Empowering Scienceand Industry

Oxford Instruments plc
Report and Financial Statements 2016

Oxford Instruments plc
is a leading provider of hightechnology tools and systems
for industry and research.
We use innovation to turn smart science
into world‑class products that support researchand industry to address the great challengesof the 21st Century.
WHAT’S INSIDE
Strategic Report

Governance

Financial Statements

Company information

We discuss developments andthe global issues that have had
an impact on our business

Read about how we manage
our Company and maintainhigh standards

See how we are performingin light of developmentsin the past year

Additional information
about uspage 1

page 40

page 79

page 137

Highlights

1

Board of Directors

41

Directors’ Responsibilities

80

Shareholder Information

137

Our Business2

Corporate Governance44

Independent Auditor’s Report81

Oxford Instruments Directory

139

Where We Operate

3

Accounting Policies

84

Directors and Advisers

IBC

51

Consolidated Statementof Income90

Consolidated Statementof Comprehensive Income

91

Consolidated Statementof Financial Position

92

Consolidated Statementof Changes in Equity

93

Consolidated Statementof Cash Flows94

Notes to the Financial
Statements

96

Parent Company Statementof Financial Position

123

Chairman’s Statement

4

Audit and Risk
Committee Report

Chief Executive’s Review

6Nomination Committee Report

57

Key Performance Indicators

8

Remuneration Report

59

Strategic Context

9Report of the Directors

76

Our Strategy

10

Business Model

12

Operations Review

14

Principal Risks and Uncertainties 22
Viability Statement

25

Financial Review

26

Corporate Responsibility

32

Statement of Changes in Equity 124
Notes to the Parent Company
Financial Statements
125
Historical Financial Summary

Front cover image: the Oxford Instruments logo etched onto a human hair using atomic force microscopy.
Using this technique we are easily measuring features 100,000 times smaller than the diameter of a hair.

136

Strategic Report

Highlights
Strategic Report

The Group delivered profit growth against adifficult macroeconomic backdrop.

Revenue (£m)
2016

361.6
380.1

£361.6m‑4.9%

Adjusted profit before tax1 (£m)
2016

37.0

2015

35.7

49.2

2015

48.4

49.2p
+1.7%

Dividend per share (p)£37.0m
+3.6%

2016

13.0

2015

13.0

13.0p

Highlights include:

Orders (£m)
380.8

2015

382.4

£380.8m‑0.4%• reported revenue down 4.9%, and 5.7% at organic constantcurrency1, driven by structural changes within the superconducting
wire market and completion of a service contract;• strong cash performance with operating cash flow up 27.5%;
leverage maintained at 2.3 times;• improved profit performance in NanoTechnology Tools and Service
sectors; decline in Industrial Products due to market softness;• early action on cost reduction delivered operational benefits of£9.4 million; and• appointment of Ian Barkshire as Chief Executive in line withsuccession plan, and Gavin Hill as Group Finance Director.
Alan Thomson to assume Chairman role in September 2016.
1.

Throughout these financial statements we make reference to adjusted numbers. These arepresented as, in the opinion of the Directors, they present a clearer picture of the businessperformance. A full definition of adjusted numbers can be found in Note 1. Where we
make reference to organic numbers, these exclude the effect of acquisitions and disposals.
Where we make reference to constant currency numbers, these are prepared using theexchange rates which prevailed in the previous year rather than the actual exchange rates
which prevailed in the year.

Oxford Instruments plc Report and Financial Statements 2016

1

Company Information

Our NanoTechnology Tools and Service sectors delivered steady
performance, whilst Industrial Products continued to face pressure
due to weakness in its end markets, in particular structural changes
within the superconducting wire market. The Medical Imaging
Resources, Inc (“MIR”) acquisition has progressed well and has madea considerable contribution to the increase in revenues, orders andprofit within the Service sector. We have placed our Omicron business
into a joint venture with GDI’s Scientia Scientific AB, which is making
good progress towards profitability. Margins for the Group increasedin the year, supported by the successful delivery of our cost reduction
programme.

• adjusted profit before tax up 3.6%, in line with expectations;
Financial Statements

2016

Read more
page 142016

Governance2015

Continuing adjusted earnings per share1 (p)Strategic Report

Our BusinessAs one of the world’s first university spin‑out companies,
we have been at the forefront of technologicalinnovation for more than 55 years.
Through our deep understanding of our customers we use our innovation to turn smart science
into world class solutions and services that support research and industry to address the greatchallenges of the 21st Century.

Our business is structured around three segments that reflect our expertise and business objectives:

NanoTechnology
Tools

Industrial
Products

High technology tools
to characterise, analyse,
manipulate and fabricate
at the nanoscaleTechnologically superior
tools and components
for industrial applications

Service
Supplying knowledgeablesupport services, training
and refurbishment of ourown products
The service, sale and rentalof third party MRI andCT machines

Read more
page 14

Read more
page 18

Read more
page 20OUR GLOBAL MARKET IS COMPRISED OF SIX AREAS:

Research and academiaLife sciences

Metals/construction

Our target market sector includes research
into nanotechnology applications, newmaterials, Quantum Information Processing
and other developments.

A growing sector that includes the supportand service of MRI and CT imaging
equipment as well as new opportunities
driven by the convergence of physicaland biological sciences.

We are supporting global industries
including metals, alloy manufacturing,steel foundries and scrap recycling.

Semiconductors/IT
This includes semiconductor electronics,
Micro Electro Mechanical Systems(“MEMS”), compound semiconductormaterials, thin film and particle analysis.

2

EnergyWe have been involved in the
search for sustainable energy, solar
technologies, oil and gas exploration,and superconductor materials.

Oxford Instruments plc Report and Financial Statements 2016

Environment
This includes greener production, recycling,detection of hazardous substances in soil,
and agriculture and food.

Where We Operate
Strategic Report

We have offices in
16 countries and employ
2,077 people worldwide.
As one of the world’s first university spin‑out
companies, we have been at the forefront oftechnological innovation for more than 55 years.

Governance
Financial Statements

Principal offices

REVENUE FROM EXTERNAL CUSTOMERS BY DESTINATION

USA£123.7m

Rest of WorldUK

Germany£32.2m£22.3mChina

Rest of Asia

Japan

£51.8m£38.4m£45.9mCompany Information£12.4mRest of Europe£34.9mFor a full list of our locations please visit our website: www.oxford‑instruments.com/offices

Oxford Instruments plc Report and Financial Statements 20163

Strategic Report

Chairman’s Statement

Against a difficult macroeconomic backdrop we
achieved profit growth on lower revenue.

The Group delivered a profit performance in line with expectations.
Against a difficult macroeconomic backdrop we achieved
profit growth on lower revenue. Reported Group revenue was£361.6 million (2015: £380.1 million) with adjusted profit before
tax rising to £37.0 million (2015: £35.7 million). Profit before tax
increased to £13.1 million (2015: loss of £9.6 million).
Our NanoTechnology Tools and Service sectors delivered steady
performance, whilst Industrial Products continued to face pressure
from weaknesses in its end markets. Good control of working capital
led to strong cash conversion in the year.
At the beginning of 2015, recognising the difficult trading
environment, we instigated a wide ranging cost reduction
programme across the Group to bring our cost base in line withtrading and secure efficiencies that enhance our performance.
This cost reduction programme has delivered the expected savingsand enabled us to improve profitability despite the constrained
market backdrop.

DID YOU KNOW?

Our systems produce
highly efficient power
semiconductors
resulting in greater
green energy potential

4

Oxford Instruments plc Report and Financial Statements 2016

Since the financial year end, we have announced Ian Barkshire’s
appointment as Chief Executive following Jonathan Flint’s decision
to step down after eleven years in the role. This followed our earlier
announcement of Gavin Hill’s appointment as Group Finance Director
to succeed Kevin Boyd, who left the Group in April 2016. Ian and
Gavin assumed their respective new roles in May 2016.
I would like to thank Jonathan for his immense contribution. Under
his leadership, Oxford Instruments has grown to become a global
leader in the provision of nanotechnology tools, high technology
industrial products and services to the research and commercial
sectors. In that period the Group has significantly improved
profitability and more than doubled sales. Jonathan will remain on
the Board until July 2016 to close out the 2016 year end and ensure
a smooth transition to Ian’s leadership.

Mary Waldner will take over from Jock as Chairman of the Audit andRisk Committee when Jock steps down from this role on 16 June
2016. Mary is CFO at Lloyd’s Register, a privately owned global
engineering, technical and business services organisation. She has
a broad range of experience across a variety of sectors having held
senior financial positions with a number of major public and privatecompanies including Ultra Electronics Holdings PLC and QinetiQ.
Mary graduated from Oxford University with an MA in Physics andis a fellow of the Chartered Institute of Management Accountants.
I have also decided that the time is right for me to step down after
17 years. It has been a great privilege to serve as Chairman of Oxford
Instruments and I take enormous satisfaction in what has beenachieved in changing the Group to one that has become increasingly
customer‑led, while retaining its leading edge technical solutions.
I am delighted that we have found such an able and experienced
successor in Alan Thomson, who joined the Board in June and will
step up to Chairman at our AGM in September.
It has been an exciting journey and I look forward to seeing Oxford
Instruments build on its great strengths and lead the way in theadvancement of technological and commercial innovation.

Nigel Keen
ChairmanFinancial Statements

I am delighted that Ian is succeeding Jonathan and that our
succession planning has seen a colleague with such experienceand quality take the helm. Ian joined Oxford Instruments in1997 and has held a number of senior leadership roles including
NanoCharacterisation Divisional Head and Group Technical Director,
before his appointment as Chief Operating Officer in 2015. His
proven track record of delivering results in technology businesses
makes him particularly well placed to lead our Group.

We have previously announced a number of other changes to theBoard. I would like to thank Jennifer Allerton and Jock Lennox, whowill be standing down from the Board at the AGM this September.
Jennifer has been a Board member since June 2013; Jock has beena Board member since April 2009, and is Chairman of the Audit andRisk Committee, and Senior Independent Director.

Governance

Given the modest growth in adjusted continuing earnings per shareof 1.7%, the Directors are proposing to maintain the final dividend
at last year’s level. This would result in a final dividend of 9.3 pence(2015: 9.3 pence), bringing the total dividend for the year to13.0 pence (2015: 13.0 pence).

Strategic Report

We continued to actively manage the Group’s portfolio. In May
2015, we acquired Medical Imaging Resources, Inc (“MIR”), a US
company specialising in the build, lease, sale and service of mobile
medical imaging laboratories. In the same month, we enteredinto a joint venture with GD Intressenter AB of Sweden (“GDI”) to
create the world’s largest player in the highly specialised ultra highvacuum surface science field. The joint venture comprises Oxford
Instruments’ Omicron NanoTechnology GmbH (“Omicron”) andGDI’s Scienta Scientific AB (“Scienta”). It is making good progress
towards profitability.

15 June 2016

OUR TOOLS‑BASED DEVELOPMENT MODEL

Company Information

Global markets
Research and academia — Life sciences — Semiconductor/IT
Energy — Metals and construction — Environment

Tools and systems are usedby customers at all levels

Key growth technologies• Fundamental research

Repeatable fabrication and analysis tools• Development of new technologies• Commercialisation and manufacture

New scientific discoveries

Oxford Instruments plc Report and Financial Statements 20165

Strategic Report

Chief Executive’s Review

We add value for our customers throughsuperior performance and improved ease ofuse for better productivity in both research
and manufacturing.
I am delighted to have been given the opportunity to take over from
Jonathan Flint as Chief Executive of Oxford Instruments. In my timewith the Group, I have worked in many parts of the Company andnow look forward to leading the organisation.
Oxford Instruments is a leading provider of high technology
capital goods to support industry and academia in developing,understanding and commercialising the applications of
nanotechnology. Our focus is on areas where we can offer significant
competitive advantage through our expertise, skill and intellectual
property that can be applied to nanotechnology such as highperformance scientific imaging, cryogenics, superconductivity, x‑ray
fluorescence and spectroscopy. We add value for our customers
through superior performance and improved ease of use for better
productivity in both research and manufacturing. Added value isobtained through intuitive user interfaces and innovative applications
which allow complex science to be undertaken by a wider range
of users.
We continue to build on our strategy to grow our business in ourcore markets of physical and material science, while exploiting
scientific convergence to expand into life sciences. The use oftechniques previously associated with the physical sciences, where
the Group has great strength, in the biological sciences produces animportant opportunity for growth.

SUMMARY• Profits in line with expectations• Margin improvements• Cost reduction delivered
operational benefits• Active management of portfolio• Improved order book6

Oxford Instruments plc Report and Financial Statements 2016

Our Industrial Products sector develops technologies which are
predominantly deployed in industrial applications, where ourcustomers are interested in optimising quality and productivity.
These products provide an opportunity for scalability in a broad
range of addressable markets. We recognise that this is a competitive
arena and we therefore concentrate on products where we have aclear advantage.

Looking back over the previous financial year, our NanoTechnology
Tools and Service sectors have both delivered improved profit
performances against an uncertain macroeconomic background.
In our Industrial Products sector, Industrial Analysis has shown
improved performance as a result of management actions, despite
challenging industrial end markets. However, our Superconducting
Wire business has suffered from a structural change in the market,
which has reduced demand from our MRI customers.

Revenue in the period was £361.6 million (2015: £380.1 million)a decline of 4.9%. Organic constant currency revenue declined by
5.7%. This performance reflects the material impact of structuralchanges within the superconducting wire market and the previously
reported completion of a Siemens MRI service contract. In Europe
revenue declined by 12.8% (0.3% on an organic constant currency
basis), while in Asia a reported decline of 2.9% translated into
organic constant currency growth of 2.2%. The loss of the MRI
contract contributed to a decline of 0.6% (16.9% at organic constantcurrency) in North America.

Kevin Boyd, our long standing Finance Director, stood down on
8 April 2016. Kevin has been an important part of the emergence ofOxford Instruments as a key player in the high technology field andI would like to thank him for his enormous contribution.
I would like to welcome Gavin Hill, Kevin’s successor, whojoined us on 9 May 2016. Gavin was Group Finance Director of
Synergy Health plc from April 2010 until the combination withSTERIS Corporation on 3 November 2015. Prior to that, he was
Corporate Finance Director of Serco Group plc where he held anumber of senior finance and commercial positions. Prior to joining
Serco, Gavin worked in a variety of finance and corporate treasury
roles with Syngenta AG and AstraZeneca plc. Gavin is a Chartered
Accountant and an associate member of the Institute of Corporate
Treasurers. I look forward to working with Gavin in the next stage ofthe evolution of Oxford Instruments.
Current trading and outlook
In continuing uncertain market conditions we remain focused on new
product development, customer service and cost optimisation, andexpect to make progress in the year. Revenue for the first two monthsof trading in the current year is in line with last year with profits
marginally ahead.
The increasing role of nanotechnology in both the physical and life
sciences will continue to yield long‑term structural growth in demandfor high technology tools for use in research. We will continue
to invest in growing the business in our core markets of physicaland materials science, and exploiting convergence to expand intolife sciences.

Ian Barkshire
Chief Executive
15 June 2016

Oxford Instruments plc Report and Financial Statements 2016

7

Company Information

Adjusted profit before tax at Group level was £37.0 million(2015: £35.7 million). Our early action on cost reduction,
implemented in 2015, has contributed to operational benefits of£9.4 million and has enabled us to deliver improved profits this year.
Adjusted return on sales rose to 12.3% (2015: 11.3%). Adjusted
operating margins in our NanoTechnology Tools sector improved from
9.8% to 11.4% reflecting the removal of the Omicron business anda better performance from Plasma Technology, Andor Technology,
Asylum Research and NanoAnalysis. Adjusted operating margins
in Industrial Products fell from 6.1% to 4.7% due to the decline
in the superconducting wire market. This was partially offset by
improved margins in our Industrial Analysis business. Adjusted
operating margins in the Service sector have increased to 24.0%(2015: 23.7%).

I would like to thank our staff around the world for their
excellent contributions this year. It is their hard work, diligenceand understanding of many technological disciplines that makeOxford Instruments the unique business that it is.

Financial Statements

Orders in the year were £380.8 million (2015: £382.4 million).
NanoTechnology Tools grew by 4% (after the removal of Omicron)offsetting a decline of 3% in Industrial Products. The acquisitionof MIR contributed to good growth in the Service sector. At theend of the year the Group order book for future deliveries stood at£140.4 million (2015: £125.2 million), growth of 12.1%.

PeopleGovernance

Our Service sector addresses the aftermarket for our own and third
party equipment. The technical complexity of our own productsmeans our customers highly value our aftermarket support andthe increasing level of service contracts provide the opportunity for
growth. Our ability to grow in the third party arena is enhanced by
the Group’s strong brand and technical capabilities.

The Group spent £29.3 million on Research and Development(“R&D“) in the period (2015: £35.2 million), reflecting improved
efficiency brought about by the consolidation of sites and the factthat the ongoing R&D programme in our Omicron joint venture is
no longer included in these figures. Some of our new and innovative
products are outlined in the Operations Review section. We monitor
the fraction of our revenues which originate from products developedin the last three years (our Vitality Index). Our Vitality Index stands
at 31% down from 44% in 2015, reflecting the continued successof the RRP Wire and the AZtec and X‑Max platforms, whose
introduction now falls outside the three year window. The Index
remains in the range where we believe a high technology businessshould be. We continue to have a healthy pipeline of new products indevelopment that will push the boundaries of technical performanceand scientific understanding. These developments are aligned to ourstrategic roadmaps and plans for growth across the Group.

Strategic Report

Our NanoTechnology Tools sector produces the very best scientificinstruments, which are matched to our customers’ needs. The
businesses in this sector offer the opportunity for good organic
growth in the medium term as nanotechnology applications are
adopted by a broader range of research users and increasingly
within commercial end markets.

Strategic Report

Key Performance Indicators

The Group uses a range of measures to monitor
progress against its strategic plans.
The key performance indicators are presented below:

Our financial goal:
To deliver Shareholder return through growth in turnover and margin.
Revenue growth (%)(4.9)

Net return on sales1 (%)

2016

2016
5.6

2015
2014

2.7

2013

4.0

Tracks our performance on our growth strategy

12.3

2015

11.3

2014

14.0

2013

14.1

Tracks our performance on our profitability strategy

Strategic priorities:
Liberating cash.

Inventing the future.

Cash conversion from profit2 (%)

Proportion of revenue coming from products
launched in previous three years3 (%)
115.2

2016
2015
2014

44

2014

51.1

46

2013

85.4

44

Monitors our use of fixed assets, working capital and R&D

Measures the effectiveness of our R&D programmes

Realising the brand.

Adding personal value.

Net Promoter score4 (%)“Value Add” – (adjusted operating profit +employment costs)/employment costs (%)

2016
2015

2016

58

2013

2015

62

2014

66
62

Measures customer feedback
1. Calculated as adjusted operating profit divided by revenue.
2. Cash conversion is defined as the ratio of cash generated to adjusted operating profit(see Income Statement). Cash generated is calculated as adjusted operating profit plus
depreciation on property, plant and equipment and amortisation on R&D, minus capital
expenditure on property, plant and equipment, and R&D, and adjusted for movements inworking capital.
3. To ensure this metric better reflects the performance of those business which invest in
R&D, the revenue from the Group’s OI Healthcare division has been excluded from thismetric. Result from previous years have been restated to show this.

8

31

2015

80.6

2013

2016

Oxford Instruments plc Report and Financial Statements 2016

1.43
1.36

2014

1.51

2013

1.54

Measures efficiency
4. The Net Promoter score is a metric which is compiled by asking customers whether theywould recommend Oxford Instruments to a friend or colleague. Customers give a score
between zero and ten. Those customers who score nine or ten are promoters, thosecustomers who score seven or eight are neutral and customers who score six or less are
detractors. The net promoter score is the difference between the numbers of promotersand the number of detractors (both expressed as a percentage of the number of replies
received). The score can range between –100 (no customers are promoters) and +100 (allcustomers are promoters). A positive score indicates that the Company has fewer detractors
than promoters.

Strategic Context
Strategic Report

Convergence allows us to offer products to anever‑widening pool of researchers and high tech
manufacturers who increasingly need to operate
at the nanoscale.

We continue to build on our strategy to grow our business in ourcore markets of physical and material science, while exploiting
scientific convergence to expand into life sciences. The use oftechniques previously associated with the physical sciences, where
the Group has great strength, in the biological sciences produces animportant area of growth.

We support industry and academia as they develop, understandand commercialise the applications of nanotechnology. We focus on
those areas where we can offer significant competitive advantage
through our expertise, skill and intellectual property. We enable
our customers to generate more value in their markets through the
exploitation of advanced material properties, made possible throughnanotechnology. This is why nanotechnology continues to be soimportant. As a result, researchers and commercial organisations areoperating at the smaller scale, using tools that are more advanced;
our aim is to ensure these are Oxford Instruments tools.

Governance

Convergence is the merging of previously distinct areas of researchand technology into a unified discipline that creates new scientificand commercial opportunities. The tools that were once restricted
to one discipline are now being utilised across a number of areas,
exposing us to a larger addressable market and a new set ofcustomers needing to work at the atomic and molecular level.

One example of convergence is the techniques developed byphysicists for x‑rays and magnetic resonance imaging are now
widely used in clinical applications settings. Oxford Instruments
services, leases and sells refurbished MRI and CT machines that utilise
technology created in physical sciences for life science applications.

nm
EngineeringMacro

10,000

Micro

1,000

Integrated exploitation
Biological principles
Physical laws
Chemical properties
Cognitive sciences

Physics andmaterial science

100

10

Nano

Financial Statements

Systems
and devices

100,000

1

Biology

Accelerated scientificdiscovery and innovation

Chemistry
1970

1980

1990

2000

2010

2020

2030

Company Information

Source: based on slide from Slideshare.net

Oxford Instruments plc Report and Financial Statements 20169

Strategic Report

Our Strategy

Oxford Instruments continues to provide
solutions to those wishing to explore newfrontiers at the nanoscale.
As well as seeking opportunities in growing markets, we also aim to increase our addressable
markets as new customers and new applications for our tools and services result from ongoing
convergence of the sciences and increasing exploitation of nanotechnology across broader
markets. Four key themes underpin our plan for delivering on this strategy while maximisingcustomer and shareholder value.
EXPLOITING THE CONVERGENCE OF SCIENCES

1: People development

2: Product development

3: Market development

4: Process development• LONG‑TERM DEMAND • INCREASED ADDRESSABLE MARKET • MAXIMISED SHAREHOLDER VALUE

10

People development

Product development

Our employees are key to our continued growth andsuccess, bringing high levels of technical skill and a deep
understanding of technology trends. We build on thetalents and skills in the business through extensive training
and development programmes and look to enhance ourskill base further through focused recruitment.

We are driven to provide customers with the latest hightechnology tools, building on our customer relationships
to understand the long‑term market trends. We utilise
our resources to retain our high level of innovation and topush the boundaries of our technology to develop tools forthe future.

We focus on the following areas:

Our focus is on:• Adaptability• R&D that is strategic and market driven• Engagement• The alignment of development with a long‑term vision• Calibre• The creation of a delivery‑enabled environment• Skill• The production of market‑leading, high margin tools

We benchmark staff engagement externally and measure
our progress through regular employee surveys. We
undertook a pulse staff survey in January 2016.

• Adding value for our customers through advanced
performance and unprecedented ease of use

Oxford Instruments plc Report and Financial Statements 2016

We monitor our progress through the Vitality Index, ameasure of the proportion of revenues coming from new
products introduced in the last three years. Our 2016
Vitality Index is 31%.

Strategic Report
GovernanceWe continue to focus on our strategy to exploit theincreasing demand for nanotechnology tools driven by theconvergence of the sciences. This presents us with broader
commercial opportunities, developing tools for bothmaterial sciences and life science markets. We will do thisthrough organic growth and strategic acquisition.

Continuous improvement in our operational excellence
forms a key part of our strategy. Through problem solving,
teamwork and effective leadership we continue to makeprogress here. We work hard to ensure our processesdeliver the benefits of economies of scale as the businessgrows and we consider operational excellence to be thecornerstone of overall excellence. To achieve operational
excellence we build on the strong fundamentals of ISO
standards to set ourselves apart from others.

Our goals are:
• To target fast growing markets• To expand our portfolio of techniques

We aim to:• To expand into attractive adjacent markets• Promote a culture of continuous improvement• To offer unrivalled service and support forour customers• Deliver business excellence in everything we do

One measure of our success is the growth in ouraddressable markets and we continue to chart thisthroughout the year.

Company Information

Process development

Financial Statements

Market development

We measure the value and success of operational
excellence through the Value Add Index. This shows thevalue each employee adds to the business. Value Add
Index = (adjusted operating profit + employment
costs)/employment costs. Our 2016 Value Add Index
is 1.43%.

Oxford Instruments plc Report and Financial Statements 201611

Strategic Report

Business ModelHigh technology tools and systems that analyseand manipulate matter at the nanoscale.
The Group sells tools to customers who wish to exploit
the opportunities offered by nanotechnology to performgroundbreaking research and make better, safer,green products.

12

Oxford Instruments plc Report and Financial Statements 2016

Strategic Report

how it works

Innovation:

To exploit the advanced properties of materials, researchers andmanufacturers are working at a smaller scale and therefore require
advanced nanotechnology tools.

We use our customer intimacy, our high level of technical skills andour understanding of technology trends to create new tools using thelatest nanotechnology techniques.

Convergence:

Global markets:

Through the convergence of science, the tools traditionalto engineering and physics are now being applied to life
science research.

We generate revenues from a broad range of geographies andindustries, thus the Group does not incur undue exposure to any one
application or market.

GovernanceNew discoveries:

Tools for customers

Industry:

Support:cutting edge
tools

industrial‑scale
tools

addingvalue

Product
application
insight

Within industry ourtools are used for quality
control, environmental
monitoring andcompliance testing.
We produce reliable,robust, accurate andefficient tools to help
others develop the mosteffective production
processes andinnovative products.

Customerbase

We help our customers
remain operational andgive them peace of mind
by offering maintenanceservice contracts, spareparts and refurbishedsystems for our own
products. We offer
service, support and saleof refurbished MRI andCT machines.

Oxford Instruments plc Report and Financial Statements 2016

Company Information

In the research field
our high technology
products are used toadvance the frontiers ofscience from atoms togalaxies. We help ourcustomers break new
ground, enabling themto make advancements
previously thought
impossible.

Innovation
approachFinancial Statements

Research:

13

Strategic Report

Operations Review

NanoTechnology
Tools
We design and manufacture equipment that canfabricate, analyse and manipulate matter at theatomic and molecular level.
The NanoTechnology Tools sector produces our highest
technology products, primarily for research customers;
83% of its revenues come from research and academia
with over a quarter of this coming from biologicalsciences. Our customers in this sector provide a uniqueinsight into emerging trends in public and privately
funded research, thus informing our approach toinnovation and product application. In the physical andlife science research fields, our tools are used to advancethe frontiers of science. We count many Nobel Laureates
amongst our customers.
The NanoTechnology Tools sector comprises two
divisions: NanoCharacterisation, which includes
NanoAnalysis, Andor Technology and Asylum Research;and NanoSolutions, which includes NanoScience andPlasma Technology. Omicron was previously reported inthis division but its revenues and profits are now excluded
as it is now part of a minority owned investment
in Scienta Scientific AB. Our organic performancereflects the effect of the change in treatment. Our
increase in margins reflects the strong performance in
our NanoAnalysis, Andor and Asylum businesses, animprovement in Plasma Technology and the transition of
Omicron into the joint venture.
Our NanoAnalysis business delivers leading‑edge
solutions and services that enable materials
characterisation and sample manipulation at thenanoscale. Our products are used on electron
microscopes and ion‑beam systems in academic
institutions and industrial applications including
semiconductors, renewable energy, mining, metallurgy
and forensics. We continue to be very strong in ourend markets and continue to deliver good commercial
and technical results. This year we launched AZtecOne,
which is the ideal solution for carrying out complex
tasks as quickly and easily as possible, without theneed for substantial training or advanced knowledgeof the underlying technique. AZtecOne can be used toanalyse the composition of a wide range of materials
in the Scanning Electron Microscope and has been well

14

Oxford Instruments plc Report and Financial Statements 2016

received in the market. We also launched our X‑Max
Extreme detector, which is able to achieve previously
unattainable analysis of features at the very small scale.
The X‑Max Extreme is the most sensitive x‑ray detector
on the market for lithium characterisation at thenanoscale. This is important for those working to makelithium ion batteries last longer while being both lighterand more powerful. We continue to develop softwareand hardware that enable our customers to obtain theirresults easily while instilling confidence that results areboth accurate and dependable. By focusing on ease ofuse we are also allowing a broader range of users to
exploit the range of techniques we offer.
Andor Technology is a global leader in the design andmanufacture of high performance scientific imaging
cameras, spectroscopy solutions and microscopy systems
for research and industrial markets. Andor continues
to show growth and is delivering a good performance.
The integration of the Andor international sites into
our federal offices is complete, providing market andoperational synergies. We have announced the relocationof our microscopy systems production from our Canadiansite to our main manufacturing site in Belfast to further
improve operational efficiency. We have received strong
interest in our iKon XL camera within the astronomy
community where the camera’s large area high sensitivity
and ability to operate without the requirement for
liquid cryogens provides significant advantages overthe previous technology. This has generated particularly
strong sales in China. Our superior performance cameras,
microscopy systems and visualisation software have beenused recently to observe how cancer drugs and othertherapies are operating at a molecular and cellular level.
This will help researchers come up with more effective
cancer therapies and develop a better understandingof autoimmune diseases such as multiple sclerosis
and arthritis.

Strategic Report
Governance
Financial Statements

Revenue (£m)
2016

187.4
211.2

2015

‑11.3%

2016

21.3

2015

20.7

Company Information

Adjusted operating profit (£m)

+2.9%

Adjusted operating margin (%)
11.4

2016
2015

9.8

+16.3%An EBSD analysis showing the distinct
layered structure of a new generation
light weight automotive steel designed toabsorb the energy of an impact, rather thanfracturing and failing.

Oxford Instruments plc Report and Financial Statements 201615

Strategic Report

Operations Review
continued

NanoTechnology
Tools
continued

Asylum Research is the technology leader in Atomic ForceMicroscopy (“AFM”) for both materials and bioscience
applications. Asylum has the opportunity for long‑term
growth as our products continue to take market share.
We have seen growth in demand for our new AFM
products from a broad range of applications and end
markets; including facilitating advancements in energy
storage and generation. Our microscopes are being used
to help understand the physical properties of organic
solar cells that are more efficient, cheaper and simpler
to make. This will lead to the creation of more cost
efficient means of powering many consumer devices.
The MFP‑3D‑BIO is being used to help researchers
understand more about how the stiffness of scar tissue
and healthy heart tissue can reduce heart function inheart attack survivors.
Plasma Technology provides processes and solutions
to semiconductor research laboratories and advanced
specialised production facilities, developing devices andmaterials for novel applications of nanotechnology.
Whilst Plasma is making a good recovery and has
maintained its position in the academic and corporate
research market, there is still some way to go to reachan acceptable level of performance. We launched anenhanced PlasmaPro100 range of etch and deposition
tools to offer our customers working in areas such as
high brightness LEDs (“HBLEDs”) and photovoltaic
development a more flexible and compact platform.
We also introduced the Astrea product line designed toenable improved uniformity and larger area processing.
We have built on our expertise gained through our workin HBLEDs to help our customers develop more efficient
power devices, which reduce the associated production
and running costs of electronic devices. In addition, thesecapabilities are helping customers fabricate ultraviolet
LEDs that will be used in the manufacture of water
purification systems. LED sources are attractive as they
can be more effective with a lower cost of ownership
than historical UV purification methods.

16

Oxford Instruments plc Report and Financial Statements 2016

NanoScience designs, manufactures and supports
market‑leading research tools that enable quantum
technologies, new materials and device development in
the physical sciences. We continue to see strong demandfor our Ultra Low Temperature systems in line with thegrowing interest in understanding the fundamentals
of quantum science and the associated industrial
applications. Our next generation Triton refrigeration
system launched this year has been well received,
providing customers with improved throughput andaccess for larger samples and experiments. Quantum
sensors are receiving increased amounts of funding
and have the potential to offer unparalleled speed andsensitivity to the measurement of electrical current,
magnetic field, and even time. This can enable thedevelopment of platforms that can be applied in awide range of situations from environmental sensing
to medical imaging, such as sensitive brain scanning.
Our cryomagnetic system is at the heart of the GE
SPINlab product, which is used to significantly enhance
the sensitivity of a clinical MRI scan and revolutionise
applications such as monitoring the effectiveness ofcancer treatment. This can identify the effectiveness of atreatment for individual patients within days rather thanmonths. While this is still in the research phase, early
results are proving extremely positive.
The Omicron Scienta joint venture created the largest
player in the ultra high vacuum surface science field. Its
restructuring programme and the integration of the twobusinesses is going well. The financial performance has
improved and, whilst there is still more to be done, it ismaking good progress toward profitability. The Group
has a 47% share in the joint venture.

Strategic Report
Governance
Financial Statements
Company Information

A Cypher ES AFM image of a polymer.
By understanding how the structure,properties and performance of thesematerials are related at the molecular level,
researchers can create more durable andsustainable polymers.

Oxford Instruments plc Report and Financial Statements 201617

Strategic Report

Operations Review
continued

Industrial
Products
Our Industrial Products sector sells products primarily
to industrial customers working in areas such as theenvironment, construction and energy.
Our Industrial Products sector sells more mature, thoughstill technically advanced, products primarily to industrial
customers; 57% of its revenues come from industrial
customers working in areas such as the environment,
construction and energy. The tools and systems producedby this sector enable us to benefit from the economies
of scale offered by trading in the larger industrial
markets, thereby maximising the returns from our R&D
programmes. In the industrial field, our tools are used
to improve production efficiency, ensure high standardsof quality control and demonstrate compliance withenvironmental legislation.
This sector saw a decline in revenues, due to a dropin sales in the Superconducting Wire business andthis, alongside continued difficulties in the metals
and construction markets served by Industrial Analysis
and X‑ray Technology, resulted in a decline in margins
and orders.
Industrial Analysis designs and sells a range ofspectrometers for industrial markets. Our customers span
global industries from metals, steel foundries and scrap
recycling through to automotive, solar, petrochemicals,
cement, recycling, and food and agriculture. We have
improved our trading position and profitability despite
the challenging macroeconomic conditions where manyof our end industrial markets remain depressed. Throughour focused efforts we continue to take market sharefrom competitors with our handheld analysers and havemade a number of changes in our global distribution
channels to further improve our position. We launched
the Foundry‑Master Smart earlier in the year. This
analyser is smaller and more mobile than existing systems
and is used to analyse the majority of metals and their
alloys. This has been well received and orders are aheadof expectation. Archaeologists in Italy have used boththe mPulse and the XMET8000 to undertake analysisof metallic pieces while investigating an air crash that
happened in April 1945. Our analysers allowed themto rapidly and reliably identify the wreckage as that ofa Messerschmitt aircraft shot down towards the end

18

Oxford Instruments plc Report and Financial Statements 2016of World War II. Our Pulsar is the highest resolution
benchtop nuclear magnetic resonance spectrometer on
the market and is currently generating increased interest
from a broad range of industrial and academic markets.
The Pulsar is currently being used to identify potentially
dangerous levels of restricted pharmaceuticals in herbal
remedies and dietary supplements.
Industrial Components comprises our Superconducting
Wire and X‑ray Technology businesses. As previously
announced, we have disposed of our non‑core Austin
Scientific business. Our Superconducting Wire businesssupplies wire for the MRI scanner market and here we
continue to be affected by the pricing pressures exerted
on us by the MRI system manufacturers and the reduced
demand for wire from our OEM customers. The effectof this reduced MRI pricing will be somewhat offset
by signed contracts to supply leading edge technology
niobium tin conductor for the High Luminosity upgrade
to the Large Hadron Collider project at CERN. Our X‑ray
Technology business supplies x‑ray sources for industry,
research and medical applications including material
composition analysis, real time medical imaging andanalysis of multi‑layer printed circuit boards. Our X‑ray
Technology business has been impacted by softening
in our industrial customers’ end markets, however wecontinue to see a good level of interest in our latest
integrated x‑ray source, especially from electronicequipment OEM customers.

Strategic Report
Governance
Financial Statements

Revenue (£m)
96.6

2016

104.1

2015

‑7.2%

2016

4.5

2015

6.4

‑29.7%

6.1‑23.0%

Company Information

Adjusted operating profit (£m)

Adjusted operating margin (%)
2016
2015

4.7

An X-MET8000 being used in a scrap yard to
identify the composition of scrap metal.

Oxford Instruments plc Report and Financial Statements 201619

Strategic Report

Operations Review
continued

Service
The Service sector comprises the Group’s maintenanceservice contracts, billable repairs and spare part sales for
Oxford Instruments’ own products; and the service, saleand rental of refurbished third party MRI and CT machines
under the OI Healthcare brand.
Our strength and reputation for customer service andsupport is a key element of our brand and market
position, and offers further opportunities for growth.
The trend in servicing is for increased uptime across boththe academic and industrial sectors and this has led toa demand for value added service, such as predictive
servicing and remote diagnostics and we continue tobuild our capabilities in these areas. Group Service
revenue increased year‑on‑year due to a strong result inbillable business offsetting a decline in spare parts and aslight reduction in contract revenue. Our NanoTechnology
Tools sector performed well showing growth in revenue
and margin.

We acquired Medical Imaging Resources, Inc (“MIR”)
to complement our range of service offerings for ourcustomers. The integration has progressed according toplan and has made a considerable contribution to theincrease in revenues, orders and profit we had this year
in Service. This has helped offset the expected decline inrevenue as a result of the completion of the Siemens MRI
service contract in the USA. Japan had a strong year withrecord revenues and a large increase in billable repairs
and spare parts. We also experienced a slight recovery
in Korea; this was after the MERS outbreak that had
impacted our revenues at the half year.

Revenue (£m)
78.4

2016
2015

66.2

+18.4%

Adjusted operating profit (£m)
18.8

2016
2015

15.7

+19.7%

Adjusted operating margin (%)

20

2016

24.0

2015

23.7

Oxford Instruments plc Report and Financial Statements 2016

+1.3%

Strategic Report
Governance
Financial Statements
Company Information

An Oxford Instruments support engineer
servicing a CT Scanner.

Oxford Instruments plc Report and Financial Statements 201621

Strategic Report

Principal Risks and Uncertainties
Risk 1: Technical risk
The Group provides high technology equipment and systems to its customers.
Risk

ImpactAssociated strategic priorities

Mitigation• Failure of the advanced
technologies applied by
the Group to produce
commercial products, capableof being manufactured andsold profitably.

• Lower profitability andfinancial returns.

• Realising the Brand
Using ‘Voice of the Customer’
to drive rapid new productdevelopment.

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

• Negative impact on theGroup’s reputation.

• Liberate CashSupport and develop our
employees to maximise theirvalue add.

• The New Product Introduction
programme that any new R&D
projects must pass throughprovides a framework within
which the commercial viabilityof projects are scrutinised
and assessed.

Risk 2: Economic environment
Government spend on R&D has been constrained.
Risk

ImpactAssociated strategic priorities

Mitigation• Demand for the Group’s
products may be lower
than anticipated.

• Lower profitability andfinancial returns.

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

• The Group has a broad spreadof customers, applications andgeographical markets.

• Delivering
Shareholder Value
Focus on balanced andattractive global markets.

Risk 3: Political risk
The Group operates in global markets and can be required to secure export licences from governments.
Risk

ImpactAssociated strategic priorities

Mitigation• Changes in political relations
may affect the grantingof licences.

• An inability to sell certain
products to certain countries.

• Delivering
Shareholder Value
Focus on balanced andattractive global markets.

• Maintaining a diversified
geographical customer base.

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

• Ensure low commitment toinventory before attaining
export licences.

Risk 4: Acquisitions
Growth for Oxford Instruments is planned to come from acquisitions which provide the Group with complementary technologies.
Risk

Impact• Appropriate acquisition• Lower profitability andtargets may fail to provide thefinancial returns.
planned value.
• Management focus taken
away from the corebusiness in order to manage
integration issues.

Associated strategic priorities

Mitigation• Realising the Brand
Developing a strong
brand in existing anddeveloping markets.

• Extensive financial, technicaland commercial due diligenceis undertaken by the Groupduring any acquisition
programmes.

• Inventing the Future
Using ‘Voice of the Customer’
to drive rapid new productdevelopment.
• Adding Personal Value
Supporting and developing
our employees.

22

Oxford Instruments plc Report and Financial Statements 2016

• Each transaction has
a comprehensive postacquisition integration plan
which is monitored at thehighest level.

The Group’s Sterling cost basis is higher than its Sterling revenue sources meaning that a significant proportion of the Group’s
profit is made in foreign currencies.
ImpactAssociated strategic priorities

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

• Lower profitability andfinancial returns.

• Delivering
Shareholder Value
Focus on balanced andattractive global markets.

• The Group seeks to mitigate
the exposure to transactionalrisk by the use of natural
hedges wherever possible.

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

• The remaining transactional
foreign exchange risk in any
year is mitigated throughthe use of forward andnon‑premium based option
exchange contracts.

Governance

Risk

Strategic Report

Risk 5: Foreign exchange volatility

Risk 6: Customer concentration
The Group’s Superconducting Wire business is reliant on a small number of MRI manufacturers as customers.
Risk

ImpactAssociated strategic priorities

Mitigation• These customers can exert
significant customer power interms of price and volume.

• Lost sales anddecreased margins.

• Delivering
Shareholder Value
Focus on balanced andattractive global markets.

• Attempt to broaden customer
base to include all OEMs.
• Explore alternative applications
for superconducting wire.

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

The Group’s strategic plan includes the outsourcing of a significantly higher proportion of the costs of its products to benefit
from economies of scale and natural currency hedges.
Risk

ImpactAssociated strategic priorities

Mitigation• Failures in the supply chain
impacting sales.

• Disruption to customers.

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

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

• Negative impact on theGroup’s reputation.

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

Financial Statements

Risk 7: Outsourcing• Where practical, dual sources
are used for key components
and services.

Risk 8: Pensions
The Group’s calculated pension deficit is sensitive to changes in the actuarial assumptions.
ImpactAssociated strategic priorities

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

• Additional cash required by
the Group to fund the deficit.

• Delivering
Shareholder Value
Focus on balanced andattractive 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 in place to reduce thepension deficit over the short
to medium term.

• Reduction in net assets.

Oxford Instruments plc Report and Financial Statements 201623

Company Information

Risk

Strategic Report

Principal Risks and Uncertainties
continued
Risk 9: People
A number of the Group’s employees are business critical.
Risk

ImpactAssociated strategic priorities

Mitigation• The employee leaves
the Group.

• Lower profitability andfinancial returns.

• Adding Personal Value
Supporting and developing
our employees.

• The Group undertakes aregular employee survey
and implements and reviews
resulting action plans.

• Inventing the Future
Providing an environment for
inventing and innovation.

• A comprehensive succession
planning process is in place,
together with a talent
network which identifies andmanages 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.

Risk 10: Routes to market
In some instances the Group’s products are components of higher level systems and thus the Group
does not control its route to market.
Risk

ImpactAssociated strategic priorities

Mitigation• The systems integrator
switches supplier denying theGroup’s route to market.

• Lower profitability andfinancial returns.

• Inventing the Future• Use of the stage gate process
Developing products that offerand ‘Voice of the Customer’
the best technical solution.
to make sure that the Group’s
products are the best in the• Realising the Brand
market.
Ensuring that end
customers appreciate• Co‑marketing with system
the benefits of Oxford
integrators to promote theInstruments technology.
merits of the Group’s products
to end customers.
• Seeking to increase thenumber of integrators suppliedby the Group.

24

Oxford Instruments plc Report and Financial Statements 2016

Viability Statement

In accordance with provision C.2.2 of the UK Corporate Governance
Code 2014, the Directors have assessed the viability of the Groupover a three year period to 31 March 2019, taking into account theGroup’s current position and the potential financial impact of thoseprincipal risks.

The medium‑term plan is underpinned by a strategic road map,the purpose of which is to ensure that the Group’s Research andDevelopment effort is focused on developing products which createhigh customer value. The medium‑term plan is a metrication of thestrategic road map which considers the Group’s revenue growth andprofitability, cash flows and compliance with banking covenants overthe period.

Based on a review of the Group’s current strategic road map
and medium‑term plan; its financial arrangements through to
February 2020; its cash flow requirements over the next three years;
its principal risks and uncertainties; and the consideration of theavailable mitigating actions, the Board has a reasonable expectationthat the Group will be able to continue to operate and meet its
liabilities as they fall due over the next three year period. Whilst the
Directors have no reason to believe the Group will not be viable
over a longer period, given the inherent uncertainty involved webelieve this presents users of the Report and Financial Statementswith a reasonable degree of confidence whilst still providing alonger‑term perspective.

Financial Statements

The Group’s three distinct segments, all with diverse geographic
markets, assist in reducing the risk of regional economic challenge
and sector specific issues. With eleven business units operating from
more than 30 sites around the world and with no reliance on any
one customer, each business is able to respond flexibly to issues
that affect it. This flexibility together with the capacity of business
unit management to adjust their own pricing structure and costbases as market conditions or prospects change helps protect theGroup’s viability in the face of adverse economic conditions and/or
political uncertainty.

In making this assessment the Directors assumed that debt financewould be readily available at a leverage (i.e. net debt to EBITDA)
covenant of three times. The Group currently has committed credit
facilities in place until February 2020, thus covering the period of thisstatement, which provides substantial headroom above existing andforecast funding requirements.

Governance

The Directors have determined that a three year period to
31 March 2019 is an appropriate period over which to assess
viability, on the basis that it is the period over which the Group hasa well established medium‑term planning process and good visibilityof markets.

In performing the viability assessment, the medium‑term plan
was subject to sensitivity analysis which included considering theimpact of a progressive strengthening of Sterling over the periodof the assessment combined with reducing revenue as a resultof the crystallisation of technical, economic, political and market
risks. Additionally, the impact of people and outsourcing risks on
profitability was considered. The Board also considered the actions
available to management that could be implemented to mitigate theimpact of the crystallisation of the risks described above.

Strategic Report

In accordance with provision C.2.1 of the UK Corporate Governance
Code 2014, the Directors have carried out a robust assessment of theprincipal risks facing the Company, including those which threaten
its business model, future performance, solvency or liquidity. This
assessment can be found in the Principal Risks and Uncertainties
section on pages 22 to 24 of this Report and Financial Statements.

Company Information

Oxford Instruments plc Report and Financial Statements 201625

Strategic Report

Financial Review

Cash generated from operations increased by
27.5% to £49.6 million, primarily due to strong
working capital inflow.
Reported revenue declined by 4.9% to £361.6 million(2015: £380.1 million), with adjusted operating profit increasing by
4.2% to £44.6 million (2015: £42.8 million). Revenue on a constantcurrency basis declined by 7.7%, with the movement in average
currency exchange rates over the last year positively impacting
reported revenue by £10.9 million. Organic constant currency
revenue, excluding the impact of acquisitions and disposals, declined
by 5.7%. Orders during the period were broadly flat at £380.8 million(2015: £382.4 million). At the end of the year, the Group order bookfor future deliveries stood at £140.4 million (2015: 125.2 million),
growth of 12.1%.
Adjusted operating profit, excluding currency effects, grew by
6.1%. Adjusted operating margin increased by 100 basis points to
12.3% (2015: 11.3%), largely driven by cost savings following a
restructuring programme implemented at the end of the last financial
year. Operating profit increased to £24.2 million (2015: £3.4 million).
Non‑recurring and acquisition related items were £4.5 million and themark‑to‑market valuation of currency hedges in place was a loss of£2.7 million. An analysis of non‑recurring and aquisition related items
is set out in Note 1 to the Financial Statements.

SUMMARY• Adjusted profit before tax, up 3.6%,
in line with expectations• Adjusted operating profit margin up
100 basis points to 12.3%, reflecting
delivery of cost saving programme• Reported revenue down 4.9% and5.7% at organic constant currency,
driven by structural changes within the
superconducting wire business andcompletion of a service contract• Strong cash performance, with
operating cash flow up 27.5%;
leverage maintained at 2.3 times• Dividend maintained at 13.0 pence
for the full year
• Improved Group order book at year
end, 12.1% above prior year

26

Oxford Instruments plc Report and Financial Statements 2016

Continuing adjusted basic earnings per share grew by 1.7%
to 49.2 pence. Earnings per share was 16.1 pence (2015: lossof 10.9 pence).

