Oxford Instruments plc
Report and Financial Statements 2012

Oxford Instruments plc
Report and Financial Statements 2012

For more information please email: info.oiplc@oxinst.com

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We are a leading provider of hightechnology tools and systems for researchand industry. We design and manufacture
equipment that can analyse and manipulatematter at the atomic and molecular level

Oxford Instruments Directory

Oxford Instruments plc
Head OfficeTubney Woods
AbingdonOxfordshire, OX13 5QX
UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
info.oiplc@oxinst.com

2006/07 Revenue

2007/08 Revenue

2008/09 Revenue

Nanotechnology£161.6m£175.6m£206.5mTools

2006/07 Adjusted operating profit

2007/08 Adjusted operating profit

2008/09 Adjusted operating profit£8.3m£10.6m£13.1m• Announced 5 year plan to double
the size of the business throughorganic and acquisitional growth
and to achieve an increase in ROS
of 10% percentage points whencompared to 2005/6• Acquired WAS Analytical (Germany)and Vericold (Germany)• Restructured the business to improve
performance• Acquired TDI (US) and LINK
Analytical (Sweden)• 10th Queen’s Award forEnterprise: innovation

2006

2007

Business Profile
Our Journey
Chairman’s Statement
Our Business
Our Markets
Our Strategy
Business Review
Chief Executive’s Statement
Operational Review
Financial Review
Principal Risks
Corporate and Social Responsibility

02
04
06
08
10
12
16
22
24

Corporate GovernanceDirectors and Advisers
Report of the Directors
Corporate GovernanceDirectors’ Remuneration Report

30
32
35
43

Financial Statements
Directors’ Responsibilities
53
Independent Auditors’ Report
54
Accounting Policies
56
Consolidated Statement of Income 64
Consolidated Statement ofComprehensive Income
66
Consolidated Statementof Changes in Equity
67
Consolidated Statementof Financial Position
68
Consolidated Statementof Cash Flows69
Notes to the Financial Statements
71
Parent Company Balance Sheet
104
Notes to the Parent Company
Financial Statements
105
Historical Financial Summary110• Best Technical Company at the
PLC Awards

2008

company Information
Shareholder Information
Oxford Instruments Directory

111
113

NanoAnalysis
Systems for materials
analysis at thenanoscale
Halifax Road
High Wycombe
Buckinghamshire
HP12 3SEUK
Tel +44 (0)1494 442255
Fax +44 (0)1494 524129
nanoanalysis@oxinst.com
Lejonvägen 28
Box 1097
S-18122 Lindingö
SwedenTel +46 8 5448 1550
Fax +46 8 5448 1558
nordiska@oxinst.com
Omniprobe10410 Miller Road
Dallas, Texas 75238
USA
Tel +1 (214) 572 6800
Fax +1 (214) 572 6801
sales@omniprobe.com
Plasma Technology
Tools fornanotechnology
fabrication
North End, Yatton
Bristol, BS49 4AP
UK
Tel +44 (0)1934 837000
Fax +44 (0)1934 837001
plasma@oxinst.com

NanoScience
Environments fornanotechnology research
Tubney Woods
AbingdonOxfordshire, OX13 5QX
UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
nanoscience@oxinst.com
Omicron
Advanced microscopes
and chemical analysis
instruments fornanotechnology
research
Limburger Strasse 75
D-65232 Taunusstein,
GermanyTel +49 6128 9870
Fax +49 6128 98733230
info@omicron.de
1, The Felbridge Centre
Willard Way,
East GrinsteadWest Sussex, RH19 1XP
UK
Tel +44 1342 331 006
Fax +44 1342 331 003
sales@omicron.co.uk
Le plan d’Aigues, RN 713760 St.-Cannat
FranceTel +33 442 50 68 64
Fax +33 442 50 68 65
omicron.nanotechnology@
wanadoo.fr
14850 Scenic Heights
Road
Suite 140
Eden Prairie
Minnesota 55344,
USA
Tel +1 (952) 345 5240
Fax +1 (952) 294 8043
info@omicronus.com
5-30-15-403 Kamata
Ota-kuTokyo 144-0052
Japan
Tel +81 3 666 10850
Fax +81 3 666 10855
r.oiwa@omicron.jp

Industrial Products
Industrial Analysis
Tools for QC,
environmental andcompliance testing
Halifax Road
High Wycombe
Buckinghamshire
HP12 3SEUK
Tel +44 (0)1494 442255
Fax +44 (0)1494 524129
industrial@oxinst.com
P.O. Box 85(Nihtisillankuja 5)
FI-02631 Espoo
FinlandTel +358 932 9411
Fax +358 932 9413
industrial@oxinst.com
360 El Pueblo Road
Scotts Valley, California
95066
USA
Tel +1 (831) 439 9729
Fax +1 (831) 439 6051
industrial@oxinst.com
Wellesweg 3147589 Uedem
GermanyTel +49 2825 93830
Fax +49 2825 9383100
industrial@oxinst.com
Magnetic Resonance
Benchtop NMR for
industrial applications
Tubney Woods,
AbingdonOxfordshire, OX13 5QX
UK
Tel +44 (0)1865 393200
Fax +44 (0)1865 393333
magres@oxinst.com
8403 Cross Park Drive,
Suite 3F
Austin, Texas 78754
USA
Tel +1 (512) 339 0640
Fax +1 (512) 339 0620
magres@oxinst.com

Company INformation
Oxford Instruments plc
Report and Financial Statements 2012

OxfordSuperconducting
Technology
Superconducting wire
600 Milik Street,
P O Box 429
Carteret
New Jersey 07008
USA
Tel +1 (732) 541 1300
Fax +1 (732) 541 7769
sales@ost.oxinst.com

Regional Sales andAustinCryogenic pumps andcompressors
4114 Todd Lane
Austin Texas 78744
USA
Tel +1 (512) 441 6893
Fax +1 (512) 441 6665
cryo-sales@oxinst.com

Rm. 1/E Building 1
Xiangzhang Garden
No. 248, Donglan Road
201102 Shanghai
China
Tel +86 (0)21 6073 2929
Fax +86 (0)21 6490 4042
china.info@oxinst.com

Service
Oxford Instruments
Service
Support services for
MRI
34 Green Street
Woodbridge
New Jersey 07095
USA
Tel +1 (732) 850 9300
Fax +1 (732) 802 0401
oiservice@oxinst.com
1027 SW 30th Avenue
Deerfield Beach
Florida 33442
USA
Tel +1 (954) 596 4945
Fax +1 (954) 596 4946
oiservice@oxinst.com
64 Union Way
Vacaville
California 95687
USA
Tel +1 707 469 1320
Fax +1 707 469 1318
oiservice@oxinst.com

Service Offices
China
Room 714, Tower 3,
Henderson Centre
No 18 Jianguomennei
Avenue100005 Beijing
China
Tel +86 (0)10 6518 8160
Fax +86 (0)10 6518 8155
china.info@oxinst.com

No.129, Lane 150,
Pingbei Road
Xinzhuang Industrial Area
Minhang District
201102 Shanghai
China
Tel +86 (0)21 6490 8580
Fax +86 (0)21 6490 4042
china.info@oxinst.com
Room 2112, Bai Hui Plaza
193 Zhong Shan Wu Road
Guangzhou 510030
China
Tel +86 (0)20 8364 9990
Fax +86 (0)20 8364 9996
china.info@oxinst.com
Room 1909, Huamin
Empire Plaza
No.1, Fu Xing Street
ChengduChina
Tel +86 (0)28 8670 3596
Fax +86 (0)28 8670 3595
china.info@oxinst.com
Czech Republic
Velvarska 13
CZ-160 00 Praha
Czech Republic
Tel +420 233 343 264
Fax +420 234 311 724
office@oxinst.cz
France77 ZA de Montvoisin
91400 Gometz la Ville,
FranceTel +33 1 69 85 25 25
Fax +33 1 69 41 46 80
infofrance@oxinst.com

113

Germany
Otto-von-GuerickeRing 1065205 Wiesbaden,
GermanyTel +49 6122 9370
Fax +49 6122 937100
ger_info@oxinst.com
India
11, Marwah’s Complex
Krishanlal Marwah Marg
Andheri East
Mumbai 400072
India
Tel +91 222 533 3930
Fax +91 222 545 2424
oiindia@oxinst.com
Japan
Haseman Bldg.
2-11-6 Tomioka, Koto-ku
Tokyo 135-0047
Japan
Tel +81 (0)3 5245 3251
Fax +81 (0)3 5245 4472
info.jp@oxinst.com
RussiaDenisovskiy per. 26
Moscow
105005
RussiaTel +7 (095) 933 51 23
Fax +7 (095) 933 51 24
info@oxford.de
Singapore
10 Ubi Crescent#04-81 Ubi TechPark
Lobby E
Singapore 408564,
SingaporeTel +65 6337 6848
Fax +65 6337 6286
oi.admin@oxfordinstruments.com.sg
Taiwan1F, No. 23, Jing-Shang
19th Street
Hsinchu, Taiwan 300,
TaiwanTel +886 3 5788696
Fax +886 3 5789993
oi.admin@oxfordinstruments.com.tw
USA/Canada/Latin
America
300 Baker Avenue,
Suite 150,
Concord MA 01742
USA
Tel +1 (978) 369 9933
Fax +1 (978) 369 8287
info@ma.oxinst.com

Our Journey We are now in our
sixth consecutive year of growth,which started in 2006

Business Profile
Oxford Instruments plc
Report and Financial Statements 201201

• Entered FTSE 250• PLC of the Year Award

2009/2010 Revenue

2010/11 Revenue

2011/12 Revenue£211.5m£262.3m£337.3m

2009/2010 Adjusted operating profit

2010/11 Adjusted operating profit

2011/12 Adjusted operating profit£14.7m£28.1m£42.1m• 5 year plan on track despite
downturn in industrial markets• Completion of 5 year plan;
revenue doubled and ROS
increased to 10.7%• First year of the next phase of ourstrategy for growth, the 14 Cubed
Plan to achieve 14% CAGR, 14%
ROS by 2014

• Received largest order for £38m
from ITER for superconducting wire

• Acquired Omicron Nanotechnology(Germany), Omniprobe Inc (US),Platinum Medical Imaging (US)• 50 years anniversary offoundation of Oxford Instruments

2009• 11th Queen’s Award forEnterprise: innovation

2010

UV touch OES metals analyser• 12th Queen’s Award forEnterprise: innovation

2011

Magnet abstract

2012

02

Business Profile
Oxford Instruments plc
Report and Financial Statements 2012

Chairman’s Statement The Group is now
performing more strongly than at any time inits history and was admitted into the FTSE250
index in September 2011

Oxford Instruments delivers shareholder
value by providing our customers withthe most advanced tools and services.
Our customers use these products
to advance the frontiers of science,
manufacture innovatively and ensure
the quality of industrial processes. The
diversity of our products and markets,
our clear customer focus, our cultureof innovation and our commitment to
attracting the very best talent in theindustry has continued to drive thegrowth of the business. The Group is
now performing more strongly than at any
time in its history and was admitted into
the FTSE250 index in September 2011.

Adjusted earnings
per share

+48%

61.6p
Dividend per share+11.1%

10.0p

This strong performance in the firstyear of our 14 Cubed three year plan
has been built around organic growth,
efficiency improvements and a successful*acquisition programme. Our healthy
product pipeline and exposure to
growing markets has yielded goodorganic revenue growth with further
improvement in operating margins.
The integration of the three acquisitions
we made in the year is proceeding toplan and each is making a positive
contribution to our business.

The Group is recommending a final
dividend of 7.23 pence, an increaseof 11.6% over the prior year bringing
the total for the year to 10.0 pence.
The success reflected in these results
has been fostered by our culture ofinclusivity and our ability to bring
together skills and ideas from acrossthe business to drive innovation and thedelivery of new products. These results
are a credit to all our people. I thankthem on behalf of the Board for their
hard work and commitment.
We are aware that we are operatingin uncertain times. We have theright people in place to maximise theopportunities and tackle the challengesof the coming years. As we enter thesecond year of our 14 Cubed Plan, it
is our intention to continue to deliver
value for all our stakeholders withthe wholehearted care, passion
and commitment for which Oxford
Instruments is renowned.

Nigel Keen
Chairman
12 June 2012

Omniprobe Gas Injector tool for
nano-fabrication and modification*see Our Strategy on page 8

Business Profile
Oxford Instruments plc
Report and Financial Statements 201203

Our values

Inclusive

We listen and engage with customers, colleagues,
shareholders and partners for mutual success.

TrustedSuperconducting wire

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

Innovative &Progressive
We bring skill, experience and openness to new ideas to address
the needs of the 21st Century.

wholehearted

We approach what we do with passion, withcare and with pace.

Wafer processingc.1900people worldwide

04

Business Profile
Oxford Instruments plc
Report and Financial Statements 2012

Our Business is structured as three segments
which reflect our targeted markets andtechnologies. This means we can focus our
expertise and our innovation on offering ourcustomers high quality products and service

Nanotechnology tools

industrial productsHigh performance technology products forresearch and industry

Analytical systems and components forresearch and industry

NanoAnalysis
Leading-edge tools that enable materials characterisation andsample manipulation at the nanometre scale.

Industrial Analysis
High quality instruments for materials identification andthickness gauging analysis essential for quality control.

NanoScience
World’s leading supplier of systems for nanocharacterisation and measurement at low temperaturesand high magnetic fields.

Superconducting Wire
World leader in the provision of high performancesuperconducting wire for industry and research.

Plasma Technology
Tools and processes for the fabrication of nanostructures.
Omicron NanoTechnology
The most advanced tools forscientists researching at thefrontiers of nanotechnology.

£153.9m

AustinSpecialises in high vacuum products, helium gas
coolers and services for the semiconductor, research,
life science and energy industries.
Magnetic Resonance
Benchtop magnetic resonanceanalysers for quality assurance.

Sectorrevenue

For more information, see
Operating Review, page 12£129.1m
Sectorrevenue

For more information, see
Operating Review, page 14

service
World-wide network of service and support•

Third party servicing and support to operators of Magnetic Resonance Imaging(MRI) and Computerised Tomography (CT) scanners.

•

Supply of refurbished MRI/CT systems, x-ray tubes, and other consumables forhealthcare customers in North America.

£56.3m•Full range of spares, consumables and accessories for all product ranges.

Sectorrevenue•

Service elements of Nanotechnology Tools and Industrial Products sectors.
For more information, see
Operating Review, page 15

Business Profile

Our vision is to pursue responsible
development and deeper understanding of
the world through science and technology

Oxford Instruments plc
Report and Financial Statements 2012

Geographies

Diverse End Markets(sales by geographies)(sales by market segments)

Life Sciences

Research & Academia
43%

Semicon/IT

Metal/
Construction

Environment

11%

12%

6%

North America 26.9%

EnergyAsia 33.8%

10%Europe 34.1%

Europe 32.0%

2010/201118%

Rest of World 3.9%

Rest of World 3.2%

Asia 37.9%

05

2011/2012

North America 28.2%

Our offices around the world

EUROPE
Tubney Woods, UK
High Wycombe, UK
Bristol, UK
East Grinstead, UK
Taunusstein, Germany
Wiesbaden, Germany
Uedem, Germany
St. Cannat, France
Gometz la Ville, France
Praha, Czech Republic
Espoo, Finland
Lidingö, Sweden
Moscow, The RussianFederation

NORTH AMERICA
Vacaville, USA
Deerfield Beach, USA
Woodbridge, USA
Eden Prairies, USA
Austin, USA (2)Concord, USA
Scotts Valley, USA
Carteret, USA
Dallas, USA

asia
Chengdu, China
Beijing, China
Shanghai, China (2)Guangzhou, China
Singapore
TaiwanTokyo, Japan (2)Mumbai, India

06

Business Profile
Oxford Instruments plc
Report and Financial Statements 2012

Total revenues from Asia

33.8%

Our Markets and applications serve a broad
range of industries and geographies. The diverse
customer base provides resilience to macroeconomic pressures, with our largest customer
representing less than 7% of sales. The diverse
geographies, especially exposure to emerging
markets supports our strategy for growth
Research & Academia
Our largest market sector includes
research into nanotechnology
applications, new materials, dataprotection, pharmaceuticals,
security, renewable energies, andnext generation quantum computing.

43%
Revenueby market
segment

Semiconductors/IT
A market that is growing significantlyin Asia and includes semiconductor
electronics, Micro Electro Mechanical
Systems, (MEMS), compound
semiconductor materials, thin film
and particle analysis.

Deep silicon etch tools

Life Sciences
A growing market sector includes the
support and service of MR and CT
imaging equipment and the supply ofsuperconducting wire for MRI scanners.

18%
Revenueby market
segment

energyNew forms of energy are attracting
significant investment from bothgovernment and the private sector.
We are involved in the search forsustainable energy (ITER), solar
technologies, oil and gas exploration,and superconductor materials.

11%

10%

Revenueby market
segment

Revenueby market
segment

Business Profile
Oxford Instruments plc
Report and Financial Statements 2012environment
As one of the major challenges ofthe 21st Century, preservation of
our environment is a key driver.
Our markets include tools for:• high brightness LEDs
• detection of hazardous substances in soil
• compliance and Quality Control testingfor RoHS and WEEE
• detection of asbestos fibres• recycling• petrochemicals• agriculture and food07

Metals/Construction
Our customers span global industries
from metals, alloy manufacturing,steel foundries and scrap recycling
to automotive, aerospace, precious
metals and cement.

X-MET7000 hand-held analyser

12%
Revenueby market
segment

Oxford Instruments X-MET7000
handheld analyser uses XRF (X-ray
fluorescence) to identify thepresence of key metal elements inonly a few seconds. The X-MET isan easy to use, robust tool whichclearly displays the types of metal
present in a sample on a clear,
colour display. The user simply
points the analyser at the scrap andpulls the trigger.

Industrial Products: X-MET7000 handheld analyser

6%
Revenueby market
segment

Increased demand for raw materials
such as copper, zinc and nickel
leads to an increase in demand
for accurate scrap sorting. Scrap
sorters and recyclers need rugged
and accurate materials analysis forthe rapid identification of alloys
enabling them to correctly value
scrap at the point they buy and sell.

Oxford Instruments plc
Report and Financial Statements 2012

14 Cubed Plan

Our Strategy to grow the business exploits
the Oxford Instruments brand, our superior
technology and exposure to diverse markets
where demand is growing. We combine this with
an ability to implement economies of scale andefficiency improvements, a focused acquisition
strategy and a world class R&D programme driven
by our highly skilled and experienced people
The 14 Cubed Plan
Having made substantial progress during
our five year plan, the foundations forlong term profitable growth were inplace. In 2011/12 we focused on the next
phase of growth with the introduction of
the 14 Cubed Plan. This plan calls forannual compound revenue growth of
14% and a return on sales of 14% to beachieved by 2014. The 14 Cubed Plan isdriven by three elements; strong organic
growth, continuous efficiency
improvements and targeted acquisitions.
These will each contribute to our targets
for growth and margin improvement.
The 14% compound growth rate isplanned to be achieved primarily throughorganic growth. We believe that thisgrowth level can be obtained because of
the valued position of the Oxford
Instruments brand in our high technology
markets, our exposure to the growing
markets of Asia and our customer
targeted R&D programme.

Financial goal

What we measure

Why we measure

To deliver shareholder
return through growthin turnover and margin

•

•

•

Delivering for shareholders•

Liberating cash•

Inventing the future•

Realising the Brand•

Adding personal value

Each of these goals is measured by key
performance indicators against which
we calibrate our progress, enabling us tomonitor momentum at both divisional
and Group level on a regular basis.

How we performed

Tracks our performanceon our growth strategy

2.4%

24.0%

Revenue growthThis organic growth will be supplemented
by targeted acquisitions and the three madein 2011 are already contributing to our
growth. The organic and acquisition growthstrands of our strategy are supported byan internal efficiency programme whichseeks both to increase revenues (byboosting our customer satisfaction levels)and to manage costs. This programme isbuilt around five key goals:

28.6%

Business Profile

Net return on sales•

Tracks our performanceon our Profitability
strategy

10.7%

•

12.5%

2010 2011 2012

7.0%

08

2010 2011 2012

Business Profile
Oxford Instruments plc
Report and Financial Statements 2012

Why we measure

Liberating Cash••Monitors our use of
Fixed Assets, Working
Capital and R&D

126.7%Cash conversion
from profit1

How we performed

110.5%

What we measure

212.9%

Strategic Priorities

09

2010 2011 2012

Realising the Brand•

Net Promoter Score•

Measures the effectivenessof our R&D programmes

44%

Proportion of revenue
coming from products
launched or acquired in
the previous 3 years

34%

•

29%

Inventing the Future2010 2011 2012

Measures Customer
Feedback

64

•

9

®2

Value Add Index –(Adjusted Operating Profit +Employment Costs)/
Employment Costs•

Measures efficiency
1.42

•

1.24

Adding Personal Value

1.49

2011 20122010 2011 20121

 ash conversion is defined as the ratio of cash generated to adjusted operating profit (see Income Statement). Cash generated is calculated as adjusted operating profit plusC
depreciation and amortisation, minus capital expenditure on property, plant and equipment and research and development, and adjusted for movements in working capital. A cash
conversion of greater than 100% shows that cash generated by the Group exceeds the adjusted operating profit for the year.
The Net Promoter Score is a metric which was introduced Group wide during 2011. No data exists for earlier years. It is compiled by asking customers at the completion of a piece ofservice work whether they would recommend Oxford Instruments to a friend or colleague. Customers give a score between zero and ten. Those customers who score nine or ten arepromoters, those customers who score seven or eight are neutral and customers who score six or less are detractors. The net promoter score is the difference between the numbers ofpromoters and the number of detractors (both expressed as a percentage of the number of replies received). The score can range between –100 (no customers are promoters) and +100
(all customers are promoters). A positive score indicates that the company has fewer detractors than promoters. The 2011 score was obtained from a survey of our customers at a single
point in time. During 2012 we initiated a process of surveying customers (on a rolling basis) immediately after the completion of a piece of work and we now use this data as the basis forour published KPI.

2For further discussion of our strategy,
see page 10

10

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Chief Executive’s Statement Innovation
remains at the core of the Group’s culture...
our strong performance is underpinned bycontinued investment in R&D which increased
this year by 29%

It is now a year since we announced
our 14 Cubed Plan to achieve compound
annual growth of 14% and a return onsales of 14% by 2014. Achievement of
our strategic objective is driven by threeelements; organic growth throughinnovation, continuous efficiency
improvements and targeted acquisitions,
all of which have contributed to our
growth and margin improvement
during the year.

Order in-take+23.5%£337.8m
Order Book

+18.6%£136.8m
Sales per Head

£183.9k+5%

Our order in-take was £337.8 million(2011: £273.5 million) and the orderbook for future delivery now stands
at £136.8 million (2011: £115.3 million).
Our two principal end market areas,
research and industrial, both remainrobust. Revenues rose to £337.3 million,
an increase of 28.6% of which 15.1%
was organic growth. Adjusted profit
before tax grew to £42.0 million (2011:£26.2 million) which equates to an
adjusted operating profit return onsales of 12.5% (2011: 10.7%). Adjusted
earnings per share rose to 61.6 pence(2011: 41.5 pence) and the Group ended
the year with a net positive cash balanceof £35.1 million (2011: £13.1 million).
The three acquisitions we made in theyear are all performing to expectations.
Omicron Nanotechnology, acquired in
June, has enabled us to extend ouroffering in the Nanotechnology Tools
sector and good progress has been madeintegrating it into the Group. Omniprobe,
also acquired in June, has contributed to
the good performance of the
NanoAnalysis business and has a strong
pipeline of new products due for launch
this year. The Platinum Medical Imaging
business, acquired in November, has beenable to exploit the value of the Oxford
Instruments brand to win new customers
and improve its business performance.

We continued to benefit from growthacross our major geographies with
Europe up 37.4%, North America
up 30.6% and Asia up 14.5%. Our
performance in developed markets
benefited from sales of products andservices from our new acquisitions whichwere primarily exposed to these regions.
Going forward, we expect further
opportunities to emerge in Asia as we
expand the reach of these products andservices. We anticipate that Asia will be
our fastest growing region over the
medium to longer term.
Innovation remains at the core of theGroup’s culture. Our strong performanceis underpinned by continued investment
in R&D, which increased this year by 29%
to £25.8 million (2011: £20.0 million). The
percentage of revenue that is made up of
products launched or acquired in the last
three years is a key indicator of the vitalityof our new product development andhas increased from 34% in 2011 to
44% in 2012.
Our People
A high technology business relies on
the skills and expertise of its people.
We therefore recognise the importanceof ensuring a sustainable business going
forward through an inclusive strategy
of managing, developing and recruiting
people who support our company values
and contribute to our growth. I am proudto lead such a talented and committed
workforce and I thank them for theircontinued contribution to our success.

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

A changing market presents interesting
opportunities as well as challenges and
we are confident that we have thestructure, products and talent in place
to make further progress in the current
year and beyond.

Jonathan Flint
Chief Executive
12 June 2012

Data courtesy of M. Crommie, Univ. Of California at Berkeley, Berkeley, CA, USA. Measured with an Omicron LT STM.
Literature: Nature Physics 4, 627-630 (2008))

Omicron LT STM meets the trend in research
towards sophisticated experiments with extremely
long measurement times

Graphene has been described as thestrongest material ever measured andis 200 times stronger than steel. It was
discovered by Professors Andre Geim
and Kostya Novoselov of the Universityof Manchester, who received a Nobel
Prize for their work. The potential
applications of graphene are huge,from electronics to aerospace. The
benefits to both business and theconsumer will come from faster andcheaper devices that are thinner andmore flexible, and from stronger andmore flexible materials.
The research world is excitedand there are many projects aroundthe world seeking to discover andexploit the potential of graphene.
Oxford Instruments Nanotechnology
Tools group offers a unique toolboxof systems and processes that can beused for research and manufactureof new graphene based materials. The
image on the left was produced on
an Omicron STM tool and shows agraphene flake on a SiO2 substrate. Allfour businesses in the Nanotechnology
Tools sector are actively supporting
researchers around the world withtools, processes and expertise.

Nanotechnology tools: Graphene

Outlook
We are now two months into thesecond year of our 14 Cubed Plan.
Trading to-date has been in line with
our expectations and our markets
remain strong despite continued
economic uncertainty, particularly
in Europe. A healthy pipeline of new
product introductions is in place andwe are investing across the businessto increase efficiency, strengthen
our market positions and drive further
profitable growth. We are well positioned
to build on the opportunities presented
by emerging markets and to takeadvantage of new applications andtechnologies as they arise. We continue
to look for bolt-on acquisitions tocomplement our existing businesses.

11

12

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Operational Review A healthy pipelineof new product introductions is in place
and we are investing across the businessto increase efficiency, strengthen ourmarket positions and drive further
profitable growth£153.9m

We operate in three sectors:
Nanotechnology Tools, Industrial
Products, and Service.

Sectorrevenuenanotechnology tools

Nanotechnology Tools
sales growth

26.4%

2012
£m

2011
£m

Revenue

153.9

121.8

Operatingprofit17.3

14.6

The Nanotechnology Tools sector comprises
our NanoAnalysis, NanoScience, Plasma
Technology and Omicron NanoTechnology
businesses. This sector produces ourhighest technology products and serves
research and industrial customers in boththe public and private sectors.
Our NanoAnalysis business produces
leading-edge tools that enable materials
characterisation and sample manipulation
at the nanometre scale. Its products areused on electron microscopes andion-beam systems across academic andindustrial applications including
semiconductors, renewable energy,
mining, metallurgy and forensics. Thisbusiness has produced a strong
performance across all regions, driven
by the launch of AZtec, a revolutionary
materials characterisation system. The
integration of Omniprobe Inc, acquired inJune 2011, has enhanced our productrange with innovative nano-manipulation
tools for sample preparation.
Our NanoScience business is the world’s
leading supplier of cryogenic systems fornano-characterisation and measurement
at low temperatures and high magnetic
fields. Its technologies are used inapplications such as characterisation of
new materials and devices at thenanoscale, data protection and storage,

Benchtop magnetic resonance analyser

fusion energy and high temperature
superconductor materials. This businesshas performed well in the year and is
now the world’s leading supplier ofcryogen-free products. The Triton
cryogen-free dilution refrigerator, withan integrated high-field superconducting
magnet, has performed strongly,
particularly in the Quantum Computing
segment. The launch in the year of
Mercury, a new electronics system,
further strengthened our market position
offering intelligent control of cryogenic
and magnetic environments.
Our Plasma Technology business provides
leading-edge tools and processes for the
fabrication of nanostructures. Our systems
provide process solutions for nanometre
layer growth of compound semiconductormaterial, etching of nanometre sizedfeatures and the controlled growth ofnanostructures in markets ranging fromsemiconductor electronics, Micro Electro
Mechanical Systems (MEMS), High
Brightness LEDs (HBLED) and photovoltaic
devices. Order intake levels weremaintained and the order book is healthy,
despite the anticipated weakening in
HBLED capital equipment demand. As
previously reported, sales of equipment tomake HBLEDs declined due to over capacity
in the market but are forecast to pick up
towards the end of the current financial year
as devices for commercial and domestic
lighting become more affordable.
In March 2012 we transferred ownershipof TDI, a wholly owned subsidiary whichdevelops hydride vapour phase epitaxy(HVPE) technology for use in the
production of High Brightness LEDs,
to Ostendo, a privately owned company
based in California. This will maximise
the value from our technology
investment in HVPE.

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

Following the acquisitions of Omicron
and Omniprobe, good progress has been
made with their integration into theGroup, growing our Nanotechnology
Tools offering and leveraging sales andbrand synergies. This has significantly
improved our competitive position whenbidding for multi-million dollar systems
that contain products from more than
one of the Nanotechnology Tools
businesses, and we have enjoyedparticular success in the fast growing
BRIC territories where brand plays animportant role in the selling process.
We monitor the market’s perception of
our performance through solicitation ofregular feedback from our customers.
We quantify this in our Net Promoter Score
metric which has improved in the year.

X-Supreme, EDXRF analyser

Billions of people around the world
suffer from ‘hidden hunger’ or
micronutrient malnutrition. They
do not get enough micronutrientsrequired to lead healthy productive
lives from the foods that they eat.
Micronutrients are vitamins andminerals (such as vitamin A, zinc, andiron) and are essential to good health.
Micronutrient malnutrition can lower
IQ, cause stunting and blindness inchildren, lower resistance to disease inboth children and adults, and increaserisks for both mothers and infants
during childbirth.
HarvestPlus, a global leader in thedevelopment of nutrient-rich crops, was
one of the first recipients of funding for
funding for research into micronutrientsin crops granted by the Bill and Melinda
Gates Foundation. HarvestPlus is using
Oxford Instruments X-ray Fluorescence(XRF) X-Supreme analyser in its plant
breeding programme to screen wholegrain rice sample for concentrationsof iron and zinc. This programme isdesigned to tackle the hidden hunger
by developing nutrient rich grains andcereals. Use of XRF costs just 2 cents
per sample, versus the $20 per sample
using other methods of analysis.

Industrial Products: Hidden Hunger

Our Omicron NanoTechnology businesssupplies analytical solutions fornanotechnology R&D, providing
innovative, high performance tools thatoffer unique multi-technique systems. We
are investing in additional R&D, sales andservice. There has been a trend in themarket towards much larger integrated
systems from which Omicron is wellplaced to benefit. For example, the recent
launch of Argus, an innovative electron
spectrometer, has enabled our researchcustomers to undertake experiments thatwere not previously possible withstandard detector technology.

13

14

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Operational Review continued

Industrial products
2012
£m

2011
£m

Revenue

129.1

100.5

Operatingprofit13.8

6.1£129.1m
Sectorrevenue

Industrial Products
sales growth

28.5%

Oxford Instruments Industrial Analysis’ Period Table App

The Industrial Products sector contains
our Industrial Analysis, Superconducting
Wire, Austin and Magnetic Resonancebusinesses. This sector supplies analyticalsystems for quality control, environmental
and compliance testing, and components
for industry and research.
Our Industrial Analysis business supplies
high quality instruments for materials
identification and thickness gauging
analysis essential for quality control. Our
customers span global industries frommetals, alloy manufacturing, steel
foundries and scrap recycling through toautomotive, solar, petrochemicals,
cement, recycling, and precious metals.
Performance for this business was verystrong across all sectors. Our OpticalEmission Spectroscopy division performed
particularly well in Asia and saw orders
rise on the back of its recently launchedFoundryMaster Xpert tool, specificallydesigned for the steel industry. We also
launched the XMET7500, a hand held
analyser, delivering high performance andflexibility for the rapid analysis of thewidest variety of materials from metals tosoils. Sales have exceeded expectations in
all territories. In addition, process
improvement in our x-ray tube facility in
California has led to significant gains in
productivity. In October 2011, werationalised the industrial productoffering by disposing of a non-coreproduct line that we produced for asingle customer, to that customer.

