rates, then, with thebenefit of hedging in place, the estimated impact is a reduction in revenue and adjusted operating profit of £7.9m and £1.3m
respectively. Uncertain volume and timing of shipments and acceptances, currency mix and FX volatility may significantly affectsecond half currency effects. Forecast rates for the second half are - GBP:USD 1.30; GBP:EUR 1.11; GBP:JPY 135.

Disposal of OI Healthcare – discontinued operations
On 24 February 2020, the Group sold the OI Healthcare business in the US to MXR Imaging, Inc, for a consideration of $14.9m(£11.5m). The business has been treated as a discontinued operation within the comparatives.

Disposal of Scienta Omicron
On 29 January 2020, the Group sold its 47% share in Scienta Omicron to a group of existing Shareholders in the joint venture fora consideration of SEK 147m (£11.7m). For the comparative period, the Group did not record a profit from the joint venture.

Dividend
The Group’s policy is to increase the dividend each year in line with the increase in underlying earnings, considering movements
in currency. Following the high uncertainty created by the impact of covid, the Board decided not to pay the 2019/20 interim
dividend of 4.1p per share and then did not declare a final dividend. A better than expected trading performance, growth in theorder book and good cash generation has resulted in the Board proposing an interim dividend of 4.1p for the 2020/21 financial year.
The interim dividend will be paid on 14 April 2021 to shareholders on the register as at 5 March 2021. Monies received under the UK
government’s furlough scheme were fully repaid in the period.

22

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Cash flow
The Group cash flow is summarised below.
Half year to
30 September
2020£mHalf year to
30 September
2019
£m

24.3

26.2

4.1

4.5

Adjusted EBITDA

28.4

30.7

Working capital movement(3.0)(11.3)

Equity settled share schemes

1.1

2.0

Share of profit/(loss) from associate——

Business reorganisation items

0.5—

Adjusted operating profit
Depreciation and amortisation

Pension scheme payments above charge to operating profit

(3.7)

(6.1)

Cash generated from operations

23.3

15.3

Interest

(1.0)

(1.1)

Tax

(4.0)

(3.5)

Capitalised development expenditure

(0.5)

(2.2)

Expenditure on tangible and intangible assets

(1.1)

(1.5)

Decrease in long-term receivables—

0.5

Dividends paid

—

(2.2)

Proceeds from issue of share capital and exercise of share options

0.1

0.2

Payments made in respect of lease liabilities

(1.3)

(1.4)

—

—

15.5

4.1

Decrease in borrowings
Net increase in cash and cash equivalents from continuing operations

Note: Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation of acquired intangibles and the mark-to-market of financial derivatives.

Cash generated from operations
Cash generated from operations of £23.3m (2019: £15.3m) represents 97% (2019: 62%) cash conversion. Cash conversion is definedas 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.
Working capital rose by £3.0m. Inventories rose by £0.6m with additional finished goods due to shipments held over the year end
following closure of customer sites. Receivables declined by £2.1m and payables and customer deposits decreased by £4.5m,
partly due to a clearing of payable balances prior to implementation of a new ERP in Asylum Research just after the half year end.
The reduction in the cost of equity settled share schemes is due to a catch-up charge relating to a correction in the valuation ofmanagement share option incentive schemes made in the comparative period.

PensionPension costs relate to recovery payments made to the UK defined benefit pension scheme. Under the current actuarial plan,
payments are scheduled to continue until 2026.

Oxford Instruments plc Half-year Report for the six months ended 30 September 202023

Finance Review continued
Cash flow continued
Interest
Net interest paid was £1.0m (2019: £1.1m), broadly in line with last year.

Tax
Tax paid was £4.0m (2019: £3.5m).

Investment in Research and Development (R&D)
Total cash spend on R&D in the half year was £12.7m, equivalent to 9.1% of sales (2019: £13.0m, 8.2% of sales). A reconciliation
between the adjusted amounts charged to the Income Statement and the cash spent is given below:
Half year to
30 September
2020£mHalf year to
30 September
2019
£m

13.2

11.9

—

0.1

Amortisation of R&D costs previously capitalised as intangibles

(1.0)

(1.2)

Amounts capitalised as intangible assets

0.5

2.2

Total cash spent on R&D during the year

12.7

13.0

R&D expense charged to the Income Statement
Amounts capitalised as fixed assets

Net debt and funding
Net debt
Good cash generation in the half year increased the Group’s net cash position from £67.5m to £81.4m. Cash generated fromoperations was £23.3m (2019: £15.3m). The Group invested in capitalised development costs of £0.5m and tangible and intangible
assets of £1.1m.
Movement in net debt£m

Net cash as at 31 March 2020

67.5

Cash generated from operations

23.3

Interest

(1.0)

Tax

(4.0)

Capitalised development expenditure(0.5)

Capital expenditure on tangible and intangible assets(1.1)

Dividends paid—

Other items(2.8)

Net cash as at 30 September 2020

81.4

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 twobanks and comprises a Euro-denominated multi-currency facility of €50.0m and a US Dollar-denominated multi-currency
facility of $80.0m.
We have agreed with our banks to extend the facility by one year to June 2024, with an option to request an extension for a further
year in one year’s time.
The Group has outstanding bilateral private placement notes of £27.9m, which mature on 31 March 2021.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 30 September 2020
the business had net cash.

24

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Pensions
The Group has a defined benefit pension scheme in the UK. This has been closed to new entrants since 2001 and closed to future
accrual from 2010.
At 30 September 2020, the net surplus arising from our defined benefit pension scheme obligations was £1.1m (31 March 2020: £30.7m).
A significant fall in corporate bond yields has resulted in a lower discount rate and, combined with changes to the assumed level ofinflation, has resulted in a higher value being placed on the scheme’s liabilities. The increase in liabilities has been partially mitigatedby contributions paid and the return on the scheme’s assets being higher than the discount rate over the period. Total scheme assets at
30 September 2020 were £352.9m (31 March 2020: £321.4m) while liabilities were £351.8m (31 March 2020: £290.7m).
We terminated the US defined benefit pension scheme at the end of the last fiscal year. All payments made last year were in fulland final settlement of the scheme’s liabilities.

Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set
out in the Performance Highlights, Chief Executive’s Review and Operations Review sections of this Half-year Report. The financial
position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Review.
Considering the global health crisis resulting from the outbreak of covid and the impact that has already materialised in terms of
disruption to operations and customer activity, it is reasonable to expect that the future performance of the Group will be adversely
affected. Due to the continuing global uncertainty, there is greater volatility and uncertainty in trading outcomes for the year ahead.
The Board has prepared and reviewed several scenarios for the Group’s future performance based on varying degrees of disruption
caused by covid on orders, trading and cash flow performance. In addition, the Group has overlaid the risk of long-term adverse
movements in foreign exchange rates to our cash flow forecasts as an additional sensitivity to those forecasts. The outcome of thisassessment shows that the Group can operate within its current facilities, without the need to obtain any new facilities, for a periodof not less than twelve months from the date of this report. The Board is satisfied, having considered the current cash position, thesensitivity analysis, as well as its committed funding facilities, that the Group has adequate resources to continue in operational
existence for the foreseeable future. Consequently, the Condensed Consolidated Financial Statements continue to be prepared ona going concern basis.

Forward-looking statements
This document contains certain forward-looking statements. The forward-looking statements reflect the knowledge andinformation available to the Company during the preparation and up to the publication of this document. By their very nature, thesestatements depend upon circumstances and relate to events that may occur in the future, thereby involving a degree of uncertainty.
Therefore, nothing in this document should be construed as a profit forecast by the Company.

Gavin Hill
Group Finance Director
10 November 2020

Oxford Instruments plc Half-year Report for the six months ended 30 September 202025

Principal Risks and Uncertainties

Information regarding the risk
management process in place at theGroup is set out on page 50 of the 2020
Annual Report. The principal risks anduncertainties identified through thatprocess are set out on pages 50 to 54 of
the 2020 Annual Report and can befound on the Group’s website atwww.oxinst.com.
In keeping with the risk management
process, the Group has performed aquarterly update of its risk register as at
30 September 2020. It has evaluated thedisclosures made on pages 50 to 54 of
the 2020 Annual Report and has
concluded that the risks identified remain
relevant for the remainder of the year
ending 31 March 2021 and that there areno other significant risks to be disclosed.

26

A summary of the risks identified is set
out below:•

impact of covid;•routes to market;•

technical risk;•

supply chain risk;•

political risk;•

Brexit-related risks;•

IT risk;•

legal/compliance risk;•

adverse movements in long-term
foreign currency rates;•

people;•operational risk; and•pensions.

The ongoing negotiations relating to theUnited Kingdom’s future trading
relationship with the European Union at
the end of the transition phase mean that
uncertainty over the potential impact of
Brexit remains. The Group has assessed
the key risks arising from Brexit andconcluded that the most significant
short-term risks arise from potential
disruption to the movement of goods both
into and out of Great Britain and Northern
Ireland.
The future impact of covid continues tocreate uncertainty and the potential forheightened disruption at an operationaland customer level remains. The possible
impacts arising from both Brexit andcovid create significant uncertainty at a
macro-economic level. Operationally, thisuncertainty could cause supply chain
disruption leading to an adverse impact
on production and, ultimately, deliveries
to customers.

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Responsibility Statement of the Directors
in respect of the Half-year Financial Statements
We confirm that to the best of ourknowledge:•

the condensed set of Financial
Statements has been prepared inaccordance with IAS 34 Interim
Financial Reporting as adopted by
the EU; and•the interim management report
includes a fair review of theinformation required by:(a)	DTR 4.2.7R of the Disclosure
Guidance and Transparency
Rules, being an indication ofimportant events that haveoccurred during the first six
months of the financial year andtheir impact on the condensed setof Financial Statements; and a
description of the principal risks
and uncertainties for theremaining six months of the year;and(b)	DTR 4.2.8R of the Disclosure
Guidance and Transparency
Rules, being related party
transactions that have takenplace in the first six months of thecurrent financial year and thathave materially affected thefinancial position or performanceof the entity during that period;
and any changes in the related
party transactions described in
the last Annual Report that could
do so.

Ian Barkshire

Gavin Hill

Chief Executive	Group FinanceDirector
10 November 2020

Oxford Instruments plc Half-year Report for the six months ended 30 September 202027

Condensed Consolidated Statement of Income
Half year ended 30 September 2020 – unaudited
Half year to 30 September 2019 as restated2

Half year to 30 September 2020

Revenue

Total£mAdjusted£m

Adjustingitems1
£m

Total
£m

Note

Adjusted
£m

4

140.3

—

140.3

157.6

—

157.6

(68.8)—(68.8)(78.1)—(78.1)

71.5

—

71.5

79.5

—

79.5

(13.2)—(13.2)(11.9)—(11.9)

Cost of sales
Gross profit
Research and development

Adjustingitems1£m

5

Selling and marketing(19.8)—(19.8)(23.4)—(23.4)

Administration and shared services(14.6)(4.3)(18.9)(16.9)(4.4)(21.3)

Foreign exchange gain/(loss)

0.4

0.8

1.2

(1.1)

(2.5)

(3.6)

Operating profit/(loss)

24.3

(3.5)

20.8

26.2

(6.9)

19.3

Interest credit on pension scheme net assets

0.4

—

0.4

—

—

—

Other financial income

0.1

—

0.1

0.5

—

0.5

Financial income

0.5

—

0.5

0.5

—

0.5

Financial expenditure

(1.1)

—

(1.1)

(0.9)

—

(0.9)

23.7

(3.5)

20.2

25.8

(6.9)

18.9

(4.9)

0.6

(4.3)

(5.2)

1.2

(4.0)

18.8

(2.9)

15.9

20.6

(5.7)

14.9

—

—

—

(0.3)

(0.4)

(0.7)

18.8

(2.9)

15.9

20.3

(6.1)

14.2

pence

pence

pence

pence

From continuing operations

32.8

27.7

36.0

26.0

From discontinued operations

—

—

(0.5)

(1.2)

32.8

27.7

35.5

24.8

From continuing operations

32.4

27.4

35.6

25.8

From discontinued operations

—

—

(0.5)

(1.2)

32.4

27.4

35.1

24.6

Profit/(loss) before income tax

4

Income tax (expense)/credit
Profit/(loss) for the half year fromcontinuing operations
Loss from discontinued operations after tax

7

Profit/(loss) for the half year attributable
to equity holders of the parent
Earnings per share

Basic earnings per share

3

From profit for the half year
Diluted earnings per share

3

From profit for the half year
Dividends per share

9

Dividends paid—

3.8

Dividends proposed3

4.1

4.1

1.

Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 2.

2.

Details of restatement of prior period numbers can be found in the basis of preparation. The restatement had no impact on total profit for the prior period.

3.

Payment of the prior period interim dividend which was proposed by the Board on 12 November 2019 has been suspended until further notice.

