Renishaw H1 2025 Earnings Report

Renishaw EPS Results

• Actual EPS: GBX 63.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Renishaw Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Renishaw Announcement Details

• Quarter: H1 2025
• Date: 2/13/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 13, 2025
• Conference Call Time: 2:00AM ET

We are a world leader in measuring and manufacturing systems. Our products give high accuracy and precision, gathering data to provide customers and end users with traceability and confidence in what they're making. This technology also helps our customers to innovate their products and processes. We are guided by our purpose: Transforming Tomorrow Together. This means working with our customers to make the products, create the materials, and develop the therapies that are going to be needed for the future. We believe that our purpose is incredibly relevant in today's environment where the pace of change in technology is faster than ever. We also know that the future will be a world of scarce resources, needing high-performance, intelligent, personalised solutions that make the best use of these resources, and our expertise can help deliver this. Our vision is to innovate and transform the capabilities of our customers and end users through unparalleled levels of: Precision, Productivity and Practicality

Renishaw H1 2025 Earnings Call Transcript

Presentation

[Will Lee, CEO at Renishaw]

Welcome to Renishaw's half year results presentation for the 2025 financial year. I'm Will Lee, chief executive, and I'm joined today by Alan Roberts, group finance director. I'm gonna start by talking you through our business performance before Alan will provide a more detailed review of our financial results. He'll then hand back to me to cover the solid strategic progress that we've made this year before I conclude with the outlook for the full year. However, before we discuss the results, I'd like to say a few words about our cofounder, sir David McMurtry.

[Will Lee, CEO at Renishaw]

In December 2024, it was with profound sadness that we announced David's death. We have since been overwhelmed by messages of support from all around the world. People reflected on his role as a visionary and empathetic business leader, as a passionate innovator. They told us how he shaped an entire industry and also his decency, humility, and his great sense of humor. Whilst his presence is deeply missed, the ethos that he and John Deere instilled in Renishaw will continue to guide us.

[Will Lee, CEO at Renishaw]

I'll now discuss business performance in the first six months of this year. We achieved steady progress against the backdrop of mixed market conditions with revenue growth of 3%, representing an increase of 2% at constant currency. Manufacturing Technologies revenue was 4% higher with growth in position measurement boosted by sales of position encoders to semiconductor equipment manufacturers. We also saw growth for our additive manufacturing products. However, sales of industrial metrology products were lower compared to the same period last year.

[Will Lee, CEO at Renishaw]

Revenue for analytical instruments and medical devices was 3% lower. Here, a stronger demand for our neurosurgical robots was offset by weaker demand for our Raman spectroscopy product line. The Americas region delivered 5% growth at constant currency, achieving growth in AM systems and positioning coders. We also saw an improvement in the order book, notably for industrial metrology sensors and also for the Agility Coordinate Measuring Machine. Our EMEA region also achieved constant currency growth of 5%, boosted by growth in Agility CMMs, AM systems, and position encoders.

[Will Lee, CEO at Renishaw]

There was, however, weaker demand from machine builders for industrial metrology sensors. The APAC region was flat overall, but 1% lower at constant currency. Here we saw higher demand for positioning coders within the semiconductor market and also a strengthening order book. This was offset by weaker industrial metrology sales to the consumer electronics sector. However, we have seen a recent improvement in orders from these customers.

[Will Lee, CEO at Renishaw]

In a period of low growth, we continue to control our fixed costs to focus on efficiency across the business whilst remaining committed to our long term growth ambitions. Our profit before tax was 2% higher at 57,500,000.0. Group operating profit was 9% higher, helped significantly by our forward currency contracts. Constant currency operating profit was actually 5% lower. At actual exchange rates, our Manufacturing Technologies segment generated an operating profit that was 15% higher in a period of modest revenue growth.

[Will Lee, CEO at Renishaw]

With lower revenue compared to the same period last year, our Analytical Instruments and Medical Devices segment generated an operating loss of 1,200,000.0. At a group level, operating profit margin was 15.1% up 0.8% on last year. We saw lower PBT in Q2 compared to a strong Q1 and this was mainly due to less favorable currency contracts, a change in product mix, and some one off supply chain costs. I'd now like to hand over to Alan who will talk us through our financial performance in more detail.

