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 11 June 2013
Oxford Instruments plc
Announcement of Preliminary Results for the year to 31 March 2013
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 2013.
Highlights:
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Good progress in the second year of our 14 Cubed growth plan
Revenue up 4.8% on an organic constant currency basis; total revenues up 4.0% to £350.8 million(2012: £337.3 million)
Adjusted profit before tax* up 14.8% to £48.2 million (2012: £42.0 million)
Adjusted operating profit* margin increased to 14.2% (2012: 12.5%)
Adjusted EPS* up 10.9% to 68.3 pence (2012: 61.6 pence)
On a constant currency basis, Nanotechnology Tools organic sales up 9.4%
Industrial markets remained soft
Strong progress in emerging and fast growing economies
Asylum Research acquisition integrating well and performing to plan
Strong new product pipeline supported by increased investment in R&D, up 5.9% to £25.1 million(2012: £23.7 million)
Net cash from operating activities of £41.5 million (2012: £41.6 million)
Proposed final dividend increased by 12.8% to 8.15 pence (2012: 7.23 pence), giving a total dividend
for the year of 11.2 pence (2012: 10.0 pence)*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:“I am pleased to report that the Group has delivered another strong performance in the year. We are now
two months into the final year of the three year period covered by the 14 Cubed objectives. Although theyear has started slowly, we are focused on completing our 14 Cubed plan and delivering further progress inthe years to come. Our R&D plan continues to deliver new products to the market which take market sharefrom our competitors. We are building on our strong position in emerging and fast growing economies andwe continue to target growth, both organically and through bolt-on acquisitions.”

Enquiries:
Oxford Instruments plc
Jonathan Flint, Chief Executive
Kevin Boyd, Group Finance Director

Tel: 01865 393200

MHP Communications
Rachel Hirst

Tel: 020 3128 8100

Ian Payne
Number of pages: 28

Announcement of Preliminary Results for the year to 31 March 2013

Chairman’s Statement
Oxford Instruments provides customers with high technology tools for use in advancing the frontiers ofscience, improving and assessing the quality of industrial processes and demonstrating compliance toenvironmental legislation. We have a broad spectrum of products operating in high growth technology
markets, supported by the world-renowned Oxford Instruments brand. This enables us to sell premium
products to our customers and recruit the most highly skilled people on a global basis.
The Group continues to make good progress. We have seen organic sales growth supplemented byacquisitions and further improvement in our margins in line with our 14 Cubed objectives. In today’s
uncertain environment, customers continue to invest in research at the cutting edge of science and in
making their manufacturing processes more efficient through the use of innovative technologies.
Oxford Instruments has a culture of inclusivity which values the role of the individual and rewards
commercial success and technical innovation. Our work worldwide has brought together skills and ideas
from across the business to deliver this strong set of results. On behalf of the Board, I thank all our staff for
their commitment and considerable achievements this year.
During the year, Bernard Taylor stepped down from the Board and we would like to thank him for his
contribution to the development of the Group. On 15 January 2013, we announced the appointment ofThomas Geitner as a new Non-Executive Director. Thomas brings extensive international experience in thetechnology and engineering sectors, having spent over thirty years in businesses operating across theglobe. Thomas will assume the chairmanship of the Remuneration Committee at this year’s AGM. We arepleased to announce that Jennifer Allerton has today joined the Board as a Non-Executive Director.
Jennifer has extensive international business experience, having spent most of her career in large
companies operating across the globe, particularly in emerging markets. In addition, Charles Holroyd andMike Hughes will be stepping down from the Board at our forthcoming AGM. As a result of these changes
to the Board, the constitution of the Board will be compliant with provision B.1.2 of the UK Corporate
Governance Code.
The Group is recommending a final dividend of 8.15 pence (2012: 7.23 pence), an increase of 12.8% overthe prior year, bringing the total for the year to 11.2 pence (2012: 10.0 pence).
As we enter the final year of our three year 14 Cubed plan, we are focused on delivering shareholder value
in line with the 14 Cubed objectives.
Nigel Keen
Chairman
11 June 2013

Oxford Instruments plc
2Announcement of Preliminary Results for the year to 31 March 2013

Chief Executive’s Statement
The Group delivered another strong performance in the year with revenues rising 4.0% to £350.8 million(2012: £337.3 million). Organic revenue growth on a constant currency basis was 4.8%. Adjusted profits
before tax grew 14.8% to £48.2 million (2012: £42.0 million). Adjusted operating profit margin increased to
14.2% (2012: 12.5%). Adjusted earnings per share rose to 68.3p (2012: 61.6p) and the Group ended theyear with a cash balance of £39.2 million (2012: £35.1 million), after funding the acquisition of Asylum
Research (Asylum) in December 2012.
Asylum, based in California, is a leading provider of scanning probe microscopes which are used to capture
images and characterise the properties of surfaces and structures down to the atomic scale. Its products
are used by academic and industrial customers for a wide range of materials and bioscience applications.
Asylum has been combined with our NanoAnalysis business in our Nanotechnology Tools sector. The
business is integrating well, performing according to the acquisition assumptions and contributing to theacquisition related part of the 14 Cubed revenue growth objectives.
The acquisitions made in 2011 are also contributing to growth. Platinum Medical Imaging (Platinum) has
performed well, securing a number of multi-year service contracts and the integration of Omniprobe into our
NanoAnalysis business is now complete. Omicron NanoTechnology (Omicron) saw poor market conditionsin the first half of the year and underperformed against expectations. Performance in the second half
improved significantly as management changes took effect. This part of the business now has a strong
long term order book.
Sales in Europe grew 9.5% to £126.2 million (2012: £115.3 million) helped by sales to ITER, aninternational collaboration project to develop carbon free energy. The Group has negligible exposure to
expenditure from the Southern European economies. Russia and Sweden delivered particularly strong
performances. Sales in North America fell by 4.2% to £91.0 million (2012: £95.0 million). This reflects
some weakness in US government-funded research markets, partially offset by a strong performance inCanada. It is not yet clear to what extent this was the result of sequestration of government spend in theUS, which may call for a reduction in state-funded research of around 9%. We currently have revenues ofapproximately $30 million from the US government. Sales in Asia increased by 8.0% to £123.0 million(2012: £113.9 million), representing 35% of total Group revenues (2012: 34%). The performance of our new
Indian subsidiary was particularly pleasing, delivering orders growth of 56%, albeit from a low base. The
high brightness LED market, which provides a significant growth opportunity in Asia, stabilised during theyear after a period of softening demand.
With some regional variations, our research markets continue to be strong. Constant currency sales in our
Nanotechnology Tools sector grew by 9.4% organically in the year. We believe that there is structural
growth in demand for nanotechnology tools over the medium term. Operating margins in Nanotechnology
Tools improved to 12.5% (2012: 11.2%) due to good progress on our Business Improvement Plan in
NanoAnalysis and Plasma Technology.
As previously reported, industrial markets continue to be soft with reported sales down 3.1%. On a
constant currency organic basis, sales in the Industrial Products Sector grew by 1.4%. This reflects general
uncertainty about the economic environment which is causing customers to delay investment in key
technology capital goods. During this period of market retrenchment, we have concentrated on further
improving business efficiency which has resulted in a 26% increase in profit in the Industrial Products
sector, bringing the margin to 13.9% (2012: 10.7%).
Innovation remains at the core of the Group’s culture. Our strong performance is made possible by ourcontinued investment in commercially driven R&D. Our R&D cash spend this year was £25.1 million (2012:£23.7 million) an increase of 5.9%. The percentage of revenues generated from products launched in thelast 3 years, our Vitality Index, remained healthy at 41%.

