Oxford Instruments Stock

Right. Good morning, everyone, and welcome to Oxford Instruments Half Year Results Presentation. I'm here today with our CFO, Paul Fry, and thank you for joining us in the room and online. As you may have seen from our announcement this morning, we've had a strong first half this year, and I'm really pleased with the progress that we're seeing across the group.

Perhaps most importantly, it's clear that the strategic actions we've taken over the last few years are paying off with an exciting period ahead of us. So let's get started. I'm going to briefly touch on a few of the highlights, and then we'll hand over to Paul to take you through the detail of the financials.

And then I'll come back and give you more color on our markets, our strategic progress and what's driving the opportunity for the future. And as usual, we'll take questions at the end, both in the room and online.

So clearly, a first half with good progress in both divisions. Imaging & Analysis has seen good order growth, driven by commercial customer success in both materials analysis and semiconductors. Academia also grew despite further U.S. weakness. With the order book up 8% on last year's position, we have better cover for H2 revenue expectations.

The step-up has been significant in Advanced Technologies. Growth in demand has accelerated, winning new business in datacoms and widening the range of new customers in volume manufacturing. Revenue growth has also been very strong at 27% as we start to increase output and deliver systems to customers in more volume. Given the order intake level, we now have revenue expectations fully covered for FY '27 with bookings extending well into next financial year, we expect revenue growth rates to continue, and we are increasing our Advanced Technologies outlook for FY '28 as a result.

Paul will go through those details shortly. Additionally, we've continued to invest to support the revenue growth and for future opportunities as well. The result is in H1 is that orders are up 44%, revenue up 9%, adjusted operating profit up 28% and margin progressing nicely. Our balance sheet also remained strong.

As expected, we delivered a step change in free cash flow. We remain focused on capital deployment options and continue to seek M&A opportunities. Our current buyback program of GBP 100 million should conclude early in the new year. And given the strength of the cash forecast, we announced this morning that we intend to continue the program through to the middle of 2027 with a further GBP 25 million allocated to buyback shares. So a good start to FY '27.

The strategy is delivering. Momentum is building across the group, and we're continuing to invest in the long-term future of Oxford Instruments.

So with that, I'll pass you over to Paul to take you through the detail of the numbers.

Great. Thank you, Richard, and good morning. So as Richard has described, we've had a strong start to the year, reflected in the financial metrics on this slide. Order intake was up 44% with growth across both divisions, but a particularly strong momentum in Advanced Technologies, where order intake in H1 was very close to the order intake we saw for the whole of last year.

We're now seeing that order growth converting into revenue, helping the group to grow reported revenue by just over 8% and by 9% at constant currency. Reported adjusted operating profit increased by 21.5%, supported by the profit drop-through from Advanced Technologies and from continued margin progression in Imaging & Analysis. Reported margin increased by 160 basis points to 14.9% despite a GBP 1.7 million currency headwind in the period, and this headwind continues to broadly track to our full year guidance.

Cash performance has also improved significantly. Normalized cash conversion was 85% compared with 41% in the prior period, and free cash flow stepped up nearly GBP 19 million, and I'll come back to the drivers of that shortly. Adjusted diluted EPS increased 29%, reflecting both higher profit and the accretive effect of the share buyback program, which contributed around 1/5 of that growth.

And then finally, on capital employed, return on capital employed moved into our target range at 30.1%, reflecting improved profitability, strong cash conversion and disciplined investment. So overall, good progress across the financial framework with almost all of our key metrics at or above the medium-term target ranges and margin continuing to move towards our 20% target.

Moving now to the key movements in revenue and margin. The chart at the top of this slide shows Advanced Technologies contributing the majority of absolute sales growth in H1. And the important feature here is the operating leverage coming through in our Advanced Technologies as revenue grows with just around -- with around 30% of the revenue growth dropping through to profit, in turn, driving up margin from just over 2% to 7.5%.

Margins also progressed in Imaging & Analysis, which, given its relative size, made the biggest contribution to the underlying group margin improvement. This underlying improvement was then partially offset by 2 factors. The first is mix. As Advanced Technologies becomes a larger proportion of group revenue, there is currently a mix headwind because its margins remain below the group average despite having made very strong progress in H1.

And the second, of course, is currency, which reduced group margin by around 80 basis points in the half. Despite those 2 effects, we now expect to more than offset the full year currency headwind at group level and continue to improve group margin versus the prior year. Turning now to Imaging Analysis. Reported order intake was up 11.7% or 12.6% OCC, growing well in what was a challenging first half last year, in turn, nearly 7% down on the year before.

And for context, H1 order intake this year has now recovered to be about 4% higher than H1 FY '25. As Richard mentioned, the customer mix this half is encouraging. Commercial orders were strong, increasing by just over 20%, but academic demand has also been resilient. Despite continuing weakness in the U.S., particularly in Healthcare and Life Sciences, overall I&A academic orders increased by nearly 3% Recovering order intake has helped replenish the order book, which started this year lower than the start of the prior year, driven by the book-to-bill ratio in H2 last year being below 1.

Despite a weaker opening order book this year, the very positive order intake in H1 enabled the division both to rebuild its order book to GBP 144 million by the end of the half and to grow revenue by 2.4% or just over 3% at constant currency. Around 70% of the closing order book is scheduled for delivery in H2, meaning as we enter the second half, we have an improved revenue cover compared to the same time last year.

The next slide brings together the I&A P&L performance and outlook. So staying with revenue, given the order book we already have for delivery in H2 and assuming Q3 order intake continues at a similar run rate, we expect second half revenue to be around 25% higher than H1. and this would translate to a low single-digit revenue growth for both H2 and for the full year, which remains in line with our guidance.

And of course, we also continue to be vigilant as to the potential impact of what remains an uncertain macro environment. Moving now to profit. The improved H1 margin benefited from a favorable product mix and from restructuring and operational improvements delivered last year.

We expect those mix benefits to unwind to some degree during H2, and we will also see the full year impact of some further investments we've made in our regional sales organization, which is helping to drive the strong order performance that Richard will talk about later.

And taking those factors together, we expect the full year divisional margin to be broadly steady on a constant currency basis, on a reported basis, we expect a currency headwind of around 120 basis points. Moving now to Advanced Technologies. Order intake was GBP 132 million in H1, more than double the intake seen in the same period last year.

The growth has been predominantly from commercial customers with commercial orders now representing around 93% of divisional order intake. And of these orders, around 75% have been for datacom applications. That growth has driven a significant expansion of the order book, which finished the half almost 90% higher than at the same point last year. Importantly, we're now seeing last year's order momentum convert into revenue, which was up over 26% in H1.

Revenue remains relatively diversified with no one customer accounting for more than 8% of revenue in the first half. Around 40% of the closing order book is scheduled for delivery in H2 with FY '27 revenue now effectively covered and new orders in H2 are being booked for delivery in FY '28 and FY '29. Our lead times remain competitive and are currently averaging around 12 months, influenced both by our production capacity and customers' ramp-up requirements.

And these dynamics are now clearly putting us in a strong position for FY '28, which I'll come back to in a moment. So on the next slide, you will see that our order book is beginning to -- the growth in order book is beginning to reshape both revenue and margins in Advanced Technologies. Adjusted operating margin stepped up 540 basis points versus last year, reflecting the operational leverage benefit we've talked about as revenue grows.

There are still some offsets to that leverage. We have the full year effect of depreciation and running costs associated with Severn Beach with incremental maintenance depreciation running around GBP 2 million in H1, and we'll continue to invest in scaling operational capacity through the second half.

Despite this, we expect further margin progression in H2 and continue to expect a high single-digit margin for FY '27 alongside high teens revenue growth. The more significant changes in the outlook for FY '28. And given the strong growth we've already seen in the FY '28 order book during H1 with further growth anticipated through H2, we now expect FY '28 revenue growth of around 20%, assuming our lead times remain broadly where they are today.

That growth and the resulting drop-through to profit are expected to move Advanced Technologies up into its 12% to 15% medium-term margin range next year earlier now than we had expected. So we're seeing a clear progression here, order growth translating into revenue growth, which is in turn driving a meaningful improvement in profitability.

Moving briefly to adjusting items. I mean the main takeaway here is that cash-related items have reduced substantially from last year as the significant restructuring activity undertaking across the group was largely concluded, reducing these costs by nearly GBP 5 million. We did incur GBP 0.6 million of acquisition costs in H1, reflecting our continued active assessment of potential opportunities.

Overall, we expect the cash impact of adjusting items to be around GBP 2 million to GBP 3 million for the full year, though that may move depending on further M&A activity. The majority of the remaining adjusting items are noncash, principally amortization of acquired intangibles. And then looking slightly further ahead, we also know that we do need to make some selected ERP upgrades in the group over the next 2 to 3 years to ensure we can support our growth execution plans.

And these will also give us opportunities to simplify some of the operating processes in the group, particularly in I&A. We're currently working through those deployment options in more detail, and we'll provide a further update in due course as our plans crystallize. And then moving now to cash flow, where we've seen a significant step-up in the first half, increasing nearly GBP 19 million.

Of this, around GBP 5 million can be attributed to the increase in profits, around GBP 7 million to an improvement in normalized cash conversion more than doubling versus last year. The biggest driver of cash conversion improvement has been working capital, which has reduced by nearly 1% of revenue. And within that, inventory increased as we position both divisions to execute against their larger order books and to continue to invest in supply chain resilience.

Specifically in Advanced Technologies, inventory increases of around GBP 9 million were more than offset by increased customer deposits as order intake grew, and we are likely to see the division to be able to fund its own working capital requirements for the remainder of the year. We've also benefited from the reduction in cash restructuring items I mentioned earlier and the cessation of contributions to the U.K. defined pension scheme following the buying completed last December. In H1 last year, those pension contributions were GBP 4.5 million.

This year, they were 0. Tax payments increased this half as they normalize following the benefit of overpayments made last year. And we finally finished the half with nearly GBP 75 million of net cash after GBP 21 million of share buybacks and a GBP 10 million dividend payment made during the period, which brings me finally to capital allocation. And here, our priorities are unchanged.

Our first priority remains organic investment where we are seeing attractive opportunities to generate growth and returns. We continue to invest around 8% to 9% of revenue in R&D alongside capital investment in areas, including customer demonstration facilities and new equipment and tooling to support the development of our semiconductor capabilities.

As Advanced Technology scales, we're also investing in operational capacity, supply chain resilience and inventory to support production execution. Our second priority is the dividend, which remains progressive in line with underlying earnings. And here, we've increased the interim dividend this time by 7.4%.

And beyond those priorities, we continue to actively review inorganic investment opportunities where there is a compelling strategic case and where returns exceed our investment hurdles. Aligned with that, we continue to ensure we retain the strategic flexibility that comes from a strong balance sheet. And finally, to capital returns. And here, we continue to return surplus capital where we believe that creates value for shareholders.

At the half year, we completed GBP 83 million of the current GBP 100 million share buyback program, and we expect the remainder of that program to complete early in the new year. And given the strength of the balance sheet and our confidence in future cash generation, we've announced this morning that we intend to continue the program with a further GBP 25 million buyback, which we would expect to complete by summer next year.

And with that, I'll hand back to Richard.

Excellent. Thank you, Paul. So now I'm going to talk through what's driving performance and importantly, why we believe there is further opportunity ahead. As we said at the full year results, Oxford Instruments is today a much simpler, more commercially focused business than it was 3 years ago. We've retained the technology leadership that has always differentiated Oxford Instruments and continue to invest significantly in maintaining this.

We've also been working hard to build the commercial and operational capabilities at the same time. Over the last 18 months, we've seen good evidence of these elements coming together. So I'll start with our markets. We continue to focus on 3 core markets where we see strong ongoing structural growth drivers that support our organic growth targets.

These being materials analysis, semiconductors and Healthcare and Life Science. I&A has seen strong order growth in materials analysis applications, up 10% year-on-year. And materials analysis remains the biggest market segment with a diverse range of use cases spanning structural materials, chemicals, aerospace, metals and many other industries from clean energy to food production.

The standout performer in the first half is clearly semiconductors with GBP 164 million worth of orders and importantly, strong growth in both silicon semiconductor and compound semiconductors. Advanced Technologies, which operates in the compound semiconductor market grew orders 173%, benefiting from strong growth in data communications. Imaging & Analysis, which supports all parts of the market, saw excellent order growth, too, up 59%.

So clearly, the growth is benefiting both divisions, and I'll show you why on the next slide. In Healthcare and Life Science, it remains the softer of our 3 core markets, largely reflecting continued weakness in Academia in the U.S. This is despite seeing some encouraging external signals and the fact that we've improved OEM camera orders as well.

Overall, we continue to benefit from the breadth of Imaging & Analysis portfolio and the market segments, which provide valuable diversification and resilience. But given the strength in the semiconductor demand, I wanted to pause for a moment to provide some color on this increasingly important market for Oxford Instruments. As some of you may know, we participate in 2 distinct parts of the semiconductor industry.

