Oxford Instruments plc
Tubney Woods, Abingdon, Oxon OX13 5QX, UK
Tel: +44 (0) 1865 393200

Press Release

Email:info.plc@oxinst.com
www.oxford-instruments.com

Release Date: 7am Tuesday 15 November 2016
Oxford Instruments plc
Announcement of Half Year Results for the six months to 30 September 2016
Oxford Instruments plc, a leading provider of high technology tools and systems for industry and research, today
announces its Half Year Results for the six months to 30 September 2016.

Revenue
Adjusted* operating profit
Adjusted* profit before tax(Loss)/profit before tax
Continuing adjusted* basic earnings per share
Dividend per share (interim)
Operating cash flow
Net debt

Half year to
30 September 2016
£m
171.5
19.0
15.7
(0.5)
21.4p
3.7p
3.7
141.1

Half year to
30 September 2015
£m
164.8
20.0
16.3
6.1
21.7p
3.7p
11.7
139.5

% change
+4.1%
-5.0%
-3.7%
-1.4%

Financial Highlights:






Stable performance in challenging markets
Reported revenue up 4.1%, down 6.9% at constant currency
Adjusted profit before tax down 3.7%; reflecting lower sales in OI Healthcare and continued weakness inSuperconducting Wire
Increase in net debt reflecting working capital outflow and payment of deferred consideration
Interim dividend maintained at 3.7 pence

Operational Highlights:









Group order book up 18.5% to £162.2 million, 5.1% at constant currency
NanoTechnology Tools: improvement in profits of 17.9% (13.7% at constant currency), stronger margin and orderbook reflecting success of new products and operational efficiencies
Industrial Products: resilient performance largely absorbed ongoing weakness in Superconducting Wire
Service: growth in service revenues from NanoTechnology Tools and Industrial Products sectors; reduced profits
due to lower sales for refurbished imaging systems in OI Healthcare, which we expect to continue in current andfuture years
Increased investment in future growth: R&D spend up 11.9% to £15.1 million, equivalent to 8.8% of revenue
Priorities for improvement and core capabilities identified to deliver sustainable growth
Continued focus on self-help and efficiencies to improve performance
Appointment of Alan Thomson as Chairman as previously reported

Outlook:

Revenue and order book are ahead of last year, but given continued slower academic funding in the US andEurope and lower sales in our OI Healthcare business, the Board expects the Group to deliver a current year
performance in line with last year
Looking further ahead, assuming no change to current foreign exchange rates and assuming a constant mix ofcurrency results, we expect a benefit from currency of approximately £7 million to operating profit in the 2017/18
financial year.

Half Year Results Announcement for the six months ended 30 September 2016
Ian Barkshire, Chief Executive of Oxford Instruments plc, said:“In challenging markets, Oxford Instruments has delivered a stable performance. NanoTechnology Tools performed
strongly, and across the Group we made good progress with new product introductions and self-help initiatives.
“The greater role of nanotechnology for use in research and a broad range of industrial applications will continue toyield long-term sustainable growth in demand for our high technology solutions and services.
“Our increased focus on enhanced product solutions and services across our existing and new markets will underpin
future revenue growth, with margin enhancement supported by the development of operational excellence as a corecapability across the Group.”

Enquiries:
Oxford Instruments plc
Ian Barkshire, Chief Executive
Gavin Hill, Group Finance Director

Tel: 01865 393200

MHP Communications
Rachel Hirst / Jamie Ricketts

Tel: 020 3128 8100

Number of pages: 39*NOTE: Throughout this half year announcement we make reference to adjusted numbers. These are presented as,in the opinion of the Directors, they present a clearer picture of the business performance. A full definition of adjusted
numbers can be found in note 2. Where we make reference to constant currency numbers these are prepared using
the exchange rates which prevailed in the previous year rather than the actual exchange rates which prevailed in theyear.

Oxford Instruments plc
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Half Year Results Announcement for the six months ended 30 September 2016
Chief Executive’s Review
Overview
Despite challenging markets, the business has continued to deliver a stable performance in the first half underpinned
by growth in NanoTechnology Tools.
Reported revenue was up 4.1% to £171.5 million (2015: £164.8 million) although down 6.9% at constant currency.
Adjusted operating profit fell by 5.0% to £19.0 million (2015: £20.0 million) with an increase in profit in
NanoTechnology Tools being more than offset by a fall in Service.
The order book (orders for future delivery) at 30 September 2016 increased to £162.2 million, an increase of 18.5%(5.1% at constant currency) compared to September 2015. Constant currency order book grew in NanoTechnology
Tools and Service by 7.0% and 14.6% respectively.
Continuing adjusted basic EPS fell by 1.4% to 21.4 pence (2015: 21.7 pence). Basic EPS was a negative 1.2 pence,largely as a result of the mark-to-market of currency hedges.
Net debt at the end of the period increased as expected to £141.1 million (2015: £139.5 million) partly due to anincrease in inventory ahead of planned shipments, a reduction in payables and the payment of deferred consideration
relating to previous acquisitions.
Turning to the performance of our individual sectors, NanoTechnology Tools saw reported revenue growth of 6.4% to£90.9 million (2015: £85.4 million), adjusted operating profit growth of 17.9% to £11.2 million, with an increase inoperating margin of 120 basis points to 12.3%. This performance was achieved as a result of the success of recently
launched products, supported by improved efficiencies.
Reported revenue in Industrial Products fell by 5.0% due to the expected revenue decline in the Superconducting Wirebusiness. Revenue growth in the other parts of the sector grew by just over 1.0%, a good performance in the face ofchallenging end markets. Reported adjusted operating profit fell by £0.3 million to £1.4 million (2015: £1.7 million) in
the period, with a fall in profit of £0.9 million within the Superconducting Wire business being partially offset by profit
growth in the sector’s remaining businesses.
Reported revenue grew by 11.2% in Service to £37.7 million (2015: £33.9 million), driven by increased demand forservices relating to our own products. Our OI Healthcare business in the US sells refurbished imaging systems andprovides mobile imaging solutions, maintenance services and replacement parts. Performance in the first half was
impacted by a lower level of sales of refurbished systems compared to the prior year. This has been driven by both aparticularly high level of activity in the prior year but also a recent change in software licensing policy by one of thelarge original manufacturers. As a result we anticipate a reduction in operating profit from the Healthcare component of
our Service division for the full year.
From a customer perspective, our end market segment distribution remained relatively unchanged compared to theprevious year, with over half our revenue coming from research and academia.
On a geographical basis, reported revenue grew in Europe and Asia by 5.6% and 14.2% respectively and declined by
5.1% in North America. On a constant currency basis revenue grew by 0.7% in Asia supported by strong growth inChina; revenue in Europe and North America declined by 4.2% and 14.7% respectively. The declines in North
America and Europe arise predominantly from reduced sales of superconducting wire and lower levels of academic
funding.
Whilst we have seen no material direct business impact due to Brexit I have formed a senior committee to continue tomonitor and evaluate potential implications of any changing policies or trade agreements.
PeopleThe skills and experience of our people are key to the success of our business. Our thanks go to all our employees fortheir ongoing commitment, energy and contribution.

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Half Year Results Announcement for the six months ended 30 September 2016
As previously reported, Alan Thomson was appointed Chairman following the AGM on 13 September 2016. Alan took
over from Nigel Keen, who stepped down after 17 years. Also stepping down from the Board at that time were Jock
Lennox and Jennifer Allerton. We would like to thank each of them for their valuable support and contributions during
their time with the Group.
R&D
We continue to invest in future products for our customers, and in the period we have increased our investment in
R&D initiatives by 11.9% to £15.1 million (2015: £13.5 million).
Dividends
The Board has declared an interim dividend of 3.7 pence per share (2015: 3.7 pence), in line with last year.
Delivering sustainable growth
In my first six months as Chief Executive I have focused on identifying the priorities that will enable us to return tolong-term sustainable growth. I remain confident that the increasing role of nanotechnology in both research and thebroadening range of industrial markets will provide long-term structural growth for our products. In order to translate
this opportunity into long-term shareholder value I have identified a number of areas for improvement that we will
make core capabilities across the Group.

Customer and Market Focus
We will enhance our approach to develop even deeper relationships with our customers to ensure our products better
meet their current and future needs. This will enable us to enhance our capabilities and better identify growth trends inboth existing and new market segments where we can provide increased value to our customers. We will increasingly
focus our capital investment and sales efforts to align with customer needs and market trends where we have theopportunity to build sustainable market-leading positions.

Innovation and New Product Development
We will continue to build on our heritage of product innovation investing in our customers’ future, aligning our R&D
roadmaps with their needs. We will increase the exploitation of our technical capabilities and synergies across theGroup to create new opportunities and enhance our new product delivery.

Delivering Enhanced Product Solutions
We will create more value for our customers by increasingly offering enhanced product solutions that allow them toachieve their outcomes more efficiently and effectively. For some of our customers this will mean the presentation of
results without the need for further interpretation or intervention. For other customers this will mean higher performing,easier to use instruments that will increase their capabilities and productivity. By way of example, our NanoSciencebusiness is increasingly providing complete measurement systems, not just the cryogenic hardware.

Delivering Operational Excellence
We will make operational excellence a core capability across the Group. This includes how we manufacture anddeliver our products and services to our customers. In combination with our leading products, this will provide theopportunity to drive efficiencies and productivity gains to enhance our customers’ experiences and our profitability.

Oxford Instruments plc
4Half Year Results Announcement for the six months ended 30 September 2016
Current Trading and Outlook
The increased role of nanotechnology in both life and physical sciences will continue to yield long-term sustainablegrowth in the demand for our high technology solutions and services for use in research and a broad range ofindustrial applications. We will continue to invest in growing the business in our core markets while further expanding
into life sciences and other application areas where we can create value for our customers.
Revenue and order book are ahead of last year, but given continued slower academic funding in the US and Europe,and lower sales in our OI Healthcare business, the Board expects the Group to deliver a current year performance inline with last year.
Looking further ahead, assuming no change to current foreign exchange rates and assuming a constant mix ofcurrency results, we expect a benefit from currency of approximately £7.0 million to operating profit in the 2017/18
financial year.

