Renishaw Regulatory News (RSW)

Renishaw plc

Trading update

10 May 2022

Renishaw plc, the global provider of manufacturing technologies, analytical instruments and medical devices, publishes this trading update for the nine months ended 31 March 2022. It contains unaudited information that covers the first nine months of the financial year and the period since.

Trading activity

Revenue for the nine months to 31 March 2022 was £492.4m, an increase of 21% compared to £407.4m for the corresponding period last year.

In our Manufacturing technologies business, revenue for the first nine months was £467.4m, compared with £382.1m last year2, with growth in all our product lines. Strong demand for our encoder product lines has largely been driven by increased investments in industrial automation and the semiconductor and electronics capital equipment markets. We also experienced good growth in demand for our machine tool and co-ordinate measuring machine product lines, where we have benefited from a recovery in investments in metal cutting machinery and the need to measure the outputs from those processes. Revenue from our Analytical instruments and medical devices business for the first nine months was £25.0m, compared with £25.3m last year2.

Our extensive in-house manufacturing operations, our proactive inventory management and our continual assessment of alternative components has allowed us to mitigate continued supply chain constraints, arising particularly due to the global shortage of electronic components.

There has been a modest increase in Group headcount in the third quarter, from 4,975 at 31 December 2021 to 5,004 at 31 March 2022. In the first half of the year, as part of our ongoing staff development and retention programmes, which includes ensuring competitive remuneration packages, we undertook extensive salary benchmarking exercises in certain areas of the business, including the UK. This led to targeted investments which resulted in around £5m of additional annual labour cost and increasing our third quarter operating costs. We have also experienced increases in utilities costs, arising from increased energy prices and usage and have recorded £2.0m of asset impairments in the quarter in relation to our operations in Russia.

Adjusted profit before tax for the nine months to 31 March 2022 amounted to £124.0m compared with £84.4m last year and the statutory profit before tax amounted to £120.2m (2021: £106.3m).

Financial position

The Group balance sheet remains strong with cash and bank deposit balances amounting to £241.1m (31 December 2021: £222.0m).

An interim dividend of 16.0p net per share was paid on 11 April 2022, totalling £11.6m.

COVID-19 update

While we continue to monitor the impact of COVID-19 on our people and our business, and retain some measures designed to minimise the risk of in-company transmission, most of our operations are now operating on a more normalised basis. We are closely monitoring the current lockdowns in China and are taking mitigating actions where possible against potential business disruption. This uncertain position makes trading levels in China in the remainder of this financial year difficult to predict.

Impact of Ukraine crisis

Following the Russian invasion of Ukraine in February 2022, we immediately stopped the supply of goods from the Renishaw Group to Renishaw Russia and we are now in the process of ceasing our trading operations in Russia. Typically, combined sales to Russia and Belarus have represented around 1% of total Group revenue. In the third quarter, £2.0m of impairments were recorded for our assets in Russia and we do not anticipate any further significant costs or impairments.

Outlook

We continue to see strong demand for our product lines and have a strong order book. Mindful of global uncertainties, we anticipate that revenue for the full year will be between £655m and £675m, and adjusted profit before tax will be between £155m and £170m.

The Board remains confident in our long-term prospects, due to our strong financial position, the high quality of our people, our innovative product pipeline, extensive global sales and marketing presence and relevance to high-value manufacturing.

The preliminary results for the year ending 30 June 2022 will be released on 15 September.

1 Adjusted profit before tax

The adjustment to statutory profit relates to:

- the accounting treatment of certain forward currency contracts used as hedging instruments which do not qualify for hedge accounting as they do not meet the hedge effectiveness criteria set out in the International Accounting Standard IFRS 9 'Financial Instruments'; and

- third-party costs relating to the formal sale process ('FSP') concluded in July 2021.

The Board deems that the adjusted profit before tax better reflects the underlying performance of the Group. The following table reconciles statutory profit before tax to adjusted profit before tax:

2 Reclassification of segmental results

In previous years, we reported the results of additive manufacturing machines marketed and sold to medical and dental customers within Analytical instruments and medical devices, reflecting how we managed this business. The management of this now sits within the Additive Manufacturing product line, with a similar customer base and risk profile to this product line, with results and operational matters reported to the Executive Committee and Chief Operating Decision Maker accordingly. We now therefore report the medical and dental results within Manufacturing technologies rather than Analytical instruments and medical devices. Comparative figures have been reclassified accordingly. For the 9 months to 31 March 2021, revenue of £3,100,000 has been reclassified from Analytical instruments and medical devices to Manufacturing technologies.