08

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

CHAIR’S STATEMENT

A strong platform
for growthThis has been another good year for Oxford Instruments,
with good financial results and progress made on
many fronts. It has also been a year of transition, as
we develop our new strategy and look to the future.

“The strategic work we havecarried out this year has
reinforced the positive impact
we have on the world around us.
We are committed to protecting
and enhancing our core strengths
as we take the steps needed
to realise the full potential of
Oxford Instruments.”
NEIL CARSON
Chair

I am pleased to report on a busy andpurposeful year at Oxford Instruments:
we delivered record revenue,
welcomed our new CEO Richard Tyson,completed the significant investment
in our new compound semiconductor
equipment facility in the UK, gained
further new colleagues with theacquisition of First Light Imaging,and developed a refreshed purpose
and strategy for the Group, all while
successfully navigating geopoliticaland economic challenges.
We were delighted that Richard
accepted the opportunity to lead us
through the next stage in our growth,joining us in October 2023. Richard
comes to Oxford Instruments withan excellent track record of success,having driven transformational change
during his nine-year leadership of TT
Electronics plc. He is an astute andstrategic leader with a remarkableability to get quickly to the heart of achallenge and find the solution. He is
also people-focused, and I was pleased
to see that he made it a firm priority tomeet his new colleagues face to face, at
all our sites, in a matter of weeks, to gettheir insights into Oxford Instruments.
Over the few months since he joined,
Richard has led the developmentof a refreshed strategy for Oxford
Instruments, working with the Board,
with leadership teams and withcolleagues around the Group to identify
the steps we need to take to realise thepotential of the Group, building on ourstrengths. As he sets out on pages 10 to
15, while we have many strengths, there
are also opportunities to do some things
differently and drive improved outcomes
which will benefit all our stakeholders.
Our new structure (see page 12) will
drive growth by facilitating the deliveryof action plans that are targeted to theprecise and differing needs of eachdivision, while Group-wide we will
focus on simplifying our organisationand processes, driving customer-firstways of working and delivering a stepchange in operational performance.

A new purpose
One of the central elements of thestrategy is our commitment to protect
and enhance our core strengths.
Our new purpose statement neatly
encapsulates both the achievementsof which we are so proud and theambition we are all striving towards:
To accelerate the breakthroughs thatcreate a brighter future for our world.

www.oxinst.com

Our technology and scientific expertise
enable our customers to discover andbring to market exciting new advancesthat drive human progress – and weare determined to continue to do sofor the long term.

Sustainability
The strategic work we have carriedout has reinforced the positive impact
we have on the world around us
through our products and services.
We want that positive impact toextend throughout our operations,from the inclusive culture we seek tobuild to the reduction of our carbon
footprint. I am particularly pleased
that this year we have committed toreach net zero in our own operations
by 2030 (see page 35).

People at the heartof our successOn behalf of the whole Board, I would
like to thank all our employees. The
company’s success is their success,generated as the result of their hard
work, talent and commitment. We areenormously grateful this year, as weare each year, for the contribution of
every individual and every team.

A fond farewell to
Ian Barkshire
I would also like to extend sincere
thanks and best wishes on behalfof the whole Board to Ian Barkshire,
who retired as Chief Executive in
October 2023. Oxford Instruments
made significant progress during
Ian’s tenure: it was he who drove
the development and delivery of the
Horizon strategy, building the strong
foundations from which we move
forward today. Ian’s vision to position
the company in structural growthmarkets, founded on deep market
insights, underpinned a period ofremarkable growth. He can be very
proud of what he and his colleagues
achieved together.

Further Board changes
in the year
We were delighted to welcome
Hannah Nichols to the Board as a
Non-Executive Director in January.
Hannah brings strong financial
expertise, extensive international
experience and a track record ofdriving transformational change,
both within and beyond thefinance function.

I am very pleased to confirm thatHannah will take up the role of Chairof the Audit and Risk Committee
following the Annual General Meeting(AGM) on 25 July 2024, at which point
Mary Waldner will step down fromthe role in preparation for leaving theBoard in February 2025, following hernine years of sterling service.
We bade farewell to Sir Richard Friend
in July 2023. Richard had served foralmost nine years as Non-Executive
Director, and his deep insights, derived
from many years’ experience at thehighest levels of academia, and in
business, will be much missed in
Board discussions.
Finally, Reshma Ramachandran
will stand down as a Non-Executive
Director with effect from the conclusionof the AGM, due to her appointment
in a new executive role externally,
which will restrict the time she is able
to commit to her role with Oxford
Instruments. The Board sincerely
thanks Reshma for the valuable
contributions she has made during
her time as a Director.

Dividend
In line with our progressive dividend
policy and strong trading performancein the year, the Board is proposing a
final dividend of 15.9p per share (2023:
14.9p), which is subject to approval at
the AGM on 25 July 2024.

Looking ahead
I am full of optimism for the future of
Oxford Instruments. Visiting our stateof-the-art new facility at Severn Beachwith my Board colleagues last month,and hearing from the team there how
warmly they welcome the Group’s new
strategic direction, marked a particular
milestone. I was struck by theatmosphere full of momentum, paceand energy, which I sense is replicatedright around the business. I am hugely
looking forward to seeing our plans
come to fruition over the coming year,
and the years that follow.

NEIL CARSON
Chair
10 June 2024

09

10

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

CHIEF EXECUTIVE OFFICER’S REVIEW

Robust financial
performance and a refreshedstrategy through a new lensI am pleased to report a robust set of resultsfor Oxford Instruments, and to set out a new
strategy for the Group to enable us to fulfil
our strong potential.

I am pleased to report a robust setof results for Oxford Instruments. We
have delivered 9.8% revenue growthat constant currency, driven by a 7%
increase in semiconductor revenue,
reflecting our greater exposure to thecompound semiconductor market,
and double-digit growth in Materials
Analysis and Healthcare & Life
Science markets, underpinned bystrong research funding.

Orders459.1m£(2023: £511.6m)

Revenue

470.4m£(2023: £444.7m)

Adjusted operating profit

80.3m

£

(2023: £80.5m)“Our exceptional technology,
strong talent base, well-distributed
regional infrastructure and choiceof markets give us a strong
platform from which to grow.
There are significant opportunities
ahead – but to address them infull we need to structure Oxford
Instruments differently.”

Operating margin

17.1%(2023: 18.1%)

Adjusted operating profit of £80.3m
was in line with expectations, up 3.7%
on a constant currency basis. Adjusted
operating margin was down 100bps
at 17.1% (2023: 18.1%), in line withguidance, primarily reflecting losses
incurred in our quantum business as aresult of ceasing certain commercial
activities for these products in China
and continued operational investment.
The successful transition of ourcompound semiconductor business toa new purpose-built facility has beena key operational highlight of the year,
delivering streamlined production andincreased capacity, and presenting
significant opportunity to scale. A
further focus has been the action we
have taken in response to the shifting
geopolitical landscape, pivoting to lesssensitive applications in China andgrowing revenue in other regions. Our
robust revenue growth in Europe andthe rest of Asia bears out the successof this programme, which will continue
into FY24/25.
Underlying order intake (excluding thepivot from China) remained robust,
supported by a good performance inEurope and the rest of Asia. Underlying
book to bill is positive, despite thestrong revenue growth, and theorderbook provides good visibility into
the year ahead. Our pipeline is strong
across all geographies and markets.

A strong platform for growth
Since joining Oxford Instruments in
October, I have carried out a thoroughreview of our business model andmarkets, working collaboratively with
our leadership team and gathering
input from across the business.
Our work confirms that academic
research is the bedrock of Oxford
Instruments’ success. Representing
more than a third of our revenue, it
is resilient across cycles and grows
steadily at 3–6% a year.

Our market-leading technology andexpertise, developed over 60 years,
spans all areas of fundamental
research and provides unrivalled reach
into academic institutions worldwide.
In recent years, by developing andleveraging our market insight, wehave strengthened our position incommercial markets applied R&D,
where the technology is used todevelop new products for industrial
applications (a market four times
larger than the academic researchmarket), which now represents c.
45% of our revenue. We have also
started to make early inroads into theeven larger commercial production
market, representing c.20% of ourrevenue today. The volume potential
in commercial applied R&D andproduction markets is significantly
bigger, offering high single-digit growthunderpinned by structural growth
drivers requiring new technologies
to support decarbonisation andproductivity globally.
Our deep dive review highlights that
90% of our revenue is generated inthree primary markets – Materials
Analysis, Semiconductors and
Healthcare & Life Science. All three
have clear sustainability drivers withhigh single-digit structural growthpotential. Quantum technology, amuch smaller contributor to our current
revenue, also represents a growth
opportunity, though its trajectory isless linear.

Our strategy for the future
Our exceptional technology, strong
talent base, well-distributed regional
infrastructure and choice of markets
give us a strong platform fromwhich to grow. There are significant
opportunities ahead – but to capturethem in full and achieve industryleading margins, we need to structure
Oxford Instruments differently.

RICHARD TYSON
Chief Executive Officer
Full year to
31 March 2024

Reported growthvs full year to
31 March 2023

Constant currency
growth vs full year to
31 March 2023

Orders£459.1m(10.3%)(2.5%1)

Revenue£470.4m

+5.8%

+9.8%

Adjusted operating profit£80.3m

(0.2%)+3.7%

Adjusted operating margin17.1%(100bps)(100bps)Group

1.	Underlying order growth is adjusted for the impact of prior year China orders removed from current year order intake due to export
licence restrictions.

www.oxinst.com

11

12

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

CHIEF EXECUTIVE OFFICER’S REVIEW continued
As we set out below, the different areasof our business fall naturally into two
distinct groupings, reflecting different
drivers and business models. This new
structure will also facilitate targeted
actions to unlock the potential in each.

Our future divisional structure
We are restructuring the business
and will be creating two newdivisions: Imaging & Analysis andAdvanced Technologies.
How we are structured today:

Materials & Characterisation
Materials imaging and analysis solutions
and advanced tech and deposition systems
for compound semiconductor devices

Research & Discovery
Scientific cameras, microscopy,
cryogenic and superconducting magnet
technology and X-ray tubes

Service & Healthcare
Customer service and support forour own products and for third-party
MRI scanners in Japan

From 2024 the Group will report against
a new divisional structure:

Imaging & Analysis
Microscopy, cameras, analytical
instruments and software

Advanced Technologies
Compound semiconductor fabricationequipment, cryogenic and superconducting
magnet technology and X-ray tubes

Imaging & Analysis will comprise our
microscopy and cameras businessAndor and our materials analysis
businesses Asylum Research,
Magnetic Resonance, NanoAnalysis
and WITec. (recent adjusted operating
profit margin history 22–24%).
Advanced Technologies will comprise
our compound semiconductor business
Plasma Technology and our quantumfocused business NanoScience,
together with the much smaller X-Ray
Technology business. (recent adjusted
operating profit margin history 0–4%).

www.oxinst.com

Moving forward, service revenue will
be reported within each respective
division. We will report against the
new structure at our half-year resultsin November 2024. The indicative andunaudited pro forma numbers under
the proposed divisional structure forthe full year 2024 are disclosed in
the Finance Review and the annual
results presentation.
The rationale for the planned reportingchange is as follows.
The businesses which will form the
new Imaging & Analysis division
represent c.70% of Group revenue, andhave strong existing synergies and a
track record of success.
They provide similar relatively smallscale imaging and analysis equipment
and software, have common businessmodels, go-to-market strategies andmargins, and they address a similar
client base in their three key markets
in materials analysis, semiconductors,
and healthcare & life science.
In recent years, particularly since
the acquisition of WITec in 2021, theMaterials Analysis businesses havecollaborated more closely, driving
cross-selling opportunities andefficiencies. Joining forces with ourscientific camera and microscopy
business will facilitate further
synergies and simplification. Together,
they will provide an unrivalled rangeof microscopy, scientific cameras,
spectroscopy and analytical tools
and software.
Action plans for these high-performing
business units are under way. It
will result in improved growth andoperational leverage supporting strong
margins. Strategic priorities will include:•

improving sales and service
channels by going to market
through streamlined regionalcustomer-facing teams andgenerating more whole life revenue
from a better customer experience;•

greater focus to leverage
maximum opportunity from theexisting product portfolio andR&D programme;•

simplifying the organisation bystreamlining business processes
and removing duplication;•

increasing cross-selling throughshared marketing initiatives;•delivering a step change inoperational performance by
optimising production andenhancing performance
management and value
engineering; and•increasing commercial sales
through sharing of best go-tomarket practice across regions andtargeted key account management.

The businesses which will form
our new Advanced Technologies
division (representing c.30% of Grouprevenue) have a very different profile.
They sell much lower volumes oflarger-scale complex systems intovery specialised markets (compound
semiconductor and quantum) withunique growth drivers and principally
separate customer bases. Thesebusinesses each require a dedicated,focused approach to leverage theirwell-invested base, deliver improved
margins and achieve their full growthand margin potential.
Our compound semiconductor businessis growing strongly. Scale is important toreap the benefits and recover the costsof our new, larger dedicated facility in
Severn Beach, outside Bristol, UK. The
business is poised to take advantage ofthe structural growth in the compound
semiconductor market, which does
not have the cyclicality inherent in
the silicon semiconductor market.
The leadership team have identified
key areas of specialism within thecompound semiconductor landscapewhere we have leading capability, or
have the potential to do so.
Here, we will maximise productivity
and output following the site move,taking advantage of the process
and efficiency opportunities the site
provides, look to optimise our supply
chain, and continue to simplify our
product range, in order to deliver good
growth and strong margin progression.
A further key focus area is customer
service, which requires a step change
to meet the stretching requirementsof the business’s growing commercial
production customer base.

Our quantum business has been
impacted by export restrictions
which have limited our ability to sell
these capabilities into China. This,
combined with operational challenges,
larger project timescales and strong
competition in the high potential,
but uncertain quantum market, has
impacted performance in 2023/24.
We have already started to restructure
the cost base, commenced a major
operational turnaround programme
in operations and refocused sales
teams on Europe and the USA. This
will continue at pace, focusing onvalue engineering, cost reduction
and performance management.
While leveraging our regionalsales and marketing infrastructure,
the businesses in the Advanced
Technologies division will operatewith greater independence than theircounterparts in Imaging & Analysis,
enabling them to address their
specialist markets in ways which will
maximise their ability to grow bothscale and margin and removing thiscomplexity from the wider business.
Structuring our business in these
two new divisions will improve ourcustomers’ experience and facilitate
the delivery of targeted action plansdesigned to suit the opportunities
and the challenges in each, whilst
supporting greater transparency of
their different paths to significant value
creation for investors.
We will provide a progress update on
the development of the new divisions
via our interim reporting in November,at which point we will report in the newdivisional structure.

Group-level strategic
priorities
While our action plans are targeted
at divisional level, the following
core priorities underpin our strategy
Group-wide.

Improve our customers’
experience
Further growing our reach into
commercial markets requires
on-time delivery paired withexceptional customer service andresponsiveness, particularly in
production environments, where
deadlines are non-negotiable anddown time is not tolerated.
More broadly, we will focus ondelivering deep customer insightand best-in-class customer service
through our regional teams aroundthe world. We also see significant
opportunity to extend whole-life
revenue via our services proposition.

Drive a step change inoperational performanceand productivity
The Group’s rapid growth has
challenged both capacity andcapabilities in some of ourmanufacturing facilities, opening
up significant opportunities in bothdivisions to reconfigure production
areas, design more efficient
production processes and upskill
colleagues to increase
their productivity.
We have appointed a Chief
Transformation Officer who
is leading a broad-ranging
transformation programme
covering all aspects of operational
performance and productivity, fromthe layout of our facilities to value
engineering to reduce our costof goods.

In addition, we have appointed
a dedicated customer service
lead who will focus on our aftersales support infrastructure andcapabilities, and target significant
improvements in our service to
our customers.

Simplify our organisational
structure
With significant overlap between
business units and markets, thestructure of Oxford Instruments
had become overly complex
over a number of years, making
it confusing for stakeholders
to understand and leading to
duplication of processes internally.
Consolidating our eight business
units and six previous end markets
into just two divisions and threecore markets, supported by asimplified customer-facing regional
structure, will drive efficiencies
and operational gearing, andprovide greater transparencyof Oxford Instruments as aninvestment proposition.

Focus on our key strengths
We will continue to protect,invest and enhance our corestrengths by investing c.8–9% ofrevenue annually in R&D, andworking closely with our regional
teams and our customers toensure we focus our efforts on
the most economically attractive
opportunities, delivering strong
return on capital employed.
Focusing on our core markets –materials analysis, semiconductors,
and healthcare & life science –will enable us to maximise our
impact in all three markets, while
deriving efficiencies from this moretargeted approach.

13

14

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

CHIEF EXECUTIVE OFFICER’S REVIEW continued
Capital allocation priorities
These can be summarised as follows:
•

•

•

•

Invest in the businessOur businesses are well invested,
as evidenced by the capital
investments we are making in
new facilities at Severn Beach
and Belfast. We will continue toinvest c.8–9% of revenue in R&D,
and make targeted operational
investments to support growth.
Drive shareholder returns
We are committed to deliveringstrong shareholder returns,
taking account of underlying
earnings, dividend cover,currency movements anddemands on our cash.
Make selective acquisitions
Our acquisition strategy is highly
selective and disciplined. We will
focus on adding capabilities in
Imaging & Analysis, with a goodpipeline of owner-managed
businesses under consideration.
Maintain strong balance sheet
Our strong balance sheet gives
us flexibility. We will continuallyassess the appropriateness of
returns to shareholders in thecontext of the strategy.

Journey to growth andhigher margins
We expect to deliver revenue growthand higher margins from both divisions
over the medium term, with the Groupcapable of delivering a revenue CAGR
of 5–8% and an adjusted operating
profit margin of 20%+. Actions to
support growth have begun. Changes
in focus and sharing of best practice
are expected to be implemented
over the next 18 months. Operational
performance improvements will require
investment in the short term, meaning
the margin improvement profile will not
be linear. The initial efforts of the lastyear or so have been supplemented
with a dedicated Chief Transformation
Officer and we have added resources
and built a more extensive change
team who have started improvement
actions in our Belfast facility first.

www.oxinst.com

As evidenced by the recent
financial performance in Advanced
Technologies, specific restructuring
and improvement activities are
required in the short term which havebeen commenced and are expected
to have some impact in the coming
financial year.
Overall, we expect these actions todeliver good sustainable organic
growth in the medium term, coupledwith the opportunity to generatesignificant value through operating
margin enhancement to 20%+.
Our anticipated mid-term outcomescan be summarised as follows:•

Organic growth of 5–8% CAGR.

•

Adjusted operating margin
improvement to 20%+.

•

Cash conversion of over 85%.

•

Continuing to invest in growth,
including 8–9% on R&D.

•

Strong return on capital
employed (currently 29%).

•

Selective acquisitions bringing
complementary capabilities.

A clear purpose
We make a tremendous positive
impact through our products andservices – from supporting Nobel
Prize-winning scientific endeavours
and the development of personalised
treatments for cancer to accelerating
the path to decarbonisation through our
extensive role in the battery ecosystem.
Our technology and scientific expertise
enable our customers to discover andbring to market exciting new advancesthat drive human progress. I am proudof the unique contribution we make. As
we set out on our new strategy, I am
delighted to share a new purpose for
Oxford Instruments:
To accelerate the breakthroughs thatcreate a brighter future for our world.
Our position is unique among UK-based
technology companies – and it is myhope that this new purpose, which has
been warmly embraced by colleagues
around the world, will highlight our
positive impact, and focus the energyof everyone at Oxford Instruments.

People and planet
I have visited almost all our global sites
since joining last autumn and havebeen impressed by the energy andcommitment of the colleagues I havemet at every level of the organisation.
Our engagement scores are high, at
78%, based on the organisation-wide
survey carried out last September. But
there is no room for complacency, andin recent months I have led a deep diveexercise, as part of the developmentof our strategy, to understand ourorganisational culture and to drive
action where there is scope to improve.
We have many strengths. Our
workforce is highly skilled, with deep
expertise in a wide range of disciplines,
from science and engineering tomarketing and sales, and our people
are passionate about what we doand the impact we have. However,there are areas we need to focus on
as we move forward in line with our
new strategy. We are clear on our new
strategic priorities, and have worked
collaboratively with focus groups
around the business to set out new
ways of working to deliver them.
We are committed to creating avalues-driven, inclusive culture. To
that end, we have launched a newequity, diversity and inclusion policy,
and successfully piloted new Inclusive
Leadership training to be rolled out
over the coming year.
Our employees have launched impact
groups focused on women’s issues
and neurodiversity this year, adding to
the network begun with our race andethnicity and LGBTQ+ impact groups.
Our products and services have aremarkably positive impact on theworld around us. We want to generatea brighter future through our own
operations, too. To that end, we areaccelerating our progress to net zero,in all the areas we can control. Last
year, we committed to achieve a 50%
reduction in Scope 1 emissions and a
70% reduction in Scope 2 emissions
by 2030. Today, we are setting a newtarget to achieve net zero in Scopes
1 and 2 by 2030, and sooner if wecan. We will continue to work with
our product development teams
and our supply chain to minimise
our Scope 3 emissions, with the goalof accelerating our overall target
to achieve net zero faster than ourcurrent target year of 2045.

Richard Tyson with colleagues in Shanghai (top left) and Belfast (above right); Richard and his Board colleagues also met apprentices on the site
visit to Severn Beach (bottom left).

Summary and outlook
I am pleased with the results for thefull year and the development of
the business during the period. We
have reported strong revenue growthof 9.8% at constant currency, withadjusted operating profit in line withexpectations. I am grateful to mycolleagues across Oxford Instruments
for their commitment and energy
through a busy year.
We have rebalanced our positions
in regional markets in the face ofgeopolitical shifts, focusing ourresources on non-sensitive areas
in China, and successfully growing
revenue and orders in Europe andelsewhere in Asia.

We have continued to make organic
investments to support our future
growth, with our state-of-the-art
compound semiconductor facility now
operational. Underlying order intake
has remained robust, with a positive
book to bill even though we hadstronger growth in the second half, andthe orderbook gives us good visibility
into the year ahead.
I am hugely impressed with the strong
platform at Oxford Instruments,
anchored by our market-leading
technologies and our talented andcommitted workforce. My work withleadership teams around the businesshas confirmed our view that there
is significant opportunity to build
on our core strengths. I have today
outlined a new strategy, setting
targets to improve the returns fromthe business in the medium term.

As part of this strategy, we arereorganising the Group into two distinct
business divisions to simplify andenhance our operations. We will target
growth by focusing on fewer markets
and a sharpened product portfolio,
tackling key areas where improvement
is required and delivering a step change
in operational and service performance.
We are in a strong position to improveand grow the business, putting it ona sustainable growth footing throughour market-leading offering together
with operational and efficiency
improvements. Given our strong orderbook and pipeline, coupled withpositive business improvement actions,
we expect to make good constantcurrency progress in the full year
ending March 2025.

RICHARD TYSON
Chief Executive Officer
10 June 2024

15

16

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

REASONS TO INVEST

Our investment case iscentred around the following
key characteristics
Purpose driven, withdifferentiated, innovativetechnologies providing
high value add tocustomers•

Clear purpose to accelerate thebreakthroughs that create a brighter
future for our world is well alignedwith global mega trends.

•

Competitive advantage built on
60-year brand heritage and broad
technology base spanning all
scientific disciplines, placing Oxford
Instruments in a unique position
to anticipate global drivers andconnect academic and commercial
customers, acting as a catalyst thatpowers real world progress.

•

Value-add products and services
accelerating customers’ progress
across the technology development
and production cycle.

 ee CEO Review /S
Pages 10 to 15

www.oxinst.com

Leading positions in
attractive structural
growth markets••

Leadership in specialist
technologies and embedded
positions across three primary end
markets with long-term structural
growth drivers: materials analysis,semiconductors, and healthcare& life science (together, c.90%
of revenues).
Diverse commercial and academic
customer base spanning the world’s
leading companies and scientificresearch communities, primarily
across Asia, North America
and Europe.

