REG - Renishaw PLC - Final Results
19/09/2023 07:00
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RNS Number : 8551M Renishaw PLC 19 September 2023
Renishaw plc
19 September 2023
Preliminary announcement of results for the year ended 30 June 2023
Solid performance in challenging markets
2023 2022 Change
Revenue (£m) 688.6 671.1 +3%
Adjusted(1) profit before tax (£m) 141.0 163.7 -14%
Adjusted(1) earnings per share (pence) 155.1 185.5 -16%
Dividend per share (pence) 76.2 72.6 +5%
Statutory profit before tax (£m) 145.1 145.6 -
Statutory earnings per share (pence) 159.7 165.4 -3%
Performance highlights
· Revenue of £688.6m (FY2022 £671.1m):
• Revenue growth in challenging trading conditions, although 1%
lower at constant exchange rates; and
• Good revenue growth from system sales, offset by weaker demand
from the semiconductor sector.
· Manufacturing technologies revenue increased by 2% to £648.2m,
with:
• Good growth in sales of multi-laser additive manufacturing (AM)
systems, 5-axis co-ordinate measuring machine (CMM) inspection systems, laser
encoders and machine calibration systems; and
• Weaker demand for optical encoders, notably in APAC, due to lower
investment in the semiconductor sector.
· Analytical instruments and medical devices revenue increased by 10% to
£40.3m, with:
• Record sales for our Spectroscopy product line, with strong
growth across all our regions; and
• Growth for our Neurological product line, with renewed growth in
robot sales.
· Adjusted(*) profit before tax of £141.0m (FY2022 £163.7m), with
return on sales reduced to 20% (24% last year).
• 1% reduction in gross margin before engineering costs: employee
pay inflation and reduction in production volumes (leading to a lower recovery
of fixed overheads), partially offset by currency and price increases; and
• Engineering, distribution and administration costs up 12%:
targeted recruitment, plus investment in employee pay in all areas to improve
employee retention, and other inflationary pressures.
· Statutory profit before tax of £145.1m (FY2022: £145.6m).
· Strong balance sheet with net cash and bank deposit balances of
£206.4m, compared with £253.2m at 30 June 2022:
• Invested £73.8m (FY2022: £30.8m) in capital expenditure,
including ongoing development of our production facility in Miskin, Wales
· Final dividend of 59.4p per share.
(*) Note 29, 'Alternative performance measures', defines how Adjusted profit
before tax, Adjusted earnings per share, Adjusted operating profit and Revenue
at constant exchange rates are calculated
Strategic progress
· A number of new product launches including a new radio transmission
system for our machine tool probes, a scanning electron microscope interface
for our Raman spectrometers, and a smart factory software platform to
consolidate shop floor measurement data.
· Introduced our new Industrial Automation product line to enhance the
accuracy and productivity of industrial robots, applying our proven technology
and knowledge to a close adjacent market that is experiencing strong
underlying growth.
· In shop-floor metrology, we achieved good growth in end user sales of
our AGILITY® co-ordinate measuring machines equipped with REVO® 5-axis
systems, and we've also seen increased sales of our EQUATOR™ flexible gauges
for electric vehicle manufacturing applications.
· A significant number of machine tool builders have now evaluated our
FORTiS™ enclosed optical encoders with a growing number of early adopters
fitting them to machines being produced in volume.
· Growth in repeat sales of our multi-laser AM machines to the medical
and consumer electronics sectors.
· Rising sales of our Virsa™ Raman analyser which takes research-grade
materials analysis out of the lab and into sampling applications in-situ,
including solar cell analysis and cultural heritage.
· Upgraded our machine tools and expanded our automated encoder assembly
systems to enable us to rapidly ramp production up and down to track cyclical
demand.
· Good progress on our largest ever capital expenditure project at
Miskin, where we are increasing manufacturing floorspace by 50% in a phased
manner.
· Committed to a new Net Zero target with an aim to achieve a 50%
reduction in our Scope 3 emissions by 2030.
William Lee, Chief Executive, commented:
"In challenging trading conditions, our performance demonstrates the
resilience of our business model, and the hard work and dedication of our
teams around the world. In a year when we saw a downturn in demand from one of
our key sectors, we achieved good growth in systems sales, which is an area of
strategic priority.
We have seen a steady start to FY2024 and our order book remains solid. We
continue to see positive trends for investment in low emission transportation,
defence, additive manufacturing and robotics. Meanwhile, demand from
semiconductor equipment suppliers for position encoders remains subdued. While
the short-term macroeconomic picture remains unclear, we continue to manage
costs prudently, we are implementing further price rises, and remain focused
on improving our productivity.
I'm confident in our strategy and the actions we're taking to deliver
sustainable long-term growth, including investments in people, infrastructure
and product innovation."
About Renishaw
We are a world leading supplier of 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 a global business, with customer-facing locations across our three
sales regions; the Americas, EMEA, and APAC. Most of our R&D work takes
place in the UK, with our largest manufacturing sites located in the UK,
Ireland and India.
Results presentation and live Q&A session today
See below a video presentation of these results, presented by William Lee,
Chief Executive, and Allen Roberts, Group Finance Director. There will be a
live audio-only question and answer session with William and Allen at 10:30
BST today. Details of how to register for and access this webcast are
available at the following link:
https://attendee.gotowebinar.com/register/3038498618137830494
(https://attendee.gotowebinar.com/register/3038498618137830494)
Questions can be submitted in advance of the webcast either through the
webcast platform or to communications@renishaw.com (if sending by email,
please submit by 10:00 BST).
A recording of the Q&A session will be made available by Wednesday 20
September 2023 at: www.renishaw.com/investors
(https://www.renishaw.com/en/investors--22615) .
Enquiries: communications@renishaw.com (mailto:communications@renishaw.com)
COMMENTARY BY THE CHAIRMAN
It's a pleasure for me to use this opportunity to thank every one of our
talented and inspiring people who have helped to make our business what it is
today.
Since co-founding Renishaw in 1973 with John Deer, I continue to be immensely
proud of how far we have come. From the early days of production taking place
in John's family home (with dust seals made from the underlay of my carpets!),
we have grown into a truly global and respected business.
We've been pioneers and innovators on behalf of our customers throughout our
50 years. To play a part in this and to transform the capabilities of
manufacturing - making the products, creating the materials and developing the
therapies that are going to be needed for the future - is a true honour.
This has been a year of celebration for the Board and me, and it has also been
a year of revenue growth despite challenging market conditions. Throughout
FY2023 we have continued to build upon our strategy and deliver our purpose
of Transforming Tomorrow Together.
The Board, like our people, embodies our values of innovation, inspiration,
integrity and involvement. As we continue to grow, it's important that we
stay true to the principles that have ensured our success over the past 50
years.
50 years of innovation
Innovation has always been central to what we do. Our products have
revolutionised component manufacturing and scientific research, helping to
make the high-performing, precision products that we all use in our daily
lives.
Each year we launch new products, and this year has been no different. We've
released innovative new products for smart factories and robot metrology and
introduced new technologies to strengthen our established product ranges.
I am a passionate engineer, and it's a privilege to continue working on
product developments that will transform our customers' capabilities. This
year, I have worked closely with our Additive Manufacturing (AM) team on our
next-generation machine. To be involved in, and directly witness,
the technological advancements our engineers make, means everyday is very
exciting.
Inspiring each other, our customers and our communities
Last year, I talked about how embedding and communicating our values are of
particular importance to the Board.
To demonstrate that importance, we launched a new annual global values
competition this year to encourage employees to share ways in which they have
exemplified our values through their work.
The competition was a great success, and I was delighted to review the entries
from across the business with my fellow Executive Directors. As part of the
contest, each winning team chose a charity to receive a £5,000 (or local
currency equivalent) donation. So, through our values, we also aim to inspire
our local communities by making a difference to people's lives.
We want to share our success with the communities where we operate, who have
been highly supportive of our growth. Therefore, as part of our anniversary
celebrations, the Board was delighted to approve a '50 at 50' charity
initiative. During our 50th year, we will donate £150,000 to 50
not-for-profit organisations in our local communities.
Integrity is at the heart of what we do
Our ambition to be more sustainable is testament to how we put integrity at
the heart of our business. It is also central to our purpose as we work
closely with our customers to help them on their own sustainability journeys
and are focused on promoting the sustainability benefits that our products
offer. For example, as I have seen first-hand in my work with the AM team,
this technology has the potential to reduce energy and material consumption
compared to traditional subtractive manufacturing.
We are also playing our part in creating a sustainable future. This year we
have made excellent progress in reducing our environmental impact.
We expect our employees to always act with integrity. To support this, we are
currently working on our new Code of Conduct which we will launch globally in
FY2024. This will apply to our employees, customers and suppliers. It will
provide guidance on decision-making and behaviours and bring all our key
policies and compliance expectations together in one place.
This year we held an externally-facilitated Board evaluation which highlighted
that the Board is working effectively. It found that meetings were conducted
with a good dynamic, facilitating challenge but also encouraging the effective
contribution of the whole Board. It also highlighted our culture of trust,
openness and debate.
Following feedback from investors, including at our Capital Markets Day, the
Board has also this year reviewed our approach to investor relations, and we
will be looking at how we can increase engagement with investors over the
next year.
Involvement of all our people is key to success
Equality, Diversity and Inclusion (EDI) remains an important area of focus for
the Board. We pride ourselves on our open and collaborative culture. This
year, we were pleased to appoint a dedicated EDI Lead, who will be
instrumental in the development of our global approach to EDI. This will help
us provide an inclusive, rewarding environment for all our people.
I am delighted to welcome Professor Karen Holford CBE to the Board as a
Non-executive Director with effect from 1 September 2023. Karen brings
extensive experience with her strong background in engineering research and
development. A Fellow of the Royal Academy of Engineering, Karen received a
CBE for services to engineering and the advancement of women in engineering in
2017, and her appointment also enhances the diversity of views we have on the
Board.
We acknowledge that we still have a way to go as a business. In appointing
Directors, the Board considers diversity at all stages of the process while
being mindful that the right person for the long-term success of the Company
should be appointed. The Nomination Committee continues to take diversity in
all its forms into consideration when considering Board succession plans in
FY2024.
To improve involvement across the business, we also reorganised our existing
product groups during the year. We believe this will bring synergies between
teams and technologies and simplify reporting to the Board. We are also
currently reviewing succession plans throughout the business.
Celebrating 50 years
Our anniversary year has given us a wonderful opportunity to celebrate.
Throughout 2023, employees across the world have taken part in local events
and activities to mark the occasion. From dressing up in 1970s clothing to
family open days, it's been fantastic to see our people come together and
celebrate.
This year also marked the anniversary of the opening of several of our global
subsidiaries including China, who are celebrating 30 years in the market, and
Austria, Canada, Hungary, Israel and Sweden which are each marking 20 years.
It's been wonderful to reflect on and celebrate our success, but we wouldn't
be where we are today without our customers, suppliers and other stakeholders.
We've had close relationships with many of them for most of our history and
they continue to support us today.
We've achieved a great deal over 50 years. I would like to thank everyone who
has been a part of Renishaw's story and I'm proud of the difference we
continue to make to the world.
It's important to look back and mark these milestones, but we have always been
focused on the future. So, as we move into our sixth decade, I am eager to see
what Renishaw and our customers will accomplish next.
Sir David McMurtry
Executive Chairman
18 September 2023
COMMENTARY BY THE CHIEF EXECUTIVE
I'm pleased to look back on a year in which we've made further progress, as we
continue to fulfil our purpose, execute our strategy, and invest in our
long-term success. We've achieved 3% revenue growth at actual exchange rates,
although this was a 1% reduction at constant currency.
We delivered good growth in systems sales, one of our strategic priority
areas, which was offset by weaker demand for optical encoders from the
semiconductor sector. Our performance demonstrates the resilience of our
business model, our excellent position in attractive markets, and the hard
work and dedication of our teams around the world.
Our purpose of Transforming Tomorrow Together remains central to everything
that we do. We continue to work closely with our customers, helping them to
create the products, materials and therapies of the future. We play a leading
role in the transition towards a sustainable future in which manufacturing
processes are increasingly efficient, automated and self-governing.
Group performance
Total revenue this year was £688.6m, compared with £671.1m in FY2022, with
both our operating segments delivering growth. While this is record revenue
for the Group, at constant currency rates our revenue was 1% lower than last
year. At actual currency rates we had growth in the EMEA and Americas regions
but saw a small reduction in the APAC region. We introduced targeted price
increases in H1 FY2023 which have contributed to the revenue growth.
Our Manufacturing technologies segment delivered 2.2% revenue growth. There
were notable advances for our REVO 5-axis co-ordinate measuring machine (CMM)
inspection systems, additive manufacturing (AM) machines, and machine
calibration solutions. By contrast, we have seen lower capital investment in
the key semiconductor market this year. This has reduced demand for our open
optical encoders, most notably in the APAC region.
Meanwhile, our Analytical instruments and medical devices segment delivered
10.5% revenue growth. Our Spectroscopy product line achieved record revenue,
with growing research and industrial applications for Raman spectroscopy,
while our Neurological product line also grew.
This year's Adjusted* profit before tax was £141.0m compared with £163.7m
last year. Adjusted* earnings per share was 155.1p compared with 185.5p last
year. Adjusted measures are the ones we use as a Board to measure our
underlying trading performance. Statutory profit before tax was £145.1m
compared with £145.6m last year, leading to Statutory earnings per share
of 159.7p compared with 165.4p last year.
Profits fell this year due to a combination of modest revenue growth and
inflationary increases in our labour costs and expenses. For more detail see
the commentary by the Group Finance Director.
Strategic progress
Innovation has always been the lifeblood of our business, and we continue to
focus on developing new solutions for emerging customer needs. We have grown
our R&D teams, and increased total engineering expenditure by 14.8%. This
year, we've introduced new products to strengthen our market-leading product
ranges. These include the RMI-QE machine tool radio transmission system, and
inLux scanning electron microscope interface for our Raman spectrometers. We
have a strong pipeline of significant new products under development, which we
will introduce over the next few years.
The use of industrial robots is accelerating as manufacturers automate work
handling, fabrication, and assembly operations. This year, we launched our new
Industrial Automation product line to enhance the accuracy and productivity of
industrial robots. Our new products enable rapid robot cell installation, and
reduce the time taken to recover from unplanned stoppages from several days to
just a few minutes. We can also compensate for errors in a robot's motion.
This improves positioning accuracy so that robots can be used for higher
precision tasks. We are excited about our prospects in this high-growth
market.
Over the years we've pioneered in-process control of machining processes,
helping manufacturers to minimise waste and boost productivity. We are now
taking this a step further with Renishaw Central, our new smart factory
software platform. Central consolidates actionable data from almost any
shop-floor metrology device, enabling fast, robust process control feedback.
This means we can help customers improve process outcomes, rather than simply
monitoring them. We believe this is a major step towards autonomous
manufacturing.
Our global sales and marketing teams support our customers' success around the
world. Our metrology probes and position encoders are primarily sold via
machine builders and distributors, and our priority here is to boost fitment
levels and gain market share. For example, our open optical encoders are being
designed into a wide range of manufacturing equipment in the automotive,
semiconductor, robotics, and automation sectors. Meanwhile, more than 100
machine tool builders have evaluated our FORTiS enclosed optical encoders and
a growing number of early adopters are fitting them to machines being produced
in volume.
We also supply complete machines and software, mostly sold direct to end
users, and serviced by our global teams. We have significant opportunities to
gain market share in substantial, high-growth markets, so our priority is to
grow these products towards market leadership positions.
Shop-floor metrology systems are a key growth area for us. We've been
particularly successful this year with our AGILITY CMMs equipped with REVO
5-axis systems, where we have gained repeat sales from key customers in the
automotive, aerospace and consumer electronics sectors. Our unique combination
of rapid scanning and multi-sensor measurement, including optical and
ultrasonic sensors, enables complete inspection in a single automated process.
We've also increased sales of Equator flexible gauges for electric vehicle
(EV) applications.
It's been a similar story for our RenAM family of multi-laser AM machines this
year, with growth of repeat sales to the medical and consumer electronics
sectors. Meanwhile, our Spectroscopy business has seen rising sales of the
Virsa Raman analyser, which takes research-grade materials analysis out of the
lab and onto the factory floor.
Our in-house manufacturing is also critical to our success, giving us the
flexibility to meet changing demands, while maintaining our exacting
standards. The current inflationary environment makes it essential that we
improve our productivity, so we can absorb higher costs while remaining price
competitive. We continue to upgrade our machine tools and expand our automated
encoder assembly systems, which will enable us to rapidly ramp production up
and down to track cyclical demand. We've also been running Renishaw Central in
our machine shops over the last year, reducing our own unplanned stoppages and
batch changeover times.
Meanwhile, we are making our biggest ever capital investment. We are
progressing well with building works at our site in Miskin, Wales, that will,
in a phased manner, increase our manufacturing floorspace by 50%, giving us
room to grow in the years ahead.
Sustainability
Sustainability is at the heart of our purpose, and we are committed to making
our entire business Net Zero by no later than 2050. We've made good progress
on our plan, reducing greenhouse gas (GHG) emissions relating to our own
operations and purchased energy, by 21% in FY2023.
A major focus this year has been our work towards fully quantifying the
emissions relating to our supply chain and the distribution and use of our
products, known as Scope 3 emissions. We estimate that these accounted for 97%
of our total carbon emissions in our baseline year (FY2020). We are targeting
a 50% reduction in these emissions by 2030, and will publish our full climate
transition plan next year.
People
Sir David has already acknowledged the tremendous contribution our employees
have made this year and throughout the past 50 years. I'd also like to add my
own thanks for everything they've done to drive us forward towards our vision
to innovate and transform the capabilities of our customers.
To pursue our purpose of Transforming Tomorrow Together, we need to attract
and develop outstanding people. We are focused on modernising our approach to
pay and reward, improving our performance reviews, and supporting career
development to help our people fulfil their potential. We've increased our
average pay by around 10.2% in FY2023 compared to FY2022, excluding other
factors, such as headcount growth. Our global voluntary turnover rate has
fallen from 10.7% to 6.8% this year.
We've responded to slowing customer demand for our optical encoders this year
by reducing direct manufacturing headcount through non-replacement of leavers.
We continue to take a long-term view for success, and our early careers
programmes provide a vital pipeline of new talent to maintain and grow our
teams. As of 30 June 2023, we employ 343 apprentices and graduates and in
FY2023 we took on 45 industrial placement students.
Outlook
FY2023 has seen mixed conditions for our markets. Demand for most of our
product lines has risen, with good growth in systems sales, but the
semiconductor equipment sector has been notably weaker this year.
We have seen a steady start to FY2024 and our order book remains solid. We
continue to see positive trends for investment in low emission transportation,
defence, additive manufacturing and robotics. Meanwhile, demand from
semiconductor equipment suppliers for position encoders remains subdued. While
the short-term macroeconomic picture remains unclear, we continue to manage
costs prudently, we are implementing further price rises, and remain focused
on improving our productivity.
I'm confident in our strategy and the actions we're taking to deliver
sustainable long-term growth, including our investments in people,
infrastructure and product innovation.
Will Lee
Chief Executive
18 September 2023
* Note 29, Alternative performance measures, defines how Adjusted profit
before tax and Adjusted earnings per share are measured.
COMMENTARY BY THE GROUP FINANCE DIRECTOR
We have achieved revenue for the year of £688.6m, compared with £671.1m last
year. However, revenue at constant exchange rates* was £662.8m, a reduction
of 1% from last year. The weakening of the semiconductor market during the
year has resulted in challenging trading conditions, however we have seen good
growth in our systems sales.
