TIDMRSW
RNS Number : 8378P
Renishaw PLC
21 October 2021
Renishaw plc
The preliminary announcement of results for the year ended 30
June 2021 released at 7.00 a.m today (RNS no.7373P) contained an
incorrect adjusted earnings per share figure for 2021 in the table
at the foot of the summary page. This has been corrected in this
announcement, with no other changes to the earlier announcement
made.
21 October 2021
Preliminary announcement of results for the year ended 30 June
2021
Summary
-- Revenue was GBP565.6m, 11% higher than 2020 revenue of GBP510.2m.
-- A positive year of recovery.
-- Strong growth in APAC throughout the year, with improving sales in EMEA and Americas in H2.
-- Manufacturing technologies (formerly Metrology) revenue increased by 11% to GBP526.2m, with:
-- record demand for encoders, driven by booming semiconductor
and electronics capital investment;
-- rising sales of flexible gauging and machine tool products,
especially in the consumer electronics sector; and
-- lower additive manufacturing sales, in line with expectations
following restructuring in 2020.
-- Analytical instruments and medical devices (formerly
Healthcare) revenue increased by 12% to GBP39.4m, with:
-- general recovery in spectroscopy investment and increasing
adoption of the Virsa(TM) Raman Analyzer; and
-- growth in neurological products, as we support large
pharmaceutical customers with clinical trials using our unique drug
delivery technology.
-- Adjusted* profit before tax of GBP119.7m (2020: GBP48.6m), an increase of 146%.
-- Statutory profit was GBP139.4m compared with GBP3.2m last year.
-- Our Fit for the Future initiative drove productivity improvements.
-- Adjusted profit before tax for the year increased to 21% of
revenue (2020: 10%); for H2 it was 25%.
-- Strong balance sheet, with net cash and bank deposits of
GBP215.0m at 30 June 2021, compared with GBP120.4m at 30 June
2020.
-- Our priorities during this pandemic continue to be the health
and welfare of our employees, their families and the wider
communities in which we operate, and to maintain high service
levels to our global customer base.
-- A formal sale process, which commenced in March 2021, was
concluded in July with no suitable offers that satisfactorily met
the interests of all stakeholders.
"We have recovered well and our employees have shown great
resilience in maintaining supply and excellent levels of support to
our customers around the world. I am excited about our new products
in development and the opportunities presented by global market
trends."
Sir David McMurtry, Executive Chairman
2021 2020 Change
Revenue (GBPm) 565.6 510.2 +11%
Adjusted* profit before tax
(GBPm) 119.7 48.6 +146%
Adjusted* earnings per share
(pence) 132.0 51.0 +159%
Dividend per share (pence) 66.0 0.0
Statutory profit before tax
(GBPm) 139.4 3.2
Statutory earnings per share
(pence) 153.2 0.4
*Note 28, 'Alternative performance measures', defines how
adjusted profit before tax, adjusted earnings per share, adjusted
operating profit and revenue at constant exchange rates are
calculated.
COMMENTARY BY THE CHAIRMAN
Introduction
It has been a positive year of recovery and I am pleased to
report that our revenue for the 2021 year was GBP565.6m, 11% higher
than the 2020 revenue of GBP510.2m (13% higher at constant exchange
rates). This was against a backdrop of improving economic
conditions. Adjusted* profit before tax amounted to GBP119.7m
(2020: GBP48.6m), an increase of 146%. Statutory profit before tax
was GBP139.4m (2020: GBP3.2m). Both revenue and Adjusted profit
before tax are consistent with the guidance provided in July.
We achieved good revenue growth in our APAC region, where we
continue to see strong demand for our encoder product lines which
are benefiting from increased investments in the semiconductor and
electronics capital equipment markets. Our EMEA and Americas
regions both achieved modest revenue growth, with the first half of
the year mirroring the second half of 2020 due to the pandemic, but
with strong growth in the second half of 2021. They have continued
to be affected by the ongoing uncertainty caused by the pandemic
and consequent challenges to key sectors, particularly
aerospace.
Our Fit for the Future initiative, which began in 2020, has
focused on productivity and has reduced our cost base. This is
reflected in the much-improved profitability compared to last year.
The initiative resulted in a number of actions including a resizing
of the business, a restructure of our Additive Manufacturing (AM)
business, and a focus on prioritising significant design
projects.
In March, Renishaw announced that John Deer (our Non-executive
Deputy Chairman), and I, had indicated to the Board our intention
to sell our entire combined shareholdings in the Company; together,
we own approximately 53% of the issued share capital of the
Company. Having considered various options with our advisers, the
Board unanimously agreed that it would be appropriate to
investigate the sale of the Company and therefore launch a formal
sale process (FSP).
Throughout this process, we considered the interests of all our
stakeholders and looked for a buyer who would respect the unique
heritage and culture of Renishaw, its commitment to the local
communities where we operate, and who would enable the Company to
prosper in the long term.
The Board, together with our advisers, carefully reviewed a
number of proposals from potential buyers. We unanimously concluded
that none would meet the Board's objectives of delivering an
outcome that satisfactorily met the interests of all stakeholders.
We therefore announced in July 2021 that we had unanimously decided
to conclude the FSP and that John and I had indicated to the Board
that we remain committed to Renishaw.
Reacting to a new world
The pandemic has resulted in profound changes to our society,
the business environment and business practices. Many of these
changes will be with us for the long term and we recognise the
risks and the opportunities that this brings to our business.
Across the world the pandemic is accelerating trends around
digitalisation, automation, near-shoring, remote working and
sustainability. For Renishaw this presents significant positive
opportunities, as our products are well placed to support our
customers as they respond to these new challenges. We recognise
that the workplace has changed and that it is possible for many
roles to successfully combine remote and site-based working. We
have therefore implemented a hybrid working policy in the UK, where
non-manufacturing employees will split their week between on-site
and home working.
As a business we also recognise the increased need for
sustainability and the need to accelerate our own work in this
area. We have made significant efforts to reduce our carbon
emissions in recent years. However, like many organisations there
is much more that we must do to meet the challenges of climate
change and we are currently developing a Net Zero strategy.
Corporate governance
We remain committed to high standards of corporate governance
and considering key stakeholders when making decisions, in the
belief this will protect our business and its long-term sustainable
success.
Our culture
The ongoing pandemic has continued to affect our business and
employees around the world. Despite this challenging environment we
remain resilient, and our people have continued to maintain supply
and excellent levels of support to our customers around the world,
many of whom are in critical global supply chains.
I would again like to thank our people for demonstrating
professionalism and dedication, despite the ever-changing
circumstances, and the challenges that many have faced in their own
personal lives due to the pandemic.
These challenges have highlighted the importance of our strong
working culture at Renishaw and we are pleased to have started the
process of communicating how our core business values of
inspiration, involvement, innovation and integrity help to support
our new purpose and vision. These values embody our culture, where
our people are encouraged:
- to be innovative and challenge convention;
- to always act with integrity;
- to inspire each other, our customers and our wider communities; and
- to be fully involved and support each other in contributing to
the success of Renishaw and our communities.
We will achieve this by embedding these values within the
business through leadership and processes that recognise and reward
behaviours that embody our four values.
Values workshops hosted by our global values ambassadors have
been held in the UK and across our regions. These communicated our
values, demonstrated how they can be applied to everyone's role,
how they will support our purpose and vision, and helped us
understand what these values mean to our people.
Our value of involvement supports our commitment to equality and
diversity initiatives at all levels of the company. Our UK
Diversity & Inclusion group led initiatives during the year,
including celebrating our first Inclusion Week, where we focused on
the meaning of inclusion, gender, cultural awareness and mental
health.
Dividend
Given the uncertain trading conditions last year, there were no
dividends in respect of 2020.
With improved profits and cash balances this year, we have
reinstated the dividend programme, with an interim dividend of 14.0
pence net per share paid on 6 April 2021. The Board is pleased to
propose a final dividend of 52.0 pence net per share.
Sir David McMurtry
Executive Chairman
21 October 2021
COMMENTARY BY THE CHIEF EXECUTIVE
Introduction
There has been a good recovery for our business, and I am proud
of our people who have again risen to the challenges faced. During
the second half of the year we started to see a recovery in some of
our key markets, and we ended the year dealing with the demands of
a record order book and supplying our customers in the face of
global supply chain challenges. We have recruited strongly in our
manufacturing operations to increase capacity, and our logistics
teams have responded admirably to another challenging period.
Our customers have appreciated our support. This has left us in
a very strong position to grow with them as they now experience new
opportunities arising from the recovery in their markets.
During the year, I spent time with all our global employees
communicating our new purpose, vision and strategy, and how every
individual can help to deliver on these. Together, we are in a
strong position to innovate and transform capabilities in
manufacturing, science and healthcare, through unparalleled levels
of precision, productivity and practicality, and help our customers
create the products, materials and therapies that will define our
world in the decades to come.
As Sir David has already mentioned, in March we launched an FSP
for the Company. However, having received no proposals that the
Board felt satisfactorily met the interests of all our
stakeholders, we announced the closure of the process in July. I am
delighted that the founders have indicated their continuing
commitment to Renishaw, and it continues to be very much business
as usual for the Board and our employees as we focus on delivering
our strategy for success.
COVID-19 pandemic
Our priorities during this pandemic continue to be the health
and welfare of our employees, their families and the wider
communities in which we operate, and to maintain high service
levels to our global customer base.
We have a wide range of robust COVID-secure working practices in
place to protect against the spread of the virus. Within the UK,
where we have higher numbers of employees, we have introduced
twice-weekly self-testing for all employees who are working
on-site. All our manufacturing facilities around the world are
operating as normal, and we have maintained supply to customers.
Like many other manufacturers our lead times have increased due to
global shortages of certain components and materials.
Many of our non-manufacturing employees have worked remotely
throughout the pandemic, and while this has generally been a
positive experience in terms of productivity, we recognise the
benefits of in-person collaboration. We have therefore agreed a
hybrid working policy, initially in the UK.
The pandemic has brought forward many digital initiatives,
including the expansion of the use of digital collaborative tools
for customer support, and the use of marketing automation, virtual
exhibitions and webinars to ensure a supply of high-quality sales
opportunities.
Performance overview
As already outlined by Sir David, we have seen good growth in
revenue and Adjusted operating profit for the Group. There was
notably strong growth for our position encoder product line due to
demand from the semiconductor and electronics sectors, which were
boosted by high pandemic-related demand for products including
laptops and games consoles. Most of our other lines also grew due
to a strong global recovery in the second half of the year. We
achieved good revenue growth in our APAC region, with a
particularly strong recovery in China based on general demand
across multiple sectors.
Revenue
We achieved revenue for the year ended 30 June 2021 of
GBP565.6m, compared with GBP510.2m last year. As previously
communicated, we have worked closely with key customers throughout
the pandemic to ensure that we were in a position to meet their
requirements when economic conditions improved, and we are now
benefiting from that approach. While the challenges remain, we are
well placed to take advantage of the opportunities presented by the
global economic recovery.
The split of our revenue by region is shown in the table
below:
Constant
2021 2020 Change fx change
GBPm GBPm % %
-------------------- ----- ----- ------ ----------
APAC 274.8 227.7 +21 +23
-------------------- ----- ----- ------ ----------
EMEA 169.1 167.2 +1 +1
-------------------- ----- ----- ------ ----------
Americas 121.7 115.3 +6 +9
-------------------- ----- ----- ------ ----------
Total Group revenue 565.6 510.2 +11 +13
-------------------- ----- ----- ------ ----------
Profit and earnings per share
Our Adjusted* profit before tax for the year was GBP119.7m
compared with GBP48.6m last year. Adjusted* earnings per share was
132.0p compared with 51.0p last year.
Statutory profit before tax for the year was GBP139.4m compared
with GBP3.2m last year. Statutory earnings per share was 153.2p
compared with 0.4p last year.
This year's tax charge is GBP28.0m (2020: GBP2.9m) representing
a tax rate of 20.1% (2020: 91.0%). For further details on the tax
rate see note 8.
Manufacturing technologies
During the year, we used the launch of our purpose, vision and
strategy to rename our operating segments to better reflect the
business. Our Manufacturing technologies business consists of
Industrial Metrology, Position Measurement and Additive
Manufacturing (AM) product groups. Revenue from our Manufacturing
technologies business for the year (formerly 'Metrology') was
GBP526.2m compared with GBP475.2m last year. While the pandemic
continues to affect some of our key sectors, primarily aerospace,
in the second half of the year we have seen a strong recovery in
sales and orders for most of the product lines which make up this
segment. The strongest recovery has been in APAC, where we have
seen strong growth over the last year but there are positive signs
of returning confidence in all our regions.
We have seen growth in demand for most of our Manufacturing
technologies products, notably in our machine tool product line,
our gauging product line, and our optical, laser and magnetic
encoder product lines. The encoder product lines have all
experienced record sales due to strong investment in the
semiconductor and electronics capital equipment markets. Our
co-ordinate measuring machine (CMM) product line experienced
reduced demand in the first half of the year due to the challenges
in some sectors, particularly aerospace. However, our strong
portfolio of measurement products and global customer base means
that we are already benefiting from a recovery in sector
investments, and the CMM line full-year revenue was only slightly
below last year.
Our AM product line revenue was also lower than last year but
was in line with our expectations following the restructuring of
the business in 2020. Demand for the RenAM 500Q multi-laser system
was affected by the challenging market conditions, especially
within the aerospace sector. With the benefits of our multi-laser
systems for high-quality, productive metal part manufacture now
being proven with key customers, and the soon-to-be-available Flex
system (for rapidly changing between differing materials during
process prove-out), we are well placed to benefit from an
improvement in market conditions and the expansion of AM into new
applications.
The geographical analysis of Manufacturing technologies revenue
is set out below:
2021 2020 Change
GBPm GBPm %
--------------------------------- ----- ----- ------
APAC 262.2 213.6 +23
--------------------------------- ----- ----- ------
EMEA 150.6 152.5 -1
--------------------------------- ----- ----- ------
Americas 113.4 109.1 +4
--------------------------------- ----- ----- ------
Total Manufacturing technologies
revenue 526.2 475.2 +11
--------------------------------- ----- ----- ------
Adjusted* operating profit for our Manufacturing technologies
business was GBP112.6m (2020: GBP50.3m).
We continued to invest in R&D, with total gross engineering
costs of GBP70.6m compared with GBP75.9m in 2020.
We launched a number of new products during the year. Our
machine tool product line introduced the second-generation NC4+
Blue non-contact tool setting system, with ultra-compact design and
measurement repeatability down to +/-0.5 microns. Within our
position encoder product line, a significant addition was the
FORTiS(TM) enclosed linear absolute encoder for harsh production
environments, including machine tools.
Analytical instruments and medical devices
Revenue from this business for the year was GBP39.4m, an
increase of 12% on last year. We saw growth in our spectroscopy and
neurological product lines, notably the latter, which experienced
record sales during the year, boosted by hospitals in key markets
restarting elective surgery as COVID-19 patient numbers fell.
While there remain challenges, confidence has returned to all
our key markets. Funds for capital expenditure projects which were
postponed last year are being released and we are seeing a good
recovery in industrial and academic research budgets which will
benefit our spectroscopy and neurological lines.
Adjusted* operating profit was GBP5.9m, compared with GBP1.4m
last year.
We continued to invest in R&D, with total gross engineering
costs in this business segment of GBP6.0m compared with GBP6.5m in
2020.