[Allen Roberts, Group Finance Director & Director at Renishaw]

Thank you, Will, and good morning, everybody. As Will has already reported, we have achieved revenue for the first half of the year of 341,400,000.0 compared to 330,500,000.0 last year, an increase of 3% or 2% at Constance exchange rates. Operating profit for the period was 51,600,000.0, a 9.3% increase on the previous period. This represents a 15% return on revenue compared to 14% last year and our target of 20%. The current period included significant gains from forward currency contracts in q one, which were entered into at favorable rates following volatility in the currency markets arising from the September 22 UK mini budget.

[Allen Roberts, Group Finance Director & Director at Renishaw]

When excluding these and translating half one twenty five results at half one twenty four exchange rates, operating profit at constant exchange rates was 4.9% lower than the previous year. I'll cover our cost drivers on the next slide. Profit before tax for the period was 57,500,000.0 compared with 56,500,000.0 last year. For this period and the comparable period, there are no adjusting items and therefore adjusted and statutory profit measures are equivalent. The income tax expense in the consolidated income statement has been estimated at a rate of 20.1, which is based on management's best estimate of the full year effective tax rates and is the same as at the previous half year.

[Allen Roberts, Group Finance Director & Director at Renishaw]

The board has approved a maintained interim dividend of 16.8p per share, which will be paid on 04/08/2025 to shareholders on the register on the 03/07/2025. Across our income statement, labor costs have increased by nearly 10,000,000 compared to the prior year. This increase primarily results from January 24 salary reviews and severance payments of 1,800,000,000.0. Our latest salary review in January 2025 amounted to around 4% of our total labor costs, which will increase our labor costs in the second half of the financial year by around £7,000,000 We continue to invest in employee remuneration to ensure competitiveness and retention of highly skilled and trained employees. However, our recruitment plans will also need to take account of the impact of the UK government's October twenty four budget, which is expected to increase labor costs by £1,000,000 in quarter four this year and will add £4,000,000 to our annual costs.

[Allen Roberts, Group Finance Director & Director at Renishaw]

Our cost of sales, excluding engineering costs for the period, was 38.5% of revenue, an improvement of 1% over the comparable period in the previous year. We have seen favorable variances relating to currency and component purchase costs. However, these have been partly offset by continued pricing pressures, particularly in the APAC region. We have also experienced a specific supply chain quality issue during quarter two, which resulted in GBP 2,000,000 of non recurring costs. We remain committed to our long term strategy of developing innovative and patented products to create strong market positions.

[Allen Roberts, Group Finance Director & Director at Renishaw]

During the first six months of the year, our net engineering spend, mostly related to labor costs, increased by 11% to £50,500,000 This included £1,400,000 of severance costs relating to the closure of our research facility in Edinburgh, UK. Our distribution and administrative expenses remain stable due to currency, but include labor cost increases and further increases in third party support and maintenance costs in relation to our ongoing IT transformation, which will lead to productivity benefits in future years. Financial income less expenses for the period was 4,100,000 compared to 6,800,000.0 last year. While interest on bank deposits increased by 1,300,000.0, we've experienced 2,700,000.0 of realized currency losses. Cash generation has been strong in this period.

[Allen Roberts, Group Finance Director & Director at Renishaw]

We have achieved adjusted cash flow conversion from operating activities of 100%, which exceeds our 70% target. In working capital, our trade receivables have reduced by $21,500,000 in line with the profile of our quarterly revenue and minimal movement in debtor days. Meanwhile, we continue to carefully manage our inventory balances, which have reduced by $4,200,000 to $157,800,000 We have reduced our capital expenditure during the period to $23,400,000 which I'll cover on the next slide, and we paid a final dividend of $43,200,000 in respect of fiscal year twenty twenty four. As a result, cash and cash equivalents and bank deposit balances at the 12/31/2024 were $233,200,000 compared with $217,800,000 at the 06/30/2024. We continue to make capital investments in our business to make sure that we have the capacity to respond to market opportunities as we grow.

[Allen Roberts, Group Finance Director & Director at Renishaw]

With the completion of the two new halls at Biscayne, South Wales last year, we have transferred production of our agility coordinate measure machines to Hall 3. This hall is also being used for the production of some of our other larger products, including additive manufacturing machines and Fortisync closed encoders. Our focus now is on investing in new equipment at all our manufacturing sites to grow our capacity and boost our productivity, including logistics automation systems. Total CapEx for this year is expected to be around £40,000,000 I'd now like to hand back to Will.