Oxford Instruments plc
5Half Year Results Announcement for the six months ended 30 September 2016
Operations Review
Our Group reports in three sectors: NanoTechnology Tools, Industrial Products and Service.
NanoTechnology Tools
2016
£m

2015
£m

GrowthConstant
Currency
Growth1(4.9%)

Revenue
85.4
6.4%
90.9
Adjusted2
Operating 11.2
9.5
ProfitAdjusted2
Operating 12.3%
11.1%
Margin1
Excludes foreign exchange
2
Details of adjusting items can be found in Note 2 of these Financial Statements

The NanoTechnology Tools sector produces our highest technology products, which are sold primarily to academic
and industrial research customers. Over three quarters of the revenues of the products and associated services within
this sector come from research and academia with over a quarter of this coming from biological sciences. Our
customers in this sector are exploring fundamental science through to the practical application of nanotechnology, in a
broad range of customer application segments. In the physical and life science research fields, our tools are used toadvance the frontiers of science, and we count many Nobel laureates amongst our customers. Our relationships withcustomers working on breakthrough applications in research and industry allow us to gain insight into futurecommercial areas. This informs our roadmaps, ensuring we continue to offer the most relevant range of products forthe broad base of research and industrial customers with whom we work.
The NanoTechnology Tools sector comprises two divisions: NanoCharacterisation, which includes NanoAnalysis,
Andor Technology and Asylum Research; and NanoSolutions, which includes NanoScience, Plasma Technology andour minority share in the ScientaOmicron JV.
Our NanoTechnology Tools sector continues to show improvement, with increased profitability despite a backdrop of
reduced funding in academic markets. The slow release of academic funding and weaker industrial markets are
particularly impacting order intake in the Americas and Eastern Europe. We continue to see strong growth in China as
the move to a higher technology economy continues to drive the demand for high performance products. Whilst overall
academic funding remains subdued, we see continued demand in the nanotechnology arena, with particular growth in
the newly emerging quantum technology segment. The strength of our brand and the ongoing success of our recent
product launches have allowed us to maintain pricing in these challenging market conditions, driving improved
profitability across the sector. Our focus on solutions that offer increased performance and ease of use is creating
more value for our customers, providing them with additional information and higher productivity.
Our NanoAnalysis business delivers leading-edge solutions and services that enable materials characterisation andsample manipulation at the nano scale. Our products are used on electron microscopes and ion-beam systems inacademic institutions and industrial applications including semi-conductors, renewable energy, mining, metallurgy andforensics. NanoAnalysis continues to deliver a strong technical and financial performance. We are creating more value
for our customers by providing application specific solutions that tackle new and emerging industrial applications insteels and metals manufacturing, and precision manufacturing. We have extended our AZtec range of automatedparticle analysis products to address specific applications for contamination control in the automotive and data storage
industries. AZtecClean supports automotive manufacturers in certifying the cleanliness of their parts according to the
ISO 16232 standard. AZtecHPA allows the identification of nano sized particles that cause hard disk failures with aproprietary classification scheme enabling the identification of contamination back to the source and supplier. This
provides higher productivity levels and improved consistency of results between suppliers.
Andor Technology is a global leader in the design and manufacture of high performance scientific imaging cameras,
spectroscopy solutions and microscopy systems for research and industrial markets. Andor continues to show good
progress in the year driven by the continued success of strong product launches and a focus on ongoing efficiencies
across the business. We have completed the transfer and integration of our Canadian production facility andcommenced shipping these products from Belfast. We continue to improve our camera performance in our physicalscience markets and have built on our world class sCMOS knowhow to deliver the iStar sCMOS camera. We recently

Oxford Instruments plc
6

Half Year Results Announcement for the six months ended 30 September 2016
launched our flagship 3D microscopy platform, Dragonfly, which resolves many of the barriers life science researchers
face when using conventional confocal microscopy. Dragonfly lets researchers capture sharper and higher contrast
images at high speeds, something they have never been able to do before. Dragonfly utilises our unique optical
illumination system combined with our sensitive cameras to deliver unprecedented performance, resolution andsensitivity. The lower light level causes less sample damage, which is critical to cancer researchers who need tovisualise deep into their samples, enabling more accurate data analysis. In addition, the uniformed illumination
combined with acquisition speed enables researchers working with brain samples to practically capture images acrosslarge samples with sufficient resolution and integrity. Dragonfly uses our new software platform, Fusion, providing easeof use and immediate visual feedback of acquired images.
Asylum Research is the technology leader in atomic force microscopy (AFM) for both materials and bioscience
applications. Asylum has been particularly impacted by the slowdown in research funding in US and European
markets. This has resulted in a contraction in the overall scanning probe microscopy (SPM) market and we have madeappropriate reductions to the cost base as a result. Despite this, we continue to invest in Asylum as we see good
growth potential through a broader range of platforms and solutions for our customers. We have added
electrochemical capabilities to our Cypher AFM to provide the best platform for those undertaking research into
batteries and energy storage devices. Cypher offers superior environmental control and unprecedented imaging
resolution, of great importance within this area of research. A recent Nobel Prize winner is using our AFM for his
current research into new flexible materials that could be used for applications such as wearable electronics and otherflexible nano-devices. As our AFMs continue to be used by customers needing the highest performing systems, we arelooking at how we can offer this level of performance to a broader range of customers.
Plasma Technology provides material etch and deposition processes and solutions to semi-conductor researchlaboratories and advanced specialised production facilities that develop devices and materials for novel applications in
nanotechnology. Recovery in the Plasma business is starting to gain momentum, with a stronger order intake in thefirst half of the year. We have shifted our focus and capabilities to provide customers with the broader range ofprocesses they need to give them the capabilities they are searching for. Growth was seen in the US, while European
markets remained stable with increasing opportunities in Asia. We are seeing increased market interest in the recently
enhanced PlasmaPro 100 largely due to its wide range of processes and its flexibility. As an extension to this product,
the new Polaris tool is gaining ground with highly competitive process performance, especially for the etching of siliconcarbide for power semiconductor applications.
NanoScience designs, manufactures and supports market-leading research tools that enable quantum technologies,
new materials and device development in the physical sciences. We have increased revenues driven by the strengthof sales of our recently launched next generation Triton and Optistat Dry products, primarily linked to increased global
funding in quantum technologies, cementing our market and technical leadership. Product, engineering consultancy
and service revenues all improved on the same period last year. We continue to provide higher value for our researchcustomers through increased productivity, throughput and integrated measurement systems, providing a solution to
our customers working in quantum technologies and physical sciences at low and ultra-low temperatures.
The ScientaOmicron joint venture created the largest player in the Ultra-High Vacuum surface science field. The
integration and ongoing restructuring of ScientaOmicron continues in line with expectations. The financial performanceis improving and continuing to make good progress toward profitability. The Group has a 47% share in the joint
venture.

Oxford Instruments plc
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Half Year Results Announcement for the six months ended 30 September 2016
Industrial Products
2016
£m

2015
£m

GrowthConstant
Currency
Growth1(14.3%)

Revenue
46.0(5.0%)
43.7
Adjusted2
Operating 1.4
1.7
ProfitAdjusted2
Operating 3.2%
3.7%
Margin1
Excludes foreign exchange
2
Details of adjusting items can be found in Note 2 of these Financial Statements

Our Industrial Products sector sells more mature, though still technically advanced, products primarily to industrial
customers. 57% of the sector’s products and service revenues come from industrial customers who are working inareas such as the environment, construction and energy. In the industrial field, our tools are used to improve
production efficiency, ensure high standards of quality control and demonstrate compliance with environmental
legislation. The proportion of the revenue from MRI wire continued to decline and now accounts for 29%. Industrial
Products comprises the Industrial Analysis, Superconducting Wire and X-ray Technology businesses.
The sector saw a decline in sales due to the reduced demand for superconducting wire from our customers who
manufacture MRI systems as previously reported. Continued weakness across the metals and construction markets
reduced the demand from our customers in these sectors. However, the launch of new products, combined withimproved efficiencies across this sector, has delivered an improved profitability from the Industrial portfolio if we
exclude the decline in Superconducting Wire.
Industrial Analysis designs and sells a range of spectrometers into a broad range of industrial markets. Our customers
span global industries from metals, steel foundries and scrap recycling through to automotive, solar, petrochemicals,
cement, recycling, and food and agriculture. Our customers continue to be impacted by declining commodity and oil
prices. However, despite the difficult trading conditions we continue to make margin improvements through our new
product introductions, improved routes to market and further business efficiencies. Our new products include a new
nuclear magnetic resonance (NMR) analyser, the GeoSpec 12, offering improved shale measurements, expanding ourrange of industry-leading rock core analysers. We continue to focus on operational excellence and are working tomaximise uptime for our industrial customers. We have seen an increase in the sales of our Pulsar benchtop NMR
spectroscopy system across academic customers and a broad range of industrial applications. We have recently
launched the Hero™ window for our handheld XRF analysers, allowing hot samples up to 400°C to be directly
analysed for alloying elements, minimising the downtime previously required to let samples cool before analysis.
Our Superconducting Wire business supplies wire for customers manufacturing MRI scanners and those working inhigh magnetic field research and National and International science facilities. During the first half of the year we
successfully completed the supply of the last batch of MRI wire to an OEM and renegotiated the future long-term
supply of wire with another MRI manufacturer. The long-term market fundamentals remain challenging with continued
pricing pressures and uncertainty regarding the funding of large international facilities.
Our X-ray Technology business supplies X-ray sources for industry, research and medical applications including
material composition analysis, real time medical imaging and analysis of multi-layer printed circuit boards. We haveincreased revenues in the period and continue to see interest in our integrated X-ray sources from medical
applications and electronic OEM customers. We, however, continue to be impacted by softening in our industrial
customers’ end markets.