In silicon, it's a very large market and it's well established, but continues to evolve as demand for processing power, memory and storage grows and devices become more complex. In Imaging & Analysis, we support customers right across the silicon life cycle and the supply chain from R&D through development and packaging to quality control and failure analysis.

So our exposure is broad in terms of both customers and applications. Compound semiconductors are a faster-growing part of the market, driven by new applications and technology transitions. They offer capabilities beyond silicon, particularly in speed, power efficiency and the generation and detection of light. Advanced Technologies has leading technology and expertise in front-end wafer processing, a critical stage in manufacturing compound semiconductor devices for datacoms, power electronics and microLED applications.

But I&A has a growing role here, too. Its established metrology capabilities are also valuable in compound semiconductor applications. We now have a full suite of I&A tools in our Severn Beach clean room to characterize materials, assess performance and identify defects, all helping us develop and optimize processes for compound semiconductor customers. So these complementary positions, broad exposure across the silicon life cycle and supply chain alongside expected multiple growth opportunities in compound semiconductors are an exciting place for us to be.

So let's now take a closer look at Imaging & Analysis. The division made good progress in the first half. Overall, orders grew nearly 13% at constant currency. The stronger order intake has also improved the order book by 8%, and this gives good cover for planned H2 revenues at this stage of the year. Profit and margin progression was pleasing, but clearly against a weaker H1 last year.

The majority of the order growth came from commercial customers where we have targeted our sales activity. Academia, which still represents 41% of the division, remained robust with low single-digit growth despite the further headwind in the U.S. These academic customer relationships have built over many years and remain very important. They give us early insight into the emerging science and technologies and help us inform where we invest our R&D.

And we continue to invest for the long-term growth of the division in both R&D and our customer sales and service activities and more on both of these in a moment. Firstly, let me give you a little more color on some of the application areas that support the growth for Imaging & Analysis. Materials Analysis remains the largest market for the division, generating GBP 82 million of orders and growing by just over 10%.

The strength of this market lies in the need for new capabilities, materials with improved performance, lighter weight, stronger composition and lower costs to produce. They're all in constant demand. Oxford Instruments has market-leading imaging and detection capabilities at the atomic and molecular layer that enable this. Some example applications are on the left-hand side of the slide.

Structural materials, the automotive and aerospace sector and chemical applications have been the largest drivers of demand in H1. Here, examples include customers investigating wear and failure modes in engine parts or researching how chemicals react to help develop new processes. The diversity you can see here is one of the attractive characteristics of I&A with demand spread across many applications, customers and industries.

On the right-hand side of the chart are some of the semiconductor examples. Overall, as I've mentioned, we have seen excellent growth with orders up 59% in the division. And as we just discussed, the products are used across the life cycle. As chips become smaller, packaging becomes more complex, the need for our imaging and analytical capabilities continues to increase. So turning now to some of the investments we're making to continue to grow the business.

We continue to invest around 9% of group revenue in advancing our technology and product portfolio. And in the first half, we've launched AI-powered upgrades to several of our software packages, which are helping customers interpret the data our technology acquires from their samples. Some of the wider priorities in R&D are shown here as well as we continue to increase the levels of investment to maintain our leading edge and support future growth opportunities.

We're also continuing to invest in our operations. In Belfast, where we've made changes to improve operational performance, earlier this year, we invested in a full refurbishment of the clean room to help embed these improvements. Clearly, with the level of growth we have in front of us, we're also investing in talent and strengthening supply chain resilience as well.

But another important area is the front end of the business. Historically, Oxford Instruments was a very product and technology-led organization with commercial activity largely driven from our major R&D and manufacturing sites. Over the last 3 years, we've deliberately rebalanced that model. We now have 4 strong regional commercial organizations across the Americas, Europe, China and Asia Pacific with more decision-making and accountability closer to our customers. And we're investing in the infrastructure around those teams, including extending our network of innovation centers where customers can experience our equipment at firsthand.

As you can see from the slide, we've expanded our presence and opening new centers in Taiwan and Seoul and a new facility in Wiesbaden, Germany. These facilities allow us to better understand our customers' requirements, improving the quality of the opportunity pipeline. And in the U.S., for example, we typically see conversion rates almost 40% higher when customers have had the benefit of a first-hand demonstration.

So let's now turn to Advanced Technologies, where the scale of the opportunity has moved on significantly. Orders more than doubled in the first half, reaching GBP 132 million. Revenue grew around 27% as we're starting to see the operating leverage come through as well with good margin progression. As you're aware, we secured a large multiyear contract early in the year.

But in addition, we received a number of new orders from other volume manufacturing customers across multiple geographies, diversifying our customer base. The strategy to move from mainly research led -- research-led business towards becoming a technology partner for volume manufacturers is delivering tangible results. The order book and visibility is now excellent.

Planned FY '27 revenue is covered in the current order book with bookings extending well into next year, leading to our upgraded revenue and profit outlook. And we're increasing investments to support delivering this growth, including supply chain resources and inventory, building our team and operations to add capacity and continuing to focus on productivity.

And next, I want to explore the drivers of this increased demand. The enormous amount of data that needs to move around an AI data center is driving the need for new technology and an increased volume of indium phosphide datacom chips. So it's important to understand what is driving the demand and what differentiates our technology. As computing power increases, connectivity becomes increasingly critical.

Traditional copper-based connections cannot efficiently provide the bandwidth, reach and power efficiency required at these higher data rates, leading to the need for optical connectivity, an area where we excel. The current technology standard is driving incredible demand, but this will be followed by further developments in technology that will require additional optical device production lines.

The middle of the slide explains why Oxford Instruments is particularly well positioned as the market scales. We are able to produce high-quality optical surfaces these devices demand through very precise control of the fabrication process, especially when working with indium phosphide and notably fragile material.

Our proprietary process technology, including our hot wafer clamping enables customers to achieve that high performance and repeatability across a range of wafer sizes without compromising the precision and the quality that they require. And the third element is scale. We've evolved our offering from stand-alone tools designed for low-volume applications towards automated multi-chamber cluster systems designed for high-volume manufacturing, where robotic wafer handling improves repeatability and throughput.

And as I said earlier, the compound semiconductor opportunity is much broader than just indium phosphide. While datacom is the major source of demand today, there are a number of important target applications for us, where we've developed critical processes and intellectual property. You can think that these markets are being at different stages of maturity.

Datacom and optical infrastructure are in a significant ramp-up today, as we've just explored. In the middle of the slide, there is a further important area of opportunity in power electronics and RF. Gallium nitride and silicon carbide can enable more efficient power conversion and lower thermal loads with potential applications spanning AI infrastructure, automotive, consumer electronics and future communications technologies.

Here, our order pipeline is growing as customers anticipate their next phase of growth. And slightly further out, we're working on a number of -- with a number of customers in microLED and augmented reality for the next generation of consumer devices where much of the activity today remains in corporate R&D. So datacom is driving growth today, while the technology base positions the business well for further opportunities in compound semiconductor applications. And with the significant growth in the Advanced Technologies order book, we're ensuring we have the right capacity and operational capability to deliver to our customers and set ourselves up for sustained growth in future years.

Firstly, on supply chain, we're working much more strategically with our key suppliers, putting longer-term agreements in place and making targeted investments in inventory where that helps us protect customer deliveries. Second, on operational execution, we're continuing to optimize our clean room processes, improve production planning and simplify and standardized products where appropriate.

And that focus on the clean room is supporting increased volumes of customer demonstrations, which we know is key for validating processes, especially in a high-volume manufacturing environment and which in turn drives an increased pipeline and conversion rates. And third, in people and capability, we're making targeted additions across operations, supply chain and service while investing in our in-house talent academy, where we've more than doubled the number of apprentices coming through.

All of these initiatives will help us deliver for our customers and convert the exceptional demand we're seeing into sustainable revenue and margin growth. So I hope that's given you a flavor of the exciting demand picture and what we are doing to support execution. To conclude then, it's been a strong first half. We're seeing strategic progress translate into commercial and financial outcomes. We're getting closer to our customers and broadening the client base.

Imaging & Analysis has good order momentum and is well placed for full year expectations. And in Advanced Technologies, it's exciting, excellent demand for our products and starting to step up in revenue and margins. As a result, we've increased next year's outlook for Advanced Technologies today. We continue to invest significantly in technology, customer engagement and operational resilience to support future sustainable growth for the group.

And the balance sheet remains strong and gives us flexibility in capital deployment, and we've confirmed our intent to extend the buyback through to the middle of next year. Of course, we're mindful and continue to be mindful of the operating environment that remains complex and challenging as well as navigating the growth opportunity in Advanced Technologies.

But the strength of the first half performance, the order cover in both divisions give us confidence in meeting full year expectations as we demonstrate strong progress to our medium-term targets. We have an exciting future ahead at Oxford Instruments.

Thank you very much, and Paul and I will be very happy to take your questions.

Tom Rands from Berenberg. Two questions. First one is maybe more for Paul on AT and the upgraded margin guidance. Obviously, kind of 2 years ago, it was 10% at kind of GBP 150 million, then it 10% to 12%. Now you've upgraded 12 to 15 for GBP 150 million revenue. Obviously, that site is GBP 250 million of revenue total potential in time. How do we see the kind of margin potential at GBP 250 million kind of panning out? And what sort of time scale do you think we should be kind of baking into our forecast for that?

Like you say, in terms of product revenue, that facility should be able to cope with GBP 250 million. That's with current labor practices, so you maybe could squeeze a bit more. You should also think about service revenue obviously being on top of that. So that's not the total capacity for that division. And then you've also got the [ XT ] division, XT piece in there as well. I mean we've seen the drop-through about 30%.

And when we think about that sort of over the next few years, that sort of feels like a reasonable number. There may be some years it's slightly better, some years are slightly worse. So if you continue to think that revenue growth should continue to drop through around 30%, and you can work through the margin as a result of that.

Okay. Great. Second question, a high level, maybe more for Richard. The kind of the way you win in AT and this kind of the flexibility of moving up the wafer size -- and as the kind of the demand for indium phosphide and datacoms seems to -- which date is, the demand for investment there.

How do you -- how -- what's competitive position within 6-inch wafer kind of at the moment? And how do you see that progressing given where kind of silicon has gone up to kind of 12-inch wafers over the last few decades? How quickly it ramp? Or is 6-inch enough for the next kind of 5 or 10 years to give the volume needed?

Well, okay. Well, let's start with -- should we talk about 5, start talking about 5. So I don't think we think it's going to 300-millimeter in that first phase, right? So I mean, in general, we have machine capability and a development path to 300 millimeters overall. So the technology plans or product plans are there for that, but we don't see it as a need in indium phosphide in next 5, I think the team would probably say.

So the wafer sizes are moving up from smaller to the 200-millimeter, if you like, right? So -- and in terms of competitive position and customers -- some customers are still saying at smaller wafer sizes because they just -- it works for them today. They can get volume through. It's kind of a low-risk addition of a production line to just add another one at those sizes. And we've sold some of the equipment to support those wafer sizes.

Equally, we've got a very good value proposition, we believe, that I was articulating just now at the higher wafer sizes as well and definitely gives us differentiation is getting us to the table with some of these customers. So all of that's important to converting brand-new customers because we're needing to offer something in addition to what they've seen before, but we're clearly getting the sense that we've got that.

And I would say just -- I know it was a little bit flippant about the demand point about today versus -- but the demand from these customers is very significant, and it goes out to -- I was with a few of them only a couple of weeks ago, quite a few of them. And they're all booked out to talking about '29 to '30 in that sort of range where they're talking about giving volumes of chips right now. So I know the macro uncertainty, and I totally get it, but these customers need product, they need it now and to be able to build out the compute that's expected today.

Okay. Great. One quick follow-up, if I may, just on that kind of the demand is there. How quickly can you add people, which seems to be the key bottleneck at the moment to kind of match your production to that kind of demand over the next 3 to 5 years?

Yes. I think -- I mean, I think I've probably said it to at least some of you, if not all of you before, but we see it as a sort of 6 monthly cycle of adding people, training them up and getting them productive. So that we're thinking constantly kind of 12 to 18 months ahead about what we think is a sensible amount of capacity based on current run rates of demand, thinking about that longer-term macro picture and partly why we've suggested that we think the outlook should move to around that 20% growth rate next year.

That's a balance of all of those things we're trying to judge. As I've just said, the current demand seems to continue to move in terms of growth going into '29 if you take the pipeline visibility. So we'll see how that evolves. But we don't want to get ahead of that either. We want to stay competitive on lead time and not put too much capacity in case that growth rate comes off back down to, I don't know, 15% or 10% or something. So we're just trying to judge all of that on a continual basis.

David?

David Farrell from Jefferies. Two questions from myself as well. Firstly, if I look at the semiconductor growth in I&A, I think it was 59%. How much of that is being driven by what's happening in AT? You alluded to the synergies between the 2 divisions. So how much of that is market growth? And how much of that is you kind of taking share through AT?

