Oxford Instruments plc

Press Release

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

Release Date: 7am Tuesday 10 June 2014
Oxford Instruments plc
Announcement of Preliminary Results for the year to 31 March 2014
Oxford Instruments plc, a leading provider of high technology tools and systems for industry and research,
today announces its Preliminary Results for the year to 31 March 2014.
Highlights:
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Orders grew by 2.5% to £342.2 million (2013: £334.0 million)
Revenue grew by 2.7% to £360.1 million (2013: £350.8 million); 4.3% on a constant currency basis
Adjusted profit before tax* of £47.1 million (2013: £47.0 million)
Adjusted operating margin* of 14.0% (2013: 14.1%), in line with 14 Cubed objectives
Adjusted EPS* up 1.8% at 67.7 pence (2013: 66.5 pence)
Andor Technology acquisition integrating well and performing ahead of plan
Investment in R&D, up 11.2% to £27.9 million (2013: £25.1 million)
Proposed final dividend of 9.04 pence (2013: 8.15 pence), giving a total dividend for the year of
12.4 pence (2013: 11.2 pence)
Strategy seeks to exploit the convergence of the sciences which will enhance demand for
nanotechnology tools*Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items
can be found in Note 1.

Jonathan Flint, Chief Executive of Oxford Instruments plc, said:“The Group delivered another successful result, with orders, sales and profits all ahead of the prior year.
We are very pleased to welcome Andor to Oxford Instruments and see the acquisition as an important partof the next phase of our growth.
We will continue to focus on developing innovative new products and growing market share in our coreareas of physical science. In addition, we will seek to extend our reach into adjacent new markets byapplying our tools and technologies to life science research and analysis.
This convergence of the sciences will enhance long term demand for our nanotechnology tools and enable
us to reach a new set of customers working in the nano-bio arena.”
Enquiries:
Oxford Instruments plc
Jonathan Flint, Chief Executive
Kevin Boyd, Group Finance Director

Tel: 01865 393200

MHP Communications
Rachel Hirst,
Rory King

Tel: 020 3128 8100

Number of pages: 30

Announcement of Preliminary Results for the year to 31 March 2014

Performance and Strategy
Performance: The Group delivered another successful result, with orders, sales and profit all up
on the prior year. Orders grew by 2.5% to £342.2 million (2013: £334.0 million). Our closing orderbook was £126.1 million. Revenues grew 2.7% to £360.1 million (2013: £350.8 million) against acurrency headwind caused by the relative strength of the pound compared to our major trading
currencies. Revenue growth on a constant currency basis was 4.3%.
As previously reported, during the first two months of 2013/14 we experienced weak demand,
particularly from government funded research. Since then, as expected, we have seen gradualsustained improvement throughout the year.
Adjusted operating profit grew 2.0% to £50.3 million (2013: £49.3 million). In line with our 14
Cubed objectives we delivered an adjusted operating margin of 14.0% (2013: 14.1%).
During the year we saw strong revenue growth in the USA of 10.9%, and modest declines in
Europe and Asia. In Asia, continued weakness in the High Brightness Light Emitting Diodes(HBLED) market suppressed growth, while in Europe, government spending, particularly in the first
half, was muted. Revenues elsewhere in the world grew by 18.5%, helped in particular by strong
performances in South America and Australia.
We have now reached the end of the period covered by our 14 Cubed plan which set a target ofachieving an average compound annual sales growth rate of 14% in the years 2011 to 2014 and a
return on sales of 14% by 2014. We delivered the targeted 14% return on sales. We achieved 11%
compound annual growth rate.
Strategy and Business Model: Across the world, people are focused on addressing the greatchallenges of the 21st century. Constant advances are needed to keep pace with our rapidly
evolving world. With finite resources, we need to achieve more with fewer raw materials. Oxford
Instruments offers the means for customers to address these challenges at the atomic andmolecular level. We use innovation to turn our smart science into commercial tools and systems
that analyse and manipulate matter at the nano scale. The continued expansion of our capabilities
and expertise allows us to address customers’ needs in a wide variety of markets that have aninterest in working at this scale.
In the research field, our tools are used to advance the frontiers of science. We count many
winners of the Nobel Prize amongst our customers. In the industrial field, our tools are used to
improve production efficiency, ensure high standards of quality control and demonstratecompliance to environmental legislation. The end user markets for our tools include life sciences,metals, construction, semiconductors, green energy and environmental services, as well as
research and academic institutions round the world.
Our staff deploy a high level of technical skill and deep understanding of technology trends toconvert our intellectual property into new tools using the latest nanotechnology techniques. We
enjoy a high Vitality Index measured by the proportion of revenues coming from products
introduced in the last three years. This stands at 42%. Our Voice of the Customer programme
constantly calibrates emerging customer requirements against available technology to ensure our
R&D activities are focused on the most commercially attractive areas.

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2Announcement of Preliminary Results for the year to 31 March 2014

We adopt a business model whereby the Group sells tools to customers who wish to exploit theopportunities offered by Nanotechnology. This model enables us to generate revenues fromemerging industries utilising nanotechnology without undue exposure to any one application ormarket. The Oxford Instruments’ brand is well recognised and valued, particularly in the research
and academic communities.
Our Group operates in three sectors: Nanotechnology Tools, Industrial Products and Service. Our
Nanotechnology Tools sector sells high technology tools, primarily to research customers (74% of
its revenues come from research and academia). It provides a unique insight into emerging trends
in public and privately funded research, thus informing our approach to innovation and productapplication. Our Industrial Products sector sells more mature, though still technically advanced
products, primarily to industrial customers (58% of its revenues come from industry). The tools andsystems produced by this sector enable us to benefit from the economies of scale offered bytrading in larger industrial markets, thereby maximising the returns from our R&D programmes.
Our Service sector addresses the aftermarket for both our own and third party high technology
equipment, notably MRI and CT scanners. The complexity and uniqueness of our products mean
our customers increasingly purchase multiyear service contracts.
Improvement of our operational excellence forms a key part of our strategy. Following the
successful introduction of continuous improvement and lean six sigma activities in selected
Nanotechnology Tools and Industrial Products businesses, we have initiated a global Operational
Excellence programme that develops and deploys best practice lean six sigma methodologies
throughout the Group to ensure our processes are continually improved and deliver the benefits ofeconomies of scale as the business grows.
This year we announced the evolution of our strategy to exploit the current convergence of thesciences, especially at the nanoscale, which is driving increased demand for nanotechnology
tools. ‘Convergence’ is an increasingly important aspect of scientific research. It is the merging ofpreviously distinct areas of research and technology into a unified discipline that creates newscientific and commercial opportunities.
This new model is being adopted by many research institutions around the world in different forms.
The past decade has seen the emergence of interdisciplinary research areas such as nanobiology,
bioinfomatics, engineered biomaterials and the human genome project. In these new fields theunderlying research models have converged. This creates significant commercial opportunities for
Oxford Instruments as tools that were once restricted to one discipline can now be utilised acrossa number of research areas, increasing our addressable market. For example, the Andor Zyla
sCMOS camera is a tool used in both the life and physical science arenas. Application areas
include Live-Cell Microscopy and Semiconductor Analysis.
Advances in information technology, new materials, imaging, and quantum physics, havetransformed physical science in recent years. Oxford Instruments is a leading tool provider for thischange. These same advances are now beginning to transform the life sciences. Convergencegives the Group an opportunity to take the technical tools and the disciplined design approachtraditional to engineering and physics, and apply them to life science research. This provides theGroup with a unique opportunity to access a new set of customers who need to work at themolecular scale. The use of techniques previously associated with the physical sciences, where
the Group has great strength, in the biological sciences produces an important area of growth. For
example, the convergence of nanotechnology and biotechnology (‘Nano-Bio’) will lead toinnovative advances in medicine, energy production, agriculture, aerospace and manufacturing.

