REG - Renishaw PLC - Half-year Report
02/02/2023 07:00
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RNS Number : 6529O Renishaw PLC 02 February 2023
Renishaw plc
2 February 2023
Interim report 2023 - for the six months ended 31 December 2022
Highlights
Good revenue growth from strategic priorities offsets weaker demand, as
expected, from the semiconductor and electronics sectors. Continued investment
for longer-term growth.
6 months to 6 months to Change %
31 December 31 December
2022 2021
Revenue (£m) 347.7 325.2 +7
Adjusted(1) profit before tax (£m) 73.5 84.2 -13
Adjusted(1) earnings per share (pence) 83.4 97.2 -14
Dividend per share (pence) 16.8 16.0 +5
Statutory profit before tax (£m) 77.8 81.5 -5
Statutory earnings per share (pence) 88.1 94.2 -6
· Revenue of £347.7m (H1 FY2022 £325.2m):
• Record revenue for a half year, 7% above last year (1% growth at
constant exchange rates)
• Strong growth in sales of multi-laser additive manufacturing (AM)
systems, 5-axis co-ordinate measuring machine (CMM) inspection systems and
laser encoders
• Weaker demand, as expected, for optical encoders from
semiconductor and consumer electronics sectors, including customers reducing
stock levels due to improved supply chain lead times
· Adjusted(1) profit before tax of £73.5m (H1 FY2022 £84.2m):
• Representing 21% of revenue (26% last year)
• Stable gross margin before engineering costs
• Targeted investments in headcount and pay for long-term growth
· Statutory profit before tax of £77.8m (H1 FY2022: £81.5m).
· Strong balance sheet with net cash and bank deposit balances of
£211.5m, compared with £253.2m at 30 June 2022, with the £41.2m final
dividend for FY2022 paid in H1.
· Interim dividend of 16.8p per share.
William Lee, Chief Executive, commented:
"I am pleased to report record revenue in a period of expected lower demand
from the semiconductor and electronics sectors. We have made good progress in
our strategy; gaining market share, introducing new products into
close-adjacent markets and taking advantage of long-term growth opportunities
in additive manufacturing, shop-floor measurement, materials research and
semiconductor manufacturing. We continue to invest in our people, product
development and infrastructure to deliver sustainable, long-term growth."
(1) Note 12, 'Alternative performance measures', defines how adjusted profit
before tax and adjusted earnings per share are calculated.
About Renishaw
We are a world leading supplier of measuring systems and production systems.
Our products give high accuracy and precision, gathering data to provide
customers and end users with traceability and confidence in what they're
making. This technology also helps our customers to innovate their products
and processes. We are a global business, with customer-facing locations across
our three sales regions; the Americas, EMEA, and APAC. Most of our R&D
work takes place in the UK, with our largest manufacturing sites located in
the UK, Ireland and India.
Results presentation and live Q&A session today
See below a video presentation of these results, presented by William Lee,
Chief Executive, and Allen Roberts, Group Finance Director. There will be a
live audio-only question and answer session with William and Allen at 10:30
GMT today. Details of how to register for and access this webcast are
available at the following link:
https://www.renishaw.co
(https://www.renishaw.com/en/register-for-the-2023-interim-results-qa-webcast--47761)
m/en/register-for-the-2023-interim-results-qa-webcast--47761
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
10:00 GMT).
Enquiries: communications@renishaw.com (mailto:communications@renishaw.com)
Overview for the six months ended 31 December 2022
Revenue
Revenue for the six months ended 31 December 2022 was £347.7m, an increase of
7% (1% increase at constant exchange rates) compared with £325.2m for the
corresponding period last year. We achieved revenue growth of 21% (8% at
constant exchange rates) in the Americas, 7% (4% at constant exchange rates)
in EMEA and 1% (-4% at constant exchange rates) in APAC. There was growth for
both our Manufacturing technologies, and Analytical instruments and medical
devices segments, with strong growth in sales of multi-laser additive
manufacturing (AM) systems, machine calibration systems, laser encoder systems
and REVO® 5-axis co-ordinate measuring machine (CMM) inspection systems.
Demand from the semiconductor and electronics sectors was weaker, resulting in
a reduction in sales of our optical encoder products.
6 months to 6 months to Change % Constant fx(1) change %
31 December 31 December
2022 2021
Group revenue £347.7m £325.2m +7 +1
Comprising:
APAC £161.7m £160.6m +1 -4
Americas £83.6m £69.1m +21 +8
EMEA £102.4m £95.5m +7 +4
Operating costs
Our gross margin (excluding engineering costs) for the period was 64% of
revenue, which is similar to the previous year. An increase in manufacturing
costs, primarily arising from pay rises for our employees, has been offset by
a favourable currency effect on revenue and increases in our sales prices.
