2015 Annual report and accounts Annual report
Annual report and accounts 2015 Renishaw plc Annual report and accounts 2015
Aerial view of the New Mills site, showing the new 153,000 sq ft Renishaw Innovation Centre building (top left) which was officially opened in July 2015 by HRH The Princess Royal.
CONTENTS
Strategic report Governance Financial statements 1 Introduction 60 Introduction 91 Consolidated income statement 2 Chairman’s statement 62 Board of directors and company secretary 92 Consolidated statement of comprehensive 6 Our business model 64 Executive Board income and expense 7 Our strategy 65 International Sales and Marketing Board 93 Consolidated balance sheet 8 Our strategy in action 66 Directors’ corporate governance report 94 Consolidated statement of changes in equity 10 Our business sectors – Metrology 72 Nomination committee report 95 Consolidated statement of cash flow 18 Our business sectors – Healthcare 73 Audit committee report 96 Notes (forming part of the financial statements) 24 Our markets – Delivering solutions globally 76 Directors’ remuneration report 119 Company balance sheet 26 Performance – Overview 84 Other statutory and regulatory disclosures 120 Reconciliation of movements 28 Performance – Metrology 87 Directors’ responsibilities in shareholders’ funds 32 Manufacturing overview 88 Independent auditor’s report 121 Notes to the Company financial statements 34 Performance – Healthcare 38 Performance – Financial review 42 Key performance indicators Shareholder information 44 Principal risks and uncertainties 130 10 financial year record 46 Corporate social responsibility 131 Shareholder information 1
Renishaw plc Annual report and accounts 2015 Strategic report INTRODUCTION
Renishaw is a world-leading metrology company. With our highly experienced team, we are confidently driving our future growth through innovative and patented products and processes, efficient high-quality manufacturing, and the ability to provide local support in a growing number of geographies and markets. Governance 95% of our sales are outside the UK. Our continuing investment in new product development, plant and equipment, and facilities (c.£90m in the last year) is the key to our confidence in the Group’s long-term strategy and prospects. With around 4,100 skilled and motivated people, we continue to be at the leading edge
of technological innovation. Financial statements
FIND MORE INFORMATION ONLINE
Downloads Investor and webcasts information Shareholder information You can access the annual and half year Information of interest to shareholders and others, reports for the last five years from our such as videos explaining our products and website. Also available are recordings business strategy, are provided on our website. of previous webcasts. www.renishaw.com/investor www.renishaw.com/financials
This Annual report has been prepared for the purpose of assisting the Company’s shareholders to assess the strategies adopted by the Company and the potential for those strategies to succeed and no-one, including the Company’s shareholders, may rely on it for any other purpose. The directors owe their duties only to the Company as a whole and they undertake no duty of care to individual shareholders, other stakeholders or potential investors. This Annual report has been prepared on the basis of the knowledge For more information visit: and information available to the directors at the time. Given the nature of some forward-looking information, which has been given in good faith, the Company’s shareholders should treat this information with due caution. www.renishaw.com
All dates within this document refer to financial years unless stated otherwise. 2
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
“I am delighted to present our 2015 annual results, representing an exceptional year with record revenue and profit.”
Sir David R McMurtry Chairman and Chief Executive
I am delighted to present our 2015 material difference between revenue last year. Statutory profit before tax for annual results, representing an at actual exchange rates and last year was £96.4m, which included exceptional year with record revenue revenue restated at previous year’s the exceptional gain of £26.3m on and profit. exchange rates. the disposal of our shareholding in Delcam plc. Revenue for the year ended 30th June Geographic analysis shows growth 2015 was £494.7m, compared with of 91% in the Far East, 13% in the This year’s tax charge amounts to £355.5m for last year, an increase Americas, 3% in Europe and 7% in the £22.8m (2014: £10.7m) representing a of 39%. As highlighted in our Interim UK. More specifically, revenue in the tax rate of 15.8% (2014: 15.3% adjusted). results, we had further large orders Far East increased from £134.6m to The patent box and research and from Far East customers in the £257.7m, in the Americas from £85.6m development tax credit amounted to consumer electronics markets, which to £96.3m, in Europe from £100.2m to £5.7m compared to £2.9m last year. generated exceptionally good growth £103.1m, and in the UK from £23.8m Earnings per share were 167.5p, in our metrology business sector. to £25.5m. compared with an adjusted 82.3p Adjusting for these large orders we The Group’s profit before tax for the last year, an increase of 104%. experienced underlying revenue growth year more than doubled to £144.2m, Statutory earnings per share were of 11% for the year. There was no compared with an adjusted £70.1m 167.5p and last year were 118.4p.
2015 performance
2015 2014 Change Statutory 2015 2014 Change
Revenue (£m) 494.7 355.5 +39% Profit before tax (£m) 144.2 96.4 +50%
Operating profit (£m) 143.9 70.4 +104% Basic earnings per share (pence) 167.5 118.4 41%
Adjusted profit before tax (£m)* 144.2 70.1 +106%
Adjusted earnings per share (pence)* 167.5 82.3 +104%
Dividend per share (pence) 46.5 41.2 +13%
*Adjusted results are for 2014 and exclude the gain on disposal of the shareholding in Delcam plc (£26.3m). 3
Renishaw plc Annual report and accounts 2015 Strategic report
Metrology Healthcare In our medical dental products line we entered into an agreement with Revenue from our metrology business Revenue from our healthcare business DENTSPLY Implants, one of the for the year was £467.0m, compared for the year was £27.7m, compared world’s leading companies in implant with £326.6m last year, an increase of with £28.9m last year. We experienced dentistry, which will see them purchase 43%. Metrology revenue in the Far East growth in both our medical dental and Renishaw additive manufacturing increased by 100%, from £124.8m to neurological product lines, but, as noted technology for the manufacture of £249.9m, and in the Americas, there in our Interim report, spectroscopy dental products. This product line has was growth of 12% from £80.1m last sales were adversely affected in the first also started to supply custom-made year to £89.4m. half due to delayed academic research craniomaxillofacial implants that support Governance funding in some territories and the Along with our good growth in our reconstructive surgery, where we act strength of Sterling. Spectroscopy has machine tool products line, we also as a subcontractor to hospitals and a however seen very strong second half experienced increased demand for university design centre. growth and much improved order intake. our measurement automation, additive In our diagnostics products line, manufacturing and encoder products. In our neurological products line, we following completion of performance made further sales of our neuromate® Operating profit was £150.7m evaluation studies to verify the Fungiplex surgical robot, including first sales in (2014: £74.4m). assay system, the product is expected the USA following FDA authorisation at to be available with a CE mark later in The significant growth has been the end of last year. We also released this calendar year. supported by the sustained investment neuroinspire™ V4.0 surgical planning in our manufacturing facilities, processes software, which includes significant new There was an operating loss of £6.8m, and latest plant and machinery in the functionality, is CE marked and now compared with a loss of £4.0m last UK, Ireland and India. available for sale in the EU. This software year. We remain focused on moving now integrates with our neuromate this business into profit. We have continued to invest in research robot. We also launched neurolocate™, Financial statements and development with total engineering a CE marked frameless patient costs in this business segment of registration system for the neuromate £55.0m, net of capitalised costs stereotactic robot. (2014: £45.3m) with a number of new product launches during the year.
Revenue £m Adjusted profit Adjusted earnings Dividend per share pence before tax £m per share pence Shareholder information
494.7 144.2 167.5 46.5
41.2 355.5 40.0 346.9 38.5 331.9 82.3 79.2 70.1 88.9 35.0 86.0 95.6 288.7 80.4 88.5
2015 2015 2015 2015 2014 2014 2014 2014 2013 2013 2013 2013 2012 2012 2012 2012 2011 2011 2011 2011 4
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CHAIRMAN’S STATEMENT CONTINUED
Continued investment for In Spain, we acquired additional offices During the year we have appointed long-term growth adjacent to our existing premises, William Lee to the Executive Board. He is providing space for future growth. the Director and General Manager of the The Group strategy to invest for the long machine tool and laser and calibration term, expanding our global marketing Working capital products lines and responsible for the and distribution infrastructure, along spatial measurement products line. with increasing manufacturing capacity Group inventory increased to £77.7m from £63.0m at the beginning of the In June, Clive Martell, previously the and research and development chief executive of Delcam plc, joined activities continues. year, to support growth in revenue and our policy of holding finished stock to the Group as head of global additive Our workforce at the end of June 2015 maintain delivery performance given our manufacturing and was appointed to the was 4,112, an increase of 620 from the short order book of approximately five International Sales and Marketing Board. 3,492 at the start of the financial year weeks. Trade debtors increased from The directors thank employees for their to support our production requirements £81.8m to £101.2m in line with higher invaluable support and contribution as well as growth in research and revenue for the year, with debtor days during this exceptional year. development and global sales and outstanding at the end of the current marketing activities. The staff increase year at 67 days (2014: 63 days). Investor communications included 30 apprentices and 58 graduates in the UK, taken on as part Net cash balances at 30th June 2015 In line with our commitment to improve of our ongoing aim and commitment to were £82.2m, compared with £43.6m at investor communications, our second train and develop skilled resource for 30th June 2014. Additionally there is an investor day was held on 14th May the Group in the future. escrow account of £14.7m (2014: £9.5m) 2015, for existing and potential new relating to the provision of security to the investors. This involved presentations Capital expenditure on property, plant UK defined benefit pension scheme. on group strategy, business segments and equipment for the year was £48.4m, and product lines, given by members of which £20.9m was spent on property Directors and employees of the Board and senior management, and £27.5m on plant and equipment. Ben Taylor, Assistant Chief Executive, as well as tours covering the Group’s Work has continued to implement has informed the Company of his activities and various Q&A sessions. regional data centres to further enhance decision to retire at the end of July 2016. The event was again well attended and the resilience and efficiency of the He will remain in full-time employment gives shareholders another opportunity, Group’s IT infrastructure. until the end of October this year and in addition to the AGM and half-year and year-end webcasts, to learn more about In the UK, the building of an additional continue thereafter on a part-time Renishaw’s business and strategy. 153,000 sq ft facility at New Mills has basis until his retirement. The Board now been completed and this building, is considering how his duties and the Renishaw Innovation Centre, was responsibilities will be managed and Queen’s Award formally opened on 7th July by HRH will make appropriate announcements On 21st April 2015, Renishaw received a The Princess Royal. Also in the UK, in due course. Queen’s Award for Enterprise 2015 in the Innovations category for its revolutionary our additive manufacturing business With effect from 1st January 2015, absolute position encoder. This award acquired and relocated into 90,000 sq ft Kath Durrant was appointed as an was granted for the development and facilities in Stone, Staffordshire, providing additional non-executive director. manufacture of our RESOLUTE™ capacity for R&D expansion, a customer Kath was until recently the Group HR family of non-contact, optical position solution centre and service facility as Director at Rolls-Royce plc and a member feedback devices. RESOLUTE enables well as providing capacity for a material of the executive team. She has significant a step change in the performance development centre. prior experience with AstraZeneca plc of motion control systems used in and GlaxoSmithKline plc. Kath currently In Ireland, we have purchased additional manufacturing and other environments. properties adjacent to our existing facility sits as an advisory board member for the and in the USA, Mexico and the Czech Lancaster University Management School. Republic, we have purchased land, on which to build offices for our expanding sales and marketing operations in those countries. 5
Renishaw plc Annual report and accounts 2015 Strategic report
1. RESOLUTE’s uniquely innovative design Outlook 1 has won us our 18th Queen’s Award. Whilst it is hard to predict to what extent there will be significant large orders in 2. Sir David McMurtry and John Deer receiving this coming year, with the development the inaugural Lifetime Achievement Award at the 2014 Gloucester Citizen and of new products and applications and Gloucestershire Echo Business Awards. continued growth in our underlying business, your directors remain 3. HRH The Princess Royal discusses the confident in the long-term prospects Queen’s Award winning RESOLUTE for the Group. At this early stage in the encoder with Jim Henshaw, Director Governance current financial year, we anticipate that and General Manager of the encoder products line. revenue for this year will be in the range of £460m to £485m and profit before tax 4. Product demonstration area inside the new will be in the range of £85m to £105m. Renishaw Innovation Centre. Dividends A final dividend of 34.0 pence net per share will be paid on 19th October 2015, 2 3 to shareholders on the register on 18th September 2015, giving a total dividend of 46.5 pence for the year, an increase of 13% over last year’s 41.2 pence.
Sir David R McMurtry Financial statements CBE, RDI, FRS, FREng, CEng, FIMechE Chairman and Chief Executive 29th July 2015
4 Shareholder information 6
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
OUR BUSINESS MODEL We identify customer needs, and then apply innovative engineering to deliver successful solutions.
Customer needs • Future trends are anticipated in order to solve problems before they are visible Successful solutions to customers. • We are a highly vertically integrated • All areas of our organisation work in company to assure success for our partnership with their customers to customers. We not only undertake understand and solve their current design of innovative products, we also and anticipated real-life problems. manufacture and sell them through our wholly-owned manufacturing and • We provide solutions that drive efficiency sales organisations. and reduce costs. Customer needs
Successful Innovative solutions engineering
Driving Driving sustainable growth sustainable Innovative engineering and shareholder return growth and • Renishaw’s strategy of investment in Our ordinary dividend, funded from our shareholder R&D and engineering skills enables us annual cash flow, is the primary form of return to take a longer term view of the viability shareholder return. We have increased the of new technologies. ordinary dividend per share by more than • We are actively expanding our 20% over the last three years. We aim to significant portfolio of innovative maintain a progressive and sustainable and patented products. dividend policy.
Key performance indicators Our key performance indicators are shown on pages 42 and 43. Principal risks and uncertainties Information on the risks associated with our business is contained on pages 44 and 45. 7
Renishaw plc Annual report and accounts 2015 Strategic report OUR STRATEGY Eight strategic priorities drive our business model.
2 3 4 Continual research Efficient high-quality creating strong manufacturing Global market positions customer support with innovative products Governance
1 People
5 Financial statements 8 Focus on Supplementing delivering the business solutions via niche acquisitions 7 6 Consistent Strong market organic growth presence and focus on emerging markets
“We are actively developing our next generation
of products with a view to integrating elements Shareholder information together to form overall market solutions. Renishaw continues to invest strategically in a number of key areas, for example, additive manufacturing and neuro, as part of our medium and long-term business plan.”
Geoff McFarland Group Engineering Director 8
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
OUR STRATEGY IN ACTION The progress we made during 2015 is summarised below:
1 2 3 4
People Continual research Efficient high-quality Global customer creating strong market manufacturing support positions with innovative products
Description Renishaw’s people are central Renishaw is well known for its Renishaw is a highly vertically Renishaw is founded on the to the success of its business. sector-leading investment in integrated organisation belief that excellent customer Our innovative, hard-working R&D and engineering. with significant in-house support delivers success. and loyal employees make “Apply innovation” is a way of manufacturing capabilities. Our customers can be global, Renishaw the business life for Renishaw employees, With high-quality manufacturing with an order being placed success that it is. Many of not just a strap-line. We have plants located in the UK, in one country, the product them have worked in the Group continued to protect our core Ireland, India, Germany, USA shipped to another and the for two or three decades, businesses with exciting and France, we are able to eventual end-user often creating a wealth of specialised new patented technology deliver robust and reliable located on a different continent. engineering expertise. and process developments, products tested to our exacting By having “local” global support In addition, Renishaw has whilst also diversifying into standards. Our efficiencies, through our wholly-owned actively focused on the new product and market areas. through in-house automation subsidiary network, we are ongoing recruitment and and the use of our own latest able to assure customers that training of many bright product developments, enable whatever their needs, we are and enthusiastic young us to be competitive with the able to support and assist them, graduates, apprentices and highest volume processes. resulting in a positive return experienced professionals. on their investment. Progress Headcount has increased A significant range of new During the last year, Renishaw’s Renishaw continues to invest in the Group to 4,112. products have been brought various manufacturing in training for both its technical This includes 1,387 in our to market during the year, operations have supported a support and sales people. overseas subsidiaries and including MODUS 2 and Primo, significant growth in turnover. As the business continues to 2,725 in the UK. Renishaw’s which introduces a genuinely This has only been possible grow and diversify, headcount in-house Academy, initially breakthrough business model. as a result of our long-term has been increased accordingly established to focus on 25 new patents have been strategic commitment to (+ 127) to ensure that resources technical training modules filed and 104 granted during manufacturing and our are available where and for applications engineers, this financial year. The RenDx sustained investments in when needed. The Renishaw has now expanded to Fungiplex diagnostic system the latest technologies and Academy now offers over 70 include sales development is in the process of obtaining facilities. Recent strategic courses at all levels, training and corporate introductory CE certification. manufacturing investment Renishaw employees around courses for employees, decisions have enabled the world to ensure that including graduates and Renishaw to manufacture they are able to deliver the apprentices. Training can be sufficient products in-house excellent support levels that as diverse as presentation to satisfy order growth and our customers demand. skills, team-building and to react to the large changes technical training with one in demand on very short of Renishaw’s software lead-times. We have done products such as MODUSTM this by accelerating additional or Productivity+TM. Courses are capacity, including the held throughout the year, refurbishment of Miskin, where and as part of a structured we now have 50% occupancy. development programme. 9
Renishaw plc Annual report and accounts 2015 Strategic report
5 6 7 8
Focus on delivering Strong market presence Consistent organic Supplementing the solutions and focus on emerging growth business via niche markets acquisitions Governance
Description Renishaw’s business has Renishaw has always been Whilst Renishaw does invest We actively undertake transitioned over recent a global group with a strong for the long term, it also closely acquisitions as a means to years from primarily being a “local” presence. By ensuring manages costs at all levels expand our product portfolio, supplier of products to capital we target emerging markets and ensures that it does not quicken geographic market equipment manufacturers, we are able to develop strong undertake undue risks. It is penetration and gain access to becoming much more working partnerships with through this approach that to new patents, technologies focused on delivering a full newly developing businesses. Renishaw has been able to and customers. solution directly to end-users. These loyal relationships build deliver such a long-term track Our experience in our core quickly as our customers record of profitable growth. product lines, which has realise that all our customers highlighted that our global are important to us. customers need assistance in solving their problems, is being carried across into our Financial statements newer product lines (medical dental, gauging, neurological, diagnostics and additive manufacturing). Our sales force and technical support teams need to be ever more knowledgeable, not just about what our products do, but also how they can be applied to benefit our customers’ processes and practices. By truly understanding our customers’ needs, we are able to offer a cost-effective, efficient and easy-to-use solution. Progress Complex problems ideally Renishaw’s expansion into new Renishaw’s new 153,000 sq ft We continue to integrate Shareholder information require simple solutions. growth economies continues, building at the New Mills site, acquired businesses and Whilst Renishaw’s hardware and this year we have opened, which houses R&D, corporate evaluate acquisition uses the latest technologies extended or relocated to larger services teams and corporate opportunities. For example, and innovative approaches to premises in the UK, Singapore, demonstration and training we recently acquired a 20% deliver robust and repeatable Vietnam, Hong Kong, areas, is now fully occupied. shareholding in HiETA functionality that is world-class, Ireland, Spain and Slovenia. The additive manufacturing Technologies Limited, a UK our software is becoming ever This includes the relocation to products line recently relocated company specialising in the more user-friendly, intuitive and a new 26,000 sq ft property in to a larger 90,000 sq ft design and delivery of additive packaged for specific problems. Hong Kong, to accommodate facility in Stone, Staffordshire manufacturing products, such The user’s experience of growth in the Far East region. to help nurture sustained as heat exchangers for a Renishaw includes the The process for developing business growth. range of applications – a sales teams, applications larger offices in the USA, complementary business for engineers and products, and Czech Republic and Mexico our additive manufacturing we endeavour to make this is also underway. products line. interaction a professional and positive experience.
To see how we measure performance on these strategic priorities please see pages 42–43. 10
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
OUR BUSINESS SECTORS – METROLOGY
Renishaw Primo™ system: first “pay-as- you-go” probing system for entry-level users.
REVENUE (+43%) £4 67.0 m
OPERATING PROFIT (+103%) £150.7m
PERCENTAGE OF GROUP REVENUE 94%
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Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
OUR BUSINESS SECTORS – METROLOGY CONTINUED
Our metrology products help manufacturers to maximise production output, significantly reduce the time taken to produce and inspect components, and keep their machines running reliably. In the fields of industrial automation and motion systems, our position measurement and calibration systems allow builders to manufacture highly accurate and reliable products. This illustration highlights typical applications for our products within a metal-part production facility and semiconductor manufacturing plant.
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1 TONiC™ 8 AM250 15 OMP600 22 MODUS™ incremental encoder additive optical transmission Organiser for position feedback manufacturing machine tool probe software for shop system floor operation of Equator™ gauge
2 RLE 9 MRS2 16 NC4 23 RGH41 fibre-optic laser rack for laser non-contact incremental interferometer automated probe/ tool setting system encoder for encoder system stylus changing position feedback
3 RM44 10 MCU5 17 Primo Radio 24 OTS magnetic position hand controller Part Setter optical transmission encoder for use for CMM axes/ radio transmission tool setting probe in industrial motorised head machine tool probe environments
4 RMP60 11 REVO® 18 RMP600 25 OMP400 radio transmission 5-axis high-accuracy high-accuracy machine tool probe measurement radio transmission optical transmission system with machine tool probe machine tool probe rack
5 RTS 12 MODUS 2 19 AxiSet™ 26 Equator™ radio transmission metrology software Check-Up versatile tool setting probe for inspection health check for gauging system on CMMs machine tool rotary axes
96 XL-80 13 RGH22 20 Renishaw OMV 27 SPRINT™ laser calibration incremental machine tool MTM Toolkit system encoder for software for repeatable position feedback inspection/ diameter verification measurement
7 Controller 14 TRS2 21 SP25 28 SPRINT™ software non-contact for high-speed OSP60 software for broken tool scanning on optical transmission the AM250 detection system Equator™ gauge scanning probe system control Strategic report Governance Financial statements Shareholder information Primo Radio Primo 3D Setter Tool transmissionradio tool setting probe GoProbe user-friendly softwareprobing 14–15 47 48 Semiconductor Semiconductor inspectionwafer bonder Wire B D
Renishaw plc AnnualRenishaw report and accounts 2015 QC20-W wireless ballbar checking for tools machine Ballbar 20 software for operating QC20-W ballbar Inspection Plus softwaremacro machine for probing tool Renishaw fixtures modular fixturing measurement for systems RGH41 incremental encoder for feedback position MCR20 module automated PH20 for changing allowing use of styli multiple Flat panel display panel Flat manufacturing Semiconductor handling wafer 46 45 44 41 42 43 A C
PH20 5-axis touch- trigger system CMMs for encoder RA100 for analyser Raman monitoring process RESOLUTE™ absolutetrue feedback position XR20-W rotary axis system calibration ATOM™ miniature incremental position encoderfeedback RotaryXL rotary axis software calibration 37 39 40 35 36 38 CNC machine tool for machining machining for tool machine CNC components metal machine manufacturing Additive Co-ordinate measuring machine used machine measuring Co-ordinate for off line inspection of components MT AM
CMM encoder for feedback position TONiC™ incremental Process Monitor Process re-mastering software for gauge Equator™ easy-to-use easy-to-use softwaregauging INTUO™ software Productivity+™ plug-in CNC software for system SPRINT™ SPRINT™ Toolkit Blade high-speed of measurement sections blade CNC ReporterCNC andanalysis reports from Productivity+™ 32 34 31 33 29 30 Hardware Software 1 2 Key: Strategic report Governance Financial statements Shareholder information 11 Advanced metal AM systems for 3D-printed of manufacturing direct metallic components. solution A total is offered from systems, materials, ancillaries and software through to supportand a training for consultancy, industrial, including industries of range tooling. mould and healthcare casting Vacuum Vacuum casting machines from entry-level high to capacity for production and prototyping rapid of polymer end-use parts. Position encoders Position Position encoders that ensure accurate linear and rotary motion control in a wide range electronics, from applications of and robotics displays, panel flat precision medical, to semiconductors production. print and machining encoders, magnetic These include encoders, optical incremental absolute optical encoders and laser encoders. interferometer manufacturingAdditive (“AM”) Miniature ATOM™ optical incremental incremental optical ATOM™ Miniature readhead mounted on glass discs of various sizes. Renishaw plc AnnualRenishaw report and accounts 2015 software is an TM Pro laser scannerfor quarry ® enables process control TM High-speed laser measurement and measurement laser High-speed surveying systems for use in extreme environments, such as mine and quarry marine positioning surveying, mapping. mobile and Fixtures to fixtures used custom and Modular hold parts securely for dimensional inspection on CMM, vision and systems. gauging Gauging Equator measurement Spatial Performance testing products Performance testing Calibration and testing products to accuracy positioning the determine a wideof range industrial of and international to machinery scientific laser a including standards, interferometer, rotary axis calibrator ballbar. wirelessand telescoping Quarryman monitoring. stockpile and surveying ideal alternative traditional to manual hours, few a in training with gauging, allowing engineers program to parts minutes. in by delivering highly repeatable, repeatable, highly delivering by thermally insensitive, versatile and shop the to gauging reprogrammable New INTUOfloor.
TM
accuracy inspection probes. inspection accuracy
‑ Modular fixtures for CMM inspection inspection CMM for fixtures Modular throughput, improved providing accuracy. and reproducibility Styli for probe systems probe Styli for Precision styli that attach probe to sensors for CMMs, machine tools, Equator and probes scanning Co-ordinate measuring machine (“CMM”) products Sensors, software and control CMMs, three-dimensional for systems scanning and touch-trigger including changers, probe automated probes, heads probe indexing motorised systems, 5-axisand measurement accurate highly enable the which manufactured of measurement assemblies. finished and components Machine tool probe systems tool Machine Sensors and software for computer metal- (“CNC”) controlled numerically cutting machine tools that allow the automation setting of and on-machine leading operations, measurement moreto productivity from existing machines and reductions in scrap and rework. These include laser tool setters, contact tool setters, tool probes, touch detectors, breakage and scanning systems contact high The product range includesThe product the following: gauging systems ensure to that is data measurement accurate acquired at the point contact. of
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Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
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Spatial measurement Group products devices overview Renishaw’s world-class laser 1 Pencil beam 5 C-ALS® 9 Cabled ® systems and modules for high- laser module slimline Boretrak performance mapping, surveying, for distance underground borehole deviation and presence laser scanner measurement for positioning and measuring, even detection for deployment safer blasts in extreme environments. through boreholes Our high-speed laser measurement and surveying systems are designed for use 2 Fanbeam® 5 6 Cavity Profiler 10 Quarryman® Pro in extreme environments where speed, ® prisms C-ALS for quarry surveying accuracy and safety are essential. mounted to oil user-friendly and stockpile From underground voids and cavities, rig docking software for fast, monitoring station accurate 3D to offshore and marine applications, cavity scans mining, quarrying or overhead, our laser systems have been developed over many years of close work with those in Fanbeam® 5 7 Void scanner 11 Quarryman® the field, and have been adopted widely 3 laser-based underground Viewer due to their reliability and ease of use. dynamic mapping of intuitive software positioning voids and for Quarryman system cavities surveying systems
4 Dynascan® 8 Cavity Profiler 12 Dynascan® (marine – VS (vehicle mounted) simple, mounted) mobile mapping functional mining mobile mapping and and surveying software for surveying system system modelling voids
Key:
1 Hardware 2 Software 17
Renishaw plc Annual report and accounts 2015 Strategic report “Pay-as-you-go” probing
Renishaw’s customer research has shown that concerns, including investment cost, ease of use and durability, have held some companies back from using probes. Our response is the Renishaw Primo™ system, a truly innovative approach that addresses each of these concerns. With a low initial cost, free training kit and immediate Governance parts replacement, the Primo system enables manufacturers to grasp the opportunities of high-value manufacturing regardless of the size of their operation. The latest pioneering initiative from Renishaw, and a first for the industry, the Primo system offers users all the advantages of automated tool setting at a very affordable price. The twin probe system comprises the Primo Radio Part Setter, Primo Radio 3D Tool Setter and Primo Interface.
Renishaw Primo Credit Tokens enable Financial statements the “pay-as-you-go” solution, which makes the Primo system unique and ensures an affordable initial investment, attractive overall purchase price and fast payback. Users buy six-month credit tokens which enable unlimited use of the Primo machine tool probe system during that period. An upgrade credit token is also available to provide unrestricted continuous use. Registration of a valid six-month credit token activates Primo Total Protect, which provides cover against accidental probe damage. Shareholder information Finally, the GoProbe software and supporting training kit makes these already easy-to-use machine tool probes even simpler. A comprehensive self-study package with a range of training tools and modules guides users through everything they need to get the most out of the Renishaw Primo system.
See more at www.renishaw.com/primo 18
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
OUR BUSINESS SECTORS – HEALTHCARE
Image shows a LaserImplant™ cranial plate created in titanium alloy using Renishaw’s additive manufacturing technology. Such implants can be used in craniomaxillofacial surgery to replace bone removed as a result of trauma or disease treatment.
REVENUE (-4%) OPERATING LOSS PERCENTAGE OF GROUP REVENUE £ 27.7m £6.8m 6% OUR BUSINESS SECTORS – HEALTHCARE CONTINUED
Our technologies are helping within applications such as craniomaxillofacial surgery, dentistry, neurosurgery, chemical analysis and nanotechnology research. These include engineering solutions for stereotactic neurosurgery, diagnosis of infectious diseases, analytical tools that identify and characterise the chemistry and structure of materials, supply of implants to hospitals and specialist design centres for craniomaxillofacial surgery, and products and services that allow dental laboratories to manufacture high-quality dental restorations. This illustration highlights 15 applications for our products within a simulated healthcare facility.
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®
20–21–22 electrodes Structural and analyser chemical (SCA) Raman and SEM combines analytical technologies SA-2000RenDx analyser for of identification targets biological RenDx SP-2000 processor sample neuromate robot for stereotactic neurosurgery DIXI medical medical DIXI electrodesrecording epilepsy for inVia microscopeRaman non-destructive for analysis material 16 15 17 14 13 18 Renishaw plc AnnualRenishaw report and accounts 2015 Productivity+™ machine PC-based tool probing software Renishaw StudioDental CAD software for dental scanning DS10 contact scannerdental DS30 blue light optical scannerdental OMP400 high-accuracy probe tool machine Furnace sintering for milled zirconia dental structures 9 8 9 7 11 10 12 Software 2
Dental build plate build Dental additively manufactured dental structures Maxillofacial Maxillofacial plate build manufactured additively parts for cutting and guidesplacement OTS transmissionoptical tool setting probe system softwareController software for the AM250 control system AM250 additive manufacturing neuroinspire™ surgical softwareplanning 6 5 4 3 2 1 Hardware 1 Key: Group products Group 23
Renishaw plc Annual report and accounts 2015
The neuromate® stereotactic robot can be used in a variety of neurosurgical procedures such as biopsy, neuroendoscopy, deep brain stimulation and stereoelectroencephalography.
Open here for more detail... w Strategic report Governance Financial statements Shareholder information 19 Diagnostic systems has Limited Diagnostics Renishaw developed the RenDx Multiplex Assay System, an automated, multiplex of diagnosis clinical for platform infectious disease, and is in the process obtaining of CE certification for the platform and its first assay, of invasive diagnosis for Fungiplex, infections. fungal Hybrid Raman systems Raman Hybrid the unite systems hybrid Renishaw’s Raman of power chemical analysis spectroscopy with the high spatial resolution other of techniques, microscopy force atomic as such microscopy. scanning electron and These new instruments are vital tools for investigating materials and devices applications. nanotechnology for analysis Raman Turnkey platform RA800The benchtop high- a companies with provides performance chemical and imaging analysis system that can be tailored for the needs their of customers. RamanRA800 research-grade gives microscopy performance in a Class 1 form. simple-to-use laser-safe, Renishaw plc AnnualRenishaw report and accounts 2015 Neurosurgical accessories Neurosurgical Specialist electrodes and instruments neurosurgery, epilepsy in use for manufactured DIXI by Medical. microscopes Raman Scientists and engineers worldwide research-grade Renishaw’s use the for microscope Raman inVia analysis chemical non-destructive and imaging materials. of Its high- speed, high-quality results and upgradeability are valued in fields as biology nanotechnology, as diverse pharmaceuticals. and Neurosurgical planning software Software that allows advanced planning targets of and trajectories for neurosurgery. stereotactic Neurosurgical implants allow that devices Implantable DBS verify expected to surgeons electrode position relative targeted to resonance magnetic using anatomy imaging (“MRI”) for the treatment of movement other disease, Parkinson’s pain. neuropathic and disorders Neurosurgical robot A stereotactic robot that provides a platform solution for a broad neurosurgical functional of range deep including procedures (“DBS”), stimulation brain stereoelectroencephalography neuroendoscopy, (“SEEG”), stereotactic biopsies and is being used trial to the delivery of therapeutics deep the into brain. Checking a processed assay before analysis analyser. sample SA-2000 RenDx the on
up of scanning routines and scanning routines of up ‑ Preparing the RenDx SP-2000 process to a diagnostic assay. custom-made implants Craniomaxillofacial Additively manufactured from titanium, craniomaxillofacial custom-made implants are structural implants that are used in the reconstruction head, a patient’s of face or jaw. required commonly most These are after oncology treatment or as a result trauma.of Dental structures manufacturing service A central manufacturing service that can handle CAD files from a wide variety dental of CAD systems produceto structures for crowns cobalt zirconia, bridges in and temporary for (used PMMA chrome, restorations) and wax, and abutments chrome. cobalt in enables laboratory staff to design staffenables to laboratory abutments and structures for crowns powerful including bridges, and functions. design anatomic Dental CAD software that allows set Dental computer-aided designDental computer-aided (“CAD”) software Dental scanners Dental 3D contact scanners and non- contact optical scanners used for digitising dental of preparations and locations implant of measurement the and frameworks tooth-supported for custom abutments. The product range includesThe product the following:
detail... for more more for here here Open Open w 24
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
OUR MARKETS – DELIVERING SOLUTIONS GLOBALLY The Group has over 70 locations in 33 countries from where we distribute and support products for our global customer base, with 95% of sales outside the UK. We manufacture our products in the UK, Ireland, India, Germany, USA and France.
