REG - Renishaw PLC - Half-year Report <Origin Href="QuoteRef">RSW.L</Origin>

RenishawAnnouncement

25/01/2018 07:05

RNS Number : 8570C
Renishaw PLC
25 January 2018
Renishaw plc 
25th January 2018
Interim report 2018 - for the six months ended 31st December 2017
Highlights
Continuing operations
6 months to
31st December
2017
Restated*
6 months to
31st December
2016
Year ended
30th June
2017
Revenue ('000)
279,458
238,081
536,807
Adjusted1 profit before tax ('000)
62,301
36,139
109,079
Adjusted1 earnings per share (pence)
72.7
41.4
132.4
Proposed dividend per share (pence)
14.0
12.5
52.0
Statutory profit before tax ('000)
66,158
25,274
117,101
Statutory earnings per share ('000)
77.0
29.4
141.3
*Note 12, 'Restatement of previous first half year', details the adjustments made to previously disclosed interim figures.
1Note 13, 'Alternative performance measures', defines how adjusted profit before tax and earnings per share are calculated.
Chairman's statement
I am pleased to report our group results for the six months to 31st December 2017. Unless otherwise stated these results are based on continuing operations.
Highlights 
 First half year revenue of 279.5m, compared with restated* previous year of 238.1m.
 Revenue growth of 17%; 20% at constant exchange rates.
 First half year adjusted1 profit before tax of 62.3m, compared with adjusted restated previous year of 36.1m, an increase of 73%.
 First half year statutory profit before tax of 66.2m, compared with restated 25.3m last year.
Trading results
Continuing operations
First half
2018
First half
2017
Change
Change at constant exchange rates
Group revenue
279.5m
238.1m
+17%
+20%
Comprising:
 Far East
125.2m
109.1m
+15%
+21%
 Americas
58.8m
48.5m
+21%
+26%
 Europe
71.8m
59.4m
+21%
+18%
 UK 
14.7m
13.0m
+13%
 Other
9.0m
8.1m
+11%
Revenue for the six months ended 31st December 2017 was 279.5m, compared with an adjusted restated 238.1m for the corresponding period last year, an increase of 17%, with an underlying growth of 20% at constant exchange rates. Geographically, there was revenue growth in all regions as illustrated above.
Adjusted profit before tax for the first half year increased by 73% to 62.3m, compared with an adjusted restated 36.1m last year. Statutory profit before tax for the first half year was 66.2m, compared with a restated 25.3m last year. Adjusted earnings per share were 72.7p, compared with 41.4p last year. Statutory earnings per share were 77.0p, compared with 29.4p last year.
Metrology
Revenue from our metrology business for the first six months was 264.3m, compared with 224.6m last year. Adjusted operating profit was 63.2m, compared with 42.0m for the comparable period last year.
There has been growth in all metrology products lines, with particularly strong growth in our additive manufacturing and measurement and automation products lines.
During the first half of the year, our additive manufacturing products line introduced the RenAM 500Q four laser additive manufacturing system, InfiniAM Spectral software for AM process monitoring and InfiniAM Central software for remote monitoring of AM builds. The RenAM 500Q significantly improves the productivity of the most commonly used machine platform size. The machine tool products line launched an enhanced version of the NC4 non-contact tool setting system and the encoder products line launched the RESOLUTETM FS (functional safety) encoder.
Healthcare
Revenue from our healthcare business for the first six months was 15.2m, compared with 13.5m last year with an adjusted operating loss of 1.9m, compared with a loss of 6.0m for the comparable period last year.
We have experienced growth in our spectroscopy and neurological products lines. Revenue in the neurological products line has benefited from an increase in sales of devices for clinical trials.
We are expecting good growth in the second half of the financial year with a further reduction in losses anticipated.
Continued investment for long-term growth
We continue our long-standing commitment to investment in research and development, and net engineering expenditure increased by 7% to 39.1m, compared with 36.4m last year.
Capital expenditure for the first half year was 16.1m. Expenditure on property totalled 2.4m, including the acquisition and refurbishment of a property for our R&D facility in Exeter. Expenditure on plant and equipment was 7.8m, and we continued to expand our manufacturing facilities, mainly in the UK, and continued to invest in our global IT and distribution infrastructure.
Working capital
Net cash balances at 31st December 2017 were 69.1m, compared with 14.0m at 31st December 2016 and 51.9m at 30th June 2017.
During the first half of the year, certain forward contracts used for cash flow hedging, which did not qualify for hedge accounting under International Accounting Standard IAS39, have been restructured with the respective banks. Each agreement now contains a forward contract that qualifies for hedge accounting.
Inventory balances at 31st December 2017 were 99.1m, an increase of 11.4m compared with 30th June 2017. The increase arises due to increased trading levels and expected future demand, particularly in our additive manufacturing products line.
Directors and employees
As announced yesterday, I will be handing over my role as Chief Executive to William Lee, currently Group Sales and Marketing Director, with effect from 1st February 2018. I will remain Executive Chairman with responsibility for group innovation and product strategy.
The workforce at the end of December 2017 was 4,584, an increase of 54 since June 2017. Included in the net increase were 87 graduates and apprentices. The directors thank employees for their valued support and contribution as the Group continues to develop and expand.
Outlook
Notwithstanding current economic uncertainties, the Board remains confident in the future prospects of the Group. We continue to anticipate growth in both revenue and profit in this financial year and expect full year revenue to be in the range of 575m to 605m and adjusted profit before tax to be in the range of 127m to 147m. Statutory profit before tax is expected to be in the range of 136m to 156m.
Dividend
The Board has approved an interim dividend of 14.0 pence net per share which will be paid on 9th April 2018 to shareholders on the register on 9th March 2018.
Investor Day
An investor day is being held on 10th May 2018 and registration details will be published in due course.
Sir David R McMurtry
CBE, RDI, FRS, FREng, CEng, FIMechE
Chairman and Chief Executive
25th January 2018
Footnote
*Previous year interim figures have been restated for the following:
Certain foreign currency forward contracts used as hedging instruments did not qualify for hedge accounting as they did not meet the hedge effectiveness criteria set out in the International Accounting Standard IAS39 'Financial Instruments: Recognition and Measurement. To ensure technical compliance with this standard it has been deemed necessary to restate the 2017 interim financial statements resulting in a 10.9 net reduction to the profit before tax for that period and an increase in other comprehensive income by the same amount. 
