Oxford Instruments plc

Press Release

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

Release Date: 7am Tuesday 13 June 2017
Oxford Instruments plc
Announcement of Preliminary Results for the year to 31 March 2017
Oxford Instruments plc, a leading provider of high technology tools and systems for industry and research,
today announces its Preliminary Results for the year to 31 March 2017.

Revenue
Adjusted* operating profit
Adjusted* profit before tax(Loss)/profit before tax
Adjusted* basic earnings per share - continuing
Basic earnings per share - continuing
Dividend per share (full year)
Operating cash flow*
Net debt

Year ended
31 March 2017£mYear ended
31 March 2016
£m

348.5
42.5
36.0
(25.5)
47.8p(44.0p)
13.0p
39.7
109.3

319.7
41.2
33.6
9.7
45.3p
12.2p
13.0p
46.4
128.2

% change

+9.0%
+3.2%
+7.1%
+5.5%

Financial Highlights:









Stable performance in line with expectations, against a challenging market backdrop
Reported revenue up 9.0%, down 3.7% at constant currency
Adjusted profit before tax up 7.1%, in line with our expectations
Adjusted operating margin down 70 basis points, reflecting lower returns in Service and higher returns in
NanoTechnology Tools
Non-cash impairment of non-current assets of £45.8 million drives reported loss before tax
Net debt of £109.3 million (2016: £128.2 million), with leverage of 2.1 times reflecting good cash conversion andthe sale of Oxford Superconducting Technology (2016: 2.3 times)
Dividend maintained at 13.0p for the full year
Stronger order book at year end, 9.3% above prior year

Operating Highlights:








Good progress in repositioning the Group for long-term growth with significant progress in portfolio management‒ ‘Horizon’ strategy underway, focused on markets with long-term growth drivers where the Group can bemarket leader‒ Completed disposal of Oxford Superconducting Technology and announced sale of Industrial Analysis
Strong performance in Nanotechnology Tools
Steady performance in Industrial Products, despite continued end market weakness
In Service, increased demand for services related to our own products was more than offset by weaker demand
for OI Healthcare in the US, as previously flagged
Geographical demand reflects global trends in funding and capital expenditure: strong growth in Asia, steady
growth in Europe, flat in North America
Stephen Blair to join Board as Senior Independent Director in July 2017

Announcement of Preliminary Results for the year to 31 March 2017

Ian Barkshire, Chief Executive of Oxford Instruments plc, said:“In a year of transition, the Group delivered a stable performance, supported by currency tailwinds. Whilst academic
and R&D funding levels remain uncertain, we believe that progress with our strategic initiatives and favourable
currency effects will deliver an outcome for the year in line with expectations.
“Our focus is on markets with long term growth drivers where nanotechnology has the potential to address some of theworld’s most complex and pressing challenges. Fundamental improvements to our structure, operations and strategy
are underway and give us a solid platform to return to sustainable growth, at improved margins over the medium
term.”

Enquiries:
Oxford Instruments plc

Tel: 01865 393200

Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director

MHP Communications

Tel: 020 3128 8100

Rachel Hirst / Jamie Ricketts/Luke Briggs

Number of pages: 38*NOTE: Throughout this preliminary announcement when we talk about performance we make reference to adjusted
numbers. These are presented as, in the opinion of the Directors, they present a clearer picture of the businessperformance. A full definition of adjusted numbers can be found in note 1. Operating cash flow is presented under amanagement format; differences to the statutory format are explained in the Finance Review. Where we makereference to constant currency numbers these are prepared using the exchange rates which prevailed in the previous
year rather than the actual exchange rates which prevailed in the year.

Announcement of Preliminary Results for the year to 31 March 2017
Chairman’s Statement
This is my first review as Chairman of Oxford Instruments, a position I am delighted to have taken on at our AGM in
September.
It has been a year of structural, operational and strategic transition for the Group. We have a new and energised
senior executive team led by Ian Barkshire and Gavin Hill. They have acted with impressive decisiveness inembedding a number of changes in our operating teams to raise the talent bar across our business.
We have also made good progress in developing and implementing the new Horizon strategy to reposition our Groupfor long-term sustainable growth. This has seen some significant actions to manage our portfolio of businesses withthe aim of accelerating our delivery of shareholder value. In November, we announced the disposal of ourunderperforming wire business, Oxford Superconducting Technology, and since the year end, we have announced theagreed sale of our Industrial Analysis business to Hitachi High-Technologies.
As Ian Barkshire sets out in his Chief Executive Review, the management team is now implementing the next phase of
the Horizon strategy to continue the transformation of Oxford Instruments. This is focused around the two anchors of
returning to sustainable growth and improving margins by concentrating on market segments with long-term growth
drivers where we have the potential to become the market leader.
Against this background of strategic activity, the team maintained the focus on short-term performance. The businessdelivered a stable performance in line with our expectations against an extremely challenging market backdrop of
slower academic funding in the US and Europe and the anticipated deterioration in the financial performance of our OI
Healthcare business. Our NanoTechnology Tools sector performed strongly and we saw good returns from theservicing of our our own products. These growth businesses provide the platform for our future growth.
Adjusted basic earnings per share on a continuing basis grew by 5.5%. However, taking into account the impact on
the Group of business disposals, currency effects and our progressive strengthening of the balance sheet, the Board
has proposed to hold the dividend at last year’s level. This results in a final dividend of 9.3 pence (2016: 9.3 pence)bringing the total dividend for the year to 13.0 pence (2016: 13.0 pence).
I am pleased that Stephen Blair will join the Board on 1st July 2017 as Senior Independent Director. He brings withhim a wide range of international experience and sound technical understanding that was gained during his time at anumber of top technical companies, such as e2v and Spectris.
Finally, I would like to thank the Board for their ongoing support during this time of change and for their commitment torepositioning Oxford Instruments to deliver long-term profitable growth, providing sustainable value for ourshareholders.

Alan Thomson
Chairman
13 June 2017

Announcement of Preliminary Results for the year to 31 March 2017
Chief Executive’s Review
I am encouraged by the performance of the Group during my first year as Chief Executive, having made good
progress in strengthening the business and positioning it for the future. The year has been one of transition with a new
strategy, associated portfolio changes and the formation of a new leadership team.
The most notable strategic development has been the launch of the Horizon strategy, our transformational programme
for the Group, which will drive both our future direction and our operational model. Horizon will build on our strengths,
brand and innovation heritage and has the following key elements:

We will focus our investment on market segments where nanotechnology drives long-term growth for ourcustomers and where we can maintain or develop leadership positions.
 We will migrate to being a more commercially focused, market-driven Group by maintaining our heritage insupporting fundamental research whilst increasing our focus on products for applied R&D and thecommercialisation of nanotechnology.
 We will drive the delivery of synergies and enhanced collaboration. For example, in R&D we will prioritise ourhigh impact projects and resource them from across the Group.
 We will evolve our existing “tools and service” model and move up the value chain by providing our customers
with enhanced solutions, information and support that will drive advances in innovation and productivity.
 We will transform our operational model to embed consistency and excellence across our businesses,
measured by clearly defined core capabilities that will enhance our competitive advantage.
Over the past ten years, Oxford Instruments has focused on being a leading provider of high technology tools andservice to research communities all over the world. Nanotechnology is now well established as a fundamental andintegral driver for delivering advances across the sciences and commercial end markets. We will build on ourleadership and expertise in the fabrication, manipulation and analysis of materials down to the molecular and atomic
scale. We will support the changing needs of our customers by evolving to become a leading provider of hightechnology solutions, information and support. We will be known for unprecedented performance, ease of use andservice that will add value to our customers’ capabilities and productivity.
Within Horizon, we will actively manage our portfolio of businesses and products, selecting those markets with longterm growth drivers where we can maintain or grow leading positions. We will focus on those markets where
nanotechnology has the potential to address some of the world’s most complex and pressing challenges and where
we can deliver enhanced solutions and service excellence.
Global drivers for our core markets are:

Healthcare, where growth is driven by demand for improvements in disease detection and the understanding offundamental mechanisms;
o Our advanced imaging and analysis solutions, such as our Dragonfly optical system and our newly
launched video rate Atomic Force Microscope are examples of where we are providing enhanced
capabilities and productivity for investigators working in this area.
Energy, where improved efficiencies and sustainability remain core drivers, and includes work in photovoltaics
and batteries;o Our deposition and etch processes, and our characterisation solutions are essential for our customers in
the development of their current and next generation devices. Plasma Technology, Asylum Research and
NanoAnalysis are particularly well aligned to support these markets with new processing andcharacterisation capabilities.
IT and Communications, where there is a focus on speed, security and capacity;o Again, it is our ability to provide the fabrication capabilities for new materials and device structures, andthe subsequent characterisation of their performance that helps our customers, for example in photonics,
semiconductors and data storage devices. Our solutions are being utilised by fundamental science rightthrough to the practical application of new materials within this area, and will support growth across our
NanoTechnology Tools portfolio.

Announcement of Preliminary Results for the year to 31 March 2017
Advanced Materials, where we can help customers lead the race to develop lighter, stronger, higher functioning
and more affordable materials;o This remains a core market for our businesses and we continue to build strong relationships with theleaders in this field, ranging from Nobel Prize winners through to Quality Assurance for leading
manufacturers.
 Quantum Technology is the exploitation of the regime where quantum effects dominate and radically change the‘rule book’ of what is possible. For example, the quantum interaction between remote particles has the potential for
new paradigms in secure communications, computing and sensors;o Our cryogenics, advanced fabrication, imaging and characterisation capabilities are all critical to theadvancement of this field.
Within our core markets, we have identified a number of niche segments that are particularly attractive to us, such as
biodynamics, quantum computing and advanced batteries, where we will focus to gain competitive advantage.
As part of Horizon we have undertaken a strategic review of the growth opportunities, competitive landscapes andleadership capabilities across the Group to inform our portfolio management. We have made notable progress inestablishing a more synergistic portfolio. In November, we announced the disposal of our Superconducting Wirebusiness and since the year end we have announced the agreed sale of our Industrial Analysis business to Hitachi
High-Technologies.
Horizon will change the way by which we operate and will embed clearly defined core capabilities across ourbusinesses in the following areas:
Market Intimacy: We will further develop in-depth understanding of our customer segments and align our innovationand product development initiatives to customers’ strategic roadmaps.
Innovation and Product Development: We will focus our R&D investment on higher growth segments, prioritising
our efforts on the most valuable product development opportunities.
Customer Support: We will build on the growing customer demand and offer a higher level and broader range ofservices and support.
Operational Excellence: We will drive improvements in cost, time and defects to become a more delivery andoutcome focused business.
Horizon will drive a culture of continuous improvement and best practice across all of our businesses, which will
deliver clear competitive advantage and long-term shareholder value. I am excited by the potential of the Horizon
strategy which builds on our heritage and is the next stage in the evolution and commercialisation of Oxford
Instruments.
Results
Looking back over the previous financial year, the Group delivered a stable performance, supported by stronger
second half trading in line with our expectations and currency tailwinds. This was despite an uncertain macroeconomic
background, which has seen a sustained period of slow global academic and R&D funding and continued softness
across industrial end markets.
Progress in the year has been underpinned by the continued strength and improved profitability across our
NanoTechnology Tools Sector. Industrial Products delivered a steady performance against continued challenging end
markets supported by new product launches. In our Service sector, the increased demand for services related to ourown products was more than offset by the previously flagged weaker performance from our OI Healthcare business in
the US.
Orders in the period increased by 4.3% to £350.7 million (2016: £336.1 million), orders at constant currency were
down 7.3%, predominantly due to lower orders in OI Healthcare and Industrial Analysis. Orders in NanoTechnology
Tools increased by 7.9% but were marginally down on the previous year at constant currency. The order book for
future deliveries at the end of the year increased by 9.3% to £144.5 million (2016: £132.2 million), representing a

