Renishaw plc

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 going to 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'll conclude with the outlook for the full year. However, before we discuss the results, I'd like to say a few words about our co-founder, Sir David McMurtry. 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 humour. Whilst his presence is deeply missed, the ethos that he and John Deere instilled in Renishaw will continue to guide us. I'll now discuss business performance in the first six months of this year. We achieved steady progress against a backdrop of mixed market conditions, with revenue growth of 3%, representing an increase of 2% of 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. 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 of constant currency, achieving growth in AM systems and position encoders. 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. 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 position encoders within the semidex 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. 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, 57.5 million. 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. With lower revenue compared to the same period last year, our analytical instruments and medical devices segment generated an operating loss of 1.2 million. 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 favourable 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.

Thank you, Will, and good morning, everybody. As Will has already reported, we have achieved revenue for the first half of the year of £341.4 million, compared to £330.5 million last year, an increase of 3% or 2% at concerts exchange rates. Operating profit for the period was 51.6 million, 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 Q1, which were entered into at favourable rates following volatility in the currency markets arising from the September 22 UK mini-budget. When excluding these and translating half-125 results at half-124 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 £57.5 million compared with £56.5 million 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. the board has approved a maintained interim dividend of sixteen point eight pence per share which will be paid on eighth of april twenty twenty five to shareholders on the register on the seventh of march Across our income statement, labour costs have increased by nearly 10 million compared to the prior year. This increase primarily results from January 24 salary reviews and severance payments of 1.8 million. Our latest salary review in January 2025 amounted to around 4% of our total labour costs, which will increase our labour costs in the second half of the financial year by around 7 million pounds. 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 24 budget, which is expected to increase labour costs by £1 million in Q4 this year and will add £4 million to our annual costs. 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 favourable 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 Q2, which resulted in £2 million of non-recurring costs. We remain committed to our long-term strategy of developing innovative and patented products to create strong market positions. During the first six months of the year, our net engineering spend, mostly related to labour costs, increased by 11% to £50.5 million. This included 1.4 million 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 labour 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 £4.1 million compared to £6.8 million last year. While interest on bank deposits increased by £1.3 million, we have experienced £2.7 million of realised currency losses. Cash generation has been strong in this period. 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 21.5 million, 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 £4.2 million to £157.8 million. We have reduced our capital expenditure during the period to £23.4 million, which I'll cover on the next slide, and we paid a final dividend of £43.2 million in respect of fiscal year 2024. As a result, cash and cash equivalents and bank deposit balances at 31 December 2024 were £233.2 million, compared with £217.8 million at 30 June 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. 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 Fortis enclosed 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 million. I'd now like to hand back to Welk.

Thank you, Alan. At our 2024 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. 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. 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. 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 giving them a longer battery life. This means more convenience for our customers and also helps with sustainability goals. These probes use our patented OptiLogic technology, which enables fast setup using a smartphone app. 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. During November, at the Formnext show in Germany, we launched the René M500D 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 Tempus 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, tool steel, stainless steel and aluminium alloy. 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 encoder line based on inductive technology. In November last year, we launched our new Astria inductive encoder line, which offers robust and accurate position measurement in demanding environments, including robotics, defence and medical devices. Like all of our encoders, the new line is designed to be easy to install. 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. We now expect to achieve steady revenue growth overall this year, with revenues between 4% and 16% stronger in H2 relative to H1. This results in a full-year revenue range of 695 to 735 million pounds. 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 four-year profit range is between £105 and £135 million. Thank you for listening.