In June 2017, after an extensive review of the spatial measurements business, the Board decided to discontinue this line of business. This business has been accounted for as a discontinued activity, with comparative figures for the previous year being restated accordingly. See note 12 for further details.
1Note 13, 'Alternative performance measures', defines how adjusted profit before tax and earnings per share are calculated.
Consolidated income statement
Unaudited
Continuing operations
Notes
6 months to
31st December
2017
'000
Restated*
6 months to
31st December
2016
'000
Audited
Year ended
30th June
2017
'000
Revenue
2
279,458
238,081
536,807
Cost of sales
(134,494)
(121,239)
(251,384)
Gross profit
144,964
116,842
285,423
Distribution costs
(59,162)
(54,559)
(112,691)
Administrative expenses
(24,098)
(24,558)
(52,376)
Profit/(loss) from the fair value of financial instruments
3,508
(12,577)
(3,601)
Operating profit
65,212
25,148
116,755
Financial income
3
308
368
766
Financial expenses
3
(946)
(1,112)
(2,256)
Share of profits from associates and joint ventures
1,584
870
1,836
Profit before tax
66,158
25,274
117,101
Income tax expense
4
(10,076)
(3,973)
(14,343)
Profit for the period from continuing operations
56,082
21,301
102,758
Profit/(loss) for the period from discontinued operations
5
791
(3,872)
(13,931)
Profit for the period
56,873
17,429
88,827
Profit attributable to:
Equity shareholders of the parent company
56,855
17,559
88,955
Non-controlling interest
18 
(130) 
(128)
Profit for the period
56,873
17,429
88,827
Pence
Pence
Pence
Dividend per share arising in respect of the period
10
14.0
12.5
52.0
Earnings per share from continuing operations
(basic and diluted)
6
77.0
29.4
141.3
Earnings/(loss) per share from discontinued operations
(basic and diluted)
6
1.09
(5.3)
(19.1)
*Note 12, 'Restatement of previous first half year', details the adjustments made to previously disclosed interim figures.
Consolidated statement of comprehensive income and expense
Unaudited
6 months to
31st December
2017
'000
Restated
6 months to
31st December
2016
'000
Audited
Year ended
30th June
2017
'000
Profit for the period
56,873
17,429
88,827
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement:
Remeasurement of defined benefit pension liabilities
(2,908)
(2,525)
(1,608)
Deferred tax on remeasurement of defined benefit pension liabilities
646
728
(835)
Total for items that will not be reclassified
(2,262)
(1,797)
(2,443)
Items that may be reclassified subsequently to the Consolidated income statement:
Foreign exchange translation differences
(1,764)
5,490
3,889
Comprehensive income and expense of associates and joint ventures
46
84
173
Effective portion of changes in fair value of cash flow hedges, net of recycling
27,918
(7,736)
8,495
Deferred tax on effective portion of changes in fair value of cash flow hedges
(5,186)
1,470
(1,573)
Total for items that may be reclassified
21,014
(692)
10,984
Total other comprehensive income and expense, net of tax
18,752
(2,489)
8,541
Total comprehensive income and expense for the period
75,625
14,940
97,368
Attributable to: 
Equity shareholders of the parent company
75,607
15,070
97,496
Non-controlling interest
18
(130)
(128)
Total comprehensive income and expense for the period
75,625
14,940
97,368
Consolidated balance sheet
Unaudited
Notes
At 31st December
2017
'000
Restated*
At 31st December
2016
'000
Audited
At 30th June
2017
'000
Assets
Property, plant and equipment
7
228,306
230,595
228,050
Intangible assets
8
54,881
60,790
54,507
Investments in associates and joint ventures
9
8,434
6,256
7,311
Long-term loans to associates and joint ventures
3,933
-
3,080
Deferred tax assets
33,404
44,330
39,115
Derivatives
10
11,153
505
3,546
Total non-current assets
340,111
342,476
335,609
Current assets
Inventories
99,076
90,802
87,697
Trade receivables
116,882
111,753
137,507
Current tax
1,194
2,740
2,276
Other receivables
18,917
16,615
15,907
Derivatives
10
802
99
-
Pension scheme cash escrow account
11
12,877
15,317
12,850
Cash and cash equivalents
69,127
26,490
51,942
Total current assets
318,875
263,816
308,179
Current liabilities
Trade payables
16,461
20,025
19,544
Overdraft
-
12,519
-
Current tax
5,764
1,130
2,803
Provisions
3,064
2,793
2,960
Derivatives
10
19,264
31,180
25,261
Other payables
27,965
19,707
37,304
Total current liabilities
72,518
87,354
87,872
Net current assets
246,357
176,462
220,307
Non-current liabilities
Employee benefits
11
67,817
68,725
66,787
Deferred tax liabilities
13,862
21,999
13,844
Derivatives
10
14,104
57,729
31,471
Total non-current liabilities
95,783
148,453
112,102
Total assets less total liabilities
490,685
370,485
443,814
Equity
Share capital
10
14,558
14,558
14,558
Share premium
42
42
42
Currency translation reserve
10
8,792
12,022
10,510
Cash flow hedging reserve
10
(8,317)
(44,237)
(31,049)
Retained earnings
476,642
389,152
450,803
Other reserve
10
(460)
(460)
(460)
Equity attributable to the shareholders of the parent company
491,257
371,077
444,404
Non-controlling interest
10
(572)
(592)
(590)
Total equity
490,685
370,485
443,814
*Note 12, 'Restatement of previous first half year', details the adjustments made to previously disclosed interim figures.