Group headcount has increased by 53 since the end of June and was 5,150 at the
end of December 2022. This increase includes continued investment in our early
careers programmes (mostly for research and development) and in our global
sales and support teams. Labour costs (excluding bonuses) were £133.4m in
this period compared to £115.1m last year, with the average headcount in the
first half-year being 5,166 (H1 FY2022: 4,824). The increase also reflects the
pay reviews we have carried out across our business over the last 14 months,
helping to improve employee retention. Our pay benchmarking will now be
undertaken around December each year, with the December 2022 review resulting
in around £4m of additional annual cost.
With pandemic related restrictions now largely lifted, we have increased our
investment in customer facing activities, resulting in higher travel and
exhibitions costs compared to last 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, our investment in engineering, including research and
development, increased by 22% to £46.1m. Since June, we have launched new
products including the CENTRUM™ metal rotary scale disc system for our ATOM
DX™ encoder series, the ACS-1 system that brings improved accuracy and speed
to the calibration of machine tool probes and the new inLux™ SEM Raman
interface for our spectroscopy line.
Profit and tax
Adjusted profit before tax(1) for the period was £73.5m (21% of revenue)
compared with £84.2m (26% of revenue) last year. Statutory profit before tax
for the period was £77.8m, compared with £81.5m last year, which includes a
£4.4m fair value gain (H1 FY2022: £2.9m loss) on financial instruments not
effective for hedge accounting and not included in adjusted profit before tax.
No forward contracts have been designated as ineffective since FY2020.
Financial income for the period was £5.0m compared with £0.4m last year, and
includes a £2.3m increase in interest on bank deposits.
The income tax expense in the Consolidated income statement has been estimated
at a rate of 17.7% (H1 FY2022: 15.9%) and is based on management's best
estimate of the full year effective tax rates by geographical unit applied to
half-year profits. This is comparable with the 17.3% achieved in FY2022 and
includes an increase in the UK corporation tax rate for the year to 20.5% from
19.0%, which is largely offset by a forecast increase in the UK patent box
benefit.
Adjusted earnings per share were 83.4p, compared with 97.2p last year.
Statutory earnings per share were 88.1p, compared with 94.2p last year.
Manufacturing technologies
Revenue for this segment, which comprises our Industrial Metrology, Position
Measurement and Additive Manufacturing businesses, was £330.9m for the first
six months, compared with £308.7m last year. We achieved strong growth in the
Americas and good growth in EMEA, with reduced revenue in our APAC region (at
constant exchange rates) mainly due to lower sales of optical encoders to the
semiconductor and electronics market. Adjusted operating profit was £66.8m,
compared with £81.3m for the comparable period last year. As already noted
there was strong growth for our RenAM 500Q multi-laser AM system where its
productivity and ability to produce high quality parts is leading to repeat
business from customers in sectors as diverse as consumer electronics,
healthcare, aerospace, defence and tooling. There was also strong growth for
our CMM inspection systems, based on the REVO® 5-axis system, which is
meeting customer demands for multi-sensor metrology to provide comprehensive
inspection and process feedback from a single measurement platform. Our
calibration business also had strong growth compared to the same period last
year as machine builders focus on the accuracy and reliability of ever more
complex machinery. Weaker demand from our semiconductor customers due to
reducing their stock levels and market uncertainty, led to reduced sales of
our optical encoder products. However, demand for our high accuracy laser
encoders for front-end semiconductor manufacturing processes was very strong.
Global forecasts for the construction of semiconductor fabrication plants,
driven by new technology, geopolitical considerations and supply chain
security, remain positive and we are optimistic about a mid-term recovery in
sales to this important sector.
Analytical instruments and medical devices
Revenue from this segment for the first six months was £16.8m, compared with
£16.5m last year. There was strong growth in both APAC and Americas regions,
offset by significantly weaker demand from EMEA. The adjusted operating profit
was £0.1m in the first half of this year compared with £1.6m for the
comparable period last year. Revenue for our spectroscopy products was flat
but we are seeing growth in the order book and strong demand in H1 for our
newer products - the Virsa™ analyser, a portable system that allows sample
analysis outside of a laboratory, and the recently launched inLux™ SEM Raman
interface which allows simultaneous Raman and scanning electron microscope
imaging. Our neurological business is continuing to progress opportunities
with pharmaceutical companies to use our drug delivery technology for clinical
trials.
Balance sheet
Net cash and bank deposit balances at 31 December 2022 were £211.5m, compared
with £253.2m at 30 June 2022, primarily reflecting the cash generated from
operating profit of £81.2m, offset by the working capital movement of
£40.6m, capital expenditure of £20.2m, tax payments of £16.9m and the final
dividend payment of £41.2m in respect of FY2022.