Oxford Instruments plc
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Half Year Results Announcement for the six months ended 30 September 2016
Service Sector
2016
£m

2015
£m

GrowthConstant
Currency
Growth1(0.9%)

Revenue
33.9
11.2%
37.7
Adjusted2
Operating 6.4
8.8
ProfitAdjusted2
Operating 17.0%
26.0%
Margin1
Excludes foreign exchange
2
Details of adjusting items can be found in Note 2 of these Financial Statements

The Service sector comprises the Group’s maintenance service contracts, billable repairs and spare part sales for
Oxford Instruments’ own products; and the service, sale and rental of refurbished third party MRI and CT machines
under the OI Healthcare brand.
Our OI Healthcare business in the US sells refurbished imaging systems and provides mobile imaging solutions,maintenance services and replacement parts. Performance in the first half was impacted by a lower level of sales ofrefurbished systems compared to the prior year, which we expect to continue. This has been driven by both aparticularly high level of activity in the prior year but also a recent change in software licensing policy by one of thelarge original manufacturers. As a result we anticipate a reduction in operating profit from the Healthcare component of
our Service division for the full year.
We continue to see an increase in our revenues from the support and additional services related to our own productsin NanoTechnology Tools and Industrial Products. We are focusing on expanding the range of services we offer
customers. This includes the recent launch of new consumable webstores in the USA, Europe and China. These,
alongside our existing webstores, enable customers to easily find and purchase consumables, services and training
for both our products and other related activities.

Oxford Instruments plc
9Half Year Results Announcement for the six months ended 30 September 2016
Finance Review
The business had a stable performance in the first half of 2016. Reported revenue grew by 4.1% to £171.5 million(2015: £164.8 million), with adjusted operating profit declining by 5.0% to £19.0 million (2015: £20.0 million). Revenue,
excluding currency effects, declined by 6.9%, with the movement in average currency exchange rates over the lastyear positively impacting reported revenue by £18.0 million. Orders during the period were broadly flat at £181.4
million (2015: £183.9 million). At the end of the period the Group order book for future deliveries stood at £162.2
million (2015: £136.9 million), growth of 18.5% (5.1% at constant currency).
Adjusted operating profit, excluding currency effects, declined by 13.5%. Adjusted operating margin fell by 100 basis
points to 11.1% (2015: 12.1%), due to a fall in margin from our Service sector arising from lower Healthcare sales anda reduction in profitability from our Superconducting Wire business. Adjusted operating profit includes realised losseson the maturity of currency hedges resulting from the devaluation of Sterling against the US Dollar, Euro andJapanese Yen since the inception of the hedges.
Non-recurring items and acquisition related costs were £1.7 million and the mark-to-market valuation of currency
hedges in place was a loss of £6.4 million.
Adjusted profit before tax of £15.7 million (2015: £16.3 million) represents a margin of 9.2% (2015: 9.9%). A loss
before tax of £0.5 million (2015: profit of £6.1 million) is after the mark-to-market of unrealised currency hedges.
Continuing adjusted basic earnings per share fell by 1.4% to 21.4 pence (2015: 21.7 pence). Earnings per share was aloss of 1.2 pence (2015: 4.9 pence).
Cash generated from operations fell by 68.4% to £3.7 million, primarily due to an increase in inventories ahead ofplanned shipments and a reduction in payables. Adjusted operating cash (defined as adjusted EBITDA, less working
capital, capitalised research & development and capital expenditure) represents 10.5% (2015: 69.5%) of adjusted
operating profit. Free cash flow declined to £0.4 million (2015: £7.5 million). Deferred consideration paid in the first halfof this year and the increase in working capital led to an increase in net debt to £141.1 million from £128.2 million at
the year end, representing a net debt to EBITDA ratio (for banking covenant purposes) of 2.6 times, comfortably within
our banking covenant of 3.5 times.
Adjusted operating profit is stated before amortisation of acquired intangibles, non-recurring items and acquisitionrelated costs, and the mark-to-market valuation of unrealised currency hedges.

Oxford Instruments plc
10Half Year Results Announcement for the six months ended 30 September 2016
1.

Income statement

The Group’s income statement is summarised below.
Table 1: Income statement
Half year to
30 September
2016
£m
171.5
82.7
(63.7)
19.0
(3.3)
15.7
(8.1)
(1.7)
(6.4)
(0.5)
(0.2)
(0.7)

Half year to
30 September
2015
£m
164.8
75.3
(55.3)
20.0
(3.7)
16.3
(8.4)
(2.6)
0.8
6.1
(3.1)
3.0

Effective tax rate1

22.3%

23.9%

Continuing adjusted earnings per share – basic
Continuing adjusted earnings per share – diluted

21.4p
21.3p

21.7p
21.6p

-1.4%
-1.4%

Earnings per share – basic
Earnings per share – diluted(1.2)p(1.2)p

4.9p
4.9p

n/a
n/a

Revenue
Gross profit
Administrative expenses
Adjusted operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquired intangibles
Non-recurring items and acquisition-related costs
Mark-to-market of currency hedges(Loss)/profit before tax
Tax(Loss)/profit for the period

Change
+4.1%
+9.8%
-5.0%
-3.7%

Dividend per share
3.70p
3.70p
1
The effective tax rate is calculated excluding amortisation on acquired intangibles, non-recurring items andacquisition-related costs, and the mark-to-market of financial derivatives
1.1

Revenue

Reported revenue of £171.5 million (2015: £164.8 million) increased by 4.1%. NanoTechnology Tools and Service
grew by 6.4% and 11.2% respectively while Industrial Products declined by 5.0%.
The depreciation of Sterling against the US Dollar, Euro and Japanese Yen has increased reported revenue by £18.0
million. Revenue growth, excluding currency effects, showed a decline of 6.9% with NanoTechnology Tools declining
by 4.9%, Service by 0.9% and Industrial Products by 14.3%.
At constant currency, revenue grew by 0.7% in Asia with strong growth in China. Revenue in Europe, North America
and Rest of World declined by 4.2%, 14.7% and 23.8% respectively.
The transfer of our Omicron business into a joint venture, ScientaOmicron, led to a reduction in revenue of £2.0 million
compared to the comparative period as under equity accounting we no longer consolidate the joint venture’s revenue.
1.2

Gross profit

Gross profit grew by 9.8% to £82.7 million (2015: £75.3 million), representing a gross profit margin of 48.2%, anincrease of 250 basis points over last year. At constant currency, gross margin was 47.3%, an increase of 160 basis
points.

Oxford Instruments plc
11Half Year Results Announcement for the six months ended 30 September 2016
1.3

Operating profit

Adjusted operating profit declined by 5.0% to £19.0 million (2015: £20.0 million), representing an adjusted operating
profit margin of 11.1%, a decrease of 100 basis points against last year. The NanoTechnology Tool margin rose by
120 basis points to 12.3% (2015: 11.1%) while lower Healthcare sales led to margin falling in Service to 17.0% (2015:
26.0%). A reduction in profit made by the Superconducting Wire business led to fall in margin in Industrial Products of
50 basis points to 3.2% (2015: 3.7%). Adjusted operating profit includes realised losses on the maturity of currency
hedges resulting from the devaluation of Sterling against the US Dollar, Euro and Japanese Yen since the inception of
the hedges.
Our ScientaOmicron joint venture showed a loss of £0.5 million in the period, an improvement of £1.0 million against
the comparative period (which includes four months when the joint venture was in operation and two months when
Omicron was a 100% subsidiary of the Group).
Currency effects (including the impact of transactional currency hedging) have increased reported adjusted operating
profit by £1.7 million when compared to blended hedged exchange rates for the comparative period. Blended hedged
exchange rates for the US Dollar, Euro and Japanese Yen against Sterling are all at stronger rates than last year.
At constant currency the adjusted operating profit margin was 11.3%, a decline of 80 basis points.
1.4

Non-recurring items and acquisition related costs

Net non-recurring items and acquisition-related costs during the period were £1.7 million. Acquisition related costs
were £0.9 million comprising professional fees and final deferred consideration (including the unwind of discount) on
financial commitments made by Andor Technology (‘Andor’) prior to its acquisition by Oxford Instruments. In the period
we have written down development costs of £0.7 million on a specific project that has been stopped as we focus anddirect resources so as to accelerate key projects. The ScientaOmicron joint venture incurred restructuring costs in the
period of £0.1 million.
The Group uses derivative products to hedge its exposure to fluctuations in foreign exchange rates. It is Group policy
to have in place at the beginning of the financial year hedging instruments to cover 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 to these foreign exchange hedges cannot be justified. Accordingly,
the Group does not use hedge accounting for these derivatives.
Net movements on marking-to-market such derivatives at the balance sheet date are disclosed in the Income
Statement as financial expenditure and excluded from our calculation of adjusted profit before tax.
The mark-to-market loss in respect of derivative financial instruments was £6.4 million (2015: £0.8 million gain). This
reflects the fair value on currency derivatives that are hedging future transactional currency exposures for the Group.
The unrealised loss is attributable to a fall in the value of Sterling at the balance sheet date against the US Dollar,
Euro and Japanese Yen, against a blended rate achieved on forward contracts that will mature over the next eighteenmonths.
1.5

Net finance costs

The Group’s net finance costs fell by £0.4 million to £3.3 million (2015: £3.7 million) with finance charges falling by£0.3 million to £2.8 million, pension financing charges falling by £0.2 million to £0.6 million and financial income fallingby £0.1 million.
1.6

Profit before tax

Adjusted profit before tax fell by 3.7% to £15.7 million (2015: £16.3 million). The adjusted profit before tax margin
declined 70 basis points to 9.2% (2015: 9.9%).

Oxford Instruments plc
12Half Year Results Announcement for the six months ended 30 September 2016
A loss before tax of £0.5 million (2015: profit of £6.1 million) is after the mark-to-market charge on derivative financial
instruments of £6.4 million.
1.7

Amortisation of acquired intangibles

Amortisation of acquired intangibles of £8.1 million relates to intangible assets identified on acquisitions, being thevalue of technology, customer relationships and brands.
1.8

Tax

The tax charge (excluding tax on non-recurring items and on the amortisation of acquired intangibles) of £3.5 million(2015: £3.9 million) represents an effective tax rate of 22.3% (2015: 23.9%). The decrease is due to a change in the
proportional mix in territories where profits are generated.
1.9

Earnings per share (EPS)

Continuing adjusted basic earnings per share and continuing adjusted diluted earnings per share, after adjusting foramortisation of intangibles and non-recurring items, decreased by 1.4%. After amortisation of acquired intangibles,
non-recurring items and acquisition related costs (including the mark-to-market of derivative financial instruments),
basic and diluted earnings per share were both a negative 1.2 pence.
Undiluted weighted average shares have stayed flat at 57.1 million.
2.0

Foreign Exchange

The Group faces transactional and translational currency exposure, most notably against the US Dollar, Euro andJapanese Yen. For the first half of the year, approximately 10% of Group revenue was denominated in Sterling, 61%
in US Dollars, 16% in Euros, 8% in Japanese Yen and 5% in other currencies. The Group has both translational andtransactional exposure. Translational exposures arise on the consolidation of overseas company results into Sterling.
Transactional exposures arise where the currency of sale or purchase transactions differs from the functional currency
in which each company prepares its local accounts.
The Group maintains a hedging programme against its net transactional exposure using internal projections of
expected currency trading transactions expected to arise over a period extending from 12 to 24 months. As at 30
September 2016 the Group had currency hedges in place extending up to 18 months forward.
We have seen recent weakening of Sterling against our major trading currencies. If currencies were to continue atcurrent levels and assuming a constant mix of currency results, we expect a currency benefit of approximately £7million to operating profit in the 2017/18 financial year.
2.