Consolidated statement of changes in equity
Unaudited
Share
capital
'000
Share
premium
'000
Currency
translation
reserve
'000
Cash flow
hedging
reserve
'000
Retained
earnings
'000
Other
reserve
'000
Non-
controlling
interest
'000
Total
'000
Balance at 1st July 2016 as initially reported
14,558
42
6,448
(56,460)
420,419
(460)
(3,162)
381,385
Restatement
-
-
-
18,489
(18,489)
-
-
-
Balance at 1st July 2016 restated
14,558
42
6,448
(37,971)
401,930
(460)
(3,162)
381,385
Profit/(loss) for the period
-
-
-
-
17,559
-
(130)
17,429
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities 
-
-
-
-
(1,797)
-
-
(1,797)
Foreign exchange translation differences
-
-
5,490
-
-
-
-
5,490
Relating to associates and joint ventures
-
-
84
-
-
-
-
84
Changes in fair value of cash flow hedges
-
-
-
(6,266)
-
-
-
(6,266)
Total other comprehensive income and expense
-
-
5,574
(6,266)
(1,797)
-
-
(2,489)
Total comprehensive income and expense
-
-
5,574
(6,266)
15,762
-
(130)
(14,940)
Transactions with owners recorded in equity
Acquisition of non-controlling interest
-
-
-
-
(2,700)
-
2,700
-
Dividends paid
-
-
-
-
(25,840)
-
-
(25,840)
Balance at 31st December 2016
14,558
42
12,022
(44,237)
389,152
(460)
(592)
370,485
Profit for the period
-
-
-
-
71,396
-
2
71,398
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities
-
-
-
-
(646)
-
-
(646)
Foreign exchange translation differences
-
-
(1,601)
-
-
-
-
(1,601)
Relating to associates and joint ventures
-
-
89
-
-
-
89
Changes in fair value of cash flow hedges
-
-
-
13,188
-
-
-
13,188
Total other comprehensive income and expense
-
-
(1,512)
13,188
(646)
-
-
11,030
Total comprehensive income and expense
-
-
(1,512)
13,188
70,750
-
2
82,428
Transactions with owners recorded in equity
Dividends paid
-
-
-
-
(9,099)
-
-
(9,099)
Balance at 30th June 2017
14,558
42
10,510
(31,049)
450,803
(460)
(590)
443,814
Profit for the period
-
-
-
-
56,855
-
18
56,873
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension liabilities
-
-
-
-
(2,264)
-
-
(2,264)
Foreign exchange translation differences
-
-
(1,764)
-
-
-
-
(1,764)
Relating to associates and joint ventures
-
-
46
-
-
-
-
46
Changes in fair value of cash flow hedges
-
-
-
22,732
-
-
-
22,732
Total other comprehensive income and expense
-
-
(1,718)
22,732
(2,264)
-
-
18,750
Total comprehensive income and expense
-
-
(1,718)
22,732
54,591
-
18
75,623
Transactions with owners recorded in equity
Dividends paid
-
-
-
-
(28,752)
-
-
(28,752)
Balance at 31st December 2017
14,558
42
8,792
(8,317)
476,642
(460)
(572)
490,685
Consolidated statement of cash flow
Unaudited
6 months to
31st December
2017
'000
Restated
6 months to
31st December
2016
'000
Audited
Year ended
30th June
2017
'000
Cash flows from operating activities
Profit for the period
56,873
17,429
88,827
Amortisation of development costs
6,059
5,756
13,645
Amortisation of other intangibles
788
2,605
10,230
Depreciation
12,758
10,716
22,192
Loss/(profit) on sale of property, plant and equipment
(160)
170
2,085
Losses/(gains) from the fair value of financial instruments
(3,857)
10,865
(8,022)
Share of profits from associates and joint ventures
(1,584)
(870)
(1,836)
Financial income
(308)
(368)
(766)
Financial expenses
946
1,112
2,256
Tax expense
10,261
3,897
13,132
24,903
33,883
52,916
Decrease/(increase) in inventories
(11,379)
4,157
7,262
Decrease/(increase) in trade and other receivables
13,174
8,358
(21,062)
(Decrease)/increase in trade and other payables
(11,160)
(1,428)
14,699
Increase in provisions
104
418
585
(9,261)
11,505
1,484
Defined benefit pension contributions
(2,532)
(2,415)
(4,204)
Income taxes paid
(5,015)
(9,075)
(23,768)
Cash flows from operating activities
64,968
51,327
115,255
Investing activities
Purchase of property, plant and equipment
(16,050)
(25,896)
(42,637)
Development costs capitalised
(7,160)
(7,177)
(15,886)
Purchase of other intangibles
(383)
(80)
(754)
Investment in subsidiaries, associates and joint ventures
-
-
-
Sale of property, plant and equipment
1,571
439
5,526
Sale of property, plant and equipment relating to discontinued activities
-
960
960
Interest received
308
368
766
Dividends received from associates and joint ventures
507
356
356
Payments (to)/from pension scheme escrow account (net)
(27)
(38)
2,429
Cash flows from investing activities
(21,234)
(31,068)
(49,240)
Financing activities
Interest paid
(292)
(320)
(696)
Dividends paid
(28,752)
(25,840)
(34,939)
Cash flows from financing activities
(29,044)
(26,160)
(35,635)
Net increase/(decrease) in cash and cash equivalents
14,690
(5,901)
30,380
Cash and cash equivalents at the beginning of the period
51,942
21,303
21,303
Effect of exchange rate fluctuations on cash held
2,495
(1,431)
259
Cash and cash equivalents at the end of the period
69,127
13,971
51,942
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 the EU endorsed standard IAS 34, 'Interim financial reporting'.
 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
A C G Roberts FCA
Group Finance Director
25th January 2018
Notes
1. Status of Interim report and accounting policies
The Interim report, which has not been audited, was approved by the directors on 25th January 2018.
General information
The Interim report has been prepared in accordance with the EU endorsed standard IAS 34, 'Interim financial reporting'. This interim financial information has been prepared on the basis of the accounting policies adopted in the most recent annual financial statements, these being for the year ended 30th June 2017, as revised for the implementation of specified new amended endorsed standards or interpretations.
Given the nature of some forward-looking information included in this report, which the directors have given in good faith, this information should be treated with due caution. The Interim report is available on our website www.renishaw.com.
The interim financial information for the six months to 31st December 2017 and the comparative figures for the six months to 31st December 2016 are unaudited. The comparative figures for the financial year ended 30th June 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006, relating to the accounting records of the Company.
Going concern
The Group has considerable financial resources at its disposal and the directors have considered the current financial projections. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Interim report.
Accounting policies
The accounting policies applied and significant estimates used by the Group in this Interim report are the same as those applied by the Group for the year ended 30th June 2017. Note, IFRS 15, Revenue from contracts with customers, effective for accounting periods beginning on or after 1st January 2018, has not yet been applied. The introduction of this standard is not expected to have a material impact on the results of the Group due to the relatively straightforward contractual terms and conditions with customers. An assessment of the impact will be concluded in the second half of the financial year and the outcome will be included in the 2018 Annual Report.
2. Segmental information
Renishaw's business is metrology, the science of measurement. The Group manages its business in two business segments, Metrology, being the traditional core business, and Healthcare.
