Oxford Instruments

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 multi-year order in the early weeks of the year, supporting even better visibility for FY27. 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. Realising 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 colour on the significant strategic progress we've made and how we are really well set for the future.

Over to you, Paul. Good. So thank you, Richard, and good morning. So as Richard described, we've delivered a very good four-year outcome after a challenging start to the year where we saw retrenchment in the academic market, especially in the US, and general market uncertainty as geopolitical factors played out. This result has been built on a progressive order intake recovery and imaging 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 INA 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 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 FY26 and restated in the FY25 comparator, with gross margin, operating margin and cash conversion all now being higher in this restated FY25 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 analysis division, we saw 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 technology's 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 FY27 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 colour 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-US 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 INA, 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 benefits restructuring completed in Belfast earlier this year, but also progress on a range of margin improvement initiatives helping to offset inflation. Imaging 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. Whilst the macroeconomic environment remains uncertain, we expect this division to be able to deliver low single-digit revenue growth for FY27. On the next slide, we're 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 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 datacom applications and for applications related to the development of augmented or virtual reality glasses. Order intake has doubled for these two 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 sizeable order received in the early part of FY27, we already have an order book that supports the vast majority of our revenue expectations for FY27 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 remain 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 FY27, 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 and adjusted operating margin for the year. As I alluded to at the start of the presentation, following the sale of nanoscience, we've restated FY25 to report nanoscience as a discontinued operation after tax and therefore excluded from operating profit. As a result, when looking at FY25, 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 Seven Beach costs and advanced technologies. At a constant currency, the net effect was an improvement of a further 30 basis points. Currency again was a headwind in FY26 of around 4.5 million and we see a further headwind of around 3.2 as a consequence of our hedge rates in FY27 being less favourable than our hedge rates in FY26 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 FY27 stabilising at around 24.5%, which is around 100 basis points below our previous guidance, based on the benefits we're seeing from the UK pattern 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. 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 YATN. Even without these two items recurring in FY27, 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 number one priority for the allocation of capital. And in line with this, in FY27, we expect to allocate an additional 10 million of free cash flow to new capital expenditure and capitalise R&D related to some specific growth opportunities. These relate to software and AI development and some of our INA tools, as well as creating solutions specifically for the semiconductor industry. In advance, technologies will be continued 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 programme and propose to grow the dividend by 6.3% for the year. And for capital that has remained unallocated after investing in these two 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 programme to buy back £100 million of shares, and at 31st March we're about two-thirds of the way through that, and we should complete this programme 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 this margin journey, but also to capture the significant growth opportunity that our advanced technologies business presents us with. Since FY24, 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 makes 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 two 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 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 two operating divisions, imaging and analysis and advanced technologies. We've reshaped the product portfolio, improved customer intimacy, and our after sales 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 42 million pounds. Importantly, though the divestment also frees up management time, it improves the rigor and optionality in our capital allocation and investment. Our £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 18 million pounds. 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 £6 million of cost savings that helped improve 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 maximising 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 three core markets, which all have strong structural growth characteristics. In materials analysis, our products are used for precision analysis of 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 two thirds, 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 median-term growth rate, as demand for data centre and optics is accelerating. And finally, healthcare and 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 ageing population. Here we saw the early signs of recovery. We signalled that the half-year continued. booked a 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 characterise 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 FY26. Additionally, we're seeking to grow our revenue from after-sales service, also gaining some traction. Service revenue is now 19% of the group versus 15% to 16% three 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 FY26 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 US 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 INA 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 US academic funding, which faced significant uncertainty for a number of months as the US 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 US 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 and 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 £6 million from the cost base of the business. The team have also successfully reduced inventory by more than double our original £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, 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 FY27 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 US. 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 8-9% 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're all designed to provide customers with the very latest advanced capabilities while being increasingly easy for non-expert 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 capitalise 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 were 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 FY27 in imaging 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 standalone 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 realise the success. And we had a challenging situation to deal with in our nanoscience quantum business. We characterised 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 Seven 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 data comms, 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 bull growth, shown here on the left. The bull 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 of 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 centres. 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 Datacom, 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 centres. 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 charges, 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 US. And Roam 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 four 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 FY27, 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 Seven 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 two years ago. We're entering FY27 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, yeah.

Thank you, Andrew Humphrey at Peel Hunt. I've got three, if I can. First one on semis in INA. 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 in INA?

Some of, for sure. So we've always been in semis, as you know, in INA, 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 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 INA 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, thank you. Secondly, in AT, you've obviously talked about the larger orders that have come into that business, the multi-year 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 RevRec different in those multi... No, it's not. RevRec 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 system's value is higher. That's probably the only difference really in terms of So I think what you can expect to see overall is the size of orders clearly have got a little bit bigger, one 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. 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.