During the year, the Group disposed of its Austin Scientific businessand this has been treated as a discontinued operation in the Financial
Statements. Accordingly, the numbers detailed in the Financial
Review exclude the results of Austin Scientific in both the current
and prior periods.
Adjusted operating profit is stated before amortisation of acquired
intangibles, non‑recurring items, acquisition‑related costs and themark‑to‑market valuation of unexpired currency hedges, as set out
in Note 1 to the Financial Statements.
Income Statement
The Group’s Income Statement is summarised below:						
						
							

Year ended
31 March 2016£m

GovernanceCash generated from operations increased by 27.5% to£49.6 million, primarily due to strong working capital inflow. This
reflected a conversion of adjusted operating profit into operating
cash (defined as adjusted EBITDA, less working capital, Research andDevelopment, and capital expenditure) of 115.2% (2015: 80.6%).
The acquisition of Medical Imaging Resources, Inc (“MIR”) anddeferred consideration paid for Platinum Medical Imaging, Inc(“PMI”) and Asylum Research Corporation (“Asylum”) contributed
to an increase in net debt to £128.2 million from £118.9 million at

the year end, representing a net debt to EBITDA ratio (for banking
covenant purposes) of 2.3 times, comfortably within our banking
covenant of 3.5 times.

Strategic Report

Adjusted profit before tax of £37.0 million (2015: £35.7 million)
represents a margin of 10.2% (2015: 9.4%). Profit before taxof £13.1 million (2015: loss of £9.6 million) represents a marginof 3.6%.

Year ended
31 March 2015£m

ChangeRevenue							

361.6

380.1

‑4.9%

Adjusted gross profit						

161.9

169.8

‑4.7%

Administrative expenses							(117.3)(127.0)Adjusted operating profit							

44.6

42.8

Net finance costs							

(7.6)

(7.1)

37.0

35.7

(16.7)(21.7)

Non‑recurring items and acquisition‑related costs					(4.5)(18.8)

Mark‑to‑market of currency hedges						

(2.7)

(4.8)

Profit before tax						

13.1

(9.6)

Tax							

(3.9)

3.4

Profit for the period							

9.2

(6.2)

Effective tax rate 1							

24.1%

22.7%

Continuing adjusted earnings per share – basic					

49.2p

48.4p

Earnings per share – basic							16.1p(10.9)pContinuing adjusted earnings per share – diluted					

49.1p

48.2p

Earnings per share – diluted						16.1p(10.9)p

Dividend per share							

13.0p

13.0p

+3.6%

+1.7%

Financial Statements

Adjusted profit before tax							Amortisation of acquired intangibles						

+4.2%

+1.9%

1. The effective tax rate is calculated excluding amortisation on acquired intangibles, non‑recurring and acquisition related items and the mark‑to‑market of financial derivatives.

Company Information

DID YOU KNOW?

We have been supplying
systems to leading
space agencies sincethe 1980s

Oxford Instruments plc Report and Financial Statements 201627

Strategic Report

Financial Review
continued

Adjusted operating profit increased by 4.2% to£44.6 million (2015: £42.8 million), representing
an adjusted operating profit margin of 12.3%,
an increase of 100 basis points against last year.
Revenue

Non‑recurring and acquisition related items

Reported revenue of £361.6 million (2015: £380.1 million) declined
by 4.9%. The movement in average currency exchange rates overthe last year (notably a strengthening of the US Dollar against
Sterling), has increased reported revenue by £10.9 million. Revenue,
excluding currency effects, showed a decline of 7.7%. Organic
constant currency revenue, which excludes the impact of acquisitions
and disposals (the disposal of Omicron to a joint venture and theacquisition of MIR), declined by 5.7%.

Net non‑recurring and acquisition related items during the period
were £4.5 million. Acquisition related costs were £2.5 million
comprising professional fees relating to the acquisition of MIR,
deferred consideration relating to PMI and financial commitments
made by Andor Technology (“Andor”) prior to its acquisition by
Oxford Instruments. Non‑recurring items totalled £2.0 million
representing restructuring costs across the Group of £4.2 million,(of which £1.3 million relates to the Scienta Omicron associate),£1.0 million of acquisition fair value adjustments, a £0.9 million
loss on the disposal of the Omicron business and a credit balanceof £4.1 million reflecting contingent consideration no longer
deemed payable.

Organic constant currency revenue by sector showed a marginal
reduction of 2.5% in NanoTechnology Tools, 11.4% in Industrial
Products and 6.5% in Service.
Gross profit
Adjusted gross profit fell by 4.7% to £161.9 million(2015: £169.8 million), representing an adjusted gross profit
margin of 44.8%, a 10 basis point increase over the previous year.
Gross profit fell by 5.1% to £160.9 million (2015: £169.6 million).
Operating profit
Adjusted operating profit increased by 4.2% to £44.6 million(2015: £42.8 million), representing an adjusted operating profit
margin of 12.3%, an increase of 100 basis points against last year.
Margins (expressed after the allocation of corporate overhead) haverisen across NanoTechnology Tools and Service. The cost reduction
programme initiated by the Group has led to an improvement inmargin of 160 basis points to 11.4% for NanoTechnology Tools anda rise of 30 basis points to 24.0% for the Service sector. Continuingchallenging market conditions for Industrial Products led to a fall inmargin of 140 basis points to 4.7%.
Removing the impact of Omicron and MIR, adjusted operating profit
on an organic constant currency basis grew by 0.2%. Currency
effects (including the impact of transactional currency hedging) have
reduced reported adjusted operating profit by £0.8 million. Blended
hedged rates for the Euro and Japanese Yen resulted in a currency
headwind against last year that more than offset a small gain on the
US Dollar.

28

Oxford Instruments plc Report and Financial Statements 2016

The Group uses derivative products to hedge its exposure tofluctuations in foreign exchange rates. It is Group policy to have inplace at the beginning of the financial year hedging instruments tocover 80% of its forecast transactional exposure for that year. The
Group has decided that the additional costs of meeting the extensive
documentation requirements of IAS 39 to apply hedge accounting tothese foreign exchange hedges cannot be justified. Accordingly, theGroup does not use hedge accounting for these derivatives.
Net movements on mark‑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.
The mark‑to‑market loss in respect of derivative financial instrumentswas £2.7 million (2015: £4.8 million loss). This reflects the fair value
on currency derivatives that are hedging future transactional currency
exposures for the Group. The uncrystallised loss is attributable toa fall in the value of Sterling at the balance sheet date against the
US Dollar, Euro and Japanese Yen, against a blended rate achieved onhedging transactions expected to arise in the 2016/17 financial year.
Net finance costs
The Group’s net finance costs, before mark‑to‑market movements
as described in the previous paragraph, rose by £0.5 million to£7.6 million (2015: £7.1 million) with finance charges rising by£0.6 million to £5.9 million, pension costs falling by £0.2 million to£1.7 million and financial income falling by £0.1 million. The rise infinance charges was due to an increase in financing costs following
the move into a higher interest ratchet band as the Group’s net
debt to EBITDA leverage rose above 2.0 times at the end of
September 2015, combined with a rise in average net debt overthe period.

Earnings per share (“EPS”)

Adjusted profit before tax increased by 3.6% to £37.0 million(2015: £35.7 million). The adjusted profit before tax margin increased
by 80 basis points to 10.2% (2015: 9.4%).

Adjusted basic earnings per share and adjusted diluted earnings
per share, after adjusting for amortisation of intangibles andnon‑recurring items, increased by 1.7% and 1.9% respectively. Basicand diluted earnings per share increased from a negative position lastyear to 16.1 pence.

Profit before tax increased to £13.1 million (2015: loss of£9.6 million). The profit before tax margin was 3.6%.
Amortisation of acquired intangibles
Amortisation of acquired intangibles of £16.7 million relates tointangible assets identified on acquisitions, being the value ofcustomer relationships and brands, the largest component of which
relates to amortisation of £7.2 million on intangibles recognised on
the acquisition of Andor.

The adjusted tax charge of £8.9 million (2015: £8.1 million)
represents an effective tax rate of 24.1% (2015: 22.7%). The
increase is due to a change in the proportional mix of territories
where profits are generated.

Undiluted weighted average shares have stayed flat at 57.1 million.
Dividend
The Board has proposed to hold the dividend at last year’s level. This
results in a final dividend of 9.3 pence, bringing the total dividend
for the year to 13.0 pence. The final dividend will be paid, subject toshareholder approval, on 20 October 2016 to Shareholders on theregister as at 23 September 2016.
Governance

Tax

Strategic Report

Profit before tax

Cash flow
The Group cash flow is summarised below:																							Year ended
31 March 2016£mYear ended
31 March 2015£m

Adjusted operating profit							

44.6

42.8

Non‑cash items							

10.4

10.2
53.0

Adjusted EBITDA								55.0Working capital movement								

7.3

(5.1)

Acquisition related costs								

(1.8)

(1.9)

(4.7)

(1.2)

(6.7)

(5.9)
(0.2)

Equity settled share schemes							

0.4Loss on disposal of plant and equipment							

0.1

0.2

Cash generated from operations							

49.6

38.9

Interest								

(5.6)

(5.0)

Tax								

(3.5)

(9.1)

Capitalised development expenditure						

(8.2)

(8.0)

Expenditure on tangible and intangible assets						

(2.7)

(5.4)
(0.8)

Acquisition of subsidiaries, net of cash acquired						(27.1)

Proceeds from sale of subsidiary undertaking						0.6

—Proceeds from issue of share capital							

—

0.2

(3.0)

—

(7.6)

(7.1)

Increase/(decrease) in borrowings							4.6(12.9)Net increase in cash and cash equivalents from continuing operations 					

(2.9)

(9.2)

Note: adjusted EBITDA is earnings before interest, tax, depreciation, intangible amortisation, mark‑to‑market of financial derivatives and other non‑cash items.

Oxford Instruments plc Report and Financial Statements 2016

29

Company Information

Increase in long‑term receivables							Dividends paid								Financial Statements

Restructuring costs								Pension scheme payments above charge to op. profit						Strategic Report

Financial Review
continued

On 1 May 2015, the Group acquired Medical Imaging
Resources, Inc, a US company specialising in the build, lease,sale and service of mobile medical imaging laboratories.
Cash generated from operations

Acquisitions

Cash generated from operations in the year increased by 28%
to £49.6 million (2015: £38.9 million), reflecting a conversion ofadjusted operating profit into operating cash (defined as adjusted
EBITDA, less working capital, Research and Development and capital
expenditure) of 115.2% (2015: 80.6%), primarily due to a large
inflow of working capital over the period.

On 1 May 2015, the Group acquired Medical Imaging Resources,
Inc (“MIR”), a US company specialising in the build, lease, saleand service of mobile medical imaging laboratories. Consideration
comprised an initial $9.4 million (circa £6.1 million) with an additional$10.1 million (circa £6.6 million) paid as deferred considerationin May 2016. MIR had $4.0 million (circa £2.6 million) of debt
on completion.

Included in working capital is £3.0 million of expenditure on
MRI related assets for the US Healthcare business. These arerefurbished and subsequently rented, after which these assets may
be sold. During the year, revenue and adjusted operating profit of£13.8 million and £1.7 million respectively was booked to the Income
Statement against the sale of refurbished assets.
Interest
Net interest paid was £5.6 million (2015: £5.0 million). The difference
from last year is primarily due to higher financing costs arising from ahigher level of average net debt compared to the comparative period.
Tax

On 28 May 2015 the Group entered into a joint venture with GD
Intressenter AB of Sweden (“GDI”) to create the world’s largest
player in the highly specialised ultra high vacuum surface sciencefield. The joint venture comprises Oxford Instruments’ Omicron
NanoTechnology GmbH (“Omicron”) and GDI’s Scienta Scientific AB(“Scienta”). In consideration for new shares in Scienta, Oxford
Instruments holds a 47% interest in the share capital of Scienta, with
GDI holding the remaining 53%. The transaction resulted in loss on
disposal of £0.9 million. The Group’s share of the post tax profit orloss of the joint venture is reported in the Income Statement as ashare of income from associate.

Tax paid was £3.5 million (2015: £9.1 million), the large reduction
reflecting the high level of tax deductible restructuring costs in theprior period.
Investment in Research and Development (“R&D”)
Total cash spend on R&D in the year was £29.3 million, equivalent to8.1% of sales, (2015: £35.2 million, 9.3% of sales). A reconciliation
between the amounts charged to the Income Statement and the cash
spent is in the table below:																							Year ended
31 March 2016£mYear ended
31 March 2015£m

R&D expense charged to the Income Statement						

24.6

30.5

Less: depreciation of R&D related fixed assets						

(0.8)

(0.8)

Add: amounts capitalised as fixed assets							

1.2

2.2

Less: amortisation of R&D costs capitalised as intangibles					

(3.9)

(4.7)

Add: amounts capitalised as intangible assets						

8.2

8.0

Total cash spent on R&D during the year						

29.3

35.2

30

Oxford Instruments plc Report and Financial Statements 2016

Net debt
Net debt increased in the period from £118.9 million to£128.2 million. Operating cash flow of £49.6 million was utilised
by interest, tax, acquisition payments, investment in capital andResearch and Development, and dividend payments. Expenditureof £30.1 million relates to the acquisition of MIR and deferredconsideration paid for the acquisitions of PMI and Asylum, acquiredin 2011 and 2012 respectively, as well as a small loan to the new
associate. In addition, the Group invested in tangible and intangible
assets of £2.7 million and capitalised Research and Development of£8.2 million.
£m

Net debt as at 31 March 2015				

118.9

Operating cash flow					(49.6)

Interest						

5.6Tax						3.5Capital expenditure on tangible and intangible assets		

2.7

Capitalised development expenditure			

8.2

Acquisitions, net of cash acquired and loan to associate		

30.1

Proceeds from sale of subsidiary undertaking			(0.6)

Dividends paid						

7.6Other items						

1.8Net debt as at 31 March 2016				

128.2

Funding

The Group has also issued a bilateral private placement note of£44.5 million, which matures in 2021, and a £25.0 million amortising
fixed rate loan from the European Investment Bank that maturesin 2020. In addition, the Group has uncommitted facilities of£20.0 million.
Debt covenants are net debt to EBITDA less than 3.5 times (until
and including 30 September 2016), reducing to 3.0 times thereafter,and EBITDA to interest greater than 4.0 times. As at 31 March 2016
net debt to EBITDA was at 2.3 times and EBITDA to interest was
9.6 times, both comfortably within our banking covenants.

The average number of people employed during the year was 2,077,
a reduction of 343 over the prior year, due primarily to the disposal of
Omicron and the restructuring commenced in January 2015.
Going concern
The Group’s business activities, together with the factors likely toaffect its future development, performance and position, are set out
in the Performance, Strategy and Operations sections. The financial
position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Financial Review.
The diverse nature of the Group, combined with its financial strength,
provides a solid foundation for a 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 the Group will be able tooperate within its existing debt facilities. This review also consideredhedging arrangements in place. The Directors believe that the Group
is well placed to manage its business risks successfully.
The Financial Statements have been prepared on a going concern
basis, based on the Directors’ opinion, after making reasonableenquires, that the Group has adequate resources to continue inoperational existence for the foreseeable future.
Viability
The Directors have considered the longer‑term viability of the Groupin the Viability Statement found on page 25 and have concluded
that it is appropriate for the Financial Statements to be preparedon a going concern basis.
Forward‑looking statements

Pensions
The Group has defined benefit pension schemes in the UK and USA.
Both have been closed to new entrants since 2001 and closed tofuture accrual from July 2010.
At 31 March 2016, the net liability arising from our defined benefit
scheme obligations was £35.0 million (2015: £53.5 million), a fallof £18.5 million. The reduction in the deficit was due to lower
inflation than expected, a small increase in the discount rate and afavourable change in experience assumptions since the last triennial
review. Total scheme assets at 31 March 2016 were £239.5 million(2015: £238.6 million) while liabilities were £274.5 million(2015: £292.1 million).

Gavin Hill
Group Finance Director
15 June 2016

Oxford Instruments plc Report and Financial Statements 201631

Company Information

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

Financial Statements

The Group has in place an unsecured multi‑currency revolving facility
agreement which is committed until February 2020. The facility has
been entered into with a group of three banks and comprises a
Sterling denominated multi‑currency facility of £100.0 million anda US Dollar denominated multi‑currency facility of $37.0 million.

Employees

GovernanceMovement in net debt						The annual deficit recovery payment to the UK scheme was£6.8 million for the financial year, payable through to and including
2021. For the years up to and including 2018, the payment willrise by the higher of inflation and growth in dividend per share;
thereafter, the payment will increase in line with inflation.

Strategic Report

Net debt and fundingStrategic Report

Corporate Responsibility

Corporate responsibility is integral
to our ongoing business success.

Corporate responsibility is integral to ourongoing business success. It reminds us of
the need to minimise our impact on theenvironment, encourages us to pay attention
to the needs of our customers, employees
and investors, and to build engagement withlocal communities.

Oxford Instruments is committed to the following guiding
principles of corporate responsibility:
To establish and maintain long‑term, effective
stakeholder relationships

To offer our people an excellent
employment experience

To strengthen our business throughdiversity and inclusion

To operate in an ethical, sustainable andenvironmentally responsible manner
Our values:
Inclusive: we listen and engage withcustomers, colleagues, Shareholders andpartners for mutual success
Trusted: we build long‑term relationships
based on integrity, trust and respect
Innovative and progressive: we bring skill,
experience and openness to new ideas toaddress the needs of the 21st Century
Wholehearted: we approach what we dowith passion, with care and with pace32

Oxford Instruments plc Report and Financial Statements 2016

Our Stakeholders
Investors
The Board recognises the importance of maintaining positive,
effective relationships with our Shareholders. In line with the Stock
Exchange and other relevant requirements, we provide investors
with regular and transparent communications on all matters thatare material to an understanding of the performance and future
prospects of the organisation.
The Chief Executive and Group Finance Director meet with investors
and analysts when requested and hold conference calls with themalso. Twice a year they present the results to the financial markets
and support this with a comprehensive roadshow to meet withinvestors and analysts.
To promote transparency, this year we recorded our resultspresentations and made these available on our investor webpages.
They have been viewed by a number of our investors, analysts andemployees. We will continue to make these recordings available.
The investor pages of Oxford Instruments website provide acomprehensive overview of the Group.
www.oxford‑instruments.com/investors

Strategic Report

THE KEY AREAS WHERE WE FOCUS OUR EFFORTS ARE:

BRAND AND EMPLOYEEENGAGEMENT

DIVERSITY AND
INCLUSIONHEALTH AND SAFETY
AND ENVIRONMENTAL
MONITORING

Business Ethics
including Human Rights
AND Business Malpractice

Governance

We have identified through our “Talent Framework” the skill setsthat employees require to be successful in an organisation suchas ours. We use this insight to develop our Learning Academy
Portfolio to offer a range of relevant training courses, providing our
employees with programmes that can help build their capability
and careers. Our flagship Management Development Programme(“MDP”) covers many of the skills needed to be a successful manager
in Oxford Instruments. We see the positive impact the MDP has
on our employees, with those completing the course reporting an
average increase of 20% in their self‑assessed skill levels. In 2016,
we plan to introduce a Technical Development Programme aimed atdeveloping the skills needed for a successful technical career. We are
now running our High Potential Programme for the second cohort ofcandidates. Those that completed the inaugural course have a robust
career development plan in place to help them map their future.
We are making preparations for the third cohort of our Early Career
programme and have adjusted this to run more in line with theacademic cycle to ensure we attract the best candidates.

We continue to focus on how we listen to customers and understandthe challenges they face to ensure we provide solutions that willmeet their needs and further their capabilities. Launching andsupporting new products is an important part of this. The percentageof revenue that is made up of products launched or acquired in thelast three years is a key indicator of the vitality of our new productdevelopment and was at 31% for the financial year 2015/16.
Externally, we continue to use a wide range of communication
channels to keep our stakeholders up to date. This includes
business‑specific newsletters, emails and social media messaging.
The Group websites are mobile responsive, with a growing numberof visitors viewing the sites on a mobile or tablet device.
Employees
Our employees are central to our business, driving innovation andcontributing to our growth. Our aim is to create a safe, modern placeof work that recognises the value of diversity and encourages people
to give their best. We continue to invest in our people, developing
environments and opportunities that will attract, develop, motivate
and retain talented employees.

This year we have developed a Group‑wide Technical Career structure
to offer technical employees a clear career path within Oxford
Instruments without taking on people management roles. This helps
us attract and retain the best technical expertise. New this year is
an OI Fellows Programme aimed at recognising our pre‑eminenttechnical contributors. This will help us raise the profile of technicalskills across the business.

Oxford Instruments plc Report and Financial Statements 201633

Company Information

Training and development

Building effective customer relationships is essential to achieving
customer satisfaction and loyalty and is central to our business.
We seek to demonstrate our values of being inclusive, trusted,
wholehearted, innovative and progressive at all our touchpoints
with customers.

Financial Statements

Customers

Strategic Report

Corporate Responsibility
continued

Corporate responsibility is integral
to our ongoing business success.
Centre for Doctoral Training case study

Oxford Instruments has been working with a number of Centres
for Doctoral Training (“CDT”), providing students with theopportunity to build on their educational learning with practical,
project‑based experience.
NanoScience ran a “Skills for Business” workshop for three CDTs
led by Bristol University, helping give the students an understandingof commercial high technology product development. The
groups worked to developed product ideas that fit with ouraim to develop nanotechnology as a solution to the challenges
researchers continue to face.

Management Development Programme

Since June 2014, six new MDP cohorts
have run, including one in China

71

additionaldelegates

11%

promoted after
completing the
programme

Senior Leadership Programme

158

course sinceJune 2014

34

9%
17%

Our businesses are active in recruiting interns and two of ourbusinesses have been working with local Centres for Doctoral
Training (“CDT”). For both interns and CDTs we offer support
centrally, demonstrating the opportunities that are available within
the wider Group organisation for career development.
As a result of this work to develop our talented workforce, wehave seen an increase in the number of employees that are rated
high potential and we are promoting more individuals internally to
Director roles. We will continue to encourage able people to join us,
stay with Oxford Instruments and progress.
Diversity and inclusion

senior leaders have
now completed
the course

Highest qualification data
PhD
Masters
DegreeDiploma
Vocational
SchoolNanoScience has offered two of the students a placement for six
weeks to allow them to continue working on their projects within
the New Product Innovation department. Working with the CDTs
has allowed us to provide students with a better understandingof the nanotechnology industry, while also highlighting theopportunities that exist within our organisation for able
people like them.

10%
14%

17%
33%

Oxford Instruments plc Report and Financial Statements 2016

We believe diversity helps us achieve and sustain excellence. We
aim to build an inclusive environment that welcomes and supports
differences and to ensure there are equal opportunities for all
employees. Having a diverse workplace allows us to draw on
different perspectives, enhancing the quality of our decision making,efficiency and effectiveness. Selection, promotion and succession
planning processes ensure that we recruit, train and promote the best
candidates based on suitability for the job. Our Code of Conduct andEthics requires that all employees are treated fairly and no one suffers
harassment or intimidation.
Our Diversity Champion is Dawn Brooks, Managing Director,
Industrial Analysis. Together with Claire Flint, Group HR and Brand
Director, Dawn hosted the first Women in OI event in October 2015,
bringing together a selection of women from across the globe. The
purpose of this meeting was to explore the topic of diversity andinclusion and to gain a better understanding of what women wantfrom working at Oxford Instruments. You can read more about thisgroup and the outcomes from this activity in the case study.

Strategic Report

Women in OI case study

The event allowed attendees to share their insights, experiences
and observations as female employees working in a majority maleenvironment, and highlighted a number of ways we can offer
them more support.

Gender diversity
					FemaleMale

Oxford Instruments				

22.0%

78.0%

Board					

22.0%

78.0%

Management Board				

25.0%

75.0%

		

20.5%

79.5%

Employees					Managers			

22.0%

78.0%

Communication
We continue to build on the feedback we receive from employees
regarding better communications about our performance andstrategy. We have made the recordings of our results presentations
easily available on our intranet and have recently released a shortvideo introducing the latest developments in the delivery of
our strategy.
Many of our businesses hold “Espresso” meetings, short informal
presentations over coffee or lunch, where topics of interest can be
discussed. Examples of these presentations include a focus on new
products, understanding what it means to be a plc and Business
Excellence case studies.
This year to support our Employee Survey, we also ran a short Pulse
questionnaire for the first time to hear how we have been addressing
the concerns our employees raised previously. We had a good
response rate and results have shown an improvement in how ouremployees feel we communicate our business performance, reflecting
the focus we have placed on this.

Oxford Instruments plc Report and Financial Statements 2016

35

Company Information

We have met last year’s aim of continuing to have each level of
our Executive Management reflect approximately the same genderbalance as exists in the Company overall. We are working towards anenvironment where the gender balance at Manager level also reflects
the Company’s gender balance overall. Our Women in OI programmeis one of a number of proactive plans that we have in place tosupport our diversity aim, with further activities also mentioned
within this report.

The initial Women in OI cohort continues to meet regularly and islooking at how we can replicate the success of this initial network
across other similar groups in the business.

Financial Statements

We have been working to further embed diversity and inclusion
within the culture of the Group. We focus on it within our MDP,
with 130 people managers receiving diversity awareness training
since 2013. We have developed unconscious bias training and willroll this out across the Group in 2016. We have also adapted thelanguage and content within recruitment activity and our Early
Careers Programme to appeal more to women. This, along with ourenhanced leave schemes, aims to attract and retain female employees
across Oxford Instruments.

Inspired by the initial meeting, some attendees have found mentors
to help them develop personally and professionally. Others havestarted to look at how they can work with local schools andcolleges to promote our drive to get more women into science,technology, engineering and mathematics (“STEM”) subjects
and careers.

GovernanceAt Oxford Instruments we strive to maximise the potential of ouremployees by making the business a more inclusive place to work.
In support of this we held the first Women in OI event, bringing
women from across all divisions together.

Strategic Report

Corporate Responsibility
continued
Andor Employee Wellbeing case study

We continue to recognise the importance of employee wellbeing
and look to ensure we have measures in place to positively affect thewelfare of our employees. With that in mind one of our businesses,
Andor Technology, launched a health and wellbeing initiative with alocal charity, Cancer Focus.
Across nine days, 197 employees in Belfast visited a cancer focus
van to receive a health check. This included body composition,
blood pressure, pulse and blood glucose checks. Nurses spoke

about self‑examinations and information packs on physical activity,
nutrition and lifestyle programmes were provided.
With some employees following up with their GPs and others
setting goals and targets for themselves this has been a very positiveand successful initiative that has helped our employees maintain ahealthy lifestyle.

Reward and recognition

Suppliers/partners

We continue to look at ways to enhance the benefits we offer our
employees. We provide our Extra intranet site to offer benefits suchas discounts on local activities, merchandise, insurance, health anddental cover. To build on this we have recently introduced a leave
purchase scheme globally, where appropriate. In the UK we have also
improved our maternity, paternity and parental leave scheme and are
currently reviewing a similar scheme in the USA. These enhancementsallow employees the opportunity to improve their work‑life balance,
a concern that was raised in our last employee survey.

The Group recognises that relationships built on trust and respectwith our business partners establishes mutually beneficial relations.
This includes our suppliers, banks and collaborative associates. We
continue to work on the roll out of our new enterprise resource
planning (“ERP“) system that will offer a more efficient means tomanage our supplier relationships, including how we purchasematerials and serve our customers.

We work hard to offer a workplace where individuals can develop
their skills and build their careers. To this end we recognise those
employees who have been with the Company for many years with
our long‑service awards. This year was a special year as we celebrated
one employee’s 50th year with the company. Mick Cooper started
as an Electronics Technician in 1965 and is presently our Facilities
Support Technician. In celebration of his time with the Company our
founders Sir Martin and Lady Audrey Wood presented Mick with a
special award.

36

Oxford Instruments plc Report and Financial Statements 2016

We perform regular inspections and audits, and strategic reviews
are in place for key suppliers. In accordance with ISO 9001 andISO 14001, only quality approved organisations are used. Thereis a Group supplier management process in place that promotes
a common supply chain strategy split by commodity, driving thebusiness towards fewer, high level, quality suppliers.
Local communities
We want to help make our local communities better places towork and live in. We recognise the impact we have socially andeconomically and aim to support those around us in a number ofways. We encourage our sites to support their communities throughcharity and community activities. This year we have raised money
for a range of charities including Macmillian Nurses, Helen andDouglas House, British Heart Foundation, American Red Cross andthe Alzheimer’s Society. Staff have engaged in a range of activities
to raise money, including football matches between sites, bake‑offs,
coffee mornings, fishing matches, collecting toys for Christmas
donations and running quiz nights.

Ethics

Health, Safety and Environment
Health and safety within Oxford Instruments is managed at the
Executive level by Charles Holroyd, Group Business Development
Director, who is assisted by Dave Wales, the Group Health, Safety
and Environment Manager. Each Group site has a nominated Health,
Safety and Environment Manager or representative responsible for
ensuring that day to day activities are carried out safely. All large sites
are audited annually by the Group auditing team, which comprises six
auditors drawn from our four UK businesses.
Global accident figures remain at a low level

We take a risk‑based approach to define our anti‑bribery andcorruption policies and procedures. All higher risk employees are
required to complete our anti‑bribery and corruption training.
We do not tolerate any form of bribery, corruption or fraud.

We have continued to focus on making our sites safer places to workand the six year picture in the graph below shows the positive trend.

Oxford Instruments does not make political donations.
Human rights
We are a company united by strong standards and values; ouremployees have the right to expect that their basic human rights anddignity are respected. We continue to review our policies and systems
supporting human rights. Our policy is guided by the United Nations
Guiding Principles on Business and Human Rights. Our Human Rights
Policy states our intent to be inclusive, supportive and safe, covering
matters including forced labour, child labour, discrimination and theright to form or join a trade union and to bargain collectively.

Globally, four serious accidents were reported during the year, an
increase from two in the previous year. For reporting purposes, global
serious accidents were normalised using the UK definition of overseven days absence from work.

Annual global accident figures
2016

74

2015

71

2014
2013
2012

109
162
217

2011

236

Company Information

We expect every employee to adhere to the spirit of our policy and it
is fully supported by our Board. All members of the Group’s Executive
Committee take responsibility for ensuring its implementation within
their part of the Group. We also extend our expectations on humanrights to those we work with; our partners, contractors and suppliers.

Financial Statements

The Board regularly reviews and updates the range of policies in place
to support our Code of Conduct. Clear guidelines exist regarding thereporting and management of any perceived risk and all employees
are made aware of, and regularly reminded about, Safecall, afully independent, confidential service, where they can report any
wrongdoing in the business.

The total number of accidents recorded worldwide during 2015/16
showed a slight increase to 74 compared to 71 in the previous year.
The substantial reduction in accidents over the previous five years has
been broadly maintained. The low number of accidents demonstrates
that our sites are operating in a very safe manner.

Governance

We have a Code of Business Conduct and Ethics that supports ourcommitment to do the right thing. All employees are aware of thisCode and have full access to it. We endeavour to build a cultureof trust and inclusiveness, and expect any person or company who
represents us or provides services for us, to act in a way that is
consistent with our Code and its principles. We perform regulardue diligence on our agents, distributors and suppliers to minimise
the risk of any unethical behaviour. Suppliers are required to prove
they do not employ workers under the age of 15 or, in thosecountries subject to the developing country exception of the ILO
Convention 138, employ no children under the age of 14.

Strategic Report

Many of our businesses have worked with local schools andcolleges to help introduce science and engineering to a newaudience. We have participated in some speed networking eventsand educational outreach programmes to engage with students
interested in companies like ours. We have also sponsored an annual
event at Oxford University, May Music, which aims to combine a
range of scientific talks with classical music to introduce both to a
new audience.

We are committed to preventing acts of modern slavery and humantrafficking from occurring within our business and supply chain andto putting in place effective systems and controls in order to do so.
This will include a review of, and improvements to, our supplier due
diligence and audit procedures. We have a zero‑tolerance approach
to all forms of modern slavery, including servitude, forced, bonded
and compulsory labour, and human trafficking, and we expect our
suppliers to adopt the same approach.

Oxford Instruments plc Report and Financial Statements 201637

Strategic Report

Corporate Responsibility
continued
Sustainability – protecting the environment

Emissions

Our overall environmental priority is that our operations around theworld minimise their environmental footprint. We monitor our energy
use and ensure that the energy we consume is used as efficiently
as possible. We also aim to minimise our waste outputs and ensurethat as little as possible goes to landfill. Several of our sites are now“zero to landfill” where waste is recycled either directly – cardboard,
metals, wood – or indirectly by sending to waste plants to be used inenergy generation.

Emissions from purchased electricity, fuel for heating or process
purposes (gas and oil) and fugitive emissions from process gases arereported in tCO2e.

Each business has an Energy Champion at a local level. They monitor
energy use, waste streams, recycling and emissions to air, waterand land. They also look for and encourage ways to reduce energy
consumption.
• Oxford Instruments consumed globally 21.09GWh of energy
in 2015/16. The Company’s measure of energy efficiency
was slightly up at 58.75MWh/£million revenue compared to58.34 MWh/£million revenue in the previous year, an increaseof 0.7%.
• Oxford Instruments is a full participant in the UK Carbon
Reduction Commitment Energy Efficiency Scheme (“CRC”)
and purchases carbon allowances to cover its UK energy use as
required. For the 2015/16 year 4,200 carbon allowances havebeen purchased to cover the year’s carbon emissions.
• As part of the UK Companies Act 2006 (Strategic Report andDirectors’ reports) Regulations 2013, Oxford Instruments has amandatory duty to report greenhouse gas emissions as tonnesof carbon dioxide equivalent (“tCO2e”). The Company’s measureof carbon emissions is tonnes of carbon dioxide equivalentper £million of revenue. This year the carbon emissions figure is
24.72 tCO2e/£million revenue (2015: 23.43 tCO2e/£million revenue).
Greenhouse gas (“GHG”) emissions
Oxford Instruments is a global business with operations in many
parts of the world. It has been monitoring energy use and carbon
emissions since 2008. Emissions from 18 company sites aremonitored and are reported in the chart above. Some small sales
offices where energy consumption is less than 0.01% of the Group’s
total energy consumption are omitted. The amount of recordedhydro‑fluorocarbons is below 5kg globally and has therefore notbeen included in the figures.

38

Oxford Instruments plc Report and Financial Statements 2016

Greenhouse gas emissions reporting (tC02e)
UK
North America
EuropeAsia

3.0% 3.2%

47.0%

46.8%

Total greenhouse gas emissions = 8,873.3 tC02e
Carbon intensity ratio = 24.72 tCO2e/£million revenue
Intensity ratio – greenhouse gas
The Company’s declared intensity ratio for greenhouse gas reporting
is tCO2e per £million of revenue. With revenues for the year at£359.0 million and the total emissions of carbon dioxide equivalentof 8,873.3 tonnes, this gives an intensity ratio as follows:

Carbonemissions= 24.72 tCO2e

Revenue£million revenue

In addition to the mandatory greenhouse gas reporting, the Company
also makes a voluntary report to the Carbon Disclosure Project(“CDP”) on its emissions. The CDP is an international, not‑for‑profit
organisation providing a global system for companies to measure,disclose, manage and share environmental information.
In accordance with its Energy and Environmental Policies the Groupis committed to improving its energy efficiency and we continue
to invest in energy reducing technologies such as LED lighting
at our sites. We are investigating the feasibility of installing solar
photovoltaics at our sites where there is a proven benefit.

Strategic Report

Plasma Technology Go Green Case Study

Governance

Plasma Technology (“Plasma”) is a business within the Oxford
Instruments Group that has many customers working in sustainable
areas such as LED lighting, power conversion for wind turbines andelectric vehicles. Plasma, keen to join its customers in contributing
to a sustainable future by reducing its own carbon footprint andimprove energy efficiency, joined Bristol’s 2015 Go Green Scheme.

Reduced water and oil usage, and the installation of LED lighting are
all part of the ongoing Go Green action plan. Plasma is also refining
the energy efficiencies of a number of its products, passing on
savings to customers globally.
In recognition of its ongoing efforts, Plasma has received Bristol’s
Go Green Energy and Efficiency Best Newcomer Award.

The “Turn it off” campaign has encouraged people to turn off
their computer monitors, PCs and office lighting each evening. Thechanges, along with switching off air conditioning units and electricheaters out of hours, have saved Plasma £32,500 to date.

The Group complies with all environmental legislation incountries where it operates including European Directives such as
the Waste Electronic and Electrical Equipment (“WEEE”) Directive,
the Restriction on use of Hazardous Substances (“RoHS”) Directive
and the Registration, Evaluation, Authorisation of Chemicals(“REACh”) Directive.

Summary
We will maintain the focus on corporate responsibility in the way
we run Oxford Instruments. We will continue to meet our customer
needs through advanced technology and premium service, and wewill maintain a wholehearted commitment to all our stakeholders
to conduct our business in an ethical and sustainable manner.

Financial Statements

Oxford Instruments also measures the energy equivalent of employee
air travel for the UK and USA operations. Air travel for the 2015/16
financial year totalled 17 million kilometres which was a 23%
reduction on the previous year. This equated to a carbon footprintof 2,619 tCO2e based on 80% long haul and 20% short haul.

Ian Barkshire
Chief Executive
15 June 2016
Company Information

Oxford Instruments plc Report and Financial Statements 201639

GovernanceCorporate GovernanceWelcome to
Corporate
GovernanceIn this section
Board of Directors

41

Corporate Governance

44

Audit and Risk Committee Report

51

Nomination Committee Report

57

Remuneration Report

59

Report of the Directors

76

Compliance statement
The Company compiled with the provisions of the UK Corporate
Governance Code published in September 2012, which applied
throughout the financial year ended 31 March 2016.

40

Oxford Instruments plc Report and Financial Statements 2016

Board of Directors
Strategic Report

Jonathan Flint CBE
Executive Director

Alan Thomson
Independent Non‑Executive
Director and Chairman Designate

Jock Lennox
Senior Independent
Non‑Executive Director

Mary Waldner
Independent
Non‑Executive Director

Thomas Geitner
Independent
Non‑Executive Director

Professor
Sir Richard Friend
Independent
Non‑Executive Director

Jennifer Allerton
Independent
Non‑Executive Director

Susan Johnson‑BrettCompany Secretary

Oxford Instruments plc Report and Financial Statements 2016

Company Information

Gavin Hill
Group Finance Director

Financial Statements

Ian Barkshire
Chief Executive

GovernanceNigel Keen
Non‑Executive Chairman

41

Governance

Board of Directors
continued
Nigel Keen
Non‑Executive Chairman

Ian Barkshire
Chief Executive

Gavin Hill
Group Finance Director

Appointed to the Board
February 1999
Standing down at 2016 AGM

Appointed to the Board
November 2015
Appointed Chief Executive May 2016

Appointed to the Board
May 2016

Committee membership
Nomination, Chairman
Remuneration

Committee membership
None

Committee membership
None

BackgroundHolds an engineering degree from Cambridge
University and has been involved in the formationand development of high technology businesses formore than 30 years. Nigel is a fellow of the Instituteof Chartered Accountants and the Institution ofEngineering and Technology.

BackgroundHolds a BSc and DPhil in physics from the University
of York and is a Member of the Institute of Physics.
Ian has worked for Oxford Instruments since 1997
in a number of senior leadership roles including
NanoCharactersation Divisional Head, Group Technical
Director and Chief Operating Officer.

BackgroundHolds a BA in economics & agricultural economics from
Exeter University. Gavin is a Chartered Accountant,a Fellow of the Institute of Chartered Accountants
and an Associate Member of the Association of
Corporate Treasury.

External appointments
Chairman of:
Bioquell Plc
Deltex Medical Group Plc
Syncona Partners LLP(a Wellcome Trust company)
ISIS Innovation Ltd (an Oxford University company)
Oxford Academic Health Science Network
Trustee of:
The David Shepherd Wildlife Foundation

Previous experience
Senior Principal Scientist of:
GEC Marconi Materials Technology
Research Fellow:
University of York

Previous experience
Group Finance Director of:
Synergy Health plc
Director, Corporate Finance of:
Serco Group plc
Senior finance positions within:
Syngenta AG and AstraZeneca plc

Jonathan Flint CBE
Executive Director

Alan Thomson
Independent Non‑Executive Director
and Chairman Designate

Jock Lennox
Senior Independent
Non‑Executive Director

Appointed to the Board
April 2005
Chief Executive until May 2016
Standing down 31 July 2016

Appointed to the Board
June 2016

Appointed to the Board
April 2009
Standing down at 2016 AGM

Committee membership
None

Committee membership
Nomination
Remuneration

Committee membership
Audit and Risk
Nomination, Remuneration

BackgroundHolds a BSc in physics from Imperial College and an
MBA from Southampton University. He is a Fellowof the Institute of Physics, the Royal Academy ofEngineering and the Institution of Engineering andTechnology. He was awarded the CBE in the 2012 New
Year’s Honours for services to science and business.

BackgroundHolds a Masters degree from Glasgow University and isqualified as a Chartered Accountant with the Instituteof Chartered Accountants of Scotland.

BackgroundHolds a law degree from Edinburgh University and isqualified as a Chartered Accountant with the Instituteof Chartered Accountants of Scotland.

External appointments
Non‑Executive Director of:
Cobham plc

External appointments
Chairman of:
Bodycote PLC
Hays PLC

External appointments
Non‑Executive Director of:
Dixons Carphone plc
EnQuest PLC
Hill & Smith Holdings PLC
A&J Mucklow Group plc

Previous experience
Senior management positions within:
Vislink plc
BAE Systems
GEC Marconi
Matra‑Space Systems

42

Previous appointments
Chairman of:
Polypipe Group plc
Senior Independent Director:
Johnson Matthey plc
Non‑Executive Director of:
Laporte plc
Chief Financial Officer:
Smiths Group plc

Oxford Instruments plc Report and Financial Statements 2016

Previous experience
Senior Audit Partner at:
EYStrategic ReportThomas Geitner
Independent Non‑Executive Director

Professor Sir Richard Friend
Independent Non‑Executive Director

Appointed to the Board
February 2016

Appointed to the Board
January 2013

Appointed to the Board
September 2014

Committee membership
Audit and Risk, Chairman
Nomination, Remuneration

Committee membership
Audit and Risk Nomination
Remuneration, Chairman

Committee membership
Audit and Risk
Nomination, Remuneration

BackgroundHolds a MA in physics from Oxford University and is
a Fellow of the Chartered Institute of Management
Accountants. She started her career at Coopers &Lybrand Management Consultancy Services and thenwent on to hold senior financial positions in a numberof major commercial companies.

Background
Extensive international experience in the technology
and engineering sectors, having spent over 30 years inbusiness operating across the globe.

Background
Cavendish Professor of Physics at the University ofCambridge, a Fellow of the Royal Society and of theRoyal Academy of Engineering and a Foreign Memberof the US National Academy of Engineering.

External appointments
Chief Financial Officer:
Lloyd’s Register

External appointments
Chairman of:
Bibliotheca RFID Library Systems AG Switzerland
Non‑Executive Director of:Supervisory Board of Haniel&Cie GmbH Duisburg

External appointments
Council member of:
The Engineering and Physical Sciences ResearchCouncil.
Non‑Executive Director of:
Eight19 Ltd
Azuri‑Technologies Ltd

Previous experience
Finance Director of:
Ultra Electronics plc
Director, Group Finance of:
Qinetiq Limited

Jennifer Allerton
Independent Non‑Executive Director

Previous experience
Executive Director of:Vodafone Group Plc
Henkel AG & Co. KGaA
RWE AG

GovernanceMary Waldner
Independent Non‑Executive Director

Susan Johnson‑BrettCompany Secretary
Financial Statements

Appointed to the Board
June 2013
Standing down at 2016 AGM

Committee membership
Audit and Risk, Nomination, Remuneration

Committee membership
Secretary to:
Audit and Risk, Nomination, Remuneration

BackgroundHolds a BSc from Imperial College and an MSc fromthe University of Manitoba, Canada. She is a Cost andManagement Accountant with extensive international
experience beginning her career.

BackgroundHolds a BA from the University of Keele and has
previously worked in the Secretariats of St. Modwen
Properties plc, Hydro Agri (UK) Limited and
TSB Group plc.

Company Information

External appointments
Non‑Executive Director of:
AVEVA Group plc
Iron Mountain Inc
Sandvik AB

Oxford Instruments plc Report and Financial Statements 201643

GovernanceCorporate Governance

The Board is responsible to
Shareholders for delivering
sustainable incremental
Shareholder value.

Susan Johnson‑Brett Company Secretary

The Board is committed to ensuring that high standards ofcorporate governance are maintained by the Group.
The Board endorses the main and supporting principles and theprovisions set out in the 2014 UK Corporate Governance Code(the “Governance Code”).

In October 2015 the Board announced that Kevin Boyd, FinanceDirector, would be leaving Oxford Instruments to join Spirax‑SarcoEngineering plc and he ceased to be a Director of the Company on
8 April 2016. Gavin Hill joined the Board as Group Finance Director
on 9 May 2016.

The Board’s policies and procedures are documented in the Board
Reference File that sets out the roles and delegated authorities
applying to the Directors, the Board and the Board Committees. The
Board Reference File is reviewed annually by the Board as part of theannual governance review undertaken by the Chairman.

Resolutions for the election of all Directors will be put to Shareholders
at the Company’s forthcoming AGM. Once passed, this will continue
to deliver a Board which meets the requirements of Provision B.1.2 of
the Governance Code.

Board constitution

The Board considers that, throughout the period under review, theGroup has complied with the provisions recommended in the 2014
UK Corporate Governance Code.

In late 2010 the Nomination Committee reviewed its Board
Development programme and put in place a multi‑year plan to allow
for an orderly refreshing of its Non‑Executive Directors over thisextended period. This programme is under annual review. The Board
Development programme ensures that the constitution of the Board
is compliant with the Governance Code.
In line with the programme, Ian Barkshire, the Group’s Chief
Operating Officer, joined the Board as an Executive Director in
November 2015 and was appointed Chief Executive on 11 May 2016,
Mary Waldner joined the Board as an Independent Non‑Executive
Director in February 2016 and will become the Chairman of the Audit
and Risk Committee on 16 June 2016 and Alan Thomson joined theBoard after the year end on 1 June 2016 and will become Chairmanof the Company and Chairman of the Nomination Committee at theconclusion of the AGM on 13 September 2016. The Board has alsoannounced that Jonathan Flint, Chief Executive until 11 May 2016,
will be retiring from the Board on 31 July 2016, Jennifer Allerton,
Non‑Executive Director, Jock Lennox, Senior Independent Director,
and Nigel Keen, Chairman, will be retiring at the close of the AGM
to be held in September 2016.

44

Oxford Instruments plc Report and Financial Statements 2016

Compliance

Preservation of value
The basis on which the Group generates and preserves value overthe longer term and the strategy for delivering the objectives of theGroup are to be found in the Strategic Report on pages 1 to 39.
Board of Directors and management structure
Board of Directors
The Board as at the date of this Report comprises the Chairman,
six Non‑Executive Directors and three Executive Directors. With thechanges that have been announced, after the AGM in September
2016, there will be six Directors: the Chairman, three Non‑Executive
Directors and two Executive Directors. The Directors’ biographiesand details of length of service are shown on pages 41 to 43. All
the Directors have written letters of appointment that have been
approved by the Board and which are available for inspection at theCompany’s Annual General Meeting.

The Board has delegated Group responsibility for the management ofhealth, safety and the environment to Ian Barkshire and he reports to
the Board on these matters at each meeting.
Board members’ length of service

Nigel Keen

17 years

Jonathan Flint

11 years

Jock Lennox

7 years

Thomas Geitner

3 years

Jennifer Allerton

3 years
2 years

Ian Barkshire<1 yearMary Waldner<1 yearGavin Hill

<1 yearAlan Thomson<1 yearManagement Board
The Board delegates management of the business to theChief Executive. To assist in this, the Chief Executive has created aManagement Board that consists of the Executive Directors, senior
managers with Group‑wide functional responsibilities and the headsof the principal businesses of the Group’s activities.

