Oxford Instruments has released an in-line half year update which highlights slightly slower progress than expected, but has all the ingredients for a strong H2 – namely pricing materialisation, order book delivery and FX. FY expectations are unchanged. Current trading Oxford has seen continued strong demand in the first half of its financial year and management expects “strong” revenue and adjusted operating profit growth, with organic growth slowing due to global supply change challenges, price increase timing and order book phasing. However, reported growth is supported by FX tailwinds. The balance sheet remains strong with net cash increasing £8m from the year end to £94m (ex-IFRS 16). Order book and outlook It continues to see good y-o-y order growth, with organic orders running ahead of revenues. Management comments that the pipeline remains robust across its end markets and that it anticipates higher H2 production combined with the positive impact of price increases. This visibility drives an unchanged FY outlook. Investment case We view Oxford Instruments as a pioneering company with scope to improve the structure of the group through portfolio and operational adjustments. Select M&A enhances the ‘tidy up’ strategy of the business model, and it is encouraging to see margin enhancement continuing. Oxford Instruments is an attractive asset – on 25 Feb 2022 a proposal for a possible offer from Spectris was confirmed. The suggested price was £31/share (compared to the closing price then at £20.20) and the Board had indicated that it was minded to recommend. This valued Oxford Instruments at CY23E PE of 34.4x, EV/EBITDA of 20.9x and an EV of c.£1.71bn. The approach was subsequently withdrawn on 7 March following Russia’s invasion of Ukraine.