28

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Year to 31 March 2020

Note

Revenue

4

Adjusted£m

Adjustingitems1
£m

Total
£m

317.4

—

317.4

(158.6)(0.4)(159.0)

158.8

(0.4)

158.4

(26.6)(7.1)(33.7)

Selling and marketing(47.7)—(47.7)

Administration and shared services(34.7)(8.3)(43.0)

Share of profit of associate, net of tax

0.7

6.5

7.2

Foreign exchange loss

—

(1.4)

(1.4)

Operating profit/(loss)

Cost of sales
Gross profit/(loss)
Research and development

5

50.5

(10.7)

39.8

Interest credit on pension scheme net assets

—

—

—

Other financial income

0.3

—

0.3

Financial income

0.3

—

0.3

Financial expenditure

(1.3)

—

(1.3)

49.5

(10.7)

38.8

(9.3)

2.5

(6.8)

40.2

(8.2)

32.0

(0.5)

2.3

1.8

39.7

(5.9)

33.8

Profit/(loss) before income tax

4

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

7

Profit/(loss) for the year attributable to equity holders of the parent
Earnings per share

pence

pence

From continuing operations

70.2

55.9

From discontinued operations

(0.9)

3.1

From profit for the year

69.3

59.0

From continuing operations

69.5

55.3

From discontinued operations

(0.9)

3.1

From profit for the year

68.6

58.4

Basic earnings per share

Diluted earnings per share

Dividends per share

3

3

9

Dividends paid
Dividends proposed
1.

14.4
—

Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 2.

Oxford Instruments plc Half-year Report for the six months ended 30 September 202029

Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2020 – unaudited
Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020
£m

15.9

14.2

33.8

(2.0)

2.7

2.5

—

—

(4.4)

(33.7)

3.3

26.8

6.4

(0.6)

(5.1)

Total other comprehensive (expense)/income(29.3)

5.4

19.8

Total comprehensive (expense)/income for the half year
attributable to equity Shareholders of the parent(13.4)

19.6

53.6

Profit for the half year/year
Other comprehensive (expense)/income:Items that may be reclassified subsequently to profit or loss
Foreign exchange translation differences
Net cumulative foreign exchange gain on disposal of subsidiaries
recycled to the Income Statement
Items that will not be reclassified to profit or loss
Remeasurement (loss)/gain in respect of post-retirement benefits (Note 11)
Tax credit/(charge) on items that will not be reclassified to profit or loss

30

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2020 – unaudited
Sharecapital£mSharepremium£m

Otherreserves£m

Translation
reserve£m

Retainedearnings
£m

Total
£m

2.9

62.2

0.2

11.5

174.8

251.6

—

—

—

—

15.9

15.9

– Foreign exchange translation differences

—

—

—

(2.0)

—

(2.0)

– Remeasurement loss in respect of
post‑retirement benefits

—

—

—

—

(33.7)(33.7)– Tax credit on items that will not be reclassified
to profit or loss

—

—

—

—

6.4

6.4

Total comprehensive expense attributable toequity Shareholders of the parent

—

—

—

(2.0)

(11.4)(13.4)– Proceeds from exercise of share options

—

—

—

—

—

—

– Credit in respect of employee service costs
settled by award of share options

—

—

—

—

1.1

1.1

– Tax credit in respect of share options

—

—

—

—

—

—

– Proceeds from shares issued

—

0.2

—

—

—

0.2

– Dividends

—

—

—

—

—

—

As at 1 April 2020
Total comprehensive income:
Profit for the half year
Other comprehensive (expense)/income:Transactions with owners recorded directlyin equity:

Total transactions with owners recorded directlyin equity:

—

0.2

—

—

1.1

1.3

As at 30 September 2020

2.9

62.4

0.2

9.5

164.5

239.5

As at 1 April 2019

2.9

61.7

0.2

13.4

124.0

202.2

—

—

—

—

14.2

14.2

– Foreign exchange translation differences

—

—

—

2.7

—

2.7

– Remeasurement gain in respect of
post‑retirement benefits

—

—

—

—

3.3

3.3

– Tax charge on items that will not bereclassified to profit or loss

—

—

—

—

(0.6)

(0.6)

Total comprehensive income attributable toequity Shareholders of the parent

—

—

—

2.7

16.9

19.6

—

—

—

0.2

0.2

Total comprehensive income:
Profit for the half year
Other comprehensive income/(expense):

Transactions with owners recorded directlyin equity:– Proceeds from exercise of share options—– Credit in respect of employee service costs
settled by award of share options

—

—

—

—

2.0

2.0

– Tax credit in respect of share options

—

—

—

—

—

—

– Proceeds from shares issued

—

—

—

—

—

—

– Dividends

—

—

—

—

(8.3)

(8.3)

Total transactions with owners recorded directlyin equity:

—

—

—

—

(6.1)

(6.1)

As at 30 September 2019

2.9

61.7

0.2

16.1

134.8

215.7

Oxford Instruments plc Half-year Report for the six months ended 30 September 202031

Condensed Consolidated Statement of Changes in Equity continued
Half year ended 30 September 2020 – unaudited
Sharecapital£mSharepremium£m

Otherreserves£m

Translation
reserve£m

Retainedearnings
£m

Total
£m

2.9

61.7

0.2

13.4

124.0

202.2

—

—

—

—

33.8

33.8

– Foreign exchange translation differences

—

—

—

2.5

—

2.5

–N
 et cumulative foreign exchange gain on disposalof subsidiaries recycled to the Income Statement

—

—

—

(4.4)

—

(4.4)

– Remeasurement gain in respect of
post‑retirement benefits

—

—

—

—

26.8

26.8

– Tax charge on items that will not bereclassified to profit or loss

—

—

—

—

(5.1)

(5.1)

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

—

—

—

(1.9)

55.5

53.6

– Proceeds from exercise of share options

—

—

—

—

0.2

0.2

– Credit in respect of employee service costs
settled by award of share options

—

—

—

—

3.1

3.1

– Tax credit in respect of share options

—

—

—

—

0.2

0.2

– Proceeds from shares issued

—

0.5

—

—

—

0.5

– Dividends

—

—

—

—

(8.2)

(8.2)

As at 1 April 2019
Total comprehensive income:
Profit for the year
Other comprehensive income/(expense):

Transactions with owners recorded directlyin equity:

Total transactions with owners recorded directlyin equity:

—

0.5

—

—

(4.7)

(4.2)

As at 31 March 2020

2.9

62.2

0.2

11.5

174.8

251.6

32

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Condensed Consolidated Statement of Financial Position
As at 30 September 2020 – unaudited

