REG - Renishaw PLC - Final Results
12/09/2024 07:00
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RNS Number : 8763D Renishaw PLC 12 September 2024
Renishaw plc
12 September 2024
Preliminary announcement of results for the year ended 30 June 2024
Solid strategic progress in challenging market conditions
FY2024 FY2023 Change
Revenue (£m) 691.3 688.6 +0.4%
Adjusted* profit before tax (£m) 122.6 141.0 -13%
Adjusted* earnings per share (pence) 133.2 155.1 -13%
Dividend per share (pence) 76.2 76.2 0%
Statutory profit before tax (£m) 122.6 145.1 -16%
Statutory earnings per share (pence) 133.2 159.7 -16%
Performance highlights
· Revenue of £691.3m (FY2023: £688.6m):
• Record revenue, 0.4% higher than FY2023, boosted by a strong final
quarter;
• Revenue at constant exchange rates, excluding the impact of forward
contracts, was £25.4m (3.7%) higher than the previous year; and
• Good revenue growth from systems sales, offset by weaker demand from
the semiconductor sector for Position Measurement products.
· Manufacturing technologies revenue flat at £648.1m, with:
• Record revenue for shop-floor gauging and co-ordinate measuring
machine (CMM) inspection systems;
• Good growth in sales of multi-laser additive manufacturing (AM)
systems, with a strong second half for sales from key customers in the medical
sector; and
• Weaker demand for Position Measurement products overall, but with
four quarters of sequential growth amid signs of recovering demand from the
semiconductor sector.
· Analytical instruments and medical devices revenue increased by 7%
to £43.2m, with:
• Record sales for our Spectroscopy product line, with stronger demand
in EMEA where we have expanded our sales team;
• Growth for our Neurological product line, including sales of our
neuromate® surgical robot to diagnose patients with epilepsy.
· Adjusted(*) profit before tax 13% lower at £122.6m (FY2023:
£141.0m):
• Profit reduction primarily resulting from a combination of the
impact of currency on revenues and increased employee pay, including £2.1m of
severance costs.
• Gross engineering expenditure increased by 6% as we continue to
invest in innovation, whilst distribution cost were 2% higher and
administration costs were flat.
· Statutory profit before tax of £122.6m (FY2023: £145.1m).
· Strong balance sheet with cash and cash equivalents and bank deposit
balances of £217.8m, compared with £206.4m at 30 June 2023:
• Invested £65.2m (FY2023: £73.8m) in capital expenditure, including
completion and occupation of the first phase of expansion of our production
facility in Miskin, Wales.
· Proposed final dividend of 59.4p per share.
*Note 29, Alternative performance measures, defines how each of these measures
is calculated.
Strategic progress
· Our ambition is to deliver high single-digit growth through the
business cycle, combined with >20% operating margins. This year, we
introduced a long-term value creation model to explain how we will achieve
these goals, including three areas of strategic focus:
1. Growing in our existing markets - aiming to increase revenue by
driving up probe fitment levels, offering higher value sensors, and by winning
more machine builder customers.
• Launched the RMP24-micro, the world's smallest wireless machine
tool probe, designed for compact machine tools that make high-precision
miniature components, where probe fitment was not previously possible.
• We also continued to grow revenue from our FORTiS™ enclosed
position encoders, where we see significant opportunities, and won new
business for our magnetic, optical and laser position encoders from machine
builders in a wide range of sectors.
2. Increasing the value of the technology we sell - aiming to provide
our end-user customers with complete solutions to capture a greater proportion
of their investment.
• Strong growth in sales of our Equator™ gauge, helped by the
continuing trend for greater automation of process control on shop-floor
machinery.
• Began rolling out our new generation of metrology software, MODUS™
IM Gauge & Control, which aims to simplify programming of our Equator
gauging system.
• Launched the RenAM 500 Ultra additive manufacturing machine,
featuring our new TEMPUS™ technology, which reduces build times by up to
50%.
3. Extending into new, high-growth markets - aiming to diversify into
close-adjacent markets where we have strong market understanding and brand
awareness.
• Our new industrial automation products, which we launched at the end
of FY2023, have generated a positive response from customers during the first
year, and we are now focused on expanding our sales teams and developing
routes to market.
· Other strategic progress this year includes:
• Completed the first phase of expansion of production facility at
Miskin on time and under budget. The first of two new halls is now
operational, providing additional production capacity for our physically
larger CMM, AM and encoder products.
• Established a comprehensive new ESG strategy and continued to make
progress on reducing carbon emissions in line with our Net Zero targets.
Will Lee, Chief Executive, commented:
"The start of FY2025 has seen continuing improvement in demand for our encoder
products from the semiconductor manufacturing sector, primarily in the APAC
region. This, together with a range of growth opportunities that we are
pursuing, especially for metrology and additive manufacturing systems, means
that we are expecting to achieve solid revenue growth in the year ahead.
We continue to focus on improving productivity in all areas. We expect these
efforts, together with higher sales volumes, to drive our operating profit
margin towards our target, although inflationary pressures, especially people
costs, will affect the rate of improvement in the near term.
The progress we've made against our three key strategic focus areas this year
gives me confidence in our organic growth strategy, and we continue to invest
for long-term success."
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.
Further information can be found at www.renishaw.com (http://www.renishaw.com)
Results presentation
See below a video presentation of these results, presented by Will Lee, Chief
Executive, and Allen Roberts, Group Finance Director.
Live Q&A session
There will be a live audio-only question and answer session with Will and
Allen at 10:30 BST on 12 September 2024. Details of how to register for this
webcast are available at the following link:
www.renishaw.com/en/register-for-the-2024-full-year-results-webcast--49399
(https://www.renishaw.com/en/register-for-the-2024-full-year-results-webcast--49399)
Questions can be submitted in advance of the webcast either through the
webcast platform or to communications@renishaw.com
(mailto:communications@renishaw.com) (if sending by email, please submit by
9:30 BST on 12 September).
A recording of the Q&A session will be made available by 13 September 2024
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 been another busy year for Renishaw, in which we achieved record sales
despite a challenging trading environment. We continued to make solid progress
against our long-term strategy, which includes delivering innovative new
products and developing our sales and manufacturing infrastructure to support
future growth. While profit is lower this year, we propose to maintain our
dividend. We remain committed to our growth strategy and are confident in our
future prospects.
Our progress this year was once again due to the talent and dedication of our
people, and I would like to thank them all for their hard work.
I am inspired by their passion and have always been impressed with their
pioneering spirit. And I am also proud that our collective determination to
push technological boundaries and help our customers solve problems is driven
by our purpose of Transforming Tomorrow Together, and built on our values of
innovation, inspiration, integrity and involvement. Our employees demonstrate
these values every day, as shown again this year by the excellent entries in
our annual global values competition.
At the end of our financial year, Sir David McMurtry informed the Board that
he was stepping down from his role as Executive Chairman. On behalf of all
Board members, employees, customers, shareholders, indeed all stakeholders, I
would like to thank him for his exceptional leadership of the Company.
Since co-founding Renishaw in 1973, he has been instrumental in building what
is today a world-class business, and we are delighted that we will retain the
benefit of his vast knowledge and experience as he remains on the Board as
a Non-executive Director. Recognising the huge achievements of Sir David and
John Deer, our founders, I am honoured to have been asked to take on the role
of Interim Chairman of the Board from 1 July 2024 while we search for a new
independent Non-executive Chair. We also welcomed Richard McMurtry to the
Board as a Non-executive Director, also with effect from 1 July 2024. Richard
is a highly experienced director and investor who supports start-ups
committed to developing the future of innovation in the UK. He trained as an
engineer with significant involvement in product development and robotic
systems.
Innovation: thinking creatively, and sparking new ideas
We put innovation at the heart of everything we do. It's what sparks new ideas
and leads to new products. That's why we continue to invest in research and
development and engineering, with total expenditure rising 6% this year to
£106.8m. We introduced a range of new products, many of them showcased at the
EMO Hannover and Formnext exhibitions. Having seen Sir David McMurtry work
alongside our Additive Manufacturing (AM) team this year, I was especially
pleased to see the launch of our TEMPUS technology, which helps significantly
reduce build times. This is a big step forward in an increasingly important
market for us. Sir David has told me how it has been a pleasure to work
alongside our AM team, and, in particular, to help our graduates and
apprentices develop their ideas and creative thinking.
Inspiring the next generation of engineers
I am also pleased to see the progress our Early Careers team is making in
their work to encourage and support the next generation of engineers and
scientists. Our company and the sector as a whole rely on a strong pipeline of
talent, and we need to help ensure that pipeline is filled from as wide a
pool as possible, since diversity of thought is essential for creativity and
innovation. So this year, our team has focused particularly on working with
all-girls' and special education needs and disability (SEND) schools, as well
as schools located in socio-economically disadvantaged areas. Meanwhile, our
new STEM Centre at our headquarters in Gloucestershire and established STEM
Centre at our site in Miskin, Wales, give us more opportunities to engage with
young people from underrepresented groups. The feedback we receive from
schools demonstrates why this work matters, with one teacher telling us that
her students are too often underestimated and that their visit to the Centre
had helped them "to look to their future and what they can achieve."
A responsible business that acts with integrity
We are committed to acting with integrity and doing the right thing - for our
people, customers, suppliers, shareholders and society. In November 2023, we
reinforced that commitment with the global launch of our new Code of Conduct.
Called 'Doing Business Responsibly', the Code is a guide to help our employees
and business partners to do business in line with our values.
Acting with integrity includes complying with all the relevant laws and
regulations wherever we work. With that in mind, the Board welcomes the
publication of the 2024 UK Corporate Governance Code and is now working on
plans to apply this new Code from FY2026, except for provision 29, which will
apply to us from 1 July 2026.
I am also delighted that we have a new environmental, social and governance
(ESG) strategy, and an ESG Steering Committee to oversee progress.
The strategy has three overarching goals: to work with our customers and
suppliers towards Net Zero; develop a diverse and inclusive team that
is inspired to work for a responsible business; and ensure we have the
appropriate governance arrangements in place to provide accountability,
transparency, compliance and integrity as a responsible business. We've
structured our sustainability-related information in this year's
Annual Report around our new strategy in our ESG review. We also provide
further details on our goals and progress.
Involving our stakeholders to create a stronger company
One of the most important aspects of our ESG strategy is its focus on our
people. Our employees are our most valuable asset and it is essential that
they feel able to share their views and are confident that we will respond.
As a Board, we regularly hear from employees, including through Catherine
Glickman, as our employee engagement ambassador. We also use site visits to
hear what's on people's minds and our engagement with some of our senior
leaders provides further opportunities to understand what employees think.
We are a growing, global organisation, and I was pleased to see the response
to our first global employee engagement survey in April 2024. Our overall
engagement score of 74% places us above the global average recorded by
our survey provider. We intend to use this as our benchmark in future
surveys and will respond to feedback over the coming year to ensure we
continue to attract and retain the most talented individuals.
That includes attracting diverse and experienced talent to support our Board.
So I am pleased to also welcome our newest independent Non-executive Director,
Professor Dame Karen Holford, who brings key engineering and research and
development skills to the Board.
Succession is an important topic for us, and following a review of our Board
composition, we've now begun work to identify and recruit a new independent
Non-executive Director, in addition to the independent Chair that I mentioned
earlier.
One of the best ways we can retain people is with a supportive, inclusive
working environment, which is why we are focusing particularly on inclusion
in our ESG strategy. This year, we have continued to develop our equality,
diversity and inclusion programme including the launch of new UK employee-led
resource groups to support our neurodiverse and disabled colleagues and new
workshops for our growing network of 'allies'. We've also marked key events
to build a sense of global community, such as Deaf Awareness Week and various
religious festivals.
Effective leadership is critical to employee engagement and our long-term
success. This year, our Senior Leadership Team worked with a specialist
consultancy to strengthen their leadership and teamwork skills. They also set
ambitious internal targets to make changes in areas like product innovation
and employee productivity across the whole organisation, and are developing
a new framework to drive strategy delivery across the Group.
The views of all our stakeholder groups inform our decision-making. This year,
following feedback from shareholders, we made important changes in our
Investor Relations Policy to allow for more engagement about our strategy for
growth with key shareholders and potential investors. We also appointed Peel
Hunt as our new joint corporate broker to work alongside our existing broker,
UBS, to help us strengthen our links with the wider investment community. We
aim to provide attractive returns for our shareholders and pursue a
progressive dividend policy.
A strategy for the long term
Our business has always been focused on sustainable, long-term value creation.
The Board is confident that our strategy of organically growing in existing
markets, increasing the value of our technology and extending into adjacent
markets will continue to maximise the potential of our sensors
and software-enabled systems, and deliver further growth. It is an
ambitious strategy for a pioneering company. Our success will depend on all
our stakeholders, and our continuing determination to innovate in everything
we do.