Oxford Instruments plc
3Announcement of Preliminary Results for the year to 31 March 2013

We are now in the final year of our 14 Cubed plan which sets a target for achieving an average compound
annual sales growth rate of 14% in the years 2011-2014 and a return on sales of 14% by 2014.
We
remain focused on meeting our three year objectives supported by the strength and diversity of thebusiness and our exposure to growing markets.
We operate in three sectors: Nanotechnology Tools, Industrial Products, and Service.
Nanotechnology Tools£m
Revenue
ProfitMargin

2013
166.1
20.8
12.5%

2012
153.9
17.3
11.2%

The Nanotechnology Tools sector produces our highest technology products and serves research andindustrial customers in both the public and private sectors. It comprises our NanoAnalysis business which
includes Omniprobe and Asylum, Plasma Technology and Omicron NanoScience. During 2013, we merged
our NanoScience and Omicron businesses to create one organisation focused on serving the science andapplied research community where both businesses shared many customers. We are now able to offer
those customers significantly enhanced opportunities for collaboration, enabling technologies andinnovative new products by harnessing the capabilities of two highly skilled and experienced teams and two
well-established brands.
The Nanotechnology Tools sector plays a key role in the Group’s strategy for growth. In 2012 we held anumber of seminars around the world jointly hosted by all the businesses in this sector. A two-day
conference in Bangalore, India with the theme of “Bringing the NanoWorld Together” was particularly
successful in attracting new customers and plans are in place to repeat the format in other territories. A
Sector Head for Nanotechnology Tools has been recruited and joined us in June 2013.
Our NanoAnalysis business produces leading-edge tools that enable materials characterisation andsample manipulation at the nanometre scale. Its products are used on electron microscopes and ion-beamsystems in academic institutions and industrial applications including semiconductors, renewable energy,
mining, metallurgy and forensics. Sales of the new X-Maxn range of large area detectors have exceeded
expectations as our customers continue to find new applications for this market leading product. For
example, Russian scientists from the NanoTech centre at the Ural Federal University used the X-Max
system to confirm that fragments of rock found around an ice hole in Chebarkul Lake were from themeteorite that fell to earth in February this year. This business continues to deliver a strong performanceacross all regions. In 2012 we opened a new sales office in South Korea to develop new opportunities inthis fast growing market. The integration of Asylum is going well and the business is performing to
expectations.
Our Omicron NanoScience business is the market and technology leader for analytical measurement
techniques in high vacuum, low temperature and high magnetic fields, supplying the fundamental andapplied research communities. Its technologies are used in a broad range of application-specific solutionsin advanced materials, advanced computing, sustainable energy, life science and security. The Omicronpart of this business, acquired in June 2011, delivered a disappointing trading performance in the first half ofthe year. However, during the second half, this business was profitable and the order book has
strengthened. The merger of Omicron and NanoScience allows us to introduce wide-reaching efficiency
measures and focus on building on our core competencies and multi-technology platforms. In May 2013,
we announced that our Triton® dilution refrigerator was part of a quantum computer purchased by aresearch collaboration of NASA and Google. Quantum computing is one of the fastest growing
nanotechnology research areas and the potential for ultra fast super computers is attracting investment
from around the world.

Oxford Instruments plc
4Announcement of Preliminary Results for the year to 31 March 2013

Our Plasma Technology business provides leading-edge tools and processes for the fabrication ofnanostructures. Our systems provide process solutions for nanometre layer growth of compound
semiconductor material, etching of nanometre sized features and the controlled growth of nanostructures,
Micro Electro Mechanical Systems (MEMS), High Brightness LEDs (HBLED) and photovoltaic devices.
Sales of the Estrelas range of systems launched this year exceeded expectations. Estrelas is used in key
research areas including nanotechnology and nanofabrication, micro and nano-electronic devices andphotovoltaic devices. The business delivered a steady performance despite the HBLED market remaining
flat, supported by growth in emerging markets, particularly Russia, Egypt and India. An efficiency
programme was initiated in 2013 to improve margins and deliver further growth.

Industrial Products£m
Revenue
ProfitMargin

2013
125.1
17.4
13.9%

2012
129.1
13.8
10.7%

This sector supplies analytical systems for quality control, environmental and compliance testing, andcomponents for industry and research. The Industrial Products sector contains our Industrial Analysis andIndustrial Components businesses. The Industrial Analysis business comprises three Groups; X-ray
Fluorescence (XRF), Optical Emission Spectroscopy (OES) and Magnetic Resonance (NMR). Industrial
Components comprises our Superconducting Wire, Austin Scientific and X-Ray Technology businesses.
Our Industrial Analysis business supplies high quality instruments for materials identification, quality
assurance, elemental analysis, thickness gauging and, essential quality control applications. Our customers
span global industries including metals, steel, scrap recycling, agriculture, automotive, textiles,
petrochemicals and construction. For example, our X-Strata XRF instrument is used by banks to provide
real time evaluation of customers’ precious metals which are commonly used as collateral in some parts of
the world. Sales in the emerging markets grew, particularly in Turkey, India and South Korea. This wasoffset by a downturn in demand from steel markets in Europe and China, and a decline in the printed circuitboard industry in Asia. During the year, three new analysers were introduced to our XRF hand held rangeof products offering ultra fast metals analysis, an optional integrated camera and a dedicated scrap metal
sorter. This means we now offer a product range which gives our customers a choice of analysers for theiranalytical requirements.
Our Superconducting Wire business is the world leader in the provision of high performancesuperconducting wire for industry and research. Markets include MRI scanners, physics research, proton
therapy and fusion energy. This business delivered a good performance in the year, supported by record
growth in China. The final delivery of the ITER order was made and the demand from OEM customers for
MRI superconductors remained strong. Work to expand our wire factory was completed, bringing additional
production efficiencies for 2013/14.
Our Austin Scientific business specialises in high vacuum products, helium gas coolers and services forthe semiconductor, research, life science and energy industries. Deliveries on a large contract for
semiconductor process equipment were successfully completed during the year as expected. Tradinglevels were consequently reduced but our move to a new modern facility has delivered efficiency savings.
Our X-Ray Technology business designs and manufactures X-ray sources for industry, research andmedical applications. Formerly part of the Industrial Analysis business, it now sits within the Industrial
Components division. This business delivered a good performance driven by organic growth and new
applications in medical markets. One of our X-ray sources is part of the chemistry and mineralogy