We have made significant investments in our production infrastructure and our
people during the year. We continue to be in a strong financial position, with
cash and cash equivalents and bank deposit balances of £206.4m at 30 June
2023 (30 June 2022: £253.2m).
Revenue analysis
Manufacturing technologies revenue grew by 2.2% to £648.2m this year at
actual rates. Our optical encoder revenue has fallen, mainly due to lower
demand from the semiconductor market, notably in the APAC region. However, we
are pleased that this has been largely offset by good growth in sales of our
multi-laser AM systems, machine calibration systems, laser encoder systems,
and CMM inspection systems.
Revenue from our Analytical instruments and medical devices segment grew by
10.5% to £40.3m this year, with record revenue for our Spectroscopy products.
We also saw growth in our Neurological business.
The below table shows revenue by geographic region.
2023 Change 2022 Underlying
revenue
from
revenue
change at
at actual
2022
at actual
constant
exchange
%
exchange
exchange
rates
rates
rates
£m
£m
%
APAC 310.6 -2 317.0 -4
EMEA 216.5 +5 205.8 +3
Americas 161.5 +9 148.2 0
Total Group revenue 688.6 +3 671.1 -1
Operating costs
Our labour costs are our largest cost. We have taken a cautious approach to
recruitment during the year and our headcount was 5,175 at 30 June 2023,
compared with 5,097 at the end of June 2022. This growth includes continued
investment in our early careers programmes.
We have carried out global salary benchmarking, which has helped improve
employee retention. This, together with an increase in average headcount of
205, are the main drivers for total labour costs (excluding bonuses)
increasing by 13% to £268.2m from £236.5m last year. Accordingly, our
production, engineering, distribution and administrative costs have all
increased. A reduction in performance bonuses of £6.6m has partially offset
the total labour cost increases.
This year's gross margin (excluding engineering costs) was 64%, compared with
65% last year. This change is mostly due to a reduction in production volumes
(leading to a lower recovery of fixed overheads) and the higher labour pay
rates. We helped minimise the effect of these by introducing targeted price
increases and not replacing leavers in our direct manufacturing teams.
We remain committed to our long-term strategy of delivering growth by
developing innovative and patented products. To that end, we invested £72.5m
in research and development expenditure, compared with £59.4m last year (see
Note 4 to the Financial statements). We also incurred £28.1m (FY2022:
£26.4m) of other engineering expenditure, to support existing products and
technologies.
Travel and exhibition costs are higher this year as COVID-19-related
restrictions have been lifted and we have been able to engage in more customer
facing activity. In addition to the labour cost growth, this has increased our
distribution costs by 12%.
We have also experienced inflationary increases across other cost categories,
notably software licences, health insurance and professional fees.
Profit and tax
As a result of the increased costs in a year of modest revenue growth,
Adjusted* profit before tax amounted to £141.0m, compared with a record
£163.7m in FY2022. This is a reduction of 13.9%. Statutory profit before tax
was £145.1m, compared with £145.6m in the previous year.
Sometimes infrequently occurring events can affect our financial statements,
recognised according to applicable IFRSs. We exclude such events from adjusted
performance measures to give the Board and other stakeholders another useful
metric to understand and compare our underlying performance.
This year, the items we excluded from Adjusted profit before tax include:
gains of £5.5m from forward contracts deemed ineffective for cash flow
hedging (FY2022: £8.3m losses); a revised estimate of FY2020 restructuring
provisions of £0.7m gain (FY2022: £1.7m gain); and a defined benefit (DB)
pension scheme past service cost relating to termination of the US DB pension
scheme totalling £2.1m. These have not affected cash flow during the
financial year. Additional items excluded in the previous year are detailed in
Note 29. The table below reconciles Adjusted profit before tax to Statutory
profit before tax.
2023 2022
£'000
£'000
Adjusted profit before tax 140,983 163,742
Revised estimate of 2020 restructuring provisions 717 1,688
Third-party FSP (formal sale process) costs - 200
US/UK DB pension scheme past service cost (2,139) (11,695)
Fair value gains/(losses) on financial instruments 5,504 (8,349)
Statutory profit before tax 145,065 145,586
Adjusted operating profit in our Manufacturing technologies segment was
£125.5m, compared with £158.6m last year. Meanwhile, in our Analytical
instruments and medical devices segment, Adjusted operating profit was £4.9m,
compared with £2.8m last year.
Financial income for the year was £9.7m, compared with £0.9m last year, and
includes a £5.5m increase in interest on bank deposits mainly due to higher
interest rates.
The FY2023 effective tax rate has increased to 20.0% (FY2022: 17.3%) mostly as
a result of a reduction in patent box tax incentives and an increase in the UK
tax rate from 19% to 25%. Note 7 provides further analysis of the effective
tax rate.
Consolidated balance sheet
We have invested £74.0m (FY2022: £31.0m) in capital expenditure, including
production plant and equipment and the ongoing development of our production
facility in Miskin, Wales.
Within working capital, we have increased our inventories to £185.8m from
£162.5m at the beginning of the year. This is mainly a result of targeted
increases in components and sub-assemblies for our optical encoder products
following global supply chain shortages in previous years. Given the reduction
in demand for optical encoders some of our components are currently
overstocked. Now that supply chain challenges have eased, we have plans to
reduce safety stock levels of critical components. However, we remain
committed to our policy of holding sufficient finished goods to ensure
customer delivery performance, given our short order book.
Trade receivables reduced from £127.6m to £123.4m due to lower levels of
trading in the fourth quarter of FY2023 relative to the previous year. Debtor
days remained constant year-on-year at 64 days. We continue to experience low
levels of defaults, and hold a provision for expected credit losses at 0.4% of
trade receivables (FY2022: 0.2%).
Total equity at the end of the year was £896.7m, compared with £815.2m at 30
June 2022. This is primarily a result of profit for the year of £116.1m,
offset by dividends paid of £53.4m.
Cash and liquidity
We continue to have a strong liquidity position, with cash and cash
equivalents, and bank deposit balances at 30 June 2023 of £206.4m (30 June
2022: £253.2m). This is a result of our trading performance, offset by our
previously noted capital investments and working capital movements, and
dividends paid of £53.4m.
We disclose details of 'severe but plausible' scenario forecasts used in our
going concern and viability assessments in note 1 and conclude that we have a
reasonable expectation that we will retain a liquid position and be able to
continue in operation for at least the next three years.
Pensions
At the end of the year, our DB pension schemes, now closed for future accrual,
showed a net surplus of £57.4m, compared with £42.2m at 30 June 2022.
In October 2022, following a significant improvement in the UK scheme's
funding position due to rising gilt yields, the Trustees (in consultation with
the Company) de-risked the investment strategy by disinvesting from the
scheme's equity and diversified growth holdings and investing the proceeds
into index-linked gilts. The overall impact of these changes is to reduce
investment risk, with the assets better matching the expected movements in the
liabilities. We now believe the scheme is fully funded and are in the process
of seeking to insure the liabilities.
During the year, pension schemes' liabilities decreased from £174.5m to
£139.0m, on an IAS 19 basis, primarily reflecting the increase in the UK
scheme discount rate from 3.6% to 5.1%.
Our DB pension schemes' assets at 30 June 2023 decreased to £196.3m from
£216.7m at 30 June 2022, with UK asset values falling (in line with
expectations) given the liability matching approach.
A termination of the US DB pension scheme was formally commenced during the
year. The Trustees of the scheme and Renishaw Inc agreed that the surplus will
be distributed to the members of the scheme, resulting in a change to members'
benefits. Accordingly, this change has resulted in a charge of £2.1m to the
Consolidated income statement, which has been excluded from Adjusted profit
before tax.
See Note 23 for further details on employee benefits.
Treasury policies
Our treasury policies are designed to manage the financial risks that arise
from operating in multiple foreign currencies. The majority of sales are made
in these currencies, while most manufacturing and engineering is carried out
in the UK, Ireland and India.
We use forward exchange contracts to hedge a proportion of anticipated foreign
currency cash inflows and the translation of foreign currency denominated
intercompany balances.
There are forward contracts in place to hedge against our Euro, US Dollar and
Japanese Yen cash inflows, and to offset movements on Renishaw plc's Euro, US
Dollar and Japanese Yen intercompany balances. We do not speculate with
derivative financial instruments.
Our treasury policies are also designed to maximise interest income on our
cash and bank deposits and to ensure that appropriate funding arrangements are
available for each of our companies.
Sustainability
With our Sustainability team doing more work this year to better understand
the risks and opportunities of climate change, we have reviewed the effect on
our financial statements and financial planning. Our five-year financial plan
includes estimates of the capital expenditure needed in this period to help
deliver our own Net Zero plans. We have also considered the potential impact
on topics such as the expected useful lives of tangible assets and the
headroom on intangible assets, and have not identified a material effect on
this year's financial statements. We will continue to review this as the Group
further develops its work on both our own Net Zero plans and the wider impact
of climate change on our risks and opportunities.
Capital allocation strategy
Our Board regularly reviews the capital requirements of the Group, to maintain
a strong financial position to protect the business and provide flexibility to
fund future growth.
We've consistently applied our capital allocation strategy for many years.
Organic growth is our first priority and we're committed to R&D investment
for new products, manufacturing processes and global support infrastructure to
generate growth in future returns and improve productivity. This is evidenced
in the year by our capital expenditure, the increase in working capital and
investments in R&D.
We may supplement organic growth with acquisitions in current and adjacent
market niches that are aligned to our strategy. We have always valued having
cash in the bank to protect the core business from downturns, and we monitor
our cash against a minimum holding according to forecast overheads and revenue
downturn scenarios. This cash also allows us to react swiftly as investment or
market capture opportunities arise.
Actual and forecast returns, along with our strong financial position, support
our progressive dividend policy, which aims to increase the dividend per share
while maintaining a prudent level of dividend cover.
Earnings per share and dividend
Adjusted earnings per share is 155.1p, compared with 185.5p last year, while
statutory earnings per share is 159.7p, compared with 165.4p last year.
We paid an interim dividend of 16.8 pence per share (FY2022: 16.0p) on 11
April 2023 and are pleased to propose a final dividend of 59.4 pence per share
in respect of the year (FY2022: 56.6p).
Looking forward
Given the uncertain market conditions, we continue to be cautious as we enter
FY2024, and are currently recruiting for critical roles only.
Where possible, we are implementing further price rises to mitigate ongoing
inflation, and are focused on delivering productivity improvements across the
business.
However, we have many drivers in our key markets to deliver long-term revenue
growth and we continue to invest in the infrastructure required to meet the
expected future demand. We expect to spend around £35m to complete phase 1 of
our new production facility at Miskin, Wales, which is expected to be
operational from early 2024, and continue to invest in automation and
productivity opportunities.
Allen Roberts
Group Finance Director
18 September 2023
*Note 29, 'Alternative performance measures', defines how revenue at constant
exchange rates, Adjusted profit before tax, Adjusted operating profit and
Adjusted earnings per share are calculated.
PRINCIPAL RISKS AND UNCERTAINTIES
Our performance is subject to a number of risks - the principal risks, factors
impacting on them and mitigations are ranked in the table below, as well as an
indication of the movement of the risk in the last year, our appetite towards
that risk, and how the risk links to our strategy. The Board has conducted a
robust assessment of the principal risks facing the business.
Appetite: Link to strategy:
- Low: Minimal risk exposure is considered the safest approach, which may mean - SM: Sales & Marketing
lower returns.
- E: Engineering
- Medium: A balanced approach which carefully considers the risks and rewards.
- P: People and Culture
- High: Greater risk tolerance, which may involve maximum risk for maximum
return. - M: Manufacturing
- CS: Corporate Services
- S: Sustainability
Economic and political uncertainty
Movement: increased risk Appetite: High Link to strategy: All
Risk owner: Chief Executive
Risk description
As a global business, we may be affected by global political, economic or
regulatory developments. This could include a global recession, USA-China
trade relations, or the Russia-Ukraine conflict. This risk can also drive
industry fluctuations.
Potential impact What we are doing to manage this risk
· Loss of financial and physical · Monitoring external economic and commercial environments and
markets in which we operate, and identifying relevant headwinds.
assets in a region.
· Maintaining sufficient headroom in our cash balances.
· Supply issues leading to failures to meet contractual obligations.
· Maintaining appropriate levels of buffer inventory.
· Reduced revenue, profit and
· Resilient business model and clear strategy, both of which are
cash generation. subject to regular scrutiny.
· Increased risk to credit, liquidity and currency.
Innovation strategy
Movement: stable risk Appetite: High
Link to strategy: E Risk owner: Directors of Industrial
Metrology, Position Measurement and Additive Manufacturing
Risk description
Failure to create new cutting-edge, high-quality products, or failing to
protect the intellectual property that underpins these products, which allows
us to differentiate ourselves from our competitors.
As a business driven by innovation, there is a higher risk when venturing
outside our traditional field of expertise where the science and engineering
are less proven.
Potential impact What we are doing to manage this risk
· Failure to lead the market in innovation of products in our core · Increase in R&D expenditure with a continued focus on
and adjacent sectors. investment for new product development.
· Loss of market share. · Establishing a 'Product Group Directors Team', which focuses on
R&D productivity initiatives around the Group. Topics in FY2023 included:
· Reduced revenue, profit and embedding the flagship projects programme and establishing in-depth quarterly
reviews with the Chief Executive; and evolving hybrid working. We will see the
cash generation. impact of these initiatives in FY2024.
· Failing to recover investment in R&D. · Monthly monitoring of the 'key technologies' R&D targets, with
an aim of identifying business value and accelerating our promising new
technologies and associated patents very early in the life-cycle.
· Continuing the drive towards incremental development and more open
customer collaboration at early stages of R&D projects, to ensure our
innovations are successful in the market.
People
Movement: decreased risk Appetite: Medium Link to strategy: P
Risk owner: Head of Group HR
Risk description
Our people are fundamental to the success of our business.
Inability to attract, retain and develop key talent at all levels of the
organisation, as well as a failure to ensure we have appropriate succession
plans in place, could mean we fail to successfully deliver our strategic
objectives.
Potential impact What we are doing to manage this risk
· Loss of expertise, skills, and specialist talent could affect · Continuing our focus on attracting, rewarding and retaining our
delivery of objectives. people globally.
· Poor retention and engagement could slow the delivery of our · Continuing our global salary benchmarking programme, with our
strategic objectives and product delivery. largest investment in reward, to date. We have seen an improvement in
retention since conducting our benchmarking exercises.
· Failure to develop future leaders, insufficient talent progression.
· Working towards implementing a global engagement platform.
· Loss of market share, reduced revenue, poor customer service, and
reduced profit. · Continuing to invest in our education and early career programmes
as well as talent development and succession planning. For example, we opened
our dedicated STEM Centre at our headquarters in Gloucestershire, UK.
· Developing a competency framework to complement our new job
architecture.
· Advancing our employee engagement through multi-media
communications, surveys, promoting wellbeing, evolving feedback mechanisms and
further developing our work to build an inclusive culture.
· Establishing continuity plans to enable rapid adaptation to
changing circumstances.
Industry fluctuations
Movement: stable risk Appetite: High Link to
strategy: SM, M, E Risk owner: Chief Executive
Risk description
We're exposed to the cyclical nature of demand from aerospace, automotive,
semiconductor and consumer electronics markets, which may be more severe if
downcycles in these key industries coincide. This risk can also be influenced
by economic and political uncertainty.
Potential impact What we are doing to manage this risk
· Reduced revenue, profit and cash generation. · Closely monitoring market developments.
· Increased competition on prices. · Expanding our product range to serve different industry sectors and
markets.
· Loss of market share if unable to meet rapid increases in demand.
· Identifying and meeting the needs of rapidly growing markets, for
example in robotic automation.
· Maintaining a strong balance sheet and strategic inventories with
the ability to flex.
Route to market / customer satisfaction model
Movement: stable risk Appetite: Medium Link to strategy: SM
Risk owner: Chief Executive
Risk description
Failure to implement appropriate and efficient sales and support processes
relating to systems integration and the sale of capital goods could restrict
growth opportunities in these areas.
Potential impact What we are doing to manage this risk
· Low capital efficiency - high people costs and low productivity. · Focusing on key customers to generate reporting revenues.
· High application engineering and distribution costs. · Closely monitoring customer feedback.
· Adversely affects customer satisfaction levels, revenue, and · Collaborating with complementary third parties.
profits.
· Adopting new approaches to the sale of capital goods.
Cyber
Movement: increased risk Appetite: Low Link to strategy:
All Risk owner: Director of Group Operations
Risk description
External and internal threats that could result in a loss of (i) data,
including IP; or (ii) our ability to operate our systems, which could severely
affect our business.
Potential impact What we are doing to manage this risk
· Loss of IP and/or commercially sensitive data and/or personal data. · Ensuring substantial resilience and back-up is built into our
systems, which are continuously updated for current threats and good industry
· Inability to access, or disruption to, our systems leading to practice. This includes duplication of hardware, dual and diverse connections
reduced service to customers. where possible, and regular back-up schedules.
· Financial loss and reputational damage. · Regularly discussing cyber and security risks at Board and Audit
Committee meetings, including the strength of our control environment.
· Impact on decision-making due to lack of clear and accurate data,
or disruption caused by the lack of service. · Deploying physical and logical control measures to protect our
information and systems. Real-life restores of data and services are carried
out regularly.
· Conducting regular security awareness training, including phishing
simulation exercises, which are proving effective. We also conduct external
penetration testing as appropriate.
IT transformation failure
Movement: increased risk Appetite: Low Link to strategy: All
Risk owner: Director of Group Operations
Risk description
The upgrade of our Sage CRM and Sage ERP systems to Microsoft Dynamics 365, to
remove legacy systems and ensure our global operations are better integrated,
could affect our business if there are major technical issues, or it is poorly
integrated. This risk could also result in problems if there are significant
delays to the programme or it runs significantly over budget.
Potential impact What we are doing to manage this risk
· Major disruption to our systems, causing delays to our operations. · Maintaining close project management between ourselves, Microsoft
and our system integrator.
· Affect our ability to process or issue invoices and customer
orders, or to procure goods and services. · Working to a clear, risk-elimination-based roadmap with measurable
milestones.
· Increased costs, including to fix technical issues and restore or
upgrade other affected systems. · Strengthening the deployment team to accelerate roll out, with
targeted recruitment and upskilling.
· Obtaining commitment from the Board to invest as necessary.
Supply chain dependencies
Movement: decreased risk Appetite: Low Link to strategy:
M, S Risk owner: Head of Group Manufacturing
Risk description
Critical components, or some components that we buy from single-source
suppliers, make us vulnerable to an interruption in supply.
Potential impact What we are doing to manage this risk
· Inability to fulfil customer orders, leading to a reduction in · Maintaining a risk dashboard for our key manufacturing sites, to
revenue and profits, and damage to reputation. help us prioritise and determine stock levels.
· Failure to meet contractual requirements. · Adapting stock levels for high-risk items, to take account of
supply lead times and time to redesign in the event of loss of supply. We
· Increased cost of alternative sourcing or redesign. actively seek cost-effective alternative sources of supply (including in-house
manufacturing), to reduce dependency on single-source suppliers, with a
· Loss of market share. continued focus on key components.
· Collaborating with product groups on an ongoing basis to review
risks and, where appropriate, carry out reviews and updates to specifications
where necessary to facilitate alternative sourcing or redesign.
Competitive activity
Movement: stable risk Appetite: Low
Link to strategy: All Risk owner: Chief
Executive
Risk description
Failure to adapt to market and/or technological changes.
Potential impact What we are doing to manage this risk
· Reduced revenue, profits and cash generation. · Ensuring we are diversified across a range of products, industries
and geographies.
· Loss of market share.
· Closely monitoring market developments, particularly across our
· Price erosion. core product groups.
· Loss of reputation as a leader in innovation. · Maintaining local sales and engineering support to quickly identify
changing local needs.