Sir David Grant
Interim Non-executive Chairman
COMMENTARY BY THE CHIEF EXECUTIVE
This has been a year of solid strategic progress, despite challenging
conditions in the semiconductor manufacturing equipment markets and currency
headwinds. We maintained our investments for long-term success and achieved
record revenue of £691.3m, boosted by a strong fourth quarter, with 0.4%
annual growth at actual exchange rates and underlying annual growth of 3.7% at
constant currency*. Adjusted* profit before tax of £122.6m was 13% lower than
last year, while statutory profit before tax of £122.6m was 16% lower, with
both measures primarily affected by currency movements and increased employee
pay.
Achieving these results in a challenging environment is testament to the skill
and efforts of our teams and I am fortunate to meet many of them during my
travels around the Group. I am always inspired by their passion, energy and
commitment to our purpose, and would like to thank them for their
contributions to our progress.
We again delivered good growth in systems sales - one of our strategic
priorities - including our Additive Manufacturing (AM) products and record
sales for our Spectroscopy product line. While we saw a gradual recovery in
our optical encoder sales as the year progressed, weaker demand from
the semiconductor sector affected sales of our laser encoder and calibration
products.
At the end of the year, we announced some changes to the Board, including the
decision by Sir David McMurtry to step down from his role as Executive
Chairman. Since founding Renishaw with John Deer over 50 years ago, he has
been instrumental in driving the success of our business. Sir David has been a
constant inspiration throughout my own career, which is why I am delighted
that he is remaining on the Board as a Non-executive Director and that he will
continue to share his expertise in product innovation with us. I would like to
thank Sir David Grant for taking on the role of Interim Non-executive
Chairman while we appoint a permanent successor.
Group performance
Total revenue for the year was £691.3m, compared with £688.6m in FY2023.
Revenue at constant exchange rates, excluding the impact of forward contracts,
was £25.4m higher than the previous year. At actual and constant currency
rates we had growth in our APAC region, with growth in Manufacturing
technologies revenue, boosted by sales from the Industrial Metrology (IM)
product group. We continue to see pricing pressures in China from emerging
local competitors. The Americas also achieved growth at both actual and
constant currency rates. This followed a very strong second half of the year,
with constant currency growth from Manufacturing technologies, most notably
from the AM product group and shop-floor gauging and co-ordinate measuring
machine (CMM) systems product line. Our EMEA region had lower revenue
at both actual and constant currency rates, with lower Manufacturing
technologies revenue than FY2023. This was due to reduced sales from the IM,
AM and Position Measurement (PM) product groups, which offset strong growth in
the Analytical instruments and medical devices segment.
Revenue for our Manufacturing technologies segment was £648.1m, with no
growth over the previous year, but 3.4% higher at constant currency rates. All
our IM product lines grew, with record revenue for our shop-floor gauging and
CMM systems product line boosted by demand from the consumer electronics
sector. Our AM systems also had good growth, with a strong second half for
sales from key customers in the medical sector. PM revenue was lower compared
to FY2023, with weaker demand for laser encoders, which are supplied into
front-end semiconductor applications. Revenue was also lower in calibration
products, which saw lower demand from manufacturers of machine tools and
semiconductor equipment. However, during the year we saw four quarters of
sequential growth from PM, with signs of recovery in demand for our position
encoders from semiconductor equipment builders.
Meanwhile, our Analytical instruments and medical devices segment achieved
record revenue of £43.2m, delivering 7.2% growth at both actual and constant
currency. We have once again achieved record Spectroscopy revenue, with a
general market improvement within EMEA for sales of Raman spectrometers, where
we have expanded our sales team, and growing sales for our Virsa Raman
Analyser. This product, which is used for in-situ analysis, is being adopted
for a wide range of applications, from chemical processing to art restoration.
We are seeing increasing sales of our inLux interface, used inside scanning
electron microscopes (SEMs). Sales of our Neurological products also grew,
including sales of our neuromate surgical robot in EMEA, driven by its use in
stereoelectroencephalography (SEEG) procedures to diagnose patients with
epilepsy.
This year's Adjusted profit before tax was £122.6m, compared with £141.0m
last year. Adjusted* earnings per share was 133.2p, compared with 155.1p last
year. Adjusted measures are the ones we use as a Board to measure our
underlying trading performance.
This reduction in profit primarily relates to the impact of currency and
increased employee pay, including £2.1m of severance costs. Statutory profit
before tax was £122.6m, compared with £145.1m last year, leading to
Statutory earnings per share of 133.2p, compared with 159.7p last year. For
more details see the commentary by the Group Finance Director.
A strategy underpinned by our purpose and ambition
Our purpose of Transforming Tomorrow Together underpins our business. By
working closely with our customers to help them to achieve their goals,
we are well positioned to meet our growth ambitions, pursuing attractive
opportunities arising from global trends such as industrial automation and
decarbonisation.
For example, our products, such as Equator gauges, position encoders and AM
systems, support our customers to create the factories and products of
the future, helping them to automate repetitive tasks and use energy and
materials more efficiently.
We are a manufacturing technology powerhouse, developing and expanding into
new, close-adjacent markets. We are solving customer problems with innovative
products, delivered through world-class in-house manufacturing and global
service. Our portfolio includes market-leading sensors, which we are
augmenting with a growing range of high-value systems products, enabled by
innovative software.
In financial terms, our goal is to continue our track record of long-term
organic revenue growth. We operate in cyclical markets and are targeting
high single-digit average growth through these cycles, combined with
Adjusted* operating profit margins in excess of 20%. Our track record of
through-cycle growth over several decades gives us the confidence that we have
both the opportunity and the capability to continue to deliver at this rate in
the future.
Our long-term value creation model, detailed as part of the strategy,
explains our three areas of strategic focus, and the technical and commercial
activities that will drive our growth. These are:
1. growing our existing markets;
2. increasing the value to Renishaw of the technology that we sell; and
3. extending into new, high-growth markets.
As I explain in the next sections, we have made good progress against each of
these during the year.
Growing our existing markets
Here, we are aiming to increase revenue by driving up probe fitment levels,
offering higher value sensors, and by winning more customers that build
machinery. This requires strong, ongoing investment in research and
development to keep creating the products that will differentiate us from our
competitors and help us to make the most of new opportunities as they arise.
This year, that continued investment led to the launch of the RMP24-micro, the
world's smallest wireless machine tool probe. This allows us to target
compact machine tools, used to make high-precision miniature components for
the medical, watchmaking and micro-mechanics sectors, where probe fitment
wasn't previously possible. This compact probe is the first of a new
generation of smart factory sensors to use our RMI-QE radio transmission
technology. Introduced in FY2022, this technology allows the use of much
smaller batteries due to its lower power consumption.
We continued to grow revenue from our FORTiS enclosed position encoders, where
we see significant opportunities. We also won new business for our position
encoders from machine builders in a wide range of sectors.
Increasing the value of the technology we sell
Our second strategic focus is designed to help us increase revenue by
providing our end-user customers with complete solutions to capture a greater
proportion of their investment. In IM, for example, we are focused
on growing our sales of systems like our AGILITY CMMs and Equator gauges and
expanding our metrology software offering. We are also developing our Renishaw
Central smart factory software platform, which helps users identify trends in
their measurement data and provides intelligent feedback to machining
processes.
As I mentioned earlier, we had a good year for systems sales, with
above-market rates of growth in some areas. Given our relatively low market
share in our newer markets, we see significant opportunities to continue this
growth. The strong growth we're seeing in our Equator gauge sales is helped
by the continuing trend for greater automation of process control on
shop-floor machinery.
During the year, we began rolling out our new generation of metrology
software, MODUS IM Gauge & Control, which aims to widen the process
control market for our Equator gauging system through simpler programming. A
number of customers have been trialling the software, and their feedback has
reinforced our confidence in the significant benefits that it delivers and
helped us further refine its capabilities. One US-based subcontract
manufacturer has been impressed with the ease with which it could quickly
develop its own programmes for gauging its precision bearings.
We've also seen some early market interest in Renishaw Central, which we
launched in FY2023. This is a conservative market that takes time to adopt
new ways of working, so early customer feedback is helping us learn the right
way to position and market this product.
It was a good year for AM systems sales growth, with a strong second half,
thanks to repeat business with key customers within the medical sector. We
also took an important step forward with the launch of our new TEMPUS
technology for our RenAM 500 series products, which allows a machine's lasers
to continue to operate, even while a new layer of metal powder is being laid
down. As a result, the technology can reduce the time it takes to build a
component by up to 50%, helping our customers to improve productivity and
reduce cost per part. Historically that cost has been a significant barrier
to AM adoption, so we see substantial opportunities for TEMPUS technology to
broaden AM's application, particularly since it is both a standard fitment on
the new RenAM 500 Ultra machine and available as a paid upgrade.
Extending into new, high-growth markets
Our third strategic focus is to diversify into close-adjacent markets where we
have strong market understanding and brand awareness. Our new industrial
automation products, which we launched at the end of FY2023, are a good
example. We have seen a positive response from customers during the first
year, and we are confident that we have an effective range of products to
enhance robot precision. That confidence was boosted when FANUC, one of the
world's largest manufacturers of industrial robots, chose to include our
products in a demonstration at Automatica, the world's leading trade show for
smart automation and robotics. Our current focus is to expand our regional
sales teams, continue to build relationships and develop routes to market.
Sustainability
We will only achieve our ambition, and deliver on our strategy and purpose, by
supporting our stakeholders, all of whom have a role to play in our
continuing success.
Increasingly, that engagement includes discussions on the part Renishaw can
play in supporting the transition to a more sustainable future. So, I was
very pleased to become Chair of our new ESG Steering Committee. This
formalises our management of sustainability-related issues, including our
climate-related financial disclosures. One of the Committee's first tasks was
to oversee the development of a new, comprehensive ESG strategy, with support
from specialist advisers, which we explain in more detail in our new ESG
review.
We have continued to make strong progress towards our target of Net Zero for
Scope 1 and 2 emissions by 2028. And we see significant commercial
opportunities as decarbonisation is one of the structural drivers that
underpin our markets, with more of our customers pursuing their own
Net Zero goals.
Outlook for the next 12 months
The start of FY2025 has seen continuing improvement in demand for our encoder
products from the semiconductor manufacturing sector, primarily in the APAC
region. This, together with a range of growth opportunities that we are
pursuing, especially for metrology and additive manufacturing systems, means
that we are expecting to achieve solid revenue growth in the year ahead.
We continue to focus on improving productivity in all areas. We expect these
efforts, together with higher sales volumes, to drive our operating profit
margin towards our target, although inflationary pressures, especially people
costs, will affect the rate of improvement in the near term.
The progress we've made against our three key strategic focus areas this year
gives me confidence in our organic growth strategy, and we continue to invest
for long-term success.
Will Lee
Chief Executive
*Note 29, Alternative performance measures, defines how each of these measures
is calculated.
COMMENTARY BY THE GROUP FINANCE DIRECTOR
Following a strong final quarter, we have achieved record revenue for the year
of £691.3m (FY2023: £688.6m). We have continued to invest in our people,
increasing employee pay, which together with adverse currency effects, is the
main reason for the reduction in Adjusted* profit before tax to £122.6m
(FY2023: £141.0m).
We have maintained our strong financial position, with cash and cash
equivalents and bank deposit balances at the year end of £217.8m (30 June
2023: £206.4m), and net current assets of £485.7m (30 June
2023: £470.8m). Our inventory holding has been a focus area in working
capital this year, which we reduced by £23.8m over the year, as explained
in more detail below.
We've continued to invest in capital expenditure that supports our long-term
growth plans, with additions to property, plant and equipment this year of
£65.2m (FY2023: £73.8m), and continued to apply our treasury strategy to
mitigate near-term market risk.
Revenue
As Will has explained in the Chief Executive's review, we achieved 0.4% growth
in our revenue to £691.3m (FY2023: £688.6m). Despite challenging market
conditions at the beginning of the year, we have seen recovering demand from
our key semiconductor market towards the end of the year, and good growth in
our systems sales.
At constant exchange rates*, revenue would have been 3.7% higher than the
previous year. This is mostly as a result of an appreciation of GBP relative
to USD, from an average of 1.21 in FY2023 to 1.26 in FY2024. The effect of
currency has been partly mitigated by our treasury strategy. Without our
forward cash flow hedging contracts, revenue would have reduced by 0.7%
year-on-year.
The below table shows revenue by geographic region.
Region FY2024 FY2023 Actual FX Constant FX
revenue at
revenue at variance variance
actual
exchange actual % %
rates
£m exchange
rates
£m
APAC 318.8 310.6 +3 +8
EMEA 208.0 216.5 -4 -1
Americas 164.4 161.5 +2 +2
Total Group revenue 691.3 688.6 0 +4
Operating costs
As noted last year, our labour costs are our largest cost and this year
we've focused on striking the right balance of investing in our people to
retain, reward and motivate while seeking sustainable profit growth. Salary
increases, in addition to an increase in average headcount of 77, are the
main drivers for total labour costs (excluding bonuses) increasing by 4%
to £279.5m from £268.2m last year. This also includes severance costs of
£2.1m, which mostly related to a mutually agreed severance scheme in the UK,
and a £4.6m currency translation benefit.
