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Asia drives Oxford Instruments

RESULTS: Oxford Instruments continues to profit from the quest for smaller applications and new legislation
November 13, 2012

Demand for Oxford Instruments' (OXIG) constantly evolving range of nanotechnology tools is growing fast. In the first half, adjusted pre-tax profit jumped 24 per cent to £23.1m, better than expected, and the high tech instrumentation specialist is close to hitting internal targets two years early.

IC TIP: Buy at 1285p

Once again, most of the growth came from China. Sales in Asia grew 23 per cent, easily outstripping North America and Europe. A 200-basis point increase in adjusted operating margin puts Oxford within easy reach of its target of 14 per cent by 2014, and analysts think they could rise to 20 per cent in time.

The strongest performance came from nano tools which posted a 42 per cent rise in profits to £10.4m. Oxford's material characterisation system - used by law enforcement agencies to detect gunshot residue - sold more than expected, and it has seen no cuts in research funding from governments, either. And the more cyclical industrial unit still raised profits by 15 per cent, driven by demand for its hand-held analysers like those used to detect heavy metal contamination at the London Olympic village. Sales of rock core analysers that detect shale oil and gas gushed 80 per cent during the first half, too. India could be the next big thing. It's pumping cash into the university system and, although it's about 8-10 years behind China, offers plenty of low-hanging fruit.

Numis Securities expects full-year adjusted EPS of 68p, up from 61.6p in 2012.

OXFORD INSTRUMENTS (OXIG)

ORD PRICE:1,285pMARKET VALUE:£722m
TOUCH:1,285-1,288p12-MONTH HIGH:1,401pLow: 815p
DIVIDEND YIELD:0.8%PE RATIO:26
NET ASSET VALUE:225p*NET CASH:£37.1m

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201115913.116.72.77
201217116.920.93.05
% change+7+29+25+10

Ex-div: 6 Mar

Payment: 8 Apr

*Includes intangible assets of £70.8m, or 126p a share