TIDMRSW
RNS Number : 5178Z
Renishaw PLC
15 September 2022
Renishaw plc
15 September 2022
Preliminary announcement of results for the year ended 30 June
2022
Record results and strong strategic progress
2022 2021 Change
Revenue (GBPm) 671.1 565.6 +19%
Adjusted(1) profit before
tax (GBPm) 163.7 119.7 +37%
Adjusted(1) earnings per
share (pence) 185.5 132.0 +41%
Dividend per share (pence) 72.6 66.0 +10%
Statutory profit before tax
(GBPm) 145.6 139.4 +4%
Statutory earnings per share
(pence) 165.4 153.2 +8%
Performance highlights
-- Record revenue of GBP671.1m, 19% higher than FY2021 revenue of GBP565.6m
-- Manufacturing technologies revenue(2) increased by 20% to GBP634.6m, with:
-- record demand for encoders, driven by sustained semiconductor
and electronics capital investment;
-- rising sales of flexible gauging and machine tool products
for automated machining, notably in the consumer electronics
sector; and
-- repeat purchases of high-value solutions by key customers in
additive manufacturing and 5-axis metrology.
-- Analytical instruments and medical devices revenue(2) increased by 4% to GBP36.5m, with:
-- strong growth in H2 to give record spectroscopy revenues, as
backlog of duty-exemption certificates in China eased; and
-- reduced neurological revenue during FY2022, though we are
talking with multiple large pharmaceutical companies to use our
unique drug delivery technology in clinical trials.
-- Record Adjusted profit before tax of GBP163.7m (FY2021: GBP119.7m), an increase of 37%
-- Return on sales increased to 24% (FY2021: 21%)
-- Statutory profit of GBP145.6m compared with GBP139.4m last year
-- Strong balance sheet, with net cash and bank deposits of
GBP253.2m at 30 June 2022, compared with GBP215.0m at 30 June
2021.
(1) Note 29, 'Alternative performance measures', defines how
Adjusted profit before tax, Adjusted earnings per share, Adjusted
operating profit and Revenue at constant exchange rates are
calculated.
(2) Results relating to sales of additive manufacturing machines
to medical and dental customers are no longer recognised in the
Analytical instruments and medical devices operating segment.
Comparative figures have been reclassified accordingly, see note
2.
Strategic progress
-- Successfully launched new products in the year including an
ultrasonic probe for REVO, our market-leading measurement system
for CMMs
-- Gained key customer accounts, including in close-adjacent
markets, following the launch of products such as our FORTiS
enclosed encoder and the NC4+ Blue tool setter in recent years
-- Made more of our products compatible with third-party
software, helping to open up new markets
-- Committed around GBP64m to increase the footprint of our
production facilities at Miskin, Wales, and are investing in
production equipment to increase both capacity and productivity,
with a focus on automation
-- Focused on the reward, retention and development of our
people, including a salary benchmarking exercise that we expect to
increase FY2023 labour costs by GBP19m compared with FY2022
-- Agreed our Net Zero commitment, aiming to achieve Net Zero
for Scope 1 and 2 emissions by 2028, and no later than 2050 for
Scope 3.
Sir David McMurtry, Executive Chairman commented: "Our
performance has been built on years of strategic focus. We've
developed the innovative products required to meet the challenges
faced by manufacturers in growing markets, while ensuring that we
have the global infrastructure and skilled people to deliver those
opportunities".
About Renishaw
We're a world leading supplier of measuring systems and
production systems. Our products give high accuracy and precision,
gathering data to provide customers and end users with traceability
and confidence in what they're making. This technology also helps
our customers to innovate their products and processes.
We're a global business, with 56 customer-facing locations
across our three sales regions; the Americas, EMEA, and APAC. Most
of our R&D work takes place in the UK, with our largest
manufacturing sites located in the UK, Ireland and India.
We are guided by our purpose: Transforming Tomorrow Together.
This means working with our customers to make the products, create
the materials, and develop the therapies that are going to be
needed for the future.
We believe that our purpose is incredibly relevant in today's
environment where the pace of change in technology is faster than
ever. We also know that the future will be a world of scarce
resources, needing high-performance, intelligent, personalised
solutions that make the best use of these resources, and our
expertise can help deliver this.
Results presentation today
There will be a webcast presentation of the results together
with a question and answer session at 10:00 a.m. (BST). Details of
how to register for and access the webcast are available at the
following link:
https://www.renishaw.com/en/register-for-the-2022-full-year-results-webcast--47618
A recording of the webcast and the presentation slides will be
made available by Friday 16 September 2022 at:
www.renishaw.com/investors . Here, you will also be able to find a
more user-friendly version of this preliminary results announcement
by the end of today.
Enquiries: communications@renishaw.com
COMMENTARY BY THE CHAIRMAN
Introduction
I'm delighted to report a record year for both revenue and
Adjusted profit before tax. Our revenue for FY2022 was GBP671.1m.
This was 19% higher than FY2021 revenue of GBP565.6m and was
achieved against a backdrop of a global recovery in all our key
markets. Adjusted profit before tax was GBP163.7m (FY2021:
GBP119.7m), an increase of 37%. Statutory profit before tax was
GBP145.6m (FY2021: GBP139.4m). Both revenue and Adjusted profit
before tax are consistent with the trading update we provided in
May.
Our performance has been built on years of strategic focus.
We've developed the innovative products required to meet the
challenges faced by manufacturers in growing markets, while
ensuring that we have the global infrastructure and skilled people
to deliver those opportunities. The right products, the right place
and the right people - all helping us to deliver on our purpose of
Transforming Tomorrow Together.
What is clear to me is that these record results couldn't have
been achieved without the huge commitment of our employees, who
have faced enormous personal and professional challenges over the
course of the pandemic. They worked tirelessly during the year to
serve our customers in the face of strong demand for our products
and considerable supply chain challenges. They have made me very
proud, and I would like to convey my thanks and that of the Board,
for everything that they've achieved.
After the end of the formal sale process (FSP) in July 2021,
John Deer and I made it clear to the Board and our employees that
we remain committed to Renishaw. I do not doubt that the process
caused some uncertainty among our employees, and we are very
grateful for the commitment they've demonstrated to Renishaw. As a
Board, we were encouraged with how well everyone delivered
'business as usual' during the process, and I feel this excellent
set of results demonstrates this, as well as underlining the
strength of our business.
Board changes bring new experience to Renishaw
A strong and experienced Board is essential to the success of a
complex, global business like Renishaw and I'm delighted with the
new appointments that were made during the year. I would firstly
like to thank Carol Chesney and John Jeans, who, during the year,
stepped down from the Board as Non-executive Directors after nine
years' service. In their place we've appointed Juliette Stacey,
currently Senior Independent Director at Fuller, Smith & Turner
plc, and Stephen Wilson, currently Chief Executive of Genus plc.
Juliette brings extensive experience with her strong finance and
leadership background, while Stephen brings strategic, financial
and business development experience in the software sector.
We remain committed to high standards of corporate governance.
We always consider key stakeholders when making decisions, in the
belief this will protect our business and its long-term sustainable
success.
Responding positively to a new world
Last year I wrote about the profound changes to our society,
trading environment and business practices brought about by the
pandemic. We have positively embraced those changes and the
opportunities that they have presented for growth and to increase
focus on employee welfare. It seems to me that our vision of
transforming capabilities in manufacturing, science and healthcare
through precision, productivity and practicality is absolutely
relevant to helping meet societal needs in the coming years.
We've also responded positively to the global challenges of
climate change. We have achieved significant reductions in our
carbon emissions in recent years but as a large business with a
global footprint, we want to make a step change in our efforts.
This year, the Board approved significant commitments to help
deliver this step change, and Will Lee explains our Net Zero
commitment in more detail on the following pages. I am acutely
aware that society has high expectations of companies like ours
when it comes to setting environmental targets, and I'm pleased to
see that we've made this commitment. The Board is determined to
ensure that we make meaningful, measurable progress. That's why we
will have our targets verified by the independent Science Based
Targets initiative, and we will not succumb to 'greenwashing'.
As part of our sustainability commitments, our new
Sustainability Committee identified three of the UN's Sustainable
Development Goals (SDGs) that are most relevant to our business.
The Board agreed that we should link our sustainability commitments
and targets to these goals, demonstrating our support for decent
work and economic growth, responsible consumption and production,
and climate action. We're now developing a plan on how we will
measure our progress against these SDGs.
Continuing to embed our values to support our culture
As I mentioned in my introduction, our employees have continued
to demonstrate resilience throughout the pandemic. This has
highlighted the importance of our strong working culture,
underpinned by our core values of innovation, inspiration,
integrity and involvement.
This year we've continued to actively communicate and embed
these values across the business, from policy documents and
training materials, to the careers pages of our corporate website.
These values embody our culture, where our people are
encouraged:
- to be innovative and challenge convention;
- to always inspire each other, our customers and our wider communities;
- to act with integrity; and
- to be fully involved and support each other in contributing to
the success of Renishaw and our communities.
Ensuring these values were well communicated and understood was
particularly important to the Board. We listened to feedback from
workshops across the business, and Will helped launch the
communications campaign.
Recognition and reward is an important way that a company can
embed its values. That's why, towards the end of the year, we
launched a global competition encouraging teams to share how they
demonstrate our values in action. Our Executive Committee will
select one winning team per value, with each team choosing a
charity to receive a GBP5,000, or local currency equivalent,
donation.
As part of our value of involvement, we are committed to
equality and diversity at all levels of the company. Our UK
Diversity & Inclusion group continued to produce
thought-provoking awareness campaigns throughout the year,
including a focus on sexuality and gender, disability, and how
inclusion drives understanding in the workplace.
Looking ahead
While there continues to be some global uncertainties due to the
geopolitical environment and rising costs for consumers and
manufacturers, the last two years have demonstrated the great
resilience of our business and people. I therefore feel that
whatever challenges and opportunities we may face in the coming
years, we'll be able to respond positively and continue to deliver
on our purpose.
Sir David McMurtry
Executive Chairman
15 September 2022
COMMENTARY BY THE CHIEF EXECUTIVE
Last year I spoke about the strong position that we were in to
take advantage of the many opportunities presented by the global
recovery in our markets. We've capitalised well on those
opportunities this year, delivering the best set of financial
results in our history. It wasn't easy, however, and our people
around the world have had to work incredibly hard to deliver these
record results given the huge challenges we have faced.
The rapid upturn in the global economy placed supply chains
under great stress, with serious shortages of electronic
components. Combined with strong demand and a highly competitive
labour market, we faced significant challenges in meeting our
customers' needs. Our teams responded brilliantly, increasing
output and re-engineering certain products when components weren't
available. Our work over the past few years to build our inventory
levels also helped us overcome these problems.
This record set of results also clearly demonstrates that our
business is in an even stronger position than when we launched the
FSP last year, and we continue to be confident in our strategic
direction.
Having introduced our new purpose, vision and strategy last
year, I'm encouraged by how well we've embedded these in the
business this year. Our purpose of Transforming Tomorrow Together
has helped guide us this year, reinforcing the importance of
working with our customers to help them make the products, create
the materials, and develop the therapies that will be needed for
the future.
A record set of results driven by strong revenue growth
As Sir David has said, we've achieved a record set of results.
We had strong revenue growth in all regions, with the strongest
growth in our Manufacturing technologies segment. This has been
driven by increased investments in the semiconductor and
electronics sectors, and demand for industrial automation due to
skills shortages and labour costs. In our Analytical instruments
and medical devices segment, our spectroscopy products also
achieved record revenue with growing research and industrial
applications for Raman microscopy.
Our revenue for the year ended 30 June 2022 was GBP671.1m,
compared with GBP565.6m last year. This is a direct result of our
new strategy, that builds from our existing strength in working
closely with our customers to develop the products they need to
grow. Our ability to make these products in-house to tight
timescales, while offering local support as a global business, has
been essential to our success this year.
We achieved record Adjusted profit before tax of GBP163.7m
compared with GBP119.7m last year, and this means Adjusted earnings
per share was 185.5p compared with 132.0p last year. Adjusted
measures are the ones we use as a Board to measure our underlying
trading performance, and we're pleased with our improvements given
that we've faced significant increases in some production costs and
made investments in pay and reward.
Statutory profit before tax for the year was GBP145.6m compared
with GBP139.4m last year, leading to Statutory earnings per share
of 165.4p compared with 153.2p last year. Allen Roberts provides
more detail of our financial performance in the Commentary by the
Group Finance Director.
Excellent progress in our customer-focused strategy
Our strategy is designed to deliver sustainable, profitable
growth by ensuring we have the agility and resources to identify
and respond to opportunities in our markets. I'm really encouraged
with the progress our two segments have made here this year, and in
the four strategic pillars that support our segments.
As I mentioned above, our teams have gone above and beyond this
year to support our customers. Many of the markets we work in have
experienced a rapid and significant recovery from the economic
effects of the pandemic, and our approach of providing local
support to our customers has helped us to respond to this.
We've continued to launch new products, such as an ultrasonic
probe for REVO (our market-leading multi-sensor system for CMMs).
Ultrasonic probes offer an advantage over traditional tactile
probes for parts where it's hard to access internal features, such
as drive shafts and hollow aerospace blades. This is a great
example of what we already do so well; understanding the problems
our customers are having and then using our expertise to make a
product that helps them solve the issue.
We've also continued to improve our existing products. When it
launched last year, our NC4+ Blue set the standard for non-contact
tool setting, thanks to its industry-first blue laser. We've since
launched the next generation product this year. Both this and the
RUP ultrasonic probe demonstrate how we can grow our business by
developing products in our existing markets.
This innovation, and our approach of building a long-term
relationship with customers, is helping us to gain new customers
and outperform market growth. I'm particularly proud of the success
of our Encoder business this year, gaining key customer accounts in
recent months and not just in the semiconductor sector.
As part of how we're moving into new markets we've also expanded
our offer to customers this year. We've been working on making more
of our products compatible with third-party software, such as our
popular Equator gauging system. Doing this helps us open new
opportunities in areas where customers and end users may already be
using a different software system.
Our design and engineering teams have made good progress this
year with our flagship product projects. These are the ones we
prioritise because the products are most important to our long-term
growth, or where we expect them to bring significant revenue growth
quickly. One of our first flagship products to launch last year was
FORTiS, our enclosed encoder for use in machine tools. One of our
strategic priorities is to develop non-substitutional products in
adjacent markets, and FORTiS is exactly this. It's been really well
received by our customers and again shows how we can grow our
business within new markets.
The skills and flexibility of our manufacturing teams have been
central to achieving this success. We've recruited around 300
people into these teams this year, and significantly increased our
productive hours ahead of this rise in headcount. This in-house
manufacturing expertise means we've been able to meet the rising
demand this year while still maintaining our exacting standards,
and have kept our gross profit margin at 53% (FY2021: 52%) despite
the global rise in costs, such as raw materials, gas and
electricity.
Sustainable, responsible business
We're committed to being a responsible business in everything we
do, and want to ensure that our people understand their role in
achieving this. This year we introduced 'Responsible Renishaw', our
global umbrella brand for compliance matters, guiding our people to
do business responsibly in line with our value of integrity. We
launched the new brand with a week of focused communications, and
'Responsible Renishaw Week' will now be an annual event.
Following the Russian invasion of Ukraine in February 2022, we
immediately stopped the supply of goods from the Group to Russia
and certain parts of Ukraine. We have now ceased our operations in
Russia. Although we've spent many years growing our business in
Russia and were conscious of the effect this would have on our
employees in Moscow and Perm, it was the right decision to make. We
are also actively managing any attempts to procure our products
through alternative routes.
Sustainability is an integral part of our business. It's at the
heart of our purpose of Transforming Tomorrow Together, working
with our people, customers, suppliers and communities to create a
more sustainable world. This year, we've committed to a
science-based Net Zero emissions target of no later than 2050 for
our entire business and a target of 2028 for Scope 1 and 2
emissions.
For us, Net Zero means achieving a 90% reduction in greenhouse
gas (GHG) emissions compared to our FY2020 baseline emissions. For
the remaining 10% of emissions, we will invest in credible carbon
offsetting and removal programmes. Although we've set an overall
target of achieving Net Zero by 2050, we expect we can do more.
We've therefore set ourselves a target of measuring our Scope 3
emissions by March 2023, with the aim of then setting an earlier
target year for achieving Net Zero for all our emissions.
The move to Net Zero also represents many opportunities for our
business, since our products positively contribute to our
customers' own sustainability ambitions, by reducing energy
consumption and minimising waste.
Our success is testament to our people
Sir David has already acknowledged the huge contribution of our
employees during another highly challenging year. I'd also like to
add my own thanks for everything that they did to help achieve this
record year for the business. With such significant sales growth
and supply chain pressures, we've been stretched in many
operational areas. Nonetheless, I've been inspired by the
resilience, skill, dedication and innovation shown by our people
this year.
We've made excellent progress this year on responding to
feedback from our people, and have focused on modernising our
approach to pay and reward, improving our performance reviews, and
supporting career progression. The Group-wide pay benchmarking
review is a major part of this. As a result of the reviews to date,
and excluding other factors such as headcount growth, we expect our
labour costs to increase by around GBP19m in FY2023 compared with
FY2022.
To support our growth, we welcomed over 400 additional people
into our business, ending the year with around 5,100 people across
the world. We continue to take a long-term view and plan for the
future success of the Group, so this year we recruited nearly 150
apprentices and graduates, and also took on more than 40 industrial
placements. Having started here as a sponsored student myself, I
know we've always been committed to developing our people to both
build and retain their skills within the business. This includes
supporting people through further study, with more than 200
colleagues currently enrolled on apprenticeship programmes.
COVID-19 update
We continue to monitor the impact of COVID-19 on our people and
business, and retain some measures designed to minimise the risk of
in-company transmissions. However, most of our operations are now
operating on a more normal basis. We were affected by the spring
lockdowns in China, with our local headquarters in Shanghai closed
for two months, but were able to respond well to this. For example,
we used technical webinars to stay in touch with customers, and
used our extensive network of offices and employees across the
country to supply key customers and satisfy urgent orders. I'd like
to recognise the huge efforts made by colleagues in China
throughout this challenging period.
Although the pandemic has clearly been a difficult time for so
many people, I think it's important to reflect on what we've learnt
from it. We've demonstrated our resilience, and the ability and
dedication of our people to respond to rapid changes. We've been
able to make better use of digital technology to work with each
other, our customers and our suppliers, meaning we can work in a
more environmentally conscious way by travelling less. More digital
engagement with customers is also opening up more sales
opportunities, and our online sales are growing too.
Outlook
We have made a positive start to FY2023 and our order book
remains strong. We have, however, recently seen a weakening in
order intake from the semiconductor and electronics sectors, and
general market sentiment is becoming more cautious. In light of
this, we are managing costs carefully and focusing on
productivity.
Having strong cash reserves also helps us take a long-term view
and weather shorter-term challenges. We believe our markets offer
very positive long-term growth opportunities, and that we're making
the right investments to benefit from them. We have some innovative
new products in the pipeline to support our growth in new and
adjacent markets with both machine builders and end users.
The work I noted above on retaining, rewarding, and developing
our people to fulfil their potential is a critical part of
delivering our growth plans. Having seen what our people have
already achieved this year, I know this potential is enormous.
Overall, I'm confident in our strategy and the actions we're
taking to deliver sustainable, long-term growth, and I look forward
to the year ahead.
Will Lee
Chief Executive
15 September 2022
COMMENTARY BY THE GROUP FINANCE DIRECTOR
I'm delighted to report record revenue for the year amounting to
GBP671.1m, an increase of 19% compared with GBP565.6m last
year.
We've also achieved record Adjusted profit before tax of
GBP163.7m, an increase of 37% compared with GBP119.7m last year.
Statutory profit before tax was GBP145.6m. We continue to be in a
strong financial position, with net cash and bank deposit balances
of GBP253.2m at 30 June 2022 (FY2021: GBP215.0m).
Revenue by region
2022 2021 Underlying
revenue revenue change at
at actual Change at actual constant
exchange from exchange exchange
rates 2021 rates rates
GBPm % GBPm %
-------------------- ----------- ------ ----------- -----------
APAC 317.0 +15 274.8 +16
-------------------- ----------- ------ ----------- -----------
EMEA 205.8 +22 169.1 +22
-------------------- ----------- ------ ----------- -----------
Americas 148.3 +22 121.7 +18
-------------------- ----------- ------ ----------- -----------
Total Group revenue 671.1 +19 565.6 +18
-------------------- ----------- ------ ----------- -----------
Revenue analysis
We've seen strong revenue growth in all our regions this year.
Our APAC region was the first to recover in the previous financial
year, but recent growth has been more evenly spread. This rapid
upturn has placed supply chains under great stress in many sectors,
most notably semiconductor and electronics, where substantial
investments are in progress to ease capacity constraints.
Manufacturing technologies revenue grew by 19.6% to GBP634.6m
this year, and we have seen increased demand for all our product
lines. The most notable growth was in our Position Measurement
business, with our encoder product line benefitting from
significant global investments in the electronics capital equipment
market, including semiconductor manufacture. This has been driven
by an increase in both consumer and commercial demand for
electronic products. Magnetic encoders designed and manufactured by
our associate company, RLS, also experienced strong growth due to
increased demand for industrial automation products.
All our Industrial Metrology product lines grew due to a
recovery in investments in metal cutting machinery and the need to
measure the outputs from those processes, including increased
investments in shopfloor metrology.
Revenue from our Analytical instruments and medical devices
business grew by 4.0% to GBP36.5m this year. Our Spectroscopy
business achieved growth across our three regions, delivering
record revenue, driven by customers releasing funds on capital
expenditure projects. Despite a challenging year for our
neurological business, we still see many opportunities to grow this
business and have a strong pipeline for drug delivery revenue.
Operating costs
Our extensive in-house manufacturing operations, proactive
inventory management and continual assessment of alternative
components has allowed us to mitigate continued supply chain
constraints, caused, in large part, by the global shortage of
electronic components.
