Hello, and welcome to Oxford Instruments full year results. I'm Ian Barkshire, Chief Executive, and I'm joined by our Chief Financial Officer, Gavin Hill. I'll start by sharing the highlights of the year, including financial performance, a brief reminder of our strategy, and an update on our positive progress on sustainability. I'll then hand over to Gavin to take you through the financial results and operational review. I'll return to talk through the drivers in our end markets and share some examples of how we're accelerating our customers' progress before summarizing and closing with our outlook. Moving straight to the highlights, the group has delivered a strong financial performance with strong organic order, revenue, and profit growth, reflecting our strategic positioning in structural growth markets. Our product leadership and continuous innovation, underpinned by market intimacy, are driving continued growth momentum for the group.
This resulted in strong performance across all our major markets and geographies, and also driving growth from both academic and commercial customers. The strength of our product range and the value we bring to our customers has supported an operating margin in line with last year, despite the inflationary environment, with earlier price rises increasingly flowing through in the second half. We have continued to increase our investment across the group to drive future growth and margin improvements in areas including R&D, operations, customer service, and infrastructure. Alongside our positive financial performance, we've also made good progress on sustainability and are today announcing a new ambitious commitment to reach net zero by 2045. First, I'd like to remind you of the key elements of our business. Our purpose as a group is to enable a greener, healthier, more connected advanced society.
Our chosen markets reflect these long-term structural growth drivers, underpinned by the need to transition away from fossil fuels, to improve healthcare, and to build the digital connectivity, which is shaping the society of the future. We provide high technology products and services to many of the world's leading companies and foremost scientific research institutes, enabling our customers to image, analyze, and manipulate materials down to the atomic and molecular level. In doing so, we play a crucial role in accelerating progress in critically important areas of science and technology, supporting customers at every stage of the life cycle, from fundamental research to applied R&D and high volume manufacturing.
The unique combination of our deep focus on understanding our customers and the drivers of our end markets, what we call our market intimacy, and our significant investment in innovation, enables us to anticipate and deliver transformational shifts to extend our customers' capabilities and speed their progress with our life science microscopy portfolio being one of many examples. To augment our organic growth, we will continue to add complementary acquisitions that create value within our target markets. Looking at progress against our strategy in the year. As those of you who are familiar with this will be aware, our Horizon strategy is founded on four key pillars: market intimacy, innovation and product development, operational excellence, and customer support. These underpin our successful delivery and provide a framework for future growth.
To further enhance our market intimacy, we have placed significant focus in the year on nurturing our existing markets, expanding into adjacent areas, and landing new key accounts. To drive this, we've invested in the size and capabilities of our regional sales and marketing teams to better exploit our in-depth insights within different regional markets. Our successful integration of WITec has also supported our progress as we exploit synergies across our materials analysis portfolio. Our focus on innovation and disruptive product development is a key differentiator, which helps us remain at the forefront of our markets. We design our products with customer productivity and ease of use at their core, and our growth momentum demonstrates the success of our approach. We continue to fuel our future organic growth with a 9.8% uplift in R&D spend.
Through our ongoing operational excellence program, we've continued to increase production capacity, shorten lead times, and drive further operational efficiencies to meet the growing demand for our products. We have continued to strengthen relationships with strategic suppliers, with a view to long-term resilience and environmental sustainability. In customer support, the consolidation of our regional service teams with our increased range of tailored products and remote digital services, is creating more value for our customers while contributing to our growth and productivity. In addition to the progress with our Horizon strategy, our strong performance in the year reflects the increasing demand across our markets, together with an effective pricing strategy underpinned by our product leadership. A strong second half was supported by the easing of supply chain issues and the increased flow-through of earlier price rises in the second half, as well as the relaxation of COVID restrictions in China.
Strong order growth across our end markets supported constant currency revenue growth of 25% into advanced materials applications, 10% in healthcare and life science, and 16% in energy and environment, with quantum technology revenue growing by 24%, as this disruptive technology continues to move towards commercialization. Within semiconductor communications, our focus on the emerging Compound Semiconductor and the more established silicon chip and electronic device markets, combined with our reach across applied R&D and manufacturing-related applications, supported strong order growth and 9% revenue growth. Research & Discovery revenue declined in line with our strategic move towards higher value markets and now represents only 4% of group revenue. We had strong growth to both commercial and academic customers, with commercial customers now representing 50% of revenue, as we increasingly target new and adjacent markets.