Our products / Metrology
Our metrology products help manufacturers to maximise production output, significantly reduce the time taken to produce and inspect components, and keep their machines running reliably. In the fields of industrial automation and motion systems, our position measurement and calibration systems allow machine builders to manufacture highly accurate and reliable products.
The product range includes the following:
Co-ordinate measuring machine (CMM) products
Sensors, software and control systems for three-dimensional CMMs, including touch-trigger and scanning probes, automated probe changers, motorised indexing probe heads and 5-axis measurement systems, which enable the highly accurate measurement of manufactured components and finished assemblies.
Machine tool probe systems
Sensors and software for computer numerically controlled (CNC) metal-cutting machine tools that allow the automation of setting and on-machine measurement operations, leading to more productivity from existing machines and reductions in scrap and rework. These include laser tool setters, contact tool setters, tool breakage detectors, touch probes, contact scanning systems and highaccuracy inspection probes.
Styli for probe systems
Precision styli that attach to probe sensors for CMMs, machine tools and Equator gauging systems to ensure that accurate measurement data is acquired at the point of contact.
Performance testing products
Calibration and testing products to determine the positioning accuracy of a wide range of industrial and scientific machinery to international standards, including a laser interferometer, rotary axis calibrator, wireless telescoping ballbar and software for data capture and analysis.
Gauging
Equator enables process control by delivering highly repeatable, thermally insensitive, versatile and reprogrammable gauging to the shop floor, both as a standalone device and as part of an automated manufacturing cell. Combined with INTUO software, Equator is also an ideal alternative to traditional manual gauging, with training in a few hours, allowing engineers to program parts in minutes.
Fixtures
Modular and custom fixtures used to hold parts securely for dimensional inspection on CMM, vision and gauging systems.
Position encoders
Position encoders that ensure accurate linear and rotary motion control in a wide range of applications from electronics, flat panel displays, robotics and semiconductors to medical, precision machining and print production. These include magnetic encoders, incremental optical encoders, absolute optical encoders and laser interferometer encoders.
Additive manufacturing (AM)
Advanced metal AM systems for direct manufacturing of 3D-printed metallic components. A total solution is offered from systems, materials, ancillaries and software through to consultancy, training and support for a range of industries including industrial, healthcare and mould tooling.
Vacuum casting
Vacuum casting machines from entry-level to high capacity for rapid prototyping and production of polymer end-use parts.
Our products / Healthcare
Our technologies are helping within applications such as craniomaxillofacial surgery, dentistry, neurosurgery, chemical analysis and nanotechnology research. These include engineering solutions for stereotactic neurosurgery, analytical tools that identify and characterise the chemistry and structure of materials, the supply of implants to hospitals and specialist design centres for craniomaxillofacial surgery, and products and services that allow dental laboratories to manufacture high-quality dental restorations.
The product range includes the following:
Dental scanners
3D contact scanners and non-contact optical scanners used for digitising of dental preparations and the measurement of implant locations for tooth-supported frameworks and custom abutments.
Dental computer-aided design (CAD) software
Dental CAD software that allows setup of scanning routines and enables laboratory staff to design abutments and structures for crowns and bridges, including powerful anatomic design functions.
Dental structures manufacturing service
A central manufacturing service that can handle CAD files from a wide variety of dental CAD systems to produce structures for crowns and bridges in zirconia, cobalt chrome, PMMA (used for temporary restorations) and wax, and abutments in cobalt chrome.
Craniomaxillofacial custom-made implants
Additively manufactured from titanium, custom-made craniomaxillofacial implants are structural implants that are used in the reconstruction of a patient's head, face or jaw. These are most commonly required after oncology treatment or as a result of trauma.
Neurosurgical robot
A stereotactic robot that provides a platform solution for a broad range of functional neurosurgical procedures including deep brain stimulation (DBS), stereoelectroencephalography (SEEG), neuroendoscopy and stereotactic biopsies, and is being used within the context of trials for both neurosurgical disorders and brain oncology.
Neurosurgical planning software
Software that allows advanced planning of targets and trajectories for stereotactic neurosurgery.
Neurosurgical implants and devices
Implantable devices that allow surgeons to verify expected DBS electrode position relative to targeted anatomy using magnetic resonance imaging (MRI) for the treatment of Parkinson's disease, other movement disorders and neuropathic pain.
Neurosurgical accessories
Specialist electrodes and instruments for use in epilepsy neurosurgery, manufactured by DIXI Medical.
Raman microscopes
Scientists and engineers worldwide use Renishaw's research-grade inVia Raman microscope for the non-destructive chemical analysis and imaging of materials. Its high-speed, high-quality results and upgradeability are valued in fields as diverse as nanotechnology, biology and pharmaceuticals.
Hybrid Raman systems
Renishaw's hybrid systems unite the chemical analysis power of Raman spectroscopy with the high spatial resolution of other techniques, such as atomic force microscopy and scanning electron microscopy. These new instruments are vital tools for investigating materials and devices for nanotechnology applications.
Turn-key Raman analysis
The RA800 benchtop platform provides companies with a high performance chemical imaging and analysis system that can be tailored for the needs of their customers. RA800 gives research-grade Raman microscopy performance in a Class 1 laser-safe, simple-to-use form.
Segmental financial results were:
6 months to 31st December 2017
Metrology
Healthcare
Total
'000
'000
'000
Revenue
264,307
15,151
279,458
Depreciation and amortisation
18,561
1,044
19,605
Operating profit/(loss) before gain from fair value of financial instruments
63,561
(1,857)
61,704
Share of profits from associates and joint ventures
1,584
-
1,584
Net financial expense
-
-
(638)
Profit from the fair value of financial instruments
-
-
3,508
Profit before tax
-
-
66,158
6 months to 31st December 2016 (restated)
Revenue
224,627
13,454
238,081
Depreciation and amortisation
15,402
1,783
17,185
Operating profit/(loss) before loss from fair value of financial instruments
43,632
(5,907)
37,725
Share of profits from associates and joint ventures
870
-
870
Net financial expense
-
-
(744)
Profit from the fair value of financial instruments
(12,577)
Profit before tax
-
-
25,274
Year ended 30th June 2017
Revenue
503,378
33,429
536,807
Depreciation and amortisation
32,983
3,831
36,814
Operating profit/(loss) before loss from fair value of financial instruments
126,830
(6,474)
120,356
Share of profits from associates and joint ventures
1,836
-
1,836
Net financial expense
-
-
(1,490)
Profit from the fair value of financial instruments
(3,601)
Profit before tax
-
-
117,101
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 analysis of revenue by geographical market:
6 months to
31st December
2017
'000
Restated
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Far East, including Australasia
125,166
109,076
248,905
Continental Europe
71,763
59,379
129,941
North, South and Central America
58,791
48,488
113,577
United Kingdom and Ireland
14,737
12,995
27,595
Other regions
9,001
8,143
16,789
Total group revenue
279,458
238,081
536,807
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
31st December
2017
'000
Restated
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
China
USA
Germany
Japan
68,144
49,934
29,031
28,822
59,030
41,878
25,889
24,723
134,984
95,927
56,403
52,166
There was no revenue from transactions with a single external customer amounting to 10% or more of the Group's total revenue
for the period.