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3Announcement of Preliminary Results for the year to 31 March 2014

Oxford Instruments’ acquisitions of Asylum in 2012, and Andor in the year just ended, support thisstrategy of extending our reach into analysis tools for Nano-Bio research.
Nanotechnology, applied to both the physical sciences and life sciences, will continue to yield longterm structural growth in demand for high technology tools. Our strategy is focused on growing thebusiness in our core markets of physical and materials science, and exploiting convergence toexpand into life sciences.
Acquisitions: The acquisition of Andor Technology (Andor), an AIM listed company based in
Belfast, Northern Ireland, was completed on 21 January 2014. Andor is a market leading supplierof high performance optical cameras, microscope systems and software. For example, its cameras
are being used to understand protein distribution in cells, giving insights into diseases such as
Alzheimer’s, Parkinson’s and Cancer. Live Cell Super Resolution microscopy, using Andor’s iXon
emCCD camera, gives much higher accuracy than previously attained. The acquisition of Andor is
strategically important to Oxford Instruments and offers substantial opportunities to expand theGroup’s current markets and technologies in both the physical science and life science arenas. A
tailored integration programme is in place that focuses on building relationships that create a firm
foundation for common processes, shared staff talent and joint future development opportunities.
Integration is going to plan and current performance is ahead of our acquisition assumptions.
In the year, the Group also made two bolt-on acquisitions to the Industrial Analysis business tobroaden the product offerings in metals analysis and coating thickness measurement. RMG, asmall UK based company, adds a unique hand-held analyser branded mPulse to our portfolio.
Using the technique of Laser Induced Breakdown Spectroscopy (LIBS), it is initially targeted at thescrap metals industry and sales are already contributing to the business ahead of acquisition
assumptions. Another recent addition is Germany-based Roentgenanalytik, which strengthens
Oxford Instruments’ range of X-ray Fluorescence (XRF) materials and coating thickness analysers.
It will become a centre of excellence for our benchtop XRF analysers, enabling the development of
a new generation of manufacturing tools for our customers.
Asylum Research, acquired in December 2012, has integrated well and has made a good
contribution to the Group’s performance this year. The launch of new products in its leading
portfolio of atomic force microscopes has extended the range of applications available to ourcustomers in the materials and bioscience markets.
As previously reported, and uniquely amongst our recent acquisitions, Omicron Nanotechnology,
acquired in 2011, has underperformed against our acquisition assumptions. As a result, we madechanges to its management earlier in the year and have laid out a new strategy. This business will
now seek to establish a leadership position, along with other Group businesses in the
Nanotechnology Tools Sector, in the study and fabrication of complex atomic scale materials anddevices. For example, it will target the emerging technology of quantum computing, where Oxford
Instruments already has a strong position. The strategic actions we have taken should enable thebusiness to break even in the current year and we anticipate that it will return to profitability in the2015/16 financial year. Once complete, we will have a world class surface science business,
which complements our material science and bio-science activities. This will enable us to offer ourcustomers a unique portfolio of Nanotechnology Tools.
People: The dedication and hard work demonstrated by our employees is key to the success of
Oxford Instruments, and we thank them for their continued contribution to our success.
Developing our employees is central to our strategy for market leadership and profitable growth

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4Announcement of Preliminary Results for the year to 31 March 2014

across all our sectors. We believe that our increased focus on diversity and inclusion across ourglobal territories will further strengthen our business.
On 11 June 2013, Jennifer Allerton joined the Board of Oxford Instruments as a Non Executive
Director. She has a broad range of technological, commercial and international experience withlarge multinational businesses. Jennifer sits on the Audit, Remuneration and Nomination
Committees.
Thomas Geitner, who was appointed to the Board on 1 January 2013, took over the Chair of theRemuneration Committee on 9 September 2013.
At this year’s AGM Professor Sir Mike Brady will step down from the Board. He was appointed inAugust 1995 and became Deputy Chairman in 2000. He was a member of the Nomination
Committee until 2011, and is a member of the Audit and Remuneration Committees. We would
like to thank Mike for his outstanding service and commitment to the Group over the last 20 years.
During the year, a new post of Chief Information Officer was created to strengthen the IT
infrastructure of the Group, investigate ways in which we can better use IT to differentiate our
products and manage the implementation of a new Group wide ERP system.
Outlook
Orders for the first two months of the year are ahead of the same period last year on both areported and constant currency organic basis.
Our strategy, which sets the stage for the next phase of growth for Oxford Instruments, willcontinue to focus on developing innovative new products and growing market share in our coreareas of physical science. In addition, we will seek to extend our reach into adjacent new markets
by applying our tools and technologies to life science research and analysis.
This convergence of the sciences will drive long term demand for our nanotechnology tools andenable us to reach a new set of customers. Despite the headwind from foreign exchange at current
levels, these factors, together with a full year contribution from recent acquisitions, complemented
by our talented people and our focus on operational excellence will underpin our continued growthin the current year.
Operations Review
The Group operates in three sectors: Nanotechnology Tools, Industrial Products and Service.
Nanotechnology Tools: The Nanotechnology Tools sector produces our highest technology
products and serves research and industrial customers in both the public and private sectors.
Since the year end this sector has been managed as the NanoCharacterisation division(comprising NanoAnalysis, Asylum Research and Andor Technology), and the NanoSolutions
division (comprising Plasma Technology and Omicron NanoScience). This allows us to bring
together our three microscopy techniques (optical, atomic force and electron) under a unified
structure in NanoCharacterisation, whilst NanoSolutions focuses on advanced research
environments and systems.

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5Announcement of Preliminary Results for the year to 31 March 2014

This sector delivered an encouraging performance in 2014, despite weaker government spending
in research and development, with revenues of £180.6 million (2013: £166.1 million) and an
adjusted operating profit of £21.2 million (2013: £20.6 million). New products introduced by the
NanoAnalysis and Asylum businesses have been particularly successful, rapidly contributing to theoverall performance of the sector.
Our NanoAnalysis business produces leading-edge tools that enable materials characterisationand sample manipulation at the nanoscale. Its products are used on electron microscopes andion-beam systems in academic institutions and industrial applications including semiconductors,
renewable energy, mining, metallurgy and forensics. Our new Layerprobe tool works with ourmarket leading Aztec electron microscopy software platform. It gives customers the ability tomeasure the thickness and composition of nanoscale thin films and membranes in a scanningelectron microscope. We are the only company providing this capability in our software. For the
first time, it unlocks information about variations in sample depth by showing composition in thethird dimension. This is vital for applications involving photovoltaic devices, light emitting diodes,
and power electronics where device performance depends on both the thickness and compositionof ultra thin films.
Asylum’s Cypher ES environmental atomic force microscope (AFM) is the best commercial AFM
on the market. It makes atomic scale imaging routine for the average user. It combines fast, ultra
stable, high resolution imaging in gaseous or liquid environments with cooling, heating and othersample control capabilities. It is used in a variety of disciplines, including material science, energy
research, biology and biophysics.
Andor Technology brings the Group a strong capability in optics. This, combined with our capability
in atomic force microscopy and spectrometers for electron microscopy, means the Group can offer
our customers a spectrum of tools with which to observe the nano world. Andor has continued todrive innovation with the launch of the ultra-sensitive Zyla 4.2 sCMOS camera. Offering the highest
sensitivity available, this camera is the technology leader in the fast growing life science imaging
market. Andor was also recognised with the “Best in the World” award from Yokogawa as theleading Global Distributor of laser spinning disk systems for high resolution living cell imaging. Its
Imaris software was used in the Clarity Brain analysis project at Stanford University, providing
accurate 3D images and analyses of specifically labelled neurons in an otherwise transparent
brain.
The Omicron NanoScience business which specialises in analytical measurement in high vacuum,at low temperatures and in high magnetic fields, had a challenging year, due in part to reduced
government spending and a general slowdown in research markets in its field. However, thisbusiness delivered its largest ever single order, to a customer in Germany to facilitate thefabrication and characterisation of materials for nano electronics. This could revolutionise theindustry and provide key components into the nascent field of Quantum Computing. Quantum
Computers have the potential to make safer aeroplanes, detect cancers through complex
computational modelling and design software that allows cars to drive themselves.
Plasma Technology, which produces nanofabrication equipment for specialist semiconductor
research and manufacturing, had a challenging year due primarily to the continued weakness indemand for High Brightness Light Emitting Diodes (HBLED). However, Plasma Technology
spearheaded an evolution in semiconductor etch technology with the launch of the
PlasmaPro1000 Astrea etch system. This tool enables large batches of advanced semiconductors