· Continuing to build our product portfolio through our strong
historic and ongoing commitment to R&D (see Note 4 to the Financial
statements for details of R&D expenditure).
Capital and resource allocation
Movement: stable risk Appetite: Medium Link to strategy:
E Risk owner: Group Finance Director
Risk description
This risk could be triggered by a failure to properly allocate budget and
resource between core and emerging activities.
Potential impact What we are doing to manage this risk
· Investing in declining or less profitable areas at the expense of · Defining, prioritising, and developing strategies for all core and
more profitable and strategically important areas. emerging areas of the business.
· Reduced profits. · Scrutinising all expenditure, including regular reporting on labour
costs and capital expenditure.
· Loss of market share.
· Regular reporting of cash balances.
· Impact on innovation.
· Tracking performance objectives, including regular reporting on
flagship project progress.
Exchange rate fluctuations
Movement: increased risk Appetite: Medium Link to strategy: SM
Risk owner: Group Finance Director
Risk description
We report our results and pay dividends in Sterling and, with more than 90% of
our revenue generated outside the UK, we're exposed to volatility in exchange
rates that could have a significant impact on our results.
Movements of Sterling against our major trading currencies cause cash flow,
currency translation, and intercompany balance translation risks.
Potential impact What we are doing to manage this risk
· Significant variations in profit. · Maintaining rolling forward contracts for cash-flow hedges in
accordance with Board-approved policy, and one-month forward contracts to
· Reduced cash generation. manage risks on intercompany balances.
· Increased competition on product prices. · Tracking overseas net assets value compared to the market
capitalisation.
· Increased costs.
· Obtaining input from external sources, including our banks.
Climate change
Movement: stable risk Appetite: Low Link to strategy: All
Risk owner: Head of Group Manufacturing
Risk description
We could be exposed to climate-related physical risks, such as hurricanes,
floods, wildfires and pandemics, which could potentially affect our ability to
operate.
Other risks related to a transition to a low-carbon economy could also affect
us if we fail to react adequately to new climate-related legislation,
technology or market factors.
Potential impact What we are doing to manage this risk
· Increased costs of key raw materials, due to climate- related · Our Sustainability team supports the Risk Committee in evaluating
legislation affecting the macroeconomic landscape with the introduction of and understanding the possible effect of climate-related risks and
carbon taxes. opportunities.
· Disruption to operations caused by climate-related hazards could · Climate-related hazards have been a driver in developing our
reduce our revenue, create safety risks to our people and increase our manufacturing approach. More detail on our risk mitigation work can be found
operational costs. in the descriptions of our Loss of manufacturing output and Supply chain
dependencies risks.
· If we fail to achieve Net Zero commitments, we could experience
damage to reputation and loss of business. · Using our product groups' priorities to manage climate-related
transitional risks.
· Reviewing and maintaining business interruption and other insurance
cover.
· Investing to reduce energy consumption and increase renewable
energy generation across the Group. For example, we are aiming for all new
buildings and refurbishments to achieve Net Zero emissions in operation.
Loss of manufacturing output
Movement: decreased risk Appetite: Low Link to strategy: M
Risk owner: Head of Group Manufacturing
Risk description
Manufacturing output can be adversely affected by factors including
environmental hazards, technical delays or outages, plant or equipment
failure, inadequate resourcing levels, or factors affecting the workforce,
such as a pandemic.
Potential impact What we are doing to manage this risk
· Inability to fulfil customer orders leading to a reduction in · Duplication of high-dependency processes, such as component
revenue, failure to meet contractual requirements and damage to reputation. manufacturing and finishing, electronic printed circuit board assembly, and
microelectronics assembly, across multiple manufacturing locations.
· Increased costs of alternative sourcing or redesign.
· Ensuring we have flexible manufacturing capacity and sufficient
· Impact on maintenance of buffer inventory. resilience across our manufacturing sites.
· Loss of market share. · Ensuring standardised approaches to assembly, annual risk
assessments, and business continuity planning.
· Reviewing and maintaining business interruption and other insurance
cover.
Non-compliance with laws and regulations
Movement: stable risk Appetite: Low Link to
strategy: All
Risk owner: General Counsel & Company Secretary and Managing Director -
Renishaw Medical
Risk description
We operate in a large number of territories and in some highly-regulated
sectors. We are subject to a wide variety of laws and regulations, including
those relating to anti-bribery, anti-money laundering, sanctions, competition
law, privacy, health and safety, product safety, and medical devices.
There is a risk that somewhere in the Group we may not be fully compliant with
these laws and regulations.
Potential impact What we are doing to manage this risk
· Damage to reputation and loss of future business. · Maintaining our whistleblowing hotline (Speak up), available to all
employees and third parties who provide services for or on behalf of the
· Potential penalties and fines, and cost of investigations. Group, which means that our people and other stakeholders can make us aware of
any potential non- compliance issues.
· Management time and attention in dealing with reports of
non-compliance. · Establishing global compliance programmes for all high-risk areas,
which includes policies, key controls and effective communication. Training
· Inability to attract and retain talent. also includes refreshed mandatory anti-bribery and anti-corruption modules.
· Promoting all compliance functions under the umbrella brand
'Responsible Renishaw'. This helps to raise awareness about compliance, and
makes it easier for our people to find the information they need to comply.
· Maintaining our global privacy programme.
Product failure
Movement: stable risk Appetite: Low Link to
strategy: E, M
Risk owner: Group Quality Manager and Quality Manager - Healthcare Regulatory
Risk description
The quality of our products could be adversely affected by internal threats,
such as inadequate quality management processes. Product quality could also be
affected by external threats, such as substandard performance from third-party
suppliers. We could also be affected by other external risk factors, including
grey market and counterfeit goods in our supply chain, and this may result in
latent risks where product failures are not yet realised.
This risk is particularly notable in our neurological products, where failure
could result in significant personal injury claims or regulatory action.
Potential impact What we are doing to manage this risk
· Damage to reputation. · Ensuring we have rigorous internal product development and testing
procedures (during development, manufacturing and release) to international
· Claims, including personal injury. standards where applicable, to ensure high levels of quality assurance. This
includes following ISO 14971 and ISO 13485 for all medical devices.
· Potential penalties and fines, cost of investigations and high
recall costs for medical devices. · Interacting with customers and regulators to obtain and address
feedback.
· Increase in non-revenue-generating warranty activity.
· Conducting a thorough vendor approval process, and regular
· Inability to fulfil customer orders leading to a reduction in monitoring of third-party suppliers to ensure incoming parts and
sales. sub-contracted activity meet requirements.
· Applying grey market product verification activity where component
sourcing is not from original equipment manufacturers (OEMs) or franchised
providers.
· Limiting our liability through our terms and conditions of sale and
we also have product liability insurance. For clinical studies, we have
separate trial insurance.
Pensions
Movement: stable risk Appetite: Medium Link to
strategy: P Risk owner: Group Finance Director
Risk description
Investment returns and actuarial assumptions of our defined benefit pension
(DB) schemes are subject to economic and social factors outside our control.
Potential impact What we are doing to manage this risk
· Any deficit may need additional funding in the form of · Implementing recovery plan for the UK DB scheme in June 2019, with
supplementary cash payments to the plans or the provision of additional the aim of funding to self-sufficiency by 2031.
security.
· Appointing a corporate Trustee in June 2022, which has reduced
· Significant management time. management time and support costs.
· External support costs. · Engaging with the corporate Trustee on investment strategy.
· Damage to reputation. · The corporate Trustee works to a statement of investment
principles, and the Company and corporate Trustee seek appropriate independent
professional advice, if needed.
· During FY2023, the Company and Trustees of the UK DB scheme agreed
to de-risk the investment strategy by disinvesting from the scheme's equity
and diversified growth holdings and investing the proceeds into index-linked
gilts. This followed a significant improvement in the scheme's funding
position due to rising gilt yields. As a result, the Trustees agreed to £8.7m
of funding due between 1 October 2022 and 30 September 2023 being deferred to
2026.
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2023
from continuing operations 2023 2022
notes £'000 £'000
Revenue 2 688,573 671,076
Cost of sales 4 (337,908) (313,527)
Gross profit 350,665 357,549
Distribution costs (137,744) (122,455)
Administrative expenses (74,894) (69,736)
UK defined benefit pension scheme past service cost 23 - (11,695)
US defined benefit pension scheme past service cost 23 (2,139) -
Losses from the fair value of financial instruments 25 (1,399) (10,413)
Operating profit 134,489 143,250
Financial income 5 9,669 932
Financial expenses 5 (1,861) (2,938)
Share of profits of joint ventures 13 2,768 4,342
Profit before tax 145,065 145,586
Income tax expense 7 (28,963) (25,235)
Profit for the year 116,102 120,351
Profit attributable to:
Equity shareholders of the parent company 116,102 120,351
Non-controlling interest 26 - -
Profit for the year 116,102 120,351
pence pence
Dividend per share arising in respect of the year 26 76.2 72.6
Dividend per share paid in the year 26 73.4 68.0
Earnings per share (basic and diluted) 8 159.7 165.4
Adjusted profit before tax for the year was £140,983,000 (2022:
£163,742,000). See note 29 Alternative performance measures for more details.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
for the year ended 30 June 2023
2023 2022
notes £'000 £'000
Profit for the year 116,102 120,351
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement:
Current tax on contributions to defined benefit pension schemes - 1,653
Deferred tax on contributions to defined benefit pension schemes - (1,653)
Remeasurement of defined benefit pension scheme assets/liabilities 23 13,612 69,078
Deferred tax on remeasurement of defined benefit pension scheme (3,071) (15,997)
assets/liabilities
Total for items that will not be reclassified 10,541 53,081
Items that may be reclassified to the Consolidated income statement:
Exchange differences in translation of overseas operations 26 (8,000) 12,151
Exchange differences in translation of overseas joint venture 26 - 118
Current tax on translation of net investments in foreign operations 26 313 (1,529)
Effective portion of changes in fair value of cash flow hedges, net of 26 23,167 (28,423)
recycling
Deferred tax on effective portion of changes in fair value of cash flow hedges 7,26 (5,692) 6,155
Total for items that may be reclassified 9,788 (11,528)
Total other comprehensive income and expense, net of tax 20,329 41,553
Total comprehensive income and expense for the year 136,431 161,904
Attributable to:
Equity shareholders of the parent company 136,431 161,904
Non-controlling interest 26 - -
Total comprehensive income and expense for the year 136,431 161,904
CONSOLIDATED BALANCE SHEET
at 30 June 2023
2023 2022
notes £'000 £'000
Assets
Property, plant and equipment 9 286,085 243,853
Right-of-use assets 10 8,402 9,950
Investment properties 11 10,323 10,568
Intangible assets 12 46,468 44,218
Investments in joint ventures 13 22,414 20,570
Finance lease receivables 14 9,935 6,961
Employee benefits 23 57,416 43,241
Deferred tax assets 7 19,944 22,893
Derivatives 25 9,443 -
Total non-current assets 470,430 402,254
Current assets
Inventories 16 185,757 162,482
Trade receivables 25 123,427 127,551
Finance lease receivables 14 3,764 3,348
Contract assets 861 578
Short-term loans to joint ventures - 302
Current tax 19,558 8,901
Other receivables 25 27,979 27,068
Derivatives 25 5,373 7,121
Bank deposits 15 125,000 100,000
Cash and cash equivalents 15,25 81,388 153,162
Total current assets 573,107 590,513
Current liabilities
Trade payables 25 21,551 30,947
Contract liabilities 18 9,971 12,956
Current tax 7,118 10,078
Provisions 17 2,758 4,244
Derivatives 25 5,089 17,890
Lease liabilities 21 3,009 3,714
Borrowings 20 4,694 919
Other payables 19 48,130 51,949
Total current liabilities 102,320 132,697
Net current assets 470,787 457,816
Non-current liabilities
Lease liabilities 21 5,624 6,466
Borrowings 20 - 5,160
Employee benefits 23 45 996
Deferred tax liabilities 7 38,770 22,815
Derivatives 25 120 9,463
Total non-current liabilities 44,559 44,900
Total assets less total liabilities 896,658 815,170
Equity
Share capital 26 14,558 14,558
Share premium 42 42
Own shares held 26 (2,963) (750)
Currency translation reserve 26 6,772 14,459
Cash flow hedging reserve 26 6,552 (10,923)
Retained earnings 871,777 798,541
Other reserve 26 497 (180)
Equity attributable to the shareholders of the parent company 897,235 815,747
Non-controlling interest 26 (577) (577)
Total equity 896,658 815,170
These financial statements were approved by the Board of Directors on 18
September 2023 and were signed on its behalf by:
Sir David McMurtry Allen Roberts
Directors
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2023
Cash
Own Currency flow Non-
Share Share Shares translation hedging Retained Other controlling
capital premium Held reserve reserve earnings reserve interest Total
Year ended 30 June 2022 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2021 14,558 42 (404) 3,719 11,345 674,603 44 (577) 703,330
Profit for the year - - - - - 120,351 - - 120,351
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme liabilities - - - - - 53,081 - - 53,081
Foreign exchange translation differences - - - 10,622 - - - - 10,622
Relating to associates and joint ventures - - - 118 - - - - 118
Changes in fair value of cash flow hedges - - - - (22,268) - - - (22,268)
Total other comprehensive income and expense - - - 10,740 (22,268) 53,081 - - 41,553
Total comprehensive income and expense - - - 10,740 (22,268) 173,432 - - 161,904
Share-based payments charge - - - - - - 180 - 180
Own shares transferred on vesting - - 404 - - - (404) - -
Own shares purchased - - (750) - - - - - (750)
Dividends paid - - - - - (49,494) - - (49,494)
Balance at 30 June 2022 14,558 42 (750) 14,459 (10,923) 798,541 (180) (577) 815,170
Year ended 30 June 2023
Profit for the year - - - - - 116,102 - - 116,102
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme assets/liabilities - - - - - 10,541 - - 10,541
Foreign exchange translation differences - - - (7,687) - - - - (7,687)
Changes in fair value of cash flow hedges - - - - 17,475 - - - 17,475
Total other comprehensive income and expenses - - - (7,687) 17,475 10,541 - - 20,329
Total comprehensive income and expenses - - - (7,687) 17,475 126,643 - - 136,431
Share-based payments charge - - - - - - 677 - 677
Own shares purchased - - (2,213) - - - - - (2,213)
Dividends paid - - - - - (53,407) - - (53,407)
Balance at 30 June 2023 14,558 42 (2,963) 6,772 6,552 871,777 497 (577) 896,658
More details of share capital and reserves are given in note 26.
CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 30 June 2023
2023 2022
notes £'000 £'000
Cash flows from operating activities
Profit for the year 116,102 120,351
Adjustments for:
Depreciation of property, plant and equipment, investment properties 9,11 19,882 25,898
Loss on sale of property, plant and equipment 9 155 157
Impairment of property, plant and equipment 9 - 1,259
Depreciation of right-of-use assets 10 4,223 4,205
Impairment of right-of-use-assets - 1,837
Amortisation of development costs 12 5,150 4,698
Amortisation of other intangibles 12 1,012 1,225
Impairment of development costs 12 1,611 -
Write-off of intangible assets - 3,510
Loss on disposal of intangible assets 550 -
Share of profits from joint ventures 13 (2,768) (4,342)
Profit on disposal of investment in associate - (582)
Write-off of lease liabilities - (1,985)
Defined benefit pension schemes past service cost 23 2,437 11,695
Financial income 5 (9,669) (932)
Financial expenses 5 1,861 2,938
(Gains)/losses from the fair value of financial instruments 25 (5,504) 8,349
Share-based payment expense 24 677 180
Tax expense 7 28,963 25,235
48,580 83,345
Increase in inventories (23,275) (48,919)
Increase in trade, finance lease and other receivables (12,379) (11,301)
(Decrease)/increase in trade and other payables (15,013) 12,288
Decrease in provisions (1,486) (2,015)
(52,153) (49,947)
Defined benefit pension scheme contributions 23 (2,341) (8,866)
Income taxes paid (25,891) (23,410)
Cash flows from operating activities 84,297 121,473
Investing activities
Purchase of property, plant and equipment, and investment properties 9,11 (74,024) (30,960)
Sale of property, plant and equipment 7,948 687
Development costs capitalised 12 (10,448) (7,966)
Purchase of other intangibles 12 (379) (929)
(Increase)/decrease in bank deposits 15 (25,000) 20,000
Interest received 5 6,302 834
Dividend received from joint ventures 13 924 525
Proceeds from sale of shares in associate - 582
Payments from pension scheme cash escrow account - 10,578
Cash flows from investing activities (94,677) (6,649)
Financing activities
Repayment of borrowings 20 (914) (974)
Interest paid 5 (656) (591)
Repayment of principal of lease liabilities 22 (4,206) (4,081)
Own shares purchased 26 (2,213) (750)
Dividends paid 26 (53,407) (49,494)
Cash flows from financing activities (61,396) (55,890)
Net (decrease)/increase in cash and cash equivalents (71,776) 58,934
Cash and cash equivalents at beginning of the year 153,162 95,008
Effect of exchange rate fluctuations on cash held 2 (780)
Cash and cash equivalents at end of the year 15 81,388 153,162
NOTES (FORMING PART OF THE FINANCIAL STATEMENTS)
1. Accounting policies
This section sets out our significant accounting policies that relate to the
financial statements as a whole, along with the critical accounting judgements
and estimates that management has identified as having a potentially material
impact on the Group's consolidated financial statements. Where an accounting
policy is applicable to a specific note in the financial statements, the
policy is described within that note.
Basis of preparation
Renishaw plc (the Company) is a company incorporated in England and Wales. The
Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the Group, and 'we') and equity account
the Group's interest in associates and joint ventures. The parent company
financial statements present information about the Company as a separate
entity and not about the Group.
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the years ended 30 June 2023 or 30 June 2022.
The financial information for the year ended 30 June 2022 is derived from the
statutory accounts for that year, which have been delivered to the Registrar
of Companies. The auditor reported on those accounts; their report was
unqualified, did not draw attention to any matters by way of emphasis without
qualifying their report and did not contain a statement under s498 (2) or (3)
Companies Act 2006. In respect of the year ended 30 June 2023, an unqualified
auditor's report was signed on 18 September 2023. The statutory accounts will
be delivered to the Registrar of Companies following the Group's annual
general meeting.
The consolidated financial statements are presented in Sterling, which is the
Company's functional currency and the Group's presentational currency, and all
values are rounded to the nearest thousand (£'000).
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements. Judgements made by the Directors, in the application of these
accounting policies, that have a significant effect on the financial
statements and estimates with a significant risk of material adjustment in
the next year are noted below.
Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to or has rights to variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights that are exercisable. The acquisition
date is the date on which control is transferred to the acquirer. The
financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases. Losses applicable to the non-controlling interests in a
subsidiary are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
Joint ventures are accounted for using the equity method (equity-accounted
investees) and are initially recognised at cost. The Group's investment
includes goodwill identified on acquisition, net of any accumulated impairment
losses.
The consolidated financial statements include the Group's share of the total
comprehensive income and equity movements of equity accounted investees, from
the date that significant influence commences until the date that significant
influence ceases. When the Group's share of losses exceeds its interest in an
equity accounted investee, the Group's carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that the
Group has incurred legal obligations or made payments on behalf of an
investee.
Intragroup balances and transactions, and any unrealised income and expenses
arising from intragroup transactions, are eliminated on consolidation.