I would say -- so the read across from AT is a helpful dynamic that we're able to bring. It's like a way to sort of showcase our capabilities in metrology for both sides of the customer base, because I mean, those of you that got involved in a site visit down there, I think, probably saw some of the capabilities being demonstrated, and it's just -- it's a very good way regardless of the customer to show them real time the equipment in a clean room in a fab. So -- but in terms of that actual contribution to the order intake, it's -- I would say, I would call it relatively low in terms of read across cross-sell, and at this stage, but it's net helpful.

And my second question, I'd be interested to get your thoughts on what's going on in China, just generally kind of what that market looks like for you?

As a whole, as you know, we've sort of tried to derisk China from the technology perspective, and that brought revenue and contribution to the group down over the last sort of 18 months. In the dynamics of the last 6 to 12 months, it's started to return to growth again from an order intake perspective. So -- and again, that's a repositioning of the sales activity to commercial customers that has driven that opportunity coming back. It's not super high, David, but it's returned to growth.

It's Richard Paige from Deutsche Numis. I'll stick to the pattern of 2 questions this morning. Firstly, on I&A, if I back out the math of what you've presented for the second half, I think it's about -- you've got about 60% more to cover in terms of the revenue. Could I just ask about what you need to see happen over the ensuing time and what sort of time line you might have full cover within I&A?

I think I said in the presentation, if we continue to see order intake at roughly the run rate that we've seen in the first half, and we have continued to see that right now. Then by the end of this quarter, we should be in a position to have an order book that just needs execution. And there may still be a bit of book and ship that may come after that, but we'd like to finish this half with a positive book-to-bill. So really if we continue that same run rate, and we see that during Q3, that should give us enough to deliver the year. And just I think a point of reference and you saw the numbers on the chart, the order book that we have today, very similar to the situation, if not almost identical situation we had at the same time FY '25, where, again, we executed quite a strong second half. So I think we're quite confident we've got that -- we'll have the order book.

It has stepped up quite significantly in Q2 as well.

And then secondly, on Advanced Technologies, you've touched on some of the other technology pipelines that could happen above the datacom. 75% of your order book as of today. When might we see that mix move towards other technologies or inherently looking at other ways of potential growth in that order book?

Yes, good question. So I think what I was trying to articulate is we're starting to see the pipeline evolve of opportunity, which tends -- we're often looking at that 18 to 24 months out. And so you could point to a few of the peer groups where they may have seen orders starting, let's say, but they're often 12 to 18 months ahead of when we would expect to see orders.

So I think if you think in that sort of 18-month time line, but it will evolve. It won't suddenly arrive if you see what I mean. And in that time period, we're fully expecting datacom to continue. So you could expect to see that sort of different phase of growth come through. But yes, I'd point to the opportunity pipeline, which is, is full, and it's given you'd expect the order intake to have taken an awful lot out of it given the strength of order intake, but actually, it's been fully replenished in terms of future visibility.

So that's good, and that's probably when you can expect to see it evolve. Also maybe just going back to the I&A point, not just about specific technical color, but as just the point I was making about the growth being broad-based, it's like the momentum is coming from multiple areas. We've got materials analysis, multi-industry, multi-geography at 10% growth in I&A. And then you've got semiconductors, not just the CapEx build-out in semiconductors, right?

It's not just that race for capacity, it's R&D, it's new applications and what they need as they get more complex. So the complexity is driving more of the sort of equipment we can provide because of our capability to image at that level.

Anyone else in the room? We got any online, Stephen?

So there's a question from Chit Sinha at JPMorgan. There's 3 parts to the question. I'll do each in turn. First of all, what is the level of confidence in execution that has led you to the growth and margin guidance in AT for 2028?

Okay. So the confidence on execution, I think, is built from clearly actions and activity we're happening right now, the fact that we've started to see the revenue run rate increase, 27% in H1, the plan in H2. If you roll that forward into sort of H1, H2 next year, that's really what we're saying. And you couple that with the level of cover we've got in the order book and the expect -- run rate of order intake, then we think that's broadly a sensible number that we can get to. It isn't without risk, though. The supply chain has to move as fast as us. We were gearing up this division to roll at 10% to 15%, and we're needing to roll it higher than that. So we've got to be on it all the time. But so far, it's going okay.

Second question, read across from players such as AIXTRON is very positive, and they are not seeing a slowdown. How do you see the outlook into next year from an orders perspective for [indiscernible]?

Well, it's always difficult to sort of directly kind of comment on the timing of conversion. But I guess I'd point back to the opportunity funnel and the fact that, that -- I think we've talked before about it being over GBP 0.5 billion and the level of order intake we've had, it's been fully replenished.

So I think sort of say, look, at the moment, the opportunity looks good for continued momentum. As I just mentioned, I think answering Tom's question, the customers that I saw very, very recently on the West Coast every single one of them was just talking about how big and how fast. So I think that speaks to it. It feels like this dynamic is ongoing at the moment.

And final question. Given your strong cash generation and potential, what are your capital allocation priorities?

So I guess it's probably more of a question on maybe M&A given that the priorities are clearly laid out.

Yes. I mean the priorities are unchanged, as you say, and we're continuing to buyback. We tend to. Maybe on the M&A front, we're very active and continue to look for opportunities. I don't know if you want to...

I think I've tried to signal it's a balanced -- the capital allocation priorities are clear. They are consistent, and there's a balance after organic investment and dividend between looking for M&A deployment opportunities as well as return to shareholders. So we -- hopefully, we've demonstrated that we are active in that balance and the allocation of the buyback stuff.

But on M&A, yes, we are keen to accelerate the strategy, and we are looking and we have been more active. We got close to something in the first half that we couldn't make the equation work in terms of returns because of the sort of valuation expectations. But -- so we read into that, we'll continue to be disciplined. We're not going to run after it, but we would like to do some of it.

And we think there's opportunities through the way we've set I&A, particularly to bring new other technologies and products into the portfolio and accelerate it through our divisional regional network that we've got. So we're going to keep looking at that, and hopefully, we can find something.

Thank you. There's no further questions online.

Yes, David, do you want one more?

In the presentation, you talked about the negative mix effects from AT growing in terms of margin. Group margin. But I just wondered in terms of kind of the seasonality of the business, is AT going to be less fourth quarter weighted than IA and therefore, you get a smoother revenue profile going forward?

So in general, I think we'd expect the sort of production run rate to gradually step up and be more like a sort of regular drumbeat. But obviously, the level of growth that's being layered on and us layering in capacity means it's naturally the next fourth quarter ahead, if you like, because of the way that you're layering in capacity. But that growth rate sort of, let's call it, stabilizes, then I think that's not an unreasonable assumption that over time, it goes back.

Harry Philips of Peel Hunt. It's just thinking about sort of supply chain security and what have you and just thinking around pricing out of that supply chain because obviously, the growth dynamics are very clear. And sort of in the whole presentation, pricing almost hasn't been mentioned at all because clearly, there's strong demand and therefore, it's just pulling through the entire system. But as you -- as the sort of bottlenecks in production are reached, is there a risk that you get sort of super normal pricing sort of a point and your ability to pass that on, would it be a sort of surcharge situation? Or am I sort of envisaging a scenario that is sort of not going to happen?

I mean there's industry examples of that over the last few years, right, when things get really, really tight. And so I think, firstly, on pricing, I mean, we haven't mentioned, we're basically pricing ahead of any inflation dynamics and managing to pass that on fine. And you can see that in the shape of the business and the margins.

I think the question on AT is we think we've got a really good value proposition, but we're also trying to get into new customers. So it's always competitive, but we're trying to price the value proposition. So we're always trying to make sure we're getting the right kind of level of margin for the capability we're bringing, but we want to win the new customer.

So that's a bit of a balancing act, Harry, just to sort of talk about the price. But I think you should think of us constantly trying to optimize that position and not take super advantage of a tight position above us, if you like, but reflect activity and the benefits we can bring. If you look down into the supply chain, I think you can envisage from time to time things getting tight in certain products that are required across the whole industry.

So that's why we were talking earlier on about trying to get ahead of that, buying inventory, looking more than just the next sort of 6 months' worth of demand coming through and talking longer term with the supply chain to try and avoid it. So that's the point about we've got to constantly stay on top of it and try and manage our way through.

Very good. All right. Well, thank you all for your questions and your time this morning. Hopefully, we've conveyed we feel like we're in a good place, and it's been a good start to the year with plenty of opportunity ahead. So thank you all very much. We'll see you on the way around.

Welcome to the Oxford Instruments Full Year Results Presentation. I'm here today with our CFO, Paul Fry, and thank you for joining us.

We're really pleased with these results, which cap off a good year and given the headwinds, some great outcomes. Clearly, a game of two halves, maybe even four quarters, and a strong finish, while making significant progress with our strategy. All of this puts us in a really good place for the current year and beyond. So first, I'll cover the highlights. Paul will take you through the financials, and I'll return more on our markets, our strategic progress and look into next year. There will, as always, be the opportunity for questions at the end, both here in the room and online.

We've delivered a really strong performance in the second half and a good full year performance. Paul and I are really proud of what our teams have achieved against a very challenging market backdrop, particularly in the early months of the year, which mostly impacted Imaging and Analysis, where Q1 orders, to remind you, fell 11%. The year ended strongly, though, slightly ahead of expectations. We saw quarter-on-quarter improvement in order intake with the second half ending up 8%. Demand in Advanced Technologies was consistently strong throughout the year with order intake growth of 28%. Here, we've made significant progress on our shift to serve more high-volume manufacturing customers, which are the source of all the volume improvement.

In addition, we received a large multiyear order in the early weeks of the year, supporting even better visibility for FY '27. In Imaging and Analysis, really good operational execution ensured revenue and profit both recovered in the second half and growth returning in H2. The profit improvement was a result of our actions taken to reduce costs in Belfast and wider business efficiencies. Importantly, this meant margins also moved forward towards our targets, up 30 basis points at group level. And for clarity, all the numbers you see here are given at an organic constant currency basis and relate to continuing operations following the divestment of our NanoScience business in January 2026.

This was a good deal for a number of reasons, realizing cash that increases our balance sheet optionality, including to invest in our growth and supporting margin improvement for the group, while giving us a sharper focus on the remaining business.

So now I'm going to hand you over to Paul to walk you through the detail of the numbers, and I'll be back with some more color on the significant strategic progress we've made and how we are really well set for the future. Over to you, Paul.

So thank you, Richard, and good morning. So as Richard described, we've delivered a very good full year outcome after a challenging start to the year, where we saw retrenchment in the academic market, especially in the U.S. and general market uncertainty as geopolitical factors played out. This result has been built on a progressive order intake recovery in Imaging and Analysis and a step change in order book size in Advanced Technologies.

On an organic constant currency or OCC basis, order intake finished up 8% for the full year and up 14% in the second half. Commercial semiconductor customers have been a key driver of order growth across both divisions. As a consequence of the timing of I&A order intake recovery and the shape of the Advanced Technologies order book, revenue recognition lagged behind orders, declining by 3% at constant currency for the full year, a good recovery from the position at the end of the first half.

Gross margin has improved as we see the benefits of Belfast restructuring and operational excellence in our Imaging and Analysis division come through. And on a constant currency basis, margin went forward again by 30 basis points. Cash conversion has also remained strong at 89% and free cash flow has remained robust despite the decline in operating cash flow.

And one final point on this slide is to remind you that following the disposal of the NanoScience business in January, we've reported that business as a discontinued operation in both FY '26 and restated in the FY '25 comparator, with gross margin, operating margin and cash conversion all now being higher in this restated FY '25 than they were reported in last year's annual report.

Moving now to revenue in more detail. As I described before, the timing of the growth in orders has had an impact on our ability to build and ship within the current year, with revenue growth being highly concentrated in Q4 for both divisions. In the Imaging and Analysis division, we saw a revenue decline of 3% for the full year, but saw growth of nearly 2% in the second half as orders steadily recovered through the year. This pattern was more acute in Advanced Technologies, where shipping and revenue recognition was heavily focused in Q4, leaving the year as a whole slightly down on revenue versus the prior year. This Advanced Technologies revenue shape has been a function of the changing profile of orders in this division towards larger and more complex systems with longer lead times and is where most of the new order growth has come from.

These larger orders began to ship in H2, significantly ramping up in Q4, where revenue recognition for the year clearly becomes more sensitive from both customer readiness to receive equipment and our own operational execution. And whilst we experienced challenges on both these dimensions in Q4, we've seen some very strong revenue growth so far in FY '27, and we expect to report significant growth in this division in the first half.

Moving to the next slide. Here, we give a little more color on some of the order and revenue dynamics in the Imaging and Analysis division, which I described earlier. Overall, order intake was up 1.9% for the year with H2 up over 8% and revenue recovery following in the second half. Academia has remained subdued for both divisions with I&A academic customers' orders down around 8% with non-U.S. academia faring slightly better. However, the main focus of growth has come from commercial R&D, notably in semiconductors, where we see our strategy to capture more growth in this sector playing out well.