Our products are used in many applications, the principal markets and relevant key drivers of consumption being the following:
Agriculture Automotive Aerospace Construction Increasing global demand for food Continuing investment in New aircraft production to meet Major infrastructure projects products from developing nations manufacturing capacity to growing global demand for civil driving heavy equipment sales Increasing global demand for biofuels meet growing global demand air transport Skills shortages requiring Greater investment in machinery Improved fuel efficiency New fuel-efficient engines more automation in for intensive farming capabilities requires tighter tolerances with complex parts requiring equipment manufacturers on powertrain components faster measurement Cost efficiencies and automated Improvements to fuel efficiency processes required throughout the by minimising airframe weight supply chain
Power generation Medical Consumer products Resource exploration Manufacture of components for Neurological disorders require Rapid growth in consumer products Equipment manufactured to civil nuclear, wind and solar energy highly precise surgical therapies New technologies prompting flat stringent safety requirements Increasing focus on maximising Growing demand for cosmetic screen factory investment requires accurate, cost-effective and traceable processes output from machinery used in dentistry with superior aesthetics New generations of electronic power generation Need to rapidly diagnose devices demand precision Non-renewable resources require infectious diseases for faster, manufacturing systems exploration in demanding terrains more specific treatments and appropriate surveying tools Global population growth and urbanisation drive long-term demand for fossil fuels 25
Renishaw plc Annual report and accounts 2015 Strategic report Key facilities developments
Stone and Miskin, UK Hong Kong, China Barcelona, Spain Dublin, Ireland Illinois, USA Acquired new 90,000 sq ft Relocated to a larger facility Acquired two buildings Purchased buildings New purpose-built facility facilities in Stone to help with over 26,000 sq ft of adjacent to our current adjacent to our current due for completion by 2016. cope with sustained space. The new premises premises in Barcelona, premises in Swords, Measuring 133,000 sq ft, it business growth. house a larger office providing an additional Dublin, providing an will include offices, training Refurbishment of the space, warehouse and 22,000 sq ft. additional 57,000 sq ft. rooms, a demonstration remaining 125,000 sq ft demonstration area. centre, a service centre, a of factory space in Miskin warehouse and an additive is in progress, including manufacturing centre. an annexe to house the Healthcare Centre of Excellence. Governance Financial statements Shareholder information
North and UK and Continental Other Far East South America Ireland Europe regions 9 Locations 15 Locations 19 Locations 7 Locations 22 Locations Metrology revenue Metrology revenue Metrology revenue Metrology revenue Metrology revenue £89.4m £20.7m £96.2m £10.8m £249.9m Healthcare revenue Healthcare revenue Healthcare revenue Healthcare revenue Healthcare revenue £6.9m £4.8m £6.9m £1.3m £7.8m
93% 7% 81% 19% 93% 7% 89% 11% 97% 3%
Metrology Healthcare 26
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – OVERVIEW
Renishaw saw a year of record site, was officially opened by HRH 31 machine tools delivered in the revenue and profit with a continuing The Princess Royal on 7th July, which second half of the year, providing focus on investments required to together with the refurbishment of other component machining capacity that achieve long-term business growth. buildings at the site, allowed employees will allow us to respond quickly to future This included strong investments from our spectroscopy and calibration projected demand. in R&D facilities, manufacturing products lines to relocate to New Mills In Staffordshire, two adjacent properties capacity, global marketing and during the summer of 2015. We have totalling 90,000 sq ft have been distribution infrastructure, new planning permission to add another acquired to allow Renishaw’s additive product development and the 77,000 sq ft to the new building, all of manufacturing products line to relocate recruitment and training of which will enable us to meet the space from its former premises. The new skilled people. requirements for our projected future facilities include training and lecture growth in R&D resource across all rooms and large R&D facilities, and will Review of 2015 product lines and the necessary growth house our UK additive manufacturing in corporate support functions. Exceptionally high revenue from solutions centre, one of a global network a number of Far East customers, Investment continued in our Miskin that is being established. particularly in the consumer electronics site, where by December 2015 we will Outside the UK, there were further markets, ensured the achievement of have invested or committed almost investments in group facilities, with record revenue and operating profit. £40m in the site acquisition and the acquisition of 57,000 sq ft of After adjusting for these large orders refurbishment, and purchase of plant space adjacent to our existing facilities there was still 11% of underlying growth. and machinery. Towards the end of the near Dublin, providing additional These results provided confidence financial year, refurbishment started manufacturing capacity. In Hong Kong, to continue our strong investments on the remaining buildings at the site, our offices have been relocated to a for the long‑term sustainability of including a 122,000 sq ft production new 26,300 sq ft facility close to the the Group, which included global hall and an annexe which will house a main container port, whilst in Shanghai marketing and distribution infrastructure, new “Healthcare Centre of Excellence” the remainder of the 18,000 sq ft R&D facilities, new product (see page 33). The planning application space acquired last year has been development, manufacturing capacity for 1.74 million sq ft of development at refurbished. In the Czech Republic, and the recruitment and training the Miskin site, including 400,000 sq ft 63,600 sq ft of land has been acquired of skilled employees. for long-term use by Renishaw, has adjacent to our existing premises in recently been approved by the local The year saw a particularly high level Brno, on which it is planned to create planning authority. of capital investment in the acquisition a 43,000 sq ft extension. and refurbishment of property. Both the Miskin and Stonehouse The 153,000 sq ft Renishaw Innovation machine shops have seen significant Centre at our New Mills headquarters further investment in machinery, with
Occupying 9,700 sq ft in the suburb of Mulgrave, our new offices in Australia are in the heart of Melbourne’s technology hub. 27
Renishaw plc Annual report and accounts 2015 Strategic report
Also in Europe, we acquired additional products used in the manufacture of As well as the previously mentioned offices adjacent to our current consumer electronics, but there was investments at Miskin and in Ireland, premises in Spain, providing space also a favourable environment for which increased manufacturing capacity for future growth. position encoders created through and reduced supply chain risk, we also investments in LED manufacture and established Renishaw Tehni ni Inženiring In the USA, we acquired an 11 acre site c the semiconductor sector. d.o.o., a company located within the in West Dundee, Illinois, which will allow Faculty of Electrical Engineering at us to build a 133,000 sq ft facility and Away from the Far East, the Americas the University of Ljubljana, Slovenia. consolidate operations from two existing showed good growth (13%), whilst The new company will design, sites. Land was also acquired in Mexico Europe (3%) and the UK (7%) also develop and supply application- Governance to develop facilities for our expanding experienced modest growth. specific integrated circuits and sensor sales and marketing operations. This spread of growth on a global basis technologies for the Group and RLS, our underlines the strength of our product The skills agenda continues to dominate Slovenian associate company, which will portfolio and distribution infrastructure. discussions amongst engineering provide an alternative controlled source and science-based businesses, so it As already mentioned, there were for custom-designed integrated circuits. was a boost to again be recognised strong business drivers in the Far East During the year, Renishaw Singapore, by The JobCrowd (a UK graduate job electronics sector, but worldwide, the which is responsible for commercial review website) as a Top 3 employer investment in production systems and activities in the ASEAN region, moved of graduates in the UK’s engineering/ processes for key sectors such as to a larger 4,300 sq ft office, offering manufacturing sector. Competition for aerospace, automotive and energy improved demonstration and training the best talent is very strong and there continued during the year. All these facilities. With more manufacturing was again a major drive to develop sectors require Renishaw systems moving into the ASEAN markets, our first younger people that will ensure the to meet their need for ever tighter office in Hanoi, Vietnam, was opened, future success of the business, with a production tolerances and cost controls. with a 2,150 sq ft facility. planned record intake of 70 graduates Financial statements and 44 apprentices this summer. Strategy To meet our key strategic aims, we Market conditions continued to make investments, which This was an exceptional year for this year included focusing on enhancing our Far East business, primarily our manufacturing capabilities and due to large orders from China and continuing to develop a strong market South Korea for our machine tool presence in emerging markets. Shareholder information
New 34,400 sq ft headquarters over two levels at the Shibei Hi-Tech Park in Shanghai’s Zhabei district. 28
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – METROLOGY
Performance Position encoders also exhibited solid Renishaw products are growth, benefitting from investments As already reported, there was in the Far East electronics and deployed in space for exceptional growth for our machine semiconductor sectors, and a global tool products line, but there the first time drive towards industrial automation was also strong growth for our which will increase capacity and measurement automation, styli and flexibility, improve product quality The European Space Agency’s fixturing, and additive manufacturing and reduce manufacturing lead times Sentinel-1A satellite was launched (metal 3D printing) products lines. and costs. Such automation requires from the European spaceport in The measurement automation products the rapid, reliable and accurate French Guiana with Renishaw’s line, which is currently focused on measurement of position between new space-encoder technology the award-winning Equator™ gauge, moving parts, delivered by our encoders. installed on the advanced continues to see high levels of success Optical Communications Payload in the automotive, aerospace and In a similar way as we have dealt with (“OCP”) of the satellite, part of a consumer electronics sectors on a the unpredictable demand for machine revolutionary inter-satellite laser global basis, with integration within tool products, our manufacturing communication system. automation cells continuing to be a investments and expert local support notable trend. organisations have given us an agile The OCP provides an optical Low capability that allows us to quickly Earth Orbit (“LEO”) to Geostationary The additive manufacturing (“AM”) respond to the large encoder orders Earth Orbit (“GEO”) communications products line, which includes the LBC from customers supplying the fast- link through a pair of Laser business in Germany (specialising in AM paced electronics sector. Communication Terminals (“LCT”) by parts manufacture, including conformally space telecommunications company cooled mould tools and tool inserts Market conditions Tesat-Spacecom (“Tesat”) of Backnang, for injection moulding and die-casting Germany. The GEO LCT is currently applications), continues to benefit from Manufacturers around the world accommodated on Europe’s AlphaSat. high levels of investment and integration are continuing the relentless drive to within the Group’s infrastructure, reduce costs, shorten lead times and Space is an exceptionally harsh including the new facility in Staffordshire, improve the quality of finished products. environment that demands encoder more machines for demonstration Renishaw technologies provide them performance and reliability far in facilities and plans for a series of AM with proven solutions to keep machines excess of normal operational limits. solutions centres which will aid adoption running reliably, maximise output from Tesat required a new rotary encoder for of AM technologies by new customers. those machines and significantly reduce the coarse pointing assembly (“CPA”) Renishaw is now being seen as a key the time taken to inspect finished of its second generation LCT, which is player in the sector and we are receiving components. The skills shortages faced essentially a telescope with coherent strong interest from large manufacturers on a global basis in engineering and receiver and transmitter hardware. in a wide range of sectors, including manufacturing are also driving increased The space-encoder, developed in aerospace, motion control, mould and investments in automated processes, collaboration with Tesat, is designed die, medical and motorsport. many of which require products from to withstand operating temperatures across our various lines. A new web shop was introduced during from -40 °C to +80 °C, bombardment the year for the promotion and sales The civil aviation sector continues by solar/cosmic radiation and high of styli, fixtures and other metrology to forecast very positive trends for mechanical loads consistent with rocket accessories, with the site now available Renishaw, with the 2015 Airbus Global launch. Radiation hardening, combined in 14 different countries. Our co‑ordinate Market Forecast predicting a doubling of with Renishaw’s extremely robust measuring machine (“CMM”) products air traffic over the next 15 years and also optical detection principle, resulted line also showed good growth, forecasting that over the next 20 years, in the encoder achieving qualification with the REVO® measuring system some additional 32,600 passenger for an impressive 15 years’ service in continuing to be adopted by some and freight aircraft will be required. a GEO environment. major global automotive businesses. Our products are used heavily in the The space-encoder is installed on both At one manufacturer, an installation of aerospace sector and the continuing rotary axes of the CPA and achieves a seven systems led to an average 45% drive towards more fuel-efficient aircraft resolution of less than 0.5 microradians, improvement in the cycle time to inspect also requires more tightly toleranced with a short-range error of less than engine blocks and cylinder heads, parts, and the “lightweighting” of 0.5 microradians and long-range error leading to an additional eight systems components, hence strong interest of less than 5 microradians. being ordered. in additive manufacturing. 29
Renishaw plc Annual report and accounts 2015 Strategic report Governance
Close-up of rotary space-encoder developed by Renishaw and Tesat-Spacecom, which is utilised on 1 axes 1 and 2 In-space laser communication. Financial statements
2 Shareholder information
Laser Communications Terminal from Tesat-Spacecom. 30
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – METROLOGY CONTINUED
Strategy for growth We also constantly evaluate Other products introduced during the new opportunities for existing or We continue to position Renishaw year for our CMM products line include complementary technologies both to as a “solutions provider” and reduce the PH20 MT system (an entry-level increase sales to our existing customer the risks of over-reliance on large “machine touch” only version of the base and to expand upon that base. customers who integrate our products. market leading PH20 five-axis touch- For example, a 20% stake in HiETA Our measurement automation, AM trigger system), RSP3-6 (a new scanning Technologies Limited was recently and accessory ranges, such as styli probe for the REVO system that enables acquired. The design and delivery of and fixtures, can be supplied direct the use of ultra-long styli up to 800mm additive manufacturing products such to the end-user, whilst we continue to in length to measure deep bores) and as heat exchangers for a range of strengthen our portfolio of hardware UCCsuite software V4.9.2 (CMM control applications, which HiETA specialises in, and software for CMMs that can be software which supports new products will greatly complement our existing AM used to upgrade measuring machines and improvements to CMM calibration). technology and products. Many of the already installed. For example, our new opportunities for AM sales are to existing Additional products for the Equator MODUS 2 software suite is designed to customers who understand Renishaw’s gauging system include a touch-trigger simplify the programming of CMMs and holistic approach to manufacturing and probe kit which gives much shorter cycle supports the full range of measurement also the complementary products that times for certain applications and EZ-IO tasks, from basic manual inspection can assist their part production, such as 4.0, an updated version of software devices to fully automated machines gauging or CMM inspection products. that allows Equator to be more easily with five-axis systems such as REVO®. configured for use in automated cells. A key focus is on developing Key developments An upgrade was also introduced for technologies that provide patented During the year, we launched a new the AM250 additive manufacturing products and methods which support concept in probing, designed to appeal machine, which includes new optical our product strategies, with £55.0m to a more price-sensitive market. control software, a gas knife lens (net of capitalisation costs) expenditure The Primo™ twin probe system (see window protection system and a high- on R&D and engineering during the page 17) offers a low initial cost and a capacity filtration system, all designed year. The current technology focus “pay-as-you-go” approach, which to give faster and cleaner processing includes miniaturised high-resolution is already gaining popularity after of AM parts. position feedback systems, user- initial launches in India and China. friendly metrology software products Also introduced towards the end of Outlook for gauging, co-ordinate measurement the year was Primo LTS, a single-axis We continue to be confident that and calibration, and the development tool setter that allows users to set there will be increased adoption of of AM systems with faster processing tool length, check for breakage and AM technologies by many of our capability and improved process control compensate for thermal growth on existing customer groups, whilst a for large-scale manufacturing. CNC machining centres. continuing recovery in the electronics There have been several new software sector will benefit our position encoder products, all designed to simplify the products line. operation of our metrology products, Growth in the world’s middle-classes, including MODUS 2 mentioned with increasing disposable income, previously. For machine tool probe is also forecast to drive demand in users, GoProbe is simplified software areas such as civil aviation, consumer that requires no prior probing experience products, agriculture, construction and comes with easy-to-use training and power generation (including oil, materials, including a smartphone gas and renewables). These trends app. To make using the Equator should all result in increased demand system similarly straightforward, for our metrology products to help our new INTUO™ gauging software drive efficiencies, reduce waste, requires minimal training and allows a increase automation and aid product programmer to create gauging routines measurement traceability. simply by using the part to be measured and its associated engineering drawing.
Fanbeam® 5 – the laser-based marine dynamic positioning for offshore support vessels. 31
Renishaw plc Annual report and accounts 2015 Strategic report
55% reduction in cooling time increases Kärcher’s productivity
Based in Germany, Alfred Kärcher GmbH & Co. KG (“Kärcher”) and its high-pressure washers with their distinctive yellow cases, are a Governance popular item in households around the world.
More than 2 million units of the basic Original design of mould tool for K2 rear Kärcher K2 pressure washer model yellow case. leave the company’s Obersontheim factory every year. As part of a project to reduce the total cycle time for the manufacture of the K2’s moulded yellow case by at least 20%, Kärcher turned to Renishaw GmbH based in Pliezhausen, Germany. “Our aim was to reduce the cycle time from the original 52 seconds to between 40 and 42 Financial statements seconds”, explained Leopold Hoffer, Kärcher’s injection moulding process co-ordinator. Renishaw carried out a full analysis of the original injection moulding process, where cooling accounted for 22 seconds of the 52 second total Kärcher K2 pressure washer. cycle time and recommended various design improvements to the mould tools, which were adopted by Kärcher. The solution combined a mix of conventional temperature control cooling technology, vacuum-brazed cores and additively manufactured conformal cooling channels that follow Shareholder information the shape of the injection mould tool cavity to achieve rapid uniform cooling. Combined with the re-organisation of external processes, including material feed and handling systems, overall cycle time reduced by almost 30% from 52 seconds to 37 seconds, within which cooling time reduced from 22 seconds to just 10 – a 55% New design of mould tool by Renishaw improvement. Overall daily output of showing additively manufactured conformal the K2 case has risen from 1,496 to cooling channels. 2,101 units. 32
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
MANUFACTURING OVERVIEW
During the last year, manufacturing to metal cutting, where a high degree of tool setting, in-process monitoring and operations have had to support standardisation has been applied to the component validation. Whilst the base Renishaw’s substantial business growth. hardware used to perform machining machine platform has evolved with This has been aided by our sustained operations, since we have an excellent improvements in machine tool technology, long‑term strategic commitment to the understanding of process capability for the fundamental process remains the latest manufacturing technologies and each platform. A secondary benefit to same and is the mainstay of Renishaw’s facilities. The Group has manufacturing this strategy is that it provides the ability standard machining platforms for facilities in the UK (Woodchester to upscale production through duplication, prismatic parts, with 50 RAMTIC systems 165,000 sq ft, Stonehouse 100,000 sq ft, as required, without the need to invent now in operation. There has been Miskin 460,000 sq ft and smaller alternative techniques, and this has been continual and substantial investment in operations at New Mills, Old Town, Stone key to delivering the growth in our turnover the latest manufacturing technologies in and York), Ireland (Swords 70,000 sq ft), in recent years. order to optimise the cost and capability India (Pune 50,000 sq ft), Germany of our manufacturing systems, resulting The same standardisation philosophies (Völklingen 19,000 sq ft), France (Lyon in investment in new equipment in the are applied during product and process 5,500 sq ft) and the USA (Grand Haven UK of £29m in the period between 2010 development to design for assembly 14,000 sq ft). and 2015. and test. Standardisation enables us to Strategy transfer our manufacturing across to other The same approach has also been sites, and during the last year, a number taken with respect to our investments At a strategic level, Renishaw’s of new products have transferred from in assembly-based technologies. manufacturing operations are highly pre-production to the assembly sites in Renishaw has a very broad product vertically integrated. This results the UK, Ireland and India. range that is largely produced in low from our commitment to delivering to medium volumes, but through our exceptional service levels in terms of Long-term investment strategies of standardisation and design delivery, service and product quality Renishaw continues to be committed to for manufacture we have created the to our customers. This approach also significant investment in its manufacturing circumstances to develop and invest in ensures that we are in control of our capability for both the medium and highly efficient and capable assembly costs, quality and many of the supply long term. The Renishaw Automated systems that deliver exceptional process chains that are critical to the success of Mill Turn Inspection Centre (“RAMTIC”) control and efficiencies. The electronics our business. system developed in the early 1990s production facilities utilise the very latest Over many years, we have strived to uses a standard machine tool platform technology capable of placing 40,000 ensure that our products are designed to that has been modified to provide a components per hour, process control optimise manufacturing capability, whether highly efficient manufacturing solution, by using in-line component validation, in relation to our machining and assembly involving a high degree of automation automated optical inspection and processes, or that of third party suppliers. and closed-loop control that is facilitated innovative technology to validate the This is best illustrated by our approach by Renishaw probing technology for performance of assembled printed circuit boards (“PCBs”). Another example is the 33
Renishaw plc Annual report and accounts 2015 Strategic report Governance
MANUFACTURING OVERVIEW
in-house development of automation of delivering exceptional customer service, volatility to demand. As a result, we systems for assembly of certain products our approach has been to maintain as employ a proportion of our assembly in the UK and Ireland facilities, where much control as possible of our supply team on a fixed-term contract basis automation and closed-loop controls chains. This has been achieved through in order to cater for the variations have delivered significant reductions a combination of in-house manufacturing in demand. Employee turnover in process variation, hence providing (including the creation of in-house within manufacturing is below enhanced product quality, as well as capability for critical processes as they 10%, and this stability, coupled
reducing our costs. become financially viable), duplication with a growing business, provides Financial statements of critical processes, dual sourcing and a platform to develop our people We have continued to be proactive strategic long-term partnerships with our within the organisation. In many in providing exceptional facilities third party suppliers. We also have supply cases, employees transfer from within which to conduct our chain management teams based in China, manufacturing into other parts of the manufacturing operations. India and at our manufacturing facilities business to assist other functions, in Ireland. such as new product development or Miskin applications engineering, making best Following the acquisition of the Miskin Our investment in the 460,000 sq ft site use of the experience gained within the facility, we have taken the opportunity at Miskin in 2012 may have been seen manufacturing arena. by some as overly ambitious at the time. to duplicate key processes in order to However, the Board’s confidence in the reduce the risk associated with certain The investment in apprentices and future growth of the business has been critical in-house supply chains, such as graduates is very much in evidence proven to be justified given the business anodising of aluminium components at the manufacturing operations performance since that time and the fact and the assembly and test of electronic at each site. All manufacturing that we are now at 50% occupancy at PCBs. For third party supply chains, graduates and apprentices follow the site. regular monitoring and review takes a well-defined programme that Shareholder information place with a view to determining supply provides exposure to a wide range Refurbishment of the remaining space at risk, dual sourcing strategies and our of functions and technologies such Miskin is currently in progress to provide contractual terms with suppliers, in that we develop well-rounded the necessary space for expansion. order to ensure continuity of supply. individuals with a broad grounding Planning permission for the development in a variety of manufacturing-related of the 193 acre site has recently been People disciplines. Many of our apprentices obtained and includes an additional Consistent with Renishaw’s overall and graduates succeed in developing 400,000 sq ft to provide capacity for philosophies, the manufacturing career paths into more senior our own future expansion requirements. operations take a long-term view engineering and operational roles with regard to development of our within the organisation. Supply chain management people. The movement of the business As a manufacturer operating in a high towards providing end-user solutions mix/low volume situation, with a strategy has introduced a much higher level of 34
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – HEALTHCARE
Performance Research into graphene and other 2D materials, life sciences, medical Bristol Royal Growth came from our medical dental research, pharmaceuticals and and neurosurgical products lines, while Children’s Hospital advanced materials for the green energy spectroscopy grew markedly in the market, require high-performance second half. Bristol Royal Children’s Hospital Raman instrumentation for which (“BRCH”) acquired a Renishaw During the year, the dental products our spectroscopy products are ideally neuromate® robot as a result of the line was re-named “medical dental”, suited. Hybrid systems, combining “Grand Appeal” charity fundraising reflecting the wider portfolio of Raman chemical analysis with the high in 2012. Since then, it has been used products now being developed, spatial resolution of either scanning for several stereotactic procedures, including craniomaxillofacial implants. electron microscopy or atomic force including deep brain stimulation This line saw another record for the microscopy, continue to be in strong treatment for dystonia and the annual production levels of metal demand. Likewise, the growing life delivery of micro-catheters for the dental structures created from cobalt science market is showing renewed treatment of brain cancer in children. chrome powder using Renishaw interest in Raman combined with AM machines, including LaserPFM™ laser scanning confocal microscopy. frameworks (crowns and bridges) and Neil Barua, Clinical Lecturer in LaserAbutments™, which are implant- Market conditions Neurosurgery, explains more about supported custom abutments that Life expectancy is increasing in both the oncology work: “The main type are machine finished for fitment (a developed and developing markets, of brain tumour we treat in children custom abutment is a prosthetic device meaning that key drivers include the is called brain stem glioma. This is inserted into an implant to replace requirement for faster procedures probably the worst kind of cancer you natural dentition and provide functional to reduce waiting times, more can have, and at the moment, children support for a crown). We continue to economical treatments and safer who are diagnosed would be expected benefit from offering dental materials procedures with reduced human errors. to survive between about 7 and that are fully certified and traceable, and Our medical dental and neurological 12 months from diagnosis.” a central manufacturing facility to dental products are well placed to deliver He added, “The brain stem is really laboratories which use non-Renishaw on these requirements. ‘tiger’ country for any kind of surgery, CAD systems. Global economic conditions have seen it’s where the clockwork of the brain An important agreement was reached academic research funding delayed is, and it’s the area where the nerves with DENTSPLY Implants which will or reduced in certain markets while controlling the face, heart rate, blood see this world-leading dental company remaining strong in others, but this pressure and breathing are. If we purchase Renishaw AM machines for improved markedly in the second are going to operate in that area, we the manufacture of dental products. half and the outlook is much more have to make sure we are as safe and accurate as possible.” At the end of the previous financial positive. Global funding for biomedical year, the FDA issued clearance for research, advanced 2D materials and The team at BRCH use the neuromate the marketing of the neuromate® green energy remains strong and our robot and a special version of the stereotactic robotic system in the USA. spectroscopy products are well placed neuroinspire™ planning software and The first installation of the system to service this sector. catheter system (both manufactured was made during the year at Thomas by Renishaw, according to BRCH’s Jefferson Hospital in Philadelphia, Strategy for growth specifications) in a technique called and is now being used regularly in We aim to develop innovative healthcare convection enhanced drug delivery, stereoelectroencephalography (“SEEG”) products that will significantly advance where very fine micro-catheters cases to identify areas of the brain where our customers’ operational performance deliver chemotherapies direct to epileptic seizures originate in epilepsy by maximising research capabilities, the tumour site. patients, with use of the robot reducing reducing process times and improving Neil comments, “Our accuracy is procedure times from eight hours to just the efficacy of medical procedures. typically within 1mm of the planned two hours. A second neuromate system As a key Renishaw focus is to develop catheter target, which helps to make for the USA was delivered to Ohio surgery less risky.” State University Hospital in Columbus technologies that provide patented at the end of the year. products and methods, we invested £8.3m (net of capitalisation costs) of expenditure on R&D and engineering during the year. 35
Renishaw plc Annual report and accounts 2015 Strategic report Governance Financial statements Shareholder information
Neil Barua, Clinical Lecturer in Neurosurgery, planning surgery with the Renishaw neuroinspire™ software. 36
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – HEALTHCARE CONTINUED
The regulatory requirements for Key developments At the end of the year, the medical dental healthcare products demand significant line launched LaserImplants™, custom- During the year, version 4.1 of our investment, but make barriers to entry made craniomaxillofacial implants that neuroinspire™ surgical planning high for competitive products. support reconstructive surgery, typically software was CE marked, making resulting from head or neck trauma, birth Our metrology and healthcare it available for sale in the EU. defects or cancer treatment. This will be businesses are interconnected and we This new version includes significant one of the products that will eventually employ core metrology technologies new functionality, including the ability to be produced at the new “Healthcare and manufacturing expertise to minimise interface with hospital data networks, Centre of Excellence” being created technology risks. This is illustrated very support for SEEG procedures, and at the Miskin site. This centre will have clearly in our dental CAD/CAM scanners importantly, it also integrates with the an ISO13485 quality management and the zirconia milling systems that we neuromate robot, allowing direct control system for the design and manufacture use in our dental structure production, of the robot from surgical plans prepared of medical devices and will operate which utilise proven measurement within the software. additive manufacturing processes to sensors, encoders, software and our At the end of the year, we announced produce medical products. As well knowledge of subtractive machining, the launch of the neurolocate™ patient as design and production facilities, whilst, as mentioned previously, we registration system in countries that the centre will include training and also produce a range of 3D-printed recognise the CE mark. neurolocate is a conferencing suites to showcase metal dental structures on Renishaw frameless patient registration system for Renishaw’s solutions in neurosurgery, AM machines. the neuromate stereotactic robot with dentistry, craniomaxillofacial surgery We also apply AM to an increasing technology based on a robot arm used and molecular diagnostics. number of healthcare applications in connection with an intraoperative including the metal delivery port X-Ray/CT. Outlook of an investigational drug delivery The spectroscopy line released WiRE™ Increased life expectancy on a global system, which is manufactured 4.1 during the year, an updated software basis means greater incidences of using a combination of AM and package that offers improvements in 2D degenerative neurological diseases, conventional machining, and and 3D Raman imaging. There were also which will require surgical therapies. also as part of developments four new applications launched for use With new regulatory approvals we for craniomaxillofacial surgery. with the inVia Raman microscope – two are increasingly well-placed to supply We actively consider acquiring for biological analysis and two for the neurosurgeons with the products and businesses and/or technologies that we material science industry. A new Raman techniques to support such procedures. feel are complementary to our existing demonstration laboratory was opened In developing markets, levels of healthcare products. within the new Renishaw facility in wealth are increasing at a national and Shanghai, featuring an environmentally- individual level, which is driving demand controlled clean room. for higher-quality medical treatments, often requiring more technologically advanced products. The market for Raman spectroscopy continues to grow in fields such as nanotechnology, advanced materials and life sciences.
Automation of a diagnostic assay on the Raman image revealing the chemical SP-2000. compounds of a tablet. 37
Renishaw plc Annual report and accounts 2015 Strategic report
Raman systems used to study 2D materials
Boston University’s Department of Electrical and Computer Engineering (“DECE”) houses the Optical Characterization and Nanophotonics laboratory. Here, Governance research focuses on developing, and applying, advanced optical characterisation techniques to the study of solid-state and biological phenomena, at the nanoscale. The group uses Renishaw Raman spectrometers to measure strain in 2D materials and the friction between 2D materials and their underlying substrates. Anna Swan is an associate professor in the DECE and involved with a research group that is currently focusing on 2D materials, such as graphene, boron nitride, molybdenum disulphide and Financial statements phosphorene. They are interested in how strain, and designed strain fields, can be used to manipulate the electronic and optical properties in these materials. For this work, they are looking at how they can control the boundary conditions and manipulate the extent of friction between the 2D material and substrate. They are using Raman spectroscopy to measure strain, the coupling between strain and Raman shifts, and the friction. Dr Anna Swan of Boston University Dr Swan and her colleagues have with her Renishaw inVia confocal been using Renishaw Raman systems Raman microscope. for a number of years, recently Shareholder information acquiring a new inVia confocal Raman microscope. Their older Renishaw RM1000 system is now connected to different custom-designed chambers, for specific research under environmentally-controlled conditions. The new inVia provides a number of advantages such as easy switching between lasers, fast spectral mapping, automatic alignment and integrated calibration, making it the “go to system” for the lab. High-resolution Raman image of graphene sheet. 38
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – FINANCIAL REVIEW
“The Group has achieved exceptional results with revenue of £494.7m (2014: £355.5m) and a profit before tax more than doubled to £144.2m.”
Allen Roberts Group Finance Director
Financial performance activities has continued in line with group The Group hedges a proportion of its strategy. Profit before tax for the year revenue by the use of forward contracts. It was another record year for group more than doubled to £144.2m (2014: This mitigated the impact of a stronger revenue, which increased by 39% adjusted £70.1m), giving an improved Sterling and contributed to the result from last year’s £355.5m to £494.7m. return on sales of 29%, compared with of a minimal effect of exchange rate Exchange rate changes relative to the 20% last year. fluctuations relative to the previous year. previous year had an overall minimal The net effect of forward contracts effect on group revenue. Revenue increased reported revenue by £11.5m. As with last year, there was substantial Group revenue for the year was The table below shows the analysis of revenue arising from trade with Far East £494.7m, an increase of £139.2m, or group revenue by geographical market. customers in the consumer electronics 39%, over the previous year of £355.5m. industry. Adjusting for these sales, we There was growth of 91% in the Far In our metrology business segment, experienced underlying revenue growth East (88% at constant exchange rates), revenue grew by 43%, from £326.6m of 11% for the year. or an underlying growth of 19% after last year to £467.0m this year. Revenue in our healthcare business The Group has invested heavily in its adjusting for the sales to customers segment was £27.7m, compared with production facilities enabling the Group in the consumer electronics industry £28.9m last year. to meet the high customer demand referred to above. We experienced experienced in the year and also growth of 13% in the Americas (11% A geographical analysis of our metrology providing capacity for future growth. at constant exchange rates), 7% in the and healthcare businesses is shown on Investment in sales and marketing UK and 3% in Europe (11% at constant page 25. resource and research and development exchange rates).
