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Oxford Instruments toasts the turtles' return

Kitting out Chinese labs is lucrative work for Oxford Instruments and Beijing has lots more cash to spend
June 12, 2012

Lured by hefty research budgets and first-class labs, China's best young brains were quick to flee the aftermath of Mao's Cultural Revolution. Most headed for Europe and America. Thirty years on, the so-called "sea turtles" are returning and it's making Oxford Instruments big bucks.

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A huge political effort to move China up the economic food chain is under way, but these foreign-educated scientists and academics demand the best facilities. That's why Chinese research institutions are paying up to $0.5m (£0.3m) a time for Oxford's advanced microscopes and other high-tech tools. Sales to Beijing jumped 25 per cent to £49m last year, about 15 per cent of group turnover, and chief executive Jonathan Flint predicts that China will eventually overtake the US as Oxford's largest market.

It will, but demand is strong elsewhere, too. Nanotechnology is immature with room for significant structural growth, and Mr Flint's estimate of 15 per cent a year could prove conservative. In the 12 months to March, last year's Omicron and Omniprobe acquisitions helped the nanotechnology tools division ramp up revenue by 26 per cent to £154m and make an operating profit of £17.3m. Oxford's new Aztec system, used to analyse samples with electron microscopes, did especially well. Supplying superconducting wire for MRI scanners was lucrative, too, driving sales of industrial products up over a quarter and doubling profits.

OXFORD INSTRUMENTS (OXIG)

ORD PRICE:1,151pMARKET VALUE:£647m
TOUCH:1,150-1,152p12-MONTH HIGH:1,290pLOW: 699p
DIVIDEND YIELD:0.9%PE RATIO:25
NET ASSET VALUE 226p*NET CASH:£35.1m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20081775.05.68.4
2009207-9.3-13.98.4
201021218.127.28.4
201126226.765.39.0
201233736.146.010.0
% change+29+35-30+11

Ex-div: 26 Sep

Payment: 25 Oct

*Includes intangible assets of £78.1m, or 139p a share