The following table shows the analysis of non-current assets, excluding deferred tax and derivatives, by geographical area:
At
31st December
2017
'000
At
31st December
2016
'000
At
30th June
2017
'000
United Kingdom
182,542
188,258
183,102
Overseas
113,012
109,383
109,846
295,554
297,641
292,948
No overseas country had non-current assets amounting to 10% or more of the Group's total non-current assets.
3. Financial income and expenses
Financial income
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Bank interest receivable
308
368
766
Financial expenses
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Interest on pension schemes' liabilities
654
792
1,560
Bank interest payable
292
320
696
946
1,112
2,256
4. Income tax expense
The income tax expense has been estimated at a rate of 15.2% (December 2016 restated: 15.7%), the rate expected to be applicable for the full year. This includes the impact of the reduction in the US corporate income tax rate from 35% to 21%, with effect from 1 January 2018, which was substantively enacted in December 2017.
5. Discontinued operations
In October 2016, the Group announced that it had decided to discontinue operations at Renishaw Diagnostics Limited and in June 2017, to discontinue the spatial measurement business. Financial information relating to discontinued operations is set out below.
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Revenue
3,708
4,055
7,217
Expenses
(2,732)
(6,642)
(13,914)
Goodwill impairment
-
(1,784)
(8,445)
Profit/(loss) before tax
976
(4,371)
(15,142)
Tax (expense)/credit
(185)
499
1,211
Profit/(loss) for the period from discontinued operations
791
(3,872)
(13,931)
Cashflow
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Profit/(loss) for the period
791
(3,872)
(13,931)
Adjustments for operating activities
950
2,421
12,155
Cash flows generated from/(used in) operating activities
1,741
(1,451)
(1,776)
Cash flows from investing activities
-
916
420
Net increase/(decrease) in cash and cash equivalents from discontinued operations
1,741
(535)
(1,356)
6. Earnings per share
The earnings per share on continuing operations for the six months ended 31st December 2017 is calculated on earnings of 56,064,000 (December 2016: 21,431,000) and on 72,788,543 shares, being the number of shares in issue during the period.
The earnings per share on continuing operations for the year ended 30th June 2017 is calculated on earnings of 102,886,000 and on 72,788,543 shares, being the number of shares in issue during that year.
The earnings per share on discontinued operations for the six months ended 31st December 2017 is calculated on losses of 791,000 (December 2016: 3,872,000 loss) and on 72,788,543 shares, being the number of shares in issue during the period.
The loss per share on discontinued operations for the year ended 30th June 2017 is calculated on losses of 13,931,000 and on 72,788,543 shares, being the number of shares in issue during that year.
7. Property, plant and equipment
Freehold
land and
buildings
'000
Plant and
equipment
'000
Motor
vehicles
'000
Assets in the
course of construction
'000
Total
'000
Cost
At 1st July 2017
165,661
201,022
9,893
8,222
384,798
Additions
2,337
7,846
514
5,353
16,050
Transfers
3,359
3,151
-
(6,510)
-
Disposals
(1,016)
(2,941)
(232)
-
(4,189)
Currency adjustment
(1,675)
(419)
(66)
-
(2,160)
At 31st December 2017
168,666
208,659
10,109
7,065
394,499
Depreciation
At 1st July 2017
28,462
121,611
6,675
-
156,748
Charge for the period
1,476
10,551
731
-
12,758
Released on disposals
(563)
(2,003)
(212)
-
(2,778)
Currency adjustment
(267)
(223)
(45)
-
(535)
At 31st December 2017
29,108
129,936
7,149
166,193
Net book value
At 31st December 2017
139,558
78,723
2,960
7,065
228,306
At 30th June 2017
137,199
79,411
3,218
8,222
228,050
Additions to assets in the course of construction of 5,353,000 (December 2016: 17,525,000) comprise 3,208,000 (December 2016: 13,765,000) for freehold land and buildings and 2,145,000 (December 2016: 3,760,000) for plant and equipment.
At the end of the period, assets in the course of construction, not yet transferred, of 7,065,000 (December 2016: 27,644,000) comprise 3,479,000 (December 2016: 21,484,000) for freehold land and buildings and 3,586,000 (December 2016: 6,160,000) for plant and equipment.
8. Intangible assets
Goodwill on consolidation
Other intangible assets
Internally
generated
development costs
Software
licences
Total
'000
'000
'000
'000
'000
Cost
At 1st July 2017
19,919
11,647
117,349
23,066
171,981
Additions
-
-
7,160
383
7,543
Disposals
-
-
-
-
-
Currency adjustment
(300)
(24)
-
(4)
(328)
At 31st December 2017
19,619
11,623
124,509
23,445
179,196
Amortisation
At 1st July 2017
6,661
11,187
81,327
18,299
117,474
Charge for the period
-
(11)
6,059
799
6,847
Released on disposal
-
-
-
-
-
Currency adjustment
-
-
-
(6)
(6)
At 31st December 2017
6,661
11,176
87,386
19,092
124,315
Net book value
At 31st December 2017
12,958
447
37,123
4,353
54,881
At 30th June 2017
13,258
460
36,022
4,767
54,507
The analysis of acquired goodwill on consolidation is:
Acquisition of:
At
31st December
2017
'000
At
31st December
2016
'000
At
30th June
2017
'000
itp GmbH
3,065
2,960
3,038
Renishaw Mayfield S.A.
