Renishaw cashes in on chip shortage
EnginEEr Renishaw saw profits soar as it cashed in on surging demand for semi-conductors.
The FTSE 250 group makes encoders, precise measuring devices that are used by factory robots to manufacture these highly sought after computer chips, and dental and bone implants for the medical industry.
in a trading update for the three months to the end of September, it said revenues jumped by 35pc to £157.8m while profits more than doubled to £41.7m from £18.3m.
renishaw said the spike in growth was driven by ‘strong’ demand from the semiconductor and electronics markets, a trend it expected to continue. it added that it was seeing record levels of orders and that alongside semiconductors it expected a recovery in demand for machine tools and measuring equipment.
Semi-conductors are used in everything from mobile phones to car brake sensors and power steering. However, a global shortage this year has caused many production lines to grind to a halt.
Afflicted firms include Apple, which may slash production targets for its iPhone 13 due to the shortage, while French car maker renault is expected to make 300,000 fewer vehicles this year.
The trading update was accompanied by a blockbuster set of results for the full year to the end of June in which it said annual profits rocketed 146pc to £119.7m as companies stepped up investments in electronics manufacturing.
Analysts at Peel Hunt said the company’s outlook was ‘promising’ following the results, adding that speculation of a potential takeover of the firm ‘will persist’ despite the company scrapping a sale process in July due to a lack of satisfactory offers. renishaw’s shares climbed 11.1pc, or 515p, to 5155p following the strong figures, valuing the stake of its 81-year-old co-founder, executive chairman and largest shareholder David McMurtry at £1.36bn. Meanwhile, fellow co-founder and deputy chairman John Deer, 83, is sitting on a stake worth £622.7m.
The FTSE 100 dropped 0.45pc, or 32.8 points, to 7190.3 while the FTSE 250 dipped 0.22pc, or 49.62 points, to 22917.05.
The re-emergence of the Evergrande debt crisis in China soured market sentiment as investors fretted over the potential effects on the Chinese economy should the developer collapse under the weight of its £221bn debt pile.
UK stocks in the firing line included miners amid fears a slowdown in Chinese output will hit the country’s demand for raw materials such as coal and iron ore. BHP Group dropped 3.7pc, or 74.6p, to 1928.4p while Rio Tinto lost 4.8pc, or 236.5p, to 4649p and Glencore sank 2.5pc, or 9.4p, to 368.55p.
Anglo American was also down 2.7pc, to 75.5p, to 2762.5p after a mediocre production report in which it said copper production had fallen 6pc in the three months to October due to maintenance work at its Collahuasi mine in Chile. However, the firm also flagged a 28pc increase in diamond production as demand for sparkling stones rebounded in its key US and Chinese markets.
greeting card and gifts firm Moonpig was brought back down to earth, slipping 3.2pc, or 11p, to 337.6p, after a number of its iPO investors sold around 30m shares in the group for £98m overnight. The shares were sold for 328p each, a nearly 6pc discount to the Wednesday closing price.
Blue-chip analytics group Relx rose 1.6pc, or 35p, to 2250p as it highlighted revenue growth in its exhibitions business as lockdown restrictions eased.
Elsewhere, asset manager Legal & General climbed 1.9pc, or 5.1p, to 279.9p after analysts at Jefferies upgraded the stock to ‘buy’ from ‘hold’, saying the company was ‘in a league of its own’ and had several ‘competitive advantages’ through its alternative investment arm. The target price was also hiked to 340p from 290p.