Inventory balances have increased by £17.3m since 30 June 2022, mainly
reflecting targeted increases in components and sub-assemblies for our optical
encoder products. Trade receivables have decreased by £4.4m in the same
period, with receivables days remaining consistent with June levels and no
significant movement in expected credit losses. Trade and other payables have
reduced by £19.6m since June, reflecting lower purchasing activity in the
second quarter and payment of bonuses accrued at June.
We invested £20.2m (H1 FY2022: £12.2m) in capital expenditure during the
first six months of this financial year, which includes production plant and
equipment and £7.8m for the ongoing development of our production facility in
Miskin, Wales.
Dividend
The Board has approved an interim dividend of 16.8 pence net per share
(FY2022: 16.0p), relecting the Board's confidence in the medium term growth
prospects of the business, which will be paid on 11 April 2023 to shareholders
on the register on 10 March 2023.
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
heightened uncertainty arising from geopolitical matters 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 39 to 49 of the 2022 Annual Report therefore
remain relevant.
COVID-19 update
We continue to monitor the impact of COVID-19 on our people and business. The
recent easing of restrictions in China led to a surge in COVID cases and
whilst this is causing some short-term disruption to our customers' operations
this is expected to dissipate in the next few months. The removal of travel
restrictions in China is enabling us to better serve our customer base from
across our extensive local office network. We continue to make better use of
digital technology to work with each other, our customers and our suppliers,
meaning we can work in a more sustainable way by travelling less.
Sustainability
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, minimising waste and improving the inherent
performance of the products that they supply to their customers.
During the period we have continued to make strong progress towards our target
of Net Zero for Scopes 1 and 2 emissions by 2028, including switching to
renewable energy contracts for all UK sites and our main sites in India and
the US. We are also moving to ultra-low emission vehicles (ULEV) fleet
vehicles in the UK and, as part of our commitment to reduce Scope 3 emissions,
we have also introduced a ULEV salary sacrifice scheme, initially in the UK,
which will enable our employees to reduce their commuting emissions. As part
of this project, we have installed over 70 charging points at our New Mills HQ
site which will be replicated at our other key sites in the UK.
As part of our commitment to achieve a science-based Net Zero emissions target
of no later than 2050 for our entire business, we will include in our next
Annual Report our progress on three of the UN's Sustainable Development Goals
(SDGs); SDG 8 (sustained, inclusive and sustainable economic growth), SDG 12
(sustainable consumption) and SDG 13 (urgent action to combat climate change).
Directors and employees
The Directors would like to thank our employees for their continuing efforts
to drive our business forward. During the period we ran a global competition
encouraging teams to share how they demonstrate our values: innovation,
inspiration, integrity and involvement. We received entries from across the
Group, from Mexico to China, and we announced the winning teams in December.
Each team chose a charity which will shortly receive a £5,000 donation,
including a school for blind children in India and a cancer treatment centre
in Wales.
Outlook
The Board remains confident in our strategy to deliver sustainable, profitable
growth over the medium term. Our approach of building long-term relationships
with customers helps us to identify opportunities in our markets, and our
agility and resources ensure we can respond to these opportunities.
Our results so far this year have benefited from products released in recent
years and the relationships we have been building with new customers. These
relationships, new products and the expected improvement in semiconductor and
electronics markets, supports our confidence for medium term growth. To
support this, we are continuing to make targeted investments in our people,
our production facilities, and our new product pipeline. We have a strong
order book, and at this stage we expect full year revenue to be in the range
of £690m to £730m. Adjusted profit before tax is expected to be in the
range of £140m to £165m.
Sir David McMurtry Will Lee Allen Roberts
Executive Chairman Chief Executive Group Finance Director
( ) ( ) ( )
2 February 2023 ( ) ( )
( ) ( )
( )
(1) Note 12, 'Alternative performance measures', defines how revenue at
constant exchange rates, adjusted profit before tax, adjusted operating profit
and adjusted earnings per share are calculated.