Against this backdrop, we're pleased to have maintained our
production costs (see note 4) at 35% of revenue. Like many
businesses, we've experienced cost increases, but by improving our
efficiency through increasing production volumes and making process
improvements we've been able to mitigate this.
The Group headcount increased during the financial year,
reaching 5,097 at the end of June 2022. This compares to 4,664 at
the end of June 2021. We have recruited additional manufacturing
staff to ensure we have sufficient capacity to meet demand, as well
as targeting headcount growth to support product development, and
expanding our future talent programmes. The average headcount
during the year was 4,931, an increase of 11% compared with last
year. Total labour costs (including bonuses) for the year were
GBP254.4m compared with GBP223.9m last year. The cost increase
results mainly from the headcount increase, pay reviews for our
employees and increased performance related bonuses.
As part of our reward and retention programmes, we have carried
out extensive salary benchmarking exercises in certain parts of the
business, including all our UK employees. Our intention is to
benchmark all Group employees by the end of this calendar year. As
a result of benchmarking and other pay reviews already completed
(and excluding other factors such as headcount growth), we expect
annual labour costs to increase by around GBP19m in FY2023 compared
with FY2022.
Certain other operating costs, such as travel and exhibitions,
are higher this year compared to last year as some pandemic-related
restrictions have been lifted. We have also experienced a notable
increase in utilities costs, caused by increasing energy prices and
usage.
During the financial year, GBP3.7m (FY2021: nil) of expenditure
on services relating to the implementation of a Group-wide ERP
software has been recognised in Administrative expenses in the
Consolidated income statement.
Following the Russian invasion of Ukraine in February 2022, we
immediately stopped the supply of goods from the Renishaw Group to
Renishaw Russia and by 30 June 2022 we had ceased our operations in
Russia. Typically, combined sales to Russia and Belarus have
represented around 1% of total Group revenue. We recorded GBP2.1m
of impairments against our assets in Russia, and we do not
anticipate any further costs or impairments.
No other significant asset impairments have been recognised this
year, as a result of upward demand trends across most of our
geographic areas and business units. In the previous year, we
recognised impairments of GBP4.7m in Administrative expenses
relating to an associate company.
Research and development
We remain committed to our long-term strategy of delivering
growth through the development and introduction of innovative and
patented products.
During the year, we incurred research and development
expenditure of GBP59.4m, compared with GBP58.6m last year (see note
4). We also incurred GBP26.4m (FY2021: GBP18.0m) on other
engineering expenditure, to support existing products and
technologies. There has been an increased focus on existing
products and technologies during the year due to global supply
chain issues, which have, in some instances, required product or
process redesigns.
Profit and tax
Adjusted profit before tax amounted to GBP163.7m compared with
GBP119.7m in FY2021, an increase of 37%. Statutory profit before
tax was GBP145.6m compared with GBP139.4m in the previous year.
There are sometimes infrequently occurring events which impact
on our financial statements, recognised according to applicable
IFRSs, that we believe should be excluded from adjusted performance
measures in order to give readers a more understandable and
comparable view of our underlying performance.
Items excluded from Adjusted profit before tax include: losses
of GBP8.3m from forward contracts deemed ineffective for cash flow
hedging (FY2021: GBP23.0m gain); third-party fees relating to the
FSP of GBP0.2m gain (FY2021: GBP3.2m loss); a revised estimate of
2020 restructuring provisions of GBP1.7m gain (FY2021: nil); and a
defined benefit (DB) pension scheme remeasurement loss relating to
augmentation of members' benefits totalling GBP11.7m (FY2021: nil).
These have not affected cash flow during the financial year.
2022 2021
GBP'000 GBP'000
------------------------------- -------- --------
Adjusted profit before
tax 163,742 119,666
------------------------------- -------- --------
Revised estimate of
2020 restructuring provisions 1,688 -
------------------------------- -------- --------
Third-party FSP costs 200 (3,222)
------------------------------- -------- --------
UK defined benefit pension
scheme past service
cost (11,695) -
------------------------------- -------- --------
Fair value (losses)/gains
on financial instruments (8,349) 22,995
------------------------------- -------- --------
Statutory profit before
tax 145,586 139,439
------------------------------- -------- --------
Adjusted operating profit in our Manufacturing technologies
segment was GBP158.6m compared with GBP114.1m last year, while in
our Analytical instruments and medical devices segment, Adjusted
operating profit was GBP2.8m compared with GBP4.5m last year.
The overall effective rate of tax was 17.3% (FY2021: 20.1%). We
operate in many countries around the world and the overall
effective tax rate is a result of the combination of the varying
tax rates applicable throughout these countries. In addition, the
tax rate has benefited from tax incentives (patent box and capital
allowances super-deduction) and higher profits from associates and
joint ventures. Note 7 provides further analysis of the effective
tax rate.
Consolidated balance sheet
We have invested GBP31.0m in property, plant and equipment and
vehicles during the year, of which GBP6.7m was spent on property
and GBP24.3m on plant and machinery, IT equipment and
infrastructure, and vehicles. Property expenditure in the year
included the completion of a new distribution facility in South
Korea, amounting to GBP3.8m, while plant and equipment expenditure
mostly comprised manufacturing equipment in the UK.
Within working capital, we have increased our inventories to
GBP162.5m from GBP113.6m at the beginning of the year. This is in
line with increases in global demand and reflecting planned
increases in certain component safety stock levels to mitigate
global supply shortages. We continue to focus on inventory
management while remaining committed to our policy of holding
sufficient finished goods to ensure customer delivery performance,
given our short order book.
Trade receivables increased from GBP114.7m to GBP127.6m due to
increased revenue and a currency translation gain of GBP5.3m.
Debtor days remained constant year-on-year at 61 days. We continue
to experience low levels of defaults, and hold a provision for
expected credit losses at 0.2% of trade receivables (FY2021:
0.3%).
Total equity at the end of the year was GBP815.2m, compared with
GBP703.3m at 30 June 2021. This is primarily a result of profit for
the year of GBP120.4m and gains from the remeasurement of defined
benefit pension scheme liabilities of GBP53.1m, offset by dividends
paid of GBP49.5m.
Cash and liquidity
We have further improved our liquidity position this year, with
net cash and bank deposit balances at 30 June 2022 of GBP253.2m
(FY2021: GBP215.0m). This is a result of our strong trading
performance, offset by our previously noted investments and working
capital movements, and dividends paid of GBP49.5m.
We disclose details of 'severe but plausible' scenario forecasts
used in our going concern and viability assessments in note 1 and
conclude that we have a reasonable expectation that we will retain
a liquid position and be able to continue in operation for at least
the next three years.
Capital allocation strategy
Our Board regularly reviews the capital requirements of the
Group, in order to maintain a strong financial position to protect
the business and provide flexibility to fund future growth.
We've consistently applied our capital allocation strategy for
many years. We're committed to R&D investment for new products,
manufacturing processes and global support infrastructure to
generate growth in future returns and improve productivity while
managing expenditure appropriate to trading conditions. This is
evidenced in the year by our capital expenditure and investments in
R&D.
Actual and forecast returns, along with our strong financial
position, support our progressive dividend policy, which aims to
increase the dividend per share while maintaining a prudent level
of dividend cover.
Pensions
The Company and trustees have successfully implemented a number
of changes to the UK Defined Benefit Pension scheme during the
year.
Following the Queen's Counsel opinion received in FY2021,
primarily in respect of the periods over which revaluation and late
retirement factors are applied, the liabilities of the scheme
reduced by GBP14.3m last year with the credit reported in Other
comprehensive income and expense.
This year the scheme rules have been changed to align with the
historic administrative method for calculating the revaluations and
early retirement factors. The resulting increase in liabilities,
totalling GBP11.7m, has been recognised as a past service cost in
the Consolidated income statement. This cost has been excluded from
Adjusted profit before tax (see note 29 for further details). We
also agreed that the Company will have the unconditional right to a
refund of any surplus on wind-up of the scheme, allowing for the
recognition of the IAS 19 scheme surplus this year. Following the
agreement of the September 2021 actuarial valuation, the GBP10.6m
held in escrow as security has now been released from charge and
the net book value of UK properties subject to charge has reduced
from GBP81.7m last year to GBP54.2m this year.
At the end of the year, our defined benefit pension schemes, now
closed for future accrual, showed a surplus of GBP42.2m, compared
with a deficit of GBP23.7m at 30 June 2021. Our defined benefit
pension schemes' assets at 30 June 2022 decreased to GBP216.7m from
GBP231.4m at 30 June 2021, primarily reflecting investment
performance during the period.
Pension scheme liabilities decreased from GBP255.1m to
GBP174.5m, on an IAS 19 basis. This primarily reflects the net
effect of:
- an increase in the discount rates of the UK and Ireland schemes;
- changes to the UK scheme rules which allows recognition of a surplus position; and
- the change in the UK scheme rules relating to members' benefits discussed above.
See note 23 for further details on employee benefits.
Treasury policies
Our treasury policies are designed to manage the financial risks
that arise from operating in a number of foreign currencies, with
the majority of sales made in these currencies, but with most
manufacturing and engineering carried out in the UK, Ireland and
India.
We use forward exchange contracts to hedge a proportion of
anticipated foreign currency cash inflows and the translation of
foreign currency denominated intercompany balances. There are
forward contracts in place to hedge against our Euro, US Dollar and
Japanese Yen cash inflows, and to offset movements on Renishaw
plc's Euro, US Dollar and Japanese Yen intercompany balances. We do
not speculate with derivative financial instruments.
Most of these forward contracts are subject to hedge accounting
under IFRS 9 'Financial Instruments'. The hedged item in these
contracts is the revenue forecasts of Renishaw plc and Renishaw UK
Sales Limited, and during the year these forecasts were increased
due to the improved economic conditions.
This means that all forward contracts have passed hedge
effectiveness testing in the year. Gains and losses, which recycle
through the Consolidated income statement as a result of contracts
previously found to be ineffective, are excluded from adjusted
profit measures. See note 25 for further details on financial
instruments and note 29 on alternative performance measures.
Our treasury policies are also designed to maximise interest
income on our cash and bank deposits and to ensure that appropriate
funding arrangements are available for each of our companies.
We have always valued having cash in the bank to protect the
core business from downturns, and we monitor our cash against a
minimum holding according to forecast overheads and revenue
downturn scenarios. This cash also enables us to react swiftly as
investment or market capture opportunities arise, while we expect
to significantly increase our investments in capital expenditure in
the coming years.
Earnings per share and dividend
Adjusted earnings per share is 185.5p, compared with 132.0p last
year, while statutory earnings per share is 165.4p, compared with
153.2p last year.
We paid an interim dividend of 16.0 pence per share (FY2021:
14.0p) on 11 April 2022 and are pleased to propose a final dividend
of 56.6 pence per share in respect of the year (FY2021: 52.0p).
Looking forward
While there remains some global economic uncertainty, we have
many drivers in our key markets to deliver long-term revenue growth
and we continue to invest in the infrastructure required to meet
the expected future demand. Supported by our strong balance sheet,
we have committed around GBP64m to increasing the footprint of our
production facilities at Miskin, Wales, and are investing in
production equipment to increase both capacity and productivity,
with a focus on automation. Where possible, we are mitigating cost
inflation by increasing the sale price of our products and are
focused on delivering productivity improvements across the
business.
Allen Roberts
Group Finance Director
15 September 2022
PRINCIPAL RISKS AND UNCERTAINTIES
Our performance is subject to a number of risks - the principal
risks, factors impacting on them and mitigations are ranked in the
table below, as well as an indication of the movement of the risk
in the last year, our appetite towards that risk, and how the risk
links to our strategy. The Board has conducted a robust assessment
of the principal risks facing the business.
Appetite: Link to strategy:
- Low: Minimal risk exposure is considered the - SM: Sales & Marketing
safest approach, which may mean lower returns. - E: Engineering
- Medium: A balanced approach which carefully - P: People and Culture
considers the risks and rewards. - M: Manufacturing
- High: Greater risk tolerance, which may involve - SS: Support Services
maximum risk for maximum return. - S: Sustainability
People
Movement: increased risk Appetite: Medium Link to strategy:
P Risk owner: Head of Group HR
Risk description
Our people are fundamental to the success of our business.
Inability to attract, retain, and develop key talent at all
levels of the organisation could mean we fail to successfully
deliver on our strategic objectives.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Loss of expertise, skills, and specialist talent * Targeted approach to attract, reward, and retain our
could affect delivery of objectives. talent globally, including the roll out of a new
benchmarking programme for annual salary reviews and
major investment in reward to ensure our pay is
* Poor retention and engagement could slow the delivery competitive.
of our strategic objectives and product delivery.
* Continued investment in our STEM and Early Career
* Failure to develop future leaders, insufficient programmes, as well as talent development and
talent progression. succession planning.
* Loss of market share, reduced revenue, poor customer * Advancing our employee engagement through multi-media
service, and reduced profit. communications, promoting wellbeing, evolving
feedback mechanisms, and further developing our
inclusion strategy.
* Establishing continuity plans to enable rapid
adaptation to changing circumstances.
-----------------------------------------------------------------
Innovation strategy
Movement: increased risk Appetite: High Link to strategy:
E Risk owner: Product Group Directors
Risk description
Failure to create new cutting-edge, high-quality products,
or failing to protect the intellectual property that underpins
these products, which allows us to differentiate ourselves
from our competitors.
As a business driven by innovation, there is a higher risk
with new ventures outside our traditional field of expertise
where the science and engineering are less proven.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Failing to meet customer needs for high-quality and * Increasing focus on presenting and understanding
complex products. technology development and commercialisation
roadmaps. R&D and flagship projects are prioritised
and regularly reviewed against milestones. Medium to
* Loss of market share. long-term R&D strategies are monitored regularly by
the Board and Executive Committee.
* Reduced revenue, profit and cash generation.
* All Board meetings now have a standing agenda item to
review disruptive technology.
* Failing to recover investment in R&D.
* Market developments are closely monitored and product
development is based on input from customers.
* Patent and intellectual property protection are core
to new product development, with management and
review integrated into the Product Innovation Process
(PIP) procedure.
-----------------------------------------------------------------
Supply chain dependencies
Movement: stable risk Appetite: Low Link to strategy: M Risk
owner: Head of Group Manufacturing
Risk description
We're exposed to the risk that critical components, or some
components that we buy from single-source suppliers, make
us vulnerable to an interruption in supply.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Inability to fulfil customer orders, leading to a * Continued focus on, and review of, sourcing of key
reduction in revenue and profits, and damage to components.
reputation.
* Increase in buffer inventory.
* Failure to meet contractual requirements.
* Cost-effective alternative sources of supply actively
* Increased cost of alternative sourcing or redesign. sought (including in-house manufacturing) to reduce
dependency on single-source suppliers.
* Loss of market share.
* Specifications are reviewed and updated where
necessary to facilitate alternative sourcing.
-----------------------------------------------------------------
Industry fluctuations
Movement: decreased risk Appetite: High Link to strategy:
SM, M, E Risk owner: Chief Executive
Risk description
We're exposed to the cyclical nature of demand from aerospace,
automotive and consumer electronics industries, which may
be more severe if downcycles in these key industries coincide.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Increased competition on prices. * Closely monitoring market developments.
* Loss of market share. * Expanding our range in order to meet the demands of a
number of different industry sectors and markets.
* Reduced revenue, profit and cash generation.
* Identifying and meeting the needs of emerging markets
,
for example in robotic automation.
* Maintaining a strong balance sheet with the ability
to flex manufacturing resource levels.
-----------------------------------------------------------------
Economic and political uncertainty
Movement: stable risk Appetite: High Link to strategy: All
Risk owner: Chief Executive
Risk description
As a global business, we may be affected by political, economic
or regulatory developments in countries that we operate in.
This could include a global recession, US/China trade relations,
or the current war in Ukraine.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Loss of financial and physical assets in a region. * Monitoring external economic and commercial
environments, and identifying relevant headwinds.
* Supply issues leading to failures to meet contractual
obligations. * Maintaining sufficient headroom in our cash balances.
* Reduced revenue, profit and cash generation. * Increase in buffer inventory.
* Closely monitoring all markets in which we operate.
-----------------------------------------------------------------
Route to market / customer satisfaction model
Movement: stable risk Appetite: Medium Link to strategy: SM
Risk owner: Chief Executive
Risk description
Inherent complexity in the move to systems integration and
the sale of capital goods.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Low capital efficiency - high people costs and low * Closely monitoring customer feedback.
productivity.
* Collaborating with complementary third parties.
* Higher engineering and distribution costs.
* Adopting new approaches to the sale of capital goods.
* Adversely affects customer satisfaction levels,
revenue, and profits.
-----------------------------------------------------------------
Capital allocation
Movement: stable risk Appetite: Medium Link to strategy: E
Risk owner: Group Finance Director
Risk description
This risk could be triggered by a failure to properly allocate
budget between core and emerging activities.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Investing in declining or less profitable areas at * Defining, prioritising, and developing strategies for
the expense of more profitable and strategically all core and emerging areas of the business.
important areas.
* Scrutinising all expenditure, including regular
* Reduced profits. reporting on labour costs and capital expenditure.
* Loss of market share. * Regular reporting of cash balances.
* Impact on innovation. * Tracking of performance objectives including regular
reporting on flagship project progress.
-----------------------------------------------------------------
Competitive activity
Movement: stable risk Appetite: Low Link to strategy: All
Risk owner: Chief Executive
Risk description
Failure to adapt to market and/or technological changes.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Reduced revenue, profits and cash generation. * We are diversified across a range of products,
industries, and geographies.
* Loss of market share.
* Closely monitoring market developments, particularly
across our core product areas.
* Erosion of prices.
* Local sales and engineering support to quickly
* Loss of reputation as a leader in innovation. identify changing local needs.
* Strong historic and ongoing commitment to R&D
investment to continue to build our product
portfolio.
-----------------------------------------------------------------
Cyber
Movement: increased risk Appetite: Low Link to strategy: All
Risk owner: Director of Group Operations
Risk description
External and internal threat which could result in a loss
of data including intellectual property, or our ability to
operate our systems which could severely affect our business.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Loss of intellectual property and/or commercially * Substantial resilience and back-up built into our
sensitive data. systems, which are continuously updated for current
threats and good industry practice.
* Inability to access, or disruption to, our systems
leading to reduced service to customers. * Regularly discuss cyber and security risks at Board
meetings, including the strength of our control
environment.
* Financial loss and reputational damage.
* Deploy physical, logical, and control measures to
* Impact on decision-making due to lack of clear and protect our information and systems, and external
accurate data, or disruption caused by the lack of penetration testing is conducted as appropriate.
service.
* Conduct regular security awareness training,
including phishing simulation exercises, which are
proving effective.
-----------------------------------------------------------------
IT transformation failure
Movement: stable risk Appetite: Low Link to strategy: All
Risk owner: Director of Group Operations
Risk description
The upgrade of our IT systems to Microsoft Dynamics 365, to
remove legacy systems and ensure our business is better integrated,
could affect our business if there are major technical issues,
or it is poorly integrated. This risk could also result in
problems if there are significant delays to the programme
or it runs significantly over budget.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Major disruption to our systems, causing delay to our * Risk assessments carried out for all key systems
operations. likely to be affected by the upgrade.
* Affect our ability to process or issue invoices and * A clear roadmap with measurable milestones, and
customer orders, or to procure goods and services. planning to implement lower risk companies first.
* Increased costs, including to fix technical issues * Assigning project managers who have clear oversight
and restore or upgrade other affected systems. of the project and any issues.
* Project delay would leave us supporting legacy * Promptly identifying and dealing with any significant
systems for longer than desired. issues.
-----------------------------------------------------------------
Loss of manufacturing output
Movement: decreased risk Appetite: Low Link to strategy: M
Risk owner: Head of Group Manufacturing
Risk description
Manufacturing output can be adversely affected by factors
including environmental hazards, technical delays or outages,
plant or equipment failure, inadequate resourcing levels,
or factors affecting the workforce, such as a pandemic.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Inability to fulfil customer orders leading to a * Duplication of high-dependency processes, such as
reduction in revenue, failure to meet contractual
requirements and damage to reputation.
* component manufacturing and finishing, electronic
printed circuit board assembly, and microelectronics
* Increased costs of alternative sourcing or redesign. assembly, across multiple manufacturing locations.
* Impact on maintenance of buffer inventory. * Ensuring we have flexible manufacturing capacity and
sufficient resilience across our manufacturing sites.
* Loss of market share.
* Standardised approaches to assembly, annual risk
assessments, and business continuity planning.
* Reviewing and maintaining business interruption and
other insurance cover.
-----------------------------------------------------------------
Exchange rate fluctuations
Movement: decreased risk Appetite: Medium Link to strategy:
SM Risk owner: Group Finance Director
Risk description
Due to the global nature of our operations, with over 90%
of the revenue generated outside the UK, we're exposed to
volatility in exchange rates that could have a significant
impact on our results.
We're exposed to exchange rate risks, including the strengthening
of Sterling against our major trading currencies, currency
cash flow, currency translation risk, and the currency risk
on intercompany balances.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Significant variations in profit. * Rolling forward contracts for cash flow hedges in
accordance with Board-approved policy, and one-month
forward contracts to manage risks on intercompany
* Reduced cash generation. balances.
* Increased competition on product prices. * Tracking of overseas net assets value compared to the
market capitalisation.
* Increased costs.
* Obtaining input from external sources including our
banks.
-----------------------------------------------------------------
Climate change
New risk Appetite: Low Link to strategy: All Risk owner: General
Counsel & Company Secretary
Risk description
We could be exposed to physical risks, potentially triggering
an inability to operate, and other transition risks regarding
our plans to achieve Net Zero. We could fail to react adequately
to new climate-related legislation, technology or market factors.
Failure to respond to large-scale natural hazards, such as
hurricanes, floods, fires or pandemics, could result in operations
failure.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Increased costs - potentially costly and uncertain * Sustainability and climate change are regularly
supplies of renewable energy certificates and/or discussed at Board and Executive Committee meetings.
offsetting schemes to achieve Net Zero commitment,
and underestimating Net Zero costs.