On the next slide and staying with I&A, here, we see that despite the decline in the revenue for the year, operating profit moved forward on a constant currency basis and operating margin moved forward on both a reported and a constant currency basis. This is mainly down to the cost benefit of restructuring completed in Belfast early this year, but also progress on a range of margin improvement initiatives helping to offset inflation.

Imaging and Analysis is a key underpin to the group's performance, and it is encouraging to see a very solid recovery here, both in terms of growth and margin. And whilst the macroeconomic environment remains uncertain, we expect this division to be able to deliver low single-digit revenue growth for FY '27.

On the next slide, we are double-clicking on order and revenue dynamics in Advanced Technologies. As I described earlier, order intake was strong with overall order intake up 28% for the full year, but with revenue growth lagging into Q4. If we look at the sources of these orders on the right here, you can see that the significant order growth in demand from -- you can see the significant growth in demand from commercial customers, in particular from high-volume manufacturing applications. This growth has been driven mainly by demand for equipment for datacomm applications and for applications related to the development of augmented or virtual reality glasses. Order intake has doubled for these 2 applications versus last year.

Focusing on the order book for a moment. Our order book on the 1st of April was about 10% below where we opened the prior year. First half order growth helped to replenish this such that by period 6, the order book was showing growth of around 7%. The second half then saw a significant expansion, and we closed the year with an order book 25% higher than at the start of the year. And then following a very sizable order received in the early part of FY '27, we already have an order book that supports the vast majority of our revenue expectations for FY '27 with a clear focus now on execution.

Moving to the next slide. Revenue growth was impacted by some of the dynamics I've already described, but also by the performance of our X-ray tubes business, which sits within the Advanced Technologies division. Revenue declined in this business where customers' demand has been slow to recover. Revenues from our plasma compound semiconductor business remained broadly flat. Margins were impacted by the contribution drop-through from the decline in revenue, but also by the increase in depreciation and maintenance costs associated with the new Severn Beach facility, which became fully operational this year.

Looking into FY '27, we expect to see and are seeing revenue pull-through into this division, delivering high teens revenue growth for the year. This growth will also enable us to make substantial progress towards a 10% to 12% margin range for this division.

On the next slide, we've laid out some of the dynamics in adjusted operating margin for the year. As I alluded to at the start of the presentation, following the sale of NanoScience, we've restated FY 2025 to report NanoScience as a discontinued operation after tax and therefore, excluded from operating profit. As a result, when looking at FY '25, our adjusted operating margin went from the 16.4% reported in last year's annual report to 17.9% in this year's, an increase of 150 basis points. And then from this higher jumping-off point, we've seen the benefits of Belfast playing out, partially offset by the drop-through from revenue decline and also the additional Severn Beach costs in Advanced Technologies.

At a constant currency, the net effect was an improvement of a further 30 basis points. Currency again was a headwind in FY '26 of around GBP 4.5 million, and we see a further headwind of around GBP 3.2 million as a consequence of our hedge rates in FY '27 being less favorable than our hedge rates in FY '26 following broad currency market trends. Setting this currency headwind aside, we expect some further progress on margin this year.

On the next slide, we detail adjusting items and the impact of discontinued operations. The key point here is that looking forward, we see many of these adjusting items reducing significantly as we embed the transformation and restructuring delivered over the last couple of years. This will have a positive impact on cash and on earnings per share. We also see the tax rate in FY '27 stabilizing at around 24.5%, which is around 100 basis points below our previous guidance based on the benefits we're seeing from the U.K. Patent Box arrangements.

Moving to cash flow now. We delivered a high cash conversion of 89% despite an increase in receivables following the high concentration of revenue later in Q4. Overall, cash from operations was down due to this effect, but also from the reduction in operating profit. However, free cash flow remained robust as a result of a reduction in cash tax due to overpayments in prior years and proceeds from the sale of Yatton.

Even without these 2 items recurring in FY '27, we see free cash flow set to improve significantly as adjusting items reduce and pension contributions have ceased following the buy-in in December. This continues to provide us with flexibility to deploy capital in line with the priorities we set out this time last year, which I'll move to now.

Organic investment remains our #1 priority for the allocation of capital. And in line with this, in FY '27, we expect to allocate an additional GBP 10 million of free cash flow to new capital expenditure and capitalized R&D related to some specific growth opportunities. These relate to software and AI development and some of our I&A tools, as well as creating solutions specifically for the semiconductor industry.

In Advanced Technologies, we'll be continuing to invest to ensure we're able to support the growth of the business and our customers' expectations for our equipment to support future moves to larger wafer sizes. We remain committed to our dividend program and propose to grow the dividend by 6.3% for the year. And for capital that has remained unallocated after investing in these 2 priorities, including proceeds from the divestment of NanoScience, we've chosen to make capital returns to shareholders by way of share buybacks.

We've announced so far a program to buy back GBP 100 million of shares. And at 31st of March, we're about 2/3 of the way through that, and we should complete this program by the end of the calendar year.

And then on the final slide, I wanted to leave you with a sense of the progress that we've made on margin over the last couple of years and the attractive prospects we see for Oxford Instruments to continue to grow -- to continue this margin journey, but also to capture the significant growth opportunity that our Advanced Technologies business presents us with.

Since FY '24, the margin profile of the business has continued to improve through the sale of Nanoscience but also a number of margin initiatives across the business, of which restructuring in Belfast has been the most significant. Against that, we've continued to invest in R&D with some margin erosion as a result and some headwind from divisional mix as Advanced Technologies has grown. Had it not been for over 130 basis points of headwind from FX, we would have been much closer to our target of 20% than our reported margin today.

However, with the steps we're taking and the operational leverage benefits of growth, we remain confident that 20% is achievable over the medium term. Revenue growth will be an important factor in delivering this target. And here, we can draw confidence from both the momentum we've regained in the second half of this year in both divisions, but also the accelerating order book and opportunity pipeline we see in our Advanced Technologies division, which Richard will describe later. And taken together, we believe this represents an attractive growth and margin profile for the company over the medium term.

And with that, I'll hand back to Richard.

Great. Thanks, Paul. So this is a very different business than the one I joined in 2023, and it's just over 2 years since launching our new strategy. We've always had a strong reputation for innovation, and we continue to invest significantly to maintain and improve this differential advantage.

But we weren't as strong as we should have been commercially and the business was too complex and not always executing as well as it should. So we're focused on fixing that to transform the business overall. We've simplified and sharpened up our operations. It's made a big difference internally and externally to restructure the group into 2 operating divisions, Imaging and Analysis and Advanced Technologies. We've reshaped the product portfolio, improved customer intimacy and our aftersales service and put the business onto a much stronger commercial foundations.

We've also made a step change in free cash flow, and it's been great to have Paul working alongside me as CFO since last April to accelerate the transformation of Oxford together. We're now a simpler business and are creating more value from our investments in future growth and operating effectiveness, all of which puts us in a good position for more growth and further margin improvement in the future.

During this last year, we've refocused the portfolio, divesting our NanoScience business, having returned it to profitability. We generated net proceeds of GBP 42 million. Importantly, though the divestment also frees up management time, it improves the rigor and optionality in our capital allocation and investment. Our GBP 75 million investment in a new compound semiconductor processing equipment factory, the benefits of which are becoming abundantly clear, with order intake up 28% year-on-year as customers seek out unique precision capabilities in this specialist field to accelerate their progress. We're successfully pivoting to commercial customers in this business who now represent 63% of all orders.

The group structure has been simplified and is now much more efficient. We run all Imaging and Analysis product lines under a single leadership group, and we have generated meaningful cost efficiencies, delivering over 165 basis points of margin improvement and enacting a step change in free cash flow of over GBP 18 million.

A critical area has been the restructuring of our Belfast business, both in terms of product strategy, new camera investments and the cost base. This, coupled with the operational improvements has delivered GBP 6 million of cost savings that helped improved margin and supported some new customer OEM wins, which I'll come back to shortly.

And across the group, we've got much closer to our customers, investing in sales and service. Having identified in 2024 that we were not maximizing our opportunity to generate service revenues, I'm pleased to report that this now constitutes 19% of the group, up more than 300 basis points. Oxford Instruments now has stronger foundations. It's more effective, more agile and more customer focused, generating good financial outcomes and well positioned for the future.

Turning to our markets and the current dynamics. We continue to focus on 3 core markets, which all have strong structural growth characteristics. In materials analysis, our products are used for precision analysis and metrology of almost every type of material. We see continued attractive structural growth in the mid-single-digit range over the medium term as electrification supports sustainability and energy security and companies look to deploy more sustainable materials.

We're seeing exceptionally strong demand in the semiconductor market. And as a reminder, both divisions have opportunity in the semiconductor market, but the majority, around 2/3 comes from our higher growth new compound semiconductor technologies. Here, the driver right now is not just the exponential growth arising from AI, but electrification and power present further key opportunities as well. Demand is clearly currently stronger than our medium-term growth rate as demand for data center and optics is accelerating.

And finally, healthcare & life science. As you know, the global market has been subdued over the last few years, but we see good long-term growth drivers as academic researchers and pharma companies look to address an aging population. Here, we saw the early signs of recovery we signaled at the half year continue. Book-to-bill finishing at 1.03, giving some confidence in a recovery in the year ahead.

This chart, with a couple of changes that I will explain, should remind you all of the way we position ourselves strategically and align with customers that support long-term growth for OI. Our heritage is in academic research, shown here as Explore, which still represents around 35% to 40% of our business as we partner with academic institutions all over the world to accelerate fundamental research. This gives us incredible insight into long-term technology trends that help us shape our own technology and product investment. We then work with customers in the commercial and OEM space as they translate this academic research in the real-world setting. This segment, which we characterize as develop in the middle represents a further 35% to 40% of Oxford's business. And then finally, produce.

A key part of our strategy, especially in advanced technologies, has been to expand our customer base in volume production. Ideally, this gives us the opportunity to commercialize our technology into faster growth areas, providing more volume potential for OI.

And here, we're making real progress with demand from production customers up 34%. This has resulted in the percentage of group turnover from production customers increasing from 18% to 25% at the end of FY '26. Additionally, we're seeking to grow our revenue from aftersales service, also gaining some traction. Service revenue is now 19% of the group versus 15% to 16%, 3 years ago. Here, we are investing in cross-training, local repair centers and improved logistics to generate better customer outcomes.

So moving on now to our divisions. I'm going to begin with Imaging and Analysis. The division has delivered a really resilient performance in FY '26, and I'm extremely proud of how the teams have dealt with everything that's been thrown at them. Over the next few slides, I'm going to walk you through the story of the year, beginning with the disruption in H1, the major restructuring in Belfast, investments in the front end of the business and the investment progress and plans in products and technology. All of this has contributed to 120 basis points of margin progression. So let's take a closer look.

In the early months of H1, we repriced our open order book to address tariffs, mitigating the direct impacts. We also adjusted some of the product assembly, notably accelerating our 'China for China' project to meet growing demand for locally produced products. We shipped the first products made in China for Chinese customers in the summer. And we also took rapid action to protect the sales of atomic force microscopes, which are produced in California amid the uncertain trading relationships between the U.S. and China. And we moved some of the assembly of AFM products to our own facility in Germany for European and Asian customers.

Export controls and rare-earth minerals led to a short-term squeeze in supply of magnets widely used in our I&A product range. Our team rapidly created new engineering solutions, secured alternative sources of supply, which will have a long-lasting positive impact on our resilience. And the final key external challenge we faced in the year was in relation to U.S. academic funding, which faced significant uncertainty for a number of months as the U.S. administration attempted to drive forward significant budget cuts.

In the end, overall budgets remain broadly intact, but there still remains a challenge as customers continue to experience funding delays. But our U.S. team has been proactive in helping customers seek new funded opportunities and working to add commercial customers to offset.

As we discussed at the interims, one of the important actions we've taken to support growth and margin improvement in the year was the restructuring of our Belfast business. The business has felt the impact of the weakness in healthcare & life science in recent years and was also struggling operationally. We took the difficult decision to reduce our workforce by 20%, which alongside further operational efficiencies, removed GBP 6 million from the cost base of the business. The team have also successfully reduced inventory by more than double our original GBP 2.5 million target. All of this supported strong H2 recovery as these benefits came through.

We've also put a new leadership team in place to drive the transformation, notably focusing on realigning our product strategy towards higher contributing lines, particularly with OEM partners. Early outcomes are encouraging with increased OEM orders, new product positions secured and discussions underway for further OEM business.

And our operational transformation in Belfast continues with sustained productivity improvements, a 30% reduction in repair times and repair backlogs down 50%. Back on a stronger footing, we're now investing for future growth, including a full clean room upgrade, which was carried out in April this year. And with book-to-bill at 1.05, we are moving into FY '27 in better shape with growth prospects for this business.

