Record half-year sales and a much improved outlook triggered a rush back into Renishaw. The shares, which lost over half their value in just a few months last year, shot up 20 per cent at one stage to their highest in almost five months. Investment in production systems within automotive, civil aviation, agriculture and energy markets "looks increasingly favourable", said management at the precision engineer, and recovery in the key electronics sector is on the cards.
That's just what investors wanted to hear, guaranteeing that they overlooked a jump in headcount and infrastructure spend that trimmed operating profit 14 per cent to £29.7m. It also helped soothe news that the Far East sales fell 9 per cent to £49.6m as Chinese sales - its largest market last year - slumped 25 per cent, largely reflecting weak demand for encoders from one electronics firm there, first flagged in October. It has since told assistant chief executive Ben Taylor that it's "just a pause"; likely to last at least three months.
European sales grew 25 per cent to £55.8m, propelled by automotive production and the civil aerospace boom. In the Americas they grew 23 per cent to £36.5m, driving revenue at the core metrology division up 10 per cent to £135.9m. Last year's acquisition of Measurement Devices and MTT helped, too. But rising costs left profits there down 8 per cent at £35.7m. Renishaw promises to keep an eye on outgoings, but still spent nearly £18m on property and equipment - more than it did in the last full year - as it gears up for recovery.
And operating losses at the smaller healthcare division grew to £6m from £4.2m, despite a 27 per cent hike in revenue. Still, rising sales of neurosurgical robots and increasing contribution from diagnostics should drive "significant improvement" during the second half.
Broker Numis Securities forecasts adjusted pre-tax profit of £75.8m in 2012 and adjusted EPS of 83.3p (£80.4m and 88p in 2011).
RENISHAW (RSW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,315p | MARKET VALUE: | £957m | |
| TOUCH: | 1,307-1,315p | 12-MONTH HIGH: | 1,886p | Low: 800p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 284p* | NET CASH: | £26.6m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 132 | 35.2 | 39.0 | 10.3 |
| 2011 | 147 | 31.2 | 34.7 | 10.3 |
| % change | +11 | -11 | -11 | - |
Ex-div: 7 Mar Payment: 10 Apr *Includes intangible assets of £49m, or 68p a share | ||||