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Announcement of Preliminary Results for the year to 31 March 2014

to be etched simultaneously and will offer manufacturers of HBLEDs market leading productivity
and cost efficiencies.
Industrial Products: Our Industrial Products sector, comprising our Industrial Analysis andIndustrial Components divisions, supplies analytical systems for quality control, environmental andcompliance testing, and components for industry and research. Industrial Analysis comprises our
X-ray Fluorescence (XRF), Optical Emission Spectroscopy (OES) and Magnetic Resonance(NMR) businesses. Industrial Components comprises our Superconducting Wire, Austin Scientificand X-Ray Technology businesses.
This sector delivered revenues of £114.7 million (2013: £125.1 million) and an adjusted operating
profit of £15.6 million (2013: £17.3 million). Deliveries of superconducting wire to the ITER
programme, which seeks to develop a commercially viable source of energy from Nuclear Fusion,
were completed in the first quarter of the year. Revenue from the ITER programme totalled £40
million over the last three years. Excluding the effect of the ITER project, underlying growth in this
sector was 2.3%.
The Industrial Analysis business achieved growth in all geographic territories, despite a downturnin its steel markets. A new portable optical emission spectrometer, PMI-Master Smart, waslaunched in the year as a result of a breakthrough in the miniaturisation of OES instrumentation,
based on the use of optics made of carbon fibre reinforced plastics. The improved mobility offeredby this product brings advantages to customers in the fields of metals analysis, positive material
identification, rapid material verification and sorting. During the year we also launched Pulsar, acost effective nuclear magnetic resonance (NMR) analyser. One specific application is its ability toidentify different species in raw meat. The analysis can be completed locally, on site in a few
seconds, whereas current testing methods for food samples are costly and can take several days.
We have seen significant interest from testing laboratories, supermarkets and government bodies.
Other NMR based tools are being used in numerous applications ranging from monitoring octane
levels in power stations to measuring salt levels in cheese.
The Industrial Components division delivered a strong performance. Austin Scientific was
successful in winning more orders for tools used in the mobile phone industry. X-ray Technology
also did well, with sales from Shasta, a new power supply system, exceeding our targets. Our
Superconducting Wire business also had a good year, increasing productivity as a result of
operational efficiency programmes and with continuing strong demand for MRI wire.
Service: The Service sector comprises the service, support, training, refurbishment, consumables
and accessories elements of our business, together with a business providing service for MRI andCT machines. This sector performed well across all territories with revenue of £66.4 million (2013:£60.6 million) and an adjusted operating profit of £13.5 million (2013: £11.4 million). This was
driven in part by our clinical instrumentation service business which has grown its servicing of GE
Healthcare MRI machines in the USA and selling refurbished parts and systems to the healthcare
market. Successful initiatives such as the OI Training Academy and remote monitoring haveincreased revenues and added to the customer experience, increasing our Net Promoter Score(customer satisfaction) from 62 to 66 this year.

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Announcement of Preliminary Results for the year to 31 March 2014

Financial Review
Trading Performance: Orders in the period were up 2.5% to £342.2 million (2013: £334.0 million).
Including inter-segment trade, the split between sectors was: Nanotechnology Tools £166.3 million,
down 0.2%; Industrial Products £110.0 million, up 7.6%; and Service £67.5 million, up 0.9%. At
the end of the year the Group order book for future deliveries fell to £126.1 million (2013: £130.8
million) partly reflecting the reduced lead times demanded by our customers.
Revenues in the year grew by 2.7% to £360.1 million (2013: 350.8 million). The increase inrevenues due to acquisitions in the comparator periods was £27.4 million. Adverse foreign
currency exchange rate movements reduced reported sales by £5.9 million.
In Nanotechnology Tools, revenues grew 8.7% aided by a full year’s contribution from Asylum, an
acquisition made in December 2012, and just over two months of Andor revenues. We saw growthin both our NanoAnalysis and Omicron Nanoscience businesses but this was offset by a decline at
Plasma Technology as the forecast recovery in the HBLED market failed to materialise. On a
constant currency organic basis and excluding the fall in HBLED sales, growth was 1.0%.
In Industrial Products, revenues reduced by 8.3%. This was expected due to the completion of the
ITER contract in the first quarter of the year. The RMG and Roentgenanalytik acquisitions made in
November 2013 and December 2013 respectively, made a small contribution in the year. On a
constant currency organic basis and excluding the ITER contract, growth was 1.6%.
Service revenues increased by 9.6% as we continued to increase the proportion of extended
service contracts in the Nanotechnology Tools and Industrial Products sectors, and saw continued
growth in Platinum Medical Imaging in the USA. On a constant currency organic basis, growth
was 10.1%.
Adjusted Group gross margins increased from 44.7% to 45.4% despite adverse currency
movements. We saw a positive mix variance due to a reduction in lower value superconducting
wire sales following the completion of the ITER contract and an increase in contributions from ourhigher margin businesses.
Adjusted operating expenses rose by £4.2 million reflecting an increase of £10.9 million spend dueto the inclusion of the acquired businesses, a £0.3 million benefit from foreign exchange rate
movements and a saving of £6.4 million in underlying costs.
Adjusted operating profit increased by 2.0% to £50.3 million with an adjusted operating profit
margin of 14.0% (2013: 14.1%).

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Announcement of Preliminary Results for the year to 31 March 2014

Adjusting Items: The Directors believe that adjusted profit before tax gives a clearer indication of
the underlying performance of the business. A reconciliation of reported profit before tax toadjusted profit before tax is given below:
2013
2014 (Restated)£m£mProfit before income tax
28.4
24.0
Reversal of acquisition related fair value adjustments to inventory
0.5
3.7
2.1
Acquisition related costs
7.8
13.8
Amortisation and impairment of acquired intangibles
14.7
0.2
0.9
Unwind of discount in respect of deferred consideration
Mark to market (gain)/loss in respect of derivative financial instruments
2.0
(4.1)
Settlement loss on US pension scheme
—
0.1
47.0
Adjusted profit before income tax
47.1
Share of taxation
(9.7)
(8.7)
37.3
Adjusted profit for the year
38.4
Financial income and expenditure: Within financial income and expenditure, the cost of interest
on loans and overdrafts and the commitment fee for our revolving credit facility, offset by depositinterest, amounted to £1.2 million (2013: £0.6 million). The interest charge on net pension scheme
liabilities was £2.0 million, a movement of £0.3 million over the prior year.
The Group uses derivative products to hedge its exposure to fluctuations in foreign exchange
rates. It is Group policy to have in place at the beginning of a financial year hedging instruments tocover 80% of its forecast transactional exposure for that year. On acquisition, Andor had limited
foreign exchange hedges in place. Hedges will be put in place during the first half of 2014/15 sothat by the end of the half year they will be in line with Group policy. Based on current spot rates
and the hedging we have in place, we believe that foreign exchange will adversely impact profits inthe year to March 2015 by approximately £5 million.
In common with a number of other companies, the Group has decided that the additional costs ofmeeting the extensive documentation requirements of IAS 39 to apply hedge accounting to these
foreign exchange hedges cannot be justified. Accordingly the Group does not use hedge
accounting for these derivatives. Net movements on marking to market such derivatives at thebalance sheet date are disclosed in the income statement as Financial Expenditure and excluded
from our calculation of adjusted profit before tax (Note 1). The mark to market gain in respect ofderivative financial instruments was £4.1 million (2013: £2.0 million loss).
The Group also uses derivative products to hedge its exposure to fluctuations in the price ofcopper, a major component for the Superconducting Wire business. Given the small number ofcontracts involved, we apply hedge accounting for these transactions and consequently the resultsof marking to market are excluded from the Income Statement.
Taxation: The Group’s weighted average statutory tax rate was 29% (2013: 30%). The underlying
rate on the profit before tax for the Group before adjusting items was 18% (2013: 21%). Thisdifference is due to brought forward tax losses (see below), tax incentives relating to income
earned from technology assets and a tax efficient financing structure.