Revenue by region 2015 revenue Change 2015 revenue Change 2014 revenue at actual from at 2014 from at actual exchange rates 2014 exchange rates 2014 exchange rates £’000 % £’000 % £’000 Far East, including Australasia 257,665 +91% 252,993 +88% 134,569 Continental Europe 103,106 +3% 110,891 +11% 100,199 North, South and Central America 96,284 +13% 94,628 +11% 85,562 UK and Ireland 25,499 +7% 25,499 +7% 23,816 Other regions 12,166 +7% 12,166 +7% 11,352 Total group revenue 494,720 +39.2% 496,177 +39.6% 355,498 39
Renishaw plc Annual report and accounts 2015 Strategic report
Profit and tax Earnings per share (“eps”) New product research and development expenditure amounted to £42.3m, which The group profit before tax amounted and dividend compares with £36.3m spent last year. to £144.2m (2014: an adjusted £70.1m, Adjusted eps, excluding the exceptional There have been a number of new the adjustment being for the exclusion item in the previous year, increased product releases in both our metrology of the non-taxable profit of £26.3m from 82.3p last year to 167.5p this year. and healthcare business segments, and on the disposal of our shareholding Statutory eps for the previous year a number of new product introductions in Delcam plc). was 118.4p. are anticipated during the 2016 Statutory profit before tax for the In line with the Group’s progressive financial year. previous year was £96.4m. dividend policy, a final dividend of 34.0p Governance Group headcount In our metrology business, operating net per share (2014: 29.87p) results in a profit was £150.7m, compared with total dividend for the year of 46.5p, an Group headcount has increased from £74.4m last year. In our healthcare increase of 13% over the 41.2p in 2014. 3,492 at 30th June 2014 to 4,112 at 30th business we recorded an operating Dividend cover is 3.6 times (2014: 2.0 June 2015, with the average for the year loss of £6.8m, compared with a loss times when based on adjusted eps). of 3,811, compared with 3,345 last year. of £4.0m last year. The increase during the year of 620 Research and development comprised additional employees of 411 The overall effective rate of tax Gross expenditure on engineering costs, in the UK and 209 overseas. Over half was 15.8% (2014 adjusted: 15.3%). including research and development (316) were in production. The increase in The Group operates in many countries on new products, was £66.1m the UK included 30 apprentices and 58 around the world and the overall (2014: £56.8m). The capitalisation of graduates, and, in addition, we sponsor effective tax rate is a result of the development costs (net of amortisation 77 students at universities across the combination of the varying tax rates charges) amounted to £2.8m UK, demonstrating our commitment to applicable throughout these countries. (2014: £3.5m), giving a net charge in the training and development of skilled In the UK, the tax charge for the the Consolidated income statement people within our engineering and Financial statements current year benefitted from a lower UK of £63.3m (2014: £53.3m). The gross commercial functions. current corporation tax rate of 20.75% charge amounts to 13% of group (2014: 22.5%) and an increase in the revenue (2014: 16%). credit arising from the research and development credit and patent box from Between the business segments, net £2.9m to £5.7m. The previous year’s tax of the capitalisation costs, £55.0m rate benefitted by 2.2% as a result of (2014: £45.3m) was spent in the a reduction in the corporation tax rate metrology segment and £8.3m used for deferred tax calculations from (2014: £8.0m) was spent in our 23% to 20%. healthcare segment.
Working capital £m Capital expenditure £m International Financial Shareholder information Reporting Standards % of revenue 144.7 48.4 (“IFRS”) 27.5 130.5 In accordance with EU law, the 39.2 consolidated financial statements 17.9 of the Company are prepared in 105.1 accordance with IFRS adopted by 97.6 28.0 30.3 the EU. The Company has elected 20.9 16.7 21.1 to prepare its parent company 75.7 21.3 financial statements in accordance with UK GAAP (“Generally Accepted 36.7% 29.3% 16.5 Accounting Practice”). 30.3% 13.6 11.1 6.9 2015 29.4% 2015 2014 2014 Plant and equipment 26.2% 2013 2013 5.4 2012 2012 Land and buildings 2011 2011 40
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PERFORMANCE – FINANCIAL REVIEW CONTINUED
Labour costs increased by 18% to Four regional data centres have been At the end of the year, the Group’s £173.7m (2014: £146.9m) reflecting an established around the Group, further defined benefit pension funds, which annual pay increase, additional bonus enhancing the resilience and efficiency closed in 2007 for future accrual, provision and the cost of the employees of the IT infrastructure. showed a deficit of £48.1m, compared taken on in both 2014 and 2015. with a deficit of £43.1m at 30th Within working capital, inventories June 2014. Defined benefit pension increased to £77.7m from £63.0m at the Consolidated balance sheet scheme assets at 30th June 2015 beginning of the year to support growth increased to £140.5m from £129.8m The Group’s shareholders’ funds at in revenue and our policy of holding at 30th June 2014, representing the end of the year were £431.2m, an finished stock to maintain delivery investment performance during the increase of £78.4m over the £352.8m at performance given our short order book year. Pension fund liabilities increased 30th June 2014, arising from an increase of approximately five weeks. in retained reserves. from £172.8m to £188.6m, reflecting Trade debtors increased from £81.8m the market rates at 30th June 2015 Additions to tangible fixed assets totalled to £101.2m as a result of higher fourth and the effect of applying IFRIC14 £48.4m, of which £20.9m was spent quarter revenue and a small increase to the guarantee provided by the on property and £27.5m on plant and in debtor days from 63 in 2014 to 67 Company in respect of the UK pension machinery and IT equipment. in 2015. scheme deficit. The main property additions were: Cash balances at 30th June 2015 were The Company has given a guarantee • at New Mills, the 153,000 sq ft £82.2m (2014: £43.6m), in addition to relating to recovery plans for the UK Renishaw Innovation Centre was which is the pension scheme escrow defined benefit pension scheme deficit, completed and occupied during account of £14.7m (2014: £9.5m). which is supported by registered charges over certain UK properties and the year; As noted below under Treasury policies, the escrow account. The application the Group uses forward contracts to • also in the UK, our additive of IFRIC14 increased pension scheme hedge against future foreign currency manufacturing products line liabilities by £10.2m (2014: £8.0m). acquired larger premises at Stone, inflows. At the end of the year, these in Staffordshire, which facilitates contracts, which mature over the next For the UK and Irish defined benefit research and development expansion, three and a half years, showed a gain pension schemes, a guide to the a customer solution centre and of £17.2m, net of tax, when re-valued sensitivity of the value of the respective service facility as well as providing at the year-end, compared with a liabilities is as follows: capacity for materials development; gain of £25.6m at the start of the year, with movements reported through the • in Ireland, the Group acquired currency reserve. additional premises adjacent
to our existing facility, for future Valuation sensitivity Variation Approximate effect on liabilities production expansion; UK – discount rate Increase/decrease by 0.5% -£18.2m/+£21.2m • in Spain, the Group acquired UK – future inflation Increase/decrease by 0.5% +£16.0m/-£14.4m additional premises, also adjacent to our existing facility, for future Ireland – discount rate Increase/decrease by 0.5% -£1.2m/+£1.5m expansion of the sales and marketing Ireland – future inflation Increase/decrease by 0.5% +£1.5m/-1.3m activity; and • in the USA, Czech Republic and Mexico, land was purchased for the build of larger premises for our expanding sales and marketing operations. 41
Renishaw plc Annual report and accounts 2015 Strategic report
Treasury policies Also, currency contracts are used to minimise the interest cost of maintaining The Group’s treasury policies are the currency borrowings. The foreign designed to manage financial risks currency borrowings are short term to the Group that arise from operating with floating interest rates. The Group in a number of foreign currencies and does not speculate with derivative to maximise interest income on cash financial instruments. deposits. As an international group, the main exposure is in respect of foreign See note 22 for an analysis of cash balances and currency borrowings currency risk on the trading transactions Governance undertaken by group companies and at the year-end. on the translation of the net assets of overseas subsidiaries. Investment for the future In recent years, the Group has made The information below includes a number of small niche-market disclosures which are required by IFRS acquisitions, which have broadened the and are an integral part of the financial Group’s range of products and markets statements. Weekly group-wide cash in both our metrology and healthcare management reporting and forecasting businesses. We have also invested is in place to facilitate management significantly in expanding our research of this currency risk. The operations and development resources, production of group treasury, which is situated at capacity and our marketing and support head office, are governed by board- infrastructure. We will continually look approved policies. to the long-term growth of the Group All Sterling and foreign currency and to invest in R&D, manufacturing balances not immediately required for and production processes to ensure Financial statements group operations are placed on short- capacity for the future, and expand our term deposit with leading international marketing and support presence around highly-rated financial institutions. the world. The Group uses a number of financial instruments to manage foreign currency risk, such as foreign currency Allen Roberts borrowings to hedge the exposure Group Finance Director on the net assets of the overseas 29th July 2015 subsidiaries and forward exchange contracts to hedge a significant proportion of anticipated foreign currency cash inflows. There are forward contracts in place
to hedge against the Group’s Euro, US Shareholder information Dollar and Japanese Yen cash inflows. 42
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
The Group’s long-term aim is to achieve sustainable growth in revenue and profits in order to provide an increasing dividend to shareholders. This is to be achieved through substantial investment in people and research and development of new products and processes, acquisition of niche businesses complementary to and supporting the Group’s strategic development aims, the application of technologies into different market areas and the development of its global marketing facilities. The main performance measures monitored by the Board are:
Financial KPIs
Revenue growth £m Total engineering costs Adjusted earnings Dividend per share including research and per share pence pence development £m Included in the Consolidated income statement Gross expenditure
494.7 167.5 46.5 66.1 63.3 41.2 56.8 40.0 355.5 53.3 346.9 51.8 38.5 48.7 331.9 47.9 82.3 88.9 35.0 45.0 95.6 288.7 40.0 88.5 37.1
2015 2015 2014 2015 2015 2014 2014 2014 2013 2013 2013 2013 2012 2012 2012 2012 2011 2011 2011 2011 Related strategic priorities:
1 to 8 1 2 3 7 1 to 8 1 to 8 We are focused on growth in The growth of the business In order to provide an increasing We aim to achieve significant revenue, through increasing is fundamentally dependent return to shareholders, along long-term returns to shareholders our market and geographic on the continuing investment with retaining adequate funds by maintaining a progressive penetration and continually in engineering costs for the for reinvestment in the business, dividend policy, whilst maintaining introducing new products. development of new products we aim to achieve year-on-year a solid capital base with sufficient We have also made a number of and processes. The Group growth in earnings per share. working capital to support the acquisitions over the last five years continues to make significant forecast growth. which expand our product range investment in future products, and will support revenue growth with engineering costs equal by using the Group’s worldwide to approximately 13% of group marketing and distribution revenue, and has also been infrastructure to expand accelerating new product these businesses. development in certain areas. KPIs are linked to strategic priorities; please see pages 6–9 for more information. 43
Renishaw plc Annual report and accounts 2015 Strategic report Governance
A number of our graduates on a team-building exercise as part of their induction programme.
Non-financial KPIs
Employee turnover % Number of apprentices in Training Health and safety training
UK average employee turnover Number of new placements Total lost working time injuries per
and members of the graduate 100,000 hours worked Financial statements Renishaw employee turnover and apprenticeship schemes
10.0% 114 0.05
105 105 108 9.5% 8.0% 9.3% 8.0%
94 0.04 0.03 71 5.7% 0.03 70 5.0% 80 68 5.5% 51 6.0% 85 0.02 55 3.2% 40 33 40 40 2015 2015 24 2015 2015 30 2014 2014 25 2014 2014 2013 2013 2013 2013 20 New placements
2012 2012 2012 2012 Shareholder information 2011 2011 2011 New graduates 2011 New apprenticeships Related strategic priorities:
1 to 4 1 to 4 1 to 4 1 3 We continue to train, develop We believe in the need to provide Our strategy is to grow organically In a manufacturing environment, and reward our employees many options for career entry for and therefore developing students it is crucial that we maintain so that we retain skilled and young people, and we are proud and taking on apprentices and high standards of health and effective teams of people. of our apprentice programme graduates forms a key element safety. Our aim is to have zero Our aim is to maintain a UK and the success it has achieved, of this strategy. Dependent on fatalities and zero lost working employee turnover rate which both for the apprentices that economic conditions, we propose time injuries. is below the UK average have trained with us, and for to increase year-on-year the for the manufacturing and Renishaw by solving skills number of new apprenticeships, production sector. gaps. In a period of growth, we graduates and student intend to increase the number of placements we take on. apprentices taken into training each year. 44
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
Current trading levels and order book Revenue growth is unpredictable and Potential impact Mitigation orders from customers generally involve Global market conditions continue to highlight • The Group is expanding and diversifying short lead-times with the outstanding risks to growth and demand, which can lead its product range in order to maintain order book at any time being around to fluctuating levels of revenue. a world-leading position in its sales of one month’s worth of revenue value. metrology products. Investment in sales Whilst global investment in production and marketing resources continues Related strategic priorities: systems and processes is expected to in order to support the diversified expand, future growth is difficult to predict, product range. 2 4 5 6 8 especially with such a short-term order book. This limited forward order visibility leaves the • The Group is applying its measurement annual revenue forecasts uncertain. expertise to grow its healthcare business activities. • The Group regularly monitors the integration of acquisitions which expand its product range in new and complementary market sectors.
Research and development The development of new products Potential impact Mitigation and processes involves risk, such as Being at the leading edge of new technology • Patent and intellectual property development timescales, meeting in metrology and healthcare, there are generation is core to new the required technical specification uncertainties whether new developments will product developments. and the impact of alternative provide an economic return. technology developments. • R&D programmes are regularly reviewed against milestones and forecast business Related strategic priority: plans and, when necessary, projects are cancelled. 2 • Medium to long-term R&D strategies are reviewed at least annually by both the Board and Executive Board. • New products involve beta testing at customers to ensure they will meet the needs of the market. • Market developments are closely monitored.
Supply chain management
Customer deliveries may be threatened Potential impact Mitigation by a failure in the supply chain. Inability to meet customer deliveries could • Production facilities are maintained with result in loss of revenue and profit. fire and flood risk in mind. Related strategic priority: • Critical production processes are 3 replicated at different locations where practical. • Ability to flex manufacturing resource levels and shift patterns. • Regular vendor reviews are performed for critical part suppliers. Note: the unprecedented demand for our • Stock policies are reviewed by the Board products this year has tested a number of on a regular basis. these mitigating controls and demonstrated the Group’s ability to react to such demand. • Product quality is closely monitored. 45
Renishaw plc Annual report and accounts 2015 Strategic report
Regulatory legislation for healthcare products The expansion of the Group’s business Potential impact Mitigation within the healthcare markets involves • Specialist legal, regulatory and quality a significantly increased requirement to Regulatory approval can be very expensive and time-consuming. This area is also very assurance teams are employed to obtain regulatory approval prior to the complex and there is a risk that the correct support the healthcare business. sale of these products. approvals are not obtained, which could result in loss of revenue and profit. • Experience of healthcare regulatory Related strategic priorities: matters exists at board level. • Healthcare operations in the UK and Governance 2 5 6 France have ISO13485 certification for their quality management systems, with Ireland and other subsidiary healthcare operations falling under the UK quality management system.
Defined benefit pension schemes Investment returns and actuarial Potential impact Mitigation valuations of the defined benefit • The investment strategy is managed pension fund are subject to economic Volatility in investment returns and actuarial assumptions can significantly affect the by the pension fund trustees, who and social factors, which are outside the defined benefit pension fund deficit, operate in line with a statement of control of the Group. impacting on future funding requirements. investment principles. Financial statements Related strategic priority: • Recovery plans are in place for the 2006, 2009 and 2012 actuarial valuations. 1
Treasury
Fluctuating foreign exchange rates may Potential impact Mitigation affect the results of the Group. Shareholder information With over 94% of revenue generated • The Group enters into forward contracts outside of the UK, there is an exposure to hedge varying proportions of Related strategic priorities: to major currency fluctuations, mainly in forecast US Dollar, Euro and Japanese respect of the US Dollar, Euro and Japanese Yen revenue. 1 6 Yen. Such fluctuations could adversely impact the Group’s income statement and • The Group uses currency borrowings to balance sheet. hedge the foreign currency denominated assets held in the Group’s balance sheet. 46
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY
“With the introduction of our CSR strategy last year, we have spent this year consolidating and improving a number of our processes. We have seen increased engagement from our people across a range of CSR-related activities, particularly on waste, charity and community activities, throughout the Group. We are pleased to have achieved a number of our CSR targets. We are capturing data from more sites than ever to reduce our reliance on industry average data and increase the accuracy of our waste and Greenhouse Gas (“GHG”) footprints. We have shown continued growth within the business, in the building space we occupy, the number of employees and our production levels. However, we have still achieved an absolute reduction of waste to landfill and a reduction of GHG emissions per £m turnover. We are pleased with the advancements made throughout this year, and will continue to strive for further progress. In this period of growth, a record number of apprentices are now in training and we have invested more than ever in developing our people.”
Ben Taylor Assistant Chief Executive
Strategy update Our strategy continues to be appropriate for the Group. In this report, we By focusing attention on our strategic concentrate on progress on our goals over this last year, we have manufacturing and training targets on been able to target areas with the page 47, and we will be posting updates greatest impact. A key focus has on our progress against all our CSR been on improving our efficiencies targets on the website. in manufacturing through waste and energy management. In addition, we have reduced the GHG footprint of our business travel this year; this is due to increasing control on the flight bookings process and significant investment in videoconferencing facilities. 47
Renishaw plc Annual report and accounts 2015 Strategic report
Progress on selected CSR targets: Targets Progress Waste management P • We implemented a new waste strategy in February 2014, focused on segregation at source. 59% • Our Carbon Trust waste certificate covers reduction of waste to landfill from UK operations. roughly 90% of our generated waste. Governance 5% • Less than 4% of our waste is sent to landfill. reduction of waste to landfill from • Just over 2,487 tonnes of waste were 96% UK operations of all waste diverted from landfill. diverted away from landfill this year.
Energy P • First solar array commissioned this year. • Second solar array planned with a 123,056 further generating capacity in excess of 220,000 kWh. kWh renewable energy generated to date. Solar array with an annual generating capacity Investigate business case for the • The replacement of lighting systems with investment in renewables lower energy options have a potential in excess of kWh has annual saving of 656,000 kWh. 280,000 Financial statements been installed.
GHG emissions P • 38% reduction in GHG emissions from gas consumption.
3% • 28% reduction in GHG emissions from 13% business travel. reduction in GHG tCO2e per million pounds turnover reduction in GHG tCO2e per million pounds compared to 2014. turnover compared to 2014 • Over £2m invested in energy reduction activities. Shareholder information
People P • 4,112 people employed globally, an increase of 620 since last year. • First graduates from our apprenticeship 8% of our UK workforce programme in Germany. (5% globally) are on structured • Over 200 people across the Group apprenticeship or graduate programmes. on formal apprenticeships and 5% graduate programmes. of our UK employees as apprentices, graduates or sponsored students on structured programmes 48
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
People female. There are nine directors on the local businesses, a sports and social Board, consisting of seven males and club, subsidised restaurants at our key Diversity two females. The senior management UK locations and a crèche at our facility Renishaw enjoys the advantages group is made up of 52 people, of in Pune, India. of being a global company. With 26 which 49 (94%) are male and 3 (6%) nationalities represented in our senior are female. Renishaw regards its senior Communication and participation management group, we benefit from management group to be the Executive As a group that operates in a large their understandings of different cultures Board, the heads of each product number of territories across the globe, and acknowledge the advantages that line, sales territory and manufacturing we recognise the need for clear and these varied experiences bring to the organisation who report directly into the open communication across the business. We work hard to promote Executive Board and the directors of business between sites, functions and a workplace that encourages open Renishaw’s subsidiary undertakings. levels of management. Our flat structure communication and innovative thinking; encourages employees to voice their as we encourage this, we are able to Employee retention ideas or concerns to management and ensure our people feel valued and can We have continued to promote we have had many excellent ideas as a achieve their career goals. career development within Renishaw result of this open dialogue. To facilitate and to provide an excellent working the dissemination of top-down Like many engineering companies, environment. Our UK employee information and to keep the employees Renishaw has a majority of male turnover rate is 5.7% (2014: 5.0%), abreast of developments within the employees, but we are working hard to which continues to be significantly business, regular communication encourage females into an engineering lower than the UK manufacturing meetings are held where a board career through our educational outreach industry national average of 10%. member is present. These also give programmes (see the Education section an opportunity for an open discussion on pages 52–54 for more information). To ensure we reward our employees’ between employees and a member Over the last two years, we have loyalty and hard work, we regularly of the Board. Communications are employed 80 apprentices and 138 hold pay reviews and benchmark supported by presentations of the graduates, and of these, 193 (89%) are our salaries against those within the annual and half-year financial results male and 25 (11%) are female. We have engineering sector. We have a group given by the Assistant Chief Executive 114 people on apprentice programmes, performance-based bonus programme at our larger locations, supplemented which, combined with graduates, based on group profitability for all by videoconference presentations for represents 5% of all employees. qualifying employees. smaller remote sites. On 30th June 2015, we employed 4,112 We offer on-site fitness suites, people across the Group, an increase appropriate flexible working (to of 620 since last year. Of these, 3,142 encourage a good work-life balance), (76%) are male and 970 (24%) are discount schemes with a number of
Our first graduate and apprentices from our apprenticeship programme in Germany. 49
Renishaw plc Annual report and accounts 2015 Strategic report
We continue to encourage our people for September 2015. A further 70 new Human rights to communicate any suggestions and graduates also start with Renishaw this A strict non-discrimination policy is ideas they may have, to either their summer (2014: 68). embedded into our Group Business management teams or the Board The quality of our apprenticeship Code, which states the minimum directly. A suggestion scheme enables and graduate programmes is widely standards of operation expected within employees to submit ideas. We value recognised through external award the Group and our representatives. these suggestions and their suitability schemes. We also award our own This Code sets out our position that for adoption are assessed, with awards Apprentice of the Year prizes. all employees have the right to non- given for the best ideas received. discriminatory treatment and equal In addition, there is an inventors’ award We are a founding member of the 5% opportunities, and to work in a safe and Governance scheme for individuals who are named Club, a UK industry-led campaign to secure working environment with a fair as inventors on granted patents. increase the recruitment of apprentices wage. Proper consideration is given to and graduates, the members of which applications for employment from all Training and development commit to ensuring that 5% of their UK ethnic backgrounds and from those We value our highly skilled people and workforce are apprentices, graduates with disabilities. Opportunities are given recognise that retaining them is essential or sponsored students on structured to employees who become disabled to the future of our business; as such, programmes within the next five years. to continue in their employment or be we place a large emphasis on ensuring We are happy to report that against a trained for other positions. We reject our training programmes continue. backdrop of a significant increase in the use of compulsory, forced and child our people of 620 over the past twelve We have long held the view that labour. We communicate this Code to all months, we have maintained 8% of investing in people enables us to potential suppliers and require appointed our UK employees (5% of our global acquire the necessary talent to grow suppliers to work to the spirit of this employees) on structured apprenticeship the business and mitigate the impacts Code. The full Code can be found at or graduate programmes, helping to of a general skills shortage. This is www.renishaw.com/en/renishaw-group- ensure the future of our highly skilled evidenced by our apprenticeship and business-code--14444. Financial statements people across the Group. sponsored student schemes that we started in 1979 and 1984 respectively. This summer, some 105 (2014: 105) students entered Renishaw for paid placements – 60 summer placements, 40 one-year industrial placements and 5 pre-university placements. There are 114 craft and technical apprentices currently in training (2014: 105) with 3 in our German subsidiary for the first time, and 44 new starters confirmed Shareholder information
Having joined Renishaw as an apprentice aged 16 and later gaining a first-class engineering honours degree, Lucy Ackland (left) won the national Women’s Engineering Society Prize award for her work engaging young children with STEM activities. 50
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
Community Association, the Association of British We continue to sponsor Ben Morgan, Healthcare Industries, the European the Gloucester and England rugby With an increasing global footprint, we Society for Precision Engineering & international, who this year presented recognise the positive contribution that Nanotechnology, Verein Deutscher our Apprentice of the Year Awards. can be made to our local communities Werkzeugmaschinenfabriken e.V. through varied interactions with local In Germany, we continue to sponsor (Germany) and UCIMU-SISTEMI PER residents, businesses, schools and Handball-Bundesliga team HBW PRODURRE (Italy). We also support not-for-profit organisations. This is Balingen-Weilstetten, which is based local chambers of trade and business especially true in the west of England, in an area where many of our major networking groups. where we are one of the region’s customers are located. largest employers. We are also a member of various With significant public interest in 3D industry research centres across the In many of our markets, we printing, we have collaborated with globe, some of these include The communicate a positive story about individuals and organisations on a Manufacturing Technology Centre (UK), the role played by science, engineering range of projects, including the creation the Advanced Manufacturing Research and manufacturing to enhance the of a titanium public arts installation in Centre (UK), Canada Makes (Canada), lives of the general populace and the Folkestone, Kent, and the manufacture PräziGen (Germany), Light Alliance attractive nature of a career within these of a prosthetic plastic hand for a young (Germany) and BazMod (Germany). sectors. We see this as vital to overcome man whose mother approached us, perceptions about career options in We continue to sponsor and help judge having read about our expertise. these areas and to ensure a strong a range of regional and national business As reported in last year’s report, we pipeline of future talent, not just for our award programmes that help encourage produced an innovative 3D-printed bike own needs, but also for our wider supply and recognise business and individual frame for Empire Cycles, which has chain and customer base. excellence. Ben Taylor is a judge for been exhibited across the globe and is the West of England Business Awards, now recognised by the Guinness Book During the past year we have hosted whilst Head of Communications, Chris of World Records as the first of its kind. tour groups and given talks to a range Pockett, helped judge the Manufacturing of organisations including primary and Excellence Awards organised by the secondary schools, universities and Institution of Mechanical Engineers and colleges, business clubs and societies. the main business awards programmes This includes our subsidiaries in Italy in Bristol and Gloucestershire. and Spain, which are increasingly active with higher education establishments. To further our aim of establishing With an increasing profile, we are also awareness of Renishaw as a significant regularly asked to give interviews to regional employer, we continue to international, national and local media, sponsor a wide range of festivals, sports and contribute our knowledge through clubs and organisations in the west of debates on a range of topics including England and South Wales. During the manufacturing, exports, education, year we became the first corporate human resource management, partner of a project which aims to raise innovation and 3D printing. funds for “Being Brunel”, a new public museum that will celebrate the life and Senior directors, including Sir David achievements of the great engineer McMurtry, Ben Taylor and Geoff Isambard Kingdom Brunel, which is McFarland, are regular speakers at scheduled to open in 2017. conferences and business/community events. In the past year, this has In South Wales, we have advertising included keynote presentations on the boards at the Liberty Stadium, home future of manufacturing, innovation to the Ospreys rugby club and Premier and automation. League football club, Swansea City. We also sponsor Swansea City We continue to actively support Renishaw-sponsored ‘Arabian Lights’ was footballer Ki Sung-Yeung, who plays the business community regionally, one of 70 giant Shaun the Sheep sculptures internationally for South Korea, an nationally and internationally, that formed part of the Shaun in the City important market for our products. through membership of trade Bristol trail, raising funds for the Bristol Royal and lobbying associations such Children’s Hospital. as the Confederation of British Image courtesy of charity no. 1043603. Shaun in Industry, the Dental Laboratories the City © & ™ Aardman Animations Ltd 2015. 51
Renishaw plc Annual report and accounts 2015 Strategic report
Charity During the year, the RCC made donations totalling just under £100,000 In the UK, the Renishaw Charities to a diverse range of over 200 Committee (“RCC”) was formed organisations. Beneficiaries included in the 1980s to distribute funds to disability support groups, primary and Donations charitable and voluntary organisations Just under secondary schools, counselling and and support the individual fundraising carers support groups, hospice care efforts of all UK employees. The RCC organisations, animal sanctuaries, is made up of representatives from medical research groups, church Renishaw’s main Gloucestershire sites restoration funds and senior Governance £100,000 and has a particular focus on assisting citizen groups. donated to local organisations organisations that help enrich the lives (www.renishaw.com/charity) of children and adults, from toddler The RCC fully matches funds raised groups and sports clubs, through to by employees for UK national initiatives organisations that support the disabled such as Movember, Comic Relief and and the bereaved. Wear it Pink, including £2,500 raised for Children in Need. A separate fund is also administered by the RCC, which donates monies During the year, significant donations of to aid the victims of global disasters, £2,000 or more were made by the RCC from which, during the year, a £10,000 to eight organisations, including support donation was made to the Disasters for capital projects at Minchinhampton Emergency Committee which Rugby Club and Kingswood co‑ordinated UK fundraising for victims Football Club. of the devastating earthquakes in Nepal. Financial statements Shareholder information
Renishaw’s Indian subsidiary gave funds to provide a swimming pool hoist for disabled children.
The GreenTeam, based at the University of Stuttgart, and Renishaw GmbH collaborated to develop and additively manufacture optimised wheel carriers for a Formula Student racing car, reducing the overall weight of the car by 1.5 kg and making it their lightest vehicle to date. 52
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
Renishaw India is also highly Despite these encouraging signs, the Renishaw has continued to target these supportive of its local community and rate of change in the growth of supply influencers over the last year. As part during the year has given significant is far too slow to meet the forecasted of the week-long Stroud Festival of grants to three non-governmental demand for engineering skills in the UK. Manufacturing and Engineering, we organisations based in Pune, supporting hosted and co-organised with other There are also some significant UK exploited women and disabled and local engineering and manufacturing population challenges in the coming disadvantaged children. companies an event entitled “Girl years that will affect the pool of Power”. This was held on a Saturday One of these organisations is Balkalyan students available for progressing into with girls between the ages of 14 and 18 Sanstha, which was established in apprenticeships and higher education. invited to attend a series of workshops, 1979 to provide entertainment and The number of 14-year-olds is set to activities and talks, and importantly, recreational facilities for disabled children fluctuate significantly, falling by 7.3% they had to be accompanied by a in Maharashtra State. It was given funds between 2012 and 2017 before jumping parent who shadowed their daughters by Renishaw to replace 35-year-old by 15.9% five years later. The number all day. Feedback suggested that playground equipment and provide a of 18-year-olds will decrease by 8.9% parents’ minds can be changed hoist that enables children to enjoy the between 2012 and 2022. about encouraging their daughters local swimming pool. Funding was also There remains a disappointing negativity to pursue an interest in engineering. given to Chaitanya Mahila Mandal, which towards the engineering sector amongst Feedback from the girls was cares for women (and their children) who the influencers of young people, with equally encouraging: are victims of sexual exploitation and 17% of STEM teachers believing that a trafficking – funds helped purchase an career in engineering is undesirable for ambulance, a toilet block and furniture “It has really opened their students. Furthermore, only 36% for a computer training centre. of STEM teachers felt confident giving up my eyes to what Education engineering careers advice (Engineering I could be doing when UK report 2015). There is growing consensus regarding I am older and has really the importance of science, technology, Targeting the influencers of young inspired me.” engineering and mathematics (“STEM”) people with up-to-date, accurate and education, skills and careers advice. non-stereotypical information about The perceptions of engineering are the range of engineering and STEM- improving and the numbers studying related careers is essential in persuading engineering in the UK are increasing. students to persist with STEM subjects throughout school, university, apprenticeships and employment.
A group of children from Old Sodbury Primary school looking at Renishaw apprentices proudly showing off their Greenpower cars. Renishaw products in the Renishaw Innovation Centre. The Greenpower Education Trust promotes sustainable engineering to young people. 53
Renishaw plc Annual report and accounts 2015 Strategic report
“It has helped me learn The project is now available nationwide Renishaw has long-standing links with for teachers to download from the DATA a number of key regional universities what sort of person I am website, and we have supported two that have some of the highest levels and what job would best other schools in 2015, enabling their of student retention in the UK, and teachers to learn the skills to pass on to therefore more likely to take up jobs in suit me. There are no limits their students. our catchment areas after graduation. in engineering.” We have a number of employees We have continued to offer all our who act as visiting professors at new graduates and second-year Another way of influencing teachers is these and other universities, with apprentices the opportunity to be STEM to increase their skills and awareness projects taking place at a large Governance ambassadors. We now have over 100 with respect to the latest technology. number. Examples include Bath and ambassadors at Renishaw and each The National Foundation for Educational Bristol universities where we have a must carry out at least one STEM Research found that the quality of STEM number of research projects, PhD and activity each year, which helps to sustain courses for 16-year-olds and over is undergraduate projects, whilst at Cardiff and grow our multiple initiatives with being undermined by a lack of time University we sponsor the Trevithick schools and universities, including talks that tutors have to develop their skills Library, the Renishaw Metrology and lectures, career fairs, after-school and knowledge in line with the pace of Laboratory and several PhD and clubs and STEM projects. change in their subject areas. undergraduate students. We have also We continue to develop relationships made significant efforts to re-establish During the year, we carried out a pilot with key universities that have been teaching of a manufacturing course, with project in conjunction with the Design identified as having relevant courses for close collaboration on the development and Technology Association (“DATA”) our business needs. This includes the of academic content. There are a to tackle the skills gap of design and sponsorship of engineering societies number of research projects and a technology teachers at Marling School in and engineering teams that design, metrology laboratory at Heriot-Watt Stroud. Steve Berry, head of design and build, test and race a small-scale formula University, and we have established technology, Marling School, said, “It was Financial statements style racing car in the global Formula a relationship with the University of brilliant and inspiring for staff, particularly Student competition. Loughborough, whereby a number of those with no previous programming their students apply to Renishaw for experience who did not believe how summer and industrial placements. much they could achieve. Being guided by experts, with up-to-date industry experience, was invaluable.” Shareholder information
Over100 STEM ambassadors each carrying out at least one STEM activity per year The six winners of the national Renishaw Pupils from the SS Great Britain Future Engineering Experience competition on the Brunel’s programme being shown BBC Breakfast sofa. electrode implantation procedures for deep brain stimulation. 54
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
After an invitation from the Ministry This year, through the DLG, we made a Environment of Education, Culture and Sport in major contribution, along with a number We recognise that improving the Spain, Renishaw Ibérica returned of other large engineering companies, operational efficiencies of our locations as a key sponsor of the 35th annual to develop a guidance document for across the world contributes to the SpainSkills competition in Madrid (part work experience students. Many small sustainable growth of our business. of the WorldSkills global career skills and medium-sized enterprises (“SMEs”) We continue to work hard on ensuring competition). As well as supplying an are deterred from taking on a student the impact of our business activities Equator™ gauging system, Renishaw for work experience, yet this is a is as low as practical. Through our sent highly experienced employees to major contributor to a young person’s assessments, we have seen that the provide guidance for the teams. career choice. There is also emerging areas of our operations with a significant evidence that work experience plays We continue to work with industry impact are energy consumption and a part in supporting admissions to leading organisations and engineering waste generation. We also recognise higher education. peers to advise the UK government that our business travel and product on national policy that will benefit the The DLG aims to encourage SMEs shipments make a significant sector in general. For example, we are to offer experience to students contribution to our carbon footprint. members of the Royal Academy of from their local schools, and the Engineering’s Leadership and Diversity guidance document was published Board (“DLG”) which has been set-up in summer 2015. to help remove barriers and encourage more women and other under- represented groups into engineering.