See Operations Review /Pages 26 to 33

Purpose and impact
commitments key toattracting high-quality
talent and customers
which are creating amore sustainable planet•••

Strong attraction and retentionof outstanding people with deep
expertise, and a highly experienced
management team, reflect ourcompelling purpose and ongoinginvestment in talent.
Technologies critical to customer
efforts to optimise the use ofresources, advance the green
transition, develop drug delivery,and sustainably power anincreasingly digital world.

Our leading technology and customer-centric, market-focusedstrategy provide a strong platform from which to deliver sustainablegrowth, margin expansion and enhanced shareholder returns.

Track record of delivery,
driving returns••

Revenue CAGR of 8.4% over thelast five years, supporting strong
2023/24 ROCE of 29.1% and a
progressive dividend, with growthof 6.7% in 2023/24.

 ee Finance Review /S
Pages 58 to 69

Strong balance sheet
and attractive financial
profile supporting
investment in growth•

Strong order book and pipeline
provide a positive underpin forcontinued growth.

•High margin and cash generativewith a strong balance sheet withsignificant net cash.

•

Attractive opportunities toaccelerate growth through existingproduct portfolio, new productpipeline, servicing offer, andselective M&A.

••

Margin enhancement opportunities
through operational and supply
chain optimisation, synergies
across the Group and enhanced
customer experience.

Well positioned to invest in
expanding operational capacity andinfrastructure (recent investments
in state-of-the-art facilities inBristol and Belfast), new productdevelopment (8–9% of revenue
annually), and selected acquisitions.

Complemented by value-accretive
acquisitions; most recently, WITecand First Light Imaging.

Building on our strong responsible
business foundations throughsix initiatives: progress to net
zero (Scopes 1 and 2 by 2030;
Scope 3 by 2045); environmental
impact; operating responsibly;
sustainable product stewardship;inclusive culture; and communityand connection.

See Sustainability Report /Pages 34 to 57

Clear opportunities toaccelerate growth andenhance margins

 ee CEO Review /S
Pages 10 to 15

 ee Finance Review /S
Pages 58 to 69

17

18

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

OUR BUSINESS MODEL

Helping to create amore sustainable future
Driven by our purpose

How we add value

To accelerate thebreakthroughs thatcreate a brighter futurefor our world.

Our technology and scientific expertise
enable our customers to discover andbring to market exciting new advancesthat drive human progress.
Our core activities

Fundamental research

Impacted by:

We develop tools and systems that enable
academic researchers and scientists to makenew breakthroughs.

Our stakeholders
Engagement with our stakeholders allows us to growand execute our strategy, so we consider the impact wehave on them, as well as what they consider important,when developing our plans for long-term success.

The health and resilience of our chosen end markets
has played a critical role in our strong performance.
We believe our strong position in these end markets,along with their structural growth drivers, will continue
to create value for our customers and present significant
opportunities for sustainable economic growth.

Driven by ourstrategic objectives

01. Deliver strong growth through‘customer first’ ways of working

The identification and evaluation of emerging risks
is derived from the Group’s quarterly risk reporting
framework. Any new risks reported by the business
units are specifically identified and discussed as partof this process, with a formal review of emerging risks
at the year end.

02.	Deliver a step change inoperational performance(delivery, quality, efficiency)

Find out more / Pages 26 to 33

Our key enabling technologies and solutions
cut the time needed to go from discovery toreal world progress.

Find out more / Pages 26 to 33

03.	Simplify the organisation,
increasing collaboration
and accountability

Our products support today’s manufacturing
challenges and increase productivity.

www.oxinst.com

Find out more / Pages 27 to 29

Research& Discovery

04.	Continue to invest in newtechnology and products,
protecting and enhancing
our core strengths

Find out more / Pages 30 to 32

470.4m

£+9.8% at constant currency

80.3m

£

+3.7% at constant currency

109.0p
(3.3%)

Service &Healthcare

05.	Embed our values and ways
of working so that they are
lived every day
Find out more / Pages 51 to 55
Find out more / Page 33

Global demand with strong
positions across Asia (47%of revenue), North America(26% of revenue) andEurope (25% of revenue)

Revenue

Adjusted EPS

Find out more / Pages 26 to 33

Customers acrossacademic (55%) andcommercial (45%) markets

Outcomes

Adjusted operating profit

Find out more / Pages 10 to 15

Production and testing

Underpinned by strong demand for our products and services:
Technology leadership in
three end markets withsustainable, structural
growth drivers

Materials &Characterisation

Find out more / Pages 10 to 15

Find out more / Pages 10 to 15

Our management of risk

Supported byour sectors

Find out more / Pages 10 to 15

Applied R&D

Our markets

Our operations

Return on capital
employed

29.1%

How we invest our capital:
Organic cash investment
with R&D of £39.2m andcapital expenditureof £27.0m

Shareholder distributions
with full-year dividend
payments of £11.4m

Balance sheet flexibility
for inorganic opportunities
with net cash of £83.8m

19

20

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

ENGAGING WITH OUR STAKEHOLDERS

As a customer-focused,market-driven business,
our stakeholders are at theheart of everything we do

In November 2023 we were delighted to open
our new Materials Innovation Centre at our High
Wycombe manufacturing site. We welcomed
local community representatives and leading
experts from academia and industry, many ofwhom are customers of Oxford Instruments,
to see demonstrations of our state-of-the-art
materials analysis techniques and explore ourmanufacturing facility.
The Centre brings together products andsoftware from across the Group, serving
as a platform to showcase our analytical
instrumentation and provide training by ourtechnique experts. It also acts as a collaborative
hub, enabling invited scientists and researchers
to access both the technology and expertisehoused at the Centre.

www.oxinst.com“We’re very proud of the Innovation Centre. With
this exceptionally well-equipped facility, we can
now offer demonstrations of the technologies
from all our Materials Analysis businesses in one
space. This gives an excellent experience to ourcustomers and allows us to evidence how our
product suite can address multiple needs.”

Promoting the success of the company
for the benefit of all stakeholders
Engagement with our stakeholders allows us to grow and
execute our strategy, so we consider the impact we haveon them as well as what they consider important whendeveloping our plans for long-term success. We use a range
of engagement mechanisms to understand and consider our
stakeholders’ views. In some cases, the Board engages directlywith stakeholders, but there is also significant engagement by
senior management and throughout the company.

The Board receives reports and updates on suchengagement and the views and feedback gatheredfrom stakeholders are used to inform discussion anddecision-making.
See pages 90 to 95 for details of how we engage with our
stakeholders and page 96 for our statement in accordancewith Section 172(1) of the Companies Act 2006.

Customers

Employees

Shareholders

Customer intimacy helps us to
identify additional opportunities
to deliver increased value to ourcustomers, as we strive to be
the scientific instrumentation
partner in every significant lab andproduction facility across the world.

By working together as one team,
we help and trust each other tosucceed. We nurture our people,
celebrate their successes andsupport them to grow.

Delivering strong growth andshareholder returns promotes thelong-term sustainable success ofthe company.

Suppliers

Local communities

Society

Our supply chain plays a vital rolein supporting sustainable growthand efficiency across the business.

We strive to support thedevelopment of stronger
communities and have a positiveenvironmental and social impact.

Our technology and scientificexpertise enables our customers
to discover and bring to market
exciting new advances that drive
human progress.

MATT HISCOCK
Head of Product Science, Materials Analysis

Read about how the Board engages with our stakeholders in the Governance section / Pages 90 to 96
Images above show the Materials Innovation Centre launch
event at High Wycombe in November 2023

21

22

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

OUR STRATEGY
Key medium-term
performance indicators

Our purpose:

To accelerate thebreakthroughs that create abrighter future for our world.

Enhance growth,margins and returns:• Organic growth
CAGR 5–8%.

Our ways of working• We start with the customer.
• We succeed by being focused.

Our opportunity:
Oxford Instruments holds a uniqueposition to anticipate global drivers andconnect academic and commercial
researchers, acting as a catalyst thatpowers real world progress.

• We make and keep our promises.
• We work together as one team.
• We help and trust each other to succeed.

• Adjusted operating
profit margin 20%+.
• Return on capital
employed > 29%.
• Cash conversion > 85%.
• Selective acquisitions.

Our strategic priorities• Deliver strong growth through‘customer first’ ways of working.
• Deliver a step change in operational
performance (delivery, quality, efficiency).
• Simplify the organisation, increasingcollaboration and accountability.
• Continue to invest in new technology andproducts, protecting and enhancing ourcore strengths.
• Embed our values and ways of working sothat they are lived every day.
• Reach net zero in our own operations by
2030 and contribute to global sustainability
through our products.
 ur strategy is set out in detail in the Chief Executive Officer’s Review,Opages 10 to 15

www.oxinst.com

How we’ll deliver• Create a new divisional structure, supported by a simplified customerfacing regional structure, to drive efficiencies and operational gearing,and provide greater transparency.
• Target our action plans by division, addressing the different needs
and opportunities in each.
• Develop our service propositions to better serve customers and maximise
whole life revenue.
• Reconfigure production areas, design more efficient production
processes and upskill colleagues to increase capacity and productivity.
• Drive value engineering opportunities while delivering against
customer needs.
• Focus R&D investment on customer-oriented clear growth opportunities
in our core markets – materials analysis, semiconductors, and healthcare& life science.

23

24

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

KEY PERFORMANCE INDICATORSThe Group uses a range ofmeasures to monitor progressagainst its strategic plans
Measuring our performance
Our goal through our financial KPIs is to deliver shareholder returns through profitable, sustainablegrowth and strong cash conversion and efficient use of capital. The Group uses a range of measures
to monitor progress against its strategic plans. The key performance indicators are presented here.

Cash flow conversion (%)*

5.8%

64%
5.8%

23/24

64%

22/23

21.1%

22/23

88%

21/22

15.3%

21/22

84%

Why we measure: To drive profitable, sustainable growththrough the implementation of our strategy against its
strategic plans.

Why we measure: To maintain a strong operating cash
conversion ratio and high level of free cash flow.

Adjusted earnings per share (EPS) growth (%)

Adjusted operating profit margin (%)(3.3)%

17.1%

23/24

23/24

17.1%

22/23

18.1%

21/22

20.0%

21/22

18.1%

29.1%
23/24

29.1%

22/23

35.2%

21/22

34.7%

Why we measure: To deliver ROCE in excess of ourcost of capital.

1.52

23/24

8.3%

23/24

1.52

22/23

7.8%

22/23

1.55

21/22

8.6%

21/22

1.57

www.oxinst.com

Why we measure: To measure efficiency.

Carbon emissions intensity (tCO2e per £m revenue)

23/24

23/24

2,786

2,786

Why we measure: To assess progress towards our targetof 20%+ adjusted operating profit margin.

5.92

22/23

1,316*

22/23

21/22

1,378

21/22

5.92
2.89*
3.75

What we measure: Carbon intensity = Absolute carbon
emissions/Revenue.
Why we measure: To track our progress towards our Scope 1
and 2 2030 net zero target.

Non-financial KPIs
Employee engagement (%)

Serious injuries (#)

78%

0

23/24

78%

2023

0

22/23

78%

2022

0

20/21**

77%

2021

1

What we measure: Engagement across a number of areas
for feelings of inclusion, value and respect.

What we measure: Rate of serious injuries to employees
for ongoing businesses.

Why we measure: Regular surveys to measure employee
engagement and identify areas of focus. This measure began
in 2019.

Why we measure: To measure the impact of our safety
drive, Push for Zero, to reduce accidents.

*	Adjusted figure following rebaselining in 2023/24; please see
pages 35 to 39.
* Normalised.

What we measure: ‘Value add’ – (adjusted operating profit+employment costs)/employment costs.

Absolute carbon emissions (Scope 1 and 2) tCO2e

Why we measure: To track our progress towards our Scope 1
and 2 2030 net zero target.

19.5%

Return on capital employed (ROCE) (%)

8.3%

What we measure: What we measure: Carbon emissions fromour own operations, Scope 1 and 2, measured using the Green
House Gas Protocol methodology.

22/23

Why we measure: To achieve long-term growth in EPS.

Value added (#)

Why we measure: To measure the effectiveness of our R&D
programmes.

23/24(3.3)%

Investment in R&D (%)

What we measure: Investment in R&D as a percentage ofrevenue. We previously measured the proportion of revenue
coming from products launched in the previous three years,
which was 25% in 2023/24.

Financial KPIs
Revenue growth (%)

Strategic KPIs** Prior to 2022, full surveys were carried out every two years.

Serious injuries are defined as those which are reportable
under RIDDOR (Reporting of Injuries, Diseases andDangerous Occurrences Regulation) and are measured as
an absolute number.

25

26

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

OPERATIONS REVIEW

A robust performance
The Group performed well in the year, delivering strong revenue growth, andoperating profit 3.7% ahead of last year at constant currency. Reported adjusted
operating margin of 17.1% (2023: 18.1%) was behind the previous year as a result of
trading losses attributable to prior year orders to China removed from the orderbook
due to export licence restrictions, where long customer lead times meant that these
could not be replaced with short-term revenue. In addition, we have continued toinvest in capability and systems across the business. With underlying book-to-billat 1.03, orderbook levels provide good visibility for the year ahead.
The Operations Review provides performance headlines
at Group level, and updates from each of our three current
segments: Materials & Characterisation, Research &Discovery, and Services & Healthcare.

Materials &Characterisation
The Materials & Characterisation sector’s products comprise:• range of microscopy and analysis techniques and software to identify
aand interpret the properties of materials and samples (Asylum Research,
NanoAnalysis, Magnetic Resonance and WITec, collectively known as
our Materials Analysis businesses); and• dvanced etch and deposition systems for compound semiconductoradevices (Plasma Technology).

With a strong focus on accelerating our customers’ applied R&D, our products
and services in this sector enable the development of new devices and next
generation higher performing materials, as well as enhancing productivity inadvanced manufacturing, quality assurance (QA) and quality control (QC).

As outlined, in the coming months we will move to a newdivisional structure – Imaging & Analysis, and Advanced
Technologies. Indicative and unaudited pro forma numbers
under the proposed structure for the full year are disclosed
in the annual results presentation. Interim reporting inNovember will reflect the new structure and will provide
comparators to the current reporting structure.

Revenue

Key highlights

470.4m£Full year to
31 March 2024

Full year to
31 March 2023

% reported
growth% constantcurrency1 growth£245.3m2£272.8m(10.1%)(7.0%)£252.2m£234.5m+7.5%+11.4%

Adjusted operating profit£46.4m£40.5m

+14.6%+20.2%

Adjusted operating margin

18.4%

17.3%

Statutory operating profit£41.7m£35.7mStatutory operating margin

16.5%

15.2%

OrdersGroup performance

Revenue
3

OrdersOrders intake of £459.1m (2023: £511.6m) was 2.5%
below a strong comparator on a constant currency
basis, and after the removal of £23m cancelled prioryear orders to China from our 2024/25 order intake.
Underlying book-to-bill remains positive, at 1.03.
Our strong pipeline across all regions demonstrates
good demand for our products and services.

Revenue
Reported revenue grew by 5.8% to £470.4m(2023: £444.7m), representing growth of 9.8% atconstant currency. At constant currency, there was
growth of 11.4% in Materials & Characterisation,
5.7% in Research & Discovery, and 12.6% in Service& Healthcare.

Profitability
The strong revenue performance, particularlyin the second half of the year, supported fullyear adjusted operating profits of £80.3m (2023:£80.5m), representing 3.7% growth on a constantcurrency basis.

www.oxinst.com

3

Revenue split by end market

1. For definition refer to Note on page 2.

Materials analysis £201.0m

Semiconductors £126.9m

Healthcare & life science £90.6mOther

£51.9m

2.	Underlying order growth is adjusted for the impact of prior year China orders removed from current year orderintake due to export licence restrictions.
3. Details of adjusting items can be found in Note 2 to the full-year financial statements, pages 163 to 165.

% constantcurrency1 growthvs full year to
31 March 2023

% of Grouprevenuefull year to
31 March 2024

Materials analysis

14.4%

43%

Semiconductors

6.9%

27%

Healthcare & life science

10.7%

19%

Other

(0.6%)

11%

End market

1. For definition refer to Note on page 2.

Other

Healthcare & life science3%5%(13%)1

Materials &Characterisation
revenue(4%)1

Materials analysis

Semiconductor

52%

40%

+19%1

1. Revenue growth at constant currency.

+7%1

27

28

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

OPERATIONS REVIEW continued

Materials & Characterisation continued
Materials & Characterisation has
performed strongly, with revenue of£252.2m (2023: £234.5m), up 11.4%
at constant currency, with a strong
second half weighting, as anticipated.
Growth was driven by investment
from governments and academia(up 29.9% at constant currency), withcommercial revenue slightly down
year-on-year (-1.7%).
Adjusted operating profit was up
20.2% on the year, at £46.4m (2023:£40.5m), generating a margin of 18.4%(2023: 17.3%).
Adjusted orders were 7.0% behinda strong comparator period atconstant currency.
Regionally, our footprint is shifting
as we adapt to new geopolitical
dynamics, pivoting to non-sensitive
areas in China, and removing someorders from the opening order bookdue to export licence policy. We havefocused successfully on growing
revenue elsewhere in Asia (mostnotably in Korea and Taiwan), in
Europe and in the UK, and on growing
commercial applications such asbattery and materials analysis in
China, which remains an important
market for the businesses in the
Materials & Characterisation segment.

Performance in North America wasbehind last year, primarily due toeconomic uncertainty and later than
anticipated release of CHIPs Act
funding. Internally, improvements are
required to the organisation capacity
and structure to capitalise on thisimportant geographical market. A newleader has been appointed and thisregion will be a focus area within our
updated strategy.

Market drivers
and performance
Our key markets in Materials &Characterisation are materials
analysis (representing 52% of revenue)
and semiconductors (representing
40% of revenue).
In materials analysis, revenue was up
19% at constant currency, reflecting
strong demand across a range ofapplications.
Our products and services address
the growing structural demand
to understand and improve theproperties of materials across a wide
range of markets. Sustainability is a
key driver of growth, as researchers
in both academic and commercial
settings seek to make better use of
the world’s resources while delivering
advanced capabilities that accelerate
human progress.

Customers are using our equipment
to develop greener alternatives, suchas lighter, stronger steels, superalloys
and low-carbon concrete, and safer,longer lasting batteries with a lower
carbon footprint.
Our ability to image and analysea wide range of materials at thenanoscale (that is, to billionths of ametre) enables academic scientists todrive breakthroughs in understanding.
In the commercial world, we support
the translation of such academic
research into product development
and help manufacturers to address
quality control in production processes.
A good example of this end-to-end
applications journey is our tailoredsupport at every stage of the battery
life cycle, from helping academic
customers understand how raw
materials perform right through the
R&D process to quality control andfailure analysis. This market continues
to grow at pace, particularly in raw
materials and geology, as customers
invest in critical minerals analysis.
In semiconductor, we have delivereda strong performance overall, withconstant currency revenue up 7% year
on year.
Our activity in this market is split
between the production of etch anddeposition equipment for the rapidly
growing compound semiconductor
market (representing c.65% of our
exposure) and the provision of imaging
and analysis solutions (c.35%), primarily
into the well-established silicon
semiconductor market.
The drivers for these two distinct
markets differ. Compound
semiconductors present a particularly
exciting market opportunity, withdemand growing by more than 10%
annually. More complex than silicon
semiconductors, they are driving rapid
advances in technology, enabling
the production of higher performing
devices, with lower energy use.
Compound semiconductors are at theforefront of developments in assisted
and virtual reality, 5G connectivity,
power electronics, optoelectronics
and hyperscale datacentres.

www.oxinst.com

Our new facility (see below) is
focused entirely on harnessing thegrowing compound semiconductor
market, which is not impacted by
the cyclicality typically seen in thesilicon market. We are playing a keyrole in all the developments set out
above, right across the life cycle fromearly-stage academic R&D to volume
manufacturing, yield and quality
control. A particular area of strength,
and source of pricing power, is ourability to improve outcomes for thelayers within devices which have thebiggest impact on performanceand yield.
The silicon semiconductor market
is extremely well established, withsilicon devices present in every aspectof consumer electronics. Here, ourmaterials analysis business’ imaging
and analysis tools are used to assess
the properties and performance ofdevices at the nanoscale, supporting
R&D, quality control and defectanalysis as customers seek to makeever smaller devices and improve yield.
This drives the remaining 35% of oursemiconductor revenue.
The breadth of our offering, which
supports customers at every stage ofthe life cycle, offers some buffer to thecyclical nature of the silicon market.
There has been robust demand for ourimaging and analysis suite of productsin the year, despite a downturn inthe wider silicon market. As we head
into 2024/25, demand indicators
across all applications are improving.
Several Tier 1 customers have orderedsystems, and the pipeline is strong
across all stages of the life cycle.

Operational developments
This has been a strong year for
Materials & Characterisation.
Our compound semiconductorbusiness has successfully transitioned
production to a new facility at Severn
Beach, near Bristol. The new site triples
production capacity and will more thandouble clean room laboratory space,taking us to world-class levels ofcompound semiconductor processing
ability. The benefits of operatingfrom the new facility, with its muchimproved layout and process flow
versus the legacy site, contributed
to a strong second half performanceand double-digit revenue growth forthe year.

In parallel with the site move, thebusiness has focused on streamlining
both product ranges and target
markets to support efficiency andfuture growth. A notable success in theyear has been the launch of a new,faster atomic layer deposition system.
A further operational development
has been on repositioning our regional
focus as we pivot to less sensitive
applications within China and grow ourbusiness elsewhere. We have delivered
strong double-digit order growth inEurope, Asia Pacific and Japan, while
China remains an important market
with a healthy pipeline.
Our materials analysis businesses
have generated double-digit
revenue growth as they continue
to maximise synergies and crossselling opportunities in areas
such as battery research andsemiconductor applications.
Two new materials analysis
innovation centres were launched
in High Wycombe, in the UK, andTokyo, joining existing centres in
China, the US, France and Germany,and strengthening our ability todemonstrate the breadth of our
product ranges to customers.

Alongside maximising synergies
between businesses, we have also
focused on extending sales fromacademic into commercial customers.
A notable example is in electronbackscatter diffraction microscopy(EBSD), which we are successfullytransitioning from a purely academic
technique to one used by major Tier 1commercial semiconductor customers.
Key developments in R&D include thelaunch of:•Unity, a new detector for scanningelectron microscopes (SEM) which
combines backscattered electron
and X-ray signals for the first time
to deliver high resolution colour
images at ‘live’ speed;•

Vero, a new atomic force
microscope which enables moreaccurate and repeatable results;
and•a bespoke Raman microscope totarget the semiconductor market.

We were delighted that our trackrecord for innovation was recognisedwith the King’s Award for Enterprise:Innovation for our Symmetry detector,
which enables material properties tobe studied at the nanoscale.

29

30

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

OPERATIONS REVIEW continued

Research& Discovery

With £142.1m of revenue (2023: £139.4m),
Research & Discovery has delivered
constant currency growth of 5.7%,
primarily driven by academic funding
into scientific cameras and microscopy.

The Research & Discovery sector’s products comprise:•scientific cameras, microscopy and accompanying software (Andor);•cryogenic and superconducting magnet technology (NanoScience); and•X-ray tubes for a wide range of applications (X-Ray Technology).

This product portfolio enables our customers to capture imaging and analyticalmeasurements down to the atomic and molecular level, as well as to create ultralow temperature and high magnetic field environments. Products from Research& Discovery are used in scientific research, applied R&D, and commercial
environments across a wide range of fields, from accelerating developments
in healthcare, life science and material science to facilitating the growing
commercialisation of quantum technology.

Key highlights
Orders
Revenue
Adjusted operating profit
3

Full year to
31 March 2024

Full year to
31 March 2023

% reported
growth% constantcurrency1 growth£158.4m2£160.4m(1.2%)(1.9%)£142.1m£139.4m

+1.9%

+5.7%

£13.6m£18.0m(24.4%)(26.1%)

Adjusted operating margin

9.6%

12.9%

Statutory operating profit£9.4m£11.3mStatutory operating margin

6.6%

8.1%

3

1. For definition refer to Note on page 2.
2.	Underlying order growth is adjusted for the impact of prior year China orders removed from current year orderbook
due to export licence restrictions.
3. Details of adjusting items can be found in Note 2 to the full-year financial statements, pages 163 to 165.

