REG - Oxford Instruments - Final Results <Origin Href="QuoteRef">OXIG.L</Origin> - Part 3

Oxford InstrumentsAnnouncement

15/06/2016 07:06

- Part 3: For the preceding part double click  ID:nRSO2025Bb 

                    Associated strategic priorities                                                                                                                                                                                                                          Mitigation                                                                           
 Technical Risk               The Group provides high technology equipment and systems to its customers.                                                                                                             Failure of the advanced technologies applied by the Group to produce commercial products, capable of being manufactured and sold profitably.  Lower profitability and financial returns.Negative impact on the Group's reputation.                                                 'Realising the Brand' - Using 'Voice of the Customer' to drive rapid new product development. 'Liberate Cash' - Support and develop our employees to maximise their value add.                                                                           The Group has moved away from large scale, single customer development programmes    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 towards more commercially orientated products. The New Product Introduction programme 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 that any new R&D projects must pass through provides a framework within which the    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 commercial viability of projects are scrutinised and assessed.                       
 Economic Environment         Government spend on R&D has been constrained.                                                                                                                                          Demand for the Group's products may be lower than anticipated.                                                                                Lower profitability and financial returns.                                                                                           'Realising the Brand' - Developing a strong brand in existing and developing markets. 'Delivering Shareholder Value' - Focus on balanced and attractive global markets.                                                                                  The Group has a broad spread of customers, applications and geographical markets.    
 Acquisitions                 Part of the growth of Oxford Instruments is planned to come from acquisitions which provide the Group with complementary technologies.                                                 Appropriate acquisition targets may fail to provide the planned value.                                                                        Lower profitability and financial returns.Management focus taken away from the core business in order to manage integration issues.  'Realising the Brand' - Developing a strong brand in existing and developing markets. 'Inventing the Future' - Using "Voice of the Customer" to drive rapid new product development. 'Adding Personal Value' - Supporting and developing our employees.  Extensive financial, technical and commercial due diligence is undertaken by the     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Group during any acquisition programmes. Each transaction has a comprehensive post   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 acquisition integration plan which is monitored at the highest level.                
 Foreign exchange volatility  The Group's sterling cost basis is higher than its sterling revenue sources meaning that a significant proportion of the Group's profit is made in foreign currencies.                 The Group's profit levels are exposed to fluctuations in exchange rates.                                                                      Lower profitability and financial returns                                                                                            'Delivering Shareholder Value' - Focus on balanced and attractive global markets. 'Liberating Cash' -Developing a competitive global supply base that supports our growth.                                                                               The Group seeks to mitigate the exposure to transactional risk by the use of natural 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 hedges wherever possible. The remaining transactional foreign exchange risk in any   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 year is mitigated through the use of forward and non-premium based option exchange   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 contracts.                                                                           
 Political risk               The Group operates in global markets and can be required to secure export licences from governments.                                                                                   Changes in political relations may affect the granting of licences.                                                                           An inability to sell certain products to certain countries.                                                                          'Delivering Shareholder Value' - Focus on balanced and attractive global markets. 'Liberating Cash' -Developing a competitive global supply base that supports our growth.                                                                               Maintaining a diversified geographical customer base. Ensure low commitment to       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 inventory before attaining export licences.                                          
 Customer Concentration       The Group's Superconducting Wire business is reliant on a small number of MRI manufacturers as customers.                                                                              These customers can exert significant customer power in terms of price and volume.                                                            Lost sales and decreased margins.                                                                                                    'Delivering Shareholder Value' - Focus on balanced and attractive global markets. 'Liberating Cash' -Developing a competitive global supply base that supports our growth.                                                                               Attempt to broaden customer base to include all OEMS. Explore alternative            
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 applications for superconducting wire.                                               
 Outsourcing                  The Group's strategic plan includes the outsourcing of a significantly higher proportion of the costs of its products to benefit from economies of scale and natural currency hedges.  Failures in the supply chain impacting sales.                                                                                                 Disruption to customers.Negative impact on the Group's reputation.                                                                   'Liberating Cash' - Developing a competitive global supply base that supports our growth. 'Realising the Brand' - Developing a strong brand in existing and developing markets.                                                                          Relationships with outsourcing businesses are monitored closely and any potential    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 issues are acted upon swiftly to avoid disruption. Where practical dual sources are  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 used for key components and services.                                                
 Pensions                     The Group's calculated pension deficit is sensitive to changes in the actuarial assumptions.                                                                                           Movements in the actuarial assumptions may have an appreciable effect on the reported pension deficit.                                        Additional cash required by the Group to fund the deficit.Reduction in net assets.                                                   'Delivering Shareholder Value' - Focus on balanced and attractive global markets. 'Liberating Cash' - Developing a competitive global supply base that supports our growth.                                                                              The Group has closed its defined benefit pension schemes in the UK and US to future  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 accrual.  The Group has a funding plan in place to reduce the pension deficit over   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 the short to medium term.                                                            
 People                       A number of the Group's employees are business critical.                                                                                                                               The employee leaves the Group.                                                                                                                Lower profitability and financial returns.                                                                                           'Adding Personal Value' - Supporting and developing our employees. 'Inventing the Future' - Providing  an environment for inventing and innovation.                                                                                                      The Group undertakes a regular employee survey and implements and reviews resulting  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 action plans. A comprehensive succession planning process is in place, together with 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 a talent network which identifies and manages contacts with people who could provide 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 external succession for critical current and future roles. A management development  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 programme provides exposure to key skills needed for growth. Regular individual      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 performance reviews take place.                                                      
 Routes to market             In some instances the Group's products are components of higher level systems and thus the Group does not control its route to market.                                                 The systems integrator switches supplier denying the Group's route to market.                                                                 Lower profitability and financial returns.                                                                                           'Inventing the Future'  - Developing products that offer the best technical solution. 'Realising the Brand' - Ensuring that end customers appreciate the benefits of Oxford Instruments technology.                                                      Use of the stage gate process and 'Voice of the Customer' to make sure that the      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Group's products are the best in the market. Co-marketing with system integrators to 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 promote the merits of the Group's products to end customers. Seeking to increase the 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 number of integrators supplied by the Group.                                         
 
 
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