* Our Sustainability team supports the Risk Committee
in evaluating and understanding the possible effect
* Damage to reputation and loss of future business. of climate-related risks and opportunities.
* Impact on macroeconomic landscape. * Reviewing and maintaining business interruption and
other insurance cover to minimise any financial loss
that may occur in the event of disruption caused by
* Disruption to operations caused by natural hazards. climate events.
-----------------------------------------------------------------
Pensions
Movement: stable risk Appetite: Medium Link to strategy: P
Risk owner: Group Finance Director
Risk description
Investment returns and actuarial assumptions of our defined
benefit pension schemes are subject to economic and social
factors outside our control.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Any deficit may need additional funding in the form * Implemented recovery plan for the UK defined benefit
of supplementary cash payments to the plans or the scheme in June 2019 with the aim of funding to
provision of additional security. self-sufficiency by 2031.
* Significant management time. * Appointed a corporate Trustee in June 2022, with the
previous Trustees stepping down. This will help
reduce management time and support costs.
* External support costs.
* Active engagement with the Trustee(s) on investment
* Damage to reputation. strategy.
* The Trustee(s) work to a statement of investment
principles, and the Company and Trustee(s) seek
appropriate independent professional advice if
needed.
-----------------------------------------------------------------
Non-compliance with laws and regulations
Movement: stable risk Appetite: Low Link to strategy: All
Risk owner: General Counsel & Company Secretary/Director of
Renishaw Neuro Solutions
Risk description
We operate in a large number of territories and in some highly-regulated
sectors. We are subject to a wide variety of laws and regulations,
including those relating to anti-bribery, anti-money laundering,
sanctions, competition law, privacy, health and safety, product
safety, and medical devices.
There is a risk that somewhere in the Group we may not be
fully compliant with these laws and regulations.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Damage to reputation and loss of future business. * Whistleblowing hotline available for use by all
employees which means that our people can make us
aware of any potential non-compliance issues.
* Potential penalties and fines, and cost of
investigations.
* Global compliance programmes in place for all high
risk areas, which includes policies, key controls,
* Management time and attention in dealing with reports and effective communication. Training also includes
of non-compliance. refreshed mandatory anti-bribery and anti-corruption
modules.
* Inability to attract and retain talent.
* Promotion of all compliance functions under the
umbrella brand 'Responsible Renishaw'. This helps to
raise awareness about compliance, and makes it easier
for our people to find the information they need to
comply.
* Implementing a global privacy programme.
-----------------------------------------------------------------
Product failure
Movement: stable risk Appetite: Low Link to strategy: E, M
Risk owner: Group Quality Manager/Renishaw Neuro Solutions
Quality Manager
Risk description
The quality of our products could be adversely affected by
internal threats, such as inadequate quality management procedures.
Product quality could also be affected by external threats,
such as substandard resourcing from third-party suppliers.
This risk is particularly notable in our neurological products,
where failure could result in significant personal injury
claims.
Potential impact What we are doing to manage this risk
-----------------------------------------------------------------
* Damage to reputation. * Rigorous internal product development and testing
procedures (during development, manufacturing, and
release) to international standards where applicable,
* Claims, including personal injury. to ensure high levels of quality assurance.
* Potential penalties and fines, and cost of * Extensive interaction with customers and regulators
investigations. to obtain and address feedback.
* Inability to fulfil customer orders leading to a * Regular monitoring of third-party suppliers to ensure
reduction in sales. incoming parts and sub-contracted activity meet
requirements.
* Liability is limited by our terms and conditions of
sale and we have liability insurance. For clinical
studies, we have separate trial insurance.
-----------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2022
from continuing operations 2022 2021
notes GBP'000 GBP'000
Revenue 2 671,076 565,559
Cost of sales 4 (313,527) (269,852)
Gross profit 357,549 295,707
Distribution costs (122,455) (110,087)
Administrative expenses (69,736) (69,257)
UK defined benefit pension scheme past
service cost 23 (11,695) -
(Losses)/gains from the fair value of financial
instruments 25 (10,413) 21,978
Operating profit 143,250 138,341
Financial income 5 932 3,406
Financial expenses 5 (2,938) (3,991)
Share of profits of associates and joint
ventures 13 4,342 1,683
Profit before tax 145,586 139,439
Income tax expense 7 (25,235) (27,980)
Profit for the year 120,351 111,459
------------------------------------------------- ------ ---------- ----------
Profit attributable to:
Equity shareholders of the parent company 120,351 111,459
Non-controlling interest 26 - -
Profit for the year 120,351 111,459
------------------------------------------------- -------- --------
pence pence
Dividend per share arising in respect of
the year 26 72.6 66.0
Dividend per share paid in the year 26 68.0 14.0
Earnings per share (basic and diluted) 8 165.4 153.2
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
for the year ended 30 June 2022
2022 2021
notes GBP'000 GBP'000
Profit for the year 120,351 111,459
---------------------------------------------------- ------ --------- ---------
Other items recognised directly in equity:
Items that will not be reclassified to the
Consolidated income statement:
Current tax on contributions to defined benefit
pension schemes 1,653 1,653
Deferred tax on contributions to defined benefit
pension schemes (1,653) (1,653)
Remeasurement of defined benefit pension scheme
liabilities 23 69,078 33,285
Deferred tax on remeasurement of defined benefit
pension scheme liabilities (15,997) (6,052)
Total for items that will not be reclassified 53,081 27,233
---------------------------------------------------- ------ --------- ---------
Items that may be reclassified to the Consolidated
income statement:
Exchange differences in translation of overseas
operations 26 12,151 (14,752)
Exchange differences in translation of overseas
joint venture 26 118 (728)
Current tax on translation of net investments
in foreign operations 26 (1,529) 735
Deferred tax on translation of net investments
in foreign operations 26 - 735
Effective portion of changes in fair value
of cash flow hedges, net of recycling 26 (28,423) 51,590
Deferred tax on effective portion of changes
in fair value of cash flow hedges 7,26 6,155 (9,790)
Total for items that may be reclassified (11,528) 27,790
---------------------------------------------------- ------ --------- ---------
Total other comprehensive income and expense,
net of tax 41,553 55,023
---------------------------------------------------- ------ --------- ---------
Total comprehensive income and expense for
the year 161,904 166,482
---------------------------------------------------- ------ --------- ---------
Attributable to:
Equity shareholders of the parent company 161,904 166,482
Non-controlling interest 26 - -
Total comprehensive income and expense for
the year 161,904 166,482
---------------------------------------------------- ------ --------- ---------
CONSOLIDATED BALANCE SHEET
at 30 June 2022 2022 2021
notes GBP'000 GBP'000
------------------------------------------ ------ --------- --------
Assets
Property, plant and equipment 9 243,853 246,242
Right-of-use assets 10 9,950 12,429
Investment properties 11 10,568 -
Intangible assets 12 44,218 43,795
Investments in associates and joint
ventures 13 20,570 16,634
Finance lease receivables 14 6,961 6,241
Employee benefits 23 43,241 -
Deferred tax assets 7 22,893 21,292
Derivatives 25 - 12,484
Total non-current assets 402,254 359,117
------------------------------------------ ------ --------- --------
Current assets
Inventories 16 162,482 113,563
Trade receivables 25 127,551 114,661
Finance lease receivables 14 3,348 1,763
Contract assets 578 332
Short-term loans to associates and joint
ventures 302 598
Current tax 8,901 1,600
Other receivables 25 27,068 30,021
Derivatives 25 7,121 9,639
Pension scheme cash escrow account 23 - 10,578
Bank deposits 15 100,000 120,000
Cash and cash equivalents 15,25 153,162 95,008
Total current assets 590,513 497,763
------------------------------------------ ------ --------- --------
Current liabilities
Trade payables 25 30,947 24,715
Contract liabilities 18 12,956 6,120
Current tax 10,078 4,680
Provisions 17 4,244 6,259
Derivatives 25 17,890 5,594
Lease liabilities 20 3,714 3,904
Borrowings 21 919 992
Other payables 19 51,949 51,716
Total current liabilities 132,697 103,980
------------------------------------------ ------ --------- --------
Net current assets 457,816 393,783
------------------------------------------ ------ --------- --------
Non-current liabilities
Lease liabilities 20 6,466 8,658
Borrowings 21 5,160 6,457
Employee benefits 23 996 23,698
Deferred tax liabilities 7 22,815 10,402
Derivatives 25 9,463 355
Total non-current liabilities 44,900 49,570
------------------------------------------ ------ --------- --------
Total assets less total liabilities 815,170 703,330
------------------------------------------ ------ --------- --------
Equity
Share capital 26 14,558 14,558
Share premium 42 42
Own shares held 26 (750) (404)
Currency translation reserve 26 14,459 3,719
Cash flow hedging reserve 26 (10,923) 11,345
Retained earnings 798,541 674,603
Other reserve 26 (180) 44
Equity attributable to the shareholders
of the parent company 815,747 703,907
------------------------------------------ ------ --------- --------
Non-controlling interest 26 (577) (577)
Total equity 815,170 703,330
------------------------------------------ ------ --------- --------
These financial statements were approved by the Board of
Directors on 15 September 2022 and were signed on its behalf
by:
Sir David McMurtry Allen Roberts
Directors
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2022
Cash
Own Currency flow Non-
Share Share Shares translation hedging Retained Other controlling
capital premium Held reserve reserve earnings reserve interest Total
Year ended 30 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
June
2021
Balance at 1
July
2020 14,558 42 (404) 17,729 (30,455) 546,100 (129) (577) 546,864
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Profit for the
year - - - - - 111,459 - - 111,459
Other
comprehensive
income and
expense
(net of tax)
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Remeasurement of
defined benefit
pension
scheme
liabilities - - - - - 27,233 - - 27,233
Foreign exchange
translation
differences - - - (13,282) - - - - (13,282)
Relating to
associates
and joint
ventures - - - (728) - - - - (728)
Changes in fair
value
of cash flow
hedges - - - - 41,800 - - - 41,800
Total other
comprehensive
income and
expense - - - (14,010) 41,800 27,233 - - 55,023
Total
comprehensive
income and
expense - - - (14,010) 41,800 138,692 - - 166,482
Share-based
payments
charge - - - - - - 173 - 173
Dividends paid - - - - - (10,189) - - (10,189)
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Balance at 30
June
2021 14,558 42 (404) 3,719 11,345 674,603 44 (577) 703,330
Year ended 30
June
2022
Profit for the
year - - - - - 120,351 - - 120,351
Other
comprehensive
income and
expense
(net of tax)
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Remeasurement of
defined benefit
pension
scheme
liabilities - - - - - 53,081 - - 53,081
Foreign exchange
translation
differences - - - 10,622 - - - - 10,622
Relating to
associates
and joint
ventures - - - 118 - - - - 118
Changes in fair
value
of cash flow
hedges - - - - (22,268) - - - (22,268)
Total other
comprehensive
income and
expenses - - - 10,740 (22,268) 53,081 - - 41,553
Total
comprehensive
income and
expenses - - - 10,740 (22,268) 173,432 - - 161,904
Share-based
payments
charge - - - - - - 180 - 180
Own shares
transferred
on vesting - - 404 - - - (404) - -
Own shares
purchased - - (750) - - - - - (750)
Dividends paid - - - - - (49,494) - - (49,494)
Balance at 30
June
2022 14,558 42 (750) 14,459 (10,923) 798,541 (180) (577) 815,170
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
More details of share capital and reserves are given in note
26.
CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 30 June 2022
2022 2021
notes GBP'000 GBP'000
------------------------------------------------ ------ --------- ----------
Cash flows from operating activities
Profit for the year 120,351 111,459
------------------------------------------------ ------ --------- ----------
Adjustments for:
Depreciation of property, plant and equipment,
investment properties 9,11 25,898 24,317
Loss on sale of property, plant and equipment 9 157 31
Impairment of property, plant and equipment 9 1,259 -
Depreciation of right-of-use assets 10 4,205 4,463
Impairment of right-of-use-assets 10 1,837 -
Amortisation of development costs 12 4,698 9,019
Amortisation of other intangibles 12 1,225 1,205
Impairment of development costs 12 - 1,092
Write-off of intangible assets 12 3,510 -
Share of profits from associates and joint
ventures 13 (4,342) (1,683)
Profit on disposal of investment in associate 13 (582) -
Impairment of investment in associate - 1,674
Impairment of long-term loan to associate - 2,633
Write-off of lease liabilities 20 (1,985) -
UK defined benefit pension scheme past
service cost 23 11,695 78
Financial income 5 (932) (3,406)
Financial expenses 5 2,938 3,991
Losses/(gains) from the fair value of
financial instruments 25 8,349 (22,995)
Share-based payment expense 24 180 173
Tax expense 7 25,235 27,980
83,345 48,572
------------------------------------------------ ------ --------- ----------
Increase in inventories (48,919) (8,066)
Increase in trade and other receivables (11,301) (25,703)
Increase in trade and other payables 12,288 27,216
(Decrease)/increase in provisions (2,015) 668
(49,947) (5,885)
------------------------------------------------ ------ --------- ----------
Defined benefit pension scheme contributions 23 (8,866) (8,866)
Income taxes paid (23,410) (9,991)
Cash flows from operating activities 121,473 135,289
------------------------------------------------ ------ --------- ----------
Investing activities
Purchase of property, plant and equipment,
and investment properties 9,11 (30,960) (10,873)
Sale of property, plant and equipment 687 33
Development costs capitalised 12 (7,966) (9,844)
Purchase of other intangibles 12 (929) (3,000)
Decrease/(increase) in bank deposits 15 20,000 (110,000)
Interest received 5 834 625
Dividend received from associates and
joint ventures 13 525 -
Purchase of additional shareholding in
joint venture - (749)
Proceeds from sale of shares in associate 13 582 -
Payments from pension scheme cash escrow
account 23 10,578 -
Cash flows from investing activities (6,649) (133,808)
------------------------------------------------ ------ --------- ----------
Financing activities
Increase in borrowings 21 - 636
Repayment of borrowings 21 (974) (3,477)
Interest paid 5 (591) (386)
Repayment of principal of lease liabilities 22 (4,081) (4,815)
Own shares purchased 26 (750) -
Dividends paid 26 (49,494) (10,189)
Cash flows from financing activities (55,890) (18,231)
------------------------------------------------ ------ --------- ----------
Net increase in cash and cash equivalents 58,934 (16,750)
Cash and cash equivalents at beginning
of the year 95,008 110,386
Effect of exchange rate fluctuations on
cash held (780) 1,372
Cash and cash equivalents at end of the
year 15 153,162 95,008
------------------------------------------------ ------ --------- ----------
NOTES (FORMING PART OF THE FINANCIAL STATEMENTS)
1. Accounting policies
This section sets out our significant accounting policies that
relate to the financial statements as a whole, along with the
critical accounting judgements and estimates that management has
identified as having a potentially material impact on the Group's
consolidated financial statements. Where an accounting policy is
applicable to a specific note in the financial statements, the
policy is described within that note.
Basis of preparation
Renishaw plc (the Company) is a company incorporated in England
and Wales. The Group financial statements consolidate those of the
Company and its subsidiaries (together referred to as the Group,
and 'we') and equity account the Group's interest in associates and
joint ventures. The parent company financial statements present
information about the Company as a separate entity and not about
the Group.
The financial information set out in the announcement does not
constitute the Group's statutory accounts for the years ended 30
June 2022 or 30 June 2021. The financial information for the year
ended 30 June 2021 is derived from the statutory accounts for that
year, which have been delivered to the Registrar of Companies. The
auditor reported on those accounts; their report was unqualified,
did not draw attention to any matters by way of emphasis without
qualifying their report and did not contain a statement under s498
(2) or (3) Companies Act 2006. In respect of the year ended 30 June
2022, an unqualified auditor's report was signed on 15 September
2022. The statutory accounts will be delivered to the Registrar of
Companies following the Group's annual general meeting. The
consolidated financial statements are presented in Sterling, which
is the Company's functional currency and the Group's presentational
currency, and all values are rounded to the nearest thousand
(GBP'000).
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements. Judgements made by the Directors, in
the application of these accounting policies, that have a
significant effect on the financial statements and estimates with a
significant risk of material adjustment in the next year are noted
below.
Critical accounting judgements and estimation uncertainties
The preparation of financial statements in conformity with
adopted IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances. The results of this form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis.
The areas of key estimation uncertainty and critical accounting
judgement that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities in the
next financial year are summarised below, with further details
included within accounting policies.
Item Key judgements (J) and estimates (E)
------------------------- -------------------------------------------
Taxation E - Estimates of future profits to
use deferred tax assets
Research and development J - Whether a project meets the criteria
costs for capitalisation
Goodwill and capitalised E - Estimates of future cash flows
development costs for impairment testing
Inventories E - Determination of net realisable
value
Defined benefit pension E - Valuation of defined benefit pension
schemes schemes' liabilities
Cash flow hedges E - Estimates of highly probable forecasts
of the hedged item
------------------------- -------------------------------------------
When reviewing the above critical judgements and estimates,
management also considered the effect of climate change, including
our own Net Zero commitment. For the year ended 30 June 2022 we
concluded that climate change did not have a material effect on any
of the above judgements and estimates. The Directors reached the
same conclusion when reviewing the Group's going concern and
viability assessment.
While the Group could benefit significantly from changing demand
as customers and end-users make progress with their own Net Zero
targets, we recognise that climate change may pose a greater risk
to the Group over time. We will continue to review the effect of
climate change on financial statements in the future, and update
our accounting and disclosures as the position changes.
New, revised or changes to existing accounting standards
The following accounting standard amendments became effective as
at 1 January 2021 and have been adopted in the preparation of these
financial statements, with effect from 1 July 2021:
- amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39,
Interest Rate Benchmark Reform Phase 2; and
- amendments to IFRS 16, COVID-19-Related Rent Concessions.
These have not had a material effect on these financial
statements.
Going concern
In preparing these financial statements, the Directors have
adopted the going concern basis. The decision to adopt the going
concern basis was made after considering:
- the Group's business model and key markets;
- the Group's risk management processes and principal risks;
- the Group's financial resources and strategies; and
- the process undertaken to review the Group's viability,
including scenario testing.
In the viability review the Directors assessed the period to 30
September 2025, using the 'highly probable' revenue forecasts used
by the Group for hedge accounting, and 'severe but plausible'
downside scenarios. In making the going concern assessment, the
Directors used the same forecasts but assessed the period to 30
September 2023.
Each scenario used the same starting point, taking the revenue
forecast as the pessimistic view in our five-year business plan
(which we also refer to as the 'highly probable' revenue forecast
for hedge accounting). The starting point for overheads, capital
expenditure, and other cash outflows was taken from the optimistic
plan. Together, this means that the scenarios started by assuming
that revenue growth is at the lowest end of our corporate view
while still incurring the costs in the next three years that are
needed to achieve revenue growth in later years. For context,
revenue in the first year of this starting point is a small
increase from FY2022's revenue of GBP671.1m.
The seven scenarios then took this same starting point and then
added in the following elements:
A - Reduction in revenue if we were unable to buy certain
critical ASIC chips for twelve months.
B - Reduction in revenue from encoder, CMM, and machine tool
products.
C - Economic and political uncertainty, causing a reduction in
revenue, an increase in labour costs, and an increase in materials,
utilities, and logistics costs.
D - A cyber-attack causing a loss of networks and systems for
three weeks (management's assessment of a worst-case scenario for
total network loss).
E - The effect on our business if we lost the use of our main
hall at Miskin, our largest factory, for six months.
F - The effect of a further 10% and 15% strengthening in
Sterling, compared to management's existing assumptions.
G - A 50% increase in our estimated Net Zero capital
expenditure.
For risks such as People, Innovation strategy, and Capital
allocation, the Directors felt that if these risks crystallised
they would result in the restriction of longer-term growth rather
than having a significant financial effect in the medium term. We
therefore didn't include these risks in the scenarios above.
We also performed reverse stress testing to identify what would
need to happen in the period to 30 September 2023 to result in the
Group having negative bank deposit and cash balances. We found that
this would occur if revenue fell to GBP19m per month before
mitigating actions were taken; this is considerably lower than
forecast.
In making their going concern assessment, the Directors also
considered the strong demand currently being experienced and how
well we've responded to challenges such as the pandemic and global
supply chain disruption.
Based on this assessment, incorporating a review of the current
position, the scenarios, our principal risks and mitigation, the
Directors have a reasonable expectation that we'll be able to
continue operating and meet our liabilities as they fall due over
the period to 30 September 2023.
Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to or has rights to variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. In
assessing control, the Group takes into consideration potential
voting rights that are exercisable. The acquisition date is the
date on which control is transferred to the acquirer. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases. Losses applicable to the non-controlling
interests in a subsidiary are allocated to the non-controlling
interests even if doing so causes the non-controlling interests to
have a deficit balance.
Associates and joint ventures are accounted for using the equity
method (equity-accounted investees) and are initially recognised at
cost. The Group's investment includes goodwill identified on
acquisition, net of any accumulated impairment losses.
The consolidated financial statements include the Group's share
of the total comprehensive income and equity movements of equity
accounted investees, from the date that significant influence
commences until the date that significant influence ceases. When
the Group's share of losses exceeds its interest in an equity
accounted investee, the Group's carrying amount is reduced to nil
and recognition of further losses is discontinued except to the
extent that the Group has incurred legal obligations or made
payments on behalf of an investee.
Intragroup balances and transactions, and any unrealised income
and expenses arising from intragroup transactions, are eliminated
on consolidation. Unrealised gains arising from transactions with
equity accounted investees are eliminated against the investment to
the extent of the Group's interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Foreign currencies
On consolidation, overseas subsidiaries' results are translated
into Sterling at weighted average exchange rates for the year by
translating each overseas subsidiary's monthly results at exchange
rates applicable to each of the respective months. Assets and
liabilities denominated in foreign currencies at the balance sheet
date are translated into Sterling at the foreign exchange rates
prevailing at that date. Differences on exchange resulting from the
translation of overseas assets and liabilities are recognised in
Other comprehensive income and are accumulated in equity.