First solar array was commissioned on the new RIC building this year, with an annual generating capacity in excess of 280,000 kWh. 55
Renishaw plc Annual report and accounts 2015 Strategic report
We have normalised our carbon This year, we have undertaken a We recognise that we are legally obliged emissions by turnover (tCO2e/£m). number of projects that have been to report on Scope 1 and 2 emissions Whilst, as a result of the growth in completed or are ongoing. We have (as defined by the Greenhouse Gas our business, we have had an overall commissioned our first solar array that Protocol). However, through analysis, it increase of GHG emissions, we have has an annual generating capacity in is evident that our Scope 3 emissions achieved a 13% tCO2e/£m reduction excess of 280,000 kWh. This array is amount to a significant proportion of compared to the previous financial year. on the new Renishaw Innovation Centre our carbon footprint. We will continue to (“RIC”) building located at our New Mills disclose our Scope 1, 2 and significant To ensure the impact of our business headquarters. During the construction Scope 3 emissions and to put efforts activities is minimised as far as of the RIC, we were able to work with into improving data quality, the scope of Governance practical, we continue to maintain our contractors and set the floor level data and expanding our Scope 3 data our environmental management to optimise the cut and fill so that no capture, to enable a more complete system (“EMS”), which covers our UK subsoil was required to be removed picture of our GHG emissions. manufacturing and head office sites. from site. The subsoil was re-used Through regular EMS meetings, we In the year, our total GHG emissions and stabilised using a lime-mix to form co-ordinate activities to minimise our for our Scope 1 and 2 emissions a solid base on which to construct, environmental impact. (statutory disclosure) were 22,914.26 negating the need for 5,000 tonnes of tCO e. Our significant Scope 3 freshly quarried stone. Removing the 2 emissions (voluntary disclosure) were need to dispose of 4,500 tonnes of 24,434.17 tCO e. subsoil and delivery of stone avoided in 2 excess of 520 lorry journeys. The RIC To calculate our GHG emissions, we contains over two acres of carpeting have used the GHG Protocol Corporate with a recycled content of over 62%, the Accounting and Reporting Standard equivalent of around 24 tonnes of waste (revised addition), data gathered for diverted from landfill. our CRC submission and the UK Financial statements government’s GHG reporting guidance Through refurbishment and maintenance as the basis of our methodology and programmes, we are gradually using the source of GHG emissions factors. more energy efficient forms of lighting, Our GHG emissions are based on with installations during the year Reduction of carbon emissions data that is taken from bills, invoices, reducing energy demand by around meter readings and expense claims 815,700 kWh, or 450 tCO e per annum. 2 when possible. For our Scope 1 and 2 We have decommissioned an old gas emissions, less than 1% of the data uses 13% boiler system at our Miskin site and estimates based on average datasets. replaced it with a much more efficient tCO2e/£m We recognise the impact from air conditioning and localised gas-fired employees commuting to our sites boiler system. This work will reduce the and whilst we have not yet quantified energy demand on the site by around this, we actively promote a car share 780,000 kWh or 160 tCO e per annum. 2 scheme through an intranet site which Renishaw continues to participate in can be used to find car share partners. Shareholder information the Carbon Reduction Commitment We provide excellent facilities for (“CRC”) Energy Efficiency Scheme and employees who choose to commute the Carbon Disclosure Project (“CDP”). by bike, such as lockers, showers and We use the CDP as a benchmarking covered bike storage areas. tool and are working extensively to ensure our efforts in GHG emission management are fully disclosed and are as transparent as is expected of us by our employees, customers and investors. Our efforts were recognised in the last CDP reporting period as we were ranked 9th in our sector. 56
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
1 3 Total GHG emissions (tCO2e) 2013 2014 2015
Scope 1 Gas consumption 1,479.53 1,438.39 889.19 Owned transport 1,521.53 2,684.40 2,219.33 Generator diesel 31.91 24.74 302.78 Heating oil 56.74 43.57 40.59 Fugitive emissions 88.72 252.67 286.68 On-site generation of electricity (solar array commissioned 2015) na na 0 Out of scope (biofuel blend) 39.74 55.35 59.42
Total Scope 1 (tCO2e) 3,178.43 4,443.77 3,738.57
Scope 2 Purchased electricity 13,629.09 16,576.71 19,175.69
Total Scope 2 (tCO2e) 13,629.09 16,576.71 19,175.69
2 Total statutory GHG emissions (tCO2e) 16,807.52 21,020.48 22,914.26
2 Normalised statutory GHG emissions by revenue (tCO2e/£m) 48.45 59.13 46.32
Scope 3 Business travel 7,392.76 6,916.31 4,737.95 Product distribution 3,545.49 5,292.98 11,570.67 Raw material purchase 4,020.35 799.72 1,199.31 Post and communications 500.13 557.85 655.04 Transmissions and distribution 1,745.09 1,991.70 2,288.45 WTT total 4,912.26 2,775.10 3,982.75 Out of scope (biofuel blend) 8.81 49.97 42.41
Total significant Scope 3 (tCO2e) 22,116.08 18,333.66 24,434.17
Total GHG emissions (tCO2e) 38,923.60 39,354.14 47,348.43
4 Normalised total GHG emissions by revenue (tCO2e/£m) 112.21 110.70 95.71
1 2014 figures have been restated due to improvements in our methodology, updated GHG conversion factors and replacing the calculation used for the June 2014 data last year – see footnote 3. 2 Statutory emissions are Scopes 1 and 2 as required by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. 3 To facilitate the timely capture of information, this disclosure uses internally reported data from July to May and the June data is given as an average of the previous three months. This will be restated next year if a significant difference is seen. 4 Total GHG emissions include Scopes 1 and 2 (statutory) and significant Scope 3 (voluntary) emissions. 57
Renishaw plc Annual report and accounts 2015 Strategic report
Product compliance Health and safety Incidents/near-misses We continue to prepare for the We have a well-established corporate A total of 67 (2014: 68) near-misses were extension of the Restriction of the use health and safety management system recorded for the period. No significant of Hazardous Substances Regulations that is in line with the ISO18001 repeating common causes have (“RoHS”), which will cover the majority requirements. It is recognised that an been established. of our products in 2017. Our entire injury may develop into something existing encoder product range is more serious if not cared for correctly. Accident reporting RoHS compliant, with robust design As our people are essential to our A new online accident reporting system procedures in place to ensure all future business, all injuries from the smallest has been introduced with the ability Governance products are compliant. We continue of paper cuts to the most serious of to raise actions, generate automatic to monitor substances against those incidents are recorded, enabling us to reminders and update statistics identified as “substances of very manage treatment and investigate all in real‑time. high concern” (“SVHC”) under the incidents effectively. UK site compliance auditing Registration, Evaluation, Authorisation The total number of accidents for the and Restriction of Chemicals (“REACH”) A full audit of all UK sites regarding period was 230 (2014: 151) against Directive, and to date, nothing we use health and safety compliance has a year-end headcount of 4,112 are on the SVHC lists. Whilst we do recently taken place and an action list (2014: 3,492). This equates to an not fall within the remit of the USA’s is being generated. accident ratio of 0.056 accidents per Dodd-Frank Wall Street Reform and person and is 30% up on the same Improvement Notices Consumer Protection Act, we recognise period the year before. The introduction that compliance with the conflict The Company was issued with an of an online accident reporting system, minerals assessment and disclosure Improvement Notice relating to our site in which has made the reporting process aspects of such legislation is important Stone on 20th March 2015 by the Health much easier and raised awareness of to a number of our customers. We also & Safety Executive (“HSE”). This related the importance of reporting any accident recognise that it is our responsibility to a failure to have assessments in Financial statements however minor, is the primary reason for to ensure that our supply chain does place with regard to hand-arm vibration the increase. not support illegal or unfair practices. operations following a RIDDOR submission by the Company, for an Continual investigations in our supply Reportable accidents chain are carried out to help ensure employee with carpal tunnel syndrome. There were four reportable accidents conflict minerals are not present; we are Actions were taken pursuant to the under the UK RIDDOR reporting working with a number of key suppliers Improvement Notice and the results requirements: one bumped head, one on this project. Any issues we consider were approved and signed off by the pulled back muscle, one cut to a hand to be against the spirit of our Group HSE on 28th May 2015. and one torn back muscle resulting in a Business Code are monitored and total lost time of 222 hours, or 28 days. we work with suppliers where issues are identified. Occupational health We have had no work-related ill health or diseases reported. Health monitoring in the form of lung Shareholder information function testing, hearing testing and eye testing, where appropriate for a job role, has been established for several years and is ongoing. Health support for employees is offered in the form of subsidised health monitoring (blood pressure, diabetes, cholesterol and BMI). 58
Renishaw plc Annual report and accounts 2015
STRATEGIC REPORT
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
A tube of un-compacted metal swarf next to a compacted briquette containing the same quantity of material. The significant reduction in size reduces the number of lorry loads required to move the material to a recycling plant. Producing swarf briquettes also enables us to remove the majority of the oil residue, improving the quality of the material and increasing its value as a recyclate. 59
Renishaw plc Annual report and accounts 2015 Strategic report
Waste management We continue to ensure that our waste can be seen as a commodity. As such, In February 2014, we implemented a there are projects focused around our new waste strategy, designed to ensure waste metals and oils, to maximise the as much waste as feasibly possible recycling and value of the metals and to is diverted from landfill. This strategy provide a closed-loop on-site re-use of continued to drive our efforts throughout the oils. the year, resulting in a further 2,487 (2014: 1,515) tonnes of waste being Renishaw recognises that large gains are often made by many small diverted from landfill. Around 90% of Governance all waste generated this year originated changes in practice, so our technical from our UK sites which are covered and sales documentation is distributed by the Carbon Trust Waste Standard. electronically whenever possible. These sites have been recognised In addition, user guides for some of by the Carbon Trust for their efforts our product groups are only available in moving waste away from landfill as online. Our commercial documentation, a disposal option, towards recovery, payslips in the UK and invoices are all recycling and re-use. managed through paperless systems. Internal communications, wherever Renishaw has introduced a segregation- possible, are only made via emails or at-source programme as part of this through the Renishaw intranet. strategy, which has been trialled at a number of sites and is being rolled out to others. This enables a direct engagement with employees by placing
a responsibility upon them to maximise Financial statements recycling. Regular feedback through email, notice boards and communication meetings helps reinforce this behaviour. Last year, we set a target of 5% for the reduction of waste to landfill in our UK The Strategic report was approved by operations. We are pleased to report the Board on 29th July 2015 and signed that, through our employees’ efforts on its behalf by over the past year, we have achieved this target, with a reduction of waste Sir David R McMurtry to landfill of 59% in the UK and 23% Chairman and Chief Executive globally (2014: 40%). We are now re‑using, recycling or recovering around 96% (2014: 92%) of our waste around the world. Shareholder information
Restated 2013 20141 20152 Waste re-used (tonnes) 0 9.33 12.96
Reduction of waste to landfill Waste diverted from landfill (tonnes) 1,210.97 1,515.10 2,487.07 Waste sent to landfill (tonnes) 220.40 131.54 101.13 59% Percentage of waste sent to landfill 15.28% 7.9 9% 3.91% in the UK 1 Restated to remove the calculations used for the June figures (see note 2) and replace them with actual figures. It also now contains more data from non-UK sites to enable a year-on-year comparison. 2 To facilitate the timely capture of information, this disclosure uses internally reported data from July to 23% May and the June data is given as an average of the previous three months. This will be restated next globally year if a significant difference is seen. 60
Renishaw plc Annual report and accounts 2015
GOVERNANCE
INTRODUCTION
In relation to our remuneration report on pages 76 to 83, the policy table from our three-year remuneration policy which was approved by 86% of shareholder votes at our annual general meeting (“AGM”) in October 2014 is set out for information purposes only. The annual report on remuneration 2015 sets out the details of directors’ compensation throughout this financial year, which will be subject to the normal advisory vote at the 2015 AGM. The Board takes seriously its responsibilities for making sure that all employees are aware of their obligations to act with openness, honesty and transparency. This strong “The Board is ultimately With the assistance of the Audit anti-corruption culture is embedded in committee, the Board approves the our Group Business Code and Anti- responsible to shareholders Group’s governance framework and Bribery Policy which can be found for all the Group’s activities, reviews its risk management and at www.renishaw.com/en/renishaw- its strategy and financial internal control processes with a view to group-business-code--14444. In 2015, maintaining high standards of corporate we undertook a specific anti-bribery performance, for the governance throughout the Group. monitoring project in order to update efficient use of the Group’s A key area of focus for 2015 was our last risk assessment undertaken in 2011/2012 when we originally resources and for social, a review of our external audit arrangements. Following revisions to implemented our policy in response to environmental and the UK Corporate Governance Code the Bribery Act 2010. Progress updates ethical matters.” (the “Code”) published by the Financial were provided to the Audit committee. Reporting Council (“FRC”) in September Other appropriate steps were also David Grant 2012 (the “2012 Code”) recommending taken in order to maintain adequate Senior Independent Director that the external audit is put out to procedures. We have now trained 1,085 tender at least every 10 years, the Board people worldwide via our anti-bribery has determined that it will commence a E Learning module, as well as other tender process in the spring of 2016 with training initiatives. the chosen audit firm to be appointed later in 2016. In the coming year, the Board is reviewing its risk management and Our Nomination committee led the internal control framework, and is process to recruit a new non-executive looking to enhance its operation so that director, and Kath Durrant joined the it remains fit for purpose and in line with Board in January 2015. the changes to the Code published by the FRC in September 2014. Strategic report Governance Financial statements Shareholder information 61 Renishaw plc AnnualRenishaw report and accounts 2015 For the purposes the of UK Listing certain Rules (“LR”), Listing Authority’s information required be provided to to the shareholders is also contained in governance corporate Directors’ the remuneration Directors’ the report, report and the Other statutory and certain including disclosures, regulatory information relating arrangements to with shareholders. controlling For the purposes the of the DTR, information required section by 7 of such rules is referred in the to Directors’ report. governance corporate Location Not applicable Not Not applicable Not Not applicable Not Not applicable Not Not applicable Not Not applicable Not Not applicable Not Not applicable Not Not applicable Not Directors’ remuneration report p76–83 remuneration Directors’ Not applicable Not Not applicable Not Other statutory and regulatory disclosures p86 disclosures regulatory and statutory Other The UK Listing Authority’s Disclosure Authority’s Listing The UK Rules (“DTR”), Transparency Rules and require the Annualreport include to a management report which can be found in the Strategic report. governance corporate Directors’ The report and Other statutory and on out set disclosures regulatory andpages 86 84 form to 71 the 66 to Directors’ report. For the purposes the of which DTR, governance corporate a require statement be included to in the Company’s the report, Directors’ are practices governance corporate set out in the Directors’ corporate part forms which report, governance of the Directors’ report. Topic Interest capitalisedInterest Publication of unaudited financial information financial unaudited of Publication Details of long-term incentive schemes Waiver of emoluments a director by Waiver of future emoluments a director by Non pre-emptive issues of equity for cash As item (7), in relation to major subsidiary undertakings major to relation in (7), item As Parent participation in a placing a listed by subsidiary Contracts of significance of Contracts Provision of servicescontrolling a by shareholder Shareholder waivers of dividends of waivers Shareholder Shareholder waivers of future dividends future of waivers Shareholder Agreements with controlling shareholders controlling with Agreements Section (1) (2) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) The information that fulfils the reporting requirements under this rule can foundbe in the Directors’ report, the Directors’ remuneration report and on the pages identified as applicable.below, Disclosure of information under Listing Rule 9.8.4R Disclosure This corporate governance report governance corporate This has been prepared in accordance Code. The Boardwith the has 2012 also considered, in advance the of Company, the for date commencement the of provisions and principles the updated Code published the by FRC Code”) to (“2014 in September 2014 procedures processes and that ensure are in place apply to the principles and Code. Thisprovisions report, the of 2014 reports of the incorporates which Nomination and committee Audit the Directors’ the with together committee, remuneration report,describes how we have applied the main principles the of 2012 Code. reportWe on the operation our of ways: following the business in businessA review the of Group’s and likely future developments is given in the and statement Chairman’s the information Segmental report. Strategic geographicalby market is given in 2 note financialto the statements. Compliance disclosures 62
Renishaw plc Annual report and accounts 2015
GOVERNANCE
BOARD OF DIRECTORS AND COMPANY SECRETARY
Sir David McMurtry N John Deer Ben Taylor CBE, RDI, FRS, FREng, CEng, FIMechE CEng, FIMechE Chairman and Chief Executive Deputy Chairman Assistant Chief Executive • Formerly employed by Rolls-Royce plc, • Trained as a mechanical engineer and • Was the Director of Engineering at Bristol, for 17 years, holding the positions worked for Rolls-Royce plc, Bristol, for Sheffield Measurement, USA, before of Deputy Chief Designer and Assistant 14 years. joining Renishaw, Inc. as President in 1985. Chief of Engine Design for all Rolls-Royce engines manufactured at Filton, Bristol. • Co-founded Renishaw with Sir David • Appointed to the Board of Renishaw plc McMurtry in 1973, serving as Managing in 19 87. • Invented the original measuring probe in Director from 1974 to 1989. the early 1970s and co-founded Renishaw • Responsible for Group marketing, with John Deer in 1973. • Primarily involved in the commercial international operations, human direction of the Group, with particular resources and metrology regulatory • Responsible for Group technology. emphasis on marketing and the quality assurance. establishment of the Group’s wholly- owned subsidiaries. • Reports to the Board on corporate social responsibility matters. • Responsible for Group manufacturing and Chair of the overseas marketing subsidiaries.
Allen Roberts Geoff McFarland Dr David Grant A R N FCA CBE, FREng, FLSW, CEng, FIET Group Finance Director Group Engineering Director Senior Independent Director • Qualified as a chartered accountant • Graduated with a BEng in computer-aided • Appointed to the Board of Renishaw plc in 1972 and is a Fellow of the Institute mechanical engineering at Heriot-Watt in April 2012. of Chartered Accountants in England University, and subsequently worked for • Vice-Chancellor of Cardiff University and Wales. several years as a research associate. from 2001 to 2012 and previously held • Joined Renishaw in 1979 and appointed • After working briefly in the high-volume leadership positions at Dowty Group to the Board of Renishaw plc in 1980. manufacturing electronic sector, joined and GEC. Renishaw in 1994. • Heads Group finance, business systems • Currently senior independent director and Wotton Travel Ltd. • Appointed to the Board of Renishaw plc of IQE plc, non-executive director of the Defence Science and Technology in 2002. • Responsible for the healthcare regulatory Laboratory (Dstl), chair of STEMNET, and and quality assurance functions. • Responsible for Group engineering and chair of the National Physical Laboratory. Group IP and patents. Strategic report Governance Financial statements Shareholder information N 63
N
1 4 R 4
A
Nomination committee Nomination Sir David McMurtry (Chair) Chesney Carol Durrant Kath David Grant Jeans John R
Executive Executive Non-executive Appointed the to Board of Renishaw plc in April 2013. Currently chair of the Council of Cardiff University, Imanova and UK Biocentre Ltd. Board member of the University and Association. Employers College Medicine Stratified UK’s Innovate Leads Advisory Board. Appointed advisor the to Prime Minister at the Office of Life Sciences in June2014. Renishaw plc AnnualRenishaw report and accounts 2015 Chairman Non-executive director Non-executive • • • • • Board balance Board Jeans John CEng CBE, Notes: 3D angle: -135% 0 0 0 10pt No shadowing David Grant (Chair) Chesney Carol Durrant Kath Jeans John Remuneration committee N A
R 4 5
0–3 years years10+ Appointed the to Board of Renishaw plc in January 2015. Held a variety of senior positions at President, Vice including AstraZeneca plc, research its for Communications and HR division. development and Until recently was the Group HR Director at Rolls-Royce plc and a member of the executive team. Currently an Advisory Board University Lancaster the for member School. Management
Audit committee (Chair) Chesney Carol David Grant Jeans John Kath Durrant Kath Board tenure Board Non-executive director Non-executive • • • • Notes: 3D angle: -135% 0 0 0 10pt No shadowing N
R
A
2 1 6 USA Ireland Joined Renishaw plc in 2001. and 1988 in solicitor a as Qualified company in specialised has then since matters, legal commercial and advising business clients and as an in- counsel. house secretariat company and legal the Heads legal on Board the advising function, matters. governance and compliance Appointed the to Board of Renishaw plc in October 2012. Chartered accountant who worked at Arthur Andersen for seven years in services.audit Worked for some time in the Group China English at function accounts Clays plc. Currently Company Secretary of Halma plc, having also been Group Controller. Financial
UK General Counsel and Company Secretary • • • Norma Tang Norma Carol Chesney Carol FCA director Non-executive • • • • Board nationality Board Notes: 3D angle: -135% 0 0 0 10pt No shadowing 64
Renishaw plc Annual report and accounts 2015
GOVERNANCE
EXECUTIVE BOARD
Sir David McMurtry Allen Roberts CBE, RDI, FRS, FREng, FCA CEng, FIMechE Group Finance Director Chairman and Chief Executive See pages 62 and 63 See pages 62 and 63 for biography for biography Geoff McFarland John Deer Group Engineering Director Deputy Chairman See pages 62 and 63 See pages 62 and 63 for biography Leo Somerville Dave Wallace for biography President, Renishaw, Inc. Director and General Manager, Norma Tang • Joined Renishaw in 1984. CMM, Styli and Fixturing Products • Initially served as Business • Joined Renishaw in 1989 Ben Taylor General Counsel and through Renishaw’s CEng, FIMechE Company Secretary Manager for machine tool probing and calibration sponsored student scheme. Assistant Chief Executive See pages 62 and 63 products at Renishaw, Inc. • Worked in various functions See pages 62 and 63 for biography of the business including for biography • Became President of Renishaw, Inc. in 1993 and a one-year secondment appointed to Executive Board at Renishaw’s German in 2004. subsidiary, before being appointed Director and • Appointed as a member of General Manager for the CMM the International Sales and products line in 2002. Marketing Board in 2008. • Appointed to the Executive Board in 2008.
William Lee Director and General Manager, Machine Tool and Laser and Calibration Products • Joined Renishaw in 1997. • Holds a degree in physics from Oxford University and an MBA from Bath University. • Became Director and General Manager for the laser and calibration products line in 2007 and subsequently Director and General Manager of the machine tool products line in 2014. • Appointed to the Executive Board in 2015. Strategic report Governance Financial statements Shareholder information 65
See page 64 for biography See pages 62 and 63 for biography See pages 62 and 63 for biography See pages 62 and 63 for biography See pages 62 and 63 for biography Joined Renishaw in 1979. Appointed as a member of and Sales International the Marketing Board in 2008. experience years’ 30 Over in sales and marketing. overseas 10 for Responsible India including operations, Russia. and Technology the of Chair UK Advanced in Collaboration of group working Engineering economic joint India – UK the committee. trade and
Leo SomervilleLeo Inc. Renishaw, President, Tang Norma and Counsel General SecretaryCompany John Deer John Deputy Chairman, and Sales International of Chair Marketing Board RobertsAllen FCA Director Finance Group Taylor Ben CEng, FIMechE ExecutiveAssistant Chief Rhydian Pountney General Manager, ROW Sales • • • • Renishaw plc AnnualRenishaw report and accounts 2015
Joined Renishaw in 2015. the for Responsible strategy and direction of manufacturing. additive in experience years’ 30 Over engineering andadvanced sales. international Progressed from graduate engineer CEO to of Delcam from transition managed plc, AIM listed company a to Autodesk. of division Appointed as a memberof and Sales International the Marketing Board in 2015. Joined Renishaw in 2006. experience years’ 20 Over positions. in related Appointed as a member of and Sales International the Marketing Board in 2008. Clive Martell Clive Global of Head Manufacturing Additive • • • • • Rainer Lotz Rainer Director, Managing GmbH Renishaw • • • Joined Renishaw in 1988 1988 in Renishaw Joined as Managing Director of France. Renishaw in degree master’s a Holds Marketing. and Economics Moved Renishaw to Hong Kong in 1997. the all for Responsible operations in the Far East and Japan. except Australasia, Appointed as a memberof and Sales International the Marketing Board in 2008. Joined Renishaw in 1989 following sandwich a year’s 1987 between placement and 1988. of experience years’ 20 Over sales, international marketing, management. product and Moved Japan to in 2008 furtherto drive sales and marketing at Renishaw KK. Appointed President of Renishaw KK and to Sales International the in Board Marketing and 2012. December Jean-Marc Meffre Jean-Marc Managing Director, Far East • • • • Sean Hymas Sean President and Representative KK Renishaw Director, • • • •
Joined Renishaw in 2000 working as both a design and the within manager business line. products tool machine Graduated with a degree Systems Manufacturing in before Engineering for internationally working a number of years in the automotive industry. Appointed as the Group’s Development Business Manager and General in 2012 Manager for the UK sales organisation in 2013. Joined the Board of the West of England Aerospace Forum in 2015. Joined and Renishaw in 2011 was appointed Director of Sales Development in 2012. the for Responsible commercial of development teams, systems and processes. the leads and Manages development of the Academy. Renishaw Appointed as a member of and Sales International the Marketing Board in 2012. Stewart Lane Stewart General Manager, UK Sales and Development Business Group • • • • • • • Kevin Gani Kevin Development Sales of Director • INTERNATIONAL SALES AND MARKETING AND BOARD SALES INTERNATIONAL 66
Renishaw plc Annual report and accounts 2015
GOVERNANCE
DIRECTORS’ CORPORATE GOVERNANCE REPORT
Board structure
Board
Executive Audit Nomination Remuneration Board committee committee committee
International Sales and Marketing Board, divisions and subsidiary undertakings
A. Leadership patent-related disputes and other material litigation, forecasts and major The role of the Board product development projects. The Board comprises four executive and four independent non-executive The Board meets as often as is directors in addition to the executive necessary to discharge its duties Chairman. The directors holding office effectively. In the financial year ended at the date of this report and short 30th June 2015, the Board met 11 times biographical details are given on pages and the directors’ attendance record 62 and 63. Full biographical details at board and committee meetings are available at www.renishaw.com. is set out at the end of this report. The Company maintains liability In addition, the non-executive directors insurance for its directors and officers, met a number of times without executive as disclosed in the Other statutory and directors present. regulatory disclosures. A high level summary of subject areas There is a formal schedule of matters discussed during the year are set out on specifically reserved for its decision. page 67. These include the approval of annual and half-year results and trading statements, company and business acquisitions and disposals, major capital expenditure, borrowings, material agreements, director and company secretary appointments and removals, Strategic report Governance Financial statements Shareholder information 67 Health and safety system and reports Legal updates and new new and updates Legal requirements disclosure Board evaluation Succession planning/executive structure management agreement shareholder Controlling Renishaw plc AnnualRenishaw report and accounts 2015 Safety • Governance • • • • and strategies and review its sales and marketing activities. This committee is chaired the by Deputy Chairman Chief Assistant the includes and Finance Director Group and Executive plus the directors the of five largest Sales of Director the regions, sales Development and the Head Global of Additive Manufacturing. A framework delegated of authorities is in place that maps out the structure delegationof below the Board and includes the matters reserved to the Executive Board and the level of authorities given management to below the Executive Board. The Board has adopted a conflict interestsof putting policy, in place procedures for the disclosure and review anyof conflicts and potential conflicts, and authorisation the by Board (if felt and granted Authorisations appropriate). the terms such of are reviewed on an annual basis. New disclosures are made applicable. where Group’s risk analysis litigationPatent AGM and other shareholder feedback Investor day Risk • • • • Stakeholder engagement The Board has three formally constituted committee, Audit the committees, the and committee Remuneration the committee. Nomination There is an executive management committee known as the Executive Board that is responsible for the executive management the of Group’s businesses. It is chaired the by Chairman and includes the executive management senior three and directors the for responsible representatives CMM products line and machine tool products line and the North and Central American market, respectively. The Executive Board usually meets for two days on a monthly basis and considers the performance and strategic direction the of metrology and matters other and businesses healthcare generalof importance the Group. to In addition, there is an executive sales and marketing committee known as the International Sales and Marketing Board which meets quarterly determine to the policies marketing and sales Group’s Forecasts Oversight of the preparation and management of the financial statements Dividend policy statements Trading Pensions policy Remuneration Salary reviews Bonus Business strategy acquisitions/disposals potential Reviewing technology and Products • • • Finance • • • • • HR • • • Strategy High level summary of subjects discussed during the year: of subjects discussed during High level summary 68
Renishaw plc Annual report and accounts 2015
GOVERNANCE
DIRECTORS’ CORPORATE GOVERNANCE REPORT CONTINUED
Division of responsibilities/ B. Effectiveness The Code recommends that at least the Chairman half the Board, excluding the Chairman, Composition of the Board The role of Chairman and Chief should comprise independent non- Executive is a combined role and thus All the non-executive directors are executive directors. The Board has contrary to the recommendations of considered by the Board to be complied with this requirement since the Code. Sir David McMurtry has held independent in character and judgement January 2015 when Kath Durrant joined, this position since the Company listed and there are no relationships or but due to retirements the Board was in 1983 and he and John Deer hold circumstances that are likely to affect not compliant prior to the appointment the majority of the voting interests in a non-executive director’s judgement. of Kath Durrant. the Company. David Grant was interim CEO of Appointments to the Board Innovate UK between January 2015 There has been a voting agreement A description of the structure and and May 2015, is currently the senior in place between Sir David and John activities of the Nomination committee independent director of IQE plc (having Deer since 1983, further details of which are set out in the Nomination committee been appointed in September 2012), are set out in the Other statutory and report on page 72. Kath Durrant was chair of STEMNET (appointed in regulatory disclosures on page 84. successfully recruited and joined the December 2011), chair of the National The Board considers that there is still a Board in January 2015 (further details Physical Laboratory (appointed in May clear division of responsibilities at board are on page 63). level to ensure an appropriate balance 2015) and on the board of the Defence of power and authority so that there is Science and Technology Laboratory Commitment (Dstl) (appointed in June 2012). He was no one person with unfettered powers The terms of appointment of the non- previously Vice-Chancellor of Cardiff of decision. The Board and Executive executive directors, which includes University from October 2001 to August Board meet on a sufficiently regular the expected time commitment and 2012. The Company has dealings basis to make decisions of significance requirement to discuss any changes with these organisations from time to to the metrology and healthcare to other significant commitments with time such as grant funded research business segments and review the Chairman and Chief Executive in projects, or research, collaboration management actions. It is intended that advance, are available for inspection at or supply agreements. The Company this combined role will continue for so the AGM and the registered office upon confirms that David Grant has taken no long as Sir David McMurtry remains written request. on the Board and he and John Deer part in decisions relating to any of the hold a majority of the voting interests in dealings between the Company and None of the executive directors holds a the Company. these organisations. directorship in a FTSE 100 company. The Chairman has no other significant John Jeans was appointed chair of Development the Council of Cardiff University in commitments as regards employment or Directors are offered the opportunity December 2011, is chair of Innovate directorships of other companies. to attend formal training courses to UK’s Stratified Medicine Steering Group update their knowledge of their duties as (having been appointed in February Non-executive directors directors. Guidance notes, papers and 2014) and was chair of MRC Technology David Grant is the Senior Independent presentations on changes to law and from December 2008 until November Director and is available to discuss regulations are provided as appropriate. 2014. The Company has dealings material concerns with shareholders Non-executive directors are invited with these organisations from time to should the normal channels of the to attend internal conferences, which time such as grant funded research Chairman and Chief Executive or provide information to the Group on new projects, or research, collaboration the Group Finance Director fail to product development and marketing or supply agreements. The Company resolve such concerns. The non- initiatives, as well as our investor days, confirms that John Jeans has taken no executive directors meet without the the second of which was held in May part in decisions relating to any of the executive directors present to discuss 2015. Business presentations are given dealings between the Company and performance and other matters. at board meetings to provide updates these organisations. on, and opportunities to discuss, The dealings referred to above are not products and business strategies. material (i.e., in aggregate they are less than 0.5% of the Company’s revenue for the financial year ended 30th June 2015). Strategic report Governance Financial statements Shareholder information 69 Renishaw plc AnnualRenishaw report and accounts 2015 The Group has considerable financial considerable has Group The resources at its disposal and the current the considered have directors a consequence, As projections. financial the directors believe that the Group is well placed manage to its business successfully. risks After making enquiries, the directors have a reasonable expectation that both the Company and the Group have adequate resources continue to in operation for the foreseeable future. Accordingly, they continue adopt to the the preparing concern in going basis Annual report and accounts. Risk management and internal control The Board is responsible for the Company’s systems risk of management and internal control, and for reviewing their effectiveness. Any system of internal control is designed manage to rather than eliminate the risk failure of achieveto business objectives and can only provide reasonable and not material against assurance absolute loss. or misstatement responsibility of lines defined are There and delegation authorities. of Established and centrally documented control procedures also exist, including, for example, capital and other technology and information expenditure, security regulatory legal and and applied These are compliance. Group. the throughout function audit internal group The independent objective and provides procedures control the that assurance applied. effectively and appropriate are Audit Manager attends Audit Group The annual present to meetings committee internal audit plans and the results suchof internal audits. Actions are committee Audit the by monitored on an ongoing basis. Given the full external evaluation in 2013, an internal evaluation was conducted with actions focusingin 2014 on improvements information to flows, succession and structure organisational for process evaluation The planning. has taken place and2015 the results will be discussed early in the new Chief and Chairman The year. financial Executive discusses performance with directors. individual The Group’s strategyThe for delivering Group’s its objectives and business model, together with the factors likely affect to its future performance position and development, are set out in the Strategic report, where details the of financial and liquidity positions are also given. In addition, the financial to 22 note statements includes objectives the Group’s and policies for managing its capital, details itsof financial instruments and hedging activities and its exposures credit to risk liquidity and risk. Fair, balanced and understandable Fair, The directors consider that the Annual report, taken as balanced a whole, is fair, the provides and understandable, and information necessary for shareholders assessto performance, the Group’s business model and strategy. Going concern Re-election In accordance with the Code all the directors will retire from the Board at the next and AGM will offer themselves up for re-election at the AGM. C. Accountability Financial and business reporting the of responsibilities respective The with connection in auditor and directors the financial statements explainedare in Directors’ responsibilities on page 87 report Independent auditor’s the and on pages 90. 88 to The Board and its committees undertake an annual evaluation of their performance. The format the of evaluation varies each year. Evaluation Information and support appropriate receives Board The accounts, management documentation, thereon commentaries and forecasts in advance each of board meeting enableto its members review to the financial performanceof the Group, business key and trading current updates financial Regular initiatives. are also provided between meetings. The Company Secretary advises the Board on all governance matters. All directors have access the to Company Secretary and independent to Company’s the at advice professional expense where necessary discharge to directors. as responsibilities their The appointment and removal the of Company Secretary is a matter reserved for the Board. An induction pack is provided new to appointees the Board, to and the the with (together programme induction programme) development continuing includes site visits and briefingsby internal at attendance managers, senior conferences management senior and external trade shows, as well as applicable. as subsidiary visits, foreign For example, non-executive directors visited Renishaw’s China and Japan operations in the period and attended strategy the days, the investor day, (where conference managers’ group present) were management senior global and various trade shows. This has facilitated a better understanding the of Renishaw’s and team leadership Group, products and markets. 70
Renishaw plc Annual report and accounts 2015
GOVERNANCE
DIRECTORS’ CORPORATE GOVERNANCE REPORT CONTINUED
There is a process for the review of D. Remuneration Constructive use of the AGM business risks throughout the Group. The Directors’ remuneration report The AGM takes place at the Company’s These are reported on a monthly basis explains how the Company applies headquarters or one of the Company’s by senior management and overseas the 2012 Code principles relating other sites and formal notification is sent subsidiaries. These reports are reviewed to remuneration. to the shareholders at least 20 working by the Board. days before the meeting. A business The Board ensures that there are E. Relations with presentation is given and all directors are effective internal controls over the shareholders available for questions during and after financial reporting and consolidation the meeting, including the chairs of the processes. Monthly accounts and Dialogue with shareholders Audit, Remuneration and Nomination forecasts are presented to the Board for The Board announced a new policy committees. Tours of the Company’s review. The group internal audit function in the 2013 Annual report. No private facilities are offered. undertakes a review of subsidiaries’ meetings will be held other than Separate resolutions are proposed for accounting processes and performance shareholder meetings with the each substantially separate issue, and to provide assurance to the Board on Chairman, Senior Independent Director all resolutions will be taken on a poll. the integrity of the information supplied and/or any other non-executive director The Company reports on the number by each company forming part of the where a shareholder has material issues, of votes lodged on each resolution, the Group’s consolidated results. concerns or questions. The director balance for and against each resolution attending such a meeting will The Board undertakes an annual and the number of votes withheld. communicate the shareholder’s issues, This information is published via an RIS formal review of the effectiveness of concerns or questions to the Board. the Group’s system of internal controls and on the Company’s website following The Board’s response will be published the meeting. and an updated risk and controls on the Renishaw website for the benefit analysis. The review covers all material of all shareholders where appropriate. controls, including financial, operational The interim and annual results and and compliance controls and risk presentations are posted on the website management systems. promptly after announcement of the The Board is satisfied that there is results to the UK Listing Authority via an ongoing process for identifying, an RIS. evaluating and managing the significant Open webcasts of presentations on risks facing the Group, that it has been annual and half-year results are held in place during the year, is regularly and recordings of the presentations reviewed and accords with the FRC and the subsequent question and guidance on risk management and answer sessions made available after control. The Board confirms that the webcast on the Company’s website. necessary action has been or is being Analysts’ and brokers’ reports will be taken to remedy any significant failings circulated to the Board. The Board or weaknesses identified from its review. intends to hold open discussions with Audit committee and auditor any shareholder who wishes to share views with the directors at the AGM A description of the structure and or the annual investor day at which activities of the Audit committee are set presentations on group strategy, out in the Audit committee report on business segments and product lines pages 73 to 75. will be given by members of the Board and senior management, as well as tours covering the Group’s activities. This year, 80 visitors attended the Company’s investor day, which included various Q&A sessions with the Board during the day as well as an opportunity to ask questions during tours, lunch and refreshment breaks. Strategic report Governance Financial statements Shareholder information – – – – 1 (1) 1 (1) 1 (1) 1 (1) 0 (0) 71 committee Nomination 3 4 – – – – – 3 (3) 6 (7) 6 6 (7) 6 7 (7) 7 committee Remuneration – – – – – – 3 (3) 3 (3) 3 (3) Audit committee Renishaw plc AnnualRenishaw report and accounts 2015 3 2 6 (6) Board 11 (11) 11 (11) 11 (11) 11 (11) 11 (11) 11 (11) 10 (11) 10 (11) the combined role of Chairman and Chairman of role combined the Chief Executive (Codeprovision A.2.1); and for part the of year at least half the comprise independent not did Board (Code directors non-executive B.1.2). provision Senior Independent Director Director Independent Senior 29th July 2015 Compliance statement The Board considers that it has complied with the requirements the of Code throughout2012 the year except in relation the following to matters (the reasons for non-compliance are stated in the report above): • • Grant David 1 David Grant did not attend one board meeting and a Remuneration committee meeting held on the same day because of illness. John Jeans did not attend one Remuneration committee meeting for family medical reasons. Kath Durrant was appointed the to Board January on 1st 2015. John Deer did not attend one board meeting because of illness. C T Chesney T C K L Durrant G McFarland G A C G Roberts D J Deer B R Taylor D J Jeans 3 4 1 2 Sir David McMurtry Board attendance record Board Director Shown against each name director’s in the table below is the number meetingsof the of Board and its was director the which at committees present, and, in brackets, the number of meetings that the director was eligible attendto during the year. Board and committeeBoard meeting attendance record The informationregarding share capital required be disclosed to this by rule is contained in the Other statutory and disclosures. regulatory Disclosure rule DTR 7.2.6 R rule DTR 7.2.6 Disclosure D Grant 72
Renishaw plc Annual report and accounts 2015
GOVERNANCE
NOMINATION COMMITTEE REPORT
Activities during the year The committee met once during the year. Further details are on page 71. A recruitment consultant, CT Partners Augmentum, was engaged in 2014 to seek appropriate candidates for appointment as an additional non- executive director, following a review of the composition of the Board and the experience represented. The shortlist for interviews was to include candidates that have the required skills and experience and, where possible, at least one-third to be female candidates. A range of experienced candidates were considered. I am pleased to report that “The Nomination committee Nomination committee role Kath Durrant joined the Board in January has an important role in and composition 2015, bringing with her extensive experience as a senior HR executive leading the process for The Nomination committee, which in the healthcare and engineering Board appointments and meets on an ad hoc basis as industries. CT Partners Augmentum has required, is responsible for reviewing ensuring that the Board no other connection with the Company. the size, structure and composition In addition to this appointment, has the correct balance of the Board, including its balance succession plans for the Board and of skills, knowledge and experience senior executives were also discussed. of experience, diversity and for nominating candidates for and skills to support our appointment to the Board. Boardroom diversity business model The members of the Nomination The Board has considered the and strategy.” committee are Sir David McMurtry recommendations of the “Women on (Chair), Carol Chesney, Kath Durrant, Boards” report issued by Lord Davies Sir David R McMurtry David Grant and John Jeans. of Abersoch as regards setting out The majority of the members of Chairman and Chief Executive aspirations for the appointment of this committee are independent women to the Board by 2013 and 2015, Chair of the Nomination committee non-executive directors. The terms and has decided that it is inappropriate of reference of this committee are to set out any levels that may require published on the Company’s website. positive discrimination in this respect, as the overriding requirement is to appoint directors with the necessary skills and experience for the role. However, as an international company, the Board acknowledges that diversity of all types is a benefit and should be borne in mind when recruiting to all roles within the Company, and has a policy to provide equal opportunities to all. The Board’s policy is to request, where recruitment consultants are appointed, that a proportion of female candidates are included in their shortlist.