Note

As at
30 September
2020
£m

As at
30 September
2019
£m

As at
31 March
2020
£m

21.8

AssetsNon-current assets
Property, plant and equipment

20.5

24.5

Right-of-use assets

7.0

8.8

8.2

Intangible assets

130.3

149.8

135.5

Investment in associate

6

—

4.6

—

Retirement benefit asset

11

1.1

3.4

30.7

Deferred tax assets

13.9

16.0

17.3

172.8

207.1

213.5

Current assets
Inventories

59.1

65.5

58.8

Trade and other receivables

68.1

75.1

71.1

Current income tax receivable

0.2

0.8

0.2

1.0

0.9

0.9

Derivative financial instruments

10

Cash and cash equivalents
Total assets

109.3

42.1

95.4

237.7

184.4

226.4

410.5

391.5

439.9

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

2.9

2.9

2.9

Share premium

62.4

61.7

62.2

Other reserves

0.2

0.2

0.2

Translation reserve

9.5

16.1

11.5

Retained earnings

164.5

134.8

174.8

239.5

215.7

251.6

Bank loans

—

27.9

—

Lease payables

5.1

5.8

6.5

Liabilities
Non-current liabilities

—

—

0.9

Provisions

Derivative financial instruments

10

0.7

1.0

0.9

Deferred tax liabilities

1.1

6.6

10.2

6.9

41.3

18.5

Current liabilities
Bank loans
Trade and other payables
Lease payables
Retirement benefit obligations

11

Current income tax payables
Accrued dividend
Derivative financial instruments
Provisions

10

27.9

—

27.9

120.4

109.1

125.1

2.2

3.4

2.1

—

0.8

—

4.5

3.5

4.6

—

6.1

—

1.1

4.2

2.6

8.0

7.4

7.5

164.1

134.5

169.8

Total liabilities

171.0

175.8

188.3

Total liabilities and equity

410.5

391.5

439.9

Oxford Instruments plc Half-year Report for the six months ended 30 September 202033

Consolidated Statement of Cash Flows
Half year ended 30 September 2020 – unaudited

NoteProfit for the half year/year
Loss/(profit) for the half year/year from discontinued operations

7

Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020
£m

15.9

14.2

33.8

—

0.7

(1.8)

15.9

14.9

32.0

4.3

4.0

6.8

Net financial expense

0.6

0.4

1.0

Fair value movement on financial derivatives

(0.8)

2.5

1.4

—

—

0.2

—

—

(0.6)

—

—

(6.5)
0.4

Profit for the half year/year from continuing operations
Adjustments for:
Income tax expense

Restructuring costs
Adjustments relating to defined benefit pension schemes
Profit on disposal of associate

6Impairment of inventory——

Impairment of capitalised development costs

—

—

7.1

Amortisation of acquired intangibles

4.3

4.4

8.7

Depreciation of right-of-use assets

1.4

1.5

3.4
3.5

Depreciation of property, plant and equipment

1.7

1.8

Amortisation of capitalised development costs

1.0

1.2

2.7

Amortisation of capitalised software costs

—

—

0.3

28.4

30.7

60.4

1.1

2.0

3.1

Adjusted earnings before interest, tax, depreciation and amortisation
Charge in respect of equity settled employee share schemes
Share of profit of associate

—

—

(0.7)

Restructuring costs received/(paid)

0.5

—

(0.6)

Cash payments to the pension scheme more than the charge to operating profit

(3.7)

(6.1)

(10.0)

Operating cash flows before movements in working capital

26.3

26.6

52.2

Increase in inventories

(0.6)

(4.8)

(2.3)

Decrease in receivables

2.1

3.5

3.3

(Decrease)/increase in payables and provisions

(8.4)

(9.5)

2.5

Increase/(decrease) in customer deposits

3.9

(0.5)

6.6

Cash generated from operations

23.3

15.3

62.3

Interest paid

(1.0)

(1.6)

(1.0)

Income taxes paid

(4.0)

(3.5)

(6.1)

Net cash from operating activities – continuing operations

18.3

10.2

55.2

Net cash from operating activities – discontinued operations

—

0.7

—

18.3

10.9

55.2

Net cash from operating activities

34

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Note

Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020£mCash flows from investing activities
Proceeds from sale of property, plant and equipment

0.1

—

0.1

Acquisition of property, plant and equipment

(1.2)

(1.5)

(4.4)

Net cash flow on disposal of associate

—

—

11.7

Capitalised development expenditure

(0.5)

(2.2)

(2.8)

Decrease in long-term receivables

—

0.5

1.4

Interest received

—

0.5

—

(1.6)

(2.7)

6.0

Net cash (used in)/generated from investing activities – continuing operations
Net cash generated from investing activities – discontinued operations
Net cash (used in)/generated from investing activities

—

1.0

8.7

(1.6)

(1.7)

14.7

Cash flows from financing activities
Proceeds from issue of share capital

0.1

—

0.5

Proceeds from exercise of share options

—

0.2

0.2

(1.3)

(1.4)

(3.3)
(0.6)

Payments made in respect of lease liabilities
Repayment of borrowings——

Dividends paid

—

(2.2)

(8.2)

(1.2)

(3.4)

(11.4)Net cash used in financing activities – continuing operations
Net cash generated from financing activities – discontinued operations
Net cash used in financing activities

—

0.3

—

(1.2)

(3.1)

(11.4)Net increase in cash and cash equivalents

15.5

6.1

58.5

Cash and cash equivalents at beginning of the year

95.4

35.2

35.2

Effect of exchange rate fluctuations on cash held

(1.6)

0.8

1.7

Cash and cash equivalents at end of the period

109.3

42.1

95.4

Oxford Instruments plc Half-year Report for the six months ended 30 September 202035

Notes to the Half-year Financial Statements
Half year ended 30 September 2020 – unaudited
1 Basis of preparation
Reporting entity
Oxford Instruments plc is a company incorporated in England and Wales. The condensed consolidated half-year Financial
Statements consolidate the results of the Company and its subsidiaries (together referred to as the “Group”). They have been
prepared and approved by the Directors in accordance with International Financial Reporting Standard (“IFRS”) IAS 34 Interim
Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements,and should be read in conjunction with the consolidated Financial Statements of the Group for the year ended 31 March 2020.
The financial information contained herein is unaudited and does not constitute statutory accounts as defined by Section 435 of
the Companies Act 2006. The comparative figures for the financial year ended 31 March 2020 are not the Company’s statutory
accounts for that financial year. Those accounts have been reported on by the Company’s auditor and delivered to the registrar ofcompanies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of theCompanies Act 2006.

Significant accounting policies
As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of
Financial Statements has been prepared applying the accounting policies and presentation that were applied in the preparationof the Company’s published consolidated Financial Statements for the year ended 31 March 2020 except as noted below.

Prior period restatement
The prior period to 30 September 2019 has been restated as a result of the Group disposing of the OI Healthcare business in the
US on 21 February 2020. Further information can be found in Note 7.