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9Announcement of Preliminary Results for the year to 31 March 2014

In the year ended March 2011, due to the improved performance of the Group’s UK businesses,
we recognised a deferred tax asset of £11.3 million in respect of brought forward tax losses in the
UK and a corresponding credit to the Income Statement. We believe that this was exceptional
both in nature and quantum and therefore excluded it from our calculation of adjusted earnings per
share. Of this asset value £2.2 million reversed in the year ended March 2014 and to beconsistent we have excluded it from the calculation of adjusted earnings per share (see Note 2).
We expect the final £1.2 million to reverse in the year ending March 2015.
Earnings: After a tax charge of £5.8 million (2013: £7.4 million), the reported net profit for thefinancial year was £18.2 million (2013: £21.0 million). With a weighted average number of sharesof 56.8 million (2013: 56.2 million), the reported basic earnings per share were 32.1 pence (2013:37.4 pence).
Adjusted profit before tax (Note 1) grew by £0.1 million to £47.1 million which equates to adjusted
earnings per share of 67.7 pence (2013: 66.5 pence), an increase of 1.8%.
Dividends: In 2011 the Group moved to a progressive dividend policy, whereby we seek to raise
dividends as adjusted earnings per share rise, although not necessarily in the same proportion. In
recommending the dividend, the Directors take account of the perceived need for cash to expand
the business both organically and through acquisition. For the year just ended, the proposed final
dividend of 9.04 pence per share (2013: 8.15 pence), payable on 23 October 2014 to shareholders
who are on the register on 26 September 2014, gives a total dividend for the year of 12.4 pence
per share (2013: 11.2 pence). Dividend cover before adjusting items was 5.5 times (2013: 5.9times).
Investment in research and development (R&D): Total cash spend on R&D in the year was£27.9 million or 7.7% of sales (2013: £25.1 million, 7.2%).
A reconciliation between the amounts charged to the Income Statement and the cash spent isgiven below:
2013
2014
£m
£m
R&D expense charged to the consolidated statement of
24.3
25.1
income.
(0.7)(0.8)
Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
0.8
2.1
Less: amortisation of R&D costs capitalised as intangibles
(3.9)
(3.9)
Add: amounts capitalised as intangible assets
4.6
5.4
Total cash spent on R&D during the year
25.1
27.9
The net book value of capitalised development costs at the end of the financial year was £14.1
million (2013: £12.3 million).
Balance sheet: Net assets rose from £137.7 million to £140.2 million in the year.
Net working capital (excluding derivative financial instruments, contingent consideration and tax
payable/receivable) rose to £41.0 million.
Inventory turns decreased by 0.4 to 2.9 while debtor days reduced from 51 days to 45 days.

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10Announcement of Preliminary Results for the year to 31 March 2014

Acquisitions and Disposals: On 21 January 2014 the Group acquired Andor Technology plc for a
net cash consideration of £158.1 million. Andor is a market leading supplier of high performance
optical cameras, microscope systems and software. The acquisition was funded from a mixture of
cash and a new debt facility.
On 31 December 2013 the Group acquired Roentgenanalytik Systeme GmbH for a net cash
consideration of £1.6 million. The company specialises in designing and supplying instruments forcoating thickness measurement and material analysis, using X-ray fluorescence. The acquisition
was funded from existing facilities.
On 8 November 2013 the Group acquired RMG Technology Limited for an initial net cash
consideration of £5.7 million. RMG is a UK business specialising in Laser Induced Breakdown
Spectroscopy. The acquisition was funded from existing facilities.
Pensions: The Group has defined benefit pension schemes in the UK and the USA. Both havebeen closed to new entrants since 2001 and closed to future accrual from July 2010. The total
deficit, before tax, under IAS19 on these pension schemes fell in the year by £1.6 million to £46.3
million. There is a corresponding deferred tax asset of £9.6 million.
Assets of the schemes at 31 March 2014 were £196.6 million (2013: £198.0 million), whileliabilities reduced from £245.9 million to £242.9 million.
The latest triennial actuarial valuation of the UK scheme was carried out as at 31 March 2012 andresulted in an actuarial deficit of £48.8 million. A long-term plan for recovering the deficit over 8
years has been agreed between the Company and the Pension Trustee. Under the deficit
recovery plan, payments will increase for the three years to March 2015 by the greater of 10
percent or the percentage increase in dividend per share. Thereafter, the payment will increase by
3.05% per annum. The payment in 2013/14, the second year of the new plan, was £5.6 million.
Cash: Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increasedby 2.4% to £59.2 million. Working capital increased by £20.9 million.
Cash generated from operations was £28.4 million (2013: £50.4 million). The ratio of operating
cash to adjusted operating profit, which is one of our Key Performance Indicators, was 51.9%(2013: 84.6%). Performance in the year was impacted by an increase in working capital, inparticular a decrease in customer deposits of £10.9 million primarily due to individually significant
customer deposits received in the prior year.
Net debt at the year-end was £124.3 million (2013: net cash £39.2 million). During the year theGroup entered into a committed Revolving Credit Facility with a club of three banks. The facility,
which extends to December 2018, is for £100 million and is extendable to £150 million by mutual
consent. On 31 March 2014 the Group issued a £44.5 million seven year fixed rate loan note to
Pricoa Capital. In August 2013 the Group borrowed £25 million from the European Investment
Bank. This fixed rate loan has a seven year term with amortisation starting in the fourth year.
These facilities were entered into to support the acquisition of Andor Technology plc. In addition,
the Group has overdraft facilities totalling £15.7 million.

Oxford Instruments plc

11Announcement of Preliminary Results for the year to 31 March 2014

Employees: The average number of people employed during the year was 2,050, an increase of
123 over the prior year. As a result of acquisitions made in the year, 434 employees joined theGroup.
Going concern: The Group’s business activities, together with the factors likely to affect its future
development, performance and position, are set out in the Performance and Strategy andOperations sections. The financial position of the Group, its cash flows, liquidity position andborrowing facilities are described in this Financial Review.
The diverse nature of the Group, combined with its financial strength, provides a solid foundation
for a sustainable business. The Directors have reviewed the Group’s forecasts and flexed them toincorporate a number of potential scenarios relating to changes in trading performance. The
Directors believe that the Group will be able to operate within its existing debt facilities. This
review also considered hedging arrangements in place. The Directors believe that the Group iswell placed to manage its business risks successfully.
The Financial Statements have been prepared on a going concern basis, based on the Directors’
opinion, after making reasonable enquiries, that the Group has adequate resources to continue inoperational existence for the foreseeable future.
Forward-Looking Statements: This document contains certain forward-looking statements. The
forward-looking statements reflect the knowledge and information available to the Company during
the preparation and up to the publication of this document. By their very nature, these statements
depend upon circumstances and relate to events that may occur in the future thereby involving a
degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecastby the Company.

Oxford Instruments plc

12Announcement of Preliminary Results for the year to 31 March 2014

Consolidated Statement of Income year ended 31 March 2014

Year ended 31 March 2013 (restated)*

Year ended 31 March 2014

Notes

Adjusted**

AdjustingItems**

Total

Adjusted**

AdjustingItems**

Total

£m

£m

£m

£m

£m

£m

360.1

—

360.1

350.8

—

350.8

Cost of sales(196.6)(3.7)(200.3)(194.0)(0.5)(194.5)Gross profit

163.5

(3.7)

159.8

156.8

(0.5)

156.3

(25.1)—(25.1)(24.3)—(24.3)

Selling and marketing(56.7)—(56.7)(51.1)—(51.1)

Administration and sharedservices(33.1)(22.6)(55.7)(35.3)(15.9)(51.2)

Foreign exchange

1.7

—

1.7

3.2

—

3.2

Operating profit

50.3(26.3)

24.0

49.3(16.4)

32.9

Other financial income

0.3

4.1

4.4

0.3

—

0.3

Financial income

0.3

4.1

4.4

0.3

—

0.3

Interest charge on pension
scheme net liabilities

(2.0)

—

(2.0)

(1.7)

—

(1.7)

Other financial expenditure

(1.5)

(0.9)

(2.4)

(0.9)

(2.2)

(3.1)

Financial expenditure

(3.5)

(0.9)

(4.4)

(2.6)

(2.2)

(4.8)

Revenue

Research and development

3

4Profit before income tax

Income tax (expense)/credit

6

Profit for the year attributable toequity shareholders of the parent

47.1(23.1)

24.0

47.0(18.6)

28.4

(8.7)

2.9

(5.8)

(9.7)

2.3

(7.4)

38.4

(20.2)

18.2

37.3(16.3)

21.0

pence

pence

pence

pence

Earnings per share

Basic earnings per share

2

67.7

32.1

66.5

37.4

Diluted earnings per share

2

67.3

31.9

65.7

37.0

Dividends per share

Dividends paid

7

11.2

10.0

Dividends proposed

7

12.4

11.2

* See note 8 for details of restatement of comparative information.
** Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1.