During the year, our neurological product line agreed to work
with a major pharmaceutical company on a programme for a new
candidate drug using our drug delivery system. The rapid growth of
potential gene therapy treatments for neurological diseases and
disorders is also generating significant interest in our delivery
device.
The spectroscopy product line introduced a new Particle Analysis
software module for our inVia(TM) Raman spectrometer system, which
enables multiple spectra captured on filter paper to be
automatically analysed and categorised by shape, size and
chemistry. This has applications for the detection of microplastics
in drinking water.
Strategy and markets
Our overarching strategy to deliver our purpose and vision is
based on creating strong market positions with patented and
innovative products and processes; cost-effective in-house
manufacturing that delivers high-quality products; strong global
support to ensure our customers achieve success; support services
that ensure an efficient, intelligent and responsible business; and
fostering a culture that allows us to attract and retain talented
and motivated people who will deliver our strategy. This strategy
underpins all our product lines, for which we also have individual
commercial and product strategies.
From transport to agriculture, electronics to neurosurgery, our
vision is to innovate and transform capabilities in manufacturing
and healthcare through unparalleled levels of precision,
productivity and practicality. In a world of increasingly scarce
resources this is especially important to help our customers to
develop products and processes that are sustainable, deliver higher
levels of performance through increased efficiency, make
intelligent use of data, and are customised to suit individual
requirements.
We continue to see external market growth drivers that are
creating positive opportunities for our business. These include
global skills shortages, digitalisation, near-shoring and
reshoring, sustainable manufacturing, population growth and
increasing life expectancy.
Focused investment for long-term growth
We strongly believe in our long-term strategy of delivering
sustainable growth through:
- investments in R&D that are focused on products that
deliver unparalleled levels of precision, productivity and
practicality;
- investments in in-house manufacturing that give us control
over quality, delivery and costs; and
- investments in our global marketing and distribution infrastructure.
However, with the global economic uncertainties during the year,
our short-term focus has been on maximising the benefits of the
investments we have made over the past few years and clearly
prioritising those 'flagship' projects that either bring faster
revenue benefits or are strategically important to the business.
The launch of the FORTiS encoder is a good example of this.
We continue to invest to improve productivity through
development programmes for our people, our Workday(R) human
resources system, and the planned deployment of Microsoft Dynamics
365 enterprise resource planning and customer relationship
management application.
Working capital
Inventories increased to GBP113.6m from GBP105.5m at the
beginning of the year, as a result of the higher trading levels and
our decision to increase safety stock levels of critical
components, where possible, to mitigate the risk of supply chain
disruption.
Trade receivables increased from GBP105.1m to GBP114.7m in line
with increased sales. There was an improvement in debtor days to 61
at the end of the year, compared with 76 at the end of last year,
which includes a currency translation gain of GBP7.8m. There have
been no significant bad debts during the year.
As a result of our strong trading performance, reduced levels of
capital expenditure, and the decision not to propose a final
dividend for 2020, we have healthy net cash and bank deposit
balances at 30 June 2021 of GBP215.0m (2020: GBP120.4m), and a
corresponding improvement in our liquidity position over the
year.
Sustainability and community
We reduced our market-based statutory greenhouse gas (GHG)
emissions by 5%, and introduced a new Group policy to only use
electricity from certified renewable sources, where possible.
Despite the pandemic we still reached more than 5,000 children with
new virtual education outreach programmes, including interactive
workshops and work experience weeks, and we assisted local
organisations through charitable donations and practical
support.
Our people
Our workforce at the end of June 2021 was 4,664 (2020: 4,463),
an increase of 5%. During the year, 40 apprentices and graduates
were taken on as part of our ongoing commitment to train and
develop skilled resource for the Group in the future. We also took
on 19 industrial placements in the year.
During the year we continued to face challenges. This included
the pandemic, tough trading conditions, lower headcount (due to the
redundancies and recruitment freeze in 2020) which increased
pressures in some areas of the business, and the formal sale
process. There were also huge demands placed on our manufacturing
operations as we saw a strong recovery in demand accompanied by
global shortages of key components.
It is testament to the continuing resilience, skill and
dedication of our people that during the year they supplied and
supported our customers, introduced innovative new products,
progressed key projects that will underpin the future of our
business, and supported each other and our local communities. They
truly demonstrated our four core values, while continuing to help
Renishaw deliver on our purpose and vision, and as a Board we are
truly grateful for their contributions during another challenging
year.
Brexit
To mitigate against the potential impacts of the UK leaving the
EU, we have taken actions in recent years including establishing a
warehouse in Ireland, expanding our existing warehouse in Germany,
and increasing the inventory of certain finished goods and
components at sites within the EU and the UK. Although there have
been some delays at the UK borders for shipments into the EU since
1 January 2021, the measures that we have taken have minimised the
impact on customer service.
Outlook
The 2022 financial year has started with a strong first quarter
and we currently have a record order book. We expect demand from
the semiconductor and electronics sectors to remain strong and that
there will continue to be a recovery in the machine tool and
coordinate measuring machine markets. In our Analytical instruments
and medical devices markets, we have seen confidence return and
capital expenditure projects released.
The Board continues to be confident in our long-term prospects,
due to our strong financial position, the high quality of our
people, our innovative product pipeline, extensive global sales and
marketing presence and relevance to high-value manufacturing.
Will Lee
Chief Executive
21 October 2021
* Note 28, Alternative performance measures, defines how
Adjusted profit before tax, Adjusted earnings per share, Adjusted
operating profit and Revenue at constant exchange rates are
calculated.
COMMENTARY BY THE GROUP FINANCE DIRECTOR
Revenue for the year amounted to GBP565.6m, an increase of 11%
compared with GBP510.2m last year. We achieved strong revenue
growth in our APAC region, largely driven by increased investments
in the semiconductor and electronics capital equipment markets. We
also saw growth in the Americas and EMEA regions, with a notable
increase in demand in the second half of the year as the economies
continued to recover from the pandemic.
In our Manufacturing technologies business (previously
Metrology), revenue increased by 11% to GBP526.2m, compared with
GBP475.2m last year. We have seen growth in demand for many of
these products, notably in our machine tool product line and our
encoder product lines, mostly as a result of the continuing
recovery in the semiconductor and electronics capital equipment
market.
Revenue in our Analytical instruments and medical devices
business also increased to GBP39.4m, compared with GBP35.0m last
year.
2021 2020 Underlying
revenue revenue change at
at actual Change at actual constant
exchange from exchange exchange
rates 2020 rates rates
GBPm % GBPm %
-------------------- ----------- ------ ----------- -----------
APAC 274.8 +21 227.7 +23
-------------------- ----------- ------ ----------- -----------
EMEA 169.1 +1 167.2 +1
-------------------- ----------- ------ ----------- -----------
Americas 121.7 +5 115.3 +9
-------------------- ----------- ------ ----------- -----------
Total Group revenue 565.6 +11 510.2 +13
-------------------- ----------- ------ ----------- -----------
Operating costs
Our Fit for the Future initiative implemented last year resulted
in actions which improved productivity and reduced our cost base.
These included a resizing of the business, a restructure of our AM
product line, and a focus on prioritising design projects to
accelerate the market launch of significant products.
As a result, underlying labour costs (excluding bonuses and
grants) were GBP208.2m this year compared to GBP225.8m last year,
with an average headcount of 4,437 (2020: 4,797). This year's total
labour cost (see note 3) includes GBP1.0m of global job retention
grant income (2020: GBP4.5m), all of which originated overseas this
year, a GBP3.5m 'thank you' payment for employees to recognise
their exceptional efforts during the pandemic, and performance
bonuses totalling GBP13.2m (2020: GBPnil). Given the increase in
demand in the second half of the year we have recruited over 300
manufacturing staff to ensure we have sufficient capacity to meet
demand.
Certain other operating costs, such as travel and exhibitions,
are around GBP6.3m lower this year compared to last year due to
restrictions resulting from the pandemic. We expect these costs to
increase as restrictions are lifted, although we do not expect
travel to return to pre-pandemic levels as the use of online
meetings has proven an effective tool for many communications and
is aligned with our environmental aims.
Production costs, as a % of sales, reduced by 1% to 35% (see
note 4). This is the result of both cost reductions and improved
manufacturing efficiencies.
Impairments of GBP4.7m have been recognised in the year,
relating to investments, loans and finance leases with an associate
company (see note 13 for further detail). No further significant
asset impairments have been recognised this year, as a result of
improving macroeconomic conditions and upward demand trends across
most of our geographic areas and business units. In the previous
year, we impaired GBP9.9m of capitalised development costs (aside
from restructuring costs).
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 GBP58.6m, compared with GBP66.6m last
year (see note 4). This reduction is consistent with our
expectations given the focus on flagship projects. We also incurred
GBP18.0m (2020: GBP15.8m) on other engineering expenditure, to
support existing products and technologies.
We have launched new products during the year, notably the
FORTiS enclosed optical encoder which provides high-performance
measurement in harsh environments, including machine tools and
semiconductor wafer dicing.
Profit and tax
Adjusted profit before tax amounted to GBP119.7m compared with
GBP48.6m in 2020, an increase of 146%. Statutory profit before tax
was GBP139.4m compared with GBP3.2m in the previous year.
Items excluded from Adjusted profit before tax are as
follows:
- GBP23.8m of restructuring costs in 2020 which have not repeated this year;
- gains of GBP23.0m from forward contracts deemed ineffective
for cash flow hedging (2020: GBP21.6m loss); and
- third-party fees relating to the FSP of GBP3.2m (2020: GBPnil).
Further details of alternative performance measures are provided
in note 28.
Adjusted operating profit in our Manufacturing technologies
business was GBP112.6m compared with GBP50.3m last year, while in
our Analytical instruments and medical devices business, Adjusted
operating profit was GBP5.9m compared with GBP1.4m last year. These
improvements result from revenue growth and the reduced cost base
described earlier.
The overall effective rate of tax was 20.1% (2020: 91.0%). 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. The reduction in
the year-on-year rate is primarily due to the derecognition of
deferred tax assets in 2020. Note 8 provides further analysis of
the effective tax rate.
Cash and liquidity
We have achieved an improvement in our liquidity position during
the year, with net cash and bank deposit balances at 30 June 2021
of GBP215.0m (2020: GBP120.4m). This is mostly a result of our
strong trading performance and reduced levels of capital
expenditure and dividends paid this year.
We disclose details of 'severe but plausible' scenario forecasts
used in our going concern assessment 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 12
months.
Consolidated balance sheet
Additions to property, plant and equipment and vehicles totalled
GBP10.9m, of which GBP1.0m was spent on property and GBP9.9m on
plant and machinery, IT equipment and infrastructure, and vehicles.
The lower expenditure this year is in line with our expectations
following significant infrastructure investments in recent
years.
Within working capital, inventories increased to GBP113.6m from
GBP105.5m at the beginning of the year, primarily as a result of
the higher trading levels. 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. Given recent global shortages, we have
also increased safety stock levels of some critical components to
mitigate the risk of supply chain disruption.
Trade receivables increased from GBP105.1m to GBP114.7m due to
increased revenue and including a currency translation gain of
GBP7.8m.
There was an improvement in debtor days to 61 at the end of the
year, compared with 76 at the end of last year. We have also seen a
reduction in the provision for expected credit losses, from 1.5% of
gross trade receivables at 30 June 2020, to 0.3% at 30 June 2021,
resulting from the economic recovery we are now experiencing across
our regions.
Total equity at the end of the year was GBP703.3m, compared with
GBP546.9m at 30 June 2020, primarily as a result of profit for the
year of GBP111.5m and cash flow hedging reserve gains of
GBP41.8m.
Capital allocation strategy
The 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 have consistently applied our capital allocation strategy for
many years. We are committed to investment in the R&D of new
products, manufacturing processes and global support infrastructure
in order to generate growth in future returns and to improve
productivity while managing expenditure appropriate to trading
conditions. This is evidenced in the year by continued investments
in capital and 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. In exceptional circumstances the Board may deem
it appropriate to not pay a dividend. This was the case in 2020,
where no final dividend was proposed as a result of global
uncertainty arising from the COVID-19 pandemic.
Pensions
At the end of the year our defined benefit pension schemes, now
closed for future accrual, showed a deficit of GBP23.7m, compared
with a deficit of GBP64.9m at 30 June 2020. Defined benefit pension
schemes' assets at 30 June 2021 increased to GBP231.4m from
GBP188.6m at 30 June 2020, primarily as a result of strong
investment performance.
Pension scheme liabilities decreased from GBP253.5m to
GBP232.6m, on an IAS 19 basis (excluding the effect of IFRIC 14 and
the asset ceiling). This primarily reflects the net effect of:
- an increase in the discount rate of the UK scheme;
- an increase in RPI for the UK and Irish schemes;
- an increase in CPI for the UK scheme; and
- a GBP14.3m reduction due to an adjustment discussed further below.
According to the terms of the current deficit funding plan, the
Company is paying GBP8.7m each year into the scheme until 1 October
2023. The agreement will continue until 30 June 2031 and any
outstanding deficit will be 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 present
value of the expected payments totalled GBP19.2m at 30 June 2021,
relative to the net asset position of GBP3.3m. This has resulted in
an additional GBP22.4m liability being recognised according to the
asset ceiling and IFRIC 14.
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. Differing
legal interpretations of the Trust Deed and Rules were subsequently
concluded by legal firms instructed by the Trustees and the
Company, mostly relating to the periods over which revaluation and
late retirement factors are applied, with significant differences
in the financial impact noted. Consequently, in April 2021, the
Trustees and the Company jointly instructed Queen's Counsel to
opine on a legal interpretation of the Trust Deed and Rules that
both parties would accept. This resulted in another interpretation
of the Trust Deed and Rules which is now the accepted legal
position, with a GBP14.3m reduction in liabilities calculated on
this basis. This change in liability estimate in the year relates
to benefits for some members payable in future years, and has been
accounted for within the 'Remeasurement of defined benefit pension
scheme liabilities' in the Consolidated statement of other
comprehensive income and expense.
See note 22 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, to
maximise interest income on cash deposits, and to ensure that
appropriate funding arrangements are available for each of our
companies.
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, such 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 24
for further details on financial instruments and note 28 on
alternative performance measures.
Earnings per share and dividend
Adjusted earnings per share is 132.0p compared with 51.0p last
year, while statutory earnings per share is 153.2p compared with
0.4p last year.
We reinstated the dividend programme during the year and paid an
interim dividend of 14.0 pence net per share (2020: nil) on 6 April
2021 and are pleased to propose a final dividend of 52.0 pence net
per share in respect of the year (2020: nil).
Looking forward
We continue to see external market growth drivers that are
creating opportunities for our business.
These include global skills shortages, digitalisation,
near-shoring and reshoring, sustainable manufacturing, population
growth and increasing life expectancy. These opportunities support
a core objective of investing in research and development to
deliver patented and innovative products and processes, helping our
customers improve efficiency and reduce both waste and cost. With
these growth opportunities in mind, we have secured planning
permission to increase production capacity at our Miskin site in
South Wales, UK.
Thanks to our highly-skilled and committed people we have
remained resilient throughout the pandemic and our financial
position has strengthened further during the year. This, combined
with our future opportunities and strategic objectives, gives us
confidence in the long-term prospects of our business.
