MKS Instruments UK Limited - Limited company accounts 18.2

REGISTERED NUMBER: 06391618 (England and Wales)

STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

FOR

MKS INSTRUMENTS UK LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Statement of Income and Retained Earnings

7

Balance Sheet

8

Notes to the Financial Statements

9

DIRECTORS:

S H Bagshaw

K F Burke

SECRETARY:

K F Burke

REGISTERED OFFICE:

Units 3-4 Cowley Way

Weston Road

Crewe

Cheshire

CW1 6AG

REGISTERED NUMBER:

06391618 (England and Wales)

INDEPENDENT AUDITORS:

Barringtons Limited

570-572 Etruria Road

Basford

Newcastle

Staffordshire

ST5 0SU

We aim to present a balanced and comprehensive review of the development and performance of our business during the

year and its position at the year end. Our review is consistent with the size and non-complex nature of our business and

is written in the context of the risks and uncertainties we face.

REVIEW OF BUSINESS

The results for the year and financial position of the company are as shown in the annexed financial statements.

These show a pre tax profit of £7,736,751 (2017 - £6,788,417). The company has net current assets of £17,067,900

(2017 - £13,202,279) and shareholders' funds of £31,386,706 (2017 - £29,004,722).

We consider that our key financial performance indicators are those that communicate the financial performance and

strength of the company as a whole, these being turnover, gross margin and return on capital employed.

Turnover has increased by 11% (2017 - increased by 35%) during the year under review and forecasts are anticipated to

be at similar levels of turnover for 2019.

Gross profit margin has decreased to 33% compared with 2017 at 36%. From forecasted results for 2019, the aim of

the company is to stabilize this level of margin.

PRINCIPAL RISKS AND UNCERTAINTIES

As for many businesses of our size, the business environment in which we operate continues to be challenging and the

market for our products is highly competitive. Principal competition factors include:

- Historical customer relationships;

- Product quality, performance and price;

- Breadth of product line;

- Manufacturing capabilities; and

- Customer service and support.

With these risks and uncertainties in mind, we are aware that any plans for the future development of the business may

be subject to unforeseen future events outside of our control.

FUTURE DEVELOPMENTS

We are looking forward to 2019 and we will continue to execute the long term strategies which have been our focus:

To grow faster than the semiconductor industry by improving the productivity of our customers and by gaining market

share with both new and existing customers.

To leverage our investments to expand and diversify into other advanced, high growth markets which also depend on the

critical process control our technologies provide.

To maintain sound financial controls to support growth in the future and deliver excellent financial results.

ON BEHALF OF THE BOARD:

S H Bagshaw - Director

6 September 2019

The directors present their report with the financial statements of the company for the year ended 31 December 2018.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of manufacture of mass spectrometers, import

and distribution of measurement and analytical instruments, precision engineering and software design.

DIVIDENDS

An interim dividend of 42.56p per share was paid on 28 February 2018. The directors recommend that no final dividend be paid.

The total distribution of dividends for the year ended 31 December 2018 will be £ 4,000,000 .

RESEARCH AND DEVELOPMENT

The nature of the company's business requires continued research and development activity in respect of new and

existing products within the principal activities described above..

DIRECTORS

S H Bagshaw has held office during the whole of the period from 1 January 2018 to the date of this report.

Other changes in directors holding office are as follows:

D D'Antilio - resigned 18 December 2018

K F Burke was appointed as a director after 31 December 2018 but prior to the date of this report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements

in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors

have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not

approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the

company and of the profit or loss of the company for that period. In preparing these financial statements, the directors

are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company's transactions and disclose with reasonable accuracy at any time the financial position of the company and

enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for

safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud

and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have

taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the

company's auditors are aware of that information.

