The Probe That Changed Everything
In the summer of 1972, inside a factory in Gloucestershire that existed to machine jet engine components for Rolls-Royce, a metrologist named David McMurtry confronted a problem that would have defeated most engineers by its sheer banality. The Olympus engines destined for the Concorde supersonic airliner required fuel pipes machined to tolerances so tight — fractions of a thousandth of an inch — that the existing method of measurement, which involved manually positioning a rigid stylus against a workpiece and reading a dial, could not keep pace with production. The pipes were three-dimensional curves. The measurement points numbered in the hundreds. Every manual touch introduced operator error, and every error cascaded into scrap, rework, and delay on a programme already drowning in both.
McMurtry's solution was so elegant it barely looked like an invention: a spring-loaded probe tip, mounted on a coordinate measuring machine, that deflected on contact and triggered an electronic signal at a repeatable force. The touch-trigger probe. It didn't measure anything itself — it simply told the machine when it had arrived at a surface, with sub-micron consistency, thousands of times an hour, without fatigue or ego. The probe converted measurement from craft into automation, from human judgment into digital coordinates. It was, in retrospect, less a product than a protocol — the foundational grammar of precision manufacturing for the next half-century.
From that single invention, McMurtry and his co-founder John Deer built Renishaw into a company that, as of fiscal year 2024, generated £688.6 million in revenue, employed more than 5,000 people across 36 countries, and commanded market positions in precision metrology, additive manufacturing, spectroscopy, neurological surgery, and position encoding that share almost nothing in common except an obsessive, occasionally stubborn devotion to measurement at the limits of physical possibility. Renishaw is not a household name. It is something more durable: the invisible infrastructure of accuracy, embedded in every semiconductor fab, every aerospace machine shop, every dental laboratory, and an increasing number of operating theatres where surgeons navigate the human brain by coordinate geometry.
The company's story is not a Silicon Valley parable of disruption and pivot. It is a distinctly British — and distinctly idiosyncratic — narrative about what happens when two engineers refuse to sell, refuse to be acquired, refuse to chase quarterly consensus, and instead compound a technological advantage for five decades while retaining majority ownership and reinvesting at rates that would make most public-company boards revolt. It is also, now, a succession story with genuine stakes: McMurtry, born in 1940, and Deer, born in 1942, together controlled approximately 53% of Renishaw's shares as recently as 2022. The question of what Renishaw becomes after its founders is not abstract. It is the question.
By the Numbers
Renishaw at a Glance (FY2024)
£688.6MRevenue (year ending June 2024)
£130.5MAdjusted operating profit
19.0%Adjusted operating margin
£5.1BApproximate market capitalisation
5,265Employees worldwide
95%Revenue generated outside the UK
~4,800Active patents and patent applications
13–18%Typical R&D spend as percentage of revenue
Two Engineers and a Garage — But Not That Kind of Garage Story
David McMurtry grew up in Clonmel, County Tipperary, studied mechanical engineering, and joined Rolls-Royce's aero engine division in Bristol, where he rose to become deputy chief designer. He was — and remains, well into his eighties — an engineer of preternatural spatial intuition, the kind of person who sees a coordinate system where others see a surface. John Deer, a quieter figure, had a complementary gift for systems, production, and the patient mechanics of turning a prototype into a product that ships.
The founding mythology is tidy: McMurtry invented the touch-trigger probe in 1972 to solve the Concorde inspection problem, Rolls-Royce licensed it, and by 1973, McMurtry and Deer had formed Renishaw Electrical Ltd. — named after the hamlet of Renishaw in Derbyshire, near one of Deer's family connections — to manufacture and sell the probe commercially. The company operated out of McMurtry's garage, then a rented facility in Wotton-under-Edge, a market town in the Cotswolds that remains Renishaw's global headquarters to this day.