Our Superconducting Wire business isthe world leader in the provision of highperformance superconducting wire forindustry and research, spanning markets
that include MRI healthcare, physics
research, life sciences, fusion energy andparticle accelerators. The core businessproviding wire for MRI machines
benefited from robust demand fromour major OEM customers. Following
the major order received in 2010, afurther small order for wire for ITER,
the multinational carbon free energy
programme, was received in 2011 andshipments remain on track.
Our Austin business specialises in highvacuum products, helium gas coolers andservices for the semiconductor, research,
life science and energy industries. It had
a good year driven by demand for its
products from the solar industry andbacked up by its core products andservices. A programme of efficiency
initiatives has reduced lead-times. The
strong performance of this business has
driven a move to new premises, plannedfor 2012.
Our Magnetic Resonance businessproduces benchtop Nuclear Magnetic
Resonance analysers for a broad range
of industries for quality assurance,
production optimisation and research
applications. They are used for applications
in agriculture, food and beverage, textiles,
polymers, petrochemicals and oil and gas
exploration. This business showed a good
performance and has a secure order bookgoing forward. It has good profit margins
and sales of the recently launched
AffirmoEX, the world’s smallest benchtop
Electron Magnetic Resonance spectrometerfor industrial, scientific and educational
applications, have exceeded expectations.

the year in review
Oxford Instruments plc
Report and Financial Statements 201215

£56.3mSectorrevenue
service
2012
£m

2011
£m

Revenue

56.3

42.5

Operatingprofit11.0

7.4

The acquisition of Platinum Medical
Imaging in November 2011 has also
made a positive contribution to this
sector. Platinum offers third party
servicing and support to operatorsof MRI and CT scanners in North
America. Structural changes in the
US health care market continue tobenefit this business. Recognition of the
Oxford Instruments brand has increased
customer confidence in the Platinum
offering and helped to further growmarket share in North America.

Servicerevenues increased

32.5%
Oxford Instruments Plasma Technology’s
successful technical seminars andworkshops are organised incollaboration with key customer
research universities in Europe, Asia andthe USA. These events aim to encourageinterest in developments within theindustrial and research communities
using Plasma and Ion Beam Etch andDeposition process techniques.
The events run worldwide several
times per year, co-hosted withprestigious organisations such as theInstitute of Science – Chinese Academyof Science in Beijing, Lawrence
Berkeley National Lab, Caltech andCornell in the USA, the University ofFreiburg/Institut für Mikrosystemtechnik
in Germany, the Universities ofSouthampton and Glasgow in theUK, and Eindhoven University ofTechnology in the Netherlands.
60–100 participants from academia andindustry attend each event, enhancing
Oxford Instruments’ relationship withthese institutes, and its standing in theindustry. These events also attract many
invited guest speakers to participate, allof whom are acknowledged specialists
in their field. Process and Applications
experts from Oxford Instruments
Plasma Technology also give a numberof talks on the company’s technologies
and process solutions, and runworkshops on specific topics.

Over 100 people attended the successful nanoscale Plasma Processing Seminar in Beijing in 2011service: collaborating to provide successful global seminars

This sector comprises our service,support, training, refurbishment,
consumables and accessories elementsof our business. It consists of our CT and
MRI Service business in North Americaand Asia, and the service elements ofNanotechnology Tools and Industrial
Products sectors. The business performed
well across all territories, particularly Asia

where the adoption of a service contract
model is gaining greater acceptanceacross a growing installed base.

16

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Financial Review The diverse nature of
the Group combined with its current financial
strength provides a solid foundation for asustainable businessTrading Performance
The Group uses adjusted figures
as key performance measures in addition
to those reported under adopted IFRS.
Unless otherwise stated, all profit,
earnings and operating cash flow figuresreferred to below are adjusted measures.
A reconciliation is given below.
Orders of £337.8 million were £64.3 million
ahead of the same period last year, an
increase of 23.5%. At the end of the year
the order book for future deliveries stoodat £136.8 million up from £115.3 million
at the end of the previous year.

Revenue£337.3m
Return on Sales

12.5%
Net Cash£35.1m+28.6%

Revenues in the year grew by 28.6%(£75.0 million) to £337.3 million. Revenues
from the acquisitions less disposals in the
period were £35.4 million, adverse foreign
currency exchange rate movements
reduced sales by £0.9 million while
increasing copper prices increased sales by£0.8 million (there was no impact on profits
as movements in the price of copper are
passed on to our customers). As a result,organic revenue growth was 15.1%.
In the Nanotechnology Tools division,
sales grew by 26.4% helped by the
Omicron and Omniprobe acquisitions thattook place in June. Organic growth at
2.1% was impacted by the expected
decline in sales of systems to
manufacture HBLEDs; excluding thesesales, underlying organic growth was
11.0%. Sales of equipment to make
HBLEDs declined due to over capacity
in the market but it is anticipated thatdemand will pick up towards the endof the current year.

Sales in the Industrial Products sector
grew by 28.5% helped by a full yearof ITER shipments, partially offset by
the disposal of a product line in October
2011. Excluding these two factors, sales
grew by 23.3% as a result of a numberof product launches including the
XMET7000 series handheld analyser inIndustrial Analysis, as well as increased
MRI sales and a large new contract for
the Austin business.
Service revenues increased by 32.5%,
helped by the acquisition of Platinum
Medical Imaging in November 2011.
Excluding this, organic growth was
16.9% reflecting the focus on sellingand marketing service contracts.
Gross margins increased from 42.7% to44.2% despite the disproportionate
growth of the lower margin
superconducting wire business. These
improved margins were predominantly
due to new product introductions andincreased efficiencies with our Value
Add Index Key Performance Indicatorincreasing from 1.42 to 1.49. Thismeasure is a reflection of the operating
profit generated from each unit of
employment costs.
Operating expenses rose by £23.1 millionof which £12.5 million related to theacquisitions and £0.7 million to foreignexchange rate movements. Underlying
constant currency growth in operating
expenses was 11.8%.
Adjusted operating profit increased by£14.0 million to £42.1 million. The majorityof this increase was a result of the higher
sales volume, with a £2.8 million
contribution from the acquisitions.

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

Adjusting Items
The Directors believe that adjusted profit
before tax gives a clearer indication of
the underlying performance of thebusiness. A reconciliation of reported
profit before tax to adjusted profit before
tax is given in the table below.

be a charge to the Income Statement in
the current year.

Amortisation of acquired intangibles has
increased by £6.5 million as a result of
the acquisitions made in the year.

Currency hedging
The Group uses derivative products tohedge its exposure to fluctuations inforeign exchange rates. It is Group policy
to have in place at the beginning of afinancial year hedging instruments tocover 80% of its forecast transactional
exposure for that period.

Financial income andexpenditureWithin financial income and expenditure,
net interest on debt reduced by£0.4 million to £0.8 million as cash levels
rose, the majority of the remainder reflects
fees related to our revolving credit facility.
The expected return on pension scheme
assets exceeded the interest charge on
pension scheme liabilities by £0.7 million,a swing of £1.4 million over the prioryear. Due to the increased pension
liabilities and the very low gilt yields at
31 March 2012, net pension interest will

In common with a number of othercompanies, the Group has decided thatthe additional costs of meeting theextensive documentation requirementsof IAS 39 to apply hedge accounting to
the foreign exchange hedges cannot bejustified. Accordingly the Group does
not use hedge accounting for thesederivatives. Net movements on marking
to market such derivatives at the balance
sheet date are disclosed in the income
statement as Financial Expenditure andexcluded from our calculation of adjusted
profit before tax (note 1).

Adjusting Items

2012
£m

2011
£m

Profit before income tax

36.1

26.7

Pension scheme curtailment gain

–

(4.1)

Shareholder earnout no longer required

–

(0.6)

Reversal of acquisition related fair value
adjustments to inventory

1.7–

Gain on disposal of product line

(7.0)

–

Acquisition related costs

1.5

–

–

0.6

Amortisation of acquired intangibles

11.2

4.7

Mark to market gain in respect of derivative
financial instruments

(1.5)

(1.1)

Adjusted profit before income tax

42.0

26.2

Share of taxation

(8.8)

(5.7)

Adjusted profit

33.2

20.5

Impairment

Adjusted gross margin17+1.5pp44.2%
Adjusted operating profit£42.1m+50%

18

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Adjusted earnings
per share

61.6p+48.4%

Financial Review continued

Commodity hedging
The Group also uses derivative products
to hedge its exposure to fluctuations in
the price of copper, a major component
for the Superconducting Wire business.
Given the small number of contracts
involved, we apply hedge accounting forthese transactions and consequently the
results of marking to market are excluded
from the Income Statement.
Taxation
The underlying tax rate on the profit
before tax for the Group before adjusting
items was broadly unchanged at 21%(2011: 22%).
The Group has significant tax losses in
the UK available to offset against futuretaxable profits. In the year ended March
2011, due to the improved performanceof the Group’s UK business units, werecognised a deferred tax asset of£11.3 million and a corresponding credit
to the Income Statement. We believe that
this was exceptional both in nature andquantum and therefore excluded it fromour calculation of adjusted earnings per
share. Of this asset value, £4.6 million
reversed in the year ended March 2012
and for consistency we have excluded itfrom the calculation of adjusted earnings
per share (see note 1).
Earnings
After a tax charge of £11.3 million, aswing of £16.8 million from the prioryear primarily due to the deferred tax
discussed above, the reported net profit
for the financial year was £24.8 million(2011: £32.2 million). With a weighted
average number of shares of 54.0 million(2011: 49.3 million), the basic earnings per
share were 46.0 pence (2011: 65.3 pence).
Adjusted profit before tax (note 1), which
we believe gives a better indication of theunderlying performance of the business,grew by £15.8 million to £42.0 million
which equates to an adjusted earnings
per share of 61.6 pence (2011: 41.5 pence),
an increase of 48.4%.
Dividends
In the prior year the Group moved to a
progressive dividend policy, whereby wewould seek to raise dividends as adjusted
earnings per share rise, although notnecessarily by the same proportion,
depending on the directors’ perceived
need for cash to expand the business bothorganically and through acquisition. For
the year just ended the proposed final
dividend of 7.23 pence per share (2011:
6.48 pence), payable on 25 October 2012
to shareholders who are on the register on
28 September 2012, gives a total dividend
for the year of 10.0 pence per share (2011:
9.0 pence). Dividend cover for theunderlying business before adjusting items
was 6.2 times (2011: 4.6 times).
Investment in research anddevelopment (R&D)
The amount charged to the Income
Statement in relation to R&D was£25.8 million or 7.6% of sales(2011: £20.0 million, 7.6%).
During the year we changed our income
statement classification in respect ofcustom engineering specials. A custom
engineering special is a product designed
to a specific customer order. We now
report the design costs of such products
within research and development which
we consider to be more comparable.
A reconciliation between the amounts
charged to the Income Statement and the
cash spent is given in the table opposite.
The net book value of capitalised R&D
at the end of the financial year was£11.7 million (2011: £15.0 million).

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

Balance sheet
Net assets rose from £93.5 million to£127.1 million primarily as a result of theequity issue made in the year and theincrease in the retained profit.
Net working capital (excluding derivative
financial instruments and tax payable/
receivable) reduced by £1.0 million in theyear to £14.9 million, despite £2.8 million ofthe £10.2 million deposit that was received
in 2009 for the ITER contract unwinding.
Inventory turns remained constant at 3.2
while debtor days increased from 48 days
to 53 days.
Acquisitions and Disposals
On 13 June 2011 the Group made two
acquisitions: Omicron NanoTechnology
GmbH for £28.3 million and Omniprobe
Inc. for £12.3 million. These were fundedusing the Group’s resources. On 17 June,
the Group raised £37.5 million throughan equity issue to ensure that there were
sufficient internal resources to complete
the 14 Cubed Plan.

On 20 October 2011 the Group disposedof a product line for consideration of£8.1 million, £7.1 million of which was
paid on completion, with a further£1.0 million receivable on the firstanniversary of completion.
On 3 November 2011 the Group acquired
Platinum Medical Imaging LLC for an initialconsideration of US$18 million with acontingent element of up to US$37 million
payable over three years dependent on
performance over that period.
On 22 March 2012 the Group transferred
its ownership of TDI, a wholly owned
subsidiary which develops Hydride
Vapour Phase Epitaxy (HVPE) technology
for use in the production of HBLEDs, toOstendo, a privately owned company
based in California. The Group received
0.65 million shares of Ostendo common
stock plus $0.65 million in cash of which$0.15 million will be paid in September
2012. The Group will also receive a royalty
if certain HVPE reactor sales are realised.

Research and development
2012
£m

2011
£m

Research and development expense charged
to the consolidated statement of income.

25.8

20.0

Less: depreciation of R&D related fixed assets

(1.6)

(0.6)

Add: amounts capitalised as fixed assets

1.3

2.3

Less: amortisation of R&D costs capitalised
as intangibles

(5.2)

(5.4)

Add: amounts capitalised as intangible assets

2.4

3.0

Total cash spent on research anddevelopment during the year

22.7

19.3

Research andDevelopment charge

19

29%

£25.8mNet assets£127.1m+36%

20

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Adjusted EBITDA+39%£52.1mCash generated
by operations+29%£50.5mFinancial Review continued

Pensions
The Group has defined benefit pension
schemes in the UK and the US. Both havebeen closed to new entrants since 2001
and closed to future accrual from July
2010. The total IAS19 deficit, before tax,
on these pension schemes rose in theyear by £23.5 million to £35.2 million
with a corresponding deferred tax assetof £8.7 million.
Assets of the schemes at 31 March 2012were £180.2 million (2011: £173.1 million),while liabilities increased from £184.8 million
to £215.4 million principally as a result of
the fall in the corporate bond yield used
to discount future cash flows from 5.6%
to 4.9%.
The latest triennial actuarial valuationof the UK scheme was carried out as
at 31 March 2009 and resulted in an
actuarial deficit of £39.5 million. A
long-term plan for recovering the deficit
over 14 years was agreed between the
Company and the Pension Trustee, which
involved a payment of £3.1 million for theyear to March 2010, £5.3 million for theyear to March 2011, £4.5 million for theyear to March 2012 and will comprise apayment of £4.9 million for the year to
March 2013. For the subsequent 10 years
the 2013 payment of £4.9 million will beinflated by 2.85% per annum. Work iscurrently underway to produce anactuarial valuation as at 31 March 2012.
The results of this valuation may alter
the future payments to the scheme.

New cooling tool for the investigation of molecular structures

Cash
Earnings before interest, tax, depreciation
and amortisation (EBITDA) increased by
39% to £52.1 million. The working
capital movement in the year reduced by£2.4 million, building on the reductions in
the previous two years. Trading working
capital, which we define as inventory plus
trade debtors less trade creditors andadvances received as a percentage ofsales, was 15.4% (2011: 16.3%).
Cash generated from operations was£50.5 million, an increase of £11.3 million
on the prior year. The ratio of operating
cash to operating profit was 110.5%(2011: 126.7%).
Net cash at the year-end was £35.1 million(2011: £13.1 million). The Group maintains
a committed Revolving Credit Facility witha club of three banks. The facility, which
extends to December 2014, is for £50 million
and is extendable to £70 million bymutual consent. In addition, the Grouphas overdraft and other facilities totalling£14.5 million.
Employees
The average number of people employedduring the year was 1,834, an increase of
336 over the prior year. Of this increase,
262 were employees who joined the Group
from acquired companies. Average sales per
employee increased by 5% to £183,900.
Share price
The closing mid-market price of theordinary shares at the end of the financial
year was £12.15, compared with £7.03 at
the beginning of the year. The highest andlowest prices recorded in the financial year
were £12.62 and £7.03 respectively.

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position,
are set out in the Chief Executive’sStatement. The financial position of theGroup, its cash flows, liquidity position
and borrowing facilities are described inthis Financial Review.

December 2014. This review also
considered hedging arrangements inplace. As a consequence, the Directors
believe that the Group is well placed to
manage its business risks successfully.
The Financial Statements have been
prepared on a going concern basis,
based on the Directors’ opinion, after
making reasonable enquiries, that theGroup has adequate resources tocontinue in operational existence forthe foreseeable future.

Kevin Boyd
Group Finance Director
12 June 2012

X-Max Silicon Drift Detector for large area
analysis on electron microscopes

We have recently been successful in
supplying our nanoanalysis systems
for transmission electron microscopes
to a number of analytical laboratories
for the enhanced detection ofasbestos fibres.
A well known carcinogen, asbestos
is found as minute airborne fibres
in both industrial and ambientenvironments. It is necessary to use
the resolving power of a transmission
electron microscope to characterise
these very fine particles bymorphology, crystal structure andchemistry. Each different type ofasbestos has a specific chemistry andthe large area of our X-Max detector
allows for accurate detection of fibre
type. This enables faster throughput
of samples but also, in many cases,
provides forensic information as tothe provenance of this airborne
carcinogen and hence the potential toeliminate the source of the pollutant.

nanotechnology tools: Asbestos detection

The diverse nature of the Group
combined with its current financial
strength provides a solid foundation
for a sustainable business. The Directors
have reviewed the Group’s forecasts
and considered 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 facility which expires in

21

22

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Specific Risk

Technical Risk

Principal Risks

Context

Risk

The Group provides hightechnology equipment andsystems to its customers.

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

Lower profitability
and financial returns.
Negative impact on theGroup’s reputation.

•

Lower profitability
and financial returns.

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

Appropriate acquisition targets •will not be available in thenecessary timescale.
•
Alternatively, once acquired,targets may fail to provide
the planned value.

Lower profitability
and financial returns.

A significant proportionof the Group’s profit is madein foreign currencies.

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

•

Lower profitability
and financial returns.

•

Disruption to customers.

Outsourcing

Failures in the supply chain
The Group’s strategic plan
impacting sales.
includes the outsourcing ofa significantly higher proportionof the costs of its products tobenefit from economies of scaleand natural currency hedges.

•

Negative impact on theGroup’s reputation.

As copper prices rise,profitability falls.

•

Lower profitability.

Raw material
volatility

The Group relies on thepurchase of a significant
amount of copper for the
production of its
superconducting wire.

•

Occasional disruption
to production.

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

•

Pensions

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

Additional cash requiredby the Group to fundthe deficit.

•

Reduction in net assets.

•

Disruption to customers.

•

Lower profitability
and financial returns.

Economic Environment

Acquisitions

Foreign exchange
volatility

PeopleThe recent global recession
Demand for the Group’s
and prevailing economic
products may be lower
downturn have resulted in cuts than anticipated.
to both government and private
sector spending.

Possible Impact

A number of the Group’s
One critical or a number of key
employees are business critical. employees in an associatedwork area leave the Group.
The Group’s growth planrequires people and structure
Performance does not meetcapable of managing the
expectations.
increasing size and complexityof the business.

Management focus taken
away from the corebusiness in order tomanage integration issues.

the year in review
Oxford Instruments plc
Report and Financial Statements 201223

Associated strategic priorities

Mitigation•‘Realising the Brand’ – Using ‘Voice of the Customer’
to drive rapid new product development.

••‘Adding Personal Value’ – Support and develop our
employees to maximise their value add.

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

•

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

•‘Realising the Brand’ – Developing a strong brand in
existing and developing markets.

•

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

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

•

The Group is expanding in the so called BRIC nations, especiallyChina, which has not suffered from the downturn.

•‘Realising the Brand’ – Developing a strong brand in
existing and developing markets.

•

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

•‘Inventing the Future’ – Using ‘Voice of the Customer’
to drive rapid new product development.

•

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

•‘Adding Personal Value’ – Supporting and developing
our employees.

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

•

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

•‘Liberating Cash’ – Developing a competitive global
supply base that supports our growth.

•

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

•‘Liberating Cash’ – Developing a competitive global
supply base that supports our growth.

•

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

•‘Realising the Brand’ – Developing a strong brand in
existing and developing markets.

•

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

•‘Liberating Cash’ – Developing a competitive global
supply base that supports our growth.

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

The Group has entered into agreements with the two largest
buyers of superconducting wire to pass the vast majority ofpricing risk to them.

•‘Delivering Shareholder Value’ – Focus on balanced andattractive global markets.

•

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

•‘Liberating Cash’ – Developing a competitive global
supply base that supports our growth.

•

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

•‘Adding Personal Value’ – Supporting and developing
our employees.

•

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

•‘Inventing the Future’ – creating a sustainableorganisation.

•

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

•

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

24

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

our VALUESCorporate and Social Responsibility The Oxford
Instruments brand and company values are at theheart of the Group’s approach to Corporate Social
Responsibility (CSR)

our Brand identity

In 2011, we announced our three year
plan for the business which we called our
14 Cubed Plan. The objectives of thisstrategy are to achieve 14% Return on
Sales and 14% revenue growth per yearby 2014. Supporting this strategy wehave introduced a Business Improvement
Plan with a set of Key Performance
Indicators focused on our growth target.
For more information, see
Our Strategy on pages 8 and 9

Inclusive
We listen and engage withcustomers, colleagues,
shareholders and partners
for mutual success.
TrustedWe build long term
relationships based on
integrity, trust and respect.
Innovative &Progressive
We bring skill, experienceand openness to new ideas
to address the needs of the
21st Century.
wholehearted
We approach what we
do with passion, with careand with pace.

We believe people makethe difference
we meet our customers’
needs throughadvanced technology
and service
we use innovation toturn smart science into
world class products
we have experience torely on and integrity
to trust

Our CSR strategy is focused on thefollowing key issues:•

Business Ethics•

Customer focus and service•

Employee Engagement,
Diversity and Inclusion•

Health and Safety•

Supplier and Partner
Engagement•

Sustainability (environments
and communities)•

Communications

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

Business Ethics
The Board is committed to maintaining
the positive ethical standards the Oxford
Instruments brand is known for andexpect the same commitment from ourpartners, employees, customers, suppliers
and representatives. We work ethically,
openly, responsibly and inclusively. We
strive for maximum transparency
wherever possible; do not make political
donations and do not tolerate any formof bribery, corruption or fraud. We havein place a Business Conduct and Ethics
Code which all employees are madeaware of:Business Conduct & Ethics Code –Supporting policies
Our Code is supported by a range ofpolicies which are regularly monitoredby the Board and updated and added towhenever necessary. Each policy gives
detailed information on how to manage
sensitive issues once an assessment ofrisk has been identified.

••Business Malpractice•Anti-Corruption and Bribery•

Human Rights

at the time of joining the Company;•

Environment•

through visibility on the Company
intranet; and•Health & Safety••

through visibility on thecorporate website

Communications (including social
media and internet policy)•

Diversity and Inclusion•

Insider Dealing•

QA requirements for suppliersThis Code is supported by a comprehensive
range of policies that the Board considers
reflect our commitment to maintaining
the standards of conduct required by acommercially responsible organisation.

MRI scanner repairs

Our vision is to pursue responsible development
and deeper understanding of the world throughscience and technology
Nordlys EBSD detector for crystal structure analysis

25

26

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Corporate and Social Responsibility continued

Employee Engagement andDiversity & Inclusion
The Board recognises that our employees
are fundamental to our success. As a hightechnology business, we have a highly
skilled workforce and it is they who
deliver our strategic objectives. The
Group’s aim is to ensure there are equal
opportunities for all employees and thatsuch decisions are based on merit and do
not take into account factors that are not
relevant such as, and without limitation,
gender, marital status, family
responsibilities, sexual orientation or
preference, colour, race, nationality,
religious belief, ethnic origin, disability,
age and unrelated criminal convictions.
We believe that decision making is more
effective when people from a range ofperspectives and backgrounds are
involved. Therefore encouraging diversity
is important to us.

Successful apprenticeship programmes

Our business should reflect our
diverse customers and markets andthe environment in which we operate.
Our value of Inclusive reflects thisdiversity. The Board recognises thestrategic importance of developing andmonitoring diversity within our
workforce. The appointment of Dawn
Brooks – Group Service Director as theGroup’s Diversity Champion evidences
this focus of our CSR strategy.
We are committed to developing thepotential of our existing employees aswell as bringing new skills into the Groupthrough acquisition and recruitment.
We therefore work hard to provide theenvironment in which they can all flourish.
The performance of all employees ismeasured against our values throughan annual appraisal process andcompetencies framework.

Cryopump testing at our Austin facility

Employee Survey
In 2011, we conducted our second global
employee survey. The results showed apleasing increase in employee engagementfrom the first survey in 2009. The
percentage of employees participating inthe survey also rose from 75% in 2009 to
83% in 2011. We are proud that so manyof our employees take the time to tell us
what they think. Omniprobe and Omicron
Nanotechnology, acquired in June 2011,were also surveyed at the end of 2011 tomeasure the success of integration andindicate any actions going forward.
Following each survey, local action plans
are drawn up with further input from
employees and progress against themis regularly reported.
Communication
Oxford Instruments’ business strategy iscommunicated throughout the Group andis set out on our intranet for all employees
to refer to. This area of the intranet also
shows progress against this plan and thebusiness KPIs. Added to this, all employees
receive regular updates on the performanceof their own business together with theperformance of the Group at regularbriefing meetings. Whenever appropriate,
video announcements or interviews withkey senior managers that offer more detailon our performance are posted on theintranet. Periodically, the Chief Executive
writes a blog which summarises, at a top
level, meetings with investors and analysts,
and business strategy sessions. This helps tocreate understanding of the interests andconcerns from an investor perspective.
We invite feedback and suggestions
at every point of communication.

the year in review
Oxford Instruments plc
Report and Financial Statements 2012

Training and Development
During 2011, we introduced androlled-out a new development training
programme for senior and middle
management, helping to raise standards
to help and support our managers create
an environment of creativity andinnovation. The course modules include
personal awareness, business strategy,
business processes and leadership.
During the year, 105 employees
from across the world including ourrecent acquisitions attended theprogrammes. In the UK, we have a long
tradition of supporting apprenticeshipschemes which have resulted in highquality young people contributing toour business. In 2010 and 2011 ourapprentices won Apprentice of the YearAwards and in 2012 one apprentice
won the 1st Year Apprentice Award
from the Engineering Trust. Planned
for introduction in 2012 is a new,international graduate programme thatreflects the global nature of the Groupand will contribute to increasing diversity
in our management teams of the future.

The 2011/12 Employee Gain Sharescheme will pay up to 2% of salary.

Employee Incentives
We recognise that communication of ourstrategy and performance is not enoughto motivate and reward the contribution
our employees make to the business. It is
important that our highly skilled andeducated workforce receive a share in the
success of the business. In addition to theregular management and sales commission
schemes, in 2011/12 we introduced a Gain
Share plan for all employees not in receipt
of an existing management bonus. This
plan was linked to our 14 Cubed Plan andaligns employees’ interest with that ofour shareholders.

The annual Chairman’s Awards forInnovation which recognise and reward
innovation in its broadest sense have also
been realigned with the Business
Improvement Plan so that entries are
more closely aligned with the brand andthe business, strategy and Key
Performance Indicators. The continued
increase in the standard and number of
entries to these awards is evidence of theengagement of our employees in thissuccessful programme.

•

1% of salary will be paid if theGroup achieves at least 12% Returnon Sales (ROS) in 2011/12. This isjust over a 1% increase against the
2010/11 performance. There mustalso be no reduction in total sales
for the Group.

•

1% of salary will be paid if the Group
achieves 14% sales growth against
the 2010/11 results. Return on sales
must be no less than for 2010/11.

In addition to the incentive scheme, weoffer employees extra benefits in the formof discounts on certain local activities,
purchases, insurance, health and dental
cover etc. For example, Oxford Instruments
is a sponsor of Oxford’s Ashmolean
Museum and regularly offers free tickets to
exhibitions for all UK employees. In the UK,
Germany, North America and Japan,
discounts for local and national shops
and services are offered.

27

Customer Focus and Service
The Group believes that customer
relationships are built on mutual trust,
respect and integrity, and that thisprinciple should govern all aspects of thebusiness. Our customer is at the heart ofeverything we do, and has led to an
improved and more professional
approach to supporting them on acontinuing basis after the original sale.
The continued focus on the “Voiceof the Customer” in any new productintroduction or current productdevelopment ensures that the customer
needs are at the core of our business.
The success of new products introduced
in 2011/12 supports this focus. The
percentage of revenue that is madeup of products launched or acquiredin the last three years is a key indicatorof the vitality of our new productdevelopment and has increased from
34% in 2011 to 44% in 2012.

Annual Chairman’s Awards for Innovation

28

The year in review
Oxford Instruments plc
Report and Financial Statements 2012

Sites worldwide

33

Corporate and Social Responsibility continued

Health & Safety
The Group is committed to providing thehighest standards of safety in theworkplace for our employees and to thecontinual improvement of our health andsafety performance.
Responsibility for Health & Safety lies
with the Board. Charles Holroyd, an
Executive Director, is responsible forformulating the Group’s H&S strategy
and objectives, reviewing performanceagainst these objectives and for ensuringthat key H&S issues are effectively
identified and managed.

Sustainability
The core element of our CSR policy issustainability. This covers four areas:•

Employees
The business has a robust succession
planning, organisation and talentreview process which the Board
reviews at least once a year. This
process and a commitment todeveloping skills and capabilities
ensures the long term sustainability
and future of the Group.

•

Environment/Energy
There are a number of European
directives aimed at benefitting theenvironment that are complied withby the Group. Such directives include
the Waste Electrical and Electronic
Equipment (WEEE) Directive, theRestriction on use of Hazardous
Substances (RoHS) Directive, theRegistration, Evaluation, Authorisation
and Restriction of Chemicals (REACh)
Directive and the Energy use of
Products (EuP) Directive.

•

Products
Many of the Group’s products andservices provide solutions which help
address the global issues ofenvironmental control andprotection, and energy conservation.
For example, our hand-held XRF
analysers are used in the analysis ofhazardous substances in soil and our
microanalysis systems are used in thedetection of asbestos fibres. We arecontinually looking for new
applications for existing technologies
to support the growing need toprotect the world and the people
who live in it.

The Board reviews the H&S performanceof the Group’s operations at eachmeeting. All Group businesses regularly
report progress on H&S issues to theGroup Health, Safety and Environment
Manager who is responsible for keeping
Charles Holroyd, and consequently the
Board, informed of serious issues. The
Group Health, Safety and Environment
Manager is responsible for auditing eachsite annually.
Reportable accidents defined as over 3
days absence per 1,000 employees fell
from 7.0 in 2010/11 to 3.8 in 2011/12.

Teslatron Cryogen free magnet system

Employees are kept informed of current
H&S issues through information provided
by local H&S committees. Members
include staff from all areas of thebusiness and meet on a regular basis.
In addition, information on health andsafety matters is published on the Group
intranet, notice boards and in monthly
cascades and quarterly business reports.
Employees are actively encouraged tosuggest improvements that can be madein working conditions and practices.

Triton Cryogen free dilution refrigerator

the year in review
Oxford Instruments plc
Report and Financial Statements 2012•

The Work Place
Every site has an Energy Champion
who is responsible for implementing
plans to reduce its carbon footprint.
Each site reports its monthly energy
consumption and reduction
activities. We have reduced theenergy consumption per £million
revenue from 77.5MWh/£million
revenue to 62.3MWh/£million
revenue during the year, a 20%
reduction. The 14 Cubed business
improvement plan targets 5% a year
for the three years up to 2014.
Taking the acquisitions into accountour actual energy consumption
increased during the year, as would
be expected. However, excluding theacquisitions actual energy consumption
fell during the year by around 160MWh,
pointing towards a more efficient useof energy. Highlights of note include
the reduction of 400MWh of gas at
the Carteret site, a 15% reduction, andalso the reduction of 160MWh ofgas at the High Wycombe site, a
20% reduction.
All major sites have a responsibility
to recycle waste materials including
cardboard, paper, wood and metals.
Employees are encouraged to recycle
paper, packaging, bottles and cans.
All corporate literature is printed on
environmentally friendly paper using
Forest Stewardship Council (FSC)
accredited printers. This, together
with the vegetable oils used to coatthe paper, means that the documents
are bio-degradable and recyclable.

External and internalCommunications
Our communications strategy is alignedwith our CSR objectives both internallyand externally. As stated above, ourintranet is the primary source of
information for all employees, but wealso use a whole range of communication
tools including informal sessions,company meetings, notice boards andopen forums. We strive to maintain good
relationships with all forms of media,
sponsors and local communities.

30,000+service calls per year

In 2011, we introduced a trial set of social
media programmes which included theuse of Twitter, YouTube and Facebook.
This has proved very successful insupporting new product launches andbrand awareness and will be rolled-out
companywide in 2012/13. Use of social
media in the Group is governed by theSocial Media Policy.
Summary
Our Corporate Social Responsibility
strategy in 2012 and beyond will maintainthe focus on CSR in the strategic decision
making process and businessperformance. We will continue to meet
our customer needs through advanced
technology and premium service and wewill maintain a wholehearted
commitment to our employees,
customers, partners, local communities
and shareholders to conduct our businessin an ethical and sustainable manner.