ON BEHALF OF THE BOARD:

S H Bagshaw - Director

6 September 2019

Opinion

We have audited the financial statements of MKS Instruments UK Limited (the 'company') for the year ended

31 December 2018 which comprise the Statement of Income and Retained Earnings, Balance Sheet and Notes to the

Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has

been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial

Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United

Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2018 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to

you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic

Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors

thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or

apparent material misstatements, we are required to determine whether there is a material misstatement in the financial

statements or a material misstatement of the other information. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact. We have nothing to

report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page three, the directors are

responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and

for such internal control as the directors determine necessary to enable the preparation of financial statements that are

free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic

alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs

(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those

matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's

members as a body, for our audit work, for this report, or for the opinions we have formed.

Nicholas Cooper FCA (Senior Statutory Auditor)

for and on behalf of Barringtons Limited

570-572 Etruria Road

Basford

Newcastle

Staffordshire

ST5 0SU

23 September 2019

TURNOVER

4

42,650,789

38,290,923

Cost of sales

28,720,928

24,488,226

GROSS PROFIT

13,929,861

13,802,697

Administrative expenses

6,200,885

7,029,020

7,728,976

6,773,677

Other operating income

7,775

10,948

OPERATING PROFIT

6

7,736,751

6,784,625

Interest receivable and similar income

-

7,647

7,736,751

6,792,272

Interest payable and similar expenses

7

-

3,855

PROFIT BEFORE TAXATION

7,736,751

6,788,417

Tax on profit

8

1,354,767

1,256,232

PROFIT FOR THE FINANCIAL YEAR

6,381,984

5,532,185

Retained earnings at beginning of year

12,114,722

14,582,537

Dividends

9

(4,000,000

)

(8,000,000

)

RETAINED EARNINGS AT END OF YEAR

14,496,706

12,114,722

FIXED ASSETS

Intangible assets

10

11,583,932

12,871,036

Tangible assets

11

838,046

1,088,326

Investments

12

1,896,828

1,896,828

14,318,806

15,856,190

CURRENT ASSETS

Stocks

13

6,603,045

5,833,945

Debtors

14

9,644,844

7,809,259

Cash at bank and in hand

4,638,502

4,627,811

20,886,391

18,271,015

CREDITORS

Amounts falling due within one year

15

3,818,491

5,068,736

NET CURRENT ASSETS

17,067,900

13,202,279

TOTAL ASSETS LESS CURRENT LIABILITIES

31,386,706

29,058,469

PROVISIONS FOR LIABILITIES

17

-

53,747

NET ASSETS

31,386,706

29,004,722

CAPITAL AND RESERVES

Called up share capital

18

9,398,000

9,398,000

Share premium

19

7,492,000

7,492,000

Retained earnings

19

14,496,706

12,114,722

SHAREHOLDERS' FUNDS

31,386,706

29,004,722

The financial statements were approved and authorised for issue by the Board of Directors on 6 September 2019 and were signed on its behalf by:

S H Bagshaw - Director

1.	STATUTORY INFORMATION

MKS Instruments UK Limited is a private company, limited by shares , registered in England and Wales. The

company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements,

as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 4 Statement of Financial Position paragraph 4.12(a)(iv);

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);

•

the requirement of Section 33 Related Party Disclosures paragraph 33.7.

Preparation of consolidated financial statements

The financial statements contain information about MKS Instruments UK Limited as an individual company and

do not contain consolidated financial information as the parent of a group. The company is exempt under

Section 401 of the Companies Act 2006 from the requirements to prepare consolidated financial statements as it

and its subsidiary undertaking are included by full consolidation in the consolidated financial statements of its

parent, MKS Instruments Inc, .

A copy of the financial statements can be obtained by writing to MKS Instruments Inc, 2 Tech Drive, Suite 201,

Andover, MA 01810, USA or by downloading from http://investor.mksinst.com/financials.cfm

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party

transactions with wholly owned subsidiaries within the group.

Turnover and revenue recognition

The company recognises revenue when (a) the significant risks and rewards of ownership have been transferred

to the buyer; (b) the company retains no continuing involvement or control over the goods; (c) the amount of

revenue can be measured reliably; (d) it is probable that future economic benefits will flow to the entity and (e)

when the specific criteria relating to each of the company's sales channels have been met. Revenue represents

the net invoiced sales for goods and services excluding value added tax and export duties.