Dividend

The Group’s policy is to increase the total dividend each year in line with the increase in underlying earnings. As
adjusted basic earnings per share were at a similar level to last year, the Board has declared an interim dividend of 3.7
pence, in line with last year. The dividend will be paid on 7 April 2017 to shareholders on the register as at 10 March2017.

Oxford Instruments plc
13

Half Year Results Announcement for the six months ended 30 September 2016
3.

Cash flow

The Group cash flow is summarised below.
Table 2: Cash flow

Adjusted operating profit
Non-cash items
Adjusted EBITDA
Working capital movement
Acquisition related costs paid
Restructuring costs
Pension scheme payments above charge to op. profit
Equity settled share schemes
Loss on disposal of plant and equipment
Cash generated from operations
Interest
Tax
Free cash flow
Capitalised development expenditure
Expenditure on tangible and intangible assets
Acquisition of subsidiaries, net of cash acquired
Increase in long term receivables
Dividends paid
Increase in borrowings
Net decrease in cash and cash equivalents from continuing
operations

Half year to
30 September
2016
£m
19.0
5.7
24.7
(17.0)
(0.8)
(3.5)
0.3
3.7
(2.6)
(0.7)
0.4
(4.0)
(2.0)
(6.8)
(2.1)
11.6
(2.9)

Half year to
30 September
2015
£m
20.0
4.7
24.7
(5.3)
(1.2)
(3.5)
(3.3)
0.2
0.1
11.7
(2.8)
(1.4)
7.5
(3.3)
(2.3)
(15.6)
(3.1)
(2.1)
10.8
(8.1)

Note: Adjusted EBITDA is earnings before interest, tax, depreciation, intangible amortisation, mark-to-market offinancial derivatives and other non-cash items
3.1
Cash generated from operations
Cash generated from operations in the year decreased by 68.4% to £3.7 million (2015: £11.7 million). Adjusted
operating cash (defined as adjusted EBITDA, less working capital, capitalised research & development and capital
expenditure) represents 10.5% (2015: 69.5%) of adjusted operating profit due to an outflow of working capital over theperiod. Free cash flow declined to £0.4 million (2015: £7.5 million).
The business normally experiences a working capital outflow in the first half of the year resulting in a cash conversion
rate much lower than seen at the year end. This half year cash conversion has been impacted by three principal
factors. First, an increase in inventories of £5.0 million reflects work in progress and inventory building prior to thesecond half across NanoTechnology Tools and Industrial Products, in line with anticipated shipments. Second, within
the Healthcare business we have had a build up of refurbished imaging system inventory prior to sale or rental in thesecond half of the year. Finally, we have experienced a reduction in payables due to phasing of payments comparedto the year end and, in addition, within our optical microscopy business, we transferred a significant manufacturingcomponent from an external supplier to self manufacture, resulting in a one-off reduction this year of £2.0 million inpayables.
3.2
Interest
Net interest paid was £2.6 million (2015: £2.8 million), broadly in line with last year.
3.3
Tax
Tax paid was £0.7 million (2015: £1.4 million), the reduction reflecting utilisation of brought forward tax losses.
3.4
Investment in research and development (R&D)
Total cash spend on R&D in the year was £15.1 million, equivalent to 8.8% of revenue, (2015: £13.5 million, 8.2% ofrevenue). A reconciliation between the amounts charged to the Income Statement and the cash spent is given below:

Oxford Instruments plc
14

Half Year Results Announcement for the six months ended 30 September 2016
Table 3: Investment in research and development (R&D)

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

Half year to
30 September
2016£mHalf year to
30 September
2015
£m

13.3
(0.4)
0.2
(2.0)
4.0
15.1

11.8
(0.4)
0.4
(1.6)
3.3
13.5

3.5
Financing
The increase in borrowings reflects the draw-down of debt on our multi-currency revolving credit facility.
4.

Acquisitions

Acquisition of subsidiaries relates to the final payment of deferred consideration of US$ 10.1 million (£6.5 million) for
Medical Imaging Resources, Inc (‘MIR’) and £0.3 million attributable to the purchase of Asylum Research Corporation(‘Asylum’).
5

Net debt and funding

5.1
Net debt
Net debt increased in the period from £128.2 million to £141.1 million. Free cash flow of £0.4 million was before
acquisition payments, capital and expenditure, capitalised research and development, and dividend payments.
Expenditure of £6.8 million relates to deferred consideration payable for MIR and Asylum. The Group invested intangible and intangible assets of £2.0 million and capitalised research and development of £4.0 million.
In October 2016 we paid deferred consideration of Canadian Dollar 5.0 million (£3.1 million) on financial commitments
made by Andor. Net debt at the end of the 2016/17 financial year is expected to be marginally above the previous
financial year.
Table 4: Movement in net debt£m
Net debt as at 31 March 2016
Free cash flow
Capital expenditure on tangible and intangible assets
Capitalised development expenditure
Acquisitions, net of cash acquired and loan to associate
Dividends paid
Foreign exchange
Net debt as at 30 September 2016

128.2
(0.4)
2.0
4.0
6.8
2.1
(1.6)
141.1

Oxford Instruments plc
15

Half Year Results Announcement for the six months ended 30 September 2016
5.2
Funding
The Group has in place an unsecured multi-currency revolving facility agreement which is committed until February
2020. The facility has been entered into with a group of three banks and comprises a Sterling denominated multicurrency facility of £100 million and a US Dollar denominated multi-currency facility of $37.0 million.
The Group has also issued a bilateral private placement note of £44.5 million, which matures in 2021 and a £25.0
million amortising fixed rate loan from the European Investment Bank that matures in 2020. In addition, the Group has
uncommitted facilities of £21.2 million.
Debt covenants are net debt to EBITDA less than 3.5 times, reducing to 3.0 times from 31 March 2017 thereafter, and
EBITDA to interest greater than 4.0 times. As at 30 September 2016 net debt to EBITDA was at 2.6 times and EBITDA
to interest was 9.5 times.
6

Pensions

The Group has defined benefit pension schemes in the UK and USA. Both have been closed to new entrants since2001 and closed to future accrual from July 2010.
At 30 September 2016, the net liability arising from our defined benefit scheme obligations was £47.5 million (2015year end: £35.0 million), an increase of £12.5 million. Macroeconomic conditions have resulted in a fall in bond yields
leading to a reduction in the discount rate and an increase in liabilities. An increase in the value of scheme assets has
partially offset the movement in liabilities.
7.0

Forward-Looking Statements

This document contains certain forward-looking statements. The forward-looking statements reflect the knowledge
and information available to the Company during the preparation and up to the publication of this document. By theirvery nature, these statements depend upon circumstances and relate to events that may occur in the future thereby
involving a degree of uncertainty. Therefore, nothing in this document should be construed as a profit forecast by theCompany.
Gavin Hill
Group Finance Director
15 November 2016

Oxford Instruments plc
16

Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Income
Half year ended 30 September 2016 – unaudited
Half Year to 30 Sept 2016
Adjusted
AdjustingTotal
items*

Half Year to 30 Sept 2015
Adjusted
AdjustingTotal
items*

Notes

£m

£m

£m

£m

£m

£m

3

171.5
(88.8)
82.7(13.3)(31.0)(15.5)

—
—
—
(0.7)
—
(8.8)

171.5
(88.8)
82.7(14.0)(31.0)(24.3)

164.8(89.5)
75.3(11.8)(28.3)(15.6)—————(13.3)

164.8(89.5)
75.3(11.8)(28.3)(28.9)

(0.4)
—
(3.5)
19.0

(0.1)
—
—
(9.6)

(0.5)
(3.5)
9.4

—
—
0.4
20.0

(0.2)
3.2
—
(10.3)

(0.2)
3.2
0.4
9.7

Other financial income
Financial income

0.1
0.1

—
—

0.1
0.1

0.2
0.2

0.8
0.8

1.0
1.0

Interest charge on pension
scheme net liabilities
Other financial expenditure
Financial expenditure

(0.6)

—

(0.6)

(0.8)

—

(0.8)

(2.8)
(3.4)

(6.6)
(6.6)

(9.4)
(10.0)

(3.1)
(3.9)

(0.7)
(0.7)

(3.8)
(4.6)

3

15.7

(16.2)

(0.5)

16.3

(10.2)

6.1

8

(3.5)

3.3

(0.2)

(3.9)

0.8

(3.1)

12.2

(12.9)

(0.7)

12.4

(9.4)

3.0

—

—

—

(0.3)

—

(0.3)

12.2

(12.9)

(0.7)

12.1

(9.4)

2.7

pence

pence

pence

pence

21.4

(1.2)

—

—

21.4

(1.2)

21.7
(0.4)
21.3

5.3
(0.4)
4.9

21.3

(1.2)

—

—

21.3

(1.2)

21.6
(0.3)
21.3

5.2
(0.3)
4.9

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Share of loss of associate, net oftax
Other operating income
Foreign exchange (loss)/gain
Operating profit(Loss)/profit before income tax
from continuing operations
Income tax (expense)/credit(Loss)/profit for the period fromcontinuing operations
Loss from discontinued operations
after tax
(Loss)/profit for the period
attributable to equity holders of
the parent

4—

Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
From (loss)/profit for the period

9

Diluted earnings per share
From continuing operations
From discontinued operations
From loss/profit for the period

9

Dividends per share
Dividends paid
Dividends proposed

10
10

3.70
3.70

3.70
3.70

* Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in note 2 of this Half Year Report.

