Oxford Instruments still trying to shake off Covid

For many businesses, Covid-related disruptions are already a thing of the past.

For Oxford Instruments (OXIG), though, an inability to access customer sites in China held back growth, as did a requirement to secure more export licenses to ship products to the country – some of which were refused. 

Oxford Instruments makes products which image, analyse and manipulate materials at molecular levels, both for academic and commercial customers. The latter now make up more than half of sales. 

Growth in its semiconductors arm was flat, meaning it dropped from being the biggest revenue contributor to the second biggest, with 29 per cent of the total. It was overtaken by the Advanced Materials business, which grew by 15 per cent and now makes up 31 per cent of the total. Overall sales increased by 18 per cent.

The silver lining to the delays is that the company’s order book swelled to almost £316mn – a 36 per cent increase – giving it “good visibility for an expected improvement in trading in the second half”, chief executive Ian Barkshire said.

Operating profit was up by a fifth to £26.3mn and net cash (excluding leases) increased by £11mn during the six-month period to £97mn, with its strong balance sheet facilitating acquisition opportunities, according to Barkshire.

Oxford Instruments' shares have been on a rollercoaster ride this year – partly the result of an aborted 3,100p bid by Spectris (SXS), which got cold feet after Russia’s invasion of Ukraine. 

They now trade at 1,976p, or 22 times broker Shore Capital’s forward earnings forecast of 89.8p a share. This doesn’t seem like too hefty a price for a well-regarded specialist operating in profitable niches. Buy.

Last IC View: Buy, 2,140p, 14 Jun 2022