Consolidated income statement
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 December 31 December 30 June
2022 2021 2022
Notes £'000 £'000 £'000
Revenue 2 347,679 325,176 671,076
Cost of sales 3 (172,442) (153,293) (313,527)
Gross profit 175,237 171,883 357,549
Distribution costs (66,836) (55,830) (122,455)
Administrative expenses (35,311) (33,560) (69,736)
UK defined benefit pension scheme past service cost - - (11,695)
Losses from the fair value of financial instruments 10 (1,792) (2,313) (10,413)
Operating profit 71,298 80,180 143,250
Financial income 4 5,003 445 932
Financial expenses 4 (290) (658) (2,938)
Share of profits from associates and joint ventures 1,803 1,515 4,342
Profit before tax 77,814 81,482 145,586
Income tax expense 5 (13,746) (12,949) (25,235)
Profit for the period 64,068 68,533 120,351
Profit attributable to:
Equity shareholders of the parent company 64,068 68,533 120,351
Non-controlling interest - - -
Profit for the period 64,068 68,533 120,351
Pence Pence Pence
Dividend per share arising in respect of the period 7 16.8 16.0 72.6
Earnings per share (basic and diluted) 6 88.1 94.2 165.4
Consolidated statement of comprehensive income and expense
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 December 31 December 30 June
2022 2021 2022
£'000 £'000 £'000
Profit for the period 64,068 68,533 120,351
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement:
Current tax on contributions to defined benefit pension schemes - 827 1,653
Deferred tax on contributions to defined benefit pension schemes - (827) (1,653)
Remeasurement of defined benefit pension scheme liabilities 16,127 (806) 69,078
Deferred tax on remeasurement of defined benefit pension scheme liabilities (3,739) 73 (15,997)
Total for items that will not be reclassified 12,388 (733) 53,081
Items that may be reclassified to the Consolidated income statement:
Exchange differences in translation of overseas operations 2,960 434 12,151
Exchange differences in translation of overseas joint venture 456 (229) 118
Current tax on translation of net investments in foreign operations (310) (245) (1,529)
Effective portion of changes in fair value of cash flow hedges, net of 1,870 (3,256) (28,423)
recycling
Deferred tax on effective portion of changes in fair value of cash flow hedges (318) 607 6,155
Total for items that may be reclassified 4,658 (2,689) (11,528)
Total other comprehensive income and expense, net of tax 17,046 (3,422) 41,553
Total comprehensive income and expense for the period 81,114 65,111 161,904
Attributable to:
Equity shareholders of the parent company 81,114 65,111 161,904
Non-controlling interest - - -
Total comprehensive income and expense for the period 81,114 65,111 161,904
Consolidated balance sheet
Unaudited Unaudited Audited
At 31 December At 31 December At 30 June
2022 2021 2022
Notes £'000 £'000 £'000
Assets
Property, plant and equipment 8 254,640 248,098 243,853
Right-of-use assets 9,321 11,973 9,950
Investment properties 10,374 - 10,568
Intangible assets 9 46,117 44,917 44,218
Investments in associates and joint ventures 21,905 17,920 20,570
Finance lease receivables 6,223 6,814 6,961
Employee benefits 61,788 - 43,241
Deferred tax assets 22,786 21,150 22,893
Derivatives 10 3,542 6,836 -
Total non-current assets 436,696 357,708 402,254
Current assets
Inventories 179,754 135,895 162,482
Trade receivables 10 123,141 111,864 127,551
Finance lease receivables 3,125 1,524 3,348
Contract assets 1,455 757 578
Short-term loans to associates and joint ventures 155 616 302
Current tax 7,382 3,279 8,901
Other receivables 31,929 27,174 27,068
Derivatives 10 3,948 9,839 7,121
Pension scheme cash escrow account - 10,580 -
Bank deposits 155,541 160,000 100,000
Cash and cash equivalents 55,957 62,038 153,162
Total current assets 562,387 523,566 590,513
Current liabilities
Trade payables 21,434 27,954 30,947
Contract liabilities 8,298 5,707 12,956
Current tax 5,989 6,700 10,078
Provisions 3,513 6,342 4,244
Derivatives 10 16,149 3,877 17,890
Lease liabilities 3,535 3,644 3,714
Borrowings 959 972 919
Other payables 41,873 47,732 51,949
Total current liabilities 101,750 102,928 132,697
Net current assets 460,637 420,638 457,816
Non-current liabilities
Lease liabilities 6,068 8,672 6,466
Borrowings 4,933 5,919 5,160
Employee benefits 328 20,229 996
Deferred tax liabilities 26,952 12,029 22,815
Derivatives 10 5,933 1,598 9,463
Total non-current liabilities 44,214 48,447 44,900
Total assets less total liabilities 853,119 729,899 815,170
Equity
Share capital 14,558 14,558 14,558
Share premium 42 42 42
Own shares held (2,963) (750) (750)
Currency translation reserve 17,565 3,679 14,459
Cash flow hedging reserve (9,371) 8,696 (10,923)
Retained earnings 833,807 704,553 798,541
Other reserve 58 (302) (180)
Equity attributable to the shareholders of the parent company 853,696 730,476 815,747
Non-controlling interest (577) (577) (577)