Oxford Instruments plc
17

Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Income
Half year ended 30 September 2016 – unaudited

Notes

Revenue
Cost of sales
Gross profit
Research and development
Selling and marketing
Administration and shared services
Share of loss of associate, net of tax
Other operating income
Foreign exchange gain
Operating profit
Other financial income
Financial income

Year to 31 March 2016
Adjusted
Adjustingitems*
£m
£m

Total
£m

361.6
(199.7)161.9(24.6)(59.8)(33.4)
(0.2)
—
0.7
44.6
—
—

—
(1.0)
(1.0)
—
—
(23.0)(1.3)
4.9—(20.4)——

361.6(200.7)160.9(24.6)(59.8)(56.4)
(1.5)
4.9
0.7
24.2
—
—

Interest charge on pension scheme net liabilities
Other financial expenditure
Financial expenditure

(1.7)
(5.9)
(7.6)

—
(3.5)
(3.5)

(1.7)
(9.4)
(11.1)

Profit before income tax from continuing
operations

37.0(23.9)

13.1

(8.9)

5.0

(3.9)

28.1
(0.3)

(18.9)
(1.9)

9.2
(2.2)

27.8

(20.8)

7.0

Income tax (expense)/credit
Profit for the period from continuing
operations
Loss from discontinued operations after tax
Profit for the period attributable to equity
holders of the parent

Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
From profit for the period
Diluted earnings per share
From continuing operations
From discontinued operations
From profit for the period
Dividends per share
Dividends paid
Dividends proposed

3

4

8

9
49.2
(0.5)
48.7

16.1
(3.9)
12.2

49.1
(0.5)
48.6

16.1
(3.8)
12.3

9

10
10

13.0
13.0

*Adjusted numbers are stated to give a better understanding of the underlying business performance. Details of adjusting items can be found in note 2 of this Half Year Report.

Oxford Instruments plc
18

Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Comprehensive Income
Half year ended 30 September 2015 - unaudited
Half year to
30 Sept
2016£m

Half year to
30 Sept
2015£mYear to31 March
2016
£m

(0.7)

2.7

7.0

—
14.7

1.8
(2.1)

—
5.6

—

—

1.2

0.1
—

0.1
—

(0.1)
—

Items that will not be reclassified subsequently to profit or loss
Remeasurement (loss)/gain in respect of post retirement benefits
Tax on items that will not be reclassified to profit or loss
Total other comprehensive income(15.1)
2.7
2.4

10.5
(2.2)
8.1

13.6
(2.6)
17.7

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

1.7

10.8

24.7

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

Oxford Instruments plc
19Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2016 – unaudited
Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

61.5

0.1

9.7

68.8

143.0

—

—

—

—

(0.7)

(0.7)

– Foreign exchange translation differences

—

—

—

14.7

—

14.7

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

—

—

0.1

—

—

0.1

Balance at 1 April 2016

Sharecapital£mSharepremium
account£m

2.9

Total comprehensive income:Loss for the period
Other comprehensive income:– Remeasurement loss in respect of post-retirement benefits

—

—

—

—

(15.1)(15.1)– Tax on items recognised directly in other comprehensive
income

—

—

—

—

2.7

2.7

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

—

—

0.1

14.7

(13.1)

1.7

Transactions with owners recorded directly in equity:– Credit in respect of employee service costs settled byaward of share options

—

—

—

—

—

—

– Dividends payable

—

—

—

—

(7.4)

(7.4)

Total transactions with owners recorded directly in equity:

—

—

—

—

(7.4)

(7.4)

Balance at 30 September 2016

2.9

61.5

0.2

24.4

48.3

137.3

Share
capital£mSharepremium
account£m

Otherreserves£m

Foreignexchangetranslation
reserve£m

Retainedearnings
£m

Total
£m

2.9

61.5

0.2

2.9

58.0

125.5

—

—

—

—

2.7

2.7

– Foreign exchange differences recycled from othercomprehensive income on disposal of subsidiary

—

—

—

1.8

—

1.8

– Foreign exchange translation differences

—

—

—

(2.1)

—

(2.1)

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

—

—

0.1

—

—

0.1

– Remeasurement gain in respect of post-retirement benefits

—

—

—

—

10.5

10.5

– Tax on items recognised directly in other comprehensive
income

—

—

—

—

(2.2)

(2.2)

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

—

—

0.1

(0.3)

11.0

10.8

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

—

—

—

—

0.2

0.2

– Dividends payable

—

—

—

—

(7.4)

(7.4)

Total transactions with owners recorded directly in equity:

—

—

—

—

(7.2)

(7.2)

Balance at 30 September 2015

2.9

61.5

0.3

2.6

61.8

129.1

Balance at 1 April 2015
Total comprehensive income:
Profit for the period
Other comprehensive income:Transactions with owners recorded directly in equity:

Oxford Instruments plc
20

Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Changes in Equity
Half year ended 30 September 2016 – unaudited continued
Foreignexchange
Other translation
reserves
reserve
£m
£m

Share
capital£mSharepremium
account
£m

2.9

61.5

0.2

—

—

– Foreign exchange translation differences—– Net foreign exchange loss on disposal of subsidiaries
taken to the Income Statement

Retainedearnings
£m

Total
£m

2.9

58.0

125.5

—

—

7.0

7.0

—

—

5.6

—

5.6

—

—

—

1.2

—

1.2

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

—

—

(0.1)

—

—

(0.1)

– Remeasurement gain in respect of post-retirement
benefits

—

—

—

—

13.6

13.6

– Tax on items recognised directly in othercomprehensive income

—

—

—

—

(2.6)

(2.6)

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

—

—

(0.1)

6.8

18.0

24.7

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

—

—

—

—

0.4

0.4

– Dividends payable

—

—

—

—

(7.6)

(7.6)

Total transactions with owners recorded directly in equity:

—

—

—

—

(7.2)

(7.2)

Balance at 31 March 2016

2.9

61.5

0.1

9.7

68.8

143.0

Balance at 1 April 2015
Total comprehensive income:
Profit for the year
Other comprehensive income:Transactions with owners recorded directly in equity:

Oxford Instruments plc
21

Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Financial Position
As at 30 September 2016 - unaudited

Notes

AssetsNon-current assets
Property, plant and equipment
Intangible assets
Investment in associateLong-term receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current income tax receivable
Derivative financial instruments
Assets of discontinued operations held for sale
Cash and cash equivalents

7

Total assets
EquityCapital and reserves attributable to the Company’s
equity shareholders
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings
Liabilities
Non-current liabilities
Bank loans
Other payables
Retirement benefit obligations
Deferred tax liabilities
Current liabilities
Bank loans and overdrafts
Trade and other payables
Current income tax payables
Accrued dividend
Derivative financial instruments
Liabilities of discontinued operations held for sale
Provisions

As at
30 Sept
2016
£m

As at
30 Sept
2015
£m

As at
31 March
2016
£m

36.0
220.7
12.6
3.6
21.5
294.4

35.2
225.8
14.4
3.1
17.8
296.3

35.2
220.8
13.1
3.4
19.0
291.5

69.8
79.2
2.4

61.1
77.5
2.7
1.5

20.9
172.3

68.8
71.5
4.1
2.3
1.2
15.3
163.2

21.8
164.6

466.7

459.5

456.1

2.9
61.5
0.2
24.4
48.3
137.3

2.9
61.5
0.3
2.6
61.8
129.1

2.9
61.5
0.1
9.7
68.8
143.0

154.0

154.8
1.2
40.5
7.1
203.6

147.0

—

3.0
102.4
2.1

—
—

—
47.5
1.8
203.3
8.0
87.3
3.5
5.3
10.9

—

—
35.0
5.7
187.7

11.1
126.1

102.6
5.2
5.3
2.0
0.4
11.3
126.8

Total liabilities

329.4

330.4

313.1

Total liabilities and equity

466.7

459.5

456.1

7

—

—
5.8

—
12.1
125.4

Oxford Instruments plc
22

Half Year Results Announcement for the six months ended 30 September 2016

Condensed Consolidated Statement of Cash Flows half year ended 30 September 2016 - unaudited
Half year to
30 Sept
2016
£m
(0.7)

Half year to
30 Sept
2015
£m
3.0

Year to31 March
2016
£m
9.2

0.2
9.9
—
0.7
—
0.1
—
—
—
0.4
—
8.1
3.3
2.7

3.1
3.6
—
0.8
0.6
0.2
—
(3.2)
0.7
—
2.8
8.4
3.1
1.6

3.9
11.1
1.0
2.5
2.9
1.3
0.9
(4.9)
—
0.2
—
16.7
6.3
3.9

24.7
0.3
—
(0.8)
—

24.7
0.1
0.2
(1.2)
(3.5)

55.0
0.1
0.4
(1.8)
(4.7)

(3.5)
20.7
(5.0)
3.7
(15.3)
0.1
(0.5)
3.7
(2.6)
(0.7)
0.4

(3.3)
17.0
(6.7)
7.6
(9.4)
3.2
—
11.7
(2.8)
(1.4)
7.5

(6.7)
42.3
2.7
9.3
(1.2)
(0.5)
(3.0)
49.6
(5.6)
(3.5)
40.5

(6.8)
(1.9)
(0.1)
—
(4.0)
(12.8)(15.6)
(2.1)
(0.2)
—
(3.3)
(21.2)(27.1)
(2.5)
(0.2)
0.6
(8.2)
(37.4)

—
11.6
(2.1)
9.5
(2.9)
—
20.4
1.6
19.1

(3.1)
10.8
(2.1)
5.6
(8.1)
(0.4)
25.1
(1.3)
15.3

(3.0)
4.6
(7.6)
(6.0)
(2.9)
(0.9)
25.1
(0.9)
20.4

Reconciliation of changes in cash and cash equivalents to movement in net debt
Half year to
30 Sept
2016£mDecrease in cash and cash equivalents(2.9)
Effect of foreign exchange rate changes on cash and cash equivalents
1.6
(1.3)
Cash inflow from increase in debt
(11.6)
Increase in net debt in the period(12.9)Net debt at start of the period(128.2)
Net debt at the end of the period(141.1)