Increased regional demand supported strong revenue growth in North America, up 36%, Europe up 16%, and Japan up 25%. Revenue into China was broadly in line with previous year, with double-digit order growth, supported by increased funding as lockdown disruption eased, and our shift in focus to attractive end markets, such as life science and renewable battery technology, in which there are fewer export license considerations. We have also made strong progress on our sustainability agenda in the year. As we set out in our purpose, we are committed to enabling a greener, healthier, more connected, advanced society. We seek to do this not just through the positive impact of our products. We have also made strong progress on our sustainability agenda in the year. As we set out in our purpose, we are committed to enabling a greener, healthier, more connected, advanced society.
We seek to do so not just through the positive impact of our products and services, but also by embedding sustainability in the way we run our own operations and engage with our stakeholders. As I mentioned earlier, we have today announced our new accelerated target to reach net zero by 2045, as well as setting 2030 targets to reduce our Scope 1 and 2 emissions by 50% and 70% respectively. In the year, we made further progress, reducing our Scope 1 and 2 emissions by 7%, representing a 23% reduction per million pounds of revenue. As a values-driven organization, social sustainability and support of our employees is also very important to us.
This year, in recognition of the increased cost of living, we brought forward our annual salary review and followed this up with a further one-off cost of living payment for the most impacted employees. We continue to invest in high-quality training and development, and have employed more apprentices in a wider range of disciplines than ever before. More broadly, we are committed to building a positive and inclusive culture where everyone feels able to be their authentic self. That concludes this part of the presentation. I will now hand over to Gavin to update on the financial and operational progress in the year.
Thank you, Ian. As some of you may have noticed, we have issued unaudited financial statements today. This is because our auditors, BDO, require additional time to complete internal processes in order to finalize its audit report. We are satisfied that there are unlikely to be any changes to the information contained in the preliminary announcement. As demonstrated by these charts, the breadth and resilience of our markets, combined with implementation of our strategy, has yielded good progress on improving key performance indicators. On a continuing operations basis, we have delivered a six-year compound annual growth rate, 9% for orders, 8% for revenue, and 17% for adjusted profit before tax. Our operating margin has increased from 13.6% to 18.1%.
Against a backdrop of robust portfolio and capital management, along with good cash conversion, our average return on capital employed now sits at a respectable 35%. Our focus remains on driving growth, improving margins, and delivering high returns on capital through delivery of our strategic objectives. Turning now to our trading performance in the financial year ending March 2023. We saw good growth in constant currency revenue of 14%, with 70% driven by volume and the remainder by price. Adjusted operating profit at constant currency grew by 13.4% to GBP 80.5 million. Adjusted operating margin at constant currency dropped marginally to 18% as the business invested to support growth. We have benefited from a currency tailwind, primarily due to a weak sterling U.S. dollar rate.
Reported adjusted operating profit grew by 21.4%, with the operating margin remaining in line with last year at 18.1%. Adjusting measures include amortization of acquired intangibles of GBP 9.3 and 1.8 million relating to legal and restructuring non-recurring items, as well as a small impairment of development costs. A credit of GBP 3 million reflects the mark-to-market movement and the revaluation of forward contracts, hedging future cash flows, which were entered into when sterling was weaker than it was at the balance sheet date. Adjusted profit before tax increased by 24.4% to GBP 82 million. The effective tax rate has risen from 17.8% to 20.7%, the increase reflecting prior year tax credits and a greater mix of profits from jurisdictions with higher tax rates than our average.
We expect the effective tax rate to rise in 2023, 2024, owing to the increase in the U.K. corporation tax rate. Adjusted basic EPS increased by 19.5% to 112.7 pence. The total dividend of 19.5 pence per share reflects an increase of 7.7%. Materials & Characterisation grew by 19.2% at constant currency, with strong growth across the portfolio. Supply chain disruption and U.K. export license rejections held back some shipments into the compound semiconductor market. Research & Discovery grew by 8.1% at constant currency, supported by improved second half reduction of our optical imaging and microscopy products. Growth was tempered by delays to the installation of some large cryogenic and magnet systems. U.K. export license rejections to China, particularly to the quantum market, also constrained growth.