Announcement of Preliminary Results for the year to 31 March 2017
constant currency increase of 0.5% at a Group level and 0.5% and 5.0% for NanoTechnology Tools and Service
respectively.
Reported Revenue in the period was up 9.0% to £348.5 million (2016: £319.7 million), down 3.7% at constant currency
reflecting the weaker performance across our Industrial Products and OI Healthcare businesses. On a geographicalbasis, demand for our products reflected global trends in funding and capital expenditure, resulting in an exceptionallystrong performance in Asia, growth in Europe and a relatively flat performance in the USA. Reported revenue grew inEurope, North America and Asia by 4.2%, 0.7% and 22.3% respectively. Revenue on a constant currency basis grew
7.2% in Asia supported by continued strong growth in China. Constant currency revenue declined in Europe by 5.9%
with growth in France and Germany being more than offset by reduced volumes from the Rest of Europe, principallyfrom lower shipments from Plasma Technology, and it declined in North America by 12.0%, predominantly due toreduced volumes in OI Healthcare and Asylum Research.
Adjusted profit before tax from continuing operations increased by 7.1% to £36.0 million (2016: £33.6 million) withimprovements across NanoTechnology Tools and Industrial Products more than offsetting a fall in Service. Adjusted
operating profit margin fell to 12.2% (2016: 12.9%) reflecting the reduced profit from OI Healthcare and the uplift torevenue due to the movement in currency exchange rates.
We recorded a loss before tax of £25.5 million after the impairment of non-current assets and other adjusting items of£45.8 million, primarily reflecting deterioration in the financial performance from Asylum Research, OI Healthcare andour joint venture, ScientaOmicron. While we have plans that address the weaknesses and issues within all threebusinesses, the impairment reflects the actions and time required to improve profitability.
Continuing adjusted basic EPS grew by 5.5% to 47.8 pence (2016: 45.3 pence). Basic EPS was a negative 44.0
pence (2016: 12.2 pence) after reflecting the impairments of non-current assets and other adjusting items.
Net debt at the end of the period fell to £109.3 million (2016: £128.2 million), largely due to good cash conversion andproceeds received from the sale of Superconducting Wire business in November 2016.
Turning to the individual sectors: NanoTechnology Tools saw reported revenue growth of 11.4% to £208.7 million(2016: £187.4 million), adjusted operating profit grew 20.2% to £25.6 million (2016: £21.3 million), with an increase inadjusted operating margin by 90 basis points to 12.3%. The improved performance is due to the success of recently
launched higher margin products across the portfolio combined with a focus on operational efficiencies. We continued
to see enhanced performance from Andor Technology and NanoAnalysis; while Plasma Technology and NanoScience
both continued to make progress in the year and contributed strongly to the improved performance. Asylum Researchunderperformed against the previous year having been disproportionally impacted by reduced academic funding levels
and a delay in launching new products. As a result of prioritising investments and delivering operational efficiencies we
expect to see an improvement in the profitability of the Asylum business, albeit still below original projections at thetime of acquisition.
In Industrial Products, reported revenue increased by 5.0% to £56.7 million (2016: £54.0 million), excluding
discontinued contributions from the Superconducting Wire business, which was divested in November. Reported
adjusted operating profit increased to £1.7 million (2016: £1.1 million) with an associated increase of 100 basis points
in adjusted operating margin to 3.0%. This represents a stable performance in the face of continued challenging end
market conditions.
In Service, reported revenue increased by 6.1% to £83.2 million (2016: £78.4 million). This was driven by theincreased demand for services relating to our own products. As previously flagged, the OI Healthcare business in theUS, which offers refurbished imaging systems, mobile imaging solutions and maintenance services, had a slower year
due to a change in the software licensing policy on second hand systems by one of the main system manufacturers.
This significantly reduced the number of refurbished systems sold in the year and, despite improved profit andoperational margin from the servicing of our own products, resulted in a fall in reported adjusted operating profit to£15.2 million (2016: £18.8 million). We have taken the necessary actions to align the business to the new software
licensing model for refurbished imaging systems and the OI Healthcare business is now positioned to deliver an
improved performance going forward.

Announcement of Preliminary Results for the year to 31 March 2017
From a customer perspective, our end market distribution has remained relatively unchanged compared to theprevious year. Over half of the Group’s revenue came from academic and commercial research customers, of which aquarter was engaged in Bio and Life Sciences.
The Group continues to invest in future products and services and in the year we increased investment in R&D by
7.1% to £30.3 million (2016: £28.3 million). We monitor the proportion of our revenue which originates from products
launched in the last three years (our Vitality Index). Our Vitality Index stands at 31%, and is in the range we expectfrom a high technology business. This reflects the continued strength of our existing leading products and thesuccessful uptake of more recently launched products. Some of the new products launched in the year are outlined in
the Operational Review. We continue to have a healthy pipeline of new products in development that push theboundaries of scientific understanding and technical performance and increase our market reach.
PeopleOur staff are central to the successful delivery of our Horizon strategy. We will focus on resourcing our corecapabilities through the development of our existing workforce and targeted recruitment.
To further support the delivery of Horizon I have reshaped our Management Board. The Management Board develops
and embeds our business processes across the Group and the new structure will drive the exploitation of synergies
and efficiencies across our businesses.
The progress we have made so far in our transformation is largely due to the talented workforce we have at Oxford
Instruments. I would like to thank all our employees for their positive response to the new strategy and the resulting
changes, their continued enthusiasm and their dedication to our customers.

OutlookIn a year of transition, the Group delivered a stable performance, supported by currency tailwinds. Whilst academic
and R&D funding levels remain uncertain, we believe that progress with our strategic initiatives and favourable
currency effects will deliver an outcome for the year in line with expectations.
Our focus is on markets with long-term growth drivers where nanotechnology has the potential to address some of theworld’s most complex and pressing challenges. Fundamental improvements to our structure, operations and strategy
are underway and give us a solid platform to return to sustainable growth, at improved margins over the medium-term.

Ian Barkshire
Chief Executive
13 June 2017

Announcement of Preliminary Results for the year to 31 March 2017
Operations Review
Our Group reports in three sectors: NanoTechnology Tools, Industrial Products and Service.

NanoTechnology Tools

Revenue
2
Adjusted Operating Profit
2
Adjusted Operating Margin(Loss)/profit before tax after adjusting items

2017
£m

2016
£m

Growth

208.6
25.6
12.3%
(17.4)

187.3
21.3
11.4%
9.0

11.4%

Constant
Currency
1
Growth
(1.2%)1

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

2

The NanoTechnology Tools sector comprises two divisions: NanoCharacterisation, which includes NanoAnalysis,
Andor Technology and Asylum Research; and NanoSolutions, which includes NanoScience, Plasma Technology andour minority share in the ScientaOmicron JV.
Our NanoTechnology Tools sector experienced continued strength and improved profitability. This was largely due tothe success of recently launched, higher margin products and an ongoing focus on operational efficiencies across thesector. Whilst overall academic funding remains subdued, we continue to see demand in the nanotechnology arena,
including the characterisation of materials associated with current and next generation batteries; biomedical imaging in
the exploration and improved understanding of disease mechanisms and with particular growth in the newly emerging
quantum technology segment. In addition we are seeing an increased demand from commercial organisations seeking
to gain competitive advantage from the exploitation of nanotechnology. Our focus on solutions that offer increased
performance and ease of use is creating more value for our academic and commercial customers, providing them withnew capabilities, additional information and higher productivity.
Our NanoAnalysis business delivers innovative solutions and services that enable materials characterisation andsample manipulation down to the nano scale. Our products are used in conjunction with electron microscopes and ionbeam systems to provide the critical compositional, structural and phase information that determines material
properties from plastics through to advanced aerospace components and quantum devices. Our solutions are market
leading being used in most of the world’s leading academic institutions and companies, with applications ranging fromrenewable energy storage, semiconductors, advanced materials research, mining, metallurgy and forensics.
NanoAnalysis continues to deliver a strong technical and financial performance in a relatively stable market. We
continue to extend our range of products, and have experienced particular success providing analytical systems
supporting production in commercial applications such as data storage and automotive markets. In addition, ourflagship XMax Extreme product has delivered strong growth since its launch in the previous year, with customers
using its unique performance to undertake materials research at a resolution and sensitivity that was previously
unobtainable. In particular, Extreme offered researchers new capabilities to characterise current and next generation
batteries and semiconductor structures at the nanoscale. Whilst the metals markets remained subdued during the year
we saw increasing interest and positive developments in the Advanced Materials and Biomedical markets driven by
investment in new manufacturing technologies, such as additive manufacturing and a continued investment inbiomedical research.
Andor Technology is a global leader in the design and manufacture of high performance scientific imaging cameras,
spectroscopy solutions and microscopy systems for research and industrial markets. During the year Andor continued
to build sales and service presence and expand the portfolio of imaging and microscopy solutions. We significantly
enhanced our offering into combustion and plasma research markets with the launch of an intensified camera solution
with market leading speed and sensitivity. Several of our core technologies have been adopted by quantum imaging
researchers who are studying quantum applications including quantum communication and quantum computing. At thecore of our microscopy business strategy was the launch this year of our Dragonfly confocal microscope platform andits associated experiment sequencing software, Fusion. Combined, these investments have received exceptionalcustomer feedback as they enable 3D imaging through thicker samples and larger areas at unprecedented resolution
and speed. A solid order book, dedicated sales team and customer interest support our high expectations of thisAnnouncement of Preliminary Results for the year to 31 March 2017segment in the next financial year and beyond. The year also delivered exceptional performance from our associatedanalysis software platform Imaris, where we continue to embrace our customers’ need to manage and process large
complex data sets, often derived from our Dragonfly systems. Imaris will deliver smooth handling of extremely large
data sets, which are a core requirement for the growing brain imaging market sector.
Asylum Research is the technology leader in atomic force microscopy (AFM) for both materials and bioscience
applications. While Asylum continues to take a leadership position when it comes to advanced technology, this was adifficult year for us and other AFM providers. The market has been disproportionally impacted by reduced academic
funding levels in the US and Europe and for us this has offset a stronger performance in Asia. Increased interest inbattery energy storage, photovoltaics, industrial polymers and two dimensional materials such as graphene
contributed to a stronger second half to the year. Our electrochemistry solution, which is based on our Cypher AFM
platform, enables the measurement and observation in real time of reactions for critical processes in their normal
environment. This is particularly important for battery research where the electrolyte, temperature and electrical bias
all affect performance and chemical response. Towards the end of the year we launched our Video Rate (VRS) AFM
which is also based on the versatile Cypher platform. It is the first and only full-featured video-rate atomic force
microscope and sets a new benchmark for speed, enabling high resolution imaging of dynamic events at thenanoscale across a range of applications including biodynamics, cosmetics, pharmaceuticals, semiconductor
processing and catalysis.
Plasma Technology provides material etch and deposition processes and solutions to semiconductor researchlaboratories and advanced specialised production facilities that develop devices and materials for novel applications in
nanotechnology. Our focus on developing advanced process recipes to complement our etch and deposition
platforms, combined with a focus on operational effectiveness, has helped deliver a significant improvement in theperformance of the business. Our proprietary processes have helped us to win a number of orders into specialist
production facilities for power semiconductors and the production of sensors. Our new hardware platforms aredelivering the anticipated operational improvements and efficiencies through their increasing standardisation andmodular design. We expect to see continuing interest from nanotechnology research with building interest in oursolutions for atomic-scale processing of materials for power conversion and storage. We were pleased to receive the‘High Volume Manufacturing’ award from the Compound Semiconductor industry recognising our development of SiC
plasma etch processes, which are delivered through our PlasmaPro 100 Polaris system launched in the previous year.
NanoScience designs, manufactures and supports market-leading products that create unique environments andmeasurement solutions primarily for the physical science and quantum technology research community. Our portfolio
includes ultra-low temperature cryogenic systems, specialised high field superconducting magnets and associatedmeasurement solutions which are enabling the advances in quantum technologies, new materials and device
development as well as fundamental research in the physical sciences. Demand for our specialist magnet systems
remains strong, including installations into leading institutes across China, Europe and the US. In addition, increased
investment in existing beamline facilities drove demand for high value, specialised superconducting magnet systems.
In the year we made successful installations into several leading facilities including OakRidge National Laboratory in
the US and the Rutherford Appleton Laboratory in the UK. We have benefited from the global increase of funding intoquantum related technologies fuelled by quantum computing and quantum sensors in particular. This has driven
increased demand across our cryogenic and related optical measurement solutions. Our market leading portfolio of
cryogenic and measurement solutions are well positioned to benefit from the forecast increase in quantum funding
initiatives across Europe, the US and China.
The ScientaOmicron joint venture created the largest player in the Ultra-High Vacuum surface science field. While theintegration and ongoing restructuring continue, the business has been impacted by the subdued academic funding andslower than planned product launches. This is being addressed by more focused investment to address product gaps
and a continued focus on driving operational efficiencies. The Group has a 47% share in the joint venture.
A loss before tax of £17.4 million (2016: profit of £9.0 million) for NanoTechnology Tools is after the impairment of noncurrent assets, amortisation of acquired intangibles and other adjusting items. Total impairment costs of £31.3 million
relate to Asylum (£23.3 million) and ScientaOmicron (£8.0 million). Amortisation of acquired intangibles was £10.6
million. Other adjusting items comprise £0.8 million of charges relating to ScientaOmicron and acquisition related costsof £0.3 million.