Allen Roberts
Group Finance Director
21 October 2021
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 safest - SM: Sales &
approach, which may mean lower returns. Marketing
- Medium: A balanced approach which carefully considers - E: Engineering
the risks and rewards. - P: Our People
- High: Greater risk tolerance, which may involve - M: Manufacturing
maximum risk for maximum return. - SS: Support
Services
Industry fluctuations
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Chief
risk 1 High SM, M, E Executive
----------------- ---------------------- ----------------------- ------------------------------------ ---------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
We are exposed - Increased COVID-19 has had - Closely monitoring
to the cyclical competition a severe impact market developments.
nature of demand on prices. on many industries, - Expanding our range
from aerospace, - Loss of market but particularly in order to meet the
automotive and share. the aerospace and demands of a number
consumer - Reduced revenue, automotive industries. of different industry
electronics profit and cash However, the impact sectors and markets.
industries, which generation. of this risk on - Identifying and meeting
may be more severe the Group has been the needs of emerging
if the downcycles less significant markets, for example
of these key than initially in robotic automation.
industries predicted. - Maintaining a strong
coincide. balance sheet with
the ability to flex
manufacturing resource
levels.
-------------------------- --------------------------------------------- -------------------------------
People
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Head
risk 2 Medium P of Group HR
----------------- ---------------------- --------------------------- -------------------------- ---------------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
Our people drive - Loss of expertise, Lockdown and remote - Establishing continuity
the success of skills and specialist working have affected plans to enable rapid
our business. talent could employee availability, adaptation to changing
Inability to affect delivery attendance, and circumstances.
attract, retain of objectives. engagement. This - Advancing our direct
and develop key - Poor retention has had an adverse employee engagement
talent at all and engagement impact in some through multi-media
levels of the could slow the areas, but we have communications, promoting
organisation delivery of also seen a positive wellbeing, evolving
could mean we our strategic impact where employees feedback mechanisms,
fail to objectives and have been able and further developing
successfully product delivery. to engage and interact our inclusion strategy
deliver on our - Failure to in new and different enabling equal opportunities
strategic goals. develop future ways. Our employees to grow and develop.
leaders, insufficient have benefited - Continued investment
talent progression. from the ability in our STEM and Early
- Loss of market of our systems Career programmes,
share, reduced and processes to as well as talent development
revenue, poor support home working, and succession planning.
customer service as well as improvements - Targeted approach
and reduced in recruitment to attract, reward,
profit. and retention, and retain our talent
and development globally.
of talent.
-------------------------- --------------------------------------------- -------------------------------
Supply chain dependencies
Movement: decreased Risk ranking: Appetite: Link to strategy: Risk owner:
risk 3 Low M Head of Group
Manufacturing
--------------------- ---------------------- --------------------- ---------------------------- ---------------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
We are exposed - Inability This risk has increased - Continued focus on,
to the risk that to fulfil customer temporarily due and review of, sourcing
some components orders leading to COVID-19 and of key components.
we source are to a reduction the resulting global - Increase in buffer
provided by in revenue and supply chain uncertainties inventory.
single-source profits, and faced by most manufacturing - Cost-effective alternative
suppliers and damage to reputation. organisations. sources of supply actively
we are vulnerable - Failure to Manufacture of sought to reduce dependency
to an interruption meet contractual cables in India on single-source suppliers.
in supply. requirements. was adversely affected - Specifications are
While we duplicate - Increased by the brief shutdown reviewed and updated
key processes costs of alternative in that market. where necessary to
at more than sourcing or Once production facilitate alternative
one manufacturing redesign. resumed, this was sourcing.
location, - Loss of market sustained by the
significant share. extraordinary efforts
disruption at of local employees.
a single site Contingency plans
could compromise were implemented
our ability to in Ireland and
supply products with a third-party
to customers. supplier to ensure
ongoing supply.
We have reviewed
and increased inventory
where appropriate.
-------------------------- --------------------------------------------- -------------------------------
Innovation strategy
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Executive
risk 4 High E Chairman /Director
of Group Technology
----------------- ---------------------- ----------------------- -------------------------- -------------------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
Failure to - Failing to Remote working - R&D projects are
innovate meet customer has had a minor better prioritised
to create new needs for high-quality impact on innovation and rationalised and
cutting-edge, and complex and project delivery. regularly reviewed
high-quality products. We have seen slight against milestones.
products, or - Loss of market delays in some Flagship projects are
failing to protect share. flagship projects. receiving greater focus
the intellectual - Reduced revenue, from management and
property that profit and cash the Board.
underpins these generation. - Medium to long-term
products, which - Failing to R&D strategies are
allows us to recover investment monitored regularly
differentiate in R&D. by the Board and the
ourselves from Executive Committee.
our competitors. - Market developments
As a business are closely monitored
driven by and product development
innovation, there is based on input from
is a higher risk customers.
with new ventures - Patent and intellectual
outside our property protection
traditional are core to new product
field of expertise development.
where the science
and engineering
are less proven.
-------------------------- --------------------------------------------- -------------------------------
Economic and political uncertainty
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Chief
risk 5 High All Executive
----------------- ---------------------- ----------------------- ---------------------------- -----------------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ------------------------------------------------- ---------------------------
As a global - Increased COVID-19 has had - Monitoring external
business, competition a severe impact economic and commercial
we may be affected on prices. across the globe environments and
by political, - Loss of financial from a health and identifying
economic or and physical economic perspective. relevant headwinds.
regulatory assets in a Developments relating - Maintaining sufficient
developments region. to US/China relations, headroom in our cash
in countries - Supply issues and supply chain balances.
that we operate leading to failures issues following - Increase in buffer
in. This could to meet contractual Brexit, have also inventory.
include a global obligations. affected the business - Closely monitoring
recession, Brexit, - Reduced revenue, to varying degrees all markets in which
and US/China profit and cash during the financial we operate.
trade relations. generation. year.
-------------------------- ------------------------------------------------- ---------------------------
Route to market / customer satisfaction model
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Chief
risk 6 Medium SM Executive
------------------- -------------------- --------------------------- ------------------------------ -----------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ------------------------------------------------- ---------------------------
Inherent - Low capital COVID-19 gave us - Closely monitoring
complexity efficiency - an opportunity to customer feedback.
in the move to high people review and refine - Reviewing our strategy
systems costs and low our approach to for this area of the
integration productivity. the sale of capital business.
and the sale - Higher engineering goods. We have now - Collaborating with
of capital goods. and distribution streamlined our complementary third
costs. product portfolio parties.
- Adversely and are working - Adopting new approaches
affects customer with third parties to the sale of capital
satisfaction to streamline our goods.
levels, revenue existing sales network.
and profits.
-------------------------- ------------------------------------------------- ---------------------------
Capital allocation
Movement: decreased Risk ranking: Appetite: Link to strategy: Risk owner:
risk 7 Medium E Group Finance Director
--------------------- -------------------- ----------------------------- -------------------------- -----------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ----------------------------------------------- -----------------------------
Failure to - Investing We have continued - Defining, prioritising
properly in declining to successfully and developing strategies
allocate budget or less profitable ensure that our for all core and emerging
between core areas at the expenditure is controlled, areas of the business.
and emerging expense of more including the prioritisation - Greater scrutiny
activities. profitable and of flagship projects of all expenditure,
strategically and monitoring labour including regular
important areas. costs versus target reporting on labour
- Reduced profits. for all areas of costs and capital
- Loss of market the business. In expenditure.
share. the first half of - Regular reporting
the year, we finalised of cash balances.
the rightsizing - Tracking of performance
activities as part objectives including
of our Fit for the regular reporting
Future initiative. on flagship project
progress.
-------------------------- ----------------------------------------------- -----------------------------
Competitive activity
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Chief Executive
risk 8 Low All
----------------- -------------------- ----------------------- -------------------------- ---------------------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ----------------------------------------------- -----------------------------
Failure to adapt - Reduced revenue, COVID-19 has accelerated - We are diversified
to market and/or profits and business change across a range of
technological cash generation. in many areas and products, industries
changes. - Loss of market we have seen technology and geographies.
share. requirements developing - Closely monitoring
- Erosion of more quickly. market developments,
prices. particularly across
- Loss of reputation our core product areas.
as a leader - Local sales and
in innovation. engineering support
to quickly identify
changing local needs.
- Strong historic
and ongoing commitment
to R&D investment
to continue to build
our product portfolio.
-------------------------- ----------------------------------------------- -----------------------------
Exchange rate fluctuations
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner:
risk 9 Medium SM Group Finance Director
----------------- -------------------- --------------------------- ---------------------------- ---------------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ----------------------------------------------- -----------------------------
Due to the global - Significant Sterling has strengthened - Rolling forward
nature of our variations in against our major contracts for cash
operations, with profit. trading currencies, flow hedges in accordance
over 90% of the - Reduced cash particularly against with Board-approved
revenue generated generation. the US Dollar and policy.
outside the UK, - Increased Japanese Yen. Ongoing - One-month forward
we are exposed competition uncertainty caused contracts to manage
to volatility on product prices. by economic conditions risks on intercompany
in exchange rates and the impact of balances.
that could have the pandemic could - Currency pricing
a significant give rise to further reviews with some
impact on our volatility. large customers.
results. - Tracking of overseas
We are exposed net assets value compared
to exchange rate to the market
risks, including capitalisation.
currency cash - Obtaining input
flow, currency from external sources
translation risk including our banks.
and the currency
risk on
intercompany
balances.
-------------------------- ----------------------------------------------- -----------------------------
Loss of manufacturing output
Movement: increased Risk ranking: Appetite: Link to strategy: Risk owner:
risk 10 Low M Head of Group
Manufacturing
--------------------- ---------------------- ------------------------- -------------------------- -------------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
Manufacturing - Inability Our manufacturing - Duplication of
output can be to fulfil customer division has responded high-dependency
adversely affected orders leading well to the pandemic processes such as component
by factors to a reduction across all markets, manufacturing and finishing,
including in revenue and although the relatively electronic printed
environmental profits, and short notice of circuit board assembly,
hazards, technical damage to reputation. a lockdown in India and microelectronics
delays or outages, - Increased did have an impact assembly across multiple
plant or equipment costs of alternative on the supply of manufacturing locations.
failure, sourcing or cables across the - Ensuring we have
inadequate redesign. Group. flexible manufacturing
resourcing levels, - Impact on capacity and sufficient
or factors maintenance resilience across our
affecting of buffer inventory. manufacturing sites.
the workforce - Loss of market - Standardised approaches
such as a share. to assembly, annual
pandemic. risk assessments and
business continuity
planning.
- Reviewing and maintaining
business interruption
and other insurance
cover.
-------------------------- --------------------------------------------- -------------------------------
IT transformation failure
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner:
risk 11 Low All Director of Group
Operations
----------------- ---------------------- ----------------------- ---------------------------- -----------------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
The upgrade of - Major disruption In the short term, - Risk assessments
our IT systems to our systems remote working carried out for all
to Microsoft (including our has had an impact key systems likely
Dynamics 365, financial and on the ability to be affected by the
to remove legacy HR systems) to meet milestones upgrade.
systems and ensure causing delay and carry out appropriate - A clear roadmap with
our business to our operations. testing. However, measurable milestones.
is better - Affect our these delays are - Assigning project
integrated, ability to process expected to be managers who have clear
could impact or issue invoices made up for in oversight of the project
our business and customer the longer-term and any issues.
if there are orders, or to timeframe of the - Promptly identifying
major technical procure goods project. and dealing with any
issues, or if and services. significant issues.
it is poorly - Increased
integrated. This costs, including
risk could also to fix technical
result in problems issues and restore
if there are or upgrade other
significant delays affected systems.
to the programme - Project delay
or it runs would leave
significantly us supporting
over budget. legacy systems
for longer than
desired.
-------------------------- --------------------------------------------- -------------------------------
Cyber
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner:
risk 12 Low All Director of Group
Operations
----------------- ---------------------- ----------------------- ---------------------------- -----------------------------
Risk description Potential impact Developments this What we are doing to
year manage this risk
-------------------------- --------------------------------------------- -------------------------------
External and - Loss of intellectual With remote working, - Substantial resilience
internal threat property and/or we have had to and back-up built into
which could result commercially increase vigilance our systems which are
in a loss of sensitive data. and awareness of continuously updated
data including - Inability potential cyber in line with current
intellectual to access, or risks. We are continuing threats and industry
property, or disruption to, to see attempted best practice.
our ability to our systems phishing attacks - Cyber risks and security
operate our leading to reduced but are managing are regularly discussed
systems service to customers. these well. at Board meetings.
which could - Financial - Physical, logical
severely loss and reputational and control measures
affect our damage. are deployed to protect
business. - Impact on our information and
decision-making systems, and external
due to lack penetration testing
of clear and is conducted as appropriate.
accurate data, - Regular security
or disruption awareness training
caused by the is conducted, including
lack of service. in relation to the
specific risks associated
with remote working.
-------------------------- --------------------------------------------- -------------------------------
Pensions
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Group Finance
risk 13 Low P Director
----------------- ---------------------- ----------------------- ------------------------ ---------------------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ----------------------------------------------- -----------------------------
Investment returns - Any deficit Strong asset growth - Recovery plan for
and actuarial may require (net of scheme funding the UK defined benefit
assumptions of additional funding and pensions payments) scheme implemented
our defined in the form of GBP33.8m. in June 2019 with
benefit of supplementary A change in the the aim of funding
schemes are cash payments estimate of benefits to self-sufficiency
subject to the plans for some members by 2031.
to economic and or the provision of the UK defined - Active engagement
social factors of additional benefit pension with the Trustees
outside our security. scheme has resulted on investment strategy.
control. - Significant in a reduction in - The Trustees operate
management time. scheme liabilities. in line with a statement
- External support of investment principles.
costs. - The Company and
Trustees seek appropriate
independent professional
advice when necessary.
-------------------------- ----------------------------------------------- -----------------------------
Non-compliance with laws and regulations
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: General
risk 14 Low All Counsel & Company
Secretary/Director
of Renishaw Neuro
Solutions
----------------- ---------------------- ----------------------- ---------------------------- -----------------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ----------------------------------------------- -----------------------------
We operate in - Damage to The forum previously - Whistleblowing hotline
a large number reputation and established to focus available for use
of territories loss of future on high-risk areas by all employees.
and in some business. including competition - Regular compliance
highly-regulated - Potential law, anti-bribery, training for all employees.
sectors. We are penalties and and sanctions, has - Controls in place
subject to a fines, and cost continued to meet to mitigate some of
wide variety of investigations. during the year. the risks (including
of laws and - Management We have reviewed insurance cover),
regulations, time and attention our current policies and audits conducted
including those in dealing with and have promoted to review some of
relating to reports of communication and these controls.
anti-bribery, non-compliance. training for our - Implementation of
anti-money - Inability employees. a global GDPR programme
laundering, to attract and (and its equivalent
sanctions, retain talent. in non-EU countries).
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.