Half year to
30 Sept
2015
£m
(8.5)
(1.3)
(9.8)
(10.8)(20.6)(118.9)(139.5)

Year to31 March
2016
£m
(3.8)
(0.9)
(4.7)
(4.6)
(9.3)
(118.9)(128.2)(Loss)/profit for the period from continuing operations
Adjustments for:
Income tax (credit)/expense
Net financial expense
Reversal of acquisition related fair value adjustments
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Contingent consideration deemed no longer payable
Contingent consideration – further amount deemed payable
Share of loss from associate
Impairment loss of assets held for sale
Amortisation and impairment of acquired intangibles
Depreciation of property, plant and equipment
Amortisation and impairment of capitalised development costs
Adjusted earnings before interest, tax, depreciation and amortisation
Loss on disposal of plant, property and equipment
Cost of equity settled employee share schemes
Acquisition related costs paid
Restructuring costs paid
Cash payments to the pension scheme more than the charge to operating
profitOperating cash flows before movements in working capital(Increase)/decrease in inventories
Decrease in receivables
Decrease in payables and provisions
Increase/(decrease) in customer deposits
Purchase of rental assets held for subsequent sale
Cash generated by operations
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiaries – deferred consideration paid
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash flow on disposal of subsidiary
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Increase in long-term receivables
Increase in borrowings
Dividends paid
Net cash generated from/(used in) financing activities
Net decrease in cash and cash equivalents from continuing operations
Decrease in cash from discontinued operations
Cash and cash equivalents at beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the period

Oxford Instruments plc
23

Half Year Results Announcement for the six months ended 30 September 2016

Notes on the Half Year Financial Statements
Half year ended 30 September 2016 – unaudited
1

BASIS OF PREPARATION OF ACCOUNTS

Reporting entity
Oxford Instruments plc is a company incorporated in England and Wales. The condensed consolidated half year
financial statements consolidate the results of the Company and its subsidiaries (together referred to as the Group).
They have been prepared and approved by the Directors in accordance with International Financial ReportingStandard (IFRS) IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information
required for full annual financial statements, and should be read in conjunction with the consolidated financial
statements of the Group for the year ended 31 March 2016.
The financial information contained herein is unaudited and does not constitute statutory accounts as defined by
Section 435 of the Companies Act 2006. The comparative figures for the financial year ended 31 March 2016 are notthe company’s statutory accounts for that financial year. Those accounts have been reported on by the Company’s
auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include areference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and(iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set offinancial statements has been prepared applying the accounting policies and presentation that were applied in the
preparation of the Company’s published consolidated financial statements for the year ended 31 March 2016, except
as explained below.
Adoption of new and revised standards
At present, there are no other new standards, amendments to standards or interpretations mandatory for the first time
for the year ending 31 March 2017.
Estimates
The preparation of half year financial statements requires management to make judgements, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
income and expense. Actual results may differ from these estimates.
In preparing these half year financial statements, the significant judgements made by management in applying thegroup’s accounting policies and key sources of estimation uncertainty were the same as those that applied to theConsolidated Financial Statements as at and for the year ended 31 March 2016.
Going concern
The condensed consolidated half year financial statements have been prepared on a going concern basis, based on
the Directors’ opinion, after making reasonable enquiries, that the Group has adequate resources to continue inoperational existence for the foreseeable future.

Oxford Instruments plc
24Half Year Results Announcement for the six months ended 30 September 2016

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2016 – unaudited
1

BASIS OF PREPARATION OF ACCOUNTS continued

Exchange rates
The principal exchange rates used to translate the Group’s overseas results were as follows:
Half year to
30 Sept
2016
1.30
1.16
132

Half year to
30 Sept
2015
1.51
1.36
181

Year to31 March
2016
1.44
1.26
162

Average translation rates
Half year to 30 September 2016
April
May
June
July
AugustSeptember

US Dollar

Euro

Yen

1.45
1.46
1.41
1.35
1.32
1.31

1.27
1.30
1.27
1.21
1.18
1.16

159
159
150
138
134
132

Average translation rates year ended 30 March 2016
April
May
June
July
AugustSeptember
OctoberNovember
DecemberJanuary
FebruaryMarch

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

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

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

Period end rates
US DollarEuro
Yen

Oxford Instruments plc
25

Half Year Results Announcement for the six months ended 30 September 2016

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2016 – unaudited
2

NON-GAAP MEASURESThe Directors present the following non-GAAP measures as they believe it gives a better indication of the underlying
performance of the business.
RECONCILIATION BETWEEN PROFIT BEFORE INCOME TAX AND ADJUSTED PROFIT(Loss)/profit before income tax from continuing operations
Reversal of acquisition related fair value adjustments toinventory
Reversal of acquisition related fair value adjustments toproperty, plant and equipment
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Amortisation and impairment of acquired intangibles
Impairment loss on assets held for sale
One-off impairment of capitalised development costs
Contingent consideration – further amount deemed payable
Contingent consideration deemed no longer payable
Unwind of discount in respect of deferred consideration andacquisition related accruals
Mark to market loss/(gain) in respect of derivative financial
instruments
Adjusted profit before income tax from continuing operations
Share of taxation
Adjusted profit from continuing operations

Half year to
30 Sept
2016
£m
(0.5)

Half year to
30 Sept
2015
£m
6.1

Year to31 March
2016
£m
13.1

—

—

0.2

—

—

0.7

0.8
0.8

0.8
2.5
2.9
1.3
0.9
16.7

—

0.1
—

—
—

—

8.4
2.8

0.7

—

—
—

0.7
(3.2)

(4.9)

0.2

0.7

0.8

6.4
15.7
(3.5)
12.2

(0.8)
16.3
(3.9)
12.4

2.7
37.0
(8.9)
28.1

8.1

—
—
—

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 relating to the Group’s investment in ScientaOmicron relate to the ongoing integration programmeof the former Scienta and Omicron businesses.
In common with a number of other companies adjusted profit excludes the non-cash amortisation and impairment ofacquired intangible assets and the unwind of discounts in respect of contingent consideration relating to businesscombinations.
During the year the Group has impaired development costs of £0.7 million on a specific project that has been stopped
as we focus and direct resources so as to accelerate key projects.
Under IAS 39, all derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition,
they are also measured at fair value. In respect of instruments used to hedge foreign exchange risk and interest raterisk the Group does not take advantage of the hedge accounting rules provided for in IAS 39 since that standard
requires certain stringent criteria to be met in order to hedge account, which, in the particular circumstances of theGroup, are considered by the Board not to bring any significant economic benefit. Accordingly, the Group accounts forthese derivative financial instruments at fair value through profit or loss. To the extent that instruments are hedges of
future transactions, adjusted profit for the year is stated before changes in the valuation of these instruments so thatthe underlying performance of the Group can be more clearly seen.

Notes on the Half Year Financial Statements (continued)

Oxford Instruments plc
26

Half Year Results Announcement for the six months ended 30 September 2016
Half year ended 30 September 2016 – unaudited
2

NON-GAAP MEASURES continued

In the prior year the reversal of acquisition related fair value adjustments to inventory and property, plant andequipment were excluded from adjusted profit to provide a measure that includes results from acquired businesses on
a consistent basis over time to assist comparison of performance.
Prior year restructuring costs comprise one-off costs in respect of the cost reduction programme begun in 2014/15,
including an impairment of inventory and capitalised development costs in the Plasma Technology business in relation
to the exit from the HBLED market.
In the prior half year the Group classified its Austin Scientific Business as held for sale and recognised an impairment
charge of £2.8 million to reduce the carrying value of the net assets of the Austin Scientific Business to the fair valueless costs to sell. By the year end, this amount had been transferred to discontinued operations.
In the prior year, the Group made a loss on disposal of its Omicron business of £0.9 million and £4.9 million was
released relating to contingent consideration on the acquisition of Asylum Research Corporation following the end of
the earnout period.
In calculating the share of tax attributable to adjusted profit before tax in 2011 a one-off recognition of deferred tax
assets relating to the Group’s UK businesses of £11.3 million was excluded. At that time the Group announced its
intention to exclude the reversal of this deferred tax from the calculation of the share of tax attributable to adjusted
profit before tax in the years in which it reverses. In the prior half year deferred tax of £0.4 million reversed andconsequently was excluded from the tax attributable to adjusted profit before tax.

Oxford Instruments plc
27

Half Year Results Announcement for the six months ended 30 September 2016

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2016 – unaudited
3

SEGMENT INFORMATIONThe Group has eight operating segments. These operating segments have been combined into three aggregatedoperating segments to the extent that they have similar economic characteristics, with relevance to products andservices, type and class of customer, methods of sale and distribution and the regulatory environment in which they
operate. Each of these three aggregated operating segments is a reportable segment.
The Group’s internal management structure and financial reporting systems differentiate the three aggregatedoperating segments on the basis of the economic characteristics discussed below:
 the NanoTechnology Tools segment contains a group of businesses supplying similar products, characterisedby a high degree of customisation and high unit prices. These are the Group’s highest technology products
serving research customers in both the public and private sectors;
 the Industrial Products segment contains a group of businesses supplying high technology products andcomponents manufactured in medium volume for industrial customers; and the Service segment contains the Group’s service, rental and refurbished asset sales business as well as
service revenues from other parts of the Group.
Reportable segment results include items directly attributable to a segment as well as those which can be allocated ona reasonable basis. Inter-segment pricing is determined on an arm’s length basis. The operating results of each are
regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Board of Directors. Discrete
financial information is available for each segment and used by the Board of Directors for decisions on resource
allocation and to assess performance. No asset information is presented below as this information is not presented inreporting to the Group’s Board of Directors.
Half year to 30 September 2016

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit fromcontinuing operations