Oxford Instruments plc

13

Announcement of Preliminary Results for the year to 31 March 2014

Consolidated Statement of Comprehensive Income
year ended 31 March 2014

2014
£m

2013
(Restated)*
£m

18.2

21.0

—

—

(8.4)

3.4

—

—

Remeasurement loss in respect of post-retirement benefits(1.9)(15.7)Tax on items that will not be reclassified to profit or loss

(1.0)

3.5

Total other comprehensive expense(11.3)

(8.8)

6.9

12.2

Profit for the year

Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss

Gain on effective portion of changes in fair value of cash flow hedges, net ofamounts recycled
Foreign exchange translation differences
Tax on items that may be reclassified to profit or loss
Items that will not be reclassified subsequently to profit or loss

Total comprehensive income for the year attributable to equity
shareholders of the parent*See Note 8 for details of restatement of comparative information.

Oxford Instruments plc

14

Announcement of Preliminary Results for the year to 31 March 2014

Consolidated Statement of Financial Position
as at 31 March 2014

2014
£m

2013
£m

Property, plant and equipment

34.4

32.9

Intangible assets

247.9

91.9

Deferred tax assets

11.2

25.0

293.5

149.8

Inventories

68.3

58.1

Trade and other receivables

80.9

71.8

Current income tax recoverable

1.0

0.4

Derivative financial instruments

5.3

2.2

AssetsNon-current assets

Current assets

Cash and cash equivalents
Total assets

32.6

39.2

188.1

171.7

481.6

321.5

EquityCapital and reserves attributable to the Company’s equity shareholders

Share capital

2.9

2.8

Share premium

61.3

60.6

Other reserves

0.1

0.1

Translation reserve

(4.4)

4.0

Retained earnings

80.3

70.2

140.2

137.7

Liabilities
Non-current liabilities

Bank loans

141.4

—

Other payables

13.1

11.1

Retirement benefit obligations

46.3

47.9

Deferred tax liabilities

12.0

6.2

212.8

65.2

Current liabilities

Bank loans

15.5

—

Trade and other payables

99.2

101.4

Current income tax payables

3.7

4.3

Derivative financial instruments

0.5

2.6

Provisions

9.7

10.3

128.6

118.6

Total liabilities

341.4

183.8

Total liabilities and equity

481.6

321.5

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

Jonathan Flint
Director

Oxford Instruments plc

Kevin Boyd
Director

Company Number: 775598

15

Announcement of Preliminary Results for the year to 31 March 2014

Consolidated Statement of Changes in Equity
year ended 31 March 2014

Other
reserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

60.6

0.1

4.0

70.2

137.7

—

—

—

—

18.2

18.2

– Foreign exchange translation differences

—

—

—

(8.4)

—

(8.4)

– Gain on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

—

—

—

—

—

—

– Remeasurement loss in respect of post-retirement
benefits

—

—

—

—

(1.9)

(1.9)

– Tax on items recognised directly in othercomprehensive income

—

—

—

—

(1.0)

(1.0)

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

—

—

—

(8.4)

15.3

6.9

—

—

—

—

1.6

1.6

Balance at 1 April 2013

Sharecapital£mSharepremium
account£m

2.8

Total comprehensive income:

Profit for the year
Other comprehensive income:Transactions with owners recorded directly inequity:– Credit in respect of employee service costs
settled by award of share options– Tax charge in respect of share options

—

—

—

—

(0.4)

(0.4)

– Proceeds from shares issued

0.1

0.7

—

—

—

0.8

—

—

—

(6.4)

(6.4)

– Dividends paid—

Total transactions with owners recorded directlyin equity:

0.1

0.7

—

—

(5.2)

(4.4)

Balance at 31 March 2014

2.9

61.3

0.1

(4.4)

80.3

140.2

Other reserves comprise the capital redemption reserve, which represents the nominal value of shares repurchased and thencancelled during the year ended 31 March 1999, and the hedging reserve in respect of the effective portion of changes in value ofcommodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 from the translationof the Group’s net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2013: 183,145) of its own shares in an employee benefit trust. The cost of these shares is included
within retained earnings. There was no movement in the shares held by the trust during the year.

Oxford Instruments plc

16

Announcement of Preliminary Results for the year to 31 March 2014

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

Other
reserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

60.2

0.1

0.6

63.4

127.1

—

—

—

—

21.0

21.0

– Foreign exchange translation differences

—

—

—

3.4

—

3.4

– Gain on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled

—

—

—

—

—

—

– Remeasurement loss in respect of post-retirement
benefits

—

—

—

—

(15.7)(15.7)– Tax on items recognised directly in othercomprehensive income

—

—

—

—

3.5

3.5

Total comprehensive incomeattributable toequity shareholders of the parent

—

—

—

3.4

8.8

12.2

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

—

—

—

—

1.4

1.4

– Tax credit in respect of share options

—

—

—

—

2.2

2.2

– Proceeds from shares issued

—

0.4

—

—

—

0.4

– Dividends paid

—

—

—

—

(5.6)

(5.6)

Balance at 1 April 2012

Share
capital£mSharepremium
account£m

2.8

Total comprehensive income:

Profit for the year
Other comprehensive income:Transactions with owners recorded directly inequity:Total transactions with owners recorded directlyin equity:

—

0.4

—

—

(2.0)

(1.6)

Balance at 31 March 2013

2.8

60.6

0.1

4.0

70.2

137.7

*See Note 8 for details of restatement of comparative information.

Oxford Instruments plc

17

Announcement of Preliminary Results for the year to 31 March 2014

Consolidated Statement of Cash Flows year ended 31 March 2014
Profit for the year
Adjustments for:
Income tax expense
Net financial expense
Acquisition related fair value adjustments to inventory
Acquisition related costs
Settlement loss on US pension scheme
Amortisation and impairment of acquired intangibles
Depreciation of property, plant and equipment
Amortisation and impairment of capitalised development costs
Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of property, plant and equipment
Cost of equity settled employee share schemes
Acquisition related costs paid
Cash payments to the pension scheme more than the charge to operating profit
Operating cash flows before movements in working capital(Increase)/decrease in inventories
Increase in receivables(Decrease)/Increase in payables and provisions
Decrease in customer deposits
Cash generated from operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of product line and subsidiary
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Increase in borrowings
Dividends paid
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year

Reconciliation of changes in cash and cash equivalents to movement in net debt
(Decrease)/Increase in cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Cash inflow from increase in debt
Movement in net cash in the year
Net cash at start of the year
Net (debt)/cash at the end of the year

2013
2014 (Restated)*
£m
£m
18.2

21.0

5.8
—
3.7
7.8
0.1
14.7
5.0
3.9
59.2
0.3
1.6
(6.4)
(5.4)
49.3
(2.9)
(3.8)
(3.3)
(10.9)

7.4
4.5
0.5
2.1
—
13.8
4.6
3.9
57.8
0.2
1.4
(1.2)
(4.9)
53.3
4.7
(9.4)
2.8
(1.0)

28.4
(1.0)
(6.2)

50.4
(0.5)
(8.4)

21.2

41.5

—
(165.7)
(6.8)
(5.4)

1.0
(20.1)(8.6)(4.6)(177.9)(32.3)

0.8
156.9
(6.4)
151.3
(5.4)
39.2
(1.2)

0.4
—
(5.6)
(5.2)
4.0
35.1
0.1

32.6

39.2

(5.4)
(1.2)
(6.6)
(156.9)

4.0
0.1
4.1
—

(163.5)
39.2

4.1
35.1

(124.3)

39.2*See note 8 for details of restatement of comparative information.