Unrealised gains arising from transactions with equity accounted investees are
eliminated against the investment to the extent of the Group's interest in the
investee. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
Foreign currencies
On consolidation, overseas subsidiaries' results are translated into Sterling
at weighted average exchange rates for the year by translating each overseas
subsidiary's monthly results at exchange rates applicable to each of the
respective months. Assets and liabilities denominated in foreign currencies at
the balance sheet date are translated into Sterling at the foreign exchange
rates prevailing at that date. Differences on exchange resulting from the
translation of overseas assets and liabilities are recognised in Other
comprehensive income and are accumulated in equity.
Monetary assets and liabilities denominated in foreign currencies are reported
at the rates prevailing at the time, with any gain or loss arising from
subsequent exchange rate movements being included as an exchange gain or loss
in the Consolidated income statement. Foreign currency differences arising
from transactions are recognised in the Consolidated income statement.
New, revised or changes to existing accounting standards
The following accounting standard amendments became effective as at 1 January
2022 and have been adopted in the preparation of these financial statements,
with effect from 1 July 2022:
- amendments to IFRS3, References to the Conceptual Framework;
- amendments to IAS 16, Property, Plant and Equipment - Proceeds before
Intended Use; and
- amendments to IAS 37, Onerous Contracts - Costs of Fulfilling a Contract.
These have not had a material effect on these financial statements.
At the date of these financial statements, the following amendments that are
potentially relevant to the Group, and which have not been applied in these
financial statements, were in issue but not yet effective:
- amendments to IAS 1, Classification of Liabilities as Current or Non-current
(not yet endorsed by the UK);
- amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting
Policies;
- amendments to IAS 7, Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures (not yet endorsed by the UK);
- amendments to IAS 8, Definition of Accounting Estimates;
- amendments to IAS 12, International Tax Reform Pillar Two Model Rules;
- amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising
from a Single Transaction; and
- amendments to IFRS 16, Lease Liability in a Sale and Leaseback.
The adoption of these Standards and Interpretations in future periods is not
expected to have a material impact on the financial statements of the Group.
The Finance (No 2) Bill 2023, that includes Pillar Two legislation, was
substantively enacted on 20 June 2023 for IFRS purposes. As permitted by the
amendments to IAS 12 International Tax Reform Pillar Two Model Rules the Group
has applied the exemption from recognising and disclosing information about
deferred tax assets and liabilities related to Pillar Two income taxes.
Alternative performance measures
The financial statements are prepared in accordance with adopted IFRS and
applied in accordance with the provisions of the Companies Act 2006. In
measuring our performance, the financial measures that we use include those
which have been derived from our reported results, to eliminate factors which
distort year-on-year comparisons.
These are considered non-GAAP financial measures. We believe this information,
along with comparable GAAP measurements, is useful to stakeholders in
providing a basis for measuring our operational performance. The Board use
these financial measures, along with the most directly comparable GAAP
financial measures, in evaluating our performance (see note 29).
Separately disclosed items
The Directors consider that certain items should be separately disclosed to
aid understanding of the Group's performance.
Gains and losses from the fair value of financial instruments are therefore
separately disclosed in the Consolidated income statement, where these gains
and losses relate to certain forward currency contracts that are not effective
for hedge accounting. Restructuring costs are also separately disclosed where
significant costs have been incurred in rationalising and reorganising our
business as part of a Board-approved initiative, and relate to matters that do
not frequently recur.
During the period, a change to the US defined benefit pension scheme rules,
per note 23, resulted in a significant non-recurring amount being recognised
in the Consolidated income statement. In the previous period, a change to the
UK defined benefit pension scheme rules resulted in a significant
non-recurring amount being recognised in the Consolidated income statement.
These have also been separately disclosed.
These items are also excluded from Adjusted profit before tax, Adjusted
operating profit and Adjusted earnings per share measures, as explained in
note 29 Alternative performance measures.
Critical accounting judgements and estimation uncertainties
The preparation of financial statements in conformity with UK-adopted IAS
requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on
historical experience and other factors that are believed to be reasonable
under the circumstances. The results of this form the basis of making the
judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may therefore differ from
these estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis.
The areas of key estimation uncertainty and critical accounting judgement that
have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities in the next financial year are summarised
below, with further details included within accounting policies as indicated.
Item Key judgements (J) and estimates (E)
Taxation E - Estimates of future profits to use deferred tax assets
Research and development costs J - Whether a project meets the criteria for capitalisation
Goodwill and capitalised development costs E - Estimates of future cash flows for impairment testing
Inventories E - Determination of net realisable value
Defined benefit pension schemes E - Valuation of defined benefit pension schemes' liabilities
Cash flow hedges E - Estimates of highly probable forecasts of the hedged item
Climate change
We have considered the potential effect of physical and transitional climate
change risks when preparing these consolidated financial statements and have
also considered the effect of our own Net Zero commitments. Our consideration
of the potential effect of climate change on these consolidated financial
statements included reviewing:
- discounted cashflow forecasts, used in accounting for goodwill, capitalised
development costs, and deferred tax assets;
- useful economic lives and residual values of property, plant and equipment;
- planned use of right-of-use assets; and
- expected demand for inventories.
We also considered the estimated capital expenditure needed in the next five
years to deliver our Net Zero plan.
Overall, we do not believe that climate change has a material effect on our
accounting judgements and estimates, nor in the carrying value of assets and
liabilities in the consolidated financial statements for the year ended 30
June 2023. We will continue to review the effect of climate change on
financial statements in the future, and update our accounting and disclosures
as the position changes.
Going concern
In preparing these financial statements, the Directors have adopted the going
concern basis. The decision to adopt the going concern basis was made after
considering:
- the Group's business model and key markets;
- the Group's risk management processes and principal risks;
- the Group's financial resources and strategies; and
- the process undertaken to review the Group's viability, including scenario
testing.
The financial models for the viability review were based on the pessimistic
version of the five-year business plan, but covering a period to 30 September
2026. For context, revenue in the first year of this pessimistic base scenario
is similar to FY2023 revenue of £688.6m, while costs and other cash outflows
still reflect ambitious growth plans. In the going concern assessment, the
Directors reviewed this same version of the plan but to 30 September 2024, as
well as the 'severe but plausible' scenarios used in the viability review,
again to 30 September 2024. These scenarios reflected a significant reduction
in revenue, a significant increase in costs, and a third scenario
incorporating both a reduction to revenue and an increase in costs but to a
less degree than the first two scenarios. In each scenario the Group's cash
balances remained positive throughout the period to 30 September 2024.
The Directors also reviewed a reverse stress test for the period to 30
September 2024, identifying what would need to happen in this period for the
Group to deplete its cash and cash equivalents and bank deposit balances. This
identified a trading level so low (between 50 and 60% of FY2023 revenue) that
the Directors feel that the events that could trigger this would be remote.
The Directors also concluded that the risk of a one-off cash outflow that
would exhaust the Group's cash and cash equivalents and bank deposits balances
in the assessment period was also remote.
Based on this assessment, incorporating a review of the current position, the
scenarios, the principal risks and mitigation, the Directors have a reasonable
expectation that the Group will be able to continue operating and meet its
liabilities as they fall due over the period to 30 September 2024.
2. Revenue disaggregation and segmental analysis
We manage our business by segment, comprising Manufacturing technologies and
Analytical instruments and medical devices, and by geographical region. The
results of these segments and regions are regularly reviewed by the Board to
assess performance and allocate resources, and are presented in this note.
Accounting policy
The Group generates revenue from the sale of goods, capital equipment and
services. These can be sold both on their own and together.
a) Sale of goods, capital equipment and services
The Group's contracts with customers consist both of contracts with one
performance obligation and contracts with multiple performance obligations.
For contracts with one performance obligation, revenue is measured at the
transaction price, which is typically the contract value except for customers
entitled to volume rebates, and recognised at the point in time when control
of the product transfers to the customer. This point in time is typically when
the products are made available for collection by the customer, collected by
the shipping agent, or delivered to the customer, depending upon the shipping
terms applied to the specific contract.
Contracts with multiple performance obligations typically exist where, in
addition to supplying product, we also supply services such as user training,
servicing and maintenance, and installation services. Where the installation
service is simple, does not include a significant integration service and
could be performed by another party then the installation is accounted for as
a separate performance obligation. Where the contracts include multiple
performance obligations, the transaction price is allocated to each
performance obligation based on the relative stand-alone selling prices. The
revenue allocated to each performance obligation is then recognised when, or
as, that performance obligation is satisfied. For installation, this is
typically at the point in time in which installation is complete. For
training, this is typically the point in time at which training is delivered.
For servicing and maintenance, the revenue is recognised evenly over the
course of the servicing agreement except for ad-hoc servicing and maintenance
which is recognised at the point in time in which the work is undertaken.
b) Sale of software
The Group provides software licences and software maintenance to customers,
sold both on their own and together with associated products. For software
licences, where the licence and/or maintenance is provided as part of a
contract that provides customers with software licences and other goods and
services then the transaction price is allocated on the same basis as
described in a) above.
The Group's distinct software licences provide a right of use, and therefore
revenue from software licences is recognised at the point in time in which the
licence is supplied to the customer. Revenue from software maintenance is
recognised evenly over the term of the maintenance agreement.
c) Extended warranties
The Group provides standard warranties to customers that address potential
latent defects that existed at point of sale and as required by law
(assurance-type warranties). In some contracts, the Group also provides
warranties that extend beyond the standard warranty period and may be sold to
the customer (service-type warranties).
Assurance-type warranties are accounted for by the Group under IAS 37
'Provisions, Contingent Liabilities and Contingent Assets'. Service-type
warranties are accounted for as separate performance obligations and therefore
a portion of the transaction price is allocated to this element, and then
recognised evenly over the period in which the service is provided.
d) Contract balances
Contract assets represent the Group's right to consideration in exchange for
goods, capital equipment and/or services that have been transferred to a
customer, and mainly includes accrued revenue in respect of goods and services
provided to a customer but not yet fully billed. Contract assets are distinct
from receivables, which represent the Group's right to consideration that is
unconditional.
Contract liabilities represent the Group's obligation to transfer goods,
capital equipment and/or services to a customer for which the Group has either
received consideration or consideration is due from the customer.
e) Disaggregation of revenue
The Group disaggregates revenue from contracts with customers between: goods,
capital equipment and installation, and aftermarket services; operating
segment; and geographical location.
Management believe these categories best depict how the nature, amount, timing
and uncertainty of the Group's revenue is affected by economic factors.
Within the two operating segments there are multiple product offerings with
similar economic characteristics, similar production processes and similar
customer bases. Our Manufacturing technologies business consists of industrial
metrology, position measurement and additive manufacturing (AM) product
groups, while our Analytical instruments and medical devices business consists
of spectroscopy and neurological product lines.
Year ended 30 June 2023 Analytical instruments and medical devices
Manufacturing technologies
Total
£'000 £'000 £'000
Revenue 648,240 40,333 688,573
Depreciation, amortisation and impairment 28,431 3,447 31,878
Operating profit before losses from fair value of financial instruments and US defined benefit pension scheme past service cost
132,843 5,184 138,027
Share of profits from joint ventures 2,768 - 2,768
Net financial income/(expense) - - 7,808
US defined benefit pension scheme past service cost - - (2,139)
Losses from the fair value of financial instruments - - (1,399)
Profit before tax - - 145,065
Year ended 30 June 2022 Analytical instruments and medical devices £'000
Manufacturing technologies
£'000 Total
£'000
Revenue 634,588 36,488 671,076
Depreciation, amortisation and impairment 36,552 2,570 39,122
Operating profit before losses from fair value of financial instruments and UK defined benefit pension scheme past service cost 165,358
162,549 2,809
Share of profits from joint ventures 4,342 - 4,342
Net financial expense - - (2,006)
UK defined benefit pension scheme past service cost - - (11,695)
Losses from the fair value of financial instruments - - (10,413)
Profit before tax - - 145,586
There is no allocation of assets and liabilities to operating segments.
Depreciation, amortisation and impairments are allocated to segments on the
basis of the level of activity.
The following table shows the analysis of non-current assets, excluding
deferred tax, derivatives and employee benefits, by geographical region:
2023 2022
£'000 £'000
UK 231,619 181,530
Overseas 152,008 155,725
Total non-current assets 383,627 337,255
No overseas country had non-current assets amounting to 10% or more of the
Group's total non-current assets.
The following table shows the disaggregation of group revenue by category:
2023 2022
£'000 £'000
Goods, capital equipment and installation 624,992 615,641
Aftermarket services 63,581 55,435
Total Group revenue 688,573 671,076
Aftermarket services include repairs, maintenance and servicing, programming,
training, extended warranties, and software licences and maintenance. There is
no significant difference between our two operating segments as to their split
of revenue by type.
The analysis of revenue by geographical market was:
2023 2022
£'000 £'000
APAC total 310,637 317,023
UK (country of domicile) 38,899 31,536
EMEA, excluding UK 177,582 174,290
EMEA total 216,481 205,826
Americas total 161,455 148,227
Total Group revenue 688,573 671,076
Revenue in the previous table has been allocated to regions based on the
geographical location of the customer. Countries with individually significant
revenue figures in the context of the Group were:
2023 2022
£'000 £'000
China 155,360 152,772
USA 138,721 128,531
Japan 67,915 69,829
Germany 61,565 58,636
There was no revenue from transactions with a single external customer which
amounted to more than 10% of the Group's total revenue.
3. Personnel expenses
The remuneration costs of our people account for a significant proportion of
our total expenditure, which are analysed in this note.
The aggregate payroll costs for the year were:
2023 2022
£'000 £'000
Wages and salaries 226,126 207,783
Compulsory social security contributions 26,579 24,497
Contributions to defined contribution pension schemes 26,142 21,988
Share-based payment charge 677 180
Total payroll costs 279,524 254,448
Wages and salaries and compulsory social security contributions include
£11,338,000 (2022: £17,914,000) relating to performance bonuses.
The average number of persons employed by the Group during the year was:
2023 2022
Number Number
UK 3,332 3,132
Overseas 1,804 1,799
Average number of employees 5,136 4,931
Key management personnel have been assessed to be the Directors of the Company
and the Senior Leadership Team (SLT), which includes an average of 21 people
(2022: 21 people).
The total remuneration of the Directors and the SLT was:
2023 2022 restated* 2022
£'000 £'000 £'000
Short-term employee benefits 5,659 8,061 3,763
Post-employment benefits 511 444 121
Share-based payment charge 677 180 180
Total remuneration of key management personnel 6,847 8,685 4,064
Short-term employee benefits include nil (2022: £2,791,000) relating to
performance bonuses payable in cash.
The share-based payment charge relates to share awards granted in previous
years, not yet vested. No shares (2022: £1,915,000 equivalent) are to be
awarded in respect of 2023 (see note 24).
*The assessment of key management personnel was updated during the year to
include the SLT, who are, along with the Directors, deemed to have authority
and responsibility for planning, directing and controlling the activities of
the Renishaw Group. This also follows the expansion of the deferred annual
equity incentive plan (DAEIP) to include the SLT, as explained in the
Governance section. Accordingly, 2022 figures have been restated.
4. Cost of sales
Our cost of sales includes the costs to manufacture our products and our
engineering spend on existing and new products, net of capitalisation and
research and development tax credits.
Included in cost of sales are the following amounts:
2023 2022
£'000 £'000
Production costs 247,665 234,919
Research and development expenditure 72,500 59,415
Other engineering expenditure 28,063 26,356
Gross engineering expenditure 100,563 85,771
Development expenditure capitalised (net of amortisation) (5,298) (3,268)
Development expenditure impaired 1,611 -
Research and development tax credit (6,633) (3,895)
Total engineering costs 90,243 78,608
Total cost of sales 337,908 313,527
Production costs includes the raw material and component costs, payroll costs
and sub-contract costs, and allocated overheads associated with manufacturing
our products.
Research and development expenditure includes the payroll costs, material
costs and allocated overheads attributed to projects identified as being
related to new products or processes. Other engineering expenditure includes
the payroll costs, material costs and allocated overheads attributed to
projects identified as being related to existing products or processes.
5. Financial income and expenses
Financial income mainly arises from bank interest on our deposits, while we
are exposed to realised currency gains and losses on translation of foreign
currency denominated intragroup balances and offsetting financial instruments.
Included in financial income and expenses are the following amounts:
2023 2022
Financial income notes £'000 £'000
Bank interest receivable 6,302 834
Interest on pension schemes' assets 23 1,639 -
Fair value gains from one-month forward currency contracts 25 1,728 98
Total financial income 9,669 932
Financial expenses
Net interest on pension schemes' liabilities 23 29 306
Currency losses 1,130 1,414
Lease interest 21 348 481
Interest payable on borrowings 20 46 52
Other interest payable 308 110
Realised currency reserve losses from discontinuation of foreign operation - 575
Total financial expenses 1,861 2,938
Currency losses relate to revaluations of foreign currency-denominated
balances using latest reporting currency exchange rates. The losses recognised
in 2022 and 2023 largely related to an appreciation of Sterling relative to
the US dollar affecting US dollar-denominated intragroup balances in the
Company.
Certain intragroup balances are classified as 'net investments in foreign
operations', such that revaluations from currency movements on designated
balances accumulate in the Currency translation reserve in Equity. Rolling
one-month forward currency contracts are used to offset currency movements on
remaining intragroup balances, with fair value gains and losses being
recognised in financial income or expenses. See note 25 for further details.
6. Profit before tax
Detailed below are other notable amounts recognised in the Consolidated income
statement.
Included in the profit before tax are the following costs/(income):
2023 2022
notes £'000 £'000
Depreciation and impairment of property, plant and equipment and investment properties (a) 9,11 19,882 27,157
Loss on sale of property, plant and equipment (a) 9 155 157
Depreciation and impairment of right-of-use assets (a) 10 4,223 6,042
Amortisation, impairment, and write-off of intangible assets (a) 12 7,773 5,923
Profit from sale of shares in associate (c) - 582
Impairment of net assets of foreign operation (b) - 2,126
Grant income (a) (3,017) (2,840)
These costs/(income) can be found under the following headings in the
Consolidated income statement: (a) within cost of sales, distribution costs
and administrative expenses, (b) within distribution costs, and (c) within
administrative expenses. Further detail on each element can be found in the
relevant notes.
Grant income relates to government grants, relating to R&D activities,
which are recognised in the Consolidated income statement as a deduction
against expenditure. Where grants are received in advance of the related
expenses, they are initially recognised in the Consolidated balance sheet and
released to match the related expenditure. Where grants are expected to be
received after the related expenditure has occurred, and there is reasonable
assurance that the entity will comply with the grant conditions, amounts are
recognised to offset the expenditure and an asset recognised.
Costs within Administrative expenses relating to auditor fees included:
2023 2022
£'000 £'000
Audit of these financial statements 707 718
Audit of subsidiary undertakings pursuant to legislation 576 526
Other assurance 6 32
All other non-audit fees - -
Total auditor fees 1,289 1,276
7. Taxation
The Group tax charge is affected by our geographic mix of profits and other
factors explained in this note. Our expected future tax charges and related
tax assets are also set out in the deferred tax section, together with our
view on whether we will be able to make use of these in the future.
Accounting policy
Tax on the profit for the year comprises current and deferred tax. Tax is
recognised in the Consolidated income statement except to the extent that it
relates to items recognised directly in Other comprehensive income, in which
case it is recognised in the Consolidated statement of comprehensive income
and expense. Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for:
- the initial recognition of goodwill;
- the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit other than in a business combination; and
- differences relating to investments in subsidiaries, to the extent that they
will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the balance sheet date.
Key estimate - Estimates of future profits to support the recognition of
deferred tax assets
Deferred tax assets are recognised to the extent it is probable that future
taxable profits (including the future release of deferred tax liabilities)
will be available, against which the deductible temporary differences can be
used, based on management's assumptions relating to the amounts and timing of
future taxable profits. Estimates of future profitability on an entity basis
are required to ascertain whether it is probable that sufficient taxable
profits will arise to support the recognition of deferred tax assets relating
to the corresponding entity.
