Renishaw: Wide Moat in Precision Measurements

08/07/2018 5:00 am EST

Focus: INDUSTRIALS

Vivian Lewis

Editor and Publisher, Global Investing

Renishaw plc (RNSHY) is maker of metrology (industrial measuring and automation software) systems for precision manufacturing of metal industrial, electronic, and dental and medical components, explains international investing expert Vivian Lewis, editor of Global Investing.

The firm's coordination measurement machines (CMM) are used to manufacture precision parts for airplanes (its original business), cars, electronic equipment and panels, and sensors for application engineering and general manufacturing equipment.

Its fastest growth is in electronic and semiconductor chip making. This is a wide-moat business. Its modest healthcare arm became profitable for the first time to the tune of £36 million in the last fiscal year. It makes measurement for fine-tolerance dentures.

It is working on a robot with software to deliver a Parkinson's disease drug and another for epileptics, now in trials in Sweden and Finland. Its healthcare robots and software got US approvals in the fiscal year.

The company reported record revenues of £611.5 million, up 18% at constant exchange rates. It had double-digit sales rises in all its regions, notable Japan (up 17%); Germany (+14%); the USA (+13%); and China (up 11%).

By region the levels were comparable this time in order of size: Far East +19%; Europe +17%; Americas +19%; and Britain and Ireland +11%. (There is a small rest of the world amount of about 3% of sales.) It was hurt by sterling's weakness against the yen and the dollar but made up for it with the pound's strength against the euro.

Its before-tax profits were up by a third to £155.2 million. After-tax profits were up a still lovely 29% to £132.4 mn, despite its tax rate rising to 14.7% from 12.2% over the Q4 of FY 2016-7. EPS were also up by 29% to 181.8 pence.

As manufacturing becomes more complex employees become less skilled, tolerances have to be checked by measurement requiring less skill, and more automation and robotics. There is still time to buy more of this a UK technology leader with a global reach.

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