1,712
1,794
1,823
R&R Fixtures, LLC
5,130
5,585
5,327
Renishaw Software Limited
1,559
1,559
1,559
Other smaller acquisitions
1,492
1,529
1,511
Measurement Devices Limited
-
6,661
-
Balance at the end of the period
12,958
20,088
13,258
9. Investments in associates
Movements during the period were:
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Balance at the beginning of the period
7,311
5,658
5,658
Dividends received
(507)
(356)
(356)
Share of profits of associates and joint ventures
1,584
870
1,836
Other comprehensive income and expense
46
84
173
Balance at the end of the period
8,434
6,256
7,311
10. Capital and reserves
Share capital
At
31st December
2017
'000
At
31st December
2016
'000
At
30th June
2017
'000
Allotted, called-up and fully paid
72,788,543 ordinary shares of 20p each
14,558
14,558
14,558
The ordinary shares are the only class of share in the Company. Holders of ordinary shares are entitled to vote at general meetings of the Company and receive dividends as declared. The Articles of Association of the Company do not contain any restrictions on the transfer of shares nor on voting rights.
Currency translation reserve
The currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the foreign operations, offset by foreign exchange differences on bank liabilities which have been accounted for directly in equity on account of them being classified as hedging items. The policy to hedge net overseas assets was ended in December 2017. Future movements in the currency translation reserve will therefore arise only from translation of financial statements of foreign operations. 
Cash flow hedging reserve
The cash flow hedging reserve comprises all foreign exchange differences arising from the valuation of forward exchange contracts which are effective hedges and mature after the period end. These are valued on a mark-to-market basis, are accounted for directly in equity and are recycled through the Consolidated income statement when the hedged item affects the Consolidated income statement. The forward contracts mature over the next three and a half years.
Movements during the period were:
6 months to
31st December
2017
'000
Restated
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Balance at the beginning of the period
(31,049)
(37,971)
(37,971)
Revaluations during the period
27,918
(7,736)
8,495
Deferred tax movement
(5,186)
1,470
(1,573)
Balance at the end of the period
(8,317)
(44,237)
(31,049)
The cash flow hedging reserve is analysed as:
At
31st December
2017
'000
At
31st December
2016
'000
At
30th June
2017
'000
Derivatives in non-current assets
11,153
505
3,546
Derivatives in current assets
802
99
-
Derivatives in current liabilities
(19,264)
(31,180)
(25,261)
Derivatives in non-current liabilities
(14,104)
(57,729)
(31,471)
(21,413)
(88,305)
(53,186)
Included in deferred tax assets
4,229
16,778
10,143
Derivatives not eligible for cash flow hedging (net of tax)
8,867
27,290
11,994
Balance at the end of the period
(8,317)
(44,237)
(31,049)
Dividends
Dividends paid during the period were:
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
2017 final dividend of 39.5p per share (2016: 35.5p)
28,752
25,840
25,840
2017 interim dividend of 12.5p
-
-
9,099
Total dividends paid during the period
28,752
25,840
34,939
An interim dividend for 2018 of 10,190,396 (14.0p net per share) will be paid on 9th April 2018 to shareholders on the register on 9th March 2018, with an ex-div date of 8th March 2018.
Other reserve
The other reserve is in relation to additional investments in subsidiary undertakings.
Non-controlling interest
Movements during the period were:
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Balance at the beginning of the period
(590)
(3,162)
(3,162)
Acquisition of remaining shareholding in Renishaw Mayfield A.G.
-
2,700
2,700
Share of profit/(loss) for the period
18
(130)
(128)
Balance at the end of the period
(572)
(592)
(590)
11. Employee benefits
The Group operates a number of pension schemes throughout the world. The major scheme, which covers the UK-based employees, was of the defined benefit type. This scheme, along with the Ireland and USA defined benefit schemes, has ceased any future accrual for current members and all these schemes are now closed to new members. UK, Ireland and USA employees are now covered by defined contribution schemes. 
The latest full actuarial valuation of the UK defined benefit scheme was carried out at September 2015 and updated to 31st December 2017 by a qualified independent actuary. The major assumptions used by the actuary were:
At
31st December
2017
At
31st December
2016
At
30th June
2017
Discount rate
2.6%
2.9%
2.7%
Inflation rate - RPI
3.5%
3.7%
3.4%
Inflation rate - CPI
2.5%
2.7%
2.4%
Retirement age
64
64
64
The assets and liabilities in the defined benefit schemes were:
At
31st December
2017
'000
At
31st December
2016
'000
At
30th June
2017
'000
Market value of assets
176,176
165,641
170,708
Actuarial value of liabilities under IAS 19
(224,493)
(226,566)
(221,295)
(48,317)
(60,925)
(50,587)
Increase in liability under IFRIC 14
(19,500)
(7,800)
(16,200)
Deficit in the schemes
(67,817)
(68,725)
(66,787)
Deferred tax thereon
11,238
12,860
11,024
The movements in the schemes' assets and liabilities were:
6 months to
31st December
2017
'000
6 months to
31st December
2016
'000
Year ended
30th June
2017
'000
Balance at the beginning of the period
(66,787)
(67,823)
(67,823)
Contributions paid
2,532
2,415
4,204
Interest on pension schemes
(654)
(792)
(1,560)
Remeasurement gain/(loss) under IAS 19
392
(10,125)
(808)
Change in remeasurement loss under IFRIC 14
(3,300)
7,600
(800)
Balance at the end of the period
(67,817)
(68,725)
(66,787)
An agreement has been entered into with the trustees of the UK defined benefit pension scheme in relation to deficit funding plans which supersede the previous arrangements. 
The Company has agreed to pay all monthly pensions payments and lump sum payments, and transfer payments up to a limit of 1,000,000 in each year (Benefits in Payment).
A number of UK properties owned by the Company are subject to registered fixed charges. One or more of the properties may be released from the fixed charge if on a subsequent valuation, the value of all properties under charge exceed 120% of the deficit. 
The Company has also established an escrow bank account, which is subject to a registered floating charge. The balance of this account was 12,877,000 at the end of the period (December 2016: 15,317,000). The funds are being released back to the Company from the escrow account over a period of 6 years, which commenced in June 2017.
The agreement continues until 30th June 2031, but may end sooner if the deficit (calculated on a self-sufficiency basis as defined in the agreement) is eliminated in the meantime. At 30th June 2031 the Company is obliged to pay any deficit at that time. All properties will be released from charge when the deficit no longer exists.
The charges may be enforced by the trustees if one of the following occurs: (a) the Company does not pay any Benefits in Payment; (b) an insolvency event occurs in relation to the Company; or (c) the Company does not pay any deficit at 30th June 2031.
Under the Ireland defined benefit pension scheme deficit funding plan, a property owned by Renishaw (Ireland) Limited is subject to a registered fixed charge to secure the Ireland defined benefit pension scheme's deficit.