This year's gross margin (excluding engineering costs), as a percentage of
revenue, was 61%, compared with 64% last year. This change is mostly due to
the adverse impact of currency on revenue, combined with higher labour pay
rates. We have made targeted price rises, although this has been offset by
pricing pressures, particularly in the APAC region.
Supporting our strategy of delivering growth by developing innovative and
patented products, we invested £71.1m in research and development
expenditure, compared with £72.5m last year (see Note 4 to the Financial
statements). We also incurred £35.7m (FY2023: £28.1m) of other engineering
expenditure, to support existing products and technologies. Net engineering
spend also includes a £2.7m reduction in capitalised development
expenditure, net of amortisation and impairments, as explained in Note 12.
This is partly offset by a £1.1m year-on-year increase in the R&D tax
credit, totalling £7.7m for FY2024, which is primarily as a result of the
rate applicable to qualifying spend increasing from 13% to 20% in April 2023.
In distribution and administrative expenses, we have also spent an additional
£4.7m in consultancy and software this year, notably on our new global ERP
system and an upgraded e-commerce platform, as part of our initiative to
improve productivity across the business. We deployed the first instance of
the new ERP system during the year and have developed in-house expertise to
reduce third-party costs as we deploy this globally over the next few years.
Profit and tax
As a result of the increased costs and impact of currency in a year of
marginal revenue growth, Adjusted* operating profit was 16.7% lower this year
at £108.7m (FY2023: £130.4m). At constant exchange rates*, Adjusted
operating profit would have been 8.8% lower than the previous year.
Adjusted* operating profit in our Manufacturing technologies segment was
£103.2m, compared with £125.5m last year. In our Analytical instruments and
medical devices segment, Adjusted* operating profit was £5.5m, compared with
£4.9m last year.
Financial income for the year was £12.3m, compared with £9.7m last year, and
includes a £2.8m increase in interest on bank deposits mainly due to higher
interest rates.
Adjusted profit before tax was £122.6m, compared with £141.0m in FY2023.
Statutory profit before tax was also £122.6m, compared with £145.1m in the
previous year.
Certain infrequent events can sometimes affect our financial statements,
prepared according to applicable International Financial Reporting Standards.
We exclude these events from adjusted profit and earnings measures to give the
Board and other stakeholders another useful metric to understand and compare
our underlying performance. This year, there were no items excluded from
Adjusted profit before tax, while additional items excluded in the previous
year are detailed in Note 29.
The FY2024 effective tax rate has increased to 21.0% (FY2023: 20.0%) mostly as
a result of an increase in the effective UK tax rate from 20.5% to 25.0%. Note
7 provides further analysis of the effective tax rate.
Consolidated balance sheet
We have invested £65.2m (FY2023: £73.8m) in capital expenditure, which
mostly relates to new production plant and equipment, and the expansion of our
Miskin production facility in Wales, UK. The Miskin project will ultimately
increase our global manufacturing floorspace by 50%, with the first of the two
new halls becoming operational during the year. I would like to thank the
project team who were responsible for delivering the first phase of this
project on time and within budget. We have also purchased a distribution
facility in the United Arab Emirates and completed the construction of
a distribution facility in Brazil.
As I mentioned earlier, we've focused this year on reducing our inventory
holding. Whilst we continue to recognise the importance to our current and
potential customers of holding sufficient finished products to meet their
needs, we have reduced both finished good and component inventories following
the easing of supply chain challenges experienced in recent years. This has
meant we've reduced inventory from £185.8m at the start of the year to
£161.9m.
Trade receivables increased from £123.4m to £134.1m due to increased trading
in the fourth quarter of FY2024 relative to the previous year. With good
credit management practices across the Group, debtor days remained constant
year-on-year at 63 days. We continue to experience low levels of defaults,
and hold a provision for expected credit losses at 0.5% of trade receivables
(FY2023: 0.4%).
Total equity at the end of the year was £902.8m, compared with £896.7m at 30
June 2023. This is primarily a result of profit for the year of £96.9m, less
dividends paid of £55.4m and the remeasurement of defined benefit (DB)
pension scheme liabilities of £36.3m.
Cash flow and liquidity
We continue to have a strong liquidity position, with cash and cash
equivalents and bank deposit balances at 30 June 2024 of £217.8m (30 June
2023: £206.4m). This is a result of our cash flows from operating activities
of £124.1m, partly offset by our previously noted capital investments and
dividends paid of £55.4m.
We have introduced a new key performance indicator (KPI) this year relating
to cash flow. Adjusted cash flow conversion* from operating activities
assesses our efficiency at converting operating profit into cash. We achieved
our target of 70% this year, which was a significant improvement from the
previous year (FY2023: 26%).
Pensions
At the end of the year, our defined benefit pension schemes showed a net
surplus of £10.8m, compared with £57.4m at 30 June 2023.
During the year, the Trustee of the UK defined benefit pension scheme
('UK scheme') undertook a buy-in and insured around 99% of the Scheme's
liabilities by purchasing an insurance policy. This contract was effective
from 19 October 2023 and the value of the contract is recognised as a UK
scheme asset. For a buy-in insurance contract such as this, where the income
received from the policy matches exactly the benefit payments due to
the members it is covering, the value attributable to the contract recognised
as an asset is the equivalent IAS 19 value of the corresponding liabilities.
The IAS 19 liabilities in respect of the buy-in policy were lower than the
transaction price of the insurance contract. Consequently, the value
attributable to the insurance contract reduced from the actual price paid,
and the resulting remeasurement loss of £31.9m was recognised in the
remeasurement of defined benefit pension scheme liabilities element in the
Consolidated Statement of Comprehensive Income and Expense. See Note 23 for
further detail.
Treasury strategy
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 both 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 over
a two-year forward period, where our forward rate cap policy allows, 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
We continue to progress with our transition to Net Zero. Our five-year
financial plan includes estimates of the capital expenditure needed to deliver
this plan, and at this stage we have not identified a material effect of
other climate-related matters on our financial statements.
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, as well as committing to the investment needed to transition to
Net Zero. We demonstrated this during the year through our capital expenditure
and investments in R&D.
We introduced Return on invested capital* as a new KPI this year. This
assesses our efficiency in allocating capital to profitable investments. We
achieved 12.3% this year, which was lower than last year (FY2023: 16.1%), due
to a combination of lower pre-tax profits, higher tax rates and recent
increases in our non-current asset base. We expect to drive this metric back
towards our target of 15% with higher profits and lower levels of future
capital expenditure.
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 133.2p, compared with 155.1p last year, while
Statutory earnings per share is 133.2p, compared with 159.7p last year.
We paid an interim dividend of 16.8 pence per share (FY2023: 16.8 pence) on 9
April 2024 and are pleased to propose a final dividend of 59.4 pence per share
in respect of the year (FY2023: 59.4 pence). This would bring the overall
dividend per share to 76.2 pence, equal to the total dividend for FY2023.
Despite lower profit this year, we have considered the Company's future growth
plans and strong cash reserves, and so have proposed to maintain the
dividend per share this year.
Looking forward
We remain committed to our organic growth strategy and will continue to invest
in our people, infrastructure and product innovation.
In recent years we have made significant investments in our manufacturing
capacity and our global ERP system to position the business for long-term
growth and improved productivity. We expect these investments to drive a
higher return on invested capital in the years ahead.
As we reduce capital expenditure from its recent exceptional levels and
continue to focus on controlling working capital, we aim to further improve
cash flow conversion.
With the infrastructure in place to deliver growth, we are targeting an
improved Adjusted operating profit margin this year.
Allen Roberts
Group Finance Director
*Note 29, 'Alternative performance measures', defines how each of these
measures is calculated.
Principal risks and uncertainties
Our performance is subject to a number of risks - the principal risks, factors
impacting on them and mitigations are listed 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 - G: Growth in existing markets
lower returns.
- I: Increasing technology value
- Medium: A balanced approach which carefully considers the risks and rewards.
- E: Extending into new markets
- High: Greater risk tolerance, which may involve maximum risk for maximum
return.
Economic and political uncertainty
Increased risk Risk description
As an international business, we may be affected by global political, economic
or regulatory developments. This could include a global recession, changes in
Appetite USA-China trade relations, or the ongoing war in Ukraine and conflict in the
Middle East. This risk can also drive industry fluctuations.
HIGH
Link to strategy
All
Risk owner
Chief Executive
Potential impact What we are doing to manage this risk
· Loss of financial and physical assets in a region. · Monitoring external economic and commercial environments and
markets in which we operate, and identifying relevant headwinds.
· Supply issues leading to failures to meet contractual obligations.
· Maintaining sufficient headroom in our cash balances.
· Reduced revenue, profit and cash generation.
· Maintaining appropriate levels of buffer inventory.
· Increased risk to credit, liquidity and currency.
· Resilient business model and clear strategy, both of which are
subject to regular scrutiny.
· Our internationally diverse business helps to spread risk.
Innovation strategy
Stable risk Risk description
Our success depends on innovation to create new, cutting-edge, sustainable and
high-quality products. Failure to make these products or protect the
Appetite intellectual property that underpins them could affect our ability to
differentiate ourselves from our competitors. There is also a higher risk
HIGH associated with venturing outside our traditional field of expertise, where
the science and engineering are less proven.
Link to strategy
All
Risk owners
Directors of Industrial Metrology, Position Measurement and Additive
Manufacturing
Potential impact What we are doing to manage this risk
· Failure to lead the market with innovative products in our core and · Continuing to invest in new product development and in the
adjacent sectors. innovation talent we need.
· Loss of market share. · Regular reviews of flagship projects and key technologies with a
focus on strategic fit and improving time to market.
· Reduced revenue, profit and cash generation.
· Designing sustainability into our products. To help, we're aiming
· Failure to recover investment in R&D. to implement a methodology to quantify the sustainability benefits from
all aspects of our products.
· Continuing to drive incremental development and more open customer
collaboration in the early stages of our R&D projects to ensure our
innovations are successful in the market.
Industry fluctuations
Increased risk Risk description
We're exposed to the cyclical nature of demand in some of our key markets,
including aerospace, automotive, semiconductor and consumer electronics, which
Appetite can affect our profitability. That impact could be more severe if downcycles
in these key industries coincided. Economic and political uncertainty can also
HIGH affect these markets and our business.
Link to strategy
G, I
Risk owner
Chief Executive
Potential impact What we are doing to manage this risk
· Reduced revenue, profit and cash generation. · Closely monitoring market developments.
· Increased pricing competition. · 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 adapt our manufacturing resource levels.
Capital products growth (formerly Route to market/customer satisfaction model)
Increased risk Risk description
Our growth opportunities could be restricted if we fail to implement
appropriate and efficient sales and support processes relating to systems
Appetite integration and the sale of capital goods.
MEDIUM
Link to strategy
I
Risk owner
Chief Executive
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 repeat business and revenue.
· High engineering and distribution costs. · Closely monitoring customer feedback so that we can keep adapting
our approach according to their needs.
· Adverse impact on customer satisfaction levels, revenue
and profits. · Collaborating with complementary third parties to make our CMM and
gauging systems compatible with a range of metrology software.
· Improving the usability of our own metrology software to streamline
application development times.
Competitor activity
Increased risk Risk description
Failure to adapt to market and/or technological changes, including those
associated with growing demand for products with sustainability benefits,
Appetite could mean losing customers to competitors who have adapted their approach.
LOW
Link to strategy
G, I
Risk owner
Chief Executive
Potential impact What we are doing to manage this risk
· Reduced revenue, profit and cash generation. · Ensuring we are diversified across a range of products, industries
and geographies.
· Loss of market share, particularly as more customers set
sustainability goals. · Closely monitoring market developments, including the emergence of
new competitors.
· Price erosion.
· Strengthening our local sales and engineering support in China,
· Loss of reputation as a leader in innovation. where we are seeing emerging competitors.
· Continuing to build our product portfolio through our ongoing
commitment to R&D (see Note 4 to the Financial statements for details of
R&D expenditure).
· Continuing to monitor and understand our customers' sustainability
and Net Zero goals to deliver products that meet these needs.
Cyber
Stable risk Risk description
The number of sophisticated external phishing attacks against our business is
rising and we also face the risk of internal cyber and data security threats.
Appetite A successful external or internal attack could severely affect our ability
to operate, or lead to the loss of personal and commercial data.
LOW
Link to strategy
All
Risk owner
Group Operations Director
Potential impact What we are doing to manage this risk
· Loss of intellectual property and/or commercially sensitive and/or · Ensuring we build substantial resilience and back-up into our
personal data. systems. We also continuously update our systems to mitigate current threats
and align with good industry practice. This includes regular back-up
· Reduced customer service due to disruption or a lack of access to schedules and, where possible, duplication of hardware and
our systems. diverse/dual connections.
