Sellers seized on a poor first half at precision engineer Renishaw (RSW) and its share price fell sharply in early trading. But then sentiment swung quickly and violently the other way, as the City rewarded a better second quarter and management confidence that business is picking up. We think the traders were right first time.
A series of big orders from the Asian consumer-electronics industry in the summer of 2012 has distorted Renishaw’s numbers ever since. That’s why first-quarter sales slumped by 18 per cent and pre-tax profit by 62 per cent to £10.6m. But against easier comparators, second-quarter sales actually grew 9 per cent and profit by 3 per cent. In fact, strip out those large contracts and revenue rose 11 per cent over the half.
Of course, it’s the core metrology division that is driving the improvement. There’s plenty of interest in its unique 3D additive manufacturing machine which 'prints' metal parts, and in its measuring devices and encoders. Dentists also like Renishaw’s 3D technology, and it is selling more surgical robots, but the healthcare division still made an operating loss of £2.3m. Spending big on extra staff and equipment halved net cash - although a £32m windfall from the sale of its stake in Delcam comes through next month.
Numis Securities expects full-year adjusted pre-tax profit of £71.5m, giving adjusted EPS of 78.6p (2013: £81.5m and 91.4p).
RENISHAW (RSW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,909p | MARKET VALUE: | £ 1.4bn | |
| TOUCH: | 1,902-1,912p | 12-MONTH HIGH: | 2,124p | Low: 1,444p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 406p* | NET CASH: | £13.4m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 174 | 45.1 | 50.7 | 11.3 |
| 2013 | 164 | 25.6 | 29.5 | 11.3 |
| % change | -6 | -43 | -42 | - |
Ex-div:05 Mar Payment: 07 Apr *Includes intangible assets of £55.6m, or 76p per share | ||||
