REG - Renishaw PLC - Half-year Report
03/02/2022 07:00
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RNS Number : 5319A Renishaw PLC 03 February 2022
Renishaw
plc
3 February 2022
Interim report 2022 - for the six months ended 31 December 2021
Highlights
Renishaw, the global provider of manufacturing technologies, analytical
instruments and medical devices, today reports its half-year results for the
six months to 31 December 2021.
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
Revenue (£m) 325.2 255.1 565.6
Adjusted(1) profit before tax (£m) 84.2 43.4 119.7
Adjusted(1) earnings per share (pence) 97.2 49.2 132.0
Dividend per share (pence) 16.0 14.0 66.0
Statutory profit before tax (£m) 81.5 63.9 139.4
Statutory earnings per share (pence) 94.2 72.1 153.2
· Record first-half revenue and adjusted profit before tax.
· Revenue growth of 27% to £325.2m, with:
• Record level of demand as key market sectors recover and
semiconductor and electronics remain strong; and
• Strong growth in all regions, continuing the trend seen in
2021 H2.
· Adjusted(1) profit before tax increased by 94% to £84.2m, with
return on revenue increasing to 26% from 17% last year.
· Statutory profit before tax of £81.5m (H1 20/21: £63.9m).
· Robust balance sheet with net cash and bank deposit balances of
£222.0m, compared with £215.0m at 30 June 2021, with the £37.8m final
dividend for FY20/21 paid in H1.
· Interim dividend of 16.0p per share.
"We achieved very strong revenue growth in all regions and there was growth
for all product lines within our Manufacturing technologies segment, most
notably for the encoder and gauging lines. The strong demand for our encoder
product lines continues to be driven by increased investments in industrial
automation and the semiconductor and electronics capital equipment markets,
while our gauging line is benefiting from a recovery in metal cutting
operations and increased investments in shopfloor metrology."
Sir David McMurtry, Executive Chairman.
(1 )Note 11, 'Alternative performance measures', defines how adjusted profit
before tax and earnings per share are calculated.
Overview for the six months ended 31 December 2021
We have continued to deliver on our purpose of making it possible to create
the products, materials and therapies that will define our world in the
decades to come and touch billions of lives.
Revenue
Revenue for the six months ended 31 December 2021 was £325.2m, an increase of
27% compared with £255.1m for the corresponding period last year. We
achieved very strong revenue growth in all regions and there was growth for
all product lines within our Manufacturing technologies segment, most notably
for the encoder and gauging lines. The strong demand for our encoder product
lines continues to be driven by increased investments in industrial automation
and the semiconductor and electronics capital equipment markets, while our
gauging line is benefiting from a recovery in metal cutting operations and
increased investments in shopfloor metrology. The notable increase in demand
from the Americas and EMEA that we experienced in the second-half of FY20/21
has continued, as these economies recovered from the impacts of the pandemic.
The investments that we made in manufacturing resources in the 2021 calendar
year have allowed us to meet the challenges presented by a record order intake
and deliver the strong increase in first-half revenue and profit.
First half First half Change % Constant fx(1) change %
FY21/22
FY20/21
Group revenue £325.2m £255.1m +27 +30
Comprising:
APAC £160.6m £125.9m +28 +32
Americas £69.1m £54.7m +26 +32
EMEA £95.5m £74.5m +28 +27
Operating costs
Our gross margin (excluding engineering costs) for this half-year at 35.5% of
revenue is similar to the previous year, however we have seen an increase in
the cost of some purchased materials and an adverse currency impact, which
have been offset by improved efficiencies resulting from higher production
volumes.
The Group headcount has increased during the first half of the financial year
and was 4,975 at the end of December 2021 compared to 4,664 at the end of June
2021 and 4,324 at the end of December 2020. This increase is primarily due to
additional manufacturing staff to ensure we have sufficient capacity to meet
demand, targeted growth to support product development, and recruitment for
our future talent programmes. Labour costs, excluding bonus provisions and
prior year overseas job retention grant income, were £115.1m in this
half-year compared to £102.4m last year, with the average headcount in the
first half-year being 4,832 (H1 20/21: 4,371). As part of our ongoing staff
development and retention programmes, which includes ensuring competitive
remuneration packages, we have recently undertaken extensive salary
benchmarking exercises in certain areas of the business, including the UK.
This has led to targeted investments which will result in around £5m of
additional annual labour cost going forward.
Certain other operating costs, such as travel and exhibitions, are higher this
half-year compared to last year as some restrictions relating to the pandemic
have been lifted. We have also experienced an increase in utilities costs,
arising from increasing energy prices and usage. The impact of these increases
will result in higher costs in the second half of the year. No significant
asset impairments have been recognised in this half-year, or in the previous
half-year.
We remain committed to our long-term strategy of developing innovative and
patented products to create strong market positions. During the first six
months of this year, we incurred net engineering expenditure of £37.8m
compared with £37.2m last year, which includes our continuing commitment to
support existing products and technologies. We continue to prioritise those
'flagship' projects that either bring faster revenue benefits or are
strategically important to the business. At the EMO Milano exhibition in
October, we launched the REVO® ultrasonic probe (RUP1) which allows the
measurement of thickness on components, such as aircraft landing gear parts
and power generation drive shafts, where access to internal features is
challenging.
Profit and tax
Adjusted profit before tax(1) for the first half-year was £84.2m compared
with £43.4m last year, primarily due to the revenue growth, giving a return
on revenue of 26% (H1 FY20/21: 17%). Statutory profit before tax for the first
half-year was £81.5m, compared with £63.9m last year, which includes a
£2.9m fair value loss on financial instruments not effective for hedge
accounting and not included in adjusted profit before tax. The gain in the
previous half-year relates primarily to proportions of forward contracts which
failed hedge effectiveness testing in FY19/20, after the global macroeconomic
uncertainty resulted in reductions to the highly probable forecasts of the
hedged item. No further contracts have been designated as ineffective in the
six months to 31 December 2021.
