Oxford Instruments plc
Annual Report 2024

CHIEF EXECUTIVE OFFICER’S REVIEW

Robust financial
performance and a refreshedstrategy through a new lensI am pleased to report a robust set of resultsfor Oxford Instruments, and to set out a new
strategy for the Group to enable us to fulfil
our strong potential.

I am pleased to report a robust setof results for Oxford Instruments. We
have delivered 9.8% revenue growthat constant currency, driven by a 7%
increase in semiconductor revenue,
reflecting our greater exposure to thecompound semiconductor market,
and double-digit growth in Materials
Analysis and Healthcare & Life
Science markets, underpinned bystrong research funding.

Orders459.1m£(2023: £511.6m)

Revenue

470.4m£(2023: £444.7m)

Adjusted operating profit

80.3m

£

(2023: £80.5m)“Our exceptional technology,
strong talent base, well-distributed
regional infrastructure and choiceof markets give us a strong
platform from which to grow.
There are significant opportunities
ahead – but to address them infull we need to structure Oxford
Instruments differently.”

Operating margin

17.1%(2023: 18.1%)

Adjusted operating profit of £80.3m
was in line with expectations, up 3.7%
on a constant currency basis. Adjusted
operating margin was down 100bps
at 17.1% (2023: 18.1%), in line withguidance, primarily reflecting losses
incurred in our quantum business as aresult of ceasing certain commercial
activities for these products in China
and continued operational investment.
The successful transition of ourcompound semiconductor business toa new purpose-built facility has beena key operational highlight of the year,
delivering streamlined production andincreased capacity, and presenting
significant opportunity to scale. A
further focus has been the action we
have taken in response to the shifting
geopolitical landscape, pivoting to lesssensitive applications in China andgrowing revenue in other regions. Our
robust revenue growth in Europe andthe rest of Asia bears out the successof this programme, which will continue
into FY24/25.
Underlying order intake (excluding thepivot from China) remained robust,
supported by a good performance inEurope and the rest of Asia. Underlying
book to bill is positive, despite thestrong revenue growth, and theorderbook provides good visibility into
the year ahead. Our pipeline is strong
across all geographies and markets.

A strong platform for growth
Since joining Oxford Instruments in
October, I have carried out a thoroughreview of our business model andmarkets, working collaboratively with
our leadership team and gathering
input from across the business.
Our work confirms that academic
research is the bedrock of Oxford
Instruments’ success. Representing
more than a third of our revenue, it
is resilient across cycles and grows
steadily at 3–6% a year.

Our market-leading technology andexpertise, developed over 60 years,
spans all areas of fundamental
research and provides unrivalled reach
into academic institutions worldwide.
In recent years, by developing andleveraging our market insight, wehave strengthened our position incommercial markets applied R&D,
where the technology is used todevelop new products for industrial
applications (a market four times
larger than the academic researchmarket), which now represents c.
45% of our revenue. We have also
started to make early inroads into theeven larger commercial production
market, representing c.20% of ourrevenue today. The volume potential
in commercial applied R&D andproduction markets is significantly
bigger, offering high single-digit growthunderpinned by structural growth
drivers requiring new technologies
to support decarbonisation andproductivity globally.
Our deep dive review highlights that
90% of our revenue is generated inthree primary markets – Materials
Analysis, Semiconductors and
Healthcare & Life Science. All three
have clear sustainability drivers withhigh single-digit structural growthpotential. Quantum technology, amuch smaller contributor to our current
revenue, also represents a growth
opportunity, though its trajectory isless linear.

Our strategy for the future
Our exceptional technology, strong
talent base, well-distributed regional
infrastructure and choice of markets
give us a strong platform fromwhich to grow. There are significant
opportunities ahead – but to capturethem in full and achieve industryleading margins, we need to structure
Oxford Instruments differently.

RICHARD TYSON
Chief Executive Officer
Full year to
31 March 2024

Reported growthvs full year to
31 March 2023

Constant currency
growth vs full year to
31 March 2023

Orders£459.1m(10.3%)(2.5%1)

Revenue£470.4m

+5.8%

+9.8%

Adjusted operating profit£80.3m

(0.2%)+3.7%

Adjusted operating margin17.1%(100bps)(100bps)Group

1. Underlying	order growth is adjusted for the impact of prior year China orders removed from current year order intake due to export
licence restrictions.

www.oxinst.com

Oxford Instruments plc
Annual Report 2024

CHIEF EXECUTIVE OFFICER’S REVIEW continued
As we set out below, the different areasof our business fall naturally into two
distinct groupings, reflecting different
drivers and business models. This new
structure will also facilitate targeted
actions to unlock the potential in each.

