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Oxford Instruments detects challenges

A raft of problems has depressed sales, orders and profits at Oxford Instruments
June 10, 2015

Trade sanctions against Russia, product delays and tepid trading in Japan conspired to send adjusted operating profit down 15 per cent to £43m at Oxford Instruments (OXIG). Although the scientific and industrial tools provider forewarned investors of an earnings slump in January, they still sent its shares down 8 per cent on results day.

IC TIP: Hold at 982p

Excluding currency shifts and acquisitions, sales slid 5 per cent and orders were flat. That partly reflected weakness in the group's nanotechnology tools division, which had to cancel orders to Russia after European authorities revoked its export licences. Underlying sales of industrial products also fell. Management blame the belated launch of the new X-MET8000 handheld analyser, which can identify alloys and scan consumer goods for hazardous elements.

The one bright spot was the service segment, where strong demand for maintenance and spare parts drove underlying sales and profits upward. But that included the completion of a major contract with Siemens, worth £4m in revenue last year, so the new financial year will be harder.

Management responded to these challenges by slashing headcount by 7 per cent and closing six sites, which they expect to help generate £8m in cost savings in the year to March 2016. Broker N+1 Singer expects adjusted EPS of 56p in the current financial year (FY 2015: 48p).

OXFORD INSTRUMENTS (OXIG)
ORD PRICE:982pMARKET VALUE:£563m
TOUCH:982-984p12-MONTH HIGH:1,452pLOW: 677p
DIVIDEND YIELD:1.3%PE RATIO:na
NET ASSET VALUE:219p*NET DEBT:95%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201126226.765.39.0
201233736.146.010.0
201335128.437.411.2
201436024.032.112.4
2015386-9.7-11.113.0
% change+7--+5

Ex-div: 24 Sep

Payment: 22 Oct

*Includes intangible assets of £231m, or 404p a share