What makes the origin story less tidy, and more instructive, is the patent fight. McMurtry's invention was so fundamental — so obviously the right way to automate dimensional inspection — that competitors immediately attempted to design around or challenge the patents. Renishaw spent much of its first two decades in intellectual property litigation that consumed management attention, legal fees, and emotional energy on a scale that would have forced most small companies to settle or sell. They did neither. McMurtry and Deer defended their patents with a ferocity that established two principles that would define Renishaw for the next fifty years: first, that intellectual property is the company's primary asset, more valuable than any factory or customer relationship; and second, that Renishaw would rather litigate than license, rather fight than accommodate, rather be right than be popular.
The patent battles — particularly against competitors in the United States and Germany — also taught McMurtry something subtler. A single invention, no matter how foundational, is a wasting asset. Patents expire. Competitors learn. The only durable defence is continuous invention — not incremental improvement, but genuine leaps that reset the competitive clock. This insight became the engine of Renishaw's capital allocation: reinvest relentlessly in R&D, at rates typically between 13% and 18% of revenue, year after year, through cycles, through downturns, through periods when the market begged for higher dividends or share buybacks. The R&D intensity is not a strategy bolted on to a manufacturing business. It is the business.
The Geometry of Competitive Advantage
To understand why Renishaw's core metrology business prints the margins it does — adjusted operating margins consistently in the high teens to mid-twenties over multi-year cycles — you need to understand the peculiar economics of precision measurement in manufacturing.
A coordinate measuring machine (CMM), the workhorse of quality inspection in aerospace, automotive, and electronics manufacturing, might cost £100,000 to £2,000,000. The probes, styli, and software that make it useful — overwhelmingly supplied by Renishaw — represent a fraction of that capital cost but are the components that determine accuracy, speed, and repeatability. More critically, once a factory has calibrated its inspection routines around Renishaw's probing system, switching to a competitor's system involves not just hardware replacement but recalibration, revalidation, and requalification of every measurement routine — a process that in regulated industries like aerospace or medical devices can take months and cost multiples of the hardware savings.
This is the classic installed-base economics of a high-switching-cost consumable, and Renishaw exploits it with the quiet efficiency of a razor-and-blade model, except that the blades are styli tips made of ruby and tungsten carbide and the razors are CMMs made by other companies. Renishaw's probe heads are the de facto standard on CMMs manufactured by Hexagon, Zeiss, Mitutoyo, and others. The probe is the interface between the machine and the workpiece, and Renishaw owns that interface.
But the razor-and-blade analogy understates the depth of the moat. Renishaw is not merely selling replacement tips. It is selling an ecosystem of probing hardware, software, and calibration artifacts that together define the language of measurement in a factory. Its REVO five-axis measurement system, introduced in the 2000s, can measure complex surfaces at scanning speeds that reduce inspection time by as much as 75% compared to conventional touch-trigger methods — but it requires Renishaw's controller, Renishaw's software, and Renishaw's probe heads. The system is open enough to work with third-party CMMs but closed enough that the intelligence — the firmware, the error compensation algorithms, the calibration routines — lives inside Renishaw's stack.
We have never been interested in being a commodity supplier. If you are in a commodity market, you are in a price war, and in a price war, the biggest company wins. We prefer to be in a technology war, because in a technology war, the best company wins.
The on-machine probing business extends this logic from the inspection room to the shop floor. Renishaw's machine tool probes — mounted directly on CNC milling machines, lathes, and grinders — allow the machine to measure the workpiece during the cutting process, compensating in real time for tool wear, thermal drift, and fixture errors. This is not post-process inspection; it is closed-loop manufacturing, and it converts what was historically a quality control cost centre into a productivity tool. The value proposition to a machine shop is not "measure more accurately" but "make fewer bad parts" — which translates directly into reduced scrap, shorter cycle times, and lower cost per part.
The installed base of Renishaw machine tool probes is enormous. The company has shipped millions of probes into CNC machines worldwide, and the replacement cycle — styli wear out, probe batteries expire, software updates unlock new capabilities — generates a recurring revenue stream that smooths the cyclicality inherent in capital equipment sales. Renishaw does not disclose the precise split between initial probe sales and aftermarket revenue, but the company's historical resilience in down-cycles — revenue fell 19% in the 2009 recession but operating profit remained positive — suggests a substantial recurring base.