Thank you. And then finally, again on AT, thinking about power semis, it feels like, again, that's a bit more of the presentation with Gann and with Rome than maybe it's been previously. Is there... Is that a function of traction with customers? I think you've... previously 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 two 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. You know, we've talked about these five 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 Indian Phosphide right now. But GAN certainly feels like it's moving a bit more into what I described up 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. Thank you.

Morning, it's Richard Page from Deutsche Neumis. Just a couple from me, please. On INA, 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?

uh so reminder h2 order intake was uh it was eight percent up for ina um and it was quarter on quarter improvement now we always have q4 is always a bit better for ina 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 um in terms of the businesses now i think it's um relatively, I think we write the first stage relatively, even sorry, I mentioned the book to Bill in in Andor or Belfast 1.05. So, you know, overall order intake was up a couple of percent right for in the year. So, yeah, I don't think you should point to any one particular area. It's just generally when, you know, it generally improved across the business and customer base through the year, albeit academia was clearly, you know, a bit more challenging. But we did well with commercial customers.

We're definitely getting more traction with OEMs in the belt cross business, the cameras business.

Thank you. And then moving to advanced technologies, obviously the question on everyone's lips about you've got a full order book for 27 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 the in the in your statement you talk about improving production processing in that in that business can you talk a bit more about the opportunity and lead times you need yeah so

So we are working operation 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 FY27 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're 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 that any of you that 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 three to six months to get labour 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.

Thank you.

Thank you. Thomas 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 timescale, et cetera?

um so you know it's one of a number of customers that are um ramping up building out fast booking their own capacity for the next two to three years to support the the need out there um which i assume everybody understands the need and the 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 two to three 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 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 the technology differentiation seems to us and referencing it be clear where 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 thank you very kind of reassuring detailed answer

The second one is just two-part on capital allocation. You mentioned the inorganic and continue to review opportunities. What is the M&A pipeline looking like? Is it a key focus? And then just on, given the great position to be in of increasing 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's been done inside 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, you know, that certainly brings the M&A angle into view and organic growth as well. So, you know, the pipeline's... 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 you know 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 prioritising some organic opportunities next year. You know we will sustain the dividend growth that we've seen over recent years but you know 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.

Okay, great. Thank you. Yes, Stefan.

Yeah, hi, morning. It's Stefan from BNB Paribas. just on the margins in advanced technologies. 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 Seven 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. Yeah, so the overall picture is no different from what I laid out originally, which is we needed to grow a double digit top line, get ourselves to around 150 to 170 million, and that would give us the margin potential in this division to 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 FY27 while building the order up for 28, we feel in good shape to deliver that revenue growth profile. Just as a reminder, because other people do ask as well, what's our capacity in Seven Beach? When we set it out originally, we're sitting between 70 and 80 million of turnover, and we said we could go 3x. So that takes you to around, let's call it 225 to 250, something like that. So we don't need a new site for a while. So the journey's there on the revenue growth. And again, we're just trying to convey that we're excited and feeling 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 to might have been tom's but we you know there's some things that we can do to continue to improve the efficiency um work lead time so that you know they're in a they're in a um they're in shape to capitalize on growth opportunity uh so there is a mixture of some efficiency but mostly operating leverage that drives the um 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 their 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 orders?

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, but one last one, I promise the pricing opportunity. So obviously, it's a excuse my my my description, it's a hot market at the moment. Yeah. 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 Yeah, when when is that point coming?

Well, that's always a debate and a discussion with your customers. I 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.

Hi, that'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 inline production or the kind of out of line testing? I'm seeing some commentary from peers of that inline being the real growth opportunity.

So I guess two 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. That and all of the growth has come from volume manufacturing customers. So the 28% growth in orders is coming from production volume um areas in terms of total i'd have to double check it that where it's currently running at but we still have a you know we still have a sizable base in academia as well in that business you know so and then just in terms of how you see the tam so 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, actually, you can just, it's such a wide range, it's almost silly to pick it. But certainly, you know, in the 10 to 20% range on a compounding basis. And clearly was some of the things going on in the the optic devices and Indian phosphide and stuff like that right now is 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 data comms. How much of the order book is now data comms and what is happening in other areas? And we've also got, how much revenue or production throughput is expected from data comms in 2027? And finally, how do you position yourself to take advantage of opportunity in data comms, but maintain diversification in data comms calls?

Right. So Matt might want to have a specific conversation. But the point of our diversification is across the multiple compounds. So I've mentioned, obviously, GaN power. I've mentioned two elements of augmented reality today. And there's also some quantum stuff that the likes of Regetti are taking. We are trying to make sure that everybody understands 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 data common, the increase in data common in year is obviously a very strong increase and that's continued in the early part of the new year. So it is a sizeable part of the order book right now for production this year and will be in FY28. 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's 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 into detail of the release, we give some examples of augmented reality where we had actually last year our biggest single order came from 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 data comm in the short term.

I would say Datacom 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. We'll hand back over to you, Richard and Paul, for any closing remarks.

Great. Well, look, thanks very much for your attention of 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.