NanoTechnology
Tools
£m
90.9
—
90.9

Industrial
Products
£m
42.9
0.8
43.7

Service
£m
37.7
—
37.7

Total
£m
171.5

11.2

1.4

6.4

19.0

NanoTechnology
Tools
£m
85.4
—
85.4

Industrial
Products
£m
45.5
0.5
46.0

Service
£m
33.9
—
33.9

Total
£m
164.8

9.5

1.7

8.8

20.0

NanoTechnology
Tools
£m
187.3
0.1
187.4

Industrial
Products
£m
95.9
0.7
96.6

Service
£m
78.4
—
78.4

Total
£m
361.6

4.5

18.8

44.6

Half year to 30 September 2015

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit fromcontinuing operations
Year to 31 March 2016

External revenue
Inter-segment revenue
Total segment revenue
Segment operating profit fromcontinuing operations

21.3
Notes on the Half Year Financial Statements (continued)

Oxford Instruments plc
28

Half Year Results Announcement for the six months ended 30 September 2016
Half year ended 30 September 2016 – unaudited
3

SEGMENT INFORMATION continued

Reconciliation of reportable segment profit from continuing operations

Operating profit for reportable segments from continuing
operations
Reversal of acquisition related fair value adjustments toinventory
Reversal of acquisition related fair value adjustments toproperty, plant and equipment
Acquisition related costs
Restructuring costs
Restructuring costs – relating to associate
Loss on disposal of subsidiary
Amortisation of acquired intangibles
Impairment loss on assets held for sale
One-off impairment of capitalised development costs
Contingent consideration – further amount deemedpayableContingent consideration deemed no longer payable
Financial income
Financial expenditure
Profit before income tax from continuing operations
4

Half year to
30 Sept
2016£m

Half year to
30 Sept
2015£mYear to31 March
2016
£m

19.0

20.0

44.6

—

—

(0.2)

—
(0.7)
—
(0.1)
—
(8.1)
—
(0.7)

—
(0.8)
(0.8)
—
—
(8.4)
(2.8)
—

(0.8)
(2.5)
(2.9)
(1.3)
(0.9)
(16.7)————
0.1(10.0)
(0.5)

(0.7)
3.2
1.0
(4.6)
6.1

—
4.9
—
(11.1)
13.1

Half year to
30 Sept
2016£m

Half year to
30 Sept
2015£mYear to31 March
2016
£m

13.3
(0.4)
0.2

11.8
(0.4)
0.4

24.6
(0.8)
1.2

(2.0)
4.0

(1.6)
3.3

(3.9)
8.2

15.1

13.5

29.3

RESEARCH AND DEVELOPMENT

Adjusted research and development spend by the Group is as follows:

Research and development expense charged to theconsolidated statement of income
Less: depreciation of R&D related fixed assets
Add: amounts capitalised as fixed assets
Less: amortisation and impairment of R&D costs
previously capitalised as intangibles
Add: amounts capitalised as intangible assets
Total cash spent on research and development during
the period

Oxford Instruments plc
29

Half Year Results Announcement for the six months ended 30 September 2016

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2016 – unaudited
5

ACQUISITIONS – PRIOR PERIOD

Medical Imaging Resources, Inc.
On 1 May 2015 the Group acquired 100% of the issued share capital of Medical Imaging Resources, Inc. (MIR) for a
net cash consideration of £8.7 million. Further contingent consideration of up to £6.3 million was payable based on theperformance of the Oxford Instruments Healthcare business in the year to 31 March 2016. MIR specialises in thebuild, lease and service 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 better align the accounting policies of the acquired business with the Group accounting policies
and to reflect the fair value of assets and liabilities acquired. The business has been acquired for the purpose of
integrating into the Oxford Instruments Healthcare business where it is believed that a number of synergies can beobtained.

Book value£mProvisional
Adjustments£mProvisional
Fair value£mIntangible fixed assets
Tangible fixed assets
Inventories
Trade and other receivables
Trade and other payables
Deferred tax
Net debt

—
3.8
1.4
0.9
(1.7)
0.2
(2.6)

5.7
0.5
0.1
—
—
(0.4)
—

5.7
4.3
1.5
0.9
(1.7)
(0.2)
(2.6)

Net assets acquired
Goodwill

2.0

5.9

7.9
4.5

Total consideration
Net debt acquired
Contingent consideration at acquisition

12.4
2.6
(6.3)

Net cash outflow relating to the acquisition

8.7

The goodwill arising is not tax deductible and is considered to represent the value of the acquired workforce andsynergistic benefits expected to arise from the acquisition. Further contingent consideration of £6.5 million was paid
during May 2016 based on the performance of the Oxford Instruments Healthcare business in the year to 31 March2016. The difference of £0.2 million between contingent consideration at acquisition and that paid during May 2016
was due to foreign currency movements.
The book value of receivables in the tables above represents the gross contractual amounts receivable.

Oxford Instruments plc
30

Half Year Results Announcement for the six months ended 30 September 2016

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2016 – unaudited
6

INVESTMENT IN ASSOCIATE – PRIOR PERIOD

On 27 May 2015 the Group entered into a strategic alliance with GD Intressenter AB of Sweden (“GDI”) to create theworld’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 ofbusiness in Sweden.
In consideration for new shares in Scienta, Oxford Instruments transferred all of its shares in the capital of Omicron to
Scienta. Oxford Instruments holds a 47% interest in the 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 byrepresentatives of GDI;
Whilst the Group has certain veto rights in respect of key decisions, it cannot unilaterally direct the activities of
the Scienta Group.

The book value of the net assets disposed of was £14.9 million. The value of the shareholding acquired in Scienta wasconsidered to be £14.6 million and as a result a £0.3 million loss on disposal arose on the transaction. In addition, afurther £0.6 million has been provided in respect of certain liabilities arising from the transaction.
The Group’s share of loss in its equity accounted associate for the period was £0.5 million (half year to September
2015: £0.2 million; full year to March 2016: £1.5 million).
7

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS – PRIOR PERIODOn 23 November 2015 the Group disposed of its Austin Scientific business for a final consideration of £0.6 million.

Effect of disposal on the financial position of the Group
Other intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Trade and other payables
Net assets divested
Consideration received, satisfied in cash
Cash disposed ofTransaction expenses
Net cash inflow
Carrying value of net assets disposed of
Impairment of net assets to fair value less costs to sellCurrency translation differences transferred from translation reserve
Gain on disposal before impairment
Less impairment loss
Loss on disposal
Tax on loss on disposal
Loss on disposal net of tax

2016
£m
(1.7)
(0.2)
(1.4)
(0.5)
0.3
(3.5)
0.6
—
(0.1)
0.5
(3.5)
2.8
0.7
0.5
(2.8)
(2.3)
0.4
(1.9)

Notes on the Half Year Financial Statements (continued)

Oxford Instruments plc
31

Half Year Results Announcement for the six months ended 30 September 2016
Half year ended 30 September 2016 – unaudited
7

DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS – PRIOR PERIOD continued

Discontinued operations
At 30 September 2016 the Group’s Austin Scientific business was classified as a discontinued operation. It wasconsidered a major class of business on the basis that it was previously an operating segment referred to in the Group
Strategic Report.

Results of discontinued operations

Half year to
30 Sept
2016£m

Revenue
Expenses
Loss from operating activities before tax
Tax
Loss from operating activities after tax
Loss on disposal
Tax on loss on disposal
Loss from discontinued operations after tax
Basic loss per share (pence)
Diluted loss per share (pence)

Cash flows from discontinued operations

—
—
—
—
—

—
—

Half year to
30 Sept
2016£m

Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Net cash flows
8

—
—
—
—

Half year to
30 Sept
2015
£m
1.7
(2.1)
(0.4)
0.1
(0.3)

(0.5)
(0.5)

Year to31 March
2016
£m
2.3
(2.8)
(0.5)
0.2
(0.3)
(2.3)
0.4
(2.2)
(3.9)
(3.8)

Half year to
30 Sept
2015
£m
(0.4)

Year to31 March
2016
£m
(0.9)

—
—

—
—

(0.4)

(0.9)

TAXATION

The total effective tax rate on profits for the half year is 40% (2015: 35%). The weighted average tax rate in respect ofadjusted profit before tax (see note 2) for the half year is 22% (2015: 24%).
9
EARNINGS PER SHAREa) Basic
The calculation of basic earnings per share is based on the profit or loss for the period after taxation and a weighted
average number of ordinary shares outstanding during the period, excluding shares held by the Employee ShareOwnership Trust, as follows:

Weighted average number of shares outstanding
Less: weighted average number of shares held byEmployee Share Ownership Trust
Weighted average number of shares used in
calculation of earnings per share

Half year to
30 Sept
2016
Sharesmillion
57.3

Half year to
30 Sept
2015
Sharesmillion57.3

Year to31 March
2016
Sharesmillion
57.3

(0.2)

(0.2)

(0.2)

57.1

57.1

57.1

Notes on the Half Year Financial Statements (continued)

Oxford Instruments plc
32

Half Year Results Announcement for the six months ended 30 September 2016
Half year ended 30 September 2016 – unaudited
9
EARNINGS PER SHARE continuedb) Diluted
The following table shows the effect of share options on the calculation of both adjusted and unadjusted diluted basic
earnings per share.
Half year to
30 Sept
2016
SharesmillionHalf year to
30 Sept
2015
SharesmillionYear to31 March
2016
Sharesmillion

57.1
0.1

57.1
0.2

57.1
0.1

57.2

57.3

57.2

Half year to
30 Sept
2016
pence
3.70

Half year to
30 Sept
2015
pence
3.70

Year to31 March
2016
pence
3.70
9.30
13.00

Number of ordinary shares per basic earnings per
share calculations
Effect of shares under option
Number of ordinary shares per diluted earnings per
share calculations

10

DIVIDENDS PER SHARE

The following dividends per share were paid by the Group:

Previous period interim dividend
Previous period final dividend

—

—

3.70

3.70

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

Interim dividend
Final dividend

Half year to
30 Sept
2016
pence
3.70

Half year to
30 Sept
2015
pence
3.70

—

—

3.70

3.70

Year to31 March
2016
pence
3.70
9.30
13.00

The final dividend for the year to 31 March 2016 was approved by shareholders at the Annual General Meeting heldon 13 September 2016. Accordingly it is no longer at the discretion of the company and has been included as a liability
as at 30 September 2016. It was paid on 20 October 2016.
The interim dividend for the year to 31 March 2017 of 3.7 pence was approved by the Board on 15 November 2016,
the same value as the previous year and has not been included as a liability as at 30 September 2016. The interim
dividend will be paid on 7 April 2017 to shareholders on the register at the close of business on 10 March 2017.

