QMT News: August 2010
Record final quarter sales for Renishaw

Technology company, Renishaw have announced record final quarter sales and a return to growth for the year to 30th June 2010. In the second half of the year, revenue sincreased strongly by  57% over the comparable period in 2009 and by 46% over revenues in the first half of the year. Total revenues for the year were £181.6m (2009 £171.2m), which includes a currency benefit of £8.1m.

 Chairman and CEO, Sir David McMurtry said,  "It is clear from the strong second half performance that the Company is showing real momentum going into the new financial year, highlighted by our record order book for the start of a new year of £23.3m, compared with £9.7m at the start of the previous year."

Geographically, there was a comparative reduction in turnover in continental Europe and the UK, but modest growth in the Americas and particularly strong growth in the Far East, largely China, and other territories, including India. After reporting a first half year operating profit of £6.9m (2009 £11.9m), Group operating profit for the year was £28.1m (2009 £6.0m) before an exceptional deduction of £1.7m for impairment costs of the investment in associates.

Profit before tax, including £6.8m currency benefit, amounted to £27.1m compared with £4.7m for the previous year and profit after tax was £21.3m (2009 £3.6m) resulting in earnings per share of 29.3p (2009 4.9p). Adjusted earnings per share, which excludes the exceptional impairment write-down this year and redundancy costs last year, were 31.6p, compared with 9.3p last year.

Segmental analysis
The Renishaw Group has divided its operating, research and development and reporting activities into two main segments: the traditional Metrology business, the cornerstone of Renishaw, and, more recently, the as yet smaller Healthcare activities into which parts of Renishaw have migrated or which have been established or acquired.

(1) Metrology
Metrology revenue grew to £162.1m from £152.9m in 2009, with operating profits, prior to exceptional items, of £31.5m compared with £10.3m in 2009. Particular growth was experienced in the Far East and, in terms of products, there was strong demand for Renishaw's encoder and laser scale products.

This sector continues to invest heavily in development of new products. Research and Development, including associated engineering costs, was £22.0m (2009 £26.2m).

This year has seen the introduction of a number of new products including the QC20-W wireless Ballbar for checking the servo-ing performance of three-axis machine tools; the RMP40, RLP40 and OLP40 compact probes with radio and optical signal transmissions for multi-axis and mill-turn machine tools and lathes; and the PH20 probe head for coordinate measuring machines was successfully launched at the Control Show in Germany in May. The TONIC range of encoders and RESOLUTE absolute encoders have also been enthusiastically received by the market said Sir David. 

On 23rd July 2010 the Group acquired a 29% shareholding in Measurement Devices Limited (MDL) for £2.3m. MDL is a metrology company based in York, with offices in Aberdeen and USA (Houston). Its laser scanner products are primarily marketed in the areas of marine positioning and mine/quarry scanning. MDL's products will add to Renishaw's current range of laser-based products and the Group's investment in MDL will enable MDL to expand further on a global basis and benefit from Renishaw's technology, engineering and manufacturing expertise and worldwide distribution network.

(2) Healthcare
The Healthcare segment comprises the neurosurgical, dental and spectroscopy products, which includes PulseTeq (head coils for the enhancement of MRI images), Renishaw Diagnostics (molecular diagnostics for the early identification of infectious diseases) and Renishaw Mayfield (neurosurgical robots).

Revenue in this sector for the year amounted to £19.5m (2009 £18.4m) which resulted in an operating loss of £3.4m, compared with a loss of £4.3m in the previous year.

Research and Development in this sector amounted to £6.6m (2009 £7.5m) and was focussed on developing the expanding range of Healthcare offerings.
The Renishaw Group recently entered into an agreement with a world leading dental implant company, Biomet 3i LLC, for the development and marketing of comprehensive digital dental solutions to dental professionals and patients worldwide. The collaboration will see Biomet 3i marketing Renishaw dental scanners, in-lab milling machines and dental 3i incise CAD software to dental laboratories through its global marketing and sales organisation. Crown and bridge dental frameworks in zirconia and cobalt chrome (cobalt chrome initially available in Europe only) will be manufactured and supplied through a collaboration between both companies.

Spectroscopy product revenue, presently the largest part of Renisahw's healthcare revenue, continued to show good growth, especially in the Far East.

Balance sheet
Capital expenditure for the year was £2.9m (2009 £11.0m). The Group is currently concluding the fitting out of production facilities at Pune in India, expected to be completed by December 2010 at a cost of around £3m. In addition, the refurbishment (estimated to cost £1.8m) of the recently acquired premises in Charfield, close to New Mills in Gloucestershire, UK, has commenced. These will be occupied by the company's dental and medical activities early in 2011.

Further investment has been made in a number of new machine tools at Renishaw's Stonehouse factory. At the Woodchester facility, investment that will double the capacity of automated surface-mount electronics assembly and automation of stylus assembly processes are currently being commissioned.

Working capital (accounts receivable plus inventories less creditors) has grown by a net £12m reflecting the significantly increased level of activity, particularly in the final quarter.

Year end net cash balances amounted to £31.1m (2009 £20.5m). 

Sir David McMurtry said that, "Whilst economic uncertainties remain, we have a robust international business model that continues to spread its applications into new markets. Our particular optimism for further developments in the expanding range of healthcare offerings, together with our continued investment in new products in our traditional markets, underpins our confidence in future growth."



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