Announcement of Preliminary Results for the year to 31 March 2017
Industrial Products

Revenue
2
Adjusted Operating Profit
2
Adjusted Operating Margin
Loss before tax after adjusting items

2017
£m

2016
£m

Growth

56.7
1.7
3.0%
(2.1)

54.0
1.1
2.0%
(3.1)

5.0%

Constant
Currency
1
Growth
(7.0%)1

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

2

After the previously announced disposal of our Superconducting Wire business, Industrial Products comprises the Xray Technology, Magnetic Resonance and Industrial Analysis businesses. Since the close of the year, we announced
the agreed sale of our Industrial Analysis business to Hitachi High-Technologies in line with our Horizon strategy.
The sector experienced a stable performance given the continued challenging end market conditions driven by
subdued oil and commodity prices and reduced steel production in China. The launch of new products, combined withimproved efficiencies across this sector, maintained a stable performance from the Industrial portfolio.
Our X-ray Technology business supplies X-ray sources to leading OEM’s for industry, research and medical
applications including material composition analysis, real time medical imaging and analysis of multi-layer printed
circuit boards. X-ray Technology made progress in the year despite challenging markets. While growth of traditional
laboratory and ROHS-driven analysis markets have slowed, the imaging markets and industrial analysis markets are
becoming an increasingly important part of our market focus. The consumer electronics, pcb inspection and oil andgas markets continued to be subdued. However, there was growth in medical imaging applications as demand for miniand micro CT, bone density and biopsy equipment increased, driven by trends in reduced footprint, portability andreduced patient dosage. Battery inspection is another increasing application area and we are further improving our
products to provide enhanced offerings to this sector. The regulatory legislations that were expected in China tocontrol metals in food and water have not yet materialised and represent potential future growth.
Our Magnetic Resonance business uses fundamental physical processes to provide essential information about thenature and behaviour of materials and products. We provide instruments to academic and industrial researchers thatare simple to operate, providing essential information that relates directly to the performance of our customers’
products. We continue to see interest in Pulsar, the highest resolution benchtop NMR spectrometer on the market.
Pulsar is an affordable system that allows researchers to have their own NMR analyser in-house rather than having to
go to high cost, low throughput specialist service laboratories.
Industrial Analysis designs and sells a range of spectrometers into a broad range of industrial markets. Our customers
span global industries from metals, steel foundries and scrap recycling through to automotive, solar, petrochemicals,
cement, recycling, and food and agriculture. The business reinforced its market positions through a number of key
product launches across our Optical Emission Spectroscopy and Hand Held Analyser portfolio. For example, ourrecently launched Vulcan hand held laser induced breakdown spectroscopy analyser, offers portable analysis at lower
cost and without ionising radiation. Vulcan has had a successful take up since launch and is targeted at quality control
applications in general manufacturing as well as metals recycling. In the year we also added the ‘Optimum’ model to
the FOUNDRY-MASTER range of compact optical emission spectrometers which provides unparalleled analytical
performance for the entry level quality assurance, quality control and metal production applications.
A loss before tax of £2.1 million (2016: loss of £3.1 million) is after the impairment of non-current assets, amortisationof acquired intangibles and other adjusting items. Total impairment costs of £1.1 million relate to a write-down ofsuperseded intellectual property within Industrial Analysis. Amortisation of acquired intangibles was £1.3 million. Other
adjusting items comprise £0.2 million of restructuring charges and acquisition related costs of £1.2 million.

Announcement of Preliminary Results for the year to 31 March 2017
Service Sector

Revenue
2
Adjusted Operating Profit
2
Adjusted Operating Margin
Profit before tax after adjusting items

2017
£m

2016
£m

Growth

83.2
15.2
18.3%
1.7

78.4
18.8
24.0%
14.9

6.1%

Constant
Currency
1
Growth
(7.1%)1

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

2

The Service sector comprises the Group’s maintenance service contracts, billable repairs and spare part sales for
Oxford Instruments’ own products; and the service, sale and rental of refurbished third party MRI and CT machines
under the OI Healthcare brand.
The improved profit and operational margin we saw from the servicing of our own products was unfortunately offset bya poor performance in our OI Healthcare business. The OI Healthcare business in the US, which offers refurbishedimaging systems, mobile imaging solutions and maintenance services, was impacted by a change in the software
licensing policy on second hand systems by one of the main system manufacturers and by the high level of activity inthe comparative period. As a result, the number of refurbished systems sold in the year and revenue generated fromleasing was significantly reduced. We are taking the necessary steps to improve sustainable profitability, including
driving operational efficiencies and improving management capabilities in specific areas of focus.
A profit before tax of £1.7 million (2016: £14.9 million) is after the impairment of non-current assets, amortisation of
acquired intangibles and other adjusting items. Total impairment costs of £11.2 million relate to OI Healthcare andamortisation of acquired intangibles was £1.9 million. Other adjusting items comprise £0.4 million of restructuring
charges.

Announcement of Preliminary Results for the year to 31 March 2017

Finance Review
The Group had a stable performance in 2017 with total adjusted profit in line with expectations. Reported revenue
grew by 9.0% to £348.5 million (2016: £319.7 million). Revenue, excluding currency effects, declined by 3.7%, with the
movement in average currency exchange rates over the last year positively impacting reported revenue by £40.6
million. At the end of the year the Group’s order book for future deliveries stood at £144.5 million (2016: £132.2
million), growth of 9.3% on a reported basis and 0.5% at constant currency.
Adjusted operating profit from continuing operations increased by 3.2% to £42.5 million (2016: £41.2 million). Adjusted
operating profit from continuing operatons, excluding currency effects, declined by 5.8%. Adjusted operating margin
from continuing operations declined by 70 basis points to 12.2% (2016: 12.9%), with a decline in Service margin morethan offsetting an increase in the NanoTechnology Tools margin.
Adjusted profit before tax grew by 7.1% to £36.0 million (2016: £33.6 million). A pre-tax adjusted profit of £1.3 million
from the Superconducting Wire business for the seven months of ownership, prior to its sale in November 2016, isincluded in discontinued operations. For the 12 months to March 2016 the Superconducting Wire business deliveredan operating profit of £3.4 million. Including discontinued operations, the Group achieved reported adjusted profit
before tax of £37.1 million (2016: £37.0 million).
Following a decline this year in financial performance from our US Healthcare and Asylum businesses we haveconcluded that our projections of future cash flows do not support the level of goodwill and intangibles held on thebalance sheet. We have also made a small impairment of acquired intellectual property in Industrial Products andwritten down inefficient capitalised development costs on the Group’s new ERP system. Consequently, goodwill andintangibles to the value of £37.8 million have been impaired. In addition, we have written down the carrying value of
our investment in the ScientaOmicron joint venture by £8.0 million. The combined impairment of £45.8 million in noncurrent assets is a non-cash adjustment.
Non-recurring items and acquisition related costs were £3.1 million and the movement in the mark-to-market valuationof currency hedges for future years gave rise to a gain of £1.2 million.
Adjusted profit before tax from continuing operations of £36.0 million (2016: £33.6 million) represents a margin of
10.3% (2016: 10.5%). After the impairment of goodwill and intangible assets and other adjusting items, the Group
recorded a loss before tax of £25.5 million from continuing operations (2016: profit of £9.7 million).
Continuing adjusted basic earnings per share grew by 5.5% to 47.8 pence (2016: 45.3 pence). Continuing earnings
per share were a loss of 44.0 pence (2016: profit of 12.2 pence).
Operating cash flow (as defined in section 3.0) decreased by 14.4% to £39.7 million, primarily due to a planned
reduction in payables compared to the previous year end. Adjusted operating cash (defined as adjusted EBITDA, lessmovement in working capital, capitalised development expenditure and capital expenditure) represents 86.1% (2016:110.4%) of adjusted operating profit. Net debt decreased from £128.2 million to £109.3 million, representing a net debt
to EBITDA ratio (for banking covenant purposes) of 2.1 times, comfortably within our banking covenant of 3.0 times.
During the year the Group disposed of its Superconducting Wire business and this has been treated as a discontinued
operation in the financial statements. Accordingly, the numbers detailed in the Finance Review exclude the results ofSuperconducting Wire in both the current and prior periods.
Adjusted operating profit is stated before impairment and amortisation of goodwill and acquired intangibles, nonrecurring items and acquisition-related costs, and the mark-to market valuation of unexpired currency hedges, as set
out in note 1 to the financial statements.
1.