Other

Healthcare & life science

27%

38%

+4%1

Materials analysis

32%
+1%1

1. Revenue growth at constant currency.

www.oxinst.com

Research& Discovery
revenue+10%1

Semiconductor &communications

3%
+13%1

The sector’s performance has been
adversely impacted by the removal oforders to China from the order book as
we proactively pivot away from sensitive
areas (notably quantum), impacting
revenue and resulting in a trading loss
for the quantum business. This impact,
together with lower OEM life scienceorders, inflationary material costs andour ongoing investment to support future
growth, has resulted in a 24.4% reductionin adjusted operating profit, with
margin 330bps behind last year. Orders
were down 1.9% at constant currency,
excluding the impact of unfulfilled
Chinese orders. This reflects a strong
underlying demand amidst a period oftransition as we rebalance our regionalpresence, moving away from restrictedmarkets within China and growing ourbusiness elsewhere. Constant currency
order growth of 21.7% in Europe has
partially offset the reduction in China
orders, and reflects our increased
marketing activity in this region. North
America orders were slightly down on
the year (-2.4% at constant currency)
due to economic uncertainty. Internally,
improvements are required to theorganisation capacity and structure tocapitalise on this important geographicalmarket. A new leader has been
appointed and this region will be a key
focus within our updated strategy.

Market drivers
and performance
The primary markets served by
Research & Discovery are healthcare& life science (38% of revenue) andmaterials analysis (32%). Quantum
constituted 18% of revenue in the year.
In healthcare & life science revenue
grew by 10% at constant currency,with strong sales of our confocal
microscope systems and Imaris
software. OEM orders and revenue
were down year-on-year, reflecting
wider destocking dynamics as
customers consume inventory built
up during supply chain shortages. We
anticipate a stronger performancein 24/25 as OEMs restock, and with
BC43 beginning to be deployed in
OEM assemblies, such as in the cancer
diagnostics market.
In this market, our equipment andsoftware have a key role to playin accelerating progress towards
a healthier society, as academic
researchers, scientists andpharmaceutical companies seek toaddress the challenges of a growing
and ageing population and develop
new and increasingly personalised
treatments and vaccines. Ouradvanced imaging systems, including
scientific cameras and microscopes,
support these developments byhelping to reveal sub-cellular detailand observe real-time interactions.

In materials analysis, revenue wasbroadly flat year-on-year; however,orders have grown by 12% at constantcurrency, reflecting strong andgrowing demand.
Demand is underpinned by
performance and sustainability drivers
as customers look to develop stronger,higher performing materials and makebetter use of the earth’s resources.
In Research & Discovery, customers
primarily use our equipment to support
their understanding of the propertiesof new materials and enhance thecapabilities of existing materials.
In quantum technology, revenue
grew by 5.5% at constant currency.
We are well placed to benefit fromthe growing commercialisation ofquantum computing, as it evolves froma pure research discipline into practicalapplications in chemistry, logistics andfinance. The world’s largest technology
companies all have quantum
computing programmes as they
explore the potential of this emerging
discipline, with a plethora of smaller
companies also active in the market.
With our range of products forquantum extending from compact
refrigerators to large systems forcommercial customers, we aresupporting customers across the
spectrum from pure academic
research to early stage start-ups
and a large technology company.

31

32

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

OPERATIONS REVIEW continued

Research & Discovery continued
Operational developments
Commitment to delivering a stepchange in operational performance isa key pillar of our strategy, as set out in
the Chief Executive Officer’s Review on
pages 10 to 15. In line with this, a wideranging operational programme has
recently begun in Belfast, which will be
the pilot site, with learnings to be rolled
out to other manufacturing businesses
in priority order.
In Belfast, we are also investing£15m in the purchase and fit out ofan additional building, adjacent toour current site, to increase capacity
to support demand growth. Plans
are taking shape and the facility
is expected to be operational in
autumn 2025.
The acquisition of First Light Imaging
in January 2024 for a considerationof €15.7m (with a further earn out of
up to €3m if specific performance
conditions are met) will further support
our imaging capabilities. First Light
specialises in high-speed, low-noise
scientific cameras for infrared andvisible imaging, with applications inastronomy and life sciences, and its
acquisition will enable us to extend
our product line to existing and newcustomers, accelerate our R&D
product roadmap and expand into
adjacent markets.

In other developments, a frameworkorder has been received for BC43
into a cancer diagnostics OEM.
Separately, two new models of the
BC43 have been launched, to makefluorescence, confocal and superresolution microscopy accessible to amuch wider user base across different
research areas and experience levels.
Significant action is required to restore
profitability at our cryogenics andmagnet business based in Oxford,
following our exit from China forquantum products, and in order toaddress operational challenges. This
year we have focused on restructuring
our cost base, including targetedheadcount reductions.

Further key developments in thisbusiness include the launch of a new,smaller cryogenic dilution refrigerator,
Proteox S, ideally suited to small
research laboratories. Alongsidequantum applications, materials
measurement is a core focus area.
We are working in partnership withLake Shore Cryotronics to create an
integrated cryomagnetic measurement
system with a broad range ofapplications in materials science.
Our X-ray tube business, based in theUS, has delivered double-digit revenue
growth and strong double-digit
order growth.

Service &Healthcare
The Service & Healthcare sector comprises the Group’s service and support
related to Oxford Instruments’ own products, and the support and service ofthird-party MRI scanners in Japan. We offer tailored support packages for all our
products, delivered by a global network of product experts, application experts
and service engineers, both in person and via digital channels, including online
training, webinars and remote service support.

Key highlights
Full year to
31 March 2024

Full year to
31 March 2023

% reported
growth% constantcurrency1 growth£78.6m

£78.4m

+0.3%

+4.3%

£76.1m£70.8m

+7.5%+12.6%£20.3m

£22.0m

(7.7%)(2.3%)

Orders
Revenue
Adjusted operating profit
2

Adjusted operating margin

26.7%

31.1%

Statutory operating profit£20.3m

£22.4mStatutory operating margin

26.7%

31.6%

2

1. For definition refer to Note on page 2.
2. Details of adjusting items can be found in Note 2 to the full-year financial statements, on pages 163 to 165.

The sector has delivered double-digit
constant currency revenue growth;
however, order growth was slower
than the prior year. Latent demand
addressed by the investments madein recent years has now largely been
fulfilled, and a period of consolidation
and regrouping is under way as
we set ourselves up to deliver an
improved operational performancefrom which we can maximise value
potential from service. Operating profit
and margin were down as a resultof the investment we are making
in capabilities and infrastructure inpursuit of this goal, and the continued
elevated costs for liquid helium
required to support MRI customers inJapan, as signalled at half year.
Revenue growth to academic
customers has continued in the second
half, as we grow point-of-sales service
contracts for our benchtop systems
and tailored life science packages for
our Imaris imaging software.

www.oxinst.com

Sales to academic customers
account for 53% of revenue in theyear (2023: 48%).
Our medium-term goal is to generate agreater proportion of Oxford Instruments’revenue from service and deliver
market-leading service performance.
As set out in our strategy, we seegood opportunity to enhance wholelife service offerings and subsequent
revenue once we strengthen our
regional infrastructure, deliver crosstraining and share best practice.
The programmes already under way
provide a good platform from which toaccelerate our growth. These include:•

the implementation of fully
integrated service management
systems, which are nearing
completion, combined withknowledge management to ensurethat service colleagues have readyaccess to the technical informationneeded to support customers;•

combining our services workforce inthe regions and cross training themto make the most of their skills andtalent, and investing in headcountto ensure maximum customer
coverage; and•continued growth in remoteconnectivity for diagnostics andproblem resolution, and theprovision of integrated connectivity
in our customer solutions andproducts: the launch of OI View, adigital platform which delivers realtime insights on Oxford Instruments
systems’ health and utilisation to acustomer’s phone, tablet, or PC, wasa notable highlight.

Moving forward, service revenue will bereported within Imaging & Analysis andAdvanced Technologies, supporting afully integrated approach as the wholeorganisation aligns around ‘customerfirst’ ways of working.

33

34

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

SUSTAINABILITYSUSTAINABILITY: ENVIRONMENT

Sustainability is central to Oxford Instruments, with
our purpose, values, strategy and products all aligningaround the positive impact we seek to haveon our planet and the societies in which we operate

We are proud of the role our products play in supporting
decarbonisation, and we are committed to continuing
to minimise our own environmental footprint

Through our products and services,
we are working to accelerate thebreakthroughs that create a brighter
future for our world. And through ourcommitment to operating responsibly,
in line with our values, we strive tooperate with the highest standards
and integrity.
We take a holistic approach tosustainability, ensuring that it
is embedded throughout theorganisation, from our Board-level
Sustainability Committee, joined by
all Board members, to our workforce
around the world. We also seek toembed principles of sustainability in
our interactions with all stakeholders,
including customers, supply chain
partners and our local communities.
We are committed to building on
past progress and continuing tochallenge ourselves to go further. Our
environmental, social and governance(ESG) strategy focuses on driving
positive action across the following
areas: progress to net zero andenvironmental impact; sustainableproduct stewardship; health andsafety; investing in our people; culture
and engagement, ethical businesspractices and regulatory financial
compliance. We set out our progress
throughout this section.

Environment
For more information /Pages 35 to 39

SocialFor more information /Pages 51 to 55

GovernanceFor more information /Pages 56 and 57

www.oxinst.com

The United Nations Sustainable Development Goals provide an ambitious andpowerful framework for companies and other organisations to focus their efforts
and commitments. We fully support all 17 goals, but have focused our efforts
around those goals where we feel most able to have a positive impact.

Our products contribute toward the following goals:

The way we run our business and the actions we take throughout
our value chain support the following goals:

Introduction
We are committed to advancing ourpositive progress on sustainability
each year. This year we have set a
new level of ambition, accelerating
our emissions reduction targets toreach net zero in Scopes 1 and 2 by2030. We have also strengthened
and re-baselined our data acrossScopes 1, 2 and 3, providing a robust
foundation from which to address our
newly strengthened net zero targets.
Our next steps include setting out thedetail of our net zero roadmap anddeveloping interim Scope 3 targets.
Once complete, we will submit ouroverall carbon reduction targets to
the Science Based Targets initiative(SBTi) to be validated. See opposite
for more detail.
We were pleased to report a strong
health and safety performance, withno serious accidents in the year,
and a continued reduction in minor
injuries. We have strengthened ourreporting framework to support
continuing reductions. Notablehighlights of our social programme
have included:•

the development and launchof our equity, diversity andinclusion policy;•

the publication of our first ethnicity
pay gap reporting in the UK; and•the launch of new employee
impact groups focused onneurodiversity and women’s issues.

Our colleagues have completed
almost 14,000 training courses
and we have launched a new
Foundations programme to support
high-potential colleagues in theirearly career. We continue to extend
both the number of participants andthe range of opportunities offeredin our apprenticeship and graduate
programmes. On Governance, wehave continued to embed responsible
practices throughout our global
operations and supply chain, driving
employee awareness through training
and regular communications. For
more on our people and governancecentred initiatives, see pages 51 to 57.
Remuneration structures are a key
tool to drive sustainability-focused
behaviours and positive impacts.
This year, we have introduced newsustainability-related performancemeasures for Executive Directors.
For further information, see the
Directors’ Remuneration Reporton pages 120 to 143.

Strategy and targets
As a Group we have been proactively
reducing our own environmental
footprint over many years. We
embarked on our environmental
journey in the early 2000s, with thecreation of our first employee-led Go
Green teams; since then, we havedramatically reduced our carbon
footprint, leaving only a relatively small
footprint in our own operations.
In FY22/23 we set near-term targets of a
50% reduction in Scope 1 emissions anda 70% reduction in Scope 2 emissions,both calculated versus our FY18/19
baseline year, and set to be achievedby 2030. As the understanding of ouremissions has evolved, we have taken
the decision to redefine our baseline
year as FY22/23. The data for this year
is more mature and robust than inprevious years, putting us on a stronger
position to enact positive change in themost relevant areas of the business.

As set out opposite, following
this rebaselining, the Board andManagement Board have made thedecision to accelerate our near-termemissions reduction targets. We
have now set the target to reach net
zero (where we add no incremental
greenhouse gases to the atmosphere)
across our own operations (Scopes
1 and 2) by 2030. In addition tothese targets, we remain committed
to delivering net zero emissions
across Scopes 1, 2 and 3 by 2045,
putting us five years ahead of the UK
Government’s commitment.
With the work undertaken to reassess
our baseline year, we took the decision
to delay setting near-term 2030 targets
for our Scope 3 emissions. Work has
been progressing to refine and improve
our data collection techniques andnear-term targets will be set in FY24/25.
We intend that all our targets will alignwith, or exceed, the SBTi framework.

Once set, the near- and long-termtargets will be sent for validation to
SBTi. Through this process we havebeen incorporating sustainability
considerations into our new productdevelopment stage gate process, toensure the ongoing reduction of our
products’ carbon footprint throughenergy use, packaging and distribution,
as well as increased recyclability
and upgradability.
Today, our market-based carbon
intensity metric for Scopes 1 and 2
stands at 5.92 tonnes CO2e per £million
revenue. This is an increase from 2.96
tonnes per £million revenue in FY22/23,
primarily caused by temporarily losing
access to REGO-certified renewableelectricity, as described later inthis section.

CASE STUDY

Go Green Teams
Go Green is a long-standing employee-led initiative,
set up originally at our four UK manufacturing
sites to help promote environmental sustainability.
The scheme has been extended this year to cover
all our major sites internationally with the goal of
improving environmental performance and helping
the Group to hit its accelerated net zero targets. A
total of 14 highly engaged teams have now been
set up, covering 24 sites. As well as delivering
self-guided projects, teams have been given aworkbook of suggested projects to work through,covering topics such as energy, waste, water andtravel. Along with helping to identify larger site
infrastructure projects, Go Green teams are driving
behaviour change projects, helping to educatecolleagues Group-wide to make environmentallyconscious decisions.

35

36

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

SUSTAINABILITY: ENVIRONMENT continued

GHG emissions (tCO2e)2024

Our roadmap to net zero
We have been making significant
progress towards achieving net zeroacross our operations. This has beenstrengthened this year by announcing
our accelerated target to be net zeroin our own operations, that is Scope 1
and 2, by 2030. This ambitious target
will help us to drive positive change
within the business over the coming
years. In addition to this work, we will
also be working to reduce our Scope
3 emissions to ensure we hit our 2045
net zero target across all Scope 1, 2
and 3 emissions. The steps we will takebetween now and 2045 include:
•

•

•

•

•

developing a transition plan during
FY24/25 to map our pathway to
net zero;ensuring that all of our sales,
service and manufacturing
operations, wherever possible, arepowered by electricity backed byrenewable energy certificates, e.g.
Renewable Energy Guarantee ofOrigin (REGO) scheme in the UK.
Where this is not achievable we will
look to move from current sites asleases come up for renewal;
prioritising positive environmental
attributes when we are looking
for new sales, services or
manufacturing facilities;
looking for opportunities to reduceenergy usage at each of our sites.
We will continue to use and invest inenergy-efficient equipment to help
reduce the quantity of energy wepurchase;
early replacement of gas and oil
boilers (with the Board setting atarget to replace boilers at two UK
sites in the next three years (seepage 143));•

switching fleet vehicles to electricrather than internal combustion
engines; and•engaging with our supply
chain to understand theirdecarbonisation strategy.

Streamlined Energy andCarbon Reporting (SECR)
We have outlined our emissions andenergy usage across the whole Group,
accounting for all Oxford Instrumentsites. Absolute location-based Scope
1 and 2 emissions increased by 11.6%
as a result of a full year reporting at
our new Severn Beach site, in addition
to increased electricity usage atsome of our sites across Asia. Scope 1
emissions have reduced by 35% due toreduced company car and fleet usage.
Scope 2 market-based emissions haveincreased significantly due to supply
issues with our renewable energy
certificates at the majority of UK sites
this year. Our previous electricity
supplier is exiting the industrial sector,
and as it pulled back from the market,
it dropped certain services, such asproviding REGO-certified electricity. In
response, we negotiated an early exit
to our contract and have contractedwith a new supplier that can provide
REGO-certified electricity long term.
Due to the time taken to negotiate andset up these new contracts, six monthsof electricity was supplied to some UK
sites that was not REGO backed. The
target to have 100% of UK sites using
renewable electricity by April 2024 has
now been met.

37

Financial Statements

Progress has been made on moving
global sites to use renewableelectricity. The new office in Tokyo
consolidated two sites and added
solar power, water-conservation andenergy-saving measures, as well as
having been constructed in part fromrecycled materials. The new site isa 4-star certified DBJ (Development
Bank of Japan) green building. We
also have an ongoing programme toimprove energy efficiency at existingsites. Actions taken during the year
have included continuing to replace
fluorescent lighting with LED lighting,and optimising heating, ventilation andair-conditioning systems to make themmore energy efficient.
In the near term, we will continue
to purchase renewable energy
certificates to reduce our marketbased Scope 2 emissions. In thelonger term we will explore further
development of onsite generationand power purchase agreements(PPAs) and pursue energy efficiency
opportunities.
We report our emissions and energy
intensity as tonnes CO2e/£m revenue
and kWh/£m revenue. Emissions
intensity has increased 5.5% thisyear, while energy intensity has
increased 3.6%.

Scope 1 fugitive emissions (tCO2e)
Scope 1 combustion emissions (tCO2e)
Total scope 1 (tCO2e)
Scope 2 location-based (tCO2e)

2023

UK

Global(exc. UK)

Group
total

UK

Global(exc. UK)

Group
total

1

1

2

–

49

49

372

51

423

571

41

612

373

52

425

571

89

660

2,315

803

3,118

1,874

641

2,515

Scope 2 market-based (tCO2e)

1,715

647

2,362

–

656

656

Total Scope 1 + 2 location-based (tCO2e)

2,688

855

3,543

2,445

730

3,175

Total Scope 1 + 2 market-based (tCO2e)

2,088

699

2,786

571

745

1,316

Upstream Scope 3 (tCO2e)––64,857––59,199Downstream Scope 3 (tCO2e)––

31,371––

29,853

Total Scope 3 (tCO2e)––96,228––89,052

Total Scope 1, 2 & 3 location-based (tCO2e)––

99,771––

92,227

Total Scope 1, 2 & 3 market-based (tCO2e)––

99,014––90,368

Scope 1 + 2 location based GHG emissions
intensity ratio (per Group turnover) £m

–

–

7.53

–

–

7.14

Total renewable fuels consumption (kWh)

0

0

0

0

0

0

Liquid fuel (diesel, petrol, fuel oil)

662,253

12,706674,959

1,388,935–

1,388,935

Gaseous fuel (natural gas)

1,091,919

261,036

1,352,955

1,240,159

223,210

1,463,369

Total non-renewable fuels consumption (kWh)1,754,172

273,7422,027,914

2,629,094

223,210 2,852,304

Total fuels consumption (kWh)1,754,172

273,7422,027,914

2,629,094

223,210 2,852,304

Consumption of purchased or acquired
electricity renewable (kWh)6,485,154

395,2026,880,356

9,689,500

64,317

9,753,817

Consumption of purchased or acquired
electricity non-renewable (kWh)4,695,603

1,893,110

6,588,713–

1,843,949

1,843,949

Consumption of self-generated non-fuelrenewable energy (solar) (kWh)–255,139

255,139–––

9,689,500 1,908,266

11,597,766

Energy consumption (kWh)Total electricity consumption (kWh)11,180,757

2,543,450 13,724,207

Consumption of purchased or acquired heating,steam and cooling non-renewable (kWh)–252,243

252,243–

153,520

153,520

Consumption of purchased or acquired heating,steam and cooling renewable (kWh)–64,96764,967–

66,852

66,852

6,485,154

715,3077,200,461

9,689,500

Total non-renewable energy consumption (kWh)6,449,775

2,419,094

8,868,869

2,629,094

2,220,679

4,849,773

Total energy consumption (kWh)12,934,929 3,134,402 16,069,330

12,318,594

2,351,848

14,670,442

Total renewable energy consumption (kWh)131,169 9,820,669% renewable electricity from total electricity

58%

16%

50%

100%

3%

84%

Energy Intensity ratio (per Group turnover) £m––

34,161––

32,9901.	This section has been prepared for the reporting period of 1 April 2023 to 31 March 2024. We report on all of the material emission sources inline with an operational control approach method, as required in Part 7 under the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 and under the UK’s Streamlined Energy and Carbon Reporting (SECR) requirements.
	Our energy consumption and emissions data is reported in accordance with the reporting requirements of the Greenhouse Gas Protocol (‘GHG
Protocol’), Revised Edition and the Environmental Reporting Guidelines, including the SECR guidance dated March 2019. The GHG Protocol
standard covers the accounting and reporting of seven greenhouse gases (GHGs) covered by the Kyoto Protocol.
	We report on Scopes 1 and 2 GHG emissions, as well as select Scope 3 emissions, providing a detailed breakdown of the Group’s emissions by typeand intensity measurement.
	In our calculations, we have taken into account instances where sites generate their own renewable electricity or purchase electricity backed
by contractual instruments, such as Renewable Energy Guarantee Origin (REGO). Consistent with the Greenhouse Gas Protocol, we regularly
review our reporting procedures in response to changes in business structure, calculation methodologies, and data accuracy and availability.
Consequently, we have restated our Scope 1 and 2 2023 emissions data to reflect updated emissions factors and data availability.
	For Scope 1 emissions, we have utilised emission factors from the UK Government’s GHG Conversion Factors for Company Reporting 2023
(provided by the Department for Environment, Food and Rural Affairs (DEFRA)). Scope 2 emissions, calculated using the GHG Protocol locationbased method, have been determined using country-specific emission factors from the International Energy Agency (IEA) and DEFRA for UK sites.
For Scope 2 emissions calculated using the GHG Protocol market-based method, we have used residual mix emission factors from the Associationof Issuing Bodies (AIB) 2022 where applicable. In cases where residual mix emission factors were not available, we employed country-specificemission factors from the International Energy Agency (IEA) in accordance with GHG Protocol guidelines.

www.oxinst.com

38

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

SUSTAINABILITY: ENVIRONMENT continued
Scope 3 emissions
During the year we re-calculated
our Scope 3 emissions using datafrom FY22/23 and then updated ourfootprint for this year. Our evaluation
confirmed that our value chain
emissions are significantly greater thanour operational carbon footprint, with
our Scope 3 emissions accounting for
97.2% of our total emissions.
We calculated all applicable Scope
3 categories for our carbon footprint,
with five categories not applicableto our business. In line with theGreenhouse Gas Protocol, we continue
to review our reporting in light ofany changes in business structure,
calculation methodology and theaccuracy or availability of data.

Due to recognised inherent
uncertainties in calculating Scope3, we have adopted a continuous
improvement approach. We willcontinue to review our processes anddisclose any restatements in a timely
and transparent manner. Below is a
description of our most material scope
3 categories for our 2023/24 Scope 3
base year footprint.
Purchased goods and services (57.2%
of Scope 3) – We use purchase data by
spend of raw materials, components
and services. As this was our firstevaluation of our purchased goods
and services we have used a ‘spendbased’ approach which allocatesemissions to an amount spent on
specific commodities. While thismethod contains a certain degree of
uncertainty, it provides a view of our
hotspots in our supply chain emissions.

As more granular data becomes
available we will refine thismethodology and look to incorporate
supplier-specific emissions.

Environmental legislation

Use of sold products (32.3% of Scope3) – We calculate the lifetime energy
use for representative products of our
key product ranges, using our annual
sales volume, average power use per
product and estimated hours in use
over life. Emissions factors for our key
sales regions are applied to this data.

Water and waste

Upstream transportation anddistribution (3.3% of Scope 3) – Allinbound, intragroup and outboundlogistics paid for by the Group are
mapped against the transportationmode, weight and distance travelled
to calculate emissions on a well-towheel basis.

As a Group, we are committed to ensuring compliance with all environmental legislation in the countries where we operate.
No environmental fines or penalties have been placed on the Group in the last three years.