The income tax expense in the Consolidated income statement has been estimated
at a rate of 15.9% (H1 20/21: 18.0%) and is based on management's best
estimate of the full year effective tax rates by geographical unit applied to
half-year profits. The reduced effective tax rate mainly arises from a
forecast increase in the UK Patent Box benefit from nil in the prior year.
Adjusted earnings per share were 97.2p, compared with 49.2p last year.
Statutory earnings per share were 94.2p, compared with 72.1p last year.
Manufacturing technologies
Revenue for our manufacturing technologies segment, which comprises our
Industrial Metrology, Position Measurement and Additive Manufacturing
businesses, was £308.7m for the first six months, compared with £236.9m last
year(2). Adjusted operating profit was £81.3m, compared with £41.1m for the
comparable period last year(2). We have seen growth in demand for all our
Manufacturing technologies product lines, notably in our gauging product line,
and our magnetic and optical encoder product lines. The latter has seen strong
growth due to significant global investments in the semiconductor and
electronics capital equipment market, driven by an increase in both consumer
and commercial demand for electronic products, the growth in electric vehicles
which contain more sensors than conventional vehicles, and the desire for more
nations to become self-sufficient in semiconductor manufacturing. Magnetic
encoders manufactured by our associate company, RLS, also experienced strong
growth due to increased demand for industrial automation products. We also
experienced good growth in demand for our machine tool and co-ordinate
measuring machine product lines, where our global customer base and strong
portfolio of products, including recent introductions, have allowed us to
benefit from a recovery in investments in metal cutting machinery and the need
to measure the outputs from those processes.
The supply chain challenges that we experienced in FY20/21 continue,
especially due to the global shortage of electronic components. However, these
risks are mitigated by our extensive in-house manufacturing operations, our
proactive inventory management, continual assessment of alternative
components, and the loyalty of our customer base.
Analytical instruments and medical devices
Revenue from our analytical instruments and medical devices segment for the
first six months was £16.5m, compared with £18.3m last year(2). The adjusted
operating profit was £1.6m in the first half of this year compared with a
£2.3m for the comparable period last year(2). Despite a good order book, our
spectroscopy line saw a small reduction in revenue due to delays shipping
product to China where some customers are experiencing long lead-times in
obtaining duty exemption certificates. Excluding China, revenue has increased
year-on-year.
Balance sheet
Capital expenditure for this half-year was £12.2m (H1 20/21: £4.8m) and was
primarily on plant and equipment to support our manufacturing processes and IT
infrastructure, and the completion of our new distribution facility in South
Korea.
Inventory balances have increased by £22.3m since 30 June 2021, in line with
increases in global demand and reflecting planned increases in certain
component safety stock levels to mitigate global supply shortages. Trade
receivables have decreased by £2.8m in the same period reflecting a reduction
in debtor days.
Net cash and bank deposit balances at 31 December 2021 were £222.0m, compared
with £215.0m at 30 June 2021, primarily reflecting the cash generated from
operating profit, offset by the working capital movement, capital expenditure,
tax payments and the final dividend payment for FY20/21.
Dividend
The Board has approved an interim dividend of 16.0 pence net per share (2021:
14.0p) which will be paid on 11 April 2022 to shareholders on the register on
11 March 2022.
Principal risks and uncertainties
The Board has considered the risks and uncertainties which could have a
material effect on the Group's performance and position. While there is
continuing uncertainty regarding the impact of COVID-19, as well as global
macroeconomic conditions, supply chain challenges and trade tensions, the
overall impact and likelihood of our principal risks is not considered to have
changed significantly. This conclusion also reflects the mitigation undertaken
by the Group in response to these risks. The principal risks and uncertainties
set out on pages 34 to 43 of the 2021 Annual Report therefore remain relevant.
COVID-19 update
Our priorities continue to be the health and welfare of our employees, their
families and the wider communities in which we operate, and to maintain high
service levels to our global customer base. Our response and mitigation
committee continues to meet at least twice weekly to review any developments
caused by the pandemic and to take any necessary mitigating actions. We have a
wide-range of robust COVID-secure working practices in place to protect
against the spread of the virus and, within the UK, where we have higher
numbers of employees, we have continued self-testing for all employees who are
working on-site, including daily testing introduced during the recent Omicron
wave of infections. All our manufacturing facilities around the world are
operating as normal, and we have maintained supply to customers. Many of our
non-manufacturing employees have worked remotely throughout the pandemic, and
while this has generally been a positive experience in terms of productivity,
we recognise the benefits of in-person collaboration. We have therefore agreed
a hybrid working policy, initially in the UK. The pandemic has brought forward
many digital initiatives, including the expansion of the use of digital
collaborative tools for customer support, and the use of marketing automation,
virtual exhibitions and webinars to ensure a supply of high-quality sales
opportunities.
Brexit
To mitigate against the impacts of the UK leaving the EU, we have taken
actions in recent years including establishing a warehouse in Ireland,
expanding our existing warehouse in Germany, and increasing the inventory of
certain finished goods and components at sites within the EU and the UK.
Although there have been some delays at the UK borders for shipments into the
EU and for imports from the EU and other regions, including shipments from our
manufacturing facility in India, the measures that we have taken have
minimised the impact on customer service.