-------------------------- ----------------------------------------------- -----------------------------
Product failure
Movement: stable Risk ranking: Appetite: Link to strategy: Risk owner: Director
risk 15 Low E, M of Corporate
Development/Head
of QA RA & Clinical
Affairs
----------------- ---------------------- ----------------------- ------------------------------ ---------------------------
Risk description Potential impact Developments this What we are doing
year to manage this risk
-------------------------- ----------------------------------------------- -----------------------------
The quality of - Damage to The pandemic limited - Rigorous internal
our products reputation. the ability of our product development
could be adversely - Claims, including engineers to conduct and testing procedures
affected by personal injury. on-site product (during development,
internal - Potential assessments for manufacturing and
threats, such penalties and customers. release) to international
as inadequate fines, and cost Where the use of standards where applicable,
quality management of investigations. the neurosurgical to ensure high levels
procedures or - Inability robot has continued of quality assurance.
external threats to fulfil customer during the pandemic, - Extensive interaction
such as orders leading servicing and surgical with customers and
substandard to a reduction support has continued regulators to obtain
resourcing from in sales. to be provided. and address feedback.
third-party The risk of failure - Regular monitoring
suppliers. of a new or existing of third-party suppliers
This risk is product has not to ensure incoming
particularly increased this year. parts and sub-contract
notable in our activity meet requirements.
neurological - Liability is limited
products, where by our terms and conditions
failure could of sale and we have
result in liability insurance
significant in place. For clinical
personal injury studies, we have separate
claims. trial insurance in
place.
-------------------------- ----------------------------------------------- -----------------------------
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2021
from continuing operations Notes 2021 2020
GBP'000 GBP'000
Revenue 2 565,559 510,215
Cost of sales 4 (269,852) (271,633)
Gross profit 295,707 238,582
Distribution costs (110,087) (123,276)
Administrative expenses (69,257) (58,584)
Restructuring costs 29 - (23,797)
Gains/(losses) from the fair value of financial
instruments 24 21,978 (26,631)
Operating profit 138,341 6,294
Financial income 5 3,406 913
Financial expenses 5 (3,991) (4,840)
Share of profits of associates and joint
ventures 13 1,683 841
Profit before tax 6 139,439 3,208
Income tax expense 8 (27,980) (2,920)
Profit for the year 111,459 288
------------------------------------------------- ------ ---------- ----------
Profit attributable to:
Equity shareholders of the parent company 111,459 288
Non-controlling interest 25 - -
Profit for the year 111,459 288
------------------------------------------------- -------- ----
pence pence
Dividend per share arising in respect of the
year 25 66.0 0.0
Dividend per share paid in the year 25 14.0 46.0
Earnings per share (basic and diluted) 7 153.2 0.4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
for the year ended 30 June 2021
2021 2020
notes GBP'000 GBP'000
Profit for the year 111,459 288
---------------------------------------------------- ------ --------- ---------
Other items recognised directly in equity:
Items that will not be reclassified to the
Consolidated income statement:
Current tax on contributions to defined benefit 1,653 -
pension schemes
Deferred tax on contributions to defined benefit (1,653) -
pension schemes
Remeasurement of defined benefit pension scheme
liabilities 22 33,285 (23,978)
Deferred tax on remeasurement of defined benefit
pension scheme liabilities (6,052) 5,484
Total for items that will not be reclassified 27,233 (18,494)
---------------------------------------------------- ------ --------- ---------
Items that may be reclassified to the Consolidated
income statement:
Exchange differences in translation of overseas
operations 25 (14,752) 3,369
Exchange differences in translation of overseas
joint venture 25 (728) 186
Current tax on translation of net investments
in foreign operations 25 735 -
Deferred tax on translation of net investments
in foreign operations 25 735 (403)
Effective portion of changes in fair value
of cash flow hedges, net of recycling 25 51,590 13,924
Deferred tax on effective portion of changes
in fair value of cash flow hedges 25 (9,790) (1,978)
Total for items that may be reclassified 27,790 15,098
---------------------------------------------------- ------ --------- ---------
Total other comprehensive income and expense,
net of tax 55,023 (3,396)
---------------------------------------------------- ------ --------- ---------
Total comprehensive income and expense for
the year 166,482 (3,108)
---------------------------------------------------- ------ --------- ---------
Attributable to:
Equity shareholders of the parent company 166,482 (3,108)
Non-controlling interest 25 - -
Total comprehensive income and expense for
the year 166,482 (3,108)
---------------------------------------------------- ------ --------- ---------
CONSOLIDATED BALANCE SHEET
at 30 June 2021 2021 2020
notes GBP'000 GBP'000
------------------------------------------ ------ -------- ---------
Assets
Property, plant and equipment 10 246,242 270,049
Right-of-use assets 11 12,429 12,672
Intangible assets 12 43,795 43,364
Investments in associates and joint
ventures 13 16,634 16,604
Long-term loans to associates and joint
ventures 13 - 2,818
Finance lease receivables 14 6,241 4,801
Deferred tax assets 9 21,292 39,641
Derivatives 24 12,484 1,242
Total non-current assets 359,117 391,191
------------------------------------------ ------ -------- ---------
Current assets
Inventories 16 113,563 105,497
Trade receivables 24 114,661 105,077
Finance lease receivables 14 1,763 1,982
Contract assets 332 606
Short-term loans to associates and joint
ventures 13 598 318
Current tax 1,600 3,878
Other receivables 24 30,021 23,196
Derivatives 24 9,639 3,758
Pension scheme cash escrow account 22 10,578 10,568
Bank deposits 15 120,000 10,000
Cash and cash equivalents 15,24 95,008 110,386
Total current assets 497,763 375,266
------------------------------------------ ------ -------- ---------
Current liabilities
Trade payables 24 24,715 16,998
Contract liabilities 18 6,120 5,976
Current tax 4,680 2,905
Provisions 17 6,259 5,591
Derivatives 24 5,594 22,546
Lease liabilities 20 3,904 4,241
Borrowings 21 992 1,061
Other payables 19 51,716 34,372
Total current liabilities 103,980 93,690
------------------------------------------ ------ -------- ---------
Net current assets 393,783 281,576
------------------------------------------ ------ -------- ---------
Non-current liabilities
Lease liabilities 20 8,658 8,925
Borrowings 21 6,457 10,482
Employee benefits 22 23,698 64,895
Deferred tax liabilities 9 10,402 499
Derivatives 24 355 41,102
Total non-current liabilities 49,570 125,903
------------------------------------------ ------ -------- ---------
Total assets less total liabilities 703,330 546,864
------------------------------------------ ------ -------- ---------
Equity
Share capital 25 14,558 14,558
Share premium 42 42
Own shares held 25 (404) (404)
Currency translation reserve 25 3,719 17,729
Cash flow hedging reserve 25 11,345 (30,455)
Retained earnings 674,603 546,100
Other reserve 25 44 (129)
Equity attributable to the shareholders
of the parent company 703,907 547,441
------------------------------------------ ------ -------- ---------
Non-controlling interest 25 (577) (577)
Total equity 703,330 546,864
------------------------------------------ ------ -------- ---------
These financial statements were approved by the Board of
Directors on 21 October 2021 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 2021
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
2020
Balance at 1
July
2019 14,558 42 (404) 14,577 (42,401) 597,784 (302) (577) 583,277
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Profit for the
year - - - - - 288 - - 288
Other
comprehensive
income and
expense
(net of tax)
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Remeasurement of
defined benefit
pension
scheme
liabilities - - - - - (18,494) - - (18,494)
Foreign exchange
translation
differences - - - 2,965 - - - - 2,965
Relating to
associates
and joint
ventures - - - 187 - - - - 187
Changes in fair
value
of cash flow
hedges - - - - 11,946 - - - 11,946
Total other
comprehensive
income and
expense - - - 3,152 11,946 (18,494) - - (3,396)
Total
comprehensive
income and
expense - - - 3,152 11,946 (18,206) - - (3,108)
Share-based
payments
charge - - - - - - 173 - 173
Dividends paid - - - - - (33,478) - - (33,478)
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
Balance at 30
June
2020 14,558 42 (404) 17,729 (30,455) 546,100 (129) (577) 546,864
Year ended 30
June
2021
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
expenses - - - (14,010) 41,800 27,233 - - 55,023
Total
comprehensive
income and
expenses - - - (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
----------------- -------- -------- -------- ------------ --------- --------- -------- ------------ ---------
More details of share capital and reserves are given in note
25.
CONSOLIDATED STATEMENT OF CASH FLOW
for the year ended 30 June 2021
Notes 2021 2020
GBP'000 GBP'000
----------------------------------------------- -------- ---------- ---------
Cash flows from operating activities
Profit for the year 111,459 288
----------------------------------------------- -------- ---------- ---------
Adjustments for:
Depreciation of property, plant and equipment
and right of use assets 10,11 28,780 30,578
Loss on sale of property, plant and equipment 31 22
Impairment of property, plant and equipment 10 - 2,590
Amortisation of development costs 12 9,019 16,861
Impairment of development costs 12 1,092 15,881
Amortisation of other intangibles 12 1,205 1,566
Loss on disposal of other intangibles - 53
Impairment of other intangibles 12 - 1,600
Impairment of goodwill 12 - 808
Share of profits from associates and joint
ventures 13 (1,683) (841)
Profit on disposal of investment in associate - (1,053)
Fair value gain on revaluation of investment
in associate - (2,775)
Impairment of investment in associate 13 1,674 257
Impairment of long-term loan to associate 13 2,633 1,297
Remeasurement of defined benefit pension
scheme liabilities from GMP equalisation 22 78 -
Financial income 5 (3,406) (913)
Financial expenses 5 3,991 4,840
(Gains)/losses from the fair value of
financial instruments 28 (22,995) 21,609
Share-based payment expense 23 173 173
Tax expense 8 27,980 2,920
48,572 95,473
----------------------------------------------- -------- ---------- ---------
(Increase)/decrease in inventories (8,066) 23,529
(Increase)/decrease in trade and other
receivables (25,703) 16,342
Increase/(decrease) in trade and other
payables 27,216 (11,297)
Increase in provisions 17 668 2,745
(5,885) 31,319
----------------------------------------------- -------- ---------- ---------
Defined benefit pension contributions 22 (8,866) (11,816)
Income taxes paid (9,991) (10,605)
Cash flows from operating activities 135,289 104,659
----------------------------------------------- -------- ---------- ---------
Investing activities
Purchase of property, plant and equipment 10 (10,873) (38,657)
Sale of property, plant and equipment 33 3,633
Development costs capitalised 12 (9,844) (17,405)
Purchase of other intangibles 12 (3,000) (3,338)
(Increase)/decrease in bank deposits 15 (110,000) 42,500
Interest received 5 625 835
Dividend received from associates and
joint ventures 13 - 512
Purchase of additional shareholding in
joint venture 13 (749) -
Proceeds from sale of shares in associate - 986
Cash flows from investing activities (133,808) (10,934)
----------------------------------------------- -------- ---------- ---------
Financing activities
Increase in borrowings 21 636 1,894
Repayment of borrowings 21 (3,477) (1,136)
Interest paid 5 (386) (1,315)
Repayment of principal of lease liabilities 20 (4,815) (4,130)
Dividends paid 25 (10,189) (33,478)
Cash flows from financing activities (18,231) (38,165)
----------------------------------------------- -------- ---------- ---------
Net increase in cash and cash equivalents (16,750) 55,560
Cash and cash equivalents at beginning
of the year 110,386 54,326
Effect of exchange rate fluctuations on
cash held 1,372 500
Cash and cash equivalents at end of the
year 15 95,008 110,386
----------------------------------------------- -------- ---------- ---------
NOTES (FORMING PART OF THE FINANCIAL STATEMENTS)
1. Accounting policies
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 equity account the Group's interest in associates and joint
ventures.
The financial information set out in the announcement does not
constitute the Group's statutory accounts for the years ended 30
June 2021 or 30 June 2020. The financial information for the year
ended 30 June 2020 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
2021, an unqualified auditor's report was signed on 21 October
2021. 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 which 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 as indicated.
Item Key judgements (J) and estimates (E)
------------------------- -------------------------------------------
Cash flow hedges E - Estimates of highly probable forecasts
of the hedged item
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
Taxation E - Estimates of future profits to
utilise deferred tax assets
------------------------- -------------------------------------------
New, revised or changes to existing accounting standards
The following accounting standard amendments became effective as
at 1 January 2020 and have been adopted in the preparation of these
financial statements, with effect from 1 July 2020:
- amendments to IFRS 3 Definition of a Business;
- amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate
Benchmark Reform;
- amendments to IAS 1 and IAS 8 Definition of Material;
- amendments to References to the Conceptual Framework for
Financial Reporting; and
- amendments to IFRS 16 COVID-19-Related Rent Concessions.
These have not had a material impact 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 which included considering the potential
future impact of COVID-19 on the Group.
In the viability review the Directors assessed the period to 31
October 2024, 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 31 October
2022.
The scenarios were:
Base scenario - pessimistic revenue forecast from the Group's
business plan, with overheads, capital expenditure, and other cash
outflows following the route of the optimistic revenue forecast
from the same business plan. Essentially, this means continuing to
plan for the growth in the business plan, including the costs that
would need to be incurred in the period to 31 October 2022 to
achieve revenue growth in following years, while assuming that
revenue growth is at the lowest end of our corporate view. The
pessimistic revenue forecasts are used as the 'highly probable'
revenue forecasts used in hedge accounting. For context, revenue in
the first
year of the base scenario is a small increase over 2021's
revenue of GBP565.6m.
The 'severe but plausible' scenarios then took the base scenario
('scenario 1') and considered the further effect of:
2) Supply-chain disruption causing a loss in revenue, due to not
being able to fulfil all orders and some permanent loss of
customers if this disruption caused them to move to our
competitors;
3) Industry fluctuations and/or macroeconomic conditions causing
revenue to significantly reduce;
4) Supply-chain disruption occurring at the same time as the
industry fluctuations and/or macroeconomic conditions, combining
scenarios 2 and 3;
5) Industry fluctuations and/or macroeconomic conditions causing
revenue to significantly reduce, and also causing a significant
deterioration in debtor days; and
6) Supply-chain disruption and economic uncertainty result in a
significant rise in material costs, and therefore a fall in gross
margin.
In all six scenarios, the Group had significant positive cash
balances throughout the period to 31 October 2022.
For our other principal risks, no further separate scenarios
were modelled. 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
short term. For other principal risks, the Directors considered
that the existing scenarios sufficiently modelled a range of
outcomes, including what would happen if multiple risks
crystallised at the same time, and that the outcomes of other risks
crystallising would be no worse than the existing scenarios.
Emerging risks of climate change and changing work patterns have
also been reviewed by the Directors when considering the impact and
likelihood of principal risks crystallising.
We also performed reverse stress testing to identify what would
need to happen in the period to 31 October 2022 to result in the
Group having negative cash balances. We found that this would occur
if revenue fell to GBP12m per month before mitigating actions were
taken; this is considerably lower than forecast, and well below the
lowest revenue months experienced in the height of the
pandemic.
In making their going concern assessment, the Directors also
considered the strong demand currently being experienced, and that
the pandemic has accelerated trends such as digitisation,
near-shoring, and remote working, which the business is well-placed
to benefit from. The assessment further considered the strong
working capital position, with cash and bank deposit balances of
GBP215m at 30 June 2021.
Based on this assessment, incorporating a review of the current
position, the scenarios, principal risks and mitigation, the
Directors have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due
over the period to 31 October 2022. Accordingly, they continue to
adopt the going concern basis in preparing these financial
statements.
Basis of consolidation
Subsidiaries - 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.
Application of the equity method to associates and joint
ventures - 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.
Transactions eliminated on consolidation - intragroup balances
and transactions, and any unrealised income and expenses arising
from intragroup transactions, are eliminated. 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
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.