Monetary assets and liabilities denominated in foreign
currencies are reported at the rates prevailing at the time, with
any gain or loss arising from subsequent exchange rate movements
being included as an exchange gain or loss in the Consolidated
income statement. Foreign currency differences arising from
transactions are recognised in the Consolidated income
statement.
Separately disclosed items
The Directors consider that certain items should be separately
disclosed to aid understanding of the Group's performance.
Gains and losses from the fair value of financial instruments
are therefore separately disclosed in the Consolidated income
statement, where these gains and losses relate to certain forward
currency contracts that are not effective for hedge accounting.
Restructuring costs are also separately disclosed where significant
costs have been incurred in rationalising and reorganising our
business as part of a Board-approved initiative, and relate to
matters that do not frequently recur.
During the period, a change to the UK defined benefit pension
scheme rules, per note 23, resulted in a significant non-recurring
amount being recognised in the Consolidated income statement. This
has also been separately disclosed.
These items are also excluded from Adjusted profit before tax,
Adjusted operating profit and Adjusted earnings per share measures,
as explained in note 29 Alternative performance measures.
Alternative performance measures
The financial statements are prepared in accordance with adopted
IFRS and applied in accordance with the provisions of the Companies
Act 2006. In measuring our performance, the financial measures that
we use include those which have been derived from our reported
results, to eliminate factors which distort year-on-year
comparisons.
These are considered non-GAAP financial measures. We believe
this information, along with comparable GAAP measurements, is
useful to stakeholders in providing a basis for measuring our
operational performance. The Board use these financial measures,
along with the most directly comparable GAAP financial measures, in
evaluating our performance (see note 29).
2. Revenue disaggregation and segmental analysis
We manage our business by segment, comprising Manufacturing
technologies and Analytical instruments and medical devices, and by
geographical region. The results of these segments and regions are
regularly reviewed by the Board to assess performance and allocate
resources, and are presented in this note.
Accounting policy
The Group generates revenue from the sale of manufacturing
technologies and analytical instruments and medical devices goods,
capital equipment and services. These can be sold both on their own
and together.
a) Sale of goods, capital equipment and services
The Group's contracts with customers consist both of contracts
with one performance obligation and contracts with multiple
performance obligations.
For contracts with one performance obligation, revenue is
measured at the transaction price, which is typically the contract
value except for customers entitled to volume rebates, and
recognised at the point in time when control of the product
transfers to the customer. This point in time is typically when the
products are made available for collection by the customer,
collected by the shipping agent, or delivered to the customer,
depending upon the shipping terms applied to the specific
contract.
Contracts with multiple performance obligations typically exist
where, in addition to supplying product, we also supply services
such as user training, servicing and maintenance, and installation
services. Where the installation service is simple, does not
include a significant integration service and could be performed by
another party then the installation is accounted for as a separate
performance obligation. Where the contracts include multiple
performance obligations, the transaction price is allocated to each
performance obligation based on the relative stand-alone selling
prices. The revenue allocated to each performance obligation is
then recognised when, or as, that performance obligation is
satisfied. For installation, this is typically at the point in time
in which installation is complete. For training, this is typically
the point in time at which training is delivered. For servicing and
maintenance, the revenue is recognised evenly over the course of
the servicing agreement except for ad-hoc servicing and maintenance
which is recognised at the point in time in which the work is
undertaken.
b) Sale of software
The Group provides software licences and software maintenance to
customers, sold both on their own and together with associated
products. For software licences, where the licence and/or
maintenance is provided as part of a contract that provides
customers with software licences and other goods and services then
the transaction price is allocated on the same basis as described
in a) above.
The Group's distinct software licences provide a right of use,
and therefore revenue from software licences is recognised at the
point in time in which the licence is supplied to the customer.
Revenue from software maintenance is recognised evenly over the
term of the maintenance agreement.
c) Extended warranties
The Group provides standard warranties to customers that address
potential latent defects that existed at point of sale and as
required by law (assurance-type warranties). In some contracts, the
Group also provides warranties that extend beyond the standard
warranty period and may be sold to the customer (service-type
warranties).
Assurance-type warranties are accounted for by the Group under
IAS 37 'Provisions, Contingent Liabilities and Contingent Assets'.
Service-type warranties are accounted for as separate performance
obligations and therefore a portion of the transaction price is
allocated to this element, and then recognised evenly over the
period in which the service is provided.
d) Contract balances
Contract assets represent the Group's right to consideration in
exchange for goods and services that have been transferred to a
customer, and mainly includes accrued revenue in respect of goods
and services provided to a customer but not yet fully billed.
Contract assets are distinct from receivables, which represent the
Group's right to consideration that is unconditional.
Contract liabilities represent the Group's obligation to
transfer goods or services to a customer for which the Group has
either received consideration or consideration is due from the
customer.
e) Disaggregation of revenue
The Group disaggregates revenue from contracts with customers
between: goods, capital equipment and installation, and aftermarket
services; operating segment; and geographical location.
Management believe these categories best depict how the nature,
amount, timing and uncertainty of the Group's revenue is affected
by economic factors.
Within the two operating segments there are multiple product
offerings with similar economic characteristics, similar production
processes and similar customer bases. Our Manufacturing
technologies business consists of industrial metrology, position
measurement and additive manufacturing (AM) product lines, while
our Analytical instruments and medical devices business consists of
spectroscopy and neurological product lines. More details of the
Group's products and services are given in the Strategic
Report.
Year ended 30 June 2022 Analytical
Manufacturing instruments
technologies and medical Total
devices
GBP'000 GBP'000 GBP'000
------------------------------------------- ---------------- ----------------- ----------
Revenue 634,588 36,488 671,076
Depreciation, amortisation and impairment 36,552 2,570 39,122
Operating profit before losses from
fair value of financial instruments
and UK defined benefit pension scheme
past service cost 162,549 2,809 165,358
Share of profits from associates and
joint ventures 4,342 - 4,342
Net financial expense - - (2,006)
UK defined benefit pension scheme past
service cost - - (11,695)
Losses from the fair value of financial
instruments - - (10,413)
Profit before tax - - 145,586
------------------------------------------- ---------------- ----------------- ----------
Year ended 30 June 2021* Analytical
Manufacturing instruments
technologies and medical Total
GBP'000 devices GBP'000 GBP'000
------------------------------------------- ---------------- ----------------- ----------
Revenue 530,445 35,114 565,559
Depreciation, amortisation and impairment 37,909 2,187 40,096
Operating profit before gains from fair
value of financial instruments 111,978 4,385 116,363
Share of profits from associates and
joint ventures 1,683 - 1,683
Net financial expense - - (585)
Gains from the fair value of financial
instruments - - 21,978
Profit before tax - - 139,439
------------------------------------------- ---------------- ----------------- ----------
*In previous years, we reported the results of additive
manufacturing machines marketed and sold to medical and dental
customers within Analytical instruments and medical devices
(formerly Healthcare), reflecting how we managed this business. The
management of this now sits within the AM product line, with a
similar customer base and risk profile to this product line, with
results and operational matters reported to the Executive Committee
and Chief Operating Decision Maker accordingly. We now therefore
report the medical and dental results within Manufacturing
technologies rather than Analytical instruments and medical
devices. Comparative figures have been reclassified accordingly.
For the year ended 30 June 2021, revenue of GBP4,254,000,
depreciation and amortisation of GBP993,000, and operating profit
before gains from fair value of financial instruments of
GBP1,480,000 have been reclassified from Analytical instruments and
medical devices to Manufacturing technologies.
There is no allocation of assets and liabilities to operating
segments. Depreciation, amortisation and impairments are 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 non-current assets,
excluding deferred tax, derivatives and employee benefits, by
geographical region:
2022 2021
GBP'000 GBP'000
-------------------------- -------- --------
UK 181,530 179,039
Overseas 155,725 146,393
--------------------------- -------- --------
Total non-current assets 337,255 325,432
--------------------------- -------- --------
No overseas country had non-current assets amounting to 10% or
more of the Group's total non-current assets.
The following table shows the disaggregation of group revenue by
category:
2022 2021
GBP'000 GBP'000
------------------------------------------- -------- --------
Goods, capital equipment and installation 615,641 513,675
Aftermarket services 55,435 51,884
-------------------------------------------- -------- --------
Total Group revenue 671,076 565,559
-------------------------------------------- -------- --------
Aftermarket services include repairs, maintenance and servicing,
programming, training, extended warranties, and software licences
and maintenance. There is no significant difference between our two
operating segments as to their split of revenue by type.
The analysis of revenue by geographical market was:
2022 2021
GBP'000 GBP'000
-------------------------- -------- --------
APAC total 317,023 274,765
--------------------------- -------- --------
UK (country of domicile) 31,536 26,923
EMEA, excluding UK 174,290 142,219
--------------------------- -------- --------
EMEA total 205,826 169,142
Americas total 148,227 121,652
Total Group revenue 671,076 565,559
--------------------------- -------- --------
Revenue in the previous 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:
2022 2021
GBP'000 GBP'000
--------- -------- --------
China 152,772 141,690
USA 128,531 103,850
Japan 69,829 51,523
Germany 58,636 51,095
---------- -------- --------
There was no revenue from transactions with a single external
customer which amounted to more than 10% of the Group's total
revenue.
3. Personnel expenses
The remuneration costs of our people account for a significant
proportion of our total expenditure, which are analysed in this
note.
The aggregate payroll costs for the year were:
2022 2021
GBP'000 GBP'000
------------------------------------------ -------- --------
Wages and salaries 207,783 183,235
Compulsory social security contributions 24,497 21,766
Contributions to defined contribution
pension schemes 21,988 19,759
Government grants - employment support - (989)
Share-based payment charge 180 173
------------------------------------------- -------- --------
Total payroll costs 254,448 223,944
------------------------------------------- -------- --------
Wages and salaries and compulsory social security contributions
include GBP16,179,000 (2021: GBP13,208,000) relating to performance
bonuses.
The average number of persons employed by the Group during the
year was:
2022 2021
Number Number
----------------------------- ------- -------
UK 3,132 2,742
Overseas 1,799 1,695
Average number of employees 4,931 4,437
----------------------------- ------- -------
Key management personnel have been assessed to be the Directors
of the Company.
The total remuneration of the Directors was:
2022 2021
GBP'000 GBP'000
------------------------------------- -------- --------
Short-term employee benefits 3,763 2,697
Post-employment benefits 121 111
Share-based payment charge 180 173
Total remuneration of the directors 4,064 2,981
-------------------------------------- -------- --------
4. Cost of sales
Our cost of sales includes the costs to manufacture our products
and our engineering spend on existing and new products, net of
capitalisation and research and development tax credits.
Included in cost of sales are the following amounts:
2022 2021
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Production costs 234,919 197,805
----------------------------------------------------------- -------- --------
Research and development expenditure 59,415 58,618
Other engineering expenditure 26,356 18,019
----------------------------------------------------------- -------- --------
Gross engineering expenditure 85,771 76,637
----------------------------------------------------------- -------- --------
Development expenditure capitalised (net of amortisation) (3,268) (825)
Development expenditure impaired - 1,092
Research and development tax credit (3,895) (4,857)
----------------------------------------------------------- -------- --------
Total engineering costs 78,608 72,047
----------------------------------------------------------- -------- --------
Total cost of sales 313,527 269,852
----------------------------------------------------------- -------- --------
Production costs includes the raw material and component costs,
payroll costs and sub-contract costs, and allocated overheads
associated with manufacturing our products.
Research and development expenditure includes the payroll costs,
material costs and allocated overheads attributed to projects
identified as being related to new products or processes. Other
engineering expenditure includes the payroll costs, material costs
and allocated overheads attributed to projects identified as being
related to existing products or processes.
5. Financial income and expenses
Financial income mainly arises from bank interest on our
deposits, while we are exposed to realised currency gains and
losses on translation of foreign currency denominated intragroup
balances and offsetting financial instruments.
Included in financial income and expenses are the following
amounts:
2022 2021
Financial income notes GBP'000 GBP'000
------------------------------------------------------- ------ -------- --------
Fair value gains from one-month forward currency
contracts 25 98 2,781
Bank interest receivable 834 625
------------------------------------------------------- ------ -------- --------
Total financial income 932 3,406
------------------------------------------------------- ------ -------- --------
Financial expenses
Net interest on pension schemes' assets/liabilities 23 306 876
Currency losses 1,414 2,660
Realised currency reserve losses from discontinuation
of foreign operation 30 575 -
Lease interest 20 481 335
Interest payable on borrowings 21 52 69
Other interest payable 110 51
------------------------------------------------------- ------ -------- --------
Total financial expenses 2,938 3,991
------------------------------------------------------- ------ -------- --------
Currency losses relate to revaluations of foreign
currency-denominated balances using latest reporting currency
exchange rates. The losses recognised in 2021 and 2022 largely
related to an appreciation of Sterling relative to the US dollar
affecting US dollar-denominated intragroup balances in the
Company.
Certain intragroup balances are classified as 'net investments
in foreign operations', such that revaluations from currency
movements on designated balances accumulate in the Currency
translation reserve in Equity. Rolling one-month forward currency
contracts are used to offset currency movements on remaining
intragroup balances, with fair value gains and losses being
recognised in financial income or expenses. See note 25 for further
details.
At 30 June 2022, the Group's trading operations in Russia had
ceased and the net assets of OOO Renishaw were written down to nil
(see note 30). In accordance with IAS 21, cumulative translation
losses relating to the company totalling GBP575,000 have been
removed from the currency translation reserve and realised in the
Consolidated income statement.
6. Profit before tax
Detailed below are other notable amounts recognised in the
Consolidated income statement.
Included in the profit before tax are the following
costs/(income):
2022 2021
notes GBP'000 GBP'000
------------------------------------------------------- ------ -------- --------
Depreciation and impairment of property, plant
and equipment and investment properties (a) 9,11 27,157 24,317
Loss on sale of property, plant and equipment (a) 157 31
Depreciation and impairment of right-of-use assets
(a) 10 6,042 4,463
Amortisation, impairment, and write-off of intangible
assets (a) 12 5,923 11,316
Impairment of investment in associates and joint
ventures (c) - 1,674
Impairment of long-term loans to associates and
joint ventures (c) - 2,633
Profit from sale of shares in associate (c) 13 582 -
Impairment of net assets of foreign operation (b) 30 2,126 -
Grant income (a) (2,840) (1,421)
------------------------------------------------------- ------ -------- --------
These costs/(income) can be found under the following headings
in the Consolidated income statement: (a) within cost of sales,
distribution costs and administrative expenses, (b) within
distribution costs, and (c) within administrative expenses. Further
detail on each element can be found in the relevant notes.
Grant income relates to government grants, which are recognised
in the Consolidated income statement as a deduction against
expenditure. Where grants are received in advance of the related
expenses, they are initially recognised in the Consolidated balance
sheet and released to match the related expenditure. Where grants
are expected to be received after the related expenditure has
occurred, and there is reasonable assurance that the entity will
comply with the grant conditions, amounts are recognised to offset
the expenditure and an asset recognised.
Costs within Administrative expenses relating to auditor fees
included:
2022 2021
GBP'000 GBP'000
------------------------------------------- -------- --------
Audit of these financial statements 718 403
Audit of subsidiary undertakings pursuant
to legislation 526 458
Other assurance 32 12
All other non-audit fees - -
Total auditor fees 1,276 873
-------------------------------------------- -------- --------
7. Taxation
The Group tax charge is affected by our geographic mix of
profits and other factors explained in this note. Our expected
future tax charges and related tax assets are also set out in the
deferred tax section, together with our view on whether we will be
able to make use of these in the future.
Accounting policy
Tax on the profit for the year comprises current and deferred
tax. Tax is recognised in the Consolidated income statement except
to the extent that it relates to items recognised directly in Other
comprehensive income, in which case it is recognised in the
Consolidated statement of comprehensive income and expense. Current
tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in previous
years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries, to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
Key estimate - Estimates of future profits to support the
recognition of deferred tax assets
Deferred tax assets are recognised to the extent it is probable
that future taxable profits (including the future release of
deferred tax liabilities) will be available, against which the
deductible temporary differences can be used, based on management's
assumptions relating to the amounts and timing of future taxable
profits. Estimates of future profitability on an entity basis are
required to ascertain whether it is probable that sufficient
taxable profits will arise to support the recognition of deferred
tax assets relating to the corresponding entity.
The following table shows an analysis of
the tax charge: 2022 2021
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Current tax:
UK corporation tax on profits for the year 9,288 7,535
UK corporation tax - prior year adjustments (28) (4,376)
Overseas tax on profits for the year 16,734 13,237
Overseas tax - prior year adjustments (176) 27
---------------------------------------------------- -------- --------
Total current tax 25,818 16,423
---------------------------------------------------- -------- --------
Deferred tax:
---------------------------------------------------- -------- --------
Origination and reversal of temporary differences (1,372) 7,692
Prior year adjustments 166 4,438
Derecognition of previously recognised tax 623 -
losses and excess interest
Recognition of previously unrecognised tax
losses and excess interest - (3,909)
Effect on deferred tax for changes in tax
rates - 3,336
---------------------------------------------------- -------- --------
(583) 11,557
Tax charge on profit 25,235 27,980
---------------------------------------------------- -------- --------
The tax for the year is lower (2021: higher) than the UK
standard rate of corporation tax of 19% (2021: 19%). The
differences are explained as follows:
2022 2021
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Profit before tax 145,586 139,439
--------------------------------------------------------- -------- --------
Tax at 19% (2021: 19%) 27,661 26,493
Effects of:
Different tax rates applicable in overseas subsidiaries (1,834) (150)
Permanent differences 978 1,431
Companies with unrelieved tax losses - 100
Share of profits of associates and joint ventures (825) (320)
Tax incentives (patent box and capital allowances (1,400) -
super-deduction)
Prior year adjustments (38) 89
Effect on deferred tax for changes in tax rates - 3,336
Recognition of previously unrecognised tax losses
and excess interest - (3,909)
Derecognition of previously recognised tax losses 623 -
and excess interest
Use of unrecognised losses (25) (162)
Irrecoverable withholding tax 2 1,052
Other differences 93 20
Tax charge on profit 25,235 27,980
--------------------------------------------------------- -------- --------
Effective tax rate 17.3% 20.1%
--------------------------------------------------------- -------- --------
We operate in many countries around the world and the overall
effective tax rate (ETR) is a result of the combination of the
varying tax rates applicable throughout these countries. In
addition, the 2022 tax rate has benefited from patent box and
capital allowances super-deduction tax incentives and higher
profits from associates and joint ventures.
The Group's future ETR will mainly depend on the geographic mix
of profits and whether there are any changes to tax legislation in
the Group's most significant countries of operations.
Deferred tax
Deferred tax assets and liabilities are offset where there is a
legally enforceable right of offset and there is an intention to
net settle the balances. After taking these offsets into account,
the net position of GBP78,000 asset (2021: GBP10,890,000 asset) is
presented as a GBP22,893,000 deferred tax asset (2021:
GBP21,292,000 asset) and a GBP22,815,000 deferred tax liability
(2021: GBP10,402,000 liability) in the Consolidated balance
sheet.
Where deferred tax assets are recognised, the Directors are of
the opinion, based on recent and forecast trading, that the level
of profits in current and future years make it more likely than not
that these assets will be recovered.
Balances at the end of the year were:
2022 2021
------------------------- --------------------------------- ---------------------------------
Assets Liabilities Net Assets Liabilities Net
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- ------------ --------- -------- ------------ ---------
Property, plant and
equipment 517 (19,966) (19,449) 425 (17,546) (17,121)
Intangible assets - (2,980) (2,980) - (2,609) (2,609)
Intragroup trading
(inventories) 20,158 - 20,158 14,539 - 14,539
Intragroup trading
(fixed assets) 1,457 - 1,457 1,252 - 1,252
Defined benefit pension
schemes 125 (11,173) (11,048) 4,548 (201) 4,347
Derivatives 3,508 - 3,508 - (2,930) (2,930)
Tax losses 3,893 - 3,893 8,365 - 8,365
Other 4,953 (414) 4,539 5,083 (36) 5,047
Balance at the end
of the year 34,611 (34,533) 78 34,212 (23,322) 10,890
------------------------- -------- ------------ --------- -------- ------------ ---------
Other deferred tax assets include timing differences relating to
inventory provisions totalling GBP1,774,000 (2021: GBP2,001,000),
other provisions (including bad debt provisions) of GBP975,000
(2021: GBP683,000), and employee benefits relating to Renishaw KK
of GBP853,000 (2021: GBP668,000), with the remaining balance
relating to a number of other temporary differences.
The movements in the deferred tax balance during the year
were:
2022 2021
GBP'000 GBP'000
---------------------------------------------- ---- --------- ---------
Balance at the beginning of the year 10,890 39,142
Movements in the Consolidated income
statement 583 (11,557)
---------------------------------------------------- --------- ---------
Movement in relation to the cash flow
hedging reserve 6,155 (9,790)
Movement in relation to the currency
translation reserve - 902
Movement in relation to the defined
benefit pension schemes (17,650) (7,705)
---------------------------------------------------- --------- ---------
Total movement in the Consolidated statement
of comprehensive income and expense (11,495) (16,593)
Currency translation 100 (102)
Balance at the end of the year 78 10,890
---------------------------------------------------- --------- ---------
The deferred tax movement in the Consolidated income statement
is analysed as:
2022 2021
GBP'000 GBP'000
----------------------------------- -------- ---------
Property, plant and equipment (2,328) (3,193)
Intangible assets (371) (1,345)
Intragroup trading (inventories) 5,619 579
Intragroup trading (fixed assets) 205 (819)
Defined benefit pension schemes 2,255 156
Derivatives 284 (2,185)
Tax losses (4,472) (5,712)
Other (609) 962
------------------------------------ -------- ---------
Total movement for the year 583 (11,557)
------------------------------------ -------- ---------
The Company has fully used the tax losses incurred in 2020,
reducing the deferred tax asset in respect of losses from
GBP3,299,000 at 30 June 2021 to nil at 30 June 2022. Deferred tax
assets of GBP3,893,000 in respect of losses are recognised across
other Group companies where it is considered likely that the
business will generate sufficient future taxable profits.