29

Queen’s Award for Enterprise standard

Jonathan Flint
June 2012

There is a dedicated area of theIntranet which regularly updates all
employees on the progress we makeon all aspects of sustainability.
Plasma Technology tools for photovoltaic devices

30

governanceOxford Instruments plc
Report and Financial Statements 2012

Directors and Advisers

Nigel Keen
Non-Executive Chairman
Nigel joined the Board in 1999. He has an engineering degreefrom Cambridge University and has been involved in theformation and development of high technology businesses formore than thirty years. He is a Fellow of the Institute ofChartered Accountants and the Institution of Engineering andTechnology. He is Chairman of Laird PLC, Bioquell PLC and
Deltex Medical Group plc and a Non-Executive Director of ISIS
Innovation Ltd. (Oxford Instruments and Oxford University
maintain a close relationship and the Group’s Directors arestrongly represented on the Board of ISIS Innovation, theUniversity’s intellectual property company).

Jonathan Flint CBE
Chief Executive
Jonathan joined the Group as Chief Executive in April 2005. He
has a BSc in Physics from Imperial College and an MBAfrom Southampton University. He is a fellow of the Instituteof Physics, the Royal Academy of Engineering and theInstitution of Engineering and Technology. He sits on theCouncil of the Institute of Physics and is a member of advisory
panels to the UK Science and Technology Facilities Council. Prior
to Oxford Instruments, he held senior management positions
within Vislink plc, BAE Systems, GEC Marconi and Matra-Space
Systems. He was awarded the CBE in the 2012 New Year’s
Honours for services to science and business.

Kevin Boyd
Group FInance Director
Kevin joined Oxford Instruments in August 2006 as Group
Finance Director. He holds a BEng in Electronic and Information
Engineering and is a Chartered Engineer and Chartered
Accountant, having qualified with Arthur Andersen. Prior tojoining Oxford Instruments, he was Group Finance Director of
Radstone Technology plc, Finance Director of Siroyan Ltd andheld senior finance positions in the TI Group (now Smiths Groupplc). He is a Non-Executive Director of Guidance Ltd and amember of the London Stock Exchange’s Primary Markets Group.

Charles Holroyd
Group Business Development Director
Charles was appointed to the Board in November 2005, having
joined Oxford Instruments in 1999, and is responsible forGroup Business Development. He has a BSc in Electrical andElectronics Engineering from Bristol University and an MBAfrom INSEAD. He is a Chartered Engineer and a Fellow of theInstitution of Engineering and Technology. Previously, he held
senior management positions within United Industries plc,
B Elliott plc, Spirent plc (previously Bowthorpe plc) and
Chloride Group plc.

Honorary President
Sir Martin Wood OBE FRS Hon FREng DL
Company Secretary
Susan Johnson-Brett ACIS

Board Committees
Audit: JF Lennox, Chairman; MA Hughes; BJ Taylor
Remuneration: NJ Keen, Chairman; MA Hughes;
JF Lennox; BJ Taylor
Nomination: NJ Keen, Chairman; JM Brady; MA Hughes;
JF Lennox; BJ Taylor
Administration: Any two Directors

governanceOxford Instruments plc
Report and Financial Statements 201231

Professor Sir Mike Brady
Deputy Chairman andIndependent Non-Executive Director
Mike joined the Board in 1995 and is Emeritus Professor in the
Department of Oncology and Biology at the University of
Oxford, having recently retired as BP Professor of Information
Engineering. He is also a Fellow of the Royal Society, of theRoyal Academy of Engineering and of the Academy of Medical
Sciences and a Commissioner of the Royal Commission for the
Exhibition of 1851. He is a founding Director (and Chairman)of Guidance Ltd, Mirada Medical Ltd and Matakina Ltd(a New Zealand based company). He is Director of RehaBox
Ltd and Chairman of Acuitas Ltd.

Professor Mike Hughes OBE
Senior Independent Non-Executive Director
Mike joined the Board in November 2004. He is Chairman
of EA Technology Ltd and a Non-Executive Director of South
Staffordshire Water Ltd. Previously he held senior management
positions in GEC including Technical Director and Managing
Director of GEC Measurements Ltd, was Deputy Managing
Director of GEC Alsthom Power Transmission and Distribution
Ltd before becoming CEO of Midlands Electricity until 2002
and Executive Vice President of GPU Inc International
Operations Group.

Jock Lennox
Independent Non-Executive Director
Jock joined the Board on 1 April 2009. He is a Non-Executive
Director of Dixons Retail plc, Enquest PLC, Hill & Smith Holdings
PLC and A&J Mucklow Group plc. He is Chairman of the Tall
Ships Youth Trust and HADIL, a human capital business. He wasa Senior Audit Partner at Ernst & Young until April 2009.

Bernard Taylor
Independent Non-Executive Director
Bernard joined the Board in 2002 and is Vice-Chairman ofEvercore Partners. He is a member of The Council of the
University of Oxford and is Chairman of the University’s Audit
Committee. He is Chairman of ISIS Innovation Ltd and a
Commissioner of the Royal Commission for the Exhibition of
1851. He is also a Fellow of the Royal Society of Chemistry andan Honorary Fellow of St. John’s College, Oxford.

Advisers
Auditors
KPMG Audit Plc
Principal Bankers
HSBC Bank plc; Clydesdale Bank plc and Santander plc
Stockbrokers
JPMorgan Cazenove Limited

UK Solicitors
Laytons Solicitors LLP; Ashurst LLPUS Counsel
Wilmer Hale LLP

32

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

The Directors present their Report
and the Financial Statements of Oxford
Instruments plc for the year ended
31 March 2012.
Principal activity andbusiness reviews
The Company is the ultimate holding
company of a group of subsidiary
undertakings (‘the Group’) engaged in
the research, development, manufactureand sale of high technology tools andsystems. The Company is required to set
out in this report a true and fair view ofthe business of the Group during thefinancial year ended 31 March 2012, theposition of the Group at the end of thefinancial year and a description of theprincipal risks and uncertainties facing
the Group. The information which fulfils
these requirements includes a businessand financial review on pages 12 to 23
and corporate and social responsibilities
on pages 24 to 29, which areincorporated in this report by reference.
The business, the strategy, the researchand development activities and likely
future prospects of the Group are
reviewed in the Chairman’s Statementon page 02, the Chief Executive’sStatement on pages 10 to 11, theOperational Review on pages 12 to
15 and the Financial Review on pages
16 to 21.
Results and dividends
The results for the year are shown in theConsolidated Statement of Income on
pages 64 to 65. The Directors
recommend a final dividend of 7.23p per
ordinary share, which together with theinterim dividend of 2.77p per ordinary
share makes a total of 10p per ordinary
share for the year (2011: 9.0p). Subject toshareholder approval, the final dividend
will be paid on 25 October 2012 toshareholders registered at close ofbusiness on 28 September 2012.

Report of the Directors

Risks and Uncertainties
The Board exercises proper andappropriate corporate governance for theGroup. It ensures that there are effective
systems of internal controls in place tomanage shareholders’ interests and theGroup’s assets, including the assessment
and the management of the risks towhich the businesses are exposed, and tomonitor and manage the compliancewith all the legal requirements that affect
the Group’s worldwide business activities.
However, such systems are designed to
manage rather than eliminate the risk offailure to achieve business objectives andcan provide only reasonable and not
absolute assurance against material
mis-statement or loss.

and in doing so they must act in a way
which they consider in good faith will bemost likely to promote the Company’s
success. A conflicts policy has beendrawn up and a register of conflicts
and potential conflicts is maintained.
Directors’ interests
The beneficial interests of the Directors
in the Company’s share capital, all in fully
paid up shares at 31 March 2012, areshown below. Details of share options for
the Executive Directors are shown in the
Directors’ Remuneration Report on pages
43 to 52.

Kevin Boyd
The Executive Directors report to theBoard on changes in the business andin the external environment which may
affect the risks which the Group faces.
The Executive Directors also provide theBoard with monthly financial information.
Key performance indicators arereviewed quarterly.
There are a number of risks anduncertainties which may have a material
effect on the Oxford Instruments Group.
These are described in Principal Risks on
pages 22 to 23.
Directors
Biographies of all the Directors at
the date of this report, including
the Non-Executive Directors, appear
on pages 30 to 31.
Directors’ conflicts of interest
With effect from 1 October 2008, theCompanies Act 2006 allows directors of
public companies to authorise conflicts
and potential conflicts of interest, whereappropriate. Only directors with nointerest in the matter under consideration
may participate in the relevant decision

2012
shares2011
shares

66,74728,410Mike Brady

2,500

2,500

Jonathan Flint

159,105

50,701

Charles Holroyd

64,68659,580Mike Hughes

13,59812,354

Nigel Keen

126,580

126,580

Jock Lennox

3,500

3,500

Bernard Taylor

190

190

No Director was beneficially interested in
the shares of any subsidiary company at
any time during the year. In the year to
31 March 2012, no Director had amaterial interest in any contract ofsignificance with the Company or any of
its subsidiaries other than as described in
the Directors’ Remuneration Report on
page 48. Since the year end, there havebeen no changes to the above
shareholdings apart from for Jonathan
Flint, Kevin Boyd and Charles Holroyd
who participate in the Company’s Share
Incentive Plan and since the year end
have each increased their shareholding by
55 shares. Since the year end Jonathan
Flint has married. As at the date of thisreport, his wife has beneficial interests
over 559 shares.

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Insurance cover andDirectors’ indemnities
For a number of years the Group has
purchased insurance to cover its Directors
and Officers against their costs indefending themselves in legal
proceedings taken against them in thatcapacity and in respect of damages
resulting from the unsuccessful defenceof any proceedings. To the extent
permitted by UK law, the Group
indemnifies its Directors and Officers.
Neither the insurance nor the indemnity
provides cover for situations where the
Director has acted fraudulently or dishonestly.
Share capital
The Company only has one class of sharecapital which comprises ordinary sharesof 5p each. All shares forming part ofthe ordinary share capital have the samerights and carry one vote each. There
are no unusual restrictions on the transfer
of a share. The full rights and obligations
attaching to the Company’s ordinary
shares, as well as the powers of the
Directors, are set out in the Company’s
Articles of Association, a copy of whichis available on the Company’s website.
These can also be obtained from
Companies House or by writing to theCompany Secretary.
During the year to 31 March 2012,
the issued share capital was increasedby 11.9% with the issue of 5,991,810
ordinary shares (2011: 607,585). Of this,
5,013,121 ordinary shares were allotted
at 775p per share following the equity
raising which took place in June 2011
and 978,689 ordinary shares were allotted
following the exercise of options under
the Company’s share option schemes. At
31 March 2012, the issued share capital of
the Company was therefore 56,166,723
ordinary shares of 5p each. In connection
with the Company’s equity incentive plans,a separately administered trust held
173,794 ordinary shares at 31 March 2012
(representing 0.3% of the total issued
share capital of the Company) andacquired a further 9,351 ordinary shares(2011: 0) which were registered in its
name on 2 April 2012. No other shareswere acquired by the Company during
the year. Details of the share capitaland options outstanding as at 31 March2012 are set out in notes 19 and 8
respectively of the Financial Statements.
At this year’s Annual General Meeting,the Directors propose to renew theauthority granted to them at last year’s
AGM to: (a) allot ordinary shares up toan aggregate nominal value of £936,113(one-third of the Company’s issued sharecapital) (Resolution 13(a)) and, including
those shares allotted under Resolution
13(a), up to an aggregate nominal valueof £1,872,226 (two-thirds of theCompany’s issued share capital) where

33

full pre-emption rights are applied(Resolution 13(b)); (b) allot ordinary
shares up to an aggregate nominal
value of £140,417 (5% of the Company’s
issued share capital) without first offering
them to existing shareholders (Resolution14); and (c) to buy back up to 5,616,677
of the Company’s issued ordinary shares(10% of the Company’s issued sharecapital) (Resolution 15). Details of theseresolutions are set out in the notice ofthe meeting.
Substantial shareholdings
In the table below are beneficial interests
of 3% or more of which the Directors
have been notified in accordance with
Chapter 5 of the Disclosure andTransparency Rules, of the Company’s
issued ordinary share capital, the onlyclass of voting capital, at 8 June 2012.
Payment of Suppliers
The Group does not follow a standard
payment practice but agrees terms andconditions for its business transactions
with each of its suppliers. Payment isthen made in accordance with theseterms. At 31 March 2012, trade creditorsof the Company and the Group’s UK
subsidiaries were equivalent to 31 days’(2011: 10) and 75 days’ (2011: 78) ofpurchases respectively, based on theamounts invoiced by suppliers during
the year and the amounts owed to
trade creditors at the end of the year.

Substantial shareholdings

BlackRockIndirect/Direct

Share
000

% of
total

Indirect

8,715,542*

15.5

Ameriprise Financial

Indirect/direct

4,983,663

8.9

Schroder Investments

Indirect

4,940,549

8.8

Sir MF and Lady KA Wood

Direct

3,593,530

6.4

Kames CapitalIndirect/Direct

2,287,533

4.1

BAE Pension Fund Investment Management (UK)

Direct2,010,677

3.6

Legal & General

Direct

1,694,491

3.0* of which 1,463,091 shares (2.6%) are held in Contracts for Difference which are disclosable under the Disclosure and Transparency Rules.

34

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Charitable Donations
During the year, the Group madecharitable donations of £1,845 (2011:£8,210). There have been no political
donations during the year.
Fixed Assets
Whilst the market value of some fixed
assets may differ from book value, theDirectors believe that the differences
are not material.
Disclosure of Information
to Auditors
Pursuant to Section 418(2) Companies
Act 2006 the Directors who held officeat the date of approval of this Directors’
Report confirm that, so far as they areeach aware, there is no relevant audit
information of which the Company’s
Auditors are unaware; and each Director
has taken all the steps that he mightreasonably have been expected to havetaken as a Director to make himself
aware of any relevant audit informationand to establish that the Company’s
Auditors are aware of that information.
Annual General Meeting
The Notice of the Annual General Meeting
to be held on 11 September 2012 is set
out in a letter to shareholders together
with explanatory notes relating to
the resolutions.

Report of the Directors continued

A resolution to re-appoint KPMG Audit
Plc as Auditor and to authorise the
Directors to set their remuneration will be
proposed at the Annual General Meeting.
Change of Control
Arrangements
There are a number of agreements thattake effect, alter or terminate upon achange of control of the Company
following a takeover, such as banking
agreements and company share plans.
None of these are deemed to besignificant in terms of their potential
impact on the business of the Group as awhole although, on a change of control,
the Company’s committed credit facilities
may be cancelled by lenders by giving notless than 3 days notice. It is also possiblethat Pension Plan funding arrangements
would need to be changed following achange of control if that resulted in aweakening of the employer covenant.
Corporate Governance
The Board reviews its work on corporate
governance in the Corporate Governance
Review on pages 35 to 42.

By Order of the Board
Susan Johnson-BrettCompany Secretary
12 June 2012

Corporate Governance

The Board is committed to ensuring thathigh standards of corporate governanceare maintained by the Group.
The Board endorses the main andsupporting principles and the provisions
set out in the UK Corporate Governance
Code (“the Governance Code”) except asdetailed below.
The Board’s policies and procedures are
documented in the Board Reference File thatsets out the roles and delegated authorities
applying to the Directors, the Board andthe Board Committees. The Board ReferenceFile is reviewed annually by the Board as partof the annual governance review
undertaken by the Chairman.
Compliance
The Board considers that, throughout
the period under review, the Grouphas complied with the provisions
recommended in Section 1 of theGovernance Code, other than in respectof Provision D.2.1 with the appointmentof Nigel Keen as Chairman of theRemuneration Committee as
described below.
Preservation of Value
The basis on which the Group generates
and preserves value over the longer term
and the strategy for delivering theobjectives of the Group are to be foundin the Chairman’s Statement on page 02,
the Chief Executive’s Statement andOperational Review on pages 10 to 15.
Board of Directors andmanagement structure
Board of Directors
The Board comprises the Chairman,
four Non-Executive Directors and three
Executive Directors. The Directors’
biographies and details of length ofservice are shown on pages 30 to 31.
All the Directors have written letters of
appointment that have been approvedby the Board and which are available
for inspection at the Company’s
Annual General Meeting.

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

The Chairman is responsible forleadership of the board and ensuring
its effectiveness on all aspects of its role.
The division of responsibilities between
the role of Chairman and the Chief
Executive has been set out in writing
and agreed by the Board.
The Board has delegated Group
responsibility for the managementof health, safety and the environment
to Charles Holroyd.
Management Team
General Committee
The Board delegates management of thebusiness to the Chief Executive. To assist
in this, the Chief Executive has created a
General Committee that consists of the
Executive Directors, the Group Operations
Director, the Group Technical Director and
the Group Human Resources Director.
The General Committee meets at least
twice a month either physically or byvideo or telephone conference andfocuses on Group wide performanceand risk management and twice a year
for strategic away days.
Executive Committee
The General Committee is supported by
an Executive Committee that consists ofthe members of the General Committeewith the addition of the Managing
Directors of each of the principal
businesses which comprise the Group.
Operation of the Board
The Board is responsible to shareholders
for delivering sustainable incremental
shareholder value through entrepreneurial
leadership within a framework of controls
for managing risk. The Board sets theGroup’s strategy, maintains the policy anddecision making framework in which thisstrategy is implemented, verifies that thenecessary financial and human resources
are in place to meet strategic aims,
monitors performance against key
financial and non-financial indicators,
oversees the system of risk management
and sets values and standards ingovernance matters.

35

The details of the way the Board
operates, including a schedule of mattersreserved to the Board for decision, are set
out in the Board Reference File.
The Board retains control over strategy,
investments and capital expenditure, andlimits the decisions which can be taken
by management in the areas of strategic
and financial management and reporting,capital structure, corporate actions,mergers and acquisitions, major contracts
and other commitments, litigation andregulatory proceedings, remunerationand share incentive plans.
Where the Board delegates authority to
management it is on a structured basis,
which requires that proper management
oversight exists at the appropriate level.
The Board meets on a regular basis,
at least ten times a year, and otherwise
as required. Of the ten regular meetings,
typically eight are held at Group locations,and the remaining two are held bytelephone conference.
Board meetings involve reviews of financial
and business performance against the plan
approved by the Board. Risk management
review, both at Group level and also foreach of the business units, is embedded in
the reporting system. On a rotating basis,the Board receives presentations from thebusiness units and key functional areas
enabling it to explore specific issues inmore detail. Any matter requiring adecision by the Board will be supported
by a pre-circulated paper analysing all
relevant aspects of the proposal andrecommending a course of action.
Board papers are distributed in advanceof the relevant meeting in sufficient timeto allow the Directors to prepare formeetings. Minutes of Committee meetings
are circulated to the relevant Directors. In
the very few instances when a Director
has not been able to attend Board or
Committee meetings, his commentson the papers to be considered at themeeting are communicated in advanceto the relevant Chairman.

36

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

The Non-Executive Directors meetwithout the Executive Directors at least
annually, with the Chairman leadingthese meetings. The Non-Executive
Directors also meet annually without the
Chairman in attendance. The Deputy
Chairman chairs these meetings.
The Company Secretary and theCompany Secretary’s Office areresponsible for implementing Board
procedures and for advising the Boardon corporate governance matters.
Board balance andindependence
The Governance Code requires theBoard should be of sufficient size thatthe balance of skills and experience isappropriate for the requirements of thebusiness and that there is a balance of
Executive and Non-Executive Directors
such that no individual or small groupof individuals can dominate the Board’s
decision making.
The composition of the Board and the
combination of diverse backgrounds andexpertise of the Non-Executive Directors
meet these principles.
Nigel Keen, Chairman, has been amember of the Board since February
1999. He has a degree in engineeringfrom Cambridge University, is a Fellowof the Institute of Chartered Accountants
and of the Institution of Engineering andTechnology and has been involved in
the formation and development of hightechnology businesses for more than
thirty years. He fulfilled the independence
criteria at the time of his appointment
as set out in the Governance Code. He is
Chairman of the Nomination Committee
and is also currently Chairman of theRemuneration Committee as the Board
considered that whilst the Company wasa SmallCap company it was appropriate
and necessary for the Chairman of theBoard to also be Chairman of theRemuneration Committee. The Board isactively looking to recruit a new NonExecutive Director with the appropriate
mix of skills to take over the Chair of the

Corporate Governance continued

Remuneration Committee in due course.
Nigel Keen also serves as Chairman of
Oxford Instruments Pension Trustee
Limited, the Trustee of the Company’s
UK defined benefit pension scheme. The
Board of the Company and the Board of
the Trustee to the Pension Scheme haveeach independently considered whether
it is appropriate to have the Chairman of
the Company as Chairman to the Boardof the Trustee of the Pension Scheme,
notwithstanding the potential conflictsof interest inherent in the same person
holding both these positions, and theyeach have unanimously confirmed thatthey believe that it is in the interest of allparties for this to continue.
Mike Brady, Deputy Chairman and
Non-Executive Director, has been amember of the Board since June 1995.
He is Emeritus Professor in the
Department of Oncology and Biology at
the University of Oxford, having recently
retired as BP Professor of Information
Engineering, and is one of the UK’s
leading engineers. He brings a depth oftechnical expertise to Board discussions.
His independence of mind gained from acareer as a senior academic supervisor of
research programmes in a major technicaldiscipline at Oxford University, his
technical expertise as the only NonExecutive Director from a scientificprofession and the value of that expertise
to Board discussions, the breadth of his
professional and business interests
unrelated to the Group, his continual
constructive probing of the technicalaspect of proposals being considered by
the Board and the composition of theBoard generally leads the Board toconclude that it is appropriate that heshould continue in office. Although theBoard continues to value Mike’s input
and does not regard this input as being
less valuable as a result of his tenure as adirector of the Company, the Board has
reviewed Mike’s status as an independent
director and in the light of guidance by
the Governance Code has determinedthat he should no longer be considered
independent. Mike is a member of theNomination Committee.

Mike Hughes, Senior Independent
Non-Executive Director, has been amember of the Board since November
2004. He is currently the Chairman of EA
Technology Ltd and a Non-Executive
Director of South Staffordshire Water Ltd.
Previously he held senior management
positions within GEC before becoming
CEO of Midlands Electricity plc and thenExecutive Vice President of GPU Inc
International Operations Group. Mike is amember of the Audit, Remuneration and
Nomination Committees.
Jock Lennox was appointed to the Board
as an Independent Non-Executive
Director on 1 April 2009. Until April 2009,he was a Senior Audit Partner at Ernst &Young where he gained extensive
experience advising clients in a variety ofindustries on financial reporting,financing, transactions and international
expansion. Jock is Chairman of the Audit
Committee and is a member of theRemuneration and Nomination
Committees. The Board believes that
Jock’s skills, experience and knowledge
enhance and maintain an effective Boardand provide a well qualified Chairman of
the Audit Committee.
Bernard Taylor was appointed to theBoard as an Independent Non-Executive
Director in November 2002. He has
worked at various City institutions,
including Robert Fleming & Co. Ltd where
he was Deputy Chairman and Chief
Executive and at J.P. Morgan plc where
he was Vice-Chairman (Investment
Banking). He is Vice Chairman of Evercore
Partners and Chief Executive of its
European business. He is also a fellow of
the Royal Society of Chemistry, Chairmanof ISIS Innovation Ltd and a member of
The Council of the University of Oxford.
Bernard will be retiring from the Board
at the Company’s forthcoming AGM.
Further information on each of the
Non-Executive Directors is to be foundin the Directors’ Biographies on pages
30 to 31.

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Independence of
Non-Executive Directors
In the opinion of the Board,
Mike Hughes, Jock Lennox and Bernard
Taylor are independent and Mike Brady
is no longer considered independent inaccordance with the guidelines set out
in the Governance Code. The Board
considers that they are each independentin character and judgement and do nothave relationships which are likely toaffect their judgement. This opinion isbased on current participation andperformance on both the Board andBoard Committees including
consideration of the length of service
at Oxford Instruments plc.
Term of appointment of
Non-Executive Directors
Each Non-Executive Director was
appointed for an initial term of three
years. In line with provision B.7.1 of theGovernance Code, the Board has
determined that all directors of the Board
are to be subject to annual election byshareholders and accordingly theappropriate resolutions will be put toshareholders at the Company’s
forthcoming AGM.
Board development
and evaluation
Board development
On appointment, Directors undertake an
induction process which is designed todevelop knowledge and understandingof the Group’s businesses through visits
to various Group operating sites,
discussion of relevant technology, as wellas product demonstrations, briefings
from management and familiarisation
with investor perceptions of the Group.
The operating business units’ senior
management teams present to the Board
on a regular basis.
Non-Executive Directors are encouraged
to meet individual members of the senior
management team and have done soduring the year under review.

Throughout the year, Non-Executive
Directors attend Oxford Instruments’
events, exhibitions and award
presentations.
The Company Secretary and her office
act as advisers to the Board on mattersconcerning governance and ensurecompliance with Board procedures. All
Directors have access to this advice and aprocedure also exists for Directors to takeindependent professional advice at theGroup’s expense. No such advice wassought during the year. The appointment
and removal of the Company Secretary
are matters for the Board as a whole.
Board evaluation
In light of the provisions of Section B.6.2
of the Governance Code which expects
that an externally facilitated evaluation of
the Board be carried out at leasttriennially, John Stopford, an emeritus
professor of the London Business School,
carried out a “light touch” evaluation of
the governance review process in 2011.
He found that the process described
below effectively reviews the mechanicsof the operation of the Board and hefound the written statement on
governance each director completes avery helpful input. His observation wasthat the Board was functional andeffective. Unfortunately he died before
being able to issue his final report
although this had already been preparedin final draft form. In light of Professor
Stopford’s observations, thequestionnaires, which are the starting
point of the evaluation process, havebeen remodelled to collect a morerounded view of the operation of theBoard and its Committees.
For the year ended 31 March 2012,
the Board has completed its annual
effectiveness evaluation exercise, including
a specific review of the effectiveness of
its principal committees and members.
This was an internal exercise under thecontrol of the Chairman using a detailed
questionnaire completed by all Directors

37

in relation to the key areas of Board
accountability and the arrangements inplace to enable effective focus on theseareas. Topics covered included Groupstrategy, performance, delegation andaccountability, success, development
and reward, Board and Committee
composition, Board induction and training,internal control and risk management. In
addition, each director has prepared awritten statement concerning governanceof the Company and has discussed thestatement with the Chairman at theindividual one-to-one interviews which
the Chairman holds with each director.
The Chief Executive is also involved in
the process by giving his input on theway the Board helps him in his role. The
output from these evaluations allows the
Chairman to review objectively the overallbalance of the Board. The Non-Executive
Directors meet annually to appraise the
Chairman’s performance.
Attendance at meetings
No one other than the Committee
Chairman and members is entitledto be present at a meeting of theNomination, Audit or Remuneration
Committee, but others may attend byinvitation of the Committee. No Director
votes on matters where he has a conflictof interest. Further details of theindividual Committees’ activities
are described below.
The table on the following page sets
out the frequency of, and attendance at,
Board and principal Board Committee
meetings for the year to 31 March 2012.

38

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Corporate Governance continued

Attendance at meetings
Main
Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Number of meetings held

11

5

5

4

Nigel Keen

11

5¹

5

4

Jonathan Flint

11

5¹

1¹

3¹

Kevin Boyd

11

5¹

–

–

Charles Holroyd

10

3¹

–

–

Mike Brady

11

5¹

5¹

4

Mike Hughes

11

5

5

4

Jock Lennox

11

5

5

4

Bernard Taylor

11

5

5

4

¹ Attended by invitation

Board Committees
The Board has formed the following
Committees: Nomination, Remuneration,
Audit and Administration.
Membership of Board Committees, which
is set out on page 30, is determined by
the Board and is reviewed regularly. The
written terms of reference of the Board
Committees are reviewed annually by eachCommittee and the Board and are available
on the Company’s website at www.
oxford-instruments.com/investors and fromthe Company on request. They will be on
display at the Annual General Meeting.
Nomination Committee
The Nomination Committee comprises
all the Non-Executive Directors, under
the chairmanship of the Chairman of
the Board. The Nomination Committee
is responsible for assisting the Board in
the formal selection and appointment
of Directors and considers succession
planning for the Board. It also considers
potential candidates and recommends
appointments of new Directors to theBoard. The appointments are based on
merit and against objective criteria
including the time available and thecommitment that will be required ofthe potential Director.

There is a formal, rigorous and transparent
procedure for the appointment of new
Non-Executive Directors to the Board,the prime responsibility for which isdelegated to the Nomination Committee.
Each appointment process begins withan evaluation of the balance of skills,
knowledge and experience existing on
the Board that is effected through a seriesof one-on-one meetings between theCommittee Chairman and Directors. The
Nomination Committee takes external
advice when considered appropriate.
During the year, the Board and theNomination Committee have reviewed
the composition of the Board. The
length of service of its Non-Executive
Directors, the promotion of theCompany into the FTSE 250 and thechanging requirements of theGovernance Code for FTSE 350
companies, together with further
reflection on diversity within the
Company, have led it to conclude thatchanges to the membership of the Boardand its Committees need further
consideration. Accordingly a subcommittee has been established whoseterms of reference are, with the help ofexecutive search consultants Korn/Ferry,
to evaluate the balance of skills,
knowledge and experience on the

Board and to identify appropriate
candidates for non-executive director
positions on the Board. Accordingly,
using information it has gathered, taking
into account diversity within the Boardand bearing in mind the desire to find a
successor to the current Chairman of theRemuneration Committee, it has drawn
up descriptions of the role and desired
capabilities for candidates to help in the
search of new non-executive directors.
The Committee is currently in theprocess of drawing up a shortlist ofqualifying candidates. These candidates
will meet with the Chairman and the
Deputy Chairman and a final selectionof potential appointees will meet several
Directors individually. Following thesemeetings, the Nomination Committee
will consider each Director’s feedback
and make a final recommendation to
the Board concerning any appointment
or appointments.
On joining the Board, new Non-Executive
Directors are provided with an induction
programme including site visits andmeetings with senior management. This
induction is supported by briefing papers
prepared by the Company Secretary.
Major shareholders are provided with anopportunity to meet any new NonExecutive Directors.

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

The Nomination Committee recommends
to the Board whether a Non-Executive
Director’s appointment should be
renewed each year, taking into accountthe performance of the individual.
The Nomination Committee also annuallyreviews the performance of the Chief
Executive and succession planning within
the business.
Remuneration Committee
The Remuneration Committee
comprises all the Independent NonExecutive Directors and the Chairmanof the Board. The Chairman of theBoard, Nigel Keen, who fulfilled the
independence criteria at the time of his
appointment as set out in the Governance
Code, is Chairman of the Remuneration
Committee because the Board considers
that in a SmallCap company it is essentialthat the Chairman be involved in setting
remuneration policy. The Board is working
to appoint new Non-Executive Directors
during the course of 2012 and 2013 and is
expecting that one of these appointments
will also be able to serve as Chairman of theRemuneration Committee. The members of
the Committee are appointed by the Board.
The Remuneration Committee is
responsible for recommending to theBoard the remuneration packages for
Executive Directors and the bonus andshare option strategy for the Group’s
executive management. Independent
professional advice is sought when
considered necessary. Under its termsof reference the Chairman of the Board
may be Chairman of the Committee. The
Board as a whole is responsible for fixing
the remuneration of the Non-Executive
Directors, including the Chairman.
The Chief Executive is invited to attend
Remuneration Committee meetings as
deemed appropriate, for example when
consideration is being given to theperformance of other Executive Directors
and on significant Group wide changes insalary structure and terms and conditions
affecting other employees at senior
executive level. Further details of theRemuneration Committee are included in
the Directors’ Remuneration Report set
out on pages 43 to 52.
Audit Committee
The Audit Committee comprises all the
Independent Non-Executive Directors andis chaired by Jock Lennox. The Chairman
and Deputy Chairman of the Board andmembers of senior management such as
the Chief Executive and Group FinanceDirector are invited to attend all or part ofany meetings or to present such reports as
are required for the Committee to discharge
its duties. The external auditors are invited
to attend meetings of the Committee ona regular basis, including at the half year,
at the planning stage before the audit andafter the audit at the reporting stage. At
least once a year the Committee meets withthe external auditors without the Executive
Directors present.
The primary objective of the Audit
Committee is to assist the Board of
Directors in fulfilling its responsibilities
relating to external financial reporting
and associated announcements, oversightof the external audit process including
consideration of the appointment,
removal and independence of theGroup’s external auditors, the resourcing
and plans of the Internal Audit function
and the adequacy and effectiveness ofthe financial control environment.
The Audit Committee’s terms ofreference include all matters indicatedby the Governance Code. The termsof reference are considered annuallyby the Audit Committee and are thenreferred to the Board for approval. The
Audit Committee structure requires theinclusion of one member with relevant
recent financial experience, currently theCommittee Chairman, and expects all
Audit Committee members to befinancially literate.
The Audit Committee Chairman reports
the outcome of meetings to the Boardand the Board receives minutes of all
Audit Committee meetings.