Oxford Instruments plc
5Announcement of Preliminary Results for the year to 31 March 2013

instrumentation on NASA’s Mars Curiosity rover, analysing rocks and soil to provide clues about the planet’s
climate and geology.

Service£m
Revenue
ProfitMargin

2013
60.6
11.5
19.0%

2012
56.3
11.0
19.5%

This sector comprises our service, support, training, refurbishment, consumables and accessories elementsof our business. It consists of two elements: the servicing of CT and MRI medical scanners in North
America and Asia and the service elements of the Nanotechnology Tools and Industrial Products sectors.
The sector performed well across all territories driven by successful initiatives such as a worldwide systemtraining course for Plasma Technology customers and on-line service training. The range of preferred
service options varies across our global customer base. In the US, 49% of customers opt for multiyear
service contracts. In Europe and Asia, take up of service contracts is slower and these territories offer
significant opportunity for further growth.
Our CT & MRI business delivered a strong performance helped by cost containment pressure arising fromthe Affordable Health Care Act. This legislation is being described as the most significant overhaul of the
US healthcare system since Medicare and Medicaid and is aimed at increasing the rate of health insurance
coverage whilst at the same time reducing the overall costs of healthcare. These factors favour our costeffective business model for servicing diagnostic imaging medical instrumentation.
Emerging markets are beginning to offer opportunities for growth. Our recently acquired regulatory
approval to provide refurbished MRI equipment to companies in South Korea provides a particular
opportunity for growth in the current year.
PeopleOxford Instruments relies on the skills and expertise of its people worldwide. We recognise the importanceof ensuring a sustainable business through a strategy of managing, developing and recruiting people who
support our company values and contribute to our growth. We seek to ensure increased diversity amongst
our workforce to utilise fully the talent pool available to us. I am proud to lead such an innovative andtalented workforce and I thank them for their continued contribution to our success.
Outlook
We are now two months into the final year of the three year period covered by the 14 Cubed objectives.
Although the year has started slowly, we are focused on completing our 14 Cubed plan and delivering
further progress in the years to come. Our R&D plan continues to deliver new products to the market whichtake market share from our competitors. We are building on our strong position in emerging and fast
growing economies and we continue to target growth, both organically and through bolt-on acquisitions.

Jonathan Flint
Chief Executive
11 June 2013

Oxford Instruments plc
6

Announcement of Preliminary Results for the year to 31 March 2013

Financial Review
Trading Performance
Orders in the period were £334.0 million (2012: £337.8 million). Including inter-segment trade, the split
between segments was: Nanotechnology Tools £166.6 million, up 5.1%; Industrial Products £102.2 million,
down 17.2%; and Service £66.9 million, up 14.8%. At the end of the year the Group order book for futuredeliveries stood at £130.8 million (2012: £136.8 million).The order book was reduced in the year by £15.6
million of sales made to the ITER project which had been booked as orders in 2009/10.
Revenues in the year grew by 4.0% to £350.8 million. The net increase in revenues due to acquisitions anddisposals was £5.0 million compared with the prior period while adverse foreign currency exchange rate
movements reduced sales by £6.0 million. Constant currency organic revenue growth was 4.8%.
In Nanotechnology Tools, revenues grew 7.9% aided by the acquisition of Asylum in December 2012.
While we saw strong growth in both our NanoAnalysis and Plasma Technology businesses, revenues in the
newly combined Omicron Nanoscience business were flat. Constant currency organic growth was 9.4%.
Following an excellent growth year in 2011/12, revenues in Industrial Products fell back by 3.1%. On a
constant currency organic basis, we saw growth of 1.4% with the fall in sales in our Austin Scientificbusiness being compensated for by growth in superconducting wire sales for MRI applications.
Service revenues increased by 7.6%, due to the Platinum business we acquired in November 2011.
Excluding this, constant currency organic revenues were flat with growth in the service revenues within
Nanotechnology Tools and Industrial Products being offset by a small reduction in revenues from our nonPlatinum MRI service business in North America.
Adjusted gross margins increased from 44.2% to 44.7%. These improved margins were predominantly due
to new product introductions and increased efficiencies with our Value Add Index Key Performance Indicatorincreasing from 1.49 to 1.55. This measure is a reflection of the adjusted operating profit generated fromeach unit of employment costs.
Adjusted operating expenses rose by £3.7 million reflecting a £4.7 million spend in newly acquired
businesses and a £1.3 million benefit from foreign exchange rate movements. On an underlying constantcurrency growth basis, adjusted operating expenses increased by £0.3 million.
Adjusted operating profit increased by 18.1% to £49.7 million with the adjusted operating profit margin risingfrom 12.5% to 14.2%.

Oxford Instruments plc
7

Announcement of Preliminary Results for the year to 31 March 2013

Adjusting Items
The Directors believe that adjusted profit before tax gives a clearer indication of the underlying performanceof the business. A reconciliation of reported profit before tax to adjusted profit before tax is given below:

Profit before income tax
Reversal of acquisition related fair value adjustments toinventory
Gain on disposal of product line
Acquisition related costs
Amortisation and impairment of acquired intangibles
Unwind of discount in respect of deferred consideration
Mark to market loss/(gain) in respect of derivative financial
instruments
Adjusted profit before income tax
Share of taxation
Adjusted profit for the year