Deferred tax assets have not been recognised in respect of tax
losses carried forward of GBP4,815,000 (2021: GBP4,459,000), due to
uncertainty over their offset against future taxable profits and
therefore their recoverability. These losses are held by Group
companies in France, Switzerland, Brazil, Australia and the US,
where for 95% of the losses there are no time limitations on their
utilisation.
In determining profit forecasts for each Group company, revenue
forecasts have been estimated using consistently applied external
and internal data sources, which is the key variable in the profit
forecasts. Sensitivity analysis indicates that a reduction of 5% to
relevant revenue forecasts would result in an impairment to
deferred tax assets recognised in respect of losses and intragroup
trading (inventories) of less than GBP100,000, while an increase of
5% would result in additions to deferred tax assets in respect of
tax losses not recognised of less than GBP200,000.
It is likely that the majority of unremitted earnings of
overseas subsidiaries would qualify for the UK dividend exemption.
However, GBP61,204,000 (2021: GBP43,858,000) of those earnings may
still result in a tax liability principally as a result of
withholding taxes levied by the overseas jurisdictions in which
those subsidiaries operate. The tax liabilities for the earnings
for which management intend to repatriate in the foreseeable future
are not material and consequently no deferred tax liability has
been recognised.
8. Earnings per share
Basic earnings per share is the amount of profit generated in a
financial year attributable to equity shareholders, divided by the
weighted average number of shares in issue during the year.
Basic and diluted earnings per share are calculated on earnings
of GBP120,351,000 (2021: GBP111,459,000) and on 72,774,147 shares
(2021: 72,778,904 shares), being the number of shares in issue. The
number of shares excludes 14,396 (2021: 9,639) shares held by the
Employee Benefit Trust (EBT). On this basis, earnings per share
(basic and diluted) is calculated as 165.4 pence (2021: 153.2
pence).
There is no difference between the weighted average earnings per
share and the basic and diluted earnings per share.
For the calculation of adjusted earnings per share, per note 29,
earnings of GBP120,351,000 (2021: GBP111,459,000) are adjusted by
post-tax amounts for:
- fair value (gains)/losses on financial instruments not
eligible for hedge accounting (reported in Revenue), which
represents the amount by which revenue would change had all the
derivatives qualified for hedge accounting GBP1,672,000 gain;
- fair value (gains)/losses on financial instruments not
eligible for hedge accounting (reported in Gains/(losses) from the
fair value of financial instruments), GBP8,435,000 loss;
- a revised estimate of 2020 restructuring costs, GBP1,367,000 gain;
- a UK defined benefit pension scheme past service cost, GBP9,473,000 loss; and
- costs relating to the 2021 formal sales process, GBP200,000 gain.
9. Property, plant and equipment
The Group makes significant investments in distribution and
in-house manufacturing infrastructure. During the year we completed
a new distribution facility in South Korea and invested in our
manufacturing equipment in the UK. We expect to significantly
increase our investments in property, plant and equipment in the
next few years.
Accounting policy
Freehold land is not depreciated. Other assets are stated at
costs less accumulated depreciation and accumulated impairment
losses, if any. Depreciation is provided to write off the costs of
assets less their estimated residual value on a straight-line basis
over their estimated useful economic lives as follows:
- freehold buildings, 50 years;
- plant and equipment, 3 to 25 years; and
- vehicles, 3 to 4 years.
Freehold Assets
in the
land Plant Motor course
and and of
buildings equipment vehicles construction Total
Year ended 30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ---------- --------- ------------- ---------
Cost
At 1 July 2021 216,783 242,432 7,421 7,109 473,745
Additions 5,715 16,756 1,150 7,144 30,765
Transfers of assets in the
course of construction 2,800 3,972 - (6,772) -
Transfers to investment
properties (11,563) - - - (11,563)
Disposals 97 (3,587) (1,269) - (4,759)
Currency adjustment 3,988 3,984 218 - 8,190
At 30 June 2022 217,820 263,557 7,520 7,481 496,378
---------------------------- ---------- ---------- --------- ------------- ---------
Depreciation
At 1 July 2021 38,530 182,557 6,416 - 227,503
Charge for the year 4,623 20,029 1,056 - 25,708
Impairment 1,259 - - - 1,259
Transfers to investment
properties (1,222) - - - (1,222)
Disposals 81 (2,837) (1,180) - (3,936)
Currency adjustment 545 2,465 203 - 3,213
---------------------------- ---------- ---------- --------- ------------- ---------
At 30 June 2022 43,816 202,214 6,495 - 252,525
---------------------------- ---------- ---------- --------- ------------- ---------
Net book value
At 30 June 2022 174,004 61,343 1,025 7,481 243,853
---------------------------- ---------- ---------- --------- ------------- ---------
At 30 June 2021 178,253 59,875 1,005 7,109 246,242
---------------------------- ---------- ---------- --------- ------------- ---------
During the year, a third-party valuation of one of our
properties in the US resulted in an impairment of GBP1,259,000.
See note 11 for detail on the reclassification of Property,
plant and equipment to Investment properties.
Freehold Assets
in the
land Plant Motor course
and and of
buildings equipment vehicles construction Total
Year ended 30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 July 2020 225,556 247,986 8,526 6,363 488,431
Additions 194 6,930 143 3,606 10,873
Transfers 345 2,515 - (2,860) -
Disposals (136) (9,628) (951) - (10,715)
Currency adjustment (9,176) (5,371) (297) - (14,844)
At 30 June 2021 216,783 242,432 7,421 7,109 473,745
------------------------- ---------- ---------- --------- ------------- ---------
Depreciation
At 1 July 2020 35,842 175,864 6,676 - 218,382
Charge for the year 4,084 19,407 826 - 24,317
Disposals (124) (9,658) (858) - (10,640)
Currency adjustment (1,272) (3,056) (228) - (4,556)
At 30 June 2021 38,530 182,557 6,416 - 227,503
------------------------- ---------- ---------- --------- ------------- ---------
Net book value
At 30 June 2021 178,253 59,875 1,005 7,109 246,242
------------------------- ---------- ---------- --------- ------------- ---------
At 30 June 2020 189,714 72,122 1,850 6,363 270,049
------------------------- ---------- ---------- --------- ------------- ---------
Additions to assets in the course of construction comprise
GBP826,000 (2021: GBP817,000) for land and buildings and
GBP6,318,000 (2021: GBP2,789,000) for plant and equipment.
Losses on disposals of Property, plant and equipment amounted to
GBP157,000 (2021: GBP31,000).
At 30 June 2022, properties with a net book value of
GBP54,208,000 (2021: GBP81,679,000) were subject to a fixed charge
to secure the UK defined benefit pension scheme liabilities. The
number of properties on fixed charge has decreased in the year, see
note 23.
10. Right-of-use assets
The Group leases properties and cars from third parties and
recognises an associated right-of-use asset where we are afforded
control and economic benefit from the use of the asset.
Accounting policy
At the commencement date of a lease arrangement the Group
recognises a right-of-use asset for the leased item and a lease
liability for any payments due. Right-of-use assets are initially
measured at cost, being the present value of the lease liability
plus any initial costs incurred in entering the lease and less any
incentives received. See note 20 for further detail on lease
liabilities. Right-of-use assets are subsequently depreciated on a
straight-line basis from the commencement date to the earlier of
the end of the useful life or the end of the lease term.
Leasehold Plant and Motor vehicles Total
property equipment
Year ended 30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
Net book value
At 1 July 2021 10,297 102 2,030 12,429
Additions 1,293 115 1,058 2,466
Depreciation (2,805) (102) (1,298) (4,205)
Impairment (1,837) - - (1,837)
Currency adjustment 1,107 2 (12) 1,097
At 30 June 2022 8,055 117 1,778 9,950
------------------------- ---------- ----------- --------------- --------
Leasehold Plant and Motor vehicles Total
property equipment
Year ended 30 June 2021 GBP'000 GBP'000 GBP'000 GBP'000
Net book value
At 1 July 2020 10,287 - 2,385 12,672
Additions 3,548 232 1,234 5,014
Depreciation (2,903) (121) (1,439) (4,463)
Currency adjustment (635) (9) (150) (794)
At 30 June 2021 10,297 102 2,030 12,429
------------------------- ---------- ----------- --------------- --------
An impairment of GBP1,837,000 was recognised in the period
relating to a leased property in Russia. See note 30 for further
detail.
11. Investment properties
The Group's investment properties consist of four facilities in
the UK, Ireland and India. During the year, we have transferred
these to investment properties, from property, plant and equipment,
following a change in use of the UK and India properties. This
includes the occupation of these properties by rent-paying third
parties during the year.
Accounting policy
Where property owned by the Group is deemed to be held to earn
rentals or for long-term capital appreciation it is recognised as
investment property.
Where a property is part-occupied by the Group, portions of the
property are recognised as investment property if they meet the
above description and if these portions could be sold separately
and reliably measured. If the portions could not be sold
separately, the property is recognised as an investment property
only if a significant proportion is held for rental or appreciation
purposes.
The Group has elected to value investment properties on a cost
basis, initially comprising an investment property's purchase price
and any directly attributable expenditure. Depreciation is provided
to write off the cost of assets on a straight-line basis over their
estimated useful economic lives, being 50 years. Amounts relating
to freehold land is not depreciated.
Total
Year ended 30 June 2022 GBP'000
---------------------------------------------- --------
Cost
At 1 July 2021 -
Transfers from Property, plant and equipment 11,563
Additions 195
Disposals (102)
Currency adjustment 249
At 30 June 2022 11,905
---------------------------------------------- --------
Depreciation
At 1 July 2021 -
Transfers from Property, plant and equipment 1,222
Charge for the year 190
Disposals (81)
Currency adjustment 6
---------------------------------------------- --------
At 30 June 2022 1,337
---------------------------------------------- --------
Net book value
At 30 June 2022 10,568
---------------------------------------------- --------
At 30 June 2021 -
---------------------------------------------- --------
The Group has no restrictions on the realisability of its
investment properties and no contractual obligations to purchase,
construct or develop investment properties.
Amounts recognised in the Consolidated income statement relating
to investment properties:
2022
GBP'000
-------------------------------------------------- --------
Rental income derived from investment properties 453
Direct operating expenses (including repairs and
maintenance) 105
-------------------------------------------------- --------
Profit arising from investment properties 348
-------------------------------------------------- --------
The fair value of the Group's investment properties totalled
GBP14,626,000 at 30 June 2022. Fair values of each investment
property have been determined by independent valuers who hold
recognised and relevant professional qualifications and have recent
experience in the location and category of each investment property
being valued.
12. Intangible assets
Our Consolidated balance sheet contains significant intangible
assets, mostly in relation to goodwill, which arises when we
acquire a business and pay a higher amount than the fair value of
its net assets, and capitalised development costs. We make
significant investments into the development of new products, which
is a key part of our business model, and some of these costs are
initially capitalised and then expensed over the lifetime of future
sales of that product.
Accounting policy
Goodwill arising on acquisition represents the difference
between the cost of the acquisition and the fair value of the net
identifiable assets acquired, net of deferred tax. Identifiable
intangibles are those which can be sold separately or which arise
from legal rights regardless of whether those rights are
separable.
Goodwill is stated at cost less any accumulated impairment
losses. It is not amortised but is tested annually for impairment
or earlier if there are any indications of impairment. The annual
impairment review involves comparing the carrying amount to the
estimated recoverable amount and recognising an impairment loss if
the recoverable amount is lower. Impairment losses are recognised
in the Consolidated income statement.
Intangible assets such as customer lists, patents, trade marks,
know-how and intellectual property that are acquired by the Group
are stated at cost less amortisation and impairment losses.
Amortisation is charged to the Consolidated income statement on a
straight-line basis over the estimated useful lives of the
intangible assets. The estimated useful lives of the intangible
assets included in the Consolidated balance sheet reflect the
benefit derived by the Group and vary from five to 10 years.
Expenditure on research activities is recognised in the
Consolidated income statement as an expense as incurred.
Expenditure on development activities is capitalised if: the
product or process is technically and commercially feasible; the
Group intends and has the technical ability and sufficient
resources to complete development; future economic benefits are
probable; and the Group can measure reliably the expenditure
attributable to the intangible asset during its development.
Development activities involve a plan or design for the
production of new or substantially improved products or processes.
The expenditure capitalised includes the cost of materials, direct
labour and an appropriate proportion of overheads. Other
development expenditure is recognised in the Consolidated income
statement as an expense as incurred.
Capitalised development expenditure is amortised over the useful
economic life appropriate to each product or process, ranging from
five to 10 years, and is stated at cost less accumulated
amortisation and less accumulated impairment losses. Amortisation
commences when a product or process is available for use as
intended by management. Capitalised development expenditure is
removed from the balance sheet 10 years after being fully
amortised.
All non-current assets are tested for impairment whenever there
is an indication that their carrying value may be impaired. An
impairment loss is recognised in the Consolidated income statement
to the extent that an asset's carrying value exceeds its
recoverable amount, which represents the higher of the asset's fair
value less costs to sell and its value-in-use. An asset's
value-in-use represents the present value of the future cash flows
expected to be derived from the asset or from the cash-generating
unit to which it relates. The present value is calculated using a
discount rate that reflects the current market assessment of the
time value of money and the risks specific to the asset
concerned.
Goodwill and capitalised development costs are subject to an
annual impairment test.
Key judgement - Whether a project meets the criteria for
capitalisation
Product development costs are capitalised once a project has
reached a certain stage of development and these costs are
subsequently amortised over their useful economic life once ready
for use. Costs are capitalised from the point the product has
passed testing to demonstrate it meets the technical specifications
of the project and it satisfies all applicable regulations.
Judgements are required to assess whether the new product
development has reached the appropriate point for capitalisation of
costs to begin. Should a product be subsequently obsoleted, the
accumulated capitalised development costs would need to be
immediately written off in the Consolidated income statement.
Key estimate - Estimates of future cash flows used for
impairment testing
Determining whether goodwill is impaired requires an estimation
of the value-in-use of cash-generating units (CGUs) to which
goodwill has been allocated. The value-in-use calculation involves
an estimation of the future cash flows of CGUs and also the
selection of appropriate discount rates, which involves judgement,
to calculate present values. Similarly, determining whether
capitalised development costs are impaired requires an estimation
of their value-in-use which involves significant judgement.
Internally Software
Other generated licences
and
intangible development Intellectual
Goodwill assets costs property Total
Year ended 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2022
Cost
At 1 July 2021 19,533 15,783 177,291 24,962 237,569
Additions - 53 7,966 876 8,895
Write-off - - - (3,510) (3,510)
Disposals - (11,211) (17,045) - (28,256)
Currency adjustment 942 4 - 51 997
--------------------- --------- ----------- ------------ ------------- ---------
At 30 June 2022 20,475 4,629 168,212 22,379 215,695
--------------------- --------- ----------- ------------ ------------- ---------
Amortisation
At 1 July 2021 9,028 13,254 151,807 19,685 193,774
Charge for the year - 201 4,698 1,024 5,923
Disposals - (11,211) (17,045) - (28,256)
Currency adjustment - (4) - 40 36
At 30 June 2022 9,028 2,240 139,460 20,749 171,477
--------------------- --------- ----------- ------------ ------------- ---------
Net book value
At 30 June 2022 11,447 2,389 28,752 1,630 44,218
--------------------- --------- ----------- ------------ ------------- ---------
At 30 June 2021 10,505 2,529 25,484 5,277 43,795
--------------------- --------- ----------- ------------ ------------- ---------
Other intangible Internally Software
assets generated licences
Goodwill development and intellectual
costs property Total
Year ended 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021
Cost
At 1 July 2020 20,518 15,829 167,447 22,063 225,857
Additions - - 9,844 3,000 12,844
Currency adjustment (985) (46) - (101) (1,132)
At 30 June 2021 19,533 15,783 177,291 24,962 237,569
--------------------- ----------- ----------------- ------------- ------------------ --------
Amortisation
At 1 July 2020 9,028 13,105 141,696 18,664 182,493
Charge for the year - 101 9,019 1,104 10,224
Impairments - - 1,092 - 1,092
Currency adjustment - 48 - (83) (35)
At 30 June 2021 9,028 13,254 151,807 19,685 193,774
--------------------- ----------- ----------------- ------------- ------------------ --------
Net book value
At 30 June 2021 10,505 2,529 25,484 5,277 43,795
--------------------- ----------- ----------------- ------------- ------------------ --------
At 30 June 2020 11,490 2,724 25,751 3,399 43,364
--------------------- ----------- ----------------- ------------- ------------------ --------
Disposals of internally generated development costs have been
recognised during the year in accordance with the Group's
accounting policy to remove capitalised development expenditure
from the balance sheet 10 years after being fully amortised.
Goodwill
Goodwill has arisen on the acquisition of a number of businesses
and has an indeterminable useful life. It is therefore not
amortised but is instead tested for impairment annually and at any
point during the year when an indicator of impairment exists.
Goodwill is allocated to cash generating units (CGUs), which are
either the statutory entities acquired or the group-wide product
line. This is the lowest level in the Group at which goodwill is
monitored for impairment and is at a lower level than the Group's
operating segments.
The analysis of goodwill is:
2022 2021
GBP'000 GBP'000
----------------------------------- -------- --------
itp GmbH 2,985 2,959
Renishaw Mayfield S.A. 2,055 1,873
Renishaw Fixturing Solutions, LLC 5,677 5,018
Other smaller acquisitions 730 655
Total goodwill 11,447 10,505
------------------------------------ -------- --------
The recoverable amounts of acquired goodwill are based on
value-in-use calculations. These calculations use cash flow
projections based on the financial business plans approved by
management for the next five financial years. The cash flows beyond
this forecast are extrapolated to perpetuity using a nil growth
rate on a prudent basis, to reflect the uncertainties over
forecasting beyond five years.
The following pre-tax discount rates have been used in
discounting the projected cash flows:
2022 2021
Business acquired CGU Discount Discount
rate rate
-------------------- ---------------------------- --------- ---------
itp GmbH itp GmbH entity ('ITP') 11.3% 10.6%
Renishaw Fixturing Renishaw fixturing product
Solutions, LLC line ('RFS') 11.5% 10.2%
Renishaw Mayfield Renishaw Mayfield S.A.
S.A. entity ('Mayfield') 22.9% 21.4%
-------------------- ---------------------------- --------- ---------
The Group post-tax weighted average cost of capital, calculated
at 30 June 2022, is 9% (2021: 8%). Pre-tax discount rates for
Manufacturing technologies CGUs (ITP and RFS) are calculated from
this basis, given that they are aligned with the wider Group's
industries, markets and processes. The Analytical instruments and
medical devices CGU (Mayfield) has a higher risk weighting,
reflecting the less mature nature of this segment. This risk
weighting is unchanged from 2021.
For there to be an impairment in the RFS, ITP or Mayfield CGUs
the discount rate would need to increase to at least 11.7%, 26% and
29% respectively. An increase of 5% in the discount rate would
result in an impairment of around GBP1.2m in the RFS CGU. At 30
June 2022, there was headroom of GBP151,000 for the RFS CGU.
The following bases have been used in determining cash flow
projections:
2022 2021
CGU Basis of forecast Basis of forecast
------------------------------ ------------------- -------------------
itp GmbH entity five-year business five-year business
plan plan
Renishaw Fixturing product five-year business five-year business
line plan plan
Renishaw Mayfield S.A. entity five-year business five-year business
plan plan
------------------------------ ------------------- -------------------
These five-year business plans are considered prudent estimates
based on management's view of the future and experience of past
performance of the individual CGUs, and are calculated at a
disaggregated level. Within these plans, revenue forecasts are
calculated with reference to external market data, Renishaw past
outperformance, and new product launches, consistent with revenue
forecasts across the Group. Production costs, engineering costs,
distribution costs and administrative expenses are calculated based
on management's best estimates of what is required to support
revenue growth and new product development. Estimates of capital
expenditure and working capital requirements are also included in
the cash flow projections.
The key estimate within these business plans is the forecasting
of revenue growth, given that the cost bases of the businesses can
be flexed in line with revenue performance. Given the average
revenue growth assumptions included in the five-year business
plans, management's sensitivity analysis involves modelling a
reduction in the forecast cash flows utilised in those business
plans and therefore into perpetuity. For there to be an impairment
there would need to be a reduction to these forecast cash flows of
60% for ITP, 2% for RFS and 24% for Mayfield. Management deems the
likelihood of these reductions to be unlikely.
Internally generated development costs
During the period, management reassessed the useful economic
life of certain capitalised projects from five to 10 years, to
align with latest expectations of product lifecycles. As a result,
amortisation during the period was GBP2,211,000 less than under the
previous useful economic life.
The key assumption in determining the value-in-use for
internally generated development costs is the forecast unit sales
over the useful economic life, which is determined by management
using their knowledge and experience with similar products and the
sales history of products already available in the market.
Resulting cash flow projections over five to 10 years, the period
over which product demand forecasts can be reasonably predicted and
internally generated development costs are written off, are
discounted using pre-tax discount rates, which are calculated from
the Group post-tax weighted average cost of capital of 9% (2021:
8%).
There were no impairments of internally generated development
costs in the year (2021: GBP1,092,000).
For the largest projects, comprising over 95% of the net book
value at 30 June 2022, a 10% reduction to forecast unit sales, or
an increase in the discount rate by 5%, would result in an
impairment of less than GBP100,000.
13. Investments in associates and joint ventures
Where we make an investment in a company which allows us
significant influence but not full control, we account for our
share of their post-tax profits in our financial statements.
Following a full divestment in HiETA during the year, we now have
joint venture arrangements with two companies, RLS and MSP.
