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Summary
- Renishaw expects challenging market after reporting 97% fall in full-year FY20 profit.
- Renishaw is axing jobs and cancelling dividends to cope with the crisis.
- National Express reported a 22 percent revenue drop in H1 FY20 despite 80 percent demand drop.
- National Express posted a loss in H1 FY20 and pledged further actions to strengthen the balance sheet.
In light of above mentioned factors unveiled by two FTSE 250 listed Companies - Renishaw PLC (LON:RSW) and National Express Group PLC (LON:NEX), the stock price of RSW dipped 0.57 percent, while NEX surged marginally by 0.47% on 14 August 2020, before the market closed at 7:20 GMT+1. At the same time, the benchmark index, FTSE 250, was down by 0.59 percent and last traded at 17,818.68. It is noteworthy that the UK Government recently announced a package worth nearly £27 million to support bus operators. As stated by Renishaw, market conditions for high-precision tool maker is likely to remain challenging, particularly in the automotive and aerospace sectors. The business environment is challenging due to macroeconomic factors – Brexit, Covid-19, and Trade tensions.
Renishaw PLC (LON:RSW)
Renishaw is a FTSE 250 listed high-precision tool manufacturer, which is operating in two business areas Healthcare and Metrology. The Metrology division assists manufacturers to improve production output and reduce inspection time for components. The Healthcare technologies serves with applications used in craniomaxillofacial surgery, chemical analysis, neurosurgery, dentistry, and nanotechnology research. The Company has been listed on the LSE (London Stock Exchange) since 16 November 1984.
On 22 October 2020, the Company is expected to release the trading update for Q1 F21.
Recent Major Developments
- 7 August 2020: Renishaw announced the collaboration with Additive Automations (UK start-up business) to automate metal additive manufacturing post-processing. The project is expected to reduce the average post-processing cost per part by 25 percent.
- 4 August 2020: RAM3D partnered with Renishaw to bolster high-quality volume manufacturing capabilities.
- 2 July 2020: The Company announced the release of FixtureBuilder 8.0, which is the latest version of its 3D fixture modelling software.
Highlights of the preliminary announcement of unaudited results (for the year ended 30 June 2020)
As on 13 August 2020, Renishaw has revealed unaudited results for FY20. As per the Executive Chairman, Sir David McMurtry, FY20 has been a challenging year; however, there are exciting opportunities in future to grow the business. The following factors can support the firm to tap upcoming market opportunities:
- New product pipeline in place.
- Excellent manufacturing and commercial operations.
- Highly skilled people.
Before moving forward, let us walk through the summary of FY20 results below:
- Revenue declined by 11 percent in FY20 year-on-year (y-o-y) to £510.2 million, which reflected the challenging economic conditions. Further, the revenue was lower in all regions, as the Covid-19 pandemic impacted most product lines.
- Due to trade tensions between the US and China, and weak demand in the machine tool sector, Metrology division revenue decreased by 11 percent y-o-y. Similarly, Healthcare division revenue plummeted 15 percent y-o-y, since COVID-19 mayhem caused delays in orders, shipments, installations, and postponements of elective surgery.
- Consequently, adjusted profit before tax was reduced by 53% y-o-y, while statutory profit crashed to £3.2 million (FY19: £109.9 million).
- As of 30 June 2020, the balance sheet remained decent with net cash and bank deposits of £120.4 million, as compared with £106.8 million at 30 June 2019.
- To cope up with the crisis, it has implemented several actions to protect the long-term health of the business by improving productivity, preserving cash, and reducing the cost base. The actions included
- Restructure of our additive manufacturing business.
- Reductions in direct manufacturing staff in the UK, Ireland, and India.
- Business resizing that led to a global headcount reduction.
- Targeted reductions in other operating costs; and
- Decision to suspend a final dividend and cancellation of the interim dividend.
(Source: Presentation, Company Website)
Share Price Performance
RSW’s shares were trading at GBX 4,850.00 on 14 August 2020, down by 0.57% (at the time of writing before the market close at 7:16 AM GMT+1 ). Stock 52 week High is GBX 5,345.00 and Low is GBX 2,234.51. Total outstanding M-Cap. (market capitalization) stood at approximately GBP 3.55 Billion.
Outlook
Inevitably, the Company is facing an uncertain macroeconomic backdrop and challenging market conditions, due to weak demand in machine tool sector and uncertainties arising from the uncertainties of Brexit, Covid-19, and Trade tensions. However, it appears to be confident in long-term prospects with decent financial position, innovative product pipeline, marketing presence, extensive global sales, and relevance to high-value manufacturing.
(Source: Presentation, Company Website)
National Express Group PLC (LON:NEX)
National Express Group PLC is a FTSE 250 listed Transport Company. It operates transportation services in eight countries (UK, US, Morocco, Spain, Canada, Switzerland, Bahrain, and Germany). It holds the largest market share for long haul coach transport in both the UK and Spain. It has been floating on the London Stock Exchange since 1992.
On 22 October 2020, the Company is expected to announce the next trading update.
(Source: Company Website)
Recent Significant Developments of 2020
- 24 June 2020: NEX’s Chief Executive Officer (CEO), Dean Finch decided to step down after serving the Company for more than ten years. He will take up the new role as CEO at Persimmon PLC.
- 6 May 2020: The Company raised nearly £235 million in gross proceeds by equity issuance of 102,347,729 new ordinary shares. The shares issued represented 19.99 percent of the existing issued share capital.
Half Year results (for the six months ended 30 June 2020)
As on 13 August 2020, NEX reported the results for H1 FY20. The financial year 2020 started off well with decent trading in January and February. However, the outbreak of coronavirus had an unprecedented impact from March onwards. The major highlights of H1 FY20 are jotted down below:
- Despite the 80% fall in patronage and mileage, the Company was able to secure 50% of expected revenue and remained EBITDA positive in H1 FY20. The positive state of EBITDA has resulted from swift and decisive actions adopted to cut costs. However, the profit after tax was in negative, and the loss after tax stood at £91.0 million (H1 FY19: Profit after tax of £69.2 million).
- As of 30 June 2020, the Company had £3.0 billion of liquidity facilities, and had £1.7 billion in cash.
- Going forward with lockdown easing, NEX is encouraged by early signs of demand returning with the gradual restart of services. Nonetheless, the activity remained at a suppressed level. Overall, the Company seems fundamentally positive about the future with the business diversification initiatives taken in recent years.
(Source: Company Website)
Share Price Performance
NEX’s shares were trading at GBX 148.20 on 14 August 2020, up by 0.47% (at the time of writing before the market close at 7:16 GMT+1). Stock 52 week High is GBX 485.00 and Low is GBX 66.30. Total outstanding M-Cap. (market capitalization) stood at approximately GBP 905.78 million.
Outlook
Considering the continuing uncertainty of the impact of Covid-19, it remained difficult for the Company to forecast financial performance for FY20. However, the NEX is confident of delivering a positive EBITDA with ongoing support from customers and governments.
(Source: Presentation, Company Website)