39

The Audit Committee has unrestricted
access to Group documents andinformation, as well as to employeesof the Group and the external auditor.
The Audit Committee reviews all
public statements containing financial
information, including the half year andannual financial statements and interim
management statements, together withthe related Stock Exchangeannouncements, having received
information on the accounting principles,policies and practices adopted in theGroup’s accounts, changes proposed tothose principles, policies and practices,significant accounting issues andcontingent liabilities affecting the Group,
potential tax contingencies and theGroup’s compliance with statutory
tax obligations.
The Audit Committee is responsible forthe development, implementation andmonitoring of the Group’s policy on
external audit. The Audit Committee
reserves oversight responsibility formonitoring the independence andobjectivity of the external auditors.
A review takes place annually of
the performance of the external
auditors following the completionof the annual audit. To assess theeffectiveness of the external auditors,
the Audit Committee reviews:•

The external auditors’ fulfilment of
the agreed audit plan and variations
from the plan•

The robustness and perceptiveness of
the auditors in their handling of key
accounting and audit judgements•

The external auditors’ comments in
respect of financial controls

To fulfil its responsibility regarding theindependence of the external auditors,
the Audit Committee reviews thechanges in key external audit staff in theexternal auditor’s plan for the current
year, the arrangements for day-to-day

40

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

management of the audit relationship,a report from the external auditors
describing their arrangements to
identify, report and manage any
conflicts of interest and the overall
extent of non-audit services provided
by the external auditors. In addition,
to safeguard auditor objectivity andindependence when the external auditor
provides non-audit services, theChairman of the Audit Committee
reviews the provision of non-audit
services by the external auditors where
the proposed fee exceeds £20,000 andwith formal Audit Committee approval
where fees are £50,000 or above.
Competitor quotes are obtained
where the proposed fee is in excessof £100,000.
Details of the audit fees, together withfees for non-audit services for the year,
are set out in note 3 (page 74) to the
Financial Statements.
The Audit Committee is required to assist
the Group Board to fulfil its responsibilities
relating to the adequacy and effectivenessof the financial control environment. This
includes consideration of the adequacy ofboth the resourcing and the plans of theInternal Audit function.
To fulfil these duties theCommittee reviews:•

The Group’s risk framework and risk
management policies•

Any internal control findings
reported by the external auditor•

The Internal Audit function’s termsof reference, reporting lines andaccess to the Audit Committee
and all members of the Board, andits plans and the outcomes of theplanned activity•

Internal Audit reports on key
audit areas and significant control
environment deficiencies

Corporate Governance continued•

Reports on the systems of financial
controls and financial risk management

The Group’s Business Malpractice Policy
comprises an internal process that has
been communicated directly to all
employees by which employees can raisea concern, including concerns relating to
fraud, damage to the environment,
criminal activity or danger to health andsafety, in the knowledge that it will betaken seriously, treated as confidential
and that no action will be taken against
them. There is also provision within the
Policy for employees to raise concerns
directly with the Senior Independent
Director. The Policy is reviewed annuallyby the Committee.
Administration Committee
The Administration Committee consistsof a minimum of two Directors and deals
with items of a routine and administrative
nature. The Board receives a summary
outlining all matters decided by the
Administration Committee since theprevious Board Meeting.
Investor relations
The Group places considerable
importance on regular communications
with its shareholders with whom it has
an ongoing programme of dialogue. All
shareholders are encouraged toparticipate in the Annual General
Meeting at which the Chairman andChief Executive present an overview of
the Group’s business and review theresults and make comments on strategy
and current business activity.
The Non-Executive Directors meetinformally with shareholders both before
and after the Annual General Meeting andrespond to shareholder queries andrequests. The Chairman and the Senior
Independent Director make themselves
available to meet shareholders, as required.
All Group announcements are postedon the Group website, www.oxfordinstruments.com/investors, as soon as
they are released. The Investor Relations

section of the website provides financial
and other information on the Group andthe website itself carries additional
information on the Group’s products,
services and markets.
Annual General Meeting (AGM)
The Annual General Meeting is an
opportunity for the Board to meetshareholders. At its AGM, the Group
complies with the provisions of theGovernance Code relating to the disclosureof proxy votes, the separation of resolutions
and the attendance of Committee
Chairmen. The Group arranges for the
Annual Reports and Financial Statements
and related papers to be posted on its
website and, where shareholders haveelected to receive paper copies, posted
to shareholders so as to allow at least 20
working days for consideration prior to
the AGM. The next AGM will be held on
11 September 2012 at the Group’s offices
in Tubney, Oxfordshire.
Risk management
Within the Group there is an
ongoing embedded process for
identifying, evaluating and managing
the significant risks faced by the Group.
Day-to-day management of this process
has been delegated by the Board to the
Executive Directors.
A standard process is in placethroughout the Group that requires
the senior management of each businessto identify significant business risks andto classify them both as to probability
and potential impact. Once identified,mitigating action, where possible, isformulated and responsibility within the
management team assigned. On a
regular basis each business reviews andupdates its risk summary which is thenreported to the Chief Executive. If amaterial risk changes or arises, theManaging Director of the business
reports this in writing to the Chief
Executive at which time there isa discussion on the adequacy of the
mitigating actions taken. Details of all
major risks identified and the mitigatingcorporate governanceOxford Instruments plc
Report and Financial Statements 2012

actions in place are reported to andreviewed by the Board. The Financial
review (pages 16 to 23) gives an
overview of the major risks anduncertainties faced by the Group.
In addition, the Board considers risks
to the Group’s strategic objectives which
are not addressed within the Group’sbusinesses and develops appropriate
actions to manage and mitigate these risks.
Internal audit
The Group has an established processof internal audits of both financial andnon-financial areas of all the Group’s
operating businesses and Head Office.
Non-financial audits are overseen by the
Board and financial audits are overseenby the Audit Committee.
••

Non-financial audits are carried out
in the areas of Operations, Human
Resources, IT, Health and Safety andResearch and Development. These
audits are carried out by the Groupfunctional heads (or their delegate).
Audit cycles vary between one
and four years dependent on therisk profile of that function in each
operating business.
Financial audits are carried out bymembers of the finance function
who are qualified accountants.
Approximately half of the audits
are carried out by members of
the Group finance team and halfby the operating businesses’
Finance Directors as it is felt thatinternal audits carried out on peerbusinesses allow a sharing of bestpractice. In Japan, internal audits
are carried out by an external firmof auditors due to the significant
language barrier and the Head
Office treasury function is reviewed
by external consultants. Financial
internal audits occur on a three year
cycle unless risk factors trigger amore frequent occurrence.

Following an internal audit, local
management are asked to comment on
any issues raised and put in place
remedial action plans. On a bi-annual
basis, a summary of the results of thenon-financial audits is reported to theBoard and a summary of the results ofthe financial audits is reported to
the Audit Committee.
There is a review at least annually of theinternal audit process which determines
whether it continues to be fit for
purpose or needs to be amended. It has
been determined that it continues to beappropriate for internal audits to be
carried out by Group personnel as it isfelt that this is the most appropriate way
for a business of the size and complexityof the Group. This year the annual
review has concluded that it is now
appropriate to recruit a risk manager
with specialist knowledge of internal
audit. This appointment will manage theinternal audit process and will perform
some of the financial audits.
Internal control
The Board is ultimately responsible for
the Group’s system of internal control
and for reviewing its effectiveness.
However, such a system is designed to
manage rather than eliminate the risk offailure to achieve business objectives andcan provide only reasonable and not
absolute assurance against material
mis-statement or loss. Day-to-day
responsibility for maintaining adequate
systems of internal control is delegated to
the Executive Directors.

The key components designed to provide
effective internal control within theGroup are as follows:•

there is a formal schedule of mattersreserved to the Board for decision;other than these matters, the Board
delegates to the Chief Executive andreviews the delegation of authorities
throughout the management structure;•

the Group’s management structure
comprises the General Committee
whose members have Group wide
financial responsibilities and towhom day-to-day responsibility
for the management of the Groupis delegated. The responsibility
is based on the identification of
separate businesses for each of
the Group’s activities, the headsof these businesses together with
the Chief Executive, the Group
Finance Director and certain othermembers of the senior management
team form the Group’s Executive
Committee. There are clearly definedlines of management responsibilities
at all levels up to and including
the Group Board and the Group’s
accounting and reporting functions
reflect this organisation;•

financial executives within Groupbusinesses report to their own
operational head but there is also awell established and acknowledged
functional reporting relationshipthrough to the Group Finance Director;•

the Board reviews strategic issues
and options formally once a
year during the annual strategicplanning process and during theyear as appropriate. In addition the
Executive Directors maintain a threeyear planning model of the Groupand its individual businesses;•

annual budgets are prepared foreach of the Group’s businesses
which include monthly figures forturnover, profit, capital expenditure;
cash flow and borrowings. The

During the year the Directors havereviewed the effectiveness of the Group’ssystem of internal controls.
These internal control procedures havebeen in place for the year under review
and up to the date of approval of thereport. They are regularly reviewed by
the Board and accord with the Turnbull
guidance. These controls include
financial, operational, compliance andrisk management.

41

42

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Corporate Governance continued

budgets are reviewed through theGroup management structure andresult in a Group financial budget
which is considered and approvedby the Board;•the businesses prepare monthly
management accounts which compare
the actual operating result withboth the budget and the prior year.
The businesses also prepare rollingreforecasts for orders, turnover,
operating profit and cash. Both arereviewed by the Board monthly;•

non-financial internal audit
visits are conducted by theGroup’s functional heads,
or their delegates;•

work performed is based ona standardised Group format
but involves random testing,
together with a review of theinternal control questionnaire;•

where required, action plans
are drawn up by the businesses
in conjunction with the Group
Finance Director or, for nonfinancial audits, with the relevant
functional head to remedy any
significant control weaknesses
that are identified fromcompletion of the internal control
questionnaire or as a result of
the internal audit. The resultsof audit reviews are reported to
local management, the Group
Finance Director and the Audit
Committee or Board and checks
on the progress of the action
items arising are made;•the Board approves all acquisitionand divestment proposals and there
are established procedures for theplanning, approval and monitoringof capital expenditure;•

for all major investments theperformance of at least the firsttwelve months against the original
proposal is reviewed by the Board;•

each Group site, except for
representative sales offices, is required
to submit a self assessment internal
control questionnaire annually;•

internal audit is carried out througha system of regular reviews of thefinancial and non-financial internal
controls at each site. These reviews
are coordinated by a manager in
Head Office.

the Board receives regular updates
on treasury, tax, property,
pensions, insurance, litigation,
human resources, corporate social
responsibility, business ethics andhealth and safety matters;•

authorisation limits are set atappropriate levels throughout theGroup; compliance with these limits
is monitored by the Group FinanceDirector and internal audit;••

financial internal audit
visits are conducted byaccountants from other partsof the Group and in Japan,
due to language differences,by local external auditors;•

all requests to quote for substantial
fixed price contracts are reviewed by
the Chief Executive and/or the Group
Finance Director to assess bothtechnical and financial risk and to fix
an appropriate balance between risk
and reward. However, no procedure
can guarantee the avoidance oflosses on fixed price contracts of atechnical nature; and•with respect to the UK pension
scheme the Group has its own
trustee representatives, involves
its own independent actuary withwhom actuarial assumptions arereviewed, agrees the investment
policy with the Trustee, ensures there
is an independent actuarial valuation
every three years and agrees funding
levels to provide adequate funding
to meet the benefit payments of themembers as they fall due.

Susan Johnson-BrettCompany Secretary
12 June 2012

Directors’ Remuneration Report

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

43

The Remuneration Committee (the “Committee”) is responsible for recommending to the Board the remuneration packages for
Executive Directors and the bonus and share incentive strategy for the Group’s executive management. The Board as a whole is
responsible for determining the remuneration of the Non-Executive Directors, including the Chairman.
The role of the Committee includes:•considering and determining the remuneration policy for the Executive Directors and executive management;•

within this agreed policy, considering and determining the total remuneration packages of each Executive Director of the Company;•

approving the design and performance targets for all performance-related plans as well as the overall total annual payments
made under such plans;•reviewing and noting remuneration trends across the Group; and•determining the policy for pension arrangements, service agreements and termination payments to Executive Directors and theexecutive management.

The Committee comprises all the Independent Non-Executive Directors and the Chairman of the Board. The Chairman of the Board,
Nigel Keen, who fulfilled the independence criteria at the time of his appointment as set out in the UK Corporate Governance Code(the Governance Code), is Chairman of the Committee. Nigel Keen was Chairman of the Committee at the time the Company listedon the FTSE Small Cap Index. As a SmallCap company this appointment recognised his significant experience of the role at theCompany and elsewhere. Now that the Company is listed on the FTSE 250 index, the Board is looking to recruit a new NonExecutive Director with the appropriate mix of skills to take over the Chair of the Committee.
The Committee normally meets at least four times a year and the members of the Committee are appointed by the Board.
The Chief Executive, the HR Director and other executives are invited to attend Committee meetings as deemed appropriate. For
example the Chief Executive is able to make a significant contribution when considering the performance of other Executive
Directors and on the significant Group-wide changes in salary structure and terms and conditions affecting other employees atsenior executive level. However, no Executive Director is present when the Committee is determining his or her remuneration.
The Committee acts within its agreed written terms of reference (which are published on the company’s website – www.oxfordinstruments.com/investors) and complies with the provisions of the Governance Code regarding best practice on the design ofperformance-related remuneration.
The performance of the Committee is reviewed at least once a year as part of the wider Board evaluation process.
During the year, the Committee:•

reviewed the remuneration packages of the Executive Directors;•

reviewed long term incentive plans;•reviewed and agreed the performance targets for the 2011/12 bonus and assessed the extent to which theperformance conditions for the 2010/11 bonus were achieved;•

reviewed the performance conditions applying to the long term incentive awards;•

assessed the achievement of the performance conditions on outstanding long term incentive awards;•

monitored the application of the Company’s shareholding guideline;

44

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Directors’ Remuneration Report continued•

reviewed the overall salary increase pool, bonus payments and pay packages for the Group as a whole and received an
update on any significant Group-wide changes in senior employees’ salaries and terms and conditions; and•carried out its annual evaluation of the Committee as part of the governance activities undertaken by the Board.

The Committee takes independent advice from New Bridge Street (an Aon Hewitt company). Aon Hewitt provided no otherservices to the Company during the year. The Committee also sought advice from Laytons, the Company’s lawyer.
The report is divided into two parts:•

Part A: which is not subject to audit and explains the Company’s current remuneration policy for Executive Directors and theexecutive management; and•Part B: which is audited and shows how the remuneration policy has been applied to Executive Directors for the year underreview and contains tables detailing the Executive Directors’ emoluments for the year ended 31 March 2012, their accrued
pensions and their interests under the Company’s long-term incentive arrangements.

PART A
Remuneration policy
The Company has an incentive-driven remuneration policy that seeks to reward executives fairly and responsibly based on Group
performance and their individual contribution. Overall the remuneration package aims to be appropriate to attract, motivate andretain high calibre executives.
The remuneration policy promotes the delivery of the Group’s strategy and seeks to align the interests of Directors andshareholders. The Committee regularly reviews the link between performance and strategy and believes that measuring the successof the strategy through sustained and significant earnings growth and the delivery of superior long-term shareholder returns ensuresa strong performance pay related culture. When appropriate, the Chairman has contact with principal shareholders regarding
remuneration policy.
The Committee considers carefully the motivational effects of the incentive structure in order to ensure that it is effective and does
not have any unintentionally negative impact on matters such as governance, environmental or social issues. More generally, theCommittee ensures that the overall remuneration policy does not encourage inappropriate operational risk.
The Committee reviews the Executive Directors’ packages annually taking account of the level of remuneration paid to comparable
positions in similar companies within the industry, as well as pay and conditions throughout the remainder of the group.
Comparative pay data is used carefully recognising the potential for an upward ratchet in remuneration caused by over reliance onsuch data. The policy for Executive Director remuneration can be summarised as follows:
Fixed remuneration
Base salary

Performance-related remuneration

Benefits

Pensions

Annual bonus

Long-term incentives

E.g. car benefit, life
& health insurance

Defined contribution

Measured over 1 year

Measured over 3 years

Corporate financial
measures and specificstrategic objectives

Executive Share Option
Scheme (ESOS) – basedon EPS performanceMax 100% of salary
for CEO & FD

Senior Executive
Long-Term Incentive
Scheme (SELTIS) – basedon TSR performance

Max 75% of salaryfor Group Business
Development Director

Shareholding guideline of 100% of base salary for Executive Directors(to be built up by retaining shares on exercise of options under the ESOS and SELTIS granted
from 2007 equal to a minimum of 50% of the net gain)corporate governanceOxford Instruments plc
Report and Financial Statements 2012

45

Company performance
In 2011, the Company successfully completed its five year plan to double the size of its business and improve net margins by ten
percentage points through organic growth. Over the last three years the share price has risen from £1.10 on 31 March 2009 to£12.16 on 31 March 2012. Over the same period, adjusted profit before income tax has risen from £11.1m to £42.0m.
The Company is now one year into its next phase of growth and delivering on its three year plan, the 14 Cubed Plan. This is anambitious plan, the objective of which is to target an average compound annual revenue growth rate of 14% per year and to have a
net return on sales of at least 14% by 2014. Progress to date is in line with meeting these objectives. The Group has delivered an
excellent result in the year to 31 March 2012 driven by new product introductions and a market environment which has remainedrobust for its products. Revenue has grown by 28.6% to £337.3 million (2011: £262.3 million); excluding acquisitions, organic
growth was 15.1% while adjusted profit before tax grew by 60.3% to £42.0 million (2011: £26.2 million). Adjusted operating margin
also continued to increase, rising to 12.5% from 10.7% in the prior year in line with the 14 Cubed Plan. The proposed dividend for
2011/12 is 11.1% higher than the previous year.
The Group’s broad spread of geographies and technologies and strong pipeline of new products should help it to remain resilient in
the event of a sustained global economic downturn. The Group completed three acquisitions in the year ended 31 March 2012 and
it is continuing its active pursuit of acquisitions that have the potential to enhance shareholder value and add to its range oftechnical capabilities. At the same time continued investment in the new product pipeline is aimed towards driving organic growth.
Trading remains strong and the Board remains confident in the continued growth prospects of Oxford Instruments and the Group’s
ability to deliver sustained shareholder value.
In September 2011, the Group was admitted to the FTSE 250 index and in March 2012 it won the prestigious PLC award for best company
in 2011. Jonathan Flint and his team have achieved tremendous results and the Committee is concerned to ensure that the remuneration
policy continues to support and reflect the business strategy to drive continued growth and returns for the Group’s shareholders.
Reasons for the review of Executives’ remuneration packages
The 14 Cubed Plan reflects a step change in the size and complexity of the Group as well as the roles of the Executives. The
Committee is keen, given this and the prolonged period of strong performance of the Group, to ensure that the Executives’
remuneration packages remain appropriate.
The Committee has, therefore, carried out a review of the remuneration packages of the Executive team and has noted that the
Executives’ base salaries and the resulting total compensation are below mid-market levels. Given the importance of the base salarylevel in determining the overall level and balance of the package, the Committee has determined that base salaries should be increased.
The Committee is very conscious of the need to pay no more than is necessary to recruit and retain key executives particularly in thecurrent climate. It is also accepted that simply moving into the FTSE 250 does not in itself merit increases in remuneration. However
the Committee believes that:•

due to the outstanding performance of the individual Executives and of the business;•because of the increasingly demanding roles that the Executives hold in an increasingly complex business. For instance its
international reach continues to make growing demands on the Executives; its Chinese business is the fastest growing in
the Group and it has a new office in India; a focused plan of acquisitions continues to be pursued; its technology capability
continues to be expanded and overall the business is more than twice the size it was when the Chief Executive and Group
Finance Director joined the Group; and•to ensure retention of the Executives by the business;

the Executive Directors’ remuneration packages need to be substantially enhanced.
Base salary
The Committee reviews salaries annually. When setting Executive Directors’ salaries, the Committee takes account of the Director’s
experience, performance and responsibilities as well as the performance of the Company, the complexity of the role within theGroup for which the Executive Directors are responsible and salary increases for employees generally. It also has regard to market
data for comparable positions in similar companies within the industry. The Committee reviews external benchmarking data
periodically, and this information is used to assist in decision making. However the Committee is mindful that benchmark data is
only one factor to consider when reviewing board remuneration packages.

46

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Directors’ Remuneration Report continued

The Committee considers that the Chief Executive’s and Group Finance Director’s positioning in terms of salary and total pay is
below market. With this in mind, with effect from 1 July 2012 the Executive Directors’ salaries will be increased as set out below.
Salary prior to
1 July 2012(‘000)

Salary wef
1 July 2012(‘000)

Percentage
increase

£350

£420

20.0%

Kevin Boyd

£242

£283

16.9%

Charles Holroyd

£200

£210

5.0%

Name
Jonathan Flint

Furthermore, it is intended that, for the year commencing 1 July 2013, Jonathan Flint’s salary will be increased to £450,000 (anincrease of 7.1% on the prior year) and Kevin Boyd’s salary will be increased to £300,000 (an increase of 6% on the prior year).
These further increases are predicated on continuing strong performance of the business.
Following this increase in base salary the Chief Executive and Group Finance Director will have a total target remuneration of aroundthe median of a benchmark group of companies similar to Oxford Instruments and of a benchmark group comprising the bottom
half of the FTSE 250.
The Committee considers that these increases in the Executive Directors’ salaries are merited in recognition of the increasingly
demanding roles they have in the business and the complexity of the Group as well as their personal contribution to its success.
The Committee has also sought the view of shareholders holding more than 50% of the issued share capital of the Company to theincreases it proposes awarding. The Committee has taken into account all the views expressed from those consulted in arriving at
the increases in salary levels and their subsequent evolution in the light of the performance of the Company.
Senior Management and Staff salaries
Senior Management salaries for the salary year starting 1 July 2012 are being reviewed dependent on individual performance withina range of 4% to 15% per annum and with annualised increases across the UK expected to average 4.5%. In addition, under aGainshare bonus plan, staff not eligible under management or other bonus plan will receive a payment of up to 2% of salaryprovided certain Company performance criteria are met.
Annual Bonus
Executive Directors and other employee groups are eligible to participate in a non-pensionable discretionary annual bonus. The
Committee sets targets for Executive Directors and the executive management which are primarily based on the achievement ofchallenging corporate financial targets, with the balance payable for meeting specific strategic objectives.
For the year ended 31 March 2012, the bonus awarded was based against the following metrics: organic sales, profit, cash
generation and other strategic objectives. The level of payment for the year took account of the Company’s very strong performancewith organic sales up 15.1%, adjusted profit before income tax up 60.3% and net cash position of £35.1m.
The on-target and maximum bonus potentials for the Executive Directors as well as the amount actually payable for the year ended
31 March 2012 are set out below.
On-targetbonus(% of salary)

Maximum
bonus(% of salary)

Actual bonus
payable for2011/12(% of salary)

Jonathan Flint

75%

100%

100%

Kevin Boyd

75%

100%

100%

Charles Holroyd

55%

75%

75%

Annual Bonus plan for 2012/13
The target and potential maximum bonus potential of the Executive Directors will be unchanged for the financial year to 31 March 2013.
The performance metrics will be based on organic sales, profit, cash generation and other strategic objectives.

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

47

Long-Term Incentive Schemes
The Company operates two discretionary plans to incentivise Executive Directors and employees:•

the Executive Share Option Scheme (ESOS); and•the Senior Executive Long-Term Incentive Scheme (SELTIS).

Under the ESOS executives are granted options to purchase shares at an exercise price based on the prevailing share price on thedate of grant. Options may be exercised between three years and ten years from the date of grant subject to the achievement of
performance conditions measured over three years. At the discretion of the Committee, the gain made on an unapproved option
may be settled in the form of issuing fully paid up shares equivalent to the gain. Under the SELTIS executives are granted options topurchase shares at zero cost. Options may be exercised between three and seven years from the date of grant under the SELTIS andare subject to the achievement of performance conditions measured over three years.
As set out below, the ESOS performance condition provides a focus on share price growth and measures performance using
adjusted earnings per share. The SELTIS performance condition concentrates on stock market out-performance by measuring Total
Shareholder Return relative to a comparator group of companies. The Committee considers that the combination of these different
plans and measures provides a good focus on the outcomes of the Company strategy together with sustainable improvements inlong-term profitability. The Committee considers that weighting the long-term incentive policy towards the ESOS provides strong
ongoing alignment with shareholder interests.
The performance conditions applying to the 2011 ESOS and SELTIS awards are set out on page 51. The Committee will set theperformance conditions for the 2012 awards which are normally granted in December at that time taking account of the Company’s
internal financial planning, market forecasts and the business environment.
Shareholding guidelines
The Committee, in 2007, established shareholding guidelines which encourage the Executive Directors to build up a shareholding
equivalent in value to 100% of basic salary. Until the guideline is met in full whenever ESOS or SELTIS options are exercised Executive
Directors are expected to retain or purchase shares equivalent to the value of 50% of the net amount realised from exercise of theoptions after allowing for tax payable.
As at 31 March 2012, Jonathan Flint, Kevin Boyd and Charles Holroyd held shares in the Company valued at 552%, 335% and 378%
of salary respectively. They each currently hold shares with a value in excess of 100% of basic salary and are thus complying with thecurrent guidelines.
All-Employee Share Schemes
Up until 1 April 2008, the Company granted options under a SAYE scheme. The SAYE scheme is administered in accordance with
Inland Revenue guidelines and there are no performance conditions attached to exercise. Currently there remain no options
exerciseable under this scheme.
The SAYE scheme has been replaced by a Share Incentive Plan (SIP) which since 1 April 2008 has been open to all UK permanent
staff employed for at least six months. The Executive Directors all participate in the SIP to the maximum extent permitted by HMRC.
The Company offers a 1:5 match for partnership shares purchased by employees. During the year, each of the Executive Directors
were awarded 33 matching shares.
Dilution limits
The ESOS, SELTIS and SAYE share option schemes provide that overall dilution through the issuance of new shares for employee
share schemes should not exceed an amount equivalent to 10% of the Company’s issued share capital over a 10 year period.
Awards made under the SELTIS scheme prior to 2009 and shares required by the SIP are satisfied by market purchased shares.
The Committee monitors the position prior to the making of any award under these share option schemes to ensure that theCompany remains within this limit. As at the date of this Report, the Company’s headroom position remains within the 10% limit.

48

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Directors’ Remuneration Report continued

Contracts
Details of the service contracts of the Executive Directors are as follows:
Contract
date
Jonathan Flint
Kevin BoydCharles Holroyd

NoticeUnexpiredperiod term of contract

21 February 2005

12 months

Rolling contract

9 May 2006

12 months

Rolling contract

22 November 2005

12 months

Rolling contract

The service contract of each Executive Director may be terminated on 12 months’ notice in writing by either side, in accordance withcurrent market practice, with the Company having a right to pay 12 months’ salary in lieu of notice if it so determines. The Committee’s
policy on early termination is to provide compensation which reflects the Company’s contractual obligations (which do not include
entitlement to bonus after the date of notification of termination), whilst recognising the principle of mitigation of losses.
Outside appointments
The Board allows Executive Directors to accept appropriate outside commercial non-executive appointments provided the aggregate
commitment is compatible with their duties as Executive Directors. The Executive Director concerned may retain fees paid for these
services, which will be subject to approval by the Board.
Jonathan Flint holds positions as a member of the Council of the Institute of Physics and a member of the advisory board of the ISIS
neutron spellation instrument. During the year he received fees of £510 from ISIS (2011: £850).
Kevin Boyd is a Non-Executive Director of Guidance Ltd. During the year he received fees of £18,300 (2011: £16,875).
Non-Executive Directors
Under an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Company
and Chairman of the Trustee to the Oxford Instruments Pension Scheme and he must account to Imperialise Limited for his services.
His current term of appointment commenced on 25 February 2011 and is for three years. This arrangement can be terminated byeither party at any time by the giving of 6 months’ notice. Imperialise Limited is paid a sum equivalent to the employer’s national
insurance contributions on these fees as it is responsible for the cost of national insurance on payments to Nigel Keen, whereas
national insurance contributions in respect of the other Non-Executive Directors are made direct to the UK Inland Revenue. Nigel
Keen’s fees for acting as Chairman to the Trustee of the Oxford Instruments Pension Scheme are also paid to Imperialise Limited. The
Company also paid to Imperialise Limited a sum equivalent to the employer’s national insurance contribution on these fees.
For the year to 31 March 2012, Nigel Keen’s fees as Chairman were £127,000 (2011: £102,475) and as Chairman to the Trustee were£25,000 (2011: £20,458) for his services for which he must account to Imperialise Limited. In addition, Imperialise Limited has been paid
a sum equivalent to the national insurance on both these fees of £21,076. After careful consideration by the Committee, it was decided
that fees payable for Nigel Keen as Chairman to the Board should be uplifted. In making this decision, it took into account the strong
performance of both the Chairman and the Group, the increasingly complex business and the increasing demands that this brings to
the role of chairman, and the promotion of the Company to the FTSE 250. It also reviewed benchmark data provided by theCommittee’s advisor which showed that the Chairman’s fee was below median of the comparator groups. It was agreed therefore that
the Chairman’s fees be increased to £161,000 with effect from 1 April 2012. Nigel Keen did not take part in these meetings.
Non-Executive Directors do not have service contracts but are appointed for an initial period of three years with subsequent reviews.
They do not have a contract of employment and their appointment can be terminated without notice.
Date of appointment

Notice period

Nigel Keen

25 February 2011

6 months

Mike Brady

1 August 2010

None

Mike Hughes

3 July 2010

None

Jock Lennox

1 April 2009

None

13 November 2011

None

Bernard Taylor

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

49

Non-Executive Directors receive fixed fees, agreed by the Board (but not the Non-Executive Directors) after reference to similar roles
in an appropriate comparator group of companies, and reimbursement of expenses incurred in attending Board and other meetings.
It is the Board’s policy for the Non-Executive Directors to be paid a level of fee that reflects the time commitment and responsibilitiesof the role and is sufficient to attract individuals with appropriate knowledge and experience.
During the year, the Non-Executive Directors received a base fee of £30,000 and Mike Brady, Mike Hughes and Jock Lennox
received an additional fee of £5,000 per annum for acting as Deputy Chairman, Senior Independent Director and Chairman of the
Audit Committee respectively. After reviewing remuneration data of comparative companies, it has been agreed that from
1 April 2012, the base fee is to be increased to £40,000 per annum. This is the first increase in Non-Executive Director fees since
October 2008. The Non-Executive Directors did not take part in these meetings.
PART B: The financial information in this part of the report has been audited
Executive Directors’ Emoluments
The remuneration paid to the Executive Directors during the year under review is summarised in the table below:
Total
remuneration
2012
£000

Total
remuneration
2011
£000

Pensioncontribution
2012
£000

Salary3£000

Benefits1£000

Annualbonus£000

Jonathan Flint2

346

17

350

713

671

48

Kevin Boyd

239

14

242

495

467

33

Charles Holroyd

198

10

150

358

333

28

Total

783

41

742

1,566

1,471

109

 Benefits comprise provision of a car or car allowance and health insurance.

1²In 2010, the Company and Jonathan Flint purchased a house in joint ownership with the Company contributing £300,000. During the year Jonathan Flint bought a further proportion of
the house by paying £99,900 to the Company. This proportion was acquired based on the original purchase price. An independent valuation established that the price paid by Jonathan
Flint was in excess of the market value of the house at the time of payment. Jonathan Flint lives in the house and paid a full commercial rent amounting to £8,147 during the financial year
for use of the Company asset.
³ Under the terms of a salary sacrifice arrangement, UK employees are able to elect to cease making personal contributions into relevant pension schemes. Each employee’s salary is reducedby the amount of their pension contributions and the Company pays the same amount directly to the pension schemes. Accordingly, the annual salaries of Jonathan Flint, Kevin Boyd andCharles Holroyd were reduced to £344,297, £222,033 and £181,480 respectively. For reasons of clarity, the salaries shown in the table above for these Directors are the amount theywould have been paid had they not made such salary sacrifices. These ‘notional’ base salaries are used to calculate salary linked remuneration such as bonus and some benefits.

Remuneration of the Chairman and Non-Executive Directors:
Remuneration paid to the Chairman and Non-Executive Directors during the year under review are set out below. They receive noother benefits.
2012

2011

Nigel Keen, Chairman1

145

116

Mike Brady

35

35

Mike Hughes

35

35

Jock Lennox

35

35

Bernard Taylor

30

30

Total

280

251

1

 igel Keen’s fees above include a payment of £17,526 to Imperialise Limited in respect of employers’ national insurance contributions. In addition, he received fees of £25,000 for his services
N
as Chairman to the Trustee of the Oxford Instruments Pension Scheme together with a payment of £3,450 to Imperialise Limited in respect of employers’ national insurance contributions.