[Will Lee, CEO at Renishaw]

Thank you, Alan. At our twenty twenty four Capital Markets Day, we spoke in detail about our purpose, our ambition, and our strategic model for success. This slide shows a summary of our purpose and ambition. For more details, you can view my presentation from last June on our Investor Relations homepage. What I'd like to focus on today is the progress we've made so far this year before ending with the outlook for FY 2025.

[Will Lee, CEO at Renishaw]

We first introduced you to our long term value creation model last year. The model has two main elements. Firstly, our positioning in substantial markets with solid underlying growth prospects, underpinned by the four growth drivers that you can see on the left of this slide. The second element is our strategy for outperforming our underlying markets, which you can see on the right. This comprises our strategic priorities, how we allocate capital to drive our organic growth, and how we develop our portfolio of businesses to build a coherent group.

[Will Lee, CEO at Renishaw]

I won't go into the detail on all of this today, but I do want to remind you about how we are strengthening our market position through our three strategic priorities. These are to grow in our existing markets, to increase the value of the technology that we sell, and to extend into new high growth markets. Over the next few slides, I'll talk about the progress that we've made so far this year. Let's look at how we are growing in our existing markets. Here, we are aiming to increase revenue by driving up pro fitment levels, offering higher value sensors, and by winning more customers that build machinery.

[Will Lee, CEO at Renishaw]

This requires us to continue our commitment to research and development with high levels of investment helping us to create the products that will differentiate us from our competitors and help us to make the most of new opportunities as they arise. This led to a number of new product introductions during the first half of the year. We introduced enhancements to our market leading twin probe system for machine tools, making the probes easier to install and also give them a longer battery life. This means more convenience for our customers and also helps with sustainability goals. These probes use our patented Opti Logic technology, which enables fast setup using a smartphone app.

[Will Lee, CEO at Renishaw]

We also launched design improvements for our range of modular metrology fixturing products, which make it easier for our customers to position components for inspection. We have also eliminated chemicals from our production process and improved packaging to significantly reduce plastic waste. I'm pleased to report that we continue to grow sales of our Fortis enclosed position encoder. We've also now extended the available range with longer length encoders to allow us to tap into the larger machine market as well. Our second strategic priority is designed to help us increase revenue by providing our end customers with complete solutions to capture a greater proportion of their investment.

[Will Lee, CEO at Renishaw]

During November at the FormNet show in Germany, we launched the Ren AM 500D dual laser additive manufacturing machine. We believe this lowers the entry barrier for manufacturers looking to adopt AM for higher volume component production. When combined with our Tempest technology, which we launched last year, the new dual laser system can deliver production speeds up to three times faster than conventional single laser systems. To further increase the adoption of AM systems for a wider range of industrial applications, we have added five new processable materials. These include variants of copper, tall steel, stainless steel, and aluminum alloy.

[Will Lee, CEO at Renishaw]

We have also increased the flexibility of our systems by enabling our customers to use new powder layer thicknesses for existing materials. Our third strategic priority is to diversify into close adjacent markets where we have a strong market understanding and brand awareness. A good example of this is our new positioning code align based on inductive technology. In November, we launched our new Astria inductive encoder line, which offers robust and accurate position measurement in demanding environments, including robotics, defense, and medical devices. Like all of our encoders, the new line is designed to be easy to install.

[Will Lee, CEO at Renishaw]

Early market feedback suggests that we have launched a product that meets significant market needs and has given us confidence to invest in this new product line further. This is clearly a period of significant global macroeconomic uncertainty. Despite this and the headwinds that we face, we continue to make progress on our strategic priorities. We remain confident in our organic growth model built on solving customer problems with innovative products, global service, and world class in house manufacturing. We faced mixed trading conditions in the first six months of the year, but we are continuing to develop growth opportunities, and we have seen orders improve recently, especially from our key semiconductor and consumer electronics markets.

[Will Lee, CEO at Renishaw]

We now expect to achieve steady revenue growth overall this year with revenues between 416% stronger in h two relative to h one. This results in a full year revenue range range of million to million. As Alan has already explained, we are facing cost headwinds in the remainder of the year. We are therefore continuing to carefully balance productivity improvements with investment in our strategic priorities to support our long term growth targets and to drive operating margins towards our 20% target in the medium term. Our expected full year profit range is between £105 and £135,000,000 Thank you for listening.

Participants

Executives

• Will Lee, CEO
• Allen Roberts, Group Finance Director & Director