Weak sterling against the U.S. dollar resulted in a currency tailwind of GBP 26.1 million. Reported group adjusted operating profit increased by 21.4% to GBP 80.5 million, equivalent to a margin of 18.1% in line with last year. Constant currency adjusted operating profit grew strongly for Materials & Characterisation, with strong demand for electron microscope analyzers and atomic force microscopes. The WITec business has been fully integrated into the group, with combined sales teams driving demand. Within Research & Discovery, our imaging and microscopy business had a strong second half of the year, despite an increase in U.K. export license rejections.
The reduction in profitability and margin in Research & Discovery is principally attributable to fewer shipments of our cryogenic systems due to some market sectors being adversely impacted by U.K. export licenses and delays in the completion of our final highly configured systems. We've seen strong order growth driven by investment in silicon semiconductor production and demand for compound semiconductor processing systems. Revenue was held back by supply chain disruption and U.K. export license refusals, limiting the number of etch and deposition processing systems that were shipped in the period. We've also seen continued investment into materials research and battery technology supporting demand, particularly for our imaging and analysis systems. WITec and its Raman imaging technology is supporting good growth, particularly in healthcare and life science. Investment in healthcare research has led to good demand for our scientific cameras and confocal microscopes.
Our benchtop microscopy systems, along with dedicated analytical software, have been designed to offer leading healthcare research capability. Research into fundamental disease mechanisms is driving strong demand for our new microscopy systems and benchtop microscope. Investment in resources, IT systems, and infrastructure is being made to support the capture and delivery of growth opportunities. We have seen strong demand in orders for our cryogenic systems, driven by an increase in research in quantum computing as governments and commercial enterprises accelerate their research as they strive to deliver transformational changes from adoption of the technology. Profitability fell this year due to the unwind of our final bespoke products and an increase in U.K. export license refusals to China. We've seen strong growth in our service segment, supported by implementation of a regionally led service model.
We've seen good growth for analytical software sales into life science applications, driven by tailored packages to specific applications. We have started to secure contracts to provide service capability to quantum computing data sites. Our business in Japan for MRI healthcare customers continues to deliver excellent levels of quality, service, and support. Revenue at constant currency grew by 16% in Europe, supported by additional deliveries of electron analyzers, optical and microscopy products, and cryogenic systems. Revenue in North America increased by 36% in constant currency, with all businesses recording good growth, to especially high demand for our semiconductor processing systems. Asia remains our largest region, with China constituting 54% of regional revenue and 24% of total group revenue. Asia delivered revenue growth of 2% at constant currency.
Strong demand for our electron microscope analyzers and atomic force microscopes was offset by fewer deliveries of our semiconductor processing systems due to supply chain disruption and U.K. export license rejections, and a pivot away from quantum-related cryogenic systems caused by export license constraints. With respect to orders, we've seen strong growth across Europe, North America, and Asia end markets, with order growth in China of 11%. With total orders in the year of GBP 512 million, our book-to-bill ratio was 1.15. The total order book at GBP 320 million has grown by 19% on a constant currency basis, with orders in the year being 60% driven by volume. We have witnessed very strong growth across all Materials & Characterization constituent businesses, with constant currency growth of 30%. The order book for Research & Discovery grew by 8%.
We have seen strong demand for our imaging and microscopy products, delivering order book growth of close to 20%. We also received a large commercial order for our cryogenic systems. The removal of previous years' orders due to U.K. export license rejections to China within the quantum sector depressed the growth rate. Turning to the cash flow. Working capital increased by GBP 9.1 million. Inventories increased to support growth and secure component supplies in the face of continued supply chain uncertainty. A high level of shipments close to the year-end due to late supplier deliveries has increased receivables. Good growth in orders has delivered an improvement in our level of customer deposits. Cash conversion was 88% on a normalized basis, which excludes capital expenditure relating to the new semiconductor facility and a facility expansion in High Wycombe.
This is an improvement on last year's conversion of 84% on the same basis. Capital expenditure of GBP 32.1 includes 23 million relating to construction by new semiconductor facility. For this financial year, we expect additional payments of approximately GBP 10 million to complete the facility. We are also planning to expand our operations in Belfast over the next 18 months to support the growth of our imaging microscopy business, particularly into life science markets. Last December, we paid the full earn-out consideration for WITec of EUR 5 million. Deficit recovery payments of GBP 11.7 million included a one-off advance payment of GBP 4 million to the U.K. Defined Benefit Pension Scheme, a security in the event of collateral calls.