50

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Report and Financial Statements 2012

Directors’ Remuneration Report continued

Outstanding Share Incentive Awards
As at the 31 March 2012, the outstanding options for Jonathan Flint, Kevin Boyd and Charles Holroyd under the ESOS, SELTIS and
SAYE schemes were as follows:
Movements during the year

JonathanFlint2

Kevin BoydCharlesHolroyd

Scheme

March
2012

ESOS

70,700Granted Exercised1
70,700LapsedShareprice onMarch Exercise date of
grant
2011
price
0

£9.90

Date for Date forDate of earliest
latestgrant exercise exercise£9.87 14/12/11 14/12/14 13/12/21

ESOS

55,00055,000£7.05£7.02 07/01/11 07/01/14 06/01/21

ESOS

140,000

140,000£2.035£2.03 17/12/09 17/12/12 16/12/19

ESOS

0

220,000

220,000£1.35£1.33 16/12/08 16/12/11 15/12/18

ESOS

0

100,000

100,000£2.32£2.30 28/09/07 28/09/10 27/09/17

ESOS

0

74,78874,788£2.19£2.18 15/07/05 15/07/08 14/07/15

SELTIS

17,6000Nil£9.87 14/12/11 14/12/14 13/12/18

SELTIS

27,50017,60027,500Nil£7.02 07/01/11 07/01/14 06/01/18

SELTIS

70,00070,000Nil£2.03 17/12/09 17/12/12 16/12/16

SELTIS

0

ESOS

48,700110,000

ESOS

38,00038,000£7.05£7.02 07/01/11 07/01/14 06/01/21

ESOS

95,00095,000£2.035£2.03 17/12/09 17/12/12 16/12/19

ESOS

0

150,000£1.35£1.33 16/12/08 16/12/11 15/12/18

48,700150,000
12,100110,000

Nil£1.33 16/12/08 16/12/11 15/12/15

0

£9.90

£9.87 14/12/11 14/12/14 13/12/21

SELTIS

12,1000Nil£9.87 14/12/11 14/12/14 13/12/18

SELTIS

19,00019,000Nil£7.02 07/01/11 07/01/14 06/01/18

SELTIS

47,50047,500Nil£2.03 17/12/09 17/12/12 16/12/16

SELTIS075,000Nil£1.33 16/12/08 16/12/11 15/12/15

ESOS

20,2000£9.90£9.87 14/12/11 14/12/14 13/12/21

75,00020,200ESOS

31,00031,000£7.05£7.02 07/01/11 07/01/14 06/01/21

ESOS

85,00085,000£2.035£2.03 17/12/09 17/12/12 16/12/19

150,000£1.35£1.33 16/12/08 16/12/11 15/12/18

0Nil£9.87 14/12/11 14/12/14 13/12/18

15,500Nil£7.02 07/01/11 07/01/14 06/01/18

42,500Nil£2.03 17/12/09 17/12/12 16/12/16

75,000Nil£1.33 16/12/08 16/12/11 15/12/15

ESOS

0

SELTIS

10,100SELTIS

15,500SELTIS

42,500SELTIS0

150,000
10,10075,0001Duringthe year, Jonathan Flint, Kevin Boyd and Charles Holroyd exercised SELTIS and ESOS options on 16 December 2011 when the mid market closing priceon the date of exercise was 951.5p. The gain yielded on the exercise of options during the year for Jonathan Flint, Kevin Boyd and Charles Holroyd was£4,138,556, £1,946,642 and £1,946,642 respectively.

2

Since the year end, Jonathan Flint has married. His wife, an employee of the Company, holds ESOS options over 64,000 shares with exercise prices ranging
from 203.5p to 990p.

The market price of the shares at 31 March 2012 was 1215p (2011: 700p) and the range during the year was 703p–1262p (2011:
256p–736p).

corporate governanceOxford Instruments plc
Report and Financial Statements 201251

Performance conditions outstanding for awards are described below (all other awards in the table above have achieved the relevant
performance conditions that had been set):
Date of award

ESOS

SELTIS

December 2009

TSR v FTSE Small Cap Index (excluding
EPS growth – 5% p.a. (33.3% vesting) to certain sectors²) – median (33.3% vesting)
10% p.a. (100% vesting)¹
to upper quartile (100% vesting)January 2011

TSR v FTSE Small Cap Index (excluding
EPS growth – 5% p.a. (33.3% vesting) to certain sectors²) – median (33.3% vesting)
10% p.a. (100% vesting)¹
to upper quartile (100% vesting

December 2011

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

TSR v FTSE 250 Index (excluding Financial
companies3) – median (33.3% vesting)to upper quartile (100% vesting)¹ For employees who are not Executive Directors, options become exercisable in full for achieving the threshold level.
²	Sectors excluded Food & Drug Retailers, General Retailers, Banks, Non-life Insurance, Life Insurance, Real Estate, General Financial, Equity Investment
Instruments and Non-equity Investment Instruments Sectors.
3

Sectors excluded Banks, Equity Investment Instruments, Finance Services, Life Insurance, Nonlife Insurance, Real Estate Investment Trusts and Real Estate
Investment Services.

Achievement of performance conditions
The calculation of the TSR performance conditions were independently measured by Thomson Reuters for options granted prior to2008 and are measured by New Bridge Street for options granted thereafter. EPS performance conditions are measured using theaudited accounts of the Company. All performance conditions are then verified by the Committee. During the year, the 2008 ESOS
and SELTIS grants vested as to 100% because of the Company’s strong EPS and relative TSR performance.
Pension plans
For UK employees and Executive Directors, the Company operates the Oxford Instruments Stakeholder Plan (a defined contribution
scheme). It also operates the Oxford Instruments Defined Benefit Pension Scheme but this has been closed to new employees sinceApril 2001 and closed to new accruals at the end of July 2010.
Oxford Instruments defined benefit pension scheme
For UK-based Executive Directors and employees employed prior to April 2001, a contributory pension, depending on length ofservice, of up to two thirds of pensionable salary is provided on retirement through the Oxford Instruments defined benefit pension
scheme (Defined Benefit Scheme). This was a contracted-out contributory pension scheme and it provides benefits based on
earnings at or near retirement and is funded through a separate trust. Early retirement is possible on a reduced pension from age 55
with the consent of the Company. Pensions in payment are guaranteed to increase by a level of inflation up to a maximum of 3%
per year on pension earned before 1 April 1997 and a maximum of 5% per year thereafter, subject to any applicable statutory
requirements. In the case of death before retirement a spouse’s pension of one half of the member’s pension at death is payable
and a refund of the member’s contributions. This Scheme was closed to future accrual on 31 July 2010.
Oxford Instruments Stakeholder Plan
Employees and Executive Directors are offered membership of the Oxford Instruments Stakeholder Plan (“Stakeholder Plan”). The
Company contribution rate and employee contribution rate varies between grades and whether the individual had previously beenin the Defined Benefit Scheme. The Company contribution ranges between 4% and 14% of base salary.
Executive Director pension arrangements
Under the terms of their service contracts Executive Directors can ask the Company to contribute to a pension plan of their own
choice. The Company contributes a maximum of 14% of base salary if matched by a contribution of 10% by the director or, if lower,
a contribution by the director which brings the total pension contribution to £50,000. Only base salary is pensionable andcontributions are not included in the calculation of bonus and share award entitlements. Where the Company’s pension contribution
exceeds £50,000 (the maximum pension contribution allowable per tax year) a balancing payment is paid by the Company to thedirector which will be taxed as income.

52

corporate governanceOxford Instruments plc
Report and Financial Statements 2012

Directors’ Remuneration Report continued

During the year, the Company contributed £48,422 (2011: £45,167) into a personal defined contribution pension plan in respect ofJonathan Flint and £33,407 (2011: £31,450) into a personal defined contribution plan in respect of Kevin Boyd. In respect of Charles
Holroyd, the company contributed £27,667 into the Stakeholder Plan (2011: £17,080 into the Stakeholder Plan together with £5,232
into the Defined Benefit Scheme). Charles Holroyd is a deferred member of the Defined Benefit Scheme and is no longer accruing
benefits in the Scheme. In accordance with the rules of the Scheme his deferred benefits are subject to increases in line withstatutory revaluation. The transfer value of his accrued benefits at 31 March 2012 was £506,000 (2011: £388,000).
Death in service life cover
There is death in service life cover for all employees in the UK, including the Executive Directors, of three times basic salary. This is
an insured scheme provided through the Oxford Instruments Life Assurance Scheme. All employees have the option to purchase anadditional level of cover of up to a further three times basic salary.
Performance graph (unaudited)
The graph below shows for the five years ended 31 March 2012 the Total Shareholder Return (TSR) on a holding of the Company’s
ordinary shares compared with a hypothetical holding of shares made up of shares of the same kind and number as those byreference to which the FTSE 250, FTSE Techmark and FTSE Electronic and Electrical Equipment indices are calculated. These indiceshave been chosen as they are considered to be the most appropriate comparator groups for the Company. TSR has been calculated
by reference to the relevant share price for each constituent company assuming dividends are reinvested.
This report was adopted by the Committee at a meeting on 7 June 2012 and has been approved subsequently by the Board forsubmission to shareholders at the Annual General Meeting to be held on 11 September 2012.
Total Shareholder ReturnSource: Thomson Reuters
600

Oxford Instruments plc
FTSE Techmark

550

FTSE E&EE
FTSE 250

500
450
400

Value (£)

350
300
250
200
150
100
50
0
31 March 2007

31 March 2008

31 March 2009

31 March 2010

31 March 2011

31 March 2012

This graph shows the value, by 31 March 2012, of £100 invested in Oxford Instruments plc on 31 March 2007 compared with the value of £100 invested in the FTSE Techmark
All Share Index, the FTSE All Share Electronic and Electrical Equipment Index or the FTSE 250 Index over the same period. The other points plotted are the values at intervening
financial year-ends.

Nigel Keen
Chairman of the Remuneration Committee
12 June 2012

Directors’ Responsibilities in relation
to the Annual Report and Financial Statements

Financial statements
Oxford Instruments plc
Report and Financial Statements 201253

The Directors are responsible for preparing the Annual Report and the Group and Parent Company Financial Statements inaccordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that
law they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable law
and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards and applicablelaw (UK Generally Accepted Accounting Practice).
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fairview of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of theGroup and Parent Company Financial Statements, the Directors are required to:•

select suitable accounting policies and then apply them consistently;•

make judgements and estimates that are reasonable and prudent;•

for the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;•

for the Parent Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Parent Company Financial Statements; and•prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent
Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’stransactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them toensure that its Financial Statements comply with the Companies Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ fromlegislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:•

the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation
taken as a whole; and•the Directors’ Report includes a fair review of the development and performance of the business and the position of thecompany and Group taken as a whole, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board

Kevin Boyd			Group Finance Director		
12 June 2012

Jonathan Flint
Chief Executive

54

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Report of the Independent Auditors
to the members of Oxford Instruments plc

We have audited the Financial Statements of Oxford Instruments plc for the year ended 31 March 2012 set out on pages 56 to 110.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law andInternational Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been applied in
the preparation of the Parent Company Financial Statements is applicable law and UK Accounting Standards (UK Generally Accepted
Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required tostate to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for this report, or forthe opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 53, the directors are responsible for the
preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit,
and express an opinion on, the Financial Statements in accordance with applicable law and International Standards on Auditing(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the Financial Statements
A description of the scope of an audit of Financial Statements is provided on the APB’s website at www.frc.org.uk/apb/scope/
private.cfm
Opinion on Financial Statements
In our opinion:•

the Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 March 2012 and of the Group’s profit for the year then ended;•

the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU;•

the Parent Company Financial Statements have been properly prepared in accordance with UK Generally Accepted
Accounting Practice;•

the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards
the Group Financial Statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:•

the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006;•

the information given in the Directors’ Report for the financial year for which the Financial Statements are prepared is consistent
with the Financial Statements;•

the information given in the Corporate Governance Statement set out on pages 35 to 42 with respect to internal control andrisk management systems in relation to financial reporting processes and about share capital structures is consistent with the
Financial Statements.

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:•adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or•the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not inagreement with the accounting records and returns; or•certain disclosures of directors’ remuneration specified by law are not made; or•

we have not received all the information and explanations we require for our audit; or•a Corporate Governance Statement has not been prepared by the company.

Under the Listing Rules we are required to review:•the directors’ statement, set out on page 56, in relation to going concern;•

the part of the Corporate Governance Statement on pages 35 to 42 relating to the company’s compliance with the nine
provisions of the UK Corporate Governance Code specified for our review; and•certain elements of the report to shareholders by the Board on directors’ remuneration.

S Haydn-Jones (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
12 June 2012

55

56

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Accounting Policies

Oxford Instruments plc (the “Company”) is a company incorporated and domiciled in the UK.
The Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU (“Adopted IFRSs”). The Company has elected to prepare its Parent Company Financial
Statements in accordance with UK GAAP; these are presented on pages 104 to 109.
The accounting policies set out below have, unless otherwise stated been applied consistently to all periods presented in theseGroup Financial Statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set
out in the Chief Executive’s Statement on pages 10 to 11. The financial position of the Group, its cash flows, liquidity position andborrowing facilities are described in the Financial Review on pages 16 to 21.
The relatively diverse nature of the Group together with its current financial strength provides a solid foundation. The Directors
have reviewed the Group’s forecasts and flexed them to incorporate a number of potential scenarios relating to changes in trading
performance and believe that the Group will be able to operate within its existing debt facility which expires in December 2014.
This review also considered hedging arrangements in place. As a consequence, the Directors believe that the Group is well placed to
manage its business risks successfully.
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after making reasonableenquiries, that the Group has adequate resources to continue in operational existence for the foreseeable future.
The Group has made three restatements in the period. Firstly, the tax credit of £2.7 million arising in respect of share options in
the prior year was, in error, reported in the Consolidated Statement of Comprehensive Income. This has been corrected and thecredit has now been reported in the Consolidated Statement of Changes in Equity. Secondly, the Group has reclassified certain
engineering costs incurred in relation to one-off special customer orders. Such costs are now treated as research and development
costs rather than as costs of sales and is considered to be a treatment consistent with the Group’s industry peers. The effect on
the Consolidated Income Statement for the prior year was to reduce cost of sales by £2.4 million and increase research anddevelopment costs by the same amount. The effect on the Consolidated Statement of Income for the current year has been to
reduce cost of sales by £3.1 million and increase research and development costs by £3.1 million. Thirdly, due to strong growthin its physical product sales, the Directors decided during the period that it was no longer appropriate to regard the Austin Scientificbusiness as a service business. Consequently, it is now included within the Industrial Products segment and the comparatives havebeen restated accordingly. In line with the other businesses, its service revenues will continue to be reported in the Service segment.
The effect of the restatement in the prior year was to increase the revenue and profit of the Industrial Products segment by£2.9 million and £0.2 million respectively with corresponding reductions in the Service segment. The amounts of the revenue andprofit in the current year are £11.0 million and £2.4 million respectively. No adjustment has any effect on earnings per share oron any balance sheet previously presented. Accordingly, a revised opening balance sheet at 1 April 2010 is not disclosed.
The Financial Statements were authorised for issuance on 12 June 2012.
(a) New accounting standards
In the current year, the Group has adopted the following new standards, amendments and interpretations. These were mandatory
for the year ended 31 March 2012.
•

IAS 24 ‘Related parties disclosures (revised 2009)’ – clarifies disclosure requirements for government related entities and amends
the definition of a related party.

•

IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ – clarifies the accounting treatment for when an entity
renegotiates the terms of its debt, such that the liability is extinguished, in whole or in part, by the entity issuing its own equity
instruments to the lender (referred to as a ‘debt for equity swap’). It addresses the accounting for such a transaction by the
debtor only.

•

Amendments to IFRIC 14 – Prepayments of a Minimum Funding Requirement: The amendment to IFRIC 14 removes unintended
consequences of when an entity is subject to a minimum funding requirement (MFR) and makes an early payment ofcontributions to cover those requirements. The amendment results in prepayments of contributions in certain circumstances
being recognised as an asset rather than an expense.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201257

None of the above standards and interpretations have had any impact on profit, earnings per share or net assets in the year ended
31 March 2012. In addition to the above, amendments to a number of standards under the annual improvement project to IFRS,
which are mandatory for the year ended 31 March 2012, have been adopted in the year. None of these amendments have had amaterial impact on the Group’s Financial Statements.
(b)	Basis of preparation
The Financial Statements are presented in pounds sterling, rounded to the nearest £0.1 million and are prepared on the historicalcost basis except as described below under the heading ‘Financial Instruments’.
The preparation of Financial Statements in conformity with adopted IFRSs requires management to make judgements, estimatesand assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The key judgements made in respect of theappropriateness of the Group accounting policies relate to:•Fair value measurements on business combinations
The measurement of fair values on a business combination requires the recognition and measurement of the identifiable assets,
liabilities and contingent liabilities. The key judgements involved are the identification and valuation of intangible assets which
require the estimation of future cash flows and the selection of a suitable discount rate. (See Note 13)•

Impairment of intangible assets (including goodwill) and tangible assets
Goodwill is held at cost and tested annually for impairment, and amortised intangibles and tangible assets are tested for
impairment where there are indications of impairment. These impairment tests require the Group to make an estimate of the
expected cash flows and to select suitable discount rates. These require an estimation of the value-in-use of these assets.
(See Note 13)•

Capitalised development costs
Capitalised development costs involve judgements around the future economic benefits that will flow from the associateddevelopment activity and in particular the Group’s assessment of the technical and commercial feasibility of the product tobe developed.

•

Measurement of defined benefit scheme liabilities
The Group recognises and measures costs relating to defined benefit pension schemes in accordance with IAS 19 ‘Employee
Benefits’. In applying IAS 19 the costs are assessed in accordance with the advice of independent qualified actuaries. Thisrequires the exercise of judgement in relation to the estimation of future changes in salaries and inflation, as well as mortality
rates, expected returns on plan assets and the selection of suitable discount rates. Further detail is provided in note 21.

•

Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting frompast expectations or events which can be reasonably estimated. The timing of recognition requires the application of judgement
to existing facts and circumstances which can be subject to change. Amounts provided represent the Group’s best estimate of
exposure based on currently available information.

•

Deferred tax assets
A deferred tax asset is recognised in the period if it is probable that future taxable profits will be available against which theasset can be utilised. This requires the exercise of judgement in relation to the estimation of future taxable profit.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects onlythat period or in the period of the revision and future periods if the revision affects both current and future periods. The key
areas where estimates have been used and assumptions applied are in the calculation of provisions, the valuation of acquired
intangible assets, the impairment testing of goodwill and the estimation of defined benefit pension plan liabilities.

58

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Accounting Policies continued(c)	Basis of consolidation
The Group accounts include the accounts of Oxford Instruments plc and its subsidiary companies adjusted to eliminate intra-groupbalances and any unrealised gains and losses or income and expenses arising from intra-group transactions.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern thefinancial and operating policies of an entity so as to obtain economic benefits from its activities. In assessing control, potential voting
rights that are currently exercisable or convertible are taken into account. The results of subsidiary companies are included from thedate that control is obtained to the date of their disposal, where control is lost.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated
into sterling at exchange rates ruling at the end of the reporting period. Income statements and cash flows of foreign operations aretranslated into sterling at average quarterly exchange rates which approximate foreign exchange rates at the date of the transaction.
Foreign exchange differences arising on retranslation are recognised directly in a separate translation reserve.
The purchase method is used to account for the acquisition of subsidiaries.
(d) Foreign currency
An individual entity’s transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of thetransaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreignexchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at thedate of the transaction.
(e) Financial instruments
Financial assets and liabilities are recognised in the Group’s Consolidated Statement of Financial Position when the Group becomes aparty to the contractual provisions of the instrument.
(i) The Group’s investments in equity securities are classified as ‘available for sale’ financial assets. Subsequent to initialrecognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains
and losses on available for sale monetary items, are recognised directly in equity. When an investment is derecognised, thecumulative gain or loss in equity is transferred to profit and loss.
(ii) Derivative financial instruments of the Group are used to hedge its exposure to interest rate, foreign currency and commodity
pricing risks arising from operational, financing and investment activities. The Group does not hold or issue derivative financial
instruments for trading purposes. All derivatives are initially recognised at fair value; attributable transaction costs are recognised
in profit or loss as incurred. Derivatives comprising interest rate swaps, foreign exchange contracts and options and metal futurescontracts are classified as ‘fair value through profit and loss’ under IAS 39, unless designated as hedges. Subsequent to initialrecognition, derivatives are measured at fair value, and gains or losses on the settlement of such derivatives are recognised inoperating expenses. Where such derivatives relate to the following year’s exposure, any gains or losses resulting from the change
in fair value are taken to the mark to market gains/losses line within financial income or expense.
(iii) Cash flow hedges
Changes in the fair value of the derivative hedging instruments designated as cash flow hedges are recognised in equity to
the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in theConsolidated Statement of Income. If the hedging instrument no longer meets the criteria for hedge accounting, expires oris sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously
recognised in equity remains there until the forecast transaction occurs. When the hedge item is a non-financial asset, theamount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amountrecognised in equity is transferred to the Consolidated Statement of Income in the same period that the hedged item affects
profit or loss.
(iv) The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting
estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar
instrument at the measurement date.
(v) The fair value of forward exchange contracts is their quoted market price at the Consolidated Statement of Financial Positiondate, being the present value of the quoted forward price. The gain or loss on remeasurement to fair value of forward exchange
contracts is recognised immediately in the Consolidated Statement of Income.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201259(vi) Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initialrecognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value
being recognised in profit or loss over the period of the borrowing on an effective interest basis.
(f) 	Property, plant and equipment
Property, plant and equipment is stated at historical cost less provisions for impairment (see accounting policy L) and depreciation
which, with the exception of freehold land which is not depreciated, is provided on a straight-line basis over each asset’s estimatedeconomic life. Depreciation is provided based on historical cost less estimated residual value. The principle estimated economic lives
used for this purpose are:Freehold buildings, long leasehold land and buildings

50 years

Leasehold improvements (less than 50 years duration)

Period of lease

Furniture and fittings
Machinery and other equipment

10 years
5 to 10 years

Computer equipment

4 years

Vehicles4 years

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are recognised in the Income Statement.
(g)	Intangible assets(i) Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisitionof subsidiaries. In respect of business acquisitions that have occurred since 31 March 2004, goodwill represents the difference
between the cost of the acquisition and the fair value of the assets, liabilities and contingent liabilities acquired. In respect ofacquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded underprevious GAAP.
The company now expenses transaction costs associated with its acquisitions and movements in liabilities relating to contingent
consideration within the income statement in conformity with the revised IFRS3.
Goodwill arising on acquisitions is stated at cost less any accumulated impairment losses and allocated to cash-generating units thatare anticipated to benefit from the combination. It is not amortised but is tested annually for impairment (see accounting policy L),or more frequently when there is an indicator that the unit may be impaired.
(ii) Development costs
Research and development costs are charged to the Consolidated Statement of Income in the year in which they are incurred unlessdevelopment expenditure is applied to a plan or design for the production of new or substantially improved products in which casethey are capitalised. The criteria for capitalisation include demonstration of the technical feasibility of completing a new intangible asset
that will be available for sale and that the asset will generate probable future economic benefits. Where expenditure meets the criteria,
development costs are capitalised and amortised through the Consolidated Statement of Income over their useful economic lives.
(iii) Acquired intangible assets
An intangible asset acquired with a subsidiary undertaking is recognised as an intangible asset if it is separable from the acquired
business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value can be reliably
measured. The asset is amortised through the Consolidated Statement of Income over it useful economic life.
(iv) Amortisation
Amortisation of intangible assets is charged to the Consolidated Statement of Income on a systematic basis in proportion to the useof the assets over their estimated useful economic lives as follows:
Capitalised development costs

3 to 5 years

Technology related acquired intangibles

5 to 10 years

Customer related acquired intangibles

6 months to 8 years

60

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Accounting Policies continued(h)	Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently stated at their amortised cost less appropriate
allowances for amounts which are expected to be non-recoverable.
(I) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour, an attributable proportionof production overheads based on normal operating capacity and all other expenditure incurred in acquiring the inventories andbringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course ofbusiness, less the estimated costs of completion and selling expenses.
Provision is made for obsolete, slow moving and defective stock where appropriate in light of recent usage, expected future
requirements, new product introduction plans and likely realisable values.
(j)	Cash and cash equivalents
Cash and cash equivalents are carried in the Statement of Financial Position at amortised cost.
Cash and cash equivalents comprise cash balances and call deposits and are carried at amortised cost. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
(k)	Non-current assets held for sale
A non-current asset is classified as held for sale if its carrying amount will be recovered principally through sale rather than throughcontinuing use, it is available for immediate sale and sale is highly probable within one year.
Immediately before classification as held for sale, the measurement of the assets is brought up-to-date in accordance with applicable
IFRSs. Then, on initial classification as held for sale, non-current assets are recognised at the lower of their carrying amount and fairvalue less costs to sell.
Impairment losses on initial classification as held for sale are included in the Consolidated Statement of Income, even when the asset
has previously been revalued. The same applies to gains and losses on subsequent remeasurement.
(l) 	Impairment of non-current assets
All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying value may be
impaired. Additionally, goodwill is subject to an annual impairment review.
For the purposes of impairment testing assets are grouped together into the smallest group of assets that generates cash flows fromcontinuing use that are largely independent of the cash inflows from other groups of assets.
An impairment loss is recognised in the Consolidated Statement of Income (reorganisation costs and impairment) to the extent thatan asset’s carrying value, or a cash generating unit’s carrying value, exceeds its recoverable amount, which represents the higherof its net realisable value and its value in use. Value in use is the present value of the future cash flows expected to be derived fromthe asset or from the cash generating unit to which it relates. The present value is calculated using a discount rate that reflects thecurrent market assessment of the time value of money and the risks specific to the asset concerned.
Impairment losses recognised in previous periods for an asset other than goodwill are reversed if there has been a change inestimates used to determine the asset’s recoverable amount, but only to the extent that the carrying amount of the asset does
not exceed its carrying amount had the impairment loss not been recognised in previous periods. Impairment losses in respect of
goodwill are not reversed.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash generating units and then to reduce the carrying amount of the other assets in the unit.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201261(m)	Employee benefits
The Group operates a number of defined benefit and defined contribution plans which require contributions to be made to
independent trustee administered funds.
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Statement of
Income as incurred.
(ii) Defined benefit plans
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating theamount of future benefit that current and past employees have earned in return for their service in the current and prior periods.
That benefit is discounted to determine its present value and the fair value of any plan assets is deducted. The calculation is
performed by a qualified actuary using the projected unit credit method.
All actuarial gains and losses in calculating the Group’s net obligation are recognised in the Consolidated Statement ofComprehensive Income in the year.
The charge to the Consolidated Statement of Income reflects the current service cost. The expected return on scheme assets andthe interest cost on scheme liabilities are included within financial income or financial expenditure in the Consolidated Statement of
Income respectively.
(iii) Share-based payment transactions
The fair value of equity settled share option programmes is measured at grant date and charged to the Consolidated Statementof Income, with a corresponding increase in equity, on a straight line basis over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking
into account the terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is
only due to market performance conditions not being met.
(n)	Provisions
A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive
obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.
A provision for warranty is recognised when the underlying products are sold. A provision for restructuring is recognised when theGroup has approved a detailed and formal restructuring plan and the restructuring has either commenced or has been announced
publicly. A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract arelower than the unavoidable cost of meeting its obligations under the contract.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects
current market assessments of the time value of money, and, where appropriate, the risks specific to the liabilities.
(o)	Trade and other payables
Trade and other payables are initially recognised at their fair value and subsequently stated at amortised cost.
(p)	Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognisedin the income statement over the period of the borrowings on an effective interest basis.

62

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Accounting Policies continued(q) Revenue
Revenue is recognised in the Consolidated Statement of Income when the significant risks and rewards of ownership havetransferred to the buyer. Revenue excludes value added tax and similar sales based taxes, represents sales to external customers
of products and services and is stated before commissions payable to agents. Revenue is recognised on shipment, except for
installation and service contracts. Revenue from installation is separately recognised on completion of the installation. Revenue fromcontracts for maintenance and support is recognised on a pro-rata basis over the contract period.
(r) 	Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except tothe extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at thereporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: theinitial recognition of goodwill, the initial recognition of assets or liabilities that effect neither accounting nor taxable profit, anddifferences relating to investments in subsidiaries to the extent that they will probably not reverse in the future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the Statement of Financial Position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the
related dividend.
(s) 	Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised in the income statement as an integral part of the total lease expense.
(t) 	Segment reporting
An operating segment is a distinguishable component of the Group that engages in business activities from which it may earnrevenues and incur expenses, including any revenues and expenses that relate to transactions with any of the Group’s othercomponents. Operating segments are combined into aggregated operating segments to the extent that they have similar economic
characteristics. Aggregated operating segment’s operating results are reviewed regularly by the Group’s Board of Directors to makedecisions about resources to be allocated to the segment and to assess its performance, for which discrete financial information isavailable. Segment results that are reported to the Board include items directly attributable to a segment as well as those that canbe allocated on a reasonable basis.
A reportable segment is an aggregated operating segment in respect of which revenue or profit exceeds 10% of the Group total.
Discrete financial information is disclosed for each reportable segment.
(u) Dividends
Interim and final dividends are recognised as a liability when they are no longer at the discretion of the company.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201263(v)	New standards and interpretations not yet adopted
The following amendment has been published by the IASB, endorsed by the EU, and is available for early adoption but has not yet
been applied by the Group in these Financial Statements:•

Amendments to IFRS 7 Disclosures – Transfers of Financial Assets: will require additional disclosures about transfers of financial
assets, e.g. securitisations and should enable users to understand the possible effects of any risks that may remain with thetransferor. The amendment also requires additional disclosures if a disproportionate amount of transfer transactions areundertaken around the end of a reporting period.

The Group has considered the impact of this amendment in future periods on profit, earnings per share and net assets. It is notexpected to have a material impact.
A number of other new standards, amendments to standards and interpretations have been issued by the IASB, although they
are not yet endorsed by the EU, and are effective for annual periods beginning after 1 April 2012. They have not been applied in
preparing these consolidated Financial Statements. None of these are expected to have a significant effect on profit, earnings per
share or net assets of the consolidated Financial Statements of the Group, with the exception of:•Amendment to IAS 19, which becomes mandatory for the Group’s consolidated Financial Statements for the annual period
beginning on 1 April 2013 and could reduce reported profits and earnings per share as the expected return on pension plan
assets is required to be calculated by applying the discount rate used for scheme liabilities to scheme assets.

•

IFRS 9 Financial Instruments, which becomes mandatory for the Group’s consolidated Financial Statements for the annual
period beginning on 1 April 2015 and could change the classification and measurement of financial assets.

The impact of these new standards, amendments to standards and interpretations has not yet been determined.

64

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Consolidated Statement of Income
year ended 31 March 2012

Beforeadjusting items*
Notes£m
Revenue2337.3

Adjustingitems*
£m

Total
£m

–

337.3

Cost of sales(188.3)(1.7)(190.0)Gross profit

149.0

(1.7)

147.3

(25.8)–(25.8)

Research and development

4

Selling and marketing(48.7)–(48.7)

Administration and shared services(32.1)(12.7)(44.8)

–

7.0

7.0

Other operating income
Foreign exchange

(0.3)

–

(0.3)

Operating profit

42.1

(7.4)

34.7

10.9

–

10.9

Expected return on pension scheme assets
Other financial income

0.2

1.5

1.7

Financial income

11.1

1.5

12.6

Interest charge on pension scheme liabilities(10.2)–(10.2)

Other financial expenditure

(1.0)

–

(1.0)

Financial expenditure(11.2)–(11.2)

Profit before income tax

42.0

(5.9)

36.1

(8.8)

(2.5)

(11.3)

33.2

(8.4)

24.8

Income tax (expense)/credit

9

Profit for the period attributable to equity
shareholders of the parent

pence

pence

Earnings per share
Basic earnings per share

10

61.6

46.0

Diluted earnings per share

10

60.3

45.0

Dividends per share
Dividends paid

11

9.0

Dividends proposed

11

10.0

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

The attached notes form part of the Financial Statements.