Composition of segments
During the period, the Directors reviewed the composition of the aggregated operating segments. The customer base of theMagnetic Resonance operating segment was found to be more closely aligned to that of the Materials & Characterisation segment
and the decision was taken to move the Magnetic Resonance segment from the Research & Discovery segment to the Materials &Characterisation segment. The management of the segment was also realigned at the same time. The segmental information forthe prior period has been restated to reflect the amended aggregated operating segments.
The prior year segmental information has also been restated to reflect the disposal of the OI Healthcare business in the US.

Estimates
The preparation of half-year Financial Statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results
may differ from these estimates.
In preparing these half-year Financial Statements, the significant judgements made by management in applying the Group’s
accounting policies and key sources of estimation uncertainty were the same as those that applied to the Consolidated
Financial Statements as at and for the year ended 31 March 2020.

Going concern
The condensed consolidated half-year Financial Statements have been prepared on a going concern basis, based on the
Directors’ opinion, after making reasonable enquiries, that the Group has adequate resources to continue in operational existence
for the foreseeable future.
In reaching this opinion the Directors noted that the Group had a net cash balance of £81.4m at 30 September 2020 and generated£18.4m of cash from operating activities in the first half of the year in spite of the disruption to the business caused by covid.
In addition, the Directors regularly monitor forward-looking indicators such as order intake which give confidence that not only
does the Group have adequate financial resources to continue in operational existence for the foreseeable future, it also has astrong pipeline of opportunities for the future. The Board is satisfied, having considered its funding facilities, as well as theforward‑looking indicators, that the Group has adequate resources to continue in operational existence for the foreseeable future.

36

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Exchange rates
The principal exchange rates used to translate the Group’s overseas results were as follows:
Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020£m

US Dollar

1.29

1.23

1.24

Euro

1.10

1.13

1.13

Japanese Yen

136

133

134

US Dollar

Euro

Japanese Yen

Period end rates

Average translation rates

Half year to 30 September 2020
April

1.25

1.14

134

May

1.25

1.13

134

June

1.24

1.11

133

July

1.27

1.11

136

August

1.33

1.11

140

September

1.32

1.11

139

US Dollar

Euro

Japanese Yen

144

Average translation rates

Year to 31 March 2020
April

1.30

1.16

May

1.28

1.15

142

June

1.27

1.13

138

July

1.26

1.12

136

August

1.23

1.11

132

September

1.23

1.12

132

October

1.26

1.14

136

November

1.28

1.16

139

December

1.30

1.17

142

January

1.32

1.18

143

February

1.30

1.19

144

March

1.27

1.16

139

Oxford Instruments plc Half-year Report for the six months ended 30 September 202037

Notes to the Half-year Financial Statements continued
Half year ended 30 September 2020 – unaudited
2 Non-GAAP measures
In the preparation of adjusted numbers, the Directors exclude certain items in order to assist with comparability between peers
and to give what they consider to be a better indication of the underlying performance of the business. These adjusting items are
excluded in the calculation of adjusted operating profit, adjusted profit before tax, adjusted profit for the year from continuing
operations, adjusted EBITDA, adjusted EPS, adjusted cash conversion and adjusted effective tax rate. Details of adjusting items
are given below.
Adjusted EBITDA is calculated by adding back depreciation of property, plant and equipment, depreciation of right-of-use assets
and amortisation of intangible assets to adjusted operating profit, and can be found in the Consolidated Statement of Cash Flows.
The calculation of adjusted EPS can be found in Note 3. Adjusted effective tax rate is calculated by dividing the share of tax attributable
to adjusted profit before tax by adjusted profit before tax. The definition of cash conversion is set out in the Finance Review.

Reconciliation between operating profit and profit before income tax and adjusted profit from continuing operations
Half year to
30 September 2020
Profit before
Operatingincome tax
profit£m£m

Statutory measure from continuing operations

Half year to
30 September 2019 as restatedProfit before
Operatingincome tax
profit£m£m

Year to31 March 2020
Profit before
Operatingincome tax
profit
£m
£m

20.8

20.2

19.3

18.9

39.8

38.8

Restructuring costs

—

—

—

—

0.2

0.2

Business reorganisation items

—

—

—

—

0.2

0.2

Adjustments relating to defined benefit
pension schemes

—

—

—

—

(0.6)

(0.6)
0.4

Impairment of inventory

—

—

—

—

0.4

Impairment of capitalised development costs

—

—

—

—

7.1

7.1

Profit on disposal of associate

—

—

—

—

(6.5)

(6.5)

Amortisation of acquired intangibles

4.3

4.3

4.4

4.4

8.7

8.7

Fair value movement on financial derivatives

(0.8)

(0.8)

2.5

2.5

1.4

1.4

Total non-GAAP adjustments

3.5

3.5

6.9

6.9

10.7

10.7

Adjusted measure from continuing operations

24.3

23.7

26.2

25.8

50.5

49.5

Income tax expense
Adjusted profit for the year fromcontinuing operations

(5.2)

(4.9)
24.3

Adjusted effective tax rates

18.8
20.7%

26.2

20.6
20.2%

(9.3)
50.5

40.2
18.8%

Restructuring costs
These represent the costs of one-off changes to senior management within the Research & Discovery segment.

Adjustments relating to defined benefit pension schemes
During the year ended 31 March 2020, the Group recognised a one-off accounting gain on the termination of its US defined benefit
pension scheme.

Impairment of inventory
During the year ended 31 March 2020, the Group implemented a new ERP system at a site within the Research & Discovery division.
In reconciling the inventory on the new system, a need for an impairment in respect of certain historic inventory differences was
identified. This was treated as an adjusting item due to its one-off nature.

38

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Impairment of capitalised development costs
During the year ended 31 March 2020, the Group reviewed the capitalised development costs to ensure they remained directly
related to targeted product or software developments. The one-off non-cash impairment relates to the Materials & Characterisation
segment, comprising software intangibles in Asylum Research, historical balances on general process development in Plasma
Technology and product development in NanoAnalysis that has been affected by a reduction in orders as a result of covid.

Profit on disposal of associate
During the year the Group made a profit on disposal of its shareholding in Scienta Scientific AB. See Note 6. This has been treatedas an adjusting item due to its non-recurring nature.

Amortisation and impairment of acquired intangibles
Adjusted profit excludes the non-cash amortisation and impairment of acquired intangible assets and goodwill.

Fair value movement on financial derivatives
Under IFRS 9, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they arealso measured at fair 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 tobe met in order to hedge account, which, in the particular circumstances of the Group, are considered by the Board not to bringany significant economic benefit. Accordingly, the Group accounts for these derivative financial instruments at fair value throughprofit 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.