One of the very important pillars of our strategy is to significantly enhance our customer interface and improve the customer journey. We've invested in new demonstration centers in South Korea and Taiwan, taking our global total to 11. The ability to demonstrate our solutions locally has an important impact on our order conversion rate as customers see our technology in action. This will continue to be a focus area for organic investment in the year ahead.

We're cross-training our sales teams to cover a wider range of products where practical, driving efficiencies and improving the ability to cross-sell across our portfolio. And the service level actions have seen a direct correlation to Net Promoter Score improvements to a record 84% in China and up from 42% to 70% in the U.S., a real positive shift in customer sentiment, and we expect to see similar improvements in our Asia and European regions as these new structures mature. Another pillar of the strategy we set out in 2024 was a commitment to invest 8% to 9% of group revenue annually in R&D, ensuring this spend is more commercially focused and in the best places for growth. This year, we've launched a number of new products, some of which you can see on the slide. I won't go into detail as we covered these at the interims, but suffice it to say, they are all designed to provide customers with the very latest advanced capabilities while being increasingly easy for nonexpert users to operate.

Given the strength in group performance, the improvement in cash flow and margins, we plan to increase our investment in the next year or so. This focus will be to capitalize on the opportunity we believe exists in the semiconductor space and to enhance our software with additional AI integration, all ensuring we stay one step ahead. Additionally, we will be launching a new camera range in our Belfast business, the first for a number of years and key to our OEM strategy. So lots to go after in FY '27 in Imaging and Analysis and some really great progress right around the division, which has underpinned the strong performance.

Now let's take a closer look at Advanced Technologies. It's also easier to see the strategic growth opportunity as a simplified stand-alone division. When we set out the strategy in '24, we could see a big potential in compound semiconductors, but still had a lot of work to do to realize the success. And we had a challenging situation to deal with in our NanoScience Quantum business. We characterized the division as fix, improve, and grow. Since then, we returned NanoScience to profitability. And in January, we divested it, delivering good value to shareholders and improving group margins. It also means we can now fully focus on the opportunity in compound semiconductor from our new site at Severn Beach.

And now that the vast majority of this division is driven by our growth strategy in compound semiconductors, I think it's helpful to remind you of where we're positioned, our differentiation, our current significant drivers of growth in order intake. Given this progress, we feel we've now moved on from the fixed phase to one where we're looking to grow strongly and deliver the potential of the business. As a result, we're now lifting our margin targets in this division to 12% to 15% as we feel over the medium term, we are now in a position to take the business into the mid-teens.

Looking at the history of the Plasma journey. Oxford acquired Plasma Technology semiconductor business in 1990 and how we have morphed now from the intellectual to the commercial. Historically, the business was focused on academic customers, gaining really valuable experience understanding the potential of compound semiconductors.

In the last decade, the team worked to move the business to establish some positions with commercial customers as well. Our recent effort has been to try and build on this and pivot to high-volume production customers to give greater growth potential. We invested, as you know, in the state-of-the-art production and development facility in Severn Beach in Bristol. We've moved in and got the business fully operational. And crucially, we stayed focused on key market segments where we believe our technology provided good growth opportunity, such as datacomms, power devices, micro LED and augmented reality, where we know we can add value for our customers.

So let me explain where we sit in the value chain. The production of a semiconductor wafer begins with the boule growth shown here on the left. The boule is then sliced into multiple wafers, and we operate in the next stage, front-end processing. This is the most capital-intensive part of the process, accounting for around 65% of total capital investment. We offer a broad range of front-end technologies, depositing material onto the wafer or etching into its surface. After this, the devices are diced and individual chips are created before being packaged.

The exciting developments in the compound semiconductor market are a result over a number of years of research and technology development, exploring how new compounds on silicon can generate devices with new capabilities to solve some of today's challenges. They're enabling devices to have greater switching speed, power efficiency, and better performance than is possible with traditional silicon devices. A great example today being the laser devices fabricated from indium phosphide, important to the build-out of today's data centers.

Oxford Instruments has critical processing technology being used in the development and manufacture of these new compound semi devices. And today, clearly, we're achieving exciting growth. Orders are up as a result of our strategic positioning and the technology and our improved commercial approach.

So here, I wanted to highlight a few of the current areas that are some of the larger drivers of the activity. And as we've consistently said, we're trying to ensure we are not dependent on any one area of the market. So firstly, in datacomm, as semiconductor customers address significant demand for data to support AI applications. The market is in the production ramp-up phase with customers using our equipment to fabricate laser transceivers for the expansion of data centers. Significant CapEx has been committed and indium phosphide laser chips are a critical enabler of the infrastructure.

Gallium nitride is used to create high-efficiency, low thermal load devices for onboard automotive chargers, consumer devices and also efficient power supply for AI servers. This market is in the positioning phase as customers use single systems in pilot production to prove out the technology.

And then in micro LED, here, we are partnering in corporate research as companies explore new capabilities for display applications where high brightness and small pixel size are required. The image projection on augmented reality glasses is a good example of this.

Here, customers are using our systems to develop and prove applications that will later move into pilot production. So our 40 years of know-how, combined with extensive IP in our part of the value chain puts us in a good position to demonstrate our capability with volume customers. On the left-hand side of the chart, you can see some examples of our customer positions. Coherent, who are deploying our equipment in their data center growth in Europe and the U.S.; and ROHM in power electronics, where our atomic layer etch technology is enabling them to take gallium nitride power device manufacturing in-house and scale to 200-millimeter wafers. And bottom left, Rigetti, who have just deployed one of our atomic layer etch systems in their dedicated Quantum fab in California.

In augmented reality applications, we're helping household names to test their prototype glasses. We're active in all 4 market areas with big names, including the likes of those you can see at the bottom of the slide, some of whom who are our customers. And what's attracting customers like these is our patented precision capabilities, which produce smoother, higher-quality surfaces and structures and boost productivity by creating uniform films at higher speed and enabling more good wafers per day at a lower cost than our competitors. These patented capabilities are underpinned now by our state-of-the-art facility, increasing focus on tailored service packages and our full suite of metrology capabilities from our Imaging and Analysis division.

There's a really exciting growth opportunity ahead for us. And with the revenue materially covered for the whole of FY '27, we expect to see good progress and continued order growth in the coming year ahead.

So to conclude, we've had a really strong year in a challenging set of circumstances, not just results, but strategic progress. We've shown real agility in our response, executing well across both divisions alongside embedding structural change and laying the foundations for a return to growth in Belfast. We have a considerable and exciting market opportunity in Advanced Technologies, facilitated by the strategic shift we've made to invest at Severn Beach and focus on pivoting to high-volume production customers.

Oxford Instruments is in great shape. Our structure, operations, market positioning and balance sheet are fundamentally stronger than they were in 2024, and it's clear in the results that we've achieved this year. I'm incredibly proud of the team's progress we've made towards our medium-term targets since we set them out just 2 years ago. We're entering FY '27 in a strong position, and I'm confident in our ability to continue to deliver growth and value to our shareholders in the coming year and beyond.

So with that, thanks very much for your attention, and we'd be very happy to take some questions in the room. And if you've got them online, please do fire them in, and we'll moderate those in the room here. Okay. Thank you.

Andrew Humphrey at Peel Hunt. I've got 3, if I can. First one on semis and I&A. I have the sense you're talking a bit more about that than you have previously. I think we've seen a couple of examples from some of the microscopy business there about synergies, technology synergies between that business and the AT business. Is that what's driving that increased focus in semis and I&A?

Some of it, for sure. So we've always been in semis, as you know, in I&A, and it's certainly for the electron microscopy, it's always been a feature in their opportunity. I think what's been happening over the last couple of years is the integration of the Imaging and Analysis team has brought together the product development thinking and the software thinking in that group. And then as we've developed the position, understanding more in the production lines as we've moved into those kind of customers in AT, that has certainly built some additional knowledge in terms of the possible opportunities we have for I&A in those bigger customers. So we're starting to see, I think, the teams have ideas of products and capability they can bring to bear, but also just an opportunity to cross-sell as well.

Great. Secondly, in AT, you've obviously talked about the larger orders that have come into that business, the multiyear visibility that gives you. Not really kind of asking any specifics at this point, but can you talk about what implications those larger, more complex orders have for rev rec and particularly margin rec in that business? Do you sort of trade those orders more conservatively in the earlier stages of the contracts?

So they are still -- I mean, if you're getting, are they sort of -- is rev rec different in those multi -- no, it's not. It's rev rec happens when we deliver the system. So the systems themselves, as we talked about, I think, as we were going through last year, as you go into production are becoming a bit more complex. So they are bigger systems in their own right. So the individual systems value is higher. That's probably the only difference really in terms of -- so I think what you can expect to see overall is size of orders clearly have got a little bit bigger, a lot bigger. But that just means that could be a bit more lumpy quarter-to-quarter as you see our order intake develop.

But in terms of revenue recognition, it's really about just delivering the system. And obviously, the date starts to matter a bit more in terms of the absolute revenue. You saw a little bit of that at the end of last year. But we're -- clearly, as we're developing the way that the momentum is going in the business, we're factoring that into our thinking of what we can achieve within the year ahead.

And then finally, again, on AT, thinking about power semis, it feels like, again, that's a bit more of the presentation with GaN and with ROHM than maybe it's been previously. Is there -- is that a function of traction with customers? I think you've previously downgrade some -- downplayed some elements of power semis given that there's been an overhang and there's been overcapacity, well-documented challenges in parts of that business. Is it sort of market-specific or customer-specific or a combination of the 2 that's leading to that increased attention now?

I wouldn't describe the attention hugely increasing for us. I think the downplaying point, I think, is silicon carbide fundamentally not GaN. So GaN has been sort of happening all along. We've talked about these 5 compounds in which we're in. We're not dependent on any one, and we don't want to be regardless of the excitement in indium phosphide right now. But GaN certainly feels like it's moving a bit more into what I described it there as a positioning phase for, hopefully, the next part of sort of growth traction. And that's what it feels like in terms of the orders we've been getting and the conversations with customers.

It's Richard Paige, Deutsche Numis. Just a couple from me, please. On I&A, the order increase you've seen in the second half, can I just ask if that is uniform across all the businesses, specifically NanoAnalysis and Andor?

So reminder, H2 order intake was 8% up for I&A, and it was quarter-on-quarter improvement. Now we always have -- Q4 is always a bit better for I&A. So I think the first thing is to say just in terms of momentum generally, we're not expecting that to be the same in Q1, but we do think it's an indication of overall stabilization for improvement. In terms of the businesses, no, I think it's relatively -- I think fair to say relatively even -- sorry, I mentioned the book-to-bill in Andor or Belfast, 1.05. So overall order intake was up a couple of percent, right, for -- in the year. So yes, I don't think you should point to any one particular area. It's just generally -- it generally improved across the business and customer base through the year, albeit academia was clearly a bit more challenging, but we did well with commercial customers.

Yes, we're definitely getting more traction with OEMs in the Belfast business, the business.

And then moving to Advanced Technologies. Obviously, a question on everyone's lips about -- you've got a full order book for '27 or there or thereabouts. Demand is obviously very strong in that one. How quickly could you respond to new orders coming in? I know you obviously in your statement, you talk about improving production processing in that business. Can you talk a bit more about the opportunity and lead times you would need?

Yes. So, we are working operational improvement activity across the piece down there given the opportunity that exists to make sure that we have a business that's set up to be able to scale growth rather than just add more orders and trade it through. The position for FY '27 is such that if you take service and you take the order book, we're materially covered now. I think it's been a strong start as well to order intake for the year on an underlying basis. So we're pleased with that.

So I think to take the point on what else could we do and how we are gearing up for it. I think the way I'd put it is, clearly, we're excited about the opportunity in the market. And if you were down at the site, it's buzzing down there right now, and the sales team are all over the customer base, and we want to be able to capitalize on that. So we are looking at what we can do incrementally to add capacity for the second half of the year.

I think any of you asked me that question before in the last 18 to 24 months, either down at the site or in this room, it usually takes us 3 to 6 months to get labor capacity up and online. So we're working on that to try and create some more opportunity. And there are ways in which we can sort of look at the construct of the way we build stuff to try and reduce lead times as well, working with our supply chain. So there's a variety of sort of strategic tactical actions, if you like, to try and help facilitate a bit more room this year and ensure we're positioned for it if there's going to be extra in the year ahead.

Thomas Rands from Berenberg. Two questions. One is a slight follow-on from the AT order in the April. How kind of one-off is that big order that you received in April? Because -- is there a pipeline of other similar kind of big orders? Or do you think it is one-off in nature in the sense of its size, kind of delivery time scale, et cetera?

So it's one of a number of customers that are ramping up, building out fast, booking their own capacity for the next 2 to 3 years to support the need out there, which I assume everybody understands the need and the higher speed switching laser optics. And there's lots of information you can go and read about what they're saying their capacity is and what they're trying to build to and what the CapEx is that's going in. So it's one of those is the large order.