Sustainability
From 30 June 2015 to 30 June 2021, we reduced our greenhouse gas emissions
(scopes 1, 2 and measured scope 3) by 39% and by the end of FY 20/21 80% of
our global electricity was from renewable sources, of which 11% was
self-generated. However, like most organisations there is much more that we
must do to meet the challenges of climate change. At the end of November, we
committed to a science-based Net Zero emissions target by no later than 2050,
with an ambition to bring this date forward once we have a better
understanding of currently unmeasured scope 3 emissions. We are also currently
in the process of agreeing a Net Zero target for scope 1 and 2 emissions. Our
targets will be validated and monitored by the internationally respected SBTi
(Science Based Target initiative) and as part of this commitment we will also
start to report against the relevant UN Sustainable Development Goals in this
year's Annual Report.
The drive to Net Zero represents many opportunities for our business as our
products positively contribute to our customers own sustainability ambitions
by reducing energy consumption and minimising waste.
Directors and employees
The Directors would like to thank our employees for their continuing
resilience, skill and dedication throughout the pandemic, which has ensured
continuous supply and support to our customers, the introduction of innovative
new products, the progression of key projects that will underpin the future
success of our business, and the support for each other and our local
communities. They have truly demonstrated our core values of innovation,
inspiration, integrity and involvement.
On 31 December 2021, Carol Chesney, stepped down from the Board as a
Non-executive Director, Chair of the Audit Committee and a member of the
Remuneration and Nomination Committees. She was appointed in 2012 and made a
considerable contribution to the Board and Renishaw, and we would like to
thank her and wish her well for the future. Juliette Stacey was appointed to
the Board on 1 January 2022 as a Non-executive Director and Chair of the Audit
Committee and has also joined the Nomination and Remuneration Committees.
Juliette is currently Senior Independent Director at Fuller, Smith &
Turner P.L.C. where she is Chair of its Audit Committee and a member of its
Nomination and Remuneration committees. She is also a Non-executive Director
of Sanderson Design Group plc where she is Chair of its Audit Committee and a
member of its Remuneration and Nomination Committees. Juliette previously held
roles as Group Finance Director and later as Group Chief Executive at Mabey
Holdings Ltd. She brings extensive experience, with her strong finance and
leadership background and will be a valuable addition to the Company's
resources at board level and particularly as Chair of the Audit Committee.
Outlook
The Board continues to be confident in our long-term prospects and ability to
deliver on our purpose, due to our strong financial position, the high quality
of our people, our innovative product pipeline, extensive global sales and
marketing presence, and relevance to high-value manufacturing.
We currently have a record order book, and we expect demand from the
semiconductor and electronics sectors to remain strong and that the recoveries
in the machine tool market and co-ordinate measuring machine market will
continue. At this stage, we expect full year revenue to be in the range of
£650m to £690m. Adjusted profit before tax is expected to be in the range of
£157m to £181m.
Sir David McMurtry Will Lee Allen Roberts
Executive Chief Executive Group Finance Director
Chairman
( ) ( ) ( )
3 February 2022 ( ) ( )
( ) ( )
( )
(1 )Note 11, 'Alternative performance measures', defines how revenue at
constant exchange rates, adjusted profit before tax, operating profit and
earnings per share are calculated.
(2 )Results relating to sales of additive manufacturing machines to medical
and dental customers are no longer recognised in the Analytical instruments
and medical devices (previously Healthcare) operating segment. Comparative
figures have been reclassified accordingly, see note 2.
Consolidated income statement
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
Notes £'000 £'000 £'000
Revenue 2 325,176 255,123 565,559
Cost of sales 3 (153,293) (128,043) (269,852)
Gross profit 171,883 127,080 295,707
Distribution costs (55,830) (54,250) (110,087)
Administrative expenses (33,560) (29,436) (69,257)
(Losses)/gains from the fair value of financial instruments 10 (2,313) 20,526 21,978
Operating profit 80,180 63,920 138,341
Financial income 4 445 3,629 3,406
Financial expenses 4 (658) (3,641) (3,991)
Share of profits from associates and joint ventures 1,515 39 1,683
Profit before tax 81,482 63,947 139,439
Income tax expense 5 (12,949) (11,487) (27,980)
Profit for the period 68,533 52,460 111,459
Profit attributable to:
Equity shareholders of the parent company 68,533 52,460 111,459
Non-controlling interest - - -
Profit for the period 68,533 52,460 111,459
Pence Pence Pence
Dividend per share arising in respect of the period 7 16.0 14.0 66.0
Earnings per share (basic and diluted) 6 94.2 72.1 153.2
Consolidated statement of comprehensive income and expense
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
Profit for the period 68,533 52,460 111,459
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement:
Current tax on contributions to defined benefit pension schemes 827 - 1,653
Deferred tax on contributions to defined benefit pension schemes (827) - (1,653)
Remeasurement of defined benefit pension scheme liabilities (806) 101 33,285
Deferred tax on remeasurement of defined benefit pension scheme liabilities 73 (171) (6,052)
Total for items that will not be reclassified (733) (70) 27,233
Items that may be reclassified to the Consolidated income statement:
Exchange differences in translation of overseas operations 434 (8,148) (14,752)
Exchange differences in translation of overseas joint venture (229) (217) (728)
Current tax on translation of net investments in foreign operations (245) 1,157 735
Deferred tax on translation of net investments in foreign operations - - 735
Effective portion of changes in fair value of cash flow hedges, net of (3,256) 40,712 51,590