Total equity 853,119 729,899 815,170
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 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 charge - - - - - - 58 - 58
Own shares transferred on vesting - - 404 - - - (404) - -
Own shares purchased - - (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
Profit for the period - - - - - 51,818 - - 51,818
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities - - - - - 53,814 - - 53,814
Foreign exchange translation differences - - - 10,433 - - - - 10,433
Relating to associates and joint ventures - - - 347 - - - - 347
Changes in fair value of cash flow hedges - - - - (19,619) - - - (19,619)
Total other comprehensive income and expense - - - 10,780 (19,619) 53,814 - - 44,975
Total comprehensive income and expense - - - 10,780 (19,619) 105,632 - - 96,793
Transactions with owners recorded in equity
Share-based payments charge - - - - - - 122 - 122
Dividends paid - - - - - (11,644) - - (11,644)
Balance at 30 June 2022 14,558 42 (750) 14,459 (10,923) 798,541 (180) (577) 815,170
Profit for the period - - - - - 64,068 - - 64,068
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities - - - - - 12,388 - - 12,388
Foreign exchange translation differences - - - 2,650 - - - - 2,650
Relating to associates and joint ventures - - - 456 - - - - 456
Changes in fair value of cash flow hedges - - - - 1,552 - - - 1,552
Total other comprehensive income and expense - - - 3,106 1,552 12,388 - - 17,046
Total comprehensive income and expense - - - 3,106 1,552 76,456 - - 81,114
Transactions with owners recorded in equity
Share-based payments charge - - - - - - 238 - 238
Own shares purchased - - (2,213) - - - - - (2,213)
Dividends paid - - - - - (41,190) - - (41,190)
Balance at 31 December 2022 14,558 42 (2,963) 17,565 (9,371) 833,807 58 (577) 853,119
Consolidated statement of cash flow
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 December 31 December 30 June
2022 2021 2022
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period 64,068 68,533 120,351
Adjustments for:
Depreciation of property, plant and equipment, and investment properties 8,741 9,748 25,898
Loss on sale of property, plant and equipment 302 17 157
Impairment of property, plant and equipment - - 1,259
Depreciation of right-of-use assets 1,974 1,981 4,205
Impairment of right-of-use-assets - - 1,837
Amortisation of development costs 2,527 4,035 4,698
Amortisation of other intangibles 581 396 1,225
Impairment of development costs - 185 -
Write-off of intangible assets - - 3,510
Share of profits from associates and joint ventures (1,803) (1,515) (4,342)
Profit on disposal of investment in associate - - (582)
Derecognition of lease liabilities - - (1,985)
UK defined benefit pension scheme past service cost - - 11,695
Financial income (5,003) (445) (932)
Financial expenses 290 658 2,938
(Gains)/losses from the fair value of financial instruments (4,350) 2,936 8,349
Share based payment expense 239 59 180
Tax expense 13,746 12,949 25,235
17,244 31,004 83,345
Increase in inventories (17,272) (22,332) (48,919)
Decrease/(increase) in trade and other receivables 1,777 5,375 (11,301)
(Decrease)/increase in trade and other payables (24,411) (1,075) 12,288
(Decrease)/increase in provisions (732) 83 (2,015)
(40,638) (17,949) (49,947)
Defined benefit pension scheme contributions (2,260) (4,431) (8,866)
Income taxes paid (16,858) (10,366) (23,410)
Cash flows from operating activities 21,556 66,791 121,473
Investing activities
Purchase of property, plant and equipment, and investment properties (20,229) (12,199) (30,960)
Sale of property, plant and equipment 2,636 363 687
Development costs capitalised (4,201) (4,820) (7,966)
Purchase of other intangibles (609) (784) (929)
(Increase)/decrease in bank deposits (55,541) (40,000) 20,000
Interest received 2,575 261 834
Dividend received from associates and joint ventures 924 - 525
Proceeds from sale of shares in associate - - 582
Payments from pension scheme cash escrow account - - 10,578
Cash flows from investing activities (74,445) (57,179) (6,649)
Financing activities
Repayment of borrowings (494) (471) (974)
Interest paid (274) (324) (591)
Repayment of principal of lease liabilities (2,100) (1,741) (4,081)
Own shares purchased (2,212) (750) (750)
Dividends paid (41,190) (37,845) (49,494)
Cash flows from financing activities (46,270) (41,131) (55,890)
Net (decrease)/increase in cash and cash equivalents (99,159) (31,519) 58,934
Cash and cash equivalents at the beginning of the period 153,162 95,008 95,008
Effect of exchange rate fluctuations on cash held 1,954 (1,451) (780)
Cash and cash equivalents at the end of the period 55,957 62,038 153,162
Notes
1. Basis of preparation
The Interim report, which includes the condensed consolidated financial
statements for the six months ended 31 December 2022, was approved by the
Directors on 2 February 2023.