The Group's investments in associates and joint ventures (all
investments being in the ordinary share capital of the associate
and joint ventures), whose accounting years end on 30 June, except
where noted otherwise, were:
Country of Ownership Ownership
incorporation and
principal place of business
---------------------------------------------------------
2022 2021
-------------------------------------- -----------------
% %
-------------------------------------- ----------------- ---------- ----------
RLS Merilna tehnika d.o.o. ('RLS')
- joint venture Slovenia 50.0 50.0
Metrology Software Products Limited
('MSP') - joint venture England & Wales 70.0 70.0
HiETA Technologies Limited ('HiETA')
(31 December) - associate England & Wales nil 33.3
-------------------------------------- ----------------- ---------- ----------
In January 2022 an agreement was reached between Renishaw plc
and Meggitt plc for the sale of Renishaw's 33.33% shareholding in
HiETA Technologies Limited to Meggitt plc. This resulted in a net
gain on disposal of GBP582,000, which was recognised in the
Manufacturing technologies operating segment.
Although the Group owns 70% of the ordinary share capital of
MSP, this is accounted for as a joint venture as the 'control'
requirements of IFRS 10 are not satisfied. This is primarily
because the shareholders agreement includes that for so long as the
Group's holding is less than 75% of the total shares of MSP,
Renishaw agrees to exercise its voting rights such that it only
votes as if it has the same aggregate shareholding as the remaining
Management Shareholders.
Movements during the year were: 2022 2021
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Balance at the beginning of the year 16,634 16,604
Additions - 749
Dividends received (525) -
Share of profits of associates and joint ventures 4,342 1,683
Impairment - (1,674)
Exchange differences 119 (728)
Balance at the end of the year 20,570 16,634
--------------------------------------------------- -------- --------
Summarised financial information for joint ventures:
RLS MSP
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- -------- -------- --------
Assets 42,308 31,535 4,601 4,211
Liabilities (7,422) (3,719) (963) (1,056)
----------------------------------------- -------- -------- -------- --------
Net assets 34,886 27,816 3,638 3,155
----------------------------------------- -------- -------- -------- --------
Group's share of net assets 17,443 13,908 2,547 2,209
----------------------------------------- -------- -------- -------- --------
Revenue 35,247 25,145 2,492 2,239
Profit/(loss) for the year 7,886 4,800 570 (182)
----------------------------------------- -------- -------- -------- --------
Group's share of profit/(loss) for the
year 3,943 2,400 399 (91)
----------------------------------------- -------- -------- -------- --------
The financial statements of RLS have been prepared on the basis
of Slovenian Accounting Standards.
The financial statements of MSP have been prepared on the basis
of FRS 102.
14. Leases (as lessor)
The Group acts as a lessor for Renishaw-manufactured equipment
on finance and operating lease arrangements. This is principally
for high-value capital equipment such as our additive manufacturing
machines .
Accounting policy
Where the Group transfers the risks and rewards of ownership of
lease assets to a third party, the Group recognises a receivable in
the amount of the net investment in the lease. The lease receivable
is subsequently reduced by the principal received, while an
interest component is recognised as financial income in the
Consolidated income statement. Standard contract terms are up to
five years and there is a nominal residual value receivable at the
end of the contract.
Where the Group retains the risks and rewards of ownership of
lease assets, it continues to recognise the leased asset in
Property, plant and equipment. Income from operating leases is
recognised on a straight-line basis over the lease term and
recognised as Revenue rather than Other revenue as such income is
not material. Operating leases are on one to five year terms .
The total future lease payments are split between the principal
and interest amounts below:
2022 2021
------------ ----------- --------------- ------------ ----------- ---------------
Gross Net investment Gross Net investment
investment Interest GBP'000 investment Interest GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ ----------- --------------- ------------ ----------- ---------------
Receivable in less than
one year 3,703 355 3,348 1,919 156 1,763
Receivable between one and
two years 2,882 252 2,630 2,641 215 2,426
Receivable between two and
three years 2,015 148 1,867 2,129 173 1,956
Receivable between three
and four years 1,779 70 1,709 1,365 111 1,254
Receivable between four
and five years 770 15 755 696 91 605
---------------------------- ------------ ----------- --------------- ------------ ----------- ---------------
Total future minimum lease
payments receivable 11,149 840 10,309 8,750 746 8,004
---------------------------- ------------ ----------- --------------- ------------ ----------- ---------------
The total of future minimum lease payments receivable under
non-cancellable operating leases were:
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------- --------
Receivable in less than one year 1,246 361
Receivable between one and four years 2,365 306
Total future minimum lease payments receivable 3,611 667
------------------------------------------------ -------- --------
During the year, GBP1,184,000 (2021: GBP582,000) was recognised
in Revenue from operating leases.
15. Cash and cash equivalents and bank deposits
We have always valued having cash in the bank to protect the
Group from downturns and enable us to react swiftly to investment
or market capture opportunities. We currently hold significant cash
and bank deposits, which is mostly in the UK and spread across a
number of banks with high credit ratings.
Accounting policy
Cash and cash equivalents comprise cash balances, and deposits
with an original maturity of less than three months or with an
original maturity date of more than three months where the deposit
can be accessed on demand without significant penalty for early
withdrawal and where the original deposit amount is recoverable in
full.
Cash and cash equivalents
An analysis of cash and cash equivalents at the end of the year
was:
2022 2021
GBP'000 GBP'000
-------------------------------- -------- --------
Bank balances and cash in hand 141,208 93,514
Short-term deposits 11,954 1,494
Balance at the end of the year 153,162 95,008
--------------------------------- -------- --------
At 30 June 2021, the Company held a pension scheme escrow
account amounting to GBP10,578,000 as part of the security given
for the UK defined benefit pension scheme. Following agreement by
the Company and Trustees in 2022 (see note 23), this amount is no
longer subject to a registered floating charge, and is recognised
in short-term deposits in cash and cash equivalents at 30 June
2022.
Bank deposits
Bank deposits at the end of the year amounted to GBP100,000,000
(2021: GBP120,000,000), of which GBP50,000,000 matured on 30 August
2022 and GBP50,000,000 is on a 90-day notice account.
16. Inventories
We have increased our inventories in the year, in line with
increases in global demand and reflecting planned increases in
certain component safety stock levels to mitigate global supply
shortages, and remain committed to high customer delivery
performance.
Accounting policy
Inventory and work in progress is valued at the lower of actual
cost on a first-in, first-out (FIFO) basis and net realisable
value. In respect of work in progress and finished goods, cost
includes all production overheads and the attributable proportion
of indirect overhead expenses that are required to bring
inventories to their present location and condition. Overheads are
absorbed into inventories on the basis of normal capacity or on
actual hours if higher.
Key estimate - Determination of net realisable inventory
value
Determining the net realisable value of inventory requires
management to estimate future demand, especially in respect of
provisioning for slow moving and potentially obsolete inventory.
When calculating an inventory provision, management use historic
usage levels (capped at 18 months), demand from customer orders and
manufacturing build plans as a basis for estimating the future
annual demand of individual stock items, except in the following
instances:
- for key products and their components, provisions are
typically made for quantities held in excess of three years'
demand. A demand basis lower than three years is used for those key
products and related components where the sales history is more
volatile; and
- where strategic purchases of critical components have been
made, an outlook beyond three years is considered where
appropriate.
An analysis of inventories at the end of the year was:
2022 2021
GBP'000 GBP'000
-------------------------------- -------- --------
Raw materials 56,034 38,973
Work in progress 31,002 21,750
Finished goods 75,446 52,840
Balance at the end of the year 162,482 113,563
--------------------------------- -------- --------
During the year, the amount of inventories recognised as an
expense in the Consolidated income statement was GBP211,209,000
(2021: GBP177,963,000) and the amount of write-down of inventories
recognised as an expense in the Consolidated income statement was
GBP481,000 (2021: GBP269,000). At the end of the year, the gross
cost of inventories which had provisions held against them totalled
GBP17,520,000 (2021: GBP17,389,000).
17. Provisions
A provision is a liability recorded in the Consolidated balance
sheet, where there is uncertainty over the timing or amount that
will be paid, and is therefore often estimated. The main provisions
we hold are in relation to warranties provided with the sale of our
products.
Accounting policy
The Group provides a warranty from the date of purchase, except
for those products that are installed by the Group where the
warranty starts from the date of completion of the installation.
This is typically for a 12-month period, although up to three years
is given for a small number of products. A warranty provision is
included in the Group financial statements, which is calculated on
the basis of historical returns and internal quality reports.
Warranty provision movements during the year were:
2022 2021
GBP'000 GBP'000
-------------------------------------- -------- --------
Balance at the beginning of the year 6,259 5,591
Created during the year 1,975 2,500
Unused amounts reversed (1,688) -
Utilised in the year (2,302) (1,832)
-------------------------------------- -------- --------
(2,015) 668
Balance at the end of the year 4,244 6,259
-------------------------------------- -------- --------
The warranty provision has been calculated on the basis of
historical return-in-warranty information and other internal
reports. It is expected that most of this expenditure will be
incurred in the next financial year and all expenditure will be
incurred within three years of the balance sheet date.
Included within the warranty provision is GBP1,912,000 (2021:
GBP4,200,000) where the warranty cost has been reassessed to be the
cost of replacing certain AM machines where the business will not
have the capability to honour the warranty on these machines going
forward as a result of restructuring activities in 2020. As we will
not have the ability to repair or maintain these machines, the
warranty cost reflects the cost of replacing these machines. It was
expected that these warranty costs would be incurred in 2021,
however this is now expected to be in 2023. During 2022, a revised
estimate of the number of machines we are more-likely-than-not to
replace, in addition to a revision to the cost of replacement,
resulted in a net reduction to this provision of GBP1,688,000.
18. Contract liabilities
Contract liabilities relate to where we have obligations to
transfer goods or services to a customer, where we have already
received consideration. Our balances mostly comprise advances
received from customers and payments for services yet to be
completed.
Balances at the end of the year were: 2022 2021
GBP'000 GBP'000
------------------------------------------- -------- --------
Goods, capital equipment and installation 1,470 1,431
Aftermarket services 4,471 4,689
------------------------------------------- -------- --------
Deferred revenue 5,941 6,120
Advances received from customers 7,015 -
------------------------------------------- -------- --------
Balance at the end of the year 12,956 6,120
------------------------------------------- -------- --------
Advances received from customers have increased this year. As
the balance at 30 June 2022 was material, we have included these
within Contract liabilities. In previous years, they were included
within Other payables, and amounted to GBP3,922,000 in 2021.
The aggregate amount of the transaction price allocated to
performance obligations that are unsatisfied at the end of the year
is GBP12,956,000 (2021: GBP6,120,000). Of this, GBP1,620,000 (2021:
GBP1,682,000) is not expected to be recognised in the next
financial year.
19. Other payables
Separate to our trade payables and contract liabilities, which
directly relate to our trading activities, our Other payables
mostly comprises amounts payable to employees, or relating to
employees.
Balances at the end of the year were:
2022 2021
GBP'000 GBP'000
------------------------------------- -------- --------
Payroll taxes and social security 6,823 7,924
Performance bonuses 16,179 13,208
Holiday pay and retirement accruals 7,810 7,200
Indirect tax payable 1,762 200
Other creditors and accruals 19,375 23,184
Total other payables 51,949 51,716
-------------------------------------- -------- --------
Holiday pay accruals are based on a calculation of the number of
days' holiday earned during the year, but not yet taken.
Other creditors and accruals includes GBP1,312,000 (2021:
GBP3,365,000) of receivables in payable positions where there is no
right of offset, and a number of other smaller accruals.
20. Leases (as lessee)
The Group leases mostly distribution properties and cars from
third parties and recognises an associated lease liability for the
total present value of payments the lease contracts commits us
to.
Accounting policy
At the commencement date of a lease arrangement the Group
recognises a right-of-use asset for the leased item and a lease
liability for any payments due. Lease liabilities are initially
measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the incremental
borrowing rate of the applicable entity. The lease liability is
subsequently measured at amortised cost using the effective
interest method and is remeasured if there is a change in future
lease payments arising from a change in an index or rate (such as
an inflation-linked increase) or if there is a change in the
Group's assessment of whether it will exercise an extension or
termination option. When this happens there is a corresponding
adjustment to the right-of-use asset. Where the Group enters into
leases with a lease term of 12 months or less, these are treated as
'short-term' leases and are recognised on a straight-line basis as
an expense in the Consolidated income statement. The same treatment
applies to low-value assets, which are typically IT equipment and
office equipment.
Lease liabilities are analysed as below:
2022
-------------------------------------------------------
Leasehold Plant Motor
property and equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ---------------- ----------- ----------
Due in less than one year 2,916 33 930 3,879
Due between one and two years 1,857 18 523 2,398
Due between two and three years 805 10 278 1,093
Due between three and four years 624 9 78 711
Due between four and five years 553 3 7 563
Due in more than five years 3,611 - - 3,611
------------------------------------- ------------ ---------------- ----------- ----------
Total future minimum lease payments
payable 10,366 73 1,816 12,255
------------------------------------- ------------ ---------------- ----------- ----------
Effect of discounting (1,993) (1) (81) (2,075)
------------------------------------- ------------ ---------------- ----------- ----------
Lease liability 8,373 72 1,735 10,180
------------------------------------- ------------ ---------------- ----------- ----------
2021
---------------------------------------------------
Leasehold Plant and Motor
property equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ----------- ----------
Due in less than one year 3,022 42 1,110 4,174
Due between one and two years 2,497 15 591 3,103
Due between two and three years 1,638 9 249 1,896
Due between three and four years 728 5 55 788
Due between four and five years 571 4 1 576
Due in more than five years 5,026 - - 5,026
Total future minimum lease payments
payable 13,482 75 2,006 15,563
------------------------------------- ------------ ------------ ----------- ----------
Effect of discounting (2,936) (2) (63) (3,001)
------------------------------------- ------------ ------------ ----------- ----------
Lease liability 10,546 73 1,943 12,562
------------------------------------- ------------ ------------ ----------- ----------
Lease liabilities are also presented as a GBP3,714,000 (2021:
GBP3,904,000) current liability and a GBP6,466,000 (2021:
GBP8,658,000) non-current liability in the Consolidated balance
sheet.
Amounts recognised in the Consolidated income statement relating
to leases were:
2022 2021
GBP'000 GBP'000
---------------------------------------------- -------- --------
Depreciation expense of right-of-use
assets 4,205 4,463
Impairment of right-of-use assets 1,837 -
Derecognition of lease liabilities (1,985) -
Interest expense on lease liabilities 481 335
Expenses relating to short-term and
low-value leases 51 139
Total expense recognised in the Consolidated
income statement 4,589 4,937
----------------------------------------------- -------- --------
Total cash outflows for leases 4,613 5,289
----------------------------------------------- -------- --------
During the year we decided to withdraw from Russia, including
moving out of a leased property by August 2022. We have therefore
derecognised amounts relating to the leased property totalling
GBP1,985,000, with a corresponding impairment to the right-of-use
asset of GBP1,837,000. See note 30 for further detail.
21. Borrowings
The Group's only source of external borrowing is a fixed
interest loan facility in our Japanese subsidiary, entered into to
directly finance the purchase of a new distribution facility in
Japan in 2019.
Third party borrowings at 30 June 2022 consist of a five year
loan entered into on 31 May 2019 by Renishaw KK, with original
principal of JPY 1,447,000,000 (GBP10,486,000). Principal of JPY
12,000,000 is repayable each month, with a fixed interest rate of
0.81% also paid on monthly accretion. The residual principal at 31
May 2024 of JPY 739,000,000 can either be repaid in full at that
time, or extended for another five years. All covenants have been
complied with during the year.
Movements during the year were:
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Balance at the beginning of the
year 7,449 11,543
Additions - 636
Interest 52 69
Repayments (974) (3,477)
Currency adjustment (448) (1,322)
Balance at the end of the year 6,079 7,449
---------------------------------- -------- --------
Borrowings are also presented as a GBP919,000 (2021: GBP992,000)
current liability and a GBP5,160,000 (2021: GBP6,457,000)
non-current liability in the Consolidated balance sheet. Borrowings
are held at amortised costs.
There is no significant difference between the book value and
fair value of borrowings, which is estimated by discounting
contractual future cash flows, which represents level 2 of the fair
value hierarchy defined in note 25.
22. Changes in liabilities arising from financing activities
1July Cash Other Currency 30 June
2021 flows 2022
------------------- -------- ------------- -------- ----------- ----------
Lease liabilities 12,562 (4,081) 513 1,186 10,180
Borrowings 7,449 (974) 52 (448) 6,079
------------------- -------- ------------- -------- ----------- ----------
20,011 (5,055) 565 738 16,259
------------------- -------- ------------- -------- ----------- ----------
1July Cash flows Other Currency 30 June
2020 2021
Lease liabilities 13,166 (4,815) 4,815 (604) 12,562
Borrowings 11,543 (2,841) 69 (1,322) 7,449
24,709 (7,656) 4,884 (1,926) 20,011
------------------- -------- ------------- -------- ----------- ----------
See notes 20 and 21 for further details on borrowing and leasing
activities.
23. Employee benefits
The Group operates contributory pension schemes, largely for UK,
Ireland and USA employees, which were of the defined benefit type
up to 5 April 2007, 31 December 2007 and 30 June 2012 respectively,
at which time they ceased any future accrual for existing members
and were closed to new members. The Group's largest defined benefit
scheme is in the UK.
Accounting policy
Defined benefit pension schemes are administered by trustees who
are independent of the Group finances. Investment assets of the
schemes are measured at fair value using the bid price of the
unitised investments, quoted by the investment manager, at the
reporting date. Pension scheme liabilities are measured using a
projected unit method and discounted at the current rate of return
on a high-quality corporate bond of equivalent term and currency to
the liability. Remeasurements arising from defined benefit schemes
comprise actuarial gains and losses, the return on scheme assets
(excluding interest) and the effect of the asset ceiling (if any,
excluding interest). The Company recognises them immediately in
Other comprehensive income and all other expenses related to
defined benefit schemes are included in the Consolidated income
statement.
The pension schemes' surpluses, to the extent that they are
considered recoverable, or deficits are recognised in full and
presented on the face of the Consolidated balance sheet under
Employee benefits. Where a guarantee is in place in relation to a
pension scheme deficit, liabilities are reported in accordance with
IFRIC 14 'The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction'. To the extent that
contributions payable will not be available as a refund after they
are paid into the plan, a liability is recognised at the point the
obligation arises, which is the point at which the minimum funding
guarantee is agreed. Overseas-based employees are covered by a
combination of state, defined benefit and private pension schemes
in their countries of residence. Actuarial valuations of overseas
pension schemes were not obtained, apart from Ireland and USA,
because of the low number of members.
For defined contribution schemes, the amount charged to the
Consolidated income statement represents the contributions payable
to the schemes in respect of the accounting period.
Key estimate - Valuation of defined benefit pension schemes'
liabilities
Determining the value of the future defined benefit obligation
requires estimation in respect of the assumptions used to determine
the present values. These include future mortality, discount rate
and inflation. Management makes these estimates in consultation
with independent actuaries.
The total pension cost of the Group for the year was
GBP21,988,000 (2021: GBP19,759,000), of which GBP121,000 (2021:
GBP111,000) related to Directors and GBP5,292,000 (2021:
GBP5,256,000) related to overseas schemes.
The latest full actuarial valuation of the UK defined benefit
pension scheme was carried out as at 30 September 2021 and updated
to 30 June 2022 by a qualified independent actuary. The mortality
assumption used for 2022 is the S3PxA base tables and CMI 2021
model, with long-term improvements of 1% per annum. Adjustments
have been made to both the core base tables and CMI 2021 model to
allow for the scheme's membership profile and best estimate
assumptions of future mortality improvements.
Major assumptions used by actuaries for the UK, Ireland and US
schemes were:
30 June 2022 30 June 2021
------------------------------- ------------------------------------ ------------------------------------
Ireland Ireland
UK scheme scheme US scheme UK scheme scheme US scheme
------------------------------- ------------ -------- ------------ ------------ -------- ------------
Rate of increase in
pension payments 3.05% 2.45% - 3.10% 1.70% -
Lump sum - assumed settlement
rate - - 4.50% - - 0.75%
Discount rate 3.60% 3.20% 4.50% 1.85% 1.10% 2.85%
Inflation rate (RPI) 3.10% 2.45% - 3.20% 1.70% -
Inflation rate (CPI) 2.10% - - 2.20% - -
pre-2030 pre-2030
3.10% 3.10%
post-2030 post-2030
------------------------------- ------------ -------- ------------ ------------ -------- ------------
Retirement age 64 65 65 64 65 65
------------------------------- ------------ -------- ------------ ------------ -------- ------------
The life expectancies for the UK scheme implied by the mortality
assumption at age 65 and 45 are:
2022 2021
years years
-------------------------- ------ ------
Male currently aged 65 21.5 22.0
Female currently aged 65 23.8 23.9
Male currently aged 45 22.2 22.7
Female currently aged 45 24.7 24.9
--------------------------- ------ ------
The weighted average duration of the UK defined benefit
obligation is around 22 years.
The assets and liabilities in the defined benefit schemes at the
end of the year were:
30 June % of total 30 June % of total
2022 GBP'000 assets 2021 GBP'000 assets
-------------------------------- -------------- ----------- -------------- -----------
Market value of assets:
Equities 111,025 51 140,717 61
Multi-asset funds 82,442 38 63,017 27
Credit and fixed income
funds 19,489 9 18,833 8
Fixed interest gilts 1,502 1 1,457 1
Index linked gilts 1,489 1 1,843 1
Property - - 802 -
Cash and other 802 - 4,686 2
-------------------------------- -------------- ----------- -------------- -----------
216,749 100 231,355 100
Actuarial value of liabilities (174,504) - (255,053) -
-------------------------------- -------------- ----------- -------------- -----------
Surplus/(deficit) in the
schemes 42,245 - (23,698) -
-------------------------------- -------------- ----------- -------------- -----------
Deferred tax thereon (11,048) - 4,347 -
-------------------------------- -------------- ----------- -------------- -----------
Note C.41 gives the analysis of the UK defined benefit pension
scheme. For the other schemes, the market value of assets at the
end of the year was GBP22,888,000 (2021: GBP26,396,000) and the
actuarial value of liabilities was GBP20,973,000 (2021:
GBP30,930,000). The UK and US schemes were both in net surplus
positions at 30 June 2022 (2021: both net deficit positions),
totalling GBP43,241,000, and are therefore presented in non-current
assets in the Consolidated balance sheet. The Ireland scheme was in
a net deficit position at 30 June 2022 (2021: net deficit
position), totalling GBP996,000, and is therefore presented in
non-current liabilities.