Operation of the Board
The Board is responsible to Shareholders for delivering sustainable
incremental Shareholder value through entrepreneurial leadershipwithin a framework of controls for managing risk. The Board sets
the Group’s strategy, maintains the Policy and decision making
framework in which this strategy is implemented, verifies thatthe necessary financial and human resources are in place to meetstrategic aims, monitors performance against key financial andnon‑financial indicators, oversees the system of risk management
and sets values and standards in governance matters.

Where the Board delegates authority to management it is on a
structured basis, which requires that proper management oversight
exists at the appropriate level.
The Board meets on a regular basis, at least nine times a year, andotherwise as required. Of the nine regular meetings, typically six
are held at Group locations and the remaining three are held bytelephone conference. Other Board meetings are held on an “asneeded” basis. The Board also held one off‑site meeting specificallyto discuss the Company’s strategic direction during the year.
Board meetings involve reviews of financial and business performanceagainst the plan approved by the Board. Risk management review,
both at Group level and also for each of the business units, isembedded in the reporting system. On a rotating basis, the Board
receives presentations from the business units and key functional
areas enabling it to explore specific issues in more detail. Any
matter requiring a decision by the Board will be supported by apre‑circulated paper analysing all relevant aspects of the proposal andrecommending a course of action.
Board papers are distributed in advance of the relevant meetingin sufficient time to allow the Directors to prepare for meetings.
Minutes of Committee meetings are circulated to the relevant
Directors. In the very few instances when a Director has not beenable to attend Board or Committee meetings, his/her comments on
the papers to be considered at the meeting are communicated inadvance to the relevant Chairman.
The Non‑Executive Directors meet without the Executive Directors
at least annually, with the Chairman leading these meetings. The
Non‑Executive Directors also meet annually without the Chairman inattendance. The Senior Independent Director chairs these meetings.

Financial Statements

The Management Board meets monthly either physically or by video
or telephone conference and focuses on Group‑wide performance,
strategy and risk management.

The Board retains control over strategy, investments and capital
expenditure, and limits the decisions which can be taken bymanagement in the areas of strategic and financial management
and shareholding reporting. The Board also decides on the Group’s
capital structure, corporate actions, mergers and acquisitions,major contracts and other commitments, litigation and regulatory
proceedings, remuneration and share incentive plans.

GovernanceRichard Friend

Strategic Report

The Chairman is responsible for leadership of the Board andensuring its effectiveness on all aspects of its role. The division of
responsibilities between the role of Chairman and the Chief Executive
has been set out in writing and agreed by the Board.

The Company Secretary and the Company Secretary’s Office areresponsible for implementing Board procedures and for advising theBoard on corporate governance matters.

Company Information

The details of the way the Board operates, including a schedule ofmatters reserved to the Board for decision, are set out in the Board
Reference File.

Oxford Instruments plc Report and Financial Statements 201645

GovernanceCorporate Governancecontinued
Board balance and independence
The Governance Code requires the Board should be of
sufficient size that the balance of skills and experience isappropriate for the requirements of the business and that
there is a balance of Executive and Non‑Executive Directors
such that no individual or small group of individuals candominate the Board’s decision making. The composition of
the Board and the combination of diverse backgrounds andexpertise of the Non‑Executive Directors meet these principles.
Nigel Keen, Chairman, has been a member of the Board since
February 1999. He has a degree in engineering from Cambridge
University, is a Fellow of the Institute of Chartered Accountants
and of the Institute of Engineering and Technology and has been
involved in the formation and development of high technology
businesses for more than 30 years. He fulfilled the independence
criteria at the time of his appointment as set out in the GovernanceCode. Nigel Keen also serves as Chairman of Oxford Instruments
Pension Trustee Limited, the Trustee of the Company’s UK defined
benefit pension scheme.
Both the Board of the Company and of the Trustee of the pension
scheme have considered and approved the potential conflicts ofinterest inherent in the same person being Chairman of both Boards
and have confirmed that they believe that it is in the interest of allparties for this to continue.
Nigel is Chairman of the Nomination Committee and a member ofthe Remuneration Committee. He will be retiring from the Board
immediately following the AGM in September.
Alan Thomson was appointed to the Board as an Independent
Non‑Executive Director on 1 June 2016 and on 13 September 2016
will be appointed Chairman from the close of the AGM. He has a
Masters degree from Glasgow University and is a Member and past
President of the Institute of Chartered Accountants of Scotland. He is
Chairman of Bodycote plc and Hays plc. Previously, he was Chairmanof Polypipe Group plc and a Non‑Executive Director of Laporte plc,
Alstom SA and of Johnson Matthey plc. Earlier in his career, heworked on a variety of audits for Arthur Andersen and Price
Waterhouse, followed by senior management positions with Rockwell
International plc, Raychem Ltd and Courtaulds plc and was Group
Finance Director of Rugby Group plc and then Smiths Group plc.
Alan is a member of the Nomination Committee and theRemuneration Committee and will become Chairman of theNomination Committee after the AGM on 13 September 2016.
Richard Friend was appointed to the Board as an Independent
Non‑Executive Director on 1 September 2014. Richard is a Fellow of
the Royal Society and of the Royal Academy of Engineering and heis Cavendish Professor of Physics and a Fellow of St John’s College at
the University of Cambridge.
His research encompasses the physics, materials science andengineering of semiconductor devices made with carbon‑based
semiconductors. His research advances have shown that thesematerials have significant applications in LEDs, solar cells, lasers andelectronics. He was knighted for services to physics in the Queen’s
Birthday Honours List in 2003. He has also been directly involvedin the commercialisation of technology through several spin‑out
companies from the University of Cambridge.

46

Oxford Instruments plc Report and Financial Statements 2016

Richard is a member of the Audit and Risk, Remuneration and
Nomination Committees.
Thomas Geitner was appointed to the Board as an Independent
Non‑Executive Director on 15 January 2013. He is a graduate of theTechnische Universität München and holds an INSEAD MBA.
Thomas has extensive international experience in the technology andengineering sectors, having spent more than 30 years in businesses
operating across the globe. Having worked in a number of global
companies he understands the importance of remuneration connectingwith strategy to appropriately incentivise the executive team.
The Board believes that his skills, experience and knowledge makeThomas well suited to chair the Remuneration Committee. Thomas isalso a member of the Audit and Risk, and Nomination Committees.
Mary Waldner was appointed to the Board as an Independent
Non‑Executive Director on 4 February 2016. She is Chief Financial
Officer at Lloyd’s Register and was, until April 2016, Finance Directorof Ultra Electronics plc. She has a Masters degree in physics from
Oxford University and is a Fellow of the Chartered Institute ofManagement Accountants.
Mary has a broad range of experience in high technology companies
that operate internationally and her background in a number ofsenior financial roles with major public limited companies gives her
the various insights needed to make her a well qualified Chairmanof the Audit and Risk Committee. On 16 June 2016 Mary will be
appointed Chairman of the Audit and Risk Committee, and she is amember of the Remuneration and Nomination Committees.
Jock Lennox was appointed to the Board as an Independent
Non‑Executive Director on 1 April 2009 and has been Senior
Independent Director since 2013. Prior to 2009, he was a Senior
Audit Partner at EY where he gained extensive experience advisingclients in a variety of industries on financial reporting, financing,transactions and international expansion. His skills, experience andknowledge help to enhance and maintain an effective Board andprovide a well qualified Chairman of the Audit and Risk Committee.
Jock is Chairman of the Audit and Risk Committee, standing down as
its Chairman on 16 June 2016, and is a member of the Remuneration
and Nomination Committees. Jock will be retiring from the Board
immediately following the AGM in September.
Jennifer Allerton was appointed to the Board as an Independent
Non‑Executive Director on 11 June 2013. Jennifer is a graduate ofImperial College, London, has a Masters degree in physics from the
University of Manitoba and is a chartered engineer. She has extensive
international business experience which strengthens the skills andexpertise of the Board. She is a member of the Audit and Risk,
Remuneration and Nomination Committees. Jennifer will be retiringfrom the Board immediately following the AGM in September.
Independence of Non‑Executive Directors
In the opinion of the Board, Alan Thomson, Mary Waldner,
Thomas Geitner and Richard Friend are independent.
The Board considers that they are each independent in character andjudgement and do not have relationships which are likely to affecttheir judgement. This opinion is based on current participation andperformance on both the Board and Board Committees including
consideration of the length of service at Oxford Instruments plc.

In light of the provisions of Section B.6.2 of the Governance Code,which expects that an externally facilitated evaluation of the Board
be carried out at least triennially, in 2014/15 Colin Mayer, thePeter Moores Professor of Management Studies at Said Business
School, University of Oxford, and a Board Member of the European
Corporate Governance Institute, carried out a thorough review ofthe way the Board operates. Professor Mayer determined that Oxford
Instruments is well governed, well run and a successful company
which comfortably fulfils the requirements of the Governance
Code in terms of the structure and conduct of its governance.
He considered the formal governance and procedures in Oxford
Instruments are significantly better than in most companies of asimilar size. Professor Mayer suggested a number of areas in which
the Company’s governance could be strengthened with a view topromoting its development from a successful medium‑sized firm to atruly global company of international significance.

Composition of the Board: independent vs. non‑independent

Independent (6)Non-independent (3)167%

1. As at the date of this report and in line with the Governance Code the Chairman is
excluded from these numbers.

Board development and evaluation
Board development

The operating business units’ senior management teams present to
the Board on a regular basis. Non‑Executive Directors are encouraged
to meet individual members of the senior management team andhave done so during the year under review.
Throughout the year, Non‑Executive Directors attend Oxford
Instruments’ events, exhibitions and award presentations.

Company Information

The Company Secretary and her office act as advisers to the Boardon matters concerning governance and ensure compliance with
Board procedures. All Directors have access to this advice and aprocedure also exists for Directors to take independent professional
advice at the Group’s expense. No such advice was sought during theyear. The appointment and removal of the Company Secretary arematters for the Board as a whole.

Financial Statements

On appointment, Directors undertake an induction process which isdesigned to develop knowledge and understanding of the Group’sbusinesses through visits to various Group operating sites, discussionof relevant technology, as well as product demonstrations, briefings
from management and familiarisation with investor perceptions of
the Group. This induction is supported by briefing papers prepared by
the Company Secretary.

This year, the Board carried out its annual effectiveness evaluation
exercise, including a specific review of the effectiveness of its principal
committees and members. This was an internal exercise under thecontrol of the Chairman using a detailed questionnaire completedby all Directors in relation to the key areas of Board accountability
and the arrangements in place to enable effective focus on theseareas. Topics covered included Group strategy, performance,delegation and accountability, success, development and reward,
Board and Committee composition, Board induction and training,internal control and risk management. At the individual one‑to‑one
interviews which the Chairman held with each Director, individual
performance and the operation of the Board and its Committees
were discussed in more detail. The Chief Executive is also involvedin the process by giving his input on the way the Board helps him
in his role. The output from these evaluations allows the Chairman
to review objectively the overall balance and effectiveness of theBoard. The Non‑Executive Directors meet annually to appraise the
Chairman’s performance.

Governance

Board evaluation

Each Non‑Executive Director was appointed for an initial term of
three years. In line with provision B.7.1 of the Governance Code,the Board has determined that all Directors of the Board are to be
subject to annual re‑election by Shareholders and accordingly theappropriate resolutions will be put to Shareholders at the Company’s
forthcoming AGM.

Strategic Report

Term of appointment of Non‑Executive Directors

Oxford Instruments plc Report and Financial Statements 201647

GovernanceCorporate Governancecontinued
Attendance at meetings

Remuneration Committee

No one other than the Committee Chairman and members is entitledto be present at a meeting of the Audit and Risk, Nomination or
Remuneration Committees, but others may attend by invitation of
the Committee. No Director votes on matters where he or she has
a conflict of interest. Further details of the individual Committees’
activities are described below and in the Committee reports.

The Remuneration Committee comprises all the Independent
Non‑Executive Directors and the Chairman of the Board. Thomas
Geitner is the Chairman of the Committee. The Board considers
that Thomas, with his experience of working at senior levels in
global companies, including high technology companies, has an
appropriate blend of skills to make a successful Chairman of theRemuneration Committee. The members of the Committee areappointed by the Board.

The following table sets out the frequency of, and attendance at,
Board and principal Board Committee meetings for the year to
31 March 2016:
Main Audit and Risk Remuneration
Board
Committee
Committee

Nomination
Committee

Number of meetings held

12

6

3

3

Nigel Keen

12

6¹

3

3

Jonathan Flint

12

6¹

3¹

2¹

Kevin Boyd

12

6¹

0

2¹

Ian Barkshire²

4

2¹

0

0

Jock Lennox

12

6

2

3

Thomas Geitner

12

6

3

3

Jennifer Allerton

11

6

3

3

Richard Friend

12

6

3

3

Mary Waldner3

2

1

1

0

1. Attended by invitation.
2. Ian Barkshire was appointed to the Board on 10 November 2015. He has attended all
Board meetings since his appointment.
3. Mary Waldner was appointed to the Board on 4 February 2016. She has attended all
meetings since her date of appointment.
Note: both Gavin Hill and Alan Thomson were appointed to the Board after 31 March 2016.

Board Committees
The Board has formed the following Committees: Audit and Risk,
Nomination, Remuneration and Administration.
Membership of Board Committees, which is set out on pages 41
to 43, is determined by the Board and is reviewed regularly. The
written terms of reference of the Board Committees are reviewed
annually by each Committee and the Board and are available on the
Company’s website at www.oxford‑instruments.com/investors andfrom the Company on request. They will be on display at the Annual
General Meeting.
Detail on the operation of each of the Audit and Risk, Remuneration
and Nomination Committees is to be found within the relevant
reports on pages 51 to 75.
Nomination Committee
The Nomination Committee comprises all the Non‑Executive
Directors, under the chairmanship of the Chairman of the Board.
The Nomination Committee is responsible for assisting the Boardin the formal selection and appointment of Directors and considers
succession planning for the Board.

48

Oxford Instruments plc Report and Financial Statements 2016

The Remuneration Committee is responsible for recommending
to the Board the remuneration packages for Executive Directors
and the bonus and share option strategy for the Group’s
executive management.
Independent professional advice is sought when considerednecessary. The Chairman and the Executive Directors are responsible
for fixing the remuneration of the Non‑Executive Directors and theRemuneration Committee is responsible for fixing the remunerationof the Chairman. No Director is involved in the process that sets
his/her own remuneration.
The Chief Executive is invited to attend Remuneration Committee
meetings as deemed appropriate, for example when consideration
is being given to the performance of other Executive Directors andon significant Group‑wide changes in salary structure and terms andconditions affecting other employees at senior executive level.
Audit and Risk Committee
The Audit and Risk Committee comprises all the Independent
Non‑Executive Directors and, as at the date of this report, its
Chairman is Jock Lennox. Mary Waldner will be taking over as
Chairman of the Committee on 16 June 2016. Other members of theBoard, senior management and the external auditor are invited toattend all or part of any meetings. The Board has determined that, asa Chartered Accountant and former Senior Audit Partner at EY, Jock
Lennox was the designated financial expert during the year and that
Mary Waldner, with her background in financial management, will be
the designated financial expert from 16 June 2016.
The Audit and Risk Committee’s main responsibilities are focused on
financial reporting, external audit, internal audit, internal controls andrisk management.
Full details of the operation and the work of the Audit and Risk
Committee are included in the Audit and Risk Committee Report set
out on pages 51 to 56.
Administration Committee
The Administration Committee consists of a minimum of two
Directors and deals with items of a routine and administrative nature.
At each of its meetings, the Board receives a summary outlining all
matters decided by the Administration Committee since the previous
Board Meeting.

The AGM is an opportunity for the Board to meet Shareholders.
At its AGM, the Group complies with the provisions of theGovernance Code relating to the disclosure of proxy votes, theseparation of resolutions and the attendance of Committee
Chairmen. The Group arranges for the Reports and Financial
Statements and related papers to be posted on its website and,
where Shareholders have elected to receive paper copies, posted toShareholders so as to allow at least 20 working days for consideration
prior to the AGM. The next AGM will be held on 13 September 2016at the Group’s offices in Tubney Woods, Oxfordshire.
Investor relations

The Non‑Executive Directors meet informally with Shareholders both
before and after the AGM and respond to Shareholder queries andrequests. The Chairman and the Senior Independent Director makethemselves available to meet Shareholders, as required.
All Group announcements are posted on the Group website,www.oxford‑instruments.com/investors, as soon as they are released.
The Investor Relations section of the website provides financial
and other information on the Group and the website itself carries
additional information on the Group’s products, services and markets.

Within the Group there is an ongoing embedded process for
identifying, evaluating and managing the significant risks facedby the Group. Day‑to‑day management of this process has beendelegated by the Board to the Executive Directors. Detail of theprocess is set out in the Audit and Risk Committee Report on
pages 51 to 56. This process has been in place for the year underreview and up to the date of approval of the Report and Financial
Statements 2016. It is regularly reviewed by the Board of Directors
and accords with the principles of the Governance Code.

The Group’s Internal Audit function has responsibility forindependently assessing the adequacy and effectiveness of the
management of significant risk areas and provides an oversightview of operational management’s front line and assurance activities.
Further details of the Internal Audit activities are set out in the
Audit and Risk Committee Report on pages 51 to 56.
Internal control
The Board has accountability for reviewing and approving theadequacy and effectiveness of internal controls operated by theGroup, including financial, operational and compliance controls
and risk management. The management of each business is
responsible for risk management and control within their business
and, through the Management Board, implementing Board policies
on risk and control.
The internal control framework includes central direction, oversightand risk management of the key activities within the Group. As
part of this framework there is a financial planning process which
includes a five year planning model and the preparation of an annual
budget approved by the Board. The results of the business units arereported monthly and compared with the budget. Forecasts are also
prepared monthly.
Control activities include policies and practices covering appropriate
authorisation and approval of transactions, the application offinancial reporting standards and reviews of significant judgements
and financial performance. Financial, regulatory and operational
controls, procedures and risk activities across the Group are reviewed
by the Group’s assurance function.
The internal control framework complies with the FRC’s guidanceon internal controls and has been designed to manage rather thaneliminate material risks to the achievement of strategic and businessobjectives and can provide only reasonable, and not absolute,assurance against material misstatement or loss. Because of inherent
limitations, internal controls over financial reporting may not preventor detect all misstatements. There has been no material change to
the Group’s internal control framework during the period covered bythis Report and Financial Statements.

Company Information

The Board has carried out a robust assessment of the principal
risks facing the Group, including those which threaten its businessmodel, future performance, solvency and liquidity. Details of all majorrisks identified and the mitigating actions in place are reported toand reviewed by the Board. The Principal Risks and Uncertainties(pages 22 to 24) give an overview of the major risks and uncertainties
faced by the Group. A standard process is in place throughout
the Group that requires the senior management of each businessto identify significant business risks and to classify them both as
to probability and potential impact. Once identified, mitigating
action, where possible, is formulated and responsibility within the
management team assigned. On a regular basis each business
reviews and updates its risk summary which is then reported to theChief Executive. If a material risk changes or arises, the Managing
Director of the business reports this in writing to the Chief Executive
at which time there is a discussion on the adequacy of the mitigating
actions taken.

Internal audit and assurance

Financial Statements

Risk management

In addition, the Board and the Audit and Risk Committee consider
risks to the Group’s strategic objectives which are not addressed
within the Group’s businesses and develops appropriate actions tomanage and mitigate these risks.

Governance

The Group places considerable importance on regular communications
with its Shareholders with whom it has an ongoing programme of
dialogue. All Shareholders are encouraged to participate in the AGM
at which the Chairman and Chief Executive present an overview of
the Group’s business and review the results and make comments on
strategy and current business activity.

Strategic Report

Annual General Meeting (“AGM”)

Oxford Instruments plc Report and Financial Statements 201649

GovernanceCorporate Governancecontinued
Internal control continued
The key components designed to provide effective internal control
within the Group are as follows:• there is a formal schedule of matters reserved to the Board for
decision and, other than these matters, the Board delegates to
the Chief Executive and reviews the delegation of authorities
throughout the management structure;• the Group’s management structure is headed up by theManagement Board. Its membership comprises the Executive
Directors, senior managers with Group‑wide functional
responsibilities and the heads of the principal businesses of theGroup’s activities. Day‑to‑day responsibility for the managementof the Group is delegated to the Management Board. The
responsibility is based on the identification of separate businesses
for each of the Group’s activities for which there are clearly
defined lines of management responsibilities at all levels up to
and including the Group Board and the Group’s accounting andreporting functions reflect this organisation;• financial executives within Group businesses report to theirown operational head but there is also a well established andacknowledged functional reporting relationship through to theGroup Finance Director;• the Board reviews strategic issues and options formally once a
year during the annual strategic planning process and during theyear as appropriate. In addition the Executive Directors maintaina five year planning model of the Group and its individual
businesses;• annual budgets are prepared for each of the Group’s businesses
which include monthly figures for turnover, profit, capital
expenditure, cash flow and borrowings. The budgets are reviewed
through the Group management structure and result in a Groupfinancial budget which is considered and approved by the Board;• the businesses prepare monthly management accounts which
compare the actual operating result with both the budget andthe prior year. The businesses also prepare rolling reforecasts fororders, turnover, operating profit and cash. Both are reviewed by
the Board monthly;• the Board approves all acquisition and divestment proposals andthere are established procedures for the planning, approval andmonitoring of capital expenditure;• for all major investments the performance of at least the firsttwelve months against the original proposal is reviewed by
the Board;• each Group site, except for representative sales offices, isrequired to submit a self‑assessment internal control
questionnaire annually;

50

Oxford Instruments plc Report and Financial Statements 2016

• internal audit is carried out through a system of regular reviews of
the financial and non‑financial internal controls at each site andthis is further reported on in the Audit and Risk Committee Reporton pages 51 to 56. These reviews are coordinated by the Group
Head of Internal Audit and Risk Management;• the Board receives regular updates on pensions, corporate social
responsibility, business ethics and health and safety and the Audit
and Risk Committee regular updates on treasury, tax, insurance
and litigation;• authorisation limits are set at appropriate levels throughout theGroup; compliance with these limits is monitored by the Group
Finance Director and the Group Head of Internal Audit and Risk
Management;• all requests to quote for substantial fixed price contracts arereviewed by the Chief Executive and/or the Group FinanceDirector to assess both technical and financial risk and to fix
an appropriate balance between risk and reward. However, noprocedure can guarantee the avoidance of losses on fixed pricecontracts of a technical nature; and• with respect to the UK pension scheme, the Group nominates halfof the trustee directors of the corporate trustee to the pension
scheme, involves as necessary its own independent actuary withwhom actuarial assumptions are reviewed, agrees the investment
Policy with the trustee, works with the trustee on its investment
sub‑committee to deal with day‑to‑day investment matters and toact as a co‑ordinator between the investment advisers, investment
managers and the trustee, ensures there is an independentactuarial valuation every three years and agrees funding levels toprovide adequate funding to meet the benefit payments of themembers as they fall due.

Susan Johnson‑BrettCompany Secretary
15 June 2016

Audit and Risk Committee Report
Strategic Report

The extended scope of the
Audit and Risk Committee
coincided with a period of
considerable change within
the business.

Dear Shareholder
2015/16 was the first full financial year in which the role of theCommittee had been extended to cover assurance on non‑financial
matters. The scope of the Committee includes, inter alia, the approvaland oversight of Group policies for insurance, litigation, tax andtreasury and the non‑financial assurance audits of Human Resources,
Information Technology, Operations and New Product Innovation in
addition to the traditional area of focus on core financial controls
and processes.

There have also been changes in financial reporting requirements
which have to be addressed for the first time this year, notably
in relation to the Viability Statement on page 25. These areas ofexternal change, combined with key areas of internal activity andthe associated risks arising, provided the focus for a substantial
proportion of the Committee’s work, in addition to the recurring
areas of responsibility and oversight that form the core of theCommittee’s remit. As a result, particular areas of focus over thelast twelve months have included:• a detailed discussion of the forecasts prepared by the Group
Finance Director prior to the AGM and the profits warning in
September 2015;• a review of the output of, and key assumptions used in, thepreparation of longer term forecasts used in the preparation of
the Group’s Viability Statement;• the risk management processes in place at our NanoAnalysis
business during a visit to the High Wycombe site; and• key areas of IT risk, including progress on the implementation of
the new ERP system (“Project Connect”), the robustness of core IT
systems and cyber security risks. This shall be an area of ongoing
focus in 2016/17.
This report sets out the role, structure and terms of reference of the
Audit and Risk Committee. It also summarises the principal activities
that have been undertaken during the course of the financial
year ended 31 March 2016 and how the Committee fulfils its
responsibilities. The foundations of our activity are designed to support
the principal requirements relating to the Group’s financial reporting
cycle. This includes our review of areas of significant accounting
judgement, monitoring the effectiveness of both the internal andexternal audit functions, and the key risk management processes.
Shortly I will be succeeded as Chairman of this Committee by Mary
Waldner. Mary and I have discussed key areas of historical importanceto the Group and potential areas of risk which may require further
scrutiny in the future. As both the Group itself and the external
environment evolve, we will continue to consider the implications ofthese factors to ensure that our activities are directed appropriately,in order to maintain effective mechanisms of governance and control
that are commensurate with the risks identified.
I will be at the AGM in September. In the meantime if you have any
questions or comments I should be delighted to hear from you.

Jock Lennox
Audit and Risk Committee Chairman
15 June 2016
Oxford Instruments plc Report and Financial Statements 2016

51

Company Information• a review of the Group’s risk register at each meeting of theCommittee which led to further review of specific topics;• a review of stock provisions within the Plasma Technology businessto consider whether potential risks in terms of obsolescence/recoverability were appropriately reflected in the carrying valueof inventory;

Financial Statements

The extended scope of the Audit and Risk Committee coincidedwith a period of considerable change within the business. The
restructuring of the business announced in January 2015 resulted ina number of short‑term challenges. Further, external factors such as
Russian trade sanctions and significant customer changes in the wirebusiness led to some significant variances in performance compared
to initial expectations for the year ended 31 March 2016.

• a review of the Group’s policies in relation to key financial risks
including foreign exchange (hedging Policy) and exposure to
movements in the prices of key commodities used in the business(notably copper);Governance

Jock Lennox Audit and Risk Committee Chairman

Governance

Audit and Risk Committee Reportcontinued
Composition

External audit

The members of the Audit and Risk Committee are Jock Lennox(Chairman), Jennifer Allerton, Mary Waldner, Richard Friend
and Thomas Geitner. Mary was appointed to the Committee inFebruary 2016 with a view to succeeding Jock Lennox as Chairman.
Mary will be appointed Chairman on 16 June 2016, following
the announcement of the Group’s results for the year ended
31 March 2016. Jock and Jennifer will step down from the Committee
when they retire from the Board at the AGM in September.

• Overseeing the relationship with the external auditor.

The Chairman of the Board, Chief Executive, Group Finance Director,
Group Head of Internal Audit and Risk Management and the external
auditor, KPMG, are invited to attend all or part of any meetings at thediscretion of the Audit Committee. The Company Secretary acts as
secretary to the Committee. Other relevant people from the businessare also invited to attend certain meetings in order to provide adeeper level of insight into key issues and developments. Eachmeeting attended by the external auditor, KPMG, allows time for theCommittee to speak with the external auditor without the presenceof the executive management.

• Monitoring and reviewing auditor independence and objectivity
and evaluating the effectiveness of the audit process.
• Reviewing and approving the annual audit plan and audit findings.
• Making recommendations to the Board for the appointment or
re‑appointment of the external auditor.
• Reviewing and monitoring the non‑audit services Policy and thelevel of non‑audit services provided by the external auditor.
Internal controls and risk management• Monitoring the adequacy and effectiveness of the internalfinancial control environment.
• Reviewing the operation of the Group’s internal control and risk
management processes.
• Regularly reviewing the output from the Group’s risk management
processes, including any risk mitigation plans arising.

The Board has determined that, as a Chartered Accountant, Audit
Committee Chairman of certain other public companies and former
Senior Audit Partner of EY, Jock Lennox is deemed to be independentand have recent and relevant financial experience. Mary Waldner,is the current Chief Financial Officer of Lloyd’s Register and has
previously held senior financial roles at Ultra Electronics plc, Qinetiq
plc and 3i Group plc. She is also considered by the Board to be
independent and to have recent and relevant financial experience.

Internal audit

Role and responsibilities• Reviewing the Group’s procedures for detecting fraud and forthe prevention of bribery.

The remit of the Committee is summarised below and is detailed
in full in the terms of reference, a copy of which can be found on
our website at www.oxford‑instruments.com/investors. The main
responsibilities of the Committee are focused on the following
five areas:
Financial reporting• Reviewing the financial results announcements and Financial
Statements and monitoring compliance with relevant statutory
and listing requirements.
• Advising the Board on whether the Report and Financial
Statements, taken as a whole, are fair, balanced andunderstandable, and provide the information necessary for
Shareholders to assess the Company’s position and performance,business model, strategy and risks.
• Reviewing and challenging significant financial reporting
judgements and accounting policies and compliance withaccounting standards.

52

Oxford Instruments plc Report and Financial Statements 2016

• Monitoring the role, resources and effectiveness of the Group
internal audit function.
• Approving an annual programme of internal audit work
(covering financial and non-financial areas of activity) andreviewing the results of such work.
Business malpractice• Reviewing the adequacy and security of the Group’s
whistle‑blowing arrangements and matters reported to thewhistle‑blowing hotline.
The Committee periodically reviews its terms of reference and its
effectiveness and recommends to the Board any changes required asa result of such review.

The Committee has worked largely to a recurring and structured programme of activities developed from its terms of reference and agreed with
the Committee Chairman at the start of the financial year. A summary of the items discussed in each meeting is set out in the table below:				
Agenda item				

July
2015

September
2015

January
2016

March
2016

June
2016

Review the integrity of the draft Financial Statements,
appropriateness of accounting policies and going concern
assumption (reports received from management and KPMG)			

•		

•

•

Review and recommend for approval the half‑year andyear‑end announcements, interim management andAGM statements and the Report and Financial Statements 		

•			

•

•

November
2015

Review viability statement requirements and reporting proposal				Assess the effectiveness of the external audit process		•••					
•		Consider the independence and objectivity of the external auditor				•		

Review internal management representation letters						

•Agree the internal audit plan 							

•Review the output of the internal audit work				

•			

•

Governance

Review and approve the non‑audit services Policy					Review the effectiveness of the Audit and Risk Committee

Strategic Report

Activities of the Audit Committee in respect of the financial year ended 31 March 2016•					

Re‑evaluate the effectiveness of the internal audit function 					Review the internal control framework						

•

•		Review the risk assessment and management processes					

•		Review the Group Risk Register			••		

Annual review of the whistle‑blowing arrangements					

•		

•		

Review systems and controls for detecting fraud
and the prevention of bribery						

•		Annual review of treasury arrangements						•		•The Committee has expanded its scope to cover areas of non‑financial assurance. As noted on page 51, this includes an area of strategic
importance to the Group – New Product Innovation (“NPI”) – together with key enabling functions such as HR (with a particular focus on
skills management) and IT with a continuing focus on Project Connect (the development of the new ERP system) and the Group’s potential
vulnerability to external threats such as cyber attack. The Committee also receives reports on the operational audit programme and health andsafety and environmental performance and compliance. The Committee considers these areas provide proportionate coverage and assurance
over the most significant areas of potential risk faced by the Group.

Financial Statements

Annual review of tax								•In accordance with the 2014 UK Corporate Governance Code (the “Governance Code”), the Board requested that the Committee advise it onwhether the Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary
for Shareholders to assess the Group’s position and performance, business model and strategy. This work formed part of the review of thedraft Financial Statements that was undertaken in June 2016. There had been discussion and approval of specific parts of the Report and
Financial Statements at earlier meetings.
Company Information

Oxford Instruments plc Report and Financial Statements 201653

Governance

Audit and Risk Committee Reportcontinued
Significant matters related to the Financial Statements
The Committee reviews all significant issues concerning the Financial
Statements. The principal areas of significant accounting judgement
considered in relation to the 2016 Financial Statements were:
Revenue recognition
The nature of the commercial relationship with customers together
with the capital nature of certain of the Group’s products means thatjudgement can be required in assessing the timing of recognitionof revenue. This is particularly relevant in the NanoTechnology Tools
segment. The Committee receives commentary from managementon the cut off of revenue and an explanation of any particular sales
where judgement has been required. This includes sales recognised
under “bill and hold” arrangements where physical delivery to thecustomer takes place post year end.
Revenue in the OI Healthcare business includes service revenue,
equipment rental and equipment sales. This is disclosed in Note 3.
This element of the business increased in significance in the yearwith the acquisition of Medical Imaging Resources, Inc in May 2015.
The Committee received a paper from management setting out
the business model and Policy for revenue recognition. Specificcommentary was also received from the external auditor who agreed
with management’s recommendations. The Committee concluded
that the proposed treatment was appropriate.
Carrying value of acquired intangible assets(including capitalised goodwill)
The Group balance sheet includes acquired intangible assets valued at£201.0 million. This includes capitalised goodwill and other intangible
assets that have arisen through historical acquisitions by the Group in
pursuit of its strategy. The most significant element relates to Andorat £124.1 million. As set out in Note 17 to the Financial Statements,
the carrying value of goodwill for each investment has been assessed
for impairment and the sensitivity to any change in the assumptions
used in those calculations has been considered. Note 17 includes asensitivity analysis; due to the recent timing of the Andor acquisition,
the headroom to impairment is relatively low.
Valuation of investment in associate undertaking
In May 2015, the Group disposed of 100% of its interest in Omicron
NanoTechnology GmbH (“Omicron“) and its subsidiaries to Scienta
Scientific AB in exchange for a 47% shareholding in the businesscombination of Omicron and Scienta Scientific AB.
On the basis of the Group’s minority shareholding and thecomposition of Scienta Scientific AB’s Board of Directors (the Groupappoints two out of five seats) the Committee is satisfied withmanagement’s assessment that the Group does not control Scienta
Scientific AB. Accordingly it has been treated in the Group Financial
Statements as an investment in an associate.

54

Oxford Instruments plc Report and Financial Statements 2016

IFRS requires that the initial carrying value of the investment in
Scienta Scientific is determined by its fair value. Management
performed this valuation, considered a range of possible values,and concluded that a fair value of £14.6 million was appropriate.
We are satisfied that an appropriate analysis has been undertaken.
A valuation at this level resulted in a loss on disposal of £0.9 million
against the book value of the investment.
Since the Group continues to include part of Omicron in its accounts(albeit on a different basis of presentation) the results of Omicron
prior to May 2015 have not been presented as discontinued
operations.
Provisions for product warranty and related matters
The Group faces an inherent risk of potential claims in relation to
product quality or intellectual property infringement. Management
has presented its analysis of potential exposure to these risks andwe have also received comments from the external auditor on thelevel of provisions recognised in the Financial Statements. Given
the inherent uncertainty in such matters it is likely that the actual
settlement cost arising from any potential claim would vary from theamounts provided. Nonetheless, we consider that the methodology
applied is appropriate and has been consistently applied.
UK defined benefit pension scheme
IFRS requires the Group to value its defined benefit pension
scheme at the difference between the value of the scheme’s assets
and the net present value of the scheme’s future liabilities as at
31 March 2016. Further, the Group is required to appoint an external
actuary to give advice as to suitable assumptions and to calculate thevalue of the liabilities at the balance sheet date.
The valuation of the scheme assets was provided by the scheme’s
investment manager in accordance with market practice for valuing
investment assets.
In calculating the deficit the actuary used member data from the
March 2015 triennial valuation prepared for the scheme’s trustee.
Previously data from the March 2012 valuation was used in preparing
the IAS 19 valuation. Using this more recent data resulted in asignificant reduction in the deficit. The Committee discussed therevision with management and the external auditor, and is satisfied
that the position at 31 March 2016 has been applied consistently
with prior years.

External auditor

The Group has a number of tax positions where the outcome
is uncertain and ultimately depends on the view taken by tax
authorities, both in the UK and overseas. The net tax liability
reported in the financial statement is effectively reduced as a resultof tax efficient activities including claims for technology related
tax reliefs, benefits from a tax efficient financing structure, anddeferred tax assets (e.g. timing differences and carried forward
losses). In preparing the provisions, judgement has been exercised bymanagement with the aim of recording assets and liabilities at thefair value of the most likely outcome. The Committee is satisfied thatjudgement has been applied consistently with prior years.

The Committee is responsible for monitoring the performance,
objectivity and independence of the external auditor, recommending
the appointment of the external auditor to the Board and approval of
its fees. KPMG, the external auditor, set out its plan for undertaking
the external audit at the Committee meeting in January 2016. Thishighlighted the proposed approach, scope and planned materiality of
the audit for the year ended 31 March 2016 and identified the key
risks and areas of audit focus, including the approach for these areas
in detail. The Committee reviewed and, as appropriate, challenged
the basis for these before agreeing the plan.

Adjusted profit and EPS

Management reported to the Committee that they were not awareof any material or immaterial misstatements made intentionallyto achieve a particular presentation. The external auditor reported
a schedule of unadjusted audit differences to the Committee.
Following discussion with management and the external auditor,
the Committee was satisfied that the adjustments were notmaterial to the Financial Statements and therefore remained
unadjusted. The Committee concluded that it was satisfied that theexternal auditor had fulfilled its responsibilities with diligence andprofessional scepticism.

In its assessment of the independence of the external auditor theCommittee receives confirmation of any relationships between theGroup and KPMG that may have a bearing on its independence andreceives confirmation that it is independent of the Group.
To further safeguard the objectivity and independence of theexternal auditor and to mitigate the risk of the external auditor firm’s
independence becoming compromised, the Committee has a formal
Policy governing the engagement of the external auditor to provide
non‑audit services. In light of changes to the Governance Code thatare due to take effect in June 2016, the Committee has updated
its Policy which governs the provision of non‑audit services. All
non‑audit related engagements over £50,000 require formal advanceapproval by the Committee. The details of the audit fees for theyear, together with fees for non‑audit services, are set out in Note 4(page 99) to the Financial Statements. In the year ended 31 March
2016, audit fees paid to KPMG were £462,000 and non-audit fees
£41,000. This represents a non‑audit to audit fee ratio of 9%.

Company Information

After reviewing the presentations and reports from management,
and after consulting, where necessary, with the external auditor theCommittee was satisfied that the Financial Statements appropriately
addressed the critical judgements and key estimates (both in respect
to the amounts reported and the disclosures). The Committee wasalso satisfied that the significant assumptions used for determining
the value of assets and liabilities, including the pension commitmentsof the Group, had been appropriately scrutinised and challenged.

Auditor independence

Financial Statements

Misstatements

As reported last year, the external audit was tendered in 2014 and
KPMG was re-appointed. The new rules for audit tendering androtation come into force in June 2016. The Group’s Policy is toconform to these new rules. Under the transitional arrangements,
this means KPMG will be replaced as auditor not later than
31 March 2021 although we shall monitor the re-appointment
of KPMG on an annual basis. A tender process will be arranged
when appropriate.

GovernanceAs explained in Note 1 to the Financial Statements, the Groupapplies adjustments to the statutory definition of profit and EPS topresent adjusted profitability and earnings as the Board believes
they present a clearer picture of the financial performance of theGroup. In the year ended 31 March 2016, £16.7 million of thetotal adjustments of £23.9 million before taxation relate to theamortisation and impairment of acquired intangible assets. The net
total of non‑recurring and acquisition related items is £4.5 millionof which £9.4 million relates to charges arising from restructuring
and acquisitions or disposals. The other adjustment relates to a
reduction in deferred consideration of ‑£4.9 million. The Committee
has received a detailed analysis from management to demonstratethat the Group’s definitions have been consistently applied. These
items involve careful judgement and the Committee is satisfied
that they have been rigorously considered by management andappropriately disclosed.

The Committee assesses the effectiveness of the audit process inaddressing any matters raised through the reporting received fromKPMG at the half year and year end and through feedback from key
stakeholders at all levels across Oxford Instruments.

Strategic Report

Tax provisions

Oxford Instruments plc Report and Financial Statements 201655

Governance

Audit and Risk Committee Reportcontinued
Internal audit
Internal audit plays an important role in assessing the effectivenessof internal controls. This is achieved through an audit programmethat includes rotational site visits providing core assurance overthe Group’s financial processes and risk‑based reviews to provide
assurance that controls over certain key risks are operating effectively.
Compared to the prior year, there were fewer internal audit visits
due to a hiatus in the recruitment of a new Group Head of Internal
Audit and Risk Management which led to the outsourcing of certain
activities until the new incumbent took over in February 2016. During
the year, reviews of core financial processes were undertaken in
the Group’s federal offices in Japan and at certain operating sites
of Plasma Technology and NanoScience. In addition, time has beenspent, together with management, developing the risk management
process and extending the scope of the Committee’s work toembrace the non‑financial areas of assurance.
The Committee has assessed the internal audit plan so that itprovides appropriate coverage over the internal control environment
and provides a balanced overview across the Group, taking into
account the level of risk, other assurance activities and previous
coverage. Reports from the Group Head of Internal Audit and Risk
Management include updates on audit activities, progress against theaudit plan, and the results of the audit work and status of any control
remediation plans.
The Group Head of Internal Audit and Risk Management has directaccess and a reporting line to the Chairman of the Audit and Risk
Committee and meets independently with the Chairman during
the year. As part of the transition process, the current and future
Chairman of the Audit and Risk Committee have held a joint
planning and review meeting with the Group Head of Internal Audit
and Risk Management. The Committee monitors the resources andscope of work of the Group Internal Audit function to ensure thatits development is commensurate with the increasing scale andcomplexity of the business.
Internal control and risk management
The changing composition of the Group, the markets it operates
in and other external factors require us to review our existing risk
management process to establish whether it is effective in theidentification and mitigation of risks (where the risks identified canbe mitigated by internal action). Currently we follow a “bottom‑up”
process where individual business units are required to identify
risks relevant to their businesses. Group management perform a“top‑down” review to add the additional Group based risks tocomplete the picture. Key risks, based on likelihood of occurrence
and significance of potential impact are consolidated into theGroup Risk Register. The Group Risk Register is reviewed at least
every quarter by executive management before being reported to
the Board. The register is tabled at each meeting of the Audit andRisk Committee.

Internal audit provides assurance on the risk management processes
as part of its audit work and utilises the output of the business risk
reporting to identify the risk‑based reviews to be included within its
audit plan. In addition, the plan includes a core compliance element
in relation to financial controls with entities selected for audit using arisk‑based approach (which includes the timing since the last visit andfindings from previous audits).
The Committee reviewed the system of internal financial control onbehalf of the Board and satisfied itself that the Group is meeting
the required standards both for the year ended 31 March 2016 andup to the date of approval of this Report and Financial Statements.
No concerns were raised with the Committee in the year about
possible improprieties in matters of financial reporting.
In coming to these conclusions the Committee reviewed reports
from Group Internal Audit and from the external auditor on internal
control findings, obtained reviews into the control environment andrisk management process; and considered the outputs from otherassurance activities performed by the Group functional heads over
operations, health and safety, NPI, human resources and IT. Following
the implementation of minimum financial control standards andmore detailed policies and procedures in the prior year, 2016 was ayear for consolidating recent changes. The associated programme ofself‑assessment forms an important part of the Committee’s review of
the internal control environment.
Whistle‑blowing
The Group’s Business Malpractice Policy comprises an internal processthat has been communicated directly to all employees by which
employees can raise a concern, including concerns relating to fraud,
bribery and/or corruption, damage to the environment, criminal
activity or danger to health and safety, in the knowledge that it
will be taken seriously, treated as confidential and that no action
will be taken against the employee raising the concern. Reporting
channels include an independent third party provider that provides
summary reports to the Group Compliance Team (comprising theHead of Group Legal and the Group Head of Internal Audit and Risk
Management). There is also provision within the Policy for employees
to raise concerns directly with the Senior Independent Director.
This Policy is reviewed annually by the Committee and is also to bereviewed as part of a wider review by Group internal audit of theGroup’s Anti‑Bribery and Anti‑Corruption Policies and Procedures.
The Group Head of Internal Audit and Risk Management maintains
a log of all matters reported through the confidential third party
provider. No serious matters were reported during the year ended
31 March 2016.
Summary
The Committee has concluded that, as a result of its work during
the year, it has acted in accordance with its terms of reference andfulfilled its responsibilities. Mary Waldner, in her role as Chairman of
the Committee from 16 June 2016, and Jock Lennox, the outgoing
Chairman, will be available at the AGM to answer any questions.

Jock Lennox
Audit and Risk Committee Chairman
15 June 2016

56

Oxford Instruments plc Report and Financial Statements 2016

Nomination Committee report

GovernanceNigel Keen Chairman of the Nomination Committee

The Nomination Committee comprises all the Non‑Executive
Directors, under the chairmanship of the Chairman of the Board.

Principal activities of the Committee during the year

Attendance at meetings year ended 31 March 2016

• Executive Director appointment: as part of its Board successionplan, an internal candidate had been identified with the potential
to succeed Jonathan Flint as CEO in due course. The Committee
identified that its potential internal successor to the CEO needed
more exposure to the Board. Accordingly it recommended that
Ian Barkshire, a long serving senior manager within Oxford
Instruments, be appointed an Executive Director with effect from
10 November 2015.

			
			

Number of meetings held

Nomination		 Date of appointment
Committee		to Committee

3

Number of meetings attended		3

Jennifer Allerton

3

25 February 1999
11 June 2013

Richard Friend

3

1 September 2014

Thomas Geitner

3

15 January 2013

Jock Lennox

3

1 April 2009

Mary Waldner10

4 February 2016

Number of meetings in attendance 		Jonathan Flint

2

Kevin Boyd2

1. No meetings of the Committee were held between appointment and 31 March 2016.

The Nomination Committee• Is responsible for assisting the Board in the formal selection andappointment of Directors. It considers potential candidates andrecommends appointments of new Directors to the Board.

• T here is a formal, rigorous and transparent procedure for theappointment of new Non‑Executive Directors to the Board, theprime responsibility for which is delegated to the Nomination
Committee. Each appointment process begins with anevaluation of the balance of skills, knowledge and experience
existing on the Board that is effected through a series of
one‑on‑one meetings between the Committee Chairman
and Directors.
• T he Nomination Committee takes external advice when
considered appropriate.

• NED appointment: the Committee established a sub‑committee toevaluate the balance of skills, knowledge and experience on the
Board and to identify appropriate candidates for Non‑Executive
Director positions on the Board, has continued its work.
• T he Committee’s succession plan for the Board identified that
Jock Lennox, in line with Provision B.1.1 of the Governance
Code, would be stepping down from the Board in 2018(subsequently he notified the Board that he wished to step
down at the 2016 AGM).
• T he sub‑committee, with the help of executive search
consultants MWM Consulting, drew up a description of therole and desired capabilities for candidates and, taking into
account both diversity within and the balance of skills on the
Board, developed a shortlist of qualifying candidates.
• C andidates met with the Chairman and the Senior
Independent Director and a final selection of potential
appointees met several Directors individually.

Company Information• T he appointments are based on merit and against objective
criteria including time available and the commitment that will
be required of the potential Director.

Appointments to the Board

Financial Statements

Nigel Keen, Chairman

Strategic Report

The Nomination Committee
is responsible for assisting
the Board in the formal
selection and appointment
of Directors.

• F ollowing these meetings, the Nomination Committee
considered each Director’s feedback and made a final
recommendation to the Board of the appointment of an
Independent Non‑Executive Director who also had potential
as a future Chairman of the Audit and Risk Committee.
Following this process, Mary Waldner was appointed to theBoard as an Independent Non‑Executive Director with effectfrom 4 February 2016 and will be appointed Chairman of the
Audit and Risk Committee from 16 June 2016.

• Considers succession planning for the Board and the top level ofsenior management.
Oxford Instruments plc Report and Financial Statements 201657

GovernanceNomination Committee Reportcontinued
Principal activities of the Committee during the year continued
Appointments to the Board continued• CEO appointment: the Committee established a sub‑committee
to drive the selection process. The sub‑committee worked with
the Group HR Director and executive search consultants, Odgers
Berndston and Mercuri Urval, to develop a candidate brief andto carry out benchmarking and candidate evaluations to help theCommittee in its deliberations on potential candidates for CEO.
• T he advisers each carried out a detailed evaluation of
the internal successor for the role of CEO to establish
his credentials and to benchmark him against externalpotential candidates.
• A fter presentations and extensive discussions between theinternal candidate and the Committee, the Committee
considered the best way forward for the Company and madeits recommendation to the Board.