The condensed consolidated financial statements for the six months ended 31
December 2022 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. These 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 2022, 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 2022 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.
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 previously mentioned principal risks and uncertainties, as
well as the Group's current trading performance and updated cashflow
forecasts. The Directors have also considered the financial resources
available to the Group, with net current assets of £460.6m at 31 December
2022 (compared to £457.8m at 30 June 2022), including £211.5m net cash and
bank deposits at 31 December 2022.
We have updated our reverse stress testing to identify what would need to
happen in the period to 31 January 2024 to result in the Group having negative
bank deposit and cash balances. We found that this would occur if revenue fell
to £24m, for each of the 12 months to January 2024. The £24m per month is
before consideration of longer-term mitigating actions such as reducing labour
costs and reducing capital expenditure, and is considerably lower than
forecast. This assessment reflects the conclusion that the overall impact and
likelihood of our principal risks is not considered to have changed
significantly during the period.
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 2022 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 2022 Analytical instruments and medical devices
Manufacturing technologies
Total
£'000 £'000 £'000
Revenue 330,916 16,763 347,679
Depreciation, amortisation and impairment 12,841 982 13,823
Operating profit before gains from fair value of financial instruments 72,957 133 73,090
Share of profits from associates and joint ventures - - 1,803
Net financial income - - 4,713
Losses from the fair value of financial instruments - - (1,792)
Profit before tax - - 77,814
6 months to 31 December 2021
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)
Losses from the fair value of financial instruments - - (2,313)
Profit before tax - - 81,482
Year ended 30 June 2022
Revenue 634,588 36,488 671,076
Depreciation, amortisation and impairment 36,552 2,570 39,122
Operating profit before losses from fair value of financial instruments 162,549 2,809 165,358
Share of profits from associates and joint ventures 4,342 - 4,342
Net financial expense - - (2,006)
UK defined benefit pension scheme past service cost - - (11,695)
Losses from the fair value of financial instruments - - (10,413)
Profit before tax - - 145,586
There is no allocation of assets and liabilities to operating segments.
Depreciation 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
2022 2021 2022
£'000 £'000 £'000
Goods, capital equipment and installation 318,959 299,077 615,641
Aftermarket services 28,720 26,099 55,435
Total Group revenue 347,679 325,176 671,076
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
2022 2021 2022
£'000 £'000 £'000
APAC 161,726 160,562 317,023
UK (country of domicile) 18,942 15,485 31,536
EMEA, excluding UK 83,497 80,007 174,290
EMEA 102,439 95,492 205,826
Americas 83,514 69,122 148,227
Total Group revenue 347,679 325,176 671,076
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
2022 2021 2022
£'000 £'000 £'000
China 81,112 80,700 152,772
USA 73,157 60,324 128,531
Japan 34,678 32,066 69,829
Germany 30,089 27,600 58,636
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
2022 2021 2022
£'000 £'000 £'000
Production costs 126,333 115,477 234,919
Research and development expenditure 36,202 27,944 59,415
Other engineering expenditure 14,114 12,644 26,356
Gross engineering expenditure 50,316 40,588 85,771
Development expenditure capitalised (net of amortisation) (1,674) (785) (3,268)
Development expenditure impaired - 185 -
Research and development tax credit (2,533) (2,172) (3,895)
Total engineering costs 46,109 37,816 78,608
Total cost of sales 172,442 153,293 313,527
4. Financial income and expenses
6 months to 6 months to Year ended
31 December 31 December 30 June
2022 2021 2022
£'000 £'000 £'000
Financial income
Fair value gains from one-month forward currency contracts 59 - 98
Interest on pension schemes' assets 844 - -
Currency gains 1,525 184 -
Bank interest receivable 2,575 261 834
Total financial income 5,003 445 932
Financial expenses
Interest on pension schemes' liabilities 16 156 306
Currency losses - - 1,414
Fair value losses from one-month forward currency contracts - 178 -
Realised currency reserve losses from discontinuation of foreign operation - - 575
Lease interest 171 236 481
Interest payable on borrowings 52 30 52
Other interest payable 51 58 110
Total financial expenses 290 658 2,938
Currency gains and 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 17.7% (H1 FY2022: 15.9%), based on management's best estimate of
the full year effective tax rates by geographical unit applied to half-year
profits. This is comparable with the 17.3% achieved in FY2022, and includes an
increase in the UK effective tax rate for the year to 20.5% from 19%, which is
largely offset by a forecast increase in the patent box benefit.