The Encoder Kingdom
If Renishaw's metrology business is the heart, position encoders are the nervous system — less visible, less discussed in the financial press, but arguably the more strategically important business over the next two decades.
An encoder converts physical position into a digital signal. Every time a semiconductor lithography machine aligns a wafer, every time an industrial robot returns to a taught position, every time a telescope mirror adjusts for atmospheric distortion, an encoder is reporting position with nanometre-level precision. Renishaw's optical and magnetic encoders are embedded inside the motion systems of ASML, FANUC, Siemens, and dozens of other OEMs whose names appear on the machine but whose accuracy depends on a Renishaw scale and read head buried inside.
The encoder business illustrates Renishaw's characteristic approach to market entry: identify a measurement problem at the frontier of precision, develop a proprietary solution, and embed it so deeply in the customer's design that extraction becomes unthinkable. Renishaw's RESOLUTE absolute encoder, launched in 2010, achieves resolution to one nanometre — one billionth of a metre — at speeds up to 100 metres per second. The physics required to achieve this (interferometric-scale optical gratings, signal processing algorithms that compensate for contamination and vibration) represent decades of accumulated know-how that cannot be replicated by reading a patent.
The encoder business is also less cyclical than metrology, because encoder demand is driven by the long-term growth of automation, semiconductor capital expenditure, and precision motion systems — all of which are structurally growing faster than
GDP. When ASML ships more EUV lithography machines, Renishaw ships more encoders. When FANUC sells more robots, Renishaw sells more encoders. The encoder is the tax on precision motion, and precision motion is the direction of industrial civilisation.
The Additive Bet
In 2011, Renishaw acquired the additive manufacturing business of MTT Technologies, a UK-based maker of metal powder bed fusion systems. It was, at the time, a puzzling move. Renishaw was a measurement company; additive manufacturing — then still widely called "3D printing" and associated more with plastic prototyping than serious production — was a fabrication technology. The adjacency was non-obvious. McMurtry saw something others didn't, or saw it earlier: that metal additive manufacturing would become a production technology for aerospace, medical, and dental applications, and that the critical bottleneck would be
process control — the ability to measure, monitor, and guarantee the quality of parts built layer by layer from metal powder.
Measurement, in other words. Renishaw's core competence.
The bet was expensive. For more than a decade, the additive manufacturing division consumed capital, reported losses or minimal profits, and tested the patience of investors who wanted the R&D spend redirected to the high-margin metrology business. Renishaw invested heavily in its RenAM 500 series of metal laser melting systems, in process monitoring technologies (InfiniAM), and in application engineering for dental frameworks, orthopaedic implants, and aerospace brackets.
By 2023, the additive manufacturing business had reached an inflection point. Dental applications — specifically the production of cobalt-chrome frameworks for dental prosthetics — proved to be the beachhead. The value proposition was compelling: a dental laboratory could replace labour-intensive lost-wax casting with a digital workflow (scan, design, print, finish) that was faster, more consistent, and more economical at scale. Renishaw's dental business grew rapidly as digital dentistry adoption accelerated, particularly in China and Europe.
The strategic logic, viewed with hindsight, is characteristic McMurtry: enter a nascent market early, absorb years of losses while developing proprietary process know-how, and emerge on the other side with an integrated hardware-software-process solution that competitors — who entered late and lack the metrology DNA — cannot easily replicate. Whether additive manufacturing becomes a significant profit contributor remains debated. The division is growing but remains a small fraction of group revenue. The bulls argue it's a $10 billion addressable market in which Renishaw has a differentiated position. The bears argue Renishaw is a £700 million company competing against EOS, GE Additive (now part of Colibrium), and SLM Solutions (acquired by Nikon) in a market that rewards scale. Both are right.