recycling
Deferred tax on effective portion of changes in fair value of cash flow hedges 607 (7,736) (9,790)
Total for items that may be reclassified (2,689) 25,768 27,790
Total other comprehensive income and expense, net of tax (3,422) 25,698 55,023
Total comprehensive income and expense for the period 65,111 78,158 166,482
Attributable to:
Equity shareholders of the parent company 65,111 78,158 166,482
Non-controlling interest - - -
Total comprehensive income and expense for the period 65,111 78,158 166,482
Consolidated balance sheet
Unaudited Unaudited Audited
At 31 December At 31 December At 30 June
2021 2020 2021
Notes £'000 £'000 £'000
Assets
Property, plant and equipment 8 248,098 257,668 246,242
Intangible assets 9 44,917 43,125 43,795
Right-of-use-assets 11,973 13,489 12,429
Investments in associates and joint ventures 17,920 16,426 16,634
Long-term loans to associates and joint ventures - 2,056 -
Finance lease receivables 6,814 5,292 6,241
Deferred tax assets 21,150 25,799 21,292
Derivatives 10 6,836 9,653 12,484
Total non-current assets 357,708 373,508 359,117
Current assets
Inventories 135,895 98,152 113,563
Trade receivables 10 111,864 95,582 114,661
Finance lease receivables 1,524 1,731 1,763
Contract assets 757 432 332
Short-term loans to associates and joint ventures 616 781 598
Current tax 3,279 5,131 1,600
Other receivables 27,174 20,684 30,021
Derivatives 10 9,839 3,192 9,639
Pension scheme cash escrow account 10,580 10,575 10,578
Bank deposits 160,000 80,000 120,000
Cash and cash equivalents 62,038 106,619 95,008
Total current assets 523,566 422,879 497,763
Current liabilities
Trade payables 27,954 18,441 24,715
Contract liabilities 5,707 6,235 6,120
Current tax 6,700 3,881 4,680
Provisions 6,342 6,279 6,259
Derivatives 10 3,877 7,771 5,594
Lease liabilities 3,644 4,150 3,904
Borrowings 972 3,628 992
Other payables 47,732 40,974 51,716
Total current liabilities 102,928 91,359 103,980
Net current assets 420,638 331,520 393,783
Non-current liabilities
Borrowings 5,919 7,562 6,457
Lease liabilities 8,672 9,569 8,658
Employee benefits 20,229 60,895 23,698
Deferred tax liabilities 12,029 499 10,402
Derivatives 10 1,598 1,394 355
Total non-current liabilities 48,447 79,919 49,570
Total assets less total liabilities 729,899 625,109 703,330
Equity
Share capital 14,558 14,558 14,558
Share premium 42 42 42
Own shares held (750) (404) (404)
Currency translation reserve 3,679 10,521 3,719
Cash flow hedging reserve 8,696 2,521 11,345
Retained earnings 704,553 598,490 674,603
Other reserve (302) (42) 44
Equity attributable to the shareholders of the parent company 730,476 625,686 703,907
Non-controlling interest (577) (577) (577)
Total equity 729,899 625,109 703,330
Consolidated statement of changes in equity
Unaudited Own Currency Cash flow Non-
Share Share shares translation hedging Retained Other controlling
capital premium held reserve reserve earnings reserve interest Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2020 14,558 42 (404) 17,729 (30,455) 546,100 (129) (577) 546,864
Profit for the period - - - - - 52,460 - - 52,460
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities - - - - - (70) - - (70)
Foreign exchange translation differences - - - (6,991) - - - - (6,991)
Relating to associates and joint ventures - - - (217) - - - - (217)
Changes in fair value of cash flow hedges - - - - 32,976 - - - 32,976
Total other comprehensive income and expense - - - (7,208) 32,976 (70) - - 25,698
Total comprehensive income and expense - - - (7,208) 32,976 52,390 - - 78,158
Transactions with owners recorded in equity
Share-based payments charge - - - - - - 87 - 87
Balance at 31 December 2020 14,558 42 (404) 10,521 2,521 598,490 (42) (577) 625,109
Profit for the period - - - - - 58,999 - - 58,999
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities - - - - - 27,303 - - 27,303
Foreign exchange translation differences - - - (6,291) - - - - (6,291)
Relating to associates and joint ventures - - - (511) - - - - (511)
Changes in fair value of cash flow hedges - - - - 8,824 - - - 8,824
Total other comprehensive income and expense - - - (6,802) 8,824 27,303 - - 29,325
Total comprehensive income and expense - - - (6,802) 8,824 86,302 - - 88,324
Transactions with owners recorded in equity
Share-based payments charge - - - - - - 86 - 86
Dividends paid - - - - - (10,189) - - (10,189)
Balance at 30 June 2021 14,558 42 (404) 3,719 11,345 674,603 44 (577) 703,330
Profit for the period - - - - - 68,533 - - 68,533
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities - - - - - (733) - - (733)
Foreign exchange translation differences - - - 189 - - - - 189
Relating to associates and joint ventures - - - (229) - - - - (229)
Changes in fair value of cash flow hedges - - - - (2,649) - - - (2,649)
Total other comprehensive income and expense - - - (40) (2,649) (733) - - (3,422)
Total comprehensive income and expense - - - (40) (2,649) 67,800 - - 65,111
Transactions with owners recorded in equity
Share-based payments net credit - - - - - - (346) - (346)
Distribution of own shares - - 404 - - - - - 404
Purchase of own shares - - (750) - - - - (750)
Dividends paid - - - - - (37,850) - - (37,850)
Balance at 31 December 2021 14,558 42 (750) 3,679 8,696 704,553 (302) (577) 729,899
Consolidated statement of cash flow
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period 68,533 52,460 111,459
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets 11,729 11,392 28,780
(Profit)/loss on sale of property, plant and equipment 17 (8) 31
Amortisation of development costs 4,035 4,577 9,019
Impairment of development costs 185 - 1,092
Amortisation of other intangibles 396 735 1,205
Share of profits from associates and joint ventures (1,515) (39) (1,683)
Impairment of investment in associate - - 1,674
Impairment of long-term loan to associate - - 2,633
Remeasurement of defined benefit pension scheme liabilities from GMP - 82 78
equalisation
Financial income (445) (3,629) (3,406)
Financial expenses 658 3,641 3,991
Losses/(gains) from the fair value of financial instruments 2,936 (20,537) (22,995)
Share based payment expense 59 87 173
Tax expense 12,949 11,487 27,980
31,004 7,788 48,572
Decrease/(increase) in inventories (22,332) 7,345 (8,066)