No scheme assets are invested in the Group's own equity.
The Company has given a guarantee relating to recovery plans for the UK defined benefit pension scheme. The value of the guarantee is greater than the value of the pension scheme's deficit. As such, in line with IFRIC 14, theUKdefined benefit pension scheme's liabilities have been increased by 19,500,000, to represent the maximum discounted liability as at 31st December 2017 (2016: 7,800,000).
12. Restatement of previous first half year
The previous first half year's results have been restated for the following:
Certain foreign currency forward contracts used as hedging instruments did not qualify for hedge accounting as they did not meet the hedge effectiveness criteria set out in the International Accounting Standard IAS39 'Financial Instruments: Recognition and Measurement. To ensure technical compliance with this standard it has been deemed necessary to restate the 2017 interim financial statements resulting in a 10.9 reduction to the profit before tax for that year and a corresponding increase in other comprehensive income.
In June 2017, after an extensive review of the spatial measurements business, the Board decided to discontinue this line of business. The business has therefore been accounted for as a discontinued activity, with comparative figures for the previous year being restated accordingly. 
The R&D tax credit, previously accounted for within administration expenses has been reclassified to be part of cost of sales.
Consolidated income statement
Previously reported
Discontinued activities
R&D tax credit
Forward contracts
Restated total
'000
'000
'000
'000
'000
Revenue
240,424
(4,055)
-
1,712
238,081
Cost of sales
(125,077)
2,738
1,100
-
(121,239)
Gross profit
115,347
(1,317)
1,100
1,712
116,842
Distribution costs
(56,156)
1,597
-
-
(54,559)
Administration expenses
(23,623)
165
(1,100)
-
(24,558)
Loss from the fair value of financial instruments
-
-
-
(12,577)
(12,577)
Operating profit
35,568
445
-
(10,865)
25,148
Finance income and expenses
(744)
-
-
-
(744)
Share of profits from associates and joint ventures
870
-
-
-
870
-
Profit before tax
35,694
445
-
(10,865)
25,274
Income tax expense
(5,961)
(76)
-
2,064
(3,973)
Profit for the year from continuing operations
29,733
369
-
(8,801)
21,301
Loss from discontinued operations
(3,503)
(369)
-
-
(3,872)
Profit for the year
26,230
-
-
(8,801)
17,429
Earnings per share from continuing operations (pence)
41.0
0.5
-
(12.1)
29.4
Balance sheet
Currency hedging reserve
Retained earnings
'000
'000
Balance at 1st July 2015 as initially reported
17,171
402,559
Restatement of opening cash flow hedging reserve (a)
(2,386)
2,386
Profit for the year as initially reported
-
69,095
Remeasurement of defined benefit pension liability as reported
-
(17,388)
Changes in fair value of financial instruments as initially reported
(73,631)
-
Adjustment to the fair value of financial instruments (b)
20,875
(20,875)
Dividends paid as initially reported
-
(33,847)
Restated balance at 30th June 2016
(37,971)
401,930
Balance at 30th June as initially reported
(56,460)
420,419
Adjustments (a) and (b) above
18,489
(18,489)
Restated balance at 30th June 2016
(37,971)
401,930
Balance at 31st December as initially reported 
(71,527)
416,442
Adjustments (a) and (b) above
18,489
(18,489)
Changes in fair value of financial instruments as reported for period 1stJuly-31stDecember 2016
(15,067)
15,067
Adjustment to the fair value of financial instruments
23,868
(23,868)
Restated balance at 31st December 2016
(44,237)
389,152
13. Alternative performance measures
Alternative performance measures are - 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 31st December 2017
6 months to 31st December 2016
'000
'000
Statutory revenue as reported
279,458
238,081
Adjustment for forward contract losses
11,569
11,444
Adjustment to restate at previous year exchange rates
7,365
-
Revenue at constant exchange rates
298,392
249,525
Adjusted profit before tax, Adjusted earnings per share and Adjusted operating profit - These measures are defined as the profit before tax, earnings per share and operating profit after excluding gains and losses in fair value from forward currency contracts which did not qualify for hedge accounting.
The gains and losses from 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. 
The Board consider these alternative performance measures to be more relevant and reliable in evaluating the Group's performance.
The amounts shown below as reported in revenue represent the amount by which revenue would change had all the derivatives qualified as eligible for hedge accounting.
Adjusted profit before tax
6 months to 31st December 2017
6 months to 31st December 2016
Year ended 30th June 2017
'000
'000
'000
Statutory profit before tax
66,158
25,274
117,101
Fair value (gains)/losses on financial instruments not eligible for hedge accounting
 - reported in revenue
(349)
(1,712)
(11,623)
 - reported in losses from the fair value of financial instruments
(3,508)
12,577
3,601
Adjusted profit before tax
62,301
36,139
109,079
Adjusted earnings per share
6 months to 31st December 2017
6 months to 31st December 2016
Year ended 30th June 2017
pence
pence
pence
Statutory earnings per share
77.0
29.4
141.3
Fair value (gains)/losses on financial instruments not eligible for hedge accounting
 - reported in revenue
(0.4)
(1.9)
(12.9)
 - reported in losses from the fair value of financial instruments
(3.9)
13.9
4.0
Adjusted earnings per share
72.7
41.4
132.4
Adjusted operating profit
6 months to 31st December 2017
6 months to 31st December 2016
Year ended 30th June 2017
'000
'000
'000
Statutory operating profit
65,212
25,148
116,755
Fair value (gains)/losses on financial instruments not eligible for hedge accounting
 - reported in revenue
(349)
(1,712)
(11,623)
 - reported in losses from the fair value of financial instruments
(3,508)
12,577
3,601
Adjusted operating profit
61,355
36,013
108,733
Adjustments to segmental operating profit:
Metrology
6 months to 31st December 2017
6 months to 31st December 2016
Year ended 30th June 2017
'000
'000
'000
Operating profit before gain/loss from fair value of financial instruments
63,561
43,632
126,830
Fair value (gains)/losses on financial instruments not eligible for hedge accounting
 - reported in revenue
(334)
(1,599)
(10,921)
Adjusted metrology operating profit
63,227
42,033
115,909
Healthcare
6 months to 31st December 2017
6 months to 31st December 2016
Year ended 30th June 2017
'000
'000
'000
Operating loss before gain/loss from fair value of financial instruments
(1,857)
(5,907)
(6,474)
Fair value (gains)/losses on financial instruments not eligible for hedge accounting
 - reported in revenue
(15)
(113)
(702)
Adjusted healthcare operating loss
(1,872)
(6,020)
(7,176)
14. Deferred tax
Reductions in the UK rate of corporation tax to 19% from 1st April 2017 and 17% from 1st April 2020 have been substantively enacted. Deferred tax assets and liabilities have been calculated based on the rate expected to be applicable when the relevant items are expected to reverse.