· Financial loss and reputational damage. · Regularly discussing cyber, security and privacy risks at Board
and/or Audit Committee meetings, including the strength of our control
· Adverse impact on business decision-making due to lack of clear environment.
and accurate data, or disruption caused by the lack of service.
· Deploying physical and logical control measures to protect our
information and systems. This includes alerting, monitoring, and automated
containment and remediation. We regularly rehearse real-life restores of data
and services.
· Conducting regular security awareness training, including phishing
simulation exercises. We also conduct external penetration testing
as appropriate, and continue to evaluate additional security solutions.
People
Decreased risk Risk description
Our people are fundamental to the success of our business. Failure to attract,
retain and develop key talent at all levels of the organisation, as well as
Appetite ensure we have appropriate succession plans in place, could adversely affect
our ability to deliver our strategic objectives.
MEDIUM
Link to strategy
All
Risk owner
Group Human Resources Director
Potential impact What we are doing to manage this risk
· Delays in product delivery and ability to deliver · Continuing to focus on attracting, rewarding and retaining
strategic objectives due to loss of expertise and specialist talent. our people globally. This includes building a more inclusive working
environment as part of our new ESG strategy.
· Failure to develop future leaders and insufficient talent
progression to support Renishaw's future. · Using the results of our first global employee engagement survey in
FY2024 to inform the next stages of our people strategy.
· Loss of market share, reduced revenue, poor customer service and
reduced profit. · Continuing to invest in our education outreach and early careers
programmes, talent development and succession planning.
· Promoting an inclusive culture by growing our network of
employee-led resource groups and allyship training to help employees connect
with and support each other.
· Identifying 'critical' roles that have a high impact on our
business resilience, and that require skills and knowledge that are either
scarce or hard to develop, to help us build continuity plans.
· We now have succession plans in place for management grades and key
critical roles globally and we intend to use a nine-box approach to talent
management.
· Promoting our new ESG strategy to help attract and retain
a diverse pool of talent within the business.
Non-compliance with laws and regulations
Increased risk Risk description
As a global business working in some highly regulated sectors, we are subject
to a wide variety of laws and regulations, including anti-bribery, anti-money
Appetite laundering, human rights, sanctions and export control, competition law,
privacy, health and safety, sustainability and climate change, and product
LOW safety and medical devices. Failure to comply could result in criminal or
civil liabilities and/or individual or corporate fines, and could affect our
reputation.
Link to strategy
All
Risk owners
Group General Counsel & Company Secretary and Managing Director - Renishaw
Medical
Potential impact What we are doing to manage this risk
· Damage to reputation and loss of future business. · Maintaining our Speak Up whistleblowing hotline, 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.
· Management time and attention diverted to deal with reports of · Improving global compliance programmes for all high-risk areas,
non-compliance. including policies, key controls (including 'Know Your Customer' procedures)
and effective communication, including refreshing our mandatory anti-bribery
· Inability to attract and retain talent. and anti-corruption training modules.
· Maintaining our global compliance brand 'Responsible Renishaw',
raising awareness and making it easier for our people to find compliance
information.
· Launching our new Code of Conduct.
· Maintaining our global privacy programme.
· Establishing our ESG Steering Committee, which oversees our
Sustainability team in their responsibility for assessing and complying with
ESG regulations.
IT transformation failure
Stable risk Risk description
We need a modern IT system to support a more integrated global business.
However, technical issues associated with upgrading our Sage CRM and Sage ERP
Appetite systems to D365, or poor integration with existing systems, could negatively
affect our ability to operate. This risk could also result in problems if
LOW there are significant delays to the programme or an increase in the cost of
implementing D365.
Link to strategy
All
Risk owner
Group Operations Director
Potential impact What we are doing to manage this risk
· Major systems disruption causing operational delays. · Maintaining good engagement between ourselves, Microsoft and our
system integrator.
· Delays in processing or issuing invoices and customer orders,
or in procuring goods and services. · Working to a clear, risk-elimination-based roadmap with measurable
milestones.
· Increased costs, including costs to fix technical issues and
restore or upgrade other affected systems. · Strengthening the deployment team to accelerate roll out, with
commitment from the Board to invest in targeted recruitment of technical,
functional and project management roles.
Upskilling the team, transferring knowledge from our system integrator,
and taking on more configuration and customisation tasks ourselves.
Risks reduced through learning valuable lessons from our first deployments
regarding data migration, role permissions, user training and system
integration. These are informing our future deployment plans.
Supply chain dependencies
Decreased risk Risk description
We rely on a range of components to make our products, some of them critical
to our operations and some that we can only source from specific parts of the
Appetite world. A shortage of critical components, or a change in the geopolitical
landscape or availability of single-sourced components, could make us
LOW vulnerable to supply interruptions.
Link to strategy
All
Risk owner
Group Manufacturing Director
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 account for supply
lead times and time to redesign in the event of loss of supply. We seek
· Increased cost of alternative sourcing or redesign. cost-effective alternative sources of supply (including in-house
manufacturing), to reduce dependency on single-source suppliers, with
· Loss of market share. continued focus on key components.
· Ongoing collaboration with product groups to review risks and,
where appropriate, review and update specifications to facilitate alternative
sourcing or redesign.
· Assessing our supply chain for potential supply interruptions due
to climate change risks or geopolitical factors.
Exchange rate fluctuations
Stable risk 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
Appetite rates that could have a significant impact on our results. Movements of
Sterling against our major trading currencies cause cash flow, currency
Medium translation, and intercompany balance translation risks.
Link to strategy
G, I
Risk owner
Group Finance Director
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.
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2024
2024 2023
from continuing operations notes £'000 £'000
Revenue 2 691,301 688,573
Cost of sales 4 (367,658) (337,908)
Gross profit 323,643 350,665
Distribution costs (139,901) (137,744)
Administrative expenses (75,075) (74,894)
US defined benefit pension scheme past service cost 23 - (2,139)
Losses from the fair value of financial instruments 25 - (1,399)
Operating profit 108,667 134,489
Financial income 5 12,336 9,669
Financial expenses 5 (2,289) (1,861)
Share of profits of joint ventures 13 3,880 2,768
Profit before tax 122,594 145,065
Income tax expense 7 (25,705) (28,963)
Profit for the year 96,889 116,102
Profit attributable to:
Equity shareholders of the parent company 96,889 116,102
Non-controlling interest 26 - -
Profit for the year 96,889 116,102
pence pence
Dividend per share arising in respect of the year 26 76.2 76.2
Dividend per share paid in the year 26 76.2 73.4
Earnings per share (basic and diluted) 8 133.2 159.7
Adjusted profit before tax for the year was £122,594,000 (2023:
£140,983,000). See note 29 Alternative performance measures for more details.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
for the year ended 30 June 2024
2024 2023
notes £'000 £'000
Profit for the year 96,889 116,102
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement:
Remeasurement of defined benefit pension scheme assets/liabilities 23 (48,688) 13,612
Deferred tax on remeasurement of defined benefit pension scheme 12,424 (3,071)
assets/liabilities
Total for items that will not be reclassified (36,264) 10,541
Items that may be reclassified to the Consolidated income statement:
Exchange differences in translation of overseas operations 26 (4,038) (8,000)
Exchange differences in translation of overseas joint venture 26 (311) -
Current tax on translation of net investments in foreign operations 26 57 313
Effective portion of changes in fair value of cash flow hedges, net of 26 5,812 23,167
recycling
Deferred tax on effective portion of changes in fair value of cash flow hedges 7,26 (1,453) (5,692)
Total for items that may be reclassified 67 9,788
Total other comprehensive income and expense, net of tax (36,197) 20,329
Total comprehensive income and expense for the year 60,692 136,431
Attributable to:
Equity shareholders of the parent company 60,692 136,431
Non-controlling interest 26 - -
Total comprehensive income and expense for the year 60,692 136,431
CONSOLIDATED BALANCE SHEET
at 30 June 2024
2024 2023*
notes £'000 £'000
Assets
Property, plant and equipment 9 325,040 286,085
Right-of-use assets 10 14,746 8,402
Investment properties 11 10,285 10,323
Intangible assets 12 47,343 46,468
Investments in joint ventures 13 25,485 22,414
Finance lease receivables 14 11,944 9,935
Employee benefits 23 10,845 57,416
Deferred tax assets 7 17,690 19,944
Derivatives 25 1,387 9,443
Total non-current assets 464,765 470,430
Current assets
Inventories 16 161,928 185,757
Trade receivables 25 134,073 123,427
Finance lease receivables 14 3,861 3,764
Current tax 21,298 19,558
Other receivables 25 34,076 28,840
Derivatives 25 13,547 5,373
Bank deposits 15 95,542 125,000
Cash and cash equivalents 15,25 122,293 81,388
Total current assets 586,618 573,107
Current liabilities
Trade payables 25 21,330 21,551
Contract liabilities 18 10,880 9,971
Current tax 1,767 7,118
Provisions 17 2,997 2,758
Derivatives 25 448 5,089
Lease liabilities 21 3,960 3,009
Amount payable to joint venture 13 8,475 -
Borrowings 20 747 4,694
Other payables 19 50,344 48,130
Total current liabilities 100,948 102,320
Net current assets 485,670 470,787
Non-current liabilities
Lease liabilities 21 11,062 5,624
Borrowings 20 2,775 -
Employee benefits 23 - 45
Deferred tax liabilities 7 33,600 38,770
Derivatives 25 177 120
Total non-current liabilities 47,614 44,559
Total assets less total liabilities 902,821 896,658
Equity
Share capital 26 14,558 14,558
Share premium 42 42
Own shares held 26 (2,963) (2,963)
Currency translation reserve 26 2,480 6,772
Cash flow hedging reserve 26 10,911 6,552
Retained earnings 876,990 871,777
Other reserve 26 1,380 497
Equity attributable to the shareholders of the parent company 903,398 897,235
Non-controlling interest 26 (577) (577)
Total equity 902,821 896,658
*2023 Other receivables have been reclassified to include Contract assets. See
Note 25.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2024
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 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2022 14,558 42 (750) 14,459 (10,923) 798,541 (180) (577) 815,170
Profit for the year - - - - - 116,102 - - 116,102
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme 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 expense - - - (7,687) 17,475 10,541 - - 20,329
Total comprehensive income and expense - - - (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
Year ended 30 June 2024
Profit for the year - - - - - 96,889 - - 96,889
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme assets/liabilities - - - - - (36,264) - - (36,264)
Foreign exchange translation differences - - - (3,981) - - - - (3,981)
Foreign exchange related to joint venture - - - (311) - - - - (311)
Changes in fair value of cash flow hedges - - - - 4,359 - - - 4,359
Total other comprehensive income and expenses - - - (4,292) 4,359 (36,264) - - (36,197)
Total comprehensive income and expenses - - - (4,292) 4,359 60,625 - - 60,692
Share-based payments charge - - - - - - 883 - 883
Dividends paid - - - - - (55,412) - - (55,412)
Balance at 30 June 2024 14,558 42 (2,963) 2,480 10,911 876,990 1,380 (577) 902,821
More details of share capital and reserves are given in Note 26.
CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 30 June 2024
2024 2023
notes £'000 £'000
Cash flows from operating activities
Profit for the year 96,889 116,102
Adjustments for:
Depreciation of property, plant and equipment, right-of-use assets, and 9,10,11 24,195 24,105
investment properties
(Profit)/Loss on sale of property, plant and equipment 9 (1,199) 155
Amortisation and impairment of intangible assets 12 8,633 7,773
Loss on disposal of intangible assets - 550
Share of profits from joint ventures 13 (3,880) (2,768)
Defined benefit pension schemes past service and administrative costs 23 907 2,437
Financial income 5 (12,336) (9,669)
Financial expenses 5 2,289 1,861
Gains from the fair value of financial instruments 25 - (5,504)
Share-based payment expense 24 883 677
Tax expense 7 25,705 28,963
45,197 48,580
Decrease/(increase) in inventories 23,829 (23,275)
Increase in trade, finance lease and other receivables (23,719) (12,379)
Increase/(decrease) in trade and other payables 3,557 (15,013)
Increase/(decrease) in provisions 239 (1,486)
3,906 (52,153)
Defined benefit pension scheme contributions 23 (161) (2,341)
Income taxes paid (21,752) (25,891)
Cash flows from operating activities 124,079 84,297
Investing activities
Purchase of property, plant and equipment, and investment properties 9,11 (65,518) (74,024)
Sale of property, plant and equipment 4,475 7,948
Development costs capitalised 12 (9,281) (10,448)
Purchase of other intangibles 12 (246) (379)
Decrease/(increase)in bank deposits 15 29,458 (25,000)
Interest received 5 9,110 6,302
Dividend received from joint ventures 13 498 924
Cash flows from investing activities (31,504) (94,677)
Financing activities
Repayment of borrowings 20 (799) (914)
Amounts received as deposit from joint venture 13 8,475 -
Interest paid 5 (608) (656)
Repayment of principal of lease liabilities 22 (4,359) (4,206)
Own shares purchased 26 - (2,213)
Dividends paid 26 (55,412) (53,407)
Cash flows from financing activities (52,703) (61,396)
Net (decrease)/increase in cash and cash equivalents 39,872 (71,776)
Cash and cash equivalents at beginning of the year 81,388 153,162
Effect of exchange rate fluctuations on cash held 1,033 2
Cash and cash equivalents at end of the year 15 122,293 81,388
Cash and cash equivalents and bank deposits at the end of the year were
£217.8m (2023: £206.4m). See Note 15 for more details.