The following table shows an analysis of the tax charge:
2023 2022
£'000 £'000
Current tax:
UK corporation tax on profits for the year 5,814 9,288
UK corporation tax - prior year adjustments (1,307) (28)
Overseas tax on profits for the year 14,161 16,734
Overseas tax - prior year adjustments 291 (176)
Total current tax 18,959 25,818
Deferred tax:
Origination and reversal of temporary differences 9,140 (1,372)
Prior year adjustments (1,052) 166
Derecognition of previously recognised tax losses and excess interest 439 623
Recognition of previously unrecognised tax losses and excess interest (591) -
Effect on deferred tax for changes in tax rates 2,068 -
10,004 (583)
Tax charge on profit 28,963 25,235
The tax for the year is lower (2022: lower) than the weighted UK standard rate
of corporation tax of 20.5% (2022: 19%). The differences are explained as
follows:
2023 2022
£'000 £'000
Profit before tax 145,065 145,586
Tax at 20.5% (2022: 19%) 29,738 27,661
Effects of:
Different tax rates applicable in overseas subsidiaries (1,695) (1,834)
Permanent differences 1,595 978
Companies with unrelieved tax losses 292 -
Share of profits of joint ventures (567) (825)
Tax incentives (patent box and capital allowances super-deduction) (679) (1,400)
Prior year adjustments (2,068) (38)
Effect on deferred tax for changes in tax rates 2,068 -
Recognition of previously unrecognised tax losses and excess interest (591) -
Derecognition of previously recognised tax losses and excess interest 439 623
Irrecoverable withholding tax 609 2
Other differences (178) 68
Tax charge on profit 28,963 25,235
Effective tax rate 20.0% 17.3%
We operate in many countries around the world and the overall effective tax
rate (ETR) is a result of the combination of the varying tax rates applicable
throughout these countries. The FY2023 effective tax rate has increased mostly
as a result of a reduction in patent box tax incentives and an increase in the
UK tax rate from 19% to 25%.
The Group's future ETR will mainly depend on the geographic mix of profits and
whether there are any changes to tax legislation in the Group's most
significant countries of operations.
Deferred tax
Deferred tax assets and liabilities are offset where there is a legally
enforceable right of offset and there is an intention to net settle the
balances. After taking these offsets into account, the net position of
£18,826,000 liability (2022: £78,000 asset) is presented as a £19,944,000
deferred tax asset (2022: £22,893,000 asset) and a £38,770,000 deferred tax
liability (2022: £22,815,000 liability) in the Consolidated balance sheet.
Where deferred tax assets are recognised, the Directors are of the opinion,
based on recent and forecast trading, that the level of profits in current and
future years make it more likely than not that these assets will be recovered.
Balances at the end of the year were:
2023 2022
Assets Liabilities Net Assets Liabilities Net
£'000 £'000 £'000 £'000 £'000 £'000
Property, plant and equipment 735 (25,124) (24,389) 517 (19,966) (19,449)
Intangible assets - (3,922) (3,922) - (2,980) (2,980)
Intragroup trading (inventories) 16,765 - 16,765 20,158 - 20,158
Intragroup trading (fixed assets) 1,770 - 1,770 1,457 - 1,457
Defined benefit pension schemes 6 (14,354) (14,348) 125 (11,173) (11,048)
Derivatives - (2,184) (2,184) 3,508 - 3,508
Tax losses 2,281 - 2,281 3,893 - 3,893
Other 5,894 (693) 5,201 4,953 (414) 4,539
Balance at the end of the year 27,451 (46,277) (18,826) 34,611 (34,533) 78
Other deferred tax assets include temporary differences relating to inventory
provisions totalling £2,256,000 (2022: £1,774,000), other provisions
(including bad debt provisions) of £913,000 (2022: £975,000), and employee
benefits relating to Renishaw KK of £806,000 (2022: £853,000), with the
remaining balance relating to several other smaller temporary differences.
The movements in the deferred tax balance during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year 78 10,890
Movements in the Consolidated income statement (10,004) 583
Movement in relation to the cash flow hedging reserve (5,692) 6,155
Movement in relation to the defined benefit pension schemes (3,071) (17,650)
Total movement in the Consolidated statement of comprehensive income and expense (8,763) (11,495)
Currency translation (137) 100
Balance at the end of the year (18,826) 78
The deferred tax movement in the Consolidated income statement is analysed as:
2023 2022
£'000 £'000
Property, plant and equipment (4,940) (2,328)
Intangible assets (942) (371)
Intragroup trading (inventories) (3,393) 5,619
Intragroup trading (fixed assets) 313 205
Defined benefit pension schemes (229) 2,255
Derivatives - 284
Tax losses (1,612) (4,472)
Other 799 (609)
Total movement for the year (10,004) 583
Deferred tax assets of £2,281,000 (2022: £3,893,000) in respect of losses
are recognised where it is considered likely that the business will generate
sufficient future taxable profits. Deferred tax assets have not been
recognised in respect of tax losses carried forward of £6,563,000 (2022:
£4,815,000), due to uncertainty over their offset against future taxable
profits and therefore their recoverability. These losses are held by Group
companies in France, Brazil, Australia, Canada and the US, where for 97% of
losses there are no time limitations on their utilisation.
In determining profit forecasts for each Group company, the key variable is
the revenue forecasts, which have been estimated using consistently applied
external and internal data sources. Sensitivity analysis indicates that a
reduction of 5% to relevant revenue forecasts would result in an impairment to
deferred tax assets recognised in respect of losses and intragroup trading
(inventories) of less than £300,000. An increase of 5% to relevant revenue
forecasts would result in additions to deferred tax assets in respect of tax
losses not recognised of less than £200,000.
It is likely that the majority of unremitted earnings of overseas subsidiaries
would qualify for the UK dividend exemption. However, £65,555,000 (2022:
£61,204,000) of those earnings may still result in a tax liability
principally as a result of withholding taxes levied by the overseas
jurisdictions in which those subsidiaries operate. The tax liabilities for the
earnings for which management intend to repatriate in the foreseeable future
are not material and consequently no deferred tax liability has been
recognised.
8. Earnings per share
Basic earnings per share is the amount of profit generated in a financial year
attributable to equity shareholders, divided by the weighted average number of
shares in issue during the year.
Basic and diluted earnings per share are calculated on earnings of
£116,102,000 (2022: £120,351,000) and on 72,719,565 shares (2022: 72,774,147
shares), being the number of shares in issue. The number of shares excludes
68,978 (2022:14,396) shares held by the Employee Benefit Trust (EBT). On this
basis, earnings per share (basic and diluted) is calculated as 159.7 pence
(2022: 165.4 pence).
There is no difference between the weighted average earnings per share and the
basic and diluted earnings per share.
For the calculation of adjusted earnings per share, per note 29, earnings of
£116,102,000 (2022: £120,351,000) are adjusted by post-tax amounts for:
- fair value (gains)/losses on financial instruments not eligible for hedge
accounting (reported in Revenue), which represents the amount by which revenue
would change had all the derivatives qualified as eligible for hedge
accounting, £5,488,000 gain;
- fair value (gains)/losses on financial instruments not eligible for hedge
accounting (reported in Gains/(losses) from the fair value of financial
instruments), £1,133,000 loss;
- a revised estimate of 2020 restructuring costs, £570,000 gain; and
- a US defined benefit pension scheme past service cost, £1,626,000 loss.
9. Property, plant and equipment
The Group makes significant investments in distribution and in-house
manufacturing infrastructure. During the year we have significantly expanded
our production facility in Wales and invested in our manufacturing equipment
in the UK. We expect to complete this facility and continue our investments in
property, plant and equipment in the coming year.
Accounting policy
Freehold land is not depreciated. Other assets are stated at costs less
accumulated depreciation and accumulated impairment losses, if any.
Depreciation is provided to write off the costs of assets less their estimated
residual value on a straight-line basis over their estimated useful economic
lives as follows: freehold buildings, 50 years; plant and equipment, 3 to 25
years; and vehicles, 3 to 4 years.
Freehold Assets in the
land and Plant and Motor course of
buildings equipment vehicles construction Total
Year ended 30 June 2023 £'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2022 217,820 263,557 7,520 7,481 496,378
Additions 1,730 16,934 1,033 54,075 73,772
Transfers 3,240 4,847 - (8,087) -
Disposals (5,383) (9,681) (1,369) - (16,433)
Currency adjustment (4,022) (2,501) (72) - (6,595)
At 30 June 2023 213,385 273,156 7,112 53,469 547,122
Depreciation
At 1 July 2022 43,816 202,214 6,495 - 252,525
Charge for the year 4,175 14,891 576 - 19,642
Disposals (1,619) (5,544) (1,167) - (8,330)
Currency adjustment (725) (2,015) (60) - (2,800)
At 30 June 2023 45,647 209,546 5,844 - 261,037
Net book value
At 30 June 2023 167,738 63,610 1,268 53,469 286,085
At 30 June 2022 174,004 61,343 1,025 7,481 243,853
Losses on disposals of Property, plant and equipment amounted to £155,000
(2022: £157,000). Additions to assets in the course of construction comprise
£42,646,000 (2022: £826,000) for land and buildings and £11,429,000 (2022:
£6,318,000) for plant and equipment. At 30 June 2023, properties with a net
book value of £88,778,000 (2022: £54,208,000) were subject to a fixed charge
to secure the UK defined benefit pension scheme liabilities.
Freehold Assets in the
land and Plant and Motor course of
buildings equipment vehicles construction Total
Year ended 30 June 2022 £'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2021 216,783 242,432 7,421 7,109 473,745
Additions 5,715 16,756 1,150 7,144 30,765
Transfers of assets in the course of construction 2,800 3,972 - (6,772) -
Transfers to investment properties (11,563) - - - (11,563)
Disposals 97 (3,587) (1,269) - (4,759)
Currency adjustment 3,988 3,984 218 - 8,190
At 30 June 2022 217,820 263,557 7,520 7,481 496,378
Depreciation
At 1 July 2021 38,530 182,557 6,416 - 227,503
Charge for the year 4,623 20,029 1,056 - 25,708
Impairment 1,259 - - - 1,259
Transfers to investment properties (1,222) - - - (1,222)
Disposals 81 (2,837) (1,180) - (3,936)
Currency adjustment 545 2,465 203 - 3,213
At 30 June 2022 43,816 202,214 6,495 - 252,525
Net book value
At 30 June 2022 174,004 61,343 1,025 7,481 243,853
At 30 June 2021 178,253 59,875 1,005 7,109 246,242
10. Right-of-use assets
The Group leases mostly properties and cars from third parties and recognises
an associated right-of-use asset where we are afforded control and economic
benefit from the use of the asset.
Accounting policy
At the commencement date of a lease arrangement the Group recognises a
right-of-use asset for the leased item and a lease liability for any payments
due. Right-of-use assets are initially measured at cost, being the present
value of the lease liability plus any initial costs incurred in entering the
lease and less any incentives received. See note 21 for further detail on
lease liabilities. Right-of-use assets are subsequently depreciated on a
straight-line basis from the commencement date to the earlier of the end of
the useful life or the end of the lease term.
Leasehold property Plant and equipment Motor vehicles Total
Year ended 30 June 2023 £'000 £'000 £'000 £'000
Net book value
At 1 July 2022 8,055 117 1,778 9,950
Additions 261 64 2,907 3,232
Reductions in consideration (308) - (13) (321)
Depreciation (2,737) (93) (1,392) (4,222)
Currency adjustment (202) 1 (36) (237)
At 30 June 2023 5,069 89 3,244 8,402
Leasehold property Plant and equipment Motor vehicles Total
Year ended 30 June 2022 £'000 £'000 £'000 £'000
Net book value
At 1 July 2021 10,297 102 2,030 12,429
Additions 1,293 115 1,058 2,466
Depreciation (2,805) (102) (1,298) (4,205)
Impairment (1,837) - - (1,837)
Currency adjustment 1,107 2 (12) 1,097
At 30 June 2022 8,055 117 1,778 9,950
11. Investment properties
The Group's investment properties consist of five properties in the UK,
Ireland and India. Which, are occupied by rent-paying third parties.
Accounting policy
Where property owned by the Group is deemed to be held to earn rentals or for
long-term capital appreciation it is recognised as investment property.
Where a property is part-occupied by the Group, portions of the property are
recognised as investment property if they meet the above description and if
these portions could be sold separately and reliably measured. If the portions
could not be sold separately, the property is recognised as an investment
property only if a significant proportion is held for rental or appreciation
purposes.
The Group has elected to value investment properties on a cost basis,
initially comprising an investment property's purchase price and any directly
attributable expenditure. Depreciation is provided to write off the cost of
assets on a straight-line basis over their estimated useful economic lives,
being 50 years. Amounts relating to freehold land is not depreciated.
2023 2022
£'000 £'000
Cost
Balance at the beginning of the year 11,905 -
Transfers from Property, plant and equipment - 11,563
Additions 252 195
Disposals - (102)
Currency adjustment (261) 249
Balance at the end of the year 11,896 11,905
Depreciation
Balance at the beginning of the year 1,337 -
Transfers from Property, plant and equipment - 1,222
Charge for the year 240 190
Disposals - (81)
Currency adjustment (4) 6
Balance at the end of the year 1,573 1,337
Net book value 10,323 10,568
The Group has no restrictions on the realisability of its investment
properties and no contractual obligations to purchase, construct or develop
investment properties.
Amounts recognised in the Consolidated income statement relating to investment
properties:
2023 2022
£'000 £'000
Rental income derived from investment properties 915 453
Direct operating expenses (including repairs and maintenance) 258 105
Profit arising from investment properties 657 348
The fair value of the Group's investment properties totalled £14,718,000 at
30 June 2023 (2022: £14,626,000). Fair values of each investment property
have been determined by independent valuers who hold recognised and relevant
professional qualifications and have recent experience in the location and
category of each investment property being valued.
12. Intangible assets
Our Consolidated balance sheet contains significant intangible assets, mostly
in relation to goodwill, which arises when we acquire a business and pay a
higher amount than the fair value of its net assets, and capitalised
development costs. We make significant investments into the development of new
products, which is a key part of our business model, and some of these costs
are initially capitalised and then expensed over the lifetime of future sales
of that product.
Accounting policy
Goodwill arising on acquisition represents the difference between the cost of
the acquisition and the fair value of the net identifiable assets acquired,
net of deferred tax. Identifiable intangibles are those which can be sold
separately or which arise from legal rights regardless of whether those
rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. It is not
amortised but is tested annually for impairment or earlier if there are any
indications of impairment. The annual impairment review involves comparing the
carrying amount to the estimated recoverable amount and recognising an
impairment loss if the recoverable amount is lower. Impairment losses are
recognised in the Consolidated income statement.
Intangible assets such as customer lists, patents, trade marks, know-how and
intellectual property that are acquired by the Group are stated at cost less
amortisation and impairment losses. Amortisation is charged to the
Consolidated income statement on a straight-line basis over the estimated
useful lives of the intangible assets. The estimated useful lives of the
intangible assets included in the Consolidated balance sheet reflect the
benefit derived by the Group and vary from five to 10 years.
Expenditure on research activities is recognised in the Consolidated income
statement as an expense as incurred. Expenditure on development activities is
capitalised if: the product or process is technically and commercially
feasible; the Group intends and has the technical ability and sufficient
resources to complete development; future economic benefits are probable; and
the Group can measure reliably the expenditure attributable to the intangible
asset during its development.
Development activities involve a plan or design for the production of new or
substantially improved products or processes. The expenditure capitalised
includes the cost of materials, direct labour and an appropriate proportion of
overheads. Other development expenditure is recognised in the Consolidated
income statement as an expense as incurred.
Capitalised development expenditure is amortised over the useful economic life
appropriate to each product or process, ranging from five to 10 years, and is
stated at cost less accumulated amortisation and less accumulated impairment
losses. Amortisation commences when a product or process is available for use
as intended by management. Capitalised development expenditure is removed from
the balance sheet 10 years after being fully amortised.
All non-current assets are tested for impairment whenever there is an
indication that their carrying value may be impaired. An impairment loss is
recognised in the Consolidated income statement to the extent that an asset's
carrying value exceeds its recoverable amount, which represents the higher of
the asset's fair value less costs to sell and its value-in-use. An asset's
value-in-use represents the present value of the future cash flows expected to
be derived from the asset or from the cash-generating unit to which it
relates. The present value is calculated using a discount rate that reflects
the current market assessment of the time value of money and the risks
specific to the asset concerned.
Goodwill and capitalised development costs are subject to an annual impairment
test.
Key judgement - Whether a project meets the criteria for capitalisation
Product development costs are capitalised once a project has reached a certain
stage of development, being the point at which the product has passed testing
to demonstrate it meets the technical specifications of the project and it
satisfies all applicable regulations. Judgements are required to assess
whether the new product development has reached the appropriate point for
capitalisation of costs to begin. These costs are subsequently amortised over
their useful economic life once ready for use. Should a product be
subsequently obsoleted, the accumulated capitalised development costs would
need to be immediately written off in the Consolidated income statement.
Key estimate - Estimates of future cash flows used for impairment testing.
Determining whether goodwill and capitalised development costs are impaired
requires an estimation of the value-in-use of cash-generating units (CGUs) to
which goodwill has been allocated. To calculate the value-in-use we need to
estimate the future cashflows of each CGU and select the appropriate discount
rate for each CGU.
Internally Software licences and
Other generated
intangible development Intellectual
Goodwill assets costs property Total
Year ended 30 June 2023 £'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2022 20,475 4,629 168,212 22,379 215,695
Additions - 254 10,448 125 10,827
Disposals - - - (10,518) (10,518)
Currency adjustment (214) (8) - (8) (230)
At 30 June 2023 20,261 4,875 178,660 11,978 215,774
Amortisation
At 1 July 2022 9,028 2,240 139,460 20,749 171,477
Charge for the year - 179 5,150 833 6,162
Impairment - - 1,611 - 1,611
Disposals - - - (9,969) (9,969)
Currency adjustment - 33 - (8) 25
At 30 June 2023 9,028 2,452 146,221 11,605 169,306
Net book value
At 30 June 2023 11,233 2,423 32,439 373 46,468
At 30 June 2022 11,447 2,389 28,752 1,630 44,218
Other intangible assets Internally generated development costs Software licences and intellectual property
Goodwill
Total
Year ended 30 June 2022 £'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2021 19,533 15,783 177,291 24,962 237,569
Additions - 53 7,966 876 8,895
Write-off - - - (3,510) (3,510)
Disposals - (11,211) (17,045) - (28,256)
Currency adjustment 942 4 - 51 997
At 30 June 2022 20,475 4,629 168,212 22,379 215,695
Amortisation
At 1 July 2021 9,028 13,254 151,807 19,685 193,774
Charge for the year - 201 4,698 1,024 5,923
Disposals - (11,211) (17,045) - (28,256)
Currency adjustment - (4) - 40 36
At 30 June 2022 9,028 2,240 139,460 20,749 171,477
Net book value
At 30 June 2022 11,447 2,389 28,752 1,630 44,218
At 30 June 2021 10,505 2,529 25,484 5,277 43,795
Goodwill
Goodwill has arisen on the acquisition of several businesses and has an
indeterminable useful life. It is therefore not amortised but is instead
tested for impairment annually and at any point during the year when an
indicator of impairment exists. Goodwill is allocated to cash generating units
(CGUs). This is the lowest level in the Group at which goodwill is monitored
for impairment and is at a lower level than the Group's operating segments.
