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Oxford Instruments looks to Horizon for growth

The company is one year into its 'Horizon' growth strategy, and continued spend on research and development suggests optimism
June 13, 2018

Around this time last year, Oxford Instruments (OXIG) announced its 'Horizon' growth strategy. It's still early days in terms of implementation, but a 5 per cent increase in orders to £313m suggests progress has been made, while continued spend on R&D – £24.8m, or 8.4 per cent of sales – demonstrates that the group is determined to expand and optimise the technologies within its proprietary offering (profit and margin growth in the service and healthcare division was driven by services relating to in-house products).

IC TIP: Hold at 983p

Oxford Instruments reversed last year's reported losses, but two factors flattered this result. First was the impact of foreign exchange. Strip out translation effects and adjusted pre-tax profit improved by 0.6 per cent. Full-year returns were also helped along by £80m garnered from the sale of the industrial analysis business, which along with an 18.5 per cent increase in operating cash flows (before working capital movements), enabled the group to cut its net debt from £109m in FY2017 to £19.7m at the period end.

An intensified focus on the nanotechnology business – part of the wider materials and characterisation division – contributed to an 11.7 per cent rise in sales to £118m, which helped to compensate for a 10.5 per cent revenue decline in the research and discovery business, resulting from longer lead times on some orders.

Prior to this announcement, analysts at JPMorgan expected pre-tax profits of £42m during the year to March 2019, giving EPS of 56.4p, up from £41m and 55p in FY2018.

OXFORD INSTRUMENTS (OXIG)  
ORD PRICE:983pMARKET VALUE:£564m
TOUCH:974-983p12-MONTH HIGH:1,174pLOW: 676p
DIVIDEND YIELD:1.4%PE RATIO:29
NET ASSET VALUE:312p*NET DEBT:11%
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201436024.032.112.4
2015380-9.6-10.913.0
20163209.712.213.0
2017300-26.2-44.713.0
201829734.234.313.3
% change-1--+2
Ex-div:13 Sep   
Payment:19 Oct   
*Includes intangible assets of £159m, or 276p a share