• Chairman appointment: following the announcement inNovember 2015 that Nigel Keen had decided after 17 years’service to step down from the Board at the 2016 AGM, theCommittee established a sub‑committee, led by Jock Lennox,
Senior Independent Director, to search for his successor.
• W ith the help of executive search advisers, the Zygos
Partnership, the Committee drew up a profile of therequirements for this role and tasked Zygos with identifying
suitable potential candidates.
• C andidates went through a vigorous interview process andmet with Directors of the Board.
• A fter careful consideration of the potential candidates, andtaking the views of all Board members into account, theCommittee made its recommendation to the Board and anoffer was made.
On 9 May 2016 the Board announced that Alan Thomson,
Chairman of Bodycote plc and Hays plc, was to be appointed
Independent Non‑Executive Director from 1 June 2016 andas Chairman designate, will be appointed Chairman after theclose of the AGM on 13 September 2016.

 n 12 April 2016 the Board announced that Ian Barkshire, theO
Company’s Chief Operating Officer and Executive Director, wasappointed to the position of Chief Executive with effect from
11 May 2016.
• Group Finance Director appointment: following notification
by Kevin Boyd that he was resigning from the Company,
the Committee established a sub‑committee to work with
MWM Consulting.
• T he sub‑committee, with the help of MWM Consulting,developed a candidate brief and identified candidates for along list.
• M
 WM Consulting carried out benchmarking and candidate
evaluations to help the Committee develop a shortlist of
candidates for the role.
• A fter careful consideration of the potential candidates, theCommittee made its recommendation to the Board and anoffer was made.
On 12 February 2016 the Board announced that Gavin Hill,
formerly Finance Director of Synergy Health, was appointed
to the position of Group Finance Director with effect from9 May 2016.

All Directors of the Board are put forward for re‑appointment by
Shareholders each year at the AGM and this includes all those
appointed during the year. The Committee, taking into accountthe performance and value that each Director brings to the Board,
has considered whether each of the Non‑Executive and Executive
Director appointments should be renewed for a further year and has
confirmed that this is indeed the case and accordingly a resolution toreappoint each Director will be put to Shareholders at the Company’s
forthcoming AGM.
Succession planning• The Group HR Director and the Chief Executive presented thework that had been carried out within the business on succession
planning, talent management and leadership and articulated thesuccession plans for each senior management position, includingat Management Board and Executive Director level.
• The Chairman updated the Board’s succession plan for
Non‑Executive Directors.
Other• The Nomination Committee also carried out its annual reviewof the performance of the Chief Executive and it, excluding the
Chairman, also reviewed the performance of the Chairman.

Nigel Keen
Chairman of the Nomination Committee
15 June 2016

58

Oxford Instruments plc Report and Financial Statements 2016

Remuneration Report

Dear Shareholder
Summary of main remuneration decisions during the year
Our Directors’ Remuneration Policy was approved by Shareholders
at the 2014 AGM and having reviewed its operation in 2015/16
the Committee has concluded that no changes are necessary to
the implementation of the Policy for the forthcoming year. The
Remuneration Committee will carry out a full review later this year
to determine whether any changes are required at our 2017 AGM,
when we must again seek shareholder approval for our Policy.

Company Information

Since the year end, the Committee has also agreed the remuneration
arrangements for Jonathan Flint, who ceased to be Chief Executive
on 11 May 2016 and who will step down from the Board on
31 July 2016, as well as setting the fee of our new Chairman,
Alan Thomson, who was appointed to the Board as an Independent
Non‑Executive Director on 1 June 2016 and will take over as
Chairman at the close of this year’s AGM on 13 September 2016.

In arriving at an appropriate package for each of our new Board
Directors, the Committee has taken into account the experienceof each of the individuals, the skills that they bring as well as
requirements of their respective roles. The Committee has also kept
in mind the market rate for each of the roles as well as the overriding
principle of paying no more than is necessary to secure the best
candidate with the right skills and experience. It is anticipated, subject
to individual and corporate performance, that as our CEO grows inexperience his base salary will be increased over the next few years toensure he receives market competitive remuneration for the skills andexperience he brings to the role.

Financial Statements

As well as the usual standing agenda items, the Committee has
spent time dealing with the remuneration matters arising as a resultof the Board changes we have seen during the year. We welcomed
Ian Barkshire onto the Executive Board as Chief Operating Officer
on 10 November 2015 and as Chief Executive with effect from
11 May 2016 as well as our new Group Finance Director, Gavin Hill,
on 9 May 2016. The Committee has agreed the remuneration
packages for these individuals as well as the remuneration
arrangements on cessation for our outgoing GFD.

Our departing GFD was, and CEO will be, paid base salary, pension
and benefits to the date of cessation and, as each have continued
in service for the full financial year, annual bonus for the financial
year ended 31 March 2016 has been determined and paid inaccordance with the performance targets set at the beginning of
the year. All outstanding long‑term incentive awards will lapse on
cessation. No bonus will be payable to Jonathan Flint in respect of his
service from 1 April 2016 to the date of his cessation. No additional
contractual or other payments are being made.

GovernanceThomas Geitner Chairman of the Remuneration Committee

Strategic Report

On behalf of the Board,
I am pleased to present the
Remuneration Report for
2015/16.

Oxford Instruments plc Report and Financial Statements 201659

Governance

Remuneration Reportcontinued
Corporate performance and remuneration for 2015/16

Implementation of Policy in 2016/17

As explained in our Strategic Report on pages 1 to 39 it has beena testing year for Oxford Instruments. The Group delivered a
profit performance in line with expectations. Against a difficult
macroeconomic backdrop we achieved profits growth on lower
revenues. Our NanoTechnology and Service businesses delivered asteady performance, whilst our industrial businesses continued to
face pressure from weaknesses in their end markets. A good cash
performance in the year has strengthened our balance sheet.

• The base salaries for our new CEO and GFD for 2016/17 were set
on appointment.

As in previous years the Committee set stretching performancetargets for the annual bonus which are clearly linked to the strategy
and financial performance of the Group. The financial targets havebeen partly met. The cash target has been met and will be paid infull and the organic sales target, which has exceeded the thresholdtarget, will pay out in part. The threshold target for profits was
not met. The Committee carefully reviewed performance against
the strategic objectives set for the annual bonus, which have been
critical to laying the foundations for future growth. The Committee
determined that performance against the strategic targets was
generally good but that not all objectives had been fully met andthis is reflected in the level of vesting of the strategic element of thebonus. Jonathan Flint’s total bonus is as a result 38.6% of maximum
and Kevin Boyd’s 35.6% of maximum.
Ian Barkshire’s bonus arrangements were in place prior to his
appointment as an Executive Director and, in line with our Directors’
Remuneration Policy, have continued for the full financial year.
Payment is determined by financial targets relating to the business
units that he was managing as well as to the Group and certain
personal targets. These targets were set before he became an
Executive Director and are more sensitive in nature given that they
relate largely to the divisional parts of the business. More detail iscontained in the Report and Financial Statements on Remuneration.
After assessing the financial performance and discussion with
Jonathan Flint, the CEO, regarding the personal element, theCommittee has determined a bonus for Ian Barkshire of 78.5% of
maximum.
The performance conditions for the share awards made to the
Executive Directors under the Executive Share Option Scheme(“ESOS”) in June 2014 and the Senior Executive Long Term Incentive
Scheme (“SELTIS”) in December 2012 and June 2014, and for which
the performance periods ended during the year, were not met andthese awards will lapse.
Further details about the targets set for the variable pay awards
referred to above and performance against them is set out in theReport and Financial Statements on Remuneration.

60

Oxford Instruments plc Report and Financial Statements 2016

• Both our CEO and GFD have a maximum annual bonus
opportunity of 100% of salary and a performance share award of
150% of salary in line with our existing Remuneration Policy. The
Committee has determined appropriately stretching targets forthe annual bonus which will be disclosed retrospectively in next
year’s Annual Report on Remuneration. Vesting of the PSP awards
will be determined 50% by EPS performance and 50% by relative
total shareholder return performance against the FTSE 250 Index(excluding financial companies). Further details are set out in theReport and Financial Statements on Remuneration.
Summary
As we are not making any changes to our Remuneration Policy there
is no vote to approve the Policy this year. There will be the usual
advisory resolution to approve the Report and Financial Statements
on Remuneration, which sets out the remuneration outcomes for theyear under review as well as how the Policy will be implemented forthe year ahead.
I hope that you will be supportive of the Resolution to be proposed at
our AGM. If you have any queries in the meantime I will be pleased
to engage with you either at the AGM or beforehand.
Yours sincerely

Thomas Geitner
Chairman of the Remuneration Committee
15 June 2016

This part of the Remuneration Report sets out the Group’s Remuneration Policy for its Directors. The Policy was put to a binding
Shareholder vote at the AGM in September 2014 and took effect from that date and, unless changed with Shareholders’ prioragreement, will stay in place until September 2017.
Policy overview

Other matters taken into consideration in determining Policy

The Remuneration Policy promotes the delivery of the Group’s
strategy and seeks to align the interests of Directors andShareholders. The Committee regularly reviews the link between
incentive structure and strategy to ensure that remuneration
packages are appropriate to attract, motivate and retain the highcalibre executives who are needed to deliver the Group’s strategy.

The Committee reviews the Executive Directors’ packages annually
taking account of the level of remuneration paid for comparable
positions in similar companies. Comparative pay data is used carefully,
recognising the potential for an upward ratchet in remuneration
caused by over reliance on such data.
In determining the remuneration of the Group’s Directors, theCommittee also takes into account the general trends in pay andconditions across the Group as a whole. The Committee seeks
to ensure that the underlying principles which form the basis for
decisions on Directors’ pay are consistent with those on which pay
decisions for the rest of the workforce are taken. Employees are notcurrently consulted on executive pay. However, the Committee willkeep this under review.

The Committee considers carefully the motivational effects of the
incentive structure in order to ensure that it is effective and does
not have any unintentionally negative impact on matters such as
governance, environmental or social issues. More generally, theCommittee ensures that the overall remuneration Policy does notencourage inappropriate risk taking.

The Remuneration Committee considers feedback from Shareholders
received at each AGM and any feedback from additional meetings,
as part of any review of Executive remuneration. In addition, theRemuneration Committee engages proactively with Shareholders andwill ensure that Shareholders are consulted in advance, where any
material changes to the remuneration Policy are proposed.

Governance

The Company has an incentive driven Policy that seeks to reward
executives fairly and responsibly based on Group performance andtheir individual contribution. The Company has a strategy aimed
at delivering significant growth and it is important for motivation
and retention that the remuneration of the executives reflects its
sustainable, profitable growth and the increasing complexity ofthe business.

Strategic Report

Part A: Directors’ Remuneration Policy

Financial Statements
Company Information

Oxford Instruments plc Report and Financial Statements 201661

Governance

Remuneration Reportcontinued
Remuneration Policy table
Element of pay

Purpose and link to strategy

Operation

Maximum opportunity

Base salary• To provide a competitive andappropriate level of basic fixed pay torecruit and retain superior talent andavoid excessive risk taking that mightotherwise result from an over‑relianceon variable remuneration.

• Reviewed annually with any increaseusually effective 1 July.

• There is no maximum or maximum
annual increase.

• Takes account of experience,
performance and responsibilities as wellas the performance of the Company,
the complexity of the role within
the Group and salary increases for
employees generally.

• Higher increases than the average
percentage for the workforce may beappropriate, for example, where an
individual changes role, where thecomplexity of the Group changes,
where an individual is materiallybelow market comparators or isappointed on a below market salarywith the expectation that his/her salarywill increase with experience andperformance.

• Reflects the experience, performanceand responsibilities of the individual.

• Set with regard to market datafor comparable positions insimilar companies in terms of size,internationality, business model,
structure and complexity, including
within the industry.

Benefits• Provided on a market‑competitive
basis, aids retention and follows reward
structure for all employees.

• Currently include but are not limited to:• life assurance;• private medical; and• company car benefit.
• The benefits provided may be subject
to amendment from time to time by
the Committee within this Policy.

• Current salary levels are disclosed on
page 67.
• The value of benefits varies fromyear to year depending on the costto the Company and is not subject
to a specific cap. Benefit costs
are monitored and controlled andrepresent a small element of total
remuneration costs.

• Relocation costs may be provided asnecessary and reasonable.
• Benefits are not part of pensionableearnings.
Pension• To provide a market‑competitive benefit
for retirement.

• Company contributions to a money
purchase pension scheme; and/or• 14% of base salary.

• Salary supplement where HMRC annual
or lifetime allowances are exceeded.
Annual bonus• Drives and rewards the successfulachievement of short‑term targets set
at the start of the year.

• Paid annually in June.
• Performance targets based on the key
performance indicators and strategic
objectives of the business.
• At least 70% of the bonus based on
financial metrics and the balance on
non‑financial strategic metrics.
• Clawback applies for financial
years commencing 2013/14 formisstatement, error or misconduct.

62

Oxford Instruments plc Report and Financial Statements 2016

• 75% of salary at year end payableat target performance.
• 100% of salary at year end payable
for maximum performance.
• Bonuses start to be earned from
0% of salary for achieving thresholdperformance.

Purpose and link to strategy

Operation

Maximum opportunity

Long term
incentives• To incentivise the Executives and reward
them for meeting stretching targets inthe long term which accrue substantial
value to and align the Directors’interests with Shareholders.

• Annual awards under the 2014
Performance Share Plan (“PSP”) ofperformance shares (or nil cost options)with vesting subject to achievement of
performance targets. Both the vestingand performance period will be overa minimum of three years but may be
up to five years at the discretion of
the Committee.

• The maximum limit under the planrules is 250% of salary (value of sharesat date of grant). The Committee will
not increase the amount of the award
above the 2014 award levels of 150%of salary without prior consultation
with major Shareholders.

• Facilitate share ownership to provide
further alignment with Shareholders.
• Annual awards aid retention.

• Dividend equivalents may accrue on
the PSP awards over the vesting period
and be paid out either as cash or as
shares on vesting and in respect of thenumber of shares that have vested.

Governance• It is the Committee’s intention to set
relative TSR targets for 50% of theaward and for the other 50% absolute
EPS growth targets although theCommittee will review the performance
conditions each year prior to awards
being made.

Strategic Report

Element of pay• 25% of the awards will vest at
threshold performance under eachperformance condition.
• Clawback may be applied for
misstatement, error or misconduct.
All‑employee
share schemes• To encourage employee shareparticipation.

• The Company may from time to time
operate tax‑approved share schemes(such as the HMRC‑approved Share
Incentive Plan) for which executive
Directors could be eligible.

• The schemes are subject to the limits
set by tax authorities.

Shareholding
guideline• To further align Executive Directors’interests with Shareholders.

• The Committee has establishedshareholding guidelines which
encourage the Executive Directors tobuild and retain a holding of Company
shares equivalent to a multiple of basesalary, as determined by the Committee.
The guideline and current shareholdingsof the Directors are set out in theReport and Financial Statements on
Remuneration.

Financial Statements• The SIP is open to all UK permanent
staff employed for at least six months.
• Not applicable.

Non‑Executive
Director fees

• To remunerate the Chairman and
Non‑Executive Directors.

• Reviewed annually.
• For the Non‑Executive Directors agreed
by the Executive Directors and Chairman.

Company Information• Until the guideline is met in full,Executive Directors are expected toretain or acquire shares equivalent tothe value of 50% of the net amountrealised from exercise/vesting of shareawards as appropriate after allowing
for tax payable.
• There is no prescribed maximum or
maximum annual increase.

• For the Chairman agreed by the
Remuneration Committee.
• Determined and reviewed taking into
account time commitment, experience,
knowledge and responsibilities of therole as well as market data for similarroles in other companies of a similar size
and/or business to Oxford Instruments.

Oxford Instruments plc Report and Financial Statements 201663

Governance

Remuneration Reportcontinued
Differences in the Remuneration Policy of the
Executive Directors and the general employees

Discretions retained by the Committee
in operating its incentive plans

There are no material differences in the structure of remuneration
arrangements for the Executive Directors and senior management
population, aside from quantum and participation levels in incentive
schemes, which reflect the fact that a greater emphasis is placedon performance‑related pay for Executive Directors and the mostsenior individuals in the management team. Outside the senior
management team, the Company aims to provide remuneration
structures for employees which reflect market norms.

The Committee operates the Group’s various incentive plansaccording to their respective rules and in accordance with HMRC
rules where relevant. To ensure the efficient administration of theseplans, the Committee may apply certain operational discretions.
These include the following:

Choice of performance measuresand approach to setting targets
The Committee selects financial and strategic measures (such as
sales, profit, cash generation) for the annual bonus that are key
performance indicators for the business over the short term. For
the long term incentives the Committee will select a combinationof measures that provide a good focus on the outcomes of theCompany strategy together with sustainable improvements inlong‑term profitability.
The Committee sets appropriate and demanding targets for variable
pay in the context of the Company’s trading environment andstrategic objectives. The targets for the annual bonus plan will be set
each year with reference to the Company’s budget and business andstrategic plan. The Committee will review the performance conditions
and targets for awards under the PSP each year prior to awards being
made taking account of the Company’s internal financial planning,market forecasts and the business environment (e.g. to determine
whether the TSR peer group continues to remain appropriate,
whether the range of EPS performance targets remains appropriate
and, more generally, in light of the Company’s long‑term strategy
and growth aspirations). Should there be a material change in the
Company’s performance conditions (e.g. introducing an additional
performance metric) appropriate dialogue with the Company’s major
Shareholders would take place along with a full explanation in theReport and Financial Statements on Remuneration to support any
such change.
The metrics for awards granted under this Policy are set out in theReport and Financial Statements on Remuneration.

64

Oxford Instruments plc Report and Financial Statements 2016• select the participants in the plans;• determine the timing of grants and/or payments;• determine the quantum of grants and/or payments (within thelimits set out in the Policy table above);• determine the extent of vesting based on the assessmentof performance;• determine “good leaver” status, and where relevant, the extent ofvesting in the case of the share‑based plans;• where relevant determine the extent of vesting in the case ofshare‑based plans in the event of a change of control;• making the appropriate adjustments required in certain
circumstances (e.g. rights issues, corporate restructuring events,
variation of capital and special dividends); and• the annual review of weighting of performance measures, andsetting targets for annual bonus plan and discretionary share plansfrom year to year.
The Committee may adjust the targets and/or set different measuresand alter weightings for the annual bonus plan and share‑based
awards only if an event occurs which causes the Committee toreasonably consider that the performance conditions would notwithout alteration achieve its original purpose and the varied
conditions are no less difficult to satisfy than the original conditions.
Any changes and the rationale for those changes will be set out
clearly in the Report and Financial Statements on Remuneration in
respect of the year in which they are made.
Legacy arrangements
In approving this Remuneration Policy, authority is given to theCompany to honour any commitments entered into with current orformer Directors (such as the payment of a pension or the vestingor exercise of past share awards) that have been disclosed to andapproved by Shareholders in previous remuneration reports. Detailsof any payments to former Directors will be set out in the Report and
Financial Statements on Remuneration as they arise. This will include
all subsisting awards granted under the Executive Share Option
Scheme (“ESOS”) and the Senior Executive Long Term Incentive
Scheme (“SELTIS”) details of which are disclosed in the Annual Report
on Remuneration.

The charts below show the level of remuneration potentially payable
to Executive Directors under different performance scenarios for thefinancial year 2016/17 (see notes for assumptions):
Chief Executive£(000s)
1,600
1,400

Group Finance Director£1,507.4

LTIPs
Annual bonus
Fixed pay

1,200

£1,097.4

1,000£1,180.841%28%£860.8800
600£380.8

400
200
0

28%

27%

100%

44%

32%

100%

44%

32%

Below
targetTargetMaximumBelowtargetTargetMaximum

Assumptions for charts above:
1. Fixed pay comprises salary levels as at 1 July 2016, pension contribution of 14% andthe value of benefits received in 2015/16.

For an internal Executive Director appointment, any variable payelement awarded in respect of the prior role may be allowed to pay
out according to its terms, adjusted as relevant to take into accountthe appointment. In addition, any other ongoing remuneration
obligations existing prior to appointment may continue.
For external and internal appointments, the Committee may agree
that the Company will meet certain relocation, legal and any otherincidental expenses as appropriate.

Governance£482.4

28%

27%

28%

41%

Flexibility is retained to offer additional cash and/or share‑based
payments on appointment in respect of deferred remuneration or
benefit arrangements forfeited on leaving a previous employer.
The Committee would look to replicate the arrangements being
forfeited as closely as possible and in doing so, will take account ofrelevant factors including the nature of the deferred remuneration,
performance conditions, attributed expected value and the timeover which they would have vested or been paid. Such awards may
be made under the terms of the PSP or as permitted under the
Listing Rules.

Strategic Report

Remuneration scenarios for Executive Directors

Executive Directors’ service contracts and Policy on cessation
Details of the service contracts of the Executive Directors, available forinspection at the Company’s registered office and at the Company’s
AGM, are as follows:

2. The on‑target level of bonus is 75% of the maximum opportunity, i.e. 75% of salary.
3. The on‑target level of vesting under the annual PSP is taken to be 50% of the face valueof the award at grant, i.e. 75% of salary.
4. The maximum level of bonus and vesting under the PSP is 100% of the bonus
opportunity and 100% of the face value of the PSP award at grant, i.e. 100% and150% of salary respectively.
5. No share price appreciation has been assumed for the PSP awards and for simplicity
SIP awards are excluded.

In setting total remuneration levels and in considering quantum
for each element of the package for a new Executive Director,
the Committee takes into account the skills and experience of theindividual, the market rate for a candidate of that experience and theimportance of securing the relevant individual.

Specific variable remuneration performance targets can be introduced
for an individual where necessary for the first year of appointment if
it is appropriate to do so to reflect the individual’s responsibilities andthe point in the year in which he or she joined the Board.

21 February 2005

Rolling contract

Ian Barkshire

11 May 2016

Rolling contract

Gavin Hill

9 February 2016

Rolling contract

1. Jonathan Flint will cease to be a Director and employee of the Company on 31 July 2016.

Details of contractual terms and the Policy on cessation of
employment are summarised in the table below.
Contractual provision

Detailed terms

Notice period

Twelve months by the Company or by
the Director.

Termination payment

A Director’s service contract may be terminatedwithout notice and without any further
payment or compensation, except for sums
accrued up to the date of termination, in theevent of gross misconduct. If the Company
terminates the employment of an Executive
Director in other circumstances, compensation
is limited to base salary due for any unexpired
notice period.
The Company has a right to pay twelve months’
salary in lieu of notice if it so determines.
In addition, any statutory entitlements inconnection with the termination would be paid
as necessary.

Remuneration
entitlements

Pro‑rata bonus may also become payable forthe period of active service along with vestingfor outstanding share awards (in certain
circumstances – see overleaf).

Change of control

No Executive Director’s contract contains
additional provisions in respect of a changeof control.

Oxford Instruments plc Report and Financial Statements 2016

65

Company Information

The Company seeks to align the remuneration package with theRemuneration Policy approved by Shareholders, including the
maximum plan limit for the long‑term incentives and an annual
bonus entitlement in line with that of the other Executive Directors.
Currently, this includes annual bonus and PSP awards of no morethan 100% and 250% of base salary respectively (not including any
arrangements to replace forfeited deferred pay). Salary is provided
at such a level as required to attract the most appropriate candidate.
For new appointments base salary and total remuneration may be
set initially at below normal market rates on the basis that it may
be increased once expertise and performance has been provenand sustained.

Unexpiredterm of contract

Financial Statements

Recruitment and promotion Policy for Executive Directors

Jonathan Flint1

ContractdateGovernance

Remuneration Reportcontinued
Executive Directors’ service contracts andPolicy on cessation continued
Any share‑based entitlements granted to an Executive Director
under the Company’s share plans will be determined based on therelevant plan rules. The default treatment for existing awards is thatany unvested awards lapse on cessation of employment. However,in certain prescribed circumstances, such as death, injury, ill health,disability, retirement or other circumstances at the discretion of theCommittee, “good leaver” status may be applied. For good leavers,
under the ESOS awards will vest at cessation to the extent theperformance condition is satisfied, but with the Committee having
discretion to vest on the normal vesting date if appropriate and to
waive the performance condition. In the case of the SELTIS, awards
continue on their normal terms. Under the 2014 PSP, awards to good
leavers will vest on the normal vesting date, subject to the satisfactionof the relevant performance conditions at that time and be scaled
back to reflect the proportion of the performance period actually
served. The Committee has discretion in exceptional circumstances todisapply time pro‑rating and/or to measure performance to and vest
awards at the date of cessation. Vesting at cessation would be thedefault position where a participant dies.

ChairmanUnder an arrangement between the Company and Imperialise
Limited, Nigel Keen is retained to act as Chairman of the Company
and Chairman of the Trustee to the Oxford Instruments Pension
Scheme via Imperialise Limited. His current term of appointmentcommenced on 25 February 2016 and is for a period ending on
13 September 2016 (the date of the AGM). This arrangement can beterminated by either party at any time by the giving of six months’
notice. In order to provide continuity he will continue as Chairman of
the Trustee to the Oxford Instruments Pension Scheme after he has
retired from the Board of the Company.
Date of last
appointment

Noticeperiod

25 February 2016

Six months

11 June 2016

None

Richard Friend

1 September 2014

None

Thomas Geitner

15 January 2016

None

1 April 2016

None

Nigel Keen
Jennifer Allerton

Jock Lennox
Mary Waldner

4 February 2016

None

Alan Thomson

5 May 2016

Six months

In the event of a takeover:• under the ESOS awards vest at that time to the extent theperformance condition is satisfied (with no scaling back);• under the SELTIS awards continue on their normal terms; and• under the 2014 PSP, awards vest to the extent the performance
condition is satisfied and are scaled back to reflect the actual
period of service with the Committee having the discretion in
exceptional circumstances not to scale back.
External appointments
The Board encourages Executive Directors to accept appropriate
external non‑executive appointments provided the aggregate
commitment is compatible with their duties as Executive Directors.
The Executive Director concerned may retain fees paid for these
services, which will be subject to approval by the Board.
Non‑Executive Directors
For the appointment of a new Chairman or Non‑Executive Director,
the fee arrangement would be in accordance with the approved
Remuneration Policy in place at the time.
Non‑Executive Directors do not have service contracts but are
appointed under letters of appointment for an initial period of three
years with subsequent reviews. With the introduction in the UK
Corporate Governance Code of annual re‑election of all Directors,
Non‑Executive Director appointments are now renewed for periodsof one year. Their appointment can be terminated without notice andwith no compensation payable on termination, other than accrued
fees and expenses.

Part B: Report and Financial Statements
on Remuneration
The financial information in this part of the report has been audited
where indicated.
The Remuneration Committee (unaudited)
The Remuneration Committee (the “Committee”) is responsible forrecommending to the Board the remuneration packages for Executive
Directors and has oversight of the bonus and share incentive
strategy for the Group’s executive management. The Chairman
and the Executive Directors are responsible for determining the
remuneration of the Non‑Executive Directors, and the Remuneration
Committee, with the exception of the Chairman, is responsible fordetermining the remuneration of the Chairman.
The role of the Committee includes:• considering and determining the Remuneration Policy for the
Executive Directors;• within this agreed Policy, considering and determining thetotal remuneration packages of each Executive Director of theCompany;• approving the design and performance targets for all
performance‑related plans for Executives as well as the overall
total annual payments made under such plans;• reviewing and noting remuneration trends across the Group; and• determining the Policy for pension arrangements, service
agreements and termination payments to Executive Directors.
The members of the Committee are appointed by the Board andcomprise all the Independent Non‑Executive Directors: Thomas
Geitner, Jennifer Allerton, Jock Lennox, Richard Friend, Mary Waldner;and the Chairman of the Board, Nigel Keen. Thomas Geitner is the
Chairman of the Committee.

66

Oxford Instruments plc Report and Financial Statements 2016

The performance of the Committee is reviewed at least once a year
as part of the wider Board evaluation process.
During the year the Committee fulfilled its duties, as laid down in theCommittee’s terms of reference.

The Chief Executive, the Group HR Director and other executives areinvited to attend Committee meetings as deemed appropriate. For
example the Chief Executive is able to make a significant contribution
when considering the performance of other Executive Directors
and to discuss the wider Group Remuneration Policy and structure
and terms and conditions affecting other employees. However, no
Executive Director is present when the Committee is determining his
or her remuneration.

Number of meetings held			

Fees are charged predominately on a “time spent” basis. The total
fees paid to NBS for the advice provided to the Committee during theyear was £21,075.

3

Number of meetings attended
Thomas Geitner, Chairman

3

15 January 2013

Jennifer Allerton

3

11 June 2013

Richard Friend

3

1 September 2014

Nigel Keen

3

25 February 1999

Jock Lennox1

2

1 April 2009

Mary Waldner2					14 February 2016

Governance

Date of appointment
to Committee

NBS is a signatory to the Remuneration Consultants’ Code of
Conduct and has confirmed to the Committee that it adheres to theCode. During the year NBS met with the Committee Chairman to
discuss remuneration matters which are of particular relevance to theCompany and how best it can work with the Company to meet theCommittee’s needs.

Attendance at meetings year ended 31 March 2016
Remuneration
Committee

New Bridge Street (a trading name of Aon Hewitt Limited and partof Aon plc) (“NBS”) is the Committee’s independent remuneration
consultants. NBS was appointed by the Committee to provide
advice on all aspects of Executive remuneration as required by
the Committee.

Strategic Report

All members served throughout the year except for Mary Waldner
who joined the Board and the Committee on 4 February 2016. Since
the year end, Alan Thomson joined the Committee with effect from
1 June 2016.

During the year in question Aon Hewitt Limited acted as both
Scheme Actuary and Scheme Administrator to the Company’s UK
defined benefit pension scheme and the Scheme Actuary also
provided the Company with its IAS 19 pension calculations andnon‑contentious pension advice. The Committee is satisfied that theadvice it has received from NBS is objective and independent.

1. Jock Lennox was unable to attend the meeting due to a prior appointment but received
papers in advance and provided his input to the Committee Chairman.
2. Mary Waldner has attended all meetings since her appointment to the Committee.

Financial Statements

The Committee acts within its agreed written terms of reference (which
are published on the Company’s website:www.oxford‑instruments.com/investors) and complies with theprovisions of the 2014 UK Corporate Governance Code regarding
remuneration.
Directors’ remuneration (audited)
The remuneration paid to the Directors during the year under review and the previous year is summarised in the tables below:										Salary			Annual			
and fees
Benefits2
Pension3
bonus4
Executive			
£’000
£’000
£’000
£’000

Long term
incentive
awards5£’000

Other6
£’000

Total
£’000

Jonathan Flint		

2016

474

18

66

184

—

1

743

		

2015

460

18

65

35

—

1

579

2016

316

14

45

113

—

1

489

2015

307

16

43

21

—

1

388

Ian Barkshire1		

2016

116

6

12

92

—

—

226

		

2015

—

—

—

—

—

—

—

Total		

2016

906

38

123

389

—

2

1,458

		

2015

767

34

108

56

—

2

967

1. Ian Barkshire was appointed to the Board as an Executive Director on 10 November 2015. Only his remuneration as an Executive Director is reported in the table above.
2. “Benefits” comprise provision of a car or car allowance, health insurance, life assurance and for Mr Barkshire overnight hotel accommodation where necessary to carry out his duties atthe Head Office of the Company.
3. Contractually, each Executive Director is entitled to receive a contribution to a money purchase pension scheme worth 14% of salary. Where the contractual pension contribution exceeds
the annual allowance, any balancing payment is made by the Company as a cash allowance.
4. “Annual bonus” represents the full annual bonus, payable in cash.
5. “Long term incentive awards” are those awards where the vesting is determined by performance periods ending in the year under report under both the SELTIS and ESOS and therefore
reports the value of the SELTIS award granted on on 19 December 2012 and 13 June 2014 and the ESOS option granted on 13 June 2014. Further details of how these sums are arrived
at are set out on page 69.
6. The Company operates a Share Incentive Plan (“SIP”) which is open to all UK permanent staff employed for at least six months. “Other” includes the value of matching SIP shares
attributable to the year. Jonathan Flint and Kevin Boyd participate in the SIP up to the maximum extent permitted by HMRC. The Company offers a 1:5 match for partnership sharespurchased by employees.

Oxford Instruments plc Report and Financial Statements 2016

67

Company Information

Kevin Boyd				Governance

Remuneration Reportcontinued
Directors’ remuneration (audited) continued												Salary			Annual				
and fees
Benefits
Pensionbonus
Non-Executive
			
£’000
£’000
£’000
£’000

Long term
incentive
awards
£’000

Total
£’000

Nigel Keen1			

2016

183

—

—

—

—

183

			

2015

183

—

—

—

—

183

Jock Lennox 			

2016

52

—

—

—

—

52

			

2015

50

—

—

—

—

50

Thomas Geitner			

2016

52

—

—

—

—

52

			

2015

50

—

—

—

—

50

Jennifer Allerton			

2016

44

—

—

—

—

44

			

2015

43

—

—

—

—

43

Richard Friend2			

2016

44

—

—

—

—

44

			

2015

26

—

—

—

—

26

Mary Waldner3			

2016

7

—

—

—

—

7

			

2015

—

—

—

—

—

—

Total			

2016

382

—

—

—

—

382

			

2015

352

—

—

—

—

352

1. Under an arrangement between the Company and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Company and Chairman of the Trustee to the Oxford Instruments
Pension Scheme and he must account to Imperialise Limited for his services. Imperialise Limited is paid fees for Nigel Keen’s services together with a sum equivalent to the employer’s
national insurance contributions on these fees as it is responsible for the cost of national insurance on payments to Nigel Keen, whereas national insurance contributions in respect of
the other Non‑Executive Directors are made direct to the UK Inland Revenue. For the year to 31 March 2016, Nigel Keen’s fees as Chairman were £161,000 (2015: £161,000) and as
Chairman to the Trustee were £25,000 (2015: £25,000) for his services for which he must account to Imperialise Limited. In addition, Imperialise Limited has been paid a sum equivalent
to the employer’s national insurance on both these fees of £25,668.
2. Richard Friend was appointed as a Non‑Executive Director on 1 September 2014.
3. Mary Waldner was appointed as a Non‑Executive Director on 4 February 2016.

External appointments (unaudited)
The Board encourages Executive Directors to accept appropriate external commercial non‑executive appointments provided the aggregate
commitment is compatible with their duties as Executive Directors. The Executive Director concerned may retain fees paid for these services,which will be subject to approval by the Board.
Jonathan Flint is a Non‑Executive Director of Cobham plc and received fees of £57,500 during the year.
Kevin Boyd is a Non‑Executive Director of EMIS Group plc and received fees of £36,250 during the year. He is a member of the London Stock
Exchange’s Primary Markets Group.
Details of variable pay earned in year (audited)Bonus
As explained in the Financial Review on pages 26 to 31, Oxford Instruments delivered a profit performance in line with expectations.
Against a difficult macroeconomic backdrop the Group achieved profits growth on lower revenues. A good cash performance in the year has
strengthened the balance sheet. We have continued to build on our strategy to grow the business in its core markets of physical and materialscience, while exploiting scientific convergence to expand into life sciences.
As in previous years the Committee set stretching performance targets for the annual bonus which are clearly linked to the strategy andfinancial performance of the Group. The financial targets were met in part and the part of the bonus determined by those targets has paid out
accordingly. The Committee carefully reviewed performance against the strategic objectives set for the annual bonus which are critical to laying
the foundations for future growth. The Committee determined that performance against the strategic targets was overall strong but also
noted that not all of the targets had been met in full.
		Measure		Threshold
CEO/GFD

On‑target
CEO/GFD

Maximum
CEO/GFD

Threshold£m

On‑target£m

Maximum£mActual£m

Payout %of maximum

Adjusted PBT		

0%

20%

45%

40.9

43.1

46.5

37.0

0

Organic sales		

0%

20%

20%

337.9

375.5

—

361.6

63

Cash generation		

0%

20%

20%

—

8.2

—

23.1

100

Strategic objectives		

0%

15%

15%

—

—

—

See below

See below

68

Oxford Instruments plc Report and Financial Statements 2016

Strategic Report

Ian Barkshire’s bonus arrangements for 2015/16 remained unchanged following his appointment to the Board. The annual bonus performancetargets were based on a balanced scorecard of Group and divisional profit and cash flow targets with an element of personal/strategic
development goals. These targets were set as part of the annual bonus plan for Group managers below Board level which applied to Ian
Barkshire prior to his being appointed to the Group Board. Given they relate largely to the divisional parts of the business that he wasmanaging and as such they are commercially sensitive, they are not therefore being disclosed. The maximum annual bonus opportunity was
100% of salary. Threshold and maximum performance for the financial targets in the balanced scorecard were set at a range of 95% to 115%of target. 10% of the total bonus related to personal performance with 80% weighted to divisional and 10% to Group financial measures.
The Group adjusted profit before tax was not met. Both half‑year and annual targets were set for the financial measures with the half‑year
targets being payable only if the full‑year targets were met at least at the on‑target level.
The strategic objectives set by the Committee for Jonathan Flint and Kevin Boyd at the beginning of the year included objectives in the areasof succession planning, management of acquisitions and disposals and the development of the Company’s strategic plan. The maximum
payable under this element of their bonus arrangements is 15% of salary. After careful consideration of each of the objectives set and what
has been achieved during the year, the Committee agreed that DJF and KJB be awarded 40% and 20% respectively of the maximum payable.

														
On‑target
Maximum						
bonus
bonus						(% of salary)(% of salary)

Actual bonus
payable for2015/16(% of salary1)

Actual bonus
payable for2015/16(£’000)Jonathan Flint						

75

100

38.6

£184,276

Kevin Boyd						

75

100

35.6

£113,304

Ian Barkshire2						Not applicable

100

78.5

£92,180

Governance

The on‑target and maximum bonus potentials for the Executive Directors as well as the amount actually payable for the year ended
31 March 2016 are set out below.

1. Bonus is calculated on salary as at 31 March 2016.
2. This table and the remuneration table on page 67 shows only that part of the bonus reflecting Ian Barkshire’s time as an Executive Director as a proportion of the total bonus year andhas been time pro‑rated.

Long Term Incentive Plans (audited)

Executive Share Option Scheme (“ESOS”)
The performance conditions which applied to the 13 June 2014 award (vesting date 13 June 2017 and awarded in respect of the full year
2013/14), for the performance period which came to end in the year under review (ending 31 March 2016) and actual performance achieved
against these were as follows:
Performance level					EPS growth over CPI performance required% of award that will vest

Below threshold					 Less than 5% per annum over three years

0

Threshold					5% per annum over three years

33.3

Between threshold and maximum				

5% to 10% per annum over three years

33.3–10010% per annum and above over three years

100

Actual achieved over the period				No EPS growth0

Maximum				Financial Statements

The performance conditions and the resulting payout in respect of the long term incentive awards where vesting is determined by aperformance period ending in the year under report were as follows:

The performance condition was not met and thus no shares vested for the Directors.
Value ofshares thatwill vest(£’000)Jonathan Flint					51,2500—£14.15

Nil

Kevin Boyd					34,5000—£14.15

Nil

Ian Barkshire1					14,2500—£14.15Nil

1. This option award was granted to Ian Barkshire before he was appointed a Director of the Company. The performance condition attached to this option provides for full vesting at
threshold performance, which is consistent with the approach taken for employees who are not Directors of the Company.

Oxford Instruments plc Report and Financial Statements 2016

69

Company Information														Total number
Percentage
Number of							
shares subjectof award
shares that
Exercise					
to option
vesting
will vest
priceGovernance

Remuneration Reportcontinued
Long Term Incentive Plans (audited) continued
Senior Executive Long Term Incentive Scheme (“SELTIS”)
The performance conditions which applied to the awards made on 19 December 2012 and 13 June 2014 (awarded in respect of the fullyear 2013/14) (vesting date 19 December 2015 and 13 June 2017 respectively), for the performance period which came to an end in theyear under review and actual performance achieved against these were as follows:
TSR relative to FTSE 250 (excluding certain sectors1)
Performance level						Performance required% of total award vesting

Below threshold 					Below median0Threshold 					Median33.3

Between threshold and stretch				

Between median and upper quartile

33.3–100Stretch or above					Upper quartile

100

Actual achieved in three year period commencing:
19 December 2012					Median TSR = 47.2%

					Oxford Instruments’ TSR = ‑50.0%

1 April 2013					Median TSR = 28.22%

					Oxford Instruments’ TSR = ‑57.97%

00

1. Sectors excluded within the FTSE Industry classification of “Financials” (namely Banks, Equity Investment Instruments, Finance Services, Life Insurance, Non-life Insurance,
Real Estate Investment Trusts, and Real Estate Investment Services sectors).
2. The performance period for the SELTIS award made on 13 June 2014 in respect of the full year 2013/14 was aligned to the Company’s financial year and therefore covered the period
1 April 2013 to 31 March 2016 (compared to earlier awards where the performance period ran from the date of grant).

The performance conditions were not met and thus no shares vested for the Directors.
						
					
Date award					
grantedTotal numberof shares
granted

Percentage		
of award
Number ofvesting
shares vesting

Value ofshares vesting(£’000)Jonathan Flint				19 December 201215,100

0

—

Nil

				

13 June 2014

12,8000—

Nil

Kevin Boyd				19 December 2012

10,150

0

—

Nil

				

13 June 2014

8,600

0

—

Nil

						
						
						
						

Total		number		of shares
Percentage
grantedof salary

Shareprice onday before
award date

Initialvesting date

Jonathan Flint						67,631150£10.2815/06/2018

Kevin Boyd						45,087150£10.2815/06/2018

Awards made in the year and outstanding share incentive awards (audited)Awards were made to the Executive Directors for the 2015/16 year under the 2014 Performance Share Plan.
2014 Performance Share Plan (“PSP”)
Awards made under the PSP on 15 June 2015 were as follows:

The Awards are subject to two performance conditions. One half of each Award is subject to a performance condition based on the
Company’s compound annualised earnings per share (“EPS”) growth. The other half of each Award is subject to a performance condition
based on the Company’s total shareholder return (“TSR”) relative to the TSR of the members of a comparator group of companies. Dividend
equivalents are payable on vesting, for the period to vesting in respect of the actual number of shares vesting.
50% of the Award will vest as set out below provided EPS measured over a three year performance period starting 1 April 2015:
Performance level					EPS growth required% of award that will vest

Below threshold					 Less than 7% per annum over three years

0

Threshold					7% per annum over three years

25

Between threshold and maximum				7% to 12% per annum over three years

25–10012% per annum and above over three years

100

Maximum				70

Oxford Instruments plc Report and Financial Statements 2016

TSR relative to FTSE 250 (excluding certain sectors1)
Performance level						Performance required% of total award vesting

Below threshold 					Below median0Threshold 					Median25

Between threshold and stretch				

Between median and upper quartile

25–100Stretch or above					Upper quartile

100

Strategic Report

50% of the Award will vest as set out below with TSR being measured over a three year performance period starting 1 April 2015:

1. Sectors excluded within the FTSE Industry classification of “Financials” (namely Banks, Equity Investment Instruments, Finance Services, Life Insurance, Non-life Insurance, Real Estate
Investment Trusts, and Real Estate Investment Services sectors).
Note: as the recipients of all PSP awards granted to date have resigned these awards will lapse when their employment ceases.

As at the 31 March 2016, the outstanding options for Jonathan Flint, Kevin Boyd and Ian Barkshire under the ESOS and SELTIS schemes andthe 2014 PSP4 were as follows:

Jonathan Flint2

Kevin Boyd

Date forearliest
exercise

Date forlatestexercise

ESOS

51,250———51,250£14.55£13.95

13/06/14 13/06/17 12/06/24

ESOS

—

—

—

60,50060,500£13.88£14.08

19/12/12 19/12/15 18/12/22

ESOS

70,700———70,700

£9.90

£9.87

14/12/11 14/12/14 13/12/21

SELTIS

12,800———12,800Nil£13.95

13/06/14 13/06/17 12/06/21

SELTIS———

15,10015,100Nil£14.08

19/12/12 19/12/15 18/12/19

PSP

67,631

67,631

—

—

—

Nil

£10.31

15/06/15 15/06/18 14/06/25

PSP

72,195———72,195Nil£10.12

08/10/14 08/10/17 07/10/24

ESOS

34,50034,500———£14.55£13.95

16/06/14 13/06/17 12/06/24

ESOS

—

—

—

40,75040,750£13.88£14.08

19/12/12 19/12/15 18/12/22

ESOS

48,700———48,700

£9.90

£9.87

14/12/11 14/12/14 13/12/21

SELTIS

8,600

—

—

—

8,600

Nil

£13.95

13/06/14 13/06/17 12/06/21

SELTIS

———

10,150

10,150Nil£14.08

19/12/12 19/12/15 18/12/19

PSP

45,08745,087

—

—

—

Nil

£10.31

15/06/15 15/06/18 14/06/25
08/10/14 08/10/17 07/10/24

PSP

48,130———48,130Nil£10.27

ESOS

37,549————£10.28£10.31

15/06/15 15/06/18 14/06/25

ESOS

14,250————£14.55£13.95

13/06/14 13/06/17 12/06/24

1. During the year Jonathan Flint’s wife, an employee of the Company, exercised ESOS options on 23 June 2015 when the mid‑market closing price on the date of exercise was £10.38.
The gain yielded on the exercise of options during the year for Jonathan Flint and Kevin Boyd was £9,120 and £nil respectively.

Financial Statements

Ian Barkshire 3

Share price		
on dateDate ofof grant
grant

Governance								
		March				MarchExercise
Name
Scheme2016
GrantedExercised1
Lapsed2015
price

2. Jonathan Flint’s wife, an employee of the Company, holds as at 31 March 2016 ESOS options over 34,600 shares with exercise prices ranging from £10.28 to £14.55. These numbers are
not included in the table.
3. Ian Barkshire was appointed to the Board on 10 November 2015. His outstanding options were granted to him as an employee of the Company prior to his appointment to the Boardand are shown as at 31 March 2016 only. He has been granted no options or awards under the Company’s LTIPs since his date of appointment.
4. Dividend equivalents are payable on PSP shares vesting, for the period to vesting in respect of the actual number of shares vesting.

The market price of the shares at 31 March 2016 was £6.80 (2015: £8.36) and the range during the year was £5.16–£10.88(2015: £6.87–£14.41).
Company Information

Oxford Instruments plc Report and Financial Statements 201671

Governance

Remuneration Reportcontinued
Long Term Incentive Plans (audited) continued
2014 Performance Share Plan (“PSP”) continued
Performance conditions outstanding for awards are described below:
Date of award

ESOS

SELTIS

13 June 2014

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

TSR v FTSE 250 Index (excluding Financial companies2)– median (33.3% vesting) to upper quartile (100% vesting)

15 June 20153

Award only to Ian Barkshire prior to being
appointed an Executive Director of market value
options granted without performance conditions
consistent with the company’s Policy for below
Executive Director levelPSP

50% of award

50% of award

08 October 2014

EPS growth – 7% p.a. (25% vesting)to 12% p.a. (100% vesting)

TSR v FTSE 250 Index (excluding Financial companies2)– median (25% vesting) to upper quartile (100% vesting)

15 June 2015

EPS growth – 7% p.a. (25% vesting)to 12% p.a. (100% vesting)

TSR v FTSE 250 Index (excluding Financial companies2)– median (25% vesting) to upper quartile (100% vesting)

1. For employees who are not Executive Directors on the date of grant, ESOS options become exercisable in full for achieving the threshold level.
2. Sectors excluded – banks, equity investment instruments, finance services, life insurance, non‑life insurance, real estate investment trusts and real estate investment services.
3. ESOS options granted on 15 June 2015 were only awarded to employees below the level of Executive Director.