But we've talked about what Coherent are doing before, and you've seen orders come in from them over the recent period, and there's a number of others in the funnel. Will they achieve a similar size of order and it depends a bit on the way they choose to place their demand is one point and how far out they are willing to sort of risk invest, if you like, to support capitalizing on the growth potential they have. So what does that mean? Maybe is the answer, but there's enough business in the pipeline for a number of those over the next 2 to 3 years to suggest that there are other opportunities of similar sizes around.

Our challenge, right, which, again, I've hopefully conveyed effectively, but we're moving from the R&D environment to get into the production environment. So we -- you've seen some examples that we've talked publicly about where we've done that successfully, and there are others we've not been able to talk about. But all the time, we're having to prove ourselves as a low-risk partner to achieve that while they're in a ramp-up phase. So there's the technology differentiation seems to us and referencing it be clear, we can add a lot of value, but we've also got to be trusted in the production environment to support the ramp-up and service. So all of those things are a selling process that we're doing all the time at the moment.

Okay. Great. Very kind of reassuring detailed answer. Second one, just two-part on capital allocation. You mentioned the inorganic and continue to review opportunities. What is the M&A kind of pipeline looking like? Is it a key focus? And then just on -- given the great position to be in of kind of increasing kind of cash generation and the cash balance, should we be thinking about the dividend growing a bit quicker than in recent years in the outer years?

So again, tried to spend a bit of time this morning conveying how much work has been done in sides over the last couple of years. So I think we're feeling pretty good about the foundations that have been laid from that and keen to move into more growth opportunities. So that certainly brings the M&A angle into view and organic growth as well. So we -- the pipeline is good in terms of opportunities for M&A, but it all depends on when they're available and at what price and when people want to trade. So as ever in that answer, but there's some active situations we're monitoring closely, and we'll have to see if any of that can come to fruition, but we'd be keen to do it if we can. Cash and cash balance.

I mean, dividends, I mean, we very much see ourselves as a growth business. So our job is to try and deploy capital to get great returns and to grow the business. If we can do that inorganically, great, but we're also prioritizing some organic opportunities next year. We will sustain the dividend growth that we've seen over recent years, but it's not a place at the moment where we want to change massively that trajectory. It's really about growth in the organic and maybe the inorganic fields.

It's Stefan from BNP Paribas. Just on the margins in Advanced Technologies, yes. So you raised your medium-term outlook. You're still at 3%. So can you basically help us a little bit on your margin journey there? So on the one hand, you have big new orders coming in. Can you, a, talk about the margin qualities of those? And then can you tell us a little bit about execution? What is the potential to improve execution further? Because you said the place is humming, you're loaded in Severn Beach. So what can you do to get execution into a level to have better margin? Or is it all a volume story? And then what is the level of sales you need to get to, let's say, a double-digit number? Sorry, it's multifaceted.

Understood, I think. Yes. So look, the overall picture is no different from what I laid out originally, which is we needed to grow at double-digit top line, get ourselves to around GBP 150 million to GBP 170 million, and that would give us the margin potential in this division. And having divested NanoScience, that's still intact and in line with the sort of moving into the early teens. We believe it can get to mid-teens over time. But that's the sort of journey we need to go on. And clearly, with an order intake of 28% and expecting high teens revenue growth in FY '27, while building the order book for '28, we feel in good shape to deliver that revenue growth profile.

Just as a reminder, because other people do ask us, well, what's our capacity in Severn Beach. When we set it out originally, we're sitting between GBP 70 million and GBP 80 million of turnover, and we said we could go 3x. So that takes you to around let's call it, 225 million to 250 million, something like that. So we don't need a new site for a while. So the journey is there on the revenue growth. And again, we're just trying to convey that we're excited and feel in good shape about the progress we're making strategically to position for that volume and actually in the numbers.

Then when you look at executing on it, we've clearly got, as I mentioned in the prior answer, I think, in Tom's, but there's some things that we can do to continue to improve the efficiency, work lead times, they're in shape to capitalize on growth opportunity. So there is a mixture of some efficiency, but mostly operating leverage that drives the margin journey. So if we're in good shape for the top line, we believe the bottom line will come from that.

Can I just do one add-on. So are you saying that the new orders that you're getting at the moment where clients are obviously very focused on lead time and getting the production ramped up as quick as possible, that the contribution margins are similar like the year before. And so it's all like fixed cost allocation.

You can assume that the contributions are similar, and we're working to try and improve them gradually through any either efficiency or pricing opportunity that we may get on the way, but basically similar. So the drop-through medium term would be in the mid-30s, something like that. We expect that to be a bit better this year given the level of growth.

One last one, I promise. The pricing opportunity, yes. So obviously, it's -- excuse my description. It's a hot market at the moment, yes. So when there's a point that the pricing opportunity becomes really achievable for you to go to your clients and say, look, you want to have a better production slot and a quicker delivery, pay X, Y, that. When is that point coming?

Well, that's always a debate and a discussion with your customers. I'd like to think that you want customers for the long term. And we're obviously trying to position ourselves here with customers we've been in R&D departments, the technology guys love us, but we want to make sure the fab operations lead think we're the best guys to work with them for the long term. So we've got to balance that appropriately, Stefan, I think it's probably the best way to answer that.

It's Rich Hill from Jefferies. If I could just continue asking in AT. In terms of that kind of growing production piece, could you possibly outline perhaps what percentage of your kind of products are going into the actual in-line production or the kind of out-of-line testing? We see kind of some commentary from peers of that in-line being the real growth opportunity.

So I guess, 2 ways to answer that versus history and the numbers that we've put up today. The first thing is 63% that I mentioned is moving to commercial customers in AT. So that's the start point for that. And all of the growth has come from volume manufacturing customers. So the 28% growth in orders is coming from production volume areas. In terms of total, I'd have to double check it where it's currently running at, but we still have a sizable base in academia as well in that business. So...

And then just in terms of how you see the TAM, you've kind of given the growth rates for semiconductor, but kind of in AT in particular, how do you see the TAM there?

Well, in terms of the total opportunity, very sizable and the growth rates in -- current growth rates being projected in power and augmented reality, well, you could just -- it's such a wide range. It's almost silly to pick it. But certainly in the 10% to 20% range on a compounding basis. And clearly, with some of the things going on in the optic devices and indium phosphide and stuff like that right now, it's much bigger than that, like significantly bigger than that.

We have a few questions from Matthew Downing at Soros. Firstly, how should we think about the diversification of growth within AT? You note 200% order growth from datacomms. How much of the order book is now datacomms and what is happening in other areas? And we've also got how much revenue or production throughput is expected from datacomms in 2027? And finally, how do you position yourself to take advantage of opportunity in datacomms, but to maintain diversification in datacomms stalls?

Right. So I might want to have a specific conversation. But the point of our diversification is across the multiple compounds. I've mentioned, obviously, GaN power. I've mentioned 2 elements of augmented reality today, and there's also some quantum stuff that the likes of Rigetti are taking. So we are trying to make sure that everybody understands it's like it's across those multiple different areas that we have growth potential, and we have an underlying base of academia that we still sell to.

So the point on datacomm and the increase in datacomm in year is obviously a very strong increase, and that's continued in the early part of the new year. So it is a sizable part of the order book right now for production this year and will be in FY '28. And if what I hear from customers is true, that will probably continue into '29 at least for now.

So we've got then we've highlighted GaN because GaN has increased as well. And Quantum has been a bit lumpier as we've gone through. There's been periodic orders for individual players in the quantum space. And then I think if you go in the detail of the release, we give some examples of augmented reality where we had actually last year, our biggest single order came from that area.

So we're trying to make sure we maintain the opportunity and can support customers across all of those compounds because we see that as being important to long-term sustainable growth. And at the same time, I think I'll probably refer back to some of the other answers I gave about capitalizing on datacomm in the short term.

Yes. I must say datacomm is growing very quickly. It doesn't yet dominate our order book, but it's certainly a key growth area.

Thank you. That's all the questions that we have online. So I'll hand back over to you, Richard and Paul, for any closing remarks.

Great. Well, look, thanks very much for your attention to a slightly longer presentation this morning and some good questions. Hopefully, you've got from that, that we feel in really good shape for the year ahead, and we're delighted with the progress we made last year, and Oxford's got a great future. So thanks very much for coming along this morning, and we'll see you around. Cheers.

All right then. Good morning, everyone, and welcome to the Oxford Instruments Half Year Results presentation. Thanks for joining us today. We provided an initial overview of the shape of the first half of the year in our first -- in our trading update a few weeks ago.

Today, I'm going to begin with the key highlights of the period, and then, I'll hand over to Paul for the financial review before returning to the detail on our strategic progress with some pointers into the second half and beyond. There will also be an opportunity for questions at the end, both in the room and online.

Since we last met in June, we have made another 6 months of good progress on our strategy to simplify the group, improve commercial execution and realign our regional presence, laying the foundations for future growth and margin expansion. At the same time, the team have had to contend with more significant disruption than anticipated in the trading environment as a result of the global tariff and trade volatility, coupled with funding challenges in academia.

As the results show, the first few months of the year were challenging in our higher-margin Imaging & Analysis division, while we are working with our customers to align on a new trading landscape. By contrast, in Advanced Technologies, we've made great progress with 25% order growth coming from our compound semiconductor business, attracting increasing numbers of commercial customers focused on R&D and production.

Across the group, our market-leading technology and expertise continues to position us for good growth in structural growth markets. So despite the disruption in Q1, we ended the half with positive orders and book-to-bill and the Q2 order momentum back to that of prior year. We're into the second half with a full order book to support another year of good growth in Advanced Technologies. And with demand improving in Imaging & Analysis, we expect to deliver a strong H2, broadly in line with last year.

We're seeing a good return on our investments in technology with a number of new recent product launches, and I'll share more about those later. Cash conversion was moderate, in line with prior H1 periods for Oxford and reflects the trading conditions. We expect it to normalize to our target levels in H2 with strong free cash flow ahead.

The balance sheet is strong with net cash at GBP 45 million and around GBP 57 million from the sale of NanoScience to come. Our share buyback program is well advanced with just over GBP 30 million has been returned to shareholders since June, and we'll be extending it by a further GBP 50 million to a total of GBP 100 million.

Now, I'd like -- just like to zero in on the Q1, Q2 dynamics. And there were 2 main factors to keep in your mind. Firstly, tariffs and their impact on trading; and secondly, U.S. academic funding. Let me take you through the slide starting on the left-hand side. We had anticipated some softening of demand from the U.S. administration actions, but the impact turned out to be more extreme in Q1.

As a major exporter, we've been managing multiple changes in the global tariff landscape since April 2. Customers have had to reevaluate their budgets and spending plans, while others have had to request additional funding over and above that allocated to support new purchases.

Initially, we focused on working with customers to reprice the open order book to cover tariff and then moved on to active quotations and the opportunity pipeline. And as we indicated in June, we were able to protect margin and achieve recovery of new tariff costs, meaning our strong contribution margins have been successfully maintained.

Q1 saw -- also saw the significant cuts proposed to academic funding by the White House. Shown here in billions of U.S. dollars, we show this in the chart in the middle, the gray bar, meaning a sizable reduction in funding was being digested by our customers in the U.S., leading to delays in purchases.

As we move into Q2, the chart shows you the evolution of the proposals as they went through Congress. We're seeing a potential normalization of U.S. funding shown in the orange bar back to prior levels, both the National Institute of Health and the National Science Laboratory, starting to give customers more confidence their future funding will be intact and to start buying again. Our U.S. team has also been proactive in helping customers seek new funding sources and build up our commercial customer base.

Moving back to tariffs. For some product lines, we have also worked quickly to relocate some assembly locations to help our opportunity and mitigate the tariffs. And then, with the retaliatory imposition of restrictions on rare earth supply impacting supply chains, our engineers have created new engineering solutions and helped to resource supply where possible.

So despite many distractions and impacted demand patterns, the whole Oxford team have done an excellent job to overcome the headwinds and deal with the fluctuating demand challenges, culminating in the environment stabilizing through Q2.

So with that, let me hand over to Paul for a deep dive into the numbers.

Thanks, Richard, and good morning. So moving to the first slide, I wanted to first highlight that all the information presented today is for continuing operations and excludes all revenues and expenses directly associated with our NanoScience business, which is now reported under discontinued operations.

As Richard has already explained, despite the disruption to order intake in the first quarter, overall, orders have grown in the first half on a constant currency basis and flat on a reported basis. However, the profile of order intake over the first quarter has had a significant impact on revenue recognized in the period.

Our Imaging & Analysis business runs on relatively short lead times, meaning the gap in orders has directly dropped through to revenue in the period. In our Advanced Technologies division, we've seen very strong order growth throughout the first half with a step change in Q4 of last year.

Revenue is yet to pull through into -- revenue is yet to pull through as a result of short-term shipment delays and lead times in this division, but we are expecting strong revenue growth in H2. Both gross margin and overheads are in line with last year. And with a relatively fixed cost base in the business, changes in revenue quickly fall through to adjusted operating profit and OP margin, and we've seen this drop through in H1.