NOTES (FORMING PART OF THE CONSOLIDATED 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 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 2024 or 30 June 2023.
The financial information for the year ended 30 June 2023 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 2024, an unqualified
auditor's report was signed on 11 September 2024. 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 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
2023 and have been adopted in the preparation of these financial statements,
with effect from 1 July 2023:
- IFRS 17 Insurance Contracts;
- amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting
Policies;
- amendments to IAS 1, Classification of Liabilities as Current or
Non-current;
- amendments to IAS 8, Definition of Accounting Estimates;
- amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising
from a Single Transaction; and
- amendments to IAS 12, International Tax Reform Pillar Two Model Rules;
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:
- IFRS 18 Presentation and Disclosures in Financial Statements (not yet
endorsed by the UK);
- amendments to IAS 7 and IFRS 7, Supplier Finance Arrangements; 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. The Group has
performed an analysis of the potential exposure to Pillar Two income taxes,
which is presented in Note 7 Taxation.
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 uses
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.
In the previous period, a change to the US defined benefit pension scheme
rules resulted in a significant non-recurring amount being recognised in the
Consolidated income statement. This was also 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)
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
Defined benefit pension schemes J - Whether past service costs need to be recognised
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 cash flow 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 2024. 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
2027. For context, revenue in the first year of this pessimistic base scenario
is similar to FY2024 revenue of £691.3m, 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 2025, as
well as the 'severe but plausible' scenarios used in the viability review,
again to 30 September 2025. 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
lesser degree than the first two scenarios. In each scenario the Group's cash
balances remained positive throughout the period to 30 September 2025.
The Directors also reviewed a reverse stress test for the period to 30
September 2025, 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 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 2025.
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 products, we also supply services such as user training,
servicing and maintenance, and installation. 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; reporting
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 Manufacturing technologies business 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. Analytical instruments and medical devices represents all
other operating segments within the Group, which consists of spectroscopy and
neurological product lines.
Year ended 30 June 2024 Analytical instruments and medical devices
Manufacturing technologies
Total
£'000 £'000 £'000
Revenue 648,063 43,238 691,301
Depreciation, amortisation and impairment 31,374 1,454 32,828
Operating profit 103,181 5,486 108,667
Share of profits from joint ventures 3,880 - 3,880
Net financial income/(expense) - - 10,047
Profit before tax - - 122,594
Year ended 30 June 2023 Analytical instruments and medical devices £'000
Manufacturing technologies
£'000 Total
£'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
There is no allocation of assets and liabilities to the segments identified
above. 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:
2024 2023
£'000 £'000
UK 268,027 231,619
Overseas 166,816 152,008
Total non-current assets 434,843 383,627
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:
2024 2023
£'000 £'000
Goods, capital equipment and installation 624,491 624,992
Aftermarket services 66,810 63,581
Total Group revenue 691,301 688,573
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:
2024 2023
£'000 £'000
APAC total 318,836 310,637
UK (country of domicile) 37,956 38,899
EMEA, excluding UK 170,077 177,582
EMEA total 208,033 216,481
Americas total 164,432 161,455
Total Group revenue 691,301 688,573
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:
2024 2023
£'000 £'000
China 177,155 155,360
USA 138,836 138,721
Germany 54,572 61,565
Japan 49,329 67,915
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:
2024 2023
£'000 £'000
Wages and salaries 233,536 226,126
Compulsory social security contributions 27,130 26,579
Contributions to defined contribution pension schemes 27,851 26,142
Share-based payment charge 883 677
Total payroll costs 289,400 279,524
Wages and salaries and compulsory social security contributions include
£10.0m (2023: £11.3m) relating to performance bonuses.
The average number of persons employed by the Group during the year was:
2024 2023
Number Number
UK 3,400 3,332
Overseas 1,813 1,804
Average number of employees 5,213 5,136
Key management personnel have been assessed to be the Directors of the Company
and the Senior Leadership Team (SLT), which includes an average of 22 people
(2023: 21 people).
The total remuneration of the Directors and the SLT was:
2024 2023
£'000 £'000
Short-term employee benefits 6,139 5,659
Post-employment benefits 529 511
Share-based payment charge 883 677
Total remuneration of key management personnel 7,551 6,847
Short-term employee benefits include £0.2m (2023: nil) relating to
performance bonuses payable in cash.
The share-based payment charge relates to share awards granted in previous
years, not yet vested. Shares equivalent to £0.2m (2023: nil equivalent) are
to be awarded in respect of FY2024 (see Note 24).
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:
2024 2023
£'000 £'000
Production costs 269,562 247,665
Research and development expenditure 71,060 72,500
Other engineering expenditure 35,723 28,063
Gross engineering expenditure 106,783 100,563
Development expenditure capitalised (net of amortisation) (4,287) (5,298)
Development expenditure impaired 3,299 1,611
Research and development tax credit (7,699) (6,633)
Total engineering costs 98,096 90,243
Total cost of sales 367,658 337,908
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 relating to
new products or processes. Other engineering expenditure includes the payroll
costs, material costs and allocated overheads attributed to projects
identified as relating 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:
2024 2023
Financial income £'000 £'000
Bank interest receivable 9,110 6,302
Interest on pension schemes' assets 2,908 1,639
Fair value gains from one-month forward currency contracts 318 1,728
Total financial income 12,336 9,669
Financial expenses
Interest on pension schemes' liabilities - 29
Currency losses 1,645 1,130
Lease interest 537 348
Interest payable on amounts owed to joint ventures 55 -
Interest payable on borrowings 36 46
Other interest payable 16 308
Total financial expenses 2,289 1,861
Currency losses relate to revaluations of foreign currency-denominated
balances using latest reporting currency exchange rates. The losses
recognised in FY2023 and FY2024 largely related to an appreciation of Sterling
relative to the US dollar affecting US dollar-denominated intragroup balances
in the Company.
Rolling one-month forward currency contracts are used to offset currency
movements on certain 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):
2024 2023
notes £'000 £'000
Depreciation and impairment of property, plant and equipment, right-of-use assets, and investment properties 9,10,11 24,195 24,105
(Profit)/loss on sale of property, plant and equipment 9 (1,199) 155
Amortisation and impairment of intangible assets 12 8,633 7,773
Grant income (2,816) (3,017)
These costs/(income) can be found within cost of sales, distribution costs and
administrative expenses in the Consolidated income statement. Further detail
on each element can be found in the relevant notes.
Grant income relates to government grants, for 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 we will comply with the grant conditions, amounts are recognised to
offset the expenditure and an asset recognised. Research and development tax
credit (RDEC) is accounted for in accordance with IAS 20 Accounting for
Government Grants and Disclosure of Government Assistance.
Costs within Administrative expenses relating to auditor fees included:
2024 2023
£'000 £'000
Audit of these financial statements 873 707
Audit of subsidiary undertakings pursuant to legislation 606 576
Other assurance 27 6
All other non-audit fees - -
Total auditor fees 1,506 1,289
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.
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:
2024 2023
£'000 £'000
Current tax:
UK corporation tax on profits for the year 3,748 5,814
UK corporation tax - prior year adjustments (693) (1,307)
Overseas tax on profits for the year 14,497 14,161
Overseas tax - prior year adjustments 105 291
Total current tax 17,657 18,959
Deferred tax:
Origination and reversal of temporary differences 8,613 9,140
Prior year adjustments (473) (1,052)
Derecognition of previously recognised tax losses and excess interest 427 439
Recognition of previously unrecognised tax losses and excess interest (519) (591)
Effect on deferred tax for changes in tax rates - 2,068
8,048 10,004
Tax charge on profit 25,705 28,963
The tax for the year is lower (2023: lower) than the UK standard rate of
corporation tax of 25% (2023: 20.5% weighted). The differences are explained
as follows:
2024 2023
£'000 £'000
Profit before tax 122,594 145,065
Tax at 25% (2023: 20.5%) 30,649 29,738
Effects of:
Different tax rates applicable in overseas subsidiaries (4,866) (1,695)
Permanent differences 1,028 1,595
Companies with unrelieved tax losses 93 292
Share of profits of joint ventures (970) (567)
Tax incentives (patent box and capital allowances super-deduction) - (679)
Prior year adjustments (1,061) (2,068)
Effect on deferred tax for changes in tax rates - 2,068
Recognition of previously unrecognised tax losses and excess interest (519) (591)
Derecognition of previously recognised tax losses and excess interest 427 439
Irrecoverable withholding tax 447 609
Deferred tax on unremitted earnings 425 -
Other differences 52 (178)
Tax charge on profit 25,705 28,963
Effective tax rate 21.0% 20.0%
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 FY2024 ETR has increased mainly due to the
increase in the UK tax rate from 19.0% to 25.0% in April 2023. The UK standard
rate of corporation tax applicable to Renishaw is 25.0% (2023: 20.5%
weighted).
The Group's future ETR largely depends on the geographic mix of profits and
whether there are any changes to tax legislation in the Group's most
significant countries of operations.
The Finance (No 2) Bill 2023, that includes Pillar Two legislation, was
substantively enacted on 20 June 2023 for IFRS purposes. The Group has
performed an analysis of the potential exposure to Pillar Two income taxes
based on the Country by Country Report for the constituent entities in the
Group for the financial year ended 30 June 2023. The analysis indicates the
transitional safe harbour relief should apply in respect of the majority of
jurisdictions in which the Group operates. The Group expects Pillar Two income
taxes to arise in Ireland due to its statutory tax rate on trading income
being lower than the global minimum tax rate of 15%. Based on the FY2023
analysis and initial assessment for FY2024, the impact of the Pillar Two rules
is not expected to exceed a 0.7% increase to the Group's Effective Tax Rate
in FY2025.
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 £15.9m
liability (2023: £18.8m liability) is presented as a £17.7m deferred tax
asset (2023: £19.9m asset) and a £33.6m deferred tax liability (2023:
£38.8m 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:
2024 2023
Assets Liabilities Net Assets Liabilities Net
£'000 £'000 £'000 £'000 £'000 £'000
Property, plant and equipment 549 (29,946) (29,397) 735 (25,124) (24,389)
Intangible assets - (4,067) (4,067) - (3,922) (3,922)
Intragroup trading (inventories) 15,147 - 15,147 16,765 - 16,765
Intragroup trading (fixed assets) 1,101 - 1,101 1,770 - 1,770
Defined benefit pension schemes - (2,445) (2,445) 6 (14,354) (14,348)
Derivatives - (3,637) (3,637) - (2,184) (2,184)
Tax losses 1,823 - 1,823 2,281 - 2,281
Other 6,895 (1,330) 5,565 5,894 (693) 5,201
Balance at the end of the year 25,515 (41,425) (15,910) 27,451 (46,277) (18,826)
Other deferred tax assets include temporary differences relating to inventory
provisions totalling £2.9m (2023: £2.3m), other provisions (including bad
debt provisions) of £1.0m (2023: £0.9m), and employee benefits relating to
Renishaw plc of £1.1m (2023: £0.8m) and Renishaw KK of £0.8m (2023:
£0.8m), with the remaining balance relating to several other smaller
temporary differences.
The movements in the deferred tax balance during the year were:
2024 2023
£'000 £'000
Balance at the beginning of the year (18,826) 78
Movements in relation to property, plant and equipment (5,008) (4,940)
Movements in relation to intangible assets (145) (942)
Movements in relation to intragroup trading (inventories) (1,618) (3,393)
Movements in relation to intragroup trading (fixed assets) (669) 313
Movements in relation to defined benefit pension schemes (521) (229)
Movements in relation to tax losses (458) (1,612)
Movement in relation to other 371 799
Movements in the Consolidated income statement (8,048) (10,004)
Movements in relation to the cash flow hedging reserve (1,453) (5,692)
Movements in relation to the defined benefit pension scheme assets/liabilities 12,424 (3,071)
Movements in the Consolidated statement of comprehensive income and expense 10,971 (8,763)
Currency adjustment (7) (137)
Balance at the end of the year (15,910) (18,826)
Deferred tax assets of £1.8m (2023: £2.3m) 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 £6.1m (2023: £6.6m),
due to uncertainty over their offset against future taxable profits and
therefore their recoverability. These losses are held by Group companies in
Brazil, Australia, Canada, UAE and the US, where for 77% 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 around £0.3m. An increase of 5% to relevant revenue
forecasts would result in additions to deferred tax assets in respect of tax
losses not recognised of around £0.5m.