Sir David R McMurtry Chair of the Nomination committee 29th July 2015 Strategic report Governance Financial statements Shareholder information 73 Renishaw plc AnnualRenishaw report and accounts 2015 The Audit committee comprises the three comprises the committee Audit The Chesney Carol directors, non-executive David(Chair), Grant and John Jeans. The Board is satisfied that at least one recent has committee the of member experience, being financial relevant and Carol Chesney. The terms reference of are website. Company’s on the available Meetings The committee meets at least three times a year with the Group Finance Director, Group the Controller, Financial Group the Secretary Company the Manager, Audit and the external auditor in attendance. leastAt one meeting, or part thereof, is held with the external auditor without executive directors present. This year the committee met three times; further details are on page 71. Audit committee role and composition appointed is committee Audit The theby Board from the non-executive directors the of The Company. Audit committee’s terms reference of include and Disclosure by indicated matters all and the Code. Transparency Rule 7.1 The terms reference of are considered annually the by Audit committee and any changes are recommended the to Board for approval. the reviews committee Audit The policies and accounting Group’s procedures, its annual and interim submission before statements financial the Boardto and its compliance with statutory requirements. integrity the monitors committee The financial theof Group’s statements to announcements and relating financial performancereviews and reporting judgements significant the contained therein. It also reviews the scope, remit and effectiveness the of internal control systems and internal function. audit
Carol Chesney Carol Chair of the Audit committee Audit the of Chair Non-executive director director Non-executive The committee Audit in play to role has a vital of integrity ensuring the our financial statements, risk our of effectiveness the processes management controls, internal and the evaluating and in performance the of process. audit external close by role our We fulfil with engagement audit internal management, auditor. external and the also we 2015 During various the monitored Code. the changes to how This report explains fulfilledour duties.” we
“ AUDIT COMMITTEEAUDIT REPORT 74
Renishaw plc Annual report and accounts 2015
GOVERNANCE
AUDIT COMMITTEE REPORT CONTINUED
Key issues and activities In addition to reviewing the financial reporting of the Company, the committee also spends a significant amount of time reviewing the effectiveness of the Group’s internal control processes. Combined with the committee’s review of the internal and external audit functions, it is able to obtain sufficient information to discharge its responsibilities. The principal activities in the year were:
Financial statements and reports Risk management Internal audit External auditor and non- audit work • reviewed the effectiveness of the • reviewed the output from • evaluated the scope of • considered the timing and Group’s risk management and internal the Group’s risk review work to be undertaken by process for the external controls and disclosures made in the process to identify, the internal audit function; audit tender; 2015 Annual report; evaluate and mitigate risks and considered • reviewed progress on • reviewed, considered and • reviewed the 2015 Annual report, whether changes recommendations brought agreed the scope and the 2015 Interim report and all other in risk profile were forward and considered methodology of the audit trading updates issued during the year. adequately addressed; recommendations arising work to be undertaken by The committee received a report from during the year; and the external auditor; the external auditor on the audit of the • considered proposals 2015 Annual report; to further enhance the • considered the resource • evaluated the robustness of the risk levels available to the independence and • reviewed areas of the accounts management process; internal audit function. objectivity of the requiring judgement including the external auditor; carrying value of goodwill, the carrying • received updates on value of inventory, capitalisation of compliance with the • agreed the terms of internally generated development Group’s anti-bribery and engagement and the fees costs, amortisation of intangible corruption policy; and to be paid to the external assets, debtor provisions, warranty auditor for the audit of the provisions and taxation provisions; • reviewed the Group’s 2015 financial statements; whistleblowing policy • reviewed the accounting and and process. • reviewed the level and disclosures in the 2014 Annual nature of non-audit services report in relation to the acquisition provided by the external of Advanced Consulting and auditor; and Engineering, Inc; and • undertook an effectiveness • reviewed the accounting and review of the external disclosures in relation to the Group’s audit process. defined benefit pension schemes.
An additional committee meeting is planned for October 2015, primarily to focus on the external audit tender, enhancements to the Group’s risk management process and to consider other changes to the Code and their implementation in the 2016 financial year. Fair, balanced and An extensive verification exercise Significant issues in relation understandable report was undertaken to ensure the factual to the financial statements accuracy of the Annual report by and accounts the Board and senior management. As part of the reporting and review One of the key governance requirements An advanced draft of the Annual report process, the committee has regular is for the Annual report to be fair, was considered by the committee at discussions with management and the balanced and understandable. its meeting on 8th July 2015 with a external auditor relating to significant Ensuring that this standard is met final draft being reviewed on 24th July issues. During the year the committee requires continuous assessment of 2015, prior to it being presented to the considered the significant issues set the financial reporting issues affecting Board. Following those discussions, the out below in relation to the financial the Group on a year-round basis committee advised the Board that the statements. Also contained below is in addition to a number of focused Annual report, taken as a whole, is fair, a commentary on how these issues exercises that take place during the balanced and understandable. were addressed: accounts production process within a The directors’ statement on a fair, strict timeframe. i) The carrying value of goodwill balanced and understandable Annual The committee focused on the report is set out on page 87. impairment testing by the Company Strategic report Governance Financial statements Shareholder information 75 Renishaw plc AnnualRenishaw report and accounts 2015 Chair of the Audit committee Audit the of Chair 29th July 2015 Other matters by policy the reviews committee The which employees the of Company may, in confidence, raise mattersof concern, in improprieties possible including financial reporting otheror matters. It also monitors the effectiveness of the Company’s procedures avoid to any bribery related the activities to of Group. the Chesney Carol Independence of external auditor In order safeguard to the independence andobjectivity the of external the auditor, committee reviews the nature and extent services non-audit supplied, the of receiving reports on the balance of committee The fees. non-audit to audit regards it most cost efficientto use the external auditor for tax advice and in- an requires this since compliance knowledge understanding and depth products, business, Company’s the of customer base and markets. The non- the services that audit provides policy auditor shall not be allowed provide to services where there is involvement in management or functions management decision making, and/or any service on primary place may management which adequacy the determining in reliance internalof controls, financial systems or financial reporting. There are also specifiedservices the require which Finance Group the of approval prior chair committee Audit and Director appointed be may auditor the before provideto such services. In addition, there are specified levelsof authorisation be obtainedto before the auditor may be permitted tender to for non- services.audit An analysis fees of paid KPMG to LLP, including the split between audit and non-audit services, is included in 6 note the accounts.to skills and knowledge the of team work; the do to proposed quality the of work; independence the of audit firm from Company; the audit partner rotation and succession planning; the for coverage global subsidiaries; Company’s value for money; methodology; and approach audit processes; governance internal technical capabilities the of firm as a whole; and ethical behaviour and fair dealing. any issues arising from the prior audit; year including plan audit proposed the the identificationof risks specific the Group, auditto scope and thresholds; materiality feedback from executive review the including management, a reportof presented the by Group Financial Group Finance Director, Audit Group the and Controller Manager on the effectiveness the of process; audit external the delivery the of audit in line with plan; the arising matters of communication the committee; the to audit the during private meetings with the auditor management present; without being and the independence and objectivity of auditor. the on the basis lowest of fees, but on a number issues of including: • • • • • • • • • • assesses the committee The effectiveness the of external audit process and the quality the of audit work considering: by year the throughout • • • • • • • The committee has primary has committee The the making for responsibility appointment, the on recommendation reappointment and removal the of external which auditor, the Board puts to shareholders for approval at the AGM. KPMG LLP and its predecessor firms and the have been auditor since 1974 lead audit partner has changed in line with their internal rotation requirements. There has been no tender for audit It is intendedservices that since 1974. a tender will be undertaken in 2016. services, audit for When tendering tenders will not be assessed solely Approach to auditorApproach appointment and audit quality Provisions are made write to down inventory obsolete and slow-moving items net realisable to value, based technological assessment an of on and market developments and on projected and historic of analysis an used assessment The demand. needed provisions the calculate to judgement of application the requires management. by confirmation received committee The approach the that management from was provision the determine to used consistent with the previous year and made enquiries management of gain to business how understandingan of technological both developments, the impacted had market-driven, and provision during The external the year. committee the to explained auditor the work they had performed on inventory provisions during the year. The committee was satisfied thatthe were applied judgements management was provision the that and appropriate appropriately stated at the year end. ii) The carrying value inventory of of theof carrying value goodwill. of applyingBy knowledge making and enquiries the of relevant cash-generating units, reviewing the forecastsand the committee the analysis, sensitivity that reached conclusion the with agreed no impairments were required. 76
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DIRECTORS’ REMUNERATION REPORT Statement from the chair of the Remuneration committee
David Grant Senior Independent Director Chair of the Remuneration committee
Remuneration committee role and composition The Remuneration committee The committee also reviews the is responsible for deciding the remuneration structure and packages Company’s framework of executive for the next level of senior leaders director remuneration and setting across the business to ensure remuneration packages for each of the appropriate competitiveness, equity executive directors. The committee’s and progression for those identified as policy is to motivate and retain potential successors to the Board and executive directors by rewarding senior executive team. them with competitive salary, benefit packages and incentives. These are All the members of the committee linked to the overall performance of the are non-executive directors, Group and, in turn, to the interests of comprising David Grant (Chair), Carol the shareholders. Chesney, John Jeans and Kath Durrant. The terms of reference of The committee reviews annually the the committee are published on the executive directors’ remuneration in the Company’s website. No executive context of the Group’s performance director attends meetings of the during the year. committee, except by invitation. Independent advisers are used as required. Strategic report Governance Financial statements Shareholder information 77 Renishaw plc AnnualRenishaw report and accounts 2015 The committee considers it essential it considers committee The that the Group can assure its ability attractto and retain talent, in different markets and in both established and particularly is This businesses. emerging markets employment important as remain competitive, as the Group grows and as a future generation leadership of is developed within the Group. As a result, the committee will continue the review financial process inyear the 2016 ensure to further commission work and benchmarking remuneration appropriate at the executive director level and in the next levels leadership, of and continue remuneration current monitor to practices including the advantages and disadvantages introducing of longer- term incentive plans. Any change to approval for tabled be would policy shareholders. by Grant David Chair of the Remuneration committee Remuneration the of Chair 29th July 2015 During the committee the year, approved executive directors’ base salaries for and the executive director2015 bonus in line with the programmefor 2014 set for that year and considered and set the executive director annual bonus In relationprogramme to for 2015. annual bonus,the reviewed we 2015 the bonus targets and maintained a transparent profit before tax target that was introduced in 2014. In relation setting to remuneration for the next financial the year, committee has taken account into the performance the the of Company, employee and environment economic UK the within conditions remuneration and the overseas markets in which operate,we together with employee retention and recruitment reviews. Renishaw’s executive directors do not participate in a long-term incentive plan committee Remuneration The (“LTIP”). recognises that this is unusual companies, other many to compared and therefore we question annually performance would Renishaw’s whether be enhanced through the introduction of scheme. a such commissioned phase committee The one an of independent review current of remuneration practices during the year. current the that concluded review The remuneration practices do not impede the performance the of Company at present, and that motivation and Company the to levels commitment are high – borne out in practice the by retention leaders key of globally. It did, opportunities for indicate however, communications the in improvement and structure bonus surrounding payouts, and in the performance and processes used review development by the Company. a statement from the Chair the of committee; Remuneration the remuneration policy table (pages an annual report on remuneration, setting out information on directors’ remuneration paid during the year. 78 and 80)78 which was approved at for a Octoberthe on AGM 16th 2014 and period; three-year The Group continues show to strong progress, delivering its strategy in key markets, and performance against all financial metricswas excellent. was attention leadership Significant focused on ensuring fulfilmentof large orders in the Far East and on strategies for medium-term growth in both established businesses. emerging and The leadership team and employees of the Company are congratulated on their achievements during the year. committee’s Remuneration The approach continues align beto to executive director remuneration with the and clear using performance, Group’s structures. remuneration simple Remuneration committee activities during the year 2. 3. On behalf the of Board, I ampleased presentto the Directors’ remuneration 2015. report for The report continues comply to with the directors’ reporting on for requirements pay introduced and is in October 2013 split the into following three sections: 1. 78
Renishaw plc Annual report and accounts 2015
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DIRECTORS’ REMUNERATION REPORT CONTINUED Remuneration policy
REMUNERATION POLICY The Company’s remuneration policy for executive and non-executive directors was approved by shareholders at the AGM on 16th October 2014 for a three-year period. No change will be proposed at the AGM on 15th October 2015. Key extracts of the policy are provided below for information purposes only. The full policy can be found on our investor relations website (downloads and video section) within the 2014 Directors’ remuneration report, contained in the 2014 Annual report. Executive directors’ policy table Set out below is a table describing each component of the remuneration package applicable to the executive directors. * The page reference change below under the maximum column was updated in the table for information only in order to be factually correct, since the table has been reproduced from last year’s Annual report (as explained above).
Element of Purpose and Performance remuneration relevance to strategy Operation Maximum measures Base salary To provide a Renishaw aims to pay the base rate 110% of median salaries To reflect the competitive fixed salary at least at the current median in a comparator group director’s role, salary to motivate market rate or above, as compared to as decided by the performance and retain executive the equivalent job position/ level in the committee. Renishaw has and experience. directors of the relevant industrial sector(s) applicable to historically paid base required quality Renishaw, as defined in the appropriate salaries that are higher to meet the benchmarking pay surveys, statistics than median, reflecting Group’s objectives. and peer comparisons (such peer the lack of an LTIP (see selection to include factors such as size Statement on page 77). * and location). The committee retains Base salary is reviewed annually the discretion to make taking into account the award for the adjustments at the UK workforce. annual review to take into account matters affecting an individual director such as changes in responsibility and anomalies discovered during benchmarking.
Benefits To provide market- Benefits provided on an ongoing basis Excluding Not applicable. competitive benefits include the following principal benefits: accommodation and to motivate and relocation costs, not to • a car or car allowance; retain executive exceed £50k p/a. directors of the • private medical insurance; required quality to meet the Group’s • life assurance; objectives and to • long-term disability cover; support them to give maximum attention • home telephone costs. to their role. If, on the recruitment of a new executive director, relocation is required to the director’s place of work, relocation support which is regarded by the committee to be necessary to provide appropriate support to the director will be provided to cover items such as transaction and legal fees, removals and temporary accommodation and subsistence costs. Strategic report Governance Financial statements Shareholder information 79
Not applicable. Not Based on group group on Based performance, primarily financial, committee the but may introduce non-financial metrics or make adjustments to appropriate reflect performance or competitive provided factors, that the bonus will always be subject achievement to baseline the of financial targets non- such and metricsfinancial more form not shall the of than 25% opportunity. bonus Performance Performance measures Renishaw plc AnnualRenishaw report and accounts 2015 The maximumThe contribution the defined to scheme, contribution applicable, where or, salaryadditional payment in lieu contributions of will base of salary. be 15% 100% of salary. of 100% Maximum Each Allen of Roberts, and Ben Taylor Geoff McFarland receive an additional base of salary,payment being 15% of the amount that would otherwise be contributed a pension to scheme on behalf. their For any new executive director, annual contributions based on a percentage base of salary will be made the Company’s defined to contribution scheme or additional salary may be paid in lieu, as agreed by committee. the Geoff McFarland is a deferred member benefit defined Company’s the of future for closed which scheme accruals April on 5th 2007. Operation The committee sets group performance targets, including a baseline below which no bonus is earned, with a bonus payable from that point, increasing on a straight-line basis a target to at which salary of 75% would be earned and a cap at which a maximum of 100% salary would be earned. Part or all any of bonus paid may be subject repayment to in the case of any financial misstatement, errors in misconduct. gross or calculation
To provide a To pension competitive to appropriate as motivate and retain executive directors theof required quality meet to the objectives.Group’s relevance to strategy to relevance Purpose and and Purpose To incentiviseTo and reward execution the of objectives.Group’s Pension Element of of Element remuneration Bonus Executive directors’ policy table continued Executive directors’ 80
Renishaw plc Annual report and accounts 2015
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DIRECTORS’ REMUNERATION REPORT CONTINUED Remuneration policy continued
Non-executive directors’ policy table The remuneration of the non-executive directors is determined by the executive directors and consists of a fee only. There is no entitlement to any benefits, bonus, incentive plans or pension. Set out below is a table showing the fees for the non-executive directors of the Company:
Element of Purpose and Performance remuneration relevance to strategy Operation Maximum measures Fee To provide a The non-executive directors are The maximum fees Not applicable. competitive fee to paid the same fee, irrespective of payable will be set by the motivate and retain membership of or acting as a Chair Company’s Articles of non-executive of a committee. Association, currently an directors of the aggregate of £300,000 The fees are reviewed annually with required quality per annum. reference to fees payable to non- to meet the executive directors of companies of Group’s objectives. a similar size and complexity. Reasonable expenses incurred in undertaking duties as a director are reimbursed.
ANNUAL REMUNERATION REPORT This section of the report sets out the remuneration of the directors in the year ended 30th June 2015. Single total figure table (audited)
Salary/fees Benefits Bonus Pension Total 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Sir David McMurtry 648 630 2 2 648 0 n/a n/a 1,298 632 D J Deer 392 381 19 19 392 0 n/a n/a 803 400 B R Taylor 451 438 20 19 451 0 68 66 990 523 A C G Roberts 367 357 20 19 367 0 55 53 809 429 G McFarland1 367 347 18 18 367 0 55 63 807 428 C T Chesney 43 42 n/a n/a n/a n/a n/a n/a 43 42 K L Durrant2 22 n/a n/a n/a n/a n/a n/a n/a 22 n/a D Grant 43 42 n/a n/a n/a n/a n/a n/a 43 42 D J Jeans 43 42 n/a n/a n/a n/a n/a n/a 43 42 1 Figures for G McFarland reflect an element of salary sacrifice for 2014. 2 K Durrant was appointed a director with effect from 1st January 2015. Strategic report Governance Financial statements Shareholder information
2 1 2 2 0 £’000 2015 81 2014 Private medical cover applies all to 2013 executive directors and home telephone costs, telephone home and directors executive insurance on personal cars, M4 bridge toll fees, US tax return advice is provided certain to directors Renishaw plc AnnualRenishaw report and accounts 2015
2012 18 18 18 18 Car n/a £’000 allowance FTSE mid 250 2011 Renishaw 2010 2009 0 800 700 600 500 400 300 200 100 Performance graph The graph below shows the Company’s shareholdertotal return (“TSR”) performance, compared with the FTSE index,mid 250 which the directors broad appropriate most the is believe comparison. for index The share price and the FTSE mid 250 index have been rebased at 1st 100 to July 2009. Payments to past directors No payments were made past to directors during the year. payments Loss of office There was no termination employment of directorsof during the year. D J Deer B R Taylor A C G Roberts McFarland G Total pension entitlements Total G McFarland is a member the of benefit defined closed Company’s thescheme. value of 30th At June 2015, entitlement pension benefit defined the was £28,645 per annum. The normal retirement age for G McFarland is 65. On death, pension benefitswould pass dependants.to scheme pension year Current contributions payable the by Company have been taken as cash. The value G McFarland’s of defined contribution scheme at 30th June 2015 was £403,329. Bonus For the year in question, the bonus was determined group by performance targets based for the on year, an adjusted profit before tax set at levels above the previous profit year’s before tax and with a threshold below which no bonus is earned. A target profit before tax set for the year in question enabled salary of 75% be earned to as a bonus. A further bonus could be earned based maximum a performance to on subject salary. of No100% other performance set. were measures Sir David McMurtry Benefits 82
Renishaw plc Annual report and accounts 2015
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED Annual remuneration report continued
Executive directors serving Percentage change in Statement of implementation as non-executive directors remuneration of the of remuneration policy in the of other companies Chief Executive next year None of the executive directors served The following table sets out a The executive directors’ salaries will as non-executive directors of any other comparison of the percentage change be increased by 2.7% for the 2016 company during the year. in the Chief Executive’s remuneration financial year, which is in line with the to the average percentage change in UK workforce salary review. The bonus Statement of directors’ remuneration for all UK employees from scheme targets have been set based on shareholding and 2014 to 2015. the policy as set out in the policy table. share interests Percentage Percentage Percentage change in Consideration by directors None of the directors is required to own change change in annual of matters relating to shares in the Company. The interests of in salary benefits bonus the directors who have served during Chief directors’ remuneration the year in shares (including connected Executive +3% 0% n/a During the year, the Remuneration persons) are: UK committee considered the amount employees Number of of the executive directors’ salary and (average) +4% +4% +65% ordinary shares of 20p each the framework for the annual bonus. Sir David McMurtry 26,377,291 UK employees have been chosen as a The members of the Remuneration D J Deer 12,233,040 comparator group in order to avoid the committee for this purpose were: B R Taylor 10,147 impact of exchange rate movements D Grant (Chair) A G Roberts 5,165 over the year. UK employees make G McFarland 2,000 up 66% of the total number of C T Chesney group employees. C T Chesney 500 D J Jeans K L Durrant _ D Grant – Relative importance of spend K Durrant (from 1st January 2015) D J Jeans – on pay PricewaterhouseCoopers LLP (“PWC”) The following table sets out the total and a consultant, Gerard Hutchinson, There were no share-based payments amount spent in the current financial assisted the committee in their made or share schemes in place during year and the previous year on consideration of the executive director the year. remuneration to all group employees and senior leadership team bonus and on dividends to shareholders: arrangements. Total fees paid to PWC Chief Executive total were £5,000 and no fees have yet been 2015 2014 change remuneration £’000 £’000 % paid to Gerard Hutchinson. Both PWC The table below sets out information Employee and Gerard Hutchinson were appointed relating to Sir David McMurtry, who was remuneration 173,744 146,850 +18% by the committee as they were known to the Chief Executive for each of the years Shareholder members of the committee and neither in question: dividends paid 30,841 29,115 +6% have advised the Company on any other matters. The committee is of the opinion Long-term Except as shown above, no other incentive that the advice received was objective distributions have been made to Single figure of Annual bonus vesting rates and independent. total payout against against shareholders or other payments or remuneration maximum maximum Year (£‘000) opportunity % opportunity % uses of profit or cash flow which impact The Company Secretary acts as 2015 1,298 100% n/a on the understanding of the relative secretary to the committee. 2014 632 0% n/a importance of spend on pay. 2013 663 10% n/a 2012 969 69% n/a 2011 1,066 100% n/a 2010 472 0% n/a Strategic report Governance Financial statements Shareholder information 83 Renishaw plc AnnualRenishaw report and accounts 2015 Votes withheld 116,826 623,285 cast Total votes Total 61,828,312 61,321,853 2.85% 13.57% % against % Votes The report was approved the by Board directorsof and has been signed on its behalf by: Grant David Chair of the Remuneration committee Remuneration the of Chair 29th July 2015 against 1,760,527 8,323,776 % for* % 97.15% 86.42% Votes for* Votes 60,067,785 52,998,077 As the Company deems that a significant percentage against votes of as being more than as a result 20%, which of the Company would be required to provide in this report any reasons known it forto such and a vote any actions taken, no commentary is necessary in annualrespect the of voting at the 2014 meeting. general *including Chairman’s discretion. Chairman’s *including Approval of remuneration report Resolution At theAt annualgeneral meeting held on cast votes proxy by October16th 2014, in respect the of directors’ remuneration were as follows: Statement of voting atStatement of voting general meeting Approval of remuneration policy 84
Renishaw plc Annual report and accounts 2015
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OTHER STATUTORY AND REGULATORY DISCLOSURES
Review of the business Dividends Sir David McMurtry, as one party, and D J Deer and Mrs M E Deer, as the other A review of the business and likely future The directors propose a final dividend party, have entered into an agreement developments is given in the Chairman’s of £24,748,105 or 34.0p per share relating to the way each party would statement and the Strategic report. (2014: £21,741,938 or 29.87p per share) vote in respect of his or her shares Segmental information by geographical which, together with the interim dividend if requested by the other party to do market is given in note 2 to the of £9,098,568 or 12.5p per share so. Under this agreement Sir David financial statements. (2014: £8,246,942 or 11.33p) makes a McMurtry, John Deer and Mrs Deer total amount of dividends for the year The Group has established and acquired agree that (i) Mr and Mrs Deer will vote of £33,846,673 or 46.5p per share, overseas manufacturing, marketing and their shares in favour of any ordinary compared to £29,988,880 or 41.2p per distribution subsidiaries to manufacture resolution if requested to do so by share for the previous year. some of the Group’s products and to Sir David McMurtry and (ii) Sir David provide support to customers in our Directors and their interests McMurtry will vote his shares against major markets in the following regions any special or extraordinary resolution outside the UK: The directors at the end of the year are if requested to do so by John Deer. listed below together with their interests The voting arrangement was renewed • Europe: Germany, France, Italy, Spain, in the share capital of the Company (with in 2013 for a further period of five years Switzerland, Netherlands, Czech the equivalent number of voting rights), and will terminate on the earlier of 25th Republic, Poland, Russia, Sweden as notified to the Company. May 2018 and the deaths of both of Sir and Austria; All the above interests were beneficially David McMurtry and John Deer. • Americas: USA, Mexico, Brazil held with the exception of 2,434,411 The rules on appointment, and Canada; shares (2014: 2,434,411 shares) which reappointment and retirement by • Far East: Japan, Hong Kong, were non-beneficially held by D J rotation of the directors and their powers Australia, South Korea, People’s Deer but in respect of which he has are set out in the Company’s Articles Republic of China, Singapore and voting rights. of Association. There are no powers Taiwan; and There has been no change in the given to the directors that are regarded as unusual. • Other regions: India and Israel. holdings below in the period 1st July 2015 to 29th July 2015. In accordance There are also representative offices with the provisions of the Code all Directors’ and officers’ in Hungary, Turkey, Malaysia, Vietnam, directors will retire and, being eligible, indemnity insurance Indonesia and Thailand and an offer themselves for re-election at the Subject to the provisions of the associate company in Slovenia, RLS, annual general meeting (“AGM”) to be Companies Act 2006, the Company’s which is 50%-owned. held on 15th October 2015. Details of Articles of Association provide for the Also part of the Group is a subsidiary the directors are shown on pages 62 directors and officers of the Company established in 2014 in Slovenia which and 63 and full biographical details are to be appropriately indemnified. designs and arranges the procurement available at www.renishaw.com. The Company maintains insurance for of application-specific integrated circuits its directors and officers in respect of for the Group and RLS. their acts and omissions during the performance of their duties. Further information is available on the Company’s website: www.renishaw.com. Ordinary shares of 20p each
Sir David McMurtry 26,377,291 D J Deer 12,233,040 B R Taylor 10,147 A C G Roberts 5,165 G McFarland 2,000 C T Chesney 500 D Grant nil D J Jeans nil K Durrant nil Strategic report Governance Financial statements Shareholder information 85 shares 3,631,612 3,578,133 3,465,730 3,846,993 Number of of Number
4.76% 5.25% 4.92% 4.99% % of issued share capital share Renishaw plc AnnualRenishaw report and accounts 2015 Employees The maintenance highly-skilled of employees is essential the future to of place directors the and business, the continuation the on emphasis great theof Company’s approved training Healthpolicy. and safety matters are given special attention the by directors and well established systems safety of management are in place throughout the Group safeguard to employees, visitors. and customers designed are policies Employment opportunities equal provide to irrespective religion, race, of colour, orientation. sexual disability or age, sex, Proper consideration is given to from employment for applications for suitable where disabled people who Employees vacancies. appropriate become disabled whilst with the every opportunity given be will Company through employment their continue to working their to adjustment reasonable this where or equipment, conditions, is notpossible, re-training for other positions. They will also be afforded opportunities continue to training and as basis same the on promotion gain employee. other any Details on information provided to employees on the performance the of employees with consultation business, and performance incentives are contained in the description corporate of on out set activities responsibility social pages 59. 46 to There are no agreements with compensation for providing employees for any loss employment of that occurs because a takeover of bid. Baillie Gifford & Co & Gifford Baillie No notifications have been received under the provisionsDTR 5 in theof period 29th to July 2015. 2015 1st July Substantial shareholdings Substantial Standard Life Investments Limited Capital Research and Management Company Management and Research Capital BlackRock Inc. Research and development Research The Group has a continuing commitment a high to level research of expenditure The development. and involved is directed towards the research and development new of products relating metrology, to design and computer-aided including manufacturing systems, and relating to Raman including products, healthcare spectroscopy systems, dental systems and certain areas in the medical devices field.Further information on the expenditure on research and development is contained in the financial review section the of Strategic report. Substantial shareholdings Apart shareholdings (and the from corresponding voting rights) Sir of David McMurtry and John Deer and (36.2% respectively), the16.8% table below discloses the voting rights that have been notifiedto the directors under the requirements the of UK Listing Rules and Disclosure Authority’s Transparency Rules which 5, DTR represent or more 3% the of voting rights attached issued to shares in the asCompany, at 30th June 2015. The directors consider that all the resolutions proposed are in the best interests the of Company and its shareholders as a whole that recommend unanimously and shareholders in favour vote the of resolutions, as they intend do in to respect their of own holdings. Annual general meeting The notice convening the and AGM an explanation the of resolutions sought are set out in a separate the At circular. meeting, the Company will be seeking amongst for, approval shareholder other things, the ability make market to purchases its of own ordinary shares, the of issued 10% of a total up to capital. share Disclosure of informationDisclosure to auditor The directors who held office at the date approvalof this of statement confirm sothat, far as they are each there aware, is no relevant audit information which of the Company’s auditor is unaware, and each director has taken all the steps that he or she ought have taken to as a himself/herself aware make to director anyof relevant audit information and to is auditor Company’s the that establish aware that of information. A resolution reappoint to KPMG LLP as auditor the will of Company, be AGM. forthcoming the at proposed Auditor Details the of Company’s share capital, given is obligations, and rights including the financial to in 21 note statements. The Company is not a party any to might that agreements significant terminate upon a changecontrol of of Company. the A shareholder’s authority for the purchase the by Company a of maximum its of own shares 10% of was financial 2015 the during existence in the Company However, did notyear. purchase any its of own shares during that time. Share capital and changeShare of control 86
Renishaw plc Annual report and accounts 2015
GOVERNANCE
OTHER STATUTORY AND REGULATORY DISCLOSURES CONTINUED
Donations By virtue of his shareholding in The Company has been in discussions the Company, Sir David McMurtry with the FCA about the application of No political donations were made during (Chairman, 36% shareholder) is a the enhanced oversight measures to the year. controlling shareholder. John Deer the remuneration and benefits received Controlling shareholders’ (Deputy Chairman, together with by the controlling shareholders in his wife, 17%) is also a controlling their capacity as executive directors arrangements shareholder by virtue of a long- (in accordance with the Company’s In May 2014 the Listing Rules were standing voting agreement between approved remuneration policy) as well amended to include new requirements John Deer (and his wife) with Sir David other ordinary course corporate matters, relating to controlling shareholders. McMurtry. The Board confirms that the such as the payment of dividends The revised Listing Rules require Company has not been able to enter by the Company to all shareholders. that premium listed companies with into a relationship agreement with its Guidance has been received from “controlling shareholders” (defined as controlling shareholders, containing the FCA that either these are not a shareholder who individually or with the independence provisions required transactions or arrangements that fall any of their concert parties exercises by the Listing Rules. The Financial within the enhanced oversight measures or controls 30% or more of the votes Conduct Authority (“FCA”) has been or that the FCA will permit a modification able to be cast on all or substantially all notified of this, as required by the Listing of the enhanced oversight measures the matters at the Company’s general Rules. The controlling shareholders so that they will not apply provided that meeting) must enter into a relationship have informed the Board that they are the arrangements remain in the ordinary agreement containing specific not willing to enter into a relationship course of business and, in the case of independence provisions, and for agreement because they are of the view salary reviews and bonuses, provided existing listed companies this agreement that the requirement to enter into the that they fall within the small transaction was required to be entered into by relationship agreement infringes upon exemption in the Annex to LR 11. 16th November 2014. their rights as shareholders and their track record demonstrates that they act Greenhouse gas emissions The independence provisions required in the best interests of the Company. The disclosures concerning greenhouse by the Listing Rules are that: gas emissions required by law are set The Company continues to discuss the (i) transactions and arrangements with out in the Corporate social responsibility requirement for a relationship agreement the controlling shareholder (and/or any report on page 56. with the controlling shareholders and of its associates) will be conducted with the FCA. As a result of there being at arm’s length and on normal no relationship agreement in place, commercial terms; Norma Tang the Listing Rules provide that certain Company Secretary (ii) neither the controlling shareholder enhanced oversight measures will apply 29th July 2015 nor any of its associates will take to the Company. any action that would have the effect Renishaw plc This means that, unless and to the of preventing the Company from extent that the FCA agrees otherwise, Registered number 1106260 complying with its obligations under all transactions with the controlling England and Wales the Listing Rules; and shareholders must be approved by the (iii) neither the controlling shareholder nor Company’s shareholders (excluding the any of its associates will propose or controlling shareholders) in accordance procure the proposal of a shareholder with the related party transaction resolution which is intended or requirements of the Listing Rules, and appears to be intended to circumvent none of the normal exemptions apply. the proper application of the Listing Rules. Strategic report Governance Financial statements Shareholder information 87 the financial statements, prepared in set applicable the with accordance accountingof standards, give a true and fair view the of assets, liabilities, financial position and profit or loss of the Company and the undertakings as taken consolidation the in included a whole; and the Strategic report includes a fair review the of development and and business the performance of the position the of Company and undertakingsthe the included in whole, a as taken consolidation together with a description the of principal risks and uncertainties that they face. Renishaw plc AnnualRenishaw report and accounts 2015 Group Finance Director Finance Group 29th July 2015 Directors’ responsibility Directors’ statement confirmWe to the that bestof knowledge: our • • considerWe the Annual report and accounts, taken as a whole, is fair, balanced understandable and and provides the information necessary for shareholders assess to the Group’s business performance, and position model and strategy. Signed on behalf the of Board Allen Roberts for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject any material to explaineddepartures and disclosed in the parent company financial statements; and prepare the financial statements on is it unless basis concern going the the that presume to inappropriate Group and the parent company will business. in continue • • keeping for responsible are directors The adequate accounting records that are sufficientto show andexplain the parent company’s transactions and disclose with reasonable accuracy at any time the financial positionof the parent company and enable them ensure to that its financial statements comply with the Companies Act 2006. They have such taking for responsibility general steps asare reasonably open them to safeguardto the assets the of Group and prevent to and detect fraud and irregularities. other regulations, and law applicable Under the directors are also responsible for Directors’ report, Strategic a preparing report remuneration Directors’ report, statement governance corporate and that complies with that law and regulations. those for responsible are directors The the maintenance and integrity the of information financial and corporate website. Company’s the on included Legislation in the UK governing the of dissemination and preparation financial statements may differ from jurisdictions. other in legislation select suitable accounting policies and policies accounting suitable select then apply them consistently; make judgements and estimates that prudent; and reasonable are for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted the by EU; • • The directors are responsible for for responsible are directors The preparing the Annual report and the group and parent company financial statements in accordance with regulations. and law applicable to directors the requires law Company prepare group and parent company financial statementsfor each financial Underyear. that law they are required to prepare the group financial statements in accordance with IFRSs as adopted theby and EU applicable law and have elected prepare to the parent company financial statements in accordance with UK Accounting Standards. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view the of state affairs of theof Group and parent company and theirof profit or lossfor that period. In preparing each the of group and parent company financial statements, the directors are required to: • Allen Roberts Director Finance Group DIRECTORS’ RESPONSIBILITIES DIRECTORS’ 88