Decrease/(increase) in trade and other receivables 5,375 6,678 (25,703)
(Decrease)/increase in trade and other payables (1,075) 9,481 27,216
(Decrease)/increase in provisions 83 688 668
(17,949) 24,192 (5,885)
Defined benefit pension contributions (4,431) (4,436) (8,866)
Income taxes paid (10,366) (4,627) (9,991)
Cash flows from operating activities 66,791 75,377 135,289
Investing activities
Purchase of property, plant and equipment (12,199) (4,825) (10,873)
Sale of property, plant and equipment 363 2,474 33
Development costs capitalised (4,820) (5,074) (9,844)
Purchase of other intangibles (784) (810) (3,000)
Increase in bank deposits (40,000) (70,000) (110,000)
Interest received 261 359 625
Purchase of additional shareholding in joint venture - - (749)
Cash flows from investing activities (57,179) (77,876) (133,808)
Financing activities
Increase in borrowings - 636 636
Repayment of borrowings (471) (550) (3,477)
Interest paid (324) (13) (386)
Repayment of principal portion of lease liabilities (1,741) (2,604) (4,815)
Purchase of own shares (750) - -
Dividends paid (37,845) - (10,189)
Cash flows from financing activities (41,131) (2,531) (18,231)
Net (decrease)/increase in cash and cash equivalents (31,519) (5,030) (16,750)
Cash and cash equivalents at the beginning of the period 95,008 110,386 110,386
Effect of exchange rate fluctuations on cash held (1,451) 1,263 1,372
Cash and cash equivalents at the end of the period 62,038 106,619 95,008
Notes
1. Basis of preparation
The Interim report, which includes the condensed consolidated financial
statements for the six months ended 31 December 2021, was approved by the
Directors on 3 February 2022.
The condensed consolidated financial statements for the six months ended 31
December 2021 were prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting' (IAS 34) as issued by the
International Accounting Standards Board and as adopted by the UK, and apply
the same accounting policies, presentation and methods of calculation as were
applied in the preparation of the Group's consolidated financial statements
for the year ended 30 June 2021, except for income taxes which are accrued
using the forecast tax rate for the financial year, and except for the
adoption of new accounting standards.
The condensed consolidated financial statements included in this Report have
not been audited and do not constitute the Group's statutory accounts as
defined in section 434 of the Companies Act 2006. The information relating to
the year ended 30 June 2021 is an extract from the Group's published Annual
Report for that year, which has been delivered to the Registrar of Companies,
and on which the auditor's report was unqualified and did not contain any
emphasis of matter or statements under section 498(2) or 498(3) of the
Companies Act 2006.
For the year to 30 June 2022 the annual financial statements will be prepared
in accordance with IFRS as adopted by the UK Endorsement Board. This change in
basis of preparation is required by UK company law as a result of the UK's
exit from the EU on 31 January 2020 and the end of the transition period on 31
December 2020. This change does not constitute a change in accounting policy
but rather a change in accounting policy which is required to ground the use
of IFRS in company law. There is no impact on recognition, measurement or
disclosure between the two frameworks in the period reported.
Going concern
The Directors have prepared the unaudited interim financial information on a
going concern basis. In considering the going concern basis, the Directors
have considered the above-mentioned principal risks and uncertainties, as well
as the Group's current trading performance and updated cashflow forecasts.
In the 2021 Annual Report we disclosed details of a 'base' scenario as well as
five 'severe but plausible' scenarios which were used in the Director's going
concern assessment, and viability statement, as at October 2021. With strong
trading performance in the first half of the year and a record order book,
both of our operating segments are expected to outperform the 'base' scenario
forecasts for the year to 30 June 2022, and performance in subsequent periods
is also expected to outperform the 'base' scenario. The Directors have
continued to monitor the 'severe but plausible' scenarios, noting no change
from the risks identified as at 30 June 2021, concluding that the Group will
have positive cash balances in all scenarios throughout the going concern
period. The Directors have also considered the financial resources available
to the Group, with net current assets of £420.6m at 31 December 2021
(compared to £393.8m at 30 June 2021), including £222.0m net cash and bank
deposits at 31 December 2021, an increase from £215.0m at 30 June 2021.
Having made appropriate enquiries, the Directors are satisfied that, at the
time of approving the unaudited condensed consolidated financial statements,
it is appropriate to continue to adopt a going concern basis of accounting.
2. Segmental information
The Group manages its business in two segments, comprising Manufacturing
technologies and Analytical instruments and medical devices. Within the
operating segments, there are multiple product offerings with similar economic
characteristics, similar production processes and similar customer bases. The
results of these segments are regularly reviewed by the Board to allocate
resources and to assess their performance. More details of the Group's
products and services are given in the Strategic Report of the 2021 Annual
Report.
In normal trading conditions, whilst future revenue is difficult to predict
given that the Group's outstanding order book is typically less than three
months' worth of revenue value, larger consumer electronics orders in the APAC
region within the manufacturing technologies segment typically fall in the
first or last quarter of the financial year. In addition, the Group typically
experiences lower demand in August and December, and so revenue and operating
profits are typically lower in the first half of the year. This information is
provided to allow for a better understanding of the results, and management do
not believe that the business is 'highly seasonal' in accordance with IAS 34.