Income statement

The Group’s income statement is summarised below.

Announcement of Preliminary Results for the year to 31 March 2017
Table 1: Income statement
Year ended
31 March 2017
£m
348.5
181.7
(139.2)
42.5
(6.5)
36.0
(13.8)(37.8)(8.0)(3.1)

Year ended
31 March 2016
£m
319.7
155.5
(114.3)
41.2
(7.6)
33.6
(16.7)(4.5)

1.2(25.5)
0.4(25.1)

(2.7)
9.7
(2.7)
7.0

24.1%

22.9%

Continuing adj. earnings per share – basic
Earnings per share – basic

47.8p(44.0)p

45.3p
12.2p

+5.5%

Continuing adj. earnings per share – diluted
Earnings per share – diluted

47.7p(44.0)p

45.2p
12.3p

+5.5%

Dividend per share

13.0p

13.0p

Revenue
Adjusted gross profit
Administrative expenses
Adjusted operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquired intangibles
Impairment of goodwill and intangibles
Impairment of investment of associate
Non-recurring items and acquisition-relatedcostsMark-to-market of currency hedges(Loss)/profit before tax
Tax from continuing operations(Loss)/profit for the period from continuing
operations
Adjusted effective tax rate

1

Change+9.0%+16.8%
+3.2%
+7.1%

1

The adjusted effective tax rate is calculated excluding impairment of non-current assets, amortisation on acquired intangibles,
non-recurring items and acquisition related costs and the mark-to-market of financial derivatives

1.1
Revenue
Reported revenue of £348.5 million (2016: £319.7 million) increased by 9.0%. NanoTechnology Tools grew by 11.4%,
Industrial Products by 5.0% and Service, 6.1%.
The depreciation of Sterling against the US Dollar, Euro and Japanese Yen has increased reported revenue by £40.6
million. Revenue growth, excluding currency effects, showed a decline of 3.7%, with NanoTechnology Tools falling by
1.2%, Industrial Products by 7.0% and Service by 7.1%.
At constant currency, revenue grew by 7.2% in Asia, with strong growth in China. Revenue in Europe, North America
and Rest of World declined by 5.9%, 12.0% and 28.2% respectively.
The transfer of our Omicron business into a joint venture, ScientaOmicron, led to a reduction in revenue of £2.0 million
compared to the comparative period as under equity accounting we no longer consolidate the joint venture’s revenue.
1.2
Gross profit
Adjusted gross profit grew by 16.8% to £181.7 million (2016: £155.5 million), representing an adjusted gross profit
margin of 52.1%, an increase of 350 basis points over last year.
1.3
Operating profit
Adjusted operating profit increased by 3.2% to £42.5 million (2016: £41.2 million), representing an adjusted operating
profit margin of 12.2%, a decrease of 70 basis points against last year. The NanoTechnology Tools margin rose by 90
basis points to 12.3% (2016: 11.4%) and the Industrial Products margin rose by 100 basis points to 3.0% (2016:2.0%). Lower US Healthcare revenue, due to a large fall in equipment sales, led to a fall in Service margin to 18.3%(2016: 24.0%). Adjusted operating profit includes realised losses on the maturity of currency hedges resulting from thedevaluation of Sterling against the US Dollar, Euro and Japanese Yen since the inception of the hedges.

Announcement of Preliminary Results for the year to 31 March 2017
Our share of the ScientaOmicron joint venture showed an adjusted loss of £0.8 million in the period, an improvementof £1.0 million against the comparative period (which includes 10 months when the joint venture was in operation andtwo months when Omicron was a fully owned subsidiary of the Group) but below the financial performance envisaged
in the investment case. Our share of the ScientaOmicron joint venture loss was £1.4 million after our share of
restructuring costs.
Currency effects (including the impact of transactional currency hedging) have increased reported adjusted operating
profit by £3.7 million when compared to blended hedged exchange rates for the comparative period, blended hedged
exchange rates for the US Dollar, Euro and Japanese Yen against Sterling are all at stronger rates than last year.
At constant currency the adjusted operating profit margin was 12.6%, a decline of 30 basis points.
Operating profit was a loss of £20.0 million (2016: profit of £20.8 million), reflecting an impairment of non-current
assets of £45.8 million, amortisation of acquired intangibles of £13.8 million and non-financial net adjusting costs of£2.9 million.
1.4

Adjusting items

Amortisation of acquired intangibles of £13.8 million relates to intangible assets identified on acquisitions, being thevalue of technology, customer relationships and brands.
During the year the financial performance of our Healthcare business in the US deteriorated with business operating
profit falling significantly from last year’s level. Performance has been impacted by a lower level of sales of refurbishedimaging systems compared to the previous year, which we expect to continue. This has been driven by both aparticularly high level of activity in the prior year but also a change in software licensing policy by one of the large
original equipment manufacturers. We have revised our financial projections for the business, consistent with a new
strategy and the actions and time required to improve profitability and operational efficiency. We concluded that
goodwill and acquired intangible assets of £11.2 million could no longer be supported by projected cash flows,
resulting in an impairment of the same.
During the year the financial performance of our Asylum business deteriorated with the business performing below our
expectations. Performance has been impacted by a slowdown in academic funding in US and European markets,
resulting in a contraction in the overall scanning probe microscopy market, compounded by delays in new productlaunches. We have revised our financial projections for the business in light of the trading environment, and planned
launch dates of new products. We concluded that goodwill of £22.6 million (of which £10.9 million was apportioned
goodwill from the Andor acquisition) could no longer be supported by projected cash flows, resulting in an impairmentof the same.
Within our Industrial Analysis division we have impaired acquired intellectual property valued at £1.1 million that has
been superseded by new product development. The write-down of intangible assets also incorporates a £2.2 million
charge for inefficient capitalised costs against the Group’s new ERP system and a charge of £0.7 million for the
impairment of capitalised development costs in Asylum that had been made at the half year.
An impairment charge of £8.0 million relating to our investment in ScientaOmicron is a consequence of the 2016
financial performance and lower projected cash flows. This has resulted in a reassessment of the joint venture’s
expected future business performance and the actions and time required to improve profitability and operational
efficiency.
Other net non-recurring costs and acquisition related items during the period were £3.1 million. These comprise £1.5
million of professional fees relating to the sale of Superconducting Wire and the impending
sale of Industrial Analysis and £1.6 million of restructuring and charges relating to the ScientaOmicron venture.
The Group uses derivative products to hedge its exposure to fluctuations in foreign exchange rates. It is Group policy
to have in place at the beginning of the financial year hedging instruments to cover 75% of its forecast transactional
exposure for that year. The Group has decided that the additional costs of meeting the extensive documentation
requirements of IAS 39 to apply hedge accounting to these foreign exchange hedges cannot be justified. Accordingly,
the Group does not use hedge accounting for these derivatives.
Net movements on marking to market derivatives in respect of the next financial year are disclosed in the Income
Statement as financial expenditure and excluded from our calculation of adjusted profit before tax.
The mark to market gain in respect of derivative financial instruments was £1.2 million (2016: £2.7 million loss). This
reflects a reduction in the fair value liability on currency derivatives that are hedging future transactional currency
exposures for the Group compared to the previous year end. The un-crystallised balance sheet liability is attributable

Announcement of Preliminary Results for the year to 31 March 2017
to a fall in the value of Sterling at the balance sheet date against the US Dollar, Euro and Japanese Yen, against a
blended rate achieved on hedges in place for the 2017/18 financial year.
1.5

Net finance costs

The Group’s adjusted net finance costs fell by £1.1 million to £6.5 million (2016: £7.6 million) with finance charges
falling by £0.3 million to £5.6 million, pension financing charges falling by £0.6 million to £1.1 million and financial
income rising to £0.2 million.
Total net finance charges were £5.5 million reflecting the unwind of discount in respect of contingent consideration andmark-to-market movements in respect of derivative financial instruments.
1.6

Profit before tax

Continuing adjusted profit before tax increased by 7.1% to £36.0 million (2016: £33.6 million). The continuing adjusted
profit before tax margin decreased by 20 basis points to 10.3% (2016: 10.5%).
A loss before tax of £25.5 million (2016: profit of £9.7 million) is after the impairment of goodwill and acquired
intangibles and other adjusting items.
1.7

Tax

The adjusted tax charge of £8.7 million (2016: £7.7 million) represents an effective tax rate of 24.1% (2016: 22.9%).
The increase is primarily due to a reduction in deferred tax assets (excluding deferred tax on adjusted items)
recognised in the US and an increase in specific tax provisions.
The statutory effective tax rate is 1.5%, lower than would be expected due to some impairment charges not deductible
for tax purposes.
1.8

Earnings per share

Continuing adjusted basic earnings per share and adjusted diluted earnings per share, before adjusting items, bothincreased by 5.5% to 47.8 pence and 47.7 pence respectively. Continuing basic and diluted earnings per share bothdecreased to a loss of 44.0 pence.
Undiluted weighted average shares have stayed flat at 57.1 million.
1.9

Foreign Exchange

The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euro andJapanese Yen. For the full year, approximately 12% of Group revenue was denominated in Sterling, 54% in US
Dollars, 19% in Euros, 10% in Japanese Yen and 5% in other currencies. Translational exposures arise on the
consolidation of overseas company results into Sterling. Transactional exposures arise where the currency of sale orpurchase transactions differs from the functional currency in which each company prepares its local accounts.
The Group maintains a hedging programme against its net transactional exposure using internal projections of
expected currency trading transactions expected to arise over a period extending from 12 to 24 months. As at 31
March 2017 the Group had currency hedges in place extending up to 12 months forward.
2.

Dividend

The Group’s policy is to increase the dividend each year in line with the increase in underlying earnings. However,taking into account the impact on the Group of business disposals, currency effects and our progressive strengtheningof the balance sheet, the Board has proposed to hold the dividend at last year’s level. This results in a final dividend of
9.3 pence, bringing the total dividend for the year to 13.0 pence. The final dividend will be paid, subject to shareholder
approval, on 19 October 2017 to shareholders on the register as at 22 September 2017.
3.

Cash flow

The Group cash flow is summarised below. Adjusted operating cash flow excludes rental assets held for resale andprofits or losses on dispoal of fixed assets, both of which are included within expenditure on tangible and intangible
assets.