Oxford Instruments plc

18

Announcement of Preliminary Results for the year to 31 March 2014
1

NON-GAAP MEASURESThe Directors present the following non-GAAP measures as they consider that they give a better indication of theunderlying performance of the business.
Reconciliation between profit before income tax and adjusted profit
2013
2014 (Restated)*£m£mProfit before income tax

24.0

28.4

Reversal of acquisition related fair value adjustments to inventory

3.7

0.5

Acquisition related costs

7.8

2.1

Amortisation and impairment of acquired intangibles

14.7

13.8

Unwind of discount in respect of deferred consideration

0.9

0.2

Mark to market (gain)/loss in respect of derivative financial instruments

(4.1)

2.0

Settlement loss on US pension scheme

0.1—

Adjusted profit before income tax

47.1

47.0

Share of taxation

(8.7)

(9.7)

Adjusted profit for the year

38.4

37.3

*See note 8 for details of restatement of comparative information.

The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide ameasure that includes results from acquired businesses on a consistent basis over time to assist comparison of
performance.
Acquisition related costs comprise professional fees incurred in relation to mergers and acquisitions activity, postacquisition restructuring costs and any consideration which, under IFRS 3 (revised), falls to be treated as a postacquisition employment expense.
In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment ofacquired intangible assets and goodwill, along with the unwind of discounts in respect of deferred consideration.
During the year the Group purchased annuities for 27 members of the US defined benefit pension scheme. A
settlement loss of £0.1m crystallised on purchase.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition,
they are also measured at fair value. In respect of instruments used to hedge foreign exchange risk and interest raterisk the Group does not take advantage of the hedge accounting rules provided for in IAS 39 since that standard
requires certain stringent criteria to be met in order to hedge account, which, in the particular circumstances of theGroup, are considered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts forthese derivative financial instruments at fair value through profit or loss. To the extent that instruments are hedges of
future transactions, adjusted profit for the year is stated before changes in the valuation of these instruments so thatthe underlying performance of the Group can be more clearly seen.
In calculating the share of tax attributable to adjusted profit before tax in 2011 a one-off recognition of deferred tax
assets relating to the Group’s UK businesses of £11.3m was excluded. At that time the Group announced its intention
to exclude the reversal of this deferred tax from the calculation of the share of tax attributable to adjusted profit before
tax in the years in which it reverses. In the current period deferred tax of £2.2m (2013: £3.3m) has reversed andconsequently been excluded from the tax attributable to adjusted profit before tax.

Oxford Instruments plc

19Announcement of Preliminary Results for the year to 31 March 2014
2

EARNINGS PER SHARE

The calculation of basic and adjusted earnings per share is based on the profit for the year as shown in theConsolidated Statement of Income and the adjusted profit for the year as shown in note 1 respectively. Basic andadjusted earnings are divided by the weighted average number of ordinary shares outstanding during the year,
excluding shares held by the Employee Share Ownership Trust.
2013
2014 (Restated)*£m£m
Basic earnings

18.2

21.0

Adjusted earnings (note 1)

38.4

37.3

Weighted average number of shares

56.8

56.2

pence

pence

Basic earnings per share

32.1

37.4

Adjusted earnings per share

67.7

66.5

*See note 8 for details of restatement of comparative information.

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

57.0

56.4

Less shares held by Employee Share Ownership Trust

(0.2)

(0.2)

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

56.8

56.2

The following table shows the effect of share options on the calculation of diluted earnings per share:
2014
Sharesmillion2013
SharesmillionWeighted average number of ordinary shares per basic earnings per share calculations

56.8

56.2

Effect of shares under option

0.4

0.6

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

57.2

56.8

3

SEGMENT INFORMATIONThe Group has seven operating segments. These operating segments have been combined into three aggregatedoperating segments to the extent that they have similar economic characteristics, with relevance to products andservices, type and class of customer, methods of sale and distribution and the regulatory environment in which they
operate. Each of these three aggregated operating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregatedoperating segments on the basis of the economic characteristics discussed below:• the Nanotechnology Tools segment contains a group of businesses supplying similar products, characterised by ahigh degree of customisation and high unit prices. These are the Group’s highest technology products serving
research customers in both the public and private sectors. The results of Andor Technology, acquired during theyear, are included in this segment;• the Industrial Products segment contains a group of businesses supplying high technology products andcomponents manufactured in medium volume for industrial customers; andtheService segment contains the Group’s service business as well as service revenues from other parts of the•Group.

Oxford Instruments plc

20

Announcement of Preliminary Results for the year to 31 March 2014
3

SEGMENT INFORMATION CONT’D

Reportable segment results include items directly attributable to a segment as well as those which can be allocated ona reasonable basis. Inter-segment pricing is determined on an arm’s length basis. The operating results of each are
regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete
financial information is available for each segment and used by the Board of Directors for decisions on resource
allocation and to assess performance. No asset information is presented below as this information is not presented inreporting to the Group’s Board of Directors.
a)Analysis by businessYear to 31 March 2014
External revenue

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

180.5

113.3

66.3

360.1

Inter-segment revenue

0.1

1.4

0.1

Total segment revenue

180.6

114.7

66.4

Segment adjusted operating profit

21.2

15.6

13.5

50.3

Nanotechnology
Tools
£m

Industrial
Products£m

Service
£m

Total
£m

165.8

124.5

60.5

350.8

Year to 31 March 2013
External revenue
Inter-segment revenue

0.3

0.6

0.1

Total segment revenue

166.1

125.1

60.6

Segment adjusted operating profit (restated*)

20.6

17.3

11.4

49.3

*See note 8 for details of restatement of comparative information.

Reconciliation of reportable segment profit
2013
2014 (restated)*£m£m
Adjusted profit for reportable segments

50.3

49.3

Acquisition related costs

(7.8)

(2.1)

Settlement loss on US pension scheme

(0.1)

—

Reversal of acquisition related fair value adjustments to inventory

(3.7)

(0.5)

Amortisation and impairment of acquired intangibles(14.7)(13.8)

Financial income

4.4

0.3

Financial expenditure

(4.4)

(4.8)

Profit before income tax

24.0

28.4

*See note 8 for details of restatement of comparative information.

Oxford Instruments plc

21

Announcement of Preliminary Results for the year to 31 March 2014
4

RESEARCH AND DEVELOPMENT

The total R&D spend by the Group is as follows:
2013

2014

Total
£m

Nanotechnology Industrial
Tools Products
£m
£m

Total
£m

7.5

25.1

17.0

7.3

24.3

Nanotechnology
Tools
£m

Industrial
Products£m

R&D expense charged to the Consolidated Statementof Income17.6

Less: depreciation of R&D related fixed assets

(0.2)

(0.6)

(0.8)

(0.2)

(0.5)

(0.7)

Add: amounts capitalised as fixed assets

0.6

1.5

2.1

0.1

0.7

0.8

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

(3.0)

(0.9)

(3.9)

(2.9)

(1.0)

(3.9)

Add: amounts capitalised as intangible assets

3.8

1.6

5.4

2.7

1.9

4.6

Total cash spent on R&D during the year

18.8

9.1

27.9

16.7

8.4

25.1

5

ACQUISITIONS

Andor Technology plc
On 21 January 2014 the Group acquired 100% of the issued listed share capital of Andor Technology plc for a net
cash consideration of £158.1m. Andor is a market leading supplier of high performance optical cameras, microscope
systems and software.
The book and provisional fair values of the assets and liabilities acquired are given in the table below. Fair value
adjustments have been made to better align the accounting policies of the acquired business with the Groupaccounting policies and to reflect the fair value of assets and liabilities acquired. The business has been acquired forthe purpose of integrating into the Nanotechnology Tools segment where it is believed that synergies can be obtained
particularly in respect of routes to market.
Book value£mProvisional
Adjustments£mProvisional
Fair value£mIntangible fixed assets

9.4

70.2

79.6

Tangible fixed assets

6.0

(4.0)

2.0

Inventories

11.1

3.0

14.1

Trade and other receivables

10.3

—

10.3

Trade and other payables(13.5)(1.3)(14.8)

Deferred tax(0.5)(15.6)(16.1)

Cash

17.2

—

17.2

Net assets acquired

40.0

52.3

92.3

Goodwill

83.0

Total consideration

175.3

Cash acquired(17.2)Net cash outflow relating to the acquisition

158.1

The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce andsynergistic benefits expected to arise from the acquisition.
The fair values shown are provisional in respect of deferred tax assets and liabilities and provisions relating to certain
claims since at the time of publication of these financial statements it has not been possible to fully ascertain all
information necessary to compute the amounts which should be included in the opening balance sheet.
.