Achievement of performance conditions (unaudited)
The calculation of the TSR performance conditions are independently measured. EPS performance conditions are measured using the audited
accounts of the Company. All performance conditions are then verified by the Remuneration Committee.
Dilution limits (unaudited)
The ESOS, SELTIS and PSP provide that overall dilution through the issuance of new shares for employee share schemes should not exceed anamount equivalent to 10% of the Company’s issued share capital over a ten year period. Awards made under the SELTIS scheme prior to 2009and shares required by the SIP are satisfied by market purchased shares. The SIP scheme only uses market purchased shares.
The Committee monitors the position prior to the making of any award under these share option schemes to ensure that the Company
remains within this limit. As at the date of this Report, the Company’s headroom position remains within the 10% limit.
Shareholding requirements (audited)
The Executive Directors are required to build and retain a shareholding in the Company equivalent in value to 100% of basic salary. Until therequirement is met, whenever ESOS, SELTIS or 2014 PSP awards are exercised Executive Directors are expected to retain or purchase sharesequivalent to the value of 50% of the net amount realised from exercise of the options after allowing for tax payable.
Executive Directors’ shareholdings as at 31 March 2016 are shown in the table below.
											
						
					
Legally
					
owned

Percentage of				salary held in			
Subject toshares under
Guideline
LTIP options
performance
shareholding
met as atvested but conditions underguideline1
31 March 2016
unexercised the LTIP unvested

Jonathan Flint2					201,602287%

Yes

70,700203,876

Kevin Boyd					94,297

202%

Yes

48,700136,317

Ian Barkshire3					

5,982

14%

No

15,00051,799

1. Shares valued using the market price of the shares on 31 March 2016: £6.81.
2. In addition, Jonathan Flint’s wife holds 5,731 Oxford Instruments shares.
3. Ian Barkshire was appointed to the Board on 10 November 2015. For the share option award granted to him in June 2015, the requirement was to retain shares on vesting as set out
above but over 50% of salary. All future awards will be subject to the requirement as detailed above.

72

Oxford Instruments plc Report and Financial Statements 2016

Executive Director Pension Arrangements (audited)
Under the terms of their service contracts, Executive Directors can ask the Company to contribute to a pension plan of their choice.
The Company contributes a maximum of 14% of base salary if matched by a contribution of 10% by the Director or, if lower, a contribution
by the Director which brings the total pension contribution to the annual allowance (the maximum tax relieved pension contribution allowable
per tax year). Only base salary is pensionable and contributions are not included in the calculation of bonus and share award entitlements.
Where the Company’s pension contribution exceeds the annual allowance a balancing payment is paid by the Company to the Director which
is taxed as income.

Strategic Report

Pension arrangements

During the year the Company contributed £33,000 (2015: £40,000) into a personal defined contribution pension plan in respect of Jonathan
Flint and £43,000 (2015: £40,000) into a personal defined contribution plan in respect of Kevin Boyd. Balancing payments to 14% of basesalary were paid as cash. Since his appointment to the Board, the Company contributed £11,786 into the Company’s Group Personal Pension
Plan in respect of Ian Barkshire.

Payments for loss of office (audited)
On 8 April 2016, Kevin Boyd left the Company. Mr Boyd received the following remuneration:

Governance

Ian Barkshire is a deferred member of the defined benefit scheme and is no longer accruing benefits in the scheme. In accordance with therules of the Scheme his deferred benefits are subject to increases in line with statutory revaluation. The transfer value of his accrued benefits at
31 March 2016 was £444,608.

• base salary, benefits and pension to the date of cessation;• annual bonus for the financial year ended 31 March 2016 determined in accordance with the financial and non‑financial performancetargets set at the beginning of the year and as disclosed in this report; and• all outstanding long‑term incentive awards lapsed on the date of cessation.
Following our year end, Jonathan Flint resigned and will leave the Company on 31 July 2016. His remuneration in respect of his resignation is
as follows:• base salary, benefits and pension to the date of cessation;• no annual bonus will be awarded for the part of the year 2016/17 for which he is with the Company; and• all outstanding long‑term incentive awards will lapse on the date of cessation.
Performance graph and CEO’s remuneration (unaudited)
The graph below shows for the seven years ended 31 March 2016 the total shareholder return (“TSR”) on a holding of the Company’s
ordinary shares compared with a hypothetical holding of shares made up of shares of the same kind and number as those by reference towhich the FTSE SmallCap, FTSE 250, FTSE Techmark and FTSE Electronic and Electrical Equipment (”E&EE”) indices are calculated. These
indices have been chosen as they are considered to be the most appropriate comparator groups for the Company. TSR has been calculated byreference to the relevant share price for each constituent company assuming dividends are reinvested.

Financial Statements• annual bonus for the financial year ended 31 March 2016 determined in accordance with the financial and non‑financial performancetargets set at the beginning of the year and as disclosed in this report;

Total shareholder return
Value (£)
1,800

1,000

Source: Thomson Reuters

1,400

Company Information

1,200

Oxford Instruments
FTSE E&EE
FTSE Techmark
FTSE 250
FTSE SmallCap

1,600

800
600
400
200
0
31 March
2009

31 March
2010

31 March
2011

31 March
2012

31 March
2013

31 March
2014

31 March
2015

31 March
2016

This graph shows the value, by 31 March 2016, of £100 invested in Oxford Instruments plc on 31 March 2009 compared with the value of£100 invested in the FTSE SmallCap, FTSE250, FTSE Techmark and FTSE Electronic and Electrical Equipment indices. The other points plotted
are the values at intervening financial year ends.
Oxford Instruments plc Report and Financial Statements 201673

Governance

Remuneration Reportcontinued
The total remuneration of the CEO over the last six years is shown in the table below. The annual bonus payout and LTIP vesting level as apercentage of the maximum opportunity is also shown.
Year ending 31 March
2016

				

2011

2012

2013

2014

2015

Total remuneration (£’000)				

2,596

3,464

2,348

1,179

579

743

Annual bonus outcome 				

100%

100%

69.1%

15%

7.5%

38.6%

ESOS vesting 				

100%

100%

100%

100%

0%

0%

SELTIS vesting				

50%

100%

100%

100%

0%

0%

Percentage change in the remuneration of the Chief Executive (“CEO”) (unaudited)
The table below shows the percentage change in each of the CEO’s salary, taxable benefits and annual bonus earned between 2014/15 and2015/16, compared to that for the average UK‑based employee of the Group (on a per capita basis).
Jonathan Flint, CEO						£’000				2015/16
2014/15

Average employee1% change

2015/16

2014/15% change

Salary				

473.9

460.0

2.9

41.7

39.0

6.9

Benefits				

18.3

18.3

0.0

1.9

1.6

18.8

Bonus2				

184.3

34.8

429.6

2.2

0.7

214.3

1. Average employee includes all UK employees in service on 1 April 2014 and 31 March 2016 but excludes those who were on maternity or long‑term sick leave.
2. 	The value of the average employee bonus for the year ended 31 March 2016 (to be paid at the end of June 2016) was not known at the time the Report and Financial Statements wereapproved and has been subsequently included.

Relative importance of the spend on pay
The following table shows the Group’s employee costs relative to dividends and share buybacks:																					

Year ended
31 March
2016

Year ended
31 March2015% change

Employee costs (£m)							

104.7

117.5

‑10.9

Dividends (£m)							

7.6

7.1

7.0

Share buybacks (£m)							

0.0

0.0

0.0

Statement of Shareholder voting (unaudited)
At last year’s AGM, the Directors’ Report and Financial Statements on Remuneration received the following votes from Shareholders:				
Resolution			

Sharesfor

Sharesdiscretionary

Sharesagainst%for%againstShares marked
as abstain

To approve the Directors’ Report on Remuneration		 43,789,805

3,071,342

198,516

99.6

0.4

5,155

How the Policy will be applied in 2016/17 (unaudited)
Base salaries
Kevin Boyd left the Company on 8 April 2016 and Jonathan Flint ceases to be a Director of the Company on 31 July 2016. No base salary
increases were determined for these individuals for 2016/17. Ian Barkshire was appointed to the Board in November 2015 and as Chief
Executive on 11 May 2016. Ian’s base salary on appointment to the Board was £300,000 and on appointment to Chief Executive has been set
at £410,000. Gavin Hill, Group Finance Director, was appointed to the Board with effect from 9 May 2016, on a base salary of £320,000.
Benefits and pension
These will be made in accordance with the approved Policy.
Annual bonus
The maximum opportunity under the annual bonus plan for 2016/17 will be 100% of base salary for both the CEO and GFD.

74

Oxford Instruments plc Report and Financial Statements 2016

Weighting as a % of opportunity
Measure								

CEOOrganic sales								

20

GFD

20

Profit								

45

45Cash generation								

20

20Strategic objectives								

15

15Strategic Report

A combination of financial (85%) and non‑financial strategic (15%) metrics will be used to determine the level of payment under the annual
bonus and as detailed in the table below:

The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include matters which theCommittee considers commercially sensitive. Retrospective disclosure of the performance against them will be made in next year’s Report and
Financial Statements on Remuneration to the extent the targets are not commercially sensitive at that time.
GovernanceLong term incentives in respect of the 2016/17 financial year
The 2016/17 PSP awards will be over shares with a market value at grant of 150% of salary for the CEO and GFD. Vesting will be subject tothe performance condition as set out below, to be achieved over three financial years commencing with the 2016/17 financial year:
Half of the award					Half of the award

EPS growth – 7% p.a. (25% vesting) to					TSR v FTSE 250 Index (excluding financial companies) –12% p.a. (100% vesting)						median (25% vesting) to upper quartile (100% vesting)
Non‑Executive Directors’ fees
The Committee reviewed and set the fee for our new Chairman at £165,000.
							

Board Chairman

2015/163

2016/173% increase1

2.5£165,000£5,000£5,0000Basic fee							£44,000£44,000

0

Additional fee for Senior Independent Director4					£5,000£5,0000Additional fee for Committee Chairman4						£7,500£7,5000

1. Fees for Non‑Executive Directors were last increased on 1 July 2014.
2. 	The Chairman’s fee for 2015/16 is the annual fee paid to Nigel Keen. For 2016/17 the annual fee shown is the fee to be paid to Alan Johnson who is to be appointed from13 September 2016. The pro‑rated fee for 2016/17 payable to Nigel Keen and Alan Thomson is £163,190.
3. The fees shown for 2015/16 and 2016/17 are the annualised rates as at 1 July 2015 and 1 July 2016 respectively.
4. Only one additional fee is paid to any Non‑Executive Director.

Financial Statements£161,000

Additional fee Deputy Chairman4					2							ApprovalThis report was adopted by the Committee on 15 June 2016 and has been approved subsequently by the Board for submission to
Shareholders at the Annual General Meeting to be held on 13 September 2016.

Company Information

Thomas Geitner
Chairman of the Remuneration Committee
15 June 2016

Oxford Instruments plc Report and Financial Statements 201675

Governance

Report of the Directors
The Directors present their Report and Financial Statements of
Oxford Instruments plc for the year ended 31 March 2016.

Directors

The Company is the ultimate holding company of a group of
subsidiary undertakings (the “Group”) engaged in the research,development, manufacture, rental, sale and service of hightechnology tools and systems. The Company is required to set out inthis report a true and fair view of the business of the Group during
the financial year ended 31 March 2016, the position of the Groupat the end of the financial year and a description of the principal
risks and uncertainties facing the Group. The information which
fulfils these requirements includes a Financial Review on pages 26
to 31 and Corporate Responsibility on pages 32 to 39, which areincorporated in this Report by reference. The business, the strategic
review, the Research and Development activities and likely future
prospects of the Group are reviewed in the Strategic Report on
pages 1 to 39.

Biographies of all the Directors at the date of this report, including
the Non‑Executive Directors, appear on pages 41 to 43. During
the year, Ian Barkshire was appointed an Executive Director on
10 November 2015 and was subsequently appointed Chief Executive
on 11 May 2016; Mary Waldner was appointed a Non‑Executive
Director on 4 February 2016 and will be succeeding Jock Lennox
as Chairman of the Audit and Risk Committee on 16 June 2016.
After the year end Kevin Boyd stepped down as Group FinanceDirector on 8 April 2016 and Gavin Hill was appointed in his place
on 9 May 2016. On 1 June 2016 Alan Thomson was appointed an
Independent Non‑Executive Director and Chairman designate andwill be succeeding Nigel Keen as Chairman of the Board after theAGM on 13 September 2016. Jonathan Flint will be stepping downfrom the Board on 31 July 2016. At the conclusion of the AGM, Nigel
Keen will retire as Chairman of the Board, Jennifer Allerton will step
down as a Non‑Executive Director and Jock Lennox will step down asa Non‑Executive Director and Senior Independent Director.

Results and dividends

Directors’ conflicts of interest

The results for the year are shown in the Consolidated Statementof Income on page 90. The Directors recommend a final dividendof 9.3 pence per ordinary share, which together with the interim
dividend of 3.7 pence per ordinary share makes a total of
13.0 pence per ordinary share for the year (2015: 13.0 pence).
Subject to Shareholder approval, the final dividend will be paid on
20 October 2016 to Shareholders registered at close of business on
23 September 2016.

With effect from 1 October 2008, the Companies Act 2006 allows
directors of public companies to authorise conflicts and potential
conflicts of interest, where appropriate. Only Directors with nointerest in the matter under consideration may participate in therelevant decision and in doing so they must act in a way which they
consider in good faith will be most likely to promote the Company’s
success. A conflicts Policy has been drawn up and a register ofconflicts and potential conflicts is maintained.

Risks and uncertainties

Directors’ interests

The Board exercises proper and appropriate corporate governancefor the Group. It ensures that there are effective systems of internal
controls in place to manage Shareholders’ interests and the Group’s
assets, including the assessment and the management of the risks towhich the businesses are exposed, and to monitor and manage thecompliance with all the legal requirements that affect the Group’s
worldwide business activities. However, such systems are designed
to manage rather than eliminate the risk of failure to achievebusiness objectives and can provide only reasonable and not absoluteassurance against material misstatement or loss.

The beneficial interests of the Directors in the Company’s
share capital, all in fully paid up shares at 31 March 2015,
are shown below.

The Executive Directors report to the Board on changes in thebusiness and in the external environment which may affect the risks
which the Group faces. The Executive Directors also provide theBoard with monthly financial information. Key performance indicators
are reviewed periodically.

Ian Barkshire					 5,982		

There are a number of risks and uncertainties which may have amaterial effect on the Oxford Instruments Group. These are describedin Principal Risks and Uncertainties on pages 22 to 24.

Nigel Keen					126,580		126,580

Principal activity and business reviews

76

Oxford Instruments plc Report and Financial Statements 2016

Details of share options for the Executive Directors are shown in
the Remuneration Report on pages 59 to 75.
					 31 March		 31 March					
2016		
2015					 Shares		
SharesJennifer Allerton					 1,000		 1,000n/aKevin Boyd					 94,297		 93,975
Jonathan Flint 					207,333		206,167
Richard Friend					—		

—Thomas Geitner					—		

—Jock Lennox					 3,500		 3,500
Mary Waldner					

—		

n/a

Insurance cover and Directors’ indemnities

Neither the insurance nor the indemnity provides cover for situations
where the Director has acted fraudulently or dishonestly.
Share capital

During the year to 31 March 2016 the issued share capital wasincreased by 0.01% with the issue of 7,575 ordinary shares(2015: 40,501) following the exercise of options under theCompany’s share option schemes. At 31 March 2016, the issued
share capital of the Company was therefore 57,298,911 ordinary
shares of 5 pence each. In connection with the Company’s equity
incentive plans, a separately administered trust held 183,145 ordinary
shares at 31 March 2016 (representing 0.3% of the total issued sharecapital of the Company). No shares in the Company were acquired by
the Company during the year (2015: nil). Details of the share capitaland options outstanding as at 31 March 2016 are set out in Notes 13
and 22 respectively to the Financial Statements.

				
				

Direct/			
indirect		Shares% oftotal

Aberdeen AssetManagers Limited				 Indirect		5,812,760

10.1

Ameriprise Financial		

Indirect/direct		4,244,607

7.4

Sir MF and Lady KA Wood			 Direct		3,105,530

5.4

Baillie Gifford & Co			 Indirect		2,917,516

5.1

Payment of suppliers
The Group does not follow a standard payment practice but agrees
terms and conditions for its business transactions with each of its
suppliers. Payment is then made in accordance with these terms.
At 31 March 2016 trade creditors of the Company and the Group’s
UK subsidiaries were equivalent to 26 days (2015: 22) and 74 days(2015: 66) of purchases respectively, based on the amounts invoiced
by suppliers during the year and the amounts owed to trade creditors
at the end of the year.
Charitable donations
During the year, the Group made charitable donations of£2,542 (2015: £1,575). There have been no political donations
during the year.
Fixed assets
Whilst the market value of some fixed assets may differ from bookvalue, the Directors believe that the differences are not material.
Disclosure of information to auditor
Pursuant to Section 418(2) of the Companies Act 2006 the Directors
who held office at the date of approval of this Directors’ Reportconfirm that, so far as they are each aware, there is no relevant audit
information of which the Company’s auditor is unaware; and each
Director has taken all the steps that he or she might reasonably havebeen expected to have taken as a Director to make himself or herself
aware of any relevant audit information and to establish that theCompany’s auditor is aware of that information.

Company Information

At this year’s Annual General Meeting, the Directors propose to
renew the authorities granted to them at last year’s AGM to:

Financial Statements

The Company only has one class of share capital which comprises
ordinary shares of 5 pence each. All shares forming part of theordinary share capital have the same rights and carry one vote each.
There are no unusual restrictions on the transfer of a share. The fullrights and obligations attaching to the Company’s ordinary shares,
as well as the powers of the Directors, are set out in the Company’s
Articles of Association, a copy of which is available on the Company’s
website. These can also be obtained from Companies House or by
writing to the Company Secretary.

The following are beneficial interests of 3% or more (where theholding is direct) or of 5% or more (where the holding is indirect) of
which the Directors have been notified in accordance with Chapter 5of the Disclosure and Transparency Rules of the Company’s issued
ordinary share capital, the only class of voting capital, at 7 June 2016:

Governance

For a number of years the Group has purchased insurance to coverits Directors and Officers against their costs in defending themselvesin legal proceedings taken against them in that capacity and inrespect of damages resulting from the unsuccessful defence of any
proceedings. In addition, to the extent permitted by UK law, theGroup indemnifies its Directors and Officers for liabilities arising fromsuch proceedings.

Substantial shareholdings

Strategic Report

No Director was beneficially interested in the shares of any subsidiarycompany at any time during the year. In the year to 31 March 2016
no Director had a material interest in any contract of significancewith the Company or any of its subsidiaries other than as describedin the Remuneration Report on pages 59 to 75. Since the year end,
there have been no changes to the above shareholdings apart fromfor Jonathan Flint who, together with his wife, participates in the
Oxford Instruments Share Incentive Plan and since the year end haveincreased their beneficial shareholding by 130 shares.

• allot ordinary shares up to an aggregate nominal value of
one‑third of the Company’s issued share capital and, where fullpre‑emption rights are applied, up to an aggregate nominal valueof two‑thirds of the Company’s issued share capital;• allot ordinary shares up to an aggregate nominal value of 10%of the Company’s issued share capital without first offering themto existing Shareholders; and• buy back up to 10% of the Company’s issued share capital.
Shareholders will be requested to renew these authorities at theAGM, details of which are set out in the notice of the meeting.

Oxford Instruments plc Report and Financial Statements 201677

Governance

Report of the Directors
continued
Annual General Meeting
The Notice of the Annual General Meeting to be held on
13 September 2016 is set out in a letter to Shareholders together
with explanatory notes relating to the resolutions.
A resolution to re‑appoint KPMG LLP as auditor and to authorise the
Directors to set their remuneration will be proposed at the Annual
General Meeting.
Change of control arrangements
There are a number of agreements that take effect, alter or terminate
upon a change of control of the Company following a takeover, suchas banking agreements and company share plans. On a change ofcontrol, the Company’s committed credit facilities may be cancelledby lenders by giving not less than three days’ notice. It is also possiblethat pension plan funding arrangements would need to be changed
following a change of control if that resulted in a weakening of theemployer covenant.
Corporate governance
The Board reviews its work on corporate governance in Corporate
Governance on pages 44 to 50.
Financial risk management
Details of the Group’s financial risk management objectives andpolicies, including the exposure to price, credit and liquidity risk are
set out in Note 19 to the Financial Statements.
Diversity and inclusion
The Board recognises that its employees are fundamental to theGroup’s success. The Group’s aim is to ensure there are equal
opportunities for all employees and that there is an inclusive culture
where differences are valued and people are given the environment
in which they can do their best work. The Corporate Responsibility
review on pages 32 to 39 further describes how diversity andinclusion is managed within Oxford Instruments.
Greenhouse gas emissions
To meet the requirements of the Companies Act 2006 (Strategic andDirectors’ Report) Regulations 2013, CO2 emissions are reported onas part of our reporting on greenhouse gas emissions in Corporate
Responsibility on page 38.
Material events
There were no material events since 31 March 2016 to report.
By order of the Board

Susan Johnson‑BrettCompany Secretary
15 June 2016

78

Oxford Instruments plc Report and Financial Statements 2016

Financial Statements
Strategic Report

Welcome to
the Financial
Statements

GovernanceIn this section
80

Independent Auditor’s Report81

Accounting Policies

84

Consolidated Statement of Income

90

Consolidated Statement of Comprehensive Income

91

Consolidated Statement of Financial Position

92

Consolidated Statement of Changes in Equity

93

Consolidated Statement of Cash Flows94

Notes to the Financial Statements

96

Parent Company Statement of Financial Position

123

Statement of Changes in Equity

124

Notes to the Parent Company Financial Statements

125

Historical Financial Summary

136

Financial Statements

Directors’ Responsibilities

Company Information

Oxford Instruments plc Report and Financial Statements 201679

Financial Statements

Directors’ Responsibilities

in relation to the Report and Financial Statements
The Directors are responsible for preparing the Report and Financial
Statements and the Group and Parent Company Financial Statementsin accordance with applicable law and regulations.

Responsibility statement of the Directors
in respect of the Report and Financial Statements

Company law requires the Directors to prepare Group and Parent
Company Financial Statements for each financial year. Under that
law they are required to prepare the Group Financial Statements inaccordance with IFRS as adopted by the EU and applicable law andhave elected to prepare the Parent Company financial statementsin accordance with UK Accounting Standards, including FRS 101
Reduced Disclosure Framework.

• the Financial Statements, prepared in accordance with theapplicable set of accounting standards, give a true and fair viewof the assets, liabilities, financial position and profit or loss of theCompany and the undertakings included in the consolidation
taken as a whole; andUnder company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fairview of the state of affairs of the Group and Parent Company and of
their profit or loss for that period. In preparing each of the Group andParent Company Financial Statements, the Directors are required to:

We confirm that to the best of our knowledge:• the Strategic Report/Directors’ Report include a fair review of thedevelopment and performance of the business and the positionof the issuer and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks
and uncertainties that they face.

• select suitable accounting policies and then apply themconsistently;

We consider the Report and Financial Statements, taken as a whole,is fair, balanced and understandable and provides the informationnecessary for Shareholders to assess the Group’s position andperformance, business model and strategy.

• make judgements and estimates that are reasonable and prudent;

Signed on behalf of the Board• for the Group Financial Statements, state whether they have been
prepared in accordance with IFRS as adopted by the EU;• for the Parent Company Financial Statements, state whether
applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Parent
Company Financial Statements; and• prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Parent Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent Company’stransactions and disclose with reasonable accuracy at any time
the financial position of the Parent Company and enable them toensure that its Financial Statements comply with the Companies Act
2006. They have general responsibility for taking such steps as arereasonably open to them to safeguard the assets of the Group and toprevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate GovernanceStatement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation anddissemination of Financial Statements may differ from legislationin other jurisdictions.

80

Oxford Instruments plc Report and Financial Statements 2016

Ian Barkshire
Chief Executive
15 June 2016

Gavin Hill
Group Finance Director

Independent Auditor’s Reportto the Members of Oxford Instruments plc only

1 Our opinion on the Financial Statements is unmodified
We have audited the Financial Statements of Oxford Instruments plc
for the year ended 31 March 2016 set out on pages 84 to 135.
In our opinion:• the financial statements give a true and fair view of thestate of the Group’s and of the Parent Company’s affairs as at
31 March 2016 and of the Group’s profit for the year then ended;• the Group Financial Statements have been properly prepared inaccordance with International Financial Reporting Standards as
adopted by the European Union;• the Financial Statements have been prepared in accordance withthe requirements of the Companies Act 2006 and, as regards theGroup Financial Statements, Article 4 of the IAS Regulation.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the Financial Statements
the risks of material misstatement that had the greatest effect on
our audit, in decreasing order of audit significance, were as follows(unchanged from 2015 except for the addition of Valuation of
investment in associate):
Revenue recognition in the NanoTechnology Tools
segment (revenue: £187.3 million (2015: £210.9 million)),Risk vs 2015 p

Risk – there is a risk that revenue is recognised on sales of individual
products produced by the Group’s NanoTechnology Tools segment
before the significant risks and rewards of ownership have passed.
This is because these products require considerable technical expertise
to manufacture, can be of individually high value, and customer
specifications vary. As such there is a risk that particular terms of sale(for example, the shipping term and product specification) may not
be met and, as a result, revenue may be recognised in the incorrect
period. In addition, in the current year an increased value of revenue
was recognised on a bill and hold basis where there is a risk that the
specific criteria for recognition has not been met. Consequently this is
one of the key areas our audit is focused on.

Refer to page 51 (Audit and Risk Committee Report), page 84(Accounting Policies) and pages 96 to 122 (financial disclosures)
Risk – the Group balance sheet includes a significant amount of
goodwill and other acquired intangible assets that have arisen asa result of acquisitions, particularly in respect of the Andor cash
generating unit. There is a risk that below forecast performance ofthe business, or the cash generating unit to which the assets areallocated will result in impairment. This could be due to weaker
than forecast demand, product obsolescence, or other factors.
Furthermore, there is inherent uncertainty and complexity involved inestimating future cash flows, growth rates and discount rates that are
the basis for the assessment of recoverability and, as such, this is oneof the key judgement areas our audit is focused on.
Our response – our procedures included performing our own
assessment of the key estimates and assumptions used to estimate
recoverable amount such as forecast cash flows, long‑term growth
rates and the discount rate applied with reference to externally andinternally derived data including, but not limited to, industry growth
rates, historical performance of similar lines of business and market
interest rates. We compared the sum of the discounted cash flows
to the value derived from the group’s market capitalisation to assess
the reasonableness of those cash flows. We also performed sensitivity
analysis in relation to the key assumptions and considered whether
the Group’s disclosures regarding the valuation of goodwill andintangible assets appropriately reflected the sensitivity, headroom andassumptions made in preparing the valuations.

Company Information

Our response – our procedures included assessing the effectivenessof internal controls regarding the recognition of revenue such as
matching a sample of sales invoices recognised to sales orders anddispatch notes. We also tested, on a sample basis, whether specificrevenue transactions around the year end had been recognised in
the appropriate period on the basis of the terms of sale within theassociated contracts, such as whether shipping terms had been met,
goods received notes completed and, or, customer acceptance of the
product received. We considered whether a sample of credit notes
issued after the year end should reduce revenue in the period andchallenged those that were not recorded by obtaining evidence andrationale for significant reversals.

Financial Statements

Refer to page 51 (Audit and Risk Committee Report), page 84(Accounting Policies) and pages 96 to 122 (financial disclosures)

Recoverability of acquired intangible assets (£201.0 million(2015: £213.3 million)), Risk vs 2015 q

Governance• the Parent Company Financial Statements have been properly
prepared in accordance with UK Accounting Standards including
FRS 101 Reduced Disclosure Framework; andWe also assessed the ageing and post year end realisation of accrued
income, customer deposits and installation balances with respect tothe agreed terms of sale, any of which may indicate the associatedrevenue has been recognised in the incorrect period. In addition we
assessed whether there was any evidence of changes in the revenue
profile by comparing the current year revenue profile to historical
trends, and comparing to actual. We challenged the recognition of
all revenue items which were recognised on a bill and hold basis byassessing whether the specific criteria set out in IAS 18 had been
met. We also considered the adequacy of the Group’s disclosures inrespect of revenue and the related estimates and judgements in thefinancial statements relating to the passing of the risk and rewards ofownership as a result of the complex technical nature of the Group’s
products (see notes (b) and (r) of the accounting policies).

Strategic Report

Opinions and conclusions arising from our audit

Oxford Instruments plc Report and Financial Statements 201681

Financial Statements

Independent Auditor’s Report continued
to the Members of Oxford Instruments plc only

Opinions and conclusions arising from our audit continued
2 Our assessment of risks of material misstatement continued
Valuation of investment in associate (new risk)
Refer to page 51 (Audit and Risk Committee Report), page 84(Accounting Policies) and pages 96 to 122 (financial disclosures)
Risk – during the year, the Group entered into a strategic alliancewith GD Intressenter AB whereby the group disposed of its wholly
owned Omicron subsidiaries in exchange for a 47% share interest in
GD Intressenter’s Scienta Scientific AB. Estimating the fair value of aninterest in a private entity involves an inherent degree of subjectivity,for example by forecasting the future cash flows of the business.
Consequently this is one of the key areas of judgement our audit isfocused on.
Our response – our procedures included performing our own
assessment of the key estimates and assumptions relating to the
future performance of the business, used to determine the initial fairvalue of the Group’s investment. We performed sensitivity analysis
over these key assumptions, including but not limited to changes in
discount rate and long‑term growth rate. We considered alternative
valuation methods to determine if there is any contradictory evidence
to support a different valuation methodology. We considered theadequacy of the Group’s disclosure of the judgement required indetermining the valuation of the investment.

3 Our application of materiality andan overview of the scope of our audit
The materiality for the financial statements as a whole was set
at £0.9 million (2015: £1.3 million). This has been determinedwith reference to a benchmark of Group profit before tax fromcontinuing operations adjusted for the items disclosed in Note 1 to
the Financial Statements, excluding amortisation and impairmentof acquired intangibles, of £20.3 million, of which it represents
4.4% (2015: Group loss before tax adjusted for the items disclosed
in Note 1 to the Financial Statements, excluding amortisation andimpairment of acquired intangibles, and normalised by averaging
over the last five years due to fluctuations in the business cycle,5.0%). Materiality represents 6.9% of the Group profit before tax
from continuing operations (2015: Group loss before tax normalisedby averaging over the last five years, 6.2%).
We report to the Audit and Risk Committee any corrected or
uncorrected misstatements exceeding £45,000 (2015: £50,000), in
addition to other identified misstatements that warranted reportingon qualitative grounds.
Of the Group’s 65 (2015: 69) reporting components, we subjected 17(2015: 21) to audits for Group reporting purposes and 8 (2015: 18)
to reviews to component materiality.
The components within the scope of our work accounted for thefollowing percentages of the group’s results:

Completeness of provisions in respect of productrelated claims, Risk vs 2015 tu				

Refer to page 51 (Audit and Risk Committee Report), page 84(Accounting Policies) and pages 96 to 122 (financial disclosures)

Audits for Group
reporting purposes

Risk – the Group designs and builds customised, high technology
products, notably in the NanoTechnology Tools segment, and assuch there is a risk that products are subject to customer claims
in respect of deficiencies in design or performance. In addition,
since the Group’s products incorporate specific design features andintellectual property that are critical to ensuring the product meets its
marketed, or customer specific, performance specifications, there isa risk that the Group inadvertently infringes the intellectual property
belonging to third parties. This could result in a material unrecorded,
or understated, provision for compensation required to be paid tocustomers or third parties respectively, or alternatively for the costof rectification, should the Group be required to recall or rework
previously supplied products.

Reviews tocomponent materiality
Total 2016 		
Total 2015 		

39

Our response – our procedures included making enquiries of theGroup regarding the existence of any previously unidentified productrelated claims and inspecting the Group’s litigation register for any
ongoing or potential patent litigation. Where product related claims
arise, or are brought forward from previous periods, we consider the
specific circumstances by inspecting correspondence between theGroup and other parties, such as legal advisers, and challenge thereasonableness of the key assumptions made by the Group to ourown expectations based on our historical knowledge, experience,and understanding. We also considered the adequacy of the Group’s
disclosures about the degree of estimation involved in arriving at
any provision.

82

Oxford Instruments plc Report and Financial Statements 2016

Number ofcomponentsGrouprevenueGroup profit
before tax

Group total
assets

17

83%

72%

81%

8

10%

10%

8%

25

93%

82%

89%

95%

88%

96%

For the remaining components, we performed analysis at an
aggregated Group level to re‑examine our assessment that there
were no significant risks of material misstatement within these. The
Group audit team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above andthe information to be reported back. The Group audit team approved
each component teams audit materiality, which ranged from
£0.4 million to £0.7 million (2015: £0.01 million to £0.8 million),
having regard to the size and risk profile of the Group across thecomponents.
The Group audit team visited 19 (2015: 24) component locations in
the UK, USA and Germany (2015: UK, USA and China). The work
performed for the US components was undertaken by the UK audit
team. Telephone conference meetings were also held with thecomponent auditors in Japan and China (2015: Germany, Japan and
Finland). At these visits and meetings, the findings reported to theGroup audit team were discussed in more detail, and any further
work required by the Group audit team was then performed by thecomponent auditor. The Group audit team reviewed the significant
risk areas of the component audit files for individually financiallysignificant components.

Strategic Report

4 Our opinion on other matters prescribed by theCompanies Act 2006 is unmodified

Under the Companies Act 2006 we are required to report to you
if, in our opinion:

In our opinion:• the part of the Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006;• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or• the information given in the Strategic Report and the Directors’
Report for the financial year for which the Financial Statements
are prepared is consistent with the Financial Statements; and• the Parent Company Financial Statements and the part of theRemuneration Report to be audited are not in agreement with theaccounting records and returns; or• the information given in the Corporate Governance Statement
set out on pages 44 to 50 with respect to internal control and risk
management systems in relation to financial reporting processes
and about share capital structures is consistent with the Financial
Statements.

• certain disclosures of Directors’ remuneration specified by law are
not made; orBased on the knowledge we acquired during our audit, we havenothing material to add or draw attention to in relation to:• the Viability Statement on page 25, concerning the principal risks,
their management, and, based on that, the Directors’ assessmentand expectations of the Group’s continuing in operation over thethree years to 31 March 2019; or• the disclosures in the accounting policies to the Financial
Statements on page 125 concerning the use of the going concern
basis of accounting.
6 We have nothing to report in respect of matters on
which we are required to report by exception

In particular, we are required to report to you if:• we have identified material inconsistencies between theknowledge we acquired during our audit and the Directors’
Statement that they consider that the Report and Financial
Statements taken as a whole is fair, balanced and understandable
and provides the information necessary for Shareholders to assess
the Group’s position and performance, business model andstrategy; or• the Directors’ statements, set out on page 31, in relation to going
concern and longer‑term viability; and• the part of the Corporate Governance Statement on pages
44 to 50 relating to the Company’s compliance with the elevenprovisions of the 2014 UK Corporate Governance Code specified
for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in Directors’ Responsibilities set out on
page 80, the Directors are responsible for the preparation of the
Financial Statements and for being satisfied that they give a trueand fair view. A description of the scope of an audit of Financial
Statements is provided on the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body andis subject to important explanations and disclaimers regarding our
responsibilities, published on our website at www.kpmg.com/uk/
auditscopeukco2014a, which are incorporated into this report as if
set out in full and should be read to provide an understanding of the
purpose of this report, the work we have undertaken and the basis of
our opinions.

Greg Watts (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
One Snow Hill
Snow Hill Queensway
Birmingham B4 6GH

Company Information• the Audit and Risk Committee Report does not appropriately
address matters communicated by us to the Audit andRisk Committee.

Under the Listing Rules we are required to review:

15 June 2016

Oxford Instruments plc Report and Financial Statements 2016

Financial Statements

Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we haveidentified other information in the Report and Financial Statementsthat contains a material inconsistency with either that knowledge or
the Financial Statements, a material misstatement of fact, or that isotherwise misleading.

• a Corporate Governance Statement has not been prepared by
the Company.

Governance

5 We have nothing to report on the disclosuresof principal risks• we have not received all the information and explanations werequire for our audit; or83

Financial Statements

Accounting Policies
Oxford Instruments plc (the “Company”) is a company incorporated
and domiciled in the UK.
The Group Financial Statements have been prepared and approvedby the Directors in accordance with International Financial ReportingStandards as adopted by the EU (“Adopted IFRS”). The Company
has elected to prepare its Parent Company Financial Statements inaccordance with FRS 101; these are presented on pages 123 to 135.
The accounting policies set out below have, unless otherwise stated,been applied consistently to all periods presented in these Group
Financial Statements.
The Financial Statements have been prepared on a going concern
basis based on the Directors’ opinion, after making reasonableenquiries, that the Group has adequate resources to continue inoperational existence for the foreseeable future.
The Group’s business activities, together with the factors likely toaffect its future development, performance and position, are set
out in the Performance and Strategy section on pages 8 to 11.
The financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Financial Review on
pages 26 to 31.
The relatively diverse nature of the Group together with its current
financial strength provides a solid foundation. The Directors havereviewed the Group’s forecasts and flexed them to incorporate
a number of potential scenarios relating to changes in trading
performance and believe that the Group will be able to operate
within its existing debt facilities which expire between February 2020
and March 2021. This review also considered hedging arrangements
in place. As a consequence, the Directors believe that the Group
is well placed to manage its business risks successfully. Further
information can be found in the Viability Statement on page 25.
The Financial Statements were authorised for issuance on
15 June 2016.
(a) New accounting standards
The following standards and interpretations are applicable to theGroup and have been adopted as they are mandatory for the year
ended 31 March 2016.
Amendments to IAS 19 Defined Benefit Plans – Employee
Contributions: the amendments introduce a relief that will reducethe complexity and burden of accounting for certain contributions
from employees or third parties. The Group has considered theimpact of this amendment in future periods on profit, earnings
per share and net assets. The adoption of this standard has had no
significant impact.
There are no other new standards, amendments to standards orinterpretations mandatory for the first time for the year ended
31 March 2016.

(b) Basis of preparation
The Financial Statements are presented in Sterling, rounded
to the nearest £0.1 million and are prepared on the historicalcost basis except as described on page 86 under the heading“Financial instruments”.
The preparation of Financial Statements in conformity with adopted
IFRSs requires management to make judgements, estimates andassumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimatesand associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making thejudgements about carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ fromthese estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. The most significant judgements and estimates madein applying the Group accounting policies relate to:Fair value measurements on business combinations
The measurement of fair values on a business combination requires
the recognition and measurement of the identifiable assets, liabilities
and contingent liabilities. The key judgements involved are:• the identification and valuation of intangible assets which require
the estimation of future cash flows and the selection of a suitablediscount rate (see Note 17); and• the initial valuation of investment in Scienta Scientific AB which
required the estimation of future cash flows and the selection ofa suitable discount rate (see Note 7).
Impairment of intangible assets (including goodwill)
and tangible assets
Goodwill is held at cost and tested annually for impairment andamortised intangibles and tangible assets are tested for impairment
where there are indications of impairment. These impairment tests
require the Group to make an estimate of the expected cash flows
and to select suitable discount rates. These require an estimation of
the value in use of these assets (see Note 17).
Provisions
Provisions are recognised in the period when it becomes probablethat there will be a future outflow of funds resulting from past
expectations or events which can be reasonably estimated. The
timing of recognition requires the application of judgement toexisting facts and circumstances which can be subject to change.
Amounts provided represent the Group’s best estimate of exposure
based on currently available information.
Revenue recognition
Revenue is recognised when, in the opinion of the Group, thesignificant risks and rewards of ownership have transferred to thebuyer. The complex technical nature of the Group’s products meansthat the application of judgement is required in determining whether
those risks and rewards have passed, notably in determining whether
shipping terms have been met or customer acceptance of the
product received.

84

Oxford Instruments plc Report and Financial Statements 2016

Measurement of defined benefit scheme liabilities
The Group recognises and measures costs relating to defined benefit
pension schemes in accordance with IAS 19 (Revised) Employee
Benefits. In applying IAS 19 (Revised) the costs are assessed inaccordance with the advice of independent qualified actuaries.
This requires the exercise of judgement in relation to the estimationof future changes in salaries and inflation, as well as mortality rates,
expected returns on plan assets and the selection of suitable discountrates. Further detail is provided in Note 26.
Contingent purchase consideration

Capitalised development costs
Capitalised development costs involve judgements around the future
economic benefits that will flow from the associated development
activity and in particular the Group’s assessment of the technical andcommercial feasibility of the product to be developed.
Deferred tax assets

Revisions to accounting estimates are recognised in the period inwhich the estimate is revised if the revision affects only that period orin the period of the revision and future periods if the revision affects
both current and future periods. The key areas where estimateshave been used and assumptions applied are in the calculation ofprovisions, the valuation of acquired intangible assets, the impairment
testing of goodwill and the estimation of defined benefit pension
plan liabilities.

Subsidiaries are entities controlled by the Group. Control exists
when the Group is exposed to or has rights to variable returns fromits investment with the investee and has the ability to affect those
returns through its power over the investee. In assessing control,
potential voting rights that are currently exercisable or convertible
are taken into account. The results of subsidiary companies areincluded in the consolidated Financial Statements from the date that
control commences until the date that control ceases. The acquisition
method is used to account for the acquisition of subsidiaries.
Associates are those entities in which the Group holds more than
20% of the shares and voting rights and has significant influence,but not control, over the financial and operating policies.
The Group financial information includes the Group’s share of thetotal comprehensive income of the associate on an equity accounted
basis, from the date that significant influence commences until thedate that significant influence ceases. When the Group’s share oflosses exceeds its interest in associate, the Group’s carrying amountis reduced to nil and recognition of further losses is discontinued
except to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of an associate.
The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on consolidation, are translated
into Sterling at exchange rates ruling at the end of the reporting
period. Income statements and cash flows of foreign operations aretranslated into Sterling at average monthly exchange rates whichapproximate foreign exchange rates at the date of the transaction.
Foreign exchange differences arising on retranslation are recognised
directly in a separate translation reserve.
(d) Foreign currency
An individual entity’s transactions in foreign currencies are translated
at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at
the reporting date are translated at the foreign exchange rate rulingat that date. Foreign exchange differences arising on translation arerecognised in profit or loss. Non‑monetary assets and liabilities thatare measured in terms of historical cost in a foreign currency aretranslated using the exchange rate at the date of the transaction.

Financial Statements

A deferred tax asset is recognised in the period if it is probable that
future taxable profits will be available against which the asset canbe utilised. This requires the exercise of judgement in relation to theestimation of future taxable profit.

The Group Financial Statements include the accounts of Oxford
Instruments plc and its subsidiary companies adjusted to eliminate
intra‑Group balances and any unrealised gains and losses or income
and expenses arising from intra‑Group transactions.

GovernanceContingent purchase consideration is measured at fair value atthe date of acquisition and tested annually against the criteria for
payment, with movements in fair value being recorded in the Income
Statement. The key judgements involved are the estimation of future
cash flows and profitability of the acquired business and the selectionof a suitable discount rate.

(c) Basis of consolidation

Strategic Report

The following other significant judgements and estimates were madein applying the Group accounting policies:

Company Information

Oxford Instruments plc Report and Financial Statements 201685

Financial Statements

Accounting Policies
continued(e) Financial instruments(f) Property, plant and equipment

Financial assets and liabilities are recognised in the Group’s
Consolidated Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument.

Property, plant and equipment is stated at historical cost lessprovisions for impairment (see accounting policy l) and depreciation
which, with the exception of freehold land which is not depreciatedand rental assets (see below), is provided on a straight‑line basis
over each asset’s estimated economic life. Depreciation is provided
based on historical cost less estimated residual value. The principal
estimated economic lives used for this purpose are:(i) Derivative financial instruments of the Group are used to hedge its
exposure to interest rate, foreign currency and commodity pricing
risks arising from operational, financing and investment activities.
The Group does not hold or issue derivative financial instruments
for trading purposes. All derivatives are initially recognised at fairvalue; attributable transaction costs are recognised in profit or loss
as incurred. Derivatives comprising interest rate swaps, foreignexchange contracts and options and metal futures contracts areclassified as “fair value through profit and loss” under IAS 39,
unless designated as hedges. Subsequent to initial recognition,
derivatives are measured at fair value and gains or losses on
the settlement of such derivatives are recognised in operating
expenses. Where such derivatives relate to the following year’s
exposure, any gains or losses resulting from the change in fairvalue are taken to the mark‑to‑market gains/losses line within
financial income or expense.
(ii) Changes in the fair value of the derivative hedging instruments
designated as cash flow hedges are recognised in equity to
the extent that the hedge is effective. To the extent that thehedge is ineffective, changes in fair value are recognised in theConsolidated Statement of Income. If the hedging instrument nolonger meets the criteria for hedge accounting, expires or is sold,terminated or exercised, then hedge accounting is discontinued
prospectively. The cumulative gain or loss previously recognised inequity remains there until the forecast transaction occurs. Whenthe hedged item is a non‑financial asset, the amount recognisedin equity is transferred to the carrying amount of the asset when
it is recognised. In other cases the amount recognised in equity istransferred to the Consolidated Statement of Income in the same
period that the hedged item affects profit or loss.
(iii) The fair value of interest rate swaps is based on broker quotes.
Those quotes are tested for reasonableness by discounting
estimated future cash flows based on the terms and maturityof each contract and using market interest rates for a similar
instrument at the measurement date.
(iv) The fair value of forward exchange contracts is their market
price at the Consolidated Statement of Financial Position date,
being the present value of the forward price. The gain or loss on
remeasurement to fair value of forward exchange contracts is
recognised immediately in the Consolidated Statement of Income.
(v) Contingent purchase consideration is measured at fair value atthe date of acquisition and subsequently carried at fair value,with movements recognised in the Income Statement.
(vi) Interest‑bearing borrowings are recognised initially at fairvalue less attributable transaction costs. Subsequent to initialrecognition, interest‑bearing borrowings are stated at amortised
cost with any difference between cost and redemption value
being recognised in profit or loss over the period of the borrowing
on an effective interest basis.

86

Oxford Instruments plc Report and Financial Statements 2016

Freehold buildings, long leasehold land and buildings
50 years
Leasehold improvements (less than 50 years’ duration) Period of lease
Furniture and fittings
10 years
Machinery and other equipment
5 to 10 years
Computer equipment
4 years
Vehicles4 years
Fixed assets held for rental as part of the Group’s service businessare depreciated using the reducing balance method at a rate of
3% per month.
Proceeds on disposal of rental assets which have been refurbishedby the Group are recorded as revenue with associated costs recordedin cost of sales. Otherwise gains and losses on disposal of an itemof property, plant and equipment are determined by comparing theproceeds from disposal with the carrying amount of property, plantand equipment and are recognised in the Income Statement.
(g) Intangible assets(i) Goodwill
All business combinations are accounted for by applying theacquisition method. Goodwill represents amounts arising on
acquisition of subsidiaries. In respect of business acquisitions thathave occurred since 31 March 2004, goodwill represents thedifference between the cost of the acquisition and the fair value ofthe assets, liabilities and contingent liabilities acquired. In respectof acquisitions prior to this date, goodwill is included on the basisof its deemed cost, which represents the amount recorded underprevious GAAP.
The Group expenses transaction costs associated with its acquisitions
and movements in liabilities relating to contingent consideration
within the Income Statement in conformity with IFRS 3.
Goodwill arising on acquisitions is stated at cost less any accumulated
impairment losses and allocated to cash generating units that are
anticipated to benefit from the combination. It is not amortised but
is tested annually for impairment (see accounting policy l), or more
frequently when there is an indicator that the unit may be impaired.
(ii) Development costs
Research and Development costs are charged to the Consolidated
Statement of Income in the year in which they are incurred unlessdevelopment expenditure is applied to a plan or design for the
production of new or substantially improved products, in whichcase they are capitalised. The criteria for capitalisation include
demonstration of the technical feasibility of completing a new
intangible asset that will be available for sale and that the asset will
generate probable future economic benefits. Where expenditure
meets the criteria, development costs are capitalised and amortised
through the Consolidated Statement of Income over their useful
economic lives.

(k) Non‑current assets held for sale

An intangible asset acquired with a subsidiary undertaking is
recognised as an intangible asset if it is separable from the acquired
business or arises from contractual or legal rights, is expected
to generate future economic benefits and its fair value can bereliably measured. The asset is amortised through the Consolidated
Statement of Income over it useful economic life.

A non‑current asset is classified as held for sale if its carrying amountwill be recovered principally through sale rather than throughcontinuing use, it is available for immediate sale and sale is highly
probable within one year.