Equities are held in externally-managed funds and primarily
relate to UK and US equities. Credit and fixed income funds, fixed
interest gilts, and index linked gilts relate to UK, US and
Eurozone government-linked securities, again held in
externally-managed funds. The fair values of these equity and fixed
income instruments are determined using the bid price of the
unitised investments, quoted by the investment manager, at the
reporting date and therefore represent 'Level 2' of the fair value
hierarchy defined in note 25. Multi-asset funds are also held in
externally-managed funds, with active asset allocation to diversify
growth across asset classes such as equities, bonds and
money-market instruments. The fair value of these funds is
determined on a comparable basis to the equity and fixed income
funds, and therefore are also 'Level 2' assets.
The UK scheme is closed for future accrual and is expected to
mature over the coming years, and therefore while the focus of the
investment strategy remains on growth the trustees are gradually
de-risking the investment portfolio when appropriate.
The agreed target investment strategy for the UK scheme as at 30
June 2022 was to hold 54% of investment assets in equities, 30% in
diversified growth funds, 10% in multi-asset credit and 6% in
defensive fixed income (government and corporate bonds).
Contributions over the year were predominantly invested in
multi-asset credit, which in combination with a disinvestment from
equities has brought the mandate up to the target allocation of 10%
of assets. Post 30 June 2022, the Trustees and Company have agreed
to disinvest 10% of assets from the diversified growth fund
allocation, with a view to making a new investment into a Liability
Driven Investment mandate that looks to hedge the sensitivities of
the liabilities to interest rates and inflation, thereby reducing
the volatility of the funding position. No scheme assets are
directly invested in the Group's own equity.
The movements in the schemes' assets and liabilities were:
Assets Liabilities Total
Year ended 30 June 2022 GBP'000 GBP'000 GBP'000
----------------------------------------- --------- ------------ ---------
Balance at the beginning of the year 231,355 (255,053) (23,698)
Contributions paid 8,866 - 8,866
Interest on pension schemes 4,337 (4,643) (306)
Remeasurement loss from augmentation of
members' benefits - (11,695) (11,695)
Remeasurement gain/(loss) under IAS 19,
the asset ceiling and IFRIC 14 (17,264) 86,342 69,078
Benefits paid (10,545) 10,545 -
Balance at the end of the year 216,749 (174,504) 42,245
----------------------------------------- --------- ------------ ---------
Assets Liabilities Total
Year ended 30 June 2021 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- ------------ ---------
Balance at the beginning of the year 188,619 (253,514) (64,895)
Contributions paid 8,866 - 8,866
Interest on pension schemes 2,933 (3,809) (876)
Remeasurement loss from GMP equalisation - (78) (78)
Remeasurement gain/(loss) under IAS 19,
the asset ceiling and IFRIC 14 36,824 (3,539) 33,285
Benefits paid (5,887) 5,887 -
------------------------------------------ -------- ------------ ---------
Balance at the end of the year 231,355 (255,053) (23,698)
------------------------------------------ -------- ------------ ---------
The analysis of the amount recognised in the Consolidated
statement of comprehensive income and expense was:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- --------- ---------
Actuarial gain/(loss) arising from:
- Changes in demographic assumptions 3,860 (2,669)
- Changes in financial assumptions 67,442 4,643
- Experience adjustment (7,818) 2,631
- Adjustment related to the application of revaluation
and late retirement factors - 14,300
Return on plan assets excluding interest income (17,264) 36,823
Adjustment for the asset ceiling 3,280 (3,280)
Adjustment to liabilities for IFRIC 14 19,578 (19,163)
Total amount recognised in the Consolidated statement
of comprehensive income and expense 69,078 33,285
-------------------------------------------------------- --------- ---------
The cumulative amount of actuarial gains and losses recognised
in the Consolidated statement of comprehensive income and expense
was a loss of GBP22,419,000 (2021: loss of GBP91,497,000).
The net surplus of the Group's defined benefit pension schemes,
on an IAS 19 basis, has increased from a GBP23,698,000 liability at
30 June 2021 to a GBP42,245,000 asset at 30 June 2022, primarily
reflecting the net effect of:
- an increase in the discount rate of the UK schemes, based on
increases in corporate bond yields;
- changes to the UK scheme rules which allows recognition of a
surplus position; and
- an adjustment for changes in the UK scheme rules relating to
members' benefits, which is discussed further below.
For the UK scheme, the latest actuarial report prepared in
September 2021 shows a deficit of GBP52,800,000, which is based on
funding to self-sufficiency and uses prudent assumptions. IAS 19
requires best estimate assumptions to be used, resulting in the IAS
19 net surplus being higher than the actuarial deficit.
For the UK defined benefit scheme, a guide to the sensitivity of
the value of the respective liabilities is as follows:
Approximate
Variation effect on liabilities
---------------------- --------------------- ----------------------
UK - discount rate Increase/decrease by -GBP12.9m/+GBP14.6m
0.5%
UK - future inflation Increase/decrease by +GBP11.5m/-GBP11.3m
0.5%
UK - mortality Increased/decreased +GBP5.9m/-GBP5.9m
life by one year
---------------------- --------------------- ----------------------
In October 2020, the Trustees of the Renishaw Pension Fund ('the
UK defined benefit scheme') notified the Company of a difference
between the calculated estimate of liabilities in the scheme for
administration purposes and for accounting purposes. Specifically,
this discrepancy related to the application of revaluation and
early and late retirement factors. In May 2021, following joint
instruction from the Trustees and Company, a Queen's Counsel (QC)
opinion was given on the correct interpretation of the Trust Deed
and Rules of the Fund in relation to this matter. The most
significant part of QC's opinion was that no revaluation increases
should be applied between ages 60 and 65 (or earlier retirement).
The 2021 financial statements reflected the impact that would arise
from correcting the benefits in payment and the valuation of future
benefits to be in line with QC's opinion, with a gain of
GBP14,300,000 recognised in the Consolidated statement of
comprehensive income and expense.
In 2022, the Company agreed to an augmentation of members'
benefits to reflect current and historic administrative revaluation
practice. The augmentation is a change to the benefits provided in
the UK scheme, which has been effected in the Rules through a Deed
of Amendment to the Trust Deed and Rules, signed by the Trustees
and Company on 20 June 2022. The impact on liabilities of this plan
amendment, totalling GBP11,695,000, has been recognised as a past
service cost in the Consolidated income statement. This amount has
been excluded from adjusted profit measures, see note 29 for
further detail.
The deficit funding plan for the UK defined benefit pension
scheme is unaffected by the changes to the Rules. Under the plan,
the Company is paying GBP8,700,000 per annum into the scheme for
five years with effect from 1 October 2018. However, the Deed of
Amendment granted the Company the unconditional right to a refund
of any surplus on wind-up of the UK scheme. IFRIC 14 is an
interpretation of IAS 19 which requires consideration of minimum
funding commitments a company has made to its pension scheme and
whether this gives rise to additional liabilities. In particular,
whether a company has an unconditional right to a refund of surplus
from a scheme dictates whether there is an impact on the
accounting. As a result of the change to the Rules to allow
recognition of a surplus, a gain of GBP3,280,000 has been
recognised in the year in respect of the removal of the asset
ceiling restriction in place in 2021, and a gain of GBP19,578,000
recognised in respect of not needing to recognise an additional
liability in consideration of minimum funding considerations.
The Company and Trustees also agreed reductions to the charges
the scheme has on the Company's assets. An escrow bank account with
a balance of GBP10,578,000 at 30 June 2021 is no longer subject to
a registered floating charge, while the number of UK properties
owned by the Company subject to registered fixed charges has
decreased. The net book value of properties subject to fixed
charges at 30 June 2022 was GBP54,208,000 (2021:
GBP81,679,000).
The current agreement will continue until 30 June 2031 and any
outstanding deficit paid at that time. The agreement will end
sooner if the actuarial deficit (calculated on a self-sufficiency
basis) is eliminated in the meantime.
The charges may be enforced by the Trustees if one of the
following occurs: (a) the Company does not pay funds into the
scheme in line with the agreed plan; (b) an insolvency event occurs
in relation to the Company; or (c) the Company does not pay any
deficit at 30 June 2031.
Under the Ireland defined benefit pension scheme deficit funding
plan, a property owned by Renishaw Ireland (DAC) is subject to a
registered fixed charge to secure the Ireland defined benefit
pension scheme's deficit.
24. Share-based payments
The Group provides share-based payment arrangements to certain
employees in accordance with the Renishaw plc deferred annual
equity incentive plan. The Governance section provides information
of how these awards are determined.
Accounting policy
Renishaw shares are granted in accordance with the Renishaw plc
deferred annual equity incentive plan (the Plan). The share awards
are subject only to continuing service of the employee and are
equity settled. The fair value of the awards at the date of grant,
which is estimated to be equal to the market value, is charged to
the Consolidated income statement on a straight-line basis over a
three-year vesting period, with appropriate adjustments made to
reflect expected or actual forfeitures. The corresponding credit is
to Other reserve.
The number of shares to be awarded is calculated by dividing the
relevant amount of annual bonus under the Plan by the average price
of a share during a period determined by the Remuneration Committee
of not more than five dealing days ending with the dealing day
before the award date. These shares must be purchased on the open
market and cannot be satisfied by issuance of new shares or
transfer of existing treasury shares.
The Renishaw Employee Benefit Trust (EBT) is responsible for
purchasing shares on the open market on behalf of the Company to
satisfy the Plan awards. These are held by the EBT until
transferring to the employee, which will normally be on the third
anniversary of the award date, subject to continued employment.
Malus and clawback provisions can be operated by the Committee
within five years of the award date. During the vesting period, no
dividends are payable on the shares. However, upon vesting,
employees will be entitled to additional shares or cash, equivalent
to the value of dividends paid on the awarded shares during this
period. This amount is accrued over the vesting period.
Own shares held are recognised as an element in equity until
they are transferred at the end of the vesting period, and such
shares are excluded from earnings per share calculations.
The total cost recognised in the 2022 Consolidated income
statement in respect of the Plan was GBP180,000 (2021: GBP173,000).
See note 26 for reconciliations of amounts recognised in
Equity.
In accordance with the Plan, amounts equivalent to GBP1,915,000
(2021: GBP734,317) of shares are to be awarded in respect of
2022.
25. Financial instruments
The Group has exposure to credit risk, liquidity risk and market
risk arising from its use of financial instruments. This note
presents information about the Group's exposure to these risks,
along with the Group's objectives, policies and processes for
measuring and managing the risks.
Accounting policy
The Group measures financial instruments such as forward
exchange contracts at fair value at each balance sheet date in
accordance with IFRS 9 'Financial Instruments'. Fair value, as
defined by IFRS 13 'Fair Value Measurement', is the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. This note provides detail on the IFRS 13 fair
value hierarchy.
Trade and other current receivables are initially recognised at
fair value and are subsequently held at amortised cost less any
provision for bad and doubtful debts and expected credit losses
according to IFRS 9. Loans to associates and joint ventures are
initially recognised at fair value and are subsequently held at
amortised cost. Trade and other current payables are initially
recognised at fair value and are subsequently held at amortised
cost.
Financial liabilities in the form of loans are initially
recognised at fair value and are subsequently held at amortised
cost. Financial liabilities are assessed for embedded derivatives
and whether any such derivatives are closely related. If not
closely related, such derivatives are accounted for at fair value
in the Consolidated income statement.
Foreign currency derivatives are used to manage risks arising
from changes in foreign currency rates relating to overseas sales
and foreign currency-denominated assets and liabilities. The Group
does not enter into derivatives for speculative purposes. Foreign
currency derivatives are stated at their fair value, being the
estimated amount that the Group would pay or receive to terminate
them at the balance sheet date, based on prevailing foreign
currency rates.
Changes in the fair value of foreign currency derivatives which
are designated and effective as hedges of future cash flows are
recognised in Other comprehensive income and in the Cash flow
hedging reserve, and subsequently transferred to the carrying
amount of the hedged item or the Consolidated income statement.
Realised gains or losses on cash flow hedges are therefore
recognised in the Consolidated income statement within revenue in
the same period as the hedged item.
Hedge accounting is discontinued when the hedging instrument
expires or when the hedging instrument or hedged item no longer
qualify for hedge accounting. If the forecast transaction is still
expected to occur, but is no longer highly probable, the cumulative
gain or loss in the cash flow hedge reserve remains in that reserve
until the transaction occurs. If the forecast transaction is no
longer expected to occur, the cumulative gain or loss in the cash
flow hedge reserve is immediately reclassified to the Consolidated
income statement.
Changes in fair value of foreign currency derivatives, which are
ineffective or do not meet the criteria for hedge accounting in
IFRS 9, are recognised in the Consolidated income statement within
Gains/losses from the fair value of financial instruments.
In addition to derivatives held for cash flow hedging purposes,
the Group uses short-term derivatives not designated as hedging
instruments to offset gains and losses from exchange rate movements
on foreign currency-denominated assets and liabilities. Gains and
losses from currency movements on underlying assets and
liabilities, realised gains and losses on these derivatives, and
fair value gains and losses on outstanding derivatives of this
nature are all recognised in Financial income and expenses in the
Consolidated income statement.
Key estimate - Estimates of highly probable forecasts of the
hedged item
Derivatives are effective for hedge accounting to the extent
that the hedged item is 'highly probable' to occur, with 'highly
probable' indicating a much greater likelihood of occurrence than
the term 'more likely than not'. Determining a highly probable
sales forecast for Renishaw plc and Renishaw UK Sales Limited,
being the hedged item, over a multiple year time period, requires
judgement of the suitability of external and internal data sources
and estimations of future sales.
Fair value
There is no significant difference between the fair value of
financial assets and financial liabilities and their carrying value
in the Consolidated balance sheet. All financial assets and
liabilities are held at amortised cost, apart from the forward
foreign currency exchange contracts, which are held at fair value,
with changes going through the Consolidated income statement unless
subject to hedge accounting.
The fair values of the forward foreign currency exchange
contracts have been calculated by a third-party expert, discounting
estimated future cash flows on the basis of market expectations of
future exchange rates, representing level 2 in the IFRS 13 fair
value hierarchy. The IFRS 13 level categorisation relates to the
extent the fair value can be determined by reference to comparable
market values. The classifications are: level 1 where instruments
are quoted on an active market; level 2 where the assumptions used
to arrive at fair value have comparable market data; and level 3
where the assumptions used to arrive at fair value do not have
comparable market data.
Credit risk
The Group's liquid funds are substantially held with banks with
high credit ratings and the credit risk relating to these funds is
therefore limited. The Group carries a credit risk relating to
non-payment of trade receivables by its customers. The Group's
policy is that credit evaluations are carried out on all new
customers before credit is given above certain thresholds. There is
a spread of risks among a large number of customers with no
significant concentration with one customer or in any one
geographical area. The Group establishes an allowance for
impairment in respect of trade receivables where recoverability is
considered doubtful.
An analysis by currency of the Group's financial assets at the
year end is as follows:
Trade & finance lease Other receivables Cash & bank deposits
receivables
2022 2021 2022 2021 2022 2021
Currency GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ----------- --------- --------- ----------- ----------
Pound Sterling 21,391 16,915 19,565 23,752 201,668 174,905
US Dollar 45,433 39,603 867 815 13,965 9,511
Euro 28,314 23,476 1,568 1,144 8,712 8,118
Japanese Yen 19,480 16,568 457 173 5,720 3,786
Other 23,242 26,103 4,611 4,137 23,097 18,688
---------------- ----------- ----------- --------- --------- ----------- ----------
137,860 122,665 27,068 30,021 253,162 215,008
---------------- ----------- ----------- --------- --------- ----------- ----------
Short-term loans to associates and joint ventures and contract
assets are mostly denominated in Pound Sterling.
The above trade receivables, finance lease receivables, other
receivables and cash are predominately held in the functional
currency of the relevant entity, with the exception of
GBP21,271,000 of US Dollar-denominated trade receivables being held
in Renishaw (Hong Kong) Limited and GBP1,852,000 of
Euro-denominated trade receivables being held in Renishaw UK Sales
Limited, along with some foreign currency cash balances which are
of a short-term nature.
The ageing of trade receivables past due, but not impaired, at
the end of the year was:
2022 2021
GBP'000 GBP'000
-------------------------------- -------- --------
Past due zero to one month 9,548 10,537
Past due one to two months 3,879 2,704
Past due more than two months 5,252 6,283
--------------------------------- -------- --------
Balance at the end of the year 18,679 19,524
--------------------------------- -------- --------
Movements in the provision for impairment of trade receivables
during the year were:
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Balance at the beginning of the
year 3,826 5,965
Changes in amounts provided (834) (1,994)
Amounts used (452) (145)
---------------------------------- -------- --------
Balance at the end of the year 2,540 3,826
---------------------------------- -------- --------
The Group applies the simplified approach when measuring the
expected credit loss for trade receivables, with a provision matrix
used to determine a lifetime expected credit loss.
For this provision matrix, trade receivables are grouped into
credit risk categories, with category 1 being the lowest risk and
category 5 the highest. Risk scores are allocated to the customer's
country of operation, their type (such as distributor, end-user and
OEM), their industry and the proportion of their debt that was past
due at the year-end. These scores are then weighted to produce an
overall risk score for the customer, with the lowest scores being
allocated to category 1 and the highest scores to category 5. The
matrix then applies an expected credit loss rate to each category,
with this rate being determined by adjusting the Group's historic
credit loss rates to reflect forward-looking information.
Where certain customers have been identified as having a
significantly elevated credit risk these have been provided for on
a specific basis. Both elements of expected credit loss are shown
in the matrix below and have been shown separately so as not to
distort the expected credit loss rate.
Risk Risk Risk Risk Risk 2022
category category category category category Total
1 2 3 4 5
Year ended 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2022
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Gross trade receivables 2,742 51,598 70,298 5,453 - 130,091
Expected credit loss
rate 0.19% 0.20% 0.22% 0.24% - 0.21%
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Expected credit loss
allowance 5 104 154 13 - 276
Specific loss allowance - - 1,502 762 - 2,264
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Total expected credit
loss 5 104 1,656 775 - 2,540
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Net trade receivables 2,737 51,494 68,642 4,678 - 127,551
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Risk Risk Risk Risk Risk 2021
category category category category category Total
1 2 3 4 5
Year ended 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Gross trade receivables 9,154 38,759 65,870 3,806 898 118,487
Expected credit loss
rate 0.28% 0.31% 0.31% 0.36% 0.39% 0.31%
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Expected credit loss
allowance 26 119 205 14 3 367
Specific loss allowance - - 2,080 1,138 241 3,459
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Total expected credit
loss 26 119 2,285 1,152 244 3,826
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Net trade receivables 9,128 38,640 63,585 2,654 654 114,661
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Finance lease receivables are subject to the same approach as
noted above for trade receivables, while contract assets and
short-term loans to associates and joint ventures are not material
to the Group.
Derivative assets are assessed based on the credit risk of the
banks counterparty to the forward contracts.
Other receivables include mostly prepayments, a proportion of
the R&D tax credit receivable, and indirect tax receivables.
Prepayment balances are reviewed at each reporting period to
confirm that prepaid goods or services are still expected to be
received, while tax balances are reviewed for recoverability.
Other receivables at the year end comprised:
2022 2021
GBP'000 GBP'000
---------------------------- -------- --------
Indirect tax receivable 9,010 7,458
Software maintenance 7,430 4,917
Grants 1,250 624
R&D tax credit recoverable 442 8,352
Other prepayments 8,936 8,670
Total other receivables 27,068 30,021
----------------------------- -------- --------
The total R&D tax credit recoverable has reduced from
GBP8,352,000 at 30 June 2021 to GBP4,337,000 at 30 June 2022. As
the Company can now offset the tax credit against its corporation
tax liability, GBP3,895,000 of the total balance at 30 June 2022
has been recognised in current tax assets, with GBP442,000
remaining in Other receivables at 30 June 2022.
The maximum exposure to credit risk is GBP425,211,000 (2021:
GBP389,817,000), comprising the Group's trade, finance and other
receivables, cash and cash equivalents and derivative assets.
The maturities of non-current other receivables, being only
derivatives, at the year end were:
2022 2021
GBP'000 GBP'000
-------------------------------------- --------- --------
Receivable between one and two years - 12,484
Receivable between two and five - -
years
-------------------------------------- --------- --------
- 12,484
------------------------------------------------ --------
Liquidity risk
Our approach to managing liquidity is to ensure, as far as
possible, that we will always have sufficient liquidity to meet our
liabilities when due, without incurring unacceptable losses or
risking damage to the Group's reputation. We use monthly cash flow
forecasts on a rolling 12-month basis to monitor cash
requirements.
With net cash and bank deposits at 30 June 2022 totalling
GBP253,162,000, an increase of GBP38,154,000 from 30 June 2021, the
Group's liquidity has improved in the period.
In respect of net cash and bank deposits, the carrying value is
materially the same as fair value because of the short maturity of
the bank deposits. Bank deposits are affected by interest rates
that are either fixed or floating, which can change over time,
affecting the Group's interest income. An increase of 1% in
interest rates would result in an increase in interest income of
approximately GBP1,000,000.