Renishaw plc Annual report and accounts 2015
GOVERNANCE
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RENISHAW PLC
Opinions and conclusions Adverse changes in assumptions, We assessed the adequacy of the arising from our audit particularly relating to forecast cash Group’s disclosures in respect of the flows and discount rates, could impairment testing of goodwill and 1. Our opinion on the financial reduce the recoverable amount whether disclosures about the sensitivity statements is unmodified below the carrying amount, and of the outcome of the impairment We have audited the financial statements give rise to an impairment charge. assessment to changes in key of Renishaw plc for the year ended The forecasting of cash flows and assumptions properly reflected the risks 30th June 2015 set out on pages 91 to the selection of an appropriate inherent in it. discount rate are therefore key 129. In our opinion: Carrying value of Work in progress judgemental areas that our audit is (£20.1m) and Finished goods (£29.2m) • the financial statements give a true concentrated on. and fair view of the state of the Refer to pages 74 and 75 (Audit • Our response – In this area our audit Group’s and of the parent company’s committee report), page 98 procedures included evaluating the affairs as at 30th June 2015 and of the (accounting policy) and page 112 Group’s budgeting procedures upon Group’s profit for the year then ended; (financial disclosures). which the forecast cash flows are • the group financial statements have based by performing an assessment • The risk – There are significant inventory been properly prepared in accordance of the historical accuracy of budgets holdings throughout the Group; in the with International Financial Reporting for trading entities by comparing key manufacturing centres in the UK, Standards as adopted by the European previously budgeted figures to actual Ireland and India and sales offices Union (IFRSs as adopted by the EU); results. We also critically assessed the around the world. Due to the fast-paced • the parent company financial ongoing forecasts for companies in the nature of the industry there is a risk of statements have been properly research and development phase, by product obsolescence. considering the assumptions adopted prepared in accordance with UK The Group maintains an inventory Accounting Standards; and by the directors when preparing the forecasts for these entities and taking provision for potential product • the financial statements have been into account the experience of the obsolescence to the extent that prepared in accordance with the Group at maturing past research and the cost of inventory is not deemed requirements of the Companies Act development companies into profitable to be recoverable through future 2006 and, as regards the group trading entities. sales. This provision is calculated financial statements, Article 4 of the at a disaggregated level based on IAS Regulation. We challenged the Group’s the historic and future forecast sales selection of the discount rates used patterns of individual stock items. 2. Our assessment of risks of by considering the assumptions These assumptions are judgemental material misstatement underlying the calculation of each and changes could have a material In arriving at our audit opinion above discount rate; using external data impact on the calculation of on the financial statements the risks (including competitor analysis) to the provision. of material misstatement that had determine an appropriate range for each type of business and • Our response – In this area our audit the greatest effect on our audit were procedures included challenging as follows. comparing the actual rate used to that range. For the period beyond the Group’s assumptions in respect Carrying value of Goodwill (£19.7m) the financial budgets and forecasts, of the provision calculation by assessing historical accuracy of the Refer to pages 74 and 75 (Audit we assessed whether the growth rate used was consistent with both inventory provision. We also critically committee report), page 98 (accounting assessed the adequacy of the policy) and pages 106 and 107 historical performance and future business strategies. Group’s provisions against inventory (financial disclosures). by identifying slow-moving line items, • The risk – The Group has engaged in We evaluated the Group’s sensitivity considering whether these items a number of business combinations in analysis, by performing our own should be provided for in accordance recent years; a number of acquisitions analysis to assess the sensitivity of the with the Group’s policy by comparison are still in the research and impairment reviews to changes in the to the most recent sales invoices development phase and have not yet key assumptions of the discount rate, for those items. We compared the started trading; this makes forecasting the forecast cash flows and growth current carrying amount of a sample inherently more judgemental. rate beyond the financial budgets. of inventory items to recent sales invoices to assess whether these Strategic report Governance Financial statements Shareholder information 89 the part the of Directors’ remuneration report be audited to has been properly prepared in accordance with the Companies Act 2006; and the information given in the Strategic report and the Directors’ report for the financial the which for year financial statements are prepared is consistent with the financial statements. Renishaw plc AnnualRenishaw report and accounts 2015 Telephone conference meetings were were meetings conference Telephone to auditors component the with held assess the audit risk, strategy and audit the these meetings, During findings. audit group the to reported findings team were discussed in more detail, and any further work required the by group audit team was then performed the by auditor. component 4. Our4. opinion on other matters prescribed the Companies by Act 2006 unmodified is opinion: our In • • (%) 5% 7% 75% 87% Total assets assets Total
3% 2% 94% 99% tax (%) Profit Profit before 9% 10% 78% 97% Revenue (%) 1 7 12 20 The components within the scope our of work accounted for the percentages of resultsthe Group’s specified in the table set out below. The remaining group total of 3% group of profit beforerevenue, 1% group total of tax assets and 13% is represented reporting 21 by individually which of none components, represented any of total of more than 4% group revenue, group profit before tax or grouptotal assets. For the remaining components, we performed analysis at an aggregated group level re-examine to our assessment that there were no misstatement material of risks significant within these. The group audit team instructed significant the to as auditors component areas be covered, to including the relevant risks detailed above and the information be reported to back. The group audit team approved the ranged which materialities, component having £3.5m, from to regard £2.5m the mixto size of and risk profileof components. the across Group the specified risk-focused the on work The audit procedures and fiveof the audits reporting was purposes group for and auditors performed component by the rest the by group audit team. Number of of Number components We alsoWe assessed the adequacy of disclosuresthe Group’s in respect of provision. inventory the items should be written down net to realisable value. Coverage Specified risk-focused audit procedures audit risk-focused Specified information financial component of Reviews Audits for group reporting purposes reporting group for Audits The materiality for the financial the for materiality The statements as a whole was set at This has been£7m. determined with reference a benchmark to total of revenue, which consider we be to for considerations principal the of one assessing in company the members of the financial performanceof the Group. Materiality group of represents 1.4% revenue group of and profit 4.9% before tax. committee Audit the report to We uncorrected or corrected any identified misstatementsexceeding in addition£0.2m, other to identified misstatements that warranted reporting on qualitative grounds. reporting 41 Of the Group’s components, subjected we seven to reporting purposes group for audits specified risk-focused to one and was latter The procedures. audit individually financial significantnot enough require to an audit for group present did but reporting purposes, needed that risks individual specific be addressedto over revenue and receivables. trade 3. Our3. application materiality of and an overview the of scope of our audit
90
Renishaw plc Annual report and accounts 2015
GOVERNANCE
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RENISHAW PLC CONTINUED
5. We have nothing to report in Under the Listing Rules we are required respect of the matters on which we to review: are required to report by exception • the Directors’ statement, set out on Under ISAs (UK and Ireland) we are page 69, in relation to going concern; required to report to you if, based on and the knowledge we acquired during our audit, we have identified other • the part of the corporate governance information in the Annual report that statement on page 71 relating to the contains a material inconsistency with Company’s compliance with the 10 either that knowledge or the financial provisions of the 2012 UK Corporate statements, a material misstatement of Governance Code specified for fact, or that is otherwise misleading. our review. In particular, we are required to report We have nothing to report in respect to you if: of the above responsibilities. • we have identified material Scope of report and inconsistencies between the responsibilities knowledge we acquired during our audit and the Directors’ statement As explained more fully in the that they consider that the Annual Directors’ responsibilities statement report and financial statements set out on page 87, the directors are taken as a whole is fair, balanced responsible for the preparation of the and understandable and provides financial statements and for being the information necessary for satisfied that they give a true and shareholders to assess the Group’s fair view. A description of the scope performance, business model and of an audit of financial statements is strategy; or provided on the Financial Reporting Council’s website at www.frc.org.uk/ • the Audit committee report does auditscopeukprivate. This report is not appropriately address matters made solely to the Company’s members communicated by us to the as a body and is subject to important Audit committee. explanations and disclaimers regarding Under the Companies Act 2006 we our responsibilities, published on are required to report to you if, in our website at www.kpmg.com/uk/ our opinion: auditscopeukco2014a, which are incorporated into this report as if set out • adequate accounting records have in full and should be read to provide an not been kept by the parent company, understanding of the purpose of this or returns adequate for our audit have report, the work we have undertaken not been received from branches not and the basis of our opinions. visited by us; or Virginia Stevens • the parent company financial (Senior Statutory Auditor) statements and the part of the for and on behalf of KPMG LLP, Directors’ remuneration report to be Statutory Auditor audited are not in agreement with the Chartered Accountants accounting records and returns; or 100 Temple Street • certain disclosures of directors’ Bristol remuneration specified by law are not BS1 6AG made; or 29th July 2015 • we have not received all the information and explanations we require for our audit. Strategic report Governance Financial statements Shareholder information 775 679 2014 41.2 (549) 40.0 £’000 91 118.4 (1,736) pence 86,215 70,388 26,280 (31,190) 85,666 85,666 96,386 (10,720) (75,367) 176,945 355,498 (178,553) – 2015 880 884 42.4 £’000 46.5 (562) 167.5 (1,492) pence (87,879) (41,828) (22,850) 144,196 121,346 121,346 121,908 273,631 143,924 494,720 (221,089) 2 6 4 5 5 7 8 11 21 21 notes Renishaw plc AnnualRenishaw report and accounts 2015 Revenue Cost of sales profit Gross costs Distribution from continuing operations continuing from CONSOLIDATED INCOME STATEMENT INCOME CONSOLIDATED at 30th June 2015 FINANCIAL STATEMENTS FINANCIAL Administrative expenses Administrative Operating profit Operating amortisation related less associates of profits of Share Profit before tax before Profit Exceptional item Exceptional income Financial expenses Financial Profit attributable to: Profit company parent the of shareholders Equity Income tax expense operationscontinuing from year the for Profit Dividend per share arising in respect of the year Profit for the year from continuing operationscontinuing from year the for Profit Dividend per share paid in the year diluted) and (basic share per Earnings Non-controlling interest Non-controlling 92
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE for the year ended 30th June 2015
2015 2014 notes £’000 £’000 Profit for the year 121,346 85,666
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement: Remeasurement of defined benefit liabilities 15 (6,032) (2,233) Deferred tax on remeasurement of defined benefit liabilities 1,580 (530) Total for items that will not be reclassified (4,452) (2,763)
Item that may be reclassified to the Consolidated income statement: Foreign exchange translation differences 111 (5,754) Effective portion of changes in fair value of cash flow hedges, net of recycling 21 (10,511) 32,876 Deferred tax on effective portion of changes in fair value of cash flow hedges 21 2,102 (6,602) Total for items that may be reclassified (8,298) 20,520
Total other comprehensive income and expense, net of tax (12,750) 17,757
Total comprehensive income and expense for the year 108,596 103,423
Attributable to: Equity shareholders of the parent company 109,158 103,972 Non-controlling interest 21 (562) (549) Total comprehensive income and expense for the year 108,596 103,423 Strategic report Governance Financial statements Shareholder information – 17 42 883 2014 (460) £’000 93 9,541 3,941 1,294 1,690 2,230 (2,076) (2,825) 16,110 67,412 16,173 81,798 10,847 14,558 62,979 56,571 18,857 13,348 18,644 25,580 23,444 40,202 43,634 43,068 315,944 140,922 350,763 350,763 183,635 223,837 352,839 234,540 42 764 2015 589 £’000 (460) 1,715 3,165 1,064 3,480 (2,714) 17,171 (2,638) 21,154 82,171 14,731 77,673 10,775 57,664 21,991 14,558 19,536 14,889 10,504 12,809 28,561 73,839 48,094 62,969 431,156 101,213 241,581 428,518 428,518 260,776 169,592 304,550 402,559 9 11 14 14 14 14 15 15 18 13 13 19 16 10 21 21 21 21 20 22 notes 17, 22 Renishaw plc AnnualRenishaw report and accounts 2015 A C G Roberts Provisions Total current assets current Total liabilitiesCurrent payablesTrade tax Current Current tax Current Derivatives equivalents cash and Cash Other receivables Other Pension scheme cash escrow account Other payables Other Derivatives Intangible assets Intangible associates in Investments receivables Trade Current assets Current Inventories Sir David R McMurtry Directors These financial statements were approved by the Board of directors on 29th July 2015 and were signed on its behalf by: on 29th July 2015 and were of directors by the Board approved These financial statements were Total current liabilities current Total assets current Net Non-current liabilities benefits Employee taxDeferred liabilities Total assets less total liabilities Equity capital Share Assets Property, plant and equipment Deferred tax assets Derivatives assets non-current Total CONSOLIDATED BALANCE SHEET CONSOLIDATED at 30th June 2015 Other payables Other Derivatives non-current liabilities Total Share premium Share reserve translation Currency Cash flow hedging reserve reserve Other Equity attributable to the shareholders of the parent company interest Non-controlling Retained earningsRetained equity Total 94
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th June 2015
Currency Cash flow Non- Share Share translation hedging Retained Other controlling capital premium reserve reserve earnings reserve interest Total Year ended 30th June 2014 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1st July 2013 14,558 42 2,929 (694) 261,607 (389) (1,334) 276,719
Profit/(loss) for the year – – – – 86,215 – (549) 85,666
Other comprehensive income and expense (net of tax) Remeasurement of defined benefit pension liabilities – – – – (2,763) – – (2,763) Foreign exchange translation differences – – (5,754) – – – – (5,754) Changes in fair value of cash flow hedges – – – 26,274 – – – 26,274 Total other comprehensive income – – (5,754) 26,274 (2,763) – – 17,757
Total comprehensive income – – (5,754) 26,274 83,452 – (549) 103,423
Acquisition of non-controlling interest – – – – – (71) (193) (264) Dividends paid – – – – (29,115) – – (29,115) Transactions with owners recorded directly in equity – – – – (29,115) (71) (193) (29,379) Balance at 30th June 2014 14,558 42 (2,825) 25,580 315,944 (460) (2,076) 350,763
Year ended 30th June 2015
Profit/(loss) for the year – – – – 121,908 – (562) 121,346
Other comprehensive income and expense (net of tax) Remeasurement of defined benefit pension liabilities – – – – (4,452) – – (4,452) Foreign exchange translation differences – – 111 – – – – 111 Changes in fair value of cash flow hedges – – – (8,409) – – – (8,409) Total other comprehensive income – – 111 (8,409) (4,452) – – (12,750)
Total comprehensive income – – 111 (8,409) 117,4 56 – (562) 108,596
Dividends paid – – – – (30,841) – – (30,841) Balance at 30th June 2015 14,558 42 (2,714) 17,171 402,559 (460) (2,638) 428,518
More details of share capital and reserves are given in note 21. Strategic report Governance Financial statements Shareholder information (24) 210 679 704 2014 (176) (679) (483) (950) (336) (808) £’000 7,476 95 1,441 1,736 2,289 3,688 8,345 3,304 (2,275) (2,573) (17,119) 59,751 11,304 10,720 32,018 13,341 (29,115) 26,605 (11,407) 85,666 43,634 (11,830) (19,709) (29,291) (19,089) (26,280) (39,050) – – (43) (99) 110 421 2015 884 £’000 (480) (884) (880) 1,492 1,995 2,408 2,990 (5,190) (1,207) 10,141 (2,427) 82,171 14,925 15,204 36,542 43,634 50,535 22,850 (21,712) (16,410) (20,781) (12,975) (14,694) (30,841) (48,387) (64,837) (30,884) 121,346 132,263 5 9 7 5 5 5 11 11 17 18 10 10 21 notes 10, 11 Renishaw plc AnnualRenishaw report and accounts 2015 Financial income Financial Amortisation of other intangibles other of Amortisation Depreciation Profit on sale of property, plant and equipment associates from profits of Share gain Exceptional Adjustments for: costs development Amortisation of Effect of exchange rate fluctuations on cash held Cash flows from operating activities operating from flows Cash Profit for the year CONSOLIDATED STATEMENT OF CASH FLOW OF CASH STATEMENT CONSOLIDATED June 2015 for the year ended 30th Tax expenseTax Financial expenses Financial capitalised costs Development intangibles other of Purchase Increase in trade and other receivables Increase/(decrease) in trade and other payables activitiesInvesting Purchase of property, plant and equipment Payments (to)/from pension scheme escrow account (net) Cash flows from investing activities activities Financing paid Interest Dividends paid Cash flows from financing activities equivalents cash and cash in increase Net Cash and cash equivalents at the end of the year Cash and cash equivalents at the beginning of the year (Increase)/decrease in inventories in (Increase)/decrease Increase/(decrease) in provisions in Increase/(decrease) activities operating from flows Cash associates and subsidiaries in Investment Sale of property, plant and equipment Interest received associates from received Dividends Defined benefit pension contributions pension benefit Defined Income taxes paid Exceptional item – sale of shareholding in Delcam plc 96
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
NOTES (FORMING PART OF THE FINANCIAL STATEMENTS)
1. Accounting policies Basis of preparation Renishaw plc (the “Company”) is a company incorporated in the UK. 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. The parent company financial statements present information about the Company as a separate entity and not about the Group. The group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU (“adopted IFRS”). The Company has elected to prepare its parent company financial statements in accordance with UK GAAP. 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. Basis of accounting The financial statements have been prepared under the historical cost convention, subject to items referred to in the derivative financial instruments note below. The accounting policies set out below have been consistently applied in preparing both the 2014 and 2015 financial statements. Critical accounting judgements 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 estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities in the next financial year are listed below:
(i) Inventory Determining the value of inventory requires judgement, especially in respect of provisioning for slow moving and potentially obsolete inventory. Management consider historic and future forecast sales patterns of individual stock items when calculating inventory provisions. (ii) Impairment of goodwill 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 10). Other estimates and judgements that have been made in these financial statements are as follows:
(i) Defined benefit pension scheme liabilities Determining the value of the future defined benefit obligation requires judgement in respect of the assumptions used to calculate present values. These include future mortality, discount rate, inflation and salary increases. Management makes these judgements in consultation with an independent actuary. Details of the estimates and judgements in respect of the current year are given in note 15.
(ii) Amortisation of intangibles and impairment The periods of amortisation of intangible assets require judgements to be made on the estimated useful lives of the intangible assets to determine an appropriate rate of amortisation. Future assessments of impairment may lead to the writing off of certain amounts of intangible assets and the consequent charge in the Consolidated income statement for the accelerated amortisation.
(iii) Capitalisation of development costs 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. 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. Strategic report Governance Financial statements Shareholder information 97 Renishaw plc AnnualRenishaw report and accounts 2015 Basis of consolidation Basis of variable to, rights has or to, exposed is it when entity an controls Group The Group. the by controlled entities are Subsidiaries - Subsidiaries returns from its involvement with the entity and has the ability affect to those returns through its powerover the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. that date the from The acquisitionstatements financial consolidated the datein isincluded the are datesubsidiaries onof which controlstatements financial The is acquirer. the to transferred control commences until the date that control ceases. Losses applicable the to non-controlling interests in a subsidiary are allocated the to non-controlling interests even if doing so causes the non-controlling interests have to a deficit balance. Associates - Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.Significant influence is presumed to exist when the Group holds between20% and50% of the voting power of another entity. Application of the equity method associates to - Associates are accounted for using The losses. impairment the equityaccumulated any of method net acquisition, (equity on identified goodwill includes accounted investment investees) and Group’s The are cost. at recognised initially consolidated financial statements include theshare Group’s of thetotal 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 share Group’s of losses exceeds its interest in an equity accounted investee, the carrying Group’s amount is reduced nil to and recognition of further losses is discontinued except the to extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee. Transactions eliminated on consolidation - Intra-group balances and transactions, and any unrealised income and expenses arising fromintra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated againstinvestment the the to extent of the interest Group’s 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. The following adopted IFRSshave been applied the by Group for the first time in these financial statements. ‘Consolidated IFRS(a) 10 Arrangements’, Financial ‘Disclosures ‘Joint IFRS 12 IFRS Statements’, 11 of Interests in Other amendment Entities’, to IAS ‘Separate 27 Financial Statements’ and amendment IAS ‘Investments to 28 in Associates and Joint Ventures’ are a package of new standards and amendments that set out the basis for consolidation and the accounting requirements. The Group holds 50% stakes in RLS merilna tehnika and Metrology d.o.o. SoftwareProducts Limited which are currently accounted for as investments in associates. The Group has assessed whether it has joint control over these companies and under has determined IFRS 11 that it does not have joint control over these entities as decisions over the relevant activities do not require group consent. These will continue be to accounted for as associates rather than joint ventures. (b) Amendments IAS to ‘Financial 32 Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities’. This amendment sets outthe criteria required for offsetting. cycles. Annual(c) 2011-2013 improvements 2010-2012, Group. the of position financial or results consolidated the effect on significant a had not has standards these of adoption The The following standards issued the by International Accounting Standards Board have been adopted the by but EU, only become effective for accounting periods commencing after 30th June 2015: IFRS(a) 9 ‘Financial Instruments’. ‘Revenue(b) IFRS 15 from Contracts with Customers’. cycle. Annual(c) improvements 2012-2014 financial or results consolidated the effect on significant a have will standards these of adoption that expect currently not does Group The requirements. disclosure impact may but Group, the of position New, revised or changes to existing accounting standards accounting existing changes or revised to New, 1. Accounting policies continued1. Accounting policies Revenue Revenue from the sale of goods is recognised in the Consolidated income statement when the significant risks and rewards of ownership have been transferred the which to buyer, is thetime of despatch. Where certain products require installation, part of the revenue may be deferred untilthe installation is complete. No revenue is recognised if there are significant uncertainties regarding recovery goods. of the of consideration return possible or the due, Revenue from the sale of services is recognised over the period which to the service relates. Where goods and services are sold as a bundle,the fair value of services is deferred and recognised over the period which to the service relateswith theremaining revenue recognisedon despatch. 98
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
NOTES CONTINUED
1. Accounting policies continued Foreign currencies Foreign subsidiaries’ results are translated into Sterling at weighted average exchange rates for the year, which is effected by translating each foreign 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 ruling at that date. Differences on exchange resulting from the translation of overseas assets and liabilities are recognised directly in equity. Gains and losses arising on currency borrowings used to hedge the foreign currency exposure on the net assets of the foreign operations are accounted for directly in equity, to the extent that hedge accounting criteria are met and are included in the Consolidated statement of comprehensive income and expense. See the note on derivative financial instruments below, for the accounting policies for forward exchange contracts and currency borrowings. Derivative financial instruments Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the Consolidated income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see below). Hedge of net investment in foreign operation The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognised directly in equity. Any ineffective portion is recognised immediately in the Consolidated income statement. The effectiveness of the hedging is tested monthly. Inventory and work in progress Inventory and work in progress is valued at the lower of cost 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 which 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. 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 at any time. Goodwill and other intangible assets Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Deferred consideration relating to acquisitions is subject to discounting to the date of acquisition and subsequently unwound to the date of the final payment. 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. Where there exists an option to purchase the non-controlling interest of a subsidiary and the option is deemed to have been exercised, the Group has adopted the anticipated-acquisition method. Any changes to the carrying amount of the liability are recognised in the Consolidated income statement. 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 through 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. On a transaction by transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at its fair value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their fair value at the acquisition date. Where there are changes to the Company’s interests in subsidiaries while retaining control, any differences between the amount by which non-controlling interests are adjusted and fair value of consideration paid or received is recognised directly in equity in the “other reserve”. Strategic report Governance Financial statements Shareholder information 99 Renishaw plc AnnualRenishaw report and accounts 2015
3 to 4 years3 to 3 to 10 years 10 3 to 50 years 50
Vehicles Employee benefits Employee The Group operates contributory pension schemes, largely for UK, Ireland and USA employees, which were of the defined benefit December 31st type up April5th to 2007 and 30th respectively, 2007, June 2012 at which time theyceased any future accrual for existing members and were closed new to members. The schemes are administered trustees by who are independent of the group finances.Pension scheme assets of the defined benefit schemesare measured using market value. 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 the to liability. Remeasurements arising from defined benefit planscomprise actuarial gains and losses, the return on plan assets (excluding interest) and the effectincluded are plans benefit of the defined asset to ceiling related expenses other excluding (if all and any, income comprehensive interest). other in immediately them recognises Company The in the Consolidated income statement. The pension schemes’ surpluses, the to 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 relationto a pension scheme deficit, liabilities reportedare in accordanceForeign-based with IFRIC 14. employees are covered state, by defined benefit and private pension schemes in their countries of residence. Actuarial valuations of foreign pension schemes were not obtained, apart from Ireland and USA, because of the limitednumber of foreign employees. For defined contribution schemes, the amount chargedto the Consolidated income statement represents the contributions payable the to schemes in respect of the accounting period. Accruals are made for holiday based pay, on a calculation of the number of days holiday earned during but the year, not yet taken. Dividends Dividends unpaid at the balance sheet date are only recognised as a liability at that date the to extent that they are appropriately declared and authorised and no longer at the discretion of the Company. The Group provides a warranty from the date of purchase on all its products. This is typically period, for a 12-month although up three to years is given for a small number of products. A warranty provision is included in the financial statements, which is calculated on the basis of historicalreturns and internal quality reports. Warranty provisions Warranty Freehold land is not depreciated. Other assets are stated at cost less accumulated depreciation. Depreciation is provided write to off the cost of assets less their estimated residual value on a straight-line basis over their estimated useful economic lives as follows: buildings Freehold Property, plant and equipment Intangible assets – software licences Intangible assets comprising software licences, that are acquiredthe by 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 ten to years. Plant and equipment 1. Accounting policies continued1. Accounting policies Intangible assets research – and development costs Expenditure on research activities is recognised in the Consolidated income statement ability technical the as has an and expense intends Group as the incurred. and feasible commercially and technically Expenditure is process or product the if capitalised is onactivities development expenditure the reliably measure can Group the and probable are benefits economic future development, complete to resources and sufficient development. its during asset intangible the to attributable expenditure The processes. or products improved substantially or new of production the for design or plan a involve activities Development is expenditure development Other overheads. of proportion appropriate an and labour direct materials, of cost the includes capitalised recognised in the Consolidated income statement as an expense as incurred. Capitalised development expenditure is amortised over fiveand years is stated at cost less accumulated amortisation and less accumulated impairment losses. Capitalised development expenditurefrom is the removed balance sheet ten years after being fully amortised. 100
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1. Accounting policies continued Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term (with an original maturity of less than three months) deposits. Bank overdrafts that are repayable on demand form part of cash and cash equivalents for the purpose of the Consolidated statement of cash flow. Exceptional items Exceptional items are items which due to their size, incidence and non-recurring nature have been classified separately in order to draw them to the attention of the reader of the accounts and, in management’s judgement, to show more accurately the underlying results of the Group. Such items are included within the Consolidated income statement caption to which they relate and are disclosed separately on the face of the Consolidated income statement. Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic report, where also given are details of the financial and liquidity positions. In addition, note 22 in the financial statements includes the Group’s objectives and policies for managing its capital, details of its financial instruments and hedging activities and its exposures to credit risk and liquidity risk. The Group has considerable financial resources at its disposal and the directors have considered the current financial projections. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual report and accounts. Cash flow hedges Forward exchange contracts are recognised at fair value. Where a forward contract is designated as a hedge of the variability in future cash inflows, the effective part of any gain or loss on the forward contract is recognised directly in equity. Any effective cumulative gain or loss is removed from equity and recognised in the Consolidated income statement at the same time as the hedged transaction. The ineffective part of any gain or loss is recognised in the Consolidated income statement immediately. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss held in equity is recognised in the Consolidated income statement immediately. The effectiveness of cash flow hedges is tested on a monthly basis by comparing the cash inflows with the hedging amounts. 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 equity, 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. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Strategic report Governance Financial statements Shareholder information 775 Total 2014 2014 880 Total £’000 £’000 £’000 £’000 (608) (1,057) 11,352 39,190 71,007 23,816 10,523 66,575 70,388 22,953 26,280 85,562 43,043 96,386 28,056 101 100,199 134,569 355,498 355,498 144,196 143,924 494,720 – – – – – – – 2015 2015 £’000 £’000 £’000 £’000 3,917 4,001 (3,986) 73,113 (6,846) 27,719 28,865 12,166 25,499 44,658 43,946 82,350 96,284 119,551 103,106 Healthcare 257,665 494,720 Healthcare – – – – 775 880 £’000 £’000 74,374 19,036 26,280 24,055 Metrology 326,633 467,001 150,770 Renishaw plc AnnualRenishaw report and accounts 2015 Metrology Operating profit/(loss) North, South and Central America UK and Ireland Japan Share of profits from associates from profits of Share Korea South Germany USA China Far East, including Australasia including East, Far Depreciation and amortisation and Depreciation Europe Continental regions Other Year endedYear 30th June 2014 Revenue Total groupTotal revenue Revenue in the previous table has been allocated regions to based on the geographical location of the customer. Countries with individually material revenue figures in the context of the Group were: Revenue Year ended 30th June 2015 amortisation and Depreciation 2. Segmental analysis regularly are segments these of results The products. healthcare and metrology comprising segments, two in operations its manages Renishaw reviewed the by Board allocate to resources segments to and assess to their performance. The Group evaluates performance of the segments on the basis of revenue and profits. Within metrology, there are multiple operating segments and that amortisation, and are aggregated depreciation revenue, The a into reporting similar. are base segment customer their and for products the of nature the where reportable purposes, were: reportable segment each for profit operating Net financial expense Profit before tax Exceptionalgain on disposal of shareholding in Delcam plc Net financial expense Profit before tax There is no allocation of assets and liabilities operating to segments. Depreciation is included within certain other overhead expenditureallocated which segments to is on the basis of the level of activity. The analysis of revenue geographical by market was: Operating profit/(loss) Share of profits from associates from profits of Share 102
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2. Segmental analysis continued There was revenue from transactions with one external customer which amounted to more than 10% of the Group’s total revenue. This was in the Metrology segment and amounted to £62,607,000. The following table shows the analysis of non-current assets by geographical region: 2015 2014 £’000 £’000 United Kingdom 166,468 142,079 Overseas 64,268 57,6 4 4 Total non-current assets 230,736 199,723
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: 2015 2014 £’000 £’000 Wages and salaries 141,392 119,890 Compulsory social security contributions 16,005 13,714 Contributions to defined contribution plans 16,347 13,246 Total payroll costs 173,744 146,850
The average number of persons employed by the Group during the year was:
2015 2014 Number Number UK 2,529 2,221 Overseas 1,282 1,124 Average number of employees 3,811 3,345
The total remuneration of the directors was: 2015 2014 £’000 £’000 Salary and fees 2,376 2,291 Bonus 2,225 – Benefits 79 77 Pension contributions 178 182 Total remuneration of the directors 4,858 2,550
Full details of directors’ remuneration are given in the Directors’ remuneration report. Strategic report Governance Financial statements Shareholder information 41 10 52 22 (24) (86) 113 121 164 108 2014 £’000 176 679 168 2014 2014 £’000 £’000 11,649 11,304 36,306 1,736 1,392 103 22 20 48 88 (99) 121 181 167 125 339 2015 28 43 £’000 2015 2015 884 £’000 £’000 13,131 14,925 42,260 1,421 1,492
(c) (c) (c) (c) (c) (c) (c) (c) (a) (c) (c) (a) (b) notes Renishaw plc AnnualRenishaw report and accounts 2015 Audit of these financial statements financial these of Audit Tax compliance Tax Audit assurance Audit Audit of subsidiary undertakings pursuant to legislation subsidiary undertakings to of pursuant Audit Tax advisory Tax Audit of pension schemes pension of Audit Other services in relation pension to schemes fees non-audit other All Bank interest payable Unwinding of discount on deferred consideration financialTotal expenses Amortisation of intangibles Amortisation of Depreciation of property, plant and equipment and plant property, of Depreciation Included in the profit before tax are the following costs/(income): 6. Profit before tax before 6. Profit Research and development expenditure development and Research Profit on sale of property, plant and equipment (gains)/losses currency Foreign Auditor: Net interest on pension schemes’ liabilities (note 15) (note liabilities schemes’ pension on interest Net Interest receivable expenses Financial 5. Financial income and expenses income Financial 4. Exceptional item (previous year) (previous 4. Exceptional item endedYear 30th June 2014 In February Autodesk a wholly Development 2014, owned subsidiary B.V., of Autodesk, Inc. acquired the whole of the issued share capital of Delcam plc at a price per share. of £20.75 Renishaw which held Delcam resulted 1,543,032 shares in a total consideration (19.4%) of £32.0m. The investment held in the balance giving sheet a profit was £5.7m, on disposal of £26.3m, which has been disclosed as an exceptional item. Delcam plc was accountedfor as an associate undertaking.