Consolidated Statement of Income
year ended 31 March 2011

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Beforeadjusting items*
as restated**
Notes
£m

65

Adjustingitems*£mTotal
as restated**
£m

262.3

–

262.3

Cost of sales(150.4)–(150.4)Gross profit

111.9

–

111.9

(20.0)–(20.0)

Revenue

Research and development

2

4

Selling and marketing(39.9)–(39.9)

Administration and shared services(23.3)(5.3)(28.6)

–

4.7

4.7

Foreign exchange

Other operating income

(0.6)

–

(0.6)

Operating profit

28.1

(0.6)

27.5

9.9

–

9.9

–

1.1

1.1

9.9

1.1

11.0

Interest charge on pension scheme liabilities(10.6)–(10.6)

Other financial expenditure

(1.2)

–

(1.2)

Financial expenditure(11.8)–(11.8)

Profit before income tax

26.2

0.5

26.7

(5.7)

11.2

5.5

20.5

11.7

32.2

Expected return on pension scheme assets
Other financial income
Financial income

Income tax (expense)/credit

9

Profit for the period attributable to equity
shareholders of the parent

pence

pence

Earnings per share
Basic earnings per share

10

41.5

65.3

Diluted earnings per share

10

40.4

63.6

Dividends per share
Dividends paid

11

8.4

Dividends proposed

11

9.0

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

66

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Consolidated Statement of Comprehensive
Income year ended 31 March 2012

Notes
Profit for the year

2012
£m

2011
As restated*
£m

24.8

32.2

Other comprehensive (expense)/income
Foreign exchange translation differences
Actuarial (loss)/gain in respect of post retirement benefits

21(Loss)/gain on effective portion of changes in fair value of cash flow
hedges, net of amounts recycled
Tax on items recognised directly in other comprehensive income
Total other comprehensive (expense)/income
Total comprehensive income for the year attributable to equity
shareholders of the parent* See accounting policies for details of restatement of comparative information.

9

(2.6)

(0.9)

(28.6)

14.4

(0.4)

0.3

7.2

(4.6)

(24.4)

9.2

0.4

41.4

Consolidated Statement of Changes
in Equity year ended 31 March 2012

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Foreignexchange
Other translation
reserves
reserve
£m
£m

Share
capital£mSharepremium
account
£m

2.5

22.5

0.4

– Profit––– Other comprehensive income––– Credit in respect of employee service costs
settled by award of share options– Tax charge in respect of share options

67

Retainedearnings
£m

Total
£m

3.2

64.9

93.5

–

–

24.8

24.8

–

(0.3)

(2.6)

(21.5)(24.4)

–

(0.3)

(2.6)

3.3

0.4

–

–

–

–

1.0

1.0

–

–

–

–

(1.0)

(1.0)

0.3

37.7

–

–

–

38.0

–

–

–

–

(4.8)

(4.8)

Total contributions by and distributions toequity shareholders

0.3

37.7

–

–

(4.8)

33.2

Balance at 31 March 2012

2.8

60.2

0.1

0.6

63.4

127.1

Balance at 1 April 2010

2.5

21.6

0.2

4.1

23.8

52.2

– Profit

–

–

–

–

32.2

32.2

– Other comprehensive income (as restated*)

–

–

0.2

(0.9)

9.9

9.2

–

–

0.2

(0.9)

42.1

41.4

– Credit in respect of employee service costs settled byaward of share options

–

–

–

–

0.4

0.4

– Tax credit recognised in respect of share options(as restated*)

–

–

–

–

2.7

2.7

– Proceeds from shares issued

–

0.9

–

–

–

0.9

– Dividends paid

–

–

–

–

(4.1)

(4.1)

Balance at 1 April 2011
Total comprehensive income/(expense)
attributable to equity shareholders of the parent

Transactions recorded directly in equity:– Proceeds from shares issued– Dividends paid

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

Transactions recorded directly in equity:

Total contributions by and distributions toequity shareholders
Balance at 31 March 2011

–

0.9

–

–

(1.0)

(0.1)

2.5

22.5

0.4

3.2

64.9

93.5

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 173,794 (2011: 433,794) of its own shares in an employee benefit trust. The cost of these shares is included within
retained earnings.
*See accounting policies for details of restatement of comparative information.

68

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Consolidated Statement of Financial
Position as at 31 March 2012

2012
£m

2011
£m

12
13
14

28.2
78.1
19.3
125.6

23.6
41.6
17.4
82.6

15
16

59.3
61.0
1.3
2.4
35.1
159.1

46.6
52.5
1.3
1.0
24.5
125.9

284.7

208.5

19

2.8
60.2
0.1
0.6
63.4
127.1

2.5
22.5
0.4
3.2
64.9
93.5

20
22
21
14

–
2.8
35.2
7.0
45.0

10.5
0.1
11.7
4.1
26.4

20
20
22

–
–
96.4
6.0
1.2
9.0
112.6

0.1
0.8
76.5
3.4
1.1
6.7
88.6

Total liabilities

157.6

115.0

Total liabilities and equity

284.7

208.5

Notes
AssetsNon-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents

18

Total assets
EquityCapital and reserves attributable to the Company’s equity shareholders
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings

Liabilities
Non-current liabilities
Bank loans
Other payables
Retirement benefit obligations
Deferred tax liabilities

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

18
23

The Financial Statements were approved by the Board of Directors on 12 June 2012 and signed on its behalf by:
Jonathan Flint			
Kevin Boyd
Director				Director
Company Number: 775598

Consolidated Statement of Cash Flows
year ended 31 March 2012

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

69

2012
£m

2011
£m

24.8

32.2

Income tax expense/(credit)

11.3

(5.5)

Net financial (income)/expense

(1.4)

0.8

Other operating income

(7.0)

(4.7)

–

0.6

Profit for the year
Adjustments for:

Impairment
Acquisition related fair value adjustments to inventory

1.7–

Acquisition related costs

1.5–

Amortisation of acquired intangibles

11.2

4.7

Depreciation of property, plant and equipment

4.8

4.0

Amortisation and impairment of capitalised development costs

5.2

5.4
37.5

Adjusted earnings before interest, tax, depreciation and amortisation

52.1

Loss on disposal of plant, property and equipment

0.5–

Cost of equity settled employee share schemes

1.0

0.4

Acquisition related costs paid

(1.0)

–

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

(4.5)

(5.6)

Operating cash flows before movements in working capital

48.1

32.3

Increase in inventories

(0.2)

(8.2)

(Increase)/Decrease in receivables

(1.7)

7.4

Increase in payables and provisions

5.7

8.8

Decrease in customer deposits

(1.4)

(1.1)

Cash generated from operations

50.5

39.2

Interest paid

(1.1)

(0.8)

Income taxes paid

(7.8)

(3.1)

Net cash from operating activities

41.6

35.3

0.1

Cash flows from investing activities
Proceeds from sale of property, plant and equipment

0.1

Proceeds from sale of product line and subsidiary

7.3–

Acquisition of subsidiaries, net of cash acquired(51.6)

(0.1)
(5.8)

Acquisition of property, plant and equipment(5.6)

Capitalised development expenditure

(2.4)

(3.0)

Net cash used in investing activities(52.2)(8.8)

Proceeds from issue of share capital

38.0

0.9

Repayment of borrowings(13.1)(19.1)

Increase in borrowings

2.5

10.0

Dividends paid

(4.8)

(4.1)

Net cash from financing activities

22.6(12.3)Net increase in cash and cash equivalents

12.0

14.2

Cash and cash equivalents at beginning of the year

23.7

9.3

Cash flows from financing activities

Effect of exchange rate fluctuations on cash held

(0.6)

0.2

Cash and cash equivalents at end of the year

35.1

23.7

70

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Consolidated Statement of Cash Flows
year ended 31 March 2012 continued

2012
£m

2011
£m

12.0

14.2

Reconciliation of changes in cash and cash equivalents to movement in net cash
Increase in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents

(0.6)

0.2

11.4

14.4

13.1

19.1

Cash inflow from increase in debt

(2.5)

(10.0)

Movement in net cash in the year

22.0

23.5

Net cash/(borrowing) at start of the year

13.1

(10.4)Net cash at the end of the year

35.1

13.1

Cash outflow from decrease in debt

Notes to the Financial Statements
year ended 31 March 2012

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

71

1	NON-GAAP MEASURESThe Directors present the following non-GAAP measures as they consider that it gives a better indication of the underlying
performance of the business.
Reconciliation between profit before income tax and adjusted profit

Profit before income tax

Year ended
31 March
2012£mYear ended
31 March
2011
£m

36.1

26.7

Pension scheme curtailment gain

–

(4.1)

Shareholder earnout no longer required

–

(0.6)

Reversal of acquisition related fair value adjustments to inventory

1.7–

Gain on disposal of product line

(7.0)

–

Acquisition related costs

1.5

–

–

0.6

11.2

4.7

Impairment
Amortisation of acquired intangibles
Mark to market gain in respect of derivative financial instruments

(1.5)

(1.1)

Adjusted profit before income tax

42.0

26.2

Share of taxation

(8.8)

(5.7)

Adjusted profit

33.2

20.5

Further to the acquisitions of Omicron Nanotechnology and Omniprobe announced in June 2011 (see Note 5), the Board
decided to modify the definition of adjusted profit before tax to exclude the reversal of acquisition related fair value
adjustments to inventory to provide an adjusted profit measure that will include results from acquired businesses on aconsistent basis over time to assist comparison of performance. Acquisition related costs comprise professional fees incurredin relation to mergers and acquisitions activity and any consideration which, under IFRS3 (revised), falls to be treated as a postacquisition employment expense.
On 20 October 2011 the Group disposed of a product line for a consideration of £8.1 million. £1.0 million of the consideration
was deferred for one year. The product line was part of the Industrial Products segment. The profit on disposal was £7.0 million.
On 21 March 2012 the Group transferred its ownership of Technologies and Devices Inc (TDI) to Ostendo, a privately owned
company based in California. The Group has received 650,000 shares of Ostendo common stock plus $0.7 million in cash ofwhich $0.2 million will be paid six months after the closing date. The Group considers the fair value of the shares to be nil.
The profit on disposal was nil. During the prior year, the Group recognised other operating income of £0.6 million in relation
to a shareholder earnout provided at the time of the acquisition of TDI and which was no longer required.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are alsomeasured at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does nottake 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 particular circumstances of the Group, are considered by the Board not to bringany significant economic benefit. Accordingly, the Group accounts for these derivative financial instruments at fair value throughprofit or loss. To the extent that instruments are hedges of future transactions, adjusted profit for the year is stated before changes
in the valuation of these instruments so that the underlying performance of the Group can more clearly be seen.
In calculating the share of tax attributable to adjusted profit before tax in the prior year a one-off recognition of deferred tax
assets relating to the Group’s UK businesses of £11.3 million was excluded. At that time the Group announced its intention to
exclude the reversal of this deferred tax from the calculation of the share of tax attributable to adjusted profit before tax in theyears in which it reverses. In the current period deferred tax of £4.6 million has reversed and consequently been excluded fromthe tax attributable to adjusted profit before tax.

72

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

1	NON-GAAP MEASURES continued
During the prior year, the Group’s defined benefit pension schemes in the UK and US were closed to future accrual. This
gave rise to a curtailment gain under IAS 19 as the majority of active members’ accrued benefits are no longer linked tofuture salary growth.
During the prior year, the Group recognised an impairment charge of £0.6 million against costs capitalised in relation to theplanned site move of the Plasma Technology business in the UK. This move will now not take place in the form originally planned.
2	SEGMENT INFORMATIONThe Group has nine operating segments. These operating segments have been combined into three aggregated operating
segments to the extent that they have similar economic characteristics, with relevance to products and services, type and classof customer, methods of sale and distribution and the regulatory environment in which they operate. Each of these threeaggregated operating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating
segments on the basis of the economic characteristics discussed below.
•

The Nanotechnology Tools segment contains a group of businesses supplying similar products, characterised by a highdegree of customisation and high unit prices. These are the Group’s highest technology products serving researchcustomers 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.

•

The Service segment contains the Group’s service business as well as service revenues from other parts of the Group.

Reportable segment results include items directly attributable to a segment as well as those which can be allocated on 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 allocated to operating segments in reporting to the Group’s
Board of Directors.
a) Analysis by businessYear to 31 March 2012

External revenue

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m
337.3

153.3

128.0

56.0

Inter-segment revenue

0.6

1.1

0.3

Total segment revenue

153.9

129.1

56.3

Segment operating profit

17.3

13.8

11.0

42.1

Financial statements
Oxford Instruments plc
Report and Financial Statements 201273

Year to 31 March 2011 (as restated*)
Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

121.4

98.5

42.4

262.3

External revenue
Inter-segment revenue

0.4

2.0

0.1

Total segment revenue

121.8

100.5

42.5

Segment operating profit

14.6

6.1

7.4

28.1

2012
£m

2011
£m

Profit for reportable segments

42.1

28.1

Other operating income

7.0

4.7

–

(0.6)

(1.5)

–

* See accounting policies for details of restatement of comparative information.

Reconciliation of reportable segment profit

Reorganisation costs and impairment
Acquisition related costs
Reversal of acquisition related fair value adjustments to inventory

(1.7)

–

Amortisation of acquired intangibles(11.2)(4.7)

Financial income

12.6

11.0

Financial expenditure(11.2)(11.8)

Profit before income tax

36.1

26.7

Depreciation, amortisation and impairment and capital expenditure arise in the following segments:
2012

2011

Depreciation£m

Amortisation£m

Capitalexpenditure£m

As restated*
Depreciation£m

Amortisation£m

Capitalexpenditure£mNanotechnology
Tools

2.9

2.8

2.8

1.9

2.6

3.7

Industrial
Products

1.6

2.4

2.5

1.6

2.8

1.5

Service

0.1

–

0.1

0.1

–

0.1

UnallocatedGroup items

0.2

11.2

0.2

0.4

4.7

0.5

Total

4.8

16.4

5.6

4.0

10.1

5.8

Amortisation of research and development costs is included in arriving at segment trading profit. Amortisation of acquired
intangibles is included below segment trading profit and excluded from the measure of operating profit reported to the Chief
Operating Decision Maker and so has been included within unallocated Group items.
* See accounting policies for details of restatement of comparative information.

74

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

2	SEGMENT INFORMATION continuedb) Geographical analysis
The Group’s reportable segments are located across several geographical locations, and make sales to customers in countries
across the world.
The analysis below shows revenue and non-current assets (excluding deferred tax) for individual countries or regions that
represent more than 5% of revenue.
Revenue from external customers by destination
2012
£m

2011
£m

92.3

66.8

Rest of Europe

61.2

46.4

Rest of Asia

28.4

32.8

UK

30.2

24.4

Japan

36.6

28.6

China

48.9

38.1

Germany

23.9

13.1

Rest of World

15.8

12.1

Total

337.3

262.3

2012
£m

2011
£m

UK

28.0

29.8

Germany

40.3

16.9

USA

30.2

10.1

USA

Non-current assets (excluding deferred tax)

Rest of Europe

7.4

8.1

Japan

0.2

0.1

China

0.2

0.2

Total

106.3

65.2

2012
£m

2011
£m

115

112

3	AUDITOR’S REMUNERATION

Audit of these Financial Statements
Amounts received by auditors and their associates in respect of:
Audit of Financial Statements of subsidiaries pursuant to legislation

275

198

Other services relating to tax

110

18

Other services

52

26

Total fees paid to auditor and its associates

552

354

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

475

RESEARCH AND DEVELOPMENT
The total research and development spend by the Group is as follows:
2012

2011
As restated*
Nanotechnology
Industrial
Total
Tools
Products
£m
£m
£m

Total
£m

Nanotechnology
Tools
£m

Industrial
Products£mResearch anddevelopment expensecharged to theconsolidated statementof income

16.8

9.0

25.8

12.1

7.9

20.0

Less: depreciation of
R&D related fixed assets

(0.6)

(1.0)

(1.6)

(0.5)

(0.1)

(0.6)

Add: amounts
capitalised as fixed
assets

0.6

0.7

1.3

2.2

0.1

2.3

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

(2.8)

(2.4)

(5.2)

(2.6)

(2.8)

(5.4)

Add: amounts
capitalised as intangible
assets

1.7

0.7

2.4

1.9

1.1

3.0

Total cash spent
on research anddevelopment during
the year

15.7

7.0

22.7

13.1

6.2

19.3

*See accounting policies for details of restatement of comparative information.

5	ACQUISITIONS
Omicron NanoTechnology GmbHOn 13 June 2011 the Group acquired 100% of the share capital of Omicron NanoTechnology GmbH for cash consideration
totalling £29.7 million. Omicron NanoTechnology GmbH specialises in the manufacture of very high-end microscopes fornanotechnology research and is headquartered in Taunusstein, Germany. It has a manufacturing facility in East Grinstead, UK
and sales offices in the US, France and Japan. The book and fair value of the assets and liabilities acquired is given in the tablebelow. The business has been acquired for the purpose of integrating into the Nanotechnology Tools segment.

76

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

5	ACQUISITIONS continued

Intangible fixed assets

Book value£m

Adjustments£m

Fair value
£m

–

27.8

27.8

Tangible fixed assets

6.2

(1.7)

4.5

Inventories

14.1

(1.3)

12.8

Trade and other receivables

5.1

–

5.1

Trade and other payables

(4.7)

(0.2)

(4.9)

Customer deposits(10.5)(0.1)(10.6)

Deferred tax liabilities

–

(6.8)

(6.8)

Cash

1.4

–

1.4

Net assets acquired

11.6

17.7

29.3

Goodwill

0.4

Total consideration

29.7

Cash acquired(1.4)

Net cash outflow relating to the acquisition

28.3

The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce.
Omniprobe, Inc.
On 13 June 2011 the Group acquired 100% of the share capital of Omniprobe, Inc. for cash consideration totalling £13.1 millionof which £0.5 million is deferred for 2 years. Omniprobe, Inc. designs and manufactures nano-manipulators for use withinscanning electron microscopes and is headquartered in Dallas, USA. The book and fair value of the assets and liabilities
acquired is given in the table below. The business has been acquired for the purpose of integrating into the Nanotechnology
Tools segment.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

0.2

11.3

11.5

Tangible fixed assets

0.6

(0.5)

0.1

Inventories

0.5

–

0.5

Trade and other receivables

0.6

–

0.6

Trade and other payables

(0.3)

(0.3)

(0.6)

Cash

0.3

–

0.3

Net assets acquired

1.9

10.5

12.4

Goodwill

0.7

Total consideration

13.1

Cash acquired(0.3)

Contingent consideration(0.5)

Net cash outflow relating to the acquisition

12.3

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce and the value ofpatents which it has not been possible to separately identify.

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

77

Platinum Medical Imaging LLC
On 3 November 2011 the Group acquired 100% of the share capital of Platinum Medical Imaging LLC for an initial cash
consideration of £10.8 million.
Further contingent consideration is payable each year until the third anniversary of the acquisition dependent on postacquisition earnings. The amount of this consideration could be between zero and £19.4 million. The fair value of the amount
likely to be paid is £2.6 million and is based on management forecasts of future profitability.
Platinum Medical Imaging LLC is an established US company providing high quality parts and services for MRI (Magnetic
Resonance Imaging) and CT (Computed Tomography) medical imaging instruments. It operates from sites in Florida andCalifornia from which the business sells parts, carries out service and maintenance and performs system rebuilds.
The book and provisional fair value of the assets and liabilities acquired is given in the table below. Provisional values have beenused to allow a new accounting team time to review and finalise the fair value adjustments. The business has been acquired forthe purpose of integrating into the Service segment.
Book
value
£m

Provisional
adjustments£mProvisional
fair value£mIntangible fixed assets

–

12.5

12.5

Tangible fixed assets

0.5

(0.2)

0.3

Inventories

0.9

0.8

1.7

Trade and other receivables

0.6

(0.3)

0.3

Trade and other payables

(0.4)

(0.4)

(0.4)

Customer deposits

(0.4)

(0.3)

(0.7)

Deferred tax

–

(0.2)

(0.2)

Overdraft

(0.1)

–

(0.1)

Net assets acquired

1.1

11.9

13.0

Goodwill

0.4

Total consideration

13.4

Overdraft acquired

0.1

Contingent consideration(2.6)

Net cash outflow relating to the acquisition

10.9

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired work force and expectedsynergies arising from the integration with the Group’s existing service business.
The book value of receivables given in the tables above represents the gross contractual amounts receivable. The fair value
adjustment to receivables represents the best estimate at the acquisition date of the cash flows not expected to be collected.
These acquisitions contributed revenue of £27.8 million, £4.5 million and £3.8 million respectively and operating losses of£4.6 million, £0.8 million and £0.7 million to the Group’s result for the period. Had the acquisitions taken place on 1 April 2011
the equivalent Group numbers would have been revenue of £351.2 million and operating profit of £33.6 million.

78

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

6	PERSONNEL COSTS
2012
£m

2011
£m

Wages and salaries

72.5

56.6

Social security costs

9.7

6.0

–

0.8

Charge in respect of defined benefit pension schemes
Contributions to defined contribution pension plans

3.1

2.9

Charge in respect of employee share options

1.0

0.4

86.3

66.7

Directors’ emoluments are disclosed in the Directors’ Remuneration Report on pages 43 to 52 of this Annual Report.
7	EMPLOYEESThe average number of people employed by the Group (including Directors and temporary employees) during the year was
as follows:
2012
Number

2011
NumberProduction

954

740

Sales and marketing

377

332

Research and development

240

207

Administration and shared services

263

219

Total average number of employees

1,834

1,498

8	SHARE OPTION SCHEMESThe Group operates four share option schemes.
Executive Share Option Scheme (ESOS)
Options awarded under the Executive Share Option Scheme are made annually to certain senior executives. The exercise prices
are determined according to the mid-market closing share price on the day before the date of grant. Options have a life of
10 years and a vesting period of 3 years.
All employee Save As You Earn Scheme
Options awarded under the Save As You Earn Scheme have a vesting period of either 3 or 5 years. The exercise prices are
determined according to the mid-market closing share price on the day before the date of grant. Options must be exercised
within 6 months of vesting. There are no performance conditions associated with this scheme. The final grant under thisscheme was made in December 2006 and at the current time the Directors do not intend to grant any further options under
this scheme.
Senior Executive Long Term Incentive Scheme (SELTIS)
Options awarded under the Senior Executive Long Term Incentive Scheme are made annually to certain senior executives. The
exercise prices are nil. Options have a life of 7 years and a vesting period of 3 years.
Both the Executive Share Option Scheme and Senior Executive Long Term Incentive Scheme are subject to performance
conditions which can be found in the Directors’ Remuneration Report on pages 43 to 52.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201279

All employee Share Incentive Plan (SIP)All UK employees are eligible to participate in the Group’s HM Revenue and Customs approved SIP. Participating employees
make a cash contribution to the plan each month. The Group contributes a further amount equal to 20% of the employee’s
contribution. Independent trustees then purchase matching shares in the market on behalf of the employees. The matching
shares vest on the completion by the participating employee of a further three years service and can be withdrawn from theplan tax-free after 5 years service.
Administrative expenses include a charge of £1 million (2011: £0.4 million) in respect of the cost of providing share options. The
cost is calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period.
Fair values are determined using an internal calculation based on a modified Black-Scholes model. Expected volatility has been
based on historical volatility over a period of time of the same length as the expected option life and ending on the grant
date. Half of the ESOS options issued before 2009 and all SELTIS options use Total Shareholder Return (TSR) as a performance
condition. As TSR is a market based performance condition, the accounting treatment differs from that for shares subject tointernal performance conditions. This means that the TSR performance conditions have been incorporated into the calculationof the fair value as a discount in calculating the fair value.
For options granted in 2012 and 2011, the fair value per option granted and the assumptions used in the calculation are as follows:
Senior Executive Long Term
Incentive Scheme

Executive Share
Option Scheme

2012

2011

2012

2011

Fair value at measurement date

£4.21

£2.98

£3.60

£2.48

Share price

£9.90

£7.05

£9.90

£7.05

Exercise price

£nil

£nil

£9.90

£7.05

Expected volatility

43.1%

47.0%

40.2%

37.6%

Expected option life (expressed as weighted
average life used in the modelling)

3 years

3 years

6 years

6 years

Expected dividend yield

0.9%

1.2%

0.9%

1.2%

Risk free interest rate

0.6%

1.5%

1.3%

2.4%

80

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

8	SHARE OPTION SCHEMES continued
The options existing at the year end were as follows:
2012
Number ofsharesExercise
price

July 2003

10,000July 2004

7,250

2011
Period when
exercisable

Number ofshares

£1.88

01/04/10 – 15/07/13

15,751£2.18

01/04/10 – 15/07/14

15,118

Options subsisting at the year end onunissued ordinary shares
Executive Share Option Schemes

July 2005

5,329

£2.19

01/04/10 – 15/07/15

91,012

July 2006

21,105£2.10

01/04/10 – 15/07/16

30,975September 2007

37,500£2.32

28/09/10 – 28/09/17

168,904

December 2007

–

£1.93

18/12/10 – 18/12/17

2,000
821,000

December 2008

72,098£1.35

16/12/11 – 16/12/18

December 2009

644,500£2.04

17/12/12 – 17/12/19

661,500

January 2011

457,000£7.05

07/01/14 – 07/01/21

463,800

December 2011498,240£9.90

14/12/14 – 14/12/21

–

1,893

£1.73

01/02/12 – 31/07/12

99,752

Save As You Earn
December 2006
Total options subsisting on unissued
ordinary shares
Percentage of issued share capital

1,754,915

2,369,812

3.1%

4.7%

Options subsisting at the year end on
existing ordinary shares held in trust
Senior Executive Long Term
Incentive Scheme
December 2008–

Nil

16/12/11 – 18/12/15

260,000

December 2009

160,000

Nil

17/12/12 – 18/12/16

160,000

January 2011

62,000Nil

07/01/14 – 07/01/18

62,000December 2011

39,800Nil

14/12/14 – 14/12/18–

Total options subsisting on existing
ordinary shares held in trust

261,800

482,000

The number and weighted average exercise prices of those options are as follows:
Weighted
average
exercise price2012

Numberofoptions
2012

Weighted
average
exercise price2011

Numberofoptions
2011

£2.32

2,851,812£1.55

3,168,371

Granted during the year

£9.17

538,040£6.22

525,800

Forfeited during the year

£2.15

(8,063)£1.92(36,398)

Exercised during the year

£1.27

(1,229,338)£1.94(667,385)

Lapsed during the year

£1.69

(135,736)£1.45(138,576)

Outstanding at the year end£4.83

2,016,715£2.32

2,851,812

Exercisable at the year end£1.79

155,175£2.23

323,760

Outstanding at the beginning of the period

The weighted average share price at the time of exercise of the options was £9.63 (2011: £5.45).

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

81

9	INCOME TAX EXPENSE
Recognised in the Consolidated Statement of Income
2012
£m

2011
£m

10.4

6.1

–

(0.5)

10.4

5.6

Current tax expense
Current year
Adjustment in respect of prior years

Deferred tax expense
Origination and reversal of temporary differences

1.4

0.9

Recognition of deferred tax not previously recognised(0.2)(11.9)

Adjustment in respect of prior years

(0.3)

(0.1)

0.9

(11.1)

11.3

(5.5)

Profit before income tax

36.1

26.7

Income tax using the UK corporation tax rate of 26% (2011: 28%)

9.4

7.5

2.4

0.4

Change in rate at which deferred tax recognised

0.3

(0.2)

Non-taxable income and expenses

0.2

0.2

Total tax expense/(credit)
Reconciliation of effective tax rate

Effect of:Tax rates other than the UK standard rate

Tax incentives not recognised in the Consolidated Statement of Income

(0.5)

(0.7)

Recognition of deferred tax not previously recognised(0.2)(11.9)–(0.2)

Adjustment in respect of prior years

(0.3)

(0.6)

Total tax expense/(credit)

11.3

(5.5)

Current tax – relating to employee benefits

–

(1.5)

Deferred tax – relating to employee benefits

(7.1)

6.0

Effect of previous tax losses now utilised

Taxation expense/(credit) recognised in other comprehensive income

Deferred tax – relating to cash flow hedges

(0.1)

0.1

(7.2)

4.6

1.0

(2.7)

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

The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A reduction in
the rate from 26% to 25% (effective from 1 April 2012) was substantively enacted on 5 July 2011, and a further reduction to24% (effective from 1 April 2012) was substantively enacted on 26 March 2012. This will reduce the Group’s future current
tax charge accordingly. The deferred tax asset at 31 March 2012 has been calculated based on the rate of 24% substantively
enacted at the balance sheet date. It has not yet been possible to quantify the full anticipated effect of the announced further
2% rate reduction, although this will further reduce the Group’s future current tax charge and reduce the Group’s deferred tax
asset accordingly.

82

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

10	EARNINGS PER SHARE
The calculation of basic earnings per share is based on the profit for the period as shown in the Consolidated Statement of
Income divided by the weighted average number of ordinary shares outstanding during the year, excluding shares held by the
Employee Share Ownership Trust, as follows:
2012
sharesmillion2011
sharesmillionWeighted average number of shares outstanding

54.2

49.7

Less shares held by Employee Share Ownership Trust

(0.2)

(0.4)

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

54.0

49.3

2012
sharesmillion2011
sharesmillion

54.0

49.3

Effect of shares under option

1.1

1.4

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

55.1

50.7

2012
pence

2011
pence

Previous year interim dividend

2.52

2.40

Previous year final dividend

6.48

6.00

9.00

8.40

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

11 DIVIDENDS PER SHARE
The following dividends per share were paid by the Group:

The following dividends per share were proposed by the Group in respect of each accounting year presented:
2012
pence

2011
pence

Interim dividend

2.772

2.52

Final dividend

7.228

6.48

10.000

9.00

The interim dividend was not provided for at the year end and was paid on 10 April 2012. The payment of the interim dividend
remains discretionary until it is paid. The final proposed dividend of 7.228 pence per share (2011: 6.48 pence) was not provided
at the year end and will be paid on 25 October 2012 subject to authorisation by the shareholders at the forthcoming Annual
General Meeting.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201283

12	PROPERTY, PLANT AND EQUIPMENT
Land andbuildings£mPlant andequipment£mFixtures andfittings
£m

Total
£m

Balance at 1 April 2010

15.8

38.8

6.9

61.5

Additions

2.1

2.5

1.2

5.8

Cost

Disposals

–

(0.6)

(0.5)

(1.1)

Effect of movements in foreign exchange rates

(0.2)

(0.5)

–

(0.7)

Balance at 31 March 2011

17.7

40.2

7.6

65.5

Balance at 1 April 2011

17.7

40.2

7.6

65.5

Additions – Business Combinations

3.6

0.2

1.1

4.9

Additions – other

0.1

5.4

0.1

5.6

Disposals

(0.1)

(4.0)

–

(4.1)

Effect of movements in foreignexchange rates

(0.1)

(0.1)

–

(0.2)

Balance at 31 March 2012

21.2

41.7

8.8

71.7

Balance at 1 April 2010

4.0

29.0

5.7

38.7

Depreciation charge for the year

0.7

3.0

0.3

4.0

–

(0.1)

(0.4)

(0.5)

Depreciation and impairment losses

Disposals
Effect of movements in foreign exchange rates

–

(0.3)

–

(0.3)

Balance at 31 March 2011

4.7

31.6

5.6

41.9

Balance at 1 April 2011

4.7

31.6

5.6

41.9

Depreciation charge for the year

0.7

3.6

0.5

4.8

–

(3.1)

–

(3.1)

Disposals
Effect of movements in foreignexchange rates

–

(0.1)

–

(0.1)

5.4

32.0

6.1

43.5

At 1 April 2010

11.8

9.8

1.2

22.8

At 31 March 2011 and 1 April 2011

13.0

8.6

2.0

23.6

At 31 March 2012

15.8

9.7

2.7

28.2

Balance at 31 March 2012
Carrying amounts

84

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

13	INTANGIBLE ASSETS

Goodwill£m

Customer
relatedacquiredintangibles
£m

14.7

4.5

Technology Development Development
relatedcosts
costs
acquiredacquiredinternallyintangibles
intangibles
generated
£m
£m
£m

Total
£m

Cost
Balance at 1 April 2010

28.0

–

29.6

76.8

Additions

–

–

–

–

3.0

3.0

Disposals

(0.1)

–

–

–

–

(0.1)

Effect of movements in foreignexchange rates

(0.1)

–

(0.4)

–

(0.3)

(0.8)

Balance at 31 March 2011

14.5

4.5

27.6

–

32.3

78.9

Balance at 1 April 2011

14.5

4.5

27.6

–

32.3

78.9

Additions – Business
Combinations

1.5

23.2

23.8

4.8

–

53.3

Additions – other

–

–

–

–

2.4

2.4

Disposals

–

–

(4.4)

–

(1.0)

(5.4)

Effect of movements inforeign exchange rates

(0.7)

(0.3)

(2.6)

–

(0.4)

(4.0)

Balance at 31 March 2012

15.3

27.4

44.4

4.8

33.3

125.2

Amortisation andimpairment losses
Balance at 1 April 2010

1.3

3.8

10.3

–

12.1

27.5

Amortisation and impairment
charge for the year

–

0.2

4.5

–

5.4

10.1

Effect of movements in foreignexchange rates

–

–

(0.1)

–

(0.2)

(0.3)

Balance at 31 March 2011

1.3

4.0

14.7

–

17.3

37.3

Balance at 1 April 2011

1.3

4.0

14.7

–

17.3

37.3

Amortisation charge
for the year

–

5.2

5.0

1.0

5.2

16.4

Disposals

–

–

(4.4)

–

(0.6)

(5.0)

Effect of movements inforeign exchange rates

(0.1)

(0.3)

(0.9)

–

(0.3)

(1.6)

Balance at 31 March 2012

1.2

8.9

14.4

1.0

21.6

47.1

At 1 April 2010

13.4

0.7

17.7

–

17.5

49.3

At 31 March 2011 and1 April 2011

13.2

0.5

12.9

–

15.0

41.6

At 31 March 2012

14.1

18.5

30.0

3.8

11.7

78.1

Carrying amounts

Financial statements
Oxford Instruments plc
Report and Financial Statements 201285

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected
to benefit from that business combination. The carrying amount of goodwill was allocated to individual CGU’s as follows:
2012
£m

2011
As restated*£m

Nanotechnology Tools
NanoScience

2.3

2.4

NanoAnalysis

3.9

3.4

Omicron0.3–

Industrial Analysis

3.2

3.5

Magnetic Resonance

2.3

2.3

Austin Scientific

1.7

1.6

0.4

–

14.1

13.2

Industrial Products

ServiceOI Service* See accounting policies for details of restatement of comparative information.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The impairment test operates by determining the recoverable amounts of relevant cash generating units, which are calculated
as the higher of the fair value less costs to sell or their value in-use. The recoverable amount of the Group’s goodwill is basedon value in use calculations. For the purpose of impairment testing, Board-approved three year cash flow forecasts, prepared by
the management of each CGU are used as a basis for the value in-use calculations together with 2.5% (2011: 5%) pa growthfor each CGU for the subsequent twenty years. This growth rate is considered to be at or below long term market trends for theGroup’s businesses.
Key assumptions
The key assumptions are those regarding discount rates, growth rates, expected selling volumes and prices and direct costs
during the period.
The growth rates are based on industry growth factors. Changes in selling prices and direct costs are based on past practices
and expectations of future changes in the market.
The pre-tax weighted average costs of capital used for Nanotechnology Tools, Industrial Products and Service in impairment
testing are 11.1% (2011: 11.1%), 10.6% (2011: 10.6%) and 10.1% (2011: 10.1%) respectively in line with the risk associatedwith each of the business segments. Management have estimated these discount rates by reference to past experience and an
industry average weighted cost of capital as adjusted for appropriate risk factors reflecting current economic circumstances andthe risk profiles of each CGU.
Sensitivity analysis
The Group’s estimate of impairments are most sensitive to changes in the discount rate and forecast cash flows. Sensitivity
analysis has been carried out by reference to both of these assumptions. This demonstrated that an impairment would only
be required if there was an increase in the discount rates by 13% (2011: 15%) or more or a greater than 10% (2011: 40%)
reduction in forecast cash flows on the CGU with the lowest level of headroom. Sensitivity testing on the other CGUs shows aneven greater level of headroom.
Based on the above, the Group considers that its impairment calculations are not sensitive to any reasonable change to the
key assumptions.