(iv) Amortisation
Amortisation of intangible assets is charged to the Consolidated
Statement of Income on a systematic basis in proportion to the use of
the assets over their estimated useful economic lives as follows:
3 to 5 years
5 to 12 years
6 months to 15 years
10 years
10 years(h) Trade and other receivables
Trade and other receivables are initially recognised at fair value
and subsequently stated at their amortised cost less appropriate
allowances for amounts which are expected to be non‑recoverable.
(i) Inventories

Provision is made for obsolete, slow‑moving and defective
stock where appropriate in light of recent usage, expected
future requirements, new product introduction plans and likely
realisable values.
(j) Cash and cash equivalents
Cash and cash equivalents are carried in the Statement of Financial
Position at amortised cost.
Cash and cash equivalents comprise cash balances and calldeposits and are carried at amortised cost. Bank overdrafts thatare repayable on demand and form an integral part of the Group’s
cash management are included as a component of cash and cash
equivalents for the purpose of the Statement of Cash Flows.

Impairment losses on initial classification as held for sale are includedin the Consolidated Statement of Income, even when the asset has
previously been revalued. The same applies to gains and losses onsubsequent remeasurement.
(l) Impairment of non‑current assets
All non‑current assets are tested for impairment whenever eventsor circumstances indicate that their carrying value may be impaired.
Additionally, goodwill is subject to an annual impairment review.
For the purposes of impairment testing assets are grouped together
into the smallest group of assets that generates cash flows fromcontinuing use that are largely independent of the cash inflows fromother groups of assets.
An impairment loss is recognised in the Consolidated Statement of
Income as under the administration and shared services heading, tothe extent that an asset’s carrying value, or a cash generating unit’s
carrying value, exceeds its recoverable amount, which represents thehigher of its net realisable value and its value in use. Value in use is
the present value of the future cash flows expected to be derived
from the asset or from the cash generating unit to which it relates.
The present value is calculated using a discount rate that reflects thecurrent market assessment of the time value of money and the risks
specific to the asset concerned.
Impairment losses recognised in previous periods for an asset otherthan goodwill are reversed if there has been a change in estimatesused to determine the asset’s recoverable amount, but only to theextent that the carrying amount of the asset does not exceed its
carrying amount had the impairment loss not been recognised
in previous periods. Impairment losses in respect of goodwill are
not reversed.

Oxford Instruments plc Report and Financial Statements 2016

Company Information

Impairment losses recognised in respect of cash generating units
are allocated first to reduce the carrying amount of any goodwill
allocated to cash generating units and then to reduce the carrying
amount of the other assets in the unit.

Financial Statements

Inventories are stated at the lower of cost and net realisable value.
Cost includes materials, direct labour, an attributable proportion of
production overheads based on normal operating capacity and allother expenditure incurred in acquiring the inventories and bringing
them to their existing location and condition. Net realisable value isthe estimated selling price in the ordinary course of business, less theestimated costs of completion and selling expenses.

Immediately before classification as held for sale, the measurement of
the assets is brought up‑to‑date in accordance with applicable IFRS.
Then, on initial classification as held for sale, non‑current assets arerecognised at the lower of their carrying amount and fair value lesscosts to sell.

GovernanceCapitalised development costs
Technology related acquired intangibles
Customer related acquired intangibles
Development costs acquired intangibles
SoftwareStrategic Report(iii) Acquired intangible assets

87

Financial Statements

Accounting Policies
continued(m) Employee benefits
The Group operates a number of defined benefit and defined
contribution plans which require contributions to be made to
independent trustee‑administered funds.
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans
are recognised as an expense in the Consolidated Statement of
Income as incurred.
(ii) Defined benefit plans
The Group’s net obligation in respect of defined benefit pension
plans is calculated separately for each plan by estimating the amountof future benefit that current and past employees have earned inreturn for their service in prior periods. That benefit is discounted todetermine its present value and the fair value of any plan assets isdeducted. The calculation is performed by a qualified actuary using
the projected unit credit method.
All actuarial gains and losses in calculating the Group’s net obligation
are recognised in the Consolidated Statement of Comprehensive
Income in the year.
The charge to the Consolidated Statement of Income reflects thecurrent service cost. The interest expense or income is calculatedon the net defined benefit liability by applying the discount rate
to the net defined benefit liability, and is included within financial
expenditure or financial income in the Consolidated Statement of
Income respectively.
(iii) Share‑based payment transactions
The fair value of equity settled share option programmes is measured
at grant date and charged to the Consolidated Statement of Income,with a corresponding increase in equity, on a straight‑line basis overthe period during which the employees become unconditionallyentitled to the options. The fair value of the options granted ismeasured using an option valuation model, taking into account theterms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest, except where forfeiture is only
due to market performance conditions not being met.
(n) Provisions
A provision is recognised in the Consolidated Statement of Financial
Position when the Group has a present legal or constructive
obligation as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the obligation.
A provision for warranty and product related liability is recognised
when the underlying products are sold. A provision for restructuring
is recognised when the Group has approved a detailed and formal
restructuring plan and the restructuring has either commenced or
has been announced publicly. A provision for onerous contracts is
recognised when the expected benefits to be derived by the Group
from a contract are lower than the unavoidable cost of meeting its
obligations under the contract. A provision for a claim or dispute ismade when it is considered probable that an adverse outcome will
occur and the amount of the loss can be reasonably estimated.

88

Oxford Instruments plc Report and Financial Statements 2016

Contractual and other provisions represent the Directors’ best
estimate of the cost of settling future obligations where the Directors,
taking into account professional advice received, assess that it is more
likely than not that such proceedings may be successful.
If the effect is material, provisions are determined by discounting
the expected future cash flows at a pre‑tax rate that reflects
current market assessments of the time value of money and, whereappropriate, the risks specific to the liabilities.
(o) Trade and other payables
Trade and other payables are initially recognised at their fair value andsubsequently stated at amortised cost.
(p) Government grants
Grants from Governments are recognised at their fair value where
there is a reasonable assurance that the grant will be received andthe Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognisedin the income statement over the period necessary to match themwith the costs they are intended to compensate. Government grants
relating to property, plant and equipment are included in othercurrent liabilities and are credited to the Income Statement on astraight‑line basis over the expected useful economic lives of therelated assets.
(q) Interest‑bearing borrowings
Interest‑bearing borrowings are recognised initially at fair value lessattributable transaction costs. Subsequent to initial recognition,interest‑bearing borrowings are stated at amortised cost with any
difference between cost and redemption value being recognisedin the Income Statement over the period of the borrowings on an
effective interest basis.
(r) Revenue
Revenue is recognised in the Consolidated Statement of Income
when the significant risks and rewards of ownership have transferredto the buyer. In the Industrial Products segment this is generally
considered to be on dispatch, as products have a low level ofcustomisation and are manufactured on a routine basis. In the
NanoTechnology Tools segment products are generally bespoke andcustomer contracts more complex. As such, there are a numberof conditions which must be satisfied before revenue can berecognised. These can include: legal; contractual ownership; passing
internal quality control testing; dispatch from manufacturing sites;
installation at customer sites; customer inspection both before andafter installation; and/or, ultimately, customer acceptance. Given
these conditions, a greater degree of consideration is given as towhether the terms of sale have been met and whether revenue canbe recognised for each product. In the Services segment, revenue
for maintenance and support is recognised on a pro‑rata basis overthe length of the contract period. Revenue relating to the rentalof machinery is recognised on a straight‑line basis over the life of
the lease. Where the Services segment makes asset sales, similar
considerations as those set out for the NanoTechnology Tools
Segment are applied. Revenue excludes value added tax and similar
sales‑based taxes and is stated before commission payable to agents.

(v) Dividends

Income tax on the profit or loss for the year comprises current anddeferred tax. Income tax is recognised in profit or loss except to theextent that it relates to items recognised directly in equity, in whichcase it is recognised in equity.

Interim and final dividends are recognised as a liability when they are
no longer at the discretion of the Company.

Current tax is the expected tax payable on the taxable income for theyear, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.

The amount of deferred tax provided is based on the expectedmanner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at theStatement of Financial Position date.
A deferred tax asset is recognised only to the extent that it isprobable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to theextent that it is no longer probable that the related tax benefit will
be realised.

(t) Lease payments

A number of other new standards, amendments to standards
and interpretations have been issued by the IASB, although they
are not yet endorsed by the EU, and are effective for annual
periods beginning after 1 April 2016. They have not been appliedin preparing these consolidated Financial Statements. The threestandards which may be relevant to the Group are set out below:• IFRS 9 Financial Instruments: which becomes mandatory for theGroup’s consolidated Financial Statements for the annual period
beginning on 1 April 2018 and could change the classification andmeasurement of financial assets;• IFRS 15 Revenue from Contracts with Customers: whichbecomes mandatory for the Group’s consolidated Financial
Statements for the annual period beginning 1 April 2018.
The potential impact on the Group of the new standard is still
being assessed; and• IFRS 16 Leases: which becomes mandatory for the Group’s
consolidated Financial Statements for the annual period beginning
1 April 2019. The potential impact on the Group of the newstandard is still being assessed.

Payments made under operating leases are recognised in profit or loss
on a straight‑line basis over the term of the lease. Lease incentives
received are recognised in the Income Statement as an integral partof the total lease expense.
(u) Segment reporting

Company Information

An operating segment is a distinguishable component of the Group
that engages in business activities from which it may earn revenues
and incur expenses, including any revenues and expenses that relate
to transactions with any of the Group’s other components. Operating
components are combined into aggregated operating segments
to the extent that they have similar economic characteristics.
Aggregated operating segments’ operating results are reviewed
regularly by the Group’s Board of Directors to make decisions
about resources to be allocated to the segment and to assess its
performance, for which discrete financial information is available.
Segment results that are reported to the Board include items directly
attributable to a segment as well as those that can be allocated on areasonable basis.

Financial Statements

Additional income taxes that arise from the distribution ofdividends are recognised at the same time as the liability to pay
the related dividend.

A number of new standards, amendments to standards andinterpretations have been issued by the IASB and endorsed by the
EU and are effective for annual periods beginning after 1 April 2016.
They have not been applied in preparing these consolidated Financial
Statements. None of these standards are expected to have asignificant impact on the Group Financial Statements.

GovernanceDeferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initialrecognition of goodwill; the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit; and differences
relating to investments in subsidiaries to the extent that they willprobably not reverse in the future.

(w) New standards and interpretations not yet adopted

Strategic Report(s) Income tax

A reportable segment is an aggregated operating segment in respectof which revenue or profit exceeds 10% of the Group total. Discrete
financial information is disclosed for each reportable segment.

Oxford Instruments plc Report and Financial Statements 201689

Financial Statements

Consolidated Statement of Income
year ended 31 March 20162016						
					
Adjusting							Adjusted1
items1
Total
Adjusted1
			
Notes
£m
£m
£m
£m

Revenue			2015
Adjustingitems1
£m

Total
£m

3

361.6

—

361.6

380.1

—

380.1

Cost of sales				(199.7)(1.0)(200.7)(210.3)(0.2)(210.5)Gross profit			

169.6

161.9

(1.0)

160.9

169.8

(0.2)

5

(24.6)—(24.6)(30.5)—(30.5)

Selling and marketing				(59.8)—(59.8)(64.9)—(64.9)

Administration and shared services			(33.4)(23.0)(56.4)(34.3)(40.6)(74.9)

Share of loss of associate, net of tax		

(0.2)

(1.3)

(1.5)

—

—

—

—

4.9

4.9

—

1.4

1.4

Research and Development			

7

Other operating income			Foreign exchange				

0.7

—

0.7

2.7

—

2.7

Operating profit/(loss)				

44.6(20.4)

24.2

42.8(39.4)

3.4

9

—

—

—

0.1

—

0.1

Financial income				

—

—

—

0.1

—

0.1

Other financial income			Interest charge on pension scheme net liabilities

26

(1.7)

—

(1.7)

(1.9)

—

(1.9)

Other financial expenditure			

10

(5.9)

(3.5)

(9.4)

(5.3)

(5.9)

(11.2)

Financial expenditure

(7.6)

(3.5)

(11.1)

(7.2)

(5.9)

(13.1)

37.0(23.9)

13.1

35.7(45.3)

(9.6)

14

(8.9)

5.0

(3.9)

(8.1)

11.5

3.4

Profit/(loss) for the year fromcontinuing operations 			

28.1(18.9)

9.2

27.6(33.8)(6.2)

Loss from discontinued operations after tax

(0.3)

(1.9)

(2.2)

(0.1)

—

(0.1)

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

27.8(20.8)

7.0

27.5(33.8)

(6.3)

					

pence		

pence

pence		

pence

			

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

8

Earnings per share 				Basic earnings per share			2			

		From continuing operations			

49.2		

16.1

48.4		

(10.9)

From discontinued operations			(0.5)		

(3.9)(0.2)		

(0.2)

From profit/(loss) for the year			

48.7		

12.2

48.2		

(11.1)

		

Diluted earnings per share			2			

From continuing operations			

49.1		

16.1

48.2		

(10.9)

From discontinued operations			(0.5)		

(3.8)(0.2)		

(0.2)

From profit/(loss) for the year			

48.6		

12.3

48.0		

(11.1)

		

Dividends per share				Dividends paid			15			

13.0			

12.4Dividends proposed			

15		

13.0			

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

The attached notes form part of the Financial Statements.

90

Oxford Instruments plc Report and Financial Statements 2016

Consolidated Statement of Comprehensive Income
year ended 31 March 2016

2016
£m

2015
£m

Profit/(loss) for the year								

7.0

(6.3)

Other comprehensive income/(expense):			
Items that may be reclassified subsequently to profit or loss			
(Loss)/gain on effective portion of changes in fair value of cash flow hedges, net of amounts recycled		

(0.1)

0.1

Foreign exchange translation differences 							

5.6

7.3

Net foreign exchange loss on disposal of subsidiaries taken to the Income Statement				1.2—

Tax on items that may be reclassified to profit or loss						—

—(10.8)

Strategic Report																	NotesItems that will not be reclassified subsequently to profit or loss			
26

13.6

14

(2.6)

2.3

Total other comprehensive income/(expense)					

17.7

(1.1)

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

24.7

(7.4)

GovernanceRemeasurement gain/(loss) in respect of post‑retirement benefits				Tax on items that will not be reclassified to profit or loss					Financial Statements
Company Information

Oxford Instruments plc Report and Financial Statements 201691

Financial Statements

Consolidated Statement of Financial Position
as at 31 March 2016																	
Notes

2016
£m

2015
£m

Assets			Non‑current assets			
Property, plant and equipment						

16

35.2

33.1

Intangible assets							

17

220.8

231.3

Investment in associate								

13.1

—

Long‑term receivables								3.4

—Deferred tax assets							18								

19.0

20.1

291.5

284.5

Current assets			
Inventories							

19

61.1

70.8

Trade and other receivables						

20

77.5

87.3

Current income tax recoverable							

2.7

3.3

Derivative financial instruments						

1.5

3.4

23

Cash and cash equivalents							

21.8

25.1

								

164.6

189.9

Total assets

456.1

474.4

						

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

24Share premium							

2.9

2.9

61.5

61.5

Other reserves								

0.1

0.2

Translation reserve								

9.7

2.9

Retained earnings							

68.8

58.0

									

143.0

125.5

144.0

Liabilities			Non‑current liabilities			Bank loans and overdrafts							

25

147.0

Other payables							

27

—

0.8

Retirement benefit obligations						

26

35.0

53.5

Deferred tax liabilities							

18

5.7

6.2

		

187.7

204.5

							Current liabilities			Bank loans and overdrafts							

25

3.0

—

Trade and other payables							

27

102.4

121.6

Current income tax payables							

2.1

2.6

Derivative financial instruments						

23

5.8

4.1

Provisions 							

28

12.1

16.1

									

125.4

144.4

Total liabilities						

313.1

348.9

Total liabilities and equity						

456.1

474.4

The Financial Statements were approved by the Board of Directors on 15 June 2016 and signed on its behalf by:

Ian Barkshire
Director

Gavin Hill
Director

Company number: 775598

92

Oxford Instruments plc Report and Financial Statements 2016

Consolidated Statement of Changes in Equity
year ended 31 March 2016

Balance at 1 April 2015				

2.9

61.5

0.2

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

2.9

58.0

125.5

—

7.0

7.0

Total comprehensive income:						Profit for the year			

—

—

—

Strategic Report								
						
Share							SharepremiumOther					
capitalaccount
reserves
					
£m
£m
£m

Other comprehensive income:						– Foreign exchange translation differences

—

—

—

5.6

—

5.6

– Net foreign exchange loss on disposal of subsidiaries
taken to the Income Statement 			

—

—

—

1.2

—

1.2

—

—

(0.1)

—

—

(0.1)

– Remeasurement gain in respect of post‑retirement benefits

—

—

—

—

13.6

13.6

– Tax on items recognised directly in other comprehensive income

—

—

—

—

(2.6)

(2.6)

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

—

—

(0.1)

6.8

18.0

24.7

Transactions with owners recorded directly in equity:						– Charge in respect of employee service costs
settled by award of share options 			

—

—

—

—

0.4

0.4

– Dividends paid			

—

—

—

—

(7.6)

(7.6)

—

—

—

—

(7.2)

(7.2)

2.9

61.5

0.1

9.7

68.8

143.0

														
Share							SharepremiumOther					
capitalaccount
reserves
					
£m
£m
£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

(4.4)

80.3

140.2

—

(6.3)

(6.3)

7.3

—

7.3

Balance at 1 April 2014 			

2.9

61.3

0.1

Total comprehensive income:						Loss for the year				

—

—

—

Other comprehensive income:						– Foreign exchange translation differences 		– Gain on effective portion of changes in fair valueof cash flow hedges, net of amounts recycled		– Remeasurement loss in respect of post‑retirement benefits– Tax on items recognised directly in other comprehensive income
Total comprehensive income/(expense) attributable
to equity Shareholders of the parent			

—

—

—

—

—

0.1

—

—

0.1

—

—

—

—

(10.8)(10.8)

—

—

—

—

2.3

2.3

—

—

0.1

7.3

(14.8)(7.4)

Financial Statements

Total transactions with owners recorded directly in equity
Balance at 31 March 2016			

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

Transactions with owners recorded directly in equity:						
—

—

—

—

(0.2)

(0.2)

– Tax charge in respect of share options			

—

—

—

—

(0.2)

(0.2)

– Proceeds from shares issued			

—

0.2

—

—

—

0.2

– Dividends paid				

—

—

—

—

(7.1)

(7.1)

Total transactions with owners recorded directly in equity

—

0.2

—

—

(7.5)

(7.3)

Balance at 31 March 2015			

2.9

61.5

0.2

2.9

58.0

125.5

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 portion of changes in value of commodity contracts.
The foreign exchange translation reserve comprises all foreign exchange differences arising since 1 April 2004 from the translation of theGroup’s net investments in foreign subsidiaries into Sterling.
The Group holds 183,145 (2015: 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 Report and Financial Statements 201693

Company Information– Credit in respect of employee service costs
settled by award of share options 			Financial Statements

Consolidated Statement of Cash Flows
year ended 31 March 2016																		

2016
£m

2015
£m

Profit/(loss) for the year from continuing operations						

9.2

(6.2)

Adjustments for:		
Income tax expense								

3.9

(3.4)

Net financial expense								

11.1

13.0
0.2

Acquisition related fair value adjustments to inventory						

0.2Acquisition related fair value adjustments to property, plant and equipment				

0.8—

Acquisition related costs								

2.5

2.2
9.9

Restructuring costs								

2.9Restructuring costs – relating to associate							1.3

—Loss on disposal of subsidiary						0.9

—Contingent consideration – further amount deemed payable					

—

6.8
(1.4)

Contingent consideration deemed no longer payable					(4.9)

Share of loss from associate							0.2

—Amortisation and impairment of acquired intangibles					

16.7

21.7

Depreciation of property, plant and equipment						

6.3

5.5

Amortisation and impairment of capitalised development costs					

3.9

4.7
53.0

Adjusted earnings before interest, tax, depreciation and amortisation				

55.0

Loss on disposal of property, plant and equipment						

0.1

0.2

Cost of equity settled employee share schemes						

0.4

(0.2)

Acquisition related costs paid							

(1.8)

(1.9)

Restructuring costs paid								

(4.7)

(1.2)

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

(6.7)

(5.9)
44.0

Operating cash flows before movements in working capital					42.3Decrease/(increase) in inventories							

2.7

(3.3)

Decrease/(increase) in receivables							

9.3

(5.3)

Increase in payables and provisions							

(1.2)

1.6

Increase in customer deposits							

(0.5)

1.9

Purchase of rental assets held for subsequent sale						

(3.0)

—

Cash generated from operations							

49.6

38.9

Interest paid							

(5.6)

(5.0)

Income taxes paid								

(3.5)

(9.1)

Net cash from operating activities						

40.5

24.8

Cash flows from investing activities		
Acquisition of subsidiaries, net of cash acquired						(27.1)(0.8)

Acquisition of property, plant and equipment					

(2.5)

(4.4)
(1.0)

Acquisition of intangible assets							(0.2)

Net cash flow on disposal of subsidiary						0.6

—Capitalised development expenditure							

(8.2)

(8.0)

Net cash used in investing activities						(37.4)(14.2)
0.2

Cash flows from financing activities		
Proceeds from issue of share capital							

—Increase in long‑term receivables							

(3.0)

—

Increase/(decrease) in borrowings							4.6(12.9)

Dividends paid								

(7.6)

(7.1)

Net cash from financing activities							(6.0)(19.8)Net decrease in cash and cash equivalents from continuing operations					

(2.9)

(9.2)

Decrease in cash from discontinued operations						

(0.9)

(0.1)

Cash and cash equivalents at beginning of the year					

25.1

32.6

Effect of exchange rate fluctuations on cash held						

(0.9)

1.8

Cash and cash equivalents at end of the year					

20.4

25.1

94

Oxford Instruments plc Report and Financial Statements 2016																		

2016
£m

2015
£m

(9.3)

Decrease in cash and cash equivalents						(3.8)

Effect of foreign exchange rate changes on cash and cash equivalents				

(0.9)

1.8

									

(4.7)

(7.5)

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

(4.6)

12.9

Movement in net debt in the year							

(9.3)

5.4

Net debt at start of the year						(118.9)(124.3)Net debt at the end of the year							(128.2)(118.9)Strategic Report

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

Governance
Financial Statements
Company Information

Oxford Instruments plc Report and Financial Statements 201695

Financial Statements

Notes to the Financial Statements
year ended 31 March 2016
1 Non‑GAAP measures
The Directors present the following non‑GAAP measures as they consider that they give a better indication of the underlying performance ofthe business.
Reconciliation between profit before income tax and adjusted profit from continuing operations																		

2016
£m

2015
£m

Profit/(loss) before income tax from continuing operations					

13.1

(9.6)
0.2

Reversal of acquisition related fair value adjustments to inventory					

0.2Reversal of acquisition related fair value adjustments to property, plant and equipment			

0.8—

Acquisition related costs								

2.5

2.2
9.9

Restructuring costs								

2.9Restructuring costs – relating to associate						1.3

—Loss on disposal of subsidiary						

0.9

—

		

—

6.8
(1.4)

Contingent consideration – further amount deemed payable			Contingent consideration deemed no longer payable						(4.9)

Unwind of discount in respect of contingent consideration and acquisition related accruals			

0.8

1.1

Non‑recurring and acquisition related items						

4.5

18.8
21.7

Amortisation and impairment of acquired intangibles						16.7Mark‑to‑market loss in respect of derivative financial instruments 					

2.7

4.8

Adjusted profit before income tax from continuing operations					

37.0

35.7

Share of taxation								

(8.9)

(8.1)

Adjusted profit for the year from continuing operations						

28.1

27.6

The reversal of acquisition related fair value adjustments to inventory and property, plant and equipment are excluded from adjusted profit toprovide a measure 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 and any consideration which,under IFRS 3 (revised), falls to be treated as a post acquisition employment expense.
Restructuring costs comprise one‑off costs in respect of the ongoing cost reduction programme begun in the prior year, including an
impairment of inventory and capitalised development costs in the Plasma Technology business in relation to the exit from the HBLED market.
Restructuring costs relating to the Group’s associate relate to exceptional costs incurred by the associate arising from the merger of the Scienta
and Omicron businesses.
In common with a number of other companies adjusted profit excludes the non‑cash amortisation and impairment of acquired intangible
assets and goodwill and the unwind of discounts in respect of contingent consideration relating to business combinations.
In the prior year, a further £6.8m was provided in respect of additional contingent consideration expected to be due in respect of theacquisition of Platinum Medical Imaging in November 2011.
In the current year, £4.9m has been released relating to contingent consideration on the acquisition of Asylum Research Corporation following
the end of the earnout period. In the prior year, £1.4m was released in respect of contingent consideration relating to the acquisition of
RMG Technology Limited.
The Group made a loss on disposal of its Omicron business of £0.9m in the current year. Further details of the transaction can be found in
Note 7.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, they are also measured
at fair value. In respect of instruments used to hedge foreign exchange risk and interest rate risk the Group does not take advantage of thehedge accounting rules provided for in IAS 39 since that standard requires certain stringent criteria to be met in order to hedge account,which, in the particular circumstances of the Group, are considered by the Board not to bring any significant economic benefit. Accordingly,
the Group accounts for these derivative financial instruments at fair value through profit or loss. To the extent that instruments are hedgesof future transactions, adjusted profit for the year is stated before changes in the valuation of these instruments so that the underlying
performance of the Group can be more clearly seen.
In calculating the share of tax attributable to adjusted profit before tax, in 2011 a one‑off recognition of deferred tax assets relating to theGroup’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 and priorperiod tax losses arose in the UK and consequently no deferred tax reversed.
See Note 8 for details of adjusting items from discontinued operations.

96

Oxford Instruments plc Report and Financial Statements 2016

The calculation of basic and adjusted earnings per share is based on the profit for the year as shown in the Consolidated Statement of Income
and the adjusted profit for the year as shown in Note 1 respectively. Basic and adjusted earnings are divided by the weighted average numberof ordinary shares outstanding during the year, excluding shares held by the Employee Share Ownership Trust.
																		

2016
£m

2015
£m

Basic earnings								

7.0

(6.3)

Adjusted earnings (Note 1)							

27.8

27.5

Weighted average number of shares						

57.1

57.1

																		

2016
pence

2015
pence

Basic earnings per share from continuing operations					16.1(11.1)

Adjusted earnings per share from continuing operations						

49.2

48.2

																										2016Sharesmillion2015
Sharesmillion57.3

Weighted average number of shares outstanding						57.3Less shares held by Employee Share Ownership Trust						

(0.2)

(0.2)

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

57.1

57.1

																										2016Sharesmillion2015
Sharesmillion

57.1

Governance

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

Strategic Report

2 Earnings per share

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

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

57.1

Effect of shares under option							

0.1

0.2

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

57.2

57.3

3 Segment information
The Group has eight operating segments. These operating segments have been combined into three aggregated operating segments tothe extent that they have similar economic characteristics, with relevance to products and services, type and class of customer, methodsof sale and distribution and the regulatory environment in which they operate. Each of these three aggregated operating segments is areportable segment.

Financial Statements

In the prior year the Group reported a loss, and as such basic earnings per share was equal to reported diluted earnings per share. This is dueto the fact that the shares under option above would have an anti‑dilutive effect. Adjusted diluted earnings per share has been calculated in amanner consistent with previous periods.

The Group’s internal management structure and financial reporting systems differentiate the three aggregated operating segments on thebasis of the economic characteristics discussed below:• the NanoTechnology Tools segment contains a group of businesses, supplying similar products, characterised by a high degree ofcustomisation and high unit prices. These are the Group’s highest technology products serving research customers in both the public
and private sectors;• the Service segment contains the Group’s service, rental and refurbished asset sales business as well as service revenues from other partsof the Group.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated on a 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 in reporting to the Group’s Board of Directors.

Oxford Instruments plc Report and Financial Statements 2016

97

Company Information• the Industrial Products segment contains a group of businesses supplying high technology products and components manufactured
in medium volume for industrial customers; andFinancial Statements

Notes to the Financial Statements continued
year ended 31 March 2016

3 Segment information continueda) Analysis by business							 NanoTechnology							ToolsYear to 31 March 2016						
£mIndustrial
Products£m

Service
£m

Total
£m

361.6

187.3

95.9

78.4

Inter‑segment revenue					

0.1

0.7

—

Total segment revenue					

187.4

96.6

78.4

Segment adjusted operating profit from continuing operations			

21.3

4.5

18.8

44.6

							 NanoTechnology							ToolsYear to 31 March 2015						
£mIndustrial
Products£m

Service
£m

Total
£m

380.1

External revenue						External revenue						

210.9

103.0

66.2

Inter‑segment revenue						

0.3

1.1

—

Total segment revenue						

211.2

104.1

66.2

Segment adjusted operating profit from continuing operations			

20.7

6.4

15.7

42.8

The loss after tax of £0.2m from the Group’s associate is reported within the NanoTechnology Tools segment.
Included in the Service sector is revenue from equipment sales of £13.8m (2015: £7.7m) and from equipment leasing of £8.1m (2015: £0.3m).
These two business lines contributed £1.7m (2015 £0.7m) and £1.5m (2015: £0.2m) respectively to the Group’s operating profit.
Reconciliation of reportable segment profit																		

2016
£m

2015
£m

Adjusted profit for reportable segments from continuing operations				

44.6

42.8

Reversal of acquisition related fair value adjustments to inventory					

(0.2)

(0.2)

Reversal of acquisition related fair value adjustments to property, plant and equipment			

(0.8)

—

Acquisition related costs								

(2.5)

(2.2)
(9.9)

Restructuring costs								(2.9)

Restructuring costs – relating to associate						

(1.3)

—

Loss on disposal of subsidiary						

(0.9)

—

Contingent consideration – further amount deemed payable					

—

(6.8)

Contingent consideration deemed no longer payable						

4.9

1.4

(16.7)(21.7)

Amortisation and impairment of acquired intangibles					

—

0.1Financial expenditure							(11.1)(13.1)

Profit/(loss) before income tax on continuing operations					

13.1

(9.6)

Financial income								Depreciation, capital expenditure, amortisation and impairment of intangibles and capitalised development costs arise in the following segments:
2016
2015
															Capital								
Depreciation
expenditure
Depreciation							£m£m
£m

NanoTechnology Tools						

2.6

1.3

3.0

Capitalexpenditure£m

2.6

Industrial Products						

1.6

0.8

1.9

1.4

Service						

1.7

3.1

0.3

0.1

Unallocated Group items						

0.4

0.5

0.4

1.3

Total						

6.3

5.7

5.6

5.4

98

Oxford Instruments plc Report and Financial Statements 2016

Capitalised
development
costs
£m

NanoTechnology Tools					

13.6

5.8

19.0

6.1

Industrial Products						

5.1

2.4

6.2

1.9

Service						

1.9

—

1.9

—

Total						

20.6

8.2

27.1

8.0

Strategic Report

2016
2015
															Capitalised								
Amortisation
development
Amortisation						and impairment
costs and impairment						£m£m£mb) Geographical analysis
The Group’s reportable segments are located across a number of geographical locations and make sales to customers in countries acrossthe world.

Revenue from continuing operations from external customers by destination																		

2016
£m

2015
£m

USA								

123.7

122.8

Rest of Europe							

45.9

52.4

Rest of Asia							

38.4

42.5

UK								

32.2

36.5

Japan								

34.9

32.0

China 							

51.8

54.3

Germany							

22.3

26.3

12.4

13.3

361.6

380.1

2016
£m

2015
£m

							

Non‑current assets (excluding deferred tax)																		

208.5

206.6

Germany								

7.5

17.7

USA							

37.3

27.9

Japan								

0.5

0.5

China								

0.5

0.7

Rest of Europe							

15.4

9.6

Rest of Asia								

0.1

0.1

UK								Rest of World							

2.7

1.3

Total							

272.5

264.4

																		

2016
£’000

2015
£’000

Audit of these Financial Statements							

150

125
282

Financial Statements

Rest of World							TotalGovernance

The analysis below shows revenue and non‑current assets (excluding deferred tax) for individual countries or regions that represent more than
5% of revenue.

4 Auditor’s remuneration– Audit of Financial Statements of subsidiaries pursuant to legislation				287– Taxation compliance services							

27

31– Audit related services								

14

29Total fees paid to the auditor and its associates					

478

467

Oxford Instruments plc Report and Financial Statements 2016

99

Company Information

Amounts received by the auditor and its associates in respect of:		

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 2016

5 Research and Development (“R&D”)
The total R&D spend by the Group is as follows:2016						
					 Nanotechnology
Industrial
				
Tools
Products
					
£m
£m

Total
£m

Nanotechnology
Tools
£m

R&D expense charged to theConsolidated Statement of Income			2015
Industrial
Products
£m

Total
£m

17.6

7.0

24.6

22.5

8.0

30.5

Less: depreciation of R&D related fixed assets

—

(0.8)

(0.8)

(0.2)

(0.6)

(0.8)

Add: amounts capitalised as fixed assets			

0.1

1.1

1.2

0.9

1.3

2.2

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

(2.8)

(1.1)

(3.9)

(3.2)

(1.5)

(4.7)

Add: amounts capitalised as intangible assets		

5.8

2.4

8.2

6.1

1.9

8.0

Total cash spent on R&D during the year		

20.7

8.6

29.3

26.1

9.1

35.2

In the current year an additional £0.6m (2015: £0.7m) impairment of capitalised development was included within administration and sharedservices in the Consolidated Statement of Income relating to the refocusing of the Plasma Technology business.
6 Acquisitions
Medical Imaging Resources, Inc
On 1 May 2015 the Group acquired 100% of the issued share capital of Medical Imaging Resources, Inc (“MIR”) for a net cash considerationof £8.7m. Further contingent consideration of up to £6.7m is payable based on the performance of the Oxford Instruments Healthcare
business in the year to 31 March 2016. MIR specialises in the build, lease, service and sale of mobile medical imaging labs.
The book and fair values of the assets and liabilities acquired are given in the table below. Fair value adjustments have been made to betteralign the accounting policies of the acquired business with the Group accounting policies and to reflect the fair value of assets and liabilities
acquired. The business has been acquired for the purpose of integrating into the Oxford Instruments Healthcare business where it is believedthat a number of synergies can be obtained.
																Book value£m

Adjustments£m

Fair value£mIntangible fixed assets							

—

5.7

5.7

Tangible fixed assets							

3.8

0.5

4.3

Inventories							

1.4

0.1

1.5

Trade and other receivables						

0.9

—

0.9

Trade and other payables							

(1.7)

—

(1.7)

Deferred tax							

0.2

(0.4)

(0.2)

Net debt							

(2.6)

—

(2.6)

Net assets acquired							

2.0

5.9

7.9

Goodwill									

4.5Total consideration									12.4Net debt acquired									

2.6Contingent consideration at acquisition								(6.3)

Net cash outflow relating to the acquisition							

8.7The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce and synergistic benefits expected
to arise from the acquisition. No deferred tax liability has been recognised relating to the fair value of acquired intangibles due to the Company
making a 3338 election in the USA to treat this acquisition as a trade and assets purchase for tax purposes.
The book value of receivables in the tables above represents the gross contractual amounts receivable.
The acquisition above contributed revenue of £16.0m and a reported operating profit of £6.3m to the Group’s result for the period. Had theacquisition taken place on 1 April 2015, the equivalent Group numbers would have been revenue of £363.1m and a reported operating profitof £24.6m.
Cash outflow from the acquisition of subsidiaries (net of cash acquired) includes £18.4m of deferred consideration paid for the acquisition of
Platinum Medical Imaging and Asylum Research Corporation in 2011 and 2012 respectively.

100

Oxford Instruments plc Report and Financial Statements 2016

On 27 May 2015 the Group entered into a strategic alliance with GD Intressenter AB of Sweden (“GDI”) to create the world’s largest company
in the highly specialised ultra high vacuum surface science field. The alliance comprises Oxford Instruments’ Omicron Nanotechnology
GmbH (“Omicron”) and associated subsidiaries and GDI’s Scienta Scientific AB (“Scienta”) and associated subsidiaries. Scienta Scientific AB
is registered and has its principal place of business in Sweden.

Strategic Report

7 Investment in associate

In consideration for new shares in Scienta, Oxford Instruments transferred all of its shares in the capital of Omicron to Scienta. Oxford
Instruments holds a 47% interest in the ordinary share capital of Scienta and GDI holds 53%. The investment has been accounted for as
an associate taking into account the following factors:• the Group holds substantial, but minority, voting rights (47%). All other rights are controlled by a single shareholder;• the Group has a minority number of Non‑Executive Board seats (two of five), with the remaining seats held by representatives of GDI; and• whilst the Group has certain veto rights in respect of key decisions, it cannot unilaterally direct the activities of the Scienta Group.

The Group’s share of loss in its equity accounted associate for the year was £1.5m. The Group did not receive any dividends from the associate.
										

£mCarrying value at 1 April 2015								

—Addition									14.6Share of loss of associate (net of tax)								(1.5)

Dividends received									

—Carrying value at 31 March 2016								13.1GovernanceThe book value of the net assets disposed of was £14.9m. The value of the shareholding acquired in Scienta was considered to be £14.6m
and as a result a £0.3m loss on disposal arose on the transaction. In addition, a further £0.6m has been provided in respect of certain liabilities
arising from the transaction.

Summary financial information for the equity accounted associate is as follows:																				

2016
£m

Non‑current assets									

3.2Current assets								

27.0
30.2
(21.4)

Non‑current liabilities									(4.0)

Total liabilities									(25.4)Net assets									

4.8Income								34.0Expenses									(37.2)

Loss for the year									(3.2)

Group’s share of net assets								

2.3Group’s share of loss									(1.5)

Financial Statements

Total assets									Current liabilities								According to the terms of the transaction, no dividend can be paid by the associate until 27 May 2017. Following that date, any dividend paid
must be agreed by both Oxford Instruments plc and GD Intressenter AB, up to a maximum of 50% of the previous year’s profit after tax.
Company Information

Oxford Instruments plc Report and Financial Statements 2016101

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 2016

8 Disposal of subsidiary and discontinued operations
On 23 November 2015 the Group disposed of its Austin Scientific business for a final consideration of £0.6m.
Effect of disposal on the financial position of the Group																				

2016
£m

Other intangible assets 									(1.7)

Property, plant and equipment 								(0.2)

Inventory 								(1.4)

Trade and other receivables 								(0.5)

Trade and other payables 								

0.3Net assets divested									(3.5)

Consideration received, satisfied in cash 								

0.6Cash disposed of 									

—Transaction expenses 									(0.1)

Net cash inflow 									

0.5Carrying value of net assets disposed of								(3.5)

Impairment of net assets to fair value less costs to sell							

2.8Currency translation differences transferred from translation reserve						

0.7Gain on disposal before impairment								

0.5Less impairment loss									(2.8)

Loss on disposal 									(2.3)

Tax on loss on disposal								

0.4Loss on disposal net of tax								(1.9)

Discontinued operations
At 31 March 2016 the Group’s Austin Scientific business was classified as a discontinued operation. It was considered a major class of businesson the basis that it was previously an operating segment referred to in the Group Strategic Report.
Results of discontinued operations																		

2016
£m

2015
£m

Revenue								

2.3

5.5

Expenses								

(2.8)

(5.6)
(0.1)

Adjusted loss from operating activities before income tax					(0.5)

Income tax credit								0.2

—Adjusted loss from operating activities after tax						

(0.3)

(0.1)

Loss on disposal								

(2.3)

—

Tax on loss on disposal								0.4

—Loss from discontinued operations after tax						

(2.2)

(0.1)

2016
pence

2015
pence

Earnings per share from discontinued operations																		Adjusted basic loss per share 							

(0.5)

(0.2)

Adjusted diluted loss per share							

(0.5)

(0.2)

Total basic loss per share								

(3.9)

(0.2)

Total diluted loss per share								

(3.8)

(0.2)

																		

2016
£m

2015
£m

(0.1)

Cash flows from discontinued operations

		

(0.9)

Net cash from investing activities							——Net cash from financing activities							——Net cash flows								

(0.9)

(0.1)

Net cash used in operating activities					

102Oxford Instruments plc Report and Financial Statements 2016																		

2016
£m

2015
£m

Interest receivable								

—0.1									

—

0.1

2016
£m

2015
£m

Strategic Report

9 Financial income

10 Financial expenditure																		Interest payable								

5.9

5.3

Interest charge on pension scheme net liabilities						

1.7

1.9

Unwind of discount on contingent consideration					

0.6

1.0

Unwind of discount on accrued expenses						

0.2

0.1

2.7

4.8

11.1

13.1

																		

2016
£m

2015
£m

Wages and salaries							

90.6

101.6

Social security costs								

9.3

11.7

11 Personnel costs

Contributions to defined contribution pension plans						

4.4

4.4

Charge/(credit) in respect of employee share options					

0.4

(0.2)

								

104.7

117.5

GovernanceFair value movement on derivative financial instruments														Directors’ emoluments are disclosed in the Remuneration Report on pages 59 to 75 of this Report and Financial Statements.
12 Employees
The average number of people employed by the Group (including Directors and temporary employees) during the year was as follows:
2016
Number

2015
Number

1,047

Production								

905Sales and marketing								

501

581

Research and Development								

390

462

Administration and shared services							

281

330

Total average number of employees							

2,077

2,420

Financial Statements																		Company Information

Oxford Instruments plc Report and Financial Statements 2016103

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 201613 Share option schemes
The Group operates three share option schemes:
All employee Share Incentive Plan (“SIP”)
All UK employees are eligible to participate in the Group’s HM Revenue and Customs approved SIP. Participating employees make a cash
contribution to the plan each month. The Group contributes a further amount equal to 20% of the employee’s contribution. Independent
trustees then purchase matching shares in the market on behalf of the employees. The matching shares vest on the completion by theparticipating employee of a further three years’ service and can be withdrawn from the plan tax‑free after five years’ service.
Executive Share Option Scheme (“ESO”)
Options awarded under the Executive Share Option Scheme are made annually to certain senior managers. The exercise prices are determinedaccording to the mid‑market closing share price on the day before the date of grant. Options have a life of ten years and a vesting period of
three years.
Senior Executive Long Term Incentive Scheme (“SELTIS”)
Options awarded under the Senior Executive Long Term Incentive Scheme are made annually to certain senior managers. The exercise prices
are nil. Options have a life of seven years and a vesting period of three years.
Both the Executive Share Option Scheme and Senior Executive Long Term Incentive Scheme are subject to performance conditions which canbe found in the Remuneration Report on pages 59 to 75.
Performance Share Plan Scheme (“PSP”)
Under the Performance Share Plan awards of performance shares (or nil cost options) are made annually to certain senior managers.
Awards have a life of ten years with vesting subject to achievement of performance targets and a vesting period of a minimum of three years(but may be up to five years).
Administrative expenses include a charge of £0.4m (2015: credit of £0.2m) in respect of the cost of providing share based remuneration.
The credit in the prior year arose as a result of options granted in 2012 under the Executive Share Option scheme failing to meet their vesting
conditions. The cost of share options is calculated by estimating the fair value of the option at grant date and spreading that amount over thevesting period after adjusting for an expectation of non‑vesting.
Fair values are determined using an internal valuation model based on a modified Black‑Scholes model. Expected volatility has been based on
historical volatility over a period of time of the same length as the expected option life and ending on the grant date. Half of the ESO options
issued before 2009, half of the PSP options and all SELTIS options use total shareholder return (“TSR”) as a performance condition. As TSR is amarket‑based performance condition, the accounting treatment differs from that for options subject to non‑market performance conditions.
This means that the TSR performance conditions have been incorporated into the calculation of the fair value as a discount in calculating thefair value.
For options granted in the years ended 31 March 2016 and 2015, the fair value per option granted and the assumptions used in thecalculation are as follows:																																Performance
Share Plan
SchemeJune 2015

Executive
Share Option
SchemeJune 2015

Performance
Share Plan
SchemeOctober 2014

Fair value at measurement date						

£6.96

£3.57

£6.58

Share price at grant date							£10.28£10.28£9.72

Exercise price							£nil£10.28£nil

Expected volatility							

38.5%

39.1%

34.6%

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

3 years

6 years

3 years

Expected dividend yield							

1.3%

1.3%

1.3%

Risk free interest rate							

1.0%

1.6%

1.0%

104

Oxford Instruments plc Report and Financial Statements 2016

2016														
NumberExercise								of shares
price		

2015Period when
exercisable

Numberof shares

Options subsisting at the year end on unissued ordinary shares				Strategic Report

The options existing at the year end were as follows:

Executive Share Option Schemes				
—

£2.19

15/07/08–14/07/15

980

9,500

£2.10

15/07/09–14/07/16

9,500

July 2005					July 2006				
September 2007					

6,000

£2.32

28/08/10–27/09/17

6,000

December 2008				

12,839£1.35

16/12/11–15/12/18

12,83920,562£2.04

17/12/12–16/12/19

24,646

100,075£7.05

07/01/14–06/01/21

111,075

December 2011				

330,540£9.90

14/12/14–13/12/21

369,470—£13.88

19/12/15–18/12/22

320,750

December 2012					June 2013					2,250£14.55

12/06/16–11/06/23

10,670March 2014					92,000£12.8920/03/17–19/03/24

94,000June 2014					338,400£14.15

13/06/17–12/06/24

388,600

July 2014				

16,375£12.6108/07/17–07/07/24

19,813

599,562£10.2815/06/18–14/06/25—

Total options subsisting on existing ordinary shares			

1,528,103			

1,368,343

Percentage of issued share capital				

2.7%			

2.4%June 2015			

		

Governance

December 2009				
January 2011				

Performance Share Plan				October 2014					120,325nil

10/10/17–09/10/21

June 2015				

112,718

nil

15/06/18–14/06/22—

Total options subsisting on existing ordinary shares			

233,043			

120,325

Percentage of issued share capital				

0.4%			

0.2%120,325

Options subsisting at the year end on existing ordinary shares held in trust
January 2011				

15,500nil

07/01/14–06/01/18

15,500December 2012				

—nil

19/12/15–18/12/19

32,800		

21,400nil

19/12/15–18/12/19

21,400Total options subsisting on existing ordinary shares held in trust		

36,900		

69,700Percentage of issued share capital				

0.1%			

0.1%June 2014			

Financial Statements

Senior Executive Long Term Incentive Scheme				The number and weighted average exercise prices of those options are as follows:2016														Weighted									average
Number							exercise priceof options

2015
Weighted
average
exercise price

Numberof options

Outstanding at the beginning of the period			£10.46

1,558,368£9.94

1,221,937

Granted during the year					£8.67720,880£10.58570,238(137,945)£12.45(35,675)£12.42£4.78(7,575)£5.68(40,501)

Lapsed during the year					£12.40(437,952)£9.74(55,361)

Outstanding at the year end					£9.251,798,046£10.46

1,558,368

Exercisable at the year end					£8.22495,016£8.26

550,010

The weighted average share price at the time of exercise of the options was £9.36 (2015: £12.06).

Oxford Instruments plc Report and Financial Statements 2016

105

Company Information

Forfeited during the year					Exercised during the year					Financial Statements

Notes to the Financial Statements continued
year ended 31 March 2016

14 Income tax expense
Recognised in the Consolidated Statement of Income																		

2016
£m

2015
£m

Current tax expense		
Current year								

4.8

6.5

Adjustment in respect of prior years							

(0.2)

(0.3)

								

4.6

6.2
(9.0)

Deferred tax expense		
Origination and reversal of temporary differences						(1.3)

Recognition of deferred tax not previously recognised						—

—Adjustment in respect of prior years							

0.6

(0.6)

									

(0.7)

(9.6)

Total tax expense/(credit)						

3.9

(3.4)

Profit/(loss) before income tax						

13.1

(9.6)

Income tax using the UK corporation tax rate of 20% (2015: 21%)				

2.6

(2.0)
1.2

Reconciliation of effective tax rate 		

Effect of: 		
Tax rates other than the UK standard rate							

2.2Change in rate at which deferred tax recognised						

(0.4)

—

Loss on disposal of held for sale assets							

0.3

—
(1.5)

Non‑taxable income and expenses							(0.4)

Tax incentives not recognised in the Consolidated Statement of Income				

(0.8)

—

Recognition of deferred tax not previously recognised						

(0.1)

—

Movement in unrecognised deferred tax							

0.3

(0.2)

Adjustment in respect of prior years							

0.2

(0.9)

Total tax expense/(credit)

3.9

(3.4)

Deferred tax – relating to employee benefits					

2.6

(2.3)

								

2.6

(2.3)

—

0.2

					

Taxation charge/(credit) recognised in other comprehensive income		Taxation charge/(credit) recognised directly in equity		
Deferred tax – relating to share options							Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were
substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were
substantively enacted on 26 October 2015. The UK deferred tax balances at 31 March 2016 have been calculated based on these rates whichwere substantively enacted at the balance sheet date. The Group carries tax provisions in relation to uncertain tax provisions arising from thepossible outcome of negotiations with tax authorities. Such provisions are a reflection of the geographical spread of the Group’s operations
and the variety of jurisdictions in which it carries out its activities.

