Key trading highlights Oxford Instruments has released a brief year-end (March) trading update, highlighting that FY22 revenues and adjusted operating profit are to be marginally ahead of management expectations (revenue, INVe £343m – consensus £350m / adjusted operating profit, INVe £63.2m – consensus £62.1m). This strong performance is despite supply chain disruption and cost inflation, and reflects a strong H2 with continued resilience in its end markets. Positive outlook Strong order growth supports a healthy order book moving into FY23 and management expects further margin improvement underpinned by its Horizon strategy which is driving growth, operational efficiencies and an improved service offering. Investment case & valuation 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 indicated it was minded to recommend. This valued Oxford Instruments at CY22E PE 36.3x, CY23E PE 34.4x, CY22E EV/EBITDA 22.0x, CY23E EV/EBITDA 20.9x and an EV of c£1.71bn at the time. The approach was subsequently withdrawn on 7 March following Russia’s invasion of Ukraine. On our forecasts, the shares currently trade on a FY22E PE of 24.8x, FY23E PE of 24.2x, FY22E EV/EBITDA of 15.0x, FY23E EV/EBITDA of 14.3x. Next catalyst: FY22 results due on 14 June 2022