Announcement of Preliminary Results for the year to 31 March 2017
Table 2: Cash flow

Adjusted operating profit
Depreciation and amortisation
Adjusted EBITDA
Working capital movement
Non-recurring items and acquisition related costs
Pension scheme payments above charge to op. profit
Equity settled share schemes
Share of loss of associate
Adjusted operating cash flow
Interest
Tax
Capitalised development expenditure
Expenditure on tangible and intangible assets
Acquisition of subsidiaries, net of cash acquired
Proceeds from sale of subsidiary undertaking
Increase in long-term receivables
Dividends paid
Decrease/(increase) in borrowings
Net increase/(decrease) in cash and cash equivalents fromcontinuing operations

Year ended
31 March 2017
£m
42.5
10.5
53.0
(4.4)
(3.3)
(6.9)
0.5
0.8
39.7
(5.0)
(2.1)
(7.9)
(4.1)
(9.8)
12.2
(7.4)
(12.8)
2.8

Year ended
31 March 2016
£m
41.2
9.4
50.6
8.4
(6.5)
(6.7)
0.4
0.2
46.4
(5.6)
(3.5)
(8.2)
(5.3)
(27.1)
0.6
(3.0)
(7.6)
4.6
(8.7)

Note: Adjusted EBITDA is earnings before interest, tax, depreciation, intangible amortisation, mark-to-market of financial derivatives
and other non-cash adjusting items

3.1
Adjusted operating Cash Flow
Adjusted operating cash flow in the year decreased by 14.4% to £39.7 million (2016: £46.4 million). Adjusted operating
cash (defined as adjusted EBITDA, less movement in working capital, capitalised development expenditure and capital
expenditure) represents 86.1% (2016: 110.4%) of adjusted operating profit due to an outflow of working capital overthe period.
The working capital outflow of £4.4 million reflects an increase in inventories of £1.5 million, a decrease in receivablesof £0.6 million and a decrease in payables of £3.5 million. The increase in inventories primarily reflects a build up of
refurbished imaging system inventory prior to sale or rental. We have experienced a planned reduction in payables as
we move to a smoother phasing of payments compared to the previous year end.
3.2
Interest
Net interest paid was £5.0 million (2016: £5.6 million). The difference from last year is primarily due to lower financing
costs arising from a lower level of average net debt compared to the comparative period.
3.3
Tax
Tax paid was £2.1 million (2016: £3.5 million), the reduction reflecting utilisation of brought forward tax losses inGermany and the UK. Losses in Germany arose from the Omicron business while losses in the UK related torestructuring costs and the roll forward of R&D credits.
3.4
Investment in research and development (R&D)
Total cash spend on R&D in the year was £30.3 million, equivalent to 8.7% of sales, (2016: £28.3 million, 8.9% ofsales). A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:

Announcement of Preliminary Results for the year to 31 March 2017
Table 3: Investment in research and development (R&D)

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

4

Year ended
31 March 2017£mYear ended
31 March 2016
£m

27.8
(0.1)
0.2

23.6
(0.8)
1.2

(5.5)
7.9
30.3

(3.9)
8.2
28.3

Acquisitions and Disposals

In the first half of the year acquisition payments comprised US$ 10.1 million (£6.5 million) for the final deferredconsideration on Medical Imaging Resources, Inc (‘MIR’) and £0.3 million attributable to the purchase of Asylum
Research Corporation (‘Asylum’). In the second half of the year £3.0 million was paid for deferred consideration on an
inherited Andor earn-out.
The Superconducting Wire business was sold on 17 November 2016 for US$ 17.5 million (£14.2 million). Cashproceeds of £12.2 million reflect deferred consideration and cash transferred on disposal.

5

Net debt and funding

5.1
Net debt
Net debt decreased in the period from £128.2 million to £109.3 million. Operating cash flow was £39.7 million.
Expenditure of £9.8 million relates to deferred consideration payable for MIR, Asylum and financial commitments
made by Andor prior to acquisition. Disposal proceeds of £12.2 million relate to the sale of Superconducting Wire. The
Group invested in tangible and intangible assets of £4.1 million and capitalised development costs of £7.9 million.

Table 4: Movement in net debt£m
Net debt as at 31 March 2016
Operating cash flow
Interest
Tax
Capital expenditure on tangible and intangible assets
Capitalised development expenditure
Acquisitions, net of cash acquired and loan to associate
Proceeds from sale of subsidiary undertaking
Dividends paid
Other items
Net debt as at 31 March 2017

128.2
(39.7)
5.0
2.1
4.1
7.9
9.8
(12.2)
7.4
(3.3)
109.3

5.2
Funding
The Group has in place an unsecured multi-currency revolving facility agreement which is committed until February
2020. The facility has been entered into with a group of 3 banks and comprises a Sterling denominated multi-currency
facility of £100 million and a US Dollar denominated multi-currency facility of $37.0 million.
The Group has also issued a bilateral private placement note of £44.5 million, which matures in 2021 and a £25.0
million amortising fixed rate loan from the European Investment Bank that matures in 2020. In addition, the Group has
uncommitted facilities of £20.0 million.
Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 31
March 2017 net debt to EBITDA was at 2.1 times and EBITDA to interest was 9.5 times, both comfortably within ourbanking covenants.

Announcement of Preliminary Results for the year to 31 March 2017
6

Pensions

The Group has defined benefit pension schemes in the UK and USA. Both have been closed to new entrants since2001 and closed to future accrual from July 2010.
At 31 March 2017, the net liability arising from our defined benefit scheme obligations was £25.1 million (2016: £35.0
million), a fall of £9.9 million. The reduction in the deficit was due to a fall in the discount rate which was offset by areduction in inflation and mortality projections rates combined with deficit recovery contributions. Total scheme assets
at 31 March 2017 were £287.9 million (2016: £239.5 million) while liabilities were £313.0 million (2016: £274.5 million).
The annual deficit recovery payment to the UK scheme was £6.9 million for the financial year, payable through to andincluding 2021. For the years up to and including 2018, the payment will rise by the higher of inflation and growth individend per share; thereafter, the payment will increase in line with inflation.

7

Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performance andposition, are set out in the Performance and Strategy and Operations sections. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described in the Financial Review.
The diverse nature of the Group, combined with its financial strength, provides a solid foundation for a sustainablebusiness. The Directors have reviewed the Group’s forecasts and flexed them to incorporate a number of potential
scenarios relating to changes in trading performance. The Directors believe that the Group will be able to operate
within its existing debt facilities. This review also considered hedging arrangements in place. The Directors believe that
the Group is well placed to manage its business risks successfully.
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after making
reasonable enquires, that the Group has adequate resources to continue in operational existence for the foreseeable
future.

8

Forward-Looking Statements

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

Gavin Hill
Group Finance Director
13 June 2017

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Income
year ended 31 March 2017

Adjusted*£m
Notes

Adjustingitems*
£m

Total
£m

348.5

—

348.5

Cost of sales(166.8)—(166.8)Gross profit

181.7

—

181.7

(27.1)(0.7)(27.8)(66.3)—(66.3)(32.9)(53.4)(86.3)

(0.8)

(8.4)

(9.2)

—

—

—

Foreign exchange(12.1)—(12.1)

Operating profit/(loss)

42.5(62.5)(20.0)

Other financial income

0.2

1.2

1.4

Financial income

0.2

1.2

1.4

Interest charge on pension scheme net liabilities

(1.1)

—

(1.1)

Other financial expenditure

(5.6)

(0.2)

(5.8)

Financial expenditure

(6.7)

(0.2)

(6.9)

Revenue

Research and development

3

4

Selling and marketing
Administration and shared services
Share of loss of associate, net of tax

6

Other operating income

Profit/(loss) before income tax
Income tax (expense)/credit

8

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

7

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

36.0(61.5)(25.5)

(8.7)

9.1

0.4

27.3

(52.4)(25.1)

0.7

4.1

4.8

28.0

(48.3)(20.3)

pence

pence

47.8

(44.0)

Earnings per share
Basic earnings per share

2

From continuing operations
From discontinued operations

1.2

8.4

From profit/(loss) for the year

49.0

(35.6)

47.7(44.0)

Diluted earnings per share

2

From continuing operations
From discontinued operations

1.2

8.4

From profit/(loss) for the year

48.9

(35.6)

Dividends per share
Dividends paid

9

13.0

Dividends proposed

9

13.0

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

The attached notes form part of the Financial Statements.

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Income
year ended 31 March 2016

Adjusted*£m
Notes

Adjustingitems*
£m

Total
£m

319.7

—

319.7

Cost of sales(164.2)(1.0)(165.2)Gross profit

155.5

(1.0)

154.5

(23.6)—(23.6)(59.4)—(59.4)(31.8)(23.0)(54.8)

(0.2)

(1.3)

(1.5)

Other operating income

—

4.9

4.9

Foreign exchange

0.7

—

0.7

Operating profit/(loss)

41.2(20.4)

20.8

Other financial income

—

—

—

Financial income

—

—

—

Interest charge on pension scheme net liabilities

(1.7)

—

(1.7)

Other financial expenditure

(5.9)

(3.5)

(9.4)

Financial expenditure

(7.6)

(3.5)

(11.1)

Revenue

Research and development

3

4

Selling and marketing
Administration and shared services
Share of loss of associate, net of tax

6

Profit/(loss) before income tax
Income tax (expense)/credit

8

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

7

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

33.6(23.9)

9.7

(7.7)

5.0

(2.7)

25.9

(18.9)

7.0

1.9

(1.9)

—

27.8

(20.8)

7.0

pence

pence

45.3

12.2

Earnings per share
Basic earnings per share

2

From continuing operations
From discontinued operations

3.4—

From profit for the year

48.7

12.2

45.2

12.3

Diluted earnings per share

2

From continuing operations
From discontinued operations

3.4—

From profit for the year

48.6

12.3

Dividends per share
Dividends paid

9

13.0

Dividends proposed

9

13.0

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

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Comprehensive Income
year ended 31 March 2017

Notes
(Loss)/profit for the year

2017
£m

2016
£m

(20.3)

7.0

Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss
Gain/(loss) on effective portion of changes in fair value of cash flow hedges, net of amounts
recycled
Foreign exchange translation differences
Net cumulative foreign exchange (gain)/loss on disposal of subsidiaries recycled to the Income
Statement

0.1

(0.1)

18.8

5.6

(5.7)

1.2

4.4

13.6

(0.9)

(2.6)

16.7

17.7

(3.6)

24.7

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

8

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Financial Position
as at 31 March 2017

2017
£m

2016
£m

32.5
181.0
3.9
3.6
26.0
247.0

35.2
220.8
13.1
3.4
19.0
291.5

53.9
81.1
4.2
0.6
27.2
167.0
414.0

61.1
77.5
2.7
1.5
21.8
164.6
456.1

2.9
61.5
0.2
22.8
45.1
132.5

2.9
61.5
0.1
9.7
68.8
143.0

129.6
25.1
5.6
160.3

147.0
35.0
5.7
187.7

6.9
93.0
6.5
5.0
9.8
121.2
281.5
414.0

3.0
102.4
2.1
5.8
12.1
125.4
313.1
456.1

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

The Financial Statements were approved by the Board of Directors on 13 June 2017 and signed on its behalf by:

Ian Barkshire
Gavin Hill
Director
Director
Company Number: 775598

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Changes in Equity
year ended 31 March 2017

Balance at 1 April 2016
Total comprehensive income/(expense):
Loss for the year
Other comprehensive income:– Foreign exchange translation differences– Net foreign exchange gain on disposal ofsubsidiaries recycled to the Income Statement– Gain on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled– Remeasurement gain in respect of post-retirement
benefits– Tax on items recognised directly in othercomprehensive income
Total comprehensive income/(expense)
attributable to equity Shareholders of the parent
Transactions with owners recorded directly inequity:– Charge in respect of employee service costs
settled by award of share options– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2017

Other
reserves£m
0.1

Foreignexchangetranslation
reserve£m
9.7

Retainedearnings
£m
68.8

Total
£m
143.0

—

—

—

(20.3)(20.3)

—

—

—

18.8

—

18.8

—

—

—

(5.7)

—

(5.7)

—

—

0.1

—

—

0.1

—

—

—

—

4.4

4.4

—

—

—

—

(0.9)

(0.9)

—

—

0.1

13.1

(16.8)

(3.6)

—
—

—
—

—
—

—
—

0.5
(7.4)

0.5
(7.4)

—
2.9

—
61.5

—
0.2

—
22.8

(6.9)
45.1

(6.9)
132.5

Share
capital
£m
2.9

Share
premium
account£m
61.5—

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased and thencancelled during the year ended 31 March 1999, and the hedging reserve in respect of the effective portion of changes in value ofcommodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 from the translationof the Group’s net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2016: 183,145) of its own shares in an employee benefit trust. The cost of these shares is included
within retained earnings. There was no movement in the shares held by the trust during the year.