The analysis of goodwill according to business acquired is:
2023 2022
£'000 £'000
itp GmbH 2,985 2,985
Renishaw Mayfield S.A. 2,089 2,055
Renishaw Fixturing Solutions, LLC 5,454 5,677
Other smaller acquisitions 705 730
Total goodwill 11,233 11,447
The recoverable amounts of acquired goodwill are based on value-in-use
calculations. These calculations use cash flow projections based on the
financial business plans approved by management for the next five financial
years. The cash flows beyond this forecast are extrapolated to perpetuity
using a nil growth rate on a prudent basis, to reflect the uncertainties over
forecasting beyond five years.
The following pre-tax discount rates have been used in discounting the
projected cash flows:
2023 2022
Business acquired CGU Discount rate Discount rate
itp GmbH itp GmbH entity ('ITP') 13.2% 11.3%
Renishaw Fixturing Solutions, LLC Renishaw plc ('PLC') 14.3% 11.5%
Renishaw Mayfield S.A. Renishaw Mayfield S.A. entity ('Mayfield') 26.3% 22.9%
The Group post-tax weighted average cost of capital, calculated at 30 June
2023, is 10.7% (2022: 9.0%). The increase is mainly driven by higher risk-free
rates in the market. Pre-tax discount rates for Manufacturing technologies
CGUs (ITP and PLC) are calculated from this basis, given that they are aligned
with the wider Group's industries, markets and processes. The Analytical
instruments and medical devices' CGU (Mayfield) has a higher risk weighting,
reflecting the less mature nature of this segment.
During the period, the CGU relating to the goodwill arising on the acquisition
of Renishaw Fixturing Solutions, LLC has been changed from the Renishaw
fixturing product line to Renishaw plc. This follows the closure of Renishaw
Fixturing Solutions, LLC, with production of fixturing products now undertaken
by the manufacturing division of Renishaw plc.
For there to be an impairment in the PLC, ITP or Mayfield CGUs the discount
rate would need to increase to at least 20%, 18% and 32% respectively.
The following bases have been used in determining cash flow projections:
2023 2022
CGU Basis of forecast Basis of forecast
itp GmbH entity five-year business plan five-year business plan
Renishaw plc five-year business plan five-year business plan
Renishaw Mayfield S.A. entity five-year business plan five-year business plan
These five-year business plans are considered fair estimates based on
management's view of the future and experience of past performance of the
individual CGUs, and are calculated at a disaggregated level. Within these
plans, revenue forecasts are calculated with reference to external market
data, Renishaw past outperformance, and new product launches, consistent with
revenue forecasts across the Group. Production costs, engineering costs,
distribution costs and administrative expenses are calculated based on
management's best estimates of what is required to support revenue growth and
new product development. Estimates of capital expenditure and working capital
requirements are also included in the cash flow projections.
The key estimate within these business plans is the forecasting of revenue
growth, given that the cost bases of the businesses can be flexed in line with
revenue performance. Given the average revenue growth assumptions included in
the five-year business plans, management's sensitivity analysis involves
modelling a reduction in the forecast cash flows utilised in those business
plans and therefore into perpetuity. For there to be an impairment there would
need to be a reduction to these forecast cash flows of 29% for ITP, 30% for
PLC and 21% for Mayfield. Management deems the likelihood of these reductions
to be unlikely.
Internally generated development costs
The key assumption in determining the value-in-use for internally generated
development costs is the forecast unit sales over the useful economic life,
which is determined by management using their knowledge and experience with
similar products and the sales history of products already available in the
market. Resulting cash flow projections over five to 10 years, the period over
which product demand forecasts can be reasonably predicted and internally
generated development costs are written off, are discounted using pre-tax
discount rates, which are calculated from the Group post-tax weighted average
cost of capital of 10.7% (2022: 9.0%).
There was an impairment of £1,611,000 (2022: nil) of internally generated
development costs in the year, which wholly related to a drug delivery project
in our Neurological business. Revenue from our drug delivery business
continues to be slow due to the long lead-time of pharmaceutical programmes,
although we remain confident in our opportunity pipeline. The uncertainty of
the near-term cash flows resulted in this partial impairment of £1,611,000,
with the remaining net book value totalling £1,984,000 at 30 June 2023.
For the largest projects, comprising 95% of the net book value at 30 June
2023, a 10% reduction to forecast unit sales, or an increase in the discount
rate by 5%, would result in an impairment of less than £800,000.
13. Investments in joint ventures
Where we make an investment in a company which gives us significant influence
but not full control, we account for our share of their post-tax profits in
our financial statements. We have joint venture arrangements with two
companies, RLS and MSP.
The Group's investments in joint ventures (all investments being in the
ordinary share capital of the joint ventures), whose accounting years end on
30 June, were:
Country of Ownership Ownership
incorporation and
principal place of business
2023 2022
% %
RLS Merilna tehnika d.o.o. ('RLS') - joint venture Slovenia 50.0 50.0
Metrology Software Products Limited ('MSP') - joint venture England & Wales 70.0 70.0
Although the Group owns 70% of the ordinary share capital of MSP, this is
accounted for as a joint venture as the 'control' requirements of IFRS 10 are
not satisfied. This is primarily because the shareholders agreement includes
that for so long as the Group's holding is less than 75% of the total shares
of MSP, Renishaw agrees to exercise its voting rights such that it only votes
as if it has the same aggregate shareholding as the remaining Management
Shareholders.
Movements during the year were: 2023 2022
£'000 £'000
Balance at the beginning of the year 20,570 16,634
Dividends received (924) (525)
Share of profits of joint ventures 2,768 4,342
Currency differences - 119
Balance at the end of the year 22,414 20,570
Summarised financial information for joint ventures:
RLS MSP
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Assets 43,168 42,308 4,539 4,601
Liabilities (4,969) (7,422) (378) (963)
Net assets 38,199 34,886 4,161 3,638
Group's share of net assets 19,100 17,443 2,913 2,547
Revenue 35,764 35,247 2,554 2,492
Profit/(loss) for the year 5,162 7,886 264 570
Group's share of profit/(loss) for the year 2,583 3,943 185 399
The financial statements of RLS have been prepared on the basis of Slovenian
Accounting Standards.
The financial statements of MSP have been prepared on the basis of FRS 102.
14. Leases (as lessor)
The Group acts as a lessor for Renishaw-manufactured equipment on finance and
operating lease arrangements. This is principally for high-value capital
equipment such as our additive manufacturing machines.
Accounting policy
Where the Group transfers the risks and rewards of ownership of lease assets
to a third party, the Group recognises a receivable in the amount of the net
investment in the lease. The lease receivable is subsequently reduced by the
principal received, while an interest component is recognised as financial
income in the Consolidated income statement. Standard contract terms are up to
five years and there is a nominal residual value receivable at the end of the
contract.
Where the Group retains the risks and rewards of ownership of lease assets, it
continues to recognise the leased asset in Property, plant and equipment.
Income from operating leases is recognised on a straight-line basis over the
lease term and recognised as Revenue rather than Other revenue as such income
is not material. Operating leases are on one to five year terms.
The total future lease payments are split between the principal and interest
amounts below:
2023 2022
Gross investment Net investment Gross investment £'000 Net investment
£'000 Interest £'000 Interest £'000
£'000 £'000
Receivable in less than one year 4,375 611 3,764 3,703 355 3,348
Receivable between one and two years 3,600 447 3,153 2,882 252 2,630
Receivable between two and three years 3,283 289 2,994 2,015 148 1,867
Receivable between three and four years 2,478 151 2,327 1,779 70 1,709
Receivable between four and five years 1,502 41 1,461 770 15 755
Total future minimum lease payments receivable 15,238 1,539 13,699 11,149 840 10,309
Finance lease receivables are presented as £9,935,000 (2022: £6,961,000)
non-current assets and £3,764,000 (2022: £3,348,000) current assets in the
Consolidated balance sheet.
The total of future minimum lease payments receivable under non-cancellable
operating leases were:
2023 2022
£'000 £'000
Receivable in less than one year 1,394 1,246
Receivable between one and four years 1,569 2,365
Total future minimum lease payments receivable 2,963 3,611
During the year, £974,000 (2022: £1,184,000) was recognised in Revenue from
operating leases.
15. Cash and cash equivalents and bank deposits
We have always valued having cash in the bank to protect the Group from
downturns and enable us to react swiftly to investment or market capture
opportunities. We currently hold significant cash and bank deposits, which is
mostly in the UK and spread across a number of banks with high credit ratings.
Accounting policy
Cash and cash equivalents comprise cash balances, and deposits with an
original maturity of less than three months or with an original maturity date
of more than three months where the deposit can be accessed on demand without
significant penalty for early withdrawal and where the original deposit amount
is recoverable in full.
Cash and cash equivalents
An analysis of cash and cash equivalents at the end of the year was:
2023 2022
£'000 £'000
Bank balances and cash in hand 80,196 141,208
Short-term deposits 1,192 11,954
Balance at the end of the year 81,388 153,162
Bank deposits
Bank deposits at the end of the year amounted to £125,000,000 (2022:
£100,000,000), of which £30,000,000 matured on 7 August 2023, and
£45,000,000 matures in December 2023, and £50,000,000 matures in March 2024.
16. Inventories
We have increased our inventories in the year, in line with increases in
global demand and reflecting planned increases in certain component safety
stock levels to mitigate global supply shortages, and remain committed to high
customer delivery performance.
Accounting policy
Inventory and work in progress is valued at the lower of actual cost on a
first-in, first-out (FIFO) basis and net realisable value. In respect of work
in progress and finished goods, cost includes all production overheads and the
attributable proportion of indirect overhead expenses that are required to
bring inventories to their present location and condition. Overheads are
absorbed into inventories on the basis of normal capacity or on actual hours
if higher.
Key estimate - Determination of net realisable inventory value
Determining the net realisable value of inventory requires management to
estimate future demand, especially in respect of provisioning for slow moving
and potentially obsolete inventory. When calculating an inventory provision,
management use historic usage levels (capped at 18 months), demand from
customer orders and manufacturing build plans as a basis for estimating the
future annual demand of individual stock items, except in the following
instances:
- for key products and their components, provisions are typically
made for quantities held in excess of three years' demand. A demand basis
lower than three years is used for those key products and related components
where the sales history is more volatile; and
- where strategic purchases of critical components have been made, an
outlook beyond three years is considered where appropriate.
An analysis of inventories at the end of the year was:
2023 2022
£'000 £'000
Raw materials 66,210 56,034
Work in progress 35,354 31,002
Finished goods 84,193 75,446
Balance at the end of the year 185,757 162,482
At the end of the year, the gross cost of inventories which had provisions
held against them totalled £24,525,000 (2022: £17,520,000). During the year,
the amount of write-down of inventories recognised as an expense in the
Consolidated income statement was £8,228,000 (2022: £481,000).
A 10% reduction in the value of exceptions in the Renishaw plc inventory
calculation would result in an increase in the write-down of inventories of
£1,130,000. Inventories in Renishaw plc account for 64% of total inventories
of the Group.
17. Provisions
A provision is a liability recorded in the Consolidated balance sheet, where
there is uncertainty over the timing or amount that will be paid, and is
therefore often estimated. The main provision we hold is in relation to
warranties provided with the sale of our products.
Accounting policy
The Group provides a warranty from the date of purchase, except for those
products that are installed by the Group where the warranty starts from the
date of completion of the installation. This is typically for a 12-month
period, although up to three years is given for a small number of products. A
warranty provision is included in the Group financial statements, which is
calculated on the basis of historical returns and internal quality reports.
Warranty provision movements during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year 4,244 6,259
Created during the year 2,382 1,975
Unused amounts reversed (717) (1,688)
Utilised in the year (3,151) (2,302)
(1,486) (2,015)
Balance at the end of the year 2,758 4,244
The warranty provision has been calculated on the basis of historical
return-in-warranty information and other internal reports. It is expected
that most of this expenditure will be incurred in the next financial year and
all expenditure will be incurred within three years of the balance
sheet date.
18. Contract liabilities
Contract liabilities represent the Group's obligation to transfer goods,
capital equipment and/or services to a customer for which the Group has either
received consideration or consideration is due from the customer. Our balances
mostly comprise advances received from customers and payments for services yet
to be completed.
Balances at the end of the year were: 2023 2022
£'000 £'000
Goods, capital equipment and installation 615 1,470
Aftermarket services 4,793 4,471
Deferred revenue 5,408 5,941
Advances received from customers 4,563 7,015
Balance at the end of the year 9,971 12,956
The aggregate amount of the transaction price allocated to performance
obligations that are unsatisfied at the end of the year is £9,971,000 (2022:
£12,956,000). Of this, £2,214,000 (2022: £1,620,000) is not expected to be
recognised in the next financial year.
19. Other payables
Separate to our trade payables and contract liabilities, which directly relate
to our trading activities, our Other payables mostly comprises amounts payable
to employees, or relating to employees.
Balances at the end of the year were:
2023 2022
£'000 £'000
Payroll taxes and social security 6,677 6,823
Performance bonuses 11,338 16,179
Holiday pay and retirement accruals 7,383 7,810
Indirect tax payable 4,486 1,762
Other creditors and accruals 18,246 19,375
Total other payables 48,130 51,949
Holiday pay accruals are based on a calculation of the number of days' holiday
earned during the year, but not yet taken. Other creditors and accruals
includes a number of other individually smaller accruals.
20. Borrowings
The Group's only source of external borrowing is a fixed-interest loan
facility in our Japanese subsidiary, entered into to directly finance the
purchase of a new distribution facility in Japan in 2019.
Third-party borrowings at 30 June 2023 consist of a five year loan entered
into on 31 May 2019 by Renishaw KK, with original principal of JPY
1,447,000,000 (£10,486,000). Principal of JPY 12,000,000 is repayable each
month, with a fixed interest rate of 0.81% also paid on monthly accretion. The
residual principal at 31 May 2024 of JPY 739,000,000 can either be repaid in
full at that time, or extended for another five years. There are no covenants
attached to this loan.
Movements during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year 6,079 7,449
Interest 46 52
Repayments (914) (974)
Currency adjustment (517) (448)
Balance at the end of the year 4,694 6,079
Borrowings are held at amortised cost. There is no significant difference
between the book value and fair value of borrowings, which is estimated by
discounting contractual future cash flows, which represents level 2 of the
fair value hierarchy defined in note 25.
21. Leases (as lessee)
The Group leases mostly distribution properties and cars from third parties
and recognises an associated lease liability for the total present value of
payments the lease contracts commits us to.
Accounting policy
At the commencement date of a lease arrangement the Group recognises a
right-of-use asset for the leased item and a lease liability for any payments
due. Lease liabilities are initially measured at the present value of the
lease payments that are not paid at the commencement date, discounted using
the incremental borrowing rate of the applicable entity. The lease liability
is subsequently measured at amortised cost using the effective interest method
and is remeasured if there is a change in future lease payments arising from a
change in an index or rate (such as an inflation-linked increase) or if there
is a change in the Group's assessment of whether it will exercise an extension
or termination option. When this happens there is a corresponding adjustment
to the right-of-use asset. Where the Group enters into leases with a lease
term of 12 months or less, these are treated as 'short-term' leases and are
recognised on a straight-line basis as an expense in the Consolidated income
statement. The same treatment applies to low-value assets, which are typically
IT equipment and office equipment.
Lease liabilities are analysed as below:
2023 Leasehold property Plant and equipment Motor
£'000 £'000 vehicles Total
£'000 £'000
Due in less than one year 1,737 21 1,520 3,278
Due between one and two years 691 13 1,192 1,896
Due between two and three years 510 13 858 1,381
Due between three and four years 351 6 387 744
Due between four and five years 110 1 66 177
Due in more than five years 3,481 - - 3,481
Total future minimum lease payments payable 6,880 54 4,023 10,957
Effect of discounting (1,566) (1) (756) (2,324)
Lease liability 5,314 53 3,267 8,633
2022 Leasehold property Plant and equipment Motor
£'000 £'000 vehicles Total
£'000 £'000
Due in less than one year 2,916 33 930 3,879
Due between one and two years 1,857 18 523 2,398
Due between two and three years 805 10 278 1,093
Due between three and four years 624 9 78 711
Due between four and five years 553 3 7 563
Due in more than five years 3,611 - - 3,611
Total future minimum lease payments payable 10,366 73 1,816 12,255
Effect of discounting (1,993) (1) (81) (2,075)
Lease liability 8,373 72 1,735 10,180
Lease liabilities are also presented as a £3,009,000 (2022: £3,714,000)
current liability and a £5,624,000 (2022: £6,466,000) non-current liability
in the Consolidated balance sheet.
Amounts recognised in the Consolidated income statement relating to leases
were:
2023 2022
£'000 £'000
Depreciation of right-of-use assets 4,223 4,205
Impairment of right-of-use assets - 1,837
Derecognition of lease liabilities - (1,985)
Interest expense on lease liabilities 348 481
Expenses relating to short-term and low-value leases 471 51
Total expense recognised in the Consolidated income statement 5,042 4,589
Total cash outflows for leases 5,025 4,613
During the previous year we withdrew from Russia, including moving out of a
leased property by August 2022. We therefore derecognised amounts relating to
the leased property totalling £1,985,000, with a corresponding impairment to
the right-of-use asset of £1,837,000.
22. Changes in liabilities arising from financing activities
1July 2022 Cash flows Other Currency 30 June 2023
Lease liabilities 10,180 (4,206) 2,918 (259) 8,633
Borrowings 6,079 (914) 46 (517) 4,694
16,259 (5,120) 2,964 (776) 13,327
1July 2021 Cash flows Other Currency 30 June 2022
Lease liabilities 12,562 (4,081) 513 1,186 10,180
Borrowings 7,449 (974) 52 (448) 6,079
20,011 (5,055) 565 738 16,259
See notes 20 and 21 for further details on borrowing and leasing activities.
23. Employee benefits
The Group operates contributory pension schemes, largely for UK, Ireland and
USA employees, which were of the defined benefit type up to 5 April 2007, 31
December 2007 and 30 June 2012 respectively, at which time they ceased any
future accrual for existing members and were closed to new members. The
Group's largest defined benefit scheme is in the UK.
Accounting policy
Defined benefit pension schemes are administered by trustees who are
independent of the Group finances. Investment assets of the schemes are
measured at fair value using the bid price of the unitised investments, quoted
by the investment manager, at the reporting date. Pension scheme liabilities
are measured using a projected unit method and discounted at the current rate
of return on a high-quality corporate bond of equivalent term and currency
to the liability. Remeasurements arising from defined benefit schemes comprise
actuarial gains and losses, the return on scheme assets (excluding interest)
and the effect of the asset ceiling (if any, excluding interest). The Company
recognises them immediately in Other comprehensive income and all other
expenses related to defined benefit schemes are included in the Consolidated
income statement.
The pension schemes' surpluses, to the extent that they are considered
recoverable, or deficits are recognised in full and presented on the face of
the Consolidated balance sheet under Employee benefits. Where a guarantee is
in place in relation to a pension scheme deficit, liabilities are reported in
accordance with IFRIC 14 'The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction'. To the extent that contributions
payable will not be available as a refund after they are paid into the plan, a
liability is recognised at the point the obligation arises, which is the point
at which the minimum funding guarantee is agreed. Overseas-based employees are
covered by a combination of state, defined benefit and private pension schemes
in their countries of residence. Actuarial valuations of overseas pension
schemes were not obtained, apart from Ireland and USA, because of the low
number of members.
For defined contribution schemes, the amount charged to the Consolidated
income statement represents the contributions payable to the schemes in
respect of the accounting period.
Key estimate - Valuation of defined benefit pension schemes' liabilities
Determining the value of the future defined benefit obligation requires
estimation in respect of the assumptions used to determine the present values.
These include future mortality, discount rate and inflation. Management makes
these estimates in consultation with independent actuaries.
The total pension cost of the Group for the year was £26,142,000 (2022:
£21,988,000), of which £126,000 (2022: £121,000) related to Directors and
£6,220,000 (2022: £5,292,000) related to overseas schemes.
