Renishaw PLC – Half-year Report

Highlights

Chairman's and Chief Executive's statement

We are pleased to report our Group results for the six months to 31st December 2018. Unless otherwise stated these results are based on continuing operations.

Highlights

·      First half year revenue of £296.7m, compared with previous year of £279.5m.

·      Revenue growth of 6%; 4% at constant exchange rates.

·      First half year adjusted¹ profit before tax of £59.6m, compared with adjusted previous year of £62.3m.

·      First half year statutory profit before tax of £61.6m, compared with £66.2m last year.

·      Cash balances of £100.5m, compared with £103.8m at 30^th June 2018.

Trading results 

Revenue for the six months ended 31st December 2018 was £296.7m, compared with £279.5m for the corresponding period last year, an increase of 6%, with an underlying growth of 4% at constant exchange rates. Aside from the Far East, we experienced revenue growth in all regions as set out above. At constant exchange rates, revenue in the Far East was 1% below the corresponding period last year, largely as a result of a slow down in demand for our encoder products and from large end-user manufacturers of consumer electronic products. In our metrology business we have experienced strong growth in both our additive manufacturing and measurement and automation product lines and in the healthcare business we have seen strong growth in our spectroscopy product line.

Adjusted profit before tax for the first half year was £59.6m compared with £62.3m last year. The current year has benefitted from a £5.3m currency gain, primarily in respect of intra-group balances. To mitigate future income statement volatility a number of intra-group loans have been reclassified as permanent investments.

Statutory profit before tax for the first half year was £61.6m, compared with £66.2m last year. Adjusted earnings per share were 69.3p, compared with 72.7p last year. Statutory earnings per share were 71.5p, compared with 77.0p last year.

Metrology

Revenue from our metrology business for the first six months was £277.7m, compared with £264.3m last year. Adjusted operating profit was £52.2m, compared with £63.2m for the comparable period last year. Whilst we have experienced strong growth in our additive manufacturing and measurement and automation product lines, the metrology business revenue and profitability have been impacted by the slow down in demand highlighted above.

Healthcare

Revenue from our healthcare business for the first six months was £19.0m, compared with £15.2m last year, and as mentioned above we have seen strong growth in our spectroscopy product line. The business broke even in the first half of this year compared to an adjusted operating loss of £1.9m in the corresponding period last year.

Continued investment for long-term growth

Over recent years we have invested in infrastructure and the recruitment of high calibre people to support growth opportunities. We maintain our long-standing commitment to research and development, with net engineering expenditure of £47.7m for the period compared with £39.1m last year.  We are now well placed to benefit from these investments and are not planning a significant headcount increase in the second half of the year. 

Capital expenditure for the first half year was £19.6m. Expenditure on property totalled £5.6m for the period, including the commencement of an extension to our Innovation Centre in Wotton-under-Edge, Gloucestershire. Expenditure on plant and equipment for the period was £13.6m as we continued to expand our manufacturing capacity, mainly in the UK, and continued to invest in our global IT and distribution infrastructure. We are well advanced in establishing a new European distribution facility at our existing Irish location to address the potential implications of the UK leaving the European Union.

Working capital

Net cash balances at 31st December 2018 were £100.5m, compared with £69.1m at 31st December 2017 and £103.8m at 30th June 2018. 

Inventory balances at 31st December 2018 were £122.5m, an increase of £11.9m since 30th June 2018. The increase has arisen primarily due to increased trading levels, expected future demand and a strategic decision to increase certain inventory lines in preparation for potential supply chain delays that could arise as a result of the UK's decision to leave the European Union.

Directors and employees

The workforce at the end of December 2018 was 4,941, a net increase of 79 since June 2018, including the current year graduate and apprentice intake. The directors thank employees for their valued support and contribution as the Group continues to develop and expand.

In July 2018, we announced the appointment of Catherine Glickman as an independent non-executive director and Chair of the Remuneration Committee with effect from 1st August and that Catherine would join both the Nomination and Audit Committees. We also announced that Kath Durrant would be stepping down as an independent non-executive director and chair of the Remuneration Committee with effect from 31st July.

UK defined benefit pension scheme

Following further engagement with The Pension Regulator, the Company and trustees have agreed the terms of a new deficit funding plan for the Company's UK defined benefit pension scheme. The Company has agreed to pay £8.7m per annum into the scheme for five years with effect from 1st October 2018. Under the terms of the current agreement the Company pays approximately £4m per year.

For further information regarding the new deficit funding plan, including details of changes to the floating charge over the escrow bank account, see note 11, 'Employee benefits'.

Dividend

The Board has approved an interim dividend of 14.0 pence net per share which will be paid on 8th April 2019 to shareholders on the register on 8th March 2019.

Outlook

Notwithstanding current economic uncertainties, the Board remains confident in the future prospects of the Group. We expect full year revenue to be in the range of £635m to £665m and adjusted profit before tax to be in the range of £140m to £160m. Statutory profit before tax is expected to be in the range of £146m to £166m.