2013
£m
29.6

2012
£m
36.1

0.5
2.1
13.8
0.2

1.7
(7.0)
1.5
11.2
-

2.0
48.2
(9.9)
38.3

(1.5)
42.0
(8.8)
33.2

Financial income and expenditureWithin financial income and expenditure, the cost of interest on loans and overdrafts and the commitment
fee for our revolving credit facility, offset by deposit interest, amounted to £0.6 million (2012: £0.8 million).
The interest charge on pension scheme liabilities exceeded the expected return on pension scheme assetsby £0.9 million, a movement of £1.6 million over the prior year. Due to the increased pension liabilities at 31
March 2013, combined with the changes in the IAS19 accounting standard, the net pension charge to the
Income Statement in 2013/14 is expected to increase to £2.5 million of which £2.2 million will be reported infinancial expenditure and £0.3 million in administration and shared service costs.
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 to cover 80% of its
forecast transactional exposure for that period.
In common with a number of other companies, the Group has decided that the additional costs of meetingthe 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 the balance sheet date are disclosed in the income
statement as Financial Expenditure and excluded from our calculation of adjusted profit before tax (Note 1).
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, weapply hedge accounting for these 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 unchanged at 21%.
The Group has brought forward tax losses in the UK to offset against future taxable profits. In the year
ended March 2011, due to the improved performance of the Group’s UK businesses, we recognised adeferred tax asset of £11.3 million 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, £3.3 million reversed in the year ended March 2013 and to be

Oxford Instruments plc
8

Announcement of Preliminary Results for the year to 31 March 2013

consistent we have excluded it from the calculation of adjusted earnings per share (see Note 1). In the2013/14 financial year we expect tax rates to be similar to 2012/13 as we exhaust these brought forward tax
losses. In 2014/15 rates will therefore rise and we currently expect them to be in the region of 24%-28%.
Earnings
After a tax charge of £7.6 million (2012: £11.3 million), the reported net profit for the financial year was£22.0 million (2012: £24.8 million). With a weighted average number of shares of 56.2 million (2012: 54.0
million), the basic earnings per share were 39.2 pence (2012: 46.0 pence).
Adjusted profit before tax (Note 1) grew by £6.2 million to £48.2 million which equates to adjusted earnings
per share of 68.3 pence (2012: 61.6 pence), an increase of 10.9%.
Dividends
In 2011 the Group moved to a progressive dividend policy, whereby we would seek to raise dividends asadjusted earnings per share rise, although not necessarily by the same proportion, depending on the
Directors’ perceived need for cash to expand the business both organically and through acquisition. For theyear just ended the proposed final dividend of 8.15 pence per share (2012: 7.23 pence), payable on 24
October 2013 to shareholders who are on the register on 27 September 2013, gives a total dividend for theyear of 11.2 pence per share (2012: 10.0 pence). Dividend cover for the underlying business before
adjusting items was 6.1 times (2012: 6.2 times).
Investment in research and development (R&D)
Total cash spend on R&D in the year was £25.1 million or 7.2% of sales (2012: £23.7 million, 7.0%).
A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:
2013
£m
24.3

2012
£m
25.8

Less: depreciation of R&D related fixed assets

(0.7)

(0.2)

Add: amounts capitalised as fixed assets

0.8

0.9

Less: amortisation of R&D costs capitalised as
intangibles

(3.9)

(5.2)

Add: amounts capitalised as intangible assets

4.6

2.4

Total cash spent on research and development
during the year

25.1

23.7

Research and development expense charged to theconsolidated statement of income.

The net book value of capitalised development costs at the end of the financial year was £12.3 million(2012: £11.7 million).
Balance sheet
Net assets rose from £127.1 million to £137.7 million in the year.
Net working capital (excluding derivative financial instruments, contingent consideration and tax
payable/receivable) increased by £2.9 million in the year to £18.8 million.
Inventory turns increased by 0.1 to 3.3 while debtor days reduced from 53 days to 51 days.

Oxford Instruments plc
9Announcement of Preliminary Results for the year to 31 March 2013

Acquisitions and Disposals
On 17 December 2012 the Group acquired Asylum Research Corporation for an initial consideration of $32
million. The acquisition was funded from the Group’s own cash resources.
Pensions
The Group has defined benefit pension schemes in the UK and the USA. Both have been closed to newentrants since 2001 and closed to future accrual from July 2010. The total deficit, before tax, under IAS19
on these pension schemes rose in the year by £12.7 million to £47.9 million with a corresponding deferred
tax asset of £11.4 million.
Assets of the schemes at 31 March 2013 were £198.0 million (2012: £180.2 million), while liabilities
increased from £215.4 million to £245.9 million principally as a result of the fall in the corporate bond yieldused to discount future cash flows from 4.9% to 4.5%.
The latest triennial actuarial valuation of the UK scheme was carried out as at 31 March 2012 and resulted
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 individend per share. Thereafter, the payment will increase by 3.05% per annum. The payment in 2012/13,
the first year of the new plan, was £5.0 million.
Cash
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 11.7% to £58.2
million. Working capital increased by £2.9 million. Trading working capital, which we define as inventory
plus trade debtors less trade creditors and customer deposits as a percentage of sales, was 16.6% (2012:
15.4%).
Cash generated from operations was £50.4 million, a reduction of £0.1 million on the prior year. The ratio of
operating cash to operating profit, which is one of our Key Performance Indicators, was 84.7% (2012:110.5%).
Net cash at the year-end was £39.2 million (2012: £35.1 million). The Group maintains a committed
Revolving Credit Facility with a club of three banks. The facility, which extends to December 2014, is for£50 million and is extendable to £70 million by mutual consent. In addition, the Group has overdraft andother facilities totalling £14.1 million. In March 2013 the Group agreed a committed facility with theEuropean Investment Bank to fund R&D in Europe. The facility which can be drawn down at any time
before December 2013 is for £25 million and can be either fixed or floating rate with a duration of up toseven years.
Employees
The average number of people employed during the year was 1,927, an increase of 93 over the prior year.
As a result of the acquisition of Asylum, 74 employees joined the Group.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performanceand position, are set out in the Chief Executive’s Statement. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in this Financial Review.
The diverse nature of the Group combined with its current financial strength provides a solid foundation fora sustainable business. The Directors have reviewed the Group’s forecasts and flexed them to incorporate
a number of potential scenarios relating to changes in trading performance. The Directors believe that theGroup will be able to operate within its existing debt facilities. This review also considered hedging

Oxford Instruments plc
10Announcement of Preliminary Results for the year to 31 March 2013

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 reasonable enquiries, that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Forward-Looking Statements
This document contains certain forward-looking statements. The forward-looking statements reflect theknowledge and information available to the Company during the preparation and up to the publication of thisdocument. By their very nature, these statements depend upon circumstances and relate to events that
may occur in the future thereby involving a degree of uncertainty. Therefore, nothing in this document
should be construed as a profit forecast by the Company.