Share of taxation
Adjusting items include the income tax on each of the items described above.

Reconciliation of changes in cash and cash equivalents to movement in net cash

Net increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash held

Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020
£m

15.5

6.1

58.5

(1.6)

0.8

1.7

13.9

6.9

60.2

Repayment of borrowings

—

—

0.6

Movement in accrued interest

—

0.6

—
60.8

Movement in net cash in the half year

13.9

7.5

Net cash at start of the year

67.5

6.7

6.7

Net cash at the end of the half year

81.4

14.2

67.5

Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020£mLoan notes – unsecured(27.9)(27.9)(27.9)Cash and cash equivalents

109.3

42.1

95.4

Net cash at the end of the half year

81.4

14.2

67.5

Reconciliation of net cash to Statement of Financial Position

Oxford Instruments plc Half-year Report for the six months ended 30 September 202039

Notes to the Half-year Financial Statements continued
Half year ended 30 September 2020 – unaudited
3 Earnings per share
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.
Half year to
30 September
2020£mHalf year to
30 September
2019
as restated£mYear to31 March
2020
£m

15.9

14.2

33.8

—

0.7

(1.8)

Business reorganisation items

—

—

0.2

Adjustments relating to defined benefit pension schemes

—

—

(0.6)
0.4

Profit for the year attributable to equity Shareholders of the parent
Discontinued operations
Adjusting items:

Impairment of inventory——

Impairment of capitalised development costs

—

—

7.1

Profit on disposal of associate

—

—

(6.5)

Amortisation of acquired intangibles

4.3

4.4

8.7

Fair value movement on financial derivatives

(0.8)

2.5

1.4

Adjusted income tax expense

(0.6)

(1.2)

(2.5)

Adjusted profit for the year from continuing operations

18.8

20.6

40.2

The weighted average number of shares used in the calculation excludes shares held by the Employee Share Ownership Trust,and is as follows:
Half year to
30 September
2020
SharesmillionHalf year to
30 September
2019
SharesmillionYear to31 March
2020
Sharesmillion57.4

Weighted average number of shares outstanding

57.4

57.4

Less: weighted average number of shares held by Employee Share Ownership Trust

(0.1)

(0.2)

(0.1)

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

57.3

57.2

57.3

Half year to
30 September
2020
SharesmillionHalf year to
30 September
2019
SharesmillionYear to31 March
2020
SharesmillionNumber of ordinary shares per basic earnings per share calculations

57.3

57.2

57.3

Effect of shares under option

0.7

0.6

0.6

Number of ordinary shares per diluted earnings per share calculations

58.0

57.8

57.9

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

For the purposes of calculating diluted and diluted adjusted EPS, the weighted average number of ordinary shares is adjusted toinclude the weighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary
shares expected to vest, relating to the Company’s share-based payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS or increase loss per share.

40

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

4 Segment information
The Group has eight operating segments. These operating segments have been combined into three aggregated operating
segments to the extent that they have similar economic characteristics, with relevance to products and services, type and class ofcustomer, methods of sale and distribution and the regulatory environment in which they operate. Each of these three aggregatedoperating segments is a reportable segment. The 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 uniqueenvironments and enable measurements 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 of third-party
healthcare imaging systems.

The Group’s internal management structure and financial reporting systems have been amended to differentiate the threeaggregated operating segments based on the economic characteristics discussed above.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on areasonable basis. Inter-segment pricing is determined on an arm’s length basis. The operating results of each are regularly reviewed
by the Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete financial information is available foreach segment and used by the Board of Directors for decisions on resource allocation and to assess performance. No asset
information is presented below as this information is not presented in reporting to the Group’s Board of Directors.
The results of the half year to 30 September 2019 and year to 31 March 2020 have been restated to reflect Magnetic Resonancemoving from the Research & Discovery segment to the Materials & Characterisation segment. Further information can be found in
Note 1.
The results of the half year to 30 September 2019 have been restated to reflect the classification of the OI Healthcare businessas a discontinued operation. OI Healthcare was included within the Service & Healthcare aggregated operating segment. Further
information can be found in Note 7.

Results from continuing operations
Materials &Characterisation£mResearch &Discovery£mService &Healthcare
£m

Total
£m

Total segment revenue

65.2

48.3

26.8

140.3

Segment adjusted operating profit from continuing operations

8.9

6.4

9.0

24.3

Materials &Characterisation£mResearch &Discovery£mService &Healthcare
£m

Total
£m

Total segment revenue

73.2

57.8

26.6

157.6

Segment adjusted operating profit from continuing operations

12.2

6.4

7.6

26.2

Materials &Characterisation£mResearch &Discovery£mService &Healthcare
£m

Total
£m

Total segment revenue

145.8

117.8

53.8

317.4

Segment adjusted operating profit from continuing operations

21.0

14.5

15.0

50.5

Research &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

Half year to 30 September 2020

Half year to 30 September 2019 as restatedYear to 31 March 2020 as restated

Reconciliation of reportable segment profit from continuing operations
Half year to 30 September 2020

Materials &Characterisation£m

Segment adjusted operating profit from continuing operations

8.9

6.4

9.0

—

24.3

Amortisation of acquired intangibles

(1.1)

(3.2)

—

—

(4.3)

Fair value movement on financial derivatives

—

—

—

0.8

0.8

Financial income

—

—

—

0.5

0.5

Financial expenditure

—

—

—

(1.1)

(1.1)

Profit before income tax from continuing operations

7.8

3.2

9.0

0.2

20.2

Oxford Instruments plc Half-year Report for the six months ended 30 September 202041

Notes to the Half-year Financial Statements continued
Half year ended 30 September 2020 – unaudited
4 Segment information continued
Reconciliation of reportable segment profit from continuing operations continued
Materials &Characterisation£m

Half year to 30 September 2019 as restatedResearch &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

26.2

Segment adjusted operating profit from continuing operations

12.2

6.4

7.6

—

Amortisation of acquired intangibles

(1.2)

(3.2)

—

—

(4.4)

Fair value movement on financial derivatives

—

—

—

(2.5)

(2.5)

Financial income

—

—

—

0.5

0.5

Financial expenditure

—

—

—

(0.9)

(0.9)

11.0

3.2

7.6

(2.9)

18.9

Materials &Characterisation£mResearch &Discovery£mService &Healthcare£mUnallocatedGroup items
£m

Total
£m

Segment adjusted operating profit from continuing operations

21.0

14.5

15.0

—

50.5

Restructuring costs

(0.1)

(0.1)

—

—

(0.2)