Water withdrawal and waste data has been collected across the Group from sites with independent water supplies anddirect control of their waste collection services. This includes all the primary UK manufacturing sites, which account for 83% ofGroup revenue.
Some of our operations are in regions with high or extremely high levels of water stress. However, water is not seen as amaterial risk due to the low volume we consume. In total the Group recorded 10,553 m3 of water withdrawal.
UK sites are sending zero waste to landfill; our waste from these sites is either recycled or used to generate electricity atenergy from waste facilities. We are committed to reducing the quantity of hazardous waste we produce.
Total waste – treatment

Recycled

Category Description

Status55,02950,505––

1

Purchased goods and services

Relevant, calculated2

Capital goods

Relevant, included in category 1

3

Fuel- & energy-related activities

Relevant, calculated

395

296

4

Upstream transportation and distribution

Relevant, calculated

3,150

4,327

5

Waste generated in operations

Relevant, calculated

13

11

6

Business travel

Relevant, calculated

4,825

2,704

7

Employee commuting

Relevant, calculated

1,445

1,353

8

Upstream leased assets

Not relevant, not applicable––

64,85759,199

326

314

–

–

Upstream emissions
9

Downstream transportation and distribution

Relevant, calculated

10

Processing of sold products

Not relevant, not applicable11

Use of sold products

Relevant, calculated

31,03429,52912End-of-life treatment of sold products

Relevant, calculated

11

11

13

Downstream leased assets

Not relevant, not applicable

–

–

14

Franchises

Not relevant, not applicable

–

–

15

Investments

Not relevant, not applicable––

Downstream emissions

31,371

29,853

Total Scope 3

96,22889,052

38.9%

12,656

5.9%

117,743

55.2%

Total

213,302kg% split of waste

615

0.3%

Non-hazardous

212,687

99.7%

Total

213,302

Our Tubney manufacturing site and head office is set in acres of woodlandwww.oxinst.com

82,903

Energy from waste

Hazardous
FY22/23 Scope 3
emissions (tCO2e)% split of waste

Landfill

Hazardous vs non-hazardous

FY23/24 Scope 3
emissions (tCO2e)

kg

39

40

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: TCFD STATEMENT

Task Force on Climate-related Financial Disclosures (TCFD)
Statement for the year ended 31 March 2024
Introduction
In tandem with our net zerocommitment, this report addresses
our climate governance and describes
how we integrate climate risks andopportunities into our risk management,
strategic planning, and decisionmaking, in line with our ambition toachieve net zero emissions acrossScopes 1 and 2 by 2030, and acrossScopes 1, 2 and 3 by 2045.
As a global manufacturer of hightechnology products, mitigating,
adapting and responding to theimpacts of climate change is central to
our strategy, both in terms of how we
operate our business, and in terms of
the key role our products and services

play in the technology pathway toenable the transition from fossil fuels toa low-carbon economy. This year wehave updated our climate-related risk
and opportunity assessment, taking
into account their impact under various
timeframes and scenarios to gain adeeper understanding.

Compliance statement
For clarity around compliance of thefollowing information with the TCFD
framework, and requirements arisingfrom Listing Rule 9.8.6R(8), we consider
our disclosure to be consistent withall TCFD recommendations andrecommended disclosures as detailedin ‘Recommendations of the Task
Force on Climate-related Financial

Disclosures’ (2017) and the additional
guidance as set out in the 2021 Annex,‘Implementing the Recommendationsof the Task Force on Climate-related
Financial Disclosures’ and with theclimate-related financial disclosure
requirements under the Companies(Strategic Report) (Climate-related
Financial Disclosure) Regulations
2022, as shown in the TCFD crossreference and disclosure consistency
summary below.

TCFD pillar

Recommended disclosure

Disclosure location

Governance: Disclose theorganisation’s governancearound climate-relatedrisks and opportunitiesa.	Describe the Board’s oversight of climate-related risks
and opportunities.

Pages 41 and 42b.	Describe management’s role in assessing and managing climaterelated risks and opportunities.

Pages 41 and 42

Strategy: Disclose theactual and potential
impacts of climate-relatedrisks and opportunities
on the organisation’s
businesses, strategy, andfinancial planning wheresuch information is materiala.	Describe the climate-related risks and opportunities the organisation
has identified over the short, medium, and long term.

Pages 44 to 49b.	Describe the impact of climate-related risks and opportunities on
the organisation’s businesses, strategy, and financial planning.

Page 50c.	Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C or
lower scenario.

Page 50

Risk management:
Disclose how theorganisation identifies,
assesses, and manages
climate-related risksa.	Describe the organisation’s processes for identifying and assessing
climate-related risks.

Pages 42 and 43b.	Describe the organisation’s processes for managing climate-relatedrisks.

Page 43c.	Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overallrisk management.

Page 43a.	Disclose the metrics used by the organisation to assess climaterelated risks and opportunities in line with its strategy and risk
management process.

Page 50b.	Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhousegas (GHG) emissions, and the related risks.

Pages 35 to 39c.	Describe the targets used by the organisation to manage climaterelated risks and opportunities and performance against targets.

Pages 35 to 39, 50

Metrics and targets:
Disclose the metrics andtargets used to assess
and manage relevant
climate-related risks andopportunities where suchinformation is materialwww.oxinst.com

Governance
Board level
The Board of Directors has ultimate
responsibility for the oversight ofclimate change-related issues andis supported by its Committees(primarily the Sustainability Committee,
the Audit and Risk Committee andthe Remuneration Committee), theManagement Board, the Sustainability
Leadership Forum, and the wider
senior leadership team. Climatechange-related considerations areembedded throughout our governancestructure, and at every level acrossthe organisation, as set out in thegraphic and explained in moredetail below. The Board engages
regularly with a range of external
advisers and internal subject matter
experts on environmental legislation,
decarbonisation and climate risk.

The Group’s environmental strategy
and the management of climaterelated risks and opportunities is
set and directed by the CEO andManagement Board. Any major capital
expenditure, including climate-related
initiatives such as solar arrays orenergy efficiency upgrades to sites, isapproved by the CEO and CFO and, if
required, the Board.

The Audit and Risk Committee provides
oversight and governance in relation
to climate change-related risks andopportunities, while the Remuneration
Committee is responsible for setting
and overseeing climate changerelated remuneration incentives,
together with any other sustainabilityrelated incentives. The current climaterelated executive remuneration
objectives can be found on pages 142
and 143. The Sustainability Committee
in turn provides strategic guidance
and oversight to the managementlevel Sustainability Leadership Forum(SLF) primarily through the attendanceof relevant SLF members at theCommittee’s meetings.

The Board, through its Sustainability
Committee (comprising all the NonExecutive Directors), provides oversightand governance over environmental
strategy, including monitoring progressto net zero targets through its review
of emissions data, and assessing
how these are being managed. The
Sustainability Committee meets atleast three times a year.

Climate-related governance framework
Oxford Instruments plc Board

Audit and Risk
Committee

Remuneration
Committee

Board Sustainability
Committee

Sustainability Leadership Forum
Management
Board

Business unit andregional leaders

Managementof climate
risks andopportunities

Energyuse andreportingTarget setting Productand progress design
towards net
zero

Supplychain

Go Green teams

Note to graphic: Arrows indicate two-way transfers of information and guidance between forums.

Waste
management

Communications
and engagement

41

42

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

SUSTAINABILITY: TCFD STATEMENT continued
Management level
The SLF is a cross-functional forum,
chaired by the Chief HR Officer, witha remit across the full spectrum ofsustainability, including environment,social and governance. It holds
responsibility for environmental
issues at a management level,
including climate-related risks andopportunities and the delivery of
the Group’s environmental strategy.
Representatives of the SLF attend
Sustainability Committee as required toshare strategic updates, and seek theBoard’s input on them. The SLF meetsat least quarterly, and is primarily
responsible for detailed developmentof strategy, together with theassessment, management and tacticaldelivery of the environmental remit.

Its membership includes functional
heads and subject matter experts,
who lead workstreams on:
•


the
management of climate risks
and opportunities;•

energy use and reporting;•development of target setting
and progress towards net zero;•product design;•

supply chain;•

waste management andrecycling; and•communications and engagement.

A key part of the SLF’s remit, working
in collaboration with the Management
Board, is to foster two-way engagementwith business units, regional leadershipand Go Green teams to drive andaccelerate Oxford Instruments’ progress
towards net zero and our managementof climate risks and opportunities. This
year our Go Green initiative (see page35) has expanded to 14 global sites tohelp Oxford Instruments drive progress
towards its 2030 net zero target for
Scopes 1 and 2, and its 2045 overall net
zero target through projects relating toenergy, waste, water and travel.

SLF members lead liaison withexternal consultant CEN-ESG on
climate, energy and progress to net
zero. In addition, members monitor the
KPIs outlined in the Metrics and Target
section on page 50.

Through this assessment, risks are
assigned a Risk Score and classified
as either Low, Moderate, High or
Significant. Risks that are classified as
High or above are reported to the Groupfor further assessment. This process
allows prioritisation of risks and ensuresthat the significance and scope ofclimate-related risks are considered inrelation to non-climate-related risks.

The decision to tolerate, transfer
or treat a risk is determined by theoutcome of the Risk Score; higher
scoring risks need to be managed
to bring the risk impact back in linewith the Group’s appropriate risk
appetite. Action plans for each risk areoutlined in the risk register including
mitigating actions and who is
responsible for these actions.

Climate-related risks scored as Highor above are reflected in the Grouprisk register which is reported to
the Audit and Risk Committee on
a quarterly basis. Risks below thisthreshold are still monitored andconsidered for future review.

Additional information regarding
each risk and opportunity has been
elaborated upon, including anassessment of their implications,
including but not limited to financial
and reputational implications, strategic
responses, associated costs, andthe variability within climate-related
scenarios, where feasible.

Risk Management

Strategy

Our process for identifying and assessing climate-related risks.

Climate-related risks
and opportunities

As a principal risk, climate-relatedrisks and opportunities are identified
and assessed in line with Oxford
Instruments’ processes for wider
enterprise risk management. This
allows the importance of climaterelated risks and opportunities tobe compared with other risks andopportunities. All physical andtransition risk categories (current
and emerging) outlined by the
TCFD are considered by Oxford
Instruments, regardless of whether
they occur within our operations,
upstream or downstream of theGroup. Our approach to identifying
and assessing risks and opportunities
is set out in detail in the Risk
Management section on pages 70
to 78 of the Annual Report 2024.

Relevant risks and opportunities
are identified with help fromexternal consultants, CEN-ESG,
and involve collaboration with key
internal stakeholders such as senior
management, legal and regulatory,
product management and healthand safety functions. As part ofthis process, we carry out horizon
scanning to identify potential threats,
particularly regulatory changes, andany emerging risks and opportunities,
which allows for better preparedness
to support decision making. We
consider climate-related risks andopportunities across the short,medium and long term, with thesetimeframes defined on page 43.

Generally, transition risks are considered
at a macro level by the Group incollaboration with internal stakeholders
and senior management, while physicalrisks are typically more granular andtherefore more relevant at a business
unit and site level. Any new regulatory
requirements are implemented asthey arise, and further actions taken
as appropriate. During the year we
carried out a site-level physical climate
risk assessment using Munich Re’s
Location Risk Intelligence tool, which
provides a geospatial natural hazard risk
assessment and evaluation, to improve
our operational risk assessment.
As with all other Group risks, climate
risks and opportunities are assessedon a 4x5 matrix, which incorporates anassessment of both Likelihood (Highly
Unlikely to Highly Likely) and Impact(Insignificant to Severe1). The financial
impact of a risk is defined below.

Our approach to managing climaterelated risks and leveraging
opportunities is incorporated into
our business strategy. This year
we have performed a new climate
scenario assessment of climaterelated risks and opportunities.
Two separate climate risk
assessments have been carriedout to reflect the contrast between
transitional and physical climate risks.

Impact time horizon

Financial Impact2
Insignificant

NotableSignificant

Major

SevereFinancial impact ofFinancial impact ofFinancial impact ofFinancial impact ofFinancial impact of

250k

250k–£1m£1m–£2m£2m–£5m> £5m

www.oxinst.com

Transition risks
and opportunities
The TCFD defines transition risks infour categories (Policy and Legal,
Market, Technology, and Reputation)and transition opportunities in fivecategories (Resource Efficiency, Energy
Source, Products & Services, Markets
and Resilience). These categories wereconsidered as part of the transition risk
assessment. Risks and opportunities
identified in these categories wereranked, with only the most significant
being reported below. Short, medium
and long-term time horizons defined
below were used as part of thisassessment to identify the impact ofclimate on our business strategy.

Year fromYear toRationale

Short term

2024

2027

In line with the existing risk management time horizon and specificbusiness plan strategy.

Medium term

2027

2035

Encompasses Oxford Instruments’ near-term emission targets.

Long term

2035

2050

Encompasses the Group’s net zero by 2045 target, the UK Government’s
net zero by 2050 target and the useful life of the organisation’s assets.

The following International Energy Agency climate scenarios have been used to perform scenario analysis on our transition
risks and opportunities.
•

Net Zero 2050 (NZE): a narrow but achievable pathway for the global energy sector to achieve net zero CO2 emissions by
2050. This scenario meets the requirement for a ‘below 2°C’ scenario and is used as a positive climate pathway. NZE also
informs the decarbonisation pathways used by the Science Based Targets initiative (SBTi).

•

Stated Policies Scenario (STEPS): representing projections based on the current policy landscape and is used as a basecase pathway. Global temperatures rise by around 2.5°C by 2100 from pre-industrial levels, with a 50% probability.

1.	Likelihood is a measure of the risk occurrence while impact is a measure of the combination of financial, reputational and compliance impacts.
Impact is a combination of financial, reputational and compliance impact.
2.	Materiality limits are set in line with the Group’s financial statement materiality levels. Last year Group financial materiality was £3.68m based on
5% of profit before tax.

Both these risk assessments
involved a Group-wide review ofoperations and value chain to gain
an understanding of how climate can
impact our revenue, assets and otheraspects of our company. An external
consultant, CEN-ESG, was engaged
to facilitate engagement with key
stakeholders within the Group such as
procurement, product development
and senior management in tandemwith horizon scanning of externalindustry risks and a desktop review ofother climate initiatives.

This detailed analysis, coupled withevaluations of impact and likelihood,facilitates the determination of
appropriate risk responses, such as
mitigation, acceptance, or control.
Consequently, resources can beallocated effectively to address themost consequential climate-related
impacts, while other risks necessitate
additional scrutiny or are deemed
acceptable within the Group’s
customary risk tolerance.

43

44

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: TCFD STATEMENT continued
Significant risk/opportunity
Report to Group

Transition risks and opportunities

High risk/opportunity
Report to Group

Moderate risk/opportunity
Do not report to Group mitigation
plan expected to be in place

Low risk/opportunity
Do not report to Group

Transition risks identified
Risk

Current andemerging
environmental
regulationand increasing
reportingrequirements

Price inflationin the value
chain

Increasing
stakeholder,
regulatory
and reporting
expectations

Potential impact
on the businessResponse/actions we are taking
and how they are managed

Rise in material prices forswitching to compliant
products or disruption
to production if unable
to react in sufficienttime. Could also
result in component/
process obsolescence.

We have product compliance processes
in place to manage the regulatoryenvironment. We use existing processes
to meet Restriction of Hazardous
Substance (RoHS) and Registration,
Evaluation, Authorisation and Restrictionof Chemicals (REACH) requirements,
which remain appropriate to manage
future changes in standards. Further,
our new product development process
considers environmental regulation.

Penalties for noncompliance withregulation. Further,cost of compliancecould increase
through being late toaddress regulation.

Oxford Instruments has dedicatedinternal risk, legal and environmental
management resource, as well as
investing in external consultancy, toensure that we are aware of, andremain compliant with, legislation.
Further, we implement any new
regulatory requirements as they arise.
Our certified ISO 14001 systems at ourfour UK manufacturing sites support our
mitigation of climate risk.

Potential of higher
supply chain costs
through increased
raw material prices.

Our target is to achieve net zero
emissions by 2045. We are in the processof assessing our Scope 3 emissions –including supply chain. This will be an
essential input into the development of
our net zero target, transition plan andability to identify key levers to reduce
supply chain emissions. We are also
engaging with our key suppliers on theircarbon footprint to identify our carbon
hotspots and mechanisms to reduce this.

Global supply chainsare implementing more
expensive production
methods and changing
raw materials to facilitate
Marketdecarbonisation, although
the extent to which increased
costs will be passed on islargely unknown.

Potential of higher
supply chain costs.

Oxford Instruments maintains close
relationships with key suppliers. ProductDevelopment and Strategic Sourcing
teams identify and evaluate viable
alternatives in materials and processes
and work closely with key suppliers todeliver supply chain solutions.

Key stakeholders aredemanding sustainability
performance from
Oxford Instruments.

Reputational damage
that could result inloss of customers
and shareholders
and reduced accessto capital.

Board-level scrutiny and oversight, andan organisation-wide focus on addressing
the risks and opportunities arising fromclimate change, together with a focus on
impact reporting, wider communications
and stakeholder engagement. Plans todevelop a transition plan will also reduce
exposure to this risk.

Risk description

Increased exposure toenvironmental regulation– such as regulation
on Perfluoroalkyl
and Polyfluoroalkyl
Substances (PFAS).

The global regulatory
landscape for ESG issues
is changing rapidly. Failure
to keep up with emerging
regulation could increase
costs of compliance.

Value chain exposure tocarbon pricing impacts.
Globally, there is anincrease in carbon pricing
mechanisms – both policy
and market instruments –for example Carbon Border
Adjustment Mechanism(CBAM) within the UK and
the EU. Our suppliers may be
exposed to carbon pricing
within their own operations.

Risk type

Policy and legal

Policy and legal

Policy and legal

Reputation*	Materiality limits are set in line with the Group’s financial statement materiality levels. Last year Group financial materiality was £3.68m based on
5% of profit before tax.

www.oxinst.com

NZE scenario
KPIs

2027

2035

STEPS scenario
2050

2027

2035

2050

Scenario Implications

Frequency of horizon
scanning for new
regulation

The pace and magnitude ofregulation would increase more
substantially under NZE – but
no foreseen long-term change
in risk exposure between
NZE and STEPS given our
mitigation processes.

•

Percentage of sites
with ISO 14001
certification

The pace and magnitude ofregulation would increase more
substantially under NZE – but
no foreseen long-term change
in risk exposure between
NZE and STEPS given our
mitigation processes.

•

Scope 3 – category
1, 4 emissions
Global carbon prices

•

•

•

•

•

Net risk= zero;companyplans to be
net zero by2045

Net risk= zero;companyplans to be
net zero by2045

Exposure is likely to be greater
under NZE due to the higher
cost of carbon and increased
global implementation ofcarbon pricing mechanisms.

Percentage of supply
chain spend withdecarbonisation
dialogue
Percentage ofsuppliers engaged tocollect emissions data

Change is more rapid under NZE
compared with STEPS. Pricing
implications under NZE are also
more significant.

Rating agency scores

Higher expectations ofstakeholders in short to medium
term under NZE. Oxford
Instruments’ emissions targets
will even out risk exposure underboth scenarios in the medium tolong term.

45

46

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: TCFD STATEMENT continued
Significant risk/opportunity
Report to Group

Transition risks and opportunities continued

High risk/opportunity
Report to Group

Moderate risk/opportunity
Do not report to Group mitigation
plan expected to be in place

Low risk/opportunity
Do not report to Group

Transition opportunities identified
Opportunity

Opportunity description

Opportunity
type

The transition to a low-carbon
economy requires significant
investment in R&D for moresustainable technologies. Innovation Products
and development in technology
and services
areas such as batteries are
critical for the transition to a lowcarbon economy.

Investment
in R&D for a
low-carbon
economyServices thatfacilitate thereductionof carbon
emissions anddeliver value
for customers

Operationalenergy andcarbonreductions

Resource
efficiency

www.oxinst.com

In-house R&D and our new productdevelopment process has thepotential to address the needfor products with sustainability
credentials, e.g. energyefficient products.

Products
and services

Proactive collaboration with
suppliers to drive low-carbon
innovation helps improve thesustainability credentials of
our product portfolio.

Products
and services

Remote Services Solutions is a
developing service across theGroup. This service area not only
Products
provides an area for growth but also
and services
allows for reduction of emissions
in our own operations and forour customers.
Local sourcing and strategic
placement of services delivers
efficiency to customers and allows
Oxford Instruments to reduce
logistics travel.

Obtaining renewable electricity
through renewable electricity
certificates (RECs) and powerpurchase agreements (PPAs)
reduces reliance on local grid andhelps to reduce Scope 2 emissions
as an interim measure whilst
exploring opportunities to reduceenergy usage.

Internally Oxford Instruments canimplement resource efficiency
programmes to improve waste,water use and energy savings.

Potential impact
on the businessResponse/actions we’re taking
and how they are managed

Increased revenue

Our products and services play a key rolein the technology pathway to enable thetransition from fossil fuels to a low-carbon
economy. Our enabling technologies, such as
materials analysis solutions, efficient powerswitching, and semiconductor equipment,
help customers address these challenges.

Increased revenue

Our new product development process
takes environmental considerations into
account. Developments in our semiconductor
equipment are implicitly geared towards
energy efficiency as well as our watersaving alternative to the standard chemicalmechanical planarization (CPM) processused to create a smooth surface on
semiconductor wafers.

Increased revenue

We have been working with key
suppliers to embed material andenergy efficiencies into the products
we purchase.

Increased revenue
and decreasedtransport costand emissions

Almost all our products are already shippedwith remote connectivity and we are building
business system infrastructure to enableremote service capabilities.

Resource
efficiency

Decreasedtransport costand emissions

We are engaging in strategic building of
capabilities and services to deliver efficiency
to customers. Load optimisation in logistics is
also part of this strategy. We continue to lookfor opportunities in this area.

EnergysourceReduced costs andScope 2 emissions.
Renewable
electricity can also
provide operating
cost savings andreduce operational
exposure tocarbon pricing.

Our current renewable energy programme
utilises REGO-certified or REGO-equivalentcertifications of renewable electricity. We
make use of solar arrays on our Severn Beachand Scotts Valley manufacturing sites, alongwith our Tokyo office. We are investigating
adding additional renewable generation
capacity to suitable sites.

Reduced costs
and emissions

Group-wide, we are continually looking foropportunities to embed resource efficiency
into our operations. Opportunities can besmall, such as reducing waste or water
usage, or part of larger capital projects, e.g.
replacement of boilers at our Tubney head
office and manufacturing site, and all-electricheating at our new site in Severn Beach.
We seek to invest in long-term, alternativetechnologies as they become suitable andeconomically feasible.

Resource
efficiency

NZE scenario
KPIs

•
•

Low-carbon market
segments growth
Industry investment in
low-carbon R&D

2027

2035

STEPS scenario
2050

2027

2035

2050

Scenario Implications

Under NZE, there is significant
investment in renewables andalternative technologies. Slower
change under STEPS.

Internal R&D investment
Scope 3 category 11,
12 emissions

Under NZE, there is significant
investment in renewables andalternative technologies. Slower
change under STEPS.

•

Number of suppliers
carbon data obtained
from Scope 3 –category 1, 11 emissions

Under NZE, more significant
investment in renewables andalternative technologies. Slower
change under STEPS.

•

Revenue fromremote services

Slightly increased exposure
under NZE due to additive effectof organisation seeking carbon
reduction opportunities.

•

Scope 3 – category 4,
9 emissions

Slightly increased exposure
under NZE due to additive effectof organisation seeking carbon
reduction opportunities.

•

Scope 2 marketbased emissions
Percentage of
renewable electricity
out of total electricity

Greater availability of supply
under NZE. STEPS lags slightly,
reduced availability of REC.

Scope 1 and Scope
2 (location-based)emissions
Total waste
Total water

Greater exposure under NZE due
to more investment in resource
efficient products and services.

•
•

•

•

•
•

47

48

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: TCFD STATEMENT continued
Physical risks
The frequency of physical climaterelated impacts is expected to increasein the future through an increased
frequency and severity of extreme
weather events. Oxford Instruments
has used Munich Re’s Location Risk
Intelligence tool to assess the Group’s
sites and key suppliers’ current andfuture risk exposure to climate-related
disruptions. Sites have been assessed
for both acute and chronic physicalrisks, including potential risks such as
drought stress, tornados, storms, sealevel rise and flooding events
among other hazards.