6 months to 31 December 2021 Analytical instruments and medical devices Total
Manufacturing technologies
£'000 £'000 £'000
Revenue 308,707 16,469 325,176
Depreciation, amortisation and impairment 15,508 837 16,345
Operating profit before gains from fair value of financial instruments 80,938 1,555 82,493
Share of profits from associates and joint ventures 1,515 - 1,515
Net financial expense - - (213)
Gains from the fair value of financial instruments - - (2,313)
Profit before tax - - 81,482
6 months to 31 December 2020 (1)
Revenue 236,873 18,250 255,123
Depreciation, amortisation and impairment 14,579 945 15,524
Operating profit before gains from fair value of financial instruments 41,078 2,316 43,394
Share of profits from associates and joint ventures 39 - 39
Net financial expense - - (12)
Gains from the fair value of financial instruments - - 20,526
Profit before tax - - 63,947
Year ended 30 June 2021 (1)
Revenue 530,445 35,114 565,559
Depreciation, amortisation and impairment 37,909 2,187 40,096
Operating profit before losses from fair value of financial instruments 111,978 4,385 116,363
Share of profits from associates and joint ventures 1,683 - 1,683
Net financial expense - - (585)
Gains from the fair value of financial instruments - - 21,978
Profit before tax - - 139,439
(1)In previous years, we reported the results of additive manufacturing
machines marketed and sold to medical and dental customers within Analytical
instruments and medical devices (formerly Healthcare), reflecting how we
managed this business. The management of this now sits within the Additive
Manufacturing product line, with a similar customer base and risk profile to
this product line, with results and operational matters reported to the
Executive Committee and Chief Operating Decision Maker accordingly. We now
therefore report the medical and dental results within Manufacturing
technologies rather than Analytical instruments and medical devices.
Comparative figures have been reclassified accordingly. For the 6 months to 31
December 2020, revenue of £1,232,000, depreciation and amortisation of
£695,000, and operating loss before gains from fair value of financial
instruments of £131,000 have been reclassified from Analytical instruments
and medical devices to Manufacturing technologies. Amounts of £4,254,000,
£993,000 and £1,480,000 (profit) respectively have also been reclassified in
the year ended 30 June 2021.
There is no allocation of assets and liabilities to operating segments.
Depreciation is included within certain other overhead expenditure which is
allocated to segments on the basis of the level of activity.
The following table shows the disaggregation of Group revenue by category:
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
Goods, capital equipment and installation 299,077 229,828 513,675
Aftermarket services 26,099 25,295 51,884
Total Group revenue 325,176 255,123 565,559
Aftermarket services include repairs, maintenance and servicing, programming,
training, extended warranties, and software licences and maintenance.
The following table shows the analysis of revenue by geographical market:
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
APAC 160,562 125,924 274,765
UK (country of domicile) 15,485 10,864 26,923
EMEA, excluding UK 80,007 63,644 142,219
EMEA 95,492 74,508 169,142
Americas 69,122 54,691 121,652
Total Group revenue 325,176 255,123 565,559
Revenue in the above table has been allocated to regions based on the
geographical location of the customer. Countries with individually material
revenue figures in the context of the Group were:
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
China 80,700 69,488 141,690
USA 60,324 46,891 103,850
Japan 32,066 24,200 51,523
Germany 27,600 23,038 51,095
There was no revenue from transactions with a single external customer
amounting to 10% or more of the Group's total revenue.
3. Cost of sales
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
Production costs 115,477 90,807 197,805
Research and development expenditure 27,944 29,290 58,618
Other engineering expenditure 12,644 10,512 18,019
Gross engineering expenditure 40,588 39,802 76,637
Development expenditure capitalised (net of amortisation) (785) (497) (825)
Development expenditure impaired 185 - 1,092
Research and development tax credit (2,172) (2,070) (4,857)
Total engineering costs 37,816 37,235 72,047
Total cost of sales 153,293 128,043 269,852
4. Financial income and expenses
6 months to 6 months to Year ended
31 December 31 December 30 June
2021 2020 2021
£'000 £'000 £'000
Financial income
Fair value gains from one-month forward currency contracts - 3,263 2,781
Currency gains 184 - -
Bank interest receivable 261 366 625
Total financial income 445 3,629 3,406
Financial expenses
Interest on pension schemes' liabilities 156 454 876
Currency losses - 2,720 2,660
Fair value losses from one-month forward currency contracts 178 - -
Lease interest 236 417 335
Interest payable on borrowings 30 30 69
Other interest payable 58 20 51
Total financial expenses 658 3,641 3,991
Currency losses relate to revaluations of foreign currency-denominated
balances using latest reporting currency exchange rates. Certain intragroup
balances are classified as 'net investments in foreign operations', such that
revaluations from currency movements on designated balances accumulate in the
Currency translation reserve in Equity. Rolling one-month forward currency
contracts are used to offset currency movements on remaining intragroup
balances, with fair value gains and losses being recognised in financial
income or expenses.
5. Taxation
The income tax expense in the Consolidated income statement has been estimated
at a rate of 15.9% (December 2020: 18.0%), based on management's best estimate
of the full year effective tax rates by geographical unit applied to half-year
profits. The reduced effective tax rate mainly arises from a forecast increase
in the UK Patent Box benefit.
6. Earnings per share
The earnings per share for the six months ended 31 December 2021 is calculated
on earnings of £68,533,000 (December 2020: £52,460,000) and on 72,774,147
shares (December 2020: 72,778,904 shares), being the number of shares in issue
during the period. This excludes 14,396 shares (December 2020: 9,639 shares)
held by the Renishaw Employee Benefit Trust.
7. Dividends
6 months to 6 months to Year ended
31 December 31 December 30 June
Dividends paid during the period were: 2021 2020 2021
£'000 £'000 £'000
2021 final dividend paid of 52.0p per share (2020: nil) 37,850 - -
Interim dividend paid of 14.0p per share (2021: nil) - - 10,189
Total dividends paid during the period 37,850 - 10,189
All shareholders on the register on 11 March 2022 will be paid an interim
dividend of 16.0p net per share on 11 April 2022, resulting in a dividend
payable of £11,646,167.
