Renishaw reports profit in FY 2020 despite revenue decline caused by COVID-19

British engineering firm and metal 3D printer manufacturer Renishaw has reported a pre-tax profit of £48.6 million in its full-year (FY) financials despite the impact of the COVID-19 pandemic on its revenue. 

Renishaw, which reports its FY results from June 30 2019 to June 30 2020, generated £510.2 million in revenue for the 2020 financial year. This figure represents a decline of 11 percent on the reported £574 million revenue in FY 2019.

Although Renishaw did report a reduction in its pre-tax profit from £103.9 million to £48.6 million, it has fared well compared to companies more reliant on their revenue gained from 3D printing. Groupe Gorgé has seen its revenue reduced by 20 percent over H1 2020, while similar declines have forced 3DSystems to undergo a strategic refocus for H2 2020.

Following the publication of its FY financial results, Renishaw’s shares dropped from £52.40 per share to £46.94, but they have since somewhat recovered to £48.22. 

In a call with analysts and investors, Will Lee, Chief Executive of Renishaw, explained how the COVID-19 pandemic forced the company to make structural changes to stay profitable. “This has been a challenging year for us as a Group, with the economic conditions that we have faced. Our revenue was lower, and this was due to challenging economic conditions throughout the year, and the impact of COVID-19 coming through in the second half for us,” said Lee. 

“So we did have to make some difficult decisions and we’re very grateful for the support of our staff whilst we were doing this,” added Lee.

“In the last quarter, we were looking at a real business resizing across the whole global group, restructuring in particular our additive manufacturing business.”

Renishaw stayed profitable in the 2020 financial year despite the ongoing pandemic. Photo via Renishaw.

Renishaw’s FY 2020 financial results 

Renishaw’s revenue is reported in two categories, Metrology and Healthcare products. The company’s Metrology segment generates the majority of its income, and includes revenue gained from selling its advanced measuring equipment as well as its 3D printers. 

Over the 2020 financial year, Renishaw’s Metrology segment reported revenue of £475.2 million, a ten percent drop compared to the £532.9 million generated in FY 2019. The firm’s line of machine tools was badly hit by the ongoing trade war between the U.S and China, as well as the fall in their usage during the COVID-19 shutdown.

Revenue by Segment  FY 2020 (£)  FY 2019 (£) Change (%)
Metrology  213.6m 223.7m -5
Healthcare Products  35m 41m -15
Total  249.1m 264m -5

Renishaw attributed its poor Metrology revenue performance to a slowdown in demand within the aerospace, automotive, consumer electronics, and oil and gas sectors. The previous year also benefited from a number of large orders from end-user manufacturers in the APAC region, which have not been repeated to the same extent during FY 2020. 

The company’s Healthcare segment reported revenue of £35 million in FY 2020, a 15 percent decrease on the £41 million generated during FY 2019. Renishaw’s 3D printed implants as well as its dental, neurological and spectroscopy product lines all saw a decline in revenues over FY 2020. The COVID-19 pandemic impacted on the firm’s overall healthcare business, by causing elective surgeries to be postponed in addition to shipping delays from its Chinese factories.

Total revenue by region FY 2020 (£) FY 2019 (£)  Change (%)
APAC  222.7m 240.1m -7
EMEA  167.3m 201.3m -17
Americas 115.2m 132.6m -13
Overall group revenue 510.2m 574m -11

During FY 2020, Renishaw’s Metrology revenue continued to benefit from increased adoption of its RenAM 500Q system, albeit at a reduced rate due to the impact of the pandemic. The launch of the company’s new RFP fringe probe and NC4+ Blue system further boosted its revenue in the segment, as did its new ATOM DX line of encoders. 

Renishaw’s systems added to its revenue by establishing a number of partnerships during the 2020 financial year. At Formnext 2019, the firm announced a project with Swedish engineering group Sandvik to qualify new 3D printing materials for production applications. BAE Systems also signed a deal with Renishaw, agreeing to develop improved manufacturing processes for its combat aircraft systems.

Renishaw's RenAM 500Q system (pictured) continued to be a key driver of Renishaw's revenue during FY 2020. Photo via Beau Jackson, 3D Printing Industry.
Renishaw’s RenAM 500Q system (pictured) continued to be a key driver of Renishaw’s revenue during FY 2020. Photo via Beau Jackson, 3D Printing Industry.

Staying profitable during the COVID-19 pandemic 

Allen Roberts, Group Finance Director of Renishaw explained on the earnings call that COVID-19 had necessitated the need for the company to make cost-cutting changes. “It has been a very challenging year for the group due to the adverse global economic conditions in the second half of the year,” said Roberts. “We want to undertake restructuring and resizing activities, which have already reduced operating costs in many areas, and there’s been an increased focus on cash preservation.”

In order to stay profitable, the company made a number of cost-cutting changes earlier in the financial year. More than 500 redundancies were made during FY 2020, reducing Renishaw’s headcount from 5,041 at the end of FY 2019 to 4,463. Although the lay-offs cost the firm an initial £6.3 million, the company considers the expense to be an investment in future profitability. Combined with shorter working hours and furloughing, Renishaw has reduced its labor costs by 7 percent from £237.4 million in FY 2019, to £221.3m in FY 2020. 

Even though the company opened new facilities in Nuevo Leon, Mexico and a rental fixtures complex in Michigan, U.S.A, it still reduced its spending on R&D during FY 2020. Renishaw spent £66.6 million on R&D over FY 2020, an 11 percent drop compared to the £75 million reported in FY 2019, reflecting the firm’s leaner spending approach.

Reviewing its own costs and supply chain due to the COVID-19 pandemic allowed Renishaw to identify new ways of optimizing the way it produces parts. As the pandemic continues, Lee said that supply chain disruptions could present an opportunity for other businesses to bring production in-house via 3D printing.

“We are seeing more and more talk about the migration of supply chains from different countries and bringing that back more locally,” said Lee. “This is something that we see as a real positive for us in terms of the onshoring of manufacturing and increased demand. We also need to make it cost-effective, so that it really drives the need for the automation.”

In terms of the company’s 3D printing strategy going into FY 2021, Lee said it was focused on getting the most from its 500Q system. Renishaw will now aim to address a small number of large-volume accounts, in order to best take advantage of the cost benefits provided but its machines. “On additive manufacturing, we are restructuring, so we do have a different revenue profile going forward. We are focusing on a smaller number of larger potential accounts, rather than the lower volume customers.”

“The 500Q’s 250×250 bed size is extremely highly productive and therefore produces low-cost parts, which is really critical when you’re going into high volume manufacturing. So we’re really targeting where we feel our innovation will give us a competitive advantage, and we’re going to focus on that area of the market.”

In his closing remarks, Lee said that Renishaw would target new partnerships and growth opportunities in the year ahead, despite the uncertainties of the ongoing pandemic. “We absolutely remain committed to our long term strategy of investing in really innovative and patented products,” concluded Lee. 

“We have had to resize the business for the challenging conditions that we are seeing at the moment, and this means we’ve really had to prioritize what we are working on. We still have an abundance of wonderful new ideas for disruptive technology that we think have opportunities for significant organic growth. These are very much around existing markets that we already operate in,” he added.

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Featured image shows a Renishaw RenAM 500 3D printer being operated. Photo via Renishaw.