Particular attention has been paid
to the four UK manufacturing sites(Severn Beach, Tubney Woods,
High Wycombe and Belfast) as they
contribute roughly 80% of Grouprevenue. Due to the nature of physicalclimate-related risks manifesting
more over the long term, different time
horizons have been used from thoseused to assess the transition risks andopportunities. These are: 2030 (shortterm), 2050 (medium term) and 2100
(long term).

Significant risk/opportunity
Report to GroupThe following scenarios have beenused for the physical risk assessment:•

RCP 2.6 is an optimistic
scenario whereby atmosphericconcentrations of greenhousegases lead to a global temperaturerise of less than 2°C by the end of
the century relative to the preindustrial period (1850–1900).

•

RCP 8.5 is a pessimistic highemissions scenario, consistent witha future with no policy change toreduce emissions and leading to a
global temperature rise of around
4°C by 2100.

High risk/opportunity
Report to Group

Moderate risk/opportunity
Do not report to Group mitigation
plan expected to be in place

Low risk/opportunity
Do not report to Group

Physical risks identified
Opportunity
type

Potential impact
on the businessResponse/actions we’re taking
and how they are managed

Opportunity

Opportunity description

Flooding

One manufacturing site is
projected to be a Zone 50 (2%chance each year of a flood event)site under all future scenarios
from 2030 onwards. A further
Acutemanufacturing site is located ina Zone 100-year return period
for storm surges (1% chance ofoccurring each year).

Increased costs anddecreased revenue
through decreased
manufacturing output,
delayed production
times and damage
to site infrastructure,equipment, or inventory.

Oxford Instruments’ sites are insured
for asset/property damage as well as
business interruption. Each site has abusiness continuity plan and emergency
response measures in place to deal
with significant events. At our new
Severn Beach facility, the building wasconstructed on a 1.5m raised platform
to mitigate flooding risk exposure.

One manufacturing site is currently
at a high-risk level and projected
to remain high against futurescenario projections. A further
Acutemanufacturing site increases
from medium to high risk acrossall projections including the most
optimistic scenario by 2030.

Increased costs anddecreased revenue
through disrupting
manufacturing output
such as road closures,
evacuation orders,
restricted access,or damage to site
infrastructure.

Oxford Instruments’ sites are insured
for asset/property damage as well as
business interruption. Each site has abusiness continuity plan and emergency
response measures in place to deal withsignificant events.

Decreased revenue

Business interruption insurance provides
a degree of cover in the event that supply
chain issues cause significant disruption
to production.

Wildfire

Supplier
disruption
from extreme
weather

www.oxinst.com

Increasing extreme weather
events can cause supply chain
disruptions or site shutdowns.
Analysis indicates low physicalrisk for our key suppliers currently. Acute
However, two of our key suppliers
are at increasing risk of riverflooding and sea level rise acrossboth scenarios in the long term.

2.6 Scenario
KPIs

•

•
•

•

•
•

•

2030

2050

8.5 Scenario
2100

2030

2050

2100

Scenario Implications

Number of days
operations are
disrupted due toflooding events
Revenue loss fromsite disruption
Insurance premiums

Minimal change in exposure
between RCP2.6 and 8.5.

Number of days
operations are
disrupted due to fire
events
Revenue loss fromsite disruption
Insurance premiums

Increased exposure under
RCP8.5, particularly in the longterm 2100 projections.

Number of days
our operations are
disrupted due tosupply chain issues
resulting from extreme
weather events

Minimal change in exposure
between RCP2.6 and 8.5.

49

50

Oxford Instruments plc
Annual Report 2024

Overview

SUSTAINABILITY: TCFD STATEMENT continued
Impact on strategy andfinancial planning
We consider climate change to be aprincipal risk for Oxford Instruments,
but also a source of material
opportunity, given our focus on
accelerating breakthroughs, and theend markets we serve. Our assessment
is based on having evaluated key
climate-related risks and opportunities,
including understanding the potential
impact of each in terms of its time
horizon, likelihood and magnitude,
and the stakeholders or areas of thebusiness that may be affected.
Although there is not a dedicatedclimate-related R&D budget,
our existing R&D expenditure
incorporates climate change. Our
products are designed to address
our structurally growing markets inadvanced materials development
and semiconductors, which both havea key role to play in decarbonisation
and addressing the impacts of climatechange. In terms of the direct impactof our products, considerations areincorporated into the Group’s New
Product Development process, toensure the ongoing reduction of
the carbon footprint of our products
through energy use, packaging anddistribution, as well as increased
recyclability and upgradability. In
addition to R&D considerations, thecosts of planned climate initiatives
are included within each business
unit’s annual budget plans of capital
expenditure requests. For example,
when purchasing new offices andmanufacturing sites we always takeenvironmental considerations into the
procurement process.

Resilience of theorganisation’s strategy
to climate change
The scenarios used in our climate
scenario analysis are explained in
more detail above. They have been
selected to provide contrasting
scenarios which allow us anunderstanding of how resilient theGroup is under different situations andtemperature pathways. Our identified
climate-related risks and opportunities,
and action plans to address these,
highlight that in aggregate our overall
climate risk exposure is moderate. We
believe, given our current mitigationplans, that we can incorporate
climate risks into our business-asusual activities and that the Groupis financially resilient to climatechange. Therefore, we do not currently
envisage any additional significant
capital expenditure or changes tobusiness strategy as a result of climatechange that sits outside of our normalplanning. Please see page 156 of our
financial statements where the impactsof climate have been considered.
The outputs of the scenario analysis
we have carried out can be found on
pages 43 to 49. The limitations of this
scenario analysis are:•scenarios often only provide highlevel global and regional forecasts;•

not all risks are easily subject toscenario analysis;•

scenario analysis requires analysisof specific factors and modellingthem with fixed assumptions;•

impacts are to be considered in
the context of the current financial
performance and prices;•

impacts are modelled to occur ina linear fashion when, in practice,
dramatic climate-related impacts
may occur suddenly after tipping
points are breached;•

the analysis considers each risk
and scenario in isolation when, in
practice, climate-related risks may
occur in parallel as part of a wider
set of potential global impacts; and•carbon pricing is informed by
the Global Energy Outlook 2023
report from the International
Energy Agency.

Metrics and targets
Climate-related metrics
We disclose our Scope 1, 2 and 3
emissions in line with the Greenhouse
Gas (GHG) Protocol A Corporate
Accounting and Reporting Standard,with additional guidance from the GHG
Protocol Corporate Value Chain (Scope3) Accounting and Reporting Standard
and the GHG Protocol Technical
Guidance for Calculating Scope 3
Emissions. This covers the accounting
and reporting of the seven greenhousegases covered by the Kyoto Protocol.
An operational control approach was
adopted, with all material emissions
sources reported.
We also disclose a wide range of
metrics to help us to track our progress
across a number of climate-related
and sustainability-related areas. This
includes electricity consumption, GHG
emissions intensity and water andwaste usage. The specific metrics used
to track our climate-related risks andopportunities are identified on pages
37 to 39. Please see the environment
section, pages 35 to 39 for further
information, and for this year’s SECR
reporting, the primary means by which
we report our progress and track
our impact.

Climate-related targets
As set out in the environment section,
we are committed to reaching net zerocarbon emissions (where we add noincremental greenhouse gases to theatmosphere) against Scopes 1, 2 and 3
by 2045. This year we are also pleased
to announce further ambition on our
Scope 1 and 2 net zero targets, with a
new target to be net zero in Scopes 1
and 2 by 2030. In the coming months
we are planning on setting ambitious
Scope 3 targets and also to have our
Scopes 1, 2 and 3 targets validated by
the SBTi. We subsequently also planto publish a net zero plan that will
detail our costed actions to achievethese targets.

Governance

Strategic Report

SUSTAINABILITY: SOCIAL

Social: We believe that businesses have avaluable contribution to make to society
We are acutely aware of our
responsibility to our employees, thecommunities that we impact and thegenerations to come.

Our social
sustainability agenda
Our social sustainability agenda
comprises six key subject areas,
as follows:• Culture, values and engagement• Equity, diversity and inclusion• Health, safety and wellbeing• Investment in our people• Next-generation talent• Community impact

Culture, values andengagement
We strive to create an open, inclusive andvalues-driven culture, where colleagues
feel able to share their views in a two-way
dialogue with senior leaders.
Our Chief Executive Officer and theleaders of our business units andregional teams based around the world
hold regular in-person and virtual
briefing meetings where employees
are encouraged to, and do, ask awide range of questions. The Board
discusses current workforce issues
regularly with management, andmeets a broad range of employees,
for example at site visits by the Chair
and Non-Executive Directors. We also
gather our people’s views annually
through our global engagement survey,
monitoring a range of cultural KPIs
and taking action on opportunities for
improvement at business unit, regional
and Group level.

Our overall engagement score in our2023 global survey, completed by
86% of employees, was maintained
at 78%, comparing favourably withexternal benchmarking1.
This year, we have carried out an
extensive piece of engagement work
led by Chief Executive Officer Richard
Tyson and the Management Board,
focused on our culture and ways
of working (see page 95). Informedby employee focus groups, this has
resulted in a new articulation of how
we work together, which will support
the delivery of our strategy (see pages
10 to 15 and 22 to 23). Both the strategy
and the ways of working (summarised
below) have been rolled out to all
employees via a global roadshow led
by the Chief Executive Officer, and arebeing fully integrated via leadershipinteractions with teams and ongoinginternal communications.

Our ways of working

We start withthe customer

We succeedby being
focusedWe makeand keep
our promises

We work
together as
one team

We help andtrust each otherto succeed

Our values

Inclusive

Innovative

TrustedPurposeful

By seeking out different
perspectives and diverse
collaboration, we deliver
better solutions andlasting success.

Through our knowledge,
expertise and focusedcuriosity, we create new
possibilities for ourselves
and for our customers.

We build successful,long-term relationships
based on accountability,
integrity and respect.

We care, and our passion
and commitment drive
positive change inthe world.

1.	Gallup 2023 research indicating an average global engagement rating of 23% across a range ofsectors www.gallup.com/394373/indicator-employee-engagement.aspx

www.oxinst.com

Financial Statements

51

52

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: SOCIAL continued
Equity, diversity and inclusion
We are committed to creating adiverse and inclusive culture. We
use the term equity, rather thanequality, as not everyone is startingfrom the same place, has the samechallenges or requires the same levelof support. Equity, therefore, refers togiving everyone what they need tobe successful, and reflects our focus
on equality of outcomes. At Oxford
Instruments, we want to encourage
everyone to achieve their potential
by actively ‘levelling the playing
field’ wherever needed. We seek todevelop and sustain a supportive andcollaborative working environment
where difference is recognised,valued and celebrated. However, we
also recognise that we operate in 17
countries around the world in which
the legislative frameworks and culturallandscapes vary hugely. In each of thecountries in which we operate, we aim
to be ahead of the curve in our equity,
diversity and inclusion targets, and ourworking practices, but will ensure that
we are not in conflict with legislative
frameworks.
Our approach to equity, diversity andthe prevention of discrimination isoverseen by the Board Sustainability
Committee. Our global Equity, Diversity
and Inclusion policy, covering 100% of
our operations, and publicised to allcolleagues via our intranet, sets out our
expectations in this area, www.oxinst.
com/corporate-content/diversity-andinclusion.
We have identified several key areasof focus, including gender, ethnicity,disability and sensitive medical
conditions, family responsibilities,
sexual orientation and gender identity,
pursuing a range of initiatives to recruitfrom a diverse pool of talent, and tosupport our existing workforce.
We have joined Business in theCommunity (BITC) and the Business
Disability Forum as part of ourcontinual drive to improve ourawareness and understanding of bestpractice in diversity and inclusion
for businesses. In 2024, we signed
up to the BITC Race at Work charterto underline our commitment toimproving equity of opportunity inthe workplace. We also engage
in externally run schemes offeringinternships and career opportunities inour diversity and inclusion focus areas.

During the year, employees havelaunched a women’s group and aneurodiversity group; these join existing
impact groups focused on race andethnicity and LGBTQ+ issues andhave been enthusiastically adopted
by both members and allies of each
community. During the year we havesuccessfully piloted new inclusive
leadership training, with a wider rollout planned for 2024/25.
We are committed to eliminating our
gender pay gap. We monitor, measure
and take action globally,. Our external
data reporting is focused on our UK
workforce and is published in our
Gender and Ethnicity Pay Gap Reportwww.oxinst.com/corporate-content/
gender-pay-report. The gap for our
Oxford Instruments Nanotechnology
Tools entity in the UK, representing 758
employees in 2023, currently stands at
10.4% (median).
We are also committed toaddressing the gender balance of
our workforce, with targets of 30%
female employees overall by 2030
and 40% female leadership by theend of 2025. A particular area of focus
is on increasing the diversity of ourmanagement board, which is being
actively addressed.
We continue to build on the work wehave done so far to establish balanced
recruitment shortlists (that is, shortlists
including candidates from groups which
are underrepresented in our workforce,
including women). We only engage
executive search firms who have signed
up to the Voluntary Code of Conduct ongender diversity.

CEO Richard Tyson makes his Pride pledge

www.oxinst.com

Our inclusive approach to recruitment
includes the use of technology toensure that the language used in job
advertisements is free from gender bias.
We operate a hybrid working policy
which helps employees to balance
work and personal commitments.
We also offer support and, whereappropriate, special leave, for thosewith caring needs for dependents.
Following the reconfiguration of ourinternal employee data portals to
include the Office for National Statistics
ethnicity categories, some 90% of UK
employees and 78% of employees
globally have provided data on theirethnicity. This year, for the first time,
we have reported on our UK ethnicity
pay data. This indicates that 10% of our
UK workforce identify as being part ofan ethnic minority group, and that on
average, these colleagues are paidslightly more than their peers (1.4%
mean and 1.7% median).
We are committed to using this datato help to ensure that our processes
and pay are fair and equitable withrespect to race and ethnicity, as wellas the characteristics on which wehave had full data for several years.
The Parker Review recommends
that we devise and work towards a
specified target for the percentage of
our senior management team to befrom ethnic minorities by the end of
2027. As an international company, we
recognise the importance of ensuring
we have strong ethnically diverse
leadership role models and a diverse
decision-making team that reflects ourcustomer base and the communities inwhich we operate.

This year we have taken steps to broaden the ethnic diversity of our wider seniorleadership team which, as of the date of the Annual Report, comprises 14 persons,of whom 14% are Asian. There are 102 direct reports of this team, of whom 22%
identify as belonging to an ethnic minority group. In that context, we will beseeking to maintain and improve the ethnic diversity of this cohort (ie, our wider
senior leadership team and their direct reports) on a year-on-year basis, within atarget range of 20% to 25%.

New employees in
FY23/24 by gender

Our Gender and Ethnicity Pay Gap Report provides more information on all theseareas: www.oxinst.com

Gender split
Male

FemaleGlobal Oxford Instruments

73%

27%

Plc Board

50%

50%

Management Board

92%

8%

Male69%

Managers

76%

24%

FemaleEmployees

72%

28%

Male

Female

UK

77%

23%

Europe

68%

32%

Asia

68%

32%

America

69%

31%

31%

Gender split by region

Targets:
Objective

Target (with date if applicable)

Progress to date

Balanced shortlists
for recruitment

100%

End of 2023/24: 82%

Ethnic minority representationon the Board

1 person of colour

Met

Women on the Board

By end of 2023/24: 40%
women in line with FTSE
Women Leaders target

Met

Women as a proportionof senior leadership

By end 2025:
40% women

34% (2023: 31%)

Women as a proportion of total
Oxford Instruments population

By end 2029/30:
30% women

Currently 27%(2023: 26%)

Three cohorts undertook the Oxford Instruments Leadership
Programme during the year

Team-building at the Foundations early careers programme

53

54

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: SOCIAL continued
We are proud to support our local community groups andcharities alongside being inclusive of our people and culture
through the celebration of events and achievements.

Health, safety and wellbeing

We are committed to fostering a healthy, safe and productive
work environment for our entire workforce, and to driving continuous
improvement in our health and safety (H&S) performance.
The Board is responsible for oversight of our approach to
H&S, supported by the Sustainability Committee.
Our six-step strategic framework, rolled out in 2023/24,
supports continuous improvement via six key areasof management.

CultureCollaboration

Controls

Employee turnover rates

We have achieved our objective of increasing H&S
awareness and reducing the actual number and severityof incidents. Our accident frequency trend remains on
a downward trajectory, with no serious incidents and adecrease in minor accidents reported in 2023. There havebeen no employee or contractor fatalities in the fiveyear reporting period from 2019 to 2023. While our H&S
performance compares favourably with industry standards,
we remain vigilant and prioritise global safety through ourPush for Zero initiative, which aims for a sustained reductionin accidents over time.

Health and safety five-year performance5

Healthy, safe andproductive working
environments

43
30

CompetenceCommunication

Clarity

1

1

34

35

21

2019

2020

Serious injury

Overall, our management approach is based on the ongoing
identification and control of risk. We focus on preventative
measures to remove hazards before they can escalate into
accidents or near misses.
Recognising that our entire workforce has a role to playin creating a safe working environment, this year we haveenhanced the Shield incident reporting system throughwhich we record, manage and monitor accidents and safety
observations, and to which all employees have access. The
system has supported our improved performance since its
introduction in 2019.

Increasing health and safety awareness
1,349
1,121
876

810

288
77

100

144

2019

2020

2021

Safety notifications raisedwww.oxinst.com

188

2022

283

2023

Shield contributors (allemployees can contribute)

19

2021
Minor injury

0

0

42

41

21

2022

18
2023

Accidents per
1,000 employees

Our structured H&S management systems, subject toexternal audits as required, underpin our commitment tosafe work practices. At our primary manufacturing facilities
in the UK, representing 83% of revenue, we maintain ISO
45001 certification. The effectiveness of our management
systems is further supported by a robust internal audit
programme across all operational domains.
During the 23/24 financial year more than 1,000 employees
have received H&S training. This figure comprises training
renewals and onboarding of new joiners. This year, we havelaunched an Institution of Occupational Safety and Health(IOSH)-accredited training programme globally, acrossall business units and regions. Over a 24-month period,
training will be provided to executive team members andeligible members of our management, production andservices workforce, further enhancing their H&S competency
and awareness.
We support our employees and their families by providing
an increasing range and number of opportunities to enhancetheir wellbeing, including readily accessible support services
on a wide range of topics from financial wellbeing to mental
health and health assistance programmes.
We strive to empower individuals coping with mental healthchallenges or disabilities to thrive in their professional roles,
encouraging colleagues to seek assistance when needed,
via our team of Mental Health First Aiders and through theprovision of independent and confidential digital platforms
and services, accessible to employees globally.

Year

Turnover2023/24

12%, of which 9% was voluntary

2022/23

11%, of which 9% was voluntary

2021/22

14%, of which 11% was voluntary

2020/218%, of which 6% was voluntary

2019/20

15%, of which 7% was voluntary

2018/19

14%, of which 10% was voluntary

Employee numbers

This year, three cohorts (35 employees) have undertaken
our bespoke Oxford Instruments Leadership programme,
which brings together high-potential candidates from acrossthe Group and covers a wide range of topics includinginterviewing skills, self-development, developing others andmanaging remote teams. We have delivered Management
Essentials training to 61 managers Group-wide, andrelaunched programmes focused on Project Management
Fundamentals and Project Leadership. We have also piloted
a new Foundations programme for emerging talent, designed
to give aspiring leaders a variety of tools and techniques toallow them to work effectively as they progress their career at
Oxford Instruments.
We have a robust system of regular feedback. 100% of ouremployees have undergone an evaluation process in theyear, embedded through our annual performance review,which also encompasses career development with a focus
on training opportunities.

Full time

Part time

Contract workers

2023/24

2,090

144

69

2022/23

1,894

134

86

Next-generation talent

2021/22

1,662

126

70

2020/21

1,518

107

100

2019/20

1,448

114

70

We take our responsibility towards developing the nextgeneration workforce seriously and are committed toinspiring the next generation of scientists, engineers andbusiness people by showing them the difference they canmake in the world.

All employees are guaranteed a fair salary and other
employment benefits in accordance with their role andresponsibilities. We ensure compliance with minimum wage
legislation and strive to offer competitive compensation
packages suitable for each position and our business needs.
All employees, regardless of location, are entitled to legallyrequired benefits such as annual leave, sick leave, maternity
leave and standard working hours. A number of employee
benefit changes have been implemented over the lastyear to improve the competitiveness, attractiveness andcost-effectiveness of our total remuneration propositions.
These include the doubling of the potential award under
the growth incentive plan available to all employees notin another bonus scheme to £1,000 (or equivalent). We
also have achieved Living Wage accreditation in the UK. In
addition, all UK-based employees have access to our Share
Incentive Plan scheme after six months’ service. Furthermore,in compliance with UK regulations, all UK employees havethe option to enrol in our workplace pension scheme.

Investing in our people
Our people and their capabilities are core to what makes us
a great company. We are committed to being the company
where the best people in our sector want to work, and to
training our people and enabling their career development
and employability.
We provide a range of opportunities for our employees
across technical, commercial, operational and businesssupport functions to gain knowledge, skills and experience.
This includes challenging assignments, learning fromcolleagues and targeted training. Colleagues havecompleted almost 14,000 online training courses in
FY23/24, pursuing more than 750 different courses.
We continue to strengthen our Oi Academy, which offers
development programmes, core skills training courses
and e-learning opportunities. We also offer a broad rangeof secondments, career breaks, apprenticeships andsupport towards external qualifications.

For us, this begins in schools, colleges and learning institutions,where we equip and encourage our employees around theworld to take any opportunity they can to talk to young people
about careers in our industry. We partner with universities andpost-graduate schools to help students understand the rangeof careers available in a technology company, supporting thiswith work experience and engagement with employees froma broad range of backgrounds. A popular benefit we offer all
employees is the offer of work experience to family members
between the ages of 16 and 25.
We remain committed to providing structured
apprenticeships, sponsorships, internships, early career jobs
and graduate programmes. We intentionally reach out toattract a diverse range of people and those from untapped
talent pools, ensuring we are inclusive and accessible.

Community impact
We actively engage in locally focused activities that makeour communities and environments a better place to live andwork. All employees are offered up to two paid volunteeringdays a year to share their professional or practical skillsin the community; we also participate in charity outreachprogrammes and offer sponsorship of local community events.
Our network of Go Green teams (see page 35) drives action
to be more environmentally friendly, both as a business andas individuals.
When we arrange gifts, celebrations, events and activities
for our teams we aim to support the small, independent
businesses near our sites. We also participate in a rangeof charity outreach activities, including raffles, marathon
sponsorships, pub quizzes and coffee mornings.

55

56

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

SUSTAINABILITY: GOVERNANCE

Governance: Upholding high ethical standards
Inclusive, innovative, trusted and purposefulWe are wholly committed to conducting our business
responsibly and holding ourselves to high ethicalstandards. Our strong values (see page 51) underpin
everything we do; from how we work with each otherand our customers to how we trade with suppliers. Every
representative of Oxford Instruments is expected tobehave in a way which is consistent with these values.
Our approach to governance is summarised in our Codeof Conduct, which is updated regularly, issued to all new
joiners and communicated regularly to existing employees.
All colleagues, customers and suppliers also have roundthe-clock access to our widely publicised and independentwhistleblowing hotline, Safecall (www.safecall.co.uk/en/
clients/oxinst/), should they encounter any behaviour not in
keeping with our ethical standards.

Our governance sustainability agenda
comprises eight key areas
Our overarching governance sustainability agenda, set out
below, is overseen by our Board Sustainability Committee,(see pages 117 to 119); with the exception of anti-bribery
and anti-corruption, sanctions, export control and customs,
and financial sustainability and tax transparency, which areoverseen by the Audit and Risk Committee (see pages 110
to 116).
1

Anti-bribery and anti-corruption

When dealing with business partners, suppliers andcustomers, or when engaging with public officials, we expect
our employees to act in a transparent and fair manner. We
choose our business partners and suppliers carefully andavoid working with anyone who does not meet and adhere
to the same high standards.
The key principles we expect everyone to follow include
not offering or accepting bribes or improper payments;
not improperly influencing any individual; and notparticipating in any kind of corrupt business activity, either
directly or through a third party. To help our employees
understand what is expected of them we have developed
a comprehensive training course, refreshed this year, which
all new joiners must complete to pass their probationary
period, and which all employees must retake annually; wealso maintain a detailed policy document, www.oxinst.com/
investors-content/compliance/anti-bribery-and-corruption.
No one has been dismissed during FY23/24 as a result of
having committed bribery.

