Renishaw Plc - Interim Report 2020

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Renishaw Plc                                                                    

Interim report 2020 - for the six months ended 31 December 2019

Highlights 

 

6 months to 31 December 2019

6 months to 31 December 2018

Year ended 30 June 2019

 

 

 

 

Revenue (£m)

259.4

296.7

574.0

 

 

 

 

Adjusted1 profit before tax (£m)

14.3

59.6

103.9

 

 

 

 

Adjusted1 earnings per share (pence)

15.1

69.3

119.9

 

 

 

 

Dividend per share (pence) 2

14.0

14.0

60.0

 

 

 

 

Statutory profit before tax (£m)

9.9

61.6

109.9

 

 

 

 

Statutory earnings per share (pence)

10.2

71.5

126.7


Note 11, 'Alternative performance measures', defines how adjusted profit before tax and earnings per share are calculated.

2 All directors have waived their rights to the interim dividend - see note 7 for further details.

Chairman's and Chief Executive's statement

We report our Group results for the six months to 31 December 2019.

Highlights

  • First half year revenue of £259.4m, compared with previous year of £296.7m.
  • First half year adjusted1 profit before tax of £14.3m, compared with adjusted previous year of £59.6m.
  • First half year statutory profit before tax of £9.9m, compared with £61.6m last year.
  • Cash balances of £71.3m, compared with £106.8m at 30 June 2019.

Trading results

 

First half 2020

First half 2019

Change %

Constant fx change %

Group revenue

£259.4m

£296.7m

-13

-14

Comprising:

 

 

 

 

APAC

£106.8m

£131.2m

-19

-20

Americas

£63.6m

£65.4m

-3

-9

EMEA

£89.0m

£100.1m

-11

-12


Revenue for the six months ended 31 December 2019 was £259.4m, compared with £296.7m for the corresponding period last year, with all regions experiencing a reduction in revenue.

It has been a challenging trading period for the Group due to the global macroeconomic environment, including the ongoing uncertainty caused by the trade tensions between the USA and China and weaker demand in the machine tool sector. The first half of 2019 also benefitted from a number of large orders from end-user manufacturers of consumer electronic products in the APAC region which have not been repeated this year.  There are however some positive indications of recovery in the semiconductor market which has benefitted our encoder lines.  

Adjusted profit before tax for the first half year was £14.3m compared with £59.6m last year, primarily due to the reduced revenue. Last year's first half benefitted from a £5.3m currency gain, primarily in respect of intra-group balances, compared with a loss of £2.0m in the first half of this year. This year also includes a £2.7m gain arising from the fair value adjustment of a convertible loan option in an associate company and a £2.0m charge from the impairment of intangible assets.

Statutory profit before tax for the first half year was £9.9m, compared with £61.6m last year, which includes a £2.2m charge for restructuring costs and a £2.1m loss from the fair value of derivatives not included in adjusted profit before tax.

Adjusted earnings per share were 15.1p, compared with 69.3p last year. Statutory earnings per share were 10.2p, compared with 71.5p last year.

Metrology

Revenue in our metrology business for the first six months was £241.5m, compared with £277.7m last year. Adjusted operating profit was £17.4m, compared with £52.2m for the comparable period last year. Despite subdued demand conditions overall, we have seen growth in our optical and laser encoder product lines due to a recovery in the semiconductor market.

Healthcare

Revenue from our healthcare business for the first six months was £17.8m, compared with £19.0m last year, but we did see growth in our neurological product line due to increased demand for our neurosurgical robot. The business recorded an adjusted operating loss of £1.5m in the first half of this year compared to break even in the corresponding period last year.

Operating costs

As previously communicated, due to the challenging trading conditions faced, we are taking a number of actions to improve productivity and to reduce the Group's cost base. These include the non-replacement of staff who have left the business, reductions in direct manufacturing staff in the UK, Ireland and India, and the planned closure of the Staffordshire site in February 2020 with activities consolidated in Gloucestershire and South Wales. We have also commenced a proposed UK compulsory redundancy programme that could lead to a headcount reduction of around 200 people (approximately 6% of total UK employees). We have reviewed all other areas of operating costs and reduced expenditure where appropriate.

Total Group headcount at the end of December 2019 was 4,871, a net reduction of 170 since June 2019.

The Group remains committed to our long-term strategy of delivering growth through the development and introduction of innovative and patented products and during the first six months of this year we incurred net engineering expenditure of £46.1m compared with £47.7m last year.

The directors thank employees for their valued support and contribution during this challenging period.    

Capital Expenditure

Capital expenditure for the first six months was £28.4m. Expenditure on property totalled £20.8m for the period, including the extension to our Innovation Centre in Wotton-under-Edge, Gloucestershire which is nearing completion; acquisition of property in Pune, India to provide capacity for future growth; refurbishment of the building purchased in Nagoya, Japan last year; and the construction of our new facility in Michigan, USA. Expenditure on plant and equipment for the period was £7.6m.

With the building projects listed nearing completion, capital expenditure in the second half of this year is planned to reduce significantly.

Working capital

Net cash balances at 31 December 2019 were £71.3m, compared with £100.5m at 31 December 2018 and £106.8m at 30 June 2019. 

Inventory balances at 31 December 2019 were £117.8m, a decrease of £11.2m since 30 June 2019, primarily

reflecting the reduction in trading activity.

Dividend

The Board has approved an interim dividend of 14.0 pence net per share (2019: 14.0 pence) which will be paid on 6 April 2020 to shareholders on the register on 6 March 2020. All directors have waived their rights to the interim dividend which results in the cost of the dividend being £4.8m compared to £10.2m last year.

Outlook

The Board believes that the structural demand drivers in our end-markets remain intact. The Group is in a strong financial position and we remain confident in the Group's long-term prospects due to the high quality of our people, our innovative product pipeline, extensive global sales and marketing presence and relevance to high-value manufacturing.

As indicated in our trading statement in October 2019, trading conditions are expected to remain challenging through the remainder of this financial year driven by the global macroeconomic environment. At this stage, we expect full year revenue to be in the range of £530m to £560m. Adjusted profit before tax is expected to be in the range of £50m to £70m, with profits in the second half of the year expected to benefit from an increase in revenue, reduced operating costs and a favourable currency impact from forward contracts compared to the first half year. Statutory profit before tax is expected to be in the range of £38m to £58m.