106

Oxford Instruments plc Report and Financial Statements 2016

The following dividends per share were paid by the Group:
2016
pence

																		

2015
pence

Previous year interim dividend						

3.70

3.36

Previous year final dividend								

9.30

9.04

								

13.00

12.40

2016
pence

2015
pence

Strategic Report

15 Dividends per share

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

3.70

3.70

Final dividend							

9.30

9.30

								

13.00

13.00

16 Property, plant and equipment																					

Land andbuildings£mPlant andequipment£mFixtures andfittings
£m

Total
£m

Balance at 1 April 2014						

24.3

47.4

9.9

81.6

Additions – other						

0.2

3.6

0.6

4.4

Disposals						

—

(1.9)

—

(1.9)

Governance

The interim dividend was not provided for at the year end and was paid on 8 April 2016. The final proposed dividend of 13.0 pence per share(2015: 9.3 pence) was not provided at the year end and will be paid on 20 October 2016 subject to authorisation by the Shareholders at theforthcoming Annual General Meeting.

Cost				Effect of movements in foreign exchange rates				

0.1

1.0

—

1.1

Balance at 31 March 2015						

24.6

50.1

10.5

85.2
85.2

24.6

50.1

10.5

—

4.3

—

4.3

Additions – other						

0.1

5.2

0.2

5.5
(5.4)

Disposals						

(0.2)

(4.4)

(0.8)

Transfer from inventory						

—

0.5

—

0.5

Effect of movements in foreign exchange rates				

0.7

1.2

0.1

2.0

Balance at 31 March 2016					

25.2

56.9

10.0

92.1
47.2

Depreciation and impairment losses				Balance at 1 April 2014						

6.2

33.9

7.1

Depreciation charge for the year					

1.0

4.1

0.5

5.6

Disposals						

—

(1.7)

—

(1.7)

Effect of movements in foreign exchange rates				

0.3

0.7

—

1.0

Balance at 31 March 2015						

7.5

37.0

7.6

52.1

7.5

37.0

7.6

52.1

0.6

5.2

0.5

6.3
(2.4)

Disposals						

(0.2)

(1.7)

(0.5)

Effect of movements in foreign exchange rates				

0.2

0.7

—

0.9

Balance at 31 March 2016					

8.1

41.2

7.6

56.9

18.1

13.5

2.8

34.4

Carrying amounts				At 1 April 2014						At 31 March 2015 and 1 April 2015					

17.1

13.1

2.9

33.1

At 31 March 2016						

17.1

15.7

2.4

35.2

At 31 March 2016, the net book value of plant and equipment included £0.2m (2015: £1.2m) of assets under construction.

Oxford Instruments plc Report and Financial Statements 2016

107

Company Information

Balance at 1 April 2015						Depreciation charge for the year					Financial Statements

Balance at 1 April 2015						Additions – business combinations					Financial Statements

Notes to the Financial Statements continued
year ended 31 March 201617 Intangible assets
					
					
					
				
Goodwill				£mCustomer
relatedacquiredintangibles£mTechnology
relatedacquiredintangibles£m

Development
costs
acquiredintangibles£m

Development
costsinternallygenerated£m

Software
£m

Total
£m

330.1

Cost							Balance at 1 April 2014			

108.0

46.4

125.2

6.5

43.1

0.9

Additions – internally generated		

—

—

—

—

8.0

1.0

9.0

Effect of movements in foreign exchange rates

(0.4)

1.7

(1.5)

(0.6)

(0.8)

—

(1.6)

Balance at 31 March 2015			

107.6

48.1

123.7

5.9

50.3

1.9

337.5

Balance at 1 April 2015			

107.6

48.1

123.7

5.9

50.3

1.9

337.5
10.2

Additions – business combinations		

4.5

5.7

—

—

—

—

Additions – internally generated		

—

—

—

—

8.2

0.2

8.4

Disposals			

(2.1)

(3.8)

(15.1)

(4.1)

(2.7)

—

(27.8)

Effect of movements in foreign exchange rates

1.2

1.4

3.4

—

1.0

—

7.0

111.2

51.4

112.0

1.8

56.8

2.1

335.3

Balance at 31 March 2016		

Amortisation and impairment losses							Balance at 1 April 2014			

1.6

21.2

25.9

4.5

29.0

—

82.2

Amortisation and impairment charge for the year

—

7.3

14.2

0.2

5.4

—

27.1

Effect of movements in foreign exchange rates

(0.2)

0.6

(2.7)

(0.6)

(0.2)

—

(3.1)

Balance at 31 March 2015			

1.4

29.1

37.4

4.1

34.2

—

106.2

Balance at 1 April 2015			

1.4

29.1

37.4

4.1

34.2

—

106.2

Amortisation and impairment charge for the year

—

3.6

12.9

0.2

4.5

—

21.2

Disposals			

(0.4)

(3.8)

(8.2)

(3.9)

(0.5)		

(16.8)

Effect of movements in foreign exchange rates

0.1

0.9

2.0

—

0.9

—

3.9

Balance at 31 March 2016		

1.1

29.8

44.1

0.4

39.1

—

114.5

Carrying amounts							At 1 April 2014			

106.4

25.2

99.3

2.0

14.1

0.9

247.9

At 31 March 2015 and 1 April 2015		

106.2

19.0

86.3

1.8

16.1

1.9

231.3

At 31 March 2016			

110.1

21.6

67.9

1.4

17.7

2.1

220.8

The following intangible assets are considered material by the Directors as they represent 78% (2015: 73%) of total acquired intangible assets:
2016																								Amortisation							periodIntangible asset category						
£m
Years

Trademarks – Andor						

10.2

15.0

2015
Remainingamortisation
period
Years

£m

12.8

11.0

Technology, know‑how and patents – Andor:						– Product related						

41.6

12.0

9.8

45.9

– Software related					

7.9

10.0

7.8

8.9

Technology, know‑how and patents – Asylum				

11.5

12.0

8.7

12.5

108

Oxford Instruments plc Report and Financial Statements 2016																		

2016
£m

2015
£m

NanoTechnology Tools		
NanoScience								

6.5

6.3

NanoAnalysis								

9.6

9.3

Asylum							

21.1

20.8

Andor							

61.4

61.4

Strategic Report

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

Industrial Products		
Industrial Analysis								

3.9

3.6

Magnetic Resonance								

2.3

2.3

Austin Scientific								—

1.8OI Healthcare							

5.3

0.7

								

110.1

106.2

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

Governance

Service		

Accounting standards require an impairment test to be carried out by determining the recoverable amount of each cash generating unit
which contains goodwill. The recoverable amount is calculated as the higher of the fair value less costs to sell or the value in use of the CGU.
In the Group’s case the recoverable amount is based on value in use calculations. Value in use is calculated by discounting expected future
cash flows and in particular Board‑approved five year cash flow forecasts, prepared by the management of each CGU, are used together with
3% (2015: 3%) per annum revenue growth and 1% (2015: 1%) growth in overheads for each CGU for the subsequent 20 years. Revenue isassumed to grow more quickly than overheads due to the effect of operational gearing. These assumptions, combined with the operational
leverage of the CGUs, result in cash flow growth for the subsequent 20 years ranging from from 4.6% to 9.4%. These rates are considered
to be at or below long‑term market trends for the Group’s businesses, determined by reference to the Group’s historical growth rates andbenchmarking with comparator companies.
Key assumptions
The growth rates are based on industry growth factors. Changes in selling prices and direct costs are based on past practices and expectationsof future changes in the market.
The pre‑tax weighted average costs of capital used for NanoTechnology Tools, Industrial Products and Service in impairment testing are
12.1%–12.9% (2015: 13.6%–14.2%), 13.0%–13.4% (2015: 13.8%–14.3%) and 13.3% (2015: 14.8%) respectively in line with the risk
associated with each of the business segments. Management have estimated these discount rates by reference to past experience and an
industry average weighted cost of capital as adjusted for appropriate risk factors reflecting current economic circumstances and the risk profilesof each CGU.

Financial Statements

The key assumptions are those regarding discount rates, growth rates, expected selling volumes and prices and direct costs during the period.

Sensitivity analysis
The Group’s estimate of impairments are most sensitive to changes in the discount rate and forecast growth rate. Sensitivity analysis has
been carried out by reference to both of these assumptions. This demonstrated that a 201 basis point increase in the discount rate would
be required in order to eliminate current headroom of £20.3m and result in an impairment in the Andor business. For the Asylum business a
295 basis point increase would required to eliminate the current headroom of £12.7m. No impairment would arise in any other business.

Oxford Instruments plc Report and Financial Statements 2016

Company Information

Similarly a 334 basis point reduction in the growth rate would be required in order to result in an impairment in the Andor business and a
490 basis point reduction in the Asylum business, with no impairment arising in any other business.

109

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 201618 Deferred tax
Movements in deferred tax assets and liabilities were as follows:
				
				
				
				

Property,plant and		
equipment
Inventory£m£m

Employeebenefits£mIntangible
assets£m

Tax losses
£m

Other
£m

Total
£m

Balance 31 March 2014			

0.4

2.2

11.1

(19.7)

2.4

2.8

(0.8)

Reclassification			

—

—

—

—

—

—

—

Recognised in income			

(1.1)

0.7

(0.9)

6.7

2.0

2.2

9.6

Recognised in other comprehensive income

—

—

2.3

—

—

—

2.3
(0.2)

Recognised directly in equity		

—

—

(0.2)

—

—

—

Acquisitions			

—

—

—

0.9

0.8

(0.2)

1.5

Foreign exchange			

(0.1)

—

0.2

1.0

(0.3)

0.7

1.5

Balance 31 March 2015			

(0.8)

2.9

12.5

(11.1)

4.9

5.5

13.9

Reclassification							Recognised in income			

1.5

0.3

(1.4)

1.7

(0.7)

(0.8)

0.6

Recognised in other comprehensive income

—

—

(2.6)

—

—

—

(2.6)

Recognised directly in equity		

—

—

—

—

—

—

—
(0.1)

Acquisitions			

(0.3)

—

—

—

—

0.2

Disposals			

0.1

—

—

1.4

(0.4)

(0.1)

1.0

Foreign exchange			

0.1

0.1

0.1

(0.1)

0.3

—

0.5

Balance 31 March 2016			

0.6

3.3

8.6

(8.1)

4.1

4.8

13.3

2015
£m

2016
£m

2015
£m

13.9

Certain deferred tax assets and liabilities have been offset as follows:
Assets
					
					
2016
					
£m

2015
£m

Liabilities
		
2016
£m

Net

Gross assets/(liabilities)				

33.6

38.9

(20.3)(25.0)

13.3

Offset				(14.6)(18.8)

14.6

18.8

—

—

Net assets/(liabilities)				

19.0

20.1

(5.7)

(6.2)

13.3

13.9

																		

2016
£m

2015
£m

Deductible temporary differences							

1.0

1.1

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

Tax losses								

9.1

4.9

								

10.1

6.0

The tax losses and the deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not beenrecognised in respect of these items as it is not probable that future taxable profits will be available in the subsidiaries concerned against
which the Group can utilise the brought forward tax losses.
No deferred tax liability has been recognised in respect of £33.1m (2015: £31.7m) of undistributed earnings of overseas subsidiaries since themajority of such distributions would not be taxable. In other cases the Group considers that it is able to control the timing of remittances sothat any tax is not expected to arise in the foreseeable future.
19 Inventories																		

2016
£m

2015
£m

Raw materials and consumables							

19.7

21.2

Work in progress								

20.6

28.0

Finished goods								

20.8

21.6

								

61.1

70.8

The amount of inventory recognised as an expense was £175.1m (2015: £190.3m). In the ordinary course of business, the Group makes
impairment provisions for slow‑moving, excess and obsolete inventory as appropriate. Inventory is stated after charging impairments of £1.9m
in the current period (2015: £2.9m). In the current year £0.2m (2015: £nil) was reversed relating to previous impairments. Impairments areincluded within gross profit.
Inventory carried at fair value less costs to sell is £nil (2015: £nil).

110

Oxford Instruments plc Report and Financial Statements 2016																		

2016
£m

2015
£m

78.1

Trade receivables 								69.2Less provision for impairment of receivables						

(2.0)

(2.3)

Net trade receivables							

67.2

75.8

Prepayments							

4.3

3.9

Accrued income								

0.7

2.6

Other receivables							

5.3

5.0

								

77.5

87.3

Strategic Report

20 Trade and other receivables

Trade receivables are non‑interest‑bearing. Standard credit terms provided to customers differ according to business and country and are
typically between 30 and 60 days.
The maximum exposure to credit risk for trade and other receivables by geographic region was:
2016
£m

2015
£m

UK								

6.8

6.7

China							

10.7

12.3

Japan							

10.3

10.6

USA							

17.0

26.7

Germany							

3.2

4.2

Rest of Europe							

17.1

10.1

Rest of Asia							

6.6

8.0

Rest of World								

4.4

3.7

Total							

76.1

82.3

2016
£m

2015
£m

Governance																		The ageing of financial assets comprising net trade receivables and other receivables at the reporting date was:																		

51.0

50.7

15.2

18.0

More than 30 days but less than 91 days overdue					

6.0

8.5

More than 90 days overdue						

3.9

5.1

								

76.1

82.3

2016
£m

2015
£m

In both periods presented the entire provision against trade receivables relates to balances more than 90 days overdue.
The movement in the allowance for impairment of trade receivables during the year was as follows:																		Balance at start of year								

2.3

1.6

(Decrease)/increase in allowance							

(0.3)

0.7

Balance at end of year								

2.0

2.3

Financial Statements

Current (not overdue)								Less than 31 days overdue							Valuation allowances are used to record provisions for credit losses. The valuation allowance is reduced and the asset impaired when thecustomer is in liquidation.

																		

2016
£m

2015
£m

Cash balances							

21.8

25.1

Bank overdraft								

(1.4)

—

Cash and cash equivalents in the Consolidated Statement of Cash Flows				

20.4

25.1

All cash and cash equivalents are available for use by the Group.

Oxford Instruments plc Report and Financial Statements 2016

111

Company Information

21 Cash and cash equivalents

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 2016
22 Financial risk management
The Group’s multinational operations and debt financing expose it to a variety of financial risks. In the course of its business, the Group is
exposed to foreign currency risk, interest rate risk, liquidity risk, commodity risk and credit risk. Financial risk management policies are set by
the Board of Directors. These policies are implemented by a central treasury function that has formal procedures to manage foreign exchangerisk, interest rate risk and liquidity risk, including, where appropriate, the use of derivative financial instruments. Commodity risk is managed
locally by the operating businesses. The Group has clearly defined authority and approval limits.
In accordance with its treasury policy, the Group does not hold or use derivative financial instruments for trading or speculative purposes.
Such instruments are only used to manage the risks arising from operating or financial assets or liabilities or highly probable future transactions.
The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates, interest rates and certain
commodity prices.
The Group has adopted hedge accounting for a limited number of related commodity contracts as outlined below. However, in common
with a number of other companies, the Group has decided that the additional costs of meeting the extensive documentation requirements of
IAS 39 to apply hedge accounting to derivative financial instruments used for hedging exposure to foreign currency and interest rate volatility
cannot be justified. Accordingly, the Group does not use hedge accounting for such derivatives.
Foreign currency risk
Foreign currency risk arises both where sale or purchase transactions are undertaken in currencies other than the respective functional currenciesof Group companies (transactional exposures) and where the results of overseas companies are consolidated into the Group’s reporting currencyof Sterling (translational exposures). The Group has operations around the world which record their results in a variety of different local functional
currencies. In countries where the Group does not have operations, it invariably has some customers or suppliers that transact in a foreign
currency. The Group is therefore exposed to the changes in foreign currency exchange rates between a number of different currencies but theGroup’s primary exposures relate to the US Dollar, the Euro and the Japanese Yen. To reduce uncertainty, the Group maintains a rolling hedge
equivalent to 80% of the exposure expected to arise over the following twelve months. The hedge comprises a mixture of fixed forward contracts
and option‑based products. The remaining 20% is sold on the spot market as it arises. The fair value of outstanding currency contracts recognised
as a liability as at 31 March 2016 amount to £5.8m (2015: £4.1m) and those recognised as an asset amount to £1.5m (2015: £3.4m).
Movements in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Income immediately. However,in order to facilitate a more meaningful comparison of the Group’s performance year on year the element of these movements that relate tohedges in respect of future sales are treated as an adjusting item in the calculation of adjusted earnings (Note 1).
The Group’s translational exposures to foreign currency risks can relate both to the Consolidated Statement of Income and net assets ofoverseas subsidiaries. The Group’s policy is not to hedge the translational exposure that arises on consolidation of the Consolidated Statementsof Income of overseas subsidiaries.
Interest rate risk
Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of interest and also the interest cash flowrisk that results from borrowing at variable rates. The Group’s policy is to use a mixture of revolving short‑ and medium‑term floating rate
debt underpinned by longer‑term fixed rate debt. The short‑ and medium‑term floating rate debt provides flexibility to reduce debt levels as
appropriate. The longer‑term fixed rate debt provides stability and cost certainty to the Group’s financing structure.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal
and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages this risk by
maintaining adequate committed lines of funding from high quality lenders. The facilities committed to the Group as at 31 March 2016 are set
out in Note 25.
Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets such as cash
balances, derivative financial instruments, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables
and cash balances. The amounts recognised in the Consolidated Statement of Financial Position are net of appropriate allowances for doubtfulreceivables, estimated by the Group’s management based on prior experience and their assessment of the current economic environment.
Trade receivables are subject to credit limits and control and approval procedures in the operating companies.

112

Oxford Instruments plc Report and Financial Statements 2016

Strategic Report

Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its tradereceivables. Credit risk associated with cash balances and derivative financial instruments is managed by transacting with financial institutions
with high quality credit ratings. In particular, a Board‑approved policy sets out guidelines for which categories of institutions may be used andthe maximum amount which may be invested with each institution within a particular category. Accordingly, the Group’s associated credit risk
is limited. The Group has no significant concentration of credit risk. The Group’s maximum exposure to credit risk is represented by the carrying
amount of each financial asset, including derivative financial instruments, in the Group Consolidated Statement of Financial Position.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2016 was£96.5m (2015: £109.3m).
																		

2016
£m

2015
£m

67.2

75.8

6.0

5.0
25.1

Cash and cash equivalents							21.8Forward exchange contracts							

1.5

3.4

								

96.5

109.3

The maximum exposure to credit risk for trade receivables is discussed in Note 20.

GovernanceTrade receivables								Other receivables								Other receivables include £3.1m (2015: £0.9m) in respect of VAT and similar taxes which are not past due date.
Commodity risk
The Group is exposed to changes in commodity prices, particularly in respect of copper used as a major component in one of the Group’s USA
operations. It manages this exposure using derivative commodity hedging instruments.
At 31 March 2016, the Group had outstanding commodity hedge contracts with a fair value liability of £0.1m (2015: £0.1m asset) that were
designated and effective as cash flow hedges of committed and highly probable forecast transactions. Fair value movements of these contracts
have been deferred in equity until the hedged transaction takes place. These contracts all mature within one year of the Consolidated
Statement of Financial Position date.

Capital management
The Board considers capital to comprise share capital, reserves and the net cash or net debt position of the Company. The Company was in a
net debt position at the year end. Total capital at the end of the current year totalled £271.2m (2015: £243.4m).
The Board’s long‑term objective is to have an efficient capital structure by maintaining a balance between the higher returns that might bepossible with higher levels of borrowings and the advantages and security afforded by a sound capital position. This is monitored by reference
to the ratio of net debt to earnings before interest, tax, depreciation and amortisation (“EBITDA”) and the Board has set itself internal limits,which are well inside any covenants the Group has with lenders. The Group maintains the right to purchase its own shares in the market; thetiming of these purchases would depend on market prices. Buy and sell decisions are made on a specific transaction basis by the Board.

Financial Statements

A £0.1m loss net of tax (2015: £0.2m gain) has been deferred in equity as at 31 March 2016 in respect of these contracts. A gain of £0.2m(2015: £0.1m loss) has been recycled to current assets (inventory) in respect of contracts designated as cash flow hedges that have matured
during the year to 31 March 2016.

The Board carefully considers dividend payments and the Company moved from a fixed dividend policy to a progressive one in the year ended
March 2011. In doing this, the Board will look to increase dividends as adjusted earnings per share increase although there will not be a direct
correlation. The Board does not have a policy to pay a fixed dividend yield or to maintain a fixed rate of dividend cover, but assess both ofthese metrics together with dividends paid by peers when assessing what dividend to recommend.

The Board encourages employees to hold shares in the Company. As well as various share option plans (full details of which are given in
Note 13), from April 2008 all UK employees have been offered the opportunity to take part in a Share Incentive Plan (“SIP”). Under this plan,
employees are able to invest up to £1,500 each tax year in shares in the Company. The Company awards one additional free share (a matching
share) for every five shares bought by each employee.
There were no changes to the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are
subject to externally imposed capital requirements.

Oxford Instruments plc Report and Financial Statements 2016

113

Company Information

As set out in the Chief Executive’s Statement, the Group’s strategy is to grow its business in its core markets of physical and materials scienceand to exploit convergence to expand into life sciences. An essential part of this will be to make acquisitions. In line with the objective of
maintaining a balance between borrowings and equity, the Group would seek to finance smaller “bolt‑on” acquisitions from operating cash
flow thus maintaining balance sheet efficiency. Larger acquisitions would be financed either by equity or a mixture of equity and debt so as toensure the Group has a manageable ratio of net debt to EBITDA.

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 201623 Financial instruments
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated Statement of Financial Position
are as follows:2016													
Fair
Carrying						
value
amount						
hierarchy
£m

2015
Fair
value
£m

Carrying
amount
£m

Fair
value
£m

67.2

75.8

75.8

Assets carried at amortised cost					Trade receivables						67.2Other receivables						

6.0

6.0

5.0

5.0

Cash and cash equivalents						

21.8

21.8

25.1

25.1

Assets carried at fair value					Derivative financial instruments:					– Copper hedging contracts (designated as an IAS 39 hedge)		

2

—

—

0.1

0.1

– Foreign currency contracts				

2

1.5

1.5

3.3

3.3

							

1.5

1.5

3.4

3.4

(4.1)

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

2

(5.8)

(5.8)

(4.1)

– Copper hedging contracts (designated as an IAS 39 hedge)		

2

(0.1)

(0.1)

—

—

Contingent consideration 					

3

(6.6)

(6.6)

(17.5)(17.5)(12.5)(12.5)(21.6)(21.6)(86.9)

						
Liabilities carried at amortised cost					Trade and other payables						(82.4)(82.4)(86.9)

Bank overdraft					

(1.4)

(1.4)

—

—

Borrowings					(148.6)(148.6)(144.0)(144.0)The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in theabove table.
Derivative financial instruments
Derivative financial instruments are marked to market using market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal and interest cash flows using
the market rate of interest at the reporting date.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the carrying amount is deemed to reflect the fair value. All otherreceivables/payables are discounted to determine their fair value. Advances received are excluded from other payables above as these
are not considered to be financial liabilities.
Contingent consideration
The fair value of contingent consideration is estimated based on the forecast future performance of the acquired business over a timeframe
determined as part of the acquisition agreement, discounted as appropriate. Key assumptions include growth rates, expected selling volumes
and prices and direct costs during the period.
Fair value hierarchy
The table above gives details of the valuation method used in arriving at the fair value of financial instruments. The different levels have been
identified as follows:• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and• Level 3: inputs for the asset or liability that are not based on observable market data.
There have been no transfers between levels during the year.

114

Oxford Instruments plc Report and Financial Statements 2016														31 March 2016						Carrying
amount£m

Contractual
cash flows£m

Due within
one year£m

Due one to
five years£mTrade and other payables						

82.4

82.4

82.4

—

Contingent consideration					

6.6

6.6

6.6

—

Foreign exchange contracts				

5.8

5.8

5.8

—

Bank overdraft						

1.4

1.4

1.4

—

Borrowings						

148.6

148.6

1.6

147.0

							

244.8

244.8

97.8

147.0

														31 March 2015						Carrying
amount£m

Contractual
cash flows£m

Due within
one year£m

Due one to
five years
£m

0.8

86.9

86.9

86.1

17.5

18.8

18.8

—

Foreign exchange contracts					

4.1

4.1

4.1

—

Bank overdraft						

—

—

—

—

Borrowings						

144.0

144.0

—

144.0

							

252.5

253.8

109.0

144.8

																																				Carrying
amount2016£m

Carrying
amount2015£m

GovernanceTrade and other payables						Contingent consideration						Strategic Report

Maturity of financial liabilities

At the reporting date the interest rate profile of the Group’s interest‑bearing financial instruments was:

Variable rate instruments		
Financial assets								

21.8

25.1

Financial liabilities								(80.7)(74.8)(69.3)(69.2)

Fixed rate instruments		
Financial liabilities								The Group has estimated the impact on the Consolidated Statement of Income and on Equity of the following changes in market conditions at
the balance sheet date:• one percentage point increase in interest rates;• ten percentage point weakening in the value of Sterling against all currencies;

Financial Statements

Sensitivity analysis• ten percentage point strengthening in the value of Sterling against all currencies;• five percentage point increase in the cost of copper; and• five percentage point decrease in the cost of copper.
The sensitivities above represent the Directors’ view of reasonably possible changes in each risk variable, not worst case scenarios or stresstests. The outputs from the sensitivity analysis are estimates of the impact of market risk assuming that the specified changes occur at the year
end and are applied to the risk exposures at that date. Accordingly, they show the impact on the balance sheet of an instantaneous shock.
The calculations include all hedges in place at the year end.

						
						
						

1% increase
in interest rates£m

10% weakening 10% strengthening
in Sterling1
in Sterling2£m£m

5% increase incopper prices£m

5% decrease incopper prices£m

At 31 March 2016					Impact on Consolidated Statement of Income			

—

(8.5)

6.9

—

—

Impact on equity				—(37.6)

(6.1)

0.1

(0.1)

Impact on Consolidated Statement of Income			

—

(4.5)

5.5

—

—

Impact on equity					

—(43.3)(15.5)——At 31 March 2015					1. Of the effect on the Consolidated Statement of Income, £7.4m (2015: £6.3m) would have been recognised on the “mark‑to‑market” line (Note 1).
2. Of the effect on the Consolidated Statement of Income, £(9.1)m (2015: £(5.1)m) would have been recognised on the “mark‑to‑market” line (Note 1).

Oxford Instruments plc Report and Financial Statements 2016

115

Company Information

Actual results in the future may differ materially from these estimates due to commercial actions taken to mitigate any potential losses fromsuch rate movements, to the interaction of more than one sensitivity occurring and to further developments in global financial markets.
As such, this table should not be considered as a projection of likely future gains and losses.

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 201624 Called up share capital
Issued and fully paid ordinary shares:
2016
Numberof shares

2015
Numberof shares

At the beginning of the year							 57,291,336

57,250,835

7,575

40,501At the end of the year								 57,298,911

57,291,336																									Issued for cash								2016														Number									of shares£m

2015
Numberof shares£m

Allotted, called up and fully paid					Ordinary shares of 5p each						 57,298,911

2.9

57,291,336

2.9																Numberof shares

Aggregate
nominal value

Consideration
per share

New issues of ordinary shares of 5p each during the year			
Exercise of executive share options						

4,084

£204

£2.04

Exercise of executive share options – share appreciation rights				

3,491

£175

£7.05‑£9.90

The total consideration received from exercise of share options in the year was £nil (2015: £0.2m).
The holders of the ordinary shares are entitled to receive dividends as declared, a proportionate amount of capital on a winding up of theCompany and one vote per share at meetings of the Company.
25 Borrowings						
Current					Effective
interest rate

2016
£m

Earlier of repricing
date or maturity date

2015
£m

Bank overdrafts						On demand

1.4—

European Investment Bank Loan – unsecured			August 2020

1.6—								3.0—						
Non‑current					

2016
£m

2015
£m

3.30%

Effective
interest rate

Earlier of repricing
date or maturity date

Revolving credit facility – unsecured				2.21%

April 2016

79.3

74.8

European Investment Bank Loan – unsecured			

3.30%

August 2020

23.3

24.8

Loan Notes – unsecured					5.10%March 2021								

44.4

44.4

147.0

144.0

The Group’s undrawn committed facilities available at 31 March 2016 were £45.7m comprising the undrawn portion of the Group’s £125.7m
revolving credit facility. This facility expires on 28 February 2020.
The European Investment Bank loan is repayable in equal quarterly instalments commencing November 2016 with the final maturity inAugust 2020.

26 Retirement benefit obligations
The Group operates defined benefit plans in the UK and USA; both offer pensions in retirement and death in service benefit to members.
Pension benefits are related to members’ final salary at retirement and their length of service. Both schemes have been closed to new members
since 2001 and closed to future accrual since 2010.
The amounts recognised in the Consolidated Statement of Financial Position are:2016						
					
UK
USA
					
£m
£m

2015
Total
£m

UK
£m

USA
£m

Total
£m

Present value of funded obligations			

266.0

8.5

274.5

283.8

8.3

292.1

Fair value of plan assets			(235.0)(4.5)(239.5)(233.9)(4.7)(238.6)

31.0

4.0

35.0

49.9

3.6

53.5

Recognised liability for defined benefit obligations

116

Oxford Instruments plc Report and Financial Statements 2016

2016						
					
UK
USA
					
£m
£m

2015
Total
£m

UK
£m

USA
£m

Total
£m

283.8

8.3

292.1

235.7

7.2

242.9

9.5

0.3

9.8

10.5

0.2

10.7

Benefits paid				

(6.1)

(0.5)

(6.6)

(4.8)

(1.0)

(5.8)

Remeasurement (gain)/loss on obligation		(21.2)

0.1(21.1)

42.4

0.8

43.2

Benefit obligation at the beginning of the year
Interest on defined benefit obligation			

Exchange rate adjustment				

Benefit obligation at the end of the year		

—

0.3

0.3

—

1.1

1.1

266.0

8.5

274.5

283.8

8.3

292.1

Total
£m

UK
£m

USA
£m

Total
£m

196.6

Strategic Report

Reconciliation of the opening and closing balances of the present value of the defined benefit obligation

Reconciliation of the opening and closing balances of the fair value of plan assets
2016						
					
UK
USA
					
£m
£m

2015

233.9

4.7

238.6

191.9

4.7

8.0

0.1

8.1

8.6

0.2

8.8

Contributions by employers			

6.8

0.4

7.2

6.3

0.2

6.5

Benefits paid				

(6.1)

(0.5)

(6.6)

(4.8)

(1.0)

(5.8)

Administrative expenses				

(0.4)

(0.1)

(0.5)

(0.4)

(0.1)

(0.5)

Actual return on assets excluding interest income		

(7.2)

(0.3)

(7.5)

32.3

0.1

32.4

—

0.2

0.2

—

0.6

0.6

235.0

4.5

239.5

233.9

4.7

238.6

																		

2016
£m

2015
£m

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

GovernanceFair value of plan assets at the beginning of the year		Interest on plan assets				

Expense recognised in the Consolidated Statement of Income

1.7

1.9

4.4

4.4

									

6.1

6.3

The Group has agreed a basis for deficit recovery payments with the trustees of the UK pension scheme. The annual deficit recovery payment
to the UK scheme was £6.8m for the financial year, payable through to and including 2021. For the years up to and including 2018,
the payment will rise by the higher of inflation and growth in dividend per share; thereafter, the payment will increase in line with inflation.
The weighted average duration of the defined benefit obligation at 31 March 2016 was 18.9 years (2015: 18.8 years).
The Group has considered the requirements of IFRIC14 and concluded that there is no impact on the amounts recognised in respect ofretirement benefit obligations.

Financial Statements

Total – defined benefit expense							Contributions to defined contribution schemes						The Group expects to contribute approximately £7.4m to defined benefit plans in the next financial year.
The pension costs are recorded in the following lines of the Consolidated Statement of Income:																		

2016
£m

2015
£m

Cost of sales								

1.5

1.4

Selling and marketing costs							

1.0

1.0

1.0

0.7

0.9

1.3

Financial expenditure								

1.7

1.9

									

6.1

6.3

Oxford Instruments plc Report and Financial Statements 2016

117

Company Information

Administration and shared services							Research and Development								Financial Statements

Notes to the Financial Statements continued
year ended 31 March 2016

26 Retirement benefit obligations continued
Remeasurement gains and losses shown in the Consolidated Statement of Comprehensive Income
2016
£m

2015
£m

Actual return on assets excluding interest income					

(7.5)

32.4

Experience gain on scheme obligations							

15.6

2.2

– Financial								5.0(45.9)– Demographic								

0.5

0.5

																		Changes in assumptions underlying the present value of scheme obligations		Cumulative actuarial losses reported in the Consolidated Statement of Comprehensive Income since 1 April 2004, the transition date to IFRS,
are £35.9m (2015: £49.5m cumulative actuarial losses).
History of experience gains and losses are as follows:						
						

2016
£m

2015
£m

2014
£m

2013
£m

2012
£m

Present value of benefit obligations			

274.5

292.1

242.9

245.9

215.4

Fair value of plan assets					(239.5)(238.6)(196.6)(198.0)(180.2)

35.0

53.5

46.3

47.9

35.2

Recognised liability for defined benefit obligations		

Difference between the expected and actual return:					Amount					

(7.5)

32.4

(7.1)

8.7

(3.0)

% of scheme assets				

(3%)

14%

(4%)

4%

(2%)

Experience gains/(losses) on scheme liabilities:					Amount					

15.6

2.2

(0.9)

0.4

(4.7)

% of the present value of the scheme liabilities		

6%

1%

—%

—%

2%

The table below shows the sensitivity of the Consolidated Statement of Financial Position to changes in the significant pension assumptions:						
						
						

Balance at
31 March 2016£m

Discount rate(‑0.1% p.a.)£m

Inflation rate(+0.1% p.a.)£mLife expectancy(+one year)£m

Value of funded obligations				

274.5

279.4

279.2

282.8

Fair value of plan assets						(239.5)(239.5)(239.5)(239.5)

Deficit						

35.0

39.9

39.7

43.3

The valuation of defined benefit liabilities is most sensitive to changes in the discount rate, inflation rate and mortality rate. The sensitivities
have been calculated by running the liability calculations in full using the alternative assumptions. In each case, only the indicated assumption
has changed by the amount stated. For the inflation sensitivity, the impact on the assumptions that are based on RPI inflation, such as CPI
inflation and the inflation‑linked pension increases, has been included.
Defined benefit scheme – UKA full actuarial valuation of the UK plan was carried out as at 31 March 2015 and has been updated to 31 March 2016 by a qualified
independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were (in nominal terms):						
						
														As at31 March
2016
%

As at
31 March
2015%

Discount rate					

3.5%

3.4%

Rate of increase in pensions in payment (“3LPI”)				

2.4%

2.4%

Rate of increase in pensions in payment (“5LPI”)				

2.9%

2.9%

Rate of inflation (“CPI”)						

1.9%

1.9%

Mortality – pre and post‑retirement – males and females
93% of S1PA tables (96% for females)
94% of S1PA tables (97% for females)					future improvement in line with CMI 2015 future improvement in line with CMI 2013				with 1.25% long‑term trendwith 1% long‑term trend

118

Oxford Instruments plc Report and Financial Statements 2016																		

2016
years

2015
years

Pre‑retirement – males								

24.5

22.4

Pre‑retirement – females								

26.4

24.5

Post‑retirement – males								

22.7

23.7

Post‑retirement – females								

24.5

26.0

Strategic Report

The mortality assumptions imply the following expected future lifetime from age 65:

The assumptions have been chosen by the Directors from a range of possible actuarial assumptions, which, due to the timescales covered,
may not be borne out in practice.
The assets in the plan were:																																				Value at
31 March
2016£mValue at
31 March
2015
£m

92.2

97.8

47.2

55.6

Gilts							

37.6

34.2

Cash 							

28.6

24.8

Alternative							

29.4

21.5

								

235.0

233.9

Governance

Equities								Corporate bonds								Defined benefit scheme – USA
A full actuarial valuation of the USA plan was carried out as at 31 December 2014, which for reporting purposes has been updated
to 31 March 2016 by a qualified independent actuary. The major assumptions used by the actuary for the purposes of IAS 19 were(in nominal terms):
As at
31 March
2016
%

As at
31 March
2015
%

3.75

Discount rate						3.75Rate of increase to pensions in payment					

0.00

0.00

Rate of inflation						

2.25

2.25

Mortality – pre- and post‑retirement										
						

RP‑2014 with projection RP‑2000CH with projection
Scale MP‑2015 (fully generational), Scale BB (fully generational),
male and female
male and female

The assets in the plan were:																																				Value at
31 March
2016£mValue at
31 March
2015£mEquities								

1.8

1.9

Bonds								

2.7

2.8

									

4.5

4.7

In the UK employees are offered participation in the defined contribution Oxford Instruments Stakeholder Plan. The Company contribution
rate and employee contribution rate varies between grades and whether the individual had previously been in the Defined Benefit scheme.
The Company contribution ranges between 4% and 14% of base salary. The Group also operates a 401k defined distribution plan in the USA.
Details of pension schemes contributions made in respect of Directors can be found in the Remuneration Report on pages 59 to 75.

Oxford Instruments plc Report and Financial Statements 2016

119

Company Information

Defined contribution schemes

Financial Statements						
						
														

Financial Statements

Notes to the Financial Statements continued
year ended 31 March 201627 Trade and other payables																		

2016
£m

2015
£m

Trade payables 							

33.7

36.4

Customer deposits								

13.4

18.0

Social security and other taxes							

2.5

3.1

Accrued expenses and deferred income						

43.3

42.1
17.5

Contingent consideration due within one year						

6.6Other creditors							

2.9

4.5

Current trade and other payables 						

102.4

121.6

Amounts due after more than one year – accrued expenses					

—

0.8Total trade and other payables 							

102.4

122.4

Contingent consideration relates to amounts payable in respect of acquisitions. It is reassessed at the end of each year to its fair value.
																														Balance at 1 April 2015								Contingent
consideration
£m

17.5

Fair value of contingent consideration on acquisitions in the year						

6.3Unwind of discount in respect of contingent consideration 						

0.6Contingent consideration paid 								(13.3)

Contingent consideration released to the Consolidated Statement of Income					(4.9)

Effect of movement in foreign exchange								

0.4Balance at 31 March 2016								

6.628 Provisions for other liabilities and charges														

Warranties£m

Restructuring
£m

Other
£m

Total
£m

Balance at 1 April 2015					

7.1

5.8

3.2

16.1

Provisions made during the year					

3.4

1.4

0.9

5.7

Provisions used during the year					

(2.1)

(3.6)

(0.3)

(6.0)

Provisions released during the year					

(2.0)

(1.7)

—

(3.7)

Effect of movement in foreign exchange					

(0.1)

—

0.1

—

Balance at 31 March 2016					

6.3

1.9

3.9

12.1

Warranty provisions
Product warranty provisions reflect commitments made to customers on the sale of goods in the ordinary course of business and included
within the Group companies’ standard terms and conditions. Warranty commitments typically apply for a twelve‑month period. The provision
represents the Directors’ best estimate of the Group’s liability based on past experience.
Restructuring provision
The Restructuring provision relates to amounts provided as a result of the cost reduction programme initiated in the prior year. The provision
represents the Directors’ best estimate of the liability arising. The Directors expect these amounts to be settled within the next twelve months.
Other provisions
Other provisions relate to various obligations including obligations in respect of onerous leases, obligations to employees in Japan on
termination of their employment and claims and disputes such as intellectual property claims arising against the Group in the ordinary courseof business.
The Company has on occasion been required to take legal or other actions to defend itself against proceedings brought by other parties.
Provisions are made for the expected costs associated with such matters, based on past experience of similar items and other known factors,
taking into account professional advice received, and represent the Directors’ best estimate of the likely outcome. The timing of utilisation ofthese provisions is frequently uncertain reflecting the complexity of issues and the outcome of various court proceedings and negotiations.
Contractual and other provisions represent the Directors’ best estimate of the cost of settling future obligations and reflect the Directors’
assessment of the likely settlement method, which may change over time. However, no provision is made for proceedings which have been,or might be brought by other parties against Group companies unless the Directors, taking into account professional advice received, assesses
that it is more likely than not that such proceedings may be successful. The Group’s expectation is that the other provisions are likely to be
utilised within a twelve‑month period.

120

Oxford Instruments plc Report and Financial Statements 2016

LeasesNon‑cancellable future total minimum operating lease rentals are payable as follows:																		

2016
£m

2015
£m

Within one year							

3.2

3.6

Between one and five years							

5.4

6.4

Over five years							

2.1

2.0

								

10.7

12.0

Strategic Report

29 Operating leases

During the year ended 31 March 2016, £3.0m was recognised as an expense in the Consolidated Statement of Income in respect of operatingleases (2015: £2.4m).

30 Capital commitments
During the year ended 31 March 2016, the Group entered into contracts to purchase property, plant and equipment which are expected to besettled in the following financial year for £nil (2015: £nil).

Governance

The majority of operating leases relate to properties occupied by the Group in the course of its business. There are no material contingent rent
payment arrangements, purchase options or escalation clauses. It is expected that most leases could be renewed on the existing or similarterms. The leases do not impose any material restrictions in respect of dividends, additional debt requirements or further leasing.

31 Contingencies
In an international group of companies, a variety of legal claims arise from time to time. The Board, having taken legal advice, are of theopinion that any ongoing actions and investigations will not have a material impact on the Group’s financial position.
32 Related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note.
The remuneration of key management personnel is as follows:
2016
£m

2015
£m

Short‑term employee benefits							

1.5

1.2

Post‑employment benefits								

0.2

0.1

Share‑based payment							

—

0.1Total								

1.7

1.4

Short‑term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
During the year the Company paid £0.2m (2015: £0.2m) to Imperialise Ltd, a company for which Nigel Keen is a Director. The payment wasfor his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2015: £nil).

Financial Statements																		During the year, the Group supplied services and materials to, and purchased services and materials from, its associate on an arm’s length
basis. It had the following transactions with its associate during the year:
Revenue£m

Purchases£m

Receivables£m

Payables£m

Scienta Omicron GmbH						

2.0

—

3.6

—

							2015						Revenue£m

Purchases£m

Receivables£m

Payables£m

Scienta Omicron GmbH						

—

—

—

—

33 Subsequent events
The interim dividend of 3.7p per share (total cost £2.1m) was paid after the year end. In addition on 9 June 2015, the Directors proposed a
final dividend of 9.3p per ordinary share (total cost £5.4m). The total amount of £7.5m has not been provided for and there are no income
tax consequences.

Oxford Instruments plc Report and Financial Statements 2016

121

Company Information							2016						Financial Statements

Notes to the Financial Statements continued
year ended 31 March 2016
34 Exchange rates
The principal exchange rates to Sterling used were:Year end rates								

2016

2015

US Dollar								

1.44

1.48

Euro							

1.26

1.38

162

178

Yen						

		Average translation rates 2016							US Dollar

Euro

Yen

April

						

1.50

1.37

180

May

						

1.52

1.37

186

June

						

1.55

1.40

192

July

						

1.57

1.41

194

August						

1.55

1.39

190

September						

1.53

1.36

184

October						

1.53

1.38

184

November						

1.53

1.41

186

December						

1.49

1.39

181

January						

1.45

1.33

175

February						

1.40

1.29

165

March

						

1.41

1.27

160

Average translation rates 2015							US Dollar

Euro

Yen

April

						

1.68

1.21

172

May

						

1.68

1.22

172

June

						

1.69

1.24

172

July

						

1.69

1.25

173

August						

1.67

1.26

173

September						

1.64

1.27

175

October						

1.61

1.28

179

November						

1.58

1.27

183

December						

1.56

1.27

186

January						

1.53

1.31

182

February						

1.52

1.35

181

March

						

1.51

1.38

181

122

Oxford Instruments plc Report and Financial Statements 2016

Parent Company Statement of Financial Position
as at 31 March 2016

2015
(Restated)£m

Assets			Non‑current assets			
Intangible assets							

d

2.1

1.8

Tangible assets							

c

1.3

1.6

Investments in subsidiary undertakings						

e

320.2

320.0

Deferred tax assets							

h

1.9

3.1

									

325.5

326.5
95.4

Strategic Report																			2016								Notes£mCurrent assets			
104.4
1.3

2.8

Cash at bank and in hand								

1.4

5.1

									

107.1

103.3

Total assets								

432.6

429.8

Debtors							

			Equity			GovernancefCurrent income tax recoverable							Capital and reserves attributable to the Company’s equity Shareholders			
Share capital								

2.9

2.9

Share premium account								

61.5

61.5

Capital redemption reserve 							

0.1

0.1

Other reserves								

7.6

7.6

Profit and loss account								

126.0

135.3

									

198.1

207.4

Liabilities			Non‑current liabilities			
144.0

i

7.1

11.4

Provisions for liabilities 							

h

0.4

0.4

154.5

155.8

30.1

36.1

Long‑term loans																Current liabilities			Bank loans and overdrafts								
g

49.9

30.5

									

80.0

66.6

Other creditors							Total liabilities								

234.5

222.4

Total liabilities and equity						

432.6

429.8

Financial Statements

147.0

Retirement benefit obligations						The Financial Statements were approved by the Board of Directors on 15 June 2016 and signed on its behalf by:

Gavin Hill
Director

Company Information

Ian Barkshire
Director
Company number: 775598

Oxford Instruments plc Report and Financial Statements 2016123

Financial Statements

Statement of Changes in Equity
for the year ended 31 March 2016						
					
Share
					
capital
					
£m

Share
premium
account£m

Capital		redemption
Other
reserve
reserves£m£mProfitand lossaccount
£m

Total
£m

Balance at 1 April 2014 (restated)			

2.9

61.3

0.1

7.6

152.6

224.5

Loss for the year				

—

—

—

—

(8.8)

(8.8)

Other comprehensive income: 						Remeasurement of defined benefit liability, net of tax		

—

—

—

—

(1.0)

(1.0)

Total comprehensive expense for the year			

—

—

—

—

(9.8)

(9.8)
0.2

Proceeds from shares issued 			

—

0.2

—

—

—

Share options awarded to employees			

—

—

—

—

—

—

Share options awarded to employees of subsidiaries		

—

—

—

—

(0.2)

(0.2)

Tax charge in respect of share options			

—

—

—

—

(0.2)

(0.2)

Dividends paid				

—

—

—

—

(7.1)

(7.1)

Balance at 1 April 2015 (restated)			

2.9

61.5

0.1

7.6

135.3

207.4

Loss for the year				

—

—

—

—

(5.4)

(5.4)

Other comprehensive income: 						Remeasurement of defined benefit liability, net of tax		

—

—

—

—

3.5

3.5

Total comprehensive income for the year			

—

—

—

—

(1.9)

(1.9)

Proceeds from shares issued 			

—

—

—

—

—

—

Share options awarded to employees			

—

—

—

—

0.3

0.3

Share options awarded to employees of subsidiaries		

—

—

—

—

0.1

0.1

Dividends paid				

—

—

—

—

(7.6)

(7.6)

Balance at 31 March 2016			

2.9

61.5

0.1

7.6

126.2

198.3

Details of issued, authorised and allotted share capital are included in Note 24 to the Group Financial Statements.
Details of treasury shares held by the Company are included as a note to the Consolidated Statement of Changes in Equity.
Details of the Group’s share option schemes are included in Note 13 to the Group Financial Statements.
Details of the Group’s defined benefit pension scheme are included in Note 26 to the Group Financial Statements.
Details of dividends paid are included in Note 15 to the Group Financial Statements.
Other reserves relates to premium on shares issued as part of acquisitions made in the year to 31 March 1987.

124

Oxford Instruments plc Report and Financial Statements 2016

Notes to the Parent Company Financial Statements
year ended 31 March 2016

Measurement convention

Oxford Instruments plc is a company incorporated and domiciled in
the UK.