2

Sanctions, export control and customs

We review our Sanctions Policy regularly (most recently in
May 2024) to align with UN, UK, EU and US sanctions.
We are committed to adhering to both the letter and thespirit of export controls governing our activities, and engage
regularly with the UK Government’s Export Control Joint
Unit and its equivalents in other jurisdictions. In response
to geopolitical shifts, we have pivoted our regional focus
towards less sensitive applications and customers in China
this year, and exited the quantum market in the country.
3

Inside information and share dealing

As a listed company on the London Stock Exchange,
Oxford Instruments and its employees must comply withthe relevant laws relating to inside information and sharedealing, including the UK Market Abuse Regulation, as wellas our internal Share Dealing Policy. We ensure that there
are adequate procedures, systems and controls in place toidentify, manage and disclose inside information and also
support our employees and anyone working on our behalf
with understanding their obligations.
4Supply chain responsible sourcing

We operate our business in compliance with all applicablelaws and regulations and expect our suppliers to do thesame. The overarching standards we expect from our
suppliers, covering all operations, are set out in our Supplier
Quality Manual, which incorporates our Code of Conduct
for Representatives and Suppliers, www.oxinst.com/assets/
uploads/documents/OI_COC_REPS_SUPPLIERS.pdf.
In addition, as part of our supplier contracts, suppliers are
required to warrant that they and their sub-contractors willcomply with all applicable laws, statutes, regulations andcodes relating to modern slavery, anti-bribery and anticorruption, and Oxford Instruments’ Supplier Quality Manual,
which incorporates our Code of Conduct for Representatives
and Suppliers.
We are committed to avoiding the use of controversial
materials and proactively eliminating the use of so-called‘conflict minerals’, i.e. minerals sourced from mines in the
Democratic Republic of Congo and adjoining countries
which support or fund conflict from products and the supply
chain. Our conflict minerals policy covers all operations. We
undertake due diligence on our key suppliers and expect
them, in turn, to conduct due diligence on their own supply
chain to help eliminate the use of conflict minerals.
Our online supplier portal allows us to store and audit
our key supplier documents and has been extended
and updated in 2024 to collect information on productenvironmental compliance, quality and sustainability.

5

Human
rights and modern slavery

We are committed to preventing acts of modern slavery
and human trafficking from occurring within our businessand supply chain. We take a zero-tolerance approach to all
forms of modern slavery, including servitude, forced bonded
and compulsory labour, and human trafficking. We require
our suppliers to guarantee the applicable national statutory
minimum living wage.
Bespoke training is mandatory for relevant employees tohelp them recognise where there may be risks of modern
slavery and human trafficking within our business and our
supply chains.
We have an established Whistleblowing Procedure for
employees to report any concerns, and further guidanceis also made available in our Global Human Rights
Policy. In addition, we have extended the availabilityof our Whistleblowing hotline to all our suppliers andrepresentatives.
Our global Code of Conduct sends a clear message to
our employees, business partners, investors and otherstakeholders about our business principles and ethics.
Our Anti-Slavery and Human Trafficking Statement is
updated annually and can be found both on our website andon the Government’s Modern Slavery Statement Registry.
6Intellectual
property and confidentiality

Our intellectual property (IP) is one of our most important
assets; it is key to our success in the market and enables
us to secure and maintain a competitive advantage. We
have comprehensive policies and procedures in place toprotect it, including templates, guidance and training forcolleagues. We continue to protect our inventions, brandand designs through the use of registered IP rights. In theyear we filed a number of new priority patent applications.
Oxford Instruments often collaborates with third parties
on projects which generate new IP, further enhancing our
product offerings to our customers. In these situations,
we will not use any IP without it first being legitimately
acquired or licensed.

7

Dataprotection, data privacy and data security

Our global privacy standard www.oxinst.com/corporatecontent/privacy sets out the principles that guide ourapproach to handling personal information, and all
employees are required to undertake mandatory training
on data protection.
Our marketing teams work closely with our legal teams
to ensure our marketing activities are compliant with theEuropean General Data Protection Regulation (GDPR), UK
GDPR and related privacy legislation in other territories. We
have invested in high-quality CRM and marketing businesssystems infrastructure that have enabled us to enhance our
security and controls.
Our legal team develops compliance programmes aroundthe world to ensure we can respond quickly to any changes
made in the data protection legislation and guidancefrom regulators.
This year we reduced our internal IT vulnerabilities
significantly as a result of upgrading or decommissioning
approximately 100 IT systems globally. We also conducted
several phishing exercises and rolled out mandatory
training for individuals who were identified as requiring
additional assistance.
8

Financialsustainability and tax transparencyWe manage our tax affairs in accordance with thefollowing objectives:•

ensuring compliance with all relevant tax law inall jurisdictions in which the Group operates whilst
managing the associated tax costs in a manner that is
consistent with our Code of Conduct and its attitude tocommercial risk;•

seeking to maintain stable effective and cash tax rates
which reflect the geographic markets in which we
operate, and the Group’s tax attributes, such as broughtforward losses and special deductions such as forresearch and development; and•ensuring that all communication with tax authorities isconducted in a transparent and professional manner.

Our Group Tax Strategy is available on our website
at oxinst.com.

www.oxinst.com

57

58

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

FINANCE REVIEW

Robust growth andinvestment for the future
We delivered a robust financial performance as
we invest for the future, with growth in revenue
and with adjusted operating profit broadly inline with last year. Our underlying book-to-billis positive at 1.03, and our orderbook at £302m
provides good visibility for the year ahead.

Summary
Oxford Instruments uses certain
alternative performance measures
to help it effectively monitor the
performance of the Group as
management believe that these
represent a more consistent measureof underlying performance. Adjusted
items exclude the amortisation andimpairment of acquired intangible
assets; transaction costs; othersignificant non-recurring items; and themark‑to‑market movement of financial
derivatives. All of these are included in
the statutory figures. Note 2 on pages
163 to 165 provides further analysisof the adjusting items in reaching
adjusted profit measures. Definitionsof the Group’s material alternative
performance measures, along withreconciliation to their equivalent IFRS
measure, are included within the
Finance Review.
The Group trades in many currencies
and makes reference to constantcurrency numbers to remove theimpact of currency effects in the year.
These are prepared on a month-bymonth basis using the translational
and transactional exchange rates
which prevailed in the previous year
rather than the actual exchange
rates which prevailed in the year.
Transactional exchange rates include
the effect of our hedging programme.

“We delivered a good constantcurrency financial performancewith growth in revenue andadjusted operating profit. We
continue to invest in resources andinfrastructure across the businessto support future growth. Ourbalance sheet remains strong tosupport organic and non-organic
growth opportunities.”
GAVIN HILL
Chief Financial Officer

www.oxinst.com

Reported orders decreased by 10.3% to£459.1m (2023: £511.6m), 7.0% down atconstant currency. Underlying orders
at constant currency fell by 2.5% after
adjusting for £23.0m of prior year
orders cancelled due to UK export
licence rejections and our commercial
decision to withdraw from the China
quantum market. Orders were lower
against a strong comparator period
and a slowdown in life-science OEMorders. Nevertheless, our underlying
book-to-bill was a positive 1.03. At theend of the year, the Group’s order bookwas £301.5m (31 March 2023: £319.6m),
down 5.7% on a reported basis and3.5% at constant currency.
Reported revenue increased by 5.8%
to £470.4m (2023: £444.7m). Revenue,
excluding currency effects, increased
by 9.8%, with the movement in average
currency exchange rates over the year
reducing reported revenue by £17.8m.
This strong growth was broadly equally
split between price and volume.
Adjusted operating profit was broadly
flat at £80.3m (2023: £80.5m). Adjusted
operating profit, excluding currency
effects, increased by 3.7%, with acurrency headwind in the year of£3.2m. Adjusted operating margin
fell to 17.1% (2023: 18.1%), reflecting
trading losses incurred in our quantum
business as a result of ceasing
commercial activities in China andcontinued operational investment.
Statutory operating profit of£68.3m (2023: £72.4m) includes theamortisation of acquired intangiblesof £9.1m (2023: £9.3m) and a charge of£0.7m (2023: credit of £3.0m) relating
to the movement in the mark-tomarket valuation of uncrystallised
currency hedges for future years. Other
adjusting non-recurring items totalled£2.2m (2023: £1.8m).

Adjusted profit before tax grew by 1.6%
to £83.3m (2023: £82.0m), representing
a margin of 17.7% (2023: 18.4%).
Statutory profit before tax decreasedby 3.0% to £71.3m (2023: £73.5m),
impacted by the mark-to-market
non-cash charge on financial
derivatives against a credit last year.
This represents a margin of 15.2%(2023: 16.5%).
Adjusted basic earnings per share fell
by 3.3% to 109.0p (2023: 112.7p). Basicearnings per share were 87.7p (2023:
101.6p), a decrease of 13.7%.
Cash from operations of £59.4m (2023:£72.9m) represents 47% (2023: 58%)
cash conversion. During the year, we
incurred expenditure of £14.1m on theconstruction of our new semiconductor
systems facility near Bristol and facility
expansion in Belfast; cash conversion
on a normalised basis that excludes
this expenditure was 64%, primarily
due to an increase in inventories. Net
cash after borrowings decreased from£100.2m on 31 March 2023 to £83.8m
on 31 March 2024, with consideration
paid on the acquisition of First Light
Imaging in January 2024.
In March 2024, we entered into a new
revolving credit facility. This provides
for approximately £200m of committed
facilities. This represents total
headroom of just around £284m.

59

60

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

FINANCE REVIEW continued
Geographic revenue growth

Consolidated Statement of Income
The Group Consolidated Statement of Income is summarised below.
Year ended
31 March 2024£m

Year ended
31 March 2023
£m£m

2023/24£m

2023/24% of total

2022/23£m

2022/23% of total

Change£m%
growth% growth
at constantcurrency

ChangeEurope

116.1

25%

104.9

24%

+11.2

10.7%

11.2%

122.9

26%

130.3

29%

(7.4)

(5.7%)(1.5%)

221.5

47%

201.2

45%

+20.3

10.1%

15.7%

9.9

2%

8.3

2%

+1.6

19.3%

26.5%

+25.7

5.8%

9.8%

Revenue

470.4

444.7

+5.8%

North America

Adjusted operating profit

80.3

80.5

(0.2%)

Asia

Amortisation of acquired intangible assets

(9.1)

(9.3)

Non-recurring items

(2.2)

(1.8)

Mark-to-market of currency hedges

(0.7)

3.0

Statutory operating profit

68.3

72.4

Net finance income1

3.0

1.1

Adjusted profit before taxation

83.3

82.0

+1.6%

Statutory profit before taxation

71.3

73.5

(3.0%)

Adjusted effective tax rate

24.4%

20.7%

Effective tax rate

28.9%

20.3%

Adjusted earnings per share – basic

109.0p112.7p

(3.3%)

Earnings per share – basic

87.7p

101.6p(13.7%)

Dividend per share (total)

20.8p

19.5p

+6.7%

Revenue: 2023/24

Rest of World

470.4(5.7%)

444.7

The total reported order book declined by 5.7% (3.5% at constant currency). During the year £23m of orders were removed due
to UK export licence restrictions. We have also seen lower lead times for our products, closer to more normalised levels. The
order book, at constant currency, compared to 31 March 2023, decreased by 11.3% for Materials & Characterisation, against astrong comparator period. Research & Discovery grew by 1.3% at constant currency, with lower demand for our imaging andmicroscopy products due to life science OEM weakness, offset by good demand from North America for cryogenic systems forthe quantum market, as well as good growth from our X-ray tubes business. Continued focus on own product service resulted
in growth of 7.9% (+11.0% at constant currency) from Service & Healthcare.
Materials &Characterisation

Research &Discovery

Service &Healthcare

Total

Revenue: 2022/23

234.5

139.4

70.8

444.7

Constant currency growth

26.7

7.9

8.9

43.5

Currency

(9.0)

(5.2)

(3.6)

(17.8)

252.2

142.1

76.1

470.4

£m

1. Net finance income for 2023 includes a non-cash charge of £0.4m against the unwind of discount on WITec contingent consideration.

Revenue growth: reported

7.5%

1.9%

7.5%

5.8%

Orders and revenue

Revenue growth: constant currency

11.4%

5.7%

12.6%

9.8%

Total reported orders fell by 10.3% (7.0% at constant currency) to £459.1m. Underlying orders at constant currency, excluding
prior year orders of £23.2m removed due to UK export licence rejections, fell by 2.5%.

Gross profit

Materials & Characterisation reported orders fell by 13.7% (10.6% at constant currency), with orders impacted by a strong
comparator period, particularly in China for our portfolio of electron microscope analysers and atomic force microscopes.
Furthermore, orders were depressed by £9.9m of prior year orders removed as a result of UK export licence restrictions.
In Research & Discovery, orders declined by 9.5% (6.5% at constant currency). Primarily due to a cessation of commercial
activities in the China quantum market, we removed £13.3m of prior year orders; in addition, we experienced weak orderintake from our life science OEM customers. Service & Healthcare orders increased by 0.3% (+4.3% at constant currency).
Reported revenue of £470.4m (2023: £444.7m) increased by 5.8% (+9.8% at organic constant currency).
Reported revenue grew by 7.5% for Materials & Characterisation (+11.4% at constant currency), with strong growth across theportfolio of product ranges, including electron microscope analysers, atomic force microscopes, Raman systems and ourcompound semiconductor processing systems.
Research & Discovery reported revenue grew by 1.9% (+5.7% at constant currency), supported by shipments of our optical imaging
and microscopy products and X-ray tubes. Growth in these products was partially offset by lower revenue from our cryogenic
systems resulting from a significant number of order cancellations as we retrench from the quantum market in China due to UK
export licence restrictions. With long customer lead times in this segment, this foregone revenue could not be replaced in-year.
Revenue from service of our own products, including revenue from our MRI service business in Japan, grew by 7.5% reported(+12.6% at constant currency).
The book-to-bill ratio (orders received to goods and services billed in the period) for the year was 0.98 (2023: 1.15). After the
exclusion of prior year orders cancelled due to UK export licence restrictions, underlying book-to-bill was 1.03, supported by agood order performance in Europe and the rest of Asia.
On a geographical basis, revenue grew by 10.7% in Europe (+11.2% at organic constant currency), supported by additionaldeliveries of compound semiconductor processing systems and optical imaging and microscopy products.
Reported revenue for North America decreased by 5.7% (1.5% at constant currency) with fewer shipments of our semiconductor
processing systems.
Asia remains our largest region by revenue, with China constituting 58% of regional revenue and 27% of total Group revenue.
Asia delivered revenue growth of 10.1% (+15.7% at constant currency), with strong demand for our electron microscope
analysers and atomic force microscopes, Raman systems and semiconductor processing systems.
www.oxinst.com

Gross profit grew by 5.3% to £242.4m (2023: £230.2m), representing a gross profit margin of 51.5%, a decrease of 30 basis
points against last year due to a small increase in raw material costs and stock provisioning.

Adjusted operating profit and margin
Adjusted operating profit was broadly flat at £80.3m (2023: £80.5m), representing an adjusted operating profit margin of 17.1%(2023: 18.1%). At constant currency, adjusted operating profit margin was 17.1%, a reduction of 100 basis points. The lower
operating margin reflects losses incurred in our quantum business as a result of ceasing commercial activities in China, as
well as continued investment in operations, IT and infrastructure.
Reported Materials & Characterisation adjusted operating profit increased by 14.6% (+20.2% at constant currency) with
reported margin increasing by 110 basis points to 18.4% (2023: 17.3%). We have seen strong demand across the portfolioof businesses encompassing electron microscope analysers, atomic force microscopes, Raman systems and compound
semiconductor processing systems.
Within Research & Discovery, our imaging and microscopy business did not see a rise in profitability despite an increase inrevenue. A shortfall in life science OEM orders against a backdrop of operations and sales, marketing and R&D investment has
put a brake on short-term profit growth. Furthermore, an increase in material costs and stock provisioning due to an inventorybuild-up resulting from lower than expected order demand and previous high levels of electronic purchases to protect output
and mitigate cost inflation, also impacted profitability. Our cryogenic business has a high exposure to quantum markets andexperienced a large trading loss as a result of ceasing commercial activities in China. Long customer lead times meant that
we were unable to replace foregone production slots within the financial year as we pivot away from markets in China for our
product range. We saw strong growth of 20% at constant currency from our X-Ray Technology business. As a result, adjusted
operating profit for the segment declined by 24.4% (26.1% at constant currency) and reported margin fell to 9.6% (2023: 12.9%).
Service & Healthcare reported adjusted operating profit fell by 7.7% (2.3% at constant currency) due to a significant increase inhelium costs under MRI service contracts and higher than expected spare parts usage. Margin decreased by 440 basis points
to 26.7% (2023: 31.1%).

61

62

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

FINANCE REVIEW continued
Transaction and translation currency effects (including the impact of transactional currency hedging) have reduced reported
adjusted operating profit by £3.2m when compared to blended hedged exchange rates for the prior period.
Materials &Characterisation

Research &Discovery

Service &Healthcare

Total

Adjusted operating profit: 2022/23

40.5

18.0

22.0

80.5

Constant currency growth

8.2

(4.7)

(0.5)

3.0

£m

Currency

(2.3)

0.3

(1.2)

(3.2)

Adjusted operating profit: 2023/24

46.4

13.6

20.3

80.3

Adjusted operating margin1: 2022/23

17.3%

12.9%

31.1%

18.1%

Adjusted operating margin : 2023/24

18.4%

9.6%

26.7%

17.1%

Adjusted operating margin(constant currency): 2023/24

18.6%

9.0%

27.0%

17.1%

1
1

1.	Adjusted margin is calculated as adjusted operating profit divided by revenue. Adjusted margin at constant currency is defined as adjusted
operating profit at constant currency divided by revenue at constant currency.

Divisional change (indicative and unaudited)
For FY25 we are changing our organisational structure to two divisions: Imaging & Analysis, and Advanced Technologies.
Our Materials Analysis businesses, Andor and Japan MRI will form the Imaging & Analysis division, with Plasma Technology,
NanoScience and X-Ray Technology comprising the Advanced Technologies division. We will report under the new divisional
structure for the 2024/25 interims. For comparative purposes, we show the FY23 and FY24 pro forma results on an indicative
and unaudited basis below.
Imaging &Analysis

Advanced
Technologies

Total

Revenue: 2023/24

327.9

142.5

470.4

Adjusted operating profit: 2023/24

80.1

0.2

80.3

Adjusted operating margin1: 2023/24

24.4%

0.1%

17.1%

£m

1. Adjusted margin is calculated as adjusted operating profit divided by revenue.

£m

Revenue: 2022/23
Adjusted operating profit: 2022/23
Adjusted operating margin : 2022/23
1

Adjusting items
Amortisation of acquired intangibles of £9.1m (2023: £9.3m) relates to intangible assets recognised on acquisitions, being thevalue of technology, customer relationships and brands.
Non-recurring items within operating profit total £2.2m (2023: £1.8m). We recorded net income of £2.9m on settlement of athird-party IP patent dispute. This was offset by acquisition costs of £1.0m, CEO dual running costs of £2.0m (incorporating six
months of overlap and buy-out compensation costs) and one-off costs of £1.7m relating to the move of our semiconductor
processing business to a new site. Finally, we recorded a charge of £0.4m reflecting past service costs on our defined benefit
pension scheme as a consequence of removing the pension increase exchange option for deferred members.
The Group uses derivative products to hedge its short-term exposure to fluctuations in foreign exchange rates. Our hedging
policy allows for forward contracts to be entered into up to 24 months forward from the end of the next reporting period. The
Group policy is to have in place at the beginning of the financial year hedging instruments to cover up to 80% of its forecast
transactional exposure for the following 12 months and, subject to pricing, up to 20% of exposures for the next six months. The
Group has decided that the additional costs of meeting the extensive documentation requirements of IFRS 9 to apply hedge
accounting to these foreign exchange hedges cannot be justified. Accordingly, the Group does not use hedge accounting forthese derivatives.
Net movements on mark-to-market derivatives in respect of transactional currency exposures of the Group in future periods
are disclosed in the Income Statement as foreign exchange and excluded from our calculation of adjusted profit before
tax. In the year this amounted to a charge of £0.7m (2023: credit of £3.0m). The net asset movement for derivative financial
instruments over the year reflects: (i) the crystallisation of forward contracts that were hedging the 23/24 financial year
which are recognised in adjusted operating profit; and an uncrystallised increase in the mark-to-market valuation of forward
contracts from a rise in the value of sterling at the balance sheet date against a blended rate achieved on forward contracts
that will mature over the next 12 months.

Net finance income
The Group recorded net interest income of £3.0m (2023: £1.1m) due to an increase in interest income on our net cash balance.
In addition, we recorded an increase in interest on lease liabilities owing to an increase in right-of-use assets.

Adjusted profit before tax and margin
Adjusted profit before tax increased by 1.6% to £83.3m (2023: £82.0m). The adjusted profit before tax margin of 17.7%(2023: 18.4%) was below last year due to a decrease in the adjusted operating margin, partially offset by an increase in
net finance income.

Reconciliation of statutory profit before tax to adjusted profit before tax

Statutory profit before tax

Year ended
31 March 2024£m

Year ended
31 March 2023
£m

71.3

73.5

9.3

Imaging &Analysis

Advanced
Technologies

Total

308.3

136.4

444.7

Amortisation of acquired intangible assets

9.1

75.1

5.4

80.5

Non-recurring items in operating profit (Note 2)

2.2

2.2

18.1%

Mark-to-market of currency hedges

0.7

(3.0)

Adjusted profit before tax

83.3

82.0

24.4%

4.0%

1. Adjusted margin is calculated as adjusted operating profit divided by revenue.

Add back:

Statutory operating profit and margin

Statutory profit before tax and margin

Statutory operating profit declined by 5.7% to £68.3m (2023: £72.4m), representing an operating profit margin of 14.5% (2023:
16.3%). Statutory operating profit is after the amortisation and impairment of acquired intangible assets; transaction costs;
other significant non-recurring items; and the mark-to-market of financial derivatives. The decline in profit was largely driven
by a charge on the mark-to-market of financial derivatives.

Statutory profit before tax decreased by 3.0% to £71.3m (2023: £73.5m). Statutory profit before tax is after the amortisation andimpairment of acquired intangible assets; transaction costs; other significant non-recurring items; and the mark-to-market offinancial derivatives. The statutory profit before tax margin of 15.2% (2023: 16.5%) was below last year due to a lower operating
margin and the charge from the mark-to-market valuation movement on financial derivatives.

Taxation
The adjusted tax charge of £20.3m (2023: £17.0m) represents an effective tax rate of 24.4% (2023: 20.7%). The increaseprimarily reflects a rise in the UK rate of corporation tax to 25%. The tax charge of £20.6m (2023: £14.9m) represents aneffective tax rate of 28.9% (2023: 20.3%). The increase in the effective tax rate is due to the increase in the UK tax rate,
expenditure not deductible for tax purposes and the impact of prior year adjustments. We expect the adjusted effective
tax rate to increase in 2024/25 to approximately 25.1%.

www.oxinst.com

63

64

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

65

Financial Statements

FINANCE REVIEW continued
Earnings per share

Dividend

Adjusted basic earnings per share decreased by 3.3% to 109.0p (2023: 112.7p); adjusted diluted earnings per share decreasedby 3.4% to 107.5p (2023: 111.3p). Basic earnings per share declined by 13.7% to 87.7p (2023: 101.6p); diluted earnings per sharedeclined by 13.8% to 86.5p (2023: 100.3p).

The Group’s policy on the dividend takes into account changes to underlying earnings, dividend cover, movements in currency
and demands on our cash. The Board remains confident in the long-term performance of the business and has proposed a
final dividend of 15.9p (2023: 14.9p) per share. This results in a total dividend of 20.8p (2023: 19.5p) per share, growth of 6.7%.
An interim dividend of 4.9p per share was paid on 12 January 2024. The final dividend will be paid, subject to shareholder
approval, on 20 August 2024 to shareholders on the register as at 12 July 2024.