The company bases its estimate of returns on historical results, taking into consideration the type of customer, the

type of transaction and the specifics of each arrangement.

Where the consideration receivable in cash or cash equivalents is deferred, and the arrangement constitutes a

financing transaction, the fair value of the consideration is measured as the present value of all future receipts

using the imputed rate of interest.

Goodwill

Goodwill, being the amount paid in connection with the acquisition of a business in 2008, is being amortised evenly over its estimated useful life of fourteen years.

Intangible assets

Intangible assets are initially measured at cost. After initial recognition, intangible assets are measured at cost

less any accumulated amortisation and any accumulated impairment losses.

Licences are being amortised evenly over their estimated useful life of three years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Improvements to property

-

equally over the lease term

Plant and machinery

-

25% on cost and 20% on cost

Fixtures and fittings

-

33% on cost

Office equipment

-

33% on cost and 25% on cost

Computer equipment

-

33% on cost

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of

depreciation and any impairment losses.

Investments in subsidiaries

Investments in subsidiary undertakings are recognised at cost.

Stocks

Stocks and work in progress are valued at the lower of cost and net realisable value, after making due allowance

for obsolete and slow moving items.

Cost includes all direct expenditure and an appropriate proportion of fixed and variable overheads.

Financial instruments

The company has chosen to adopt the Sections 11 and 12 of FRS 102 in respect of financial instruments.

The company only enters into basic financial instruments transactions that result in the recognition of financial

assets and liabilities such as trade and other debtors and creditors, loans to and from related parties and

investments in non-puttable ordinary shares.

(i)Financial assets

Basic financial assets, including trade and other receivables, cash and bank balances and investments in

commercial paper, are initially recognised at transaction price, unless the arrangement constitutes a financing

transaction, where the transaction is measured at the present value of the future receipts discounted at a market

rate of interest.

Such assets are subsequently carried at amortised cost using the effective interest method.

At the end of each reporting period financial assets measured at amortised cost are assessed for objective

evidence of impairment. If an asset is impaired the impairment loss is the difference between the carrying amount

and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The

impairment loss is recognised in profit or loss.

If there is decrease in the impairment loss arising from an event occurring after the impairment was recognised

the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the

carrying amount would have been had the impairment not previously been recognised. The impairment reversal

is recognised in profit or loss.

Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss,

except that investments in equity instruments that are not publicly traded and whose fair values cannot be

measured reliably are measured at cost less impairment.

(ii) Financial liabilities

Basic financial liabilities, including trade and other payables, bank loans, loans from fellow group companies

and preference shares that are classified as debt, are initially recognised at transaction price, unless the

arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the

future receipts discounted at a market rate of interest.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is

discharged, cancelled or expires.

Current taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to

the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or

substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance

sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from

those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that

have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the

timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research and development

Expenditure on research and development is written off in the year in which it is incurred.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the

balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at

the date of transaction. Exchange differences are taken into account in arriving at the operating result.

The company's functional and presentational currency is the pound sterling.

Operating leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the

lease.

Incentives received to enter into a finance lease reduce the fair value of the asset and are included in the

calculation of present value of minimum lease payments.

Incentives received to enter into an operating lease are credited to the profit and loss account, to reduce the lease

expense, on a straight-line basis over the period of the lease.

The company has taken advantage of the exemption in respect of lease incentives on leases in existence on the

date of transition to FRS 102 (1 January 2014) and continues to credit such lease incentives to the profit and loss

account over the period to the first review date on which the rent is adjusted to market rates.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension

scheme are charged to profit or loss in the period to which they relate.

Product guarantees

Costs of rectification and service arising under warranty are charged against profit in the period in which they are

incurred or identified.

Computer equipment/software

Expenditure on replacement computer equipment and upgrading of software is written off against profits in the

year in which it is incurred.

3.	CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the company's accounting policies, management is required to make judgements, estimates

and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other

sources.