Kevin Boyd
Group Finance Director
11 June 2013

Oxford Instruments plc
11Announcement of Preliminary Results for the year to 31 March 2013

Consolidated Statement of Income year ended 31 March 2013

Adjusted*

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and sharedservices
Other operating income
Foreign exchange
Operating profit

Notes
2

3

£m
350.8
(194.0)156.8(24.3)(51.1)(34.9)

Year to 31 March 2013
AdjustingTotal
items*
£m
£m
350.8
(0.5)
(194.5)(0.5)
156.3(24.3)(51.1)(15.9)(50.8)

Adjusted*£m
337.3(188.3)149.0(25.8)(48.7)(32.1)

Year to 31 March 2012
AdjustingTotal
items*
£m
£m
337.3
(1.7)
(190.0)(1.7)
147.3(25.8)(48.7)(12.7)(44.8)

3.2
49.7(16.4)

3.2
33.3

(0.3)
42.1

7.0
(7.4)

7.0
(0.3)
34.7

Expected return on
pension scheme assets

9.5

-

9.5

10.9

-

10.9

Other financial income

0.3

-

0.3

0.2

1.5

1.7

Financial income

9.8

-

9.8

11.1

1.5

12.6

(10.4)-(10.4)(10.2)-(10.2)(0.9)(11.3)

(2.2)
(2.2)

(3.1)
(13.5)(1.0)(11.2)-(1.0)(11.2)

48.2(18.6)

29.6

42.0

(5.9)

36.1

(9.9)

2.3

(7.6)

(8.8)

(2.5)

(11.3)

38.3(16.3)

22.0

33.2

(8.4)

24.8

pence

pence

pence

Pence

68.3
67.5

39.2
38.8

61.6
60.3

46.0
45.0

Interest charge on
pension scheme liabilities
Other financial
expenditure
Financial expenditure

Profit before income tax

Income tax (expense)/credit

5

Profit for the year
attributable to equity
shareholders of the parent

Earnings per share
Basic earnings per share
Diluted earnings per share

6
6

Dividends per share
Dividends paid
Dividends proposed

7
7

10.0
11.2

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

9.0
10.0

.

Oxford Instruments plc
12Announcement of Preliminary Results for the year to 31 March 2013

Consolidated Statement of Comprehensive Income year ended 31 March 2013
2013

2012

£m

£m

22.0

24.8

3.4

(2.6)

(16.9)(28.6)

Loss on effective portion of changes in fair value of cash flow
hedges, net of amounts recycled

-

(0.4)

Tax on effective portion of changes in fair value of cash flow hedges,
net of amounts recycled-

0.1

Tax on items recognised directly in equity

3.7

7.1

Total other comprehensive income(9.8)(24.4)

Total comprehensive income for the year attributable to equity
shareholders of the parent

12.2

0.4

Profit for the year
Other comprehensive income/(expense)
Foreign exchange translation differences
Actuarial loss in respect of post retirement benefits

Oxford Instruments plc
13

Announcement of Preliminary Results for the year to 31 March 2013

Consolidated Statement of Financial Position year ended 31 March 2013
2013

2012

£m

£m

32.9
91.9
25.0

28.2
78.1
19.3

149.8

125.6

58.1
71.8
0.4
2.2
39.2

59.3
61.0
1.3
2.4
35.1

171.7

159.1

321.5

284.7

2.8
60.6
0.1
4.0
70.2

2.8
60.2
0.1
0.6
63.4

137.7

127.1

11.1
47.9
6.2

2.8
35.2
7.0

65.2

45.0

101.4
4.3
2.6
10.3

96.4
6.0
1.2
9.0

118.6

112.6

Total liabilities

183.8

157.6

Total liabilities and equity

321.5

284.7

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

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
Other payables
Retirement benefit obligations
Deferred tax liabilities

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

The financial statements were approved by the Board of Directors on 11 June 2013 and signed on its behalf by:
Jonathan Flint
Director

Kevin Boyd
Director

Oxford Instruments plc
14

Announcement of Preliminary Results for the year to 31 March 2013

Consolidated Statement of Changes in Equity year ended 31 March 2013
ForeignShareexchangeSharepremium

Othertranslation

Retained

capitalaccount

reserves

reserveearnings

Total

£m

£m

£m

£m

£m

£m

Balance at 1 April 2012

2.8

60.2

0.1

0.6

63.4

127.1

Profit for the year

-

-

-

-

22.0

22.0

Other comprehensive income:-Foreign exchange translation differences

-

-

-

3.4

-Actuarial loss in respect of post retirement
benefits----Loss on effective portion of changes in fairvalue of cash flow hedges, net of amounts
recycled----Tax on items recognised directly in othercomprehensive income

-

-

-

-

Transactions recorded directly inequity:- Credit in respect of employee service
costs settled by award of share options-- Tax credit/(charge) in respect of shareoptions- Proceeds from shares issued- Dividends paid
Total contributions by and distributions
to equity shareholders
Balance at 31 March 2013

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

-

3.4

-

(16.9)(16.9)

-

-

-

-

-

3.7

3.7

-

3.4

8.8

12.2

-

-

-

1.4

1.4

-

-

-

-

2.2

2.2

-

0.4

-

-

-

0.4

-

-

-

-

(5.6)

(5.6)

-

0.4

-

-

(2.0)

(1.6)

2.8

60.6

0.1

4.0

70.2

137.7

Other reserves comprise the capital redemption reserve which represents the nominal value of shares repurchased
and then cancelled during the year ended 31 March 1999, and the hedging reserve in respect of the effective portionof changes in value of commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 fromthe translation of the Group’s net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2012: 173,794) of its own shares in an employee benefit trust. The cost of these shares is
included within retained earnings.

Oxford Instruments plc
15

Announcement of Preliminary Results for the year to 31 March 2013

Consolidated Statement of Changes in Equity year ended 31 March 2012
ForeignShareexchangeSharepremium

Othertranslation

Retained

capitalaccount

reserves

reserveearnings

Total

£m

£m

£m

£m

£m

£m

Balance at 1 April 2011

2.5

22.5

0.4

3.2

64.9

93.5

Profit for the year

-

-

-

-

24.8

24.8

-Foreign exchange translation differences

-

-

-

(2.6)

-

(2.6)

-Actuarial loss in respect of post retirement
benefits

-

-

-

-

(28.6)(28.6)-Loss on effective portion of changes in fairvalue of cash flow hedges, net of amounts
recycled

-

-

(0.3)

-

(0.1)

(0.4)

-Tax on items recognised directly in othercomprehensive income

-

-

-

-

7.2

7.2

-

-

(0.3)

(2.6)

3.3

0.4

Transactions recorded directly in equity:- Credit in respect of employee service
costs settled by award of share options

-

-

-

-

1.0

1.0

- Tax credit/(charge) in respect of shareoptions

-

-

-

-

(1.0)