86

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

14 DEFERRED TAX
Movements in deferred tax assets and liabilities were as follows:
Property,plant andequipment£m

Inventory£m

Employeebenefits£mIntangible
assets£mTaxlosses
£m

Other
£m

Total
£m

Balance 31 March 2010

2.2

1.2

10.7

(10.7)

1.5

1.3

6.2

Recognised in income

0.9

0.5

(0.6)

3.2

7.1

(0.1)

11.0

Recognised in othercomprehensive income

–

–

(6.6)

–

–

(0.1)

(6.7)

Recognised directly in equity

–

–

2.7

–

–

–

2.7

Foreign exchange

–

–

–

0.1

–

–

0.1

Balance 31 March 2011

3.1

1.7

6.2

(7.4)

8.6

1.1

13.3

Recognised in income

(2.0)

0.7

(2.1)

3.8

(2.9)

1.6

(0.9)

Recognised in othercomprehensive income

–

–

7.1

–

–

0.1

7.2

Recognised directly in equity

–

–

(1.0)

–

–

–

(1.0)

0.5

(0.4)

–

(6.9)

–

0.1

(6.7)

–

–

–

0.4

–

–

0.4

1.6

2.0

10.2

(10.1)

5.7

2.9

12.3

Acquisitions
Foreign exchange
Balance 31 March 2012

Certain deferred tax assets and liabilities have been offset as follows:
Assets2012£m

Assets2011£m

Liabilities
2012£m

Liabilities
2011
£m

Net
2012
£m

Net
2011
£m

Gross assets/(liabilities)

23.6

20.8

(11.3)

(7.5)

12.3

13.3

Offset

(4.3)

(3.4)

4.3

3.4

–

–

Net assets/(liabilities)

19.3

17.4

(7.0)

(4.1)

12.3

13.3

Of the deferred tax assets £0.7 million relate to a loss making subsidiary in China. Management have reviewed a detailed
forecast for that subsidiary which shows that it is highly probable that future profits will arise and on that basis it is consideredappropriate to recognise the deferred tax asset.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201287

Deferred tax assets have not been recognised in respect of the following items:
2012
£m

2011
£m

Deductible temporary differences

6.5

2.0

Tax losses

9.5

4.5

16.0

6.5

The tax losses and the deductible temporary differences do not expire under current tax legislation. Deferred tax assets havenot been recognised in respect of these items as it is not probable that future taxable profits will be available in the subsidiaries
concerned against which the Group can utilise the brought forward tax losses.
No deferred tax liability has been recognised in respect of £50.2 million (2011: £48.7 million) of undistributed earnings ofoverseas subsidiaries since the majority of such distributions would not be taxable. In other cases the Group considers that it isable to control the timing of remittances so that any tax is not expected to arise in the foreseeable future.
On 21 March 2012 the Chancellor announced the reduction in the main rate of UK corporation tax to 24% with effect from
1 April 2012. This change became substantively enacted on 26 March 2012 and therefore the effect of the rate reduction
creates a reduction in the deferred tax asset which has been included in the figures above.
The Chancellor also proposed changes to further reduce the main rate of corporation tax by one per cent per annum to 22%
by 1 April 2014, but these changes have not yet been substantively enacted and therefore are not included in the figures above.
The overall effect of the further reductions from 24% to 22%, if these applied to the deferred tax balance at 31 March 2012,
would be to further reduce the deferred tax asset by approximately £1.0 million.
15	INVENTORIES
2012
£m

2011
£m

Raw materials and consumables

15.8

14.3

Work in progress

25.8

19.7

Finished goods

17.7

12.6

59.3

46.6

The amount of inventory recognised as an expense was £165.4 million (2011: £133.5 million) In the ordinary course of business,
the Group makes impairment provisions for slow-moving, excess and obsolete inventory as appropriate. Inventory is stated after
charging impairments of £0.6 million in the current period (2011: nil). There were no credits reversing previous impairments ineither the current or prior period. Impairments are included within operating profit.
Inventory carried at fair value less costs to sell is £0.2 million (2011: nil) due to the acquisitions as described in Note 5.

88

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

16	TRADE AND OTHER RECEIVABLES

Trade receivables

2012
£m

2011
£m

53.7

43.0

Less provision for impairment of receivables

(1.8)

(0.7)

Net trade receivables

51.9

42.3

Prepayments and accrued income

4.6

3.8

Other receivables

4.5

6.4

61.0

52.5

Trade receivables are non-interest bearing. Standard credit terms provided to customers differ according to business andcountry, and are typically between 30 and 60 days.
The maximum exposure to credit risk for trade receivables by geographic region of the selling business was:

UK

2012
£m

2011
£m

13.3

14.6

Continental Europe

9.7

5.6

North America

17.6

12.7

Japan

13.0

9.2

Rest of World

0.1

0.9

53.7

43.0

The ageing of financial assets, comprising net trade receivables and other receivables at the reporting date was:
2012
£m

2011
£m

Current (not overdue)

33.5

31.9

Less than 31 days overdue

9.5

7.0

More than 30 days but less than 91 days overdue

7.3

5.4

More than 90 days overdue

6.1

4.4

56.4

48.7

In both periods presented the majority of the provision against trade receivables relates to balances more than 90 days overdue.
The movement in the allowance for impairment of trade receivables during the year was as follows:
2012
£m

2011
£m

Balance at start of year

0.7

0.7

Acquired on acquisition

0.5–

Increase in allowance

0.6–

Balance at end of year

1.8

0.7

Valuation allowances are used to record provisions for credit losses. The valuation allowance is reduced and the asset impaired
when the customer is in liquidation.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201289

17 FINANCIAL RISK MANAGEMENTThe Group’s multinational operations and debt financing expose it to a variety of financial risks. In the course of its business,
the Group is exposed to foreign currency risk, interest rate risk, liquidity risk, commodity risk and credit risk . Financial risk
management policies are set by the Board of Directors. These policies are implemented by a central treasury function that hasformal procedures to manage foreign exchange risk, interest rate risk, and liquidity risk, including, where appropriate, the use ofderivative financial instruments. Commodity risk is managed locally by the operating businesses. The Group has clearly defined
authority and approval limits.
In accordance with its treasury policy, the Group does not hold or use derivative financial instruments for trading or speculative
purposes. Such instruments are only used to manage the risks arising from operating or financial assets or liabilities or highly
probable future transactions.
The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates, interest rates
and certain commodity prices.
The Group has adopted hedge accounting for a limited number of related commodity contracts as outlined below. However,in common with a number of other companies, the Group has decided that the additional costs of meeting the extensive
documentation requirements of IAS 39 to apply hedge accounting to derivative financial instruments used for hedging exposure
to foreign currency and interest rate volatility cannot be justified. Accordingly the Group does not use hedge accounting forsuch derivatives.
Foreign currency risk
Foreign currency risk arises both where sale or purchase transactions are undertaken in currencies other than the respectivefunctional currencies of Group companies (transactional exposures) and where the results of overseas companies areconsolidated into the Group’s reporting currency of sterling (translational exposures). The Group has operations around theworld which record their results in a variety of different local functional currencies. In countries where the Group does not haveoperations, it invariably has some customers or suppliers that transact in a foreign currency. The Group is therefore exposed tothe changes in foreign currency exchange rates between a number of different currencies but the Group’s primary exposuresrelate to the US dollar, the Euro and the Japanese Yen. To reduce uncertainty the Group maintains a rolling hedge equivalent
to 80% of the exposure expected to arise over the following 12 months. The hedge comprises a mixture of fixed forward
contracts and option based products. The remaining 20% is sold on the spot market as it arises. The fair value of outstanding
currency contracts recognised as a liability as at 31 March 2012 amount to £1.0 million (2011: £0.5 million) and those recognised
as an asset amount to £2.4 million (2011: £0.7 million).
Movements in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Income
immediately. However, in order to facilitate a more meaningful comparison of the Group’s performance year on year theelement of these movements that relate to hedges in respect of future sales are treated as adjusting item in the calculation ofadjusted earnings (see note 1).
The Group’s translational exposures to foreign currency risks can relate both to the Consolidated Statement of Income and net
assets of overseas subsidiaries. The Group’s policy is not to hedge the translational exposure that arises on consolidation of theConsolidated Statements of Income of overseas subsidiaries.
Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of interest and also theinterest cash flow risk that results from borrowing at variable rates. At this time, the majority of the Group’s borrowings attract
floating rates of interest and therefore the Group’s principal interest rate risk is a cash flow risk. In May 2008 the Group enteredinto an interest rate swap in order to manage its exposure to interest rate movements. Under the terms of the swap, the Grouppaid fixed interest of 4.1% on the notional amount of £14.8 million and received three months Sterling LIBOR. The swap wascancelled on 1 April 2011 for a settlement value of £0.6 million.
The fair value of interest rate swaps entered into as at 31 March 2012 is estimated as a liability of £0.1 million (2011:£0.6 million). These amounts are based on market estimates of equivalent instruments at the Consolidated Statement of
Financial Position date. These interest rate swaps are not designated as cash flow hedges, for hedge accounting purposes,
and consequently they are accounted for at fair value through profit or loss. No charge/credit was made to the Consolidated
Statement of Income in the period (2011: credit of £0.3 million).

90

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

17 FINANCIAL RISK MANAGEMENT continued
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation. The Group manages this risk by maintaining adequate committed lines of funding from high quality lenders. The
facilities committed to the Group as at 31 March 2012 are set out in note 20.
Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial
assets such as cash balances, derivative financial instruments, trade and other receivables. The Group’s credit risk is primarily
attributable to its trade receivables. The amounts recognised in the Consolidated Statement of Financial Position are net of
appropriate allowances for doubtful receivables, estimated by the Group’s management based on prior experience and theirassessment of the current economic environment. Trade receivables are subject to credit limits, and control and approval
procedures in the operating companies.
Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on
its trade receivables. Credit risk associated with cash balances and derivative financial instruments is managed by transacting withfinancial institutions with high quality credit ratings. Accordingly the Group’s associated credit risk is limited. The Group has no
significant concentration of credit risk. The Group’s maximum exposure to credit risk is represented by the carrying amount of eachfinancial asset, including derivative financial instruments, in the Group Consolidated Statement of Financial Position.
Exposure to credit risk
The carrying amount of financial assets represent the maximum credit exposure. The maximum exposure to credit risk at
31 March 2012 was £93.9 million (2011: £73.9 million).
2012
£m

2011
£m

Trade receivables

51.9

42.3

Other receivables

4.5

6.4

Cash and cash equivalents

35.1

24.5

Forward exchange contracts

2.4

0.7

93.9

73.9

The maximum exposure to credit risk for trade receivables is discussed in note 16.
Other receivables include £1.0 million (2011: £0.9 million) in respect of VAT and similar taxes which are not past due.
Commodity risk
The Group is exposed to changes in commodity prices, particularly in respect of copper used as a major component in theGroup’s US operations. It manages this exposure using derivative commodity hedging instruments.
At 31 March 2012, the Group had outstanding commodity hedge contracts with a fair value liability of £0.1 million (2011:£0.3 million asset) that were designated and effective as cash flow hedges of committed and highly probable forecast
transactions. Fair value movements of these contracts have been deferred in equity until the hedged transaction takes place.
These contracts all mature within one year of the Consolidated Statement of Financial Position date.
A £0.1 million loss net of tax (2011: £0.2 million gain) has been deferred in equity as at 31 March 2012 in respect of thesecontracts. A gain of £0.3 million (2011: £0.3 million gain) has been recycled to current assets (inventory) in respect of contracts
designated as cash flow hedges that have matured during the year to 31 March 2012.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201291

Capital management
The Board considers Capital to comprise share capital, reserves and the net cash or net debt position of the company. The
company was in a net cash position at the year end.
The Board’s long term objective is to have an efficient capital structure by maintaining a balance between the higher returns
that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.
This is monitored by reference to the ratio of net debt to Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
and the board has set itself internal limits, which are well inside any covenants the Group has with lenders. The Group
maintains the right to purchase its own shares in the market; the timing of these purchases would depend on market prices.
Buy and sell decisions are made on a specific transaction basis by the Board.
The Board carefully considers dividend payments and the company moved from a fixed dividend policy to a progressive one
in the year ended March 2011. In doing this the Board will look to increase dividends as adjusted earnings per share increase
although there will not be a direct correlation. The Board do not have a policy to pay a fixed dividend yield or to maintaina fixed rate of dividend cover, but assess both of these metrics together with dividends paid by peers when assessing what
dividend to recommend.
The Group outlined its new medium term targets on the 14 June 2011 in its 14 Cubed Plan. Part of this plan calls for “bolt-on”
acquisitions. In line with the objective of maintaining a balance between borrowings and equity, the Group decided to seek
to repay the debt drawn down to finance the first two acquisitions of the 14 Cubed Plan through an equity issue, improving
the net debt to EBITDA ratio, thereby allowing it to finance any future bolt-on acquisitions from its balance sheet and existingcommitted facility without recourse to further equity issues.
The Board encourages employees to hold shares in the Company. As well as various share option plans (full details of which
are given in note 8), from April 2008 all UK employees have been offered the opportunity to take part in a Share Incentive Plan
(SIP). Under this plan, employees are able to invest up to £1,500 each tax year in shares in the Company. The Company awards
one additional free share (a matching share) for every five shares bought by each employee.
There were no changes to the Group’s approach to capital management during the year. Neither the Company nor any of its
subsidiaries are subject to externally imposed capital requirements.

92

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

18 FINANCIAL INSTRUMENTS
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statement of
Financial Position are as follows:
Fair
value
hierarchy

Carrying
amount
2012
£m

Fair
value
2012
£m

Carrying
amount
2011
£m

Fair
value
2011
£m

Assets carried at amortised cost
Trade receivables

2

51.9

51.9

42.3

42.3

Other receivables

2

4.5

4.5

6.4

6.4

Cash and cash equivalents

2

35.1

35.1

24.5

24.5

Foreign currency contracts

2

2.4

2.4

0.7

0.7

Copper hedging contracts

2

Assets carried at fair value
Derivative financial instruments:
–

–

0.3

0.3

2.4

2.4

1.0

1.0

Liabilities carried at fair value
Derivative financial instruments:
Foreign currency contracts

2

(1.0)

(1.0)

(0.5)

(0.5)

Interest rate swaps

2

(0.1)

(0.1)

(0.6)

(0.6)

Copper hedging contracts

2

(0.1)

(0.1)

–

–

(1.2)

(1.2)

(1.1)

(1.1)

–

–

(10.0)(9.1)

Liabilities carried at amortised cost
Unsecured bank borrowing

2

Secured bank borrowing (note 20)

2

–

–

(0.6)

(0.6)

Trade and other payables

2(99.2)(99.2)(76.6)(76.6)

Bank overdraft

2

–

–

(0.8)

(0.8)

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments
reflected in the above table.
Derivative financial instruments
Derivative financial instruments are marked to market using listed market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal and interest cash
flows using the market rate of interest at the reporting date.

Financial statements
Oxford Instruments plc
Report and Financial Statements 201293

Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the carrying amount is deemed to reflect the fair value. Allother receivables/payables are discounted to determine their fair value.
Fair value hierarchy
The table above gives details of the valuation method used in arriving at the fair value of financial instruments. The different
levels have been identified as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly(ie. as prices) or indirectly (ie. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data
There have been no transfers between levels during the year.
Maturity of financial liabilities
31 March 2012
Carrying
amount£m

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

Trade and other payables

99.2

99.2

96.4

2.8

Foreign exchange contracts

1.0

0.6

0.6

–

Interest rate swaps

0.1

0.1

0.1

–

100.3

99.9

97.1

2.8

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

31 March 2011
Carrying
amount£m
Bank overdrafts

0.8

0.8

0.8

–

–

Bank borrowing

10.6

11.9

0.4

11.1

0.4

Trade and other payables

76.6

76.6

76.5

0.1

–

Foreign exchange contracts

0.5

1.0

0.7

0.3

–

Interest rate swaps

0.6

0.6

0.6

–

–

89.1

90.9

79.0

11.5

0.4

94

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

18 FINANCIAL INSTRUMENTS continued
At the reporting date the interest rate profile of the Group’s interest – bearing financial instruments was:Carrying
amount2012£m

Carrying
amount2011£mFinancial assets

35.1

24.5

Financial liabilities–(10.8)

(0.1)

(0.6)

Variable rate instruments

Fixed rate instruments
Financial liabilities

Bank overdraft
In the prior year bank overdrafts carried interest rates of 2.65% in the UK, 3% in Europe and LIBOR+ 3.5% in Japan.
Sensitivity analysis
The Group has estimated the impact of the change to the fair value of its financial instruments and the translation of currency
profits and assets on the Consolidated Statement of Income and on equity for the following:•

one percentage point increase in interest rates•

ten percentage point weakening in the value of sterling against all currencies•

ten percentage point strengthening in the value of sterling against all currencies•

five percentage point increase in the cost of copper•

five percentage point decrease in the cost of copper

The outputs from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur
net of any hedging in place at the year end. Actual results in the future may differ materially from these estimates due tocommercial actions taken to mitigate any potential losses from such rate movements, to the interaction of more than one
sensitivity occurring and to further developments in global financial markets. As such this table should not be considered as aprojection of likely future gains and losses.
1% increase
in interest
rates
£m

10%
weakeningin sterling¹£m10%
strengthening
in sterling¹£m

5% increasein copper
prices£m

5% decreasein copper
prices£m

At 31 March 2012
Impact on Consolidated
Statement of Income

–

3.4

(3.4)

–

–

Impact on equity

–

3.4

(3.4)

0.1

(0.1)

Impact on Consolidated
Statement of Income

0.3

2.4

(2.4)

–

–

Impact on equity

0.3

2.4

(2.4)

0.1

(0.1)

At 31 March 2011

¹ Of the effect on the Consolidated Statement of Income, £4.2 million (2011: £4.2 million) would have been recognised on the ‘Mark to Market’ line
(see Note 1).

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

95

19	CALLED UP SHARE CAPITAL
Issued and fully paid ordinary shares:
2012
Number ofshares2011
Number ofsharesAt the beginning of the year

50,174,913

49,567,328

Issued for cash

5,991,810

607,585

At the end of the year

56,166,723

50,174,913

2012
Number of
Shares

2012
£m

2011
Number of
Shares2011£m

58,000,000

2.9

58,000,000

2.9

56,166,723

2.8

50,174,913

2.5

Number ofsharesAggregate
nominal value

Consideration
per share

Exercise of Savings Related Share Options

97,796£4.890£1.73

Exercise of Executive Share Options

195,264£9,763£1.35-£7.05

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

New issues of ordinary shares of 5p each during the year

Exercise of Executive Share Options – share appreciation rights

676,278£33,814£0.05

Equity raising5,013,121£250,656

£7.75

9,351

£468

–

Other

The holders of the ordinary shares are entitled to receive dividends as declared, a proportionate amount of capital on a winding
up of the Company and to one vote per share at meetings of the Company.
20	BORROWINGSAt 31 March 2012 the Group had borrowings with a book value of £nil (2011: £10.6 million).
In December 2010, the Group entered into a committed revolving credit facility with a club of three banks. The facility, currently
undrawn, expires in December 2014, is for £50 million and is extendable to £70 million by mutual consent.
The facility carries a floating interest rate of LIBOR plus a margin of between 1.625% and 2.75% depending on the level of net debt
in relation to earnings (current margin is 1.625%). All necessary conditions precedent and covenants were met at 31 March 2012.
As at 31 March 2011 borrowings with a book and fair value of £0.6 million related to a mortgage made available to Oxford
Instruments Analytical GmbH (formerly Worldwide Analytical Systems AG) in respect of a property in Uedem. This mortgage
was re-paid during the year.

96

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

21 RETIREMENT BENEFIT OBLIGATIONSThe Group operates defined benefit plans in the UK and US; both offer pensions in retirement and death in service benefit tomembers. Pension benefits are related to members’ final salary at retirement and their length of service. Both schemes havebeen closed to new members since 2001.
During the prior year, the Group’s defined benefit plans in the UK and the US were closed to future accrual.
The Group has opted to recognise all actuarial gains and losses immediately via the Consolidated Statement ofComprehensive Income.
The amounts recognised in the Consolidated Statement of Financial Position are:
UK
2012
£m

USA
2012
£m

Total
2012
£m

UK
2011
£m

USA
2011
£m

Total
2011
£m

Present value of funded
obligations

206.3

9.1

215.4

177.1

7.7

184.8

Fair value of plan assets(173.6)(6.6)(180.2)(166.5)(6.6)(173.1)

32.7

2.5

35.2

10.6

1.1

11.7

Recognised liability for defined
benefit obligations

Reconciliation of the opening and closing balances of the present value of the defined benefit obligation
UK
2012
£m

USA
2012
£m

Total
2012
£m

UK
2011
£m

USA
2011
£m

Total
2011
£m

Benefit obligation at the
beginning of the year

177.1

7.7

184.8

183.7

9.0

192.7

Interest on obligation

9.8

0.4

10.2

10.2

0.4

10.6

Current service cost

–

–

–

0.6

0.2

0.8

Benefits paid

(3.4)

(0.4)

(3.8)

(3.6)

(0.3)

(3.9)

Actuarial loss/(gain) on obligation

22.8

1.4

24.2

(11.3)

0.4(10.9)

Curtailment gains

–

–

–

(2.5)

(1.6)

(4.1)

Exchange rate adjustment

–

–

–

–

(0.4)

(0.4)

206.3

9.1

215.4

177.1

7.7

184.8

Benefit obligation at the endof the year

The benefit obligation under the UK pension scheme was reduced by approximately £10.6 million during the prior year
following the Government’s decision to move from RPI to CPI as the measure of inflation used in pension calculations. The
Group expects that as a result of these changes, and subject to the existing caps, CPI will be used to calculate the increase ofpensions in deferment. Pensions in payment will, subject to the cap, continue to be indexed in line with RPI.

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

97

Reconciliation of the opening and closing balances of the fair value of plan assets
UK
2012
£m

USA
2012
£m

Total
2012
£m

UK
2011
£m

USA
2011
£m

Total
2011
£m

Fair value of plan assets at the
beginning of the year

166.5

6.6

173.1

151.7

5.9

157.6

Expected return on plan assets

10.4

0.5

10.9

9.5

0.4

9.9

Contributions by employers

4.5

–

4.5

5.9

0.5

6.4

Benefits paid

(3.4)

(0.4)

(3.8)

(3.6)

(0.3)

(3.9)

Actuarial (loss)/gain on assets

(4.4)

–

(4.4)

3.0

0.5

3.5

–

(0.1)

(0.1)

–

(0.4)

(0.4)

173.6

6.6

180.2

166.5

6.6

173.1

Exchange rate adjustment
Fair value of plan assets at theend of the year

Expense recognised in the Consolidated Statement of Income
2012£mCurrent service cost

2011
£m

–

0.8

Interest on obligation

10.2

10.6

Expected return on plan assets(10.9)(9.9)

Total – defined benefit

(0.7)

1.5

Contributions to defined contribution schemes

3.1

2.9

2.4

4.4

The actual gain on plan assets was £6.5 million (2011: £13.4 million gain).
The Group expects to contribute approximately £4.8 million to defined benefit plans in the next financial year.
The pension costs are recorded in the following lines of the Consolidated Statement of Income:

Cost of sales

2012
£m

2011
£m

0.8

1.5

Selling and marketing costs

0.7

0.8

Administration and shared services

0.3

0.7

Research and development

1.3

0.7

Financial income(10.9)(9.9)

Financial expenditure

10.2

10.6

2.4

4.4

98

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

21 RETIREMENT BENEFIT OBLIGATIONS continued
Actuarial gains and losses shown in the Consolidated statement of Comprehensive Income

Actuarial (loss)/gain

2012
£m

2011
£m

(28.6)

14.4

Cumulative actuarial losses reported in the Consolidated Statement of Comprehensive Income since 1 April 2004, the transition
date to IFRS, are £17.8 million (2011: £10.8 million cumulative actuarial gains).
History of experience gains and losses are as follows:
2012
£m

2011
£m

2010
£m

2009
£m

2008
£m

Present value of benefit
obligations

215.4

184.8

192.7

139.4

161.0

Fair value of plan assets(180.2)(173.1)(157.6)(125.0)(139.8)

35.2

11.7

35.1

14.4

21.2

(4.4)

3.5

23.9

(27.2)(7.3)(2.4%)

2%

15%

(22%)

(5%)

Amount £m

(4.7)

10.9

(46.7)

33.6

14.4% of the present value of thescheme liabilities

2%

(6%)

24%

(24%)

(9%)

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

Defined benefit scheme – United Kingdom
A full actuarial valuation of the UK plan was carried out as at 31 March 2009 and has been updated to 31 March 2012 by aqualified independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):
As at 31 March 2012%

As at 31 March 2011%

Discount rate

4.9

5.6

Rate of salary increase

n/a

n/a

Rate of increase to pensions in payment(pre 1997)

2.4

2.4

Rate of increase to pensions in payment(post 1997)

3.1

3.2

Rate of inflation (CPI)
Mortality – pre- and post-retirement –males and females

2.25

2.7

94% of SP1A tables (97% forfemales) – year of birth:
medium cohort (min annual
improvement of 1%)

94% of SP1A tables (97% forfemales) – year of birth:
medium cohort (min annual
improvement of 1%)

99

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

The assumptions used in determining the overall expected rate of return of the plan have been set with reference to yields
available on government bonds and appropriate risk margins.
The mortality assumptions imply the following expected future lifetime from age 65:
2012
years

2011
years

Pre-retirement – males

23.7

23.0

Pre-retirement – females

26.0

25.2

Post-retirement – males

21.7

21.6

Post-retirement – females

24.1

23.9

The assumptions have been chosen by the Directors from a range of possible actuarial assumptions, which due to thetimescales covered, may not be borne out in practice.
The assets in the plan and the expected rates of return were:Long-term
rate of return
expected at
31 March
2012%

Value at
31 March2012£mLong-term
rate of return
expected at
31 March
2011%

Value at
31 March
2011£mEquities

7.9

48.6

7.9

64.3

Corporate bonds

4.9

45.1

5.6

45.8

Gilts

3.5

47.2

4.4

33.7

Cash

3.5

24.4

4.4

13.5

Alternative

7.3

8.3

7.2

9.2

173.6

166.5

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

Discount rate

As at 31 March 2012%

As at 31 March 2011
%

4.75

5.75

Rate of salary increase

n/a

n/a

Rate of increase to pensions in payment

0.00

0.00

Rate of inflation
Mortality – pre- and post-retirement

2.25%

3.00

2012 IRS prescribed mortality –optional combined table for smallplans, male and female

2011 IRS prescribed mortality –optional combined table for smallplans, male and female

The assumptions used in determining the overall expected rate of return of the plan have been set with reference to yields
available on government bonds and appropriate risk margins.

100

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

21 RETIREMENT BENEFIT OBLIGATIONSDefined benefit scheme – United States continued
The assets in the plan and the expected rates of return were:Long term
rate of return
expected at
31 March
2012%

Value at
31 March
2012£mLong term
rate of return
expected at
31 March
2011%

Value at
31 March
2011£mEquities

9.1

3.0

9.2

3.5

Bonds

4.8

3.2

6.1

2.9

Property and other

6.8

0.4

8.4

0.2

6.6

6.6

Defined contribution schemes
In the UK employees are offered participation in the defined contribution Oxford Instruments Stakeholder Plan. The Company
contribution rate and employee contribution rate varies between grades and whether the individual had previously been in the
Defined Benefit scheme. The Company contribution ranges between 4% and 14% of base salary. The Group also operates a
401k defined distribution plan in the USA. Details of pension schemes contributions made in respect of Directors can be foundin the Directors’ Remuneration Report.
22 	TRADE AND OTHER PAYABLES
2012
£m

2011
£m

Trade payables

31.1

29.7

Advances received

28.0

16.5

Social security and other taxes

2.5

1.5

Accrued expenses and deferred income

31.9

27.4

Deferred consideration due with one year

3.8–

Other creditors

1.9

1.5

99.2

76.6

Amounts due after more than one year – other creditors (deferred consideration)

(2.8)

(0.1)

96.4

76.5

Warranties
£m

Other
£m

Total
£m

4.9

1.8

6.7

Deferred consideration relates to amounts payable in respect of acquisitions made in the year.
23	PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Balance at 1 April 2011
Provisions made during the year

3.9

2.6

6.5

Provisions used during the year

(2.1)

(0.5)

(2.6)

Provisions released during the year

(1.3)

(0.3)

(1.6)

Balance at 31 March 2012

5.4

3.6

9.0

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

101

Warranty provisions reflect the Group’s standard terms and conditions. In general these apply for a year, and as a result, themajority of the provision is expected to be utilised within a twelve-month period. Other provisions relate to various obligations
including claims and disputes arising against the Group in the ordinary course of business, obligations in respect of onerous
leases and obligations to employees in Japan on termination of their employment. The Group’s expectation is that the majorityof the other provisions are likely to be utilised within a twelve month period.
24 OPERATING LEASES
LeasesNon-cancellable future minimum operating lease rentals are payable as follows:
2012
£m

2011
£m

Less than one year

3.3

2.2

Between one and five years

4.4

2.7

Greater than five years

2.5

–

10.2

4.9

During the year ended 31 March 2012 £2.7 million was recognised as an expense in the Consolidated Statement of Income inrespect of operating leases (2011: £2.2 million).
The majority of operating leases relate to properties occupied by the Group in the course of its business. There are no material
contingent rent payment arrangements, purchase options or escalation clauses. It is expected that most leases could be
renewed on the existing or similar terms. The leases do not impose any material restrictions in respect of dividends, additional
debt requirements or further leasing.
25	CAPITAL COMMITMENTS
During the year ended 31 March 2012, the Group entered into contracts to purchase property, plant and equipment which are
expected to be settled in the following financial year for less than £0.9 million (2011: £0.1 million).
26	CONTINGENCIESIn an international group of companies a variety of legal claims arise from time to time. The Board, having taken legal advice,
are of the opinion that any ongoing actions and investigations will not have a material impact on the Group’s financial position.
27 RELATED PARTIESTransactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation andare not disclosed in this note. Executive directors are considered to be the key management personnel.
Remuneration is as follows:
2012
£m

2011
£m

Short term employee benefits

1.6

1.5

Post employment benefits

0.1

0.1

Share-based payment

0.4

0.2

Total

2.1

1.8

Short-term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
During the year the Company paid £0.2 million (2011: £0.1 million) to Imperialise Limited, a company for whom Nigel Keen is a
Director. The payment was for his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil
(2011: nil).
There are no other related party transactions.

