Oxford Instruments shares rally despite early profit disruption
Manufacturing and research company Oxford Instruments has seen its shares rocket despite a steep fall in profits during the first half of the year.
The group’s stock rallied 9.93 per cent in early morning trading to 1,970, as the group confirmed it was beginning to recover from “significant disruption” in the early months of the year.
The FTSE 250 company revealed revenue had dropped a staggering 7.9 per cent to £185.5m, reflecting the impact of delayed shipments and market volatility caused by US tariffs.
Profit before tax also tumbled 22.5 per cent from £26m to £25.4m, but cash flow jumped from £39.3m to £45.1m.
Despite weaker profits, the group has maintained its full year guidance of £5.5m operating profit, and hiked its dividend by 5.9 per cent to 5.4 pence.
However, basic earnings per share fell 29.9 per cent from 46.6 pence to 33 pence.
Chief executive, Richard Tyson, said: “Our trading performance reflects that we, like others, have had to navigate the impact of tariffs and the related global economic disruption.”
Order momentum and sales growth
The group credited its optimism for the second half of the year towards rising order momentum from large commercial customers, including both academic and industrial laboratories.
The Oxfordshire based business saw a slight 1.4 per cent increase in orders to £205.2m, driven by strong sales of semiconductors to the US and Europe by its advanced technologies arm.
It also completed the move to its new semiconductor site in Bristol, following the sale of its Somerset factory in September for £4.8m, boosting its production and manufacturing capabilities.
The Imaging and Analysis division also launched new products, which improved customer reach, following the restoration of its Belfast facility.
It also expects to complete the sale of its Nano Science branch in the third quarter for an undisclosed amount, with capital from the transaction set to be pumped back into its top performing markets, semiconductors and life sciences.
Going forward
As of the end of October, the company has completed £32m of its £50m share buyback programme, with the Board now expecting to increase the programme to £100m.
In its pursuit of growth, the group also reiterated its commitment to investing 8 per cent to 9 per cent of revenue to its research and development capabilities.
Analysts held the company at a buy rating, believing its revenue downgrade to be primarily caused by early trading issues which are unlikely to continue going forward.
Peel Hunt’s morning note said: “We see the recent setback as an opportunity to build earnings momentum, which should be very supportive for the shares.”