Our future divisional structure
We are restructuring the business
and will be creating two newdivisions: Imaging & Analysis andAdvanced Technologies.
How we are structured today:

Materials & Characterisation
Materials imaging and analysis solutions
and advanced tech and deposition systems
for compound semiconductor devices

Research & Discovery
Scientific cameras, microscopy,
cryogenic and superconducting magnet
technology and X-ray tubes

Service & Healthcare
Customer service and support forour own products and for third-party
MRI scanners in Japan

From 2024 the Group will report against
a new divisional structure:

Imaging & Analysis
Microscopy, cameras, analytical
instruments and software

Advanced Technologies
Compound semiconductor fabricationequipment, cryogenic and superconducting
magnet technology and X-ray tubes

Imaging & Analysis will comprise our
microscopy and cameras businessAndor and our materials analysis
businesses Asylum Research,
Magnetic Resonance, NanoAnalysis
and WITec. (recent adjusted operating
profit margin history 22–24%).
Advanced Technologies will comprise
our compound semiconductor business
Plasma Technology and our quantumfocused business NanoScience,
together with the much smaller X-Ray
Technology business. (recent adjusted
operating profit margin history 0–4%).

www.oxinst.com

Moving forward, service revenue will
be reported within each respective
division. We will report against the
new structure at our half-year resultsin November 2024. The indicative andunaudited pro forma numbers under
the proposed divisional structure forthe full year 2024 are disclosed in
the Finance Review and the annual
results presentation.
The rationale for the planned reportingchange is as follows.
The businesses which will form the
new Imaging & Analysis division
represent c.70% of Group revenue, andhave strong existing synergies and a
track record of success.
They provide similar relatively smallscale imaging and analysis equipment
and software, have common businessmodels, go-to-market strategies andmargins, and they address a similar
client base in their three key markets
in materials analysis, semiconductors,
and healthcare & life science.
In recent years, particularly since
the acquisition of WITec in 2021, theMaterials Analysis businesses havecollaborated more closely, driving
cross-selling opportunities andefficiencies. Joining forces with ourscientific camera and microscopy
business will facilitate further
synergies and simplification. Together,
they will provide an unrivalled rangeof microscopy, scientific cameras,
spectroscopy and analytical tools
and software.
Action plans for these high-performing
business units are under way. It
will result in improved growth andoperational leverage supporting strong
margins. Strategic priorities will include:•

improving sales and service
channels by going to market
through streamlined regionalcustomer-facing teams andgenerating more whole life revenue
from a better customer experience;•

greater focus to leverage
maximum opportunity from theexisting product portfolio andR&D programme;•

simplifying the organisation bystreamlining business processes
and removing duplication;•

increasing cross-selling throughshared marketing initiatives;•delivering a step change inoperational performance by
optimising production andenhancing performance
management and value
engineering; and•increasing commercial sales
through sharing of best go-tomarket practice across regions andtargeted key account management.

The businesses which will form
our new Advanced Technologies
division (representing c.30% of Grouprevenue) have a very different profile.
They sell much lower volumes oflarger-scale complex systems intovery specialised markets (compound
semiconductor and quantum) withunique growth drivers and principally
separate customer bases. Thesebusinesses each require a dedicated,focused approach to leverage theirwell-invested base, deliver improved
margins and achieve their full growthand margin potential.
Our compound semiconductor businessis growing strongly. Scale is important toreap the benefits and recover the costsof our new, larger dedicated facility in
Severn Beach, outside Bristol, UK. The
business is poised to take advantage ofthe structural growth in the compound
semiconductor market, which does
not have the cyclicality inherent in
the silicon semiconductor market.
The leadership team have identified
key areas of specialism within thecompound semiconductor landscapewhere we have leading capability, or
have the potential to do so.
Here, we will maximise productivity
and output following the site move,taking advantage of the process
and efficiency opportunities the site
provides, look to optimise our supply
chain, and continue to simplify our
product range, in order to deliver good
growth and strong margin progression.
A further key focus area is customer
service, which requires a step change
to meet the stretching requirementsof the business’s growing commercial
production customer base.

