Hello, and welcome to today's presentation of our half year results. I'm Richard Tyson, Chief Executive, and I'm joined by Gavin Hill, our Chief Financial Officer. As many of you will know, this is my first time presenting results at Oxford Instruments, having joined the company at the start of October. With that in mind, I'll be focusing on giving you a top-level overview of results and some of my first impressions of the company, and Gavin is gonna take you through the financial results and more detail on how we performed in the half. Before I start, I'd like to say thank you to Gavin and my new colleagues at Oxford Instruments for the really warm welcome they've given me over the last six weeks. It's been fantastic to join such an open, collaborative team.
Gavin and all those I've met as I've traveled around our sites, have gone out of their way to help me understand what really makes Oxford Instruments tick. I'm pleased to say that the group has delivered a really robust performance in the half, particularly in the context of pretty tough trading landscape out there. We've delivered 7.5% constant currency revenue growth, and our adjusted operating profit is up by 6.5%. We're seeing continued strong demand for our products. The order book is up 10%, giving us good visibility out to the end of the year. Order intake has remained positive, booking ahead of revenue with book-to- bill at 1.07, albeit actual intake is a fraction down on last year's very strong comparator period.
Much of our revenue growth has been driven by a really strong performance in healthcare and life science applications, as well as advanced materials. But we've also performed robustly in semiconductors, slightly up year-on-year. Here, we're shielded from some of the cyclicality in the market because of our principal focus on compound semiconductor applications, making up more than 60% of our semiconductor activity. And because we support customers at every stage in the semiconductor life cycle, from early stage R&D to high volume manufacturing. Looking at the geographical picture, we've seen a strong performance in Europe and in Asia, notably in China. Here we've been targeting some new and adjacent markets, including strengthening our position in healthcare and life science, and also extending our reach in energy and the environment. This has resulted in strong revenue growth and an increase in orders.
The other story of the half is the investment we're making to increase capacity and boost our operational capabilities. Ian and Gavin spoke about this at the prelims, but it's an ongoing program, and I think it's worth walking you through some of the specifics. We're investing close to GBP 90 million in new facilities. On the left, our state-of-the-art compound semiconductor facility just outside Bristol. We're currently moving people in and getting production up and running, and the site will be fully operational next year. With GBP 75 million invested here, it's a demonstration of confidence in this growing market, and it's what we need to do to ramp up production capacity to meet the high levels of demand that we're seeing. In the middle is an artist's impression of our planned site expansion in Belfast.
We've bought the building next to our current facility, and this will enable us to double production capacity and keep pace with the growing demand for our optical microscopy products, Dragonfly and BC43, as well as ramping up capacity for our scientific cameras. This is a fast-growing part of the business, so the GBP 15 million investment is significant and needed to support that growth. I was there two weeks ago, and it's clear that it's badly needed, and the changes will roughly double operational capacity. But we're not just investing in infrastructure. In R&D, we've spent nearly GBP 20 million in the half. That's 9.4% of revenue, 70 basis points up from the full year because of the strong pipeline of new product opportunities across the business. We're also investing in people, operations, and systems, including ERP upgrades and production processes.
This investment is needed to ensure we deliver our customers' expectations, underpin our rapid growth, and start to find efficiencies. That's an overview of what's driving the results you see today. What I'd like to do now is to share some of my first impressions of Oxford Instruments and what attracted me to the company. Ian and Gavin together have done a great job over the last few years building the Oxford Instruments you see today. As I hope is clear from what I've said so far, I'm hugely excited to be at the reins of this brilliant business, which is a real global leader in its field. We're well positioned in global markets with strong structural growth drivers linked to sustainability. In addition, the diverse nature of the markets, geographies, and customer types provide resilience when one area experiences any weakness.
Another key driver of resilience is the split of our customer base between academic and commercial. That's roughly equal. Our world-class technology has earned Oxford Instruments a really strong brand and reputation for high quality. Four days into my time here, I joined the Oxford Instruments Fellows Conference. Scientists from all over the group were present, and I learned that yet again, Oxford equipment have been used in the experiments that won this year's Nobel Prizes for Physics, Chemistry, and Medicine. Pretty much every scientist you meet will have used our equipment at some point in their career. Also, when I was with the team in Belfast a couple of weeks ago, they showed me a BC43 in action.
That image you see at the top right in the egg is the egg chamber of a fruit fly, which shows you just how good the new product is at imaging at the cellular level, the press of a button. Even I could do it! The business delivers high gross margins due to the quality of our products and the value they add to our customers. The balance sheet is strong, thanks to the work that Gavin has done. From the feedback and observations through my site visits in the last few weeks, right across this business, the people I've met are also highly engaged and committed, and open to new ways of thinking. As those of you who know me will appreciate, I believe strong teams and our people are fundamental to any good business's success.