Profit/(loss) before income tax from continuing operations

Year to 31 March 2020 as restated

Adjustments relating to defined benefit pension schemes

—

—

—

0.6

0.6

Impairment of inventory

—

(0.4)

—

—

(0.4)

(6.3)

(0.8)

—

—

(7.1)

—

6.5

—

—

6.5

(2.3)

(6.4)

—

—

(8.7)

Fair value movement on financial derivatives

—

—

—

(1.4)

(1.4)

Financial income

—

—

—

0.3

0.3

Financial expenditure

—

—

—

(1.3)

(1.3)

12.3

13.3

15.0

(1.8)

38.8

Half year to
30 September
2020£mHalf year to
30 September
2019£mYear to31 March
2020
£m

13.2

11.9

26.6

—

0.1

0.1

Less: amortisation of R&D costs previously capitalised as intangibles

(1.0)

(1.2)

(2.7)

Add: amounts capitalised as intangible assets

0.5

2.2

2.8

Total cash spent on R&D during the year

12.7

13.0

26.8

Impairment of capitalised development costs
Profit on disposal of associate
Amortisation of acquired intangibles

Profit/(loss) before income tax from continuing operations

5 Research and development (“R&D”)
The total adjusted research and development spend by the Group is as follows:

R&D expense charged to the Consolidated Statement of Income
Add: amounts capitalised as fixed assets

6 Investment in associate
The Group held a 47% interest in the ordinary share capital of Scienta Scientific AB. Scienta Scientific AB is registered and has its
principal place of business in Sweden. On 28 January 2020, the Group sold its holdings in Scienta Scientific AB for £11.7m in cash.
The Group’s share of profit in its equity accounted associate for the prior half year was £nil and for the period to 28 January 2020was £0.7m. The Group did not receive any dividend from the associate in the current or prior periods.
The profit on disposal recognised in the accounts to 31 March 2020 was £6.5m.

42

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

7 Disposal of subsidiary and discontinued operations
On 21 February 2020, the Group disposed of its OI Healthcare business in the US for a final consideration of $14.9m, of which $1.5m
is held in escrow for twelve months pending any claims from the purchaser.
In the year to 31 March 2020 the OI Healthcare business was classified as a discontinued operation. It was considered a major classof business on the basis of its size and that it was previously an operating segment and referred to in the Group’s Strategic Report.
The 2019 half-year results have been restated to reflect the classification of the OI Healthcare business as a discontinued operation.
During the current period to 30 September 2020 there were no transactions relating to discontinued operations.
Half year to
30 September
2019
as restatedOI Healthcare£mHalf year to
30 September
2019
Industrial
Analysis
£m

—

8.7

—

—

(9.1)

—

—

—

(0.4)

—

Income tax credit

—

—

0.1

—

Adjusted loss after tax

—

—

(0.3)

—
—

Half year to
30 September
2020
OI Healthcare£mHalf year to
30 September
2020
Industrial
Analysis£m

Revenue—

Expenses—

Adjusted loss before tax

Results of discontinued operations

Adjusting items:
Amortisation of acquired intangibles

—

—

(0.5)

Income tax on adjusting items

—

—

0.1

—

Loss from discontinued operations after tax

—

—

(0.7)

—

Year to31 March 2020
OI Healthcare£mYear to31 March 2020
Industrial
Analysis£m

Revenue

14.8—

Expenses(15.5)—

Adjusted loss before tax

(0.7)

—

Income tax credit

0.2—

Adjusted loss after tax

(0.5)

—

Restructuring costs

(0.1)

(0.2)

Amortisation of acquired intangibles

(0.8)

—

Income tax on adjusting items

0.3—

Loss after tax

(1.1)

(0.2)

Results of discontinued operations

Adjusting items:

Gain on disposal

3.1—

Profit/(loss) from discontinued operations after tax

2.0

(0.2)

Oxford Instruments plc Half-year Report for the six months ended 30 September 202043

Notes to the Half-year Financial Statements continued
Half year ended 30 September 2020 – unaudited
7 Disposal of subsidiary and discontinued operations continued
Half year to
30 September
2020£mHalf year to
30 September
2019
as restated£m

Net cash generated from operating activities

—

0.7

—

Net cash generated from investing activities

—

1.0

8.7

Net cash used in financing activities

—

0.3

—

Half year to
30 September
2020
pence

Half year to
30 September
2019
as restatedpenceYear to31 March
2020
pence

Adjusted basic loss per share

—

(0.5)

(0.9)

Adjusted diluted loss per share

—

(0.5)

(0.9)

Total basic loss per share

—

(1.2)

3.1

Total diluted loss per share

—

(1.2)

3.1

Cash flows from discontinued operations

Earnings per share from discontinued operations

Year to31 March 2020£m

8 Taxation
The total effective tax rate on profits for the half year is 21.3% (prior half year as restated: 21.2%). The weighted average tax rate inrespect of adjusted profit before tax (see Note 2) for the half year is 20.7% (prior half year as restated: 20.2%).
For the full year the Group expects the tax rate in respect of adjusted profit before tax to be 21.0%.

9 Dividends per share
The following dividends per share were paid by the Group:Year to31 March
2020
pence

Half year to
30 September
2020
pence

Half year to
30 September
2019
pence

Previous period interim dividend

—

3.8

3.8

Previous period final dividend

—

—

10.6

—

3.8

14.4

Half year to
30 September
2020
pence

Half year to
30 September
2019
pence

Year to31 March
2020
pence

Interim dividend

4.1

4.1

4.1

Final dividend

—

—

—

4.1

4.1

4.1

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

The interim dividend for the year to 31 March 2020 of 4.1p was approved by the Board on 12 November 2019, and had been intended
to be paid on 14 April 2020 to Shareholders on the register at close of business on 6 March 2020. On 30 March 2020, the Board
decided to suspend payment of this dividend. Subsequently, the Board has decided not to pay this dividend.
The interim dividend for the year to 31 March 2021 of 4.1p was approved by the Board on 9 November 2020 and has not been
included as a liability as at 30 September 2020. The interim dividend will be paid on 14 April 2021 to Shareholders on the registerat the close of business on 5 March 2021.

44

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

10 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 fairvalue if the carrying amount is a reasonable approximation of fair value.

