What Oxford Instruments (OXIG) Said on Its H1 Earnings Call

Key Points

• Oxford Instruments reported a strong first half: Group orders rose 44%, revenue increased 9% at constant currency, and adjusted operating margin expanded 160 basis points to 14.9%.
• Advanced Technologies’ outlook improved after orders more than doubled to £132 million, driven largely by datacom demand tied to AI data centers. The company expects about 20% divisional revenue growth in fiscal 2028 and now anticipates reaching its 12%–15% medium-term margin range a year earlier than planned.
• Cash generation and shareholder returns strengthened: Free cash flow rose nearly £19 million year over year, Oxford Instruments ended the half with nearly £75 million in net cash, and it plans an additional £25 million share buyback after completing its existing program.

Oxford Instruments LON: OXIG raised its outlook for Advanced Technologies after a surge in orders for semiconductor manufacturing equipment helped drive a stronger first half of fiscal 2027.

The company said group order intake rose 44% and revenue increased 9% at constant currency. Reported adjusted operating profit rose 21.5%, while the adjusted operating margin expanded by 160 basis points to 14.9%, despite a £1.7 million currency headwind.

Oxford Instruments also plans to extend its share buyback by £25 million after completing its current £100 million program. The company expects the additional purchases to be completed by the middle of 2027.

Advanced Technologies lifts outlook

Advanced Technologies received £132 million in orders in the first half, more than double the level of a year earlier and close to its total intake for the whole of the previous year. Commercial customers accounted for around 93% of divisional orders, with about 75% of those commercial orders for datacom applications, Chief Financial Officer Paul Fry said.

The division’s order book ended the half almost 90% higher than a year earlier. Fry said fiscal 2027 revenue was effectively covered by existing orders, with new orders in the second half being booked for delivery in fiscal 2028 and 2029. Lead times were averaging around 12 months.

Revenue in Advanced Technologies rose more than 26% in the first half as earlier orders converted into deliveries. Its adjusted operating margin increased to 7.5%, from just over 2% a year earlier.

For fiscal 2028, the company now expects divisional revenue growth of around 20%, assuming lead times remain broadly unchanged. It also expects the division to reach its medium-term margin range of 12% to 15% next year, earlier than previously anticipated. For fiscal 2027, it continues to expect high-teens revenue growth and a high-single-digit margin.

Fry said roughly 30% of the division’s revenue growth flowed through to profit in the first half. He described that as a reasonable assumption for the next few years, although the figure could vary from year to year.

Richard Tyson said demand for optical connectivity in AI data centers was driving orders for equipment used to make indium phosphide chips. He said the company was adding operational and supply-chain resources, while cautioning that suppliers would need to keep pace with the faster growth.

Imaging and Analysis rebuilds order book

Imaging and Analysis orders rose 12.6% at constant currency, supported by commercial orders that increased just over 20%. Academic orders grew nearly 3%, despite continued weakness in the U.S., particularly in healthcare and life sciences, Fry said.

The division ended the half with a £144 million order book, with around 70% scheduled for delivery in the second half. First-half revenue rose 2.4% on a reported basis and just over 3% at constant currency.

Fry said the company expects second-half divisional revenue to be around 25% higher than in the first half, provided third-quarter orders continue at a similar pace. That would produce low-single-digit revenue growth for both the second half and the full year, in line with guidance.

The company expects the division’s full-year margin to be broadly steady at constant currency, with a reported currency headwind of around 120 basis points. Fry said favorable product mix benefits from the first half would partly unwind, while investment in regional sales would also affect the second half.

Across the group, semiconductor orders totaled £164 million. Tyson said Imaging and Analysis semiconductor orders rose 59%, while Advanced Technologies semiconductor orders increased 173%. He said direct cross-selling between the divisions contributed relatively little to the order intake at this stage, although their combined capabilities were helpful.

Cash generation and capital returns

Free cash flow increased by nearly £19 million from the prior-year period, and normalized cash conversion rose to 85% from 41%. Fry attributed the improvement to higher profits, better working-capital performance and lower restructuring costs, among other factors.

Oxford Instruments ended the half with nearly £75 million in net cash after spending £21 million on share buybacks and paying a £10 million dividend. It increased its interim dividend by 7.4%.

The company continues to assess acquisitions alongside organic investment and shareholder returns. Tyson said Oxford Instruments had come close to a potential deal in the first half but could not make the expected returns work at the valuation sought. He said the company would remain disciplined as it looks for opportunities.

About Oxford Instruments (LON:OXIG)

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