It is likely that the majority of unremitted earnings of overseas subsidiaries
would qualify for the UK dividend exemption. However, £68.3m (2023: £65.6m)
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. These tax liabilities are not expected to exceed £4.3m
(2023: £4.3m), of which £0.4m (2023: nil) has been provided on the basis
that the Group expects to remit these amounts.
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
£96,889,000 (2023: £116,102,000) and on 72,719,565 shares (2023: 72,719,565
shares), being the number of shares in issue. The number of shares excludes
68,978 (2023: 68,978) shares held by the Employee Benefit Trust (EBT). On
this basis, earnings per share (basic and diluted) is calculated as 133.2
pence (2023: 159.7 pence).
There is no difference between the weighted average earnings per share and the
basic and diluted earnings per share.
There is no difference between statutory and adjusted earnings per share in
FY2024. For the calculation of adjusted earnings per share in FY2023, per Note
29, earnings of £116,102,000 were 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 manufacturing
infrastructure. During the year we have completed the expansion of our
production facility in Wales, UK, invested in our manufacturing equipment,
and purchased distribution facilities in Brazil and the United Arab Emirates
Accounting policy
Freehold land is not depreciated. Other assets are stated at cost less
accumulated depreciation and accumulated impairment losses, if any.
Depreciation is provided to write off the cost of assets less their estimated
residual value on a straight-line basis over their estimated useful economic
lives as follows: freehold buildings, 50 years; building infrastructure, 10 to
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 2023 213,385 273,156 7,112 53,469 547,122
Reclassification 3,669 (3,669) - - -
Additions 2,412 10,615 308 51,912 65,247
Transfers 42,637 6,151 - (48,788) -
Disposals (2,916) (6,810) (1,245) - (10,971)
Currency adjustment (3,651) (1,254) (76) - (4,981)
At 30 June 2024 255,536 278,189 6,099 56,593 596,417
Depreciation
At 1 July 2023 45,647 209,546 5,844 - 261,037
Reclassification 540 (540) - - -
Charge for the year 4,378 14,526 382 - 19,286
Disposals (658) (5,951) (1,086) - (7,695)
Currency adjustment (447) (743) (61) - (1,251)
At 30 June 2024 49,460 216,838 5,079 - 271,377
Net book value
At 30 June 2024 206,076 61,351 1,020 56,593 325,040
At 30 June 2023 167,738 63,610 1,268 53,469 286,085
Profit/loss on disposals of Property, plant and equipment amounted to £1.2m
profit (2023: £0.2m loss).
Additions to assets in the course of construction comprise £36.5m (2023:
£42.6m) for land and buildings and £15.4m (2023: £11.4m) for plant and
equipment.
At 30 June 2024, properties with a net book value of £45.9m (2023: £88.8m)
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 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
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 2024 £'000 £'000 £'000 £'000
Net book value
At 1 July 2023 5,069 89 3,244 8,402
Additions 7,320 51 3,843 11,214
Reductions - - (3) (3)
Depreciation (2,434) (73) (2,416) (4,653)
Currency adjustment (56) (1) (157) (214)
At 30 June 2024 9,899 66 4,781 14,746
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
Reduction (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
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.
2024 2023
£'000 £'000
Cost
Balance at the beginning of the year 11,896 11,905
Additions 271 252
Currency adjustment (64) (261)
Balance at the end of the year 12,103 11,896
Depreciation
Balance at the beginning of the year 1,573 1,337
Charge for the year 256 240
Currency adjustment (11) (4)
Balance at the end of the year 1,818 1,573
Net book value 10,285 10,323
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:
2024 2023
£'000 £'000
Rental income derived from investment properties 829 915
Direct operating expenses (including repairs and maintenance) 247 258
Profit arising from investment properties 582 657
The fair value of the Group's investment properties totalled £14.7m at 30
June 2024 (2023: £14.7m). Fair values of each investment property have been
determined within the last three years 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. These
valuations have been assessed to be materially appropriate at 30 June 2024.
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 is 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 become
obsolete, 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 cash flows of each CGU and select the appropriate discount
rate for each CGU.
Internally Software licences and Intellectual property and
generated
development Intellectual other intangible
Goodwill costs property assets Total
Year ended 30 June 2024 £'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2023 20,261 178,660 11,978 4,875 215,774
Additions - 9,281 246 - 9,527
Currency adjustment (3) - (27) (11) (41)
At 30 June 2024 20,258 187,941 12,197 4,864 225,260
Amortisation
At 1 July 2023 9,028 146,221 11,605 2,452 169,306
Charge for the year - 5,011 165 158 5,334
Impairment - 3,299 - - 3,299
Currency adjustment - - (19) (3) (22)
At 30 June 2024 9,028 154,531 11,751 2,607 177,917
Net book value
At 30 June 2024 11,230 33,410 446 2,257 47,343
At 30 June 2023 11,233 32,439 373 2,423 46,468
Internally generated development costs Software licences and intellectual property Intellectual property and other intangible assets
Goodwill
Total
Year ended 30 June 2023 £'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2022 20,475 168,212 22,379 4,629 215,695
Additions - 10,448 125 254 10,827
Disposals - - (10,518) - (10,518)
Currency adjustment (214) - (8) (8) (230)
At 30 June 2023 20,261 178,660 11,978 4,875 215,774
Amortisation
At 1 July 2022 9,028 139,460 20,749 2,240 171,477
Charge for the year - 5,150 833 179 6,162
Impairment - 1,611 - - 1,611
Disposals - - (9,969) - (9,969)
Currency adjustment - - (8) 33 25
At 30 June 2023 9,028 146,221 11,605 2,452 169,306
Net Book value
At 30 June 2023 11,233 32,439 373 2,423 46,468
At 30 June 2022 11,447 28,752 1,630 2,389 44,218
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), as set out below. This is the lowest level in the Group at which
goodwill is monitored for impairment.
The analysis of goodwill according to business acquired is:
2024 2023
£'000 £'000
itp GmbH 2,934 2,985
Renishaw Mayfield S.A. 2,089 2,089
Renishaw Fixturing Solutions, LLC 5,497 5,454
Other smaller acquisitions 710 705
Total goodwill 11,230 11,233
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:
2024 2023
Business acquired CGU Discount rate Discount rate
itp GmbH itp GmbH entity ('ITP') 13.6% 13.2%
Renishaw Fixturing Solutions, LLC Renishaw plc ('PLC') 14.6% 14.3%
Renishaw Mayfield S.A. Renishaw Mayfield S.A. entity ('Mayfield') 24.6% 26.3%
The Group post-tax weighted average cost of capital, calculated at 30 June
2024, is 10.7% (2023: 10.7%). 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.
CGU specific five-year business plans have been used in determining cash flow
projections. Within these plans, revenue forecasts are calculated with
reference to external market data, 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 in the PLC, ITP or Mayfield CGUs, the discount
rate would need to increase to at least 17%, 23% and 42% respectively, or
there would need to be a reduction to forecast cash flows of 16%, 44% and 43%
respectively.
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% (2023: 10.7%).
There were impairments of internally generated development costs in the year
of £3.3m (2023: £1.6m). This includes a £2.0m impairment for Renishaw
Central, our smart manufacturing data platform for industrial process control,
where the near-term cash flows are uncertain in a market new to Renishaw. The
remaining £1.3m covers two lower value impairments where revenue growth
is now expected to be lower than previously forecast.
For the largest projects, comprising 94% of the net book value at 30 June
2024, a 10% reduction to forecast unit sales, or an increase in the discount
rate by 5%, would result in an impairment of less than £0.4m.
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 2024 2023
principal place of business % %
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 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 plc 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: 2024 2023
£'000 £'000
Balance at the beginning of the year 22,414 20,570
Dividends received (498) (924)
Share of profits of joint ventures 3,880 2,768
Currency differences (311) -
Balance at the end of the year 25,485 22,414
During FY2024, Renishaw International Limited ('RIL') entered into a 14-day
notice deposit agreement with RLS. Interest is payable by RIL to RLS at a
market rate on a monthly basis. As at 30 June 2024, according to this
agreement RIL had received EUR 10.0m (£8.5m equivalent), which is recognised
as 'amounts payable to joint venture' in the Consolidated balance sheet.
Summarised financial information for joint ventures:
RLS MSP
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Assets 49,295 43,168 5,470 4,539
Liabilities (6,167) (4,969) (442) (378)
Net assets 43,128 38,199 5,028 4,161
Group's share of net assets 21,564 19,100 3,520 2,913
Revenue 38,548 35,764 2,947 2,554
Profit/(loss) for the year 6,546 5,162 867 264
Group's share of profit/(loss) for the year 3,273 2,583 607 185
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:
2024 2023
Gross investment Net investment Gross investment £'000 Net investment
£'000 Interest £'000 Interest £'000
£'000 £'000
Receivable in less than one year 4,761 900 3,861 4,375 611 3,764
Receivable between one and two years 5,903 765 5,138 3,600 447 3,153
Receivable between two and three years 4,038 347 3,691 3,283 289 2,994
Receivable between three and four years 2,072 138 1,934 2,478 151 2,327
Receivable between four and five years 1,264 83 1,181 1,502 41 1,461
Total future minimum lease payments receivable 18,038 2,233 15,805 15,238 1,539 13,699
Finance lease receivables are presented as £11.9m (2023: £9.9m) non-current
assets and £3.9m (2023: £3.8m) current assets in the Consolidated balance
sheet.
The total of future minimum lease payments receivable under non-cancellable
operating leases were:
2024 2023
£'000 £'000
Receivable in less than one year 1,042 1,394
Receivable between one and four years 707 1,569
Total future minimum lease payments receivable 1,749 2,963
During the year, £1.2m (2023: £1.0m) of operating lease income was
recognised in revenue.
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 cash equivalents and
bank deposits, mostly in the UK and spread across several 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:
2024 2023
£'000 £'000
Bank balances and cash in hand 75,090 80,196
Short-term deposits 47,203 1,192
Balance at the end of the year 122,293 81,388
Short-term deposits includes a short-term bank deposit in Renishaw plc of
£47.1m which matured on 8 July 2024.
Bank deposits
Bank deposits at the end of the year amounted to £95.5m (2023: £125.0m), of
which £50.0m matures in December 2024, and £43.0m matures in May 2025.
16. Inventories
We have reduced our inventories in the year, as global supply challenges faced
during the previous year have eased, 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 generates an estimate of future demand for individual inventory
items (capped at 3 years) based upon the higher of 12 months of historic usage
or 12 months of demand from customer orders and manufacturing build plans. A
50% provision is calculated where actual holdings represent between 3 to 5
years' worth of future demand, and 100% is calculated where actual holdings
represent over 5 years' worth of future demand. Adjustments are made where
needed, for example where it is highly likely that there will be an increase
in sales beyond the 12-month demand period or where there are obsolescence
programmes.
This reflects a change from our previous accounting estimate, whereby up to 18
months was used as an initial estimate of future demand for the majority of
products. This change to 3 years has been based on our experience of
previously recognising significant exceptions to the initial calculation, our
obsolescence programmes are typically planned at least three years in advance,
and our inventories are not perishable. We have not disclosed the effect of
this change in estimate, as it is not practical to calculate a provision on
the previous basis at 30 June 2024, due to the level of adjustments which
varies based on the nature of inventory on-hand at each year-end.
An analysis of inventories at the end of the year was:
2024 2023
£'000 £'000
Raw materials 53,542 66,210
Work in progress 32,840 35,354
Finished goods 75,546 84,193
Balance at the end of the year 161,928 185,757
At the end of the year, the gross cost of inventories which had provisions
held against them totalled £29.6m (2023: £24.5m). During the year, the
amount of write-down of inventories recognised as an expense in the
Consolidated income statement was £6.2m (2023: £8.2m).
Inventories in Renishaw plc account for 63% of the total Inventories of the
Group. A 10% reduction in the estimate of future demand for all Renishaw plc
inventory items would result in an increase in the write-down of inventories
of £0.6m.
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. The main
provision we hold relates 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:
2024 2023
£'000 £'000
Balance at the beginning of the year 2,758 4,244
Created during the year 2,633 2,382
Unused amounts reversed - (717)
Utilised in the year (2,394) (3,151)
239 (1,486)
Balance at the end of the year 2,997 2,758
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: 2024 2023
£'000 £'000
Goods, capital equipment and installation 210 615
Aftermarket services 6,955 4,793
Deferred revenue 7,165 5,408
Advances received from customers 3,715 4,563
Balance at the end of the year 10,880 9,971
The aggregate amount of the transaction price allocated to performance
obligations that are unsatisfied at the end of the year is £10.9m (2023:
£10.0m). Of this, £1.4m (2023: £2.2m) 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:
2024 2023
£'000 £'000
Payroll taxes and social security 6,477 6,677
Performance bonuses 9,990 11,338
Holiday pay and retirement accruals 9,397 7,383
Indirect tax payable 5,163 4,486
Other creditors and accruals 19,317 18,246
Total other payables 50,344 48,130
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 FY2019.