Neurological Detours and Other Obsessions
There is a wing of Renishaw's portfolio that defies conventional portfolio logic: neurological surgery robotics. Renishaw's neuromate and neuroinspire systems are used in stereotactic neurosurgery — the placement of electrodes, biopsies, and drug delivery devices deep inside the brain using coordinate-guided robotics. The systems are cleared by the FDA and CE-marked, and they are used in procedures including deep brain stimulation for Parkinson's disease, stereoelectroencephalography for epilepsy diagnosis, and experimental drug delivery for brain tumours.
The neurosurgery business is tiny relative to the group — Renishaw does not break out its revenue separately, but it is almost certainly in the low tens of millions of pounds. It is also, by any financial metric, a questionable capital allocation. The regulatory burden is immense. The addressable market is small. The sales cycles are glacial. And yet McMurtry has funded it for over two decades, because the problem — navigating three-dimensional space inside the human skull with sub-millimetre accuracy — is, at its core, a metrology problem, and he finds it irresistible.
This is the tension at the heart of Renishaw's strategy, and it would be dishonest to resolve it cleanly. The same R&D obsession that produced the REVO five-axis system and the RESOLUTE encoder also produced a neurological surgery robot that may never generate returns commensurate with the invested capital. The company's Raman spectroscopy instruments — used in pharmaceutical analysis, materials science, and forensics — occupy a similarly ambiguous position: technically impressive, strategically interesting, financially marginal. Renishaw's willingness to pursue these adventures is simultaneously its greatest cultural strength (it attracts engineers who want to solve hard problems, not optimise ad click-through rates) and its most persistent governance question (who decides when to kill a project that the 84-year-old founder finds fascinating?).
We have always taken the view that you have to invest in the technology first and the market will follow. If you wait for the market to tell you what it wants, you are already too late.
The Succession Question
In July 2021, Renishaw announced that it had explored a potential sale of the company and decided not to proceed. The announcement landed like a controlled detonation in the precision engineering world. McMurtry and Deer, then 81 and 79 respectively, had hired Lazard to run a formal process, received expressions of interest from private equity firms and strategic buyers, and ultimately concluded that none of the offers met their criteria for a buyer who would preserve the company's culture, commitment to R&D investment, UK manufacturing base, and long-term independence.
The episode revealed several things simultaneously. First, that the founders were actively thinking about succession and estate planning — their combined 53% stake, at prevailing market prices, was worth roughly £3.5 billion, creating estate tax liabilities of staggering proportions. Second, that the private equity industry's appetite for high-quality UK industrial companies was ravenous. Third, and most importantly, that McMurtry and Deer ultimately could not bring themselves to hand the company to buyers whose incentive structures — levered returns over five-to-seven-year hold periods — were antithetical to everything they had built.
The decision not to sell was widely praised by employees and customers, and widely questioned by minority shareholders who had seen the share price spike 30% on sale rumours and wanted liquidity. Since then, the succession plan has taken a different shape. Will Lee, a career Renishaw engineer who joined the company in 2001, was appointed Chief Executive in 2018 and has gradually assumed operational control. McMurtry and Deer have reduced their combined shareholding incrementally — by early 2024, McMurtry held approximately 36% and Deer approximately 17%, suggesting ongoing estate planning through structured disposals.
The question that hangs over Renishaw is not whether Lee is competent — by all available evidence, he is a capable operator who understands the product portfolio and the customer base intimately. The question is whether Renishaw's distinctive culture — the willingness to invest for decades without near-term returns, the tolerance for quixotic R&D bets, the refusal to be managed to quarterly earnings — can survive the transition from founder control to institutional ownership. McMurtry's shareholding is a governance moat: as long as he holds a blocking stake, no activist, no acquirer, and no impatient board can force Renishaw to behave like a normal public company. When that stake eventually disperses — through death, estate transfers, or charitable disposition — the governance structure becomes conventional, and conventional governance tends to optimise for conventional returns.
Manufacturing as Ideology
Renishaw manufactures almost everything in-house, in the UK, and this is not merely an operational choice but an ideological commitment that shapes the company's cost structure, product architecture, and competitive position in ways both advantageous and constraining.
