Lack of Far East activity sees Renishaw revenues shrink

A lack of activity on the Far East saw Renishaw's revenues shrink significantly in the first half of its financial year, according to the firm's interim report released on Thursday.

The FTSE 250 company reported first half revenue of £198.5m in the six months to 31 December 2015, down from £223.8m in the same period a year earlier.

Renishaw said it had underlying growth, however, of 5% when adjusted for significant Far East orders in the previous year and on a constant currency basis.

Its first half profit before tax was £26.1m, compared with £56.6m the previous year. At period end, Renishaw had net cash reserves of £33.3m.

"Revenue last year benefitted from a number of large orders in the Far East, which have not been repeated to the same extent this year", said Renishaw chairman Sir David McMurtry in a statement.

The group's headcount had also increased by 388 since December 2014, which McMurtry said had an impact on earnings.

"The consequent increase in the cost base, combined with the impact of the product sales mix and lower revenue, has contributed to the reduction in the group's profit before tax for the first half", he said.

"Earnings per share were 30.7p, compared with 64.2p last year", McMurtry added.

Most of the losses came from Renishaw's metrology division, where revenue for the period was £184.9m, compared with £213.9m the previous year. Operating profit there was £29.8m, compared with £62.3m in 2014.

In its healthcare division, revenue grew by 37% to £13.6m. The division's operating loss shrunk to £3.9m, from £5.7m in 2014.

Renishaw said it was continuing to invest in long-term growth, upping spending on research and development by 14% to £34.1m in the period. Capital expenditure on property, plant, equipment and vehicles was £28.7m.

"We anticipate an improvement in our underlying growth during the second half of the year and, as we indicated in our October trading statement, we currently expect full year revenue to be in the range of £440m to £465m and profit before tax to be in the range of £85m to £105m", McMurtry said.

"We remain confident of the group's prospects for both this year and the future", he concluded.

Renishaw's net cash balance on 31 December 2015 was £33,3m, compared with £38.8m a year earlier. The company's board announced an interim dividend of 12.5p per share, to be paid on 7 April 2016.