Our quantum business has been
impacted by export restrictions
which have limited our ability to sell
these capabilities into China. This,
combined with operational challenges,
larger project timescales and strong
competition in the high potential,
but uncertain quantum market, has
impacted performance in 2023/24.
We have already started to restructure
the cost base, commenced a major
operational turnaround programme
in operations and refocused sales
teams on Europe and the USA. This
will continue at pace, focusing onvalue engineering, cost reduction
and performance management.
While leveraging our regionalsales and marketing infrastructure,
the businesses in the Advanced
Technologies division will operatewith greater independence than theircounterparts in Imaging & Analysis,
enabling them to address their
specialist markets in ways which will
maximise their ability to grow bothscale and margin and removing thiscomplexity from the wider business.
Structuring our business in these
two new divisions will improve ourcustomers’ experience and facilitate
the delivery of targeted action plansdesigned to suit the opportunities
and the challenges in each, whilst
supporting greater transparency of
their different paths to significant value
creation for investors.
We will provide a progress update on
the development of the new divisions
via our interim reporting in November,at which point we will report in the newdivisional structure.

Group-level strategic
priorities
While our action plans are targeted
at divisional level, the following
core priorities underpin our strategy
Group-wide.

Improve our customers’
experience
Further growing our reach into
commercial markets requires
on-time delivery paired withexceptional customer service andresponsiveness, particularly in
production environments, where
deadlines are non-negotiable anddown time is not tolerated.
More broadly, we will focus ondelivering deep customer insightand best-in-class customer service
through our regional teams aroundthe world. We also see significant
opportunity to extend whole-life
revenue via our services proposition.

Drive a step change inoperational performanceand productivity
The Group’s rapid growth has
challenged both capacity andcapabilities in some of ourmanufacturing facilities, opening
up significant opportunities in bothdivisions to reconfigure production
areas, design more efficient
production processes and upskill
colleagues to increase
their productivity.
We have appointed a Chief
Transformation Officer who
is leading a broad-ranging
transformation programme
covering all aspects of operational
performance and productivity, fromthe layout of our facilities to value
engineering to reduce our costof goods.

In addition, we have appointed
a dedicated customer service
lead who will focus on our aftersales support infrastructure andcapabilities, and target significant
improvements in our service to
our customers.

Simplify our organisational
structure
With significant overlap between
business units and markets, thestructure of Oxford Instruments
had become overly complex
over a number of years, making
it confusing for stakeholders
to understand and leading to
duplication of processes internally.
Consolidating our eight business
units and six previous end markets
into just two divisions and threecore markets, supported by asimplified customer-facing regional
structure, will drive efficiencies
and operational gearing, andprovide greater transparencyof Oxford Instruments as aninvestment proposition.

Focus on our key strengths
We will continue to protect,invest and enhance our corestrengths by investing c.8–9% ofrevenue annually in R&D, andworking closely with our regional
teams and our customers toensure we focus our efforts on
the most economically attractive
opportunities, delivering strong
return on capital employed.
Focusing on our core markets –materials analysis, semiconductors,
and healthcare & life science –will enable us to maximise our
impact in all three markets, while
deriving efficiencies from this moretargeted approach.

Oxford Instruments plc
Annual Report 2024

CHIEF EXECUTIVE OFFICER’S REVIEW continued
Capital allocation priorities
These can be summarised as follows:
•

•

•

•

Invest in the businessOur businesses are well invested,
as evidenced by the capital
investments we are making in
new facilities at Severn Beach
and Belfast. We will continue toinvest c.8–9% of revenue in R&D,
and make targeted operational
investments to support growth.
Drive shareholder returns
We are committed to deliveringstrong shareholder returns,
taking account of underlying
earnings, dividend cover,currency movements anddemands on our cash.
Make selective acquisitions
Our acquisition strategy is highly
selective and disciplined. We will
focus on adding capabilities in
Imaging & Analysis, with a goodpipeline of owner-managed
businesses under consideration.
Maintain strong balance sheet
Our strong balance sheet gives
us flexibility. We will continuallyassess the appropriateness of
returns to shareholders in thecontext of the strategy.

Journey to growth andhigher margins
We expect to deliver revenue growthand higher margins from both divisions
over the medium term, with the Groupcapable of delivering a revenue CAGR
of 5–8% and an adjusted operating
profit margin of 20%+. Actions to
support growth have begun. Changes
in focus and sharing of best practice
are expected to be implemented
over the next 18 months. Operational
performance improvements will require
investment in the short term, meaning
the margin improvement profile will not
be linear. The initial efforts of the lastyear or so have been supplemented
with a dedicated Chief Transformation
Officer and we have added resources
and built a more extensive change
team who have started improvement
actions in our Belfast facility first.

www.oxinst.com

As evidenced by the recent
financial performance in Advanced
Technologies, specific restructuring
and improvement activities are
required in the short term which havebeen commenced and are expected
to have some impact in the coming
financial year.
Overall, we expect these actions todeliver good sustainable organic
growth in the medium term, coupledwith the opportunity to generatesignificant value through operating
margin enhancement to 20%+.
Our anticipated mid-term outcomescan be summarised as follows:•

Organic growth of 5–8% CAGR.