Transactions and balances - 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 users' 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 strategy and relate to matters
that do not frequently recur.
These items are also excluded from Adjusted profit before tax,
Adjusted operating profit and Adjusted earnings per share measures,
as explained in note 28 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 in order 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 28).
Revenue
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 assessment of which is documented in the Key judgement.
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. Where the software 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 continue to be 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; reporting 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.
Financial instruments and fair value measurements
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. Note 24, Financial instruments, 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 derivative cash flow hedges
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 no longer qualifies for hedge accounting. At that time,
any cumulative gain or loss on the hedging instrument previously
recognised in equity is retained in equity until the hedged
transaction occurs. If the hedged transaction is no longer expected
to occur, the net cumulative gain or loss recognised in equity is
then transferred 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. See note 24 for further detail on
financial instruments .
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. Relevant sensitivity analysis is
included in note 24.
Cash and cash equivalents
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.
Pension scheme cash escrow account
The Company holds a pension scheme escrow account as part of the
security given for the UK defined benefit pension scheme. This
account is shown within current assets in the Consolidated balance
sheet as it may be used to settle pension scheme liabilities
immediately upon enforcement of the charge over the account.
Goodwill and other intangible assets
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.
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group.
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 ten years.
Intangible assets - research and development costs
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 and 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 five years
and is stated at cost less accumulated amortisation and less
accumulated impairment losses. Capitalised development expenditure
is removed from the balance sheet ten years after being fully
amortised.
Key judgement - Whether a project meets appropriate 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 a five-year period. 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.
Intangible assets - software licences
Intangible assets, comprising software licences that are
acquired by the Group, are stated at cost less accumulated
amortisation and impairment losses. Amortisation is charged on a
straight-line basis over the estimated useful life of the assets.
The useful life of each of these assets is assessed on an
individual basis and they range from two to 10 years.
Impairment of non-current assets
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 net
realisable value 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 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 (see note 12). Similarly, determining
whether capitalised development costs are impaired requires an
estimation of their value-in-use which involves significant
judgement. Relevant sensitivity analysis is included in note
12.
Property, plant and equipment
Freehold land is not depreciated. Other assets are stated at
cost less accumulated depreciation. Depreciation is provided to
write off the cost 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,
Vehicles 3 to 4 years.
Inventory and work in progress
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.
Leases
As a lessee
At the lease commencement date the Group recognises a
right-of-use asset for the leased item and a lease liability for
any lease 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 lease incentives
received. Right of use assets are subsequently depreciated on a
straight-line basis from the commencement date to the earlier of i)
the end of the useful life of the asset, or ii) the end of the
lease term.
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), of 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 also
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.
As a lessor
The Group acts as a lessor for Renishaw-manufactured plant and
equipment and determines at inception whether the lease is a
finance or an operating lease.
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.
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.
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 schemes are administered by trustees who are independent of
the Group finances. Investment assets of the defined benefit
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 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.
Accruals are made for holiday pay, based on a calculation of the
number of days holiday earned during the year, but not yet taken,
and also for annual performance bonuses, if applicable.
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. Details of the estimates in respect of
the current year are given in note 22. Based on a review of the
terms of the UK scheme trust deed, management has concluded that
there are no likely circumstances which would result in the Company
having an unconditional right to a refund in the event of a fund
surplus. Relevant sensitivity analysis is included in note 22.
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 Plan) (see the Governance section for
further detail). 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
Renishaw Employee Benefit Trust (EBT) is responsible for purchasing
shares on the open market on behalf of the Company to satisfy the
Plan awards. 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.
Warranty provisions
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.
Government grants
Government grants 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.
Taxation
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. Relevant
sensitivity analysis is included in note 9.
2. SEGMENTAL ANALYSIS
The Group manages its business in two segments, comprising
manufacturing technologies (previously metrology) and analytical
instruments and medical devices (previously healthcare). Within the
operating segments, there are multiple product offerings with
similar economic characteristics, similar production processes and
similar customer bases. The results of these segments are regularly
reviewed by the Board to allocate resources and to assess their
performance.
During the year, we used the launch of our purpose, vision and
strategy to rename our operating segments to better reflect the
business. 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, neurological
and medical dental product lines.
More details of the Group's products and services are given in
the Strategic report.
Year ended 30 June 2021 Manufacturing Analytical
technologies instruments
and medical Total
devices
GBP'000 GBP'000 GBP'000
---------------------------------- --------------- ----------------- ----------
Revenue 526,191 39,368 565,559
Depreciation, amortisation and
impairment 36,916 3,180 40,096
Operating profit before gains
from fair value of financial
instruments 110,498 5,865 116,363
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
---------------------------------- --------------- ----------------- ----------
Year ended 30 June 2020 Manufacturing Analytical
technologies instruments
GBP'000 and medical Total
devices GBP'000 GBP'000
---------------------------------- --------------- ----------------- ----------
Revenue 475,203 35,012 510,215
Depreciation, amortisation and
impairment 62,591 2,557 65,148
Operating profit before losses
from fair value of financial
instruments 31,188 1,737 32,925
Share of profits from associates
and joint ventures 841 - 841
Net financial expense - - (3,927)
Losses from the fair value of
financial instruments - - (26,631)
Profit before tax - - 3,208
---------------------------------- --------------- ----------------- ----------
There is no allocation of assets and liabilities to operating
segments. Depreciation is included within certain other overhead
expenditure which is allocated to segments on the basis of the
level of activity.
The following table shows the disaggregation of group revenue by
category:
2021 2020
GBP'000 GBP'000
------------------------------------------- -------- --------
Goods, capital equipment and installation 513,675 457,024
Aftermarket services 51,884 53,191
-------------------------------------------- -------- --------
Total Group revenue 565,559 510,215
-------------------------------------------- -------- --------
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:
2021 2020
GBP'000 GBP'000
-------------------------- -------- --------
APAC 274,765 227,650
--------------------------- -------- --------
UK (country of domicile) 26,923 27,478
EMEA, excluding UK 142,219 139,775
--------------------------- -------- --------
EMEA 169,142 167,253
Americas 121,652 115,312
Total Group revenue 565,559 510,215
--------------------------- -------- --------
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:
2021 2020
GBP'000 GBP'000
--------- -------- --------
China 141,690 102,840
USA 103,850 101,153
Japan 51,523 57,833
Germany 51,095 49,397
---------- -------- --------
There was no revenue from transactions with a single external
customer which amounted to more than 10% of the Group's total
revenue.
The following table shows the analysis of non-current assets,
excluding deferred tax and derivatives, by geographical region:
2021 2020
GBP'000 GBP'000
-------------------------- -------- --------
UK 179,039 186,249
Overseas 146,393 159,258
Total non-current assets 325,432 345,507
--------------------------- -------- --------
No overseas country had non-current assets amounting to 10% or
more of the Group's total non-current assets.
3. PERSONNEL EXPENSES
The aggregate payroll costs for the year were:
2021 2020
GBP'000 GBP'000
------------------------------------------ -------- --------
Wages and salaries 183,235 183,165
Compulsory social security contributions 21,766 21,373
Contributions to defined contribution
pension schemes 19,759 21,103
Government grants - employment support (989) (4,532)
Share-based payment charge 173 173
------------------------------------------- -------- --------
Total payroll costs 223,944 221,282
------------------------------------------- -------- --------
Wages and salaries and compulsory social security contributions
include GBP13,208,000 (2020: GBPnil) relating to performance
bonuses and GBP3,500,000 (2020: GBPnil) relating to a one-off
'thank you' payment.
Amounts recognised as 'Government grants - employment support'
relate to non-UK schemes in 2021 and mostly related to the UK
Coronavirus Job Retention Scheme in 2020. The 2021 net amount of
GBP989,000 includes GBP1,900,000 that was received in the year in
relation to the UK Coronavirus Job Retention Scheme, and repaid in
the same period.
The average number of persons employed by the Group during the
year was:
2021 2020
Number Number
----------------------------- ------- -------
UK 2,742 3,001
Overseas 1,695 1,796
Average number of employees 4,437 4,797
----------------------------- ------- -------
Key management personnel have been assessed to be the Directors
of the Company.
The total remuneration of the Directors was:
2021 2020
GBP'000 GBP'000
------------------------------------- -------- --------
Short-term employee benefits 2,697 1,980
Post-employment benefits 111 136
Share-based payment charge 173 173
Total remuneration of the directors 2,981 2,289
-------------------------------------- -------- --------
Full details of Directors' remuneration are given in the
Directors' remuneration report
4. COST OF SALES
Included in cost of sales are the following amounts:
2021 2020
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Production costs 197,805 184,326
----------------------------------------------------------- -------- --------
Research and development expenditure 58,618 66,614
Other engineering expenditure 18,019 15,755
----------------------------------------------------------- -------- --------
Gross engineering expenditure 76,637 82,369
----------------------------------------------------------- -------- --------
Development expenditure capitalised (net of amortisation) (825) (544)
Development expenditure impaired (see note 12) 1,092 9,881
Research and development tax credit (4,857) (4,399)
----------------------------------------------------------- -------- --------
Total engineering costs 72,047 87,307
----------------------------------------------------------- -------- --------
Total cost of sales 269,852 271,633
----------------------------------------------------------- -------- --------
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.
Development expenditure impaired in 2020 excluded amounts
relating to Restructuring costs in that period.
5. FINANCIAL INCOME AND EXPENSES
2021 2020
Financial income GBP'000 GBP'000
----------------------------------------------- -------- --------
Fair value gains from one-month forward 2,781 -
currency contracts (note 24)
Bank interest receivable 625 913
----------------------------------------------- -------- --------
Total financial income 3,406 913
----------------------------------------------- -------- --------
Financial expenses
Net interest on pension schemes' liabilities
(note 22) 876 861
Currency losses 2,660 2,433
Fair value losses from one-month forward
currency contracts (note 24) - 154
Lease interest 335 765
Interest payable on borrowings 69 78
Other interest payable 51 549
----------------------------------------------- -------- --------
Total financial expenses 3,991 4,840
----------------------------------------------- -------- --------
Currency losses relate to revaluations of foreign
currency-denominated balances using latest reporting currency
exchange rates. The losses recognised in 2021 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 24 for further
details
6. PROFIT BEFORE TAX
Included in the profit before tax are the following costs:
Notes 2021 2020
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Depreciation and impairment of property, plant
and equipment and right-of-use assets (a) 28,780 33,168
Loss on sale of property, plant and equipment (a) 31 22
Amortisation and impairment of intangible assets (a) 11,316 36,716
Impairment of investment in associates and joint
ventures (b) 1,674 257
Impairment of long-term loans to associates
and joint ventures (b) 2,633 1,297
Auditor:
Audit of these financial statements (b) 403 293
Audit of subsidiary undertakings pursuant to
legislation (b) 458 398
Other assurance (b) 12 12
All other non-audit fees (b) - 3
-------------------------------------------------- --------- -------- --------
These costs can be found under the following headings in the
Consolidated income statement: (a) within cost of sales,
distribution costs and administrative expenses and (b) within
administrative expenses.
7. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated on earnings
of GBP111,459,000 (2020: GBP288,000) and on 72,778,904 shares
(2020: 72,778,904 shares), being the number of shares in issue. The
number of shares excludes 9,639 shares held by the EBT, which were
purchased on 10 December 2018.
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 28,
earnings of GBP111,459,000 (2020: GBP288,000) are adjusted by
post-tax amounts for Fair value (gains)/losses on financial
instruments not eligible for hedge accounting (reported in
Revenue), Fair value (gains)/losses on financial instruments not
eligible for hedge accounting (reported in Gains/(losses) from the
fair value of financial instruments) and costs relating to the
formal sales process, amounting to GBP825,000 gain, GBP17,802,000
gain and GBP3,222,000 loss respectively.
8. INCOME TAX EXPENSE
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Current tax:
UK corporation tax on profits for the year 7,535 -
UK corporation tax - prior year adjustments (4,376) 333
Overseas tax on profits for the year 13,237 9,236
Overseas tax - prior year adjustments 27 (89)
---------------------------------------------------- -------- --------
Total current tax 16,423 9,480
---------------------------------------------------- -------- --------
Deferred tax:
---------------------------------------------------- -------- --------
Origination and reversal of temporary differences 7,692 (9,349)
Prior year adjustments 4,438 (185)
Derecognition of previously recognised tax
losses and excess interest - 2,953
Recognition of previously unrecognised tax
losses and excess interest (3,909) (1,127)
Effect on deferred tax for changes in tax
rates 3,336 1,148
---------------------------------------------------- -------- --------
11,557 (6,560)
Tax charge on profit 27,980 2,920
---------------------------------------------------- -------- --------
Prior year adjustments mainly relate to carry back of losses,
with a current tax credit offset by a deferred tax charge.
The tax for the year is higher (2020: higher) than the UK
standard rate of corporation tax of 19% (2020: 19%).
The differences are explained as follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Profit before tax 139,439 3,208
--------------------------------------------------------- -------- --------
Tax at 19% (2020: 19%) 26,493 610
Effects of:
Different tax rates applicable in overseas subsidiaries (150) (312)
Expenses not deductible for tax purposes 1,817 576
Companies with unrelieved tax losses 100 189
Share of profits of associates and joint ventures (320) (85)
Items with no tax effect (386) (596)
Prior year adjustments 89 58
Effect on deferred tax for changes in tax rates 3,336 1,148
Recognition of previously unrecognised tax losses
and excess interest (3,909) (1,127)
Derecognition of previously recognised tax losses
and excess interest - 2,953
Use of unrecognised losses (162) (399)
Irrecoverable withholding tax 1,052 -
Other differences 20 (95)
Tax charge on profit 27,980 2,920
--------------------------------------------------------- -------- --------
Effective tax rate 20.1% 91.0%
--------------------------------------------------------- -------- --------
The Group's future effective tax rate (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. In the Spring Budget 2021, the UK Government announced
that from 1 April 2023 the UK corporation tax rate will increase to
25%, rather than remaining at 19%, which has resulted in a deferred
tax charge of GBP3,336,000. This has been more than offset by the
recognition of deferred tax assets totalling GBP3,909,000, which
has mostly arisen from increased confidence over the recoverability
of a portion of previously unrecognised losses and excess interest
against future taxable profits in our US business. The increased
confidence arises from a recovery in trading conditions and cost
reductions following restructuring activities in 2020 (see note
29).
9. 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 GBP10,890,000 asset (2020: GBP39,142,000 asset)
is presented as a GBP21,292,000 deferred tax asset (2020:
GBP39,641,000 asset) and a GBP10,402,000 deferred tax liability
(2020: GBP499,000 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.
It is likely that the majority of unremitted earnings of
overseas subsidiaries would qualify for the UK dividend exemption.
However, 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.