Notes on the Half Year Financial Statements (continued)
Half year ended 30 September 2016 – unaudited

Oxford Instruments plc
33

Half Year Results Announcement for the six months ended 30 September 2016
11

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of financial assets and liabilities together with the carrying amounts shown in the Consolidated
Statement of Financial Position are as follows:
Carrying
amount30 Sept
2016
£m

Fair
value
30 Sept
2016£m

Carrying
amount30 Sept
2015
£m

Fair
value
30 Sept
2015£m

Carrying
amount31 March
2016
£m

Fair
value
31 March
2016
£m

69.2
6.4
20.9

69.2
6.4
20.9

58.4
5.7
15.3

58.4
5.7
15.3

67.2
6.0
21.8

67.2
6.0
21.8

—
—

—
—

—

—

0.2
2.1
2.3

0.2
2.1
2.3

—
1.5
1.5

1.5
1.5

2

(10.9)(10.9)

(2.0)

(2.0)

(5.8)

(5.8)

2
3

—
—
(10.9)——(10.9)—(19.1)(21.1)—(19.1)(21.1)(0.1)(6.6)(12.5)(0.1)(6.6)(12.5)(55.9)(1.8)(160.2)(55.9)(1.8)(160.2)(69.5)—(154.8)(69.5)—(154.8)(82.4)(1.4)(148.6)(82.4)(1.4)(148.6)Fair
value
hierarchy

Assets carried at amortised cost
Trade receivables
Other receivables
Cash and cash equivalents
Assets carried at fair value
Derivative financial instruments:– Copper hedging contracts (designated as an
IAS 39 hedge)– Foreign currency contracts

Liabilities carried at fair value
Derivative financial instruments:– Foreign currency contracts– Copper hedging contracts (designated as an
IAS 39 hedge)
Contingent consideration
Liabilities carried at amortised cost
Trade and other payables
Bank overdraft
Borrowings

2
2—

The following summarises the major methods and assumptions used in estimating the fair values of financial
instruments reflected in the above table.
Derivative financial instruments
Derivative financial instruments are marked-to-market using market prices.
Fixed and floating rate borrowings
The fair value of fixed and floating rate borrowings is estimated by discounting the future contracted principal andinterest 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 fairvalue. All other receivables/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.

Notes on the Half Year Financial Statements (continued)

Oxford Instruments plc
34

Half Year Results Announcement for the six months ended 30 September 2016
Half year ended 30 September 2016 – unaudited
11

FAIR VALUE OF FINANCIAL INSTRUMENTS continued

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) or indirectly (i.e. derived from prices); andLevel 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.
Contingent consideration relates to amounts payable in respect of acquisitions. It is reassessed at the end of eachyear to its fair value.

Contingent consideration
Balance brought forward at beginning of period
Fair value of contingent consideration on acquisitions in the year
Unwind of discount in respect of contingent consideration
Contingent consideration paid
Increase in contingent consideration
Contingent consideration released to the consolidated statement of income
Effect of movement in foreign exchange
Balance carried forward at end of period

1230 Sep
2016
£m
6.6
—
—

(6.5)
—
—

(0.1)
—

30 Sep 31 March
2015
2016
£m
£m
17.5
17.5
6.7
6.3
0.7
0.6
(2.6)
(13.3)
0.7
—
(3.2)
(4.9)
(0.7)
0.4
19.1
6.6

RELATED PARTIESAll transactions with related parties are conducted on an arm’s length basis and in accordance with normal businessterms. Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
During the period, the Group supplied services and materials to its associate, Scienta Omicron Gmbh, on an arm’s
length basis. The following transactions occurred during the period:
Half year to 30 September 2016
Scienta Omicron GmbH

Revenue£m
0.1

Receivables£m
3.6

Half year to 30 September 2015
Scienta Omicron GmbH

Revenue£m
0.3

Receivables£m
3.4

Included in receivables is a non-current loan receivable of £3.6 million (2015: £3.1 million). The loan is repayable atthe end of May 2020. During the period the Group received interest charged on the loan of £0.1m (2015: £0.1m).

Oxford Instruments plc
35

Half Year Results Announcement for the six months ended 30 September 2016

Principal Risks and Uncertainties
The Group has in place a risk management structure and internal controls which are designed to identify, manage andmitigate risk.
In common with all businesses, Oxford Instruments faces a number of risks and uncertainties which could have amaterial impact on the Group's long term performance.
On pages 22 to 24 of its 2016 Annual Report and Accounts (a copy of which is available at www.oxfordinstruments.com), the Company set out what the Directors regarded as being the principal risks and uncertainties
facing the Group's long term performance and these are reproduced in the table below. Many of these risks are
inherent to Oxford Instruments as a global business and they remain valid as regards their potential impact during theremainder of the second half of the year.
The impact of the economic and end market environments in which the Group's businesses operate are considered in
the Half Year Statement of this Half Year Report, together with an indication if management is aware of any likely
change in this situation.
Specific Risk
Technical Risk

Economic
Environment

Acquisitions

Foreign Exchange
Volatility

Political Risk

Context

Risk

The Group provides hightechnology equipment
and systems to its
customers.

Failure of theadvanced
technologies
applied by
the Group to
producecommercial
products,
capable ofbeing
manufactured
and sold
profitably.

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

Associated strategic
priorities‘Realising the Brand’‘Liberating Cash’

Government spend on
R&D has been
constrained.

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

Lower
profitability andfinancial returns.

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

Appropriateacquisition
targets may
fail to provide
the planned
value.

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

‘Realising the Brand’A significant proportion of
the Group’s profit is madein foreign currencies.
Most costs are in Sterling.

The Group’s
profit levels
are exposedtofluctuations in
exchange
rates.

Lower
profitability andfinancial returns‘Delivering
Shareholder Value’

Changes inpolitical
relations may
affect the
granting oflicences.

An inability tosell certain
products tocertain countries

The Group operates in
global markets and canbe required to secure
export licences fromgovernment.

‘Delivering
Shareholder Value’‘Inventing the Future’‘Adding Personal
Value’

Mitigation
The Group has moved awayfrom large scale, single
customer development
programmes towards morecommercially orientatedproducts.
The New ProductIntroduction programme thatany new R&D projects must
pass through provides aframework within which thecommercial viability of
projects are scrutinised andassessed.
The Group has a broad
spread of customers,
applications andgeographical markets.
Extensive financial, technicaland commercial due
diligence is undertaken by
the Group during any
acquisition programmes.

‘Liberating Cash’

Each transaction has acomprehensive postacquisition integration plan
which is monitored at thehighest level.
The Group seeks to mitigate
the exposure to transactionalrisk by the use of natural
hedges wherever possible.

‘Delivering
Shareholder Value’

The remaining transactional
foreign exchange risk in any
year is mitigated through theuse of forward and nonpremium option exchange
contracts.
Maintain a diversified
geographical customer base.

‘Liberating Cash’

Ensure low commitment toinventory before attaining
export licences

Oxford Instruments plc
36

Half Year Results Announcement for the six months ended 30 September 2016

CustomerConcentration

Outsourcing

Pensions

PeopleThe Group’s
Superconducting Wirebusiness in reliant on asmall number of MRI
manufacturers as
customers .

Thesecustomers
can exert
significant
customer
power interms of priceand volume

Lost sales,
decreased
margins

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

Failures inthe supply
chain
impactingsales.

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

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

Movements
in theactuarialassumptions
may have anappreciable
effect on thereported
pensiondeficit.

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

‘Delivering
Shareholder Value’Theemployeeleaves theGroup.

Lower
profitability andfinancial returns.

‘Adding Personal
Value’

A number of the Group’s
employees are businesscritical.

‘Delivering
Shareholder Value’Attempt to broaden customer
base to include all OEMS

‘Liberating Cash’

Explore alternative
applications forsuperconducting wire

‘Liberating Cash’

Relationships withoutsourcing businesses aremonitored closely and any
potential issues are acted
upon swiftly to avoid
disruption.

‘Realising the Brand’

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

‘Liberating Cash’

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

‘Inventing the Future’

The Group undertakes aregular employee survey andimplements and reviews
resulting action plans.
A comprehensive succession
planning process is in place,
together with a talent network
which identifies andmanages contacts withpeople who could provide
external succession for
critical current and futureroles.

Routes to Market

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

The systems
integrator
switches
supplier
denying theGroup’s routeto market.

Lower
profitability andfinancial returns.

‘Inventing the Future’‘Realising the Brand’

A management development
programme provides
exposure to key skills
needed for growth. Regularindividual performance
reviews take place.
Use of the stage gate
process and ‘Voice of the
Customer’ to make sure that
the Group’s products are thebest in the market.
Co-marketing with system
integrators to promote themerits of the Group’s
products to end customers.
Seeking to increase thenumber of integrators
supplied by the Group .

Oxford Instruments plc
37

Half Year Results Announcement for the six months ended 30 September 2016

Responsibility Statement of the Directors in respect of the Half Year Financial Statements
We confirm that to the best of our knowledge:•

the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU;•

the interim management report includes a fair review of the information required by:(a)DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events thathave occurred during the first six months of the financial year and their impact on the condensed set offinancial statements; and a description of the principal risks and uncertainties for the remaining six
months of the year; and(b)

DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that havetaken place in the first six months of the current financial year and that have materially affected thefinancial position or performance of the entity during that period; and any changes in the related party
transactions described in the last annual report that could do so.

Ian Barkshire, Chief Executive
15 November 2016

Gavin Hill, Group Finance Director

Oxford Instruments plc
38

Half Year Results Announcement for the six months ended 30 September 2016

Independent review report to Oxford Instruments plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30 September 2016 which comprises the Condensed Consolidated
Statement of Income, the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated
Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated
Statement of Cash Flows and the related explanatory notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist the company inmeeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct
Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters weare required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company for our review work, for this report, or for theconclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The
condensed set of financial statements included in this half-yearly financial report has been prepared in accordancewith IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the halfyearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410
Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing(UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 September 2016 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Greg Watts
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill, Snow Hill Queensway
Birmingham, B4 6GH
15 November 2016

Oxford Instruments plc
39