•

Adjusted operating margin
improvement to 20%+.

•

Cash conversion of over 85%.

•

Continuing to invest in growth,
including 8–9% on R&D.

•

Strong return on capital
employed (currently 29%).

•

Selective acquisitions bringing
complementary capabilities.

A clear purpose
We make a tremendous positive
impact through our products andservices – from supporting Nobel
Prize-winning scientific endeavours
and the development of personalised
treatments for cancer to accelerating
the path to decarbonisation through our
extensive role in the battery ecosystem.
Our technology and scientific expertise
enable our customers to discover andbring to market exciting new advancesthat drive human progress. I am proudof the unique contribution we make. As
we set out on our new strategy, I am
delighted to share a new purpose for
Oxford Instruments:
To accelerate the breakthroughs thatcreate a brighter future for our world.
Our position is unique among UK-based
technology companies – and it is myhope that this new purpose, which has
been warmly embraced by colleagues
around the world, will highlight our
positive impact, and focus the energyof everyone at Oxford Instruments.

People and planet
I have visited almost all our global sites
since joining last autumn and havebeen impressed by the energy andcommitment of the colleagues I havemet at every level of the organisation.
Our engagement scores are high, at
78%, based on the organisation-wide
survey carried out last September. But
there is no room for complacency, andin recent months I have led a deep diveexercise, as part of the developmentof our strategy, to understand ourorganisational culture and to drive
action where there is scope to improve.
We have many strengths. Our
workforce is highly skilled, with deep
expertise in a wide range of disciplines,
from science and engineering tomarketing and sales, and our people
are passionate about what we doand the impact we have. However,there are areas we need to focus on
as we move forward in line with our
new strategy. We are clear on our new
strategic priorities, and have worked
collaboratively with focus groups
around the business to set out new
ways of working to deliver them.
We are committed to creating avalues-driven, inclusive culture. To
that end, we have launched a newequity, diversity and inclusion policy,
and successfully piloted new Inclusive
Leadership training to be rolled out
over the coming year.
Our employees have launched impact
groups focused on women’s issues
and neurodiversity this year, adding to
the network begun with our race andethnicity and LGBTQ+ impact groups.
Our products and services have aremarkably positive impact on theworld around us. We want to generatea brighter future through our own
operations, too. To that end, we areaccelerating our progress to net zero,in all the areas we can control. Last
year, we committed to achieve a 50%
reduction in Scope 1 emissions and a
70% reduction in Scope 2 emissions
by 2030. Today, we are setting a newtarget to achieve net zero in Scopes
1 and 2 by 2030, and sooner if wecan. We will continue to work with
our product development teams
and our supply chain to minimise
our Scope 3 emissions, with the goalof accelerating our overall target
to achieve net zero faster than ourcurrent target year of 2045.

Richard Tyson with colleagues in Shanghai (top left) and Belfast (above right); Richard and his Board colleagues also met apprentices on the site
visit to Severn Beach (bottom left).

Summary and outlook
I am pleased with the results for thefull year and the development of
the business during the period. We
have reported strong revenue growthof 9.8% at constant currency, withadjusted operating profit in line withexpectations. I am grateful to mycolleagues across Oxford Instruments
for their commitment and energy
through a busy year.
We have rebalanced our positions
in regional markets in the face ofgeopolitical shifts, focusing ourresources on non-sensitive areas
in China, and successfully growing
revenue and orders in Europe andelsewhere in Asia.

We have continued to make organic
investments to support our future
growth, with our state-of-the-art
compound semiconductor facility now
operational. Underlying order intake
has remained robust, with a positive
book to bill even though we hadstronger growth in the second half, andthe orderbook gives us good visibility
into the year ahead.
I am hugely impressed with the strong
platform at Oxford Instruments,
anchored by our market-leading
technologies and our talented andcommitted workforce. My work withleadership teams around the businesshas confirmed our view that there
is significant opportunity to build
on our core strengths. I have today
outlined a new strategy, setting
targets to improve the returns fromthe business in the medium term.

As part of this strategy, we arereorganising the Group into two distinct
business divisions to simplify andenhance our operations. We will target
growth by focusing on fewer markets
and a sharpened product portfolio,
tackling key areas where improvement
is required and delivering a step change
in operational and service performance.
We are in a strong position to improveand grow the business, putting it ona sustainable growth footing throughour market-leading offering together
with operational and efficiency
improvements. Given our strong orderbook and pipeline, coupled withpositive business improvement actions,
we expect to make good constantcurrency progress in the full year
ending March 2025.

RICHARD TYSON
Chief Executive Officer
10 June 2024