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Changes in Equity
year ended 31 March 2016

Balance at 1 April 2015
Total comprehensive income/(expense):
Profit for the year
Other comprehensive income:– Foreign exchange translation differences– Net foreign exchange loss on disposal ofsubsidiaries recycled to the Income Statement– Loss on effective portion of changes in fair value ofcash flow hedges, net of amounts recycled– Remeasurement gain in respect of post-retirement
benefits– Tax on items recognised directly in othercomprehensive income
Total comprehensive income/(expense)
attributable to equity Shareholders of the parent
Transactions with owners recorded directly inequity:– Charge in respect of employee service costs
settled by award of share options– Dividends paid
Total transactions with owners recorded directly inequityBalance at 31 March 2016

Other
reserves£m
0.2

Foreignexchangetranslation
reserve£m
2.9

Retainedearnings
£m
58.0

Total
£m
125.5

—

—

—

7.0

7.0

—

—

—

5.6

—

5.6

—

—

—

1.2

—

1.2

—

—

(0.1)

—

—

(0.1)

—

—

—

—

13.6

13.6

—

—

—

—

(2.6)

(2.6)

—

—

(0.1)

6.8

18.0

24.7

—
—

—
—

—
—

—
—

0.4
(7.6)

0.4
(7.6)

—
2.9

—
61.5

—
0.1

—
9.7

(7.2)
68.8

(7.2)
143.0

Share
capital
£m
2.9

Share
premium
account£m
61.5—

Announcement of Preliminary Results for the year to 31 March 2017

Consolidated Statement of Cash Flows year ended 31 March 2017
2016
£m

2015
£m

(Loss)/profit for the year from continuing operations
Adjustments for:
Income tax expense
Net financial expense
Acquisition related fair value adjustments to inventory
Acquisition related fair value adjustments to property, plant and equipment
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Impairment of capitalised development costs
Loss on disposal of subsidiary
Contingent consideration deemed no longer payable
Impairment of investment in associate
Amortisation and impairment of acquired intangibles
One off impairment of capitalised intangible software costs
Depreciation of property, plant and equipment
Amortisation of capitalised development costs(25.1)

7.0

(0.4)
5.5
—
—
1.5
0.6
0.4
0.7
0.4
—
8.0
48.7
2.2
5.7
4.8

2.7
11.1
0.2
0.8
2.5
2.9
1.3
—
0.9
(4.9)
—
16.7
—
5.5
3.9

Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Share of loss from associate
Acquisition related costs paid
Restructuring costs paid
Foreign currency loss on intra-group dividends
Cash payments to the pension scheme more than the charge to operating profit
Operating cash flows before movements in working capital(Increase)/decrease in inventories
Decrease in receivables(Decrease)/increase in payables and provisions
Increase/(decrease) in customer deposits
Purchase of rental assets held for subsequent sale
Cash generated from operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash flow on disposal of subsidiary
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Increase in long-term receivables(Decrease)/increase in borrowings
Dividends paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents from continuing operations
Increase in cash from discontinued operations
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year

53.0
0.5
0.5
0.8
(1.2)
(1.3)
(0.8)
(6.9)
44.6
(1.5)
0.6
(4.5)
1.0
(1.0)
39.2
(5.0)
(2.1)
32.1

50.6
0.1
0.4
0.2
(1.8)
(4.7)
—
(6.7)
38.1
1.1
7.4
2.2
(2.3)
(3.0)
43.5
(5.6)
(3.5)
34.4

(9.8)
(3.5)
(0.1)
12.2
(7.9)
(9.1)

(27.1)
(2.2)
(0.2)
0.6
(8.2)
(37.1)—(12.8)(7.4)(20.2)
2.8
1.4
20.4
1.9
26.5

(3.0)
4.6
(7.6)
(6.0)
(8.7)
4.9
25.1
(0.9)
20.4

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

4.2
1.9

(3.8)
(0.9)

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

6.1
12.8

(4.7)
(4.6)

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

18.9
(128.2)(9.3)(118.9)Net debt at the end of the year

(109.3)(128.2)

Announcement of Preliminary Results for the year to 31 March 2017

Notes to the Financial Statements
year ended 31 March 2017
1 Non-GAAP measures
The Directors present the following non-GAAP measures as they consider that they give a better indication of the underlying
performance of the business.
Reconciliation between profit before income tax and adjusted profit from continuing operations
2017
2017 (Loss)/profit
Operating before income
2016(loss)/profit
tax Operating profit
£m
£m
£m

Statutory measure from continuing operations
Reversal of acquisition related fair value adjustments to inventory
Reversal of acquisition related fair value adjustments to property, plant andequipment
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Contingent consideration deemed no longer payable
Unwind of discount in respect of contingent consideration and acquisition
related accruals
Non-recurring and acquisition related items
Impairment of acquired intangibles
Impairment of investment in associate
Impairment of capitalised development costs
Impairment of capitalised software costs
Amortisation and impairment of acquired intangibles
Mark to market (gain)/loss in respect of derivative financial instruments
Adjusted measure from continuing operations
Share of taxation
Adjusted profit for the year from continuing operations

2016
Profit before
income tax£m(20.0)(25.5)

20.8

9.7

—

—

0.2

0.2

—
1.5
0.6
0.4
0.4
—

—
1.5
0.6
0.4
0.4
—

0.8
2.5
2.9
1.3
0.9
(4.9)

0.8
2.5
2.9
1.3
0.9
(4.9)

—
2.9
34.9
8.0
0.7
2.2
13.8
—
42.5
—
—

0.2
3.1
34.9
8.0
0.7
2.2
13.8
(1.2)
36.0
(8.7)
27.3

—
3.7
—
—
—
—
16.7
—
41.2
—
—

0.8
4.5
—
—
—
—
16.7
2.7
33.6
(7.7)
25.9

Acquisition related costs comprise professional fees incurred in relation to mergers and acquisitions activity and any consideration
which, under IFRS 3 (revised), falls to be treated as a post-acquisition employment expense.
Restructuring costs comprise one-off costs in respect of the cost reduction programme which began in March 2015. Restructuringcosts relating to the Group’s associate relate to exceptional costs incurred by the associate arising from the merger of the Scienta
and Omicron businesses.
During the year the Group settled various claims totalling £0.4m relating to the disposal of its Omicron business in the prior year. In
the prior year the Group made a loss on disposal of £0.9m in respect of the disposal on Omicron.
In order to assist with comparability between peers, adjusted profit excludes the non-cash amortisation and impairment of acquired
intangible assets and goodwill and the unwind of discounts in respect of contingent consideration relating to business combinations.
During the year the Group recognised an impairment of £8.0m relating to its equity accounted associate investment. See note 7 forfurther details
The one off impairment of capitalised development costs relates to a specific internal systems project that has been stopped as theGroup focuses and directs resources so as to accelerate key projects.
The one off impairment of capitalised software costs has been carried out following a reassessment of the future value expected to
be derived from internally developed software.
The Group reports ineffectiveness of its hedging as an adjusting item. In the current year this includes losses on certain contracts
relating to the hedging of the Japanese Yen which were not required for ordinary trading and which were re-allocated for use
against the remittance of net income of the Group’s Japan operations. Additionally, under IAS 39, all derivative financial
instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured at fair value. In respect of
instruments used to hedge foreign exchange risk and interest rate risk the Group does not take advantage of the hedge accounting
rules provided for in IAS 39 since that standard requires certain stringent criteria to be met in order to hedge account, which, in theAnnouncement of Preliminary Results for the year to 31 March 2017
particular circumstances of the Group, are considered by the Board not to bring any significant economic benefit. Accordingly, theGroup accounts for these derivative financial instruments at fair value through profit or loss. To the extent that instruments arehedges of future transactions, adjusted profit for the year is stated before changes in the valuation of these instruments so that theunderlying performance of the Group can be more clearly seen.
In the prior year:

the reversal of acquisition related fair value adjustments to inventory and property, plant and equipment were excluded
from adjusted profit to provide a measure that includes results from acquired businesses on a consistent basis over time toassist comparison of performance.

£4.9m was released relating to contingent consideration on the acquisition of Asylum Research Corporation following theend of the earnout period.

2 Earnings per share
The calculation of basic and adjusted earnings per share is based on the profit for the year as shown in the Consolidated Statementof Income and the adjusted profit for the year as shown in Note 1 respectively. Basic and adjusted earnings are divided by theweighted average number of ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership
Trust.
2017
£m

2016
£m

Basic (loss)/earnings from continuing operations
Basic earnings from discontinued operations
Basic (loss)/earnings
Adjusted earnings (Note 1)
Weighted average number of shares(25.1)
4.8(20.3)
28.0
57.1

7.0
—
7.0
27.8
57.1

pence

pence

Basic (loss)/earnings per share from continuing operations
Basic earnings per share from discontinued operations
Basic (loss)/earnings per share
Adjusted earnings per share(44.0)
8.4(35.6)
49.0

12.2
—
12.2
48.6

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

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

2017
Sharesmillion2016
Sharesmillion

57.3
(0.2)
57.1

57.3
(0.2)
57.1

2017
Sharesmillion2016
Sharesmillion

57.1
0.1
57.2

57.1
0.1
57.2

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

Weighted average number of ordinary shares per basic earnings per share calculations
Effect of shares under option
Weighted average number of ordinary shares per diluted earnings per share calculations
Adjusted diluted earnings per share has been calculated in a manner consistent with previous periods.