Oxford Instruments plc

22Announcement of Preliminary Results for the year to 31 March 2014
5

ACQUISITIONS CONT’D

RoentgenAnalytik Systeme GmbHOn 31 December 2013 the Group acquired 100% of the issued share capital of Roentgenanalytik Systeme GmbH for a
net cash consideration of £1.6m.The company specialises in designing and supplying instruments for coating
thickness measurement and material analysis, using X-ray fluorescence (XRF).
The book and provisional fair values of the assets and liabilities acquired are given in the table below. Fair value
adjustments have been made to better align the accounting policies of the acquired business with the Groupaccounting policies and to reflect the fair value of assets and liabilities acquired. The business has been acquired tostrengthen Oxford Instruments’ range of X-ray Fluorescence (XRF) materials and coating thickness analysers.
Book value£mProvisional
Adjustments£mProvisional
Fair value£mIntangible fixed assets

—

1.2

1.2

Inventories

0.2

—

0.2

Trade and other receivables

0.1

—

0.1

Trade and other payables

(0.3)

0.2

(0.1)

Cash

0.1

—

0.1

Net assets acquired

0.1

1.4

1.5

Goodwill

0.2

Total consideration

1.7

Cash acquired(0.1)

Net cash outflow relating to the acquisition

1.6

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired workforce andsynergistic benefits expected to arise from the acquisition. The fair values shown are provisional in respect ofprovisions relating to certain claims since at the time of publication of these financial statements it has not beenpossible to fully ascertain all information necessary to compute the amounts which should be included in the opening
balance sheet.
RMG Technology Ltd
On 8 November 2013 the Group acquired 100% of the issued share capital of RMG Technology Limited for an initial
net cash consideration of £5.7m. RMG is a UK business specialising in Laser Induced Breakdown Spectrography.
The book and provisional fair values of the assets and liabilities acquired are given in the table below. Fair value
adjustments have been made to better align the accounting policies of the acquired business with the Groupaccounting policies. The business has been acquired for the purpose of integrating into the Industrial Analysis
segment where it will add a unique hand-held analyser to the Group’s product portfolio.
Book value£mProvisional
Adjustments£mProvisional
Fair value£mIntangible fixed assets

—

8.2

8.2

Inventories

0.1

—

0.1

Trade and other receivables

0.2

—

0.2

Trade and other payables

(0.3)

—

(0.3)

Deferred tax

—

(1.6)

(1.6)

Cash

0.4

—

0.4

Net assets acquired

0.4

6.6

7.0

Goodwill

0.5

Total consideration

7.5

Cash acquired(0.4)

Contingent consideration(1.4)

Net cash outflow relating to the acquisition

5.7

Oxford Instruments plc

23

Announcement of Preliminary Results for the year to 31 March 2014
5

ACQUISITIONS CONT’D

The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce andsynergistic benefits expected to arise from the acquisition. Further contingent consideration of up to £4m is payable
based on revenue of the acquired business in the year to 31 March 2015.
The fair values shown are provisional in respect of provisions relating to certain claims since at the time of publicationof these financial statements it has not been possible to fully ascertain all information necessary to compute theamounts which should be included in the opening balance sheet.
The three acquisitions above contributed revenue of £15.3m and a reported operating profit of £2.9m to the Group’s
result for the period. Had the acquisitions taken place on 1 April 2013 the equivalent Group numbers would have beenrevenue of £409.1m and a reported operating profit of £28.6m.
Acquisition costs of £4.0m, £0.1m and £0.1m have been charged to the consolidated statement of income as adjusting
items in respect of the purchases of Andor Technology plc, RoentgenAnalytik Systeme GmbH and RMG Technology
Ltd respectively.
The book value of receivables in the tables above represent the gross contractual amounts receivable. The fair value
adjustments to receivables represent the best estimate at the acquisition date of the cash flows not expected to becollected.
Asylum Research Corporation
On 19 December 2012 the Group acquired the trade and certain assets of Asylum Research Corporation for an initial
cash consideration of £19.8m. Further contingent consideration of between £2.0m and £31.6m is payable based on
post acquisition business performance. At 31 March 2014 £6.5m is provided in the accounts in respect of thiscontingent consideration being the fair value of the contingent consideration payable. Asylum Research is a leading
manufacturer of atomic force and scanning probe microscopes and is headquartered in Santa Barbara, USA withsubsidiaries in the UK, Germany and Taiwan.
The book and fair value of the assets and liabilities acquired is given in the table below. Fair value adjustments havebeen made to better align the accounting policies of the acquired business with the Group accounting policies. The
business has been acquired for the purpose of integrating into the Nanotechnology Tools segment where it is believedthat synergies can be obtained particularly in respect of routes to market.
Book value£m

Adjustments£m

Fair value£mIntangible fixed assets

—

14.4

14.4

Tangible fixed assets

0.4

(0.1)

0.3

Inventories

2.4

(0.3)

2.1

Trade and other receivables

1.7

—

1.7

Trade and other payables

(2.3)

(0.2)

(2.5)

Deferred tax

—

0.3

0.3

Net assets acquired

2.2

14.1

16.3

Goodwill

9.3

Total consideration

25.6

Contingent consideration at acquisition(5.8)

Net cash outflow relating to the acquisition

19.8

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

Oxford Instruments plc

24

Announcement of Preliminary Results for the year to 31 March 2014
6

INCOME TAX EXPENSE

Recognised in the Consolidated Statement of Income
2013
2014 (Restated)*£m£m
Current tax expense

Current year

6.5

8.8

Adjustment in respect of prior years

(0.1)

(1.0)

6.4

7.8

Origination and reversal of temporary differences

0.2

(0.4)

Recognition of deferred tax not previously recognised

—

(0.2)

Deferred tax expense

Adjustment in respect of prior years

(0.8)

0.2

(0.6)

(0.4)

5.8

7.4

Profit before income tax

24.0

28.4

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

5.5

6.8

Tax rates other than the UK standard rate

1.7

1.9

Total tax expense

Reconciliation of effective tax rate

Effect of:
Change in rate at which deferred tax recognised

(0.2)

(0.3)

Non-taxable income and expenses

(0.1)

0.8

Tax incentives not recognised in the Consolidated Statement of Income

(0.4)

(1.2)

—

(0.2)

Recognition of deferred tax not previously recognised
Movement in unrecognised deferred tax

0.2

0.4

Adjustment in respect of prior years

(0.9)

(0.8)

Total tax expense

5.8

7.4

1.0

(3.5)

1.0

(3.5)

0.4

(2.2)

Taxation charge/(credit) recognised in other comprehensive income

Deferred tax – relating to employee benefits
Taxation charge/(credit) recognised directly in equity

Deferred tax – relating to share options*See note 8 for details of restatement of comparative information.

On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21%(effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. The UK
deferred tax balances at 31 March 2014 have been calculated based on the rate of 20% which was substantively
enacted at the balance sheet date.

Oxford Instruments plc

25

Announcement of Preliminary Results for the year to 31 March 2014
7

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:
2014
pence

2013
pence

Previous year interim dividend

3.05

2.772

Previous year final dividend

8.15

7.228

11.20

10.000The following dividends per share were proposed by the Group in respect of each accounting year presented:
2014
pence

2013
pence

Interim dividend

3.36

3.05

Final dividend

9.04

8.15

12.40

11.20

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

8

BASIS OF PREPARATION

Except as noted below, this preliminary statement has been prepared under the same accounting policies as thoseused to prepare the 2013 Report and Financial Statements.
IAS 19 restatement
As a result of the amendments to IAS 19 Employee Benefits, the Group has changed its accounting policy with respect
to determining the income or expense related to its defined benefit pension scheme. The standard prescribes that aninterest expense or income is calculated on the net defined benefit liability by applying the discount rate to the net
defined benefit liability. This replaces the interest expense on the defined benefit obligation and the expected return onplan assets. In addition, the revised standard clarifies the treatment for scheme administration expenses. The revised
standard requires retrospective application therefore the table below reflects the adjustments made to the comparative
amounts for the year ended 31 March 2013.
The restatements in the year ended 31 March 2013 comprise the reversal of the interest expense on the defined
benefit obligation of £10.4m and the interest income on pension scheme assets of £9.5m to be replaced by a net
interest expense of £1.7m and an increase in the scheme administration expenses charged to the consolidated
income statement of £0.4m. The associated income tax has been restated accordingly. Actuarial losses recognised in
the consolidated statement of comprehensive income of £16.9m have been restated into a remeasurement loss of£15.7m with the associated income tax also restated.