The estimates and associated assumptions are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these estimates.

Amortisation period of goodwill

Upon acquisition of a business in 2008, goodwill is being amortised over its useful economic life of fourteen

years. This was selected by management in 2013 as being the remaining period of twenty years, where goodwill

was not being amortised for the first six years (as previously permitted). When estimating the life of goodwill,

management considered the continued and sustained generation of positive cash flows and the growth of the

business. There is a degree of estimation uncertainty and judgement which management encountered in

estimating this and any changes to this estimate could have a material effect on the carrying amount of goodwill.

Any changes to accounting estimates are applied prospectively, affecting the current and future accounting

periods.

For details of the carrying amount of goodwill, refer to note 10.

Stock obsolescence provisions

The company maintains a level of component stock which is used in production together with stock of finished

goods. As a result, it is necessary to consider the recoverability of the stock and the associated provision

required. When calculating the provision, management considers the level of historical activity of each line of

stock within the past two years and estimated future use to determine the useability of the stock and,

subsequently, whether a provision is required.

For details of the carrying amount of stocks, refer to note 13.

4.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

2018

2017

£

£

Telvac division

10,504,725

9,514,473

Technology division

17,767,424

14,634,355

Spectra division

14,378,640

14,142,095

42,650,789

38,290,923

An analysis of turnover by geographical market is given below:

2018

2017

£

£

United Kingdom

23,604,567

21,248,388

Europe

3,820,809

2,783,242

United States of America

7,903,207

6,047,986

Asia

7,322,206

8,211,307

42,650,789

38,290,923

5.	EMPLOYEES AND DIRECTORS

2018

2017

£

£

Wages and salaries

5,065,700

4,689,454

Social security costs

555,963

517,150

Other pension costs

301,246

320,875

5,922,909

5,527,479

The average number of employees during the year was as follows:

2018

2017

Administration and production

113

111

2018

2017

£

£

Directors' remuneration

-

-

6.	OPERATING PROFIT

The operating profit is stated after charging:

2018

2017

£

£

Hire of plant and machinery

20,745

20,899

Other operating leases

221,428

232,738

Depreciation - owned assets

465,359

446,807

Loss on disposal of fixed assets

-

370,374

Goodwill amortisation

1,287,104

1,310,818

Auditors' remuneration

29,625

28,544

Foreign exchange differences

78,768

492,376

7.

INTEREST PAYABLE AND SIMILAR EXPENSES

2018

2017

£

£

Interest on late payment of CT

-

3,855

8.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2018

2017

£

£

Current tax:

UK corporation tax

1,410,754

1,296,804

Deferred tax

(55,987

)

(40,572

)

Tax on profit

1,354,767

1,256,232

Reconciliation of total tax charge included in profit and loss

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is

explained below:

2018

2017

£

£

Profit before tax

7,736,751

6,788,417

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2017 - 19%)

1,469,983

1,289,799

Effects of:

Change in rate of corporation tax

-

21,997

Disallowed expenditure

(2,927

)

2,263

Excess of depreciation over capital allowances

29,280

15,152

Research & Development enhancement

(52,271

)

(55,204

)

Amortisation

244,550

249,055

Deferred tax

(55,987

)

(40,572

)

Patent box deduction

(277,861

)

(296,629

)

Profit/Loss on asset disposals

-

70,371

Total tax charge

1,354,767

1,256,232

9.

DIVIDENDS

2018

2017

£

£

Ordinary shares of 1 each

Interim

4,000,000

8,000,000

10.	INTANGIBLE FIXED ASSETS

Goodwill

Licences

Totals

£

£

£

COST

At 1 January 2018

and 31 December 2018

18,019,451

33,551

18,053,002

AMORTISATION

At 1 January 2018

5,148,415

33,551

5,181,966

Amortisation for year

1,287,104

-

1,287,104

At 31 December 2018

6,435,519

33,551

6,469,070

NET BOOK VALUE

At 31 December 2018

11,583,932

-

11,583,932

At 31 December 2017

12,871,036

-

12,871,036