(1.0)

- Proceeds from shares issued

0.3

37.7

-

-

-

38.0

- Dividends paid

-

-

-

-

(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

Other comprehensive income:

Total comprehensive income/(expense)
attributable to equity shareholders of theparentOxford Instruments plc
16

Announcement of Preliminary Results for the year to 31 March 2013

Consolidated Statement of Cash Flows year ended 31 March 2013
2013
£m
22.0

2012
£m
24.8

Profit for the year
Adjustments for:
Income tax expense
Net financial expense/(income)
Other operating income
Acquisition related fair value adjustments to inventory
Acquisition related costs
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 plant, property 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
Decrease/(Increase) in inventories
Increase in receivables
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 property, plant and equipment
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

7.6
3.7
0.5
2.1
13.8
4.6
3.9
58.2
0.2
1.4
(1.2)
(5.3)
53.3
4.7
(9.4)
2.8
(1.0)
50.4
(0.5)
(8.4)
41.5

11.3
(1.4)
(7.0)
1.7
1.5
11.2
4.8
5.2
52.1
0.5
1.0
(1.0)
(4.5)
48.1
(0.2)
(1.7)
5.7
(1.4)
50.5
(1.1)
(7.8)
41.6

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

0.1
7.3(51.6)(5.6)(2.4)(52.2)Cash flows from financing activities
Proceeds from issue of share capital
Repayment of borrowings
Increase in borrowings
Dividends paid
Net cash from financing activities

0.4
(5.6)
(5.2)

38.0
(13.1)
2.5
(4.8)
22.6

Net 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

4.0
35.1
0.1
39.2

12.0
23.7
(0.6)
35.1

Increase in cash and cash equivalents

4.0

12.0

Effect of foreign exchange rate changes on cash and cash
equivalents

0.1

(0.6)

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

4.1

11.4

Cash outflow from decrease in debt

-

13.1

Cash inflow from increase in debt

-

(2.5)

Movement in net cash in the year

4.1

22.0

Net cash at start of the year

35.1

13.1

Net cash at the end of the year

39.2

35.1

Oxford Instruments plc
17

Announcement of Preliminary Results for the year to 31 March 2013

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

Profit before income tax
Reversal of acquisition related fair value adjustments to inventory
Gain on disposal of product line
Acquisition related costs
Amortisation and impairment of acquired intangibles
Unwind of discount in respect of deferred consideration
Mark to market loss/(gain) in respect of derivative financial instruments
Adjusted profit before income tax
Share of taxation
Adjusted profit for the year

Year to31 March
2013
£m
29.6
0.5
2.1
13.8
0.2
2.0
48.2
(9.9)
38.3

Year to31 March
2012
£m
36.1
1.7
(7.0)
1.5
11.2
(1.5)
42.0
(8.8)
33.2

The reversal of acquisition related fair value adjustments to inventory are excluded from adjusted profit to provide ameasure that will include 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 and any consideration which, under IFRS3 (revised), falls to be treated as a post acquisition employment
expense.
In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment ofacquired intangible assets.
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 more clearly be 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 £3.3 million (2012: £4.6 million) has reversedand consequently been excluded from the tax attributable to adjusted profit before tax.
During the prior year the Group:-

disposed of a product line for a consideration of £8.1m. £1.0m of the consideration was deferred for one year.
The product line was part of the Industrial Products segment. The profit on disposal was £7.0m.
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 $0.9m in cash.
The Group considers the fair value of the shares to be nil. The profit on disposal was nil.

Oxford Instruments plc
18

Announcement of Preliminary Results for the year to 31 March 2013

2

SEGMENT INFORMATIONThe Group has six operating segments. These operating segments have been combined into three aggregated operating segments
to the extent that they have similar economic characteristics, with relevance to products and services, type and class 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 aggregated operating segmentson the basis of the economic characteristics discussed below.
- The Nanotechnology Tools segment contains a group of businesses supplying similar products, characterised by a 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 arm’s length basis. The operating results of each are regularly reviewed
by the Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete financial information is available foreach segment and used by the Board of Directors for decisions on resource allocation and to assess performance. No asset
information is presented below as this information is not presented in reporting to the Group’s Board of Directors.
Year to 31 March 2013
Nanotechnology

Industrial

Tools

Products

External revenue

Service

Total

£m

£m

£m

£m

165.8

124.5

60.5

350.8

Inter-segment revenue

0.3

0.6

0.1

Total segment revenue

166.1

125.1

60.6

Segment operating profit

20.8

17.4

11.5

49.7

Nanotechnology

Industrial

Tools

Products

Service

Total

£m

£m

£m

£m
337.3

Year to 31 March 2012

External revenue

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

2013

2012

£m

£m

Reconciliation of reportable segment profit

49.7

42.1

Other operating income-

7.0

Acquisition related costs

(2.1)

(1.5)

Reversal of acquisition related fair value adjustments to inventory

(0.5)

(1.7)

Amortisation and impairment of acquired intangibles(13.8)(11.2)

Profit for reportable segments

9.8

12.6

Financial expenditure(13.5)(11.2)

Profit before income tax

29.6

36.1

Financial income

Oxford Instruments plc
19Announcement of Preliminary Results for the year to 31 March 2013

3

RESEARCH AND DEVELOPMENT

The total research and development spend by the Group is as follows:
2013
Nanotechnology

Industrial

Tools

Products£mResearch anddevelopment expensecharged to theconsolidated statement ofincome2012
Nanotechnology

Industrial

Total

Tools

Products

Total

£m

£m

£m

£m

£m

17.0

7.3

24.3

16.8

9.0

25.8

Less: depreciation of R&D
related fixed assets

(0.2)

(0.5)

(0.7)

(0.1)

(0.1)

(0.2)

Add: amounts capitalised
as fixed assets

0.1

0.7

0.8

0.7

0.2

0.9

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

(2.9)

(1.0)

(3.9)

(2.8)

(2.4)

(5.2)

Add: amounts capitalised
as intangible assets

2.7

1.9

4.6

1.7

0.7

2.4

Total cash spent on
research anddevelopment during the
year

16.7

8.4

25.1

16.3

7.4

23.7

The Group has identified that certain depreciation and capital expenditures were double counted in the calculation of cash spent on research and development in the prior year. This has beencorrected in the above table resulting in an increase of cash spent on research and development by £1.0 million in the year to 31 March 2012. This has had no impact on the primary Financial
Statements.

Oxford Instruments plc
20

Announcement of Preliminary Results for the year to 31 March 2013

4

ACQUISITIONS

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 2013 £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 provisional book and fair value of the assets and liabilities acquired is 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 Nanotechnology Tools
segment where it is believed that synergies can be obtained particularly in respect of routes to market.

Intangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Net assets acquired
Goodwill
Total consideration
Contingent consideration at acquisition
Net cash outflow relating to the acquisition

Provisional
book value
£m
0.4
2.4
1.7
(2.3)
2.2

Provisional
adjustments
£m
14.4
(0.1)
(0.3)
(0.2)
0.3
14.1

Provisional
fair value
£m
14.4
0.3
2.1
1.7
(2.5)
0.3
16.3
9.3
25.6
(5.8)
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.
The fair values shown are provisional and may be amended if information not currently available comes to light.
Provisional values have been used to allow the finance team to finalise the fair value adjustments.
This acquisition contributed revenue of £3.2m and a reported operating loss of £0.1m to the Group’s result for theperiod. Had the acquisitions taken place on 1 April 2012 the equivalent Group numbers would have been revenue of£358.6m and a reported operating profit of £32.1m.

Oxford Instruments plc
21

Announcement of Preliminary Results for the year to 31 March 2013

4

ACQUISITIONS CONT’D

Omicron NanoTechnology GmbHOn 13 June 2011 the Group acquired 100% of the share capital of Omicron NanoTechnology GmbH for cash
consideration totalling £29.7m. Omicron NanoTechnology GmbH specialises in the manufacture of very high-end
microscopes for nanotechnology 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 table below. The business has been acquired for the purpose of integrating into
the Nanotechnology Tools segment.

Intangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Customer deposits
Deferred tax liabilities
Cash
Net assets acquired
Goodwill
Total consideration
Cash acquired
Net cash outflow relating to the acquisition

Book value
£m
6.2
14.1
5.1
(4.7)
(10.5)
1.4
11.6

Adjustments
£m
27.8
(1.7)
(1.3)
(0.2)
(0.1)
(6.8)
17.7

Fair value
£m
27.8
4.5
12.8
5.1
(4.9)
(10.6)
(6.8)
1.4
29.3
0.4
29.7
(1.4)
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£13.1m of which £0.5m is deferred for 2 years. Omniprobe, Inc. designs and manufactures nano-manipulators for use
within scanning electron microscopes and is headquartered in Dallas, USA. The book and fair value of the assets andliabilities acquired is given in the table below. The business has been acquired for the purpose of integrating into the
Nanotechnology Tools segment.

Intangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Cash
Net assets acquired
Goodwill
Total consideration
Cash acquired
Contingent consideration at acquisition
Net cash outflow relating to the acquisition

Book value
£m
0.2
0.6
0.5
0.6
(0.3)
0.3
1.9

Adjustments
£m
11.3
(0.5)
(0.3)
10.5

Fair value
£m
11.5
0.1
0.5
0.6
(0.6)
0.3
12.4
0.7
13.1
(0.3)
(0.5)
12.3

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

Oxford Instruments plc
22Announcement of Preliminary Results for the year to 31 March 2013

4

ACQUISITIONS CONT’D

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 £10.8m.
Further contingent consideration is payable up until the third anniversary of the acquisition dependent on postacquisition earnings. The amount of this consideration could be between zero and £19.4m. The fair value of theamount likely to be paid is £2.6m 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 and California from which the business sells parts, carries out service and maintenance and performs
system rebuilds.
The book and fair value of the assets and liabilities acquired is given in the table below. The business has beenacquired for the purpose of integrating into the Service segment.

Intangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Customer deposits
Deferred tax
Overdraft
Net assets acquired
Goodwill
Total consideration
Overdraft acquired
Contingent consideration
Net cash outflow relating to the acquisition

Book value
£m
0.5
0.9
0.6
(0.4)
(0.4)
(0.1)
1.1

Adjustments
£m
12.5
(0.2)
0.8
(0.3)
(0.4)
(0.3)
(0.2)
11.9

Fair value
£m
12.5
0.3
1.7
0.3
(0.8)
(0.7)
(0.2)
(0.1)
13.0
0.4
13.4
0.1
(2.6)
10.9

The goodwill arising is tax deductible in full and is considered to represent the value of the acquired work force andexpected synergies 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 fairvalue adjustment to receivables represents the best estimate at the acquisition date of the cash flows not expected tobe collected.
During the prior year the acquisitions of Omicron Nanotechnology GmbH, Omniprobe Inc and Platinum Medical
Imaging Inc, contributed revenue of £27.8m, £4.5m and £3.8m respectively and operating losses of £4.6m, £0.8m and£0.7m to the Group’s result for the period. Had the acquisitions taken place on 1 April 2011 the equivalent Group
numbers for 2011/12 would have been revenue of £351.2m and operating profit of £33.6m.

Oxford Instruments plc
23

Announcement of Preliminary Results for the year to 31 March 2013

5

INCOME TAX EXPENSE

Recognised in the Consolidated Statement of Income
2013

2012

£m

£m

Current year

8.8

10.4

Adjustment in respect of prior years

(1.0)

-

7.8

10.4

Current tax expense

Deferred tax expense
Origination and reversal of temporary differences

(0.2)

1.4

Recognition of deferred tax not previously recognised

(0.2)

(0.2)

Adjustment in respect of prior years

0.2

(0.3)

(0.2)

0.9

7.6

11.3

Profit before income tax

29.6

36.1

Income tax using the UK corporation tax rate of 24% (2012: 26%)

7.1

9.4

Tax rates other than the UK standard rate

1.9

2.4

Change in rate at which deferred tax recognised

(0.3)

0.3

Non-taxable income and expenses

0.7

0.2

Tax incentives not recognised in the Consolidated Statement of Income

(1.2)

(0.5)

Recognition of deferred tax not previously recognised

(0.2)

(0.2)

Movement in unrecognised deferred tax

0.4-

Adjustment in respect of prior years

(0.8)

(0.3)

Total tax expense

7.6

11.3

Current tax - relating to employee benefits--

Deferred tax - relating to employee benefits

(3.7)

(7.1)

Total tax expense
Reconciliation of effective tax rate

Effect of:

Taxation credit recognised in other comprehensive income

Deferred tax - relating to cash flow hedges

-

(0.1)

(3.7)

(7.2)

(2.2)

1.0

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

On 20 March 2013 the Chancellor announced that the UK corporation tax rate will reduce to 20% by 1 April 2015.
A reduction in the rate from 25% to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012 anda further reduction to 23% (effective from 1 April 2013) was substantively enacted on 3 July 2012.
It has not yet been possible to quantify the full anticipated effect of the announced further 3% rate reduction, although
this will further reduce the Group’s future current tax charge and reduce the Group’s deferred tax assets and liabilities
accordingly.
The deferred tax assets and liabilities at 31 March 2013 have been calculated on the rate of 23% which wassubstantively enacted at the balance sheet date.