The number of undiluted weighted average shares increased to 57.8 million (2023: 57.7 million).

Currency
The Group faces transactional and translational currency exposure, most notably against the US dollar, euro and Japaneseyen. For the year, approximately 17% of Group revenue was denominated in sterling, 52% in US dollars, 20% in euros, 9% inJapanese yen and 2% in other currencies. 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’s translation and transaction foreign currency exposure for the full year is summarised below.
Revenue

Sterling

81.0(91.5)

US dollar

243.3

115.3

Euro

93.5

31.5

Japanese yen

42.1

23.1

Chinese renminbi

5.2

0.9

Other

5.3

1.0

470.4

80.3

The Group maintains a hedging programme against its net transactional exposure using internal projections of currency
trading transactions expected to arise over a period extending from 12 to 24 months. As at 31 March 2024, the Group had
currency hedges in place extending up to 18 months forward.
For the full year 2024/25, our assessment of the currency impact is, based on hedges currently in place and forecast currency
rates, a headwind of £8.4m to revenue and £6.2m to profit. Forecast currency rates on unhedged positions for the full year
are GBP:USD 1.28; GBP:EUR 1.17; GBP:JPY 200. The headwind to operating profit is due to stronger sterling currency rates onhedged transactional US dollar, euro and Japanese yen exposures against hedged currency rates achieved in 2023/24. In
addition, we face stronger sterling currency rates on unhedged transactional and translational US dollar, euro and Japanese
yen exposures against actual currency rates achieved in 2023/24. All currency impacts are prior to mitigating pricing and costactions. Uncertain volume and timing of shipments and acceptances, currency mix and rate volatility may significantly affectfull-year currency forecast effects.
Looking further ahead to the financial year 2025/26, based on the above currency assumptions, we would expect currency
effects to have a neutral impact to revenue and operating profit.

Acquisition of First Light Imaging SAS
On 9 January 2024, the Group completed the purchase of 100% of the share capital in First Light Imaging SAS for an initialconsideration of €15.7m. Additional consideration of €3.0m may be paid after a period of one year if specific conditions on
trading performance are met.

Acquisition of FemtoTools AG
On 7 June 2024, the Group agreed to purchase 100% of the shared capital of FemtoTools AG for an initial consideration of
CHF 17m, subject to certain closing conditions which are expected to be satisfied within four weeks of signing these financial
statements. Additional consideration of up to CHF 7m is conditional on trading performance over a period of 33 months.

www.oxinst.com

The Group Consolidated Statement of Cash Flows is summarised below.
Year ended
31 March 2024£m

Year ended
31 March 2023
£m

80.3

80.5

Depreciation and amortisation

11.0

10.8

Adjusted1 EBITDA

91.3

91.3

Working capital movement(24.7)(9.1)

Non-recurring costs

(2.2)

–

Equity settled share schemes

3.0

2.4

Pension scheme payments above charge to operating profit(8.0)(11.7)Cash from operations

59.4

72.9

Interest

2.2

0.4

Tax

(16.1)(5.7)

Capitalised development expenditure

(0.7)

(0.6)

Net expenditure on tangible and intangible assets(26.5)(32.1)

Acquisition of subsidiaries, net of cash acquired(13.4)(4.8)

Dividends paid

(11.4)(10.6)–

0.1

Payments made in respect of lease liabilities

(4.8)

(5.6)

Decrease in borrowings

(1.8)

(0.5)

Net (decrease)/increase in cash and cash equivalents(13.1)

13.5

Adjusted operating profit
Adjusted
operating profit£m (equivalent)

Consolidated Statement of Cash Flows

Proceeds from issue of share capital

1.	Adjusted EBITDA is defined as Adjusted operating profit before depreciation and amortisation of capitalised development costs.

66

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

FINANCE REVIEW continued
Cash from operations

Net cash and funding

Cash from operations of £59.4m (2023: £72.9m) represents 47% (2023: 58%) cash conversion. Cash conversion on a normalised
basis was 64%, which excludes capital expenditure relating to our new semiconductor systems facility and facility expansion
in Belfast. Cash conversion is defined as cash from operations before business reorganisation costs and pension scheme
payments above charge to operating profit, less capitalised development expenditure, capital expenditure and payments
made in respect of lease liabilities, divided by adjusted operating profit.

Net cash

Reconciliation of cash generated from operations to adjusted operating cash flow

Cash from operations

Year ended
31 March 2024£m

Year ended
31 March 2023
£m

59.4

72.9

The Group invested in tangible and intangible assets of £26.5m, of which £11.7m relates to payments associated with the new
semiconductor systems facility in Bristol and £2.4m against the facility expansion in Belfast. For the financial year ended 31
March 2025, we expect payments of approximately £7m to complete the facility in Bristol and expenditure of approximately£10m on the Belfast expansion.
Movement in net cash

Add back/(Deduct):Pension scheme payments above charge to operating profit

8.0

11.7

Non-recurring costs

2.2–

Capitalised development expenditure

(0.7)

(0.6)

Expenditure on tangible and intangible assets(26.5)(32.1)

Repayment of lease payables

(4.8)

(5.6)

Adjusted cash from operations

37.6

46.3

Cash conversion % (adjusted cash from operations/adjusted operating profit)

47%

58%

Cash conversion % (normalised1)

64%

88%

1.	Cash conversion calculated on a normalised basis excludes expenditure in the year of £14.1m (2023: £24.7m) on the new semiconductor systems
facility in Bristol and site expansion in Belfast.

Working capital increased by £24.7m, with inventories increasing by £26.3m. Approximately half the inventory increase wasdue to higher raw materials from customer OEM overstocking within our optical imaging business leading to an unexpected
decline in orders against an already-planned production cycle, raw material investment ahead of the move to the new
semiconductor systems facility in Bristol, and the impact of UK export licence restrictions to China which resulted in an
increase in finished goods. A quarter of the increase related to investment in work-in-progress on a one-off quantum-related
long-term contract, additional demo stock (principally for our newer life science products), higher levels of service stock within
our regions, and additional safety stock to limit operational risk. The remaining increase supports the revenue growth that thebusiness has delivered over the year.

Interest
Net interest received was £2.2m (2023: £0.4m), the improvement reflecting the higher interest income received on our net
cash balance.

Tax
Tax paid was £16.1m (2023: £5.7m). In the prior year the Group benefited from accelerated capital allowances on the new
semiconductor facility currently under construction, partly contributing to cash tax being lower than the accounting charge.

Investment in Research and Development (R&D)
Total cash spend on R&D in the year was £39.2m, equivalent to 8.3% of sales (2023: £34.8m, 7.8% of sales). A reconciliation
between the adjusted amounts charged to the Consolidated Statement of Income and the cash spent is given below:
Year ended
31 March 2024£m

Year ended
31 March 2023
£m

R&D expense charged to the Consolidated Statement of Income

39.1

36.7

Depreciation of R&D-related fixed assets

(0.2)

(0.3)

Amounts capitalised as fixed assets

0.2–

Amortisation and impairment of R&D costs capitalised as intangibles

(0.6)

(2.2)

Amounts capitalised as intangible assets

0.7

0.6

Total cash spent on R&D during the year

39.2

34.8

www.oxinst.com

Cash from operations in the year was partially offset by an increase in capital expenditure and payment of initial consideration
for the acquired First Light Imaging business, resulting in a decrease in the Group’s net cash position at 31 March 2024 to£83.8m (31 March 2023: £100.2m).

£m

Net cash after borrowings as at 31 March 2023

100.2

Cash generated from operations

59.4

Interest

2.2

Tax(16.1)

Capitalised development expenditure(0.7)

Net expenditure on tangible and intangible assets(26.5)

Acquisition of subsidiaries, net of cash acquired(13.4)

Dividend paid

(11.4)

Payments made in respect of lease liabilities(4.8)

Foreign exchange & other(5.1)

Net cash after borrowings as at 31 March 2024

83.8

Net cash including lease liabilities

Year ended
31 March 2024£m

Year ended
31 March 2023
£m

Net cash after borrowings

83.8

100.2

Lease liabilities(33.4)(31.4)Net cash and lease liabilities after borrowings

50.4

68.8

67

68

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

FINANCE REVIEW continued
Return on capital employed (ROCE)

Funding

ROCE measures effective management of capital employed relative to the profitability of the business. ROCE is calculated
as adjusted operating profit less amortisation of intangible assets divided by average capital employed. Capital employed
is defined as assets (excluding cash, pension, tax and derivative assets) less liabilities (excluding tax, debt and derivative
liabilities). Average capital employed is defined as the average of the closing balance at the current and prior year end. ROCE
has fallen to 29.1% (2023: 35.2%), with the change principally reflecting an increase in assets from the acquisition of First Light
Imaging SAS and the large investment in the new semiconductor systems facility in Bristol which has increased property,
plant and equipment, as well as a higher level of inventories at the year end.

On 19 March 2024, the Group entered into a new four-year unsecured multi-currency revolving facility agreement, with two
extension options. The facility has been entered into with four banks and comprises a euro-denominated multi-currency
facility of €95.0m (£81m) and a US dollar-denominated multi-currency facility of $150.0m (£118m).

Year ended
31 March 2024£m

Year ended
31 March 2023
£m

Adjusted operating profit

80.3

80.5

Amortisation of acquired intangible assets

(9.1)

(9.3)

Adjusted operating profit after amortisation of acquired intangible assets

71.2

71.2

Property, plant and equipment

80.5

59.3

Right-of-use assets

32.4

31.4

Intangible assets

137.9

132.1

1.3

0.5

Inventories

108.4

81.4

Trade and other receivables

114.7

113.2

Non-current lease payables(28.6)(26.2)

Trade and other payables(166.2)(159.4)Current lease payables

(4.8)

(5.2)

Current provisions

(6.4)

(7.6)

Capital employed

269.2

219.5

Average capital employed

244.4

202.1

Return on capital employed (ROCE)

29.1%

35.2%

Return on capital employedLong-term receivables

Return on invested capital (ROIC)
ROIC measures the after-tax return on the total capital invested in the business. It is calculated as adjusted operating profit
after tax divided by average invested capital. Invested capital is total equity less net cash, including lease liabilities. Average
invested capital is defined as the average of the closing balance at the current and prior year end. Oxford Instruments aims todeliver high returns, measured by a return on capital in excess of our weighted average cost of capital. ROIC was lower thanthe previous year due to an increase in property assets and leases, and higher working capital.
Year ended
31 March 2024£m

Year ended
31 March 2023
£m

Adjusted operating profit

80.3

80.5

Taxation(20.3)(17.0)

Adjusted operating profit after taxation

60.0

63.5

Total equity

365.7

344.0

Net cash after borrowings (including lease liabilities)(50.4)(68.8)

Invested capital

315.3

275.2

Return on invested capital

Average invested capital

294.3

262.1

Return on invested capital (ROIC)

20.3%

24.2%

www.oxinst.com

Debt covenants are net debt to EBITDA less than 3.0 times and EBITDA to interest greater than 4.0 times. As at 31 March 2024
the business had net cash.

Pensions
The Group has a defined benefit pension scheme in the UK. This has been closed to new entrants since 2001 and closed tofuture accrual from 2010.
On an IAS 19 basis, the surplus arising from our defined benefit pension scheme obligations on 31 March 2024 was £16.1m(2023: £26.4m). The value of scheme assets fell to £239.7m (2023: £251.5m) due to a fall in value of the scheme’s gilt holdings
and other liability matching assets. Scheme liabilities decreased to £223.6m (£225.1m), principally due to a decrease in the
inflation-linked assumptions.
Pension recovery payments above charge to operating profit total £8.0m (2023: £11.7m). In the comparative year, an advancepayment of £4.0m was made to allow the Trustees to meet collateral calls to swap counterparties under the Liability Driven
Investment scheme. These funds were not required and while the company has the right to recover this advance throughmaking reduced payments in the future, it is not expected to do so.
The scheme’s actuarial valuation review, rather than the accounting basis, determines our cash payments into the scheme.
The cash contributions into the scheme are expected to continue until 2025, at which point we expect, based on current
assumptions, for the scheme to achieve self-sufficiency. The scheme rules provide that in the event of a surplus remaining
after settling contractual obligations to members, the Group may determine how the surplus is utilised.

Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position,
are set out in the Performance Highlights, Chief Executive Officer’s Review and Operations Review sections of this Report. The
financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Review.
The Going concern statement is set out on page 81 in the Risk Management section of the Strategic Report.

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

GAVIN HILL
Chief Financial Officer
10 June 2024

69

70

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

RISK MANAGEMENT

Audit, risk andinternal control

Internal control

Approach to risk management
An ongoing process for identifying,evaluating and managing thesignificant risks faced by the Groupis embedded throughout theorganisation. Day-to-day managementof this process has been delegated by
the Board to the Executive Directors,
as detailed in the Audit and Risk
Committee Report on pages 110 to116. Our risk management and internal
control systems have been in placethroughout the financial year and
up to the date of approval of thisAnnual Report, and are subject toannual review by the Audit and Risk
Committee. In respect of the year
ended 31 March 2024, the Board
considered that these processes
remained effective. A summary of ourrisk management framework andprocess can be found below and on
pages 72 to 73.

The Board has carried out a robust
assessment of the principal risksfacing the Group, including thosewhich threaten its business model,
future performance, solvency andliquidity. Details of all major risks
identified, and the mitigating actions
adopted, are reported to and reviewed
by the Audit and Risk Committee
throughout the year. On pages 73
to 78 we provide an overview of the
major risks and uncertainties faced by
the Group. All business units follow astandard process for risk identification
and reporting. The process is further
described on page 72. On a regularbasis, each business unit reviews
and updates its risk register whichis then consolidated and assessedin the context of the wider Groupand reported to the Chief Executive
Officer. If a material risk changes orarises, a review of the adequacy of the
mitigating actions taken is completedwith the Chief Executive Officer.

The Board and Audit and Risk
Committee also consider any risks
which may impact delivery against
our strategic objectives at a Grouplevel, and consider the approach to
managing and mitigating these risks.

Priorities during financial
year ended 31 March 2024
During the year ended 31 March 2024
our priorities included continuing
to strengthen the Group’s internal
audit provision by engaging external
expertise to support and enhancethe delivery of our internal audit
plan, developing and commencing
execution of a Group-wide compliancetraining programme and working toenhance the risk management andinternal control structures associatedwith our enterprise resource planning(ERP) system. During the year ahead,
we will focus further on our plansto adopt the changes we consider
necessary to comply with the revised
UK Corporate Governance Code as
published in January 2024.

Risk governance framework
The diagram below summarises the key accountabilities and features of our risk governance framework.

Operational
management

Internal audit andassurance function

Audit and Risk
Committee

Board

Responsible for risk
management andcontrol within thebusiness and, throughthe Management Board,
implementing Board
policies on risk andcontrol.

Assesses the adequacyand effectivenessof the managementof significant risk
areas and provides
oversight of operational
management’s frontline
and assurance activities.

Reviews the internalfinancial controls andsystems that identify,
assess, manage andmonitor financial risks,and other internal
control and risk
management systems.

Guided by the internal
audit and assurancefunction, completes
detailed risk reviewson a quarterly basis.

Further information
regarding the scopeof internal audit andassurance activities is
set out on page 71.

More information
regarding the work of
the Committee can befound in its report on
pages 110 to 116.

Oversees the internal
control frameworkand determines thenature and extent of
the principal risks thecompany is willing totake in order to achieve
its long-term strategic
objectives.

www.oxinst.com

Ultimately accountable
for approving theadequacy andeffectiveness of internal
controls operated by
the Group.

Our internal control framework
includes central direction, oversightand risk management of the key
activities within the Group. It includes
a financial planning process which
comprises a five‑year planningmodel and a detailed annual budget
which is subject to Board approval.
All Group businesses’ results arereported monthly and include varianceanalysis to budget and the prioryear. Management also prepares
monthly reforecasts.
Control activities include policies
and procedures for appropriate
authorisation and approval oftransactions, the application offinancial reporting standards andreviews of significant judgements
and financial performance. Financial,
regulatory and operational controls,
procedures and risk activities acrossthe Group are reviewed by the Group’s
internal audit and assurance function,
and are subject to separate review by
subject matter experts where required(e.g. trade compliance and healthand safety).
The internal control frameworkhas been designed to manage,
rather than eliminate, material risks
to the achievement of strategic
and business objectives and canprovide only reasonable, and not
absolute, assurance against material
misstatement or loss. Due to inherent
limitations, internal controls overfinancial reporting may not preventor detect all misstatements. There
has been no material change to theGroup’s internal control frameworkduring the period covered by thisAnnual Report.

The key components designed to provide effective internal control within theGroup include:•

a formal schedule of matters reserved for the Board for decision andspecific terms of reference for each of its Committees; other than thesematters, the Board delegates to the Chief Executive Officer, who in turnreviews the delegation of authorities throughout the management
structure;•

the Group’s internal management beneath the Board is led by theManagement Board. Day‑to‑day responsibility for the management of theGroup is delegated to the Management Board. There are clearly definedlines of management responsibilities at all levels up to and including theGroup Board, and the Group’s accounting and reporting functions reflect
this organisation;•whilst financial executives within Group businesses largely report to theirown operational head, there is also a well‑established and acknowledged
functional reporting relationship to the Chief Financial Officer;•

the Board reviews strategic issues and options both as part of the annual
strategic planning process and on an ongoing basis throughout the year.
In addition, the Executive Directors maintain a five‑year planning model ofthe Group and its individual businesses;•

annual budgets are prepared for each of the Group’s businesses which
include monthly figures for turnover, profit, capital expenditure, cash
flow and borrowings. The budgets are reviewed through the Groupmanagement structure and result in a Group financial budget which isconsidered and approved by the Board;•the businesses prepare monthly management accounts which compare
the actual operating result with both the budget and prior year. They also
prepare rolling reforecasts for orders, turnover, operating profit and cash.
These are reviewed by the Board at each of its scheduled meetings;•

the Board approves all acquisition and divestment proposals and there
are established procedures for the planning, approval and monitoring of
capital expenditure;•

for all major investments, the performance of at least the first 12 months
against the original proposal is reviewed by the Board;•internal audits are carried out through a system of regular reviews of
the financial and non‑financial internal controls at individual businesses.
See the Audit and Risk Committee Report on pages 110 to 116, for more
information;•

the Board and its Committees receive regular updates on tradecompliance, sustainability, business ethics, health and safety, treasury, tax,
insurance and litigation, amongst other topics;•

authorisation limits are set at appropriate levels throughout the Group;compliance with these limits is monitored by the Chief Financial Officer and
the Group assurance function;•

there is a detailed and risk‑based delegation of authority structure inplace for sales contracts and managing commercial risks. Contracts withonerous terms and conditions (such as unlimited liability contracts) are
subject to enhanced approval requirements;•

the International Trade Committee monitors, considers action and makes
recommendations around the management of key risks relating tointernational trade, including sanctions, export controls and customs; and•as regards the UK pension scheme, the Group nominates half of
the Trustee Directors of the scheme’s Corporate Trustee; involves asappropriate its own independent actuary to review actuarial assumptions;agrees the investment policy with the Trustee; works with the Trustee on
its investment sub‑committee to deal with day‑to‑day investment matters;
ensures there is an independent actuarial valuation every three years; andagrees funding levels to provide adequate funding to meet the benefit
payments to the members as they fall due.

71

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

RISK MANAGEMENT continued
Risk management process

1

The diagram below summarises our methodical approach to risk management. The principal risks and uncertainties detailedon pages 73 to 78 are identified, reported and monitored through this process.

Alignmentwith strategy

Evaluationof risk

Mitigation
implementation

Risk
review

The broad range ofpotential factors which
could impact the Groupare considered andthose which have asignificant effect on
its ability to deliver its
strategy are determined
to be principal risks anduncertainties.

Careful consideration
is given to:

Suitable management
actions or robust
control mechanisms are
determined, developedand implemented.

An embedded, cyclicalprocess review:

It is recognised that emerging risks
can also be principal risks. A detailed
description of the principal risks andthe activities to mitigate these is set
out on pages 73 to 78.
The identification and evaluationof emerging risks is derived fromthe Group’s quarterly risk reporting
framework. The output from thebusiness units’ detailed risk registers
is reviewed by the Group Head of Risk,
Assurance and Trade Complianceand the Chief Financial Officer every
quarter. Any new risks reported by thebusiness units are specifically identified
and discussed as part of this process.
A formal review of emerging risks is
conducted annually, with the outputs
shared and discussed with the Audit
and Risk Committee as part of its
review of the Group risk register andprincipal risks and uncertainties.
During the latest review the Audit andRisk Committee considered whether
generative artificial intelligence(‘Generative AI’) may represent an
emerging risk. They concluded thatwhilst this presents significant risks
and opportunities for the Group, these
are already contemplated by some of
our other principal risks, such as new
product introduction and legal andregulatory compliance, and therefore
it is not necessary to consider it aprincipal risk in its own right.

Principal risks
and uncertainties
Principal risks are reported anddiscussed at every meeting of the
Audit and Risk Committee. We
generally consider that principal
risks are those which could have asignificant adverse impact on theGroup’s business model, financial
performance, liquidity or reputation.
The Audit and Risk Committee also
considers emerging risks, within therisk management framework. A formal
review of emerging risks is conductedannually. Risks relating to the use ofgenerative AI were identified but were
not considered to represent a principal
risk to the Group.
Four risks which were separately
identified in the Report and Financial
Statements 2023 have now beencombined into two risks, as their natureand potential impacts were considered
to be similar. Market risk and the risk

Principal risks anduncertainties matrix
Our principal risks and uncertainties
are mapped onto a probability
and impact matrix, so that we canmeaningfully assess their relative
importance. The arrows used in thismatrix indicate the change in therisk by comparison to the prior year’s
assessment. Our methodology uses
the Group’s assessment of the residual
risk, being the probability of the risk
occurring and the potential impact
it may have, taking account of any
mitigating actions and controls thathave been implemented.
In the simplified version of this matrix
shown here, the most significant
risks are positioned in its top rightquadrant and the least significant in
the bottom left. It shows that, basedon our assessment, the likelihood of
the Cyber/Information technology
risk materialising has increased
compared to the prior year, due toexternal factors, while the residual
risk for all existing risk categories
remains the same as the prior year.

Severeof adverse movements in long-term
foreign currency are considered
to be part of macroeconomic risk.
Risks relating to disruption from a
global pandemic or disaster havebeen incorporated into businessinterruption risk. The Board no longer
considers risks relating to the fundingof the Group’s defined benefit pension
scheme to be a significant risk and it is
no longer identified nor disclosed as aprincipal risk.

Major

The Board is required to complete arobust assessment of the company’s
emerging and principal risks andconfirms that it performed such anevaluation during the financial year.

The Committee also consideredmanagement’s proposal to add
operational transformation as a newprincipal risk, which was identified
as part of the emerging risk review.
It is disclosed as principal risk 2 andfurther details are set out on page
74. The Committee agreed withmanagement’s assessment that
operational transformation constitutes
a principal risk, because delivering
future improvements in operating
margins partly depends upon realising
efficiency gains from the operationaltransformation programme, andconsiders the detailed disclosure tobe appropriate.

ii)	the effectiveness of
the implemented
mitigation
mechanisms.

1
10

5

2

3

GeopoliticalContext: The Group operates in global markets and isrequired to comply with relevant regulations including,but not limited to, sanctions, embargoes and export
controls. Government policy on the export of specifictechnologies and the approval of particular end users
is subject to foreign policy objectives which can changeover time.
Risk
Changes in the geopolitical landscape, or an escalationin global trade tensions, may result in major obstacles
to trade with specific customers or end users in key
markets. Events such as conflicts and regime change cantrigger changes in foreign policy objectives relating tosanctions, trade embargoes, export licensing and trade
tariffs. Further, as a consequence of such restrictions,affected nations may seek to reduce reliance on imports
in strategic technologies through the development ofdomestic competition and/or implement protectionist
measures. This risk is particularly relevant to the exportof certain technologies to China for end uses in bothquantum computing and advanced semiconductor
manufacturing. With manufacturing operations in the UK,
the US, Germany and France, the Group is exposed tochanges in the sanctions, embargoes and export controls
imposed by those jurisdictions.