Despite the fall in the asset value due to rising gilt yields, our LDI investment strategy is working as intended, with the technical deficit falling as expected. We remain on track to achieve funding self-sufficiency in 2025. Net cash was GBP 100.2 at the end of March, up from 85.9 million, as at the end of the 31 March, 2022. As regularly presented, the business has a large exposure to foreign currency fluctuations. This chart shows the long positions for our major trading currencies, as well as the short sterling position. As you can infer from the previous slide, the group's financial results are subject to currency fluctuations.
We maintain a hedging program to mitigate currency movements up to 18 months forward from the next reporting date, covering up to 80% of forecast transactional exposures. In the year, we recorded a favorable currency impact of GBP 26.1 to revenue and 5.3 million to operating profit. Looking ahead to this year, our assessment of the currency impact is based on hedges currently in place and current FX rates, a headwind to revenue and profit of GBP 15 and 0.6 million, respectively. This is based on current FX rates of 1.26 for sterling dollar, 1.177 for sterling euro, and 176 for sterling yen.
Looking further ahead to the financial year, 2024, 2025, using forecast rates and hedges currently in place, we'd expect a broadly neutral impact to revenue and a GBP 4.2 million headwind to profit, owing to the unwind of hedges crystallizing the previous year at more favorable rates. The actual currency impacts will be dependent on currency volumes and mix, as well as currency rates at the time of shipments and customer acceptances, and is therefore subject to a high degree of uncertainty. To summarize key financial highlights from the year, we've seen good growth in orders, and we ended the year with a record order book valued at GBP 320 million. Operating margin remained flat despite cost inflation and an increase in overhead investment.
We will continue to support our future growth ambitions and position ourselves to invest in delivery and efficiency by investing in capabilities across the business, including in infrastructure, IT, and resources. The geopolitical environment has led to an increase in U.K. export license rejections to China. We are directing our sales efforts to markets and customers where we expect fewer barriers to trade. In the year, we saw some currency benefit as a result of the volatile and weak sterling U.S. dollar pair. We do expect some currency headwind in 2023, 2024, with the profit impact partially mitigated through hedges in place. An increase in net cash to just over GBP 100 million further supports our strong balance sheet. This will enable future growth in the business through organic investment and acquisition opportunities. With that, I will hand back to Ian.
Thank you, Gavin. I will now shed some further light on the key market drivers shaping our end markets and give some examples of how we are supporting our customers. The strength and breadth of our chosen end markets has played a critical role in the positive performance of the group. Each of our end markets has strong structural growth drivers, stimulating demand and increased funding across both academic and commercial customers. In healthcare and life science, our customers are using advanced technology to gain ever more detailed insights into fundamental disease mechanisms, and to develop new treatments and more effective medicines at much reduced costs. In semiconductor and communications, the ever-growing demand for data and more sophisticated electronics is fueling rapid growth, with devices requiring increased power and advances in capability.
Sustainability drivers are also key in this market, with compound semiconductors playing a vital role in providing higher power and bandwidth while reducing energy use. In advanced materials, our products are playing a vital part in helping customers develop and optimize the new and sustainable materials needed to support modern society. Likewise, in energy and environment, the shift towards renewable power sources, the desire to prevent pollution, and the need to provide food and water security in the face of climate change, are all powerful drivers to create more sustainable solutions. Within quantum technology, investment is rapidly increasing, with tens of billions of dollars committed by governments and companies over the coming years as they seek to develop and exploit- the potential of quantum computers and enable transformational disruption of established markets, such as pharma, logistics, and finance.
The drivers for research and fundamental science are longer-term economic and social progress, as customers use our products and solutions to develop the technologies of the future. Moving now to look at some more specific examples where our products are accelerating customers' progress. Starting with life science. Here, we enable our customers to analyze cells, organs, and tissues down to the nanoscale. Through our R&D program, we have developed a portfolio of disruptive products optimized to the specific needs within the life science and pharma market. Our benchtop microscope, BC43, shown on the left, has disrupted the market by making research-level capability available to non-expert operators, and crucially, combining high performance with high throughput, enabling rapid progress in preclinical trials and other applications. It has dramatically increased our addressable market by making our technology accessible to a broader user community and at a compelling price point.