The latest full actuarial valuation of the UK defined benefit pension scheme
was carried out as at 30 September 2021 and updated to 30 June 2023 by
a qualified independent actuary. The mortality assumption used for 2023 is
the S3PxA base tables and CMI 2022 model, with long-term improvements of 1%
per annum. Adjustments have been made to both the core base tables and CMI
2022 model to allow for the scheme's membership profile and best estimate
assumptions of future mortality improvements.
Major assumptions used by actuaries for the UK, Ireland and US schemes were:
30 June 2023 30 June 2022
Ireland scheme Ireland scheme
UK scheme US scheme UK scheme US scheme
Rate of increase in pension payments 3.05% 2.70% - 3.05% 2.45% -
Discount rate 5.10% 3.60% - 3.60% 3.20% 4.50%
Inflation rate (RPI) 3.25% 2.70% - 3.10% 2.45% -
Inflation rate (CPI) 2.25% pre-2030 - - 2.10% pre-2030 - -
3.25% post-2030 3.10% post-2030
Retirement age 64 65 65 64 65 65
The life expectancies from the retirement age of 65 for the UK scheme implied
by the mortality assumption at age 65 and 45 are:
2023 2022
years years
Male currently aged 65 21.1 21.5
Female currently aged 65 23.5 23.8
Male currently aged 45 21.8 22.2
Female currently aged 45 24.3 24.7
The weighted average duration of the UK defined benefit obligation is around
17 years (2022: 22 years).
The assets and liabilities in the defined benefit schemes at the end of the
year were:
30 June 2023 £'000 % of total assets 30 June 2022 £'000 % of total assets
Market value of assets:
Index linked gilts 55,183 28 1,489 1
Credit and fixed income funds 54,656 28 19,489 9
Cash and other 40,576 20 802 -
Multi-asset funds 26,966 14 82,442 38
Fixed interest gilts 13,219 7 1,502 1
Equities 5,729 3 111,025 51
196,329 100 216,749 100
Actuarial value of liabilities (138,958) - (174,504) -
Surplus/(deficit) in the schemes 57,371 - 42,245 -
Deferred tax thereon (14,348) - (11,048) -
The UK scheme was in a net surplus position at 30 June 2023 totalling
£57,416,000, (2022: surplus £40,331,000), and is therefore presented in
non-current assets in the Consolidated balance sheet. The Ireland scheme was
in a net deficit position at 30 June 2023 (2022: deficit), totalling £45,000,
and is therefore presented in non-current liabilities.
Equities are held in externally-managed funds and primarily relate to UK and
US equities. Credit and fixed income funds, fixed interest gilts, and index
linked gilts relate to UK, US and Eurozone government-linked securities, again
held in externally-managed funds. The fair values of these equity and fixed
income instruments are determined using the bid price of the unitised
investments, quoted by the investment manager, at the reporting date and
therefore represent 'Level 2' of the fair value hierarchy defined in note 25.
Multi-asset funds are also held in externally-managed funds, with active asset
allocation to diversify growth across asset classes such as equities, bonds
and money-market instruments. The fair value of these funds is determined on a
comparable basis to the equity and fixed income funds, and therefore are also
'Level 2' assets. Cash and other at 30 June 2023 mostly comprises a Sterling
liquidity fund, in which the principal is preserved and same day liquidity is
available.
In October 2022, following a significant improvement in the UK scheme's
funding position due to rising gilt yields, the Trustees (in consultation with
the Company) de-risked the investment strategy by disinvesting from the
scheme's equity and diversified growth holdings and investing the proceeds
into index-linked gilts. The overall impact of these changes is to reduce
investment risk, with the assets better matching the expected movements in the
liabilities. We now believe the scheme is fully funded and are in the process
of seeking to insure the liabilities. No scheme assets are directly invested
in the Group's own equity.
The movements in the schemes' assets and liabilities were:
Assets Liabilities Total
Year ended 30 June 2023 £'000 £'000 £'000
Balance at the beginning of the year 216,749 (174,504) 42,245
Contributions paid 2,341 - 2,341
Interest on pension schemes 7,745 (6,135) 1,610
Remeasurement loss from augmentation of members' benefits (US) - (1,930) (1,930)
Remeasurement gain/(loss) under IAS 19 (16,722) 30,334 13,612
Scheme administration expenses (398) - (398)
(Loss)/gain on settlements (1,098) 989 (109)
Benefits paid (12,288) 12,288 -
Balance at the end of the year 196,329 (138,958) 57,371
Assets Liabilities Total
Year ended 30 June 2022 £'000 £'000 £'000
Balance at the beginning of the year 231,355 (255,053) (23,698)
Contributions paid 8,866 - 8,866
Interest on pension schemes 4,337 (4,643) (306)
Remeasurement loss from augmentation of members' benefits (UK) - (11,695) (11,695)
Remeasurement gain/(loss) under IAS 19, the asset ceiling and IFRIC 14 (17,264) 86,342 69,078
Benefits paid (10,545) 10,545 -
Balance at the end of the year 216,749 (174,504) 42,245
The analysis of the amount recognised in the Consolidated statement of
comprehensive income and expense was:
2023 2022
£'000 £'000
Actuarial gain/(loss) arising from:
- Changes in demographic assumptions 2,028 3,860
- Changes in financial assumptions 37,318 67,442
- Experience adjustment (9,012) (7,818)
Return on plan assets excluding interest income (16,722) (17,264)
Adjustment for the asset ceiling - 3,280
Adjustment to liabilities for IFRIC 14 - 19,578
Total amount recognised in the Consolidated statement of comprehensive income and expense 13,612 69,078
The cumulative amount of actuarial gains and losses recognised in the
Consolidated statement of comprehensive income and expense was a loss of
£8,807,000 (2022: loss of £22,419,000).
The net surplus of the Group's defined benefit pension schemes, on an IAS 19
basis, has increased from £42,245,000 at 30 June 2022 to £57,371,000 at 30
June 2023, primarily reflecting the effect of an increase in the UK discount
rate, based on increases in corporate bond yields, which was partially offset
by a reduction in investment asset values.
In 2022, the Company agreed to an augmentation of UK scheme members' benefits
to reflect current and historic administrative revaluation practice. The
impact on liabilities of this plan amendment, totalling £11,695,000, was
recognised as a past service cost in the Consolidated income statement.
In 2023, a termination of the US plan (other than distribution of surplus) was
completed, with most members opting for lump sum payments, and it was agreed
that the surplus will be distributed to qualifying scheme members.
Accordingly, the surplus of £1,930,000 has been treated as an augmentation to
member benefits. This, together with related expenses of £209,000, has been
reported separately in the Consolidated income statement as a past service
cost and excluded from adjusted profit measures.
For the UK scheme, the latest actuarial report prepared in September 2021
shows a deficit of £52,800,000, which is based on funding to self-sufficiency
and uses prudent assumptions. IAS 19 requires best estimate assumptions to be
used, resulting in the IAS 19 net surplus being higher than the actuarial
deficit.
The existing deficit funding plan for the UK defined benefit pension scheme is
in place until 30 June 2031, at which time any outstanding deficit will be
paid. The agreement will end sooner if the actuarial deficit (calculated on a
self-sufficiency basis) is eliminated in the meantime. The net book value of
properties subject to fixed charges under this agreement at 30 June 2023 was
£88,778,000 (2022: £54,208,000).
The charges may be enforced by the Trustees if one of the following occurs:
(a) the Company does not pay funds into the scheme in line with the agreed
plan; (b) an insolvency event occurs in relation to the Company; or (c) the
Company does not pay any deficit at 30 June 2031.
Under the Ireland defined benefit pension scheme deficit funding plan, a
property owned by Renishaw Ireland (DAC) is subject to a registered fixed
charge to secure the Ireland defined benefit pension scheme's deficit.
For the UK defined benefit scheme, a guide to the sensitivity of the value of
the respective liabilities is as follows:
Approximate
Variation effect on liabilities
UK - discount rate Increase/decrease by 0.5% -£9.6m/+£10.7m
UK - future inflation Increase/decrease by 0.5% +£8.2m/-£7.6m
UK - mortality Increased/decreased life by one year +£4.0m/-£3.8m
24. Share-based payments
The Group provides share-based payment arrangements to certain employees in
accordance with the Renishaw plc deferred annual equity incentive plan. The
Governance section provides information of how these awards are determined.
Accounting policy
Renishaw shares are granted in accordance with the Renishaw plc deferred
annual equity incentive plan (the Plan). The share awards are subject only to
continuing service of the employee and are equity settled. The fair value of
the awards at the date of grant, which is estimated to be equal to the market
value, is charged to the Consolidated income statement on a straightline basis
over a three-year vesting period, with appropriate adjustments made to reflect
expected or actual forfeitures. The corresponding credit is to Other reserve.
The number of shares to be awarded is calculated by dividing the relevant
amount of annual bonus under the Plan by the average price of a share during a
period determined by the Remuneration Committee of not more than five dealing
days ending with the dealing day before the award date. These shares must be
purchased on the open market and cannot be satisfied by issuance of new shares
or transfer of existing treasury shares.
The Renishaw Employee Benefit Trust (EBT) is responsible for purchasing shares
on the open market on behalf of the Company to satisfy the Plan awards. These
are held by the EBT until transferring to the employee, which will normally be
on the third anniversary of the award date, subject to continued employment.
Malus and clawback provisions can be operated by the Committee within five
years of the award date. During the vesting period, no dividends are payable
on the shares. However, upon vesting, employees will be entitled to additional
shares or cash, equivalent to the value of dividends paid on the awarded
shares during this period. This amount is accrued over the vesting period.
Own shares held are recognised as an element in equity until they are
transferred at the end of the vesting period, and such shares are excluded
from earnings per share calculations.
The total cost recognised in the 2023 Consolidated income statement in respect
of the Plan was £677,000 (2022: £180,000). See note 26 for reconciliations
of amounts recognised in Equity
In accordance with the Plan, no shares (2022: £1,915,000 equivalent) are to
be awarded in respect of 2023.
25. Financial instruments
The Group has exposure to credit risk, liquidity risk and market risk arising
from its use of financial instruments. This note presents information about
the Group's exposure to these risks, along with the Group's objectives,
policies and processes for measuring and managing the risks.
Accounting policy
The Group measures financial instruments such as forward exchange contracts at
fair value at each balance sheet date in accordance with IFRS 9 'Financial
Instruments'. Fair value, as defined by IFRS 13 'Fair Value Measurement', is
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. This note provides detail on the IFRS 13 fair value
hierarchy.
Trade and other current receivables are initially recognised at fair value and
are subsequently held at amortised cost less any provision for bad and
doubtful debts and expected credit losses according to IFRS 9. Loans to
associates and joint ventures are initially recognised at fair value and are
subsequently held at amortised cost. Trade and other current payables are
initially recognised at fair value and are subsequently held at amortised
cost.
Financial liabilities in the form of loans are initially recognised at fair
value and are subsequently held at amortised cost. Financial liabilities are
assessed for embedded derivatives and whether any such derivatives are closely
related. If not closely related, such derivatives are accounted for at fair
value in the Consolidated income statement.
Foreign currency derivatives are used to manage risks arising from changes in
foreign currency rates relating to overseas sales and foreign
currency-denominated assets and liabilities. The Group does not enter into
derivatives for speculative purposes. Foreign currency derivatives are stated
at their fair value, being the estimated amount that the Group would pay or
receive to terminate them at the balance sheet date, based on prevailing
foreign currency rates.
Changes in the fair value of foreign currency derivatives which are designated
and effective as hedges of future cash flows are recognised in Other
comprehensive income and in the Cash flow hedging reserve, and subsequently
transferred to the carrying amount of the hedged item or the Consolidated
income statement. Realised gains or losses on cash flow hedges are therefore
recognised in the Consolidated income statement within revenue in the same
period as the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or when
the hedging instrument or hedged item no longer qualify for hedge accounting.
If the forecast transaction is still expected to occur, but is no longer
highly probable, the cumulative gain or loss in the cash flow hedge reserve
remains in that reserve until the transaction occurs. If the forecast
transaction is no longer expected to occur, the cumulative gain or loss in the
cash flow hedge reserve is immediately reclassified to the Consolidated income
statement.
Changes in fair value of foreign currency derivatives, which are ineffective
or do not meet the criteria for hedge accounting in IFRS 9, are recognised in
the Consolidated income statement within Gains/losses from the fair value of
financial instruments.
In addition to derivatives held for cash flow hedging purposes, the Group uses
short-term derivatives not designated as hedging instruments to offset gains
and losses from exchange rate movements on foreign currency-denominated assets
and liabilities. Gains and losses from currency movements on underlying assets
and liabilities, realised gains and losses on these derivatives, and fair
value gains and losses on outstanding derivatives of this nature are all
recognised in financial income and expenses in the Consolidated income
statement.
Key estimate - Estimates of highly probable forecasts of the hedged item.
Derivatives are effective for hedge accounting to the extent that the hedged
item is 'highly probable' to occur, with 'highly probable' indicating a much
greater likelihood of occurrence than the term 'more likely than not'.
Determining a highly probable sales forecast for Renishaw plc and Renishaw UK
Sales Limited, being the hedged item, over a multiple year time period,
requires judgement of the suitability of external and internal data sources
and estimations of future sales.
Fair value
There is no significant difference between the fair value of financial assets
and financial liabilities and their carrying value in the Consolidated balance
sheet. All financial assets and liabilities are held at amortised cost, apart
from the forward foreign currency exchange contracts, which are held at fair
value, with changes going through the Consolidated income statement unless
subject to hedge accounting.
The fair values of the forward foreign currency exchange contracts have been
calculated by a third-party expert, discounting estimated future cash flows on
the basis of market expectations of future exchange rates, representing level
2 in the IFRS 13 fair value hierarchy. The IFRS 13 level categorisation
relates to the extent the fair value can be determined by reference to
comparable market values. The classifications are: level 1 where instruments
are quoted on an active market; level 2 where the assumptions used to arrive
at fair value have comparable market data; and level 3 where the assumptions
used to arrive at fair value do not have comparable market data.
Credit risk
The Group's liquid funds are substantially held with banks with high credit
ratings and the credit risk relating to these funds is therefore limited. The
Group carries a credit risk relating to non-payment of trade receivables by
its customers. The Group's policy is that credit evaluations are carried out
on all new customers before credit is given above certain thresholds. Risk is
spread across a large number of customers with no significant concentration
with one customer or in any one geographical area. The Group establishes an
allowance for impairment in respect of trade receivables where recoverability
is considered doubtful.
An analysis by currency of the Group's financial assets at the year end is as
follows:
Trade & finance lease receivables Other receivables Cash and cash equivalents and bank deposits
2023 2022 2023 2022 2023 2022
Currency £'000 £'000 £'000 £'000 £'000 £'000
Pound Sterling 17,530 21,391 20,592 19,565 161,489 201,668
US Dollar 49,609 45,433 814 867 12,465 13,965
Euro 28,418 28,314 1,433 1,568 6,481 8,712
Japanese Yen 16,555 19,480 137 457 6,481 5,720
Other 25,014 23,242 5,003 4,611 19,472 23,097
137,126 137,860 27,979 27,068 206,388 253,162
The above trade & finance lease receivables, other receivables and cash
and bank deposits are predominately held in the functional currency of the
relevant entity, with the exception of £19,669,000 (2022: £21,271,000) of US
Dollar-denominated trade receivables being held in Renishaw (Hong Kong)
Limited and £1,697,000 (2022: £1,852,000) of Euro-denominated trade
receivables being held in Renishaw UK Sales Limited, along with some foreign
currency cash balances which are of a short-term nature.
The ageing of trade receivables past due, but not impaired, at the end of the
year was:
2023 2022
£'000 £'000
Past due zero to one month 11,808 9,548
Past due one to two months 3,880 3,879
Past due more than two months 9,732 5,252
Balance at the end of the year 25,420 18,679
Movements in the provision for impairment of trade receivables during the year
were:
2023 2022
£'000 £'000
Balance at the beginning of the year 2,540 3,826
Changes in amounts provided 1,784 (834)
Amounts used (886) (452)
Balance at the end of the year 3,438 2,540
The Group applies the simplified approach when measuring the expected credit
loss for trade receivables, with a provision matrix used to determine a
lifetime expected credit loss.
For this provision matrix, trade receivables are grouped into credit risk
categories, with category 1 being the lowest risk and category 5 the highest.
Risk scores are allocated to the customer's country of operation, their type
(such as distributor, end-user and OEM), their industry and the proportion of
their debt that was past due at the year-end. These scores are then weighted
to produce an overall risk score for the customer, with the lowest scores
being allocated to category 1 and the highest scores to category 5. The matrix
then applies an expected credit loss rate to each category, with this rate
being determined by adjusting the Group's historic credit loss rates to
reflect forward-looking information.
Where certain customers have been identified as having a significantly
elevated credit risk these have been provided for on a specific basis. Both
elements of expected credit loss are shown in the matrix below and have been
shown separately so as not to distort the expected credit loss rate.
Risk category 1 Risk category 2 Risk category 3 Risk category 4 Risk category 5 2023
Total
Year ended 30 June 2023 £'000 £'000 £'000 £'000 £'000 £'000
Gross trade receivables 3,126 60,826 57,991 4,922 - 126,865
Expected credit loss rate 0.34% 0.38% 0.41% 0.44% - 0.39%
Expected credit loss allowance 11 228 240 22 - 501
Specific loss allowance - 219 1,313 1,405 - 2,937
Total expected credit loss 11 447 1,553 1,427 - 3,438
Net trade receivables 3,115 60,379 56,438 3,495 - 123,427
Risk category 1 Risk category 2 Risk category 3 Risk category 4 Risk category 5 2022
Total
Year ended 30 June 2022 £'000 £'000 £'000 £'000 £'000 £'000
Gross trade receivables 2,742 51,598 70,298 5,453 - 130,091
Expected credit loss rate 0.19% 0.20% 0.22% 0.24% - 0.21%
Expected credit loss allowance 5 104 154 13 - 276
Specific loss allowance - - 1,502 762 - 2,264
Total expected credit loss 5 104 1,656 775 - 2,540
Net trade receivables 2,737 51,494 68,642 4,678 - 127,551
Finance lease receivables are subject to the same approach as noted above for
trade receivables.
Derivative assets are assessed based on the credit risk of the banks
counterparty to the forward contracts.
Other receivables include mostly prepayments and indirect tax receivables.
Prepayment balances are reviewed at each reporting period to confirm that
prepaid goods or services are still expected to be received, while tax
balances are reviewed for recoverability.
Other receivables at the year end comprised:
2023 2022
£'000 £'000
Indirect tax receivable 9,304 9,010
Software maintenance 5,857 7,430
Grants 1,426 1,250
Other prepayments 11,392 9,378
Total other receivables 27,979 27,068
The maximum exposure to credit risk is £386,309,000 (2022: £425,211,000),
comprising the Group's trade, finance and other receivables, cash and cash
equivalents and derivative assets.
The maturities of non-current other receivables, being only derivatives, at
the year end were:
2023 2022
£'000 £'000
Receivable between one and two years 9,443 -
Receivable between two and five years - -
9,443 -
Liquidity risk
Our approach to managing liquidity is to ensure, as far as possible, that we
will always have sufficient liquidity to meet our liabilities when due,
without incurring unacceptable losses or risking damage to the Group's
reputation. We use monthly cash flow forecasts on a rolling 12-month basis to
monitor cash requirements.
With cash and cash equivalents and bank deposits at 30 June 2023 totalling
£206,388,000 and £84,297,000 cash flows generated from operating activities
in the period, the Group remains in a strong liquidity position.