7

Possible impact
Significant

Emerging risksi)	determination ofprincipal risks anduncertainties; andA contraction in export volumes to key markets andconsequential loss of revenue and reputational damage.
• Restrictions on the provision of after-sales service,leading to lower service contract revenues.
• Reduced volumes may impact research anddevelopment (R&D) investment decisions due toadverse impacts on business cases.
• Lower net pricing to markets adversely affected bytariffs, reducing contribution margins.
• Increases to input costs and lower gross margins.
• Counter measures by countries affected, such as
restrictions on supply of key raw materials andinvestment in domestic alternatives, the latter leading
to longer term reduction in export opportunities tospecific markets.
•

6

Moderateii)	the various potential
impacts which therisk could present.

The risk management process identified 11 principal risks.
Across pages 73 to 78 we have summarised each risk,
explained why it is relevant for the Group, set out thepotential consequences should it materialise and detailed
the risk mitigation mechanisms. The arrows indicate thechange (up for an increased risk, down for a decreasedrisk). A static risk is depicted by an equals symbol. Risks aremanaged at Board level and are not assigned an individual
risk owner.

9

8

4

11

Minor

i)	the specific scenarios
in which the risk could
arise; andOur assessment of the operational transformation risk is thatshould it materialise, the impact is likely to be major, while
the likelihood is considered to be possible.

Impact72

Rare

Unlikely

Possible
Likelihood

Probable

Very likely

Key:
1

Geopolitical2Operational transformation3

Supply chain4

Routes to market

5New Product Introduction (NPI)

6

Macroeconomic

7

Cyber/information technology

8Legal and regulatory compliance9People and capability

10Business interruption

11

Climate change

Control mechanisms
Engagement with UK Government and regulatory
authorities.
• Contract review and protection against breach ofcontract should export licences be withheld.
• Long-term investment planning strategies.
•

Mitigation
Focus on lower-risk markets and end users.
Broad global customer base; contractual protection.
• Market diversification.
••

Change in the year:

Unchanged
www.oxinst.com

Increased

Reduced73

74

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

RISK MANAGEMENT continued
Operational transformation2

3

Supply chain

Routes to market

4

New Product Introduction (NPI)

5

Context: Following our latest strategy review anoperational transformation programme is in progressthat aims to improve operating efficiencies. Businessplans include revenue growth and operating margin
improvements that are, in part, dependent on
realising those efficiencies in production, service
and support functions.

Context: The Group operates a global supply chain,sourcing from many suppliers across a wide range ofcategories. For certain technologies, there are limited
alternative sources. Disruption may be triggered by
global events such as conflict, natural disaster, ora pandemic.

Context: In some instances, the Group’s products arecomponents of higher‑level systems sold by original
equipment manufacturers (OEMs), and thus theGroup does not control its route to market.

Context: The Group provides high-technology
equipment, systems and services to its customers.

Risk

Risk

Risk

Risk

•

Operational disruption or price increases,
due to supply chain shortages, particularly inelectronic components.
• Suppliers de-committing orders due to their inability
to supply as a result of internal production issues.
• Change of supplier ownership resulting in lossof supply.
• Regulatory changes or economic viability causing
suppliers to discontinue production, impacting thelong-term availability of key components.

•

Possible impact

Possible impact

Possible impact

Lower sales volumes than planned due tohigher lead times.
• Higher costs of production leading tolower gross margins.
• Higher overhead costs leading to lower
operating profit.

•

Short-term delays or hiatus in our production
arising from component shortages.
• Poor customer service.
• Reputational damage.
• Lost revenue.
• Downward pressure on margins.
• Increased lead times and potential of being unable
to fulfil orders.
• Increased stock holding adversely impacting
cash conversion.

•

Control mechanisms

Control mechanisms

Control mechanisms

Control mechanisms•

Sales and operational planning process.
• Group strategic sourcing programme to consolidate
demand and manage key supplier risks.
• Sourcing of alternative options and/or buffer stocks
in relation to high-risk suppliers.
• Long-term contracts with key suppliers.

•

Customer insight to match product performance tocustomer needs.
• Positioning of the Oxford Instruments brand andmarketing directly to end users.

•

Mitigation

Mitigation

Mitigation

Strategic, selective and diversified supplier base.
Long-term demand planning.
• Buffer stock in extended supply chain.
• Relationship management with key suppliers.
• Responsive and adaptive engineeringchange process.

•

Strategic relationships with OEMs to promote thebenefits of combined systems.
• Product differentiation to promote advantages ofOxford Instruments’ equipment and solutions.
• Direct marketing to end users.

•

Change in the year:

Change in the year:

Change in the year:•

The programme may fail to generate operational
efficiencies intended to improve operational gearing
through measures such as lead time reduction andreduced overheads in relative terms.

••

CEO and steering group oversight of operational
excellence programme.

Mitigation•

Programme headed by Chief Transformation
Officer with a proven track record in operational
improvement with dedicated support in key areas
such as manufacturing and strategic sourcing.

Change in the year: New•••

Vertical integration by OEMs.

Loss of key customers/routes to market.
Reduction in sales volumes and/or pricing andlower profitability.

•

Failure of the Group’s R&D programme to produce
commercially viable products.

Possible impact
Loss of market share or negative pricing pressure,
resulting in lower turnover and reduced profitability.
• Additional NPI expenditure.
• Adverse impact on the Group’s brand and reputation.
•‘Voice of the Customer’ customer listening approachand deep market knowledge to direct productdevelopment activities.
• Formal NPI processes to prioritise investment and to
manage R&D expenditure.
• Product life cycle management.

Understanding customer needs/expectations andtargeted new product development programme tomaintain and strengthen product positioning.
• Stage gate process in product development tochallenge commercial business case and mitigate
technical risks.
• Operational practices around sales‑production
matching and inventory management to mitigate
stock obsolescence risks.

Unchanged
www.oxinst.com

Increased

Reduced75

76

Oxford Instruments plc
Annual Report 2024

Overview

Governance

Strategic Report

Financial Statements

RISK MANAGEMENT continued
6

Macroeconomic

7

Cyber/information technology

8

Legal and regulatory compliance

People and capability

9Context: Macroeconomic factors such as recession,
inflation and government budget priorities may affectdemand or place upward pressure on key elementsof the cost base such as labour and materials. A
high proportion of the Group’s revenue is in foreign
currencies, notably US dollars, while the cost base ispredominantly denominated in GBP.

Context: Elements of production, financial and othersystems rely on IT availability.

Context: The Group operates in a complex
technological and regulatory environment,
particularly in areas such as export controls andproduct compliance. Competitors may seek toprotect their position through intellectual property(IP) rights and the Group may at times experience
unintentional regulatory or IP compliance issues.

Context: Delivering and protecting core capability
and knowledge is a strategic priority for the Group.

Risk

Risk

Risk

Risk

•

Lower demand for the Group’s products and services.
• Rises in key cost drivers such as people costs,
energy, components and raw materials.
• For sales of long lead-time items, requirement tomake inflationary estimates when pricing, which may
be inaccurate.
• Long-term strengthening of sterling against key
foreign currencies.

•

Cyber-attack on the Group’s IT infrastructure.
• Ransomware/spread of viruses or malware.

•

Infringement of a third party’s intellectual property.
• Regulatory breach.

•

Possible impact

Possible impact

Possible impact

Possible impact

Decrease in sales volumes.
• Increased cost of production leading to a
reduction in operating profit if not offset by
sufficient price increases.
• Potential for under-recovery of increases if inflation
estimates are too low, or reduction in order volumes
if competitors do not react similarly.
• Reduction in reported revenue and earnings.

•

System failure/data loss and sustained disruption to
production operations.
• Loss of business-critical data.
• Financial and reputational damage.
• Data privacy breach.

•Potential loss of future revenue.
• Future royalty payments.
• Payment of damages.
• Fines and non-financial sanctions such as
restrictions on trade, exclusion from public
procurement contracts.
• Reputational damage.

•Control mechanisms

Control mechanisms

Control mechanisms

Control mechanisms•

Strategic focus on growth markets.
• Price reviews.
• Inflation protection in commercial response to long
lead-time tenders and long-term agreements.
• Strategic management of currency exposure.

•

Suite of IT protection mechanisms including
penetration testing, regular backups, virtual
machines and cyber reviews.
• External IT security consultants.
• Internal IT governance to maintain protection
systems and our incident response.
• Employee awareness training.

•

Formal ‘Freedom to Operate’ assessment to identify
potential IP issues during product development.
• Internal control framework including policies,
procedures and training in risk areas such as bribery
and corruption, sanctions and export controls.
• Product compliance teams.

•

Mitigation

Mitigation

Mitigation

Mitigation

Ability to address inflationary pressures throughprice management reviews.
• Reviews of key drivers of financial performance.
• Reviews of supply chain currency base.
• Active review of net exposure in key currencies.

•

Managed service with third-party security specialists
providing incident monitoring.
• Regular review, monitoring and testing of key security
measures to assess adequacy of protection against
known threats.
• Upgrade of enterprise resource planning (ERP)and other internal systems.
• End user education and phishing
simulation exercises.

•

Confirmation of ‘Freedom to Operate’ during new
product development stage gate process.
• Compliance training, communications andmonitoring programmes for key compliance risks.

•

Change in the year:

Change in the year:

Change in the year:

Change in the year:••

Challenges in attracting and retaining high-quality
talent in a tight labour market.
• Shortage of key capabilities required to meet theGroup’s strategic priorities.

Salary inflation and/or additional recruitment costs.
Adverse impact on NPI.
• Operational disruption.
• Lower sales and profitability.
•

Strategic focus on the employee experience,
including career development, communications
and competitive remuneration, to differentiate
Oxford Instruments.

Talent management and succession processes.
Leadership and technical development programmes.
• Hybrid and remote working policies to facilitate
location-agnostic appointments.
• Visa sponsorship registration for employee mobility.
• Comprehensive internal communications.
• Regular updates to benefits packages tomaintain competitiveness.
•

Unchanged
www.oxinst.com

Increased

Reduced77

78

Oxford Instruments plc
Annual Report 2024

Overview

RISK MANAGEMENT continued
10

Business interruption

Context: Business units’ production facilities
are typically located at a single site and are
dependent on availability of parts sourced fromglobal supply chains.

Strategic Report

Governance

Financial Statements

VIABILITY STATEMENT
11

Climate change

Context: Climate change generates both risks andopportunities. Our response needs to address risks
and optimise opportunities. More detail on our
approach is set out in our Task Force on Climaterelated Disclosures Statement on pages 40 to 50.

The Board has assessed the viability of the Group over a three-year period, taking into consideration its current position andthe potential impact of certain of its principal risks and uncertainties. This assessment concerns the three-year period from
1 April 2024 to 31 March 2027 (the ‘Viability Assessment Period’).
Whilst the Board has no reason to believe that the Group will not remain viable for a longer period, it is comfortable thatthree years is an appropriate assessment period and is consistent with the approach taken since the introduction of therequirement to prepare a viability statement in 2016, in line with the UK Corporate Governance Code.

Scenario testing
Risk

Risk

Sustained disruption to production arising from amajor incident at a site.
• Hiatus in production due to shortage of supply.

••

The transition from fossil fuels to a low‑carbon/net
zero economy may require significant changes inmaterials used and production methods that may
impact our own operations and those of our suppliers.
• Chronic changes in weather and extreme weather
events may disrupt supply chains, operations
and logistics.

Possible impact

Possible impact

Inability to fulfil orders in the short term, resulting in a
reduction in sales and profitability.
• Additional, non-recurring overhead costs.

••

Rises in production costs and product development
costs to reduce CO2 emissions linked to our products.
• Delayed production and/or installation leading todelayed revenue.
• Reduction in sales volumes if we fail to meetcustomers’ environmental expectations/requirements.
• Reputational damage or loss of investment arisingfrom failure to anticipate or address climate risk.
• Increased freight and packaging costs.
Control mechanisms

Business continuity plans for all manufacturing sites.
Contractual protection to limit financial
consequences of delayed delivery.
• Group strategic sourcing programme.

••

Sustainability Committee and management-level
Sustainability Leadership Forum.
• Climate-related risks and opportunities evaluation
and reporting embedded in operating businesses.
• Strategic sourcing.
• Product compliance groups.

Mitigation

Mitigation

Business continuity plans can reduce downtime
arising from incidents and facilitate the restoration or
relocation of production.
• Standard sales contracts include clauses forlimitation of liability, liquidated damages and theexclusion of consequential losses.
• Business interruption insurance.

•

Change in the year:

Change in the year:•

Product compliance teams have an establishedmethodology to deal with changes to environmental
regulations.
• Investment in product development to capitalise on
the opportunities for our key enabling technologies tohelp customers address climate-related challenges.
• Investment in CO2 reduction solutions.

Unchanged
www.oxinst.com

The process and methodology used for the Viability Assessment is consistent with prior years.
The below table outlines the risk areas and their potential impact and explains the nature of the scenario testing performed.
RISK AREA
1. Geopolitical, operational transformation, supply chain, routes to market, macroeconomic

Control mechanisms•

The viability assessment process is informed by the potential impact of the principal risks and uncertainties and the likelihoodof them arising. This led to the application of four sensitivities against management’s base-case forecasts to quantify thepotential impact of risks materialising. Further detail regarding the key risks and uncertainties which have been consideredin this assessment are set out in the Risk Management section on pages 70 to 79.

Increased

ReducedPotential impact of risk

Explanation

Loss of revenue due to lower volumes,
leading to lost margin

The potential impact is estimated by applying thefollowing sensitivities to revenue:
Year 1 – use of detailed budget revenue(after Group contingency)
Year 2 – no revenue growth for any businessYear 3 – same as for Year 2

RISK AREA
2. Operational transformation, supply chain, macroeconomic, climate change
Potential impact of risk

Explanation

Reduction in gross margin if business
units are unable to mitigate cost
increases through higher selling prices

Simulates lower gross margins from failing to recover increased input costs
via increases in the selling price. Considers the potential impact of incremental
overheads that could arise in the principal areas of expenditure such as staff
costs, logistics and facilities costs, including energy.

Increased overheads

In years 2 and 3 of the viability assessment period, the impact is simulated
by applying a 200 basis points reduction in the gross margin year-on-year(cumulatively 400 basis points).
No specific additional charges for recurring overheads have been included
relating to inflation risk compared to the baseline scenario. This is because, in a
scenario of stagnant revenue growth (scenario 1), the baseline assumptions for
inflationary increases are considered sufficient as they include a reasonable yearon-year increase throughout the Viability Assessment Period when compared to
Bank of England forecast inflation.

79

80

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

VIABILITY STATEMENT continued
RISK AREA
3.	Legal and compliance, Cyber/Information technology, New Product Introduction, macroeconomic,
people and capability
Potential impact of risk

Explanation

Additional non-recurring
overhead costs

Additional non-recurring overheads have been applied, representing acontingency for the potential impact of a significant one-off charge totalling £15m.
As timing is unpredictable, it has been spread evenly over the three years.

RISK AREA
4. Business interruption
Potential impact of risk

Explanation

Increased working capital

The financial impact of major disruption to the Group’s manufacturing operations
is mitigated through business interruption insurance. Consequently, for the
purposes of this assessment, the sensitivity applied relates to increased working
capital requirements only and was applied broadly at a Group level. In each year,
the additional working capital requirements in the baseline forecasts have been
doubled to quantify the impact of this sensitivity.

Note that not all principal risks and uncertainties have been utilised for scenario testing purposes in this context. The potential
impact of cyber risk (for example, disruption to business-as-usual operations arising from a cyber-attack or malware) has
not been estimated through the inclusion of a specific scenario, as the impact is unpredictable (as it would depend on thenature and duration of the issue) and because the downside impact assessed from the impact of the other risks is considered
to be sufficient to account for this risk. Further, some of the potential short-term impacts that may arise from climate change
are reflected in the inflationary cost sensitivities that have been applied to direct costs, but potential longer-term impacts falloutside the Viability Assessment Period.

Methodology
The Group starts the Viability
Assessment Period with a positive
net cash position and the criteria
used to assess viability in aggregate
were the same as the prior year. The
Board believes that either maintaining
a positive net cash position during
the Viability Assessment Period or,alternatively, operating within agreed
debt arrangements (particularly
relevant if retained cash is used to fundacquisitions), would demonstrate theGroup’s liquidity to meet its liabilities
as they fall due. Currently, the Grouphas committed credit facilities ofapproximately £200m. There arecovenants associated with the facilities
which principally require the Group to
operate within a ratio of three times
EBITDA to net debt. These covenants,
therefore, could limit the headroom
available from facilities and arefactored into the viability assessment
calculations where relevant.

www.oxinst.com

The starting point to undertake theviability assessment is the three-year
Group forecast (‘Forecast’) produced aspart of the annual budgeting process.
The Forecast has several scenarios
which include a downside case, a basecase and an upside case. The basecase Forecast forms the ‘Baseline’ forthe viability assessment calculations.
The sensitivities set out above wereapplied to the Baseline to provide asensitised operating profit figure for
the Group.
The Forecast includes cash flow
forecasts for each year of the Viability
Assessment Period at Group level
only. These start with the operating
profit calculations (after sensitivities),
and then generally apply the same
assumptions as the baseline model
to calculate movements in working
capital, investing activities, tax,
dividends paid, etc. to forecast the
net cash flow in each year. The
only exception is the application of
additional working capital requirements
set out in sensitivity 4 above.

Thus, the viability assessment uses
the same model as the Forecasts toestimate annual movements in net
cash and includes no adjustment forany mitigating actions that the Groupmight take in the event of adverse
financial performance such as reduced
capital expenditure, changes todividend policy, reduction in bonuses,
etc. This reflects a prudent approach tothe viability assessment calculations.
The cumulative impact of the scenarios
tested is to reduce revenue by £116m(7% of the Baseline total) and operating
profit by roughly £96m compared to
the Baseline in the three-year period
covered by the assessment. However,
the only elements of the cash flow
forecasts that have been adjusted in
the viability assessment relate to the
movements in working capital andthe tax payment. All other cash flows,
including, but not limited to, capital
expenditure, R&D expenditure anddividends, have not been adjusted in
the viability assessment. The Baseline
revenue for year 1 already includes aGroup contingency.

Conclusion

Going concern statement

In aggregate, over the three years of
the Viability Assessment Period andsubsequent to scenario testing, thecalculations demonstrate that theGroup would remain profitable andwould continue to generate a positive
operating cash flow. The outcomes
show positive EBITDA and positive
adjusted operating profit in all three
years. Further, the calculations showthat the Group would continue togenerate a positive net cash flow inevery year of the Viability Assessment
Period, leading to additional headroom.
Consequently, the Group would
maintain a healthy net cash balanceat the end of the Viability Assessment
Period and at each balance sheet dateduring the period.

The Group’s business activities
and factors that are considered
likely to affect its performance andposition in the future are set out in
the Strategic Report on pages 10 to
82. The Finance Review on pages 58
to 69 discloses information relevantto the Group’s financial position, its
cash flows, borrowing facilities andliquidity. The Board has considered
the Group’s current financial position
and future prospects and, as set out
in the accounting policies note, hasperformed an assessment up to 30
June 2025, as well as an assessmentof longer-term viability up to 31
March 2027 as noted in the viability
statement. On this basis, the Directors
conclude that there is a reasonable
expectation that the Group willcontinue in operational existence forthe foreseeable future and that there
are no material uncertainties which
may cast significant doubt over its
ability to continue as a going concern.
As a result, the Board considers it
appropriate to continue to adopt thegoing concern basis of accounting. For
further information, see the accounting
policies on page 155.

The forecast level of net cash,
combined with banking facilities ofapproximately £200m, demonstratethat during the Viability Assessment
Period, the Group’s forecasts include
substantial headroom. Consequently,
the Board has a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the next
three years.
The outcome of this assessment
supports not only the Viability
statement, but also the Going concern
statement, as set out subsequently.

Approval
The Strategic Report wasapproved by the Board on
10 June 2024.

RICHARD TYSON
Chief Executive Officer
10 June 2024

81

82

Oxford Instruments plc
Annual Report 2024

Overview

Strategic Report

Governance

Financial Statements

NON-FINANCIAL INFORMATION STATEMENT
The table below explains where relevant non-financial information can be found within this report, further to the Financial
Reporting Directive requirements contained in Sections 414CA and 414CB of the Companies Act 2006. Where appropriate,
details on where additional information on these matters can be found, have also been included.
Key policies and procedures

Information within this report

Additional information

Health and Safety Policy

Sustainability Report: pages 34 to 57

www.oxinst.com/investors-content/sustainability

Environmental Policy

Sustainability Committee Report:
pages 117 to 119

www.oxinst.com/investors-content/compliance/
environmental-policy

Task Force on Climate-related
Financial Disclosures (TCFD)
Statement: pages 40 to 50

www.oxinst.com/CBCE

www.oxinst.com/corporate-content/health-and-safety

Working at Oxford Instruments Policy

Engaging with our stakeholders:pages 20 and 21

Leaving Oxford Instruments Policy

Sustainability Report: pages 34 to 57

www.oxinst.com/corporate-content/employees

IT Infrastructure and Use Policy

How we engage with our stakeholders:pages 90 to 96
Board Leadership and Company
Purpose: page 89

Environment

Supplier Due Diligence and Audit Procedureswww.oxinst.com/corporate-content/supplier-and-partnerengagement

Employees
Health and Safety Policy

Conflicts of Interest Policy
Business Travel Policy
Crisis Management Policy
Reward and Recognition Policy

Sustainability Committee Report:
pages 117 to 119

Governance
84

Chair’s overview

86

Board of Directors

www.oxinst.com/investors-content/compliance/crisismanagement-policy

89

Board leadership and company purpose

www.oxinst.com/corporate-content/diversity-and-inclusion

89

Corporate Governance statement

www.oxinst.com/CBCE

www.oxinst.com/careers

Performance Management Policy
Opportunity and Career Policy
Share Dealing Policy

90 How we engage with our stakeholders
96

Section 172(1) Statement

97

Division of responsibilities

101 Composition, succession and evaluation

Social matters
Export Control Policy

Sustainability Report: pages 34 to 57

www.oxinst.com/corporate-content/privacy

Privacy Policy

Community engagement:
page 92 and 93

www.oxinst.com/CBCE

106 Nomination Committee Reportwww.oxinst.com/investors-content/compliance/groupsanctions-policy

110 Audit and Risk Committee Reportwww.oxinst.com/investors-content/compliance/groupexport-controls-policy

117 Sustainability Committee Report

Code of Conduct
Group Sanctions PolicyGroup Export Controls

Sustainability Committee Report:
pages 117 to 119

120 Directors’ Remuneration Report

Human rights
Global Human Rights Policy

Ethics – human rights: page 57

www.oxinst.com/corporate-content/human-rights-policy

Modern Slavery Statement

www.oxinst.com/corporate-content/modern-slavery

Gender & Ethnicity Pay Gap Reportwww.oxinst.com/corporate-content/gender-pay-report

Privacy Policy

www.oxinst.com/corporate-content/privacy

Whistleblowing Policy
Share Dealing Policy
Supplier Code of Conduct

Ethics – anti-bribery andcorruption: page 56

www.oxinst.com/investors-content/compliance/antibribery-and-corruption

Supplier engagement:
pages 92 and 93

www.oxinst.com/investors-content/compliance/businessmalpractice-procedure
www.oxinst.com/CBCE

Conflicts of Interest Policy
Supplier Due Diligence and Audit Procedures
Additional disclosures: – Business model – Principal risks – Non-financial KPIs
Group Tax Strategy

Investment case: pages 16 and 17
Business Model: pages 18 and 19
Strategy: pages 22 and 23
KPIs: pages 24 and 25
Principal Risks: pages 72 to 78
Audit and Risk Committee Report:
pages 110 to 116

The Directors’ Report is approved by the Board and signed on its behalf by

SARAH HARVEY
Company Secretary
10 June 2024

www.oxinst.com

145 Directors’ report
148 Directors’ responsibilities

Anti-bribery and corruption
Anti-bribery and Anti-corruption Policy

144 Shareholder informationwww.oxinst.com/investors-content/compliance/group-taxstrategy

83