At the other end of the spectrum, our Dragonfly suite of microscopes offers ultimate performance and capabilities for high-end researchers, enabling 3D imaging of neural networks and large samples, such as laboratory-grown organoids, but with the unrivaled speed and sensitivity to analyze the finest molecular details. We further support our customers to gain valuable insights and accurately interpret the richness of their data through our tailored software solutions for applications such as cancer and neuroscience. Within semiconductor and communications, we provide systems and proprietary processes into the growing compound semiconductor market, which represents more than 60% of our semiconductor revenue. Our innovative systems and processes are at the forefront of the development and manufacturing of advanced chips that require, for example, gallium nitride, silicon carbide, and indium phosphide materials, which enable new capabilities ranging from higher power and speed, as well as improved energy efficiency.
Our proprietary processes for these compounds are enabling breakthroughs in power electronics, optoelectronics, and display and lighting. Customers are using our systems in a wide range of areas, including enabling 5G connectivity and reducing data center power requirements, higher performance augmented reality headsets, managing power requirements for electronic vehicles, and creating ever more sophisticated autonomous driving solutions. Our focus on the critical layers within devices that have the most significant impact on device performance, combined with our expertise in producing and controlling layers at the atomic level, allows dramatic improvements in power devices, such as the one represented on the slide. The precision and accuracy of our processes also enables customers to dramatically improve their wafer yields and manufacturing efficiency required to achieve their economically viable price point for many applications.
Our image and analysis products are playing an increasing role in the quest for a cleaner and less polluted environment. For example, a major European-funded project is using our Raman microscopes, together with our dedicated software, to map and analyze the microplastic particles from discarded single-use plastic and packaging, which pollute our oceans, damage ecosystems, and reduce biodiversity. With our tools for electron microscopes, scientists can analyze and seek to eliminate sources of pollution. Importantly, our solutions can measure the precise size, shape, and composition of the polluting particles, which determine the impact of the pollution on the environment and within the food chain. Together, our tools and techniques are finding an increasing market as academics and commercial researchers seek to diagnose, address, and ultimately prevent environmental damage, climate change, and human health impacts.
A further growth market for us is quantum technology, where we are among a relatively small group of companies with the advanced capabilities needed to transition this disruptive technology into mainstream applications. Quantum computers predominantly require extremely low temperatures in order to operate, driving growing demand for our cryogenic refrigerators, which operate at temperatures colder than outer space and create the environments where quantum effects dominate. Our advanced technologies have a crucial role to play in the development of next generation quantum computers, and are also now being used to support the rapid transition to commercial applications. The tubular structure in the center of the slide, houses one of our refrigerators, cooling the first commercial quantum computer in a Japanese data center. We now provide full service support packages for commercial quantum computer installations, ensuring 24/7 uptime, a new source of income for the group as this market grows.
We are also partnering with major global technology companies to accelerate their quantum computer roadmaps as they seek to unleash the capabilities of quantum on complex challenges in areas from logistics to pharmaceuticals and from climate change to cybersecurity. I hope this gives you a flavor of some of the many ways in which we are supporting our customers and accelerating their progress. Moving to our summary and outlook. The positive momentum we have continued to generate reflects the purpose-driven focus on structural growth markets of enabling a greener, healthier, more connected, advanced society. Our deep understanding of customers' needs and the drivers of growth in our markets, combined with our product leadership, our relentless innovation, and our commitment to operational excellence, all key elements of our well-embedded Horizon strategy, have supported a strong set of results and underpinned continuing investment for future growth.
We have delivered growth in orders, revenue, and profit, as well as maintaining margin, with performance strengthened in H2 as we converted our order book and realized the benefits of new pricing structures. While mindful that the wider macroeconomic context remains challenging, our record order book and strong positions in attractive end markets underpin our confidence in the future growth of the group. Our strong balance sheet positions us well to invest in people, infrastructure, and innovation, and to make synergistic acquisitions to augment our organic growth. Full year outlook remains in line with our expectations. Thank you for watching. This concludes our presentation.