In respect of cash and cash equivalents and bank deposits, the carrying value
is materially the same as fair value because of the short maturity of the bank
deposits. Bank deposits are affected by interest rates that are either fixed
or floating, which can change over time, affecting the Group's interest
income. An increase of 1% in interest rates would result in an increase in
interest income of approximately £1,250,000.
The contractual maturities of financial liabilities at the year end were:
Contractual cash flows
Carrying amount Effect of discounting Gross maturities Up to 1 year 1-2 years 2-5 years
Year ended 30 June 2023 £'000 £'000 £'000 £'000 £'000 £'000
Trade payables 21,551 - 21,551 21,551 - -
Other payables 48,130 - 48,130 48,130 - -
Borrowings 4,694 36 4,730 4,730 - -
Forward exchange contracts 5,209 - 5,209 5,089 120 -
79,584 36 79,620 79,500 120 -
Effect of Gross Contractual cash flows
Carrying amount discounting maturities Up to 1 year 1-2 years 2-5 years
Year ended 30 June 2022 £'000 £'000 £'000 £'000 £'000 £'000
Trade payables 30,947 - 30,947 30,947 - -
Other payables 51,949 - 51,949 51,949 - -
Borrowings 6,079 82 6,161 926 5,235 -
Forward exchange contracts 27,353 - 27,353 17,890 9,463 -
116,328 82 116,410 101,712 14,698 -
Market risk
The Group operates in several foreign currencies with the majority of sales
being made in these non-Sterling currencies, but with most manufacturing being
undertaken in the UK, Ireland and India.
A large proportion of sales are made in US Dollar, Euro and Japanese Yen,
therefore the Group enters into US Dollar, Euro and Japanese Yen derivative
financial instruments to manage its exposure to foreign currency risk,
including:
i. forward foreign currency exchange contracts to hedge a significant
proportion of the Group's forecasted US Dollar, Euro and Japanese Yen revenues
over the next 24 months;
ii. foreign currency option contracts, entered into alongside the forward
contracts above until May 2018 as part of the Group hedging strategy, are
ineffective for cash flow hedging purposes. Note 29, 'Alternative performance
measures', gives an adjusted measure of profit before tax to reflect the
original intention that these derivatives were entered into for hedging
purposes. The final option contract matured in November 2021; and
iii. one-month forward foreign currency exchange contracts to offset the
gains/losses from exchange rate movements arising from foreign
currency-denominated intragroup balances of the Company.
The amounts of foreign currencies relating to these forward contracts and
options are, in Sterling terms:
2023 2022
Nominal value Fair value Nominal value Fair value
£'000 £'000 £'000 £'000
US Dollar 345,010 5,009 306,270 (26,249)
Euro 179,992 1,389 129,799 1,711
Japanese Yen 30,318 3,209 37,941 4,306
555,320 9,607 474,010 (20,232)
The following are the exchange rates which have been applicable during the
financial year.
2023 2022
Average forward contract rates Year end exchange rate Average exchange rate Average forward contract rates Year end exchange rate Average exchange rate
Currency
US Dollar 1.24 1.27 1.21 1.34 1.22 1.33
Euro 1.13 1.16 1.15 1.12 1.16 1.18
Japanese Yen 141 183 166 132 165 156
Hedging
In relation to the forward currency contracts in a designated cash flow hedge,
the hedged item is a layer component of forecast sales transactions. Forecast
transactions are deemed highly probable to occur and Group policy is to hedge
around 75% of net foreign currency exposure for USD, EUR and JPY. The hedged
item creates an exposure to receive USD, EUR or JPY, while the forward
contract is to sell USD, EUR or JPY and buy GBP. Therefore, there is a strong
economic relationship between the hedging instrument and the hedged item. The
hedge ratio is 100%, such that, by way of example, £10m nominal value of
forward currency contracts are used to hedge £10m of forecast sales. Fair
value gains or losses on the forward currency contracts are offset by foreign
currency gain or losses on the translation of USD, EUR and JPY based sales
revenue, relative to the forward rate at the date the forward contracts were
arranged. Foreign currency exposures in HKD and USD are aggregated and only
USD forward currency contracts are used to hedge these currency exposures.
Sources of hedge ineffectiveness according to IFRS 9 Financial Instruments
include:
- changes in timing of the hedged item;
- reduction in the amount of the hedged sales considered to be highly
probable;
- a change in the credit risk of Renishaw or the bank counterparty to the
forward contract; and
- differences in assumptions used in calculating fair value.
During 2020, global macroeconomic uncertainty resulted in a reduction to the
'highly probable' revenue forecasts of Renishaw plc and Renishaw UK Sales
Limited, being the hedged item, which resulted in proportions of forward
contracts failing hedge effectiveness testing, with nominal value amounting to
£247,547,000. These contracts have matured in the periods since, and the
remaining nominal value of ineffective forward contracts at 30 June 2023 was
nil (2022: £63,045,000). Fair value gains of £5,504,000 (2022: £8,349,000
losses) recognised in the Consolidated income statement relate to the
unwinding of the mark-to-market valuations of the ineffective contracts.
No contracts have become ineffective during the period. A decrease of 10% in
the highly probable forecasts would result in around £30,000,000 nominal
value of forward contracts becoming ineffective.
The following table details the fair value of these forward foreign currency
derivatives according to the categorisations of instruments noted previously:
2023 2022
Nominal value Fair value Nominal value Fair value
£'000 £'000 £'000 £'000
Forward currency contracts in a designated cash flow hedge (i)
Non-current derivative assets 268,908 9,443 - -
Current derivative assets 118,271 4,461 77,460 7,077
Current derivative liabilities 109,434 (5,048) 128,950 (12,046)
Non-current derivative liabilities 21,148 (120) 179,149 (9,463)
517,761 8,736 385,559 (14,432)
Amounts recognised in the Consolidated statement of comprehensive income and
expense
- 23,167 - 28,423
Forward currency contracts ineffective as a cash flow hedge (i)
Current derivative liabilities - - 63,045 (5,504)
Amounts recognised in Gains/(losses) from the fair value of financial
instruments in the Consolidated income statement
- (11,551)
- (1,399)
Amounts recognised in Gains/(losses) from the fair value of financial
instruments in the Consolidated income statement
- - - 1,138
Forward currency contracts not in a designated cash flow hedge (iii)
Current derivative assets 17,134 912 4,880 44
Current derivative liabilities 20,425 (41) 20,526 (340)
37,559 871 25,406 (296)
Amounts recognised in Financial income/(expense) in the Consolidated income
statement
- 1,728 - 98
Total forward contracts and options
Non-current derivative assets 268,908 9,443 - -
Current derivative assets 135,405 5,373 82,340 7,121
Current derivative liabilities 129,859 (5,089) 212,521 (17,890)
Non-current derivative liabilities 21,148 (120) 179,149 (9,463)
555,320 9,607 474,010 (20,232)
The total losses recognised in Revenue in the Consolidated income statement
relating to cash flow hedges previously recognised through other comprehensive
income amounted to £21,553,000 (2022: £3,385,000).
For the Group's foreign currency forward contracts at the balance sheet date,
if Sterling appreciated by 5% against the US Dollar, Euro and Japanese Yen,
this would increase pre-tax equity by £24,655,000 and increase profit before
tax by £1,789,000, while a depreciation of 5% would decrease pre-tax equity
by £27,251,000 and decrease profit before tax by £1,977,000.
26. Share capital and reserves
The Group defines capital as being the equity attributable to the owners of
the Company, which is captioned on the Consolidated balance sheet. The Board's
policy is to maintain a strong capital base, ensuring the security of the
Group, and to maintain a balance between significant returns to shareholders,
with a progressive dividend policy. This note presents figures relating to
this capital management, along with an analysis of all elements of Equity
attributable to shareholders and non-controlling interests.
Share capital
2023 2022
£'000 £'000
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each 14,558 14,558
The ordinary shares are the only class of share in the Company. Holders of
ordinary shares are entitled to vote at general meetings of the Company and
receive dividends as declared. The Articles of Association of the Company do
not contain any restrictions on the transfer of shares nor on voting rights.
Dividends paid
Dividends paid comprised:
2023 2022
£'000 £'000
2022 final dividend paid of 56.6p per share (2021: 52.0p) 41,190 37,850
Interim dividend paid of 16.8p per share (2022: 16.0p) 12,217 11,644
Total dividends paid 53,407 49,494
A final dividend of 59.4p per share is proposed in respect of 2023, which will
be payable on 7 December 2023 to shareholders on the register on 3 November
2023.
Own shares held
The EBT is responsible for purchasing shares on the open market on behalf of
the Company to satisfy the Plan awards, see note 24 for further detail. Own
shares held are recognised as an element in equity until they are transferred
at the end of the vesting period.
Movements during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year (750) (404)
Disposal of own shares on vesting of awards - 404
Acquisition of own shares (2,213) (750)
Balance at the end of the year (2,963) (750)
In November 2021, 14,396 shares were purchased on the open market by the EBT
at a price of £52.10, costing a total of £750,017. The fair value of these
awards at the grant date, being 28 October 2021, was £734,317. These shares
will vest on 28 October 2024, with no forfeitures expected at 30 June 2023.
In November 2022, 54,582 shares were purchased on the open market by the EBT
at a price of £40.24, costing a total of £2,212,831. The fair value of these
awards at the grant date, being 26 October 2022, was £1,915,000. These shares
will vest on 26 October 2025, with no forfeitures expected at 30 June 2023.
Other reserve
The other reserve relates to share-based payments charges according to IFRS 2
in relation to the Plan, along with historical amounts relating to investments
in subsidiary undertakings not eliminated on consolidation.
Movements during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year (180) 44
Share-based payments charge in respect of share vesting in 2022 - 16
Transfer of own shares on vesting of awards - (404)
Share-based payments charge in respect of share vesting in 2024 245 164
Share-based payments charge in respect of shares vesting in 2025 432 -
Balance at the end of the year 497 (180)
Currency translation reserve
The currency translation reserve comprises all foreign exchange differences
arising from the translation of the financial statements of the overseas
operations and currency movements on intragroup loan balances classified as
net investments in overseas operations.
Movements during the year were: 2023 2022
£'000 £'000
Balance at the beginning of the year 14,459 3,719
(Loss)/gain on net assets of foreign currency operations (5,905) 3,529
Transfer of accumulated loss relating to net assets of Russian operation - 575
(Loss)/gain on intragroup loans classified as net investments in foreign operations (2,095) 8,047
Tax on translation of net investments in foreign operations 313 (1,529)
(Loss)/gain in the year relating to subsidiaries (7,687) 10,622
Currency exchange differences relating to joint ventures - 118
Balance at the end of the year 6,772 14,459
See note 5 for further information on intragroup loans classified as net
investments.
Cash flow hedging reserve
The cash flow hedging reserve, for both the Group and the Company, comprises
all foreign exchange differences arising from the valuation of forward
exchange contracts which are effective hedges and mature after the year end.
These are valued on a mark-to-market basis, are accounted for in Other
comprehensive income and expense and accumulated in Equity, and are recycled
through the Consolidated income statement and Company income statement when
the hedged item affects the income statement, or when the hedging relationship
ceases to be effective. See note 25 for further detail.
Movements during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year (10,923) 11,345
Losses on contract maturity recognised in revenue during the year (21,553) (3,385)
Revaluations during the year 44,720 (25,038)
Deferred tax movement (5,692) 6,155
Balance at the end of the year 6,552 (10,923)
Non-controlling interest
Movements during the year were:
2023 2022
£'000 £'000
Balance at the beginning of the year (577) (577)
Share of profit for the year - -
Balance at the end of the year (577) (577)
The non-controlling interest represents the minority shareholdings in Renishaw
Diagnostics Limited - 7.6%.
27. Capital commitments
At the end of a financial year, we typically have obligations to make payments
in the future, for which no provision is made in the financial statements. In
2022, we committed to the expansion of one of our production facilities in
Wales, UK, which is expected to cost an additional £35m over the next year.
Authorised and committed capital expenditure at the end of the year were:
2023 2022
£'000 £'000
Freehold land and buildings 35,607 65,328
Plant and equipment 11,423 22,760
Motor vehicles 14 319
Total committed capital expenditure 47,044 88,407
28. Related parties
We report our two joint venture companies, RLS Merilna tehnika d.o.o. and
Metrology Software Products Limited, as related parties.
Joint ventures and other related parties had the following transactions and
balances with the Group:
Joint ventures
2023 2022
£'000 £'000
Purchased goods and services from the Group during the year 117 553
Sold goods and services to the Group during the year 24,271 29,355
Paid dividends to the Group during the year 924 525
Amounts owed to the Group at the year end 35 1
Amounts owed by the Group at the year end 2,837 3,950
Loans owed to the Group at the year end - 350
There were no bad debts relating to related parties written off during 2023 or
2022.
By virtue of their long-standing voting agreement, Sir David McMurtry
(Executive Chairman 36.23% shareholder) and John Deer (Non-executive Deputy
Chairman, together with his wife, 16.59%), are the ultimate controlling party
of the Group.
29. Alternative performance measures
There are sometimes infrequently occurring events which impact on our
financial statements, recognised according to applicable IFRS, that we believe
should be excluded from adjusted performance measures in order to give readers
a more understandable and comparable view of our underlying performance.
In accordance with Renishaw's alternative performance measures (APMs) policy
and ESMA Guidelines on Alternative Performance Measures (2015), APMs are
defined as - Revenue at constant exchange rates, Adjusted profit before tax,
Adjusted earnings per share and Adjusted operating profit.
Revenue at constant exchange rates is defined as revenue recalculated using
the same rates as were applicable to the previous year and excluding forward
contract gains and losses.
2023 2022
Revenue at constant exchange rates £'000 £'000
Statutory revenue as reported 688,573 671,076
Adjustment for forward contract gains 7,815 (744)
Adjustment to restate current year at previous year exchange rates (33,549) -
Revenue at constant exchange rates 662,839 670,332
Year-on-year revenue growth at constant exchange rates -1.1% -
Year-on-year revenue growth at constant exchange rates for 2022 was +18.3%.
Adjusted profit before tax, Adjusted earnings per share and Adjusted operating
profit are defined as the profit before tax, earnings per share and operating
profit after excluding:
- costs relating to a revision to a provision made in 2020 relating to
restructuring (a);
- third-party costs relating to the formal sales process ('FSP') (b);
- a UK defined benefit pension scheme past service cost (c);
- a US defined benefit pension scheme past service cost (d); and
- gains and losses in fair value from forward currency contracts which did not
qualify for hedge accounting and which have yet to mature (e).
a) Restructuring costs, where applicable during a year, are reported
separately in the Consolidated income statement and excluded from adjusted
measures on the basis that they relate to matters that do not frequently
recur. During 2022, a revised estimate of a warranty provision relating to
restructuring in 2020 resulted in a reduction to this provision of
£1,688,000, then in 2023 a further revision resulted in a reduction of
£717,000. As this provision was initially excluded from adjusted measures,
the revised estimates have also been excluded.
b) Third-party legal and advisory costs relating to the 2021 FSP were
excluded from adjusted measures in 2021. During 2022, £200,000 was released
from an accrual made in respect of these costs relating to indirect tax, which
was also excluded in the previous year.
c) In 2022, the Company agreed to an augmentation of UK defined benefit
pension scheme members' benefits. This was effected in the scheme Rules
through a Deed of Amendment to the Trust Deed and Rules, signed by the
Trustees and Company on 20 June 2022, therefore relates to a matter which is
not expected to frequently recur. The impact on liabilities of this plan
amendment, totalling £11,695,000, were recognised as a past service cost,
reported separately in the Consolidated income statement and excluded from
adjusted profit measures.
d) In 2023, a termination of the US plan (other than distribution of
surplus) was completed, with most members opting for lump sum payments. It was
agreed that the surplus will be distributed to qualifying scheme members.
Accordingly, the surplus of £2,139,000 has been treated as an augmentation to
member benefits, reported separately in the Consolidated income statement and
excluded from adjusted profit measures. See note 23 for further detail.
e) From 2017, the gains and losses from the fair value of financial
instruments not effective for cash flow hedging have been excluded from
statutory profit before tax, statutory earnings per share and statutory
operating profit in arriving at Adjusted profit before tax, Adjusted earnings
per share and Adjusted operating profit to reflect the Board's intent that the
instruments would provide effective hedges. This is classified as 'Fair value
(gains)/losses on financial instruments not eligible for hedge accounting (i)'
in the following reconciliations. The amounts shown as reported in revenue
represent the amount by which revenue would change had all the derivatives
qualified as eligible for hedge accounting.
Gains and losses which recycle through the Consolidated income statement as a
result of contracts deemed ineffective during 2020, as described in note 25,
are also excluded from adjusted profit measures, on the basis that all forward
contracts are still expected to be effective hedges for Group revenue. This is
classified as 'Fair value (gains)/losses on financial instruments not eligible
for hedge accounting (ii)' in the following reconciliations.
The Board considers these alternative performance measures to be additional
useful measures to analyse the underlying performance of the Group.
2023 2022
Adjusted profit before tax: £'000 £'000
Statutory profit before tax 145,065 145,586
Revised estimate of 2020 restructuring provisions (717) (1,688)
Third-party FSP costs - (200)
UK defined benefit pension scheme past service cost - 11,695
US defined benefit pension scheme past service cost 2,139 -
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
- reported in revenue - 2,621
- reported in (gains)/losses from the fair value in financial instruments - (1,138)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue (6,903) (4,685)
- reported in (gains)/losses from the fair value of financial instruments 1,399 11,551
Adjusted profit before tax 140,983 163,742
2023 2022
Adjusted earnings per share: pence pence
Statutory earnings per share 159.7 165.4
Revised estimate of 2020 restructuring provisions (0.8) (0.3)
Third-party FSP costs - (1.9)
UK defined benefit pension scheme past service cost - 13.0
US defined benefit pension scheme past service cost 2.2 -
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
- reported in revenue - 2.9
- reported in (gains)/losses in fair value in financial instruments - (1.3)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue (7.5) (5.2)
- reported in (gains)/losses from the fair value of financial instruments 1.5 12.9
Adjusted earnings per share 155.1 185.5
2023 2022
Adjusted operating profit: £'000 £'000
Statutory operating profit 134,489 143,250
Revised estimate of 2020 restructuring provisions (717) (1,688)
Third-party FSP costs - (200)
UK defined benefit pension scheme past service cost - 11,695
US defined benefit pension scheme past service cost 2,139 -
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
- reported in revenue - 2,621
- reported in (gains)/losses in fair value in financial instruments - (1,138)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue (6,903) (4,685)
- reported in (gains)/losses from the fair value of financial instruments 1,399 11,551
Adjusted operating profit 130,407 161,406
Adjustments to the segmental operating profit:
2023 2022
Manufacturing technologies £'000 £'000
Operating profit before losses from fair value of financial instruments and UK and US defined benefit pension schemes' past service cost
132,843 162,549
Revised estimate of 2020 restructuring provisions (717) (1,688)
Third-party FSP costs - (197)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
- reported in revenue - 2,576
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue (6,644) (4,605)
Adjusted manufacturing technologies operating profit 125,482 158,635
2023 2022
Analytical instruments and medical devices £'000 £'000
Operating profit before loss from fair value of financial instruments and
UK and US defined benefit pension schemes' past service cost 5,184 2,809
Third-party FSP costs - (3)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
- reported in revenue - 45
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue (259) (80)
Adjusted analytical instruments and medical devices operating profit 4,925 2,771
Registered office:
Renishaw plc
New Mills
Wotton-under-Edge
Gloucestershire
GL12 8JR
UK
Registered number: 01106260
LEI number: 21380048ADXM6Z67CT18
Telephone: +44 1453 524524
Email: communications@renishaw.com
Website: www.renishaw.com
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