8. Property, plant and equipment
Freehold Assets in the
land and Plant and Motor course of construction
buildings equipment vehicles Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2021 216,783 242,432 7,421 7,109 473,745
Additions 2,647 2,367 1,258 5,927 12,199
Transfers 39 1,395 - (1,434) -
Disposals - (1,057) (827) - (1,884)
Currency adjustment (126) (83) (12) - (221)
At 31 December 2021 219,343 245,054 7,840 11,602 483,839
Depreciation
At 1 July 2021 38,530 182,557 6,416 - 227,503
Charge for the period 1,756 7,702 290 - 9,748
Released on disposals - (700) (804) - (1,504)
Currency adjustment 11 (14) (3) - (6)
At 31 December 2021 40,297 189,545 5,899 - 235,741
Net book value
At 31 December 2021 179,046 55,509 1,941 11,602 248,098
At 30 June 2021 178,253 59,875 1,005 7,109 246,242
Additions to assets in the course of construction of £5,927,000 (December
2020: £3,040,000) comprise £1,095,000 (December 2020: £251,000) for
freehold land and buildings and £4,832,000 (December 2020: £2,789,000) for
plant and equipment. At the end of the period, assets in the course of
construction, not yet transferred, of £11,602,000 (December 2020:
£6,663,000) comprise £4,308,000 (December 2020: £2,804,000) for freehold
land and buildings and £7,294,000 (December 2020: £3,859,000) for plant and
equipment.
9. Intangible assets
Other intangible assets Internally Software
Goodwill on consolidation generated licences and intellectual property
development costs
Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2021 19,533 15,783 177,291 24,962 237,569
Additions - - 4,820 784 5,604
Currency adjustment 147 (6) - (14) 127
At 31 December 2021 19,680 15,777 182,111 25,732 243,300
Amortisation
At 1 July 2021 9,028 13,254 151,807 19,685 193,774
Charge for the period - 128 4,035 268 4,431
Impairment - - 185 - 185
Currency adjustment - 6 - (13) (7)
At 31 December 2021 9,028 13,388 156,027 19,940 198,383
Net book value
At 31 December 2021 10,652 2,389 26,084 5,792 44,917
At 30 June 2021 10,505 2,529 25,484 5,277 43,795
As detailed in the 2021 Annual Report, the key assumption in determining the
value-in-use of intangible assets are sales forecasts. Latest sales forecasts,
and other factors which may impact the business plans, for relevant cash
generating units have been reviewed for indicators of impairment at 31
December 2021. As a result, total impairments of £185,000 have been
recognised in the six months to 31 December 2021 (December 2020: £nil).
10. Financial instruments
There is no significant difference between the fair value of financial assets
and financial liabilities and their book value in the Consolidated balance
sheet. All financial assets and liabilities are held at amortised cost, apart
from the forward 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 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. There were no transfers between levels
during any period disclosed.
Credit risk
The Group carries a credit risk relating to non-payment of trade receivables
by its customers and establishes an allowance for impairment in respect of
trade receivables where recoverability is considered doubtful. In the six
months to 31 December 2021, the Group has not experienced a deterioration in
debtor repayments nor in the assumptions used in calculating allowances for
expected credit losses. At 31 December 2021, total expected credit losses
amounted to £3,544,000, being 3.2% of gross trade receivables, compared with
£3,826,000 at 30 June 2021, being 3.2% of gross trade receivables.
Liquidity risk
The Group's approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when
due, and the Group continues to use monthly cash flow forecasts on a rolling
12-month basis to monitor cash requirements. With net cash and bank deposits
at 31 December 2021 totalling £222,038,000, an increase of £7,030,000 from
30 June 2021, and bank deposits of maximum six-month maturity, the Group's
liquidity has improved in the six months to 31 December 2021.
Market risk
At 31 December 2021 the total nominal value of USD, EUR and JPY forward
contracts held for cash flow hedging purposes was £516,547,000. At 31
December 2021 the remaining nominal value of USD, EUR and JPY forward
contracts ineffective for cash flow hedging and yet to mature amounted to
£109,199,000, with no additional forward contracts becoming ineffective for
hedge accounting purposes in the six months to 31 December 2021. On an ongoing
basis, a 10% depreciation of GBP against USD, EUR and JPY would result in a
£12,133,000 gain being recognised in the Consolidated Income Statement, while
a 10% appreciation would result in a £9,927,000 loss. Fair value gains and
losses relating to this have been excluded from adjusted profit measures, see
note 11 for further detail.
11. Alternative performance measures
In accordance with Renishaw's Alternative Performance Measures (APMs) policy
and ESMA Guidelines on Alternative Performance Measures (2015), APMs are
defined as - Revenue at constant exchange rates, Adjusted profit before tax,
Adjusted earnings per share and Adjusted operating profit.
Revenue at constant exchange rates is defined as revenue recalculated using
the same rates as were applicable to the previous year and excluding forward
contract gains and losses.
Revenue at constant exchange rates 6 months to 31 December 2021 6 months to 31 December 2020
£'000 £'000
Statutory revenue as reported 325,176 255,123
Adjustment for forward contract losses (391) 1,375
Adjustment to restate at previous year exchange rates 9,404 -
Revenue at constant exchange rates 334,189 256,498
Year-on-year revenue growth at constant exchange rates 30% -
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 third-party costs relating to the formal sale process
('FSP') concluded in July 2021 and gains and losses in fair value from forward
currency contracts which did not qualify for hedge accounting and which have
yet to mature.