6. Earnings per share
The earnings per share for the six months ended 31 December 2022 is calculated
on earnings of £64,068,000 (December 2021: £68,533,000 ) and on 72,719,565
shares (December 2021: 72,774,147 shares), being the number of shares in issue
during the period. This excludes 68,978 shares (December 2021: 14,396 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: 2022 2021 2022
£'000 £'000 £'000
FY2022 final dividend paid of 56.6p per share (2021: 52.0p) 41,190 37,850 37,850
Interim dividend paid of 16.0p per share (2022: 14.0p) - - 11,644
Total dividends paid during the period 41,190 37,850 49,494
All shareholders on the register on 10 March 2023 will be paid an interim
dividend of 16.8p net per share on 11 April 2023, resulting in a dividend
payable of £12,228,475.
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 2022 217,820 263,557 7,520 7,481 496,378
Additions 1,080 1,078 710 17,363 20,231
Transfers 44 886 - (930) -
Disposals (73) (4,508) (863) - (5,444)
Currency adjustment 2,066 868 37 - 2,971
At 31 December 2022 220,937 261,881 7,404 23,914 514,136
Depreciation
At 1 July 2022 43,816 202,214 6,495 - 252,525
Charge for the period 1,955 6,539 140 - 8,634
Released on disposals - (1,848) (658) - (2,506)
Currency adjustment 278 527 38 - 843
At 31 December 2022 46,049 207,432 6,015 - 259,496
Net book value
At 31 December 2022 174,888 54,449 1,389 23,914 254,640
At 30 June 2022 174,004 61,343 1,025 7,481 243,853
Additions to assets in the course of construction of £17,363,000 (December
2021: £5,927,000 ) comprise £8,474,000 (December 2021: £1,095,000) for
freehold land and buildings and £8,889,000 (December 2021: £4,832,000) for
plant and equipment. At the end of the period, assets in the course of
construction, not yet transferred, of £23,914,000 (December 2021:
£11,602,000) comprise £9,707,000 (December 2021: £4,308,000) for freehold
land and buildings and £14,207,000 (December 2021: £7,294,000) for plant and
equipment.
9. Intangible assets
Other intangible assets Internally Software
Goodwill generated licences and intellectual property
development costs
Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2022 20,475 4,629 168,212 22,379 215,695
Additions - 255 4,201 354 4,810
Disposals - - - (76) (76)
Currency adjustment 201 10 - 43 254
At 31 December 2022 20,676 4,894 172,413 22,700 220,683
Amortisation
At 1 July 2022 9,028 2,240 139,460 20,749 171,477
Charge for the period - 92 2,527 489 3,108
Released on disposals - - - (44) (44)
Currency adjustment - (10) - 35 25
At 31 December 2022 9,028 2,322 141,987 21,229 174,566
Net book value
At 31 December 2022 11,648 2,572 30,426 1,471 46,117
At 30 June 2022 11,447 2,389 28,752 1,630 44,218
As detailed in the 2022 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 2022. This includes a revision to our discount rate from 9.0% to
10.4% based on prevailing market assumptions at 31 December 2022. As a result,
no impairments have been recognised in the six months to 31 December 2022
(December 2021: £185,000).
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 2022, 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 2022, total expected credit losses
amounted to £2,441,000, being 1.9% of gross trade receivables, compared with
£2,540,000 at 30 June 2022, being 2.0% 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. Net cash and bank deposits at 31
December 2022 totalled £211,498,000, compared with £253,162,000 at 30 June
2022. This reduction included a dividend payment of £41,193,000 and cash
generation from operating activies of £21,556,000 during the period. In
consideration of this, the Group remains in a strong liquidity position.
Market risk
At 31 December 2022 the total nominal value of USD, EUR and JPY forward
contracts held for cash flow hedging purposes was £525,603,000 (December
2021: £516,547,000). At 31 December 2022 the remaining nominal value of USD,
EUR and JPY forward contracts ineffective for cash flow hedging and yet to
mature amounted to £21,950,000 (December 2021: £109,199,000), with no
additional forward contracts becoming ineffective for hedge accounting
purposes in the six months to 31 December 2022. A decrease of 10% in the
highly probable revenue forecasts of Renishaw plc and Renishaw UK Sales
Limited, being the hedged item, would result in an additional £5.8m of
forward contracts becoming ineffective at 31 December 2022. On an ongoing
basis, a 10% depreciation of GBP against USD, EUR and JPY would result in a
£2,439,000 gain being recognised in the Consolidated Income Statement, while
a 10% appreciation would result in a £1,995,000 loss. Fair value gains and
losses relating to this have been excluded from adjusted profit measures, see
note 12 for further detail.