Third-party borrowings at 30 June 2024 consist of a 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 for the first five
years. This loan was extended for an additional five years in May 2024, with a
fixed interest rate of 1.41% payable for the remaining term, at which time the
principal will have been repaid in full. There are no covenants attached
to this loan.
Movements during the year were:
2024 2023
£'000 £'000
Balance at the beginning of the year 4,694 6,079
Interest 36 46
Repayments (799) (914)
Currency adjustment (409) (517)
Balance at the end of the year 3,522 4,694
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 commit 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:
2024 Leasehold property Plant and equipment Motor
£'000 £'000 vehicles Total
£'000 £'000
Due in less than one year 2,396 36 2,161 4,593
Due between one and two years 2,137 22 1,816 3,975
Due between two and three years 1,862 7 1,035 2,904
Due between three and four years 1,549 1 205 1,755
Due between four and five years 1,001 - 8 1,009
Due in more than five years 4,454 - - 4,454
Total future minimum lease payments payable 13,399 66 5,225 18,690
Effect of discounting (3,311) (2) (355) (3,668)
Lease liability 10,088 64 4,870 15,022
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
Lease liabilities are also presented as a £4.0m (2023: £3.0m) current
liability and a £11.1m (2023: £5.6m) non-current liability in the
Consolidated balance sheet.
Amounts recognised in the Consolidated income statement relating to leases
were:
2024 2023
£'000 £'000
Depreciation of right-of-use assets 4,653 4,223
Interest expense on lease liabilities 537 348
Expenses relating to short-term and low-value leases 138 471
Total expense recognised in the Consolidated income statement 5,328 5,042
Total cash outflows for leases 5,034 5,025
22. Changes in liabilities arising from financing activities
£000 1 July 2023 Cash flows Other Currency 30 June 2024
Lease liabilities 8,633 (4,359) 10,967 (219) 15,022
Borrowings 4,694 (799) 36 (409) 3,522
13,327 (5,158) 11,003 (628) 18,544
£000
1 July 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
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 and Ireland
employees, which were of the defined benefit type up to 5 April 2007 and 31
December 2007 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. For buy-in insurance
contracts, where the income received from a policy matches exactly the benefit
payments due to the members it is covering, the value attributable to the
contract to be recognised as an asset is the equivalent IAS 19 value of the
corresponding liabilities.
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.
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.
Key judgement - Whether past service costs need to be recognised
Management also need to determine the appropriate accounting treatment for
past service costs, and do so in consultation with independent legal advisors
and actuaries.
The total pension cost of the Group for the year was £27.9m (2023: £26.1m),
of which £0.1m (2023: £0.1m) related to Directors and £6.5m (2023: £6.2m)
related to overseas schemes.
The latest full actuarial valuation of the UK defined benefit pension scheme
('UK scheme') was carried out as at 30 September 2021 and updated to 30 June
2024 by a qualified independent actuary. The mortality assumption used for
FY2024 is the S3PxA base tables and CMI 2023 model, with long-term
improvements of 1% per annum. Adjustments have been made to both the core base
tables and CMI 2023 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 2024 30 June 2023
UK scheme Ireland scheme UK scheme Ireland scheme
Rate of increase in pension payments 2.95% 2.50% 3.05% 2.70%
Discount rate 5.10% 3.75% 5.10% 3.60%
Inflation rate (RPI) 3.25% 2.50% 3.25% 2.70%
Inflation rate (CPI) 2.25%1 2.25%1
3.25%2 2.50% 3.25%2 2.70%
Retirement age 64 65 64 65
1. pre-2030 2. post-2030
The life expectancies from the retirement age of 65 for the UK scheme implied
by the mortality assumption at age 65 and 45 are:
2024 2023
years years
Male currently aged 65 21.1 21.1
Female currently aged 65 23.5 23.5
Male currently aged 45 21.8 21.8
Female currently aged 45 24.4 24.3
The weighted average duration of the UK scheme obligation is around 17 years
(2023: 17 years).
The assets and liabilities in the defined benefit schemes at the end of the
year were:
30 June 2024 £'000 % of total assets 30 June 2023 £'000 % of total assets
Market value of assets:
Insurance contract 129,207 84 - -
Credit and fixed income funds 9,268 6 54,656 28
Equities 6,861 4 5,729 3
Multi-asset funds 5,869 4 26,966 14
Index linked gilts 1,269 1 55,183 28
Fixed interest gilts - - 13,219 7
Cash and other 660 - 40,576 20
153,134 100 196,329 100
Actuarial value of liabilities (142,289) - (138,958) -
Surplus/(deficit) in the schemes 10,845 - 57,371 -
Deferred tax thereon (2,445) - (14,348) -
Note C.43, within the Annual Report, gives the analysis of the UK scheme. For
the other schemes, the market value of assets at the end of the year was
£14.0m (2023: £14.6m) and the actuarial value of liabilities was £11.9m
(2023: £14.7m). The UK scheme was in a net surplus position at 30 June 2024
totalling £8.7m (2023: surplus £57.4m), and is therefore presented in
non-current assets in the Consolidated balance sheet. The Ireland scheme was
in a net asset position at 30 June 2024 totalling £2.1m (2023: £0.1m
deficit), and is therefore also presented in non-current assets.
During FY2024, the Trustee of the UK scheme undertook a buy-in and insured
around 99% of the UK scheme's liabilities by purchasing an insurance policy.
This contract was effective from 19 October 2023 and is held in the name of
the Trustee. The value of the contract is recognised as a UK scheme asset for
the purposes of IAS 19. In line with IAS 19.115, for a buy-in insurance
contract such as this, where the income received from the policy matches
exactly the benefit payments due to the members it is covering, the value
attributable to the contract to be recognised as an asset is the equivalent
IAS 19 value of the corresponding liabilities.
The value of the corresponding IAS 19 liabilities for the members covered by
the buy-in contract was calculated based on individual member data as at 27
January 2023, allowing for known deaths and transfer-outs between 27 January
2023 and 19 October 2023. The IAS 19 liabilities in respect of the buy-in
policy were lower than the transaction price of the insurance contract.
Consequently, the value attributable to the insurance contract has reduced
from the actual price paid, and the resulting remeasurement loss is recognised
in the 'Return on plan assets' item in the Consolidated statement of
comprehensive income and expense. The IAS 19 liabilities as at 19 October 2023
were £118.5m. The final premium paid for the buy-in was £150.4m, and
therefore a loss of £31.9m has been reflected in the Consolidated statement
of comprehensive income and expense.
Equities are held in externally-managed funds and primarily relate to UK and
US equities. Credit and fixed income funds, 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 2024 mostly comprises amounts held
in a Sterling bank account, in which the principal is preserved and same day
liquidity is available.
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 2024 £'000 £'000 £'000
Balance at the beginning of the year 196,329 (138,958) 57,371
Contributions paid 161 - 161
Interest on pension schemes 9,581 (6,673) 2,908
Remeasurement gain/(loss) under IAS 19 (45,054) (3,634) (48,688)
Scheme administration expenses (907) - (907)
Benefits paid (6,976) 6,976 -
Balance at the end of the year 153,134 (142,289) 10,845
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
The analysis of the amount recognised in the Consolidated statement of
comprehensive income and expense was:
2024 2023
£'000 £'000
Actuarial gain/(loss) arising from:
- Changes in demographic assumptions 35 2,028
- Changes in financial assumptions 863 37,318
- Experience adjustment (4,532) (9,012)
Return on plan assets excluding interest income (45,054) (16,722)
Total amount recognised in the Consolidated statement of comprehensive income and expense (48,688) 13,612
The cumulative amount of actuarial gains and losses recognised in the
Consolidated statement of comprehensive income and expense was a loss of
£57.5m (2023: loss of £8.8m).
The net surplus of the Group's defined benefit pension schemes, on an IAS 19
basis, has decreased from £57.4m at 30 June 2023 to £10.8m at 30 June 2024,
primarily as a result of the buy-in remeasurement loss.
For the UK scheme, the latest actuarial report prepared in September 2021
shows a deficit of £52.8m, 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 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 2024 was £45.9m (2023:
£88.8m).
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.
Benefits in the UK scheme are subject to a DC underpin at the point of
retirement or transfer out. Historically, this has been allowed for in the
accounts in a consistent manner to current administrative practice and the
triennial funding valuations. During the buy-in process, it was identified
that the drafting of the DC underpin in the UK scheme Rules may require that
the DC underpin is applied in a manner which is different to the
administrative practice which has been applied. The Trustee and Company are
currently seeking legal clarification and advice on this issue, with the
intention of correcting the Rules to match administrative practice. No
allowance for this matter has been made at 30 June 2024, as management have
assessed it to be unlikely that there will be an increase in liabilities, and
due to the uncertainty of legal treatment and therefore any potential impact
on liabilities.
In June 2023, the High Court ruled that certain historic amendments made to
the rules of the Virgin Media pension scheme were invalid without the scheme's
actuary having provided the associated Section 37 certificates. This judgement
was upheld by the Court of Appeal in July 2024, which has implications on
other schemes that were contracted-out on a salary-related basis, and made
amendments between April 1997 and April 2016. The UK scheme was contracted out
until 5 April 2007 and amendments were made during the relevant period and as
such the ruling could have implications for the UK scheme. The Directors
sought initial professional advice on this after June 2023 and our expectation
is that proper procedures would have been undertaken at the time of changes by
the Trustees, actuaries and administrators. However, as of the date of
approving these financial statements, the possible implications, if any, for
the UK Scheme not having all Section 37 certificates have not been
investigated in detail. The Trustee and Company will now seek further legal
advice on this matter and will act appropriately. Accordingly, no amendments
for this matter have been included in the IAS 19 actuarial valuation as the
impact, if any, cannot be reliably assessed.
For the UK 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% -£9.2m/+£10.3m
UK - future inflation Increase/decrease by 0.5% +£7.7m/-£6.6m
UK - mortality Increased/decreased life by one year +£4.0m/-£4.1m
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 DAEIP). 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 straight-line
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 DAEIP 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 DAEIP 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 FY2024 Consolidated income statement in
respect of the DAEIP was £0.9m (2023: £0.7m). See Note 26 for
reconciliations of amounts recognised in Equity.
In accordance with the DAEIP, shares equivalent to £0.2m (2023: nil) are to
be awarded in respect of FY2024.
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. 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 and finance lease receivables Other receivables Cash and cash equivalents and bank deposits
2024 2023 2024 2023 2024 2023
Currency £'000 £'000 £'000 £'000 £'000 £'000
Pound Sterling 17,258 17,530 24,807 20,592 168,781 161,489
US Dollar 57,209 49,609 1,613 814 8,261 12,465
Euro 30,699 28,418 2,320 1,433 10,532 6,481
Japanese Yen 13,135 16,555 144 137 3,358 6,481
Other 31,577 25,014 5,192 5,003 26,903 19,472
149,878 137,126 34,076 27,979 217,835 206,388
The above Trade and finance lease receivables, Other receivables and Cash and
cash equivalents bank deposits are predominately held in the functional
currency of the relevant entity, with the exception of £21.3m (2023: £19.7m)
of US Dollar-denominated trade receivables being held in Renishaw (Hong Kong)
Limited and £1.6m (2023: £1.7m) 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:
2024 2023
£'000 £'000
Past due zero to one month 13,250 11,808
Past due one to two months 7,763 3,880
Past due more than two months 13,041 9,732
Balance at the end of the year 34,054 25,420
Movements in the provision for impairment of trade receivables during the year
were:
2024 2023
£'000 £'000
Balance at the beginning of the year 3,438 2,540
Changes in amounts provided 2,264 1,784
Amounts used (1,223) (886)
Balance at the end of the year 4,479 3,438
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 2024
Total
Year ended 30 June 2024 £'000 £'000 £'000 £'000 £'000 £'000
Gross trade receivables 14,215 38,781 84,049 1,508 - 138,553
Expected credit loss rate 0.46% 0.50% 0.54% 0.58% - 0.52%
Expected credit loss allowance 65 193 447 9 - 714
Specific loss allowance - 4 3,440 322 - 3,766
Total expected credit loss 65 197 3,887 331 - 4,480
Net trade receivables 14,150 38,584 80,162 1,177 - 134,073
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
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 date 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:
2024 2023*
£'000 £'000
Indirect tax receivable 7,206 9,304
Software maintenance 7,816 5,857
Grants 875 1,426
Research and development tax credit recoverable 4,969 351
Contract assets 309 861
Other prepayments 12,901 11,041
Total other receivables 34,076 28,840
The maximum exposure to credit risk is £416.7m (2023: £387.2m*), comprising
the Group's trade, finance and other receivables, cash and cash equivalents
and bank deposits, and derivative assets.
*2023 other receivables have been reclassified to include Contract assets,
given the relatively low value of this line item.
