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Oxford Instruments riding Asian recovery

While orders in April and May have been poor in Europe and North America, growth in Asia has made up for it
June 9, 2020

With universities closed across the world, Oxford Instruments’ (OXIG) high-margin products are stuck on the shelf. But the company is in a healthy net cash position thanks to divestments and can bring in sales from its non-academic divisions, which are still performing well in Asia.

IC TIP: Hold at 1,300p

The group – which makes high-tech measurement products like electron microscopes – said Covid-19 disruption caused sales in Asia to fall by 6.5 per cent at constant currencies in the year to 31 March. The overall impact of the pandemic in the final quarter knocked about two weeks’ worth of revenue off the full year total. Chief executive Ian Barkshire said this offset “much of the progress we had made in the preceding three quarters”.

But order activity in Asia was up strongly in April and May – the 19 per cent year-on-year improvement helped counteract the decline in European and North American orders of 23 per cent and 7 per cent respectively.

Like many other companies, Oxford Instruments decided to hold off announcing a final dividend because of pandemic uncertainty. This follows the interim payout being suspended in March. Peel Hunt has shifted its 2021 dividend forecast to zero, from 10p. 

The balance sheet is healthy despite the doom and gloom. The group started its 2020 financial year with net cash of £6.7m (excluding lease liabilities) and reached nine times that figure by the year-end.

Peel Hunt forecasts a hefty contraction in the company’s FY2021 adjusted pre-tax profit, down 26 per cent from 2020 to £34m.

OXFORD INSTRUMENTS (OXIG)   
ORD PRICE:1,300pMARKET VALUE:£ 745m
TOUCH:1,288-1,320p12-MONTH HIGH:1,672pLOW: 724p
DIVIDEND YIELD:naPE RATIO:23
NET ASSET VALUE:439p*NET CASH:£58.9m**
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20163209.7012.213.0
2017300-26.2-44.713.0
201827034.234.313.3
2019 (restated)31434.348.614.4
202031738.855.9nil
% change+1+13+15-
Ex-div:na   
Payment:na   
*Includes £136m in intangible assets or 236p a share, **Includes £8.6m in lease liabilities