From FY16/17, the gains and losses from the fair value of financial
instruments not effective for cash flow hedging have been excluded from
statutory profit before tax, statutory earnings per share and statutory
operating profit in arriving at Adjusted profit before tax, Adjusted earnings
per share and Adjusted operating profit, to reflect the Board's intent that
the instruments would provide effective hedges. This is classified as 'Fair
value (gains)/losses on financial instruments not eligible for hedge
accounting (i)' in the following reconciliations. The amounts shown as
reported in revenue represent the amount by which revenue would change had all
the derivatives qualified as eligible for hedge accounting. Gains and losses
which recycle through the Consolidated income statement as a result of
contracts deemed ineffective during FY19/20 are also excluded from adjusted
profit measures, on the basis that all forward contacts are still expected to
be effective hedges for Group revenue, while the potentially high volatility
in fair value gains and losses relating to these contracts will otherwise
cause confusion for users of the financial statements wishing to understand
the underlying trading performance of the Group. This is classified as 'Fair
value (gains)/losses on financial instruments not eligible for hedge
accounting (ii)' in the following reconciliations.
The Board considers these alternative performance measures to be more relevant
and reliable in evaluating the Group's performance.
Adjusted profit before tax 6 months to 31 December 2021 6 months to 31 December 2020 Year ended 30 June 2021
£'000 £'000 £'000
Statutory profit before tax 81,482 63,947 139,439
Third-party FSP costs (200) - 3,222
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue 2,621 (11) 1,882
- reported in (gains)/losses from the fair value of financial instruments - derivatives (1,138) 2,763 846
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (1,998) - (2,899)
- reported in (gains)/losses from the fair value of financial instruments - derivatives 3,451 (23,289) (22,824)
Adjusted profit before tax 84,218 43,410 119,666
Adjusted earnings per share 6 months to 31 December 2021 6 months to 31 December 2020 Year ended 30 June 2021
pence pence pence
Statutory earnings per share 94.2 72.1 153.2
Third-party FSP costs (0.2) - 4.4
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue 2.9 0.0 2.1
- reported in (gains)/losses from the fair value of financial instruments - derivatives (1.3) 3.1 0.9
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (2.2) - (3.2)
- reported in (gains)/losses from the fair value of financial instruments - derivatives 3.8 (25.9) (25.4)
Adjusted earnings per share 97.2 49.3 132.0
Adjusted operating profit 6 months to 31 December 2021 6 months to Year ended 30 June 2021
31 December 2020
£'000 £'000 £'000
Statutory operating profit 80,180 63,921 138,341
Third-party FSP costs (200) - 3,222
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue 2,621 (11) 1,882
- reported in (gains)/losses from the fair value of financial instruments - derivatives (1,138) 2,763 846
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (1,998) - (2,899)
- reported in (gains)/losses from the fair value of financial instruments - derivatives 3,451 (23,289) (22,824)
Adjusted operating profit 82,916 43,384 118,568
Adjustments to segmental operating profit:
Manufacturing technologies 6 months to 31 December 2021 6 months to Year ended 30 June
31 December 2020(2) 2021(2)
£'000 £'000 £'000
Operating profit before gain/loss from fair value of financial instruments 80,938 41,078 111,978
Third-party FSP costs (196) - 3,061
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue 2,572 (12) 1,797
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (1,960) - (2,734)
Adjusted manufacturing technologies operating profit 81,354 41,066 114,102
Analytical instruments and medical devices 6 months to 31 December 2021 6 months to 31 December 2020(2) Year ended 30 June 2021(2)
£'000 £'000 £'000
Operating loss before gain/loss from fair value of financial instruments - derivatives 1,555 2,316 4,385
Third-party FSP costs (4) - 161
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue 49 1 86
Fair value gains on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (38) - (166)
Adjusted analytical instruments and medical devices operating profit 1,562 2,317 4,466
(2 )Results relating to sales of additive manufacturing machines to medical
and dental customers are no longer recognised in the Analytical instruments
and medical devices (previously Healthcare) operating segment. Comparative
figures have been reclassified accordingly, see note 2.
12. Related party transactions and events subsequent to the end
of the reporting period
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Full details of the Group's other related party relationships,
transactions and balances are given in the Group's Annual Report for the year
ended 30 June 2021. No related party transactions have taken place in the
first six months of the financial year that have materially affected the
financial position or the performance of the Group during that period.
In January 2022 an agreement was reached between Renishaw plc and Meggitt plc
for the sale of Renishaw's 33.33% shareholding in HiETA Technologies Limited
to Meggitt plc. This has resulted in a net gain on disposal of £0.5m, to be
recognised in the Manufacturing technologies operating segment in the second
half of the financial year.
13. Responsibility statement
The condensed set of financial statements is the responsibility of, and has
been approved by, the Directors. We confirm that to the best of our knowledge:
- As required by DTR 4.2 of the Disclosure Rules and Transparency
Rules, the condensed set of financial statements, which has been prepared in
accordance with the applicable set of accounting standards, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation as a whole. The
Interim report has been prepared in accordance with IAS 34, 'Interim Financial
Reporting', as issued by the International Accounting Standards Board and as
adopted by the UK.
- The Interim report includes a fair review of the information
required by:
(a) DTR 4.2.7 of the Disclosure Rules and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8 of the Disclosure Rules and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
On behalf of the Board
Allen Roberts FCA
Group Finance Director
3 February 2022
Financial calendar
2022 interim dividend record date 11 March 2022
2022 interim dividend payment date 11 April 2022
Trading statement 10 May 2022
Investor day (provisional) 10 May 2022
Announcement of 2022 full year results September 2022
Publication of 2022 Annual Report September 2022
Annual General Meeting October 2022
Registered office:
Renishaw plc
New Mills
Wotton-under-Edge
Gloucestershire
GL12 8JR
UK
Registered number: 01106260
Telephone: +44 1453 524524
Email: uk@renishaw.com
Website: www.renishaw.com
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