The maturities of non-current other receivables, being only derivatives, at
the year end were:
2024 2023
£'000 £'000
Receivable between one and two years 1,387 9,443
Receivable between two and five years - -
1,387 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 2024 totalling
£217.8m and £124.1m 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. A decrease of 1% in interest rates would result in a reduction in
interest income of approximately £2m.
The contractual maturities of financial liabilities at the year end were:
Contractual cash flows
Carrying amount Effect of discounting Gross maturities Up to 1-2 2-5
1 year years years
Year ended 30 June 2024 £'000 £'000 £'000 £'000 £'000 £'000
Trade payables 21,330 - 21,330 21,330 - -
Other payables 50,344 - 50,344 50,344 - -
Borrowings 3,522 138 3,660 756 745 2,159
Forward exchange contracts 625 - 625 448 177 -
75,821 138 75,959 72,878 922 2,159
Contractual cash flows
Carrying Effect of discounting Gross Up to 1-2 2-5
amount maturities 1 year years 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 -
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; and
ii. 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:
2024 2023
Nominal value Fair value Nominal value Fair value
£'000 £'000 £'000 £'000
US Dollar 332,679 7,388 345,010 5,009
Euro 173,089 4,661 179,992 1,389
Japanese Yen 15,581 2,260 30,318 3,209
521,349 14,309 555,320 9,607
The following are the exchange rates which have been applicable during the
financial year.
2024 2023
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 1.25 1.27 1.26 1.24 1.27 1.21
Euro 1.13 1.18 1.17 1.13 1.16 1.15
Japanese Yen 140 203 189 141 183 166
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.
No contracts have become ineffective during the period. A decrease of 10% in
the highly probable forecasts would result in around £0.5m 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:
2024 2023
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 140,109 1,387 268,908 9,443
Current derivative assets 245,577 13,338 118,271 4,461
Current derivative liabilities 790 - 109,434 (5,048)
Non-current derivative liabilities 54,852 (177) 21,148 (120)
441,328 14,548 517,761 8,736
Amounts recognised in the Consolidated statement of comprehensive income and
expense
- 5,812 - 23,167
Forward currency contracts ineffective as a cash flow hedge (i)
Current derivative liabilities - - - -
Amounts recognised in Losses from the fair value of financial instruments in
the Consolidated income statement
- (1,399)
- -
Forward currency contracts not in a designated cash flow hedge (iii)
Current derivative assets 17,614 209 17,134 912
Current derivative liabilities 62,407 (448) 20,425 (41)
80,021 (239) 37,559 871
Amounts recognised in Financial income/(expense) in the Consolidated income
statement
- 318 - 1,728
Total forward contracts and options
Non-current derivative assets 140,109 1,387 268,908 9,443
Current derivative assets 263,191 13,547 135,405 5,373
Current derivative liabilities 63,197 (448) 129,859 (5,089)
Non-current derivative liabilities 54,852 (177) 21,148 (120)
521,349 14,309 555,320 9,607
The total recognised in Revenue in the Consolidated income statement relating
to cash flow hedges previously recognised through Other comprehensive income
amounted to £0.1m gain (2023: £7.7m loss).
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 £21.0m and increase profit before tax
by £3.8m, while a depreciation of 5% would decrease pre-tax equity by £23.2m
and decrease profit before tax by £4.2m.
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 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
2024 2023
£'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:
2024 2023
£'000 £'000
2023 final dividend paid of 59.4p per share (2022: 56.6p) 43,195 41,190
Interim dividend paid of 16.8p per share (2023: 16.8p) 12,217 12,217
Total dividends paid 55,412 53,407
A final dividend of 59.4p per share is proposed in respect of FY2024, which
will be payable on 5 December 2024 to shareholders on the register on 1
November 2024.
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:
2024 2023
£'000 £'000
Balance at the beginning of the year (2,963) (750)
Acquisition of own shares - (2,213)
Balance at the end of the year (2,963) (2,963)
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 2024.
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 2024.
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:
2024 2023
£'000 £'000
Balance at the beginning of the year 497 (180)
Share-based payments charge in respect of share vesting in 2024 245 245
Share-based payments charge in respect of shares vesting in 2025 638 432
Balance at the end of the year 1,380 497
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: 2024 2023
£'000 £'000
Balance at the beginning of the year 6,772 14,459
Loss on net assets of foreign currency operations (3,811) (5,905)
Loss on intragroup loans classified as net investments in foreign operations (227) (2,095)
Tax on translation of net investments in foreign operations 57 313
Loss in the year relating to subsidiaries (3,981) (7,687)
Currency exchange differences relating to joint ventures (311) -
Balance at the end of the year 2,480 6,772
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:
2024 2023
£'000 £'000
Balance at the beginning of the year 6,552 (10,923)
Losses on contract maturity recognised in revenue during the year 133 (21,553)
Revaluations during the year 5,679 44,720
Deferred tax movement (1,453) (5,692)
Balance at the end of the year 10,911 6,552
Non-controlling interest
Movements during the year were:
2024 2023
£'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
FY2022, we committed to the expansion of one of our production facilities in
Wales, UK, which is expected to cost an additional £12.4m over the next year.
We have recently committed £11.4m to renovating and expanding our warehousing
operation in Germany, which includes expenditure on sustainability
initiatives.
Authorised and committed capital expenditure at the end of the year were:
2024 2023
£'000 £'000
Freehold land and buildings 26,199 35,607
Plant and equipment 16,206 11,423
Motor vehicles 135 14
Total committed capital expenditure 42,540 47,044
28. Related parties
We report our two joint venture companies, RLS and MSP, as related parties.
Joint ventures and other related parties had the following transactions and
balances with the Group:
Joint ventures
2024 2023
£'000 £'000
Purchased goods and services from the Group during the year 250 117
Sold goods and services to the Group during the year 23,026 24,271
Paid dividends to the Group during the year 498 924
Amounts owed to the Group at the year end 243 35
Amounts owed by the Group at the year end 11,422 2,837
Amounts owed by the Group include a 14-day notice deposit agreement with RLS
for EUR 10.0m (£8.5m equivalent) (2023: nil), see Note 13 for further
details.
There were no bad debts relating to related parties written off during FY2024
or FY2023.
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. The only significant transactions between the Group and these
parties are in relation to their respective remuneration.
29. Alternative performance measures
In accordance with Renishaw's alternative performance measures (APMs) policy
and ESMA Guidelines on Alternative Performance Measures (2015), this section
defines non-IFRS measures that we believe give readers additional useful and
comparable views of our underlying performance.
We continue to report Revenue at constant exchange rates, Adjusted profit
before tax, Adjusted earnings per share and Adjusted operating profit
(including by segment) as APMs, which are calculated consistently with
previous years. In addition, this year we have added Adjusted operating profit
at constant exchange rates, Adjusted cash flow conversion from operating
activities, and Return on invested capital. Aside from Revenue at constant
exchange rates, all other APMs exclude infrequently occurring events which
impact our financial statements, recognised according to applicable IFRS, that
we believe should be excluded from these APMs to give readers additional
useful and comparable views of our underlying performance.
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.
2024 2023
Revenue at constant exchange rates £'000 £'000
Statutory revenue as reported 691,301 688,573
Adjustment for forward contract (gains)/losses (133) 7,815
Adjustment to restate current year at previous year exchange rates 30,664 -
Revenue at constant exchange rates 721,832 696,388
Year-on-year revenue growth at constant exchange rates 3.7% -
Year-on-year revenue growth at constant exchange rates for FY2023 was -1.1%.
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 FY2020 relating to
restructuring (a);
- a US defined benefit pension scheme past service cost (b); and
- gains and losses in fair value from forward currency contracts which did not
qualify for hedge accounting and which have yet to mature (c).
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 FY2022, a revised estimate of a warranty provision relating to
restructuring in FY2020 resulted in a reduction to this provision of
£1,688,000, then in FY2023 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) In FY2023, 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.
c) Gains and losses which recycle through the Consolidated income
statement as a result of contracts deemed ineffective during FY2020 are also
excluded from adjusted profit measures, on the basis that all forward
contracts were 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.
2024 2023
Adjusted profit before tax: £'000 £'000
Statutory profit before tax 122,594 145,065
Revised estimate of FY2020 restructuring provisions - (717)
US defined benefit pension scheme past service cost - 2,139
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue - (6,903)
- reported in (gains)/losses from the fair value of financial instruments - 1,399
Adjusted profit before tax 122,594 140,983
2024 2023
Adjusted earnings per share: Pence pence
Statutory earnings per share 133.2 159.7
Revised estimate of FY2020 restructuring provisions - (0.8)
US defined benefit pension scheme past service cost - 2.2
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue - (7.5)
- reported in (gains)/losses from the fair value of financial instruments - 1.5
Adjusted earnings per share 133.2 155.1
2024 2023
Adjusted operating profit: £'000 £'000
Statutory operating profit 108,667 134,489
Revised estimate of FY2020 restructuring provisions - (717)
US defined benefit pension scheme past service cost - 2,139
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue - (6,903)
- reported in (gains)/losses from the fair value of financial instruments - 1,399
Adjusted operating profit 108,667 130,407
Adjustments to the segmental operating profit:
2024 2023
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
103,181 132,843
Revised estimate of FY2020 restructuring provisions - (717)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue - (6,644)
Adjusted manufacturing technologies operating profit 103,181 125,482
2024 2023
Analytical instruments and medical devices £'000 £'000
Operating profit before losses from fair value of financial instruments and UK and US defined benefit pension schemes' past service cost
5,486 5,184
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue - (259)
Adjusted analytical instruments and medical devices operating profit 5,486 4,925
Adjusted operating profit at constant exchange rates is defined as Adjusted
operating profit recalculated using the same rates as to the previous year and
excluding forward contract gains and losses.
2024 2023
Adjustments to operating profit at constant exchange rates: £'000 £'000
Adjusted operating profit 108,667 130,407
Adjustment for forward contract (gains)/losses (133) 14,649
Adjustment to restate current year at previous year exchange rates 23,725 -
Adjusted operating profit at constat exchange rates 132,259 145,056
Year-on-year adjusted operating profit reduction at constant exchange rates -8.8% -
Adjusted cash flow conversion from operating activities is calculated as
Adjusted cash flow from operating activities as a proportion of Adjusted
operating profit. This is useful for the Board to measure how efficient we are
at converting operating profit into cash.
2024 2023
Adjusted cash flow conversion from operating activities: £'000 £'000
Cash flows from operating activities 124,079 84,297
Income taxes paid 21,752 25,891
Purchase of property, plant and equipment and intangible assets (74,774) (84,599)
Proceeds from sale of property, plant and equipment and intangible assets 4,475 7,948
Adjusted cash flow from operating activities 75,532 33,537
Adjusted cash flow conversion from operating activities 69.5% 25.7%
Return on invested capital is the Adjusted profit after tax before bank
interest receivable as a percentage of the Average invested capital in the
year. This is useful for the Board to measure our efficiency in allocating
capital to profitable activities.
Adjusted profit after tax before bank interest receivable is calculated as
follows:
2024 2023
£'000 £'000
Statutory profit after tax 96,889 116,102
Revised estimate of FY2020 restructuring provisions (net of tax) - (570)
US defined benefit pension scheme past service cost (net of tax) - 1,626
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
- reported in revenue (net of tax) - (5,488)
- reported in losses from the fair value of financial instruments (net of tax) - 1,133
Adjusted profit after tax 96,889 112,803
Bank interest receivable (net of tax) (6,832) (5,010)
Adjusted profit after tax before bank interest received 90,057 107,793
2024 2023 2022
Return on invested capital (ROIC): £'000 £'000 £'000
Total non-current assets 464,765 470,430 402,254
Total current assets 586,618 573,107 590,513
Total current liabilities (100,948) (102,320) (132,697)
Less cash and cash equivalents (122,293) (81,388) (153,162)
Less bank deposits (95,542) (125,000) (100,000)
Invested capital 732,600 734,829 606,908
Average invested capital 733,715 670,869 -
Return on invested capital 12.3% 16.1% -
Average invested capital in the year is the average of the invested capital at
the beginning of the year and at the end of the year.
Cautionary statement
This document contains statements about Renishaw plc that are or may be
forward-looking statements.
These forward-looking statements are not guarantees of future performance.
They have not been reviewed by the auditors of Renishaw plc. They involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of any such person to be
materially different from any results, performance or achievements expressed
or implied by such statements. They are based on numerous assumptions
regarding the present and future business strategies of such persons and the
environment in which each will operate in the future. All subsequent oral or
written forward-looking statements attributable to Renishaw plc or any of its
shareholders or any persons acting on its behalf are expressly qualified in
their entirety by the cautionary statement above. All forward-looking
statements included in this document speak only as of the date they were made
and are based on information then available to Renishaw plc. Investors should
not place undue reliance on such forward-looking statements, and Renishaw plc
does not undertake any obligation to update publicly or revise any
forward-looking statements.
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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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