Fair value
hierarchy

Half year to
30 September 2020
Carrying
amountFair value£m£m

Half year to
30 September 2019
Carrying
amountFair value£m£mYear to31 March 2020
Carrying
amountFair value£m£m

Assets carried at amortised cost
Trade receivables

54.4

63.4

59.7

Other receivables

9.7

7.0

7.7

109.3

42.1

95.4

Cash and cash equivalents
Assets carried at fair value
Derivative financial instruments:– Foreign currency contracts

2

1.0

1.0

0.9

0.9

0.9

0.9

2

(1.1)

(1.1)

(4.2)

(4.2)

(3.5)

(3.5)

Liabilities carried at fair value
Derivative financial instruments:– Foreign currency contracts
Liabilities carried at amortised cost
Trade and other payables(57.5)(56.6)(65.9)

Bank loans(27.9)(27.9)(27.9)

Lease payables

(7.3)

(9.2)

(8.6)

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflectedin 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 the market 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 otherpayables above as these are not considered to be financial 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) or indirectly (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.

Oxford Instruments plc Half-year Report for the six months ended 30 September 202045

Notes to the Half-year Financial Statements continued
Half year ended 30 September 2020 – unaudited
11 Retirement benefit obligations
The Group operates a defined benefit plan in the UK. A full actuarial valuation of the UK plan was carried out as at 31 March 2018
which, for reporting purposes, has been updated to 30 September 2020 by a qualified independent actuary.
At 31 March 2020, the scheme actuary calculated a retirement benefit asset of £30.7m. In the period to 30 September 2020, there
has been a significant fall in corporate bond yields, which reduced the discount rate from 2.5% to 1.6%, and an increase in theassumed level of CPI and RPI inflation rates by 0.3% (to 2.2% and 2.9% from 1.9% and 2.6% respectively at 31 March 2020). The impactof these changes has increased the benefit obligation to £351.8m (31 March 2020: £290.7m).
The Group has agreed a basis for deficit recovery payments with the trustees of the UK pension scheme. The deficit recovery
payments are payable through to and including 2026 and will rise by approximately 3% per annum. The deficit recovery payment
for the period was £3.9m (year to 31 March 2020: £7.6m). In addition, the scheme’s assets generated a higher return than the discountrate. As a result, the fair value of plan assets increased to £352.9m (31 March 2020: £321.4m).
The overall effect is that for the purposes of IAS 19 the surplus on the scheme reduced from £30.7m to £1.1m.

12 Related parties
All transactions with related parties are conducted on an arm’s length basis and in accordance with normal business terms.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation andare not disclosed in this Note.
Included in the Consolidated Statement of Financial Position at 30 September 2019 was a current loan receivable of £0.8m due from
Scienta Scientific AB. The loan was repaid in February 2020. During the prior period to 30 September 2019, the Group received
interest charged on the loan of £0.1m (year to 31 March 2020: £0.1m).

46

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

Independent Review Report
to Oxford Instruments plc
Introduction

Our responsibility

Use of our report

We have been engaged by the Company
to review the condensed set of Financial
Statements in the half-yearly financial
report for the six months ended
30 September 2020 which comprises
the Condensed Consolidated Statementof Income, Condensed Consolidated
Statement of Comprehensive Income,Condensed Consolidated Statement of
Changes in Equity, Condensed
Consolidated Statement of Financial
Position and Condensed Consolidated
Statement of Cash Flows.

Our responsibility is to express to
the Company a conclusion on thecondensed set of Financial Statementsin the half-yearly financial reportbased on our review.

Our report has been prepared inaccordance with the terms of ourengagement to assist the Company inmeeting its responsibilities in respect ofhalf-yearly financial reporting inaccordance with the Disclosure Guidance
and Transparency Rules of the United
Kingdom’s Financial Conduct Authority
and for no other purpose. No person isentitled to rely on this report unless sucha person is a person entitled to rely uponthis report by virtue of and for the purposeof our terms of engagement or has been
expressly authorised to do so by our priorwritten consent. Save as above, we do not
accept responsibility for this report to any
other person or for any other purpose andwe hereby expressly disclaim any and allsuch liability.

We have read the other information
contained in the half-yearly financial
report and considered whether it contains
any apparent misstatements or materialinconsistencies with the information in thecondensed set of Financial Statements.

Directors’ responsibilities
The half-yearly financial report is the
responsibility of and has been approvedby the Directors. The Directors are
responsible for preparing the half-yearlyfinancial report in accordance with theDisclosure Guidance and Transparency
Rules of the United Kingdom’s Financial
Conduct Authority.
As disclosed in Note 1, the annual
Financial Statements of the Groupare prepared in accordance with
International Financial ReportingStandards (IFRSs) as adopted by theEuropean Union. The condensed setof Financial Statements included inthis half-yearly financial report has
been prepared in accordance with
International Accounting Standard 34,‘‘Interim Financial Reporting’’, as adopted
by the European Union.

Scope of review
We conducted our review in accordancewith International Standard on Review
Engagements (UK and Ireland) 2410,‘‘Review of Interim Financial Information
Performed by the Independent Auditor of
the Entity’’, issued by the Financial
Reporting Council for use in the United
Kingdom. A review of interim financial
information consists of making enquiries,
primarily of persons responsible forfinancial and accounting matters, andapplying analytical and other review
procedures. A review is substantially lessin scope than an audit conducted inaccordance with International Standards
on Auditing (UK) and consequently does
not enable us to obtain assurance that wewould become aware of all significant
matters that might be identified in anaudit. Accordingly, we do not express anaudit opinion.

Conclusion

BDO LLP
Chartered Accountants
Reading, UK
10 November 2020
BDO LLP is a limited liability partnershipregistered in England and Wales (withregistered number OC305127).

Based on our review, nothing has come toour attention that causes us to believe thatthe condensed set of Financial Statementsin the half-yearly financial report for thesix months ended 30 September 2020 is
not prepared, in all material respects, inaccordance with International AccountingStandard 34, as adopted by the European
Union, and the Disclosure Guidance andTransparency Rules of the United
Kingdom’s Financial Conduct Authority.

Oxford Instruments plc Half-year Report for the six months ended 30 September 202047

Directors and Advisers

Honorary President

Auditor

Sir Martin Wood OBE FRS Hon FREng DL

BDO LLP (from 1 April 2020)

Company Secretary
Susan Johnson-Brett ACIS

Company number
Registered in England and Wales number 775598

Board Committees
Audit and Risk
Mary Waldner, Chair
Steve Blair
Richard Friend
Thomas Geitner
Alison Wood

Principal bankers
HSBC Bank plc
Santander plc

Stockbroker
JPMorgan Cazenove

UK solicitors
Ashurst LLP

US counsel
Wilmer Hale LLP

Nomination
Neil Carson, Chair
Steve Blair
Richard Friend
Thomas GeitnerMary Waldner
Alison Wood

Remuneration
Thomas Geitner, Chair
Steve Blair
Neil Carson
Richard Friend
Mary Waldner
Alison Wood

Administration
Any two Directors

48

Oxford Instruments plc Half-year Report for the six months ended 30 September 2020

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