Announcement of Preliminary Results for the year to 31 March 2017
3 Segment information
The Group has seven operating segments. These operating segments have been combined into three aggregated operating
segments to the extent that they have similar economic characteristics, with relevance to products and services, type and class ofcustomer, methods of sale and distribution and the regulatory environment in which they operate. Each of these three aggregatedoperating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating segmentson the basis of the economic characteristics discussed below:
the NanoTechnology Tools segment contains a group of businesses, supplying similar products, characterised by a high
degree of customisation and high unit prices. These are the Group’s highest technology products serving research customers
in both the public and private sectors;
the Industrial Products segment contains a group of businesses supplying high technology products and componentsmanufactured in medium volume for industrial customers; andthe Service segment contains the Group’s service, rental and refurbished asset sales business as well as service revenues
from other parts of the Group.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on areasonable basis. Inter-segment pricing is determined on an arm’s length basis. The operating results of each are regularly
reviewed by the Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete financial information isavailable for each segment and used by the Board of Directors for decisions on resource allocation and to assess performance. No
asset information is presented below as this information is not presented in reporting to the Group’s Board of Directors.
a) Analysis by businessResults from continuing operations
Year to 31 March 2017

External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit from continuing operations

Results from continuing operations
Year to 31 March 2016

External revenue
Inter-segment revenue
Total segment revenue
Segment adjusted operating profit from continuing operations

NanoTechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

208.6
0.1
208.7
25.6

56.7
—
56.7
1.7

83.2
—
83.2
15.2

348.5

NanoTechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

187.3
0.1
187.4
21.3

54.0
—
54.0
1.1

78.4
—
78.4
18.8

319.7

42.5

41.2

The adjusted loss after tax of £0.8m (2016: £0.2m) from the Group’s associate is reported within the NanoTechnology Tools
segment.
Included in the Service sector is revenue from equipment sales of £5.6m (2016: £13.8m) and from equipment leasing of £9.0m(2016: £8.1m) .
Reconciliation of reportable segment profit
Year to 31 March 2017
Adjusted profit for reportable segments fromcontinuing operations
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Impairment of capitalised development costs
Loss on disposal of subsidiary
Impairment of investment in associate
Impairment of capitalised software costs
Amortisation of acquired intangibles
Impairment of acquired intangibles
Financial income
Financial expenditure(Loss)/profit before income tax on continuing
operations

NanoTechnology
Tools Industrial Products£m£mService£m

UnallocatedGroup items
£m

Total
£m

25.6
(0.3)
—
(0.4)
(0.7)
(0.4)
(8.0)
—
(10.6)(22.6)
—
—

1.7
(1.2)
(0.2)
—
—
—
—
—
(1.3)
(1.1)
—
—

15.2
—
(0.4)
—
—
—
—
—
(1.9)
(11.2)
—
—

—
—
—
—
—
—
—
(2.2)
—
—
1.4
(6.9)

42.5
(1.5)
(0.6)
(0.4)
(0.7)
(0.4)
(8.0)
(2.2)
(13.8)(34.9)
1.4(6.9)(17.4)

(2.1)

1.7

(7.7)

(25.5)

Announcement of Preliminary Results for the year to 31 March 2017
NanoTechnology
Tools Industrial Products£m£mYear to 31 March 2016
Adjusted profit for reportable segments fromcontinuing operations
Reversal of acquisition related fair value adjustments
to inventory
Reversal of acquisition related fair value adjustments
to property, plant and equipment
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Contingent consideration deemed no longer payable
Amortisation of acquired intangibles
Financial income
Financial expenditure
Profit/(loss) before income tax on continuing
operations

Service£m

UnallocatedGroup items
£m

Total
£m

21.3

1.1

18.8

—

41.2

—

—

(0.2)

—

(0.2)

—
(1.7)
(2.5)
(1.3)
(0.9)
4.9
(10.8)
—
—

—
(0.1)
(0.1)
—
—
—
(4.0)
—
—

(0.8)
(0.7)
(0.3)
—
—
—
(1.9)
—
—

—
—
—
—
—
—
—
—
(11.1)

(0.8)
(2.5)
(2.9)
(1.3)
(0.9)
4.9
(16.7)—(11.1)

9.0

(3.1)

14.9

(11.1)

9.7

4 Research and development (R&D)
The total R&D spend by the Group is as follows:

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

NanoTechnology
Tools
£m

2017
Industrial
Products
£m

21.0
(0.1)
0.1
(4.3)
5.3
22.0

Total
£m

NanoTechnology
Tools
£m

2016
Industrial
Products
£m

Total
£m

6.8
—
0.1

27.8
(0.1)
0.2

17.6
—
0.1

6.0
(0.8)
1.1

23.6
(0.8)
1.2

(1.2)
2.6
8.3

(5.5)
7.9
30.3

(2.8)
5.8
20.7

(1.1)
2.4
7.6

(3.9)
8.2
28.3

In the prior year an additional £0.6m impairment of capitalised development was included within administration and shared services
in the Consolidated Statement of Income relating to the refocusing of the Plasma Technology business.

Announcement of Preliminary Results for the year to 31 March 2017
5 Acquisitions – prior period only
Medical Imaging Resources, Inc.
On 1 May 2015 the Group acquired 100% of the issued share capital of Medical Imaging Resources, Inc. (MIR) for a net cash
consideration of £8.7m. Further consideration of up to £6.3m was payable based on the performance of the Oxford Instruments
Healthcare business in the year to 31 March 2016. MIR specialises in the build, lease, service and sale of mobile medical imaging
labs.
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been madeto better align the accounting policies of the acquired business with the Group accounting policies and to reflect the fair value of
assets and liabilities acquired. The business was acquired for the purpose of integrating into the Oxford Instruments Healthcare
business where it was believed that a number of synergies could be obtained.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

—

5.7

5.7

Tangible fixed assets

3.8

0.5

4.3

Inventories

1.4

0.1

1.5

Trade and other receivables

0.9

—

0.9

Trade and other payables

(1.7)

—

(1.7)

Deferred tax

0.2

(0.4)

(0.2)

Net debt

(2.6)

—

(2.6)

Net assets acquired

2.0

5.9

7.9

Goodwill

4.5

Total consideration

12.4

Net debt acquired

2.6

Contingent consideration at acquisition(6.3)

Net cash outflow relating to the acquisition

8.7

The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce and synergistic benefits
expected to arise from the acquisition. No deferred tax liability was recognised relating to the fair value of acquired intangibles dueto the company making a S338 election in the United States of America to treat this acquisition as a trade and assets purchase fortax purposes.
Contingent consideration of £6.5m was paid during May 2016 based on the performance of the Oxford Instruments Healthcare
business in the year to 31 March 2016. The difference of £0.2m between contingent consideration provided at acquisition and that
paid in May 2016 was due to foreign currency movements.
The book value of receivables in the tables above represents the gross contractual amounts receivable.

Announcement of Preliminary Results for the year to 31 March 2017
6 INVESTMENT IN ASSOCIATE
During the period year the Group entered into a strategic alliance with GD Intressenter AB of Sweden (GDI) to create the world’s
largest company in the highly specialised Ultra High Vacuum Surface Science field. The alliance comprised Oxford Instruments’Omicron Nanotechnology GmbH (“Omicron”) and associated subsidiaries and GDI’s Scienta Scientific AB (“Scienta”) andassociated subsidiaries. Scienta Scientific AB is registered and has its principal place of business in Sweden.
In consideration for new shares in Scienta, Oxford Instruments transferred all of its shares in the capital of Omicron to Scienta.
Oxford Instruments holds a 47% interest in the ordinary share capital of Scienta and GDI holds 53%. The investment has beenaccounted for as an associate taking into account the following factors:-

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

The book value of the net assets disposed of was £14.9m. The value of the shareholding acquired in Scienta was considered to be£14.6m and as a result a £0.3m loss on disposal arose on the transaction in 2015/16.
During the current year the Group:Settled various claims totalling £0.4m relating to the disposal of its Omicron business in the prior year; and
Recognised an impairment charge of £8.0m in respect of its investment in Scienta.

The Group’s share of loss in its equity accounted associate for the year was £1.2m (2016: £1.5m). The Group did not receive any
dividends from the associate in either period.

Carrying value at 1 April
Addition
Share of loss of associate (net of tax)
Impairment charge
Dividends received
Carrying value at 31 March

2017
£m

2016
£m

13.1
—
(1.2)
(8.0)
—
3.9

—
14.6
(1.5)
—
—
13.1

During the year the Group recognised an impairment charge of £8.0m relating to its investment in ScientaOmicron due to theassociate’s financial performance for the year ended 31 December 2016 and lower projected cash flows. This resulted in areassessment of ScientaOmicron’s expected future business performance and the actions and time required to improve profitability
and operational efficiency.
The £8.0m impairment has been reported in the results of the NanoTechnology Tools segment. As at 31 March 2017, the estimateof the recoverable amount of the Group’s investment in ScientaOmicron, being its value in use, was calculated as £3.9m. The pretax discount rate used to arrive at this estimate was 15.5%.
Summary financial information for the equity accounted associate is as follows:
2017

2016

£m

£m

Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets

3.5
25.0
28.5
(21.7)(3.6)(25.3)
3.2

3.2
27.0
30.2
(21.4)(4.0)(25.4)
4.8

IncomeExpenses
Loss for the year

50.8
(53.3)(2.5)

34.0(37.2)(3.2)

Group’s share of net assets
Group’s share of loss

1.5
(1.2)

2.3
(1.5)

According to the terms of the transaction, no dividend can be paid by the associate until 27 May 2017. Following that date, any
dividend paid must be agreed by both Oxford Instruments plc and GD Intressenter AB, up to a maximum of 50% of the previous
year’s profit after tax. At the date of signing these financial statements no dividend has been declared or paid.

Announcement of Preliminary Results for the year to 31 March 2017
7 Disposal of subsidiary and discontinued operations
On 17 November 2016 the Group disposed of its Superconducting Wire business for a final consideration of £14.0m. In the prioryear, on 23 November 2015, the Group disposed of its Austin Scientific business for a final consideration of £0.6m.
Superconducting
Wire

Austin Scientific

2017

2016

£m

£m

Effect of disposal on the financial position of the Group

—

(1.7)

Property, plant and equipment

(3.1)

(0.2)

Inventory(12.6)(1.4)

Trade and other receivables

(6.5)

(0.5)

Cash and cash equivalents

(0.3)

—

Trade and other payables

6.6

0.3

Provisions

0.1—

Net assets divested(15.8)(3.5)

Consideration receivable

14.0

0.6

Deferred consideration

(1.0)

—

Consideration received, satisfied in cash

13.0

0.6

Cash disposed of

(0.3)

—

Transaction expenses

(0.5)

(0.1)

Other intangible assets

Net cash inflow

12.2

0.5

Carrying value of net assets disposed of (excluding cash and cash equivalents)(15.5)(3.5)

Deferred consideration

1.0—

Impairment of net assets to fair value less costs to sell—

2.8

Recognition of provision on disposal

(0.2)

—

Currency translation differences transferred from translation reserve

5.7

0.7

Gain on disposal before impairment

3.2

0.5

Less impairment loss

—

(2.8)

Gain/(loss) on disposal

3.2

(2.3)

Tax credit on gain/loss on disposal

0.9

0.4

Gain/(loss) on disposal net of tax

4.1

(1.9)

Discontinued operations
In the year to 31 March 2017 the Group’s Superconducting Wire business was classified as a discontinued operation; and in theyear to 31 March 2016 the Group’s Austin Scientific business was classified as a discontinued operation. They were consideredmajor classes of business on the basis that they were previously operating segments and referred to in the Group Strategic Report.
Results of discontinued operations – Superconducting Wire
Revenue
Expenses
Adjusted profit from operating activities before income tax
Income tax charge
Adjusted profit from operating activities after tax
Profit on disposal
Tax on profit on disposal
Profit from discontinued operations after tax

2017
£m

2016
£m

22.2
(20.9)
1.3
(0.4)
0.9
3.2
0.9
5.0

41.9
(38.5)
3.4
(1.2)
2.2
—
—
2.2

Announcement of Preliminary Results for the year to 31 March 2017
Results of discontinued operations – Austin Scientific

2017
£m

2016
£m

—
(0.2)
(0.2)
—
(0.2)
—
—
(0.2)

2.3
(2.8)
(0.5)
0.2
(0.3)
(2.3)
0.4
(2.2)