So when you combine the great team with the strong market positions we hold in structural growth areas, we have a really strong platform to build from. Let's take a look at these strong market positions. In advanced materials, healthcare and life science, semiconductor and communications, these three markets drive over 80% of our revenue. Some of these areas I know well from my prior role. Our biggest market by revenue is advanced materials, representing 32% of group revenue in this half, and we're seeing strong growth here, 12% at constant currency. Customers are coming to us to understand the properties and characteristics of a wealth of advanced materials, from metals to alloys and polymers. And there are strong sustainability drivers, such as the need to make lighter, stronger steels for automotive and construction.
Our next market is semiconductor and communications, making up 27% of group revenue. Here we're responding to really strong drivers around the demand for faster, more power efficient, and greener chips and devices. We are particularly strong in designing equipment and applications for compound semiconductors, representing more than 60% of our activity in semiconductor and communications. These compounds, the likes of gallium nitride and silicon carbide, outperform silicon semiconductors because of their increased power, faster processing ability, and the ability to emit and sense light, meaning they're essential to the development of the next generation technology for power devices, 5G connectivity, augmented reality, and wireless charging. The combination of these capabilities across the sector has supported a really robust performance in the half. Then, as I mentioned earlier, our fastest growing market is healthcare and life science, up 22% year-over-year.
Our optical microscopy portfolio and specialist analytical software for applications in areas including cancer and neuroscience give scientists the ability to understand what's happening at the cellular and molecular level, testing formulations and developing new and better vaccines and personalized medicines. Clearly, we also have strong positions in energy and the environment and quantum technology, both markets with significant growth potential, given the sustainability drivers for energy and the ongoing commercialization of quantum computing. Gavin is now going to provide more detail on how these dynamics have played out in the results for the business. Over to you, Gavin.
Thank you, Richard, and can I just wish you a very warm welcome on behalf of all of us at OI. We are delighted to have you on board, and are very much looking forward to working together to deliver the strong future we've spoken about. As Richard said at the start, we've delivered good constant currency revenue growth of 7.5%, supported by a strong opening order book. Constant currency adjusted operating profit grew by 6.5% to GBP 36.5 million. However, a currency headwind, due to the weakness of the Japanese yen against sterling, led to a reported adjusted operating profit being marginally behind last year.
Our constant currency operating profit margin was broadly in line with last year, reflecting an increase in gross margin of 100 basis points, offset by investments in the period on ERP systems and operational improvement. Statutory operating profit increased by 8.7%. This includes amortization of acquired intangibles and the mark-to-market valuation of uncrystallized currency hedges for future years. Our effective tax rate increased to 24%, following the rise in the U.K. corporation tax rate from the first of April this year. As a result, adjusted basic EPS fell 2.8% to GBP 0.494. Our confidence in the outlook for the group is demonstrated by an increase in the interim dividend of 6.5%. Materials and Characterization grew by just over 3% at constant currency.
Shipments of our electron analyzers declined marginally against a very strong comparative period, in part due to a larger amount of finished goods than normal, awaiting export license clearance. During the first half, we delivered an increase in shipments of compound semiconductor processing systems. With good demand for our life science products and an improvement in operational execution, we've delivered constant currency revenue growth of just under 18% in Research and Discovery. We've also recorded good demand in the period from OEMs for our X-ray tubes. Revenue growth from service of our own products supported constant currency growth of 4%. A strengthening of sterling against the U.S. dollar, and more significantly, the Japanese yen against the comparative period, resulted in a currency headwind of GBP 5.9 million. Reported group adjusted operating profit decreased slightly by 0.8% to GBP 36.5 million.
Constant currency margin was broadly in line with last year, although a currency headwind resulted in reported margin declining to 17.4%. In Materials and Characterization, higher revenue from our compound semiconductor processing systems offsets a small decline in revenue from our electron analyzers. Within Research and Discovery, we've delivered strong profit growth in our imaging and microscopy business.... The segment recorded adjusted profit growth in constant currency of 44% and an improvement in margin to 14.4%, growth of 240 basis points. Service and Healthcare constant currency adjusted profit fell by 7.3%, primarily due to additional cost pressures in our Japan MRI business. Currency effects, including the impact of transactional currency hedging, depressed reported adjusted operating profit by GBP 2.7 million.