The Financial Statements are prepared on the historical cost basis
except that the following assets and liabilities are stated at their fairvalue: derivative financial instruments.

These Financial Statements were prepared in accordance withFinancial Reporting Standard 101 Reduced Disclosure Framework(“FRS 101”). The amendments to FRS 101 (2013/14 Cycle) issued inJuly 2015 and effective immediately have been applied.
In preparing these Financial Statements, the Company applies
the recognition, measurement and disclosure requirements ofInternational Financial Reporting Standards as adopted by the EU(“Adopted IFRS”), but makes amendments where necessary in order
to comply with Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken.

In these Financial Statements, the Company has applied theexemptions available under FRS 101 in respect of the following
disclosures:• a Cash Flow Statement and related notes;• comparative period reconciliations for share capital, tangible fixed
assets, intangible assets and investment properties;• disclosures in respect of transactions with wholly owned
subsidiaries;• the effects of new but not yet effective IFRS;• an additional balance sheet for the beginning of the earliest
comparative period following the reclassification of items in the
Financial Statements (see Note n); and• disclosures in respect of the compensation of key
management personnel.
As the consolidated Financial Statements of Oxford Instruments plc
include the equivalent disclosures, the Company has also
taken the exemptions under FRS 101 available in respect of
the following disclosures:• IFRS 2 Share-based Payments in respect of Group settled
share‑based payments;• certain disclosures required by IFRS 13 Fair Value
Measurement and the disclosures required by IFRS 7 Financial
Instrument Disclosures.
The accounting policies set out below have, unless otherwise stated,been applied consistently to all periods presented in these Financial
Statements and in preparing an opening FRS 101 IFRS Balance
Sheet at 1 April 2014 for the purposes of the transition to FRS 101
Adopted IFRS.

Income tax on the profit or loss for the year comprises current anddeferred tax. Income tax is recognised in profit or loss except to theextent that it relates to items recognised directly in equity, in whichcase it is recognised in equity.
Current tax is the expected tax payable on the taxable income for theyear, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initialrecognition of goodwill; the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit; and differences
relating to investments in subsidiaries to the extent that they willprobably not reverse in the future.
The amount of deferred tax provided is based on the expectedmanner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at thebalance sheet date.
A deferred tax asset is recognised only to the extent that it isprobable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to theextent that it is no longer probable that the related tax benefit will
be realised.
Additional income taxes that arise from the distribution of dividends arerecognised at the same time as the liability to pay the related dividend.
Non‑derivative financial instruments
Non‑derivative financial instruments comprise trade and otherdebtors, cash and cash equivalents, loans and borrowings, and tradeand other creditors.
Trade and other debtors
Trade and other debtors are recognised initially at fair value.
Subsequent to initial recognition they are measured at amortised costusing the effective interest method, less any impairment losses.
Trade and other creditors
Trade and other creditors are recognised initially at fair value.
Subsequent to initial recognition they are measured at amortised costusing the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.

Oxford Instruments plc Report and Financial Statements 2016

125

Company Information• certain disclosures required by IAS 36 Impairment of Assets in
respect of the impairment of goodwill and indefinite life intangible
assets; andTaxation

Financial Statements• disclosures in respect of capital management;

The Financial Statements have been prepared on a going concern
basis, based on the Directors’ opinion, after making reasonableenquiries, that the Company has adequate resources to continue inoperational existence for the foreseeable future.

GovernanceIn the transition to FRS 101, the Company has applied IFRS 1 whilst
ensuring that its assets and liabilities are measured in compliancewith FRS 101. An explanation of how the transition to FRS 101 has
affected the reported financial position, financial performance andcash flows of the Company is provided in Note n.

Going concern

Strategic Reporta) Accounting policies

Financial Statements

Notes to the Parent Company Financial Statements continued
year ended 31 March 2016a) Accounting policies continued

Non‑financial assets

Non‑derivative financial instruments continued

The carrying amounts of the Company’s non‑financial assets,other than deferred tax assets, are reviewed at each reporting date todetermine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated.

Interest‑bearing borrowings
Interest‑bearing borrowings are recognised initially at fair value lessattributable transaction costs. Subsequent to initial recognition,interest‑bearing borrowings are stated at amortised cost using theeffective interest method, less any impairment losses. Details of theGroup’s interest‑bearing borrowings are included in Note 25 to theGroup Financial Statements.
Intra‑Group lending
The Company has lent funds to and from its UK subsidiaries oninterest‑free terms. These amounts are repayable on demand.
They are stated at cost less any impairment losses.
Derivative financial instruments
The Company’s accounting policies for financial instruments are
the same as the Group’s accounting policies under IFRS, namely
IAS 32 Financial Instruments: Presentation, IAS 39 Financial
Instruments: Recognition and Measurement and IFRS 7 Financial
Instruments: Disclosures. These policies are set out in accounting
policy “(e) Financial instruments” in the Group accounting policies,
on page 86.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of tangible fixed assets have different useful lives,
they are accounted for as separate items of tangible fixed assets.
Depreciation is charged to the profit and loss account on astraight‑line basis over the estimated useful lives of each part of an
item of tangible fixed assets. The estimated useful lives are as follows:
Computer equipment
Motor vehicles

4 years
4 years

Depreciation methods, useful lives and residual values are reviewed ateach balance sheet date.
Intangible assets
Intangible assets represents internally developed software.
Amortisation is charged to the profit and loss account on astraight‑line basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Intangible assets are amortised fromthe date they are available for use. The estimated useful lives are
as follows:
Computer software

10 years

Impairment excluding deferred tax assets
Financial assets (including trade and other debtors)
The Company assesses at each balance sheet reporting date whether
there is any objective evidence that a financial asset, or group offinancial assets, is impaired. A financial asset, or group of financial
assets, is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that haveoccurred after the initial recognition of the asset (an incurred “lossevent”) and that loss event has an impact on the estimated future
cash flows of the financial asset or group of financial assets that canbe reliably estimated.

126

Oxford Instruments plc Report and Financial Statements 2016

The recoverable amount of an asset or cash generating unit is thegreater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to theirpresent value using a pre‑tax discount rate that reflects current market
assessments of the time value of money and the risks specific to theasset. For the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group ofassets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets(the “cash generating unit” or “CGU”).
An impairment loss is recognised if the carrying amount of an asset
or its CGU exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised
in respect of CGUs are allocated first to reduce the carrying amountof any goodwill allocated to the units, and then to reduce thecarrying amounts of the other assets in the unit (group of units)
on a pro‑rata basis.
Impairment losses recognised in prior periods are assessed at eachreporting date for any indications that the loss has decreased or
no longer exists. An impairment loss is reversed if there has been achange in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if noimpairment loss had been recognised.
Employee benefits
Defined contribution plans
A defined contribution plan is a post‑employment benefit planunder which the Company pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
pension plans are recognised as an expense in the profit and loss
account in the periods during which services are rendered by
employees.
Defined benefit plans
A defined benefit plan is a post‑employment benefit plan otherthan a defined contribution plan. The Company’s net obligation in
respect of defined benefit pension plans is calculated by estimating
the amount of future benefit that employees have earned in returnfor their service in the current and prior periods; that benefit is
discounted to determine its present value, and the fair value of any
plan assets (at bid price) are deducted. The Company determines thenet interest on the net defined benefit liability/(asset) for the period
by applying the discount rate used to measure the defined benefit
obligation at the beginning of the annual period to the net defined
benefit liability/(asset).
The discount rate is the yield at the reporting date on bonds that have acredit rating of at least AA that have maturity dates approximating theterms of the Company’s obligations and that are denominated in thecurrency in which the benefits are expected to be paid.

The calculation of the defined benefit obligations is performed by aqualified actuary using the projected unit credit method. When thecalculation results in a benefit to the Company, the recognised asset
is limited to the present value of benefits available in the form of any
future refunds from the plan or reductions in future contributions
and takes into account the adverse effect of any minimum funding
requirements.

Short‑term benefits
Short‑term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service isprovided. A liability is recognised for the amount expected to be paid
under short‑term cash bonus or profit‑sharing plans if the Company
has a present legal or constructive obligation to pay this amount asa result of past service provided by the employee and the obligation
can be estimated reliably.

Termination benefits are recognised as an expense when the Company isdemonstrably committed, without realistic possibility of withdrawal, to aformal detailed plan to either terminate employment before the normal
retirement date, or to provide termination benefits as a result of an offer
made to encourage voluntary redundancy. Termination benefits forvoluntary redundancies are recognised as an expense if the company has
made an offer of voluntary redundancy, it is probably that the offer will
be accepted, and the number of acceptances can be estimated reliably.
If benefits are payable more than twelve months after the reporting
date, then they are discounted to their present value.
Share‑based payment transactions

Provisions
A provision is recognised in the Balance Sheet when the Company
has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an
outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash
flows at a pre‑tax rate that reflects risks specific to the liability.
LeasesPayments (excluding costs for services and insurance) made underoperating leases are recognised in the profit and loss account on astraight‑line basis over the term of the lease. Lease incentives received
are recognised in the profit and loss account as an integral part of thetotal lease expense.
Foreign currencies
The Company enters into forward exchange contracts and options
to mitigate the currency exposures that arise on sales and purchases
denominated in foreign currencies. Transactions in foreign currencies
are converted into Sterling at the rate ruling on the date of thetransaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rates ruling at the balance sheet
date or at the appropriate forward contract rates. Exchange profits
and losses arising from the above are dealt with in the profit andloss account.
Own shares held by Employee Benefit Trust (“EBT”)
Transactions of the Group‑sponsored EBT are included in the Group
Financial Statements. In particular, the trust’s purchase of shares in
the Company are debited directly to equity.
Investments
Investments in subsidiaries are stated at cost, less any provision for
impairment, where appropriate.

Oxford Instruments plc Report and Financial Statements 2016

127

Company Information

The grant date fair value of share‑based payments awards granted
to employees is recognised as an employee expense, with acorresponding increase in equity, over the period in which theemployees become unconditionally entitled to the awards. The fairvalue of the awards granted is measured using an option valuation
model, taking into account the terms and conditions upon which
the awards were granted. The amount recognised as an expense
is adjusted to reflect the actual number of awards for which therelated service and non‑market vesting conditions are expected tobe met, such that the amount ultimately recognised as an expense
is based on the number of awards that do meet the related service
and non‑market performance conditions at the vesting date. For
share‑based payment awards with non‑vesting conditions, the grant
date fair value of the share‑based payment is measured to reflect
such conditions and there is no true‑up for differences between
expected and actual outcomes.

Transactions of the Company‑sponsored ESOP trust are treatedas being those of the Company and are therefore reflected in the
Company Financial Statements. In particular, the trust’s purchases
and sales of shares in the Company are debited and credited directly
to equity.

Financial Statements

Termination benefits

Own shares held by ESOP trust

Governance

The Company is the sponsoring employer of a Group-wide defined
benefit pension plan. The net defined benefit cost of the plans ischarged to participating entities on the basis of the proportion ofscheme membership attributable to each legal entity at the reporting
date. The contributions payable by the participating entities are
determined on the same basis.

Where the Company grants options over its own shares to theemployees of its subsidiaries it recognises, in its individual Financial
Statements, an increase in the cost of investment in its subsidiaries
equivalent to the equity settled share‑based payment charge
recognised in its consolidated Financial Statements with thecorresponding credit being recognised directly in equity. Amounts
recharged to the subsidiary are recognised as a reduction in thecost of investment in subsidiary. If the amount recharged exceeds
the increase in the cost of investment the excess is recognised asa dividend.

Strategic Report

Remeasurements arising from defined benefit plans comprise
actuarial gains and losses, the return on plan assets (excludinginterest) and the effect of the asset ceiling (if any, excluding interest).
The Company recognises them immediately in other comprehensive
income and all other expenses related to defined benefit plans in
employee benefit expenses in profit or loss.

Financial Statements

Notes to the Parent Company Financial Statements continued
year ended 31 March 2016a) Accounting policies continued
Provisions
Provisions are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past expectations or
events which can be reasonably estimated. The timing of recognition requires the application of judgement to existing facts and circumstances
which can be subject to change. Amounts provided represent the Group’s best estimate of exposure based on currently available information.
Dividends on shares presented within Shareholders’ funds
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately
authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in thenotes to the Financial Statements.
Financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company
considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract as acontingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
b) Loss for the year
The Company’s loss for the financial year was £5.4m (2015: loss of £8.8m). Other comprehensive income in the year was £3.5m(2015: expense of £1.0m). The expense will not subsequently be reclassified to profit or loss.
The auditor’s remuneration comprised £150,000 (2015: £125,000) for the statutory audit.
The average number of people employed by the Company (including Directors) during the year was 51 (2015: 62). All of these individuals
were involved in administration.
The aggregate payroll costs (including Directors) of these people were as follows:																		

2016
£m

2015
£m

Wages and salaries								

4.4

5.2

Social security costs								

0.6

0.6

Other pension costs							

0.2

0.2

								5.26.0The share‑based payment expense was £0.8m (2015: income of £0.2m). Details of the Group’s share option schemes are included in Note 13
to the Group Financial Statements.
Full details of the emoluments paid to Directors can be found in the Remuneration Report on pages 59 to 75.
c) Tangible fixed assets																								Motorvehicles£mComputerequipment
£m

Total
£m

Cost			Balance at 1 April 2015							

0.1

5.5

5.6

Additions							

—

0.2

0.2

Disposals							

(0.1)

—

(0.1)

Balance at 31 March 2016						

—

5.7

5.7

Depreciation			
Balance at 1 April 2015							

—

4.0

4.0

Charge for year							

—

0.4

0.4

Balance at 31 March 2016						

—

4.4

4.4

Net book value			At 31 March 2015							

0.1

1.5

1.6

At 31 March 2016							

—

1.3

1.3

128

Oxford Instruments plc Report and Financial Statements 2016																				Software£m

Cost
Balance at 1 April 2015									

1.8Additions									

0.3Balance at 31 March 2016								

2.1Strategic Reportd) Intangible assets

Depreciation
Balance at 1 April 2015									

—Charge for year									

—Balance at 31 March 2016								—Net book value
1.8

At 31 March 2016									

2.1The software assets are in the course of construction and therefore not currently being amortised.
e) Investments																																								Investments
in subsidiary
undertakings£m

GovernanceAt 31 March 2015									Cost or valuation
Balance at 1 April 2015									338.7Expense in respect of share options transferred to subsidiary undertakings					

0.2Balance at 31 March 2016								338.9Impairment
Balance at 1 April 2015 and 31 March 2016							18.7Net book value
320.0
320.2

Financial Statements

At 31 March 2015									At 31 March 2016									Company Information

Oxford Instruments plc Report and Financial Statements 2016129

Financial Statements

Notes to the Parent Company Financial Statements continued
year ended 31 March 2016e) Investments continued
The following is a full list of the subsidiaries and associates, the country of registration and percentage of equity owned directly or indirectly by
Oxford Instruments plc, as at 31 March 2016. This information is provided in accordance with Section 409 of the Companies Act 2006.
																		Country ofincorporation

Ultimateholding %Subsidiaries		Nanotechnology Tools Limited						

UK

100

Oxbridge Instruments Limited						

UK

100

Oxford Instruments Analytical Limited						

UK

100

Oxford Instruments Superconductivity Limited					

UK

100

Oxford Instruments Innovation Limited						

UK

100

Oxford Instruments NanoScience Limited						

UK

100

Oxford Magnet Technology Limited						

UK

100

Oxford Instruments Industrial Analysis Limited					

UK

100

Oxford Instruments Industrial Products Holdings Limited					

UK

100

Oxford Instruments Industrial Products Limited					

UK

100

RMG Technology Limited							

UK

100

Oxford Instruments NanoAnalysis Limited						

UK

100

Oxford Instruments Nanotechnology Tools Holdings Limited				

UK

100

Andor Technology Limited							

UK

100

Andor U.S. Holdings, Inc							

USA

100

Apogee Imaging Systems Inc						

USA

100

Bitplane AG							Switzerland

100

Bitplane Inc							

USA

100

Spectral Applied Research Inc						Canada100

Oxford Instruments Molecular Biotools Limited					

UK

100

Resonance Instruments Limited						

UK

100

Oxford Instruments Nanotechnology Tools Limited					

UK

100

Link Analytical Limited							

UK

100

Oxbridge Instruments Limited						

UK

100

Oxford Instruments AFM Limited						

UK

100

Oxford Instruments Industrial Analysis Limited					

UK

100

Link Analytical Limited							

UK

100

Oxford Instruments Plasma Technology Limited					

UK

100

Oxford Semicon Limited							

UK

100

Plasma Technology (UK) Limited 						

UK

100

Oxford Instruments Overseas Holdings Ltd					

UK

100

Oxford Instruments (Shanghai) Co. Limited 1					

China

100

Oxford Instruments Analytical Oy						Finland100

Oxford Instruments Holdings 2013 Inc						

USA

100

Oxford Instruments Holdings 2008 Inc						

USA

100

Oxford Instruments Holdings Inc						

USA

100

Omniprobe, Inc							

USA

100

Oxford Instruments (Tennessee) Inc						

USA

100

Oxford Instruments America Inc						

USA

100

Medical Imaging Resources Inc						

USA

100

Oxford Instruments OST Asset Co. LLC						

USA

100

Oxford Instruments OST Holdings LLC						

USA

100

Oxford Superconducting Technology Limited Partnership					

USA

100

Oxford Instruments Service LLC						

USA

100

Oxford Instruments Superconducting Wire LLC					

USA

100

Oxford Instruments Asylum Research Inc						

USA

100

130

Oxford Instruments plc Report and Financial Statements 2016

Asylum Research Technology Limited						Country ofincorporation

Ultimateholding %Taiwan100

Asylum Research UK Limited						

UK

100

Oxford Instruments KK							

Japan

100

Oxford Instruments Overseas Marketing Limited					

UK

100

Oxford Instruments X‑Ray Technology Inc						

USA

100

Oxford Instruments Holdings Europe Limited					

UK

100

Oxford Instruments Guernsey Ltd.						Guernsey100

Oxford Instruments Holdings GmbH						Germany

100

Oxford Instruments GmbH							Germany

100

Oxford Instruments Analytical GmbH						Germany

100

Roentgenanalytik Systeme GmbH & Co KG					Germany

100

India

100

Sweden100

Oxford Instruments Overseas Holdings 2008 Limited					

UK

100

Oxford Instruments UK 2013 Limited						

UK

100

Oxford Instruments Funding (Ireland) Limited					Ireland100

Oxford Instruments Funding (Luxembourg) S.a.r.l.					Luxembourg100

Oxford Instruments Private Limited						Singapore100

Oxford Instruments India Private Limited						

India

100

Oxford Instruments SAS							France100

Oxford Instruments Synchrotron Research Limited					

UK

100

Oxford Semicon Limited							

UK

100

Scienta Scientific AB1							Sweden47

Scienta Omicron GmbH1							Germany

47

Omicron NanoTechnology Japan, Inc.1						

Japan

47

Omicron Nanotechnology Limited1						

UK

47Omicron UHV Technik Limited1						

UK

47Scienta Omicron Inc.1							

USA

47

Scienta Omicron Nanotechnology EURL1						France47

VACGEN Limited 							

UK

47GovernanceOxford Instruments India Private Limited						Oxford Instruments Nordiska Ab						Strategic Report																		Associates		

1. Year end is 31 December.

Financial Statements

1

Equity owned by the Company represents issued ordinary share capital. All subsidiaries are consolidated in the Group accounts.
f) Debtors																		

2016
£m

2015
£m

91.3

Amounts falling due within one year:		
98.0
6.1

3.8

Prepayments and accrued income							

0.3

0.3

									

104.4

95.4

Other debtors include £3.4m (2015: £nil) due after more than one year.

Oxford Instruments plc Report and Financial Statements 2016131

Company Information

Amounts owed by subsidiary undertakings						Other debtors								Financial Statements

Notes to the Parent Company Financial Statements continued
year ended 31 March 2016g) Other creditors																		

2016
£m

2015
£m

Trade creditors							

0.6

0.5

Amounts owed to subsidiary undertakings						

40.7

23.3

Tax, social security and sales related taxes							

1.2

0.9

Other financial liabilities							

5.8

4.2

Accruals and deferred income						

1.6

1.6

								

49.9

30.5

																				Restructuringprovisionh) Provisions for liabilities

Balance at 1 April 2015									

0.4Provisions made during the year								

0.4Provisions used during the year 								(0.4)

Balance at 31 March 2016								

0.4Deferred tax asset																		

2016
£m

2015
£m

Balance at 1 April								

3.1

2.7

Profit and loss (debit)/credit							

(1.2)

0.4

Balance at 31 March								

1.9

3.1

The amounts of deferred tax assets are as follows:																											2016
£mRecognised
2015£m

Excess of depreciation over corresponding capital allowances				

0.5

0.3
0.5

Tax losses								

—Provisions								0.1

—Employee benefits – pension and share schemes						

1.3

2.3

									

1.9

3.1

The Company recognises deferred tax assets only to the extent that there will be suitable taxable profits from which the future reversal of theunderlying timing differences can be deducted.
Deferred tax assets have not been recognised in respect of the following items:																		

2016
£m

2015
£m

Tax losses								1.0—									1.0

—Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were
substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were
substantively enacted on 26 October 2015. The UK deferred tax balances at 31 March 2016 have been calculated based on these rates whichwere substantively enacted at the balance sheet date.

132

Oxford Instruments plc Report and Financial Statements 2016

Defined benefit scheme
The Oxford Instruments Pension Scheme (“The Scheme”), a defined benefit scheme, was closed to new members from 1 April 2001 and to
future accrual from the year to 31 March 2011. The Company continues to make deficit recovery contributions to this Scheme. Contributions
are based on the pension deficit of the Group as a whole. The assets of the Scheme are held in a separate trustee‑administered fund.

Strategic Reporti) Pension commitments

During the year, the Group went through a detailed exercise to attempt to identify an employer for each member of the scheme. The actuary
used this data to apportion the pension liability of each member to the appropriate employing company. For approximately one quarter ofmembers it was not possible to identify an employing company. The liability in respect of these members has been allocated to the employers
in proportion to the known liabilities for each employer.
Details of the scheme and most recent actuarial valuation can be found in Note 26 to the Group Financial Statements. The contributions paidby the Company to the Oxford Instruments Pension Scheme were £0.4m (2015: £0.4m).
Stakeholder pension schemej) Guarantees

Governance

The Company makes contributions to a stakeholder pension scheme. The pension costs charge for the year represents contributions payable by
the Company to the scheme. These amounted to £0.2m (2015: £0.2m). There were no outstanding contributions at the end of the financial
year (2015: £nil).

The Company has given a guarantee to the pension scheme in respect of the liability of its UK subsidiaries to the pension scheme.
The guarantee is for the excess of 105% of the liabilities of the scheme, calculated on the basis of Section 179 of the Pensions Act 2004,
over the assets of the scheme.
The Company and its UK subsidiaries have entered into a cross‑guarantee for £10.0m (2015: £10.0m) in respect of overdraft facilities of which£nil (2015: £nil) was drawn at the year end.
k) Commitments
At 31 March 2016, capital commitments contracted were £nil (2015: £nil) and authorised were £nil (2015: £nil).
l) Subsequent eventsm) Related party transactions
The Company has a related party relationship with its Directors and Executive Officers and with its wholly owned subsidiary companies.
Transactions with key management personnel are disclosed in the Remuneration Report on pages 59 to 75. There were no other significant
transactions with key management personnel in either the current or preceding year other than the following.
During the year the Company paid £0.2m (2015: £0.2m) to Imperialise Ltd, a company for whom Nigel Keen is a Director. The payment wasfor his services as Chairman of the Group. The liability due to Imperialise Ltd at the year end was £nil (2015: £nil).

Financial Statements

See Note 33 to the Group Financial Statements for details of dividends paid or declared after the balance sheet date.

Company Information

Oxford Instruments plc Report and Financial Statements 2016133

Financial Statements

Notes to the Parent Company Financial Statements continued
year ended 31 March 2016n) Explanation of transition to FRS 101
As stated in Note 1, these are the Company’s first Financial Statements prepared in accordance with FRS 101.
The accounting policies set out in note a) have been applied in preparing the Financial Statements for the year ended 31 March 2016, thecomparative information presented in these Financial Statements for the year ended 31 March 2015 and in the preparation of an opening
FRS 101 Balance Sheet at 31 March 2014 (the Company’s date of transition).
In preparing its FRS 101 Balance Sheet, the Company has adjusted amounts reported previously in Financial Statements prepared in accordancewith its old basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to FRS 101 has affected the Company’s
financial position and financial performance is set out in the following tables and the notes that accompany the tables.
1 April 2014						
						
Effect of 									
transition to 								
UK GAAPFRS 101
FRS 101
UK GAAP
				
Notes
£m
£m
£m
£m

31 March 2015
Effect oftransition to
FRS 101£m

FRS 101£m

Assets							Non‑current assets							
(i)

—

0.9

0.9

—

1.8

1.8

Tangible assets				Intangible assets			

2.5

(0.9)

1.6

3.4

(1.8)

1.6

Investments in subsidiary undertakings			

320.0

320.2

—

320.2

320.0

—

(iii)

0.4

2.2

2.6

0.8

2.3

3.1

					

323.1

2.2

325.3

324.2

2.3

326.5
95.4

Deferred tax assets			

Current assets							Debtors				

93.9

—

93.9

95.4

—

Current income tax recoverable			

—

—

—

2.8

—

2.8

Cash at bank and in hand				

1.5

—

1.5

5.1

—

5.1

					

95.4

—

95.4

103.3

—

103.3

Total assets			

418.5

2.2

420.7

427.5

2.3

429.8

Equity							Capital and reserves attributable to theCompany’s equity Shareholders			
Share capital				

2.9

—

2.9

2.9

—

2.9

Share premium account				

61.3

—

61.3

61.5

—

61.5

Capital redemption reserve 			

0.1

—

0.1

0.1

—

0.1

Other reserves				

7.6

—

7.6

7.6

—

7.6

Profit and loss account				

160.4

(7.8)

152.6

144.4

(9.1)

135.3

					

232.3

(7.8)

224.5

216.5

(9.1)

207.4

144.0

—

144.0
11.4

Liabilities							Non‑current liabilities							Long-term loans				Retirement benefit obligations		

141.4

—

141.4

(ii)

—

10.0

10.0

—

11.4

Provisions for liabilities 				

—

—

—

0.4

—

0.4

					

141.4

10.0

151.4

144.4

11.4

155.8

Current liabilities							Bank loans and overdrafts				

31.7

—

31.7

36.1

—

36.1

Other creditors				

13.1

—

13.1

30.5

—

30.5

					

44.8

—

44.8

66.6

—

66.6

Total liabilities			

186.2

10.0

196.2

211.0

11.4

222.4

Total liabilities and equity			

418.5

2.2

420.7

427.5

2.3

429.8

134

Oxford Instruments plc Report and Financial Statements 2016

(i) Software which was treated as a fixed asset under UK GAAP has been reclassified to intangible assets on transition to FRS 101.
(ii) Under UK GAAP (FRS 17), as the defined benefit scheme was a multi‑employer scheme of which the Company was unable to identify its
share of the defined benefit contribution plan’s underlying assets and liabilities, this scheme was accounted for as a defined contribution
scheme, recognising only the contribution payable by the Company. Under FRS 101 the multi‑employer exemption is no longer available.
The stated policy for charging the net defined benefit cost within the Group amongst the participating companies is to do so on the basisof the proportion of scheme membership attributable to each statutory entity. Therefore under FRS 101 the Company has recognised its
calculated share of the defined benefit liability on the Balance Sheet which was not previously recognised on the individual balance sheetof any UK company within the Group.

Strategic Report

Notes to the reconciliation of equity

The impact has been to increase non‑current liabilities at 1 April 2014 by £10.0m and at 31 March 2015 by £11.4m. As prescribed under
FRS 101 any actuarial gains and losses are recognised through the Statement of Comprehensive Income. In 2014/15 the defined benefit
deficit increased by £1.4m of which £1.3m related to actuarial losses, £0.4m net interest income and £0.1m scheme administrative costs.

Under UK GAAP, a deferred tax asset is recognised in relation to share options outstanding at the balance sheet date, based on the lowerof the cumulative accounting charge and the total expected future tax deductions. Under FRS 101, a deferred tax asset is recognised on
the total expected future tax deductions. As a result, the deferred tax asset and profit and loss account reserves have increased by £0.2m torecognise the higher deferred tax asset on the Company Balance Sheet as at the transition date.

Governance(iii) A deferred tax asset of £2.0m has been recognised at the transition date on the retirement benefit scheme liability which has been brought
onto the Balance Sheet under FRS 101. This results in an increase in the profit and loss account reserve of £2.0m. The increase in thepension scheme liability in the year to 31 March 2015, as described above, has given rise to an increase in the corresponding deferred tax
asset from £2.0m to £2.3m and has increased the profit and loss account reserve by £0.3m.

In addition, at 31 March 2015 as a result of the share option charges during the year, an adjustment is required to reduce the deferred tax
asset from £0.2m to £nil, reducing the profit and loss account reserves by £0.2m giving an overall transitional adjustment for the year to
31 March 2015 of £nil.
Reconciliation of profit for the year to 31 March 2015
In accordance with the exemption provided by Section 408 of the Companies Act 2006, the Company has not presented its own profit
and loss account. As a result of the adjustments noted above, the transition to FRS 101 has reduced the profit after tax for the year to
31 March 2015 by £9.1m. This relates to the net defined benefit cost of £9.1m.
Financial Statements
Company Information

Oxford Instruments plc Report and Financial Statements 2016135

Financial Statements

Historical Financial Summary						
						
						

2012
(Restated)2£m

2013(Restated)2
£m

2014
£m

2015
£m

2016
£m

Consolidated Statement of Income					Revenue from continuing operations				

337.3

350.8

360.1

380.1

361.6

Adjusted operating profit from continuing operations			

41.7

49.3

50.3

42.8

44.6

Other operating income					

7.0

—

—

—

—

Contingent consideration deemed no longer payable			

—

—

—

1.4

4.9

Reversal of acquisition related fair value adjustments			

(1.7)

(0.5)

(3.7)

(0.2)

(1.0)

Acquisition related costs					

(1.5)

(2.1)

(7.8)

(2.2)

(2.5)
(0.9)

Loss on disposal of subsidiary undertakings			

—

—

—

—

Contingent consideration – further amount deemed payable		

—

—

—

(6.8)

—

Restructuring costs					

—

—

—

(9.9)

(2.9)

Restructuring costs – relating to associate				

—

—

—

—

(1.3)

Settlement loss on US pension scheme				

—

—

(0.1)

—

—

Amortisation of acquired intangibles				(11.2)(13.8)(14.7)(21.7)(16.7)

Operating profit from continuing operations			

34.3

32.9

24.0

3.4

24.2

Net financing (costs)/income				

—

(4.5)

—

(13.0)(11.1)(Loss)/profit before taxation from continuing operations			

34.3

28.4

24.0

(9.6)

13.1

Income tax credit/(expense)					(10.9)

(7.4)

(5.8)

3.4

(3.9)

(Loss)/profit for the year from continuing operations			

23.4

21.0

18.2

(6.2)

9.2

Adjusted profit before tax from continuing operations 2			

40.2

47.0

47.1

35.7

37.0

Consolidated Statement of Financial Position					Property, plant and equipment				

28.2

32.9

34.4

33.1

35.2

Intangible assets					

78.1

91.9

247.9

231.3

220.8
13.1

Investment in associate					

—

—

—

—

Long‑term receivables					

—

—

—

—

3.4

Deferred and current tax					

7.6

14.9

(3.5)

14.6

13.9

Inventories					

59.3

58.1

68.3

70.8

61.1

Trade and other receivables				

61.0

71.8

86.2

90.7

79.0

Trade and other payables					(99.2)(112.5)(112.8)(126.5)(108.2)

Net assets excluding net cash				

135.0

157.1

320.5

314.0

318.3

Cash and cash equivalents					

35.1

39.2

32.6

25.1

21.8

Bank overdrafts					

—

—

—

—

(1.4)

Bank borrowings					—

—(156.9)(144.0)(148.6)(128.2)

Net cash/(debt)					

35.1

39.2

(124.3)(118.9)Provisions and other items					(7.8)(10.7)(9.7)(16.1)(12.1)

Retirement benefit obligations				(35.2)(47.9)(46.3)(53.5)(35.0)Net assets employed/capital and reserves attributable to theCompany’s equity holders					

127.1

137.7

140.2

125.5

143.0

Cash flow					Net cash from operating activities				

41.6

41.5

21.2

24.8

40.5

Net cash used in investing activities 				(52.2)(32.3)(177.9)(14.2)(37.4)Net cash from financing activities				

22.6

(5.2)

151.3

(19.8)(6.0)

Net (decrease)/increase in cash equivalents			

12.0

4.0

(5.4)

(9.2)

(2.9)

						

pence

pence

pence

pence

pence

16.1

Per ordinary share					Earnings – continuing					

43.5

37.4

32.1

(11.1)

Adjusted earnings1					

59.1

66.5

67.7

48.2

49.2

Dividends					

10.0

11.2

12.4

13.0

13.0

1,834

1,927

2,050

2,420

2,077

Employees					Average number of employees				

1. Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in Note 1 to the Group Financial Statements.
2. Years 2012 and 2013 were restated as a result of changes to IAS 19 (Revised) Employee Benefits.

136

Oxford Instruments plc Report and Financial Statements 2016

Shareholder Information
Dividend bank mandates

2016

If you wish dividends to be paid directly into a bank or building
society account and notification to be sent to your Shareholder
register address, please contact the Company’s Registrar at theaddress given above for a dividend mandate form. Overseas
holders can also choose to receive payment directly into their bankaccount, or can be sent a draft in local currency. Further details oninternational payments are available from Capita Asset Services at thecontact details below.

10 March

Ordinary shares quoted ex‑dividend

11 March

Record date for interim dividend

13 March	Dividend reinvestment (“DRIP”) last datefor election
31 March

Financial year end

8 AprilPayment of interim dividend

15 JuneAnnouncement of preliminary results

15 JuneAnnouncement of final dividend

Late July	Publication of Report and
Financial Statements
Annual General Meeting

22 September

Ordinary shares quoted ex‑dividend

23 September

Record date for final dividend

25 September

DRIP date

20 October

Payment of final dividend

15 November

Announcement of interim results

2017

Tel: +44 (0)871 664 0385 (Calls cost 12 pence per minute plus
your phone company’s access charge. Calls outside the UK will becharged at the applicable international rate. Lines are open between
09:00 – 17:30, Monday to Friday excluding public holidays in Englandand Wales)
Website: http://international.capitaregistrars.com/
Duplicate share register accounts
If you are receiving more than one copy of our report, it may be thatyour shares are registered in two or more accounts on our register ofmembers. If that was not your intention you might consider merging
them into one single entry. Please contact Capita Asset Services,which will be pleased to carry out your instructions.

Ordinary shares quoted ex‑dividend

Shareholder communications

March

DRIP last date for election

March

Record date for interim dividend

31 March

Financial year end

Unless you have elected to continue to receive Shareholder
communications by post, you will be notified by post or, where you
have given us an email address for electronic notification, by emailthat Shareholder communications are available for viewing on the
Company’s website at www.oxford‑instruments.com/investors. The
Company reserves the right to distribute any communication in hard
copy if it deems this necessary.

Administrative enquiries concerning shareholdings
You may view your shareholding and dividend history, registerto receive your dividends direct to your bank account or elect tore‑invest your dividends and register a change of address online atwww.capitashareportal.com. To register to use this facility you willneed your Investor Code (“IVC”), which can be found on your sharecertificate, dividend tax voucher or proxy card.
Administrative enquiries concerning shareholdings in Oxford
Instruments plc, such as the loss of a share certificate, dividend
payments, or a change of address should be directed, in the first
instance, to the Registrar, Capita Asset Services, The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4TU.

Email: Shareholderenquiries@capita.co.uk
Website: www.capitaassetservices.com
Correspondence should refer to Oxford Instruments plc andstate clearly the registered name and address of the Shareholder.
Please notify the Registrar promptly of any change of address.

Shareholders who have questions relating to the Group’s businessor who wish to have additional copies of the Report and Accounts
should apply to:Company Secretary
Oxford Instruments plc
Tubney Woods, Abingdon, Oxfordshire OX13 5QX
Tel: 01865 393200
Fax: 01865 393442
Email: investors@oxinst.com
Website: www.oxford‑instruments.com
Company registration
Registered office: Tubney Woods, Abingdon, Oxfordshire OX13 5QXRegistered in England number: 775598
Website: www.oxford‑instruments.com
Oxford Instruments has an extensive website which gives detailsof all its products and services, contact information, vacancies andlatest news announcements. An interactive investor relations section
gives information on recent trading reports, share price data andforthcoming events.

Oxford Instruments plc Report and Financial Statements 2016

137

Company Information

Tel: +44 (0)871 664 0300 (Calls cost 12 pence per minute plus
your phone company’s access charge. Calls outside the UK will becharged at the applicable international rate. Lines are open between
09:00 – 17:30, Monday to Friday excluding public holidays in Englandand Wales)

Shareholder enquiries

Financial Statements

March

Governance13 September

Strategic Report

Financial calendar

company information

Shareholder Information
continued
Capita Share Dealing Services
A quick and easy share dealing service to either sell or buy sharesin many leading UK companies is provided by Capita Share Dealing
Services. An online and telephone facility is available, providing ourShareholders with an easy to access and simple to use service. There’s
no need to pre‑register and there are no complicated forms to fill in.
The online and telephone dealing service allows you to trade “realtime” at a known price which will be given to you at the time you
give your instruction. To deal online or by telephone all you need isyour surname, Investor Code (“IVC”) reference number, full postcode
and your date of birth. Your Investor Code can be found on a recent
share certificate, statement or tax voucher. Should you not be able
to locate your IVC number, please contact Capita Asset Services
on +44 (0)871 664 0300 (Calls cost 12 pence per minute plus
your phone company’s access charge. Calls outside the UK will becharged at the applicable international rate. Lines are open between
09:00 – 17:30, Monday to Friday excluding public holidays in Englandand Wales). Please have the appropriate documents to hand when
you log on or call, as this information will be needed before you canbuy or sell shares.

138

Oxford Instruments plc Report and Financial Statements 2016

For further information on this service, or to buy and sellshares, please contact www.capitadeal.com (online dealing) or+44 (0)371 664 0445 (telephone dealing – calls are charged at thestandard geographic rate and will vary by provider. Calls outside theUK will be charged at the applicable international rate. We are open
between 09:00 – 17:30, Monday to Friday excluding public holidays
in England and Wales). Full terms, conditions and risks apply and areavailable on request or by visiting www.capitadeal.com.
This is not a recommendation to buy or sell shares. Remember
the price of shares can go down as well as up, and you are notguaranteed to get back the amount that you originally invested.
Analysis of Shareholders as at 31 March 2016
			 Number of			holders

% of
total

Total
holding

% of
total

Up to 5,000 shares			

2,219

87.8

1,456,305

2.5

5,001 to 50,000 shares		

179

7.1

2,893,098

5.1

50,001 to 200,000 shares		

75

3.0

8,088,334

14.1

Over 200,000 shares		

52

2.1

44,861,174

78.3

Total			

2,523

100

57,298,911100

Oxford Instruments Directory
Descriptor

Country

Telephone

Fax

Oxford Instruments Head Office				Tubney Woods, Abingdon		UK+44 (0)1865 393200+44 (0)1865 393333
Oxfordshire OX13 5QX, UK		

Strategic ReportCompany/addressEmailinfo.oiplc@oxinst.com

NanoTechnology Tools					NanoCharacterisation					Oxford Instruments NanoAnalysis				
Halifax Road, High Wycombe
Systems for materialsUK+44 (0)1494 442255
Buckinghamshire HP12 3SE, UK
analysis at the nanoscale		+44 (0)1494 524129

nanoanalysis@oxinst.com+46 8 5448 1558

nordiska@oxinst.com

Asylum Research					6310 Hollister Ave, Santa Barbara
Systems for materialsUSA+1 (805) 696 6466
+1 (805) 696 6444
CA 93117 USA
analysis at the nanoscale

sba.sales@oxinst.com

Arenavägen 41, 10th floor
121 77 Johanneshov, Sweden

Systems for materials
analysis at the nanoscale

Sweden+46 8 5448 1550

Germany+49 621 762117 0+49 621 762117 11

sba.de.sales@oxinst.com

3‑4 Shaochuan Street		
Kaohsiung City, 80441
Taiwan, R.O.C.

Taiwan+886 9 3837 4589

+886 2 2794 2757

sba.tw.sales@oxinst.com

Halifax Road, High Wycombe		
Buckinghamshire HP12 3SE, UK		UK

+44 (0)1494 442255+44 (0)1494 524129

sba.uk.sales@oxinst.com

Andor/Bitplane/Spectral					7 Millennium Way
Scientific imaging cameras, UK+44 (0)28 9023 7126
+44 (0)28 9031 0792
Springvale Business Park
spectroscopy solutions
Belfast, BT12 7AL UK
and microscopy systems			

Governance

Hauptstrasse 161, DE‑68259 		
Mannheim, Germany		

info@andor.com

Badenerstrasse 682		
CH‑8048 Zürich		

Switzerland+41 44 430 11 00+41 44 430 11 01

info@bitplane.com

9078 Leslie St., Unit 11		Richmond Hill, Ontario
Canada L4B 3L8		

Canada+1 (905) 326 5040

+1 (905) 326 5041

info@spectral.ca

NanoSolutions					Oxford Instruments
Omicron NanoScience				Tubney Woods, Abingdon
Advanced tools forUK+44 (0)1865 393200
Oxfordshire OX13 5QX, UK
applied research+44 (0)1934 837001

plasma@oxinst.com+44 (0)1865 393333

nanoscience@oxinst.com

Financial Statements

Oxford Instruments
Plasma Technology				North End, Yatton
Tools forUK
+44 (0)1934 837000
Bristol BS49 4AP, UK
nanotechnology
fabrication

Industrial Products					Industrial Analysis					Oxford Instruments
Industrial Analysis				Tubney Woods, Abingdon
Tools for QC/QA,
UK+44 (0)1865 393200
Oxfordshire OX13 5QX, UK
environmental andcompliance testing+44 (0)1865 393333

industrial@oxinst.com

Finland+358 932 9411

+358 932 9413

industrial@oxinst.com

Wellesweg 31, 47589 Uedem		Germany		Germany+49 2825 93830+49 2825 9383100

industrial@oxinst.com

8403 Cross Park Drive, Suite 3F		Austin, TX 78754, USA		USA+1 (512) 339 0640

+1 (512) 339 0620

industrial@oxinst.com

Company Information

Derby Business Park		
Tarvonsalmenkatu 17
FI‑02600 Espoo, Finland		

Industrial Components					Oxford Superconducting
Technology		
600 Milik Street, PO Box 429
Superconducting wire
Carteret, NJ 07008, USA
Oxford X‑Ray Technology
360 El Pueblo Road, Scotts Valley
CA 95066, USA

X‑ray tubes anddetectorsUSA+1 (732) 541 1300

+1 (732) 541 7769

sales@ost.oxinst.com

USA+1 (831) 439 9729

+1 (831) 439 6051

industrial@oxinst.com

Oxford Instruments plc Report and Financial Statements 2016

139

company information

Oxford Instruments Directory
continued
Company/address		

Country

Telephone

Fax

Email

Service					OiService CT & MR
1027 SW 30th Avenue, Deerfield Beach, FL 33442, USAUSA+1 (954) 596 4945

+1 (954) 596 4946

oiservice@oxinst.com

64 Union Way, Vacaville, CA 95687, USAUSA+1 (707) 469 1320

+1 (707) 469 1318

oiservice@oxinst.com

120 Enterprise Drive, Ann Arbor		
USA+1 (888) 323 1316
+1 (734) 822 1011
M1, 48103, USA					info@mobileleasing.com
info@medimagingsales.com

Regional Sales and Service Offices				
Oxford Instruments/Canada/Latin America				300 Baker Avenue, Suite 150, Concord, MA 01742, USAUSA+1 (978) 369 9933
+1 (978) 369 8287
Oxford Instruments China			
Unit 1, Building A, No. 66 Zhufang Road
China
Haidian District, Beijing, 100085, China

info@ma.oxinst.com+86 (0)40 621 5191

+86 (0)10 8271 9055

china.info@oxinst.com

Floor 1, Building 60, No.461, Hongcao Road
Shanghai, 200233, China		

China+86 21 6127 3858

+86 21 6127 3828

china.info@oxinst.com

No. 129, Lane 150, Pingbei Road, Xinzhuang Industrial Area
Minhang District, 201102 Shanghai, China

China+86 (0)21 6490 8580

+86 (0)21 6490 4042

china.info@oxinst.com

Room 2112, Bai Hui Plaza, 193 Zhong Shan Wu Road
Guangzhou 510030, China		

China+86 (0)20 8364 9990

+86 (0)20 8364 9996

china.info@oxinst.com

Room 1909, Huamin Empire Plaza, No.1, Fu Xing Street
Chengdu, China

China+86 (0)28 8670 3596

+86 (0)28 8670 3595

china.info@oxinst.com+420 234 311 724

office@oxinst.cz

Oxford Instruments France				
77 ZA de Montvoisin, 91400 Gometz la Ville, France
France+33 1 69 85 25 25+33 1 69 41 46 80

infofrance@oxinst.com

Oxford Instruments Germany				Borsigstrasse 15a, 65205 Wresbaden, Germany
Germany+49 6122 9370

+49 6122 937100

info‑oiplc@oxinst.com

Oxford Instruments India				11, Marwah’s Complex, Krishanlal Marwah Marg
Andheri East, Mumbai 400072, India		
India+91 224 4253 5100

Oxford Instruments Czech Republic				Velvarska 13, CZ‑160 00 Praha		Czech+420 233 343 264
Czech Republic		Republic+91 224 4253 5110

india@oxinst.com

Oxford Instruments Japan				IS Building 3‑32‑42, Higashi‑Shinagawa 		Japan+81 (0)3 6732 8961
Shinagawa‑ku Tokyo 140‑0002, Japan 		+81 (0)3 6732 8937

info.jp@oxinst.com

Oxford Instruments Korea				No. 8‑S 26, 8F., 10 Chungmin‑ro, Songpa‑gu
Republic+82 2 2008 4500
Seoul 138‑962 Korea (Republic of) 		
of Korea+82 2 2008 4555

nanoanalysis@oxinst.com+7 (095) 933 51 24

russia.info@oxinst.com

Oxford Instruments Russia				Denisovskiy per. 26, Moscow 105005, Russian Federation
Russia+7 (095) 933 51 23

Oxford Instruments Singapore				10 Ubi Crescent, #04‑81 Ubi TechPark Lobby E
Singapore+65 6337 6848
+65 6337 6286
Singapore 408564, Republic of Singapore				oi.admin@oxfordinstruments.com.sg

Oxford Instruments Taiwan				
1F, No. 23, Jing‑Shang 19th Street		
Taiwan+886 3 5788696+886 3 5789993
Hsinchu, Taiwan 300, Taiwan, R.O.C.					oi.admin@oxfordinstruments.com.tw

140

Oxford Instruments plc Report and Financial Statements 2016

Directors and Advisers
Honorary President

Auditor

Sir Martin Wood OBE FRS Hon FREng DL

KPMG LLP

Company Secretary
Susan Johnson‑Brett ACIS

Principal Bankers
HSBC Bank plc
Santander plc

Board Committees

The Royal Bank of Scotland plc

Audit and Risk

Stockbroker

Jock Lennox, Chairman2

JPMorgan Cazenove

Jennifer Allerton
Richard Friend

UK Solicitors

Thomas Geitner

Laytons Solicitors LLP

Mary Waldner

Ashurst LLP

1Nomination

US Counsel

Nigel Keen, Chairman

Wilmer Hale LLP

Jennifer Allerton
Richard Friend
Thomas Geitner
Jock Lennox
Mary Waldner1
Alan Thomson3
Remuneration
Thomas Geitner, Chairman
Jennifer Allerton
Richard Friend
Nigel Keen
Jennifer Lennox
Mary Waldner1
Alan Thomson3
Administration
Any two Directors
1. Mary Waldner’s term commenced on 4 February 2016.
2. Mary Waldner takes over as Chairman of the Committee on 16 June 2016.
3. Alan Thomson’s term commenced on 1 June 2016.

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