The contractual maturities of financial liabilities at the year
end were:
Contractual cash flows
Carrying Effect Gross Up to 1-2 years 2-5 years
amount of discounting maturities 1 year
Year ended 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2022
-------------------- --------- ---------------- ------------ -------- ---------- ----------
Trade payables 30,947 - 30,947 30,947 - -
Other payables 51,949 - 51,949 51,949 - -
Borrowings 6,079 82 6,161 926 5,235 -
Forward exchange
contracts 27,353 - 27,353 17,890 9,463 -
-------------------- --------- ---------------- ------------ -------- ---------- ----------
116,328 82 116,410 101,712 14,698 -
-------------------- --------- ---------------- ------------ -------- ---------- ----------
Effect Gross Contractual cash flows
of
Carrying discounting maturities Up to 1 1-2 years 2-5 years
amount year
Year ended 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021
-------------------- --------- ------------ ----------- -------- ---------- ----------
Trade payables 24,715 - 24,715 24,715 - -
Other payables 51,716 - 51,716 51,716 - -
Borrowings 7,449 144 7,593 992 6,601 -
Forward exchange
contracts 5,949 - 5,949 5,594 355 -
-------------------- --------- ------------ ----------- -------- ---------- ----------
89,829 144 89,973 83,017 6,956 -
-------------------- --------- ------------ ----------- -------- ---------- ----------
Market risk
As noted in the Strategic Report under Principal risks and
uncertainties, the Group operates in a number of foreign currencies
with the majority of sales being made in these non-Sterling
currencies, but with most manufacturing being undertaken in the UK,
Ireland and India.
A large proportion of sales are made in US Dollar, Euro and
Japanese Yen, therefore the Group enters into US Dollar, Euro and
Japanese Yen derivative financial instruments to manage its
exposure to foreign currency risk, including:
i. forward foreign currency exchange contracts to hedge a
significant proportion of the Group's forecasted US Dollar, Euro
and Japanese Yen revenues over the next 24 months;
ii. foreign currency option contracts, entered into alongside
the forward contracts above until May 2018 as part of the Group
hedging strategy, are ineffective for cash flow hedging purposes.
Note 29, 'Alternative performance measures', gives an adjusted
measure of profit before tax to reflect the original intention that
these derivatives were entered into for hedging purposes. The final
option contract matured in November 2021; and
iii. one-month forward foreign currency exchange contracts to
offset the gains/losses from exchange rate movements arising from
foreign currency-denominated intragroup balances of the
Company.
The amounts of foreign currencies relating to these forward
contracts and options are, in Sterling terms:
2022 2021
Nominal Fair Nominal Fair
value value value value
GBP'000 GBP'000 GBP'000 GBP'000
--------------
US Dollar 306,270 (26,249) 399,065 4,192
Euro 129,799 1,711 146,120 6,040
Japanese Yen 37,941 4,306 68,938 5,942
--------------
474,010 (20,232) 614,123 16,174
--------------
The following are the exchange rates which have been applicable
during the financial year.
2022 2021
Average Year Average Average Year Average
Currency forward end exchange exchange forward end exchange exchange
contract rate rate contract rate rate
rates rates
US Dollar 1.34 1.22 1.33 1.37 1.38 1.36
Euro 1.12 1.16 1.18 1.09 1.17 1.14
Japanese Yen 132 165 156 136 154 145
Hedging
In relation to the forward currency contracts in a designated
cash flow hedge, the hedged item is a layer component of forecast
sales transactions. Forecast transactions are deemed highly
probable to occur and Group policy is to hedge around 75% of net
foreign currency exposure for USD, EUR and JPY. The hedged item
creates an exposure to receive USD, EUR or JPY, while the forward
contract is to sell USD, EUR or JPY and buy GBP. Therefore, there
is a strong economic relationship between the hedging instrument
and the hedged item. The hedge ratio is 100%, such that, by way of
example, GBP10m nominal value of forward currency contracts are
used to hedge GBP10m of forecast sales. Fair value gains or losses
on the forward currency contracts are offset by foreign currency
gain or losses on the translation of USD, EUR and JPY based sales
revenue, relative to the forward rate at the date the forward
contracts were arranged. Foreign currency exposures in HKD and USD
are aggregated and only USD forward currency contracts are used to
hedge these currency exposures. Sources of hedge ineffectiveness
according to IFRS 9 Financial Instruments include: changes in
timing of the hedged item; reduction in the amount of the hedged
sales considered to be highly probable; a change in the credit risk
of Renishaw or the bank counterparty to the forward contract; and
differences in assumptions used in calculating fair value.
During 2020, global macroeconomic uncertainty resulted in a
reduction to the 'highly probable' revenue forecasts of Renishaw
plc and Renishaw UK Sales Limited, being the hedged item, which
resulted in proportions of forward contracts failing hedge
effectiveness testing, with nominal value amounting to
GBP247,547,000. Following maturities during 2021 and 2022, the
remaining nominal value of ineffective forward contracts at 30 June
2022 totalled GBP63,045,000 (2021: GBP153,585,000), with fair value
losses of GBP11,551,000 (2021: GBP22,824,000 gain) recognised in
the Consolidated income statement relating to movements in the
mark-to-market valuations of these outstanding contracts.
In 2021 and 2022, improvements in global macroeconomic
conditions and business performance have resulted in subsequent
increases to the 'highly probable' revenue forecasts of the hedged
item, such that no additional contracts have become ineffective. A
decrease of 10% in the highly probable forecasts would result in no
additional forward contracts becoming ineffective.
The following table details the fair value of these forward
foreign currency derivatives according to the categorisations of
instruments noted previously:
2022 2021
Nominal Fair Nominal Fair
value value value value
GBP'000 GBP'000 GBP'000 GBP'000
Forward currency contracts in
a designated cash flow hedge
(i)
Non-current derivative assets - - 172,165 9,865
Current derivative assets 77,460 7,077 127,548 7,512
Current derivative liabilities 128,950 (12,046) 74,652 (3,063)
Non-current derivative liabilities 179,149 (9,463) 34,245 (322)
385,559 (14,432) 408,610 13,992
Amounts recognised in the Consolidated
statement of comprehensive income
and expense - 28,423 - 51,590
Forward currency contracts ineffective
as a cash flow hedge (i)
Non-current derivative assets - - 56,357 2,619
Current derivative assets - - 31,011 428
Current derivative liabilities 63,045 (5,504) 59,529 (1,653)
Non-current derivative liabilities - - 6,687 (33)
63,045 (5,504) 153,585 1,361
Amounts recognised in Gains/(losses)
from the fair value of financial
instruments in the Consolidated
income statement - (11,551) - 22,824
Foreign currency options ineffective
as a cash flow hedge (ii)
Non-current derivative assets - - - -
Current derivative assets - - - 1,699
Current derivative liabilities - - - (216)
Non-current derivative liabilities - - - -
- - - 1,483
Amounts recognised in Gains/(losses)
from the fair value of financial
instruments in the Consolidated
income statement - 1,138 - (846)
Forward currency contracts not
in a designated cash flow hedge
(iii)
Current derivative assets 4,880 44 - -
Current derivative liabilities 20,526 (340) 51,929 (662)
25,406 (296) 51,929 (662)
Amounts recognised in Financial
income/(expense) in the Consolidated
income statement - 98 - 2,781
Total forward contracts and
options
Non-current derivative assets - - 228,522 12,484
Current derivative assets 82,340 7,121 158,559 9,639
Current derivative liabilities 212,521 (17,890) 186,110 (5,594)
Non-current derivative liabilities 179,149 (9,463) 40,932 (355)
474,010 (20,232) 614,123 16,174
For the Group's foreign currency forward contracts at the
balance sheet date, if Sterling appreciated by 5% against the US
Dollar, Euro and Japanese Yen, this would increase pre-tax equity
by GBP18,360,000 and increase profit before tax by GBP4,212,000,
while a depreciation of 5% would decrease pre-tax equity by
GBP20,293,000 and decrease profit before tax by GBP4,655,000.
26. Share capital and reserves
The Group defines capital as being the equity attributable to
the owners of the Company, which is captioned on the Consolidated
balance sheet. The Board's policy is to maintain a strong capital
base and to maintain a balance between significant returns to
shareholders, with a progressive dividend policy, while ensuring
the security of the Group is supported by a sound capital position.
The Group may adjust dividend payments due to changes in economic
and market conditions which affect, or are anticipated to affect,
Group results. This note presents figures relating to this capital
management, along with an analysis of all elements of Equity
attributable to shareholders and non-controlling interests.
Share capital
2022 2021
GBP'000 GBP'000
Allotted, called-up and fully paid 72,788,543
ordinary shares of 20p each 14,558 14,558
The ordinary shares are the only class of share in the Company.
Holders of ordinary shares are entitled to vote at general meetings
of the Company and receive dividends as declared. The Articles of
Association of the Company do not contain any restrictions on the
transfer of shares nor on voting rights.
Dividends paid
Dividends paid comprised:
2022 2021
GBP'000 GBP'000
------------------------------------
2021 final dividend paid of 52.0p
per share (2020: nil) 37,850 -
Interim dividend paid of 16.0p per
share (2021: 14.0p) 11,644 10,189
Total dividends paid 49,494 10,189
-------------------------------------
A final dividend of 56.6p per share is proposed in respect of
2022, which will be payable on 5 December 2022 to shareholders on
the register on 4 November 2022.
Own shares held
The EBT is responsible for purchasing shares on the open market
on behalf of the Company to satisfy the Plan awards, see note 24
for further detail. Own shares held are recognised as an element in
equity until they are transferred at the end of the vesting
period.
Movements during the year were:
2022 2021
GBP'000 GBP'000
-------- --------
Balance at the beginning of the year (404) (404)
Disposal of own shares on vesting 404 -
of awards
Acquisition of own shares (750) -
Balance at the end of the year (750) (404)
-------- --------
On 10 December 2018, 9,639 shares were purchased on the open
market by the EBT at a price of GBP41.66, costing a total of
GBP404,348. The fair value of these awards at the grant date, being
2 August 2018, was GBP519,542. These shares vested during the
period on 2 August 2021 with no forfeitures.
On 25 November 2021, 14,396 shares were purchased on the open
market by the EBT at a price of GBP52.10, costing a total of
GBP750,017. The fair value of these awards at the grant date, being
28 October 2021, was GBP734,317. These shares will vest on 28
October 2024, with no forfeitures expected at 30 June 2022.
Other reserve
The other reserve relates to additional investments in
subsidiary undertakings and share-based payments charges according
to IFRS 2 in relation to the Plan.
Movements during the year were:
2022 2021
GBP'000 GBP'000
Balance at the beginning of the year 44 (129)
Share-based payments charge in respect of share
vesting in 2022 16 -
Transfer of own shares on vesting of awards (404) -
Share-based payments charge in respect of share
vesting in 2024 164 173
Balance at the end of the year (180) 44
Further explanations for these movements can be found in the
above Own shares held section and note 24.
Currency translation reserve
The currency translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of the overseas operations and currency movements on
intragroup loan balances classified as net investments in overseas
operations.
Movements during the year were: 2022 2021
GBP'000 GBP'000
Balance at the beginning of the year 3,719 17,729
Gain/(loss) on net assets of foreign currency
operations 3,529 (7,009)
Transfer of accumulated loss relating to net assets
of Russian operation 575 -
Gain/(loss) on intragroup loans classified as
net investments in foreign operations 8,047 (7,743)
Tax on translation of net investments in foreign
operations (1,529) 1,470
Gain/(loss) in the year relating to subsidiaries 10,622 (13,282)
Currency exchange differences relating to associates
and joint ventures 118 (728)
Balance at the end of the year 14,459 3,719
See notes 5 and 30 for further information on intragroup loans
classified as net investments and the cessation of activities in
Russia.
Cash flow hedging reserve
The cash flow hedging reserve, for both the Group and the
Company, comprises all foreign exchange differences arising from
the valuation of forward exchange contracts which are effective
hedges and mature after the year end. These are valued on a
mark-to-market basis, are accounted for in Other comprehensive
income and expense and accumulated in Equity, and are recycled
through the Consolidated income statement and Company income
statement when the hedged item affects the income statement, or
when the hedging relationship ceases to be effective. See note 25
for further detail.
Movements during the year were: 2022 2021
GBP'000 GBP'000
Balance at the beginning of the year 11,345 (30,455)
Losses on contract maturity recognised in revenue
during the year (3,385) (608)
Revaluations during the year (25,038) 52,198
Deferred tax movement 6,155 (9,790)
Balance at the end of the year (10,923) 11,345
Non-controlling interest
Movements during the year were:
2022 2021
GBP'000 GBP'000
-------- --------
Balance at the beginning of the year (577) (577)
Share of profit for the year - -
Balance at the end of the year (577) (577)
-------- --------
The non-controlling interest represents the minority
shareholdings in Renishaw Diagnostics Limited - 7.6%.
27. Capital commitments
At the end of a financial year, we typically have obligations to
make payments in the future, for which no provision is made in the
financial statements. This year, we have committed to the expansion
of one of our production facilities in Wales, UK, which is expected
to cost around GBP64m over the next three years.
Authorised and committed capital expenditure at the end of the
year were:
2022 2021
GBP'000 GBP'000
------------------------------------- -------- --------
Freehold land and buildings 65,328 412
Plant and equipment 22,760 3,255
Motor vehicles 319 79
Software licences and intellectual
property - 68
-------------------------------------- -------- --------
Total committed capital expenditure 88,407 3,814
-------------------------------------- -------- --------
28. Related parties
We report our two joint venture companies, RLS Merilna tehnika
d.o.o. and Metrology Software Products Limited, as related parties.
A previous associate company, HiETA Technologies Limited, was
entirely sold to a third party during the year.
Associates, joint ventures and other related parties had the
following transactions and balances with the Group:
Joint ventures Associate
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Purchased goods and services from the
Group during the year 553 711 711 642
Sold goods and services to the Group
during the year 29,355 22,175 - -
Paid dividends to the Group during
the year 525 - - -
Amounts owed to the Group at the year
end 1 146 - 2,747
Amounts owed by the Group at the year
end 3,950 2,556 - -
Loans owed to the Group at the year
end 350 598 - -
There were no bad debts relating to related parties written off
during 2022. Loans and finance leases owed to the Group by an
associate totalling GBP3,030,000 were impaired in 2021.
By virtue of their long-standing voting agreement, Sir David
McMurtry (Executive Chairman 36.23% shareholder) and John Deer
(Non-executive Deputy Chairman, together with his wife, 16.59%),
are the ultimate controlling party of the Group.
The only significant transactions between the Group and these
parties are in relation to their respective remuneration.
29. Alternative performance measures
There are sometimes infrequently occurring events which impact
on our financial statements, recognised according to applicable
IFRS, that we believe should be excluded from adjusted performance
measures in order to give readers a more understandable and
comparable view of our underlying performance.
In accordance with Renishaw's alternative performance measures
(APMs) policy and ESMA Guidelines on Alternative Performance
Measures (2015), APMs are defined as - Revenue at constant exchange
rates, Adjusted profit before tax, Adjusted earnings per share and
Adjusted operating profit.
Revenue at constant exchange rates is defined as revenue
recalculated using the same rates as were applicable to the
previous year and excluding forward contract gains and losses.
2022 2021
Revenue at constant exchange rates GBP'000 GBP'000
-------- --------
Statutory revenue as reported 671,076 565,559
Adjustment for forward contract gains (744) (1,427)
Adjustment to restate current year at previous (2,682) -
year exchange rates
-------- --------
Revenue at constant exchange rates 667,650 564,132
-------- --------
Year-on-year revenue growth at constant exchange +18.3% -
rates
-------- --------
Year-on-year revenue growth at constant exchange rates for 2021
was +13.0%.
Adjusted profit before tax, Adjusted earnings per share and
Adjusted operating profit are defined as the profit before tax,
earnings per share and operating profit after excluding costs
relating to business restructuring, third-party costs relating to
the formal sales process ('FSP'), and gains and losses in fair
value from forward currency contracts which did not qualify for
hedge accounting and which have yet to mature.
Restructuring costs, where applicable during a year, are
reported separately in the Consolidated income statement and
excluded from adjusted measures on the basis that they relate to
matters that do not frequently recur. During 2022, a revised
estimate of a warranty provision relating to restructuring in 2020
resulted in a reduction to this provision of GBP1,688,000. As this
provision was initially excluded from adjusted measures, the
revised estimate has also been excluded.
Third-party legal and advisory costs relating to the 2021 FSP
were excluded from adjusted measures in 2021. During 2022,
GBP200,000 was released from an accrual made in respect of these
costs relating to indirect tax, which has been excluded this
year.
In 2022, the Company agreed to an augmentation of UK defined
benefit pension scheme members' benefits. This was effected in the
scheme Rules through a Deed of Amendment to the Trust Deed and
Rules, signed by the Trustees and Company on 20 June 2022,
therefore relates to a matter which is not expected to frequently
recur. The impact on liabilities of this plan amendment, totalling
GBP11,695,000, have therefore been recognised as a past service
cost, reported separately in the Consolidated income statement and
excluded from adjusted profit measures. See note 23 for further
detail.
From 2017, the gains and losses from the fair value of financial
instruments not effective for cash flow hedging have been excluded
from statutory profit before tax, statutory earnings per share and
statutory operating profit in arriving at Adjusted profit before
tax, Adjusted earnings per share and Adjusted operating profit to
reflect the Board's intent that the instruments would provide
effective hedges. This is classified as 'Fair value (gains)/losses
on financial instruments not eligible for hedge accounting (i)' in
the following reconciliations. The amounts shown as reported in
revenue represent the amount by which revenue would change had all
the derivatives qualified as eligible for hedge accounting.
Gains and losses which recycle through the Consolidated income
statement as a result of contracts deemed ineffective during 2020,
as described in note 25, are also excluded from adjusted profit
measures, on the basis that all forward contracts are still
expected to be effective hedges for Group revenue, while the
potentially high volatility in fair value gains and losses relating
to these contracts will otherwise cause confusion for users of the
financial statements wishing to understand the underlying trading
performance of the Group. This is classified as 'Fair value
(gains)/losses on financial instruments not eligible for hedge
accounting (ii)' in the following reconciliations.
The Board considers these alternative performance measures to be
more relevant and reliable in evaluating the Group's
performance.
2022 2021
Adjusted profit before tax: GBP'000 GBP'000
Statutory profit before tax 145,586 139,439
Revised estimate of 2020 restructuring provisions (1,688) -
Third-party FSP costs (200) 3,222
UK defined benefit pension scheme past service
cost 11,695 -
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 2,621 1,882
- reported in (gains)/losses from the fair value
in financial instruments (1,138) 846
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (4,685) (2,899)
- reported in (gains)/losses from the fair value
of financial instruments 11,551 (22,824)
Adjusted profit before tax 163,742 119,666
2022 2021
Adjusted earnings per share: Pence Pence
Statutory earnings per share 165.4 153.2
Revised estimate of 2020 restructuring provisions (0.3) -
Third-party FSP costs (1.9) 4.4
UK defined benefit pension scheme past service
cost 13.0 -
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 2.9 2.1
- reported in (gains)/losses in fair value in
financial instruments (1.3) 0.9
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (5.2) (3.2)
- reported in (gains)/losses from the fair value
of financial instruments 12.9 (25.4)
Adjusted earnings per share 185.5 132.0
2022 2021
Adjusted operating profit: GBP'000 GBP'000
Statutory operating profit 143,250 138,341
Revised estimate of 2020 restructuring provisions (1,688) -
Third-party FSP costs (200) 3,222
UK defined benefit pension scheme past service
cost 11,695 -
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 2,621 1,882
- reported in (gains)/losses in fair value in
financial instruments (1,138) 846
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (4,685) (2,899)
- reported in (gains)/losses from the fair value
of financial instruments 11,551 (22,824)
Adjusted operating profit 161,406 118,568
Adjustments to the segmental operating profit:
2022 2021*
Manufacturing technologies GBP'000 GBP'000
--------
Operating profit before loss from fair value
of financial instruments and UK defined benefit
pension scheme past service cost 162,549 111,978
Revised estimate of 2020 restructuring provisions (1,688) -
Third-party FSP costs (197) 3,061
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 2,576 1,797
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (4,605) (2,734)
Adjusted manufacturing technologies operating
profit 158,635 114,102
2022 2021*
Analytical instruments and medical devices GBP'000 GBP'000
--------
Operating profit before loss from fair value of
financial instruments and 2,809 4,385
UK defined benefit pension scheme past service
cost
Third-party FSP costs (3) 161
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 45 86
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (80) (166)
Adjusted analytical instruments and medical devices
operating profit 2,771 4,466
* Results relating to sales of additive manufacturing machines
to medical and dental customers are no longer recognised in the
Analytical instruments and medical devices operating segment.
Comparative figures have been reclassified accordingly, see note
2.
30. Cessation of operations in Russia
The Group has now ceased all operations in Russia, which were
previously carried out through our wholly owned subsidiary, OOO
Renishaw. This has not been classified as a discontinued operation
as the results of the company were not material to the Group.
Following the start of the Russian invasion of Ukraine in
February 2022, the Group immediately took measures to reduce its
operations in Russia through its wholly owned subsidiary, OOO
Renishaw. This included:
- stopping the supply of goods from the Renishaw Group to OOO Renishaw;
- returning advanced payments to customers where local stock was
not available to fulfil orders;
- giving notice on the leased office property in Moscow, which
was vacated in August 2022; and
- relocating or offering redundancy to all employees of OOO Renishaw.
By 30 June 2022, all trading operations had ceased, and by
August 2022 the subsidiary was effectively wound up. The following
amounts were recognised in 2022 accordingly:
- cash held locally, with an equivalent value of GBP1,392,000,
was unable to be repatriated and has been fully impaired;
- outstanding amounts relating to the leased property equivalent
to GBP1,985,000 were released from lease liabilities, with a
corresponding impairment to the right-of-use asset of
GBP1,837,000;
- fixed assets mostly relating to fit-out and furnishings of the
leased property were impaired, totalling GBP636,000;
- remaining net assets of the subsidiary equivalent to GBP98,000 were impaired; and
- cumulative translation losses relating to the company on
consolidation, totalling GBP575,000, were removed from the currency
translation reserve and realised in the Consolidated income
statement, according to IAS 21.
The net impact on the Consolidated income statement in 2022
totalled GBP2,553,000, and net assets and equity relating to OOO
Renishaw totalled nil at 30 June 2022. There is not expected to be
any impact of operations in Russia on future financial
statements.
Registered office:
Renishaw plc
New Mills
Wotton-under-Edge
Gloucestershire
GL12 8JR
UK
Registered number: 01106260
LEI number: 21380048ADXM6Z67CT18
Telephone: +44 1453 524524
Email: communications@renishaw.com
Website: www.renishaw.com
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