Oxford Instruments plc

26

Announcement of Preliminary Results for the year to 31 March 2014
8

BASIS OF PREPARATION CONT’D
31 March 2013£mConsolidated income statement
Increase in administrative and shared service expenses(0.4)

Decrease in finance expense

8.7

Decrease in finance income(9.5)

Decrease in income tax expense

0.2

Decrease in profit for the period(1.0)

Decrease in basic and diluted earnings per share(1.8p)

Consolidated statement of comprehensive income
Other comprehensive income:Decrease in re-measurement of defined benefit plans

1.2

Decrease in income tax on other comprehensive income(0.2)

Increase in other comprehensive income

1.0

The revised standard stipulates that remeasurement gains and losses are recognised immediately in the periods inwhich they occur. The Group already adopted this policy and therefore there are no changes to the consolidatedbalance sheet and consolidated cash flow statement.
In the current year, the revised standard has had the effect of reducing the Group's profit after tax by £2.0m andreducing the remeasurement loss on post-retirement benefits by the same amount.
The principal exchange rates used to translate the Group’s overseas results were as follows:Year end rates

2014

2013

US Dollar

1.67

1.52

Euro

1.21

1.18

Yen

172

143

US Dollar

Euro

Yen

April 2013

1.53

1.19

147

May

1.53

1.18

152

June

1.52

1.17

152

July

1.53

1.16

151

August

1.54

1.17

151

September

1.58

1.18

155

October

1.62

1.18

158

November

1.63

1.19

163

December

1.65

1.20

171

January 2014

1.65

1.21

171

February

1.66

1.22

169

March

1.67

1.21

171

Average translation rates 2014

Oxford Instruments plc

27

Announcement of Preliminary Results for the year to 31 March 2014
8

BASIS OF PREPARATION CONT’D

Average translation rates 2013

US Dollar

Euro

Yen

Quarter 1

1.58

1.23

127

Quarter 2

1.59

1.26

125

Quarter 3

1.61

1.24

132

Quarter 4

1.56

1.19

142

The financial information set out above does not constitute the company's statutory accounts for the years ended 31
March 2014 or 2013. Statutory accounts for 2013 have been delivered to the registrar of companies, and those for2014 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii)
did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying
their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Company is registered in England Number 775598.
9

THE ANNUAL GENERAL MEETING

The Annual General Meeting will be held on Tuesday, 9 September 2014 at 2.30 pm at Group Head Office, Tubney
Woods, Abingdon, Oxfordshire, OX13 5QX.

Oxford Instruments plc

28

Announcement of Preliminary Results for the year to 31 March 2014
PRINCIPAL RISKS
Specific
Risk
Technical
Risk

Economic
Environment

Acquisitions

Foreignexchangevolatility

Context

Risk

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

Failure of theadvanced
technologies
applied by theGroup to produce
commercial
products, capableof being
manufactured andsold profitably.

The recent global
recession andprevailing economic
downturn have resulted
in cuts to bothgovernment and private
sector spending.

Demand for theGroup’s products
may be lower than
anticipated.

Part of the growth of
Oxford Instruments isplanned to come fromacquisitions which
provide the Group withcomplementary
technologies.

Appropriateacquisition targets
may not be
available in thenecessarytimescale.
Alternatively, once
acquired, targets
may fail to provide
the planned value.

A significant proportionof the Group’s profit ismade in foreign
currencies.

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

Possible
ImpactLower
profitability andfinancial returns.
Negative impact
on the Group’s
reputation.

Associated strategic
priorities‘Realising the Brand’ Using ‘Voice of the
Customer’ to drive rapid
new productdevelopment.

Lower
profitability andfinancial returns.

‘Realising the Brand’ Developing a strong
brand in existing anddeveloping markets.

Lower
profitability andfinancial returns.
Management
focus taken
away from thecore business inorder to manage
integration
issues.

Lower
profitability andfinancial returns‘Liberate Cash’ - Supportand develop our
employees to maximise
their value add.

‘Delivering Shareholder
Value’ - Focus onbalanced and attractive
global markets.
‘Realising the Brand’ Developing a strong
brand in existing anddeveloping markets.
‘Inventing the Future’ Using “Voice of the
Customer” to drive rapid
new productdevelopment.
‘Adding Personal Value’ –Supporting anddeveloping our
employees.
‘Delivering Shareholder
Value’ - Focus onbalanced and attractive
global markets.
‘Liberating Cash’ –Developing a competitive
global supply base that
supports our growth.

Outsourcing

Pensions

The Group’s strategicplan includes theoutsourcing of asignificantly higher
proportion of the costsof its products to benefit
from economies ofscale and natural
currency hedges.

Failures in the
supply chain
impacting sales.

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

Movements in theactuarialassumptions may
have anappreciable effecton the reported
pension deficit.

Oxford Instruments plc

Mitigation

The Group has moved away fromlarge scale, single customer
development programmes towards
more commercially orientatedproducts.
The New Product Introduction
programme that any new R&D
projects must pass throughprovides a framework within which
the commercial viability of projects
are scrutinised and assessed.
The Group has a broad spread ofcustomers, applications andgeographical markets.
The Group is expanding in the socalled BRIC nations, whosemarkets have been more resilient
during the economic downturn.
Extensive financial and technicaldue diligence is undertaken by theGroup during any acquisition
programmes.
Each transaction has acomprehensive post acquisition
integration plan which is reviewed
at the highest level.

The Group seeks to mitigate theexposure to transactional risk by
the use of natural hedges wherever
possible.
The remaining transactional foreignexchange risk in any year is
mitigated through the use of
forward and non-premium based
option exchange contracts.
Relationships with outsourcing
businesses are monitored closely
and any potential issues are acted
upon swiftly to avoid disruption.

Disruption tocustomers.
Negative impact
on the Group’s
reputation.

‘Liberating Cash’ –Developing a competitive
global supply base that
supports our growth.
‘Realising the Brand’ Developing a strong
brand in existing anddeveloping markets.

Where practical dual sources areused for key components andservices.

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

‘Delivering Shareholder
Value’ - Focus onbalanced and attractive
global markets.

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

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

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

29

Announcement of Preliminary Results for the year to 31 March 2014
PRINCIPAL RISKS CONT’D
Specific
Risk
PeopleContext

Risk

A number of theGroup’s employees arebusiness critical.

The employee
leaves the Group.

Possible
ImpactLower
profitability andfinancial returns.

Associated strategic
priorities‘Adding Personal Value’ –Supporting anddeveloping our
employees.

‘Inventing the Future’ –Providing an environment
for inventing andinnovation.

Routes tomarketIn some instances theGroup’s products arecomponents of higher
level systems and thus
the Group does notcontrol its route tomarket.

Oxford Instruments plc

The systems
integrator switches
supplier denying
the Group’s routeto market.

Lower
profitability andfinancial returns.

‘Inventing the Future’ –Developing products thatoffer the best technicalsolution.
‘Realising the Brand’ –Ensuring that end
customers appreciate thebenefits of Oxford
Instruments technology.

Mitigation

The Group undertakes a regular
employee survey and implements
and reviews resulting action plans.
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.
Use of the stage gate process and‘Voice of the Customer’ to makesure that the Group’s products are
the best in the market.
Co-marketing with system
integrators to promote the merits of
the Group’s products to end
customers.
Seeking to increase the number ofintegrators supplied by the Group.

30