# Renishaw plc Sees its adjusted profit before tax down 60.1%

- Link: https://www.directorstalkinterviews.com/renishaw-plc-sees-its-adjusted-profit-before-tax-down-60-1/412820318
- Published: 2020-05-12T07:26:46+01:00
- Author: Giles Arbor

**Renishaw plc** (LON:RSW), the global high-precision metrology and healthcare technology
group, published today a trading update for the nine months ended 31 March 2020.
It contains unaudited information that covers the first three quarters of the financial
year and the period since.

**Trading activity**

|   | 9 months to 31 March 2020 | 9 months to 31 March 2019 | Change | 
|   |   |   |   | 
| Metrology | £365.9m | £404.5m | -9.5% | 
| Healthcare | £24.0m | £26.6m | -9.8% | 
| Total Revenue | £389.9m | £431.1m | -9.6% | 
|  |   |   |   | 
| Adjusted* Profit before tax | £31.8m | £79.6m | -60.1% | 
| Statutory Profit before tax | £19.7m | £84.8m | -76.8% |

Revenue for the first three quarters of the current financial year was £389.9m, 
compared to £431.1m for the corresponding period last year.

In our metrology business revenue amounted to £365.9m compared to £404.5m last year
and in our healthcare business revenue was £24.0m compared with £26.6m last year.

Adjusted profit before tax for the first three quarters amounted to £31.8m compared
with £79.6m last year and the statutory profit before tax amounted to £19.7m (2019:
£84.8m).

Adjusted profit in the third quarter benefitted from reduced operating costs, primarily
arising from initiatives undertaken before the outbreak of the global pandemic, 
and a favourable currency impact from forward contracts compared to the first half
year.

The global macroeconomic environment has been challenging for the Group during this
nine-month period. Even before the pandemic, we were facing trading challenges including
the ongoing uncertainty caused by the trade tensions between the USA and China and
weaker demand in the machine tool sector. We also faced tough comparators with the
2019 trading year, which 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. However, 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.

During the third quarter we initially experienced reduced demand in China due to
the Chinese Government’s actions to deal with the COVID-19 outbreak, but we have
since seen a good recovery as factories have reopened. In our EMEA and Americas 
markets we did not experience a significant change in demand as a result of the 
pandemic during the quarter, but we believe that the effects will begin to be felt
in the coming months.

Despite the challenges to global supply chains caused by the pandemic, we did not
have any significant issues supplying our customers, although it was necessary to
delay shipments of some capital goods, including additive manufacturing and spectroscopy
products, due to customer site closures. 

**Financial position **

During this period of high uncertainty, the Board has focused on cash preservation
with capital expenditure being significantly lower in the third quarter and with
stock levels lower than at the half year. As communicated on 25 March, the Board
decided to cancel the 14.0p interim dividend. The interim dividend was expected 
to result in a payment of £5.1m, which reflects the previously announced decision
for all Directors to waive their rights to this interim dividend

The Group balance sheet remains strong with net cash balances of £94.0m as at 31
March 2020 (30 June 2019: £106.8m).

**Covid-19 update**

Renishaw’s number one priority continues to be the health and welfare of our employees,
their families and the wider communities in which we operate. Since January we have
implemented a wide range of measures to protect against the spread of COVID-19 at
our sites around the world and we continue to monitor the impact of the pandemic,
including a response and mitigation committee which has met daily since February.

All our manufacturing facilities around the world are open, although most are operating
at lower capacity due to reductions in staff numbers caused by a combination of 
school closures, shielding due to health conditions, or local operating restrictions.
At all manufacturing sites we have implemented robust measures to protect the welfare
of our employees and mitigate against business risk. We have been able to maintain
supply to customers during this challenging period, but this is a constantly evolving
situation and we continue to closely monitor all aspects of our supply chain and
are taking mitigating actions where necessary.

In March, Renishaw became a founder member of Ventilator Challenge UK, a consortium
of companies that is producing 20,000 ventilators for the UK’s National Health Service,
to treat serious cases of COVID-19. Our main role has been to produce machined components
at our Stonehouse and Miskin sites, where staff have been working seven days a week
to meet the urgent deadlines.

To closely manage costs and to mitigate against the risks of redundancies, the majority
of our non-manufacturing staff across the Group are either working reduced hours(
in some cases supported by local Government support schemes) or are part of the 
UK Government’s Coronavirus Job Retention Scheme. Where possible staff are working
from home and our people have adapted well and are working productively.

The members of the Renishaw Board and the senior management team across the Group
have all agreed to have their salaries reduced during the period that employees 
have reduced working hours. This includes co-founders, Sir David McMurtry and John
Deer, who will take no salary/fees during this period.  

The Board would like to thank all employees for their understanding and commitment
during this extremely challenging period.

**Outlook**

Based on recent order trends and customer feedback, we now expect full year revenue
to be in the range of approximately £490m to £505m. Adjusted profit before tax is
now expected to be in the range of approximately £45m to £55m with profits in quarter
four expected to benefit from ongoing reduced operating costs and a repeat of the
favourable currency impact from forward contracts seen in the third quarter. Statutory
profit before tax is expected to be in the range of approximately £31m to £41m.

Given the uncertain macroeconomic backdrop, we expect very challenging market conditions,
particularly in the automotive and aerospace sectors, in the coming periods. The
Group is in a strong financial position and the Board remains 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 across all sectors.

In light of the COVID-19 outbreak, we now anticipate the preliminary results for
the year ending 30 June 2020 will be released mid-August 2020 compared to the previously
published date of 3 August 2020.

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