A stunning start to the year meant an impressive first half for precision engineer
China is the culprit. Renishaw spent the first three months filling big orders from consumer electronics giants there, so profits doubled to more than £28m on sales that rose 36 per cent. But it's lumpy work and there was no repeat in the second quarter, which explains why adjusted pre-tax profit fell to £15m during the three months on sales that were only fractionally higher. With sales falling in both Germany and the US, prospects largely depend on the Far East. It generates 45 per cent of sales and well over half of that comes from China. Clearly, there are powerful structural drivers at play and the Chinese are desperate to improve output and accuracy of production methods. Renishaw is already getting work from manufacturers gearing up for the next generation of TVs. Outside of Europe, more car plants requiring Renishaw's kit are being built, too, and modern aircraft engines use its measurement tools.
Numis Securities expects full-year pre-tax profit of £96m, giving EPS of 105.5p (95.6p in 2012).
|ORD PRICE:||1,868p||MARKET VALUE:||£1.36bn|
|TOUCH:||1,868-1,872p||12-MONTH HIGH:||2,121p||Low: 1,229p|
|DIVIDEND YIELD:||2.1%||PE RATIO:||17|
|NET ASSET VALUE:||368p*||NET CASH:||£12.6m|
|Half-year to 31 Dec||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 6 Mar
Payment: 8 Apr
*Includes intangible assets of £54.4m, or 75p a share
Despite the negative reaction to these results, Renishaw's shares still trade on 18 times forecast earnings. That's high enough given the lack of visibility and current expectation that last year's record fourth quarter won't be beat. Hold.
Last IC view: Hold, 1,742p, 25 Oct 2012