The company's primary facilities are in Wotton-under-Edge, Woodchester, and Miskin (South Wales), with additional manufacturing in Pune, India, and Dublin, Ireland. The Miskin plant, a 60,000-square-metre facility opened in 2019, represented a £67 million investment and was the largest single capital project in Renishaw's history. The plant produces encoders, probe heads, and other precision components using Renishaw's own CNC machines, calibrated by Renishaw's own probes, inspected by Renishaw's own measurement systems. The recursion is not accidental — Renishaw is its own most demanding customer, and the production process serves as a continuous real-world test of its own products.
The vertical integration extends to components that most companies would outsource: custom ASICs for signal processing, optical gratings for encoders, ruby styli for probes, even the machine tools used in production. The logic is Renishaw's version of
Steve Jobs's "own the whole widget" philosophy, adapted for precision manufacturing: if you control every stage of production, you control every source of error, and in a business where competitive advantage is measured in nanometres, controlling error
is competitive advantage.
The cost is structural. Renishaw's manufacturing base is predominantly UK-based, in a country with high energy costs, high labour costs relative to Asia, and a currency (sterling) that, when strong, makes exports less competitive. The company employs over 3,000 people in the UK, including a large cohort of skilled machinists, assemblers, and technicians whose expertise is difficult to replicate but whose cost structure is difficult to justify on a pure unit-economics basis against Asian competitors. Renishaw partially mitigates currency exposure through natural hedging (some costs are in non-sterling currencies) and through the premium pricing that its brand and technology command, but the fundamental tension between UK manufacturing and global price competition is a recurring theme in analyst calls.
We make what we sell and we sell what we make. That vertical integration gives us control over quality, over supply chain, and critically over the rate of innovation. We don't wait for a supplier to develop the next generation of a component — we develop it ourselves.
Cycles, Semiconductors, and the Revenue Roller Coaster
Renishaw's revenue profile is cyclical in a way that no amount of recurring aftermarket revenue fully smooths. The company sells capital equipment — probes, encoders, additive manufacturing systems, spectroscopy instruments — to manufacturers whose purchasing decisions are tied to industrial capex cycles, semiconductor investment cycles, and automotive production cycles. When TSMC and Samsung accelerate fab construction, Renishaw's encoder business surges. When automotive OEMs cut capacity, machine tool probe orders fall. When aerospace MRO spending rises, CMM probe demand follows.
The cyclicality has been dramatic. In fiscal year 2022, revenue reached £671.1 million — a record at the time — driven by post-pandemic semiconductor capex and industrial restocking. In fiscal 2023, revenue declined to £688.6 million after a brief dip (the timing of Renishaw's June fiscal year-end makes year-on-year comparisons tricky), but the path was uneven: the first half was strong, the second half weakened as semiconductor and consumer electronics demand softened. The share price, which peaked near £67 in early 2022, fell below £35 by late 2023 as investors extrapolated the downturn.
What makes Renishaw's cyclicality distinctive — and, for patient investors, potentially attractive — is the company's behaviour during downturns. Unlike most cyclical industrials, which cut R&D, freeze hiring, and hoard cash when revenue falls, Renishaw maintains or increases R&D spending through cycles, on the theory that downturns are precisely when competitors cut investment and when the best engineering talent becomes available. This counter-cyclical R&D investment is funded by a balance sheet that carries minimal debt — net cash of £87 million at June 2024 — and by founders whose 53% ownership stake immunises them from short-term earnings pressure.
The result, viewed over decades, is a company that emerges from each downturn with a wider product portfolio, a deeper technology moat, and a larger share of a growing market. The cost is earnings volatility that looks ugly in any given year but compounds into something remarkable over twenty-year periods.
Renishaw revenue and operating margin through recent cycles
| Fiscal Year | Revenue (£M) | Adj. Operating Margin | Context |
|---|
| FY2019 | 574.0 | 17.8% | Trade war slowdown |
| FY2020 | 510.2 | 10.4% | COVID shock |
| FY2021 | 565.6 | 18.3% | Post-COVID recovery |
| FY2022 | 671.1 | 22.6% | Semiconductor capex boom |
|
The Geography of Precision
Ninety-five percent of Renishaw's revenue is generated outside the United Kingdom. The APAC region — led by China, Japan, South Korea, and Taiwan — accounts for approximately 45–50% of group revenue. The Americas represent roughly 20%, and Continental Europe another 25%. The UK itself, despite hosting the company's entire manufacturing and R&D infrastructure, generates only about 5% of sales.
