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China boost for Renishaw

RESULTS: Demand from China's manufacturers for Renishaw's sophisticated measuring equipment has done wonders for its results
July 28, 2010

On almost unchanged sales (after allowing for a £8.1m currency gain) Renishaw has produced wonders in terms of a profits rebound. Before taking in exceptional costs of £1.6m (£4.1m last year), operating profits jumped from £6m to £28.1m thanks to cost-cutting. Sales would have been lower had it not been for a sharp rise in demand from the far east. Revenues there rose from £52m (or £65.9m on a constant currency basis) to £71.1m, while sales to China advanced from £19.5m to £34.1m and were just £1m behind the US's contribution.

IC TIP: Hold at 820p

And the good news is continuing as Renishaw introduces a raft of new measuring products and beefs up its new healthcare division. The company turned in record fourth-quarter sales and a good indicator of this is the sharp rise in end-June trade receivables from £24.1m a year earlier to £45.9m, while trade payables was only up from £6.6m to £10.4m. Renishaw's order book has also more than doubled over the 12-month period to £23.3m at the end of June. China is still the fastest-growing market but there are signs of demand recovering in both the US and Germany.

Broker UBS expects underlying pre-tax profits to rise from £28.7m to £50.1m on sales of £230m, giving adjusted EPS of 55p (31.6p in 2010).

RENISHAW (RSW)

ORD PRICE:820pMARKET VALUE:£597m
TOUCH:817-823p12-MONTH HIGH:860pLOW: 380p 
DIVIDEND YIELD:2.1%PE RATIO:28
NET ASSET VALUE:218p*NET CASH:£31.1m

Year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200617638.141.921.8
200718152.155.222.9
200820143.147.625.4
20091714.74.97.8
201018227.129.317.6
% change+6+474+498+127

Ex-div: 15 Sep

Payment: 18 Oct

*Includes intangible assets of £28.6m, or 39p a share.

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