Renishaw Share Price Surged 19.1% Despite H1 Revenue Decline

The Renishaw plc (LON: RSW) share price surged 19.1% after releasing its interim report for the six months ended 31 December 2023. The company recorded a slight decline in revenues to £330.5 million from £347.7 million, marking a 5% decrease. 

The segment focusing on manufacturing technologies witnessed a 6% drop in revenue. This was partially mitigated by robust growth in Industrial Metrology, but the demand for position encoders used in semiconductor manufacturing equipment remained low.

Conversely, the revenue from analytical instruments and medical devices experienced a notable increase of 16%, primarily driven by solid sales of Spectroscopy products.

When looking at revenue on a constant currency basis, the overall group revenue dipped by 2%. Geographically, the Asia-Pacific region showed a positive trend with a 6% increase. In contrast, Europe, the Middle East, and Africa (EMEA) saw a 6% decline, and the Americas faced a more significant reduction of 13%. 

The second quarter of the fiscal year mirrored the trends observed in the first quarter of this fiscal year and the second quarter of the previous fiscal year, with the order book remaining stable.

The adjusted profit before tax stood at £56.5 million, down from £73.5 million in the first half of the fiscal year. This profit represents 17% of the company's revenue, a slight decrease from 21% in the previous year.

The gross margin before engineering costs saw a 3% reduction. This was due to targeted price increases that were negated by the adverse impact of currency fluctuations on revenue, inflation in employee wages, and decreased production overhead absorption, which resulted from deliberate inventory reductions.

The company successfully managed its engineering, distribution, and administration expenses with a modest annual increase of 3%. The statutory profit before tax also experienced a decline, coming in at £56.5 million compared to £77.8 million in the first half of the previous fiscal year.

The company forecasts its full-year revenues to fall from £675 million to £715 million, compared to £688.6 million the previous year. Adjusted profit before tax is expected to be between £122m and £147m, compared to £141m previously.

Renishaw share price. 

The Renishaw share price surged 19.08% to trade at 4107.0p from Monday’s closing price of 3449.0p.

Following the report, Barclays lifted its price target for Renishaw shares to 3,510p from 2,920p, keeping an Underweight rating on the company.