Balances at the end of the year were:
2021 2020
------------------------- --------------------------------- ---------------------------------
Assets Liabilities Net Assets Liabilities Net
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- ------------ --------- -------- ------------ ---------
Property, plant and
equipment 425 (17,546) (17,121) 306 (14,234) (13,928)
Intangible assets - (2,609) (2,609) - (1,264) (1,264)
Intragroup trading
(inventories) 14,539 - 14,539 14,249 (289) 13,960
Intragroup trading
(fixed assets) 1,252 - 1,252 2,071 - 2,071
Defined benefit pension
schemes 4,548 (201) 4,347 11,951 (55) 11,896
Derivatives - (2,930) (2,930) 6,344 - 6,344
Tax losses 8,365 - 8,365 14,077 - 14,077
Other 5,083 (36) 5,047 6,023 (37) 5,986
Balance at the end
of the year 34,212 (23,322) 10,890 55,021 (15,879) 39,142
------------------------- -------- ------------ --------- -------- ------------ ---------
Other deferred tax assets include timing differences relating to
inventory provisions totalling GBP2,001,000 (2020: GBP1,876,000),
other provisions (including bad debt provisions) of GBP683,000
(2020: GBP1,628,000), employee benefits relating to Renishaw KK of
GBP668,000 (2020: GBP731,000), and uniform capitalisation relating
to Renishaw, Inc. of GBP117,000 (2020: GBP729,000), with the
remaining balance relating to a number of other temporary
differences.
The movements in the deferred tax balance during the year
were:
2021 2020
GBP'000 GBP'000
---------------------------------------------- ---- --------- --------
Balance at the beginning of the year 39,142 29,316
Reallocation from current tax - 163
Movements in the Consolidated income
statement (11,557) 6,560
---------------------------------------------------- --------- --------
Movement in relation to the cash flow
hedging reserve (9,790) (1,978)
Movement in relation to the currency
translation reserve 902 (403)
Movement in relation to the defined
benefit pension schemes (7,705) 5,484
---------------------------------------------------- --------- --------
Total movement in the Consolidated statement
of comprehensive income and expense (16,593) 3,103
Currency translation (102) -
Balance at the end of the year 10,890 39,142
---------------------------------------------------- --------- --------
The deferred tax movement in the Consolidated income statement
is analysed as:
2021 2020
GBP'000 GBP'000
----------------------------------- --------- --------
Property, plant and equipment (3,193) (847)
Intangible assets (1,345) 1,230
Intragroup trading (inventories) 579 (2,725)
Intragroup trading (fixed assets) (819) (238)
Defined benefit pension schemes 156 (2,114)
Derivatives (2,185) (494)
Tax losses (5,712) 10,822
Other 926 926
------------------------------------ --------- --------
Total movement for the year (11,557) 6,560
------------------------------------ --------- --------
The Company has partially used the tax losses incurred in 2020
by way of loss carry back and offset against 2021 profits, reducing
the deferred tax asset in respect of losses from GBP11,225,000 at
30 June 2020 to GBP3,299,000 at 30 June 2021. It is considered
likely that the Company will generate sufficient future taxable
profits to recognise the remaining deferred tax asset in full, as
losses made in 2020 included a number of costs such as
restructuring costs per note 29, which are unlikely to reoccur in
future years, while the Company reported a profit before tax of
GBP54,771,000 in 2021 (excluding intragroup dividends received).
Further deferred tax assets of GBP5,066,000 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 GBP4,459,000 (2020: GBP20,930,000), due
to uncertainty over their offset against future taxable profits and
therefore their recoverability. These losses are held by Group
companies in Switzerland, Brazil and Australia. Losses in
Switzerland (46%) expire by 2023, while there are no time
limitations to the remainder.
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 GBP300,000, while an increase of
5% would result in additions to deferred tax assets in respect of
tax losses not recognised of less than GBP100,000.
10. PROPERTY, PLANT AND EQUIPMENT
Freehold Assets
in the
land and Plant Motor course
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
------------------------- ---------- ---------- --------- ------------- ---------
At 30 June 2021, properties with a net book value of
GBP81,679,000 (2020: GBP83,200,000) were subject to a fixed charge
to secure the UK defined benefit pension scheme liabilities.
Additions to assets in the course of construction comprise
GBP817,000 (2020: GBP12,836,000) for land and buildings and
GBP2,789,000 (2020: GBP5,886,000) for plant and equipment.
Freehold Assets
in the
land and Plant Motor course
and of
buildings equipment vehicles construction Total
Year ended 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 July 2019 197,474 245,027 9,555 8,758 460,814
Additions 11,808 7,818 309 18,722 38,657
Transfers 15,948 5,169 - (21,117) -
Disposals (297) (10,061) (1,305) - (11,663)
Currency adjustment 623 33 (33) - 623
At 30 June 2020 225,556 247,986 8,526 6,363 488,431
------------------------- ---------- ---------- --------- ------------- ---------
Depreciation
At 1 July 2019 31,893 158,567 6,877 - 197,337
Charge for the year 3,985 20,796 1,061 - 25,842
Impairment - 2,590 - - 2,590
Disposals (386) (6,389) (1,235) - (8,010)
Currency adjustment 350 300 (27) - 623
At 30 June 2020 35,842 175,864 6,676 - 218,382
------------------------- ---------- ---------- --------- ------------- ---------
Net book value
At 30 June 2020 189,714 72,122 1,850 6,363 270,049
------------------------- ---------- ---------- --------- ------------- ---------
At 30 June 2019 165,581 86,460 2,678 8,758 263,477
------------------------- ---------- ---------- --------- ------------- ---------
11. RIGHT-OF-USE ASSETS
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
------------------------- ---------- ----------- --------------- --------
12. INTANGIBLE ASSET
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
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) - (102) (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
Impairment - - 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
--------------------- --------- ----------- ------------ ------------- --------
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
2020
Cost
At 1 July 2019 20,227 13,823 150,042 20,827 204,919
Additions - 1,986 17,405 1,352 20,743
Disposals - - - (140) (140)
Currency adjustment 291 20 - 24 335
At 30 June 2020 20,518 15,829 167,447 22,063 225,857
--------------------- ----------- ----------------- ------------- ------------------ --------
Amortisation
At 1 July 2019 8,220 11,260 108,954 17,429 145,863
Charge for the year - 267 16,861 1,299 18,427
Impairments 808 1,600 15,881 - 18,289
Disposals - - - (87) (87)
Currency adjustment - (22) - 23 1
At 30 June 2020 9,028 13,105 141,696 18,664 182,493
--------------------- ----------- ----------------- ------------- ------------------ --------
Net book value
At 30 June 2020 11,490 2,724 25,751 3,399 43,364
--------------------- ----------- ----------------- ------------- ------------------ --------
At 30 June 2019 12,007 2,563 41,088 3,398 59,056
--------------------- ----------- ----------------- ------------- ------------------ --------
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 acquired goodwill on consolidation is:
2021 2020
GBP'000 GBP'000
----------------------------------- -------- --------
itp GmbH 2,959 3,148
Renishaw Mayfield S.A. 1,873 2,039
Renishaw Fixturing Solutions, LLC 5,018 5,585
Other smaller acquisitions 655 718
Total acquired goodwill 10,505 11,490
------------------------------------ -------- --------
The recoverable amounts of acquired goodwill are based on
value-in-use calculations. These calculations use cash flow
projections based on either the financial business plans approved
by management for the next five financial years, or estimated
growth rates over the five years, which are set out below. 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 discount rates have been used in discounting the
projected cash flows:
2021 2020
Business acquired CGU Discount Discount
rate rate
-------------------- ---------------------------- --------- ---------
itp GmbH itp GmbH entity ('ITP') 10.6% 8%
Renishaw Fixturing Renishaw fixturing product
Solutions, LLC line ('RFS') 10.2% 8%
Renishaw Mayfield Renishaw Mayfield S.A.
S.A. entity ('Mayfield') 21.4% 15%
-------------------- ---------------------------- --------- ---------
The Group post-tax weighted average cost of capital, calculated
at 30 June 2021, is 8% (2020: 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 2020.
An increase of 5% in the discount rates would result in an
impairment of around GBP2m in the RFS CGU. For there to be an
impairment in the ITP or Mayfield CGUs the discount rate would need
to increase to at least 42% and 98% respectively. Management deems
the likelihood of these increases to be unlikely.
The following bases have been used in determining cash flow
projections:
2021 2020
CGU Basis of forecast Basis of forecast
------------------------------ ------------------- -------------------
itp GmbH entity five-year business 5% growth rate
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 5-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
80% for ITP, 10% for RFS and 83% for Mayfield. Management deems the
likelihood of these reductions to be unlikely.
Internally generated development costs
The key assumption in determining the value-in-use for
internally generated development costs is the forecast unit sales
over five years, 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 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 8% (2020: 8%).
Impairments of internally generated development costs in the
year totalled GBP1,092,000 (2020: GBP15,881,000), resulting from an
increase in the forecast of ongoing support costs of one project.
This was accounted for in Cost of sales in the Consolidated income
statement and relates to the Manufacturing technologies
segment.
For the largest projects, comprising over 95% of the net book
value at 30 June 2021, a 10% reduction to forecast unit sales, or
an increase in the discount rate by 5%, would result in a further
impairment of less than GBP500,000.
13. INVESTMENT IN ASSOCIATES AND JOINT VENTURES
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
---------------------------------------------------------
2021 2020
-------------------------------------- -----------------
% %
-------------------------------------- ----------------- ---------- ----------
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 50.0
HiETA Technologies Limited ('HiETA')
(31 December) - associate England & Wales 33.3 33.3
-------------------------------------- ----------------- ---------- ----------
On 28 June 2021 Renishaw acquired an additional 20% shareholding
in MSP, a pre-existing joint venture company, with cash
consideration of GBP749,000. Following the transaction, the Group
owns 70% of the ordinary share capital of MSP, and continues to
equity account for MSP as a joint venture as the 'control'
requirements of IFRS 10 are not satisfied. This is primarily
because under the terms of the pre-existing and unchanged
shareholders agreement, dated 8 September 2005, 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:
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Balance at the beginning of the year 16,604 13,095
Additions 749 4,299
Dividends received - (512)
Share of profits of associates and joint ventures 1,683 841
Impairment (1,674) (1,306)
Exchange differences (728) 187
Balance at the end of the year 16,634 16,604
--------------------------------------------------- -------- --------
A revision to HiETA's five-year business plan at 30 June 2021,
in light of the ongoing effects of the COVID-19 pandemic on certain
industries, has resulted in an impairment to Renishaw's investment
of GBP1,674,000. This has also resulted in additional and full
impairment of a long-term loan of GBP2,633,000 and a finance lease
impairment of GBP397,000. These have been accounted for in
Administrative expenses in the Consolidated income statement. Other
Short-term loans to associates and joint ventures of GBP598,000
relate to RLS.
Long-term and short-term loans to associates and joint ventures
are tested for impairment using discounted cash flow projections at
each reporting period, according to five-year business plans
approved by management, or where there are indicators of
impairment.
Summarised aggregated financial information for associates and
joint ventures:
RLS MSP HiETA
2021 2020 2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------- -------- -------- -------- -------- --------
Assets 31,535 28,896 4,211 3,965 3,459 5,171
Liabilities (3,719) (4,430) (1,056) (623) (7,780) (7,494)
------------------------------------------- -------- -------- -------- -------- -------- --------
Net assets/(liabilities) 27,816 24,466 3,155 3,342 (4,321) (2,323)
------------------------------------------- -------- -------- -------- -------- -------- --------
Group's share of net assets/(liabilities) 13,908 12,233 2,209 1,671 (1,426) (767)
------------------------------------------- -------- -------- -------- -------- -------- --------
Revenue 25,145 21,447 2,239 2,452 1,973 1,926
Profit/(loss) for the
year 4,800 1,974 (182) 1,094 (1,881) (3,685)
------------------------------------------- -------- -------- -------- -------- -------- --------
Group's share of profit/(loss)
for the year 2,400 987 (91) 547 (626) (1,088)
------------------------------------------- -------- -------- -------- -------- -------- --------
14. LEASES (as lessor)
The Group acts as lessor for Renishaw manufactured plant and
equipment on both an operating and finance lease basis.
Where the Group retains the risks and rewards of ownership of
leased assets, it continues to recognise the leased asset in
Property, plant and equipment, while the lease payments made during
the term of the operating lease are recognised in Revenue (2021:
GBP582,000 and 2020: GBP1,183,000). Operating leases are on one to
four year terms. The total of future minimum lease payments
receivable under non-cancellable operating leases were:
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Receivable in less than one year 361 742
Receivable between one and five years 306 152
Total future minimum lease payments receivable 667 894
------------------------------------------------ -------- --------
Where the Group transfers the risks and rewards of ownership of
leased assets to a third party, the Group recognises a receivable
in the amount of the net investment in the lease in Finance lease
receivables. 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.
The total future lease payments are split between the principal
and interest amounts below:
2021 2020
------------ ----------- --------------- ------------ ----------- ---------------
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 1,919 156 1,763 2,113 131 1,982
Receivable between one and
two years 2,641 215 2,426 2,226 138 2,088
Receivable between two and
three years 2,129 173 1,956 1,758 109 1,649
Receivable between three
and four years 1,365 111 1,254 1,053 65 988
Receivable between four
and five years 696 91 605 81 5 76
---------------------------- ------------ ----------- --------------- ------------ ----------- ---------------
Total future minimum lease
payments receivable 8,750 746 8,004 7,231 448 6,783
---------------------------- ------------ ----------- --------------- ------------ ----------- ---------------
15. CASH AND CASH EQUIVALENTS
Bank deposits
Bank deposits at the end of the year amounted to GBP120,000,000
(2020: GBP10,000,000), of which GBP20,000,000 matures on 29 July
2021, GBP20,000,000 matures on 15 September 2021, GBP40,000,000
matures on 16 September 2021, and GBP40,000,000 is on a 90-day
notice account.
Cash and cash equivalents
An analysis of cash and cash equivalents at the end of the year
was:
2021 2020
GBP'000 GBP'000
-------------------------------- -------- --------
Bank balances and cash in hand 93,514 108,609
Short-term deposits 1,494 1,777
Balance at the end of the year 95,008 110,386
--------------------------------- -------- --------
Amounts held on bank deposit, where the original term exceeds
three months, and the UK defined benefit pension scheme cash escrow
account are shown separately within current assets.
16. INVENTORIES
An analysis of inventories at the end of the year was:
2021 2020
GBP'000 GBP'000
-------------------------------- -------- --------
Raw materials 38,973 37,717
Work in progress 21,750 18,737
Finished goods 52,840 49,043
Balance at the end of the year 113,563 105,497
--------------------------------- -------- --------
During the year, the amount of inventories recognised as an
expense in the Consolidated income statement was GBP177,963,000
(2020: GBP169,769,000) and the amount of write-down of inventories
recognised as an expense in the Consolidated income statement was
GBP269,000 (2020: GBP7,473,000). At the end of the year, the gross
cost of inventories which had provisions held against them totalled
GBP17,389,000 (2020: GBP21,133,000).
17. PROVISIONS
Warranty provision movements during the year were:
2021 2020
GBP'000 GBP'000
-------------------------------------- -------- --------
Balance at the beginning of the year 5,591 2,846
Created during the year 2,500 5,308
Utilised in the year (1,832) (2,563)
-------------------------------------- -------- --------
668 2,745
Balance at the end of the year 6,259 5,591
-------------------------------------- -------- --------
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 GBP4,200,000 (2020: GBP3,400,000)
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 the
replacement product is now expected to be available in early
2022.
18. CONTRACT LIABILITIES
Movements during the year were: 2021 2020
GBP'000 GBP'000
-------------------------------------- -------- --------
Balance at the beginning of the year 5,976 5,631
Released to revenue (3,893) (3,802)
Arising in year 3,864 4,100
Currency translation 173 47
-------------------------------------- -------- --------
Balance at the end of the year 6,120 5,976
-------------------------------------- -------- --------
The aggregate amount of the transaction price allocated to
performance obligations that are unsatisfied at the end of the year
is GBP6,120,000 (2020: GBP7,416,000). Of this, GBP1,682,000 (2020:
GBP1,489,000) is not expected to be recognised in 2022.