15. Related party transactions
The only related party transactions which have taken place during the first half year were normal business transactions between the Group, its associates and joint ventures, which have not had a material effect on the results of the Group for this period.
16. Principal risks and uncertainties
As reported in the 2017 Annual report, the business implications of Brexit remain uncertain and any risks arising will be a key focus area for the Board and it's committees for the foreseeable future. Currency fluctuations, trading arrangements, employment issues, research and development project funding and other risks that become apparent over time are under review by the Board and mitigations are being put in place where possible.
Area of risk
Description
Potential impact
 Mitigation
Current trading levels and order book
Revenue growth is unpredictable and orders from customers generally involve short lead-times with the outstanding order book at any time being around one month's worth of revenue value.
Global market conditions continue to highlight risks to growth and demand which can lead to fluctuating levels of revenue. 
Whilst global investment in production systems and processes is expected to expand, future growth is difficult to predict, especially with such a short-term order book. This limited forward order visibility leaves the annual revenue and profits forecasts uncertain.
The Group is expanding and diversifying its product range in order to maintain a world-leading position in its sales of metrology products. Investment in sales and marketing resources continues in order to support the breadth of the product range.
The Group is applying its measurement expertise to grow its healthcare and additive manufacturing business activities.
The Group retains a strong balance sheet and has the ability to flex manufacturing resource levels and shift patterns.
Research and development
The development of new products and processes involves risk, such as development timescales, meeting the required technical specification and the impact of alternative technology developments.
Being at the leading edge of new technology in metrology and healthcare, there are uncertainties whether new developments will provide an economic return.
Patent and intellectual property generation is core to new product developments.
R&D programmes are regularly reviewed against milestones and, when necessary, projects are cancelled.
Medium to long-term R&D strategies are monitored regularly by both the Board and Executive Board, including reviews of the allocation of R&D resource to key projects.
Product development processes around the Group are reviewed and aligned where possible to provide consistency and efficiency.
New products involve beta testing at customers to ensure they will meet the needs of the market.
Market developments are closely monitored and customer requirements regularly reviewed.
Supply chain management
Customer deliveries may be threatened by either an external or internal failure in the supply chain.
Inability to meet customer deliveries could result in loss of revenue and profit.
Production facilities are maintained with fire and flood risk in mind.
Critical production processes are replicated at different locations where practical.
The Group is highly vertically integrated, providing increased control over many aspects of the supply chain.
Ability to flex manufacturing resource levels and shift patterns.
Regular vendor reviews are performed for critical part suppliers.
Stock policies are reviewed by the Board on a regular basis.
Product quality is closely monitored.
Regulatory legislation for healthcare products
The expansion of the Group's business into the healthcare markets involves a significantly increased requirement to obtain regulatory approval prior to the sale of these products.
Regulatory approval can be very expensive and time-consuming. This area is also very complex and there is a risk that the correct approvals are not obtained.
Specialist legal and regulatory staff support the healthcare business.
Experience of healthcare regulatory matters at board level.
Healthcare operations in UK and France have ISO13485 certification for their quality management systems, with Ireland and other subsidiary healthcare operations falling under the UK quality management system.
Defined benefit pension schemes
Investment returns and actuarial valuations of the defined benefit pension fund liabilities are subject to economic and social factors which are outside of the control of the Group.
Volatility in investment returns and actuarial assumptions can significantly affect the defined benefit pension fund deficit, impacting on future funding requirements.
The investment strategy is managed by the pension fund trustees who operate in line with a statement of investment principles and take appropriate independent professional advice when necessary. 
A new recovery plan was agreed in June 2016 for the 2015 actuarial valuation based on funding to self-sufficiency.
Exchange rate fluctuations
Fluctuating foreign exchange rates may affect the results of the Group.
With 95% of revenue generated outside of the UK, there is an exposure to major currency fluctuations, mainly in respect of the US Dollar, Euro and Japanese Yen. Such fluctuations could adversely impact the results of the Group, and in particular the income statement.
The Group enters into forward contracts in order to hedge varying proportions of forecast US Dollar, Euro and Japanese Yen revenue and other currencies from time to time.
Monthly board review of currency rates and hedging position.
Note that the balance sheet hedging policy ceased in December 2017 as the Board now consider the balance sheet impact of currency movements to be low.
Cyber security threats
For the Group to operate effectively it requires continuous access to timely and reliable information at all times. We seek to ensure continuous availability, security and operation of information systems. Cyber threats continue to increase.
Reduced service to customers due to a lack of reliable management information putting the Group at a competitive disadvantage.
Delay or impact on decision making through lack of availability of sound data or disruption in/denial of services.
Loss of commercially sensitive and/or personal information leading to implications including reputational damage, claims or fines. 
Theft of commercial or sensitive information/data or fraud causing loss or disruption.
There is substantial resilience and back up built into group systems.
Cyber risks and security is a regular topic for board discussions.
Internal penetration testing is utilised on an appropriates basis.
The Group operates central IT policies in all aspects of information security.
Regular monitoring of all group systems takes place with regular reporting and analysis.
Operating systems are continuously updated and refreshed in line with current threats.
The Group employs a number of physical, logical and control measures to protect its information and systems.
E-learning courses covering certain cyber threats were rolled out to all employees group wide during calendar year 2017 as well as management training.
Financial calendar
Record date for 2018 interim dividend 9th March 2018
2018 interim dividend payment9th April 2018
Announcement of 2018 full year results26th July 2018
Mailing of 2018 Annual report Late August 2018 
Annual general meeting  18th October 2018
2018 final dividend payment 23rd October 2018
Registered office:
Renishaw plc
New Mills
Wotton-under-Edge
Gloucestershire
UK
GL12 8JR
Registered number: 1106260
LEI number: 21380048ADXM6Z67CT18
Telephone. +44 1453 524524
Fax.  +44 1453 524901
email.  uk@renishaw.com
Website.  www.renishaw.com

This information is provided by RNS
The company news service from the London Stock Exchange
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