Moving to revenue in more detail. The Imaging & Analysis division was most impacted by the order profile we saw in the first half. Whilst opportunities in the form of confirmed customer interest continued to rise in the first half, customers have taken longer to convert these to firm orders.

In Advanced Technologies, order growth has been consistently strong since Q4 last year. But given some timing delays and lead times in the division, we are yet to see this growth pull through into revenue. However, the order book is full for the year, and we expect to see early teen revenue growth in the second half as we execute on this.

Currency has continued to be a headwind in H1 versus the prior year with Sterling strengthening versus the U.S. dollar, but we've seen that trend reverse recently, and I'll touch on the impact of this later.

Imaging & Analysis, so this slide gives you a snapshot of the profile of Imaging & Analysis in the first half. Here, you can see the uptick in both orders and revenue in Q2 versus a low Q1 with orders moving back in line with the prior year, but revenue still lagging this recovery.

On the right, you can see order intake by end customer type, which shows a broad-based impact across both commercial and academic customers. U.S. academia has been quite resilient in terms of order intake, but revenue in the first half was heavily impacted, down nearly 25% on the prior period.

The book-to-bill ratio for this division is above 1, and we expect I&A to trade in line with H2 last year. So far, Q3 is tracking in line with our expectations, but order intake for this quarter will be key, and we plan to update the market on progress in mid-January.

On the next slide, you can see the same data cut for Advanced Technologies, where you can see the strong and more consistent order growth in both Q1 and Q2, building on a very strong Q4 from last year. Whilst revenue in Q2 was significantly higher than Q1, we are yet to see this growth pull through into revenue due to the timing delays and lead times I mentioned just now. On the right, you can see the significant growth in commercial customer orders, up 34%, and which made up more than half of the order intake in H1.

This shift has been accompanied by increasing numbers of orders for larger multichambered systems, mainly from the U.S. and Europe-based customers. This has contributed to higher average selling prices, but also to longer lead times. Academia outside the U.S. has grown strongly in H1, mainly large systems for Quantum-related semiconductor applications in Europe. Again, as we execute on our full order book, we expect to see this translate into early teen revenue growth for the division in H2.

So moving to adjusted operating profit. You can see the drop-through to operating profit from the H1 revenue gap. Gross margin was steady at 55% and overheads fell slightly. Given the relatively fixed nature of the cost base, incremental revenue converts to incremental operating profit at a very high margin, and we expect to see the strong operational leverage effect in H2.

As I mentioned earlier, currency has continued to be a headwind in H1, impacting overall margin by around 100 basis points. For the full year, we're expecting I&A to move back into its target margin range and to see continued margin progression in Advanced Technologies.

On the next slide, you can see the bridge to our statutory results. We've made no changes to the definition of adjusting items. And most of the nonrecurring or exceptional costs here relate to Belfast restructuring and the move of the semiconductor business to Severn Beach, including the sale of the Yatton site, all of which were ongoing at the beginning of the year.

We expect all of these projects to have concluded by the end of this financial year. Discontinued operations is reported here on an after-tax basis and includes all transaction-related costs. Pre-tax discontinued operations made an adjusted loss of GBP 2.2 million in half 1.

And then moving to cash flow. Clearly, the foreign operating profit in the first half was fed through directly into free cash flow generation, albeit an improvement of around GBP 7 million on the prior year. The working capital movement largely reflects the normal shape of H1 and is down on the same time last year. Inventories are higher than the year-end, mainly in preparation to execute on the second half order book. We expect working capital to be less of a drag in H2, and we expect cash conversion to return to over 80% for the year.

As I mentioned back in June, I think it's worth underlying again the positive cash inflection we see coming next year. Capital expenditure this year is benefiting from proceeds from the Yatton sale in August with underlying CapEx at around GBP 5.5 million in H1. But following completion of Severn Beach, capital expenditure will be lower than recent years, normalizing at levels much closer to depreciation.

Our restructuring programs will complete this year, meaning exceptional costs are not expected to be material next year. And following engagement with insurers ahead of policy buying, we now expect to make no further payments to the group's defined benefit pension fund in the remainder of this year or beyond. This means a GBP 4 million upside to guidance we gave for the FY '26 and a further GBP 4 million benefit in both FY '27 and FY '28. So a GBP 12 million improvement versus our previous expectations for the 3 years.

These, combined with operational cash flow, will have a material effect on free cash flow next year. Our balance -- our cash balance is strong, ending the year -- ending the half, sorry, at GBP 45 million after investing GBP 25 million in the share buyback program and before the receipt of gross proceeds from the NanoScience sale expected to be around GBP 57 million.

Which then leads me to reconfirm our capital allocation priorities, which have not changed since I presented them in June. Our first priority remains profitable growth, and this is where we will always seek to deploy capital first. We will continue to invest in opportunities to improve productivity to drive order growth and to develop new products. We're also committed to our dividend program, and given our cash balance, the confidence we have in future cash flows and our strong dividend cover, we've grown the interim dividend again up 6%.

Beyond these 2 priorities, we will look to deploy capital either inorganically, where we see a compelling case to drive growth and returns or return to shareholders via share buybacks, again, where there is a compelling case to do so, which makes sense for our individual shareholders. We are continuing to look actively inorganic options, but with a disciplined approach to ensure any acquisition increases the value of the company.

As I outlined on the last slide, we see cash flow generation to markedly improve as we move into FY '27. And so taking into consideration all these factors, we've announced this morning that the current share buyback program is to be extended by a further GBP 50 million to GBP 100 million, and further details of that will be announced in due course.

And then finally, I wanted to summarize some guidance for the rest of this financial year. This has not changed since our October trading update. On a constant currency basis, we expect our Imaging & Analysis division to trade in line with H2 last year with margin improving in H2 as a result of approximately GBP 4 million of cost benefit, mainly from our Belfast-based business.

And as I mentioned earlier, we expect Advanced Technologies to transition to early teens revenue growth in H2 with a significant drop-through benefit to operating profit. These Belfast savings and the operational leverage benefit from a growing semiconductor business give us confidence that we can grow operating profit in the second half on the prior year and finish the year broadly in line with last year, ignoring the impact of currency.

Currency is a continued headwind in H2. And in the guidance here, we've assumed a U.S. dollar rate of 134 for the rest of the year, giving us a headwind for the full year of around GBP 5.5 million. The impact of changes in this rate will not -- in rates this year will not be very significant given we are largely hedged for the remainder of the year. But if sterling continues to weaken to the levels we've seen recently, certainly to $1.30 or below, we would not expect to see further FX headwind in next year's results.

And with that, I'll hand back to Richard.

Great. Thank you, Paul. So now, I'm going to walk you through some of our progress that we've made on our key strategic actions. This progress is giving us clear line of sight to margin improvement and future revenue growth.

I'm going to start with Imaging & Analysis, the larger of our 2 divisions. The Imaging & Analysis division brings together all of our small-scale imaging, microscopy and camera product lines with similar customer bases and go-to-market strategies. It currently generates around 3/4 of the group revenue and the vast majority of the group's profit given its very good contribution margins with recent year -- recent full-year operating margin, operating in the range of 22% to 24%.

I've already covered the first-half disruptions and our actions in response, and we're expecting a much stronger performance in the second half, supported by the self-help actions on cost and efficiency in Belfast and our usual improved H2 seasonality.

So let's take a closer look at the 3 main markets in which we operate. In Materials Analysis, our products are ideal for analyzing the widest range of materials across multiple sectors. And although we started out in academia, we're attracting more commercial customers as companies seek to test properties of new materials and products and to carry out the quality test and failure analysis on those in production. With the constant demand for better and more sustainable materials, we anticipate a mid-single-digit growth over the medium term.

We also support a strong and growing presence in the semiconductor market, where demand has been exceptionally strong in recent periods. We operate right across the life cycle, supporting customers at every stage from academic research to corporate R&D through to packaging, test and failure analysis. Significant long-term investments in security of supply and productivity are driving market opportunity for many years ahead.

And our third key market in this division is Healthcare & Life Science. As you know, the global market has been subdued over the last couple of years following COVID with some customers overstocked. And although demand patterns have remained weak, they have been stable for a few periods now. And we're starting to see some early signs of improvement with book-to-bill now above 1. Order growth in the U.S. and China has returned, and we're making positive progress on rebuilding OEM relationships with another key order secured already in H2.

As well as being well positioned in our main markets, we're also in a strong position geographically, globally diversified with good opportunity in all regions. In recent years, we shifted the weights of our markets with the U.S. increasing and China reducing, as we followed the best areas of opportunity for the business.

At a group level, clearly, the short-term demand dynamic has been similar across all markets, but the medium-term opportunities in these 3 markets are exciting. And with the great products and technology we have in our portfolio, our competitive position, combined with our globally diverse business, we feel we are well placed to take advantage of the opportunities in the future.

We've also been agile in responding to the immediate challenges. Given the changing trade and tariff circumstances in Q1, we took a number of specific actions to support customers and improve the resilience of the business. These included making adjustments to a few assembly lines.

We accelerated a China for China project that was already underway to meet growing demand for locally produced products. Here, the plan was to produce Oxford Instruments detectors in China aligned with a number of our electron microscope partners who do the same. Our local team and supply partners successfully shipped our first products made in China for Chinese customers in the summer.

And given the uncertain trading relationship between the U.S. and China and the proposed tariff levels, there was a risk to demand on our atomic force microscopes, which are made in California. This was likely to have a sizable impact on this product line. So we swiftly established assembly of AFM products at our WITec facility in Germany for European and Asian customers, a real achievement because we only started in April and the first products were shipped from Germany last week.

Both of these initiatives should add to our competitive advantage as well as protecting and increasing market share. We're also now working on a further project to relocate some of our Nano indentation production from Zurich to High Wycombe during H2 to capitalize on our capabilities in this excellent facility.

And as I touched on earlier, I'm also really proud of the U.S. team's response in such a volatile environment, bouncing back from the disruption in Q1, 11% order growth at the half year. That growth has been underpinned by commercial customers, notably in semiconductor, which we'll talk more about shortly. And they've also delivered 9% growth in service revenue, as we increase our focus on contract sales and improved utilization of our field service engineers.

Given the historical performance of Andor in Belfast and the demand environment in Life Sciences, we spoke about this in June, the need to turn around the business performance. Over the summer, we took the unwelcome, but necessary decision to reduce the size of the workforce by 20%. And we will see the financial benefit of that flow into H2. In combination with other reductions, we expect to see around GBP 4 million worth of benefit in the second half.

We've also continued with our operational program, which is delivering a 60% productivity uplift on our cameras work stream, reducing lead times and achieving GBP 4 million reduction in inventory, surpassing our GBP 2.5 million target. We've also reduced the backlog of customer repairs by 30% since January. All of that is helping us to rebuild our partnerships with OEMs.

I'm pleased to say we've secured 2 new OEM positions and won back 1/3 since the start of the year by working closely to really understand the needs and deliver the product development that fits their requirement. Initial, but important steps forward. And we're working hard to reinforce the benefits of our leading technology with customers outlining the much stronger operational foundations we now have in place.

And finally, the product line restructure we announced in June is complete, enabling us to focus on regaining market share and improving our margins. That is being helped by the launch of a new range of cameras, developed by the team in First Light Imaging that we acquired in 2024. This is just one of the important developments in the Imaging & Analysis new product lineup.

Let's take a closer look at the examples of outputs of our technology investment, which is a key component of our organic growth strategy. New launches so far this year, including an extension to our atomic force microscope range, which is entering a new market segment, delivering our typical excellent standard of imaging at a more attractive price point for customers as well as being much simpler for the non-expert users to operate.

We delivered this project in record time for OI, 9 months from start to finish. And the second one on the chart is a significantly updated benchtop Nuclear Magnetic Resonance instrument, which has enabled us to regain technology leadership in this space. This new model had an early success and was snapped up by GSK for one of its pharma production sites in the U.S.

The third is that suite of new scientific cameras I just mentioned.

And finally, a refresh of our Raman Microscope line, paired with a groundbreaking new spectrometer. Recognizing that our market-leading technology is and always will be key to our ongoing success, we are committed to a continued investment at our target level of 8% to 9% of revenue.

Let's now turn to our Advanced Technologies division, where we've seen such strong order growth this year. Following the divestment of our NanoScience business, which in accounting terms in the results is held for sale, this division now mainly comprises our compound semiconductor business and Severn Beach here in the U.K., making large capital equipment for semiconductor development and fabrication. Though it does also include our much smaller components business, X-ray Technology in California.

In this division, we focused on building the scale of Severn Beach, as we move from supporting academia to commercial customers, as they develop new chips and establish volume production activity. There is a big opportunity to improve margin as we improve efficiency and grow revenue to more than twice its current scale in the current facility.

There is a second half weighting to revenue, fully covered by a strong order book, which will deliver improved margins. As you've already heard, Severn Beach has delivered excellent growth in orders over the half year, trading with strong momentum. So we'll take a look at what's driving that.