19. OTHER PAYABLES
Balances at the end of the year were:
2021 2020
GBP'000 GBP'000
----------------------------------- -------- --------
Payroll taxes and social security 7,924 5,833
Performance bonuses 13,208 -
Other creditors and accruals 30,584 28,539
Total other payables 51,716 34,372
------------------------------------ -------- --------
Other creditors and accruals includes GBP2,114,000 (2020:
GBPnil) relating to outstanding third-party fees relating to the
2021 formal sales process ('FSP'), GBP7,287,000 (2020:
GBP3,087,000) of receivables in payable positions where there is no
right of offset, GBP7,200,000 (2020: GBP7,003,000) of holiday pay
and retirement accruals, and a number of other smaller
accruals.
20. LEASES (as lessee)
The Group acts as lessee for land and buildings, plant and
equipment, and vehicles and recognises leases as a liability in the
Consolidated balance sheet, with a corresponding amount recognised
as a right-of-use asset.
Lease liabilities are analysed as below:
2021 GBP'000
Leasehold Plant and Motor
property equipment vehicles Total
------------------------------------- ------------ ------------ ----------- --------
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
------------------------------------- ------------ ------------ ----------- --------
2020 GBP'000
Leasehold Plant and Motor
property equipment vehicles Total
------------------------------------- ------------ ------------ ----------- --------
Due in less than one year 3,011 - 1,325 4,336
Due between one and five years 4,754 - 1,130 5,884
Due in more than five years 7,182 - - 7,182
Total future minimum lease payments
payable 14,947 - 2,455 17,402
------------------------------------- ------------ ------------ ----------- --------
Effect of discounting (4,189) - (47) (4,236)
------------------------------------- ------------ ------------ ----------- --------
Lease liability 10,758 - 2,408 13,166
------------------------------------- ------------ ------------ ----------- --------
2021 2020
GBP'000 GBP'000
--------------------------------------- -------- --------
Depreciation expense of right-of-use
assets 4,463 4,736
Interest expense on lease liabilities 335 766
Expenses relating to short-term and
low-value leases 139 80
Total recognised in the Consolidated
income statement 4,937 5,582
---------------------------------------- -------- --------
Total cash outflows for leases 5,289 4,976
---------------------------------------- -------- --------
21. BORROWINGS
Third-party borrowings at 30 June 2021 consist of a five year
loan entered into on 31 May 2019 by Renishaw KK to purchase a new
property, 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. Additionally, a Renishaw (Korea) Limited property loan,
which had a balance of GBP1,908,000 at 30 June 2020, was increased
by GBP636,000 and fully repaid during the year.
Borrowings are held at amortised cost. 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 24.
Movements during the year were:
2021 2020
GBP'000 GBP'000
--------------------------------- -------- --------
Balance at the beginning of the
year 11,543 10,399
Additions 636 1,894
Interest 69 78
Repayments (3,477) (1,136)
Currency adjustment (1,322) 308
Balance at the end of the year 7,449 11,543
---------------------------------- -------- --------
22. EMPLOYEE BENEFITS
The Group operates defined benefit pension schemes for several
Group companies. As noted in the accounting policies, actuarial
valuations of overseas pension schemes have not been obtained,
except for the schemes relating to Renishaw Ireland (DAC) and
Renishaw, Inc. ('the Irish scheme' and 'the US scheme'
respectively).
The largest scheme, which covers qualifying UK-based employees,
is also of the defined benefit type. This scheme, together with the
Irish scheme and the US scheme, are closed to new members and have
ceased any future accrual for existing members. These employees are
now covered by defined contribution schemes.
The total pension cost of the Group for the year was
GBP19,759,000 (2020: GBP21,103,000), of which GBP111,000 (2020:
GBP136,000) related to Directors and GBP5,256,000 (2020:
GBP5,253,000) related to overseas schemes.
The latest full actuarial valuation of the UK defined benefit
pension scheme was carried out as at 30 September 2018 and updated
to 30 June 2021 by a qualified independent actuary. The mortality
assumption used for 2021 is the S2PxA base tables and CMI 2020
model, with long-term improvements of 1% per annum. Adjustments
have been made to both the core base tables and CMI 2020 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 2021 30 June 2020
------------------------------- --------------------------------- --------------------------------
UK scheme Ireland US scheme UK scheme Ireland US scheme
scheme scheme
------------------------------- ----------- -------- ---------- ---------- -------- ----------
Rate of increase in
pension payments 3.10% 1.70% - 2.80% 1.30% -
Lump sum - assumed settlement
rate - - 0.75% - - 0.80%
Discount rate 1.85% 1.10% 2.85% 1.50% 1.10% 2.80%
Inflation rate (RPI) 3.20% 1.70% - 2.80% 1.30% -
Inflation rate (CPI) 2.20% - - 2.20% - -
pre-2030
3.10%
post-2030
------------------------------- ----------- -------- ---------- ---------- -------- ----------
Retirement age 64 65 65 64 65 65
------------------------------- ----------- -------- ---------- ---------- -------- ----------
The life expectancies implied by the mortality assumption at age
65 and 45 are:
2021 2020
years years
-------------------------- ------ ------
Male currently aged 65 22.0 21.4
Female currently aged 65 23.9 23.4
Male currently aged 45 22.7 22.4
Female currently aged 45 24.9 24.6
--------------------------- ------ ------
The weighted average duration of the defined benefit obligation
is around 23 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
2021 GBP'000 assets 2020 GBP'000 assets
-------------------------------- -------------- ----------- -------------- -----------
Market value of assets:
Equities 140,717 61 110,027 58
Multi-asset funds 63,017 27 54,822 29
Credit and fixed income
funds 18,833 8 14,339 8
Fixed interest gilts 1,457 1 1,488 1
Index linked gilts 1,843 1 1,929 1
Property 802 0 - 0
Cash and other 4,686 2 6,014 3
-------------------------------- -------------- ----------- -------------- -----------
231,355 100 188,619 100
Actuarial value of liabilities (255,053) - (253,514) -
-------------------------------- -------------- ----------- -------------- -----------
Deficit in the schemes (23,698) - (64,895) -
-------------------------------- -------------- ----------- -------------- -----------
Deferred tax thereon 4,347 - 11,896 -
-------------------------------- -------------- ----------- -------------- -----------
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 24.
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.
No scheme assets are directly invested in the Group's own
equity.
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 intend to start
gradually de-risking the investments where (and when)
appropriate.
The overall target investment strategy for the UK scheme for the
period to 30 June 2021 was to hold 61% of investment assets in
equities, 34% in diversified growth funds and 5% in fixed income.
Contributions over the year were predominantly invested in buy and
maintain credit, bringing the current actual allocation up to 6% of
assets. Remaining contributions have been held in a cash fund,
pending investment into a multi-asset credit mandate.
The movements in the schemes' assets and liabilities were:
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)
------------------------------------------ -------- ------------ ---------
Assets Liabilities Total
Year ended 30 June 2020 GBP'000 GBP'000 GBP'000
--------------------------------- -------- ------------ ---------
Balance at the beginning of the
year 181,588 (233,458) (51,870)
Contributions paid 11,814 - 11,814
Interest on pension schemes 4,371 (5,232) (861)
Remeasurement loss under IAS 19 (2,237) (21,741) (23,978)
Benefits paid (6,917) 6,917 -
--------------------------------- -------- ------------ ---------
Balance at the end of the year 188,619 (253,514) (64,895)
--------------------------------- -------- ------------ ---------
In November 2020 the High Court of England and Wales issued a
supplementary ruling in the Lloyds Bank GMP equalisation case with
respect to members that have transferred out of their scheme prior
to the ruling. The result of this means that Trustees are obliged
to make transfer payments that reflect equalised benefits and are
required to make top up payments where this was not the case in the
past, and a defined benefit pension scheme that received a transfer
is concurrently obliged to provide equalised benefits in respect of
the transfer payments. We determined an estimated cost of the
impact of this ruling for the UK fund of GBP78,000, which has been
recognised through Administrative expenses in the Consolidated
income statement as a past service cost.
The analysis of the amount recognised in the Consolidated
statement of comprehensive income and expense was:
2021 2020
GBP'000 GBP'000
-------------------------------------------------------- --------- ---------
Actuarial gain/(loss) arising from:
- Changes in demographic assumptions (2,669) (682)
- Changes in financial assumptions 4,643 (22,402)
- Experience adjustment 2,631 1,648
- Adjustment related to the application of revaluation 14,300 -
and late retirement factors
Return on plan assets excluding interest income 36,823 (2,542)
Adjustment for the asset ceiling (3,280) -
Adjustment to liabilities for IFRIC 14 (19,163) -
Total amount recognised in the Consolidated statement
of comprehensive income and expense 33,285 (23,978)
-------------------------------------------------------- --------- ---------
The cumulative amount of actuarial gains and losses recognised
in the Consolidated statement of comprehensive income and expense
was a loss of GBP91,497,000 (2020: loss of GBP124,782,000).
The total deficit of the Group's defined benefit pension
schemes, on an IAS 19 basis (excluding the asset ceiling and IFRIC
14 adjustments), has decreased from GBP64,895,000 at 30 June 2020
to GBP1,254,000 at 30 June 2021, primarily reflecting the net
impact of:
- an increase in the discount rate of the UK scheme;
- an increase in RPI for the UK and Irish schemes;
- an increase in CPI for the UK scheme;
- strong performance of the investment assets of the UK, Irish
and US schemes; and
- an adjustment relating to the application of revaluation and
late retirement factors, which is discussed further below.
For the UK scheme, the latest actuarial report prepared in
September 2018 shows a deficit of GBP70,700,000, 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 deficit being lower 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 -GBP21.2m/+GBP24.4m
0.5%
UK - future inflation Increase/decrease by +GBP20.3m/-GBP17.1m
0.5%
UK - mortality Increased/decreased +GBP9.2m/-GBP8.9m
life by one year
---------------------- --------------------- ----------------------
In October 2020, the Trustees of 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. Differing legal interpretations of the
Trust Deed and Rules were subsequently concluded by legal firms
instructed by the Trustees and the Company, mostly relating to the
period over which revaluation and late retirement factors are
applied, with significant differences between the firms in the
financial impact noted. Consequently, in April 2021, the Trustees
and the Company jointly instructed Queen's Counsel to opine on a
legal interpretation of the Trust Deed and Rules that both parties
would accept. This resulted in another interpretation of the Trust
Deed and Rules which is now the accepted legal position, with a
GBP14,300,000 reduction in liabilities calculated on this basis.
This change in liability estimate in the year relates to benefits
for some members payable in future years, and has
been accounted for within the 'Remeasurement of defined benefit
pension scheme liabilities' line item in the Consolidated statement
of comprehensive income and expense.
A deficit funding plan for the UK defined benefit pension scheme
was agreed with The Pensions Regulator in 2018, which superseded
all previous arrangements. The Company agreed to pay GBP8,700,000
per annum into the scheme for five years with effect from 1 October
2018.
The present value of the expected payments under the plan at 30
June 2021 totalled GBP19,163,000, which compares to the IAS 19
pension scheme surplus of GBP3,280,000 at 30 June 2021. As such, an
adjustment of GBP3,280,000 has been recognised in respect of the
asset ceiling restriction, on the basis that the surplus is not
deemed to be recoverable, and GBP19,163,000 has been recognised in
accordance with IFRIC 14, to present a net liability position of
GBP19,163,000. At 30 June 2020, the IAS 19 deficit was higher than
the present value of expected payments, such that no adjustment was
recognised.
A number of UK properties owned by the Company with a book value
of GBP81,679,000 at 30 June 2021 are subject to registered fixed
charges and continue to provide security to the scheme under the
deficit funding plan. The Company also has an escrow bank account
with a balance of GBP10,578,000 at the end of the year (2020:
GBP10,568,000) which is subject to a registered floating charge.
There is no scheduled release of funds back to the Company under
the deficit funding plan.
In the event a subsequent actuarial valuation results in the
combined value of the properties and the escrow bank account
exceeding 120% of the actuarial deficit, some of the contingent
assets will be released back to the Company. Any remaining
contingent assets will be released from charge when the deficit no
longer exists.
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.
23. SHARE-BASED PAYMENTS
In accordance with the remuneration policy approved by
shareholders at the 2017 AGM, the deferred annual equity incentive
plan ('the Plan') was implemented in relation to the financial year
ending 30 June 2018. The 20 July 2018 Remuneration Committee
meeting recommended plan rules that were adopted by a resolution of
the Board on 24 July 2018. The Committee also approved the grant of
awards under the Plan to the participating Executive Directors.
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 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.
An employee benefit trust (EBT) exists to purchase and hold such
shares, 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.
The total cost recognised in the 2021 Consolidated income
statement in respect of the Plan was GBP173,000 (2020:
GBP173,000).
In accordance with the Plan, amounts equivalent to GBP734,317
(2020: GBPnil) have been awarded in respect of 2021.
24. 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.
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
2021 2020 2021 2020 2021 2020
Currency GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ----------- --------- --------- ----------- ----------
Pound Sterling 16,915 9,293 23,752 16,974 174,905 75,052
US Dollar 39,603 33,358 815 946 9,511 7,096
Euro 23,476 15,607 1,144 1,663 8,118 6,324
Japanese Yen 16,568 20,416 173 337 3,786 4,553
Other 26,103 33,186 4,137 3,276 18,688 27,361
---------------- ----------- ----------- --------- --------- ----------- ----------
122,665 111,860 30,021 23,196 215,008 120,386
---------------- ----------- ----------- --------- --------- ----------- ----------
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
GBP20,447,000 of US Dollar-denominated trade receivables being held
in Renishaw (Hong Kong) Limited and GBP1,761,000 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.
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.
The ageing of trade receivables past due, but not impaired, at
the end of the year was:
2021 2020
GBP'000 GBP'000
-------------------------------- -------- --------
Past due zero to one month 10,537 11,703
Past due one to two months 2,704 4,510
Past due more than two months 6,283 15,495
--------------------------------- -------- --------
Balance at the end of the year 19,524 31,708
--------------------------------- -------- --------
Movements in the provision for impairment of trade receivables
during the year were:
2021 2020
GBP'000 GBP'000
--------------------------------- -------- --------
Balance at the beginning of the
year 5,965 3,081
Changes in amounts provided (1,994) 3,254
Amounts used (145) (370)
---------------------------------- -------- --------
Balance at the end of the year 3,826 5,965
---------------------------------- -------- --------
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.
This includes management's latest assessment of the impact of
COVID-19 and the recent improvements in global macroeconomic
conditions, which has resulted in a decrease in the expected credit
loss rate, and the expected credit loss allowance, compared to the
prior year
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 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
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Risk Risk Risk Risk Risk 2020
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
2020
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Gross trade receivables 714 39,931 64,908 5,187 302 111,042
Expected credit loss
rate 1.24% 1.35% 1.42% 1.58% 1.69% 1.40%
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Expected credit loss
allowance 9 541 922 82 5 1,559
Specific loss allowance - - 3,730 676 - 4,406
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Total expected credit
loss 9 541 4,652 758 5 5,965
------------------------- ---------- ---------- ---------- ---------- ---------- --------
Net trade receivables 705 39,390 60,256 4,429 297 105,077
------------------------- ---------- ---------- ---------- ---------- ---------- --------
The Group has no material contract assets, and finance lease
receivables are subject to the same approach as noted above for
trade receivables.
