H1’20 results are positive highlighting good growth and margin progress Oxford posted strong half-year results highlighting good growth, margin expansion and robust underlying cash generation. Revenue growth was driven by semiconductors, advanced materials and energy end markets, while the operating margin benefitted from increased revenues and operational improvements. An 8% increase in the interim dividend is encouraging. Revenues grew by 13.1% (9.1% organic) to £166.3m (INVe £160.0m). The operating margin expanded 120bps to 15.5% giving operating profit growth of 22.9% (+12.4% organic growth) to £25.8m (INVe £23.5m). EPS increased by 30.0% to 35.5p while the dividend increased 7.9% to 4.1p. The company remains in a net cash position with £14.2m of net cash at the half-year. Outlook Orders were up 6.4% to £173.3m (+2.8% organic and a book-to-bill of 1.04x) and the order book stands at £186.8m (+6.0% organic). Management expects FY20 to be in-line with expectations with the second half showing a more normal seasonal bias. We believe that consensus has potential to increase by mid-single digit percentage in FY20 when factoring the first half and current FX rates. Our view and valuation We view Oxford Instruments as a work-in-progress, and its recent updates have been reassuring. There has been underlying growth and some currency tailwind, and the full-year expectations were confirmed. Top-line progress has started to drop through to profit, due in part to investment in operational improvement. At this stage – in view of the lumpiness of orders, a lack of visibility in some places, macro constraints and valuation – we remain a Hold. On our current forecasts, the shares are trading on FY20E PE of 20.2x, EV/EBITDA of 11.8x, and dividend yield of 1.1%.