Renishaw sees H1 profits sink but gives brighter outlook

Renishaw has said that higher costs, pay inflation and currency movements hit margins in the first half, leading to a 23% slump in adjusted profits amid challenging market conditions, but said it expected things to pick up in the second half.

The engineering group saw revenues fall 5% year-on-year in the six months to 31 December to £330.5m with falling sales in its biggest division, Manufacturing Technologies, as solid growth in Industrial Metrology was offset by continued weak demand for position encoders for semiconductor manufacturing equipment.

The gross margin excluding engineering costs was 61% of revenue, compared to 64% the year before, as targeted price rises were offset by adverse currency impact on revenue, employee pay inflation, and lower production overhead absorption due to planned inventory reductions, Renishaw explained.

As a result, adjusted pre-tax profit came in at just £56.5m for the period, down from £73.5m a year earlier.

For the full year, Renishaw said it expects "an improvement in our trading performance in the second half of the financial year as market conditions improve, and as we continue to pursue a range of growth opportunities".

The company added: "To support our through-cycle growth strategy, we are continuing to focus on productivity and to make targeted investments in our people, our production facilities, and our new product pipeline."

Full-year revenues are expected to be in the range of £675m to £715m, compared with £688.6m the year before, while adjusted profit before tax is project to be between £122m and £147m, compared with £141m previously.

The stock was up 2.4% in early deals on Tuesday at 3,517.99p.