These costs/(income) can be found under the following headings in the Consolidated income statement: within (a) cost of sales, distribution costs and administrative expenses; (b) within cost of sales; and within (c) administrative expenses. 104
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7. Income tax expense 2015 2014 £’000 £’000 Current tax: UK corporation tax on profits for the year 11,526 3,983 UK corporation tax – prior year adjustments 327 – Overseas tax on profits for the year 12,131 8,354 Total current tax 23,984 12,337
Deferred tax: Origination and reversal of other temporary differences (1,134) (99) Effect on deferred tax for change in UK tax rate to 20% – (1,518) (1,134) (1,617) Tax charge on profit 22,850 10,720
Effective tax rate (based on profit before tax) 15.8% 11.1%
The tax for the year is lower (2014: lower) than the weighted average of the UK standard rate of corporation tax of 20.75% (2014: 22.5%). The differences are explained as follows: 2015 2014 £’000 £’000 Profit before tax 144,196 96,386
Tax at 20.75% (2014: 22.5%) 29,921 21,687 Effects of: Different tax rates applicable in overseas subsidiaries (2,723) (911) Research and development tax credit and patent box (5,745) (2,923) Expenses not deductible for tax purposes 324 345 Companies with unrelieved tax losses 749 477 Items with no tax effect (183) (6,400) Prior year adjustments 327 – Effect on deferred tax for change in UK tax rate to 20% – (1,518) Other differences 180 (37) Tax charge on profit 22,850 10,720
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1st April 2014) and 20% (effective from 1st April 2015) were substantively enacted on 2nd July 2013. In the Budget on 8th July 2015, the Chancellor announced additional planned reductions to 18% by 2020. This will reduce the Company’s future current tax charge accordingly. As at 30th June 2015, UK deferred tax has been calculated at the rate of 20% for all timing differences.
8. Earnings per share Basic and diluted earnings per share are calculated on earnings after tax of £121,908,000 (2014: £86,215,000) and on 72,788,543 shares, being the number of shares in issue during both years. There is no difference between the weighted average earnings per share and the basic and diluted earnings per share. The adjusted earnings per share figure for 2014 excludes the exceptional item. Strategic report Governance Financial statements Shareholder information – – Total Total (643) £’000 £’000 (1,323) (2,634) (6,854) (4,171) (6,196) 11,304 (1,688) (3,887) 39,200 14,925 48,387 117,926 251,169 110,247 220,146 105 140,922 140,922 102,220 251,169 110,247 119,597 289,189 169,592 – – – – – – – – – – – – – – £’000 £’000 5,304 5,304 7,875 7,875 24,240 13,930 13,930 13,930 (15,614) 27,286 course of 13,930 (33,341) course of construction Assets in the Assets in the construction – – 842 (334) (208) (206) (390) (175) £’000 Motor £’000 (329) (599) (695) 5,181 7,70 9 Motor 4,753 1,064 2,956 2,868 2,868 8,049 1,189 5,181 8,575 1,550 2,979 8,049 5,596 vehicles vehicles Renishaw plc AnnualRenishaw report and accounts 2015 (874) (359) £’000 £’000 5,786 (1,474) 8,960 7,846 14,110 (2,339) 47,182 47,182 (1,018) (4,120) 37,626 (1,440) 76,825 (2,985) 83,952 11,444 91,393 Plant and Plant 12,222 83,952 54,249 131,134 114,451 131,134 Plant and Plant equipment 145,642 equipment (78) (115) (952) £’000 £’000 (495) (303) 8,110 1,502 1,504 (4,125) 7,329 21,114 2,292 (1,381) 21,114 land and land Freehold 76,942 76,942 72,040 (2,402) 20,642 92,682 buildings 98,056 25,495 98,056 land and land 22,608 Freehold buildings 127,097 104,489 At 30thAt June 2014 Net book value At 30th June 2015 At 30th June 2015 Cost July 1st At 2014 9. Property, plant and equipment 9. Property, Year ended 30th June 2015 Year ended 30th June 2014 Cost July 1st At 2013 Additions Disposals 30thAt June 2014 Net book value 30thAt June 2014 Currency adjustment Currency Depreciation July 1st At 2013 year the for Charge At 30th were propertiesAt subject June 2015, a registered to with a net charge book £37,597,000) value secure to of £45,033,000 the (2014: liabilities. scheme pension benefit UK defined forAdditions freehold assets to in £13,185,000) the course comprise £24,240,000) of construction (2014: £13,556,000 (2014: of £27,286,000 for plant and equipment.land £11,055,000) and buildings (2014: and £13,730,000 Currency adjustment Currency Charge for the year the for Charge disposals Released on Transfers Disposals Depreciation July 1st At 2014 Additions Transfers 30thAt June 2013 Released on disposals Releasedon 30thAt June 2014 At 30th June 2015 Currency adjustment Currency Currency adjustment Currency 106
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10. Intangible assets
Internally Software licences Other generated Goodwill on intangible development In the course consolidation assets costs In use of acquisition Total Year ended 30th June 2015 £’000 £’000 £’000 £’000 £’000 £’000 Cost At 1st July 2014 19,873 10,644 78,188 20,509 36 129,250 Additions – 36 12,975 994 177 14,182 Transfers – – – 188 (188) – Disposals (198) – (1,688) (189) – (2,075) Currency adjustment 61 (25) – (12) – 24 At 30th June 2015 19,736 10,655 89,475 21,490 25 141,381
Amortisation At 1st July 2014 198 8,631 50,371 13,479 – 72,679 Charge for the year – 1,293 10,141 1,697 – 13,131 Released on disposal (198) – (1,688) (189) – (2,075) Currency adjustment – (10) – (8) – (18) At 30th June 2015 – 9,914 58,824 14,979 – 83,717
Net book value At 30th June 2015 19,736 741 30,651 6,511 25 57,664 At 30th June 2014 19,675 2,013 27,817 7,0 3 0 36 56,571
Internally Software licences Other generated Goodwill on intangible development In the course consolidation assets costs In use of acquisition Total Year ended 30th June 2014 £’000 £’000 £’000 £’000 £’000 £’000 Cost At 1st July 2013 20,182 10,768 66,358 20,152 – 117,46 0 Additions 469 – 11,830 394 89 12,782 Transfers – – – 53 (53) – Disposals – – – (51) – (51) Currency adjustment (778) (124) – (39) – (941) At 30th June 2014 19,873 10,644 78,188 20,509 36 129,250
Amortisation At 1st July 2013 198 7,259 42,026 11,834 – 61,317 Charge for the year – 1,397 8,345 1,732 – 11,474 Released on disposal – – – (51) – (51) Currency adjustment – (25) – (36) – (61) At 30th June 2014 198 8,631 50,371 13,479 – 72,679
Net book value At 30th June 2014 19,675 2,013 27,817 7,0 3 0 36 56,571 At 30th June 2013 19,984 3,509 24,332 8,318 – 56,143 Strategic report Governance Financial statements Shareholder information – % 50 50 2014 2014 £’000 1,784 2,770 1,487 1,559 1,364 6,661 4,050 19,675 107 Ownership is % 50 50 20 2015 2015 £’000 4,411 1,784 1,537 1,328 1,559 6,661 2,456 19,736 Ownership Country of Slovenia Renishaw plc AnnualRenishaw report and accounts 2015 incorporation England & Wales England & Wales itp GmbH and Renishaw Software Limited (both part of the metrology segment) – actual operating results and an average growth rate of five5% for years with a nil growthto rate perpetuitysame basis). (2014: Renishaw Diagnostics Limited, Renishaw Mayfield S.A. (both in the healthcare segment), Measurement Devices Limited and R&R Fixtures, (bothLLC in the metrology segment) – five-year business plans with a nil growthto rate perpetuity(2014: same basis). Total acquired goodwill acquired Total The recoverable amounts of acquired goodwill are based on value in use calculations. These calculations use cash flow projections follows: as withassumptions • • These are considered prudent estimates based on management’s view of the future and experience of past performance. The growth ratesused in the business plans vary except from for 34%, Renishaw to 20% Diagnostics Limited, which is in its research and development phase and thus has negligible revenue date. to A pre-tax discount has been rate of 12% used in discounting the projected cash flows of itp GmbH, Renishaw Software Limited, Measurement Devices A pre-tax Limited discount has and 12%). been R&R Fixtures, rate of 15% used for Renishaw (2014: LLC Diagnostics Limited and RenishawThe discount15%). Mayfield rates have been S.A. derived(2014: by comparison with rates adoptedby other market participants, adjusted reflect to Group and CGU specific risks. On this basis, no impairment write-downs are required. There is significant headroom in all except Measurement Devices Limited and for an impairmentto arise, there would needto be a significant material deterioration in business; this is considered be to remote. An increase in the of 5% discount rate would not result in an impairment, except for Measurement Devices Limited, where, the discount with a headroom rate would have increase of £1.7m, to 14.5%. to Renishaw Mayfield S.A. (75%) Limited Devices Measurement Software Limited Renishaw acquisitions smaller Other Limited Products Software Metrology December) (31st Limited Technologies HiETA RLS merilna tehnika d.o.o. The investments Group’s in associates(all investments being in the ordinary share capital of the associate), whose accounting years end on 30th June, except where noted otherwise, were: 11. Investments in associates Renishaw Diagnostics Limited (92.4%) Limited Diagnostics Renishaw R&R Fixtures, LLC itp GmbH itp expected be to subject tax to relief. is: consolidation on goodwill acquired of analysis The 10. Intangible assets continued 10. Intangible assets amortised not is it Therefore life. useful indeterminable an has and businesses of number a of acquisition the on arisen has acquired Goodwill but is tested forimpairment annually and at any point during the year when an indicator of impairment exists. Goodwill is allocated the to CGUs, which are currently the statutory entities acquired. This is the lowest level in the Group at which goodwill is monitored for impairment and is at a lower level than the operating Group’s segments. In the table below, only the goodwill relating the to acquisition of R&R Fixtures, LLC 108
Renishaw plc Annual report and accounts 2015
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NOTES CONTINUED
11. Investments in associates continued Movements during the year were: 2015 2014 £’000 £’000 Balance at the beginning of the year 2,230 7,40 3 Dividends received (110) (210) Share of profits of associates 880 950 Amortisation of intangibles – (175) Disposal of shareholding in Delcam plc – (5,738) Additions 480 – Balance at the end of the year 3,480 2,230
Summarised aggregated financial information for associates: 2015 2014 £’000 £’000 Revenue 5,713 9,278 Share of profits for the year 880 950 Assets 4,978 4,172 Liabilities 2,393 2,258
12. Acquisitions (previous year)
Year ended 30th June 2014 There were no significant acquisitions in the year. In March 2014, the Group purchased Advanced Consulting and Engineering, Inc, which resulted in goodwill of £469,000.
13. Deferred tax assets and liabilities Balances at the end of the year were:
2015 2014 Assets Liabilities Net Assets Liabilities Net £’000 £’000 £’000 £’000 £’000 £’000 Property, plant and equipment – (5,589) (5,589) – (4,439) (4,439) Intangible assets – (8,017) (8,017) – ( 7,724) ( 7,724) Intragroup trading (inventory) 9,237 – 9,237 7,224 – 7,224 Pension schemes 9,398 – 9,398 8,141 – 8,141 Other 901 (8,385) (7,484) 808 (11,281) (10,473) Balance at the end of the year 19,536 (21,991) (2,455) 16,173 (23,444) ( 7,271) Strategic report Governance Financial statements Shareholder information – 17 17 721 239 2014 2014 2014 2014 (301) (530) £’000 £’000 £’000 £’000 2,149 1,617 1,617 (1,191) ( 7,132) ( 7,271) (1,756) (6,602) 31,992 13,348 18,644 109 764 2015 887 2015 2015 2015 £’000 £’000 £’000 £’000 (323) (293) 1,134 1,134 2,102 3,165 2,013 1,580 3,682 3,929 (1,150) (7,271) (2,455) 14,889 10,504 25,393 Renishaw plc AnnualRenishaw report and accounts 2015 £13,045,000 (2014: £10,675,000) due the to uncertainty £10,675,000) (2014: £13,045,000 Movement in relation the to cash flow hedging reserve Movement in relation the to pension schemes Balance at the beginning of the year Movements in the Consolidated income statement Total movementTotal in the Consolidated statement of comprehensive income and expense Balance at the end of the year Total movementTotal for the year No deferred tax asset has been recognised in respect of tax losses carried forward of over their recoverability, as a significant proportion held in overseas subsidiaries may only be carried forward for a limited period of time. Pension schemes Pension Other assets Current values fair positive with derivatives of Total Non-current liabilities Non-current Intragroup trading (inventory) trading Intragroup Derivatives comprising the fair value of outstanding forward contracts with negative fair values are shown within: liabilities Current Non-current assets Non-current 14. Derivatives Derivatives comprising the fair value of outstanding forward contracts with positive fair values are shown within: Property, plant and equipment Intangible assets Intangible values fair negative with derivatives of Total 13. Deferred tax assets and liabilities continued tax assets and 13. Deferred The movements in the deferred tax balance during the year were: The deferred tax movement in the Consolidated income statement is analysed as: 110
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
NOTES CONTINUED
15. Employee benefits The Group operates a number of pension schemes throughout the world. As noted in the accounting policies, actuarial valuations of foreign pension schemes are not obtained for the most part because of the limited number of foreign employees. The major scheme, which covers the UK-based employees, was of the defined benefit type. This scheme, along with the Ireland and USA defined benefit schemes, has ceased any future accrual for current members and these schemes are closed to new members. UK, Ireland and USA employees are now covered by defined contribution schemes. The total pension cost of the Group for the year was £16,347,000 (2014: £13,246,000), of which £178,000 (2014: £182,000) related to directors and £5,035,000 (2014: £3,537,000) related to overseas schemes. The latest full actuarial valuation of the UK defined benefit scheme was carried out as at September 2012 and updated to 30th June 2015 by a qualified independent actuary. The mortality assumption used for 2015 is S2PMA and S2PFA tables, CMI (core) 2014 model with long-term improvements of 0.2% per annum. The major assumptions used by the actuary for the UK and Ireland schemes were:
30th June 2015 30th June 2014 30th June 2013
UK scheme Ireland scheme UK scheme Ireland scheme UK scheme Ireland scheme Rate of increase in pension payments 3.4% 1.6% 3.5% 1.9% 3.5% 2.5% Discount rate 4.0% 3.0% 4.4% 2.7% 4.8% 3.6% Inflation rate (RPI) 3.6% 1.6% 3.7% 1.9% 3.7% 2.5% Inflation rate (CPI) 2.6% – 2.7% – 2.7% – Retirement age 64 65 64 65 64 65
The assets and liabilities in the defined benefit schemes were:
30th June % of 30th June % of 30th June % of 30th June % of 30th June % of 2015 total 2014 total 2013 total 2012 total 2011 total £’000 assets £’000 assets £’000 assets £’000 assets £’000 assets Market value of assets: Equities 138,174 98 127,8 0 5 98 117,114 99 93,827 99 99,365 98 Bonds and cash 2,325 2 1,950 2 1,653 1 1,409 1 1,684 2 140,499 100 129,755 100 118,767 100 95,236 100 101,049 100 Actuarial value of liabilities (188,593) – (172,823) – (160,485) – (137,224) – (138,713) – Deficit in the schemes (48,094) – (43,068) – (41,718) – (41,988) – (37,664) – Deferred tax thereon 9,398 – 8,141 – 8,973 – 9,519 – 9,393 –
All equities have quoted prices in active markets in the UK, North America, Europe, Asia-Pacific, Japan and emerging markets. Note C.36 gives the analysis of the UK defined benefit pension scheme. For the other schemes, the market value of assets at the end of the year was £14,410,000 (2014: £12,752,000) and the actuarial value of liabilities was £16,644,000 (2014: £18,544,000). The weighted average duration of the defined benefit obligation is around 24 years. For a sensitivity analysis of certain elements of the UK defined benefit pension scheme, see the financial review section of the Strategic report. It is expected that contributions to defined benefit schemes for the next financial year will be at a similar level to the current year. The movements in the schemes’ assets and liabilities were: Assets Liabilities Total Year ended 30th June 2015 £’000 £’000 £’000 Balance at the beginning of the year 129,755 (172,823) (43,068) Contributions paid 2,427 – 2,427 Interest on pension schemes 5,547 (6,968) (1,421) Remeasurement gain/(loss) 5,028 (11,060) (6,032) Benefits paid (2,258) 2,258 – Balance at the end of the year 140,499 (188,593) (48,094) Strategic report Governance Financial statements Shareholder information – (1%) (1%) Total 2014 12% £’000 £’000 2,275 3,533 2,300 6,808 (1,521) (1,392) (1,577) (2,632) (2,233) (2,233) 11,773 (41,718) 111 (12,242) (43,068) Year ended Year 30th June 2011 – – – (6%) 672 358 2015 £’000 (14%) £’000 2,387 ( 7,781) (4,120) 5,233 (6,032) (2,200) Liabilities (13,266) (10,605) (10,095) (172,823) (160,485) Year ended Year 30th June 2012 1% (1%) 11% (860) £’000 Assets 9,213 1,887 2,275 1,089 (2,387) 13,474 118,767 129,755 Year ended Year Renishaw plc AnnualRenishaw report and accounts 2015 30th June 2013 5% 2% (1%) 2,828 6,535 (2,233) Year ended Year 30th June 2014 – – 4% (3%) 5,905 (6,032) Year ended Year 30th June 2015 The analysis of the amount recognised in the Consolidated statementof comprehensive income and expense was: percentage of scheme assets scheme of percentage Adjustment to liabilities for IFRIC 14 IFRIC for liabilities to Adjustment amountTotal recognised in the Consolidated statement of comprehensive income and expense – Experience adjustment Experience – Return on plan assets excluding interest income Interest on pension schemes pension on Interest gain/(loss) Remeasurement paid Benefits Balance at the end of the year Difference between the expected and actual actual and expected the between Difference assets scheme return on (£’000) amount Experience gains and losses on scheme liabilities scheme on losses and gains Experience (£’000) amount percentage of present value of scheme liabilities Total amount recognised in the Consolidated Consolidated the in recognised amount Total expense and comprehensive income statement of (£’000) amount The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and expense lossof £78,756,000). wasa loss of £84,788,000 (2014: The history of experience gains and losses is: – Changes in financial assumptions financial in Changes – Actuarial (loss)/gain arising from: arising (loss)/gain Actuarial assumptions demographic in Changes – Contributions paidContributions 15. Employee benefits continued 15. Employee benefits Year ended 30th June 2014 Balance at the beginning of the year percentage of present value of scheme liabilities 112
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FINANCIAL STATEMENTS
NOTES CONTINUED
15. Employee benefits continued The assumptions used for mortality rates for members, medium cohort at the expected retirement age of 65 years are: 2015 2014 years years Male currently aged 65 22.3 22.1 Female currently aged 65 24.4 24.8 Male currently aged 45 23.6 23.4 Female currently aged 45 25.7 26.1
Under the UK and Ireland defined benefit pension scheme deficit funding plans, there are certain UK properties, owned by the Company, and a property owned by Renishaw (Ireland) Limited, which are subject to registered fixed charges to secure the UK and Ireland defined benefit pension schemes’ deficits respectively. The Company has also established an escrow account, which is subject to a registered floating charge to secure the UK defined benefit pension scheme liabilities. The balance of this account was £14,731,000 at the end of the year (2014: £9,541,000). The Company has given a guarantee relating to recovery plans for the UK defined benefit pension scheme and the trustees have the right to enforce the charges to recover any deficit up to £48,200,000 if an insolvency event occurs in relation to the Company before 30th September 2016 or if the Company has not made good any deficit up to £48,200,000 by midnight on 30th September 2016. No scheme assets are invested in the Group’s own equity. The value of the guarantee discussed above is greater than the value of the pension scheme’s deficit. As such, in line with IFRIC 14, the UK defined benefit pension scheme’s liabilities have been increased by £10,200,000, to represent the maximum discounted liability as at 30th June 2015 (2014: £8,000,000).
16. Inventories An analysis of inventories at the end of the year was: 2015 2014 £’000 £’000 Raw materials 28,344 22,795 Work in progress 20,087 15,338 Finished goods 29,242 24,846 Balance at the end of the year 77,673 62,979
During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £144,547,000 (2014: £114,597,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income statement was £1,254,000 (2014: £1,017,000).
17. Cash and cash equivalents An analysis of cash and cash equivalents at the end of the year was: 2015 2014 £’000 £’000 Bank balances and cash in hand 77,282 38,930 Short-term deposits 4,889 4,704 Balance at the end of the year 82,171 43,634
The UK defined benefit pension scheme cash escrow account is shown separately within current assets. Strategic report Governance Financial statements Shareholder information 2014 2014 458 2014 £’000 (794) (336) £’000 £’000 4,153 1,630 1,294 16,110 11,957 14,558 113 2015 421 2015 2015 £’000 £’000 £’000 1,715 1,518 5,097 1,294 (1,097) 28,561 23,464 14,558 Renishaw plc AnnualRenishaw report and accounts 2015 Utilised in the year Created during the year Balance at the end of the year Balance at the beginning of the year The warranty provision has been calculated on the basis of historical return-in-warranty information and other internal reports. It is expectedthat 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. The currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the of statements financial the of translation the from differences arising exchange foreign all reserve comprises translation currency The foreign operations, offset foreign by exchange differences on bank liabilities which have been accounted for directly in equity on accountthem being of classified as hedging instruments.loss comprises £5,754,000) (2014: a Theloss movement on the in the year of a gain£111,000 of net assets of foreign and a gain currency on foreign operations currency loss £11,307,000) overdrafts of £2,390,000 (2014: held for the purpose of net investment gain £5,553,000). hedging (2014: of £2,501,000 Currency translation reserve translation Currency Allotted, called-up and fully paid ordinary72,788,543 shares of 20p each The ordinary shares are the only class of share in the Company. Holders of ordinary shares are entitled at general vote to 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. Share capital Share The deferred consideration of £589,000 is in respect of investments in subsidiaries, which is payable over the next two years (2014: £883,000). 21. Capital and reserves 20. Other payables (non-current) Payroll taxes and social security Balances at the end of the year were: 19. Other payables Other creditors and accruals otherTotal payables The exposure Group’s currency to and liquidity risk related trade to and other payables is disclosed in note 22. 18. Provisions Warranty provision Movements during the year were: 114
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NOTES CONTINUED
21. Capital and reserves continued Cash flow hedging reserve The cash flow hedging reserve comprises all foreign exchange differences arising from the valuation of forward exchange contracts which are effective hedges and mature after the year end. These are valued on a mark-to-market basis, are accounted for directly in equity and are recycled through the Consolidated income statement when the hedged item affects the Consolidated income statement. The forward contracts mature over the next three and a half years. Movements during the year were: 2015 2014 £’000 £’000 Balance at the beginning of the year 25,580 (694) Amounts transferred to the Consolidated income statement (within revenue) (13,348) (1,565) Revaluations during the year 2,837 34,441 Deferred tax movement 2,102 (6,602) Balance at the end of the year 17,171 25,580
Dividends paid Dividends paid comprised: 2015 2014 £’000 £’000 2014 final dividend paid of 29.87p per share (2013: 28.67p) 21,742 20,868 Interim dividend paid of 12.50p per share (2014: 11.33p) 9,099 8,247 Total dividends paid 30,841 29,115
A final dividend in respect of the current financial year of £24,748,105 (2014: £21,741,938), at the rate of 34.0p net per share (2014: 29.87p) is proposed, to be paid on 19th October 2015 to shareholders on the register on 18th September 2015, with an ex-dividend date of 17th September 2015. Non-controlling interest Movements during the year were: 2015 2014 £’000 £’000 Balance at the beginning of the year (2,076) (1,334) Acquisition of further share in subsidiary – (193) Share of loss for the year (562) (549) Balance at the end of the year (2,638) (2,076)
The non-controlling interest represents the minority shareholdings in Renishaw Diagnostics Limited – 7.6%, Renishaw Mayfield SARL – 25% and Renishaw Mayfield S.A. – 25%. Strategic report Governance Financial statements Shareholder information (89) 2014 2014 2014 (457) £’000 £’000 £’000 3,122 2,979 3,525 1,903 3,496 (9,050) 18,879 13,854 43,634 115 (30,521) (22,404) 102,113 Cash 2015 2015 2015 509 (524) £’000 £’000 £’000 5,163 2,372 2,979 2,964 24,171 82,171 10,710 16,636 (11,431) (31,752) (31,959) 146,603 2014 £’000 7,863 1,828 4,055 13,397 15,696 42,839 Renishaw plc AnnualRenishaw report and accounts 2015 2015 £’000 1,671 8,541 9,388 3,882 Other receivables Other 14,720 38,202 2014 £’000 7,0 9 3 9,097 81,798 30,418 16,332 18,858 2015 £’000 8,029 Trade receivables Trade 18,701 31,423 10,660 32,400 101,213 , which can change over time, affecting the interest Group’s income. An increase in interest of 1% rates Balance at the end of the year Movements in the provision for impairment of trade receivables during the year were: Changes in amounts provided Amounts utilisedAmounts Balance at the end of the year Currency Liquidity risk The approach Group’s managing to liquidity is ensure, to as far as possible, that it will always have sufficient liquidityto meet its liabilities when due, without incurring unacceptable losses or risking damage the reputation. to Group’s The Group is cash generative and uses monthly cash flow forecaststo monitor cash requirements. In respect of net cash, the carrying value approximates fair to value because of the short maturity of the deposits and borrowings. Interest ratesare floating and based on LIBOR/LIBID Balance at the beginning of the year would result in an increase in interest income of approximately £700,000. The market value of forward exchange contracts is determined by reference market to data. Past due 0–1 month Past due months 1–2 Past due more than 2 months Pound Sterling Pound Euro The above trade receivables, other receivables and cash are predominately held in the functional currency of the relevant entity, with of Euro-denominated the exception of £3,511,000 trade receivables being held in the Company, along with some foreign currency cash balances which are of a short-term nature. Also, see note below on net assets and associated borrowings, regarding the holding of foreign currency activity. hedging its of respect in Company the by borrowings The ageing of trade receivables past due, but not impaired, at the end of the year was: Other Credit risk Credit The Group carries a credit risk, being the risk of non-payment of trade receivables its by customers. Credit evaluations are carried out on allcustomers new 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 doubtful. considered is of trade recoverability where receivables An analysis currency by of the financial Group’s assets at the year end is as follows: 22. Financial instruments The Group has exposure credit to risk, liquidity risk and market risk arising from its use of financial instruments. This note presents informationabout the exposure Group’s these to risks, along with the objectives, Group’s policies and processes for measuring and managing the risks. US Dollar US Yen Japanese 116
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NOTES CONTINUED
22. Financial instruments continued The contractual maturities of financial liabilities at the year end were:
Contractual cash flows Carrying amount Up to 1 year 1–2 years 2–5 years Year ended 30th June 2015 £’000 £’000 £’000 £’000 Trade payables 21,154 21,154 – – Other payables 28,561 27,972 589 – Provisions 1,715 1,715 – – Forward exchange contracts 3,929 764 863 2,302 55,359 51,605 1,452 2,302
Carrying amount Up to 1 year 1–2 years 2–5 years Year ended 30th June 2014 £’000 £’000 £’000 £’000 Trade payables 18,857 18,857 – – Other payables 16,993 16,111 377 533 Provisions 1,294 1,294 – – Forward exchange contracts 17 – – 17 37,161 36,262 377 550
For non-current other receivables of £10,504,000 (2014: £18,644,000), £6,295,000 (2014: £11,884,000) is receivable between 1 and 2 years and £4,209,000 (2014: £6,760,000) is receivable between 2 and 5 years. 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. 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 exchange contracts, which are held at fair value, with changes going through the Consolidated income statement unless subject to hedge accounting. The fair values of the forward exchange contracts have been calculated by a third party expert, discounting estimated future cash flows on the basis of market expectations of future exchange rates, representing level 2 in the IFRS 13 fair value hierarchy. The IFRS 13 level categorisation relates to the extent the fair value can be determined by reference to comparable market values. The classifications range from level 1 where instruments are quoted on an active market through to level 3 where the assumptions used to arrive at fair value do not have comparable market data. Exchange rates and sensitivity analysis The Group has hedged a significant proportion of its forecasted US Dollar, Japanese Yen and Euro revenues and hence the impact on the Group’s results resulting from fluctuations in these exchange rates against Sterling is lessened. The following are the exchange rates which have been applicable during the financial year. Also noted is the increase in profit that a one US Dollar cent change, a one Japanese Yen change and a one Euro cent change in exchange rate, where the foreign currency is strengthening against Sterling, might have on the Group’s results. The method of estimation involves assessing the impact of this currency on the Group’s transactions assuming all other variables are unchanged.