Oxford Instruments plc
24

Announcement of Preliminary Results for the year to 31 March 2013

6

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:
2013

2012

SharesSharesmillionmillionWeighted average number of shares outstanding

56.4

54.2

Less shares held by Employee Share Ownership Trust

(0.2)

(0.2)

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

56.2

54.0

The following table shows the effect of share options on the calculation of diluted earnings per share:
2013

2012

SharesSharesmillionmillionWeighted average number of ordinary shares per basic earnings per
share calculations

56.2

54.0

Effect of shares under option

0.6

1.1

Weighted average number of ordinary shares per diluted earnings per sharecalculations

56.8

55.1

2013

2012

pence

pence

Previous year interim dividend

2.772

2.52

Previous year final dividend

7.228

6.48

10.000

9.00

7

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:
2013

2012

pence

pence

Interim dividend

3.05

2.772

Final dividend

8.15

7.228

11.20

10.000The interim dividend was not provided for at the year end and was paid on 8 April 2013. The payment of the interim
dividend remains discretionary until it is paid. The final proposed dividend of 8.15 pence per share (2012: 7.228
pence) was not provided at the year end and will be paid on 24 October 2013 subject to authorisation by theshareholders at the forthcoming Annual General Meeting.

Oxford Instruments plc
25

Announcement of Preliminary Results for the year to 31 March 20138

BASIS OF PREPARATIONThis preliminary statement has been prepared under the same accounting policies as those used to prepare the 2012
Report and Financial Statements.
The principal exchange rates used to translate the Group’s overseas results were as follows:Year end rates
2013
1.52
1.18
143

2012
1.60
1.20
131

US Dollar
1.58
1.59
1.61
1.56

Euro
1.23
1.26
1.24
1.19

Yen
127
125
132
142

US Dollar
1.63
1.60
1.57
1.58

Euro
1.13
1.14
1.17
1.19

Yen
132
125
121
125

US Dollar
Euro
Yen

Average translation rates 2013
Quarter 1
Quarter 2
Quarter 3
Quarter 4

Average translation rates 2012
Quarter 1
Quarter 2
Quarter 3
Quarter 4

The financial information set out above does not constitute the company's statutory accounts for the years ended 31
March 2013 or 2012. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for2013 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, 10 September 2013 at 2.30 pm at Group Head Office, Tubney
Woods, Abingdon, Oxfordshire, OX13 5QX.

Oxford Instruments plc
26

Announcement of Preliminary Results for the year to 31 March 2013

PRINCIPAL RISKS
Specific Risk

Context

Risk

Possible Impact

Technical Risk

The Group
provides hightechnology
equipment andsystems to its
customers.

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

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

The recent global
recession andprevailing
economic
downturn haveresulted in cuts toboth government
and private sector
spending.

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

Lower profitability
and financial
returns.

Part of the growthof Oxford
Instruments isplanned to comefrom acquisitions
which provide theGroup withcomplementary
technologies.

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

Economic
Environment

Acquisitions

Foreignexchangevolatility

A significant
proportion of theGroup’s profit ismade in foreign
currencies.

Associated strategic
priorities‘Realising the Brand’ - Using‘Voice of the Customer’ todrive rapid new productdevelopment.
‘Liberate Cash’ - Supportand develop our employees
to maximise their value add.

‘Realising the Brand’ Developing a strong brandin existing and developing
markets.
‘Delivering Shareholder
Value’ - Focus on balanced
and attractive global
markets.

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

Lower profitability
and financial
returns.
Management
focus taken awayfrom the corebusiness in orderto manage
integration issues.

Lower profitability
and financial
returns‘Realising the Brand’ Developing a strong brandin existing and developing
markets.
‘Investing in the Future’ Using ‘ Voice of the
Customer’ to drive rapid
new product development.
‘Adding Personal Value’ –Supporting and developing
our employees.
‘Delivering Shareholder
Value’ - Focus on balanced
and attractive global
markets.
‘Liberating Cash’ –Developing a competitive
global supply base that
supports our growth.

Outsourcing

The Group’s
strategic plan
includes theoutsourcing of asignificantly higher
proportion of thecosts of its
products to benefit
from economies ofscale and natural
currency hedges.

Failures in the
supply chain
impacting sales.

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 brandin existing and developing
markets.

Mitigation
The Group has moved awayfrom large scale, single
customer development
programmes towards morecommercially orientatedproducts.
The New ProductIntroduction programme thatany new R&D projects must
pass through provides aframework within which thecommercial viability of
projects are scrutinised andassessed.
The Group has a broad
spread of customers,
applications andgeographical markets.
The Group is expanding inthe so called BRIC nations,whose markets have been
more resilient during the
economic downturn.
Extensive financial andtechnical due diligence isundertaken by the Groupduring any acquisition
programmes.
Each transaction has acomprehensive postacquisition integration plan
which is reviewed at thehighest level.

The Group seeks to mitigate
the exposure totransactional risk by the useof natural hedges wherever
possible.
The remaining transactional
foreign exchange risk in any
year is mitigated through theuse of forward and nonpremium based option
exchange contracts.
Relationships withoutsourcing businesses aremonitored closely and any
potential issues are acted
upon swiftly to avoid
disruption.
Where practical dual
sources are used for key
components and services.

Oxford Instruments plc
27

Announcement of Preliminary Results for the year to 31 March 2013

Pensions

PeopleThe Group’s
calculated pension
deficit is sensitive
to changes in theactuarialassumptions.

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

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

A number of theGroup’s
employees arebusiness critical.

The employee
leaves the Group.

Lower profitability
and financial
returns.

‘Delivering Shareholder
Value’ - Focus on balanced
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.
‘Adding Personal Value’ –Supporting and developing
our employees.

The Group has a funding
plan in place to reduce thepension deficit over the
short to medium term.
The Group undertakes aregular employee survey
and implements andreviews resulting actionplans.

‘Investing in the Future’ Using ‘ – providing career
challenges.

Routes to market

In some instances
the Group’s
products arecomponents ofhigher levelsystems and thus
the Group does
not control its routeto market.

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

Lower profitability
and financial
returns.

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

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 criticalcurrent and future roles.
A management
development programme
provides exposure to key
skills needed for growth.
Regular individual
performance reviews takeplace.
Use of the stage gate
process and ‘Voice of the
Customer’ to make sure that
the Group’s products are
the best in the market.
Co-marketing with system
integrators to promote themerits of the Group’s
products to end customers.

Oxford Instruments plc
28