Strategy reset at Oxford Instruments pleases investors / Image source: Adobe
  • Year to March 2024 mixed
  • Medium-term strategy excites
  • Shares jump 11% to year-high

High-tech equipment maker Oxford Instruments (OXIG) posted a relatively unexceptional set of results for the year to March with a drop in operating margins and EPS (earnings per share) but outlined a plan to simplify the business and improve returns.

Investors responded enthusiastically to the strategy reset, sending the shares up 280p or 11% to a new high for the year of £27.40.


For the 12 months to the end of March, revenue was up 9.8% to £470 million, although taking into account currency movements the growth rate was just 5.8%, while adjusted operating profit was slightly lower at £80.3 million.

That meant the operating margin slipped from 18.1% to 17.1%, while adjusted EPS fell 3.3% from 112.7p to 109p and cash conversion before investments dropped to 64% against 88% the previous year, which was nothing to shout about.

However, as chief executive Richard Tyson explained, the firm had to ‘rebalance’ its geographic exposure by refocusing on non-sensitive areas in China following export licence refusals and increasing sales in Europe and other parts of Asia.

On the plus side, underlying order growth remained robust, providing good visibility for the year ahead, but the real excitement centred on the firm’s plan to reorganise itself into two distinct businesses targeting fewer markets with a streamlined product portfolio to deliver ‘a step change in operational and service performance’ as Tyson put it.

As part of the plan, the firm set out new medium-term targets including organic top-line growth of between 5% and 8% per year, an increase in the operating margin to above 20%, cash conversion of over 85% and a ‘strong’ ROCE (return on capital employed), which is already close to 30%, together with a commitment to maintain R&D (research and development) spending at 8% to 9% of revenue.

Separately, the company announced a small bolt-on acquisition, buying Swiss precision instrument-maker FemtoTools for CHF 17 million (£14.9 million) plus a potential further payment of CHF 7 million (£6.1 million) dependent on the firm’s performance post-completion.


Shore Capital analysts Akhil Patel and Robin Speakman flagged Oxford Instruments’ strong order book for the current financial year, which they expect to underpin their earnings forecasts, as well as its strong cash position which gives it flexibility to make more bolt-on acquisitions to complement organic growth.

‘Oxford is materially more robust and profitable business than two years ago, with a credible strategy to improve EBIT (earnings before interest and tax) margins to an economically sustainable level of around 20% as minimum base over the medium term and a much stronger balance sheet.

‘We continue to believe its current valuation metrics still significantly fails to reflect Oxford as a higher quality business, its strategic progress and the significant operational improvement undertaken’, they concluded.


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Issue Date: 11 Jun 2024