2015 2014 Increase in group profit for Year end Average one cent or one Year end Average exchange exchange Yen movement exchange exchange Currency rate rate £’000 rate rate US Dollar 1.57 1.57 420 1.71 1.64 Japanese Yen 192 182 70 173 166 Euro 1.41 1.32 60 1.25 1.20 Average US Dollar forward contract rates 1.54 1.57 Average Japanese Yen forward contract rates 121 126 Average Euro forward contract rates 1.17 1.17 Strategic report Governance Financial statements Shareholder information % 2014 2014 0.28 0.09 £’000 £’000 2,176 1,745 -0.02 5,709 3,964 117 interest rate Base borrowing Base 2015 2015 £’000 £’000 £’000 4,913 7,222 2,363 2,309 14,139 36,875 35,407 Currency borrowing £’000 15,912 44,549 39,933 subsidiary Renishaw plc AnnualRenishaw report and accounts 2015 Net assets of Total leaseTotal payments for the financial year Japanese Yen Japanese Euro The currency borrowings are short term, with floating interest rates. For the net assets of the overseas subsidiaries not change hedged, in a 1% exchange rates will affect reserves approximately by £700,000. Due in less than one year Due between one and five years 23. Operating leases The total of future minimum lease payments under non-cancellable operating leases (all of which relate land to and buildings in subsidiaries) were: Capital management The Group defines capital as being the equity attributableto the owners of the Company, which is captioned on the Consolidated balance sheet. The Board’s policy is maintain to a strong capital base and maintain to a balance between significant returnsto shareholders, with a progressive dividend policy, whilst ensuring the security of the Group supported a sound by capital position. The Group may adjust dividend payments changes dueto in economic and market conditions which affect, or are anticipated affect, to group results. US Dollar US Currency Net assets and associated borrowings The Group maintains foreign currency borrowings as a method of providing hedging against the currency translation risk of the net assets of its overseas subsidiaries. The level of hedging in place at the year end for the major currencies and their relative base borrowing interest rates, were: 22. Financial instruments continued 22. Financial instruments The Company has US Dollar, Japanese and Euro Yen forward contracts which mature after the balance sheet date. The fair value of these profit £25,580,000)21). The contractsnominal (see(2014: note at theamounts year endof resulted in profit a carried forward£17,171,000 of foreign currencies relating these to forward contracts are, in Sterling terms, £353,044,000 £26,042,000 in £121,326,000). £245,824,000), in US Dollars in Euro (2014: (2014: and £107,904,000 £47,087,000) Japanese (2014: Yen The Group classifies these forward contracts as cash flow hedges and states them at fair value. The forward contracts cover monthly revenues over the next three and a half years. Further details arenoted in the treasury policies in the financial review section of the Strategic report. Total futureTotal minimum lease payments Lease payments recognised as an expense during the year were: 118
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NOTES CONTINUED
24. Capital commitments Capital commitments at the end of the year, for which no provision has been made in the financial statements, were: 2015 2014 £’000 £’000 Authorised and committed 7,381 10,676
25. Contingencies The UK banking arrangements are subject to cross-guarantees between the Company and its UK subsidiaries. These accounts are subject to a right of set-off.
26. Related parties During the year, associates and other related parties purchased goods and services from the Group to the value of £1,288,000 (2014: £249,000) and sold goods and services to the Group to the value of £8,648,000 (2014: £6,515,000). At 30th June 2015, associates owed £525,000 to the Group (2014: £56,000). Associates were owed £499,000 by the Group (2014: £318,000). Dividends of £110,000 were received from associates during the year (2014: £210,000). Loans to related parties from the Group at 30th June 2015 were £3,048,000 (2014: £2,520,000). There were no bad debts written off during the year (2014: £nil). Strategic report Governance Financial statements Shareholder information 42 704 2014 (900) £’000 (9,117) 9,541 74,179 27,70 6 37,567 14,558 92,823 25,580 18,644 98,567 (23,421) 119 219,175 316,772 475,428 475,428 416,043 144,361 435,248 498,849 508,866 (126,352) 42 2015 £’000 1,184 17,171 (8,541) (3,754) 14,731 49,740 57,395 14,558 10,504 (28,528) (79,280) 190,146 147,560 179,642 631,079 618,784 319,257 120,492 269,426 440,933 590,256 558,485 590,256 15 C.31 C.37 Notes C.28 C.32 C.39 C.38 C.35 C.29 C.36 C.33 C.34 C.30 Renishaw plc AnnualRenishaw report and accounts 2015
A C G Roberts Net current assets current Net Due within one year Debtors Pension scheme escrow bank account Stock Creditors Amounts falling due within one year Due after more than one year Cash at bank Profit and loss account equity – funds Shareholders’ Capital and reserves and Capital capital share up Called account premium Share reserve Currency Net assets including pension liability pension including assets Net Pension liability Pension Total assets less current liabilities current less assets Total Creditors Amounts falling due after more than one year liabilities for Provisions Current assets Current liability pension excluding assets Net Fixed assets Fixed assets Tangible Investments in subsidiaries in Investments associates in Investments These financial statements were approvedby the Board of directors on 29thand were July signed2015 on its behalfby: Sir David R McMurtry COMPANY BALANCE SHEET COMPANY at 30th June 2015 Directors 120
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS for the year ended 30th June 2015
2015 2014 £’000 £’000 Profit for the financial year 162,185 83,285 Dividends paid (30,841) (29,115) Effective portion of changes in fair value of cash flow hedges, net of recycling and deferred tax (8,409) 26,274 Actuarial loss in the pension scheme, net of deferred tax (8,107) (5,476) Increase in shareholders’ funds 114,828 74,968 Shareholders’ funds at 1st July 2014 475,428 400,460 Shareholders’ funds at 30th June 2015 590,256 475,428 Strategic report Governance Financial statements Shareholder information 121 Renishaw plc AnnualRenishaw report and accounts 2015
Stocks Stocks are valued at the lower of cost and net realisable value. Cost comprises direct materials and labour plus overheads applicable the to stage of manufacture reached. Employee benefits Employee The Company operated a contributory pension scheme, of the defined benefit type 5th to after up Aprilwhich 2007, this scheme was closed for future accruals existing to members and was closed new to members. Since the Company April 5th has 2007, operated a defined contribution scheme, which is part of the same scheme. The scheme is administered trustees by who are independent of the company finances. a using measured are liabilities scheme Pension value. market using measured are scheme benefit defined the in assets scheme Pension projected unit method and discounted at the current rate of return ona high-quality corporate bond of equivalent term and currency the to liability. The expected return on the scheme’s assets and the interest on the scheme’s liabilities arising from the passage of time are included in income. finance other The pension scheme’s surplus, the to extent that it is considered recoverable, or deficit is recognised in full and presented on the face of the balance sheet net of the related deferred tax. Accruals are made for holiday based pay, on a calculation of the number of days holiday earned during but the year, not yet taken and also for performance annual bonus. the Taxation The charge for taxation is based on the Company’s profit for theDeferred year. tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes, which have arisen but not reversed the by balancesheet date, except as otherwise required FRS by 19. Deferred tax assets are recognised the to extent that it is regarded as more likely than not that they will be recovered. Research and development Research and development expenditure is charged profit to and loss account in the year in which it is incurred. Plant and equipment years 10 – 3 to Dividends Dividends unpaid at the balance sheet date are only recognised asa liability at that date the to extent that they are appropriately declared and authorised and no longer at the discretion of the Company. Tangible assets and depreciation Tangible Tangible assets are stated at cost less accumulated depreciation. Depreciation is provided write to 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 Motor vehicles 4 years – 3 to No depreciation is provided on freehold land. Investments Investments in subsidiary and associated undertakings are stated at cost less any provision for permanent impairment losses. Basis of preparationBasis of The financial statements have been prepared in accordance with applicable UK GAAP. Under section 408 of the Companies Act 2006 the Company is exempt from the requirement present to its own profit and loss account. Under FRS 1 the Company is exempt from the requirement prepare to a cash flow statement on the grounds that the parent undertakingstatements. financial consolidated published own its in Company the includes Advantage has been taken of FRS 8 “Related party disclosures” not disclose to transactions with subsidiaries on the basis that all transactionswere with members of the Group, of whose 100% voting rights were controlled. The Company has adopted FRS 29 “Financial Instruments Disclosures”, which came into effect contain statements the Januaryfinancial from Company However, group 1st the as disclosures 2007. instrument financial present to not companies parent to available exemption the taken has standard. the with comply that disclosures C.27. Accounting policies C.27. Accounting financial the to relation in material considered are which items with dealing in consistently applied been have policies accounting following The statements of the Company. NOTES TO THE COMPANY FINANCIAL STATEMENTS FINANCIAL COMPANY THE TO NOTES 122
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FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C.27. Accounting policies continued Warranty on the sale of products The Company provides a warranty from the date of purchase on all its products. 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 accounts, which is calculated on the basis of historical returns and internal quality reports. Derivative financial instruments In accordance with its treasury policy, the Company does not hold or issue derivative financial instruments for trading purposes. The Company uses forward exchange contracts to hedge its exposure to foreign exchange risk arising from operational and financing activities. Forward exchange contracts are recognised initially at cost and then subsequently remeasured at fair value. Where a forward contract is designated as a hedge of the variability in future cash inflows, the effective part of any gain or loss on the forward contract is recognised directly in equity. Any effective cumulative gain or loss is removed from equity and recognised in the profit and loss account at the same time as the hedged transaction. The ineffective part of any gain or loss is recognised in the profit and loss account immediately. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Foreign currencies Transactions in foreign currencies are translated at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on such translation are recognised in the profit and loss account. Going concern The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report, where also given are details of the financial and liquidity positions. In addition, note 22 in the financial statements includes the Company’s objectives and policies for managing its capital, details of its financial instruments and hedging activities and its exposures to credit risk and liquidity risk. The Company has considerable financial resources at its disposal and the directors have considered the current financial projections. As a consequence, the directors believe that the Company is well placed to manage its business risks successfully. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual report and accounts.
C.28. Tangible fixed assets
Freehold Assets in the land and Plant and Motor course of buildings equipment vehicles construction Total Year ended 30th June 2015 £’000 £’000 £’000 £’000 £’000 Cost At 1st July 2014 53,546 122,316 3,220 13,966 193,048 Additions 1,315 6,062 724 27,463 35,564 Transfers 25,495 8,034 – (33,529) – Disposals (1,381) (2,818) (246) – (4,445) At 30th June 2015 78,975 133,594 3,698 7,900 224,167 Depreciation At 1st July 2014 11,315 80,930 2,236 – 94,481 Charge for the year 1,276 10,195 515 – 11,986 Released on disposals (300) (2,241) (251) – (2,792) At 30th June 2015 12,291 88,884 2,500 – 103,675 Net book value At 30th June 2015 66,684 44,710 1,198 7,900 120,492 At 30th June 2014 42,231 41,386 984 13,966 98,567 Strategic report Governance Financial statements Shareholder information
296 2014 £’000 123 316,476 316,772 2015 £’000 2,485 316,772 319,257 Renishaw plc AnnualRenishaw report and accounts 2015 Service, distribution, research and development of group products. group of development and research Service, distribution, Manufacture and sale of advanced precision metrology and equipment. inspection agency. Travel surface- and diagnostics molecular of sale and manufacture Design, products. spectroscopy Raman enhanced Marketing of surgical robots for neurosurgical applications. Manufacture and sale of surgical robots for applications. neurosurgical Design, manufacture and sale of advanced precision metrology and equipment. inspection rapid and manufacturing additive of sale and manufacture Design, systems. prototyping Development and sale of software solutions. Manufacture and sale of fixturing products. services. and products measurement dimensional of Supply integrated application-specific of procurement and Design circuits (ASICs). Principal activities Principal company. investment and holding Overseas and metrology precision advanced of sale and Manufacture equipment. inspection
Balance at the beginning of the year C.29. Investments in subsidiaries Movements during the year were: C.28. Tangible fixed assets continued C.28. Tangible 30th were propertiesAt subject June 2015, registered a to with a net charge book £37,597,000) value secure to of £45,033,000 the (2014: UK defined benefit pension scheme liabilities. The trustees have the right to enforce the charge to recover any deficit £48,200,000 to up if an insolvency event occurs in relation the to Company before 30th September or if the Company 2016 has not made good any deficit toup £48,200,000 midnight by on 30th September 2016. Additions for freehold assets to in the £13,185,000) course £24,329,000) comprise of construction (2014: £13,556,000 (2014: of £27,463,000 for plant and equipment. £11,144,000) land and (2014: buildings and £13,907,000 Investments made during the year itp GmbH (Germany)* LimitedWotton Travel (Scotland) (92.4%) Limited Diagnostics Renishaw Renishaw Mayfield (Switzerland)* S.A. (75%) Renishaw Mayfield (France)* SARL (75%) Renishaw Metrology Systems Limited March) (India)* (31st Limited MTT Technologies Renishaw Software Limited R&R Fixtures, December) (USA)* LLC (31st December) (31st (USA)* Inc. Engineering, & Consulting Advanced (Slovenia) d.o.o. Inženiring Tehnicni Renishaw Balance at the end of the year wholly-owned, unless otherwise stated. plc as at 30th June 2015, all of which are the subsidiary undertakings of Renishaw The following are The country of incorporation is also the country of unless otherwise stated. is England and Wales The country of incorporation and registration in all the subsidiary undertaking is 30th June unless otherwise stated. The shareholdings operation. The accounting year end for each subsidiary capital of those undertakings. share in the ordinary undertakings are Company Limited International Renishaw Ireland)* of (Republic Limited (Ireland) Renishaw (France)* S.A.S. Renishaw 124
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C.29. Investments in subsidiaries continued Company – principal activity is the service and distribution of group products Renishaw, Inc. (USA)* Renishaw KK (Japan)* Renishaw GmbH (Germany)* Renishaw S.p.A. (Italy)* Renishaw Ibérica S.A.U. (Spain)* Renishaw AG (Switzerland)* Renishaw (Hong Kong) Limited (Hong Kong)* Renishaw Latino Americana Ltda. (Brazil)* (31st December) Renishaw Benelux BV (Netherlands)* Renishaw Oceania Pty Limited (Australia)* Renishaw s.r.o. (Czech Republic)* Renishaw Healthcare Inc. (USA)* Renishaw Sp. z.o.o. (Poland)* OOO Renishaw (Russia)* (31st December) Renishaw AB (Sweden)* Renishaw (Austria) GmbH (Austria)* Renishaw (Korea) Limited (South Korea)* Renishaw (Canada) Limited (Canada)* Renishaw (Israel) Limited (Israel)* Renishaw (Shanghai) Trading Company Limited (People’s Republic of China)* (31st December) Renishaw (Singapore) Pte Limited (Singapore)* Renishaw (Shanghai) Management Company Limited (People’s Republic of China)* (31st December) Renishaw (Taiwan) Inc. (Taiwan)* Renishaw México, S. de R.L. de C.V. (Mexico)* Company – non-trading (holding or dormant companies) MTT Investments Limited MTT Technologies Inc. (USA)* MTT Technologies srl (Italy)* Measurement Devices Limited (Scotland) Measurement Devices US LLC (USA)* Renishaw R&R Inc. (USA)* Renishaw Metrology Limited Renishaw Transducer Systems Limited Renishaw PT Limited Renishaw Advanced Materials Limited Measurement Devices (Australia) Pty Limited (Australia)* Thomas Engineering and Construction Limited (Canada)* (31st December) *Equity held by a subsidiary undertaking. C.30. Investments in associates Movements during the year were: 2015 2014 £’000 £’000 Balance at the beginning of the year 704 6,888 Disposal of shareholding in Delcam plc – (6,184) Additions 480 – Balance at the end of the year 1,184 704
The following are the associated undertakings of Renishaw plc at 30th June 2015. The country of incorporation and registration is England and Wales unless otherwise stated. The country of incorporation is also the country of operation. The accounting year end for each associate undertaking is 30th June unless otherwise stated. The shareholdings in all the associated undertakings are in the ordinary share capital of those undertakings unless otherwise stated. Company Principal activities RLS merilna tehnika d.o.o. (50%) (Slovenia)* Manufacture and sale of angular magnetic encoder ICs, rotary and linear encoders, interpolator ICs, and photodiode arrays. Metrology Software Products Limited (50%) Design and sale of fixturing solutions and machine diagnostics. HiETA Technologies Limited (20%, Ordinary-A shares) (31st December) Design and provision of additive manufacturing solutions and heat exchangers. *Equity held by a subsidiary undertaking. Strategic report Governance Financial statements Shareholder information – 17 214 883 900 2014 2014 2014 2014 £’000 £’000 £’000 £’000 2,100 2,576 2,628 5,250 2,346 8,285 14,731 37,567 14,551 13,551 13,938 13,348 18,644 90,992 125 125,717 105,126 144,361 126,352 764 297 2015 2015 2015 2015 589 £’000 £’000 £’000 £’000 3,165 3,754 3,573 5,337 5,465 2,639 19,124 19,122 11,494 49,740 43,138 11,908 14,623 14,889 10,504 12,482 79,280 147,560 137,056 101,221 Renishaw plc AnnualRenishaw report and accounts 2015 Amounts owed group to undertakings undertakings associated to owed Amounts Other taxes and social security social and taxes Other Corporation tax Corporation creditors Other Fair value of forward exchange contracts Balance at the end of the year consideration Deferred Fair value of forward exchange contracts The deferred consideration of £589,000 is in respect of investments in subsidiaries, which is payable over the next two years (2014: £883,000). C.34. Creditors Amounts falling due after more than one year An analysis of creditors due after more than one year was: An analysis of creditors due within one year at the end of the year was: creditors Trade C.33. Creditors Amounts falling due within one year Total creditorsTotal due after more than one year Debtors due within one year debtors Trade C.32. Debtors An analysis ofdebtors at the end of the year was: Raw materials Raw Work in progress goods Finished C.31. Stock An analysis of stock at the end of the year was: Balance at the end of the year Amounts owed group by undertakings undertakings associated by owed Amounts Prepayments and other receivables Fair value of forward exchange contracts Balance at the end of the year Debtors due after more than one year Fair value of forward exchange contracts 126
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C.35. Provisions for liabilities and charges An analysis of provisions for liabilities and charges was: 2015 2014 £’000 £’000 Warranty provision 1,294 948 Deferred tax 7,247 8,169 Total provisions for liabilities and charges 8,541 9,117
Warranty provision Movements during the year were: 2015 2014 £’000 £’000 Balance at the beginning of the year 948 1,260 Created in the year 1,202 392 Utilised in the year (856) (704) 346 (312) Balance at the end of the year 1,294 948
The warranty provision has been calculated on the basis of historical return-in-warranty information and other quality 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.
Deferred tax Movements during the year were: 2015 2014 £’000 £’000 Balance at the beginning of the year 8,169 1,366 Movements during the year (922) 6,803 Balance at the end of the year 7,247 8,169
The deferred tax asset is represented by:
2015 2014 £’000 £’000 Difference between accumulated depreciation and capital allowances 2,973 1,824 Other timing differences 4,274 6,345 7,247 8,169 Deferred tax on pension scheme liability (note C.36) (7,132) (5,855) Balance at the end of the year 115 2,314
The movements in the deferred tax balance were:
2015 2014 £’000 £’000 Balance at the beginning of the year 2,314 (4,675) Amount charged to the profit and loss account 1,262 863 Amount reflected through the statement of total recognised gains and losses (3,461) 6,126 Balance at the end of the year 115 2,314 Strategic report Governance Financial statements Shareholder information – – – – – 64 total (1%) % of (2%) 100 100 12% 7.3% 2.7% 3.7% 3.5% 4.8% assets (1,521) (2,588) 11,650 127 Year ended Year 30th June 2011 30th June 2013 362 2011 £’000 9,023 94,941 95,303 (34,705) (25,682) 30th June 30th (130,008) – – 64 (5%) (15%) 7.3% 2.7% 4.4% 3.7% 3.5% – – – – – (5,836) (13,168) total % of 100 100 Year ended Year assets 30th June 2014 30th June 2012 154 2012 £’000 – – 8,913 (37,139) 89,807 64 89,653 (28,226) (1%) 30th June 30th (126,946) 10% 6.7% 3.4% 4.0% 3.6% 2.6% (1,230) 10,707 Year ended Year Renishaw plc AnnualRenishaw report and accounts 2015 – – – – – total 30th June 2013 % of 100 100 30th June 2015 assets 3% 2% (4%) 301 2013 £’000 6,041 2,828 3,245 (5,952) Restated (20,226) (26,267) 106,117 30th June 30th 106,418 (132,685) Year ended Year 30th June 2014 – – – – – total % of 100 100 assets – – 1% 939 (6%) (10,169) 198 2014 £’000 Year ended Year 5,855 (23,421) (29,276) 117,0 0 3 30th June 30th 116,805 (146,279) 30th June 2015 – – – – – 100 100 total % of assets 320 2015 £’000 7,132 (28,528) (35,660) 125,769 30th June 126,089 (161,749) Pension liability Pension The history of experience gains and losses is: Deferred tax thereon tax Deferred Deficit in the scheme the in Deficit Actuarial value of liabilities of value Actuarial Total amount recognised in the statement of losses and gains total recognised (£’000) amount percentage of present value of scheme liabilities percentage of present value of scheme liabilities Experience gains and losses on scheme liabilities scheme on losses and gains Experience (£’000) amount Bonds and cash Market value of assets: Equities Rate of increase in pension payments C.36. Pension scheme The Company operated a defined benefit pension scheme, which, ceased in April any 2007, future accrual for current members and was closed newto members. Employees of the Company are now covereddefined a by contribution scheme.15 regarding See note details of registered liabilities. scheme pension benefit defined UK the to relating charges related £182,000) £9,330,000), (2014: ofThe which total pension £178,000 (2014: cost of the Company for the year was £11,146,000 to directors. The latest full actuarial valuation of the scheme was carried out at September and updated 30th 2012 to on an a by FRS 17 basis June 2015 actuary. independent qualified were: scheme the actuary for the by used assumptions major The The assets and liabilities in the scheme were: Discount rate Inflation rate (RPI) Expected return on assets age Retirement The mortality assumption is adopted tables, S2PMA and model S2PFA for 2015 CMI with (core) 2014 long-term improvements per of 0.2% annum. Inflation (CPI) rate Difference between the expected and actual actual and expected the between Difference assets scheme return on (£’000) amount percentage of scheme assets scheme of percentage 128
Renishaw plc Annual report and accounts 2015
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C.36. Pension scheme continued The movements in the scheme were: Assets Liabilities Total Year ended 30th June 2015 £’000 £’000 £’000 Deficit in scheme at the beginning of the year 117,003 (146,279) (29,276) Contributions 1,649 – 1,649 Expected return on pension scheme assets 8,528 – 8,528 Interest on pension scheme liabilities – (6,392) (6,392) Actuarial gain/(loss) 939 (11,108) (10,169) Benefits paid (2,030) 2,030 – Deficit in scheme at the end of the year 126,089 (161,749) (35,660)
Assets Liabilities Total Year ended 30th June 2014 £’000 £’000 £’000 Deficit in scheme at the beginning of the year 106,418 (132,685) (26,267) Contributions 1,513 – 1,513 Expected return on pension scheme assets 7,753 – 7,753 Interest on pension scheme liabilities – (6,323) (6,323) Actuarial gain/(loss) 3,245 (9,197) (5,952) Benefits paid (1,926) 1,926 – Deficit in scheme at the end of the year 117,0 0 3 (146,279) (29,276)
All equities have quoted prices in active markets in the UK, North America, Europe, Asia-Pacific, Japan and emerging markets. The weighted average duration of the defined benefit obligation is around 24 years.
The analysis of the amount recognised in the statement of total recognised gains and losses was: 2015 2014 £’000 £’000 Actual return less expected return on scheme assets 939 3,245 Experience gain arising on scheme liabilities – 2,828 Changes in financial assumptions (11,108) (12,025) Total recognised in the statement of total recognised gains and losses (10,169) (5,952)
C.37. Share capital 2015 2014 £’000 £’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. Strategic report Governance Financial statements Shareholder information 476 2014 2014 2014 (694) £’000 £’000 £’000 7,612 (5,476) (1,565) (5,952) (6,602) (29,115) 34,441 83,285 25,580 129 435,248 386,554 2015 2015 2015 £’000 £’000 £’000 2,102 2,062 6,328 2,837 (8,107) 17,171 25,580 (10,169) (30,841) (13,348) 162,185 435,248 558,485 Renishaw plc AnnualRenishaw report and accounts 2015 Deferred tax thereon tax Deferred Actuarial loss in the pension scheme pension the in loss Actuarial Balance at the beginning of the year Profit for the year Dividends paid in the year Balance at the end of the year Authorised and committed and Authorised Amounts recycled into the profit and loss account in the year Movements in the profit and loss account during the year were: C.39. Profit and loss account C.39. Profit Balance at the beginning of the year C.38. Currency reserve C.38. Currency The currency reserve comprises all foreign exchange differences arising from the valuation of forward exchange contracts whichhedges are effective and mature after the year end. These are valued on a mark-to-market basis, are accounted for directly in equity and are recycled through the profit and loss account when the hedged item affects the profit and loss account. The unrealised currency gain/(loss) on foreign exchange forward contracts outstanding at the year end has been recognised net of deferred tax. Movements during the year were: C.41. Capital commitments Capital commitments at the end for of the which year, no provision has been made in the financial statements, were: C.40. Related parties During related the year, parties, these being Renishaw Diagnostics Limited, Renishaw Mayfield S.A. and theassociates Group’s 11), (see note purchased goods and services and £331,000) sold goods from and the (2014: services Company the to value the of £1,513,000 to Company £2,579,000). (2014: to the value of £3,145,000 30th relatedAt June parties £56,000) 2015, the to Company. Related owed £214,000) £525,000 (2014: parties (2014: were owed £297,000 by the Company. Dividends were received of £110,000 from related parties Loans during £210,000). related to parties the year (2014: from £10,373,000). the Company (2014: at 30th were £12,653,000 June 2015 All transactions were on length an arm’s basis. There were no bad debts written off during £nil). the year (2014: Revaluations during the year the during Revaluations Deferred tax movement tax Deferred Balance at the end of the year Profit for the year includes from associates dividends £27,210,000) and a subsidiaryreceived(2014: of £83,610,000 undertaking. 130
Renishaw plc Annual report and accounts 2015
SHAREHOLDER INFORMATION
10 YEAR FINANCIAL RECORD
note note note note note note note 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Results £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Overseas revenue 469,221 331,682 326,213 313,007 273,989 170,957 159,988 189,137 169,094 164,322 UK and Ireland revenue 25,499 23,816 20,668 18,885 14,761 10,650 11,259 12,020 11,789 11,513 Total revenue 494,720 355,498 346,881 331,892 288,750 181,607 171,247 201,157 180,883 175,835 Operating profit 143,924 70,388 79,071 83,188 79,286 28,095 5,991 37,3 35 29,729 35,468 Profit before tax 144,196 70,106 79,193 86,046 80,410 28,725 8,843 41,715 32,672 38,102 Taxation 22,850 10,720 15,046 17,0 0 8 16,345 5,745 2,105 8,309 6,532 7,621 Profit for the year 121,346 59,386 64,147 69,038 64,065 22,980 6,738 33,406 26,140 30,481
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Capital employed £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Share capital 14,558 14,558 14,558 14,558 14,558 14,558 14,558 14,558 14,558 14,558 Share premium 42 42 42 42 42 42 42 42 42 42 Reserves 413,918 336,163 262,119 227,79 9 187,118 144,021 129,162 151,725 153,400 128,136 Total equity 428,518 350,763 276,719 242,399 201,718 158,621 143,762 166,325 168,000 142,736
Statistics 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Overseas revenue as a percentage of total revenue 94.8% 93.3% 94.0% 94.3% 94.9% 94.1% 93.4% 94.0% 93.5% 93.5% Adjusted earnings per share 167.5p 82.3p 88.9p 95.6p 88.5p 32.3p 9.6p 45.9p 35.9p 41.9p Proposed dividend 46.5p 41.2p 40.0p 38.5p 35.0p 17.6 p 7.76 p 25.39p 22.87p 21.78p
Note The results and adjusted earnings per share for the years 2007 to 2011, 2013 and 2014 exclude the exceptional items. These were: 2007 and 2008 – pension curtailment credits (2007: £19.5m; 2008: £1.3m); 2009 – redundancy costs (£4.1m); 2010 – impairment write-down (£1.7m); 2011 – reversal of impairment write- down (£1.7m); 2013 – gain on deferred consideration settlement (£2.9m); and 2014 – profit on disposal of shareholding in Delcam plc (£26.3m). Strategic report Governance Financial statements Shareholder information 131 . The interim results and the Renishaw plc AnnualRenishaw report and accounts 2015 Half year Half December31st 2015 results year Half 2016 January update Trading May 2016 Final dividend SeptemberEx-div date 17th 2015 Record September date 18th 2015 Payment October date 19th 2015 Interim dividend (provisional) Ex-div date 3rd March 2016 Record date March 4th 2016 Payment April date 7th 2016 Financial reports reports, financial previous of copies with together report, Annual The is available at www.renishaw.com preliminary announcement of the full results year’s are published on our website promptly after they have been released through a Service. Information Regulatory Financial calendar Annual general meeting 15th October 2015 :
www.shareview.co.uk
AGM The AGM is held at the Company’s offices and is open for attendance allby shareholders. AGM will The be held 2015 on Thursday 15th October at the Company’s headquarters at New Mills, Wotton- under-Edge, Gloucestershire noon. 8JR The at 12 Notice of GL12 meeting is set out in a separate circular shareholders. to Shareholders service nominee a should through Company the in shares holding arrange be to appointed as a corporate representative or a proxy in respect of their shareholding in order attend to and at vote the meeting. Registrars and transfer officeRegistrars transfer and Limited, Equiniti Registrars For all enquiries about shareholders’ holdings, transfer and registration of shares and changes of name and address, contact the Company’s registrars, Equiniti Limited, or use www.shareview.co.uk House, Aspect Road, Spencer West Sussex UK Lancing, 6DA BN99 callers) (UK 2169 384 0871 Telephone: Ordinary shares Ordinary on listed shares ordinary 20p of class one has Company The the London Stock Exchange under code ISIN number RSW, GB0007323586. callers) (international 7047 415 121 +44 Website: UK calls cost 8p per minute plus network extras. Lines open 8.30am 5.30pm,to Monday Friday. to SHAREHOLDER INFORMATION SHAREHOLDER 132
Renishaw plc Annual report and accounts 2015
SHAREHOLDER INFORMATION
SHAREHOLDER NOTES
Registration details and company secretary Share fraud Company secretary and registered office Renishaw has received reports that our shareholders have received unsolicited calls from overseas firms offering to purchase their shares Norma Tang, for a price in excess of the current market price in order to mount a New Mills, hostile takeover bid. Please be aware that this is likely to be a scam, Wotton-under-Edge, with the intention of obtaining payment from shareholders of a bond Gloucestershire UK or legal fee in order to secure the share transaction, which never GL12 8JR materialises or obtaining an option to purchase shares with no fixed Registered number: 1106260 transfer date. There are other types of share fraud or “boiler room England and Wales scams” and therefore if you receive any unsolicited investment advice the Financial Conduct Authority (FCA) advises the following: Telephone: +44 (0)1453 524524 Facsimile: +44 (0)1453 524401 • make sure you get the correct name of the person and organisation email: [email protected] and make a record of any other information they give; For the latest investor information and news, • check that they are properly authorised by the FCA before getting visit www.renishaw.com/investor involved by visiting www.fca.org.uk/register and contacting the firm using the details on the register; Auditor and corporate advisors • the FCA also maintains a list of unauthorised overseas firms who are targeting or have targeted UK investors and any approach from Auditor such firms should be reported to the FCA so that the information KPMG LLP can be kept updated; • report the matter to the FCA on their consumer helpline 0800 111 6768 Solicitors or using the share fraud reporting form on the FCA website (search Norton Rose Fulbright LLP for “share fraud” to find the relevant pages); and Burges Salmon LLP • you could also contact the police via the national fraud reporting Stockbrokers centre Action Fraud on 0300 123 2040 or [email protected]. UBS Action Fraud will be particularly interested if you sent money to a bank account or other type of money transfer. Principal bankers Lloyds Bank plc Shareholder profile 8 Shareholdings % 7 1 1 – 5,000 2.4 6 2 5,001 – 25,000 3.0 3 25,001 – 50,000 1.9 4 50,001 – 100,000 3.2 5 4 5 100,001 – 500,000 15.9 3 1 2 6 500,001 – 1,000,000 6.9 7 1,000,001 – 3,000,000 13.7 8 more than 3,000,000 53.0 2 Shareholdings % 1 Directors 53.1 2 Individuals 1.9 3 Institutions 45.0
3 1 Design and production by Radley Yeldar | ry.com Printed on FSC certified, 100% post-consumer content paper using fully sustainable, vegetable oil-based inks. Print production system registered to ISO 14001-2004, ISO 9001-2008 and EMAS standards. Annual report and accounts 2015 For more information visit: For more www.renishaw.com Renishaw plc Renishaw Wotton-under-Edge, Mills, New 8JRGloucestershire GL12 Kingdom United 524524 T +44 (0) 1453 524401 F +44 (0) 1453 [email protected] E