Our strong opening order book has supported good revenue growth for our compound semiconductor processing systems, more than offsetting lower sales of materials analysis products into the silicon market. Our leading and broad product range that supports advanced materials research has provided good revenue growth in this market. Orders are down against a strong comparator period. Macroeconomic uncertainties lengthening commercial order cycles, and we are in the process of pivoting our pipelines towards customers who are less susceptible to export license concerns. However, the sector book-to-bill of 1.07x supported growth in the order book. We have seen strong growth for life science imaging and microscopy products. Our benchtop microscopy systems, along with our dedicated analytical software, are improving understanding of disease mechanisms at a molecular and cellular level, providing ease of use at a competitive price point. This is supporting good order intake.
We've also seen strong demand for our X-ray tubes, which are used extensively across advanced materials applications. Demand for our cryogenic systems is being driven by an increase in research in quantum computing and materials science. We've delivered good growth in our service segment, supported by the successful implementation of a regionally led service model. Service and Healthcare adjusted operating profit fell by 7.3% at constant currency, largely due to an increase in the cost of helium, which is used in service contracts under our Japan MRI business. With total orders in the half year of GBP 224 million, our book-to-bill ratio was 1.07x. We have delivered constant currency revenue and order growth in Europe of 11% and 10% respectively, supported by strong demand for our compound semiconductor processing systems and large framework OEM orders for our X-ray tubes.
Revenue for North America fell by 3% at constant currency, reflecting a lengthening of commercial order cycles. In addition, unfavorable timing of academic budgets for our semiconductor processing tools contributed to a weaker first half of the region. These issues also contributed to a fall in constant currency orders of 8%, although pipelines remain strong across all our end markets. Asia remains our largest revenue by region, with China constituting 64% of regional revenue following strong order intake in the previous financial year. Revenue for China grew by 18% at constant currency. Overall, Asia delivered revenue growth of 8.7% at constant currency, with strong demand for atomic force microscopes, optical and microscopy products, and compound semiconductor processing systems. Orders for the region fell by 5% at constant currency, with 4% growth in China, offset by lower orders for Taiwan and Korea.
China constituted 26% of group orders in the half year. During the half year, the positive book-to-bill increased the order book by 10% at constant currency to GBP 332 million. We have achieved growth across all three segments, providing good visibility for the remainder of the financial year. Turning to the cash flow, working capital increased by just under GBP 32 million. This larger than usual increase reflects several factors that have impacted inventories over the period by GBP 23 million. First, within our cryogenic business, we proactively accelerated raw material purchases ahead of an ERP transition. Second, to safeguard operational output, we increased inventories ahead of our planned move of operations to the new compound semiconductor facility. Finally, we have a substantial number of finished goods awaiting export license clearance due to government processing delays.
We expect to see this increase in inventory largely unwind in the second half. In addition to these one-off items, inventory levels have increased due to build costs incurred on long lead time, new cryogenic platforms and some strategic inventory purchases made to avoid cost inflation. Our capital expenditure of GBP 16.7 million primarily comprises later stage construction costs on the new compound semiconductor processing systems facility in Bristol, as well as purchase and strip out costs on the new building in Belfast to support expanded production by life science product range. We expect completion of the new Bristol facility by the end of the fiscal year, with an additional GBP 7 million of expenditure. The estimated total cost of the expansion in Belfast is not expected to exceed GBP 15 million and will be phased over the next 24 months.
Cash conversion was 41% on a normalized basis, which excludes expenditure relating to capacity expansion and the impact from export license delays and rejections. We expect an improvement in the second half, more in line with historic conversion rates. We made deficit recovery payments of GBP 4 million to the U.K. Defined Benefit Pension Scheme. We are recording an accounting asset of GBP 11 million, and despite the fall in the asset value due to a rise in gilt yields, our LDI investment strategy is working well, reducing the quantum of the actuarial deficit, and we are still on track to attain funding self-sufficiency early in 2026.
Net cash was GBP 79.1 million at the end of September, down from GBP 100.2 million as at the 31st of March, owing to the increase in working capital, capital expenditure, and a rise in tax payments because of the higher U.K. corporation tax rate. 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 half year, we recorded an adverse currency impact of GBP 5.9 million to revenue and GBP 2.7 million to operating profit.
Looking ahead to the full year, our assessment of the currency impact is, based on the hedges currently in place and forecast FX rates, a decrease in revenue and operating profit of approximately GBP 11.8 million, GBP 3.1 million, respectively. Forecast rates used are 1.23 for sterling dollar, 1.15 for sterling euro, and 185 for sterling yen. Looking further ahead to the financial year 2024-2025, using the same currency rate assumptions, we would expect a broadly neutral impact on revenue and a GBP 2.8 million headwind to operating profit. 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 therefore, these estimates will always be subject to a high degree of uncertainty.