11. Employee benefits
The net surplus of the Group's defined benefit pension schemes, on an IAS 19
basis, has increased from a £42,245,000 net asset at 30 June 2022 to a
£61,460,000 net asset at 31 December 2022. This mostly relates to a reduction
in liabilities resulting from a 1.05% increase in the UK scheme discount rate.
Changes to other key assumptions from 30 June 2022 to 31 December 2022 have
not had a material effect on these financial statements. During the first half
of this financial year, there has also been a change in the UK scheme asset
portfolio, to increase the proportion of assets held as gilts and therefore
increase the correlation with future liability exposure.
12. 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 2022 6 months to 31 December 2021
£'000 £'000
Statutory revenue as reported 347,679 325,176
Adjustment for forward contract losses 7,045 391
Adjustment to restate at previous year exchange rates (26,239) -
Revenue at constant exchange rates 328,485 325,567
Year-on-year revenue growth at constant exchange rates 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 business restructuring, third-party
costs relating to the formal sales process ('FSP'), 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 FY2017, 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 FY2020 are also excluded from adjusted profit measures, on
the basis that all forward contracts 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 2022 6 months to 31 December 2021 Year ended 30 June 2022
£'000 £'000 £'000
Statutory profit before tax 77,814 81,482 145,586
Revised estimate of FY2020 restructuring provisions - - (1,688)
Third-party FSP costs - (200) (200)
UK defined benefit pension scheme past service cost - - 11,695
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue - 2,621 2,621
- reported in (gains)/losses from the fair value of financial instruments - derivatives - (1,138) (1,138)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (6,142) (1,998) (4,685)
- reported in (gains)/losses from the fair value of financial instruments - derivatives 1,792 3,451 11,551
Adjusted profit before tax 73,464 84,218 163,742
Adjusted earnings per share 6 months to 31 December 2022 6 months to 31 December 2021 Year ended 30 June 2022
pence pence pence
Statutory earnings per share 88.1 94.2 165.4
Revised estimate of FY2020 restructuring provisions - - (0.3)
Third-party FSP costs - (0.2) (1.9)
UK defined benefit pension scheme past service cost - - 13.0
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue - 2.9 2.9
- reported in (gains)/losses from the fair value of financial instruments - derivatives - (1.3) (1.3)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (6.7) (2.2) (5.2)
- reported in (gains)/losses from the fair value of financial instruments - derivatives 2.0 3.8 12.9
Adjusted earnings per share 83.4 97.2 185.5
Adjusted operating profit 6 months to 31 December 2022 6 months to Year ended 30 June 2022
31 December 2021
£'000 £'000 £'000
Statutory operating profit 71,298 80,180 143,250
Revised estimate of FY2020 restructuring provisions - - (1,688)
Third-party FSP costs - (200) (200)
UK defined benefit pension scheme past service cost - - 11,695
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue - 2,621 2,621
- reported in (gains)/losses from the fair value of financial instruments - derivatives - (1,138) (1,138)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (6,142) (1,998) (4,685)
- reported in (gains)/losses from the fair value of financial instruments - derivatives 1,792 3,451 11,551
Adjusted operating profit 66,948 82,916 161,406
Adjustments to segmental operating profit:
Manufacturing technologies 6 months to 31 December 2022 6 months to Year ended 30 June
31 December 2021 2022
£'000 £'000 £'000
Operating profit before gain/loss from fair value of financial instruments and UK defined benefit pension scheme past service cost 72,957 80,938 162,549
Revised estimate of 2020 restructuring provisions - - (1,688)
Third-party FSP costs - (196) (197)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue - 2,572 2,576
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (6,131) (1,960) (4,605)
Adjusted manufacturing technologies operating profit 66,826 81,354 158,635
Analytical instruments and medical devices 6 months to 31 December 2022 6 months to 31 December 2021 Year ended 30 June 2022
£'000 £'000 £'000
Operating profit before loss from fair value of financial instruments and UK defined benefit pension scheme past service cost 133 1,555 2,809
Third-party FSP costs - (4) (3)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)
- reported in revenue - 49 45
Fair value gains on financial instruments not eligible for hedge accounting (ii)
- reported in revenue (11) (38) (80)
Adjusted analytical instruments and medical devices operating profit 122 1,562 2,771
13. 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 2022.
No related party transactions have taken place in the first six months of the
financial year, or events subsequent to the end of the reporting period, that
have materially affected the financial position or the performance of the
Group during that period.
14. 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
2 February 2023
Financial calendar
2023 interim dividend record date 10 March 2023
2023 interim dividend payment date 11 April 2023
Investor day 8 June 2023
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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