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Renishaw PLC  -  RSW   

Half-year Report

Released 07:00 25-Jan-2018

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

 

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, the UK defined 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 payment                                               9th April 2018

Announcement of 2018 full year results                                26th 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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Half-year Report - RNS