Renishaw (LON:RSW) reported a “record” first half, pointing to a notable pickup in second-quarter demand and improving profitability despite ongoing currency headwinds and still-mixed end markets. Management said demand was strongest from customers making semiconductor manufacturing equipment—particularly for encoder products—and from the defense sector, while more traditional machine tool and coordinate measuring machine (CMM) sensor demand remained subdued, especially in Germany.
First-half performance and regional trends
On the income statement, the company reported revenue growth of 7.1% on a reported basis and 11.5% at constant currency. Chief Financial Officer Mark Poulton said growth was achieved across all three reporting segments, with an improving order book in each segment and region.
- Americas: Revenue rose more than 15% at reported rates (more than 20% at constant currency), driven by demand for higher-value capital equipment such as additive manufacturing machines and five-axis CMMs. The region also benefited from around £5 million of higher pricing and surcharging to offset tariff duties introduced during 2025.
- APAC: Revenue grew more than 10% at reported rates (more than 15% at constant currency). Drivers included demand from semiconductor and electronics manufacturing equipment customers for position encoders, along with growth in Equator flexible gauge sales to consumer electronics subcontract manufacturers.
- EMEA: Revenue fell around 5% at both reported and constant currency, reflecting continued subdued demand early in the period. Poulton said demand picked up later in the half and the order book ended stronger, helped by a step-up in Q2 performance versus Q1. Management also noted that implementation of a new sales ERP system in some territories in September affected the half-year performance.
Margins improve as cost actions offset FX and tariffs
Operating profit increased 11.4% to £57.5 million, with operating margin improving by 0.6 percentage points to 15.7%. Management emphasized that the margin improvement came despite significant currency pressure, as the company’s costs are largely sterling-denominated while most revenues are earned in other currencies.
Poulton said currency dynamics reduced margin by about 3.6 percentage points year over year, reflecting both adverse exchange rate movements and lower income from forward currency contracts compared with the prior year. While hedging still added roughly £5 million of revenue to mitigate the impact, he said last year’s hedging gains were unusually strong because the contracts were taken out when sterling was weaker.
Tariffs impacted revenues by around 1.4% but had no effect on operating profit, resulting in a small degradation to operating margin.
To support profitability, management highlighted two cost-reduction programs:
- A company-wide operating cost initiative targeting £20 million of annualized savings.
- The closure of the loss-making drug delivery aspect of the neurological business, targeting around £3 million of annualized savings.
Combined, these actions reduced group headcount by about 7% to just below 5,000 employees at the end of December. Poulton said £9 million of savings were realized in the first half, with the company expecting to achieve £23 million of annualized savings going forward. The company also pointed to operating leverage from constant-currency growth helping to offset inflation in pay and benefits.
Profit before tax rose 11.5% to £64.1 million. The effective tax rate was 21.1% (21.8% on an adjusted basis), which management said is more representative of expectations for the second half. The dividend was unchanged at 16.8 pence, with management noting a target dividend cover of 2 and pointing to broader capital allocation considerations as a board-level strategic question.
Segment results: additive manufacturing drives specialized tech
Industrial metrology—the largest segment—grew 4.3% reported (8.8% constant currency). Poulton said growth was driven by “emerging” systems and software businesses including five-axis CMMs, flexible gauges, and metrology software. Calibration products also saw growing demand, particularly from semiconductor and electronics manufacturing equipment customers using the products in their factories. By contrast, sales of sensor products (CMM probes, machine tool probes, and styli) were flat overall, with strength in some parts of Asia but weaker demand in Europe and automotive. Segment margin was roughly flat, as currency headwinds were largely offset by cost savings and operating leverage.
Position measurement grew 7.4% reported (nearly 12% constant currency), with management describing it as a “game of two halves” with a notable Q2 pickup and “great momentum” into H2. Established open optical and magnetic encoder lines benefited from semiconductor and electronics manufacturing equipment demand, while magnetic encoders also saw strength in general factory automation and robotics. Laser encoders declined versus an “abnormally strong” prior-year comparator tied to wafer inspection applications. Poulton said the short-term decline was driven primarily by product mix and that the prior-year period was exceptional, while order book trends and new product launches supported long-term confidence. Segment operating margin was 23.4% (down about 4 percentage points year over year), which management attributed largely to the mix change.
Specialized technologies posted the fastest growth, up more than 25% at constant currency, driven “almost largely” by additive manufacturing. Management said its strategy of focusing on key accounts and volume opportunities led to customers adding to machine fleets as production ramps, while new customer wins also contributed. Demand from aerospace and defense was cited as particularly strong. Spectroscopy was slightly down overall but had improved recent order momentum and typically delivers a stronger second half, management said. In neurosurgical, the company completed the closure of the drug delivery activity. The segment improved by 22 percentage points in margin and ended just short of break-even, with operating leverage from additive manufacturing described as the largest driver.
Strategy: product innovation, emerging businesses, and ERP progress
Chief Executive Will presented long-term priorities centered on innovation-led growth across markets the company described as favorable and growing on average by more than 5% per year. He highlighted recent product launches including Equator X and MODUS IM Equator software, next-generation laser encoder performance improvements for wafer inspection, inductive encoder technology (FORTIS/ASTRIA), a new Raman instrument (STRADA) designed to simplify Raman analysis, and Libertas software for additive manufacturing intended to reduce the need for support structures and improve productivity and surface finish.
Will said progress in emerging businesses was a key positive, citing improved performance in metrology gauging systems and additive manufacturing after strategic refocusing on differentiators and key customers. On inductive encoders, he said customer feedback has been strong and the company decided to invest more in engineering and manufacturing to capture near-term opportunity, particularly in defense-related demand. However, management cautioned that while development is “quick” by its standards, it is not expected to be materially impactful within the next year or so.
On cash and capital discipline, Poulton reported return on invested capital improved to 13.2% versus a 15% target. First-half capital expenditure was £17 million, with full-year CapEx expected around £40 million, focused on plant and equipment for capacity and productivity. Cash conversion was 68%, below the company’s target, reflecting restructuring costs and working capital investment to support rising demand in Q2. Cash balances were just over £240 million at period end, down from the summer due to restructuring outflows, working capital, and a dividend payment related to the prior second half.
Management also addressed implementation of its ERP system, describing challenges in its most complicated U.K. center after a smoother rollout in a small Canadian office. Will said the company believes it is “through the worst” but still has issues to resolve before further rollout, with Germany next planned to transition to D365.
Looking ahead, management said it expects strong revenue and profit growth for the year ahead and stated it has momentum going into the second half, while acknowledging ongoing market uncertainty and continued currency headwinds.
About Renishaw (LON:RSW)
We are a world leader in measuring and manufacturing systems.
Our products give high accuracy and precision, gathering data to provide customers and end users with traceability and confidence in what they’re making. This technology also helps our customers to innovate their products and processes.
We are guided by our purpose: Transforming Tomorrow Together. This means working with our customers to make the products and the materials that are going to be needed for the future.
We believe that our purpose is incredibly relevant in today’s environment where the pace of change in technology is faster than ever.