To summarize key financial highlights from the half year, we have delivered constant currency-adjusted operating profit of 6.5% after additional investments in ERP systems and operational improvement. Our continued investment in the future is supported by an increase in research and development spend to just under GBP 20.5 million, equivalent to 9.4% of sales. Cash flow has been adversely affected by capital investments, a buildup of inventories, and the impact of export license delays and rejections. We expect to return to a more normalized cash flow conversion in the second half. Our confidence in the business, as demonstrated by our strong order book and pipeline of opportunities, is recognized by an increase in the interim dividend of 6.5%.
With net cash of GBP 79.1 million, we retain a strong balance sheet, enabling future growth in the business through organic investment and acquisition opportunities. And finally, our strong order book and normal seasonal second half weighting support unchanged expectations for the full year. And now back to Richard to wrap up today's presentation.
Great. Thank you, Gavin. So before we close today, I wanted to build on my early impressions and provide you some sense from the early weeks here of the opportunities I see going forward. These are some of the areas you can expect to hear more about as we think about the next phase of our growth. Developing and enhancing market intimacy has been a central priority for Oxford Instruments for the last few years. As I've noted, these markets are the right ones, with structural growth drivers underpinning them for the medium term. And it's clear that the teams have lots of innovations and new product opportunities across multiple subsegments of these markets. Now, clearly, we need to continue to nurture and support R&D and the vibrant pipeline of potential new products and ideas.
But I do believe there's a clear opportunity to sharpen our focus and energy on the most attractive of these, with the strongest growth potential, and to help direct the allocation of our capital. Also, as I said earlier, we have some fantastic products. We need to make sure we're identifying and exploiting every opportunity available in the best markets for growth and increase our reach within commercial customers. I'd highlight North America, one of the largest markets for us, but as you can see from the levels of revenue we have in this region, that we have not managed to optimize our reach to this very sizable customer base. There's opportunity to extend and deepen our service offering.
High-value capital assets need a through-life service to aid and underpin the understanding of how our customers use the product, get performance feedback, and create a closed loop to new product development. This should help revenue growth at high contribution and support margin enhancement. Overall, this is building on the good work done in the Horizon strategy and supporting increased growth. My sense, though, is that there is a real and substantial opportunity to pair this with enhanced operational performance and effectiveness to deliver even better outcomes for customers and investors. We've already spoken about the investment we're making in manufacturing operations and systems. I think we need to go further to really sharpen up our performance to get ourselves fit for the future. To give you a sense of the opportunity, in one of our larger growing facilities, we have a first-time pass rate of just 30%.
A product can often go through the production process three times before it leaves to the customer, also using significant engineering resource. A clear opportunity to create more capacity to execute on our strong order book, improve efficiency, and release engineers to focus on new product development. The business has been growing so quickly here, the operational processes has not kept pace. The same goes for our supply chain. This has been one of the challenges impacting the ability to deliver on the strong order book. There is a need to have a more robust strategic approach that is integrated with new product development and our operational teams, which should also generate savings over time. In terms of the way the business is run, there are some areas of best practice that I'd like to see rolled out more broadly and increase efficiency, supporting margin improvement.
Finally, we'll look at how we can simplify the business operations, the structure and the ways of working, so that customers find it easy to deal with us, and our teams can maximize their effectiveness and effort to the benefit of all Oxford stakeholders. Clearly, it's early days yet, and we will continue to build out these thoughts with the senior team as we develop the next phase of our strategy. I hope we've given you a flavor today of the robust shape we're in as we get into the second half of the year, and more broadly, as we start looking into the future. Despite the tough macro environment, the team have delivered well, with strong growth in life sciences and advanced materials, and a really robust performance in semiconductors.
Geographically, we've seen strong growth in Europe and Asia, and most notably, 18% revenue growth in China. I'm pleased to see early signs that our pivot in China to new and adjacent markets is starting to bear fruit, and that we're seeing order growth there, too. Overall, with positive book-to-bill and order book growth, we're set up well for the second half, albeit we remain mindful of the external landscape. Looking towards the long term, I see exciting opportunities ahead based on the really strong foundations that we're starting from. In summary, I'm thrilled to be here, delighted to have my feet under the table, and I look forward to working with Gavin and the team to help Oxford Instruments realize its full potential. Thank you all very much.