102

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Financial Statements
year ended 31 March 2012 continued

28	PRINCIPAL GROUP ENTITIES
Equity owned by
the company%

Country ofIncorporation

Principal
Activity

Oxford Instruments lndustrial Products Holdings Ltd

100

England

Holding

Oxford Instruments Holdings Europe Ltd

100

England

Holding

Oxford Instruments Overseas Holdings Ltd

100

England

Holding

Oxford Instruments Overseas Holdings 2008 Ltd*100

England

Holding

Oxford Instruments Nanotechnology Tools Holdings Ltd

100

England

Holding

Oxford Instruments Overseas Marketing Ltd*100

EnglandMarketing

Oxford Instruments Industrial Products Ltd*100

England

Trading

Oxford Instruments Nanotechnology Tools Ltd*100

England

Trading

Omicron UHV Technik Ltd*100

England

Trading

Oxford Instruments America Inc

*100

USA

Distribution

Oxford Instruments OST Holdings LLC

*100

USA

Holding

Oxford Instruments OST Asset Co LLC

*100

USA

Holding

Oxford Instruments Service LLC

*100

USA

Trading

Oxford Instruments Superconductivity Wire LLC

*100

USA

Trading

Oxford Instruments (Tennessee) Inc

*100

USA

Holding

Oxford Instruments Holdings Inc

*100

USA

Holding

Oxford Instruments Holdings 2008 Inc

*100

USA

Holding

Oxford Instruments Austin, Inc

*100

USA

Trading

Oxford Instruments X-Ray Technology Inc

*100

USA

Trading

Oxford Superconducting Technology LP

*100

USA

Trading

Omniprobe Inc

*100

USA

Trading

Omicron Nanotechnology USA LLC

*100

USA

Distribution

Oxford Instruments KK

*100

Japan

Distribution

Oxford Instruments (Shanghai) Company Ltd**

*100

China

Trading

Oxford Instruments HKL Technologies A/S*100

Denmark

Trading

Oxford Instruments Analytical Oy*100

Finland

Trading

Oxford Instruments SAS*100

FranceDistribution

Omicron Nanotechnology GmbH*100

Germany

Trading

Oxford Instruments GmbH*100

Germany

Distribution

VeriCold Technologies GmbH*100

Germany

Trading

Oxford Instruments Analytical GmbH*100

Germany

Trading

Oxford Instruments Pte Ltd*100

SingaporeMarketing

Equity owned by the Company represents issued ordinary share capital.
A full list of the Group companies as at 31 March 2012 is available for inspection at the Company’s registered office.
With the exception of holding companies, all the above companies are engaged in the research, development, manufacture,service or sale of high technology tools and systems. Equity owned by subsidiary companies is indicated by an asterisk (*).
All the above companies are consolidated in the Group accounts.
**Year end is 31 December.

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

103

29	SUBSEQUENT EVENTS
The interim dividend of 2.772p per share (total cost £1.6m) was paid after the year end. In addition, on 12 June 2012, theDirectors proposed a final dividend of 7.228p per ordinary share (total cost £4.1 million). The total amount of £5.7 million has
not been provided for and there are no income tax consequences.
30	EXCHANGE RATESThe principal exchange rates to sterling used were:Year end rates
2012

2011

US Dollar

1.60

1.60

Euro

1.20

1.13

Yen

131

133

Euro

Yen

Average translation rates 2012
US Dollar
Quarter 1 2012

1.63

1.13

132

Quarter 2 2012

1.60

1.14

125

Quarter 3 2012

1.57

1.17

121

Quarter 4 2012

1.58

1.19

125

US Dollar

Euro

Yen

Average translation rates 2011
Quarter 1 2011

1.50

1.17

138

Quarter 2 2011

1.55

1.20

133

Quarter 3 2011

1.57

1.17

130

Quarter 4 2011

1.58

1.16

131

104

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Parent Company Balance Sheetas at 31 March 2012

Notes

2012
£m

2011
£m

Tangible assets

C

0.5

0.7

Investments in subsidiary undertakings

D

146.4

127.2

146.9

127.9

Fixed assets

Current assets
Debtors (including £56.6 million (2011: £40.0 million) due after morethan one year)

E

Cash at bank and in hand

62.1

47.3

26.0

9.8

88.1

57.1

(10.0)(13.8)

Creditors: amounts falling due within one year
Bank loans and overdrafts
Other creditorsF(31.4)(22.1)(41.4)(35.9)Net current assets

46.7

21.2

Total assets less current liabilities

193.6

149.1

Creditors: amounts falling due after more than one year
Bank loans

G–(10.0)

Provisions for liabilities and charges

H

(0.2)

(0.2)

193.4

138.9

Net assets
Share capital

I

2.8

2.5

Share premium account

I

60.2

22.5

Other reserves

I

7.7

7.7

Profit and loss account

I

122.7

106.2

193.4

138.9

Equity shareholders’ funds

The Financial Statements were approved by the Board of Directors on 12 June 2012 and signed on its behalf by:

Jonathan Flint			
Kevin Boyd
Director				Director
Company number: 775598

Notes to the Parent Company
Financial Statements

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

105a) 	Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation
to the Company’s Financial Statements, except as noted below.
Basis of preparation
The Financial Statements have been prepared in accordance with applicable UK GAAP accounting standards and under thehistorical cost accounting rules. In accordance with s408 of the Companies Act 2006, the Company is exempt from therequirement to present its own profit and loss account.
In accordance with FRS 1: Cash flow statements, the company is exempt from preparing its own cash flow statement.
Going concern
The Financial Statements have been prepared on a going concern basis, based on the Directors’ opinion, after making
reasonable enquiries, that the Company has adequate resources to continue in operational existence for the foreseeable future.
Taxation
The charge for taxation is based on the result for the year and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without
discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes
which have arisen but not reversed by the Balance Sheet date, except as otherwise required by FRS 19: Deferred Tax.
LeasesOperating lease rentals are charged to the profit and loss account on a straight-line basis over the life of the lease.
Fixed assets and depreciation
Depreciation is provided to write off the valuation or the cost less estimated residual value of tangible fixed assets by equal
instalments over their estimated useful economic lives as follows:
Freehold buildings		

50 yearsComputer equipment 		

4 years

Motor vehicles 		

4 years

Financial instruments
The Company’s accounting policies for financial instruments under UK GAAP, namely FRS 25 – Financial instruments:
presentation, FRS 26 – Financial instruments: measurement and FRS 29 – Financial instruments: disclosures, are the same as theGroup’s accounting policies under IFRS, namely IAS 32 – Financial instruments: presentation, IAS 39 – Financial instruments:
recognition and measurement and IFRS 7 – Financial instruments: disclosures. These policies are set out in accounting policy ‘(E)Financial instruments’ in the Group accounting policies. As consolidated financial information has been disclosed under IFRS 7
in notes 16, 17 and 18 to the Group Financial Statements, the Parent Company is exempt from the disclosure requirementsof FRS 29.
Post retirement benefits
The Company participates in a group wide pension scheme providing benefits based on final pensionable pay. The assets ofthe scheme are held separately from those of the Company. The Company is unable to identify its share of the underlying
assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS 17: Retirement
benefits, accounts for the scheme as if it were a defined contribution scheme. As a result, the amount charged to the profit
and loss account represents the contributions payable to the scheme in respect of the accounting period. Refer to note J for the
additional disclosures required by FRS 17.
Foreign currencies
The Company enters into forward exchange contracts and options to mitigate the currency exposures that arise on sales andpurchases denominated in foreign currencies. Transactions in foreign currencies are converted into Sterling at the rate ruling on
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates rulingat the Balance Sheet date or at the appropriate forward contract rates. Exchange profits and losses arising from the above aredealt with in the profit and loss account.

106

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Parent Company
Financial Statements continueda) 	Accounting Policies continued
Own shares held by Employee Benefit Trust (EBT)Transactions of the Group-sponsored EBT are included in the Group Financial Statements. In particular, the trust’s purchase ofshares in the company are debited directly to equity.
Investments
Investments in subsidiaries are stated at cost, less any provision for impairment, where appropriate.
Share-based payments
The share option programme allows employees to acquire shares of the Company. The fair value of options granted after
7 November 2002 and those not yet vested as at 1 April 2005 is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using an option pricing model, taking
into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted
to reflect the actual number of share options that vest except where forfeiture is only due to market conditions.
When options are granted to employees of subsidiaries of the Company, the fair value of options granted is recognised as an
employee expense in the Financial Statements of the subsidiary undertaking together with the capital contribution received. In
the Financial Statements of the Company, the options granted are recognised as an investment in subsidiary undertakings witha corresponding increase in equity.
Dividends on shares presented within shareholders’ funds
Dividends unpaid at the Balance Sheet date are only recognised as a liability at that date to the extent that they areappropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria
are disclosed in the notes to the Financial Statements.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within
its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, theCompany treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will
be required to make a payment under the guarantee.
b)	Profit for the year
The Company’s profit for the financial year was £20.3 million (2011: £12.6 million).
The auditor’s remuneration comprised £115,000 (2011: £112,000) for statutory audit.
The average number of people employed by the Company (including Directors) during the year was 47 (2011: 42). All of these
individuals were involved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:
2012
£m

2011
£m

Wages and salaries

4.3

4.5

Social security costs

1.8

1.3

0.5

0.2

6.6

6.0

Other pension costs

The share-based payment expense was £0.6 million (2011: £nil).
Full details of the emoluments paid to Directors can be found in the Directors’ Remuneration Report on pages 43 to 52.

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

107c)	Tangible fixed assets
Land andbuildings£m

Motorvehicles£mComputerequipment
£m

Total
£m

Cost
Balance at 1 April 2011

0.3

0.2

3.5

4.0

Additions

–

–

0.1

0.1

Disposals

(0.1)

(0.1)

–

(0.2)

Balance at 31 March 2012

0.2

0.1

3.6

3.9

Balance at 1 April 2011

–

0.1

3.2

3.3

Charge for year

–

–

0.2

0.2

Disposal

–

(0.1)

–

(0.1)

Balance at 31 March 2012

–

–

3.4

3.4

At 31 March 2011

0.3

0.1

0.3

0.7

At 31 March 2012

0.2

0.1

0.2

0.5

Investments
in subsidiary
undertakings
£m

Other
investments
£m

Total
£m

142.9

0.3

143.2

Depreciation

Net book valued) 	Investments

Cost or valuation
Balance at 1 April 2011
Additions

19.2

–

19.2

Balance at 31 March 2012

162.1

0.3

162.4

Impairment
Balance at 1 April 2011

15.7

0.3

16.0

Balance at 31 March 2012

15.7

0.3

16.0

Net book value at 31 March 2011

127.2

–

127.2

Net book value at 31 March 2012

146.4

–

146.4

Other investments at 31 March 2012 comprise:
Investment
ARKeX Limited

Principal activity

Percentage ofcompany owned

Supply of gravity-gradiometry exploration andrelated services to the oil, gas and minerals industries

9.3%

The addition to subsidiary investments of £18.8 million relates to investments in Oxford Instruments Holdings Europe Limited,as well as £0.4 million in relation to the awarding of share options to employees of subsidiary companies.

108

e)

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Notes to the Parent Company
Financial Statements continued

Debtors

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

2012
£m

2011
£m

58.4
2.7
0.6
–
0.4
62.1

43.2
2.4
0.7
0.6
0.4
47.3

Amounts owed by subsidiary undertakings includes £56.6 million (2011: £40.0 million) due after more than one year.
f)

Other creditors

Trade creditors
Amounts owed to subsidiary undertakings
Tax, social security and sales related taxes
Other financial liabilities
Accruals and deferred income
Other creditors

2012
£m
0.4
26.0
1.1
1.0
2.9
–
31.4

2011
£m
0.1
16.8
0.9
1.2
3.0
0.1
22.1

g)	Creditors: amounts falling due after one year
Details of the bank loans are included in note 20 of the Group Financial Statements.
h)	Provisions for liabilities and charges

Vacant lease provision£m

Balance at 1 April 2011

0.2

Utilised during the year–

Balance at 31 March 2012

0.2

The transfer of economic benefits in relation to the vacant lease provisions is expected to be within one year.
Deferred tax asset

2012
£m
0.6
(0.6)
–

2011
£m
–
0.6
0.6

2012
£m

Recognised
2011£m

Excess of depreciation over corresponding capital allowances–

0.6

Other timing differences

–

–

–

0.6

Balance at 1 April
Profit and loss (charge)/credit
Balance at 31 March
The amounts of deferred tax assets are as follows:

The Company recognises deferred tax assets only to the extent that there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted. Deferred tax assets have not been recognised for losses of£7.3 million as the Company does not expect to generate suitable taxable profits in the foreseeable future.

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012i)

Reserves

Balance at 1 April 2011
Retained profit for the year
Proceeds from shares issued
Share options awarded to employees
Share options awarded to
employees of subsidiaries
Dividends paid
Balance at 31 March 2012

109

Share
capital
£m
2.5
–
0.3
–

Share
premium
account
£m
22.5
–
37.7
–

Capitalredemption
reserve
£m
0.1
–
–
–

Other
reserves
£m
7.6
–
–
–

Profit andlossaccount
£m
106.2
20.3
–
0.6

Total
£m
138.9
20.3
38.0
0.6

–
–
2.8

–
–
60.2

–
–
0.1

–
–
7.6

0.4
(4.8)
122.7

0.4
(4.8)
193.4

Details of issued, authorised and allotted share capital are included in Note 19 of the Group Financial Statements.
Details of treasury shares held by the Company are included as a note to the Consolidated Statement of Changes in Equity.
Details of the Group’s share option schemes are included in Note 8 of the Group Financial Statements.
Other reserves relates to premium on shares issued as part of acquisitions made in the year to 31 March 1987.
j)	Pension commitments
Defined benefit scheme
The Oxford Instruments Pension Scheme, a defined benefit scheme was closed to new members from 1 April 2001 and to future accrualfrom the year to 31 March 2011. The company continues to make deficit recovery contributions to this scheme. Contributions are based on
the pension deficit of the Group as a whole. The assets of the Scheme are held in a separate trustee administered fund.
The Directors do not believe it is possible to allocate the assets and liabilities of the scheme to individual group members on aconsistent and reasonable basis. Accordingly, under FRS 17 the Company is exempt from recognising its share of the net pension
deficit and accounts for the scheme as though it were a defined contribution scheme. Details of the scheme and most recent
actuarial valuation can be found in note 21 of the Group Financial Statements. The contributions paid by the Company to the Oxford
Instruments Pension Scheme were £0.3 million (2011: £0.1 million).
Stakeholder pension scheme
The Company makes contributions to a stakeholder pension scheme. The pension costs charge for the year represents contributions
payable by the Company to the scheme. These amounted to £0.2 million (2011: £0.1 million). There were no outstanding
contributions at the end of the financial year (2011: £nil).
k) Guarantees
The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to the pension scheme.
The guarantee is for the excess of 105% of the liabilities of the scheme, calculated on the basis of Section 179 of the Pensions Act
2004, over the assets of the scheme.
l)	Commitments
At 31 March 2012, capital commitments contracted were £0.5 million (2011: £nil) and authorised were £2.0 million (2011: £nil).
The majority of this relates to new software.
m)	Subsequent events
See note 29 of the Group Financial Statements for details of dividends paid or declared after the Balance Sheet date.
n) Related party transactions
The Company has a related party relationship with its Directors and Executive officers and with its wholly owned subsidiary companies.
Transactions with key management personnel are disclosed in the Director’s Remuneration Report on pages 43 to 52.
There were no other significant transactions with key management personnel in either the current or preceding year other than the following.
During the year the Company paid £0.2 million (2011: £0.1 million) to Imperialise Limited, a company for whom Nigel Keen is a Director.
The payment was for his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was nil (2011: nil).

110

Financial statements
Oxford Instruments plc
Report and Financial Statements 2012

Historical Financial Summary

2008
£m

2009
£m

2010
£m

2011
£m

2012
£m

Consolidated Statement of Income
Revenue

176.5

206.5

211.5

262.3

337.3

Adjusted operating profit*
Other operating income
Reversal of acquisition related fair value adjustments
Acquisition related costs
Reorganisation costs and impairment
Amortisation of acquired intangibles
Operating profit
Net financing (costs)/income
Profit/(loss) before taxation
Income tax (expense)/credit
Profit/(loss) for the year

10.6
–
–
–
0.7
(2.9)
8.4
(3.4)
5.0
(2.3)
2.7

13.1
–
–
–
(6.8)
(4.3)
2.0
(11.3)
(9.3)
2.6
(6.7)

14.7
–
–
–
(0.4)
(4.1)
10.2
7.9
18.1
(4.8)
13.3

28.1
4.7
–
–
(0.6)
(4.7)
27.5
(0.8)
26.7
5.5
32.2

42.1
7.0
(1.7)
(1.5)
–
(11.2)
34.7
1.4
36.1
(11.3)
24.8

Adjusted profit before tax*

9.5

11.1

11.9

26.2

42.0

22.4
44.0
0.6
1.5
34.9
54.1
(48.6)
108.9
7.2(25.0)(17.8)(7.4)(21.2)

23.5
54.9
–
2.5
39.9
57.6
(54.3)
124.1
3.6(31.9)(28.3)(19.5)(14.4)

22.8
49.3
–
4.5
39.3
60.2
(70.0)
106.1
9.3(19.7)(10.4)(8.4)(35.1)

23.6
41.6
–
11.2
46.6
52.5
(76.6)
98.9
23.7(10.6)
13.1(6.8)(11.7)

28.2
78.1
–
7.6
59.3
61.0
(99.2)
135.0
35.1
–
35.1
(7.8)
(35.2)

62.5

61.9

52.2

93.5

127.1

(0.1)
(15.1)
19.4
4.2

14.4
(10.6)
(6.6)
(2.8)

31.1
(9.1)
(16.0)
6.0

35.3
(8.8)
(12.3)
14.2

41.6(52.2)
22.6
12.0

Consolidated Statement of Financial Position
Property, plant and equipment
Intangible assets
Available for sale equity securities
Deferred and current tax
Inventories
Trade and other receivables
Trade and other payables
Net assets excluding net cash
Cash and cash equivalents
Bank borrowings
Net cash
Provisions and other items
Retirement benefit obligations
Net assets employed/capital and reserves attributable
to the company’s equity holders
Cash flow
Net cash from operating activities
Net cash used in investing activities
Net cash from financing activities
Net increase/(decrease) in cash equivalents

pence

pence

pence

pence

pence

Per ordinary share
Earnings – continuing
Adjusted earnings*
Dividends

5.6
11.7
8.4

(13.9)
14.8
8.4

27.2
17.8
8.4

65.3
41.5
9.0

46.0
61.6
10.0

Employees
Average number of employees

1,501

1,531

1,341

1,498

1,834

* 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 theGroup Financial Statements.

Shareholder Information

Company INformation
Oxford Instruments plc
Report and Financial Statements 2012

111

Financial calendar
7 March 2012

Ordinary shares quoted ex-dividend

9 March 2012

Record date for interim dividend

16 March 2012

Dividend reinvestment (DRIP) last date for election

31 March 2012

Financial year end

10 April 2012

Payment of interim dividend

12 June 2012

Announcement of preliminary results

12 June 2012

Announcement of final dividend

Late July

Publication of Annual Report

11 September 2012

Annual General Meeting

26 September 2012

Ordinary shares quoted ex-dividend

28 September 2012

Record date for final dividend

30 September 2012
25 October 2012
13 November 2012

DRIP Date
Payment of final dividend
Announcement of interim results

March 2013

Ordinary shares quoted ex-dividend

March 2013

Dividend reinvestment (DRIP) last date for election

March 2013

Record date for interim dividend

31 March 2013

Financial year end

Administrative enquiries
concerning shareholdings
You may view your shareholding and dividend history, registerto receive your dividends direct to your bank account or elect tore-invest your dividends and register a change of address onlineat www.capitashareportal.com. To register to use this facility
you will need your Investor code (IVC), which can be found on
your share certificate, dividend tax voucher or proxy card.

Dividend bank mandates
If you wish dividends to be paid directly into a bank or building
society account and notification to be sent to your shareholder
register address, please contact the Company’s Registrar at theaddress given above for a dividend mandate form. Overseas
holders can also choose to receive payment directly into theirbank account, or can be sent a draft in local currency. Further
details are available from Capita Registrars.

Administrative enquiries concerning shareholdings in Oxford
Instruments plc, such as the loss of a share certificate, dividend
payments, or a change of address should be directed, in the first
instance, to the Registrar, Capita Registrars.

The Registry, 34 Beckenham Road, Beckenham, Kent BR3 9ZA

The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Tel: 0871 664 0300 (calls cost 10p per minute plus network
extras; lines are open 8.30am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3399
Email: shareholder.services@capitaregistrars.com
Website: www.capitashareportal.com
Correspondence should refer to Oxford Instruments plc andstate clearly the registered name and address of the shareholder.
Please notify the Registrar promptly of any change of address.

Tel: 0871 664 0385 (calls cost 10p per minute plus network
extras; lines are open to 9.00am to 5.30pm, Monday to Friday)
Overseas callers: +44 20 8639 3405
Website: or by logging on to www.capitaregistrars.com/
international.
Duplicate Share Register Accounts
If you are receiving more than one copy of our report, it may bethat your shares are registered in two or more accounts on our
register of members. If that was not your intention you might
consider merging them into one single entry. Please contact
Capita who will be pleased to carry out your instructions.

112

Company INformation
Oxford Instruments plc
Report and Financial Statements 2012

Shareholder Information continued

Shareholder Communications
Unless you have elected to continue to receive shareholder
communications by post, you will be notified by post or, where
you have given us an email address for electronic notification,by email that shareholder communications are available forviewing on the Company’s website at www.oxford-instruments.
com/investors. The Company reserves the right to distribute any
communication in hard copy if it deems this necessary.
Shareholder enquiries
Shareholders who have questions relating to the Group’sbusiness or who wish to have additional copies of the Reportand Accounts should apply to:Company Secretary, Oxford Instruments plc
Tubney Woods, Abingdon, Oxon OX13 5QX
Tel: 01865 393200
Fax: 01865 393442
E-mail: info.oiplc@oxinst.com
Website: www.oxford-instruments.com
Company registration
Registered office: Tubney Woods, Abingdon, Oxon OX13 5QXRegistered in England number: 775598
Websitewww.oxford-instruments.com
Oxford Instruments has an extensive website which gives detailsof all its products and services, contact information, vacancies
and latest news announcements. An interactive investor
relations section gives information on recent trading reports,
share price data and forthcoming events.

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

Analysis of shareholders as at 31 March 2012
Number ofholders% of total

Total holding% of total

2,288

87.29

1,486,073

2.65

5,001 to 50,000 shares

201

7.67

3,129,113

5.57

50,001 to 200,000 shares

82

3.13

8,944,392

15.92

Size of shareholding
Up to 5,000 sharesOver 200,000 shares
Total

50

1.91

42,607,145

75.86

2,621

100.0056,166,723

100.00We are a leading provider of hightechnology tools and systems for researchand industry. We design and manufacture
equipment that can analyse and manipulatematter at the atomic and molecular level

Oxford Instruments Directory

Oxford Instruments plc
Head OfficeTubney Woods
AbingdonOxfordshire, OX13 5QX
UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
info.oiplc@oxinst.com

2006/07 Revenue

2007/08 Revenue

2008/09 Revenue

Nanotechnology£161.6m£175.6m£206.5mTools

2006/07 Adjusted operating profit

2007/08 Adjusted operating profit

2008/09 Adjusted operating profit£8.3m£10.6m£13.1m• Announced 5 year plan to double
the size of the business throughorganic and acquisitional growth
and to achieve an increase in ROS
of 10% percentage points whencompared to 2005/6• Acquired WAS Analytical (Germany)and Vericold (Germany)• Restructured the business to improve
performance• Acquired TDI (US) and LINK
Analytical (Sweden)• 10th Queen’s Award forEnterprise: innovation

2006

2007

Business Profile
Our Journey
Chairman’s Statement
Our Business
Our Markets
Our Strategy
Business Review
Chief Executive’s Statement
Operational Review
Financial Review
Principal Risks
Corporate and Social Responsibility

02
04
06
08
10
12
16
22
24

Corporate GovernanceDirectors and Advisers
Report of the Directors
Corporate GovernanceDirectors’ Remuneration Report

30
32
35
43

Financial Statements
Directors’ Responsibilities
53
Independent Auditors’ Report
54
Accounting Policies
56
Consolidated Statement of Income 64
Consolidated Statement ofComprehensive Income
66
Consolidated Statementof Changes in Equity
67
Consolidated Statementof Financial Position
68
Consolidated Statementof Cash Flows69
Notes to the Financial Statements
71
Parent Company Balance Sheet
104
Notes to the Parent Company
Financial Statements
105
Historical Financial Summary110• Best Technical Company at the
PLC Awards

2008

company Information
Shareholder Information
Oxford Instruments Directory

111
113

NanoAnalysis
Systems for materials
analysis at thenanoscale
Halifax Road
High Wycombe
Buckinghamshire
HP12 3SEUK
Tel +44 (0)1494 442255
Fax +44 (0)1494 524129
nanoanalysis@oxinst.com
Lejonvägen 28
Box 1097
S-18122 Lindingö
SwedenTel +46 8 5448 1550
Fax +46 8 5448 1558
nordiska@oxinst.com
Omniprobe10410 Miller Road
Dallas, Texas 75238
USA
Tel +1 (214) 572 6800
Fax +1 (214) 572 6801
sales@omniprobe.com
Plasma Technology
Tools fornanotechnology
fabrication
North End, Yatton
Bristol, BS49 4AP
UK
Tel +44 (0)1934 837000
Fax +44 (0)1934 837001
plasma@oxinst.com

NanoScience
Environments fornanotechnology research
Tubney Woods
AbingdonOxfordshire, OX13 5QX
UK
Tel +44 (0) 1865 393200
Fax +44 (0) 1865 393333
nanoscience@oxinst.com
Omicron
Advanced microscopes
and chemical analysis
instruments fornanotechnology
research
Limburger Strasse 75
D-65232 Taunusstein,
GermanyTel +49 6128 9870
Fax +49 6128 98733230
info@omicron.de
1, The Felbridge Centre
Willard Way,
East GrinsteadWest Sussex, RH19 1XP
UK
Tel +44 1342 331 006
Fax +44 1342 331 003
sales@omicron.co.uk
Le plan d’Aigues, RN 713760 St.-Cannat
FranceTel +33 442 50 68 64
Fax +33 442 50 68 65
omicron.nanotechnology@
wanadoo.fr
14850 Scenic Heights
Road
Suite 140
Eden Prairie
Minnesota 55344,
USA
Tel +1 (952) 345 5240
Fax +1 (952) 294 8043
info@omicronus.com
5-30-15-403 Kamata
Ota-kuTokyo 144-0052
Japan
Tel +81 3 666 10850
Fax +81 3 666 10855
r.oiwa@omicron.jp

Industrial Products
Industrial Analysis
Tools for QC,
environmental andcompliance testing
Halifax Road
High Wycombe
Buckinghamshire
HP12 3SEUK
Tel +44 (0)1494 442255
Fax +44 (0)1494 524129
industrial@oxinst.com
P.O. Box 85(Nihtisillankuja 5)
FI-02631 Espoo
FinlandTel +358 932 9411
Fax +358 932 9413
industrial@oxinst.com
360 El Pueblo Road
Scotts Valley, California
95066
USA
Tel +1 (831) 439 9729
Fax +1 (831) 439 6051
industrial@oxinst.com
Wellesweg 3147589 Uedem
GermanyTel +49 2825 93830
Fax +49 2825 9383100
industrial@oxinst.com
Magnetic Resonance
Benchtop NMR for
industrial applications
Tubney Woods,
AbingdonOxfordshire, OX13 5QX
UK
Tel +44 (0)1865 393200
Fax +44 (0)1865 393333
magres@oxinst.com
8403 Cross Park Drive,
Suite 3F
Austin, Texas 78754
USA
Tel +1 (512) 339 0640
Fax +1 (512) 339 0620
magres@oxinst.com

Company INformation
Oxford Instruments plc
Report and Financial Statements 2012

OxfordSuperconducting
Technology
Superconducting wire
600 Milik Street,
P O Box 429
Carteret
New Jersey 07008
USA
Tel +1 (732) 541 1300
Fax +1 (732) 541 7769
sales@ost.oxinst.com

Regional Sales andAustinCryogenic pumps andcompressors
4114 Todd Lane
Austin Texas 78744
USA
Tel +1 (512) 441 6893
Fax +1 (512) 441 6665
cryo-sales@oxinst.com

Rm. 1/E Building 1
Xiangzhang Garden
No. 248, Donglan Road
201102 Shanghai
China
Tel +86 (0)21 6073 2929
Fax +86 (0)21 6490 4042
china.info@oxinst.com

Service
Oxford Instruments
Service
Support services for
MRI
34 Green Street
Woodbridge
New Jersey 07095
USA
Tel +1 (732) 850 9300
Fax +1 (732) 802 0401
oiservice@oxinst.com
1027 SW 30th Avenue
Deerfield Beach
Florida 33442
USA
Tel +1 (954) 596 4945
Fax +1 (954) 596 4946
oiservice@oxinst.com
64 Union Way
Vacaville
California 95687
USA
Tel +1 707 469 1320
Fax +1 707 469 1318
oiservice@oxinst.com

Service Offices
China
Room 714, Tower 3,
Henderson Centre
No 18 Jianguomennei
Avenue100005 Beijing
China
Tel +86 (0)10 6518 8160
Fax +86 (0)10 6518 8155
china.info@oxinst.com

No.129, Lane 150,
Pingbei Road
Xinzhuang Industrial Area
Minhang District
201102 Shanghai
China
Tel +86 (0)21 6490 8580
Fax +86 (0)21 6490 4042
china.info@oxinst.com
Room 2112, Bai Hui Plaza
193 Zhong Shan Wu Road
Guangzhou 510030
China
Tel +86 (0)20 8364 9990
Fax +86 (0)20 8364 9996
china.info@oxinst.com
Room 1909, Huamin
Empire Plaza
No.1, Fu Xing Street
ChengduChina
Tel +86 (0)28 8670 3596
Fax +86 (0)28 8670 3595
china.info@oxinst.com
Czech Republic
Velvarska 13
CZ-160 00 Praha
Czech Republic
Tel +420 233 343 264
Fax +420 234 311 724
office@oxinst.cz
France77 ZA de Montvoisin
91400 Gometz la Ville,
FranceTel +33 1 69 85 25 25
Fax +33 1 69 41 46 80
infofrance@oxinst.com

113

Germany
Otto-von-GuerickeRing 1065205 Wiesbaden,
GermanyTel +49 6122 9370
Fax +49 6122 937100
ger_info@oxinst.com
India
11, Marwah’s Complex
Krishanlal Marwah Marg
Andheri East
Mumbai 400072
India
Tel +91 222 533 3930
Fax +91 222 545 2424
oiindia@oxinst.com
Japan
Haseman Bldg.
2-11-6 Tomioka, Koto-ku
Tokyo 135-0047
Japan
Tel +81 (0)3 5245 3251
Fax +81 (0)3 5245 4472
info.jp@oxinst.com
RussiaDenisovskiy per. 26
Moscow
105005
RussiaTel +7 (095) 933 51 23
Fax +7 (095) 933 51 24
info@oxford.de
Singapore
10 Ubi Crescent#04-81 Ubi TechPark
Lobby E
Singapore 408564,
SingaporeTel +65 6337 6848
Fax +65 6337 6286
oi.admin@oxfordinstruments.com.sg
Taiwan1F, No. 23, Jing-Shang
19th Street
Hsinchu, Taiwan 300,
TaiwanTel +886 3 5788696
Fax +886 3 5789993
oi.admin@oxfordinstruments.com.tw
USA/Canada/Latin
America
300 Baker Avenue,
Suite 150,
Concord MA 01742
USA
Tel +1 (978) 369 9933
Fax +1 (978) 369 8287
info@ma.oxinst.com

Oxford Instruments plc
Report and Financial Statements 2012

Oxford Instruments plc
Report and Financial Statements 2012

For more information please email: info.oiplc@oxinst.com

www.oxford-instruments.com
As part of Oxford Instruments’ environmental policy
this report has been printed on FSC paper
This publication is the copyright of Oxford Instruments plc and provides outline information only, which (unless agreed by thecompany in writing) may not be used, applied or reproduced for any purpose or form part of any order or contract or regarded
as the representation relating to the products or services concerned. Oxford Instruments’ policy is one of continued improvement. The company reserves the right to alter, without notice the specification, design or conditions of supply of any product orservice. Oxford Instruments acknowledges all trademarks and registrations. © Oxford Instruments plc, 2012. All rights reserved.

www.oxford-instruments.com