The maximum exposure to credit risk is GBP377,333,000 (2020:
GBP259,200,000), comprising the Group's trade, finance and other
receivables, cash and cash equivalents and derivative assets.
The maturities of non-current other receivables, being long-term
loans to associates and joint ventures and derivatives, at the year
end were
2021 2020
GBP'000 GBP'000
-------------------------------------- -------- --------
Receivable between one and two years 12,484 905
Receivable between two and five
years - 3,155
--------------------------------------- -------- --------
12,484 4,060
-------------------------------------- -------- --------
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 2021 totalling
GBP215,008,000, an increase of GBP94,622,000 from 30 June 2020, 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 GBP1,200,000.
The contractual maturities of financial liabilities at the year
end were:
Contractual cash flows
Carrying Effect Gross Up to 1 1-2 years 2-5 years
amount of discounting maturities 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 7,448 145 7,593 992 6,601 -
Forward exchange
contracts 5,949 - 5,949 5,594 355 -
-------------------- --------- ---------------- ------------ -------- ---------- ----------
89,828 145 89,973 83,017 6,956 -
-------------------- --------- ---------------- ------------ -------- ---------- ----------
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
2020
-------------------- --------- ------------ ----------- -------- ---------- ----------
Trade payables 16,998 - 16,998 16,998 - -
Other payables 34,372 - 34,372 34,372 - -
Borrowings 11,543 226 11,769 1,149 3,034 7,586
Forward exchange
contracts 63,648 - 63,648 22,546 29,220 11,882
-------------------- --------- ------------ ----------- -------- ---------- ----------
126,561 226 126,787 75,065 32,254 19,468
-------------------- --------- ------------ ----------- -------- ---------- ----------
Changes in liabilities arising from financing activities
1 July 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
------------------- ------- ----------- ------ --------- --------
1 July Cash flows Other Currency 30 June
2019 2020
------------------- ------- ----------- ------ --------- --------
Lease liabilities 14,247 (4,896) 4,000 (185) 13,166
Borrowings 10,399 758 78 308 11,543
------------------- ------- ----------- ------ --------- --------
24,646 (4,138) 4,078 123 24,709
------------------- ------- ----------- ------ --------- --------
See notes 20 and 21 for further details on borrowing and leasing
activities.
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 currencies, but with
most manufacturing being undertaken in the UK, Ireland and
India.
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 28, '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 will mature 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 following table details the fair value of these forward
foreign currency derivatives according to the categorisations of
instruments noted above:
2021 2020
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 78,527 1,133
Current derivative assets 127,548 7,512 19,467 283
Current derivative liabilities 74,652 (3,063) 154,045 (11,415)
Non-current derivative liabilities 34,245 (322) 290,499 (24,925)
--------- --------- --------- ---------
408,610 13,992 542,538 (34,924)
Amounts recognised in the Consolidated
statement of comprehensive income
and expense - 51,590 - 13,924
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 59,529 (1,653) 93,962 (10,030)
Non-current derivative liabilities 6,687 (33) 153,585 (16,021)
--------- --------- --------- ---------
153,585 1,361 247,547 (26,051)
Amounts recognised in Gains/(losses)
from the fair value of financial
instruments in the Consolidated
income statement - 22,824 - (24,361)
Foreign currency options ineffective
as a cash flow hedge (ii)
Non-current derivative assets - - - 108
Current derivative assets - 1,699 - 3,394
Current derivative liabilities - (216) - (122)
Non-current derivative liabilities - - - (155)
--------- --------- --------- ---------
- 1,483 - 3,225
Amounts recognised in Gains/(losses)
from the fair value of financial
instruments in the Consolidated
income statement - (846) - 2,021
Forward currency contracts not
in a designated cash flow hedge
(iii)
Current derivative assets - - 5,127 80
Current derivative liabilities 51,929 (662) 62,549 (979)
--------- --------- --------- ---------
51,929 (662) 67,676 (899)
Amounts recognised in Financial
income/(expense) in the Consolidated
income statement - 2,781 - (154)
Total forward contracts and options
Non-current derivative assets 228,522 12,484 78,527 1,242
Current derivative assets 158,559 9,639 24,594 3,758
Current derivative liabilities 186,110 (5,594) 310,556 (22,546)
Non-current derivative liabilities 40,932 (355) 444,085 (41,102)
--------- --------- --------- ---------
614,123 16,174 857,762 (58,648)
---------------------------------------- --------- --------- --------- ---------
The amounts of foreign currencies relating to these forward
contracts and options are, in Sterling terms:
2021 2020
Nominal value Fair value Nominal Fair
GBP'000 GBP'000 value value
GBP'000 GBP'000
-------------- -------------- ----------- --------- ---------
US Dollar 399,065 4,192 596,032 (56,562)
Euro 146,120 6,040 159,221 409
Japanese Yen 68,938 5,942 102,509 (2,495)
-------------- -------------- ----------- --------- ---------
614,123 16,174 857,762 (58,648)
-------------- -------------- ----------- --------- ---------
The following are the exchange rates which have been applicable
during the financial year.
2021 2020
Average Year end Average Average Year Average
Currency forward exchange exchange forward end exchange exchange
contract rate rate contract rate rate
rates rates
-------------- ----------- ---------- ---------- ---------- -------------- ----------
US Dollar 1.37 1.38 1.36 1.37 1.24 1.26
Euro 1.09 1.17 1.14 1.09 1.10 1.14
Japanese Yen 136 154 145 136 134 136
--------------- ---------- ---------- ---------- ---------- -------------- ----------
For the Group's foreign currency forward contracts and options
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 GBP31,300,000 and increase profit before tax by
GBP9,200,000, while a depreciation of 5% would decrease pre-tax
equity by GBP4,100,000 and decrease profit before tax by
GBP1,100,000.
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, the remaining
nominal value of ineffective forward contracts at 30 June 2021
totalled GBP153,585,000, with fair value gains of GBP22,824,000
recognised in the Consolidated income statement relating to
movements in the mark-to-market valuations of these outstanding
contracts.
During 2021, an improvement in global macroeconomic conditions
and business performance has resulted in an increase 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 an additional
GBP7,430,000 notional value of forward contracts becoming
ineffective, with GBP818,000 gain immediately recycled to the
Consolidated income statement based on 30 June 2021 mark-to-market
valuations.
25. SHARE CAPITAL AND RESERVES
Capital management
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.
Share capital
2021 2020
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:
2021 2020
GBP'000 GBP'000
------------------------------------ -------- --------
2020 final dividend paid of nil
per share (2019: 46.0p) - 33,483
Interim dividend paid of 14.0p per 10,189 -
share (2020: nil)
Total dividends paid 10,189 33,478
------------------------------------- -------- --------
As a result of the outbreak of the COVID-19 pandemic, and
according to the Board's priority of conserving cash and managing
the Group in a prudent manner during a period of uncertainty, no
final dividend was declared in respect of 2020. Following an
improvement in global macroeconomic conditions and the financial
position of the Group during 2021, the Board have reinstated the
dividend, with an interim dividend of 14.0p per share paid in April
2021. A final dividend of 52.0p per share is proposed in respect of
2021, which will be payable on 29 November 2021 to shareholders on
the register on 29 October 2021.
Currency translation reserve
The currency translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of the foreign operations and currency movements on
intragroup loan balances classified as net investments in foreign
operations (see note 5).
Movements during the year were: 2021 2020
GBP'000 GBP'000
------------------------------------------------------ --------- --------
Balance at the beginning of the year 17,729 14,577
------------------------------------------------------ --------- --------
(Loss)/gain on net assets of foreign currency
operations (7,009) 996
(Loss)/gain on intragroup loans classified as
net investments in foreign operations (7,743) 2,373
Tax on translation of net investments in foreign
operations 1,470 (403)
------------------------------------------------------ --------- --------
(Loss)/gain in the year relating to subsidiaries (13,282) 2,966
Currency exchange differences relating to associates
and joint ventures (728) 186
Balance at the end of the year 3,719 17,729
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 24
for further detail.
Movements during the year were: 2021 2020
GBP'000 GBP'000
Balance at the beginning of the year (30,455) (42,401)
Losses on contract maturity recognised in revenue
during the year (608) 16,216
Losses transferred to the Consolidated income statement
during the year - 24,361
Deferred tax transferred to the consolidated income
statement - (4,629)
Revaluations during the year 52,198 (26,653)
Deferred tax movement (9,970) 2,651
Balance at the end of the year 11,345 (30,455)
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 23
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:
2021 2020
GBP'000 GBP'000
-------- --------
Balance at the beginning of the year (404) (404)
Acquisition of own shares - -
Balance at the end of the year (404) (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.
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:
2021 2020
GBP'000 GBP'000
-------- --------
Balance at the beginning of the year (129) (302)
Share-based payments charge 173 173
Balance at the end of the year 44 (129)
Non-controlling interest
Movements during the year were:
2021 2020
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%.
26. CAPITAL COMMITMENTS
Authorised and committed capital expenditure at the end of the
year, for which no provision has been made in the Financial
statements, were:
2021 2020
GBP'000 GBP'000
------------------------------------- -------- --------
Freehold land and buildings 412 640
Plant and equipment 3,255 1,621
Motor vehicles 79 -
Software licences and intellectual
property 68 3,854
-------------------------------------- -------- --------
Total committed capital expenditure 3,814 6,115
-------------------------------------- -------- --------
27. RELATED PARTIES
Associates, joint ventures and other related parties had the
following transactions and balances with the Group:
Joint ventures Associate
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Purchased goods and services from the
Group during the year 711 837 642 526
Sold goods and services to the Group
during the year 22,175 17,160 - -
Paid dividends to the Group during
the year - 512 - -
Amounts owed to the Group at the year
end 146 87 2,747 3,227
Amounts owed by the Group at the year
end 2,556 3,103 - -
Loans owed to the Group at the year
end 598 955 - 2,500
Loans and finance leases owed to the Group by an associate
totalling GBP3,030,000 were impaired in 2021. There were no bad
debts relating to related parties written off during 2020.
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.
28. ALTERNATIVE PERFORMANCE MEASURES
In accordance with Renishaw's Alternative Performance Measures
(APMs) policy and ESMA Guidelines on Alternative Performance
Measures (2015), APMs are defined as - Revenue at constant exchange
rates, Adjusted profit before tax, Adjusted earnings per share and
Adjusted operating profit.
Revenue at constant exchange rates is defined as revenue
recalculated using the same rates as were applicable to the
previous year and excluding forward contract gains and losses.
2021 2020
Revenue at constant exchange rates GBP'000 GBP'000
-------- --------
Statutory revenue as reported 565,559 510,215
Adjustment for forward contract (gains)/losses (1,427) 12,053
Adjustment to restate current year at previous 26,206 -
year exchange rates
-------- --------
Revenue at constant exchange rates 590,338 522,268
-------- --------
Year-on-year revenue growth at constant exchange +13.0% -
rates
-------- --------
Year-on-year revenue growth at constant exchange rates for 2020
was -13.2%.
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 reported separately in the Consolidated
income statement (see note 29), and third-party legal and advisory
costs relating to the 2021 FSP reported in Administrative expenses,
have been excluded from adjusted measures on the basis that they
relate to matters that do not frequently recur.
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 24, 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.
2021 2020
Adjusted profit before tax: GBP'000 GBP'000
Statutory profit before tax 139,439 3,208
Restructuring costs - 23,797
Third-party FSP costs 3,222 -
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 1,882 (731)
- reported in gains from the fair value in financial
instruments 846 (2,021)
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (2,899) -
- reported in gains from the fair value of financial
instruments (22,824) 24,361
Adjusted profit before tax 119,666 48,614
2021 2020
Adjusted earnings per share: Pence Pence
Statutory earnings per share 153.2 0.4
Restructuring costs - 26.5
Third-party FSP costs 4.4 -
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 2.1 (0.8)
- reported in gains in fair value in financial
instruments 0.9 (2.2)
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (3.2) -
- reported in gains from the fair value of financial
instruments (25.4) 27.1
Adjusted earnings per share 132.0 51.0
2021 2020
Adjusted operating profit: pence pence
------------------------------------------------------ --------- --------
Statutory operating profit 138,341 6,294
Restructuring costs - 23,797
Third-party FSP costs 3,222 -
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (i):
- reported in revenue 1,882 (731)
- reported in gains in fair value in financial
instruments 846 (2,021)
Fair value (gains)/losses on financial instruments
not eligible for hedge accounting (ii):
- reported in revenue (2,899) -
- reported in gains from the fair value of financial
instruments (22,824) 24,361
Adjusted operating profit 118,568 51,700
Adjustments to the segmental operating profit:
2021 2020
Manufacturing technologies GBP'000 GBP'000
Operating profit before loss from fair value of
financial instruments 110,498 31,188
Restructuring costs - 23,797
Third-party FSP costs 3,061 -
Fair value gains on financial instruments not
eligible for hedge accounting (i):
- reported in revenue 1,797 (688)
Fair value gains on financial instruments not
eligible for hedge accounting (ii):
- reported in revenue (2,734) (4,036)
Adjusted manufacturing technologies operating
profit 112,622 50,261
2021 2020
Analytical instruments and medical devices GBP'000 GBP'000
--------
Operating profit before loss from fair value of
financial instruments 5,865 1,737
Third-party FSP costs 161 -
Fair value gains on financial instruments not
eligible for hedge accounting (i):
- reported in revenue 86 (43)
Fair value gains on financial instruments not
eligible for hedge accounting (ii):
- reported in revenue (166) (255)
Adjusted analytical instruments and medical devices
operating profit 5,946 1,439
29. RESTRUCTURING COSTS
During 2020 the Board implemented its 'Fit for the Future'
initiative, which incorporated the rationalisation and
reorganisation of certain operating activities, particularly
relating to the additive manufacturing (AM) business, and cost
control measures which included a UK compulsory redundancy
programme.
The Board considered that the costs relating to these
restructuring activities should be reported separately in the
Consolidated income statement in order to aid users' understanding.
No expenses relating to this initiative have been incurred in 2021.
The table below shows the analysis of these costs:
2020
GBP'000
--------
Redundancy costs (a) 6,281
Impairment of capitalised research and development
costs (b) 5,999
Impairment of goodwill (c) 405
Impairment of property, plant and equipment (a) 2,590
Increase in inventory provisions (b) 4,910
Increase in warranty provisions (b) 3,400
Other expenses (c) 212
--------
Total Restructuring expenses 23,797
--------
These costs would be found under the following headings in the
Consolidated income statement if they had not been separately
identified in Restructuring costs: (a) within cost of sales,
distribution costs and administrative expenses; (b) within cost of
sales; and (c) within administrative expenses.
Registered office:
Renishaw plc
New Mills
Wotton-under-Edge
Gloucestershire
GL12 8JR
UK
Registered number: 01106260
LEI number: 21380048ADXM6Z67CT18
Telephone: +44 1453 524524
Email: uk@renishaw.com
Website: www.renishaw.com
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END
FR DZMZGGMKGMZM
(END) Dow Jones Newswires
October 21, 2021 06:50 ET (10:50 GMT)
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