Renishaw Q1 profit rises on reduced costs

Renishaw posted a rise in first-quarter profit on Thursday despite a decline in revenue, thanks to reduced operating costs and the job retention grant.

In the three months to the end of September, adjusted pre-tax profit rose 326% to £18.3m, while statutory pre-tax profit was up 453% to £28.2m. Renishaw said adjusted profit had benefited from a number of actions taken last year to reduce the company’s operating cost base and also included the global job retention grant income totalling £2.3m.

Overall revenue fell 6% from the same period last year to £116.9m, with revenue in the metrology segment down 8% to £110.2m while the healthcare division saw a 16% increase to £5.7m.

In the metrology business, there was revenue growth in the APAC region, where the company has seen increased demand for its optical and laser encoder product lines due to a recovery in the semiconductor market. Revenue in EMEA and the Americas fell, however, due to ongoing uncertainty caused by the pandemic and weaker demand, particularly in the aerospace and automotive sectors.

In the healthcare segment, there was increased demand for both Renishaw's spectroscopy and neurological product lines.

"The group is in a strong financial position and we continue to invest in the development of new products and applications, along with targeted investment in production, and sales and marketing facilities around the world," it said. "Given the continuing uncertain macroeconomic backdrop, including the pandemic, we continue to expect challenging market conditions, particularly in the aerospace and automotive sectors."

At 1225 BST, the shares were up 1.2% at 5,780p.

Broker Peel Hunt said: "We see this as an encouraging update that puts the group running well ahead of our FY assumptions - particularly at the operating margin level - however, we will leave our numbers unchanged for now as we do not know whether some discretionary costs will come back in or whether continuing investment in the group will suppress margins as the year progresses.

"We await more detail at the interims on 4 February, but if Q2, Q3 and Q4 continue at Q1’s level the FY will come in at £72m versus PHe £48.6m. Despite the potential beat we do not think it is enough to warrant the rating. Even if it makes that number, the implied FY21E PE is still 65x."

Peel Hunt rates Renishaw at 'hold'.