The business is founded on 40 years plus of expertise in fabrication on compound semiconductor process development, positioning us really well to access the exciting growth potential in the compound semi market of between 10% to 20%.

With the combination of our deep expertise and the significant investment we have made in our new facility at Severn Beach, we've positioned ourselves to target commercial customers developing next-generation technologies, including hyperscale data centers for AI and augmented reality devices.

We're gaining traction, delivering 25% order growth in H1 and with a sixfold increase in orders from commercial production customers versus the first half of last year. That's supported by our world-class clean room, which is now fully operational, supporting growing number of customer samples and demonstrations.

And this sampling forms an increasingly important part of the sales process, enabling us to work in partnership with commercial customers to develop and refine processes in our new clean room. We're also starting to see repeat orders from some of these larger customers, including Coherent, as they expand their data center presence in Europe and the U.S.

As we grow our reach into commercial customers, we're also seeing more large systems and average order sizes increasing as well, as Paul mentioned. And as we grow the business, we're focused on doing so efficiently. The new facility is a great help with that, and we've seen a 12% uplift in labor efficiency so far this year.

Our Operational Excellence program, which began in Belfast, is also now working at the facility to drive this forward further. And as I've already touched on, our growth is coming from key developments in technology, including AI and related developments in data center, power efficiency, quantum and augmented reality. We have focused our R&D investments in these areas of compound semiconductor technology, as we expect them to offer the strongest growth potential.

Semiconductors are made up of many layers of materials. Our plasma equipment is used to etch that is to remove and deposit to add nanoscale layers of material to give the semiconductors their specific properties such as greater power efficiency or better optoelectronic properties. These so-called critical layer applications are where we have the most specialized technology, and we can, therefore, win orders from our target customers and command an improve value.

The rapid progress in the AI ecosystem provides us with an exciting opportunity given our expertise in so many areas that are vital to its success. If I take you from left to right, we all know how important data centers are. Our equipment is used to fabricate the material required for the latest generation of optical laser transceivers and also gallium nitride devices, key to energy efficiency.

Then there's also quantum technology development, too. Here, we're supporting a range of customers from leading academic institutions to start-ups and also some of the world's largest technology companies, as they take this technology from concept to reality.

Finally, augmented reality is a further part of the future pathway for the AI ecosystem. And in a particularly nice example of our role, the team are playing in development of the technologies for tomorrow. In the diagram, you can see numerous different processes we are supporting the development of augmented reality glasses, which we have seen widely reported increase in investment in recent years, notably from the big U.S. technology players. We're excited about the potential for these areas and expect growth -- continued growth, as these rapidly advancing areas of technology continue.

So despite the short-term disruption in H1, we have made good progress across both divisions, all meaning we remain confident, we are on track to our medium-term targets set out last year, which you can see on the right. Through swift and decisive action, we've protected our margin structure. As growth returns, we are well positioned for another step towards our 20% plus goal.

In Imaging & Analysis, self-help cost and efficiency will support improvement in H2 and next year. And in Advanced Technologies, the success of the strategy is evidenced by more commercial customers and a strong order book, an opportunity pipeline supporting continued growth in revenue and margins. We're also continuing to invest significantly in the -- at the top end of our target range to maintain our technology leadership with new product launches directly from our R&D investment.

Cash conversion is expected to return to target levels by the end of the year and net -- with the net proceeds of the sale from NanoScience will boost progress to our return on capital targets. And our balance sheet is strong. The capital allocation priorities mean we have already returned more than GBP 30 million to shareholders.

With our forecast for strong future free cash flow, we have announced today a further GBP 50 million of share buybacks when the current program completes, taking the total program to GBP 100 million. So putting the short-term disruption earlier in this year behind us, I'm really pleased with the response from the team and actions on the building blocks to continued progress towards our targets.

So to conclude, we go into the second half of the year with an improved position and good execution on strategic actions. I'm really proud of the way the teams have stepped up and found positive resolutions to unforeseen external headwinds, while we continue to make progress on our priorities. It is a challenging macro environment, but we've been navigating it with agility.

That performance and the foundations we're building reinforce our confidence in the ability to deliver an improved performance in the second half. And with great people and fantastic technology, this is a good business, and it's improving well, as we put ourselves in the best position possible to deliver growth and the benefits of margin and improve value for our shareholders.

Thanks very much for your attention. We'll now hand over to the room for Q&A and also online. If you're online, do post your question, and we can moderate that after we've dealt with the ones in the room. Thank you.

Thomas Rands from Berenberg. Just 3 questions, if I may, please. First one is around Advanced Technologies and that very strong order momentum during Q1 and Q2. And you mentioned kind of momentum in Q3, any kind of extra color you can give on? Should we expect a similar sort of level of growth in Q3? Or is that maybe too much? And linked to that, you mentioned shipment delays. Can you just give us a bit more reasoning for what was internal or external kind of causes of that, please? I'll come on to the 2, if that makes it easy.

Sure. Yes, no problem. So I mean, obviously, the order -- we're delighted with the order momentum in the first half. It's broad-based. There's no sort of one specific thing or customer or something like that that's driven it. It's across a range of customers, and it's been great. As I said, the pipeline continues to look really good and is building. So we're feeling good about the next sort of couple of years ahead as well for continued momentum in the business. And yes, there's reason to believe that Q3 could continue or certainly Q3, H2 could continue at least double-digit momentum.

Do you want to pick up on the delayed piece?

Mainly customer readiness. There was one, which was just a logistical issue on our side, which is resolved, but it's mainly customer readiness just to receive the equipment and install it and so forth. So those are getting resolved during this half -- I think, it is quarter I should say.

Small internal, but mainly external in place.

Second one was just around capital allocation, and I guess, the increased share buyback. What is the M&A kind of pipeline looking like? And can you just remind us of kind of which key areas you're hoping to kind of find acquisitions? And then linked to that with the increase in the share buyback, which is kind of doubling great kind of number, was there any discussion at the Board to kind of have an even bigger than GBP 50 million? Or is that in time to come to that kind of balance between keeping your powder dry?

Okay. Sure. So from the M&A perspective, the pipeline we're looking at remains interesting. The areas we've been focused on is really for I&A generally and expanding there, either their sort of reach principally into the U.S. and Europe and extending the sort of product and technology range we're able to offer to the similar customers.

And in terms of the pipeline, part of the capital allocation discussion is we've kicked it pretty hard in the last few months, and we don't see any of the sort of key targets coming into sort of ability to transact in the near term, basically, Tom. So that plays into -- it's not a change in our view on M&A as a strategy and wanting to use it to support the group's development going forward, but in the near term, you look at the strong free cash flow, the strength in the balance sheet, and the Board's conclusion on that was it made sense to extend the program by the GBP 50 million.

That broadly puts us -- if you think 12 to 18 months out, it's putting us back in a similar position in terms of M&A potential. So it's a sort of keeping optionality, I guess, over that time frame for the strategy.

I think the other point is it's an active continual conversation effectively about the capital allocation balance.

Good. And then just the third one, interesting to see where the kind of R&D and innovation is kind of going on Slide 19. Difficult to kind of for us as analysts to kind of gauge which one is exciting. Which of those kind of 4 kind of key products do you think has got the most potential from a revenue and profitability kind of point of view?

Actually, I think that the sort of 4 that we put up there happen to be the ones that have come to market in the first half. They're all important moves in those product lines, I guess, to -- I wouldn't put any one of those as sort of head and shoulders above the rest. I think we've got some others coming in, in H2 that I think we're hoping might be sort of more comprehensive or significant.

The imaging camera stuff is -- that's good. The First Light technology was a proper extension to our opportunity in camera imaging, and potentially, as we said on the chart, takes us into some newer spaces, and that did offer us the opportunity to secure a position with a new OEM. So that's in a development program. So we'll have to see how that moves forward, but that was certainly good.

David Farrell from Jefferies. Two questions from me. Firstly, if we think about Advanced Technologies, you referenced potentially doubling revenue with the existing facility you have. I think you've also talked about kind of better pricing in the order book. Can you just kind of talk about what needs to happen to get to the 10% to 12% operating margin target? Is that purely operational leverage? Or is there an assumption that the pricing is part of that progress?

Sure. So there's a basic assumption that the mix sort of improves a bit over time, but nothing sort of major step up, David, and it's been doing that. So it's a continuation of what we've been achieving over the last few periods. And then, it's really all about ensuring we get the revenue growth and continuing the top line, which as we've shown is in really good shape. That will be another year of double-digit growth on top of the last 3. So I think the strategy has positioned us with a balance of opportunity across the different compounds. I mean, if one is down, others are still offering some great potential for us. So yes, I think it's really all mostly about the revenue growth and the leverage that comes from that.

And I think I'm right in saying [ Brooke ] had talked about signs of life in China last week. Maybe just get your views on what you're seeing in that market.

So probably talk I&A for China, I think -- we mentioned, I think, in the release this morning the -- in general, a good data point was in the sort of life science and/or arena that we've seen the cameras return to some growth. So that was good in China.

Overall, I think we need to do continuous certain actions like the product line that I mentioned, the sort of the entry-level detector. China for China is key to match it with our electron microscope partners. And that definitely gets the team excited out there, and there's an opportunity for selling that. So I think I'd sort of point to a few of those things, and overall dynamic for China is, as we said, we obviously made that deliberate reduction, but then, it's sort of stabilizing at the level that we've seen, and we're hoping for growth in there with I&A.

It's Richard Paige from Deutsche Numis. Three from me, please. Aligned to the former 2 questions on the AT business, the 25% order growth in the first half, can you give us just a bit of flavor? Because you've spoken about larger systems of price versus volume within that?

And then on the pro forma numbers you've given, obviously, a couple of changes since October, I understand, on stranded costs, but can you just align us as to where we are and whether there's any opportunity post the NanoScience disposal of any more...

Stranded costs...

To do that on stranded costs, yes, please. And then, obviously, it's only a month on since your trading update in October, but the second half bridge all important, could you just talk about visibility in the order book and timing of that, particularly given, obviously, the last month and a bit, we've been in a U.S. shutdown.

Sure. Paul, how do you fancy doing the first 2, and I'll come back on the trade demand?

Yes. So...

I mean, you talked a bit about the price-volume increasing.

Yes. I mean, certainly, order growth has been very strong. And, as I said, it's been both academia, as in Europe, in particular, as well as commercial systems. Both of those have led to -- have been around larger systems, more complex, multi-chamber, which has given us a higher ASP, but it does mean some longer lead times. But that's -- we don't think that's going to handicap us in terms of delivering a double-digit growth still in the second half in terms of revenue.

On the pro forma, so yes, we've been stabilizing just in terms of what costs sit within the discontinued line versus sit within continuing operations. And so you probably saw some slight tweaks versus our -- what we set out in October. Hopefully, that will not move again now. Obviously, we've got the order to go through, but our auditors have had a look at those numbers so far. Stranded costs are where we expect them to be in terms of quantum, as we set out -- in fact, slightly less actually than we set out in June, so probably around 3.5% full year. And as we set out in June, we've got a line of sight on how to reduce those by at least half.

So -- on trading, Rich? Yes. So I mean, basically, obviously, I&A is the key one where we said we need a Q3 order intake in line with Q2 momentum. So essentially, Q3 is running to expectations at the moment. So outlook forecasts are in line. P7 kind of moves as we'd anticipated going through the quarter. So yes, there's not a lot -- there's still another 2 sizable months to do, and P8 and P9 are sizeable months like they were in Q2, but the outlook is in line with that. So, hence, we're sort of moving along the way we need to, I guess, so far.

The shutdown clearly has not been super helpful, as you can imagine, in the U.S. in period 7. And so there are a few specific orders where -- which we were expecting to land, and they've moved alongside not having somebody to place it basically. But I think we're -- that's obviously looking like it's normalizing, and we were expecting those in Q3. So we're -- we think that risk is obviously going away.

Any more in the room? No? No more in the room. Any more online?

Yes. We've got 1 question from Daniel Thornton from Shore Capital. Can you talk about the new product launches in I&A and whether these are going into industrial commercial labs as opposed to academia?

Okay. Right. So well, the 4 that we talked about, what would we say about those? I guess -- so yes, it's a mix, actually. There is a few specific -- so Raman tends to be specifically academia, but not exclusively, but the majority of it, but actually, the other areas are targeted at more commercial customers in general that we mentioned this morning. The higher-end cameras are pretty high end and quite individual projects, but they're moving towards the commercial arena.

No further questions from the webcast. So I'll just hand back to you, Richard, for closing remarks.

Great. Well, thanks for coming along this morning. I appreciate the attention. And hopefully, we've managed to convey that we've been navigating a disrupted Q1 and a better Q2, so a difficult H1, but well positioned for a much improved H2, as well as making great progress on the strategic actions, which underpin our confidence in the medium-term targets. So thanks for listening this morning, and see you around. Okay.