This geographic profile embeds a strategic concentration risk that Renishaw's management discusses with notable candour. China alone can represent 15–20% of group revenue in strong years, and the combination of Chinese industrial policy (which favours domestic suppliers), geopolitical tension (which could restrict technology exports), and cyclicality (Chinese manufacturing PMI swings drive probe and encoder demand) creates a vulnerability that no amount of diversification within China can eliminate.
Japan is a different kind of exposure — less politically volatile but structurally tied to the health of Japan's machine tool industry, which is itself a bellwether for global manufacturing capex. When Japanese machine tool orders (tracked monthly by the Japan Machine Tool Builders' Association) rise, Renishaw's Japanese revenue rises; when they fall, Renishaw feels it within a quarter.
The semiconductor supply chain concentration is particularly acute. Renishaw's encoder business benefits enormously from the capex cycles of TSMC, Samsung, Intel, and the handful of lithography, deposition, and etch equipment makers (ASML, Applied Materials, Lam Research, Tokyo Electron) that serve them. This exposure is a double-edged sword: the secular tailwinds of semiconductor investment — AI, electrification, IoT — are powerful, but the cyclicality is savage. The 2023–2024 semiconductor inventory correction hit Renishaw's encoder order book hard, and the recovery will depend on factors entirely outside the company's control.
A Cathedral Built in Microns
Wotton-under-Edge is not where you expect to find the headquarters of a company with a £5 billion market capitalisation. The town has roughly 6,000 residents, a weekly market, and a medieval parish church. Renishaw's campus on the edge of town — a growing complex of engineering buildings, clean rooms, and assembly halls — is, by some margin, the town's largest employer and most improbable institution.
There is something irreducibly McMurtry about this. The refusal to relocate to London, or Reading, or Cambridge — places where an ambitious technology company might logically establish itself for access to capital markets, universities, and talent — is a statement about what Renishaw values. The company recruits heavily from local schools and universities, runs extensive apprenticeship programmes (over 50 apprentices at any given time), and has invested in STEM education initiatives across South West England and South Wales with a persistence that suggests genuine conviction rather than corporate social responsibility window dressing.
The campus itself embodies the Renishaw paradox: world-class technology developed and manufactured in pastoral English settings that could be the backdrop for a BBC period drama. CNC machines cutting encoder scales to nanometre tolerances, a few hundred metres from fields where sheep graze. It is a reminder that advanced manufacturing does not require a Silicon Valley postcode — it requires decades of accumulated know-how, a culture that respects craft, and founders who have the patience (and the equity stake) to let compounding do its work.
McMurtry, who was knighted in 2001 for services to design and innovation, still came into the office regularly well into his eighties. Deer, more private, stepped back from daily operations earlier but remained on the board. Together they built not just a company but an institution — one whose peculiar combination of technological excellence, geographic stubbornness, financial conservatism, and founder eccentricity has no real analogue in British industry. The closest comparison might be Danaher in the United States, but Danaher is a conglomerate of acquired businesses managed by process; Renishaw is an organism that grew from a single cell, by mitosis, for fifty years.
The touch-trigger probe that McMurtry invented in 1972 to solve a manufacturing problem on Concorde is still sold, in evolved form, as part of Renishaw's product line. The original patent expired decades ago. It didn't matter. By the time competitors could legally copy the probe, Renishaw had moved to scanning probes, five-axis probes, optical encoders, Raman spectrometers, and metal additive manufacturing systems — each new product building on the measurement expertise embedded in the one before, each new layer of the stack making the whole more difficult to replicate. Fifty-two years later, in a factory in Gloucestershire, spring-loaded probe tips still click against metal surfaces, a few microns at a time, counting the shape of the world.