2017
pence

2016
pence

Adjusted basic earnings per share
Adjusted diluted earnings per share

1.2
1.2

3.4
3.4

Total basic earnings per share
Total diluted earnings per share

8.4
8.4

—
—

Cash flows from discontinued operations

2017

2016

Revenue
Expenses
Adjusted loss from operating activities before income tax
Income tax credit
Adjusted loss from operating activities after tax
Loss on disposal
Tax on loss on disposal
Loss from discontinued operations after tax

Earnings per share from discontinued operations

Net cash generated from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash flows

£m

£m

1.4
—
—
1.4

5.2
(0.3)
—
4.9

Announcement of Preliminary Results for the year to 31 March 2017
8 Income tax expense
Recognised in the Consolidated Statement of Income

Current tax expense
Current year
Adjustment in respect of prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustment in respect of prior years
Total tax (credit)/expense
Reconciliation of effective tax rate
(Loss)/profit before income tax
Income tax using the weighted average statutory tax rate of 22% (2016: 20%)
Effect of:Tax rates other than the weighted average statutory rate
Change in rate at which deferred tax recognised
Loss on disposal of held for sale assets
Transaction costs, deferred consideration and impairments not deductable for tax
Non-taxable income and expenses
Tax incentives not recognised in the Consolidated Statement of Income
Recognition of deferred tax not previously recognised
Movement in unrecognised deferred tax
Adjustment in respect of prior years
Total tax (credit)/expense
Taxation charge recognised in other comprehensive income
Deferred tax – relating to employee benefits

2017
£m

2016
£m

6.5
(2.2)
4.3

3.6
(0.2)
3.4

(5.6)
0.9
(4.7)
(0.4)

(1.3)
0.6
(0.7)
2.7

(25.5)
(5.6)

9.7
1.9

(0.5)
(0.2)
—
5.7
1.4
(0.4)
—
0.6
(1.4)
(0.4)

1.7
(0.4)
0.3
—
(0.4)
(0.8)
(0.1)
0.3
0.2
2.7

0.9
0.9

2.6
2.6

—

—

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

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013.
Further reductions to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26
October 2015, and an additional reduction to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016.
This will reduce the company’s future current tax charge accordingly. The UK deferred tax liability at 31 March 2017 has been
calculated based on those rates. The Group carries tax provisions in relation to uncertain tax provisions arising from the possible
outcome of negotiations with tax authorities. Such provisions are a reflection of the geographical spread of the Group’s operations
and the variety of jurisdictions in which it carries out its activities.
9 Dividends per share
The following dividends per share were paid by the Group:

Previous year interim dividend
Previous year final dividend

2017
pence

2016
pence

3.7
9.3
13.0

3.7
9.3
13.0

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

Interim dividend
Final dividend

2017
pence

2016
pence

3.7
9.3
13.0

3.7
9.3
13.0

Announcement of Preliminary Results for the year to 31 March 2017
The interim dividend was not provided for at the year end and was paid on 7 April 2017. The final proposed dividend of 9.3 pence
per share (2016: 9.3 pence) was not provided at the year end and will be paid on 19 October 2017 subject to authorisation by the
Shareholders at the forthcoming Annual General Meeting.
10 Basis of preparation
This preliminary announcement does not constitute the company’s statutory accounts for the years ended 31 March 2017 or 2016.
Statutory accounts for 2016 have been delivered to the registrar of companies, and those for 2017 will be delivered in due course.
The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which
the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The financial information presented in this preliminary announcement for the year ended 31 March 2017 is based on, and isconsistent with, that in the Group’s audited Financial Statements for the year ended 31 March 2017. No revisions to adopted IFRS
that became applicable in 2017 had a significant impact on the Group’s Financial Statements for the year ended 31 March 2017.
The Company is registered in England, Registration Number 775598.
The principal exchange rates to Sterling used were:Year end rates

2017

2016

US Dollar
Euro
Yen

1.25
1.17
139

1.44
1.26
162

Average translation rates 2017

April 2016
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary 2017
February
March
Average translation rates 2016

April 2015
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary 2016
FebruaryMarch

US Dollar

Euro

Yen

1.45
1.46
1.41
1.35
1.32
1.31
1.26
1.23
1.24
1.25
1.25
1.25

1.27
1.30
1.27
1.21
1.18
1.16
1.13
1.14
1.17
1.17
1.18
1.18

159
159
150
138
134
132
130
134
142
144
142
140

US Dollar

Euro

Yen

1.50
1.52
1.55
1.57
1.55
1.53
1.53
1.53
1.49
1.45
1.40
1.41

1.37
1.37
1.40
1.41
1.39
1.36
1.38
1.41
1.39
1.33
1.29
1.27

180
186
192
194
190
184
184
186
181
175
165
160

11 The Annual General Meeting
The Annual General Meeting will be held on Tuesday, 12 September 2017 at 2.00pm at Group Head Office, Tubney Woods,
Abingdon, Oxfordshire, OX13 5QX.

Announcement of Preliminary Results for the year to 31 March 201712 Principal Risks and Uncertainties
Specific Risk
1

Technical Risk

Context

Risk

The Group provides
high technology
equipment andsystems to its
customers.

Failure of theadvanced
technologies appliedby the Group to
produce commercial
products, capable ofbeing manufactured
and sold profitably.

Possible Impact
Lower returns
through loss ofmarket share &reducedprofitability.
Negative impact
on the Group’s
reputation.

Control
Mechanisms
Voice of the
Customer’approach to drive
the productdevelopment roadmap;
Formal new
product
development
stage gate
process tomanage R&D
Product lifecycle
management

2

Routes to market

In some instances
the Group’s products
are components ofhigher levelsystems, sold byOEMs and thus theGroup does notcontrol its route tomarket.

Backward vertical
integration by OEMs

Loss of a key
route to market;
new competitors;
lower sales andprofitability.

Customer intimacy
to match productperformance tocustomer needs;

Positioning of OI
brand andmarketing directly
to end users

Mitigation
Understanding customer needs /expectations and targeted new
product development
programme to maintain andstrengthen product positioning.
Stage gate process in productdevelopment to challengecommercial business case andmitigate technical risks.
Operational practices aroundsales-production matching andinventory management to
mitigate stock obsolescencerisks.
Product differentiation topromote advantages of OI
equipment & solutions;
Strategic marketing with OEMs
to sell performance of the
combined system;
Broadening the OEM customer
base;
Direct marketing to end users

3

Economic
environment

Government
expenditure may
become constrainedin key markets

Reduction in global
research funding

Lower sales andprofitability

Market intimacy
and identificationof alternative
markets

Market diversification –increasing penetration into
corporate customers notdependent on external funding

4

Political risk

The Group operates
in global markets
and can be required
to secure export
licences fromgovernments.

Geopoliticalchanges resulting insanctions and bar
on exports tospecific countries orunfavourable
changes in tariffs /other controls on
exports

Lower sales andprofitability

Contract review
and protection
against breach in
the event thatexport licence iswithheld

Broad global customer base;contractual protection

5

Brexit relatedrisks

The UK will leave
the EU

Short-term decline inEuropean researchfunding;

Lower sales andprofitability

Market intimacy
and identificationof alternative
markets

Market diversification –increasing penetration into
corporate customers notdependent on external funding

Inflationary pressure
on purchases andsalaries;

Salary inflation;
Increased input
costs;

Procurement
strategy to reduce
price volatility

Long term pricing agreementsfor key suppliers

Product pricing
strategy

Possible changes to
EU citizens’ rights towork in UK
impacting retention& recruitment.

Loss of key skills /increasedrecruitment /salary costs

HR people
strategy tofacilitate
recruitment &retention of staff
with key skills

Margin focused sales targets tomitigate potential increases incosts
Renewal of UK work permit
scheme to facilitate employmentof non UK / EU nationals

Announcement of Preliminary Results for the year to 31 March 20176

Supply chain risk

The Group’s
operates a strategic
make or buy policy
and outsources asignificant proportionof the costs ofproduction to benefit
from economies ofscale and natural
currency hedges.

Supply chain
disruption inparticular for single
source components
leading to
production delays
and potentially lost
revenue.

Disruption tocustomers.
Lower sales andprofitability

Procurement
strategy tomanage stock
availability

Buffer stocks of key
components;
Where possible, dual source
supply is sought

Negative impact
on the Group’s
reputation.

7

PeopleA number of theGroup’s employees
have businesscritical skills.

Key employees
leave and effective
replacements are
not recruited on atimely basis

Lower sales andprofitability

HR people
strategy for
retention &recruitment of staff
with key skills

Succession management plans;Technical career paths;
Renewal of UK work permit
scheme to facilitate employmentof non UK / EU nationals

8

IT risk

Elements ofproduction, financial
and other systems
rely on IT availability

Increasing risk ofdata loss / breachthrough cyberattack, viruses ormalware.

Loss of businesscritical data and /or financial loss

IT security policy &associatedstandards andprotection
systems.

On-going evolution of security
levels in consultation with IT
security partners to ensurechanges are in-line with current
threats.

Internal IT
governance tomaintain those
protection systems
and our incident
response

Inter alia, we deliver user
education, improved
configuration, internal testingand new tools whereappropriate.

Business
Continuity Plans inplace

Principal sites have detailed
BCPs which include plans to
restore or relocate production in
the event of a major incident.

“Zero-day” incidents,
where new viruses
or malware canspread before
security vendors can
respond represent a
particularly high risk
9

Operational risk

Business units’
production are
typically located at asingle site

Loss of all or part ofa major production
facility

Delayedshipments leading
to lower sales andprofitability

Use of contractual
protection to
mitigate financial
consequences ofdelayed delivery

10

Pensions

The Group’s
calculated pension
deficit is sensitive tochanges in theactuarialassumptions.

Movements in theactuarialassumptions may
have an appreciable
effect on thereported pension
deficit.

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

‘Delivering
Shareholder Value’- Focus onbalanced andattractive global
markets.
‘Liberating Cash’ –Developing acompetitive global
supply base that
supports our
growth.

11

Foreignexchangevolatility

The Group’s sterling
cost basis is higher
than its sterling
revenue sources
meaning that asignificant proportionof the Group’s profit
is made in foreign
currencies.

Adverse foreign
currency movements

Reducedprofitability

Natural hedging tooffset foreign
currency sales
throughprocurement inforeign currencies;
Hedging
programme

Mechanisms such as clauses forlimitation of liability / liability caps
/ exclusion of consequential
losses in sales contracts

The Group has closed its
defined benefit pension
schemes in the UK and US tofuture accrual.
The Group has a funding plan inplace to reduce the pension
deficit over the short to medium
term.

Strategic procurement in USD,
Euros & Yen.

Short-term exposure to volatility
is managed by hedging

Announcement of Preliminary Results for the year to 31 March 2017
programme (forward contracts)
12

Legal /
compliance risk

The Group’s
operates in acomplextechnologicalenvironment andcompetitors may
seek to protect theirposition throughintellectual property
rightsInfringement of athird party’s
intellectual property

Potential loss of
future revenue;
financialcompensation

Formal ‘Freedom
to Operate’assessment to
identify potential
IP